public governance, administration and finances law review vol. 6. no. 2. (2021) • 5–6 . © the authors 2022 editorial doi: 10 .53116/pgaflr .2021 .2 .1 privacy and governmental transparency andrás koltay*¤, miklós könczöl**¤, andrás lapsánszky***¤, ákos tussay****¤ * university of public service, e-mail: koltay .andras@uni-nke .hu ** centre for social sciences, e-mail: konczol .miklos@tk .hu *** university of győr, e-mail: lapsanszky .andras@sze .hu **** university of public service, e-mail: tussay .akos@uni-nke .hu the second, semi-thematic issue of our 2021  volume comprises the proceedings of a  conference as well as research papers . on 7–8  june 2021, pázmány péter catholic university’s faculty of law (budapest, hungary), the university of stockholm’s faculty of law (stockholm, sweden), the university of windsor’s faculty of law (windsor, canada), the university of alabama’s school of law (tuscaloosa, usa), université paris dauphine-psl research university (paris, france), emory university’s school of law (atlanta, usa), and the university of louisville’s louis d . brandeis school of law co-hosted an online forum on privacy and governmental transparency. the goal of this forum was to bring together a  small group of prominent scholars to facilitate a  multidisciplinary discussion on privacy and transparency . today, in times of the covid-19  pandemic, with governments introducing special legislation and track-andtrace measures to combat the virus (see hoffman & balázs, 2021; karácsony & nag ypál, 2021), and the societal impact of social media reaching new peaks (cinelli et al ., 2020), the significance of privacy and governmental transparency would be hard to deny . with that significance in mind, the first four articles are based on papers presented at the forum, while the following articles address various themes within the conceptual domains of public administration and jurisprudence . the first article, robert kahn’s masks, face veil bans and “living together”. what’s privacy got to do with it? considers the concept of “living together” and its implications to privacy, with a special focus on the requirement of modern democracies to show one’s face in public . next, algorithms of machines and law: risks in pattern recognition, machine learning and artificial intelligence for justice and fairness, by michael losavio, elaborates on the opportunities and the inherent risks in adopting ai technologies, such as facial recognition in the public sphere, predominantly in law enforcement . the third piece of the proceedings, public registries as tools for realising the swedish welfare state  –  can the state still be trusted?, authored by jane reichel and johanna chamberlain, argues that the high level of social trust in the swedish society is mostly due to citizens’ general trust in one another as well as in public institutions, which is https://doi.org/10.53116/pgaflr.2021.2.1 https://orcid.org/0000-0002-4991-4343 https://orcid.org/0000-0002-8789-4291 https://orcid.org/0000-0003-3555-6802 https://orcid.org/0000-0002-0592-2587 mailto:koltay.andras@uni-nke.hu mailto:konczol.miklos@tk.hu mailto:lapsanszky.andras@sze.hu mailto:tussay.akos@uni-nke.hu public governance, administration and finances law review • vol.  6. no. 2.  6 andrás koltay, miklós könczöl, andrás lapsánszky, ákos tussay further enhanced by the transparent operation of the latter, and the credibility of their official records . however, a  number of swedish “register scandals” may threaten these achievements: it is for that reason that they urge a careful balance between transparency and the right to privacy . finally, the fourth article, russell weaver’s the constitutional implications of drones, facial recognition technolog y and cctv, examines how courts in the usa assess and implement new surveillance technologies, such as drones and cctv . the fifth article, by zoltán hazafi and enikő kovácsné szekér, addresses a hungarian issue, that of the introduction of the personal decision support it system in the hungarian public service. the sixth, ágnes orosz and norbert szijártó’s socioeconomic governance in the eu gives an overview of the eu framework of social and economic governance . the seventh piece, by boldizsár szentgáli-tóth, the source of unexplored opportunities or an unpredictable risk factor? could artificial intelligences be subject to the same laws as human beings? inquires into the problematic relationship between the adoption of ai technologies and the idea of the rule of law, especially with a  view to its challenges to law and policy-making . the last article, ádám varga’s local self-governments and the vertical division of power, considers, once again, a  hungarian issue: it deals with the role hungarian local self-governments play within the hungarian constitutional system . references cinelli, m ., quattrociocchi, w ., galeazzi, a . et al . (2020) . the covid-19 social media infodemic . scientific reports, 10(16598) . online: https://doi .org/10 .1038/s41598-020-73510-5 hoffman, i ., & balázs, i . (2021) . administrative law in the time of corona(virus): resilience and trustbuilding . public governance, administration and finances law review, 6(1), 35–50 . online: https:// doi .org/10 .53116/pgaflr .2021 .1 .4 karácsony, a ., & nag ypál, sz . (2021) . the rule of law and the extraordinary situation . public governance, administration and finances law review, 6(1), 65–72 . online: https://doi .org/10 .53116/pgaflr .2021 .1 .6 https://doi.org/10.1038/s41598-020-73510-5 https://doi.org/10.53116/pgaflr.2021.1.4 https://doi.org/10.53116/pgaflr.2021.1.4 https://doi.org/10.53116/pgaflr.2021.1.6 © 2021 the authors public governance, administration and finances law review vol.  6. no. 1. (2021) • 5–6 . editorial doi: 10 .53116/pgaflr .2021 .1 .1 progress and tradition andrás koltay*¤, miklós könczöl**¤, andrás lapsánszky***¤, ákos tussay****¤ * university of public service, e-mail: koltay .andras@uni-nke .hu ** centre for social sciences, e-mail: konczol .miklos@tk .hu *** university of győr, e-mail: lapsanszky .andras@sze .hu **** university of public service, e-mail: tussay .akos@uni-nke .hu the journal, public governance, administration and finances law review (pgaf lr) was launched in 2016  as a  central and eastern european based law journal which was committed to facilitating an interdisciplinary forum of public law within the so-called visegrád countries . over the past six years, the journal’s editorial team was constantly facing with a  somewhat thorny issue, namely a  theoretical discussion of cee problems might, in many cases, not be confined within the journal’s original and initial aims and scope . as a  result of this, the editorial team was forced to refuse otherwise relevant pieces of scholarship, or to accept papers that strictly-speaking did not fall within the journal’s scope . in 2020, after publishing five volumes with a total number of ten issues, the editorial board decided to put an end to the above-mentioned practice and transform pgaf lr into a law journal with global coverage that accepts articles on all facets of public administration, public policy and public management within the region and with other parts of the world as well . as part of this transformation, the editorial board was partly renewed and several new members outside of the cee area were invited to join . this process also brought along some changes within the editorial team itself . the work, which was initiated by pgaf lr’s two past editors, gábor hulkó and tamás kaiser, is now shared, under the watchful eye of founder editor-in-chief, andrás lapsánszky, among three new editors: andrás koltay, who is also the rector of the university of public service, miklós könczöl, who is currently editor of two other prestigious hungarian journals and ákos tussay, former secretary of the previous editorial team . however, this transformation signals neither the end of a progress, nor a break with past traditions; rather, the editorial team wishes to uphold all the values, academic commitments and good practices that characterised the journal’s past six years of operation . as a  manifest sign of this expectation, the editorial team has decided to even continue with the former editors’ last initiative, namely, as a  follow up to the pandemic https://doi.org/10.53116/pgaflr.2021.1.1 https://orcid.org/0000-0002-4991-4343 https://orcid.org/0000-0002-8789-4291 https://orcid.org/0000-0003-3555-6802 https://orcid.org/0000-0002-0592-2587 mailto:koltay.andras%40uni-nke.hu?subject= mailto:konczol.miklos%40tk.hu?subject= mailto:lapsanszky.andras%40sze.hu?subject= mailto:tussay.akos%40uni-nke.hu?subject= 6 public governance, administration and finances law review • vol.  6. no. 1.  and governance conference, organised in november 2020, the editors convened a second conference, post-pandemic politics: perspectives and possibilities, in june 2021 . encouraged by the conference’s success, the editorial team invited the conference’s speakers to submit their manuscripts to be published in the journal’s pending issue . thus, the first issue of our 2021 volume is partly a conference proceeding and partly an ordinary issue . the list of its articles is opened by the conference’s keynote speaker’s, raphael cohen-almagor’s, paper who considers israel’s response to the challenges raised by the covid-19 pandemic with a specific focus on the invoked public policies and the related political, economic and legal concerns . after outlining the keys for the initial israeli success, namely, the government’s swift and effective reaction to the pandemic, the close cooperation and coordination between the organisations that were mobilised to counter the pandemic, and the effective implementation of governmental policies, the author indulges into a  fuller consideration of the mistakes and the moral of the vaccination campaign too . the second paper is bence gát’s coronavirus test of the european union’s policy on the rule of law. in this article, the author gives a  general overview of the european union’s approach towards the idea of the rule of law just to set out that an extraordinary situation, such as the current pandemic, reveals that the eu institutions cannot provide sufficient guarantees for any objective examination of the issue . next, istván hoffman and istván balázs’s article describes the impact of covid-19  on the hungarian body of administrative law . they argue that several new rules have been incorporated into the hungarian legal system and that the ‘legislative background’ of the pandemic offered an opportunity to the central government to pass significant, yet rather controversial reforms . the fourth study is mina hosseini’s article which raises legal and ethical concerns regarding those dilemmas that hinge around the production and distribution of covid-19  vaccines . as a  possible solution the author proposes the need to emphasise the vital significance of public rights as opposed to focusing exclusively on individual rights, such as those intellectual property rights that hinder the world-wide manufacturing of covid-19 vaccines . in the fifth article, andrás karácsony and szabolcs nag ypál investigate how and by what constitutional mandate the hungarian government deviated from the normal constitutional situation in 2020 .  based on carl schmitt’s and giorgio agamben’s idea of the ‘state of exception’, they argue that the hungarian situation in 2020  did not fall within this category; rather, it shall be described as an extraordinary situation . finally, the last article of the conference’s proceedings is a study from oana şerban in which the author proposes that the models of good governance in the post-pandemic world must be shaped by leftist principles, in order to ensure not the reopening, but the reconstruction of public life . next to these six conference papers, the present issue publishes two research articles as well . the first article is authored by tibor buskó and it provides an all-encompassing overview of the lower-middle level of public administration in hungary, while csaba lentner’s study endeavours to outline the development of hungary’s monetary policy from the late 1980s to the present . public governance, administration and finances law review vol. 6. no. 2. (2021) • 133–135 . © the author 2022 book review doi: 10 .53116/pgaflr .2021 .2 .10 raphael cohen-almagor, just, reasonable multiculturalism. liberalism, culture and coercion (cambridge university press, 2021) lilla berkes*¤ * assistant professor, pázmány péter catholic university, e-mail: berkes .lilla@jak .ppke .hu the existence of multicultural societies, and thus accommodating cultures that are different from the culture of the majority (or dominant culture), is a  contemporary reality . its roots go back mostly to the 1960s and 1970s, to the period that laid the foundations of our current value system . the spread of the idea of universalism of human rights has changed the thinking about those who were different from us, humanitarian aid has become a major issue, and equality between people and non-discrimination has become a leading idea, too . there was also a growing need to fill the missing workforce . as a result of these changes, western countries, as opposed to their previous practice of limited and tightly controlled immigration, increasingly opened their gates to migrant workers and those seeking a  new homeland . people who previously have not been welcome because of cultural reasons were able to enter and settle in the country much easier than before . these components concluded to the change of the cultural composition of the societies and brought the emergence of public policies that deal with this situation . instead of the former exclusion or assimilation, solutions have emerged to emphasise and promote social inclusion, e .g . the policy of multiculturalism . on the one hand, all this has had a number of exciting effects: the fill of the missing workforce and the brain drain have contributed significantly to economic development and prosperity, foreign cultures were so interesting, they opened up the hitherto unknown world to the people, people could enjoy culinary multiculturalism, etc . in general, multicultural policies were a  success for years, especially when the different cultures were not yet politically active, did not form a  significant community and the diversity was not wide . on the other hand, what we can see now is that the changes were not entirely under state control . the states (state policies) were inclusive but they did not know what exactly they try to host and whether their own society will be inclusive and adaptive enough . family reunification has deepened the diversity, illegal migration (and the insufficient fight against it) and the growing ghettoisation have had another negative impact on state control, deepening and widening further the diversity . as a result of this https://doi.org/10.53116/pgaflr.2021.2.10 https://orcid.org/0000-0001-8068-5852 mailto:berkes.lilla@jak.ppke.hu 134 lilla berkes public governance, administration and finances law review • vol.  6. no. 2.  increasing diversity, habits and traditions that were shocking to the majority society appeared, conflicts arising from cultural misunderstanding increased, and the value system that was inclusive of those culturally different from the majority was questioned . the solution is yet to come . faith in equality, freedom of religion and other freedoms provide protection for cultures that are different from the majority (dominant culture), states although prohibit the most unacceptable practices (female genital mutilation, forced marriage, etc .) but in general refrain from community-level solutions, rather deciding on a  case-by-case basis who should adapt to whom, through a  series of court decisions . solving problems on individual level is easier, because the general drawing of boundaries at the community level casts the shadow that it contradicts the belief in the values that underpin western cultures, and western cultures are not yet ready for a paradigm shift . ultimately, therefore, the protection of individual rights and the management of public affairs at the community level, also the moral foundations of our system and the need for law and order have come into conflict . the three main issues in cohen-almagor’s book  –  the compatibility of multiculturalism with liberalism, the best-known cultural fractures and security challenges that arise and the question of reasonable balance between accommodation and intervention  –  also embody these dilemmas . it also follows that the methodolog y of the book draws clear boundaries and consistently leads the reader to the author’s theory of the reasonable limits and applicability of multiculturalism . the author aims to establish a  middle ground between liberal reasoning and multiculturalists who see multiculturalism as an alternative to liberalism and who believe that protecting the group’s culture trumps otherwise generally applicable laws . he does this by advocating the concept of reasonableness, delineates the boundaries of multiculturalism within the framework of liberal democracy . his fundamental idea is that the state may have justifiable grounds to interfere in the business of illiberal minority cultures when their norms and practices are at odds with the underpinning values of liberal democracy . he differentiates between the reasonableness of a cultural rite on a basis of its significance for the minority culture and of the majority culture: whether it is crucial for the livelihood of the group, it is an integral part of social and family life, perceived as important for maintaining the group’s heritage and the way the group defines itself or they have no  value for the group, or, as a third case, the cultural rites are of importance to the group but have no value or utility for society at large because they are unreasonable and possibly offensive in the eyes of outsiders . this all actually sheds light on different layers of reasonableness and opens up the possibility of setting general limits to accommodation . at the same time by differentiating between moral reasonableness, legal reasonableness, social reasonableness and political reasonableness, the author also highlights the importance of the different viewpoints as a  method . however, this opens up other tensioning problems . reasonableness also carries a subjective value judgment, we cannot count on it as something objective that is outside and above changes . the main point is that social reasonableness (rationality) ultimately changes together with society, in other words, the capability and will of accommodating others also change, and ever-changing boundaries do not help stability . there are also limits of legal reasonableness . the author refers to the supreme court of canada case law of reasonable accommodation which public governance, administration and finances law review • 2. 2021 135raphael cohen-almagor, just, reasonable multiculturalism. liberalism, culture and coercion… can be considered a standard in cultural disputes but although the court can decide that wearing a kirpan under the clothes is not dangerous (multani v . commission, 2006) but wearing a turban instead of a helmet while motorcycling is (bouchard & taylor, 2008), then a  legislator can decide otherwise (cbc, 2018), the decision is still within the framework of a legal thinking . the court cannot step its boundaries to take the place of the legislator, it cannot make political decisions, and ultimately it is not the task of the court to decide what should be considered a value (morally) and what should not . the state, the political power is the only one that is able to take into account and integrate the different types of reasonableness together, thus it cannot spare itself from making a  decision . this is what brings us to the practical part of the book where the author analyses different areas of interference of minority affairs . he argues that intervention is justified in the case of gross and systematic violations of human rights, such as murder, slavery, expulsion or inflicting severe bodily harm on certain individuals or groups but he limits the state’s immediate control to the most obvious and undisputed matters . thus, he handles with caution the questions of other disputed matters  –  rites, patterns, behaviours that are also (heavily) questioned by the majority (dominant) culture – that do not fall under his scope and how (and whether) his just reasonableness test can be used for these cases . he rather argues that the state cannot and should not control everything and we should consider internal restrictions (the right of a  group against its own members) and external protections (the right of a  group against the larger society), with a case by case investigation . all things considered, we can certainly agree on that to answer the main challenge of multiculturalism  –  the recognition of the need for an intervention and the use of reasonableness as a method –, the starting point is to know and understand the field of the intervention, namely the cultural patterns . references bouchard, g . & taylor, c . (2008) . building the future. a time for reconciliation . report . online: www . mce .gouv .qc .ca/publications/ccpardc/rapport-final-integral-en .pdf cbc news (2018, october 11) . ontario to allow turban-wearing sikhs to ride motorcycles without helmets . online: https://bit .ly/3e1feb6 cohen-almagor, r . (2021) . just, reasonable multiculturalism. liberalism, culture and coercion. cambridge university press . online: https://doi .org/10 .1017/9781108567213 deutsche welt (2019, april 07) . german court: sikhs have to wear helmets on motorbikes . online: https:// bit .ly/3f336vb multani v . commission scolaire marguerite-bourgeoys, [2006] 1 scr 256 . online: https://scc-csc .lexum . com/scc-csc/scc-csc/en/item/15/index .do http://www.mce.gouv.qc.ca/publications/ccpardc/rapport-final-integral-en.pdf http://www.mce.gouv.qc.ca/publications/ccpardc/rapport-final-integral-en.pdf https://bit.ly/3e1feb6 https://doi.org/10.1017/9781108567213 https://bit.ly/3f336vb https://bit.ly/3f336vb https://scc-csc.lexum.com/scc-csc/scc-csc/en/item/15/index.do https://scc-csc.lexum.com/scc-csc/scc-csc/en/item/15/index.do public governance, administration and finances law review case studies �e right to information: whether or not to publish information on salaries of employees paid from public funds kateřina frumarová* * judr. kateřina frumarová, phd. is associate professor for administrative law, palacky university in olomouc, faculty of law. (e-mail address: katerina.frumarova@upol.cz) abstract: �e right to information is an important instrument for a control of public authority in any democratic state. ocasionally, however, there may be a con�ict between this right and the right to privacy. in this context, the czech supreme administrative court was tasked with solving the question of whether information on the salaries of employees who are paid from public funds can be published. keywords: right to information; right to privacy; recipient of public funds; information on salaries ensuring access to information is essential for the proper functioning of any democratic society, and the exercise of public power in a democratic legal state should be open to public debate and control. �ese principles of publicity, transparency, and openness in the exercise of public authority is recognized and consistently applied in the czech republic. and the institute of the right to information signi�cantly contributes to the ful�llment of these principles. ‘�e right to information is a constitutionally guaranteed right’, (article 17, czech charter of fundamental rights and freedoms states [hereinafter ‘charter’1]). �is clearly states that the freedom of expression and the right to information are guaranteed, and that state bodies and territorial self-governing bodies are obliged, in an appropriate manner, to provide information on their activities. conditions therefore, and the implementation thereof, are provided for by law – namely by act no. 106/1999 coll., free access to information. �is act is based on the presumption that all information must be published, unless the law provides an exception. from this act, a highly discussed and controversial issue emerged: whether information shall be provided (i.e. published) on the salaries and other bene�ts of employees who are paid from public funds. regarding this issue, the czech supreme administrative court was very clear in judgment no. 8 as 55/201210.53116/pgaflr.2016.1.6 https://doi.org/10.53116/pgaflr.2016.1.6 62, dated 22 october 2014.2 �e respective case concerned whether information on the salary of the director of an elementary school should be published. while this was one speci�c case the judgment is essential, because it provides generalizing (general) conclusions on whether and why such information should be published by employers (those represented by state and local authorities, and various public institutions) if citizens request this information under the act. �e supreme administrative court dealt primarily with the apparent con�ict between the right to free access of information, and the right to privacy. both are guaranteed by the charter, as article 10 provides that anyone has the right to be protected from the unauthorized gathering, public revelation, or other misuse of his/her personal data. according to article 7 of the charter, the protection of the person and of his/her privacy is guaranteed, and this may only be altered in cases provided for by law. however the act on free access to information states that there will be personal data provided on those individuals who receive public �nance (a so-called recipient of public funds), to this extent: name, surname, date of birth, municipality where the recipient has a permanent residence, amount, and purpose and terms of provided public funds. a public administration employee receives a salary for his/her work, which is paid from public funds. he/she is therefore considered (by the act on free access to information), ‘a recipient of public funds’. �erefore, the amount of a salary and other �nancial bene�ts in connection with the name and surname of the person is personal data that should be published. how does one reconcile the con�ict of these constitutionally guaranteed rights? �ere is no doubt that the right to obtain information on the recipients of public funds represents a not insigni�cant interference with the recipients’ privacy. such information is certainly at odds with personal data protections outlined in article 10 of the charter, and also in article 8 of the european convention for the protection of human rights and fundamental freedoms. in a situation which contradicts two fundamental rights, the legislator (the state – i.e. the czech republic) must carefully weigh which of them will be given priority; to what extent and under what conditions. �e legislator must consider whether the solution to this con�ict can be determined on a general level, or whether discretion should be given to the administrative authorities, or courts, for the consideration of individual cases. it should be noted that the con�ict between the right to information and the right to privacy requires (to a certain extent) the prioritizing of one basic right over the other. �e supreme administrative court, after a thorough analysis of the law (including aspects of eu law), concluded that the act on free access to information does not allow the court to determine which right should supersede the other (ie. to apply the principle of proportionality). while the legislator did favor the right to information of recipients of public funds, the legislator noted that certain information should be completely eliminated (for example, information regarding recipients of pensions or unemployment bene�ts) and in all other cases only a limited amount of personal data shall be provided, in an e�ort to provide some privacy to recipients. �e reasoning which led to this conclusion was summarized by the supreme administrative court as follows: ‘�e basic purpose is to control public power through access to information on the spending of public funds.’ it is generally known that the modern state manages a large amount of money, and through public budgets passes almost half of the gross domestic product. �ese funds are redistributed and used for a variety of purposes, from pensions and other social spending, to a variety of grants and subsidies, to salaries of public sector employees and operating expenses. and there is a strong public interest that these funds be e�ectively managed and spent in accordance with the law. besides control through public authorities, a direct control of management of public funds by the citizens is very important because each citizen should be informed of how public power manages public �nances. each power, even democratic, corrupts, and the less it is monitored, the greater the risk of its misuse is. �e control of public authorities signi�cantly prevents the abuse of public power and strengthens the democratic legitimacy of the political system. another purpose is that the �ndings obtained through the act on free access to information can be used to e�ectively re�ect of public authority itself. if a fault is detected, there should follow a correction of the behavior and management of public authorities. finally, we cannot underestimate the preventive e�ect of this act. �e fact that the public authority may be exposed to questions from the public which it is required to answer, usually leads to more proper behavior of public power authorities. but it is also beyond doubt that public control can have negative consequences and that this institute could be abused by citizens. however, the court adds that the positives certainly outweigh the negatives. �e inclusion of employees among the recipients of public funds, on which such information must be provided, is legitimized by the intense public interest in controlling public authority and the e�ciency and e�ectiveness of its activities in the areas of employment and remuneration. it is suitable and in a modern state is a very useful instrument in controlling the public sphere. �e costs for salaries (wages) and other �nancial bene�ts to employees are an important item of public expenditure, and the public power has a relatively high degree of discretion. �erefore, there must be a broad, general, and e�ective public control. �e control mechanisms which are available to the public sphere itself, without public participation, would not be su�ciently e�ective. �e supreme administrative court stated that publishing salaries does not represent, for someone who is paid from public funds, any material injury. information on salaries cannot be considered information that would have shamed the recipient or otherwise reduced their human dignity. arguments that this information can lead to envy and discord among the sta�, or the unrest in their personal lives, must be rejected. �e individual who determines the salary is obliged to follow the law, and must be able to justify his/her decision and defend their authority, which underlies his/her discretionary authority. furthermore, the supreme administrative court adds that neither fear nor envy can be considered relevant. envy is a human trait stemming from the pettiness of the soul and we cannot face it by legal means. despite the above �ndings, however, the supreme administrative court accepts that the employer is not obliged to provide salary information relating to recipients of public funds –only for certain exceptions. if the employee participates in the activities of the employer only indirectly and in an insigni�cant way, concurrently there is no doubt that public funds are spent e�ciently. �is will apply in particular to employees who perform ancillary and service jobs (e.g. maintenance, cleaning, catering, etc.). in relation to these employees, a publishing of the information about their salaries may be denied (on the principle of proportionality), even if they are paid from public funds. if there are doubts, a preference should be given to provide information. �e judgment of the supreme administrative court thus provides the following general conclusions for practice in the publishing of data on the salaries of employees who are paid from public funds: 1. information on the salaries of employees paid from public funds must be provided according to the law on free access to information. 2. �e employer does not provide information on employee’s salary. only rarely – in cases when such a person participates in activities only indirectly and in an insigni�cant way, and concurrently there is no doubt that public funds are spent e�ciently. �is decision of the supreme administrative court can be undoubtedly evaluated positively. although the publishing of information on employee salaries may bring some negatives or may be abused, this author believes that it is a necessary and e�ective instrument in controlling public authority. citizens have the right to exercise control over the management of state public funds, which consist largely of taxes that are paid by citizens. consequently, the judgment is a signi�cant step towards ful�lling the principle of publicity and transparency in the exercise of public authority in the czech republic. references 1. resolution of the presidium of the czech national council of 16 december 1992 on the declaration of the charter of fundamental rights and freedoms as a part of the constitutional order of the czech republic, no. 2/1993 coll. 2. available at www.nssoud.cz. http://www.nssoud.cz/ © 2019 dialóg campus, budapest public governance, administration and finances law review vol. 4. no. 1. (2019) • 44–49 . international cooperation in the fight against tax evasion roman vybíral* * judr . roman vybíral, phd, assistant professor of financial law and financial science, department of financial law and financial science, faculty of law, charles university, the czech republic . the author specialises in tax law and insurance law . he is the author or co-author of more than 30 reviewed articles and books . he is an attorney-at-law and a  member of the centre of information and organization of public finances and tax law research in central and eastern europe . this paper has been elaborated within the programme “progres q02 – publicization of law in the european and international context” which is realized in 2019 at the faculty of law of the charles university . orcid: 0000-0002-1112-408x . (e-mail: vybiralr@prf .cuni .cz) abstract: as regards the fight against tax evasion individual states do not act isolated, on the contrary the key role is being played by international organisations . because of the wide fiscal sovereignty of states such cooperation takes many forms and outputs . on the one hand, this article aims to identify areas within which the fight against tax evasion occurs . furthermore, it aims to analyse the development and current status of important international organisations that fight against tax evasion and to present their selected outputs . keywords: tax evasion; international organisation; oecd; european union 1. introduction at the begging, it is necessary to outline the not very clear relationship between the terms tax evasion, tax optimisation, law abuse, circumvention of law, aggressive tax planning and other such terms . although it may look like a  considerably unclear group of terms, from a  purely theoretical viewpoint, it is mainly just about labelling concrete practices as legal and the others as illegal . however, it is clear that to define such boundaries is not only difficult, but also under the current circumstances, i dare to say, impossible . this is the reason why there are many practices that could be identified as lying somewhere at the edge of legal and illegal . the borderline between the legal and illegal practices is sometimes being deduced based on the decision-making practice of courts in the particular countries . given the fact that for a  long period of time, the countries on the field of international tax law are not performing separately and that they cooperate firstly on the basis of legally binding exchange of information, and secondly on more or less unbinding cooperation in the area of sharing knowledge and practices that aim to improve the efficiency of the fight against tax evasion, as a  result, international organisations play a  key role in the area of fighting tax evasion, even though international organisations frequently produce solely unbinding and recommending measures and conclusions .1 then it is often upon the particular countries to reflex these 10.53116/pgaflr.2019.1.4 mailto:vybiralr%40prf.cuni.cz?subject= https://doi.org/10.53116/pgaflr.2019.1.4 45 public governance, administration and finances law review • 1. 2019 international cooperation in the fight against tax evasion unbinding conclusions into their domestic legislation and decision-making practice in order to make the fight against tax evasion more efficient . this paper deals with the issue of this international cooperation, and apart from a brief outline of historical development, it is also analysing current positions of particular significant international organisations or political coalitions,2 which have covered the fight against tax evasion on their agendas . 2. definition of the area of the fight against tax evasion this part describes the areas in which tax evasion occurs or have occurred . as it was stated in the introduction, the classification of the term “tax evasion” in the tax law is nearly as unclear as is the definition of the term . it is not the aim of this paper to define tax evasion – that have been tried by many legal scholars throughout history .3 the area of tax evasion is quite broad, and of course the tools to prevent tax evasion respond to this accordingly . 2.1. double tax treaties in the international context, there are situations when the factually generated income, which would under standard circumstances be subject to taxation, cannot be taxed at all in either of the countries when appropriately using some particular processes (e .g . when the place of residency of the subject is modified etc .), especially in cases when there is a double taxation international treaty (resp . double tax treaty) between the two particular countries .4 therefore, using gaps and loopholes may not result in double taxation, but in no taxation at all . we can observe this issue more and more often nowadays and operations that aim to cover and modify decisive facts to minimalise tax are highly-developed and more difficult for tax administrators to resolve . both unilateral domestic and international measures have two roles in international tax law . on the one hand, these measures arise from its initial fundamentals, which consists in elimination of multiple tax, on the other hand, the authorities must deal with using the shortcomings of the measures in order to minimalise tax, especially in the last decades . it is clear that playing these two roles at the same time can be difficult . the organisation for economic co-operation and development (hereinafter referred to as “oecd”) and the united nations (hereinafter referred to as “un”) are the key international organisations in this field . 2.2. exchange of information between tax administrators another area of cooperation in the fight against tax evasion is exchange of information between the tax administrators from different countries; its aim is to make a picture of the whole situation using partial information, that as such would not be sufficient to reveal and “prosecute” tax evasion . the issue of information exchange is often included in the double taxation treaties . between the countries that are not parties to such treaties, the bipartial treaties concerning information exchange in tax issues play an important role . in the 46 roman vybíral public governance, administration and finances law review • vol. 4. no. 1. area of information exchange between tax administrators, the oecd, the european union, the un and the council of europe play a key role . 2.3. other areas of international cooperation apart from the stated areas, there is a  wide range of other levels of cooperation . often it can be the publishing of unbinding reports and recommendations that aim to raise the awareness of efficient procedures to prevent tax evasion that the particular countries voluntarily include into their legislation or administrative practice . furthermore, cooperation can also be realised on a  political level, which means that lists of (un) cooperating countries concerning information exchange and prevention of tax evasion are being issued, these countries can be labelled as so called tax havens . as it was stated above, these lists have an impact primarily on the political and not on the legal level . moreover, in the context of the fight against tax havens, it is noteworthy to mention the particular “quasi-cooperation” in a  form of transposing instruments from other jurisdictions into its own legislation . an example of this measure may be an introduction of higher tax rate on the incomes that are to be subject to tax in the tax havens . “coming into force on 1st of january 2013 in section 36 (1) (c) act no. 586/1992 coll., code on taxation on income, there is […] introduced 35% withholding tax rate […], which applies, in short, when paying income to tax non-residents who are not residents of other european union member states or european economic area member states or non-residents of a  country that have entered into a double taxation treaty with the czech republic or an agreement on concerning information exchange in tax matters […].”5 we could find many such activities or similar ones in the field of international tax law . usually they are rather informal recommending instruments powered by political power, which is a result of tax sovereignty of particular countries . 3. the role of particular international organisations and groups this chapter is dealing with international organisations which play a  key role in the fight against tax evasion, and the outcomes of these organisations . given the fact that many of the partial instruments are rooted deeply in the past, it is not very convenient to organise the particular subchapter into two periods (history and contemporary state), so the topic will be discussed comprehensively . 3.1. oecd this organisation has created many interpretation and recommending manuals during the decades, which were more or less accepted by the developed world economies . due to the nature of this organisation, its main outcomes are researches and recommendations without direct international binding effect which are being afterwards reflected by domestic measures of particular countries . this is the largest difference between the oecd instruments and for 47 public governance, administration and finances law review • 1. 2019 international cooperation in the fight against tax evasion example the european union instruments, whose instruments may be legally binding . on the other hand, it is important to add that the oecd’s political influence is so important in this field, that the member states do accept its conclusions and reflect them in their domestic legislation . in this matter is the role of the oecd quite specific . should we mention the particular research, it would be the one entitled harmful tax competition  –  an emerging global issue6 from 1998 or a more recent research entitled the global forum on transparency and exchange of information for tax purposes7 from 2012 . furthermore, the oecd in its regular reports presents (or have presented) the imaginary black, grey and white list of countries, depending on their willingness to cooperate on international level in information exchange in tax matters . on the black list there are (or were) jurisdictions that refuse any international cooperation in information exchange in tax matters, on the grey list there are jurisdictions that take first steps towards cooperation, and on the white list there are listed jurisdictions that fully cooperate . the examination of these issues takes place on two levels . the first level concerns the existence of the legal framework for information exchange and transparency . the second level deals with the practical functioning of the legal framework in practice . a current issue that the oecd is dealing with is the issue of base erosion and profit shifting . following the meeting of the ministers of finance and governors of the central banks of the so called g20 (the group of twenty), the oecd issued the common action plan,8 which is in many ways inspired by the previous document issued solely by the eocd .9 at the following meeting of the g20 group, the parties also came to a  partial conclusion that the content of the action plan, which is primarily concerning double taxation, artificially reducing tax base and shifting profits to more convenient jurisdictions, must be strictly obeyed . the action plan contains 15 partial points that must be in a considerably short time dealt with .10 on the 1st of february 2014, the multilateral convention on mutual administrative assistance in tax matters came into force . the convention was prepared under the auspices of the oecd and the council of europe and has been open to a signature since 1998 . on the 1st of june 2012, a protocol came into effect which amends the convention and puts it in line with the new oecd standards for information exchange in tax area . the convention amended by the protocol represents a  comprehensive multilateral tool developed by the cooperation of the council of europe and the oecd that enables all forms of international administrative cooperation that are stated in annex a of the convention .11 3.2. the european union concerning documents passed by the european union (or its predecessor), they can be categorised into two levels . the first level is made up of legally binding documents, typically in a  form of secondary european union law . the second level contains unbinding documents (whatever they are called) which function just as a  recommending lead, however, they have a  significant impact on the interpretation of the binding rules . both levels are undoubtedly important . concerning the binding documents, it is necessary to mention directive 2011/16/eu on administrative cooperation in the field of taxation and repealing directive 77/799/eec10 that covers the information exchange between the tax 48 roman vybíral public governance, administration and finances law review • vol. 4. no. 1. administrators in the member states . a significant document on the second level is the so called action plan to strengthen the fight against tax fraud and tax evasion from december 2012 .12 apart from the evaluation of the current state, it contains a  list of particular measures which should be reached in a short or long term .13 in march 2015, the european commission issued a  package which aims to raise tax transparency in the area of income tax of legal entities . it mentions, for example, the obligation of the tax administrators to exchange the particular tax decision and other aspects that aim to limit tax evasion . a part of the package is the call for revising the code of conduct for business taxation from 1997,14 in which the countries have committed themselves not to introduce new potentially harmful tax measures and to limit existing measures of this nature . 3.3. other international organisations to provide the readers with a full picture, it is necessary to at least briefly mention that the particular activities related to the fight against tax evasion take place in other political groups, for example the countries of the so called g8 (the group of eight)15 or the already mentioned g20; once again, they solely issue recommendations that are not legally binding . other activities take place in the council of europe, as it was stated above . last but not least, it is important to point out the un activities .16 worldwide, there are tens of other, often local organisations, and the roles and documents they issue fairly differentiate between each other . some countries are involved in almost no international cooperation; these are very often the so called tax havens . there are none but political sanction threats for them especially due to the still wide tax sovereignty . 4. conclusion to sum up, although some international organisations (typically the oecd) have played a  significant role in the area of the fight against tax evasion, it can be said that their influence have consisted solely on the political level, which is a result of the nature of these organisations that are not able to pass a binding legal rule . even though the outcomes are not binding, their documents have a  strong impact on the domestic legal frameworks of (not only) its member states . apart from the oecd, there are other organisations whose impact lays mainly on the political level, these are the g8, the g20, the un or the council of europe . the most important actor nowadays which can pass legally binding documents is the european union . cooperation between the member states against tax evasion takes place primarily on the procedural level (information exchange between the tax administrators), as well as on the substantial level, on which many documents with various names were passed (researches, reports etc .), which have no binding effect, however, they play a  key role concerning the interpretation and application of the binding norms of the european union law . in the previous years the tendencies to fight tax evasion have increased within practically all international organisations, however, any rapid development is hardly to happen in the following years . 49 public governance, administration and finances law review • 1. 2019 international cooperation in the fight against tax evasion references 1 not exclusively; some measures adopted within the european union can be used as an example (as discussed below) . 2 the single abbreviation “international organisation” will be used in the text . 3 see e .g . kevin prosser, rebecca murray, tax avoidance, 2 et seq . (london, sweet & maxwell, 2012) . 4 for more details see michael lang, introduction to the law of double taxation conventions, 2nd edition, 35 (amsterdam, ibfd, 2013) . 5 see informace generálního finančního ředitelství k prokázání daňové rezidence u fyzických a právnických osob pro účely stanovení srážkové daně [information of the general financial directorate to prove tax residency for natural and legal persons for the purpose of determining withholding tax], www .financnisprava .cz/assets/ cs/prilohy/d-seznam-dani/srazkova_dan .pdf (accessed 26 may 2018) . 6 see harmful tax competition – an emerging global issue, www .uniset .ca/microstates/oecd_44430243 .pdf (accessed 21 may 2018) . 7 see the global forum on transparency and exchange of information for tax purposes, www .oecd .org/ctp/ harmful/43757434 .pdf (accessed 21 may 2018) . 8 see action plan on base erosion and profit shifting, www .oecd-ilibrary .org/taxation/action-plan-on-baseerosion-and-profit-shifting_9789264202719-en (accessed 24 may 2018) . doi: http://dx .doi .org/10 .1787 /9789264202719-en 9 see addressing base erosion and profit shifting, www .oecd-ilibrary .org/taxation/addressing-base-erosionand-profit-shifting_9789264192744-en (accessed 21 may 2018) . doi : http ://dx .doi .org/10 .1787/ 9789264192744-en 10 for more details see action plan on base erosion and profit shifting, www .oecd .org/ctp/bepsactionplan . pdf (accessed 26 may 2018) . doi: http://dx .doi .org/10 .1787/9789264202719-en 11 see úmluva o vzájemné správní pomoci v daňových záležitostech [convention on mutual administrative assistance in tax matters], www .mfcr .cz/cs/legislativa/mezinarodni-vymena-info-v-danove-oblasti/umluvao-vzajemne-spravni-pomoci-v-danov (accessed 15 may 2018) . 12 see an action plan to strengthen the fight against tax fraud and tax evasion, https://ec .europa .eu/taxation_ customs/sites/taxation/files/resources/documents/taxation/tax_fraud_evasion/com_2012_722_en .pdf (accessed 25 may 2018) . 13 in the conclusion it is stated that “this action plan identifies a series of specific measures which can be developed now and in years to come. […] in order to ensure that the actions described in this action plan will be duly implemented, the commission will put in place appropriate monitoring and scoreboards, which includes in particular regular exchanges of views in relevant committees and working groups on the basis of detailed questionnaires.” 14 see the code of conduct for business taxation, www .consilium .europa .eu/en/council-eu/preparatory-bodies/ code-conduct-group (accessed 27 may 2018) . 15 for more details see e .g . michele fratianni, john kirton, paolo savona, financing development: the g8 and un contribution (aldershot, ashgate publishing, 2007) . 16 see e .g . the ecosoc discussion on “international cooperation in tax matters”, www .un .org/esa/ffd/wpcontent/uploads/2014/08/2013_6taxnewsletter .pdf (accessed 28 june 2018) . http://www.financnisprava.cz/assets/cs/prilohy/d-seznam-dani/srazkova_dan.pdf http://www.financnisprava.cz/assets/cs/prilohy/d-seznam-dani/srazkova_dan.pdf http://www.uniset.ca/microstates/oecd_44430243.pdf http://www.oecd.org/ctp/harmful/43757434.pdf http://www.oecd.org/ctp/harmful/43757434.pdf http://www.oecd-ilibrary.org/taxation/action-plan-on-base-erosion-and-profit-shifting_9789264202719-en http://www.oecd-ilibrary.org/taxation/action-plan-on-base-erosion-and-profit-shifting_9789264202719-en http://dx.doi.org/10.1787/9789264202719-en http://dx.doi.org/10.1787/9789264202719-en http://www.oecd-ilibrary.org/taxation/addressing-base-erosion-and-profit-shifting_9789264192744-en http://www.oecd-ilibrary.org/taxation/addressing-base-erosion-and-profit-shifting_9789264192744-en http://dx.doi.org/10.1787/ 9789264192744-en http://dx.doi.org/10.1787/ 9789264192744-en http://www.oecd.org/ctp/bepsactionplan.pdf http://www.oecd.org/ctp/bepsactionplan.pdf http://dx.doi.org/10.1787/9789264202719-en http://www.mfcr.cz/cs/legislativa/mezinarodni-vymena-info-v-danove-oblasti/umluva-o-vzajemne-spravni-pomoci-v-danov http://www.mfcr.cz/cs/legislativa/mezinarodni-vymena-info-v-danove-oblasti/umluva-o-vzajemne-spravni-pomoci-v-danov https://ec.europa.eu/taxation_customs/sites/taxation/files/resources/documents/taxation/tax_fraud_evasion/com_2012_722_en.pdf https://ec.europa.eu/taxation_customs/sites/taxation/files/resources/documents/taxation/tax_fraud_evasion/com_2012_722_en.pdf http://www.consilium.europa.eu/en/council-eu/preparatory-bodies/code-conduct-group http://www.consilium.europa.eu/en/council-eu/preparatory-bodies/code-conduct-group http://www.un.org/esa/ffd/wp-content/uploads/2014/08/2013_6taxnewsletter.pdf http://www.un.org/esa/ffd/wp-content/uploads/2014/08/2013_6taxnewsletter.pdf public governance, administration and finances law review legal remedies against state funding decisions in slovakia gábor hulkó* * judr. gábor hulkó, phd. is associate professor for administrative law, széchenyi istván university in győr, faculty of law. (e-mail address: gabor.hulko@email.cz) abstract: legal remedies against decisions of central state administration or special administrative bodies instead of the standardly used appeal (which is more or less identical in all visegrad states) special types of legal remedies step in, which can be still considered as ordinary remedies. in slovakia, the standard legal remedy in administrative procedures is the appeal (in case of organs of central administration called remonstrance) regulated by act no. 71/1976 on administrative proceedings, however in case of special organs this regulation is often overwritten by special rules and by special legal remedies. latter mentioned – from a jurisprudential point of view raising the question, whether they can really serve as a tool for a real legal remedy if they represent an e�ective tool of decision supervision. �e following case study introduces the standard procedure of use of such special legal remedy against a decision of the state fund for housing development in slovakia. keywords: administrative procedure; legal remedies; appeal; remonstrance; suggestion of error; bodies of central administration; state funds �e possibility to defend oneself against the decision of an administrative body is one of the basic principles of administrative procedure. an appeal is a universal tool against an administrative decision in the slovak republic; an ordinary legal remedy. �e basic regulation of this legal institute is given by act no. 71/1967 on administrative proceedings (administrative code). �is statue contains the basic principles and rules of administrative procedure, as lex generalis. in the system of the administrative code, the ordinary legal remedy is referred to as an ‘appeal’ or ‘remonstrance’, depending on whether it is used against central administration bodies or not. regarding regular administrative organizations, the appeal applies, while in case of groups of central administration, remonstrance is used. �e main di�erence between these two is that remonstrance has no devolutive e�ect, and according to the regulation (paragraph 61 section 2) ‘remonstrance shall be settled by the chief o�cer of the central body of public administration based on the motion of a special committee established by the chief o�cer’. �is legal construction in itself raises the question of whether it can guarantee substantive and e�ective review of a decision, because it is carried out by the same authority which issued the decision in the �rst instance. among the visegrad states, this legal construction can be considered universal, with the exception of hungary. hungary, in 10.53116/pgaflr.2016.1.7 https://doi.org/10.53116/pgaflr.2016.1.7 accordance with paragraph 100 act no. cxl of 2004 on the general rules of administrative proceedings and services, cannot submit an appeal ‘...against any decision of the �rst instance adopted by a minister, by the head of an autonomous government body, an autonomous regulatory agency or other similar government agency;’ or ‘...against any decision of the �rst instance adopted by the head of a central government body’. in these cases, ‘the decision of the �rst instance may be subject to judicial review’. �e regulation is somewhat di�erent in cases of special procedures. for various reasons, the administrative code does not apply to administrative procedures (proceedings in which the rights, the legitimate interests and the duties of the citizens and organizations regarding the public administration are decided), or applies, but only to a minor extent. �ese procedures are regulated by special laws, which therefore contain special rules exclusively for these procedures, the lex special derogat legi generali rule applies, and the use of the administrative code can be excluded partially or completely. �e uniqueness of these procedures can be due to numerous factors, such as by the specialty of the organization making the decision. in the case of these procedures, the extent to which basic principles and basic procedural rights (right to legal remedy, fair procedure) apply is always problematic, as generally these special rules do not contain a complex regulation of the given procedure. alternatively, there has to be a core regulation (mainly concerning principles and basic party rights), which has to be part of every procedure, regardless of its relation to the administrative code. for instance, such rule is to be found in the czech regulation. according to paragraph 177 section 1 of act no. 500/2004 on code of administrative procedure, in spite of which ‘fundamental principles of activities of administrative bodies... shall apply in public administration also in cases where special law provides that administrative procedure code shall not apply but the special law itself fails to contain relevant provisions corresponding with the principles’. �e case in question deals with this kind of special procedure, with the decision-making of state funds, namely the state fund for housing development. state funds in the slovak republic are legal persons, constituted by law for �nancing specialized state tasks (see paragraph 5 of act no. 523/2004 on budgetary rules of public administration). state funds are under the supervision of a central state administration body, while their budget is in�uenced by the government. state funds can be considered administrative bodies in a wider sense, legal persons of public law. state funds often decide on rights, legitimate interests, and duties of the citizens, so in this regard they can be considered as bodies of public administration; sometimes the administrative code is applied for their procedures, but in many cases their procedures are regulated by di�erent, special rules. �e state fund for housing development is constituted in act no. 150/2013 on state fund for housing development (hereinafter as act on housing development fund). �e competence of the fund for housing development (hereinafter as fund) has its own specialties as well, which must be explained in some extent, according to the actual case, which is concerned with the subsidies granted for local self-municipalities. local self-municipalities in slovakia can apply for a subsidy combined from a non-repayable grant and a long-term loan for housing acquisition. �e grant is provided by the ministry of transport, construction, and regional development of the slovak republic (hereinafter as ministry), while the loan is provided by the fund. �e loan is advanced under favorable terms (a mortgage loan with a 20-30 year duration and a �xed 1% interest rate). as a thumbnail rule it is valid that the ministry �nances approximately 1/3 of the cost of acquisition, while 2/3 of the price is �nanced through the fund’s loan. �e decision-making of the ministry is regulated by act no. 443/2010 on grants for housing development and on social housing (hereinafter as act on grants for housing development), the decision-making of the fund by the act on housing development fund. one of the basic conditions of approving the loan is that the applicant did not breach the �nancial agreement during the disposal with the fund’s �nancial assets (this refers to previous time periods). additionally, a basic condition of approving the grant is that the applicant has disposal over the remainder of the acquisition price. in this way, the application for a loan goes hand-in-hand with the application for a grant. for approving the subsidy (neither for the grant, nor for the loan) there is no legal entitlement, which means, that despite that the applicant ful�lls all conditions, his/her application can be rejected. of course even in these cases, the negative decision cannot be arbitrary – it must be properly reasoned in line with the expectation (or principle) of good administration. �e loan can be declined due to the fact that the fund ran out of its annual budget for this objective or the application failed to ful�ll the conditions prescribed by the act on housing development fund (see paragraph 15 section 19). legal remedies are determined by the act on housing development fund, which states that against a negative decision a suggestion of error (hereinafter as suggestion) could be submitted within 30 days after the delivery of the decision, while the decision-review is carried out (in another 30 day period, after �ling the suggestion) by the ministry, as the supervisory body. a particular case deals with the application for a subsidy (grant and loan) of the local self-government holice, which is a small settlement of approximately 2000 inhabitants in the southwestern region of slovakia, on great rye island. an application for a grant was to �nance the acquisition of 13 housing units, where 30% was �nanced from a grant, and 70% of the price from a loan. �e application was submitted on 15th january 2015, rejected by the fund’s decision on 9th july 2015, with the justi�cation that the applicant breached the budgetary discipline during the disposal with the fund’s �nancial assets (see above), due to the fact that the annual auditor’s report labeled the shortterm liability of the local self-government risky. in other words: the selfgovernment’s cash �ow was rather low. based on this decision, the ministry also refused (23rd july 2015) acknowledgement of a grant, due to the fact that the applicant could not prove the disposal over the 70% of the acquisition price. both decisions were �led on 24th july 2015 at the self-government. in this way, the decision of the fund a�ected the subsidy as a whole, as the loan and the grant in this case are mutually dependent. against the decision of the fund, a suggestion of error was �led, which is an ordinary-like legal remedy regulated by the act on housing development fund. �e suggestion highlighted that the annual auditor’s report cannot serve as a reason for breaching the budgetary discipline. since the report was positive, the auditor stated no breach of law. it only declares that the selfgovernment’s capacity of settling short-term debts has a higher risk factor. furthermore, low cash �ow alone is not enough to ful�ll the condition of breaching the �nancial agreement in accordance with disposal of the fund’s �nancial assets, as there must be a connection between the low cash �ow and the using of (previous) �nancial assets of the fund, while this connection simultaneously causes a breach of the act on budgetary rules of public administration otherwise it cannot be considered as breaching the �nancial agreement. �e suggestion was handed over to the fund on 27th july 2015, the overview was ensured by the ministry in rejecting the suggestion on 4th september 2015. according to its argument, having a low cash �ow alone does not mean there was a breach of the �nancial agreement. however, during the review process it was determined that the local self-government failed to pay on-time the credit installment from previous loans from the fund, so these late payments can be considered as breaching budgetary discipline. from a boarder perspective, the procedure is legal, but not �awless in all regards. it is certainly positive, in that in accordance to the principles of legality and material truth, the decision can be changed also to the disadvantage of the applicant. �is shows that the suggestion can serve as a tool of objective legal protection. furthermore, the decision-review does not limit itself only to legality, but also extends to technical issues, and it is quicker when compared to judicial review. on the other hand, this standard procedure has its own issues. probably the most important among these is the (legal and practical) e�ect of a successful suggestion – in such case a restitutio in integrum would be in place, so that the applicant should regain his former status and legal position among the other applicants. �e problem is that: 1) submitting an suggestion has no delaying e�ect (the fund’s loans can be approved to other applicant instead), so it can lead to a situation, where the fund depletes its �nancial assets for loans meantime and despite the successful suggestion the restitution is de facto impossible; and 2) submitting an suggestion has no e�ect whatsoever on the ministry’s grant (so the grant can be awarded to another applicant meanwhile), which could lead to a similar situation, because budgetary limitations on grants are serious. from the applicant’s point of view, the loan without the grant is practically worthless, and the grant without the loan is legally inaccessible. additionally, the factual impossibility of the restitutio in integrum cause, that the use of suggestion in this case is mostly formal, so there is a little to no chance of a review favorable for the applicant. in this way the subjective legal protection of the applicant is negligible – and it raises the question of whether a formal guarantee of legal remedy could really serve as an e�ective tool of decision-overview. book reviews tax ordinance – directives on constituting a new regulation1 damien czudek* * dr mgr. damian czudek, ph.d., assistant professor, masaryk university, faculty of law, specialized in �nancial law. (e-mail: damian.czudek@law.muni.cz)   �e publication tax ordinance – directives on constituting a new regulation [ordynacja podatkowa – kierunkowe założenia nowej regulacji] was the e�ort of a team of authors led by professor leonard etel, an expert in the �eld of tax law, and chairman of the general tax law recodi�cation commission [komisja kody�kacyjna ogólnego prawa podatkowego]. �is commission was established in november 2014 in order to prepare and submit to the council of ministers complex and systemic changes in polish tax procedure. over the next two years, the bill (new act) was to be prepared. during the preparation of the o�cial opinion of the commission, there were various compromises and modi�cations when compared to the original draft. authors therefore decided that they would write and issue their ideas and suggestions regarding new regulations of tax administration in poland in the form of a currently peer-reviewed monograph. �is type of format allows more space for the presentation of various ideas, currently insurmountable for several reasons (whether political or with regard to conservatism). �e current tax ordinance [ordynacja podatkowa] came into e�ect in 1997. but since the polish economy has changed and developed over time, and polish taxpayers and their internationalization have changed with it. it now seems more than appropriate to consider a comprehensive and systematic change in the legal regulation of tax administration. �ese changes are also necessary for the proper functioning of �nancial management and e�cient tax collection. keeping this in mind, it is necessary to continue to ensure the fundamental rights of taxpayers. more and more often (and as we see in czech courts) there is a misunderstanding of the function and role of taxes in the state regarding its fundamental duty – the production of material to ensure the creation of public goods. taxes are often viewed as quite the opposite, similar to restrictions on economic activities of entities operating in the market. �is leads to measured and varied interests of the state versus interests of the individual. �e commission also worked interactively, and during the work partial results were presented, and numerous suggestions from the tax and customs administration were collected. one such example was ix scienti�c conference ‘ordynacja podatkowa w teorii i praktyce’ organized by the faculty of law, university of białystok in the picturesque augustów, in may 2015. �e book is a compilation of proposals for changes to improve the quality of legislation with regard to its impact on public budgets and the addressees of legal norms–tax subjects. �e authors analyzed a number of sources: scienti�c literature, case law and legal regulation, and were inspired by a wealth of both international experience and foreign regulations. �e book contains a number of theories on what the new regulation of tax administration should look like. �ere are three di�erent opinions and approaches to solving the current problems with the aim to improve the future regulation, but not at the cost of its rigidity and casuistry, but in order to simplify and streamline the system. �is publication is highly recommended. its concepts and settings of the e�ective functioning of �nancial management, with the maintenance and guarantee of taxpayers’ rights, makes it a recommended read both for those who are involved in tax procedures, and legislators outside of �nancial law. references 1. leonard etel (ed.), tax ordinance directives on constituting a new regulation [ordynacja podatkowa. kierunkowe założenia nowej regulacji] (białystok, temida 2, 2015). chapters on special public administration1 júlia fehér* * dr. júlia fehér, phd student, specialized in administrative law, széchenyi istván university in győr, faculty of law. (e-mail address: juliafmail@gmail.com)   �e main aim of the three-volume series, chapters on special public administration is to place practical public administration into focus. �rough creating an awareness-raising presentation of national basic functions, economy, infrastructure, and human public services based on legislature, in a comparative way with historical analyses, and ful�lling the need of course books and professional books as well. it is the �rst relevant publication in hungary which attempts a comprehensive analysis and description of as much particular sectors of public administration as possible. for this reason, a nationwide ‘work group’ was established (the series has over 30 authors) under editor andrás lapsánszky. �e volumes are special and unique in this way, because they are also the result of a work group which is characterized by a high degree of professionalism and true collegiality. it is the common, harmonized work of hungary’s departments of public administration and the national university of public service. �e relationship of general (general administration) and special public administration (special administration) must be clari�ed, because of the possibilities of shade and sharp demarcation in the hungarian doctrinal system. in understanding this system, general administration is indispensable, but the distinction between the two branches is mostly virtual. �e system is a theoretical basis and general doctrine of special administration. �erefore the general notional order and structure of public administration is described by the general public administration (science of public administration and legal systemic) – ensuring unity in the more particular world of special administration. �e law of special administration focuses on individual sectors of public administration. however, it cannot be separated from the basic notions, apparatus, or procedure of public administration, nor can it be understood in itself, since it cannot be scienti�cally analysed without the general doctrines. as for the theoretical basis, it is important to note that national tasks and functions provide a certain framework for special administration: the activity of authorities belonging to public administration is the route of carrying out state administration. as a result, modern public administration is essentially special administration, as public administration bodies carry out their activities with regards to one sector, in one given area. �e rapid improvement of society generates newer and newer needs, and ful�lling them occurs through newer and newer national engagements (therefore, the restrictive listing of tasks is impossible, as it is constantly changing). �e realizations of these tasks occur mostly via public administration, in the frame of the modern ‘administrative state.’ �e general aim of nearly all cases is to increase citizens’ quality of life and to realize social wealth.2 �e administrative tasks of the state prevail in many areas (and this is by no means an exhaustive list): operation of national economy; health and social insurance administration; social administration (decreasing social di�erences, labour administration, social net); public education; cultural (human) administration; protection of nature and the environment; consumer protection; transportation administration; communication and media administration; police administration (averting catastrophes, acting against terrorism); energy and industry administration; etc. �e volumes elaborate on the most signi�cant branches of special administration, and endeavour to highlight information which conveys the important theoretical basis both for students and professionals, such as: reasons and degree of national intervention; most signi�cant institutions of the sector; relevant legislature; historical characteristics of sectorial administration; international comparative analysis; and regulative models. �erefore the dual objective, so the volumes may serve as course books and special books as well, has been fully realized. also, it should be emphasized, that the volumes present elaborate on such areas of special public administration which have not been previously discussed in hungary. while most of the areas explored are rich in literature, in these cases a systematization and a dogmatic uni�cation is carried out. �e theory of organizing special administration chapters into a book can be understood in the wider subject of administration. based on this, the �rst volume details the basis of special administration and state functions. it presents the current form of european public administration law, as well as: its expected means of improvement; the system of national registers; the basis of police administration and police law; administrative rules referring to foreigners; regulations of the right of asylum; national defence administration; tax and customs administration; judiciary administration; public �nance administration; and the special administration basis of e-public administration. �e second volume covers economic and infrastructure administration, such as: the administration of the national economy; economic competition; energy and mining administration; water administration; information communications; the construction administration; trade; rules of regional development and area management; administration of environmental protection; the special administration basis of �nancial services; hunting administration; transportation administration; and the law of national support. �e third volume centers on: connections to human administration, such as health law and administration; education; the administrative basis of public education; child protection and social service administration; cultural administration; social administration; and media regulation. to summarize, these three volumes are professional, accurate, and rooted in law. �ey are not only interesting, but can be learned, taught, and utilized. �ey will greatly assist those to better understand such a comparative analysis that takes multiple perspectives, from not only international and european viewpoints, but also from the perspective of students and researchers. �e discovery and understanding of public administration beyond administrative procedure proves to be a serious challenge, but the three volumes of chapters on special public administration provide an outstanding guide in this endeavour. references 1. andrás lapsánszky (ed.), fejezetek szakigazgatásaink köréből [chapters on special public administration], vol. i-iii. (budapest, wolters kluwer, 2013). 2. adrián fábián, közigazgatás és szakigazgatás [public administration and special administration], 13, in lapsánszky andrás (ed.), fejezetek szakigazgatásaink köréből [chapters from our special administration], (budapest, wolters kluwer, 2013). © 2019 dialóg campus, budapest public governance, administration and finances law review vol. 4. no. 1. (2019) • 50–57 . case studies judicial review of municipal legislation on hazard games in the czech republic michael kohajda,* jiri moravec** * doc . judr . phd, associate professor of financial law and financial science, department of financial law and financial science, faculty of law, charles university, the czech republic . the author specialises in financial system law, capital markets law and banking law . he is the author or co-author of 5 books and more than 40 reviewed articles in prestigious journals . the author has elaborated this article within the programme “progres q02  –  publicization of law in theeuropean and international context” which is realized in 2019 at the faculty of law of the charles university . orcid: 0000-0001-7235-0921 (e-mail: kohajda@prf .cuni .cz) ** mgr ., j .d ., doctoral student of financial law and financial science, department of financial law and financial science, faculty of law, charles university, the czech republic . j . d . alumnus of school of law, nova southeastern university, usa . the author specialises in payment systems regulation, international payments and virtual currencies . the author has elaborated this article within the project of the student scientific research “finance and information technolog y as drivers of legal regulation in the european union countries and their criminal law aspects” which is realized in the years 2017–2019 at the faculty of law of the charles university, svv 260 360/2017 . orcid: 0000-0003-4856-385x (e-mail: moravec .ji@gmail .com) abstract: the aim of the article is to discover fundamental regulating legislative activities of municipalities in the field of hazard games . for several recent years there have been a  lot of problematic cases relating to authorisations to carry on hazard games in the czech towns and villages that have had to be decided by the ministry of finance and later by administrative courts and the constitutional court . some of the decisions can be considered fundamental and very relevant for fundamental principles of municipal legislation making . the authors focus on elected court decisions with the aim to evaluate the practise of municipalities in the field . keywords: gambling ; hazard games; legislation; municipality 1. introduction seen through the eyes of the regulator, hazard games (hereinafter also referred to as gambling ), at minimum, is a  debatable area of social relations as is the operation of gambling itself . unless gambling is allowed by the authority, the legal relationships arising out of gambling are not protected under the law . indeed, at some point in time, an insignificant number of countries banned gambling completely . even when the authority allows gambling, it is subject to countless restrictions . from the beginning of the existence 10.53116/pgaflr.2019.1.5 mailto:kohajda%40prf.cuni.cz?subject= mailto:moravec.ji%40gmail.com?subject= https://doi.org/10.53116/pgaflr.2019.1.5 51 public governance, administration and finances law review • 1. 2019 judicial review of municipal legislation on hazard games in the czech republic of the czech republic, gambling caused negative reactions particularly on the municipal level where there were relatively large numbers of small gambling establishments with just a  few slot machines . those establishments differ from casinos, not only in the scope of gambling, but particularly in the type of the customer who is frequently a source of issues to local public safety and social cohabitation . this paper aims to shortly define solutions for the legislative regulating administration of gambling on local level, to describe actual challenges of this legislative and its application but also to bring up opinions on the procedural process of application of local ordinances forbidding the administration of slot machines . 2. constitutional grounds the authority of municipality councils of each municipality is based on article 104 par . 3 of the constitution of the czech republic (hereinafter referred to as the “constitution”): “[r]epresentative bodies may, within the limits of their jurisdiction, issue generally binding ordinances .” the underlining problem of this formulation is that any other articles of the constitution do not define what is the limit of the jurisdiction of the representative bodies, as article 104 par . 1 of the constitution sets forth: [t]he powers of representative bodies shall be provided for only by statute . therefore, the constitution does not protect the autonomous competence of the municipalities . a  general definition of the municipality competence is described in section 10 of the law on establishment of municipalities (128/2000 coll .), which delimits three areas of autonomous competence, where the municipalities are allowed to impose duties: 1 . for the purpose of safeguarding local affairs in public order; especially it may stipulate which particular activities that could disturb the public peace in the municipality or could run counter to the good morals, protection of safety, health and property can be performed solely on sites and at times specifically determined by a binding ordinance, or stipulate that such activities are prohibited in some public premises in the municipality; 2 . for the purpose of organizing, holding and terminating publicly accessible sporting and cultural events, including dances and discotheques, by stipulating binding conditions to an extent necessary to secure public order; 3 . or the purpose of maintaining the cleanliness of streets and other public spaces, for the protection of the environment, greenery in built-up areas and other public green space, and for using the municipality’s amenities serving public needs . in other areas, municipalities can impose duties only if specifically allowed by a  special act . this absence of a  general scope of autonomous competence that would allow municipalities to enact ordinances causes disputes subsequently scrutinised by the constitutional court . the prime example might be the disputes regarding the regulation of the administration of gambling . the extent of autonomous competence, where the municipality can impose duties, was the subject of many decisions of the constitutional court . in the beginning, following the establishment of the czech republic, its constitution and the constitutional court, the constitutional court had a rather restrictive view . in this matter, the case pl . ús 5/93 was essential, where the constitutional court found that in order to impose specific duties, 52 michael kohajda, jiri moravec public governance, administration and finances law review • vol. 4. no. 1. a generally binding ordinance must have a statutory basis . even though the constitutional court found a generally binding ordinance to be the underivative juridical norm, the court still required a  concrete statutory basis which are typical for a  secondary juridical norm (not primary, as that is usually considered the synonym to the term underivative) . after more than 10 years of its existence, the constitutional court’s restrictive view began to change possibly also because of the personal changes within the court . in its case pl . ús 63/04 the constitutional court first used the four-level test to measure constitutionality of municipalities’ generally binding ordinances . this test of abstract control of juridical norms enacted within the autonomy of municipalities, when the constitutional court scrutinises the conformity of these norms with the constitution and laws, consists of four successively asked questions: 1 . whether the municipality has the authority to enact the disputed provision of a  generally binding ordinance; 2 . whether the municipality while enacting the disputed provision of the generally binding ordinance did not exceed the limit of its statutory subject-matter authority (if the municipality did not act ultra vires); 3 . whether the municipality while enacting the generally binding ordinance did not abuse the statutory entrusted authority, and 4 . whether the municipality enacting the disputed provision did not act evidently unreasonably . using this test, the constitutional court subsequently scrutinised a generally binding ordinance in a case that became the subject of the decision pl . ús 45/06 where the original restrictive approach of the statutory basis underwent a major change setting forth that the generally binding ordinance must be in accordance with the subject matter authority of the municipality . 3. the right of municipalities to regulate hazard games in the field of regulation of gambling using the generally binding ordinances, the constitutional court found two fundamental cases, first the pl . ús 56/10 where the court scrutinised the ordinance of frantiskovy lazne and second the pl . ús 29/10 where the court scrutinised the ordinance of chrastava . the town of chrastava enacted its generally binding ordinance, based on an express statutory delegation pursuant to 202/1990 coll ., the law on gambling (hereinafter the “gambling act”, this act is null and void as of now), on designated places where interactive slot machines may be administrated, with the purpose to ensure public safety . it might be necessary, at this point, to explain that at that time the general opinion was that there is a  difference between a  so-called slot machine, where the game itself is happening within the machine, and a  so-called video-lottery terminal, where the game itself does not happen within the machine but on a central computer, and thus the machine is just an access point . this distinction was based on a restrictive interpretation of the then positive law . the existing interpretation of the authorities found a  difference between those types of gambling machines and asserted that the municipalities are (based on the express statutory authority of the gambling act) able to regulate just the slot machines . however, the city of chrastava in its generally binding ordinance set forth that the interactive video53 public governance, administration and finances law review • 1. 2019 judicial review of municipal legislation on hazard games in the czech republic lottery machines are included within the sort of slot machines and thus those machines are under the authority of a  different chrastava’s generally binding ordinance that regulates the operation of those slot machines within the town that was the first time any municipality came with such interpretation . although the constitutional court agreed with the interpretation that from the point of view of the positive law, there is a  difference between the slot machine and the video-lottery terminal, it did not find that the authority of the municipalities to regulate those gaming machines would be limited just to the slot machines . quite the opposite, the court found that the express statutory authority found in the gambling act can be used in local regulation on all types of gambling machines . the generally binding ordinance of the town of frantiskovy lazne was enacted “in order to ensure the safety of local matters and concerns in the field of gambling limitation” . this town argued the above mentioned general definition of autonomous competence in section 10 of the municipality act, when its gambling regulation enacted with the goal of ensuring public safety as opposed to the above mentioned statutory authority encompassed in the gambling act . thus, the town used the more general formulation with the goal to increase its possibilities of gambling regulations . at first, the town of frantiskovy lazne in its generally binding ordinance found the operation of gambling using technical machines  –  slot machine as a  potentially public order disturbing conduct, subsequently found just one specific address, namely just one building, where gambling can be operated . this approach, showing the peak of the efforts of the municipalities to regulate slot machines on its premises, was one of the first that in the shape of the general biding ordinance was scrutinised by the constitutional court . the constitutional court found that the regulation of technical machines  –  slot machines is within the subject matter authority of the autonomy competence of municipalities . the constitutional court further scrutinised the specificity of the local ordinance, namely the permission to operate the slot machines only on one address within the town (on this address a  casino was located), in other words limiting this type of business to a single entrepreneur . according to the constitutional court, this limitation stands rather for individual regulation than a general one, and as such, typical for authority decisions as opposed to legal norms . regulation by a  legal norm should respect “the requirement of universality of regulation that the zoning must be based on a neutral and non-discriminatory rational regarding specific persons who are influenced by the regulation” . in this very case, rational reasons for limiting the administration of gambling must have had existed . the constitutional court found that in this case the rationale was the character of frantiskovy lazne as a spa town and the ongoing existence of a casino at that address where the goal was to concentrate gambling into the already existing casino . the constitutional court thus confirmed that the generally binding ordinance in question limiting slot machines into one concrete place in the town is constitutional . the practice of the constitutional court based at first upon those two cases helped to open a  door for the municipalities to regulate gambling on multiple types of gambling machines on the local level to keep public safety in order . based on the case regarding the town of frantiskovy lazne, municipalities subsequently began to not only completely ban gambling within its premises, but also to delimit so called allowed addresses, in other words 54 michael kohajda, jiri moravec public governance, administration and finances law review • vol. 4. no. 1. places where the administration of gambling is allowed and consequently limit the administration of gambling in this way . this development in reaction on the decisions of the constitutional court was sub sequently supported by the legislator by act 300/2011 coll . which amended the gambling act and authorised the municipalities to regulate even by a  complete ban, all types of gambling machines . consequent problems are still rotating around the question in what way and for what reason can be the so called allowed addresses chosen . 4. types of limitation on operating gambling machines as time advanced, municipalities, supported by the success of the towns of chrastava and frantiskovy lazne, began to regulate the operating of gambling in local establishments, which was often just a separated part of common restaurants, on a higher scale . it is apt to note, that for the operation of those gambling machines its entrepreneur needed permission which was issued by ministry of finance, those permissions in some cases (relatively quite often) were issued for up to 10 years . villages and towns thus had to cope with the situation when in a  specific place within the town an entrepreneur operates a  gambling business based on a  correct permission issued for a  long term, the change, or revocation of which was according to the corresponding statute legal, but the decision must have been made by the ministry of finance . the reason for change or revocation of the permission might have been in conflict with the generally binding ordinance which regulates the specific address regarding the operation of gambling machines . municipalities therefore had to, if they wanted to limit or forbid the operation of gambling games, enact a  specific generally binding ordinance . and the municipalities started to do so, after the decision of the constitutional court in the above-mentioned cases . municipalities chose one of the variants, either forbid gambling on slot machines completely on its entire cadastre or allow it on just specific addresses . in both cases however, the municipalities interfere with the valid permissions to operate and conduct such a business . the first approach as seen from the regulatory view is much better, because the entrepreneurs cannot assert discrimination and it is not necessary to weight and reason the choosing of specific addresses . the disadvantage of completely banning the administration of slot machines on the premises of the municipality is mainly the impact on its budget, because the taxation on operating slot machines within the premises of the municipality brings significant income to its budget . another drawback is the possibility of sparking a black market on operating slot machines, which means that the negative social influence of gambling stays without the corresponding income that would come with the taxation, or the possibility that the adjacent town will allow gambling, but the social problems will remain within the first town which forbade gambling . the ban to operate slot machines on different than certain addresses (done by allowing a certain, named address) keeps the income from the taxation and does not spark the black market but is problematic when it comes to the justification as per why those addresses 55 public governance, administration and finances law review • 1. 2019 judicial review of municipal legislation on hazard games in the czech republic were chosen and when it comes to conservation of the free competition of entrepreneurs, when some of them may feel the negative impact of the partial ban . 5. the procedure of partial ban on gambling machines no matter how the local ban of gambling duly allowed by another authority might be considered negative and the due expectations might be generally argued when it comes to the regulation of gambling, it is necessary to weight the underlining principles, where the interest of the society to regulate the negative impact of gambling stands against the due expectations principle . in the field of gambling regulation, the gambling act contained in its section 43 express authority to alter the issued permission: “the body which licensed the lottery or other like game shall withdraw the license if there occur or become known any circumstances for which it would not have been possible to license the lottery or other like game or if it proves later that the data according to which the license was granted are inaccurate .” because of the existence of this section, the argument of the entrepreneur of gambling machines that the once issued permission allows him to administrate the gambling machines for the time the permission is set forth cannot be accepted . the entrepreneur should have known that there is a possibility of substantial impact, for example the abovementioned enactment of the generally binding ordinance regulating the operation of gambling machines following the issuance of the permit that might cause alternation of the permission . much more problematic is, however, the partial ban done by specifying the so called allowed addresses and that is because, as outlined above, the argument of discrimination of the entrepreneurs on the excluded addresses . it is undisputed that choosing the allowed addresses should be based on rational and duly justified arguments . the question however is, who should be inquiring into this justification and rationalisation of the generally binding ordinance . the generally binding ordinance is a  normative act of the local authority, and by its due process of enactment the conditions for its general authority are fulfilled . from the beginning of its due publication of the accepted generally binding ordinance all persons must act accordingly . the czech republic recognises the process of the government control of the generally binding ordinances of municipalities, when every single ordinance shall be sent to the ministry of the interior of the czech republic, which scrutinises the ordinance and if the ordinance is not in compliance with the statutory requirements, the ministry will command the municipality to correct the ordinance; further the ministry can suspend and subsequently propose the constitutional court to scrutinise the ordinance in order to check its specific provision or completely rescind it . this is how the abstract scrutiny of the municipalities’ regulation works . this proceeding however might take a  long time and its process, if the ordinance is not suspended, does not impede its effects on the influenced persons . 56 michael kohajda, jiri moravec public governance, administration and finances law review • vol. 4. no. 1. enacting the ordinance forbidding the operation of slot machines which were previously duly allowed on the location where they are operated, should have an impact on the entrepreneur of the machines that should end in stopping the operations of such machines . in practice, it most certainly started the administrative proceeding of the issuer of the permission (the ministry of finance) pursuant to article 43 section 1 of the gambling act, which result should be the cancelation of the issued permission based on the change of factors, that is the enactment of the generally binding ordinance . because of the double instance of the administrative proceeding, this process might take up to one year and for the whole time of the proceeding the slot machine is being operated . a  substantial question is whether the ministry of finance is allowed in the proceedings to scrutinise the reasons why the generally binding ordinance was enacted . as said above, the duly enacted generally binding ordinance has authority against all and thus is binding for the ministry of finance as well, as long as it is not proceeded by the abovementioned process of suspending effectiveness of the generally binding ordinance which may be done however only by the ministry of the interior . the request that the administrative authority (namely the ministry of finance) scrutinises the rationality of the enactment of the original legal norm (in this sense the originality of the legal norm, the generally biding ordinance is on the same level as an act) is unacceptable . the administrative authority in case of its acceptance would be authorised to impact the legislative power on the local level but by comparison on the national level . in the end even, the constitutional court in its above-mentioned case pl . ús 56/10 touched this question when according to the court: “the administrative authority is authorized to scrutinize all individual conditions of the case, moreover even if the municipality by including the concrete real estate into the text of the ordinance did not act arbitrarily or in a discriminatory way .” argument that this scrutiny should be done by the ministry of finance while deciding the issuance of the permission to operate the gambling machines is also refuted by the constitutional court: “[w]hen the ministry of finance finds a  collision of permission with the generally binding ordinance it must pursuant to a statute begin the proceeding on the scrutiny of those permissions and proceed in the intention of article 43 section 1 of the gambling act . this article assumes revoking the issued permissions not only upon the emerging of new factors for which it would not be possible to permit the lottery of different game, but also when those factors happened after the issuance of the permission . if the ministry of finance does not follow this process it acts against the constitutional right of the municipalities for autonomous competence .” evident drawback of this proceeding which however is in accordance with the current law is the fact that in case that the court finds that the generally binding ordinance was discriminatory when it comes to the local limitation of the allowed addresses, it generally happens at the time when the permission on behalf of which the slot machine was operated is already void and so the administration itself should have ended and the machine should not be making any money to the entrepreneur . 57 public governance, administration and finances law review • 1. 2019 judicial review of municipal legislation on hazard games in the czech republic this consequence can be limited only by the act of court that deals with the action against the decision of the ministry of finance, which would exclude the effects of such decision and so keeps the validity of such decision (this is however in practice a  rather theoretical possibility) . 6. conclusion the effort of municipalities to regulate gambling within their territories, within its scope of authority, is rational, understandable, and definitely in conformity with the general function of municipalities to provide for public welfare, as operating gambling establishments negatively influence the social cohabitation . the actual impact of those efforts, when the municipalities impose duties using the generally binding ordinances, banning gambling entirely or in chosen localities of the municipality causes numerous disputes as the entrepreneurs operating those slot machines defy the negative impacts of the generally binding ordinances on their business . banning gambling entirely in the whole territory of the municipality is quite effective and from the legal point of view less problematic, nevertheless it supports the creation of illicit gambling environment and excludes the possibility of not insignificant income from the taxation of operation of the slot machines . on the other hand, banning gambling in some localities of the municipalities creates more legal issues, in particular such a ban is apt to create a  discriminatory environment in operating this sort of business between the entrepreneurs . proceedings, when the entrepreneurs influenced by the ban imposed by the generally binding ordinance defend against the rescind of the permit to operate slot machines, are at the moment subject of administrative proceedings judicial review . generally, the petitioners argue that the reasonableness of the ban delimiting particular parts of the municipality where the operating of slot machines is forbidden should be reviewed with regard to the corresponding generally binding ordinances . they argue that such review should be done rather by the ministry of finance in the proceeding where such permit is rescinded, than an administrative court . but it is impossible to agree with such argument as the ministry of finance does not have the authority for such review, indeed neither does the ministry of the interior which is the pivotal authority supervising the autonomous regulation . even the ministry of the interior can only submit the generally binding ordinance to the constitutional court for its review but cannot invalidate such generally binding ordinance . such authority of the ministry of finance would interfere with the right of municipalities for autonomous government and it would be in breach of the constitutional separation of powers . public governance, administration and finances law review taxation of professional team sport athletes in the czech republic1 michal radvan*, jan neckář** * judr. michal radvan, phd. is associate professor for financial law, specialized in tax law and local government �nance. he is the author of 5 books and the co-author of almost 40 books. he presented his scienti�c research in approx. 70 reviewed articles in prestigious journals and conference proceedings. he is a member of european association of tax law professors and information and organization centre for the research on the public finances and tax law in the countries of central and eastern europe. (e-mail: michal.radvan@law.muni.cz) ** mgr. jan neckář, phd. masaryk university, faculty of law, specialized in tax law. (e-mail: janeckar@seznam.cz) abstract: �e career of a professional athlete is unique when compared to other professions. not purely the role and nature of the position (such as whether they are individual or team players), but also from the factual, legal, and especially tax perspectives. and since a professional athlete’s income is subject to taxation, it is necessary that their activity is accurately determined for appropriate tax assessment. �e main purpose of this article is to examine the taxation of income on professional athletes in team sports. our study is based on case law determined by the czech republic’s supreme administrative court (hereinafter ‘supreme administrative court’),2 which determined that it is necessary to tax the activities of team players as income from self-employment. �e existing scienti�c literature on this subject in the czech republic is not particularly relevant, as it is mostly descriptive.3 international scienti�c literature is more abundant and comprehensive, such as noted publications by tetłak,4 simpson,5 and taxation of artistes and sportsmen in international tax law, edited by loukota and stefaner.6 keywords: tax; tax assessment; professional athletes; self-employment 1. characteristics of team player activity �e performance of a team player is largely determined by club rules and regulations in which his or her activity is performed. �is di�ers considerably from the abilities of an individual athlete. individual professional athletes (i.e. tennis players, boxers, etc.)7 act on his or her own behalf and exhibit a great deal of agency in the decision-making process. he or she chooses which tournament(s) to play and with what frequency, he or she may be paid by several subjects (usually by the organizer of a sporting event), he or she bears the costs of hiring a coach, massage therapist(s), servicemen, and other people on his or her team, he or she chooses when and where they train, etc. in contrast, team players (such as hockey, football, basketball players, etc.) are in a relationship only with one subject: the club in which they perform their activity. �ey do not act on their behalf nor in their own personal 10.53116/pgaflr.2016.1.4 https://doi.org/10.53116/pgaflr.2016.1.4 interest, but only as members of a team or club. it is the leadership of the club who determines all functional duties, such as who participates in a speci�c competition, if a player is transferred during the season (with or without the player’s consent), training, following a dietary regime, and other decisions that a�ect players. furthermore, team players cannot usually in�uence who the club hires for coaching sta� or the service team. instead, team players must abide by regulations set forth by the leadership and their coaches. it is paradoxical that the more competitive a team becomes, the more it relies on the performance of its individual players–players who do not participate in the club’s decision-making processes. in some european countries, it is quite common that team players are employees of the club. in the czech republic however, professional team players (for all sports, not solely football) are self-employed.8 �e player and the club agree on a so-called ‘professional contract’ which is considered an innominate contract in the czech legal order.9 professional contracts include mutual rights and obligations of the player and the club. some kind of a model contract is included in the directive on the evidence of professional and nonamateur contracts approved by the executive committee of the football association of the czech republic.10 �is is somewhat contradictory to the notion of self-employment in team sports, because the �rst article states that, ‘in accordance with the professional contract the player performs the sports activity as his or her main employment’, which would indicate a dependent activity. however, according to the model professional contract for football,11 ‘in the area of income tax, social and health security, the player is considered to be self-employed in accordance with art. 7 par. 2b) of the income tax act12 and his or her income arising from this contract is the income from independent employment, which is neither a profession based on a license nor entrepreneurship under special regulations’. it is important to note that similar contracts are implemented for other team sports, however any provision of this type in a private contract is, for the purpose of public tax law, irrelevant. one element regarding the taxation of team player’s income that is repeatedly discussed is the di�erent rate of income taxation if the athlete taxes his or her income from employment, or self-employment. from a tax perspective team players consider themselves as self-employed because it is mutually favorable for themselves and the clubs. athletes receive an undeducted fee, and it is their obligation to complete tax returns, and pay taxes including social and health security. �is obligation is therefore not on, all of which is not required for the club. �is also enables the players to make deductions from their incomes costs, which they spend in accordance with their activity, something that is not possible with the taxation of employees. any costs related to their employment can be deducted. �is could include the washing of uniforms (although this is done by the club), cost for travel to european cup matches,13 food to maintain their diet, accommodation, trips for training, and any additional costs incurred as they relate to a player’s position as a member of the club’s team. �e activity of a professional team player is unique, so it is not possible to apply (without limitations) all institutes of labor laws guaranteed by the labor act. one of the main areas for potential disputes that may arise is the possibility of a one-way termination of the employee (the player) from the club without any reason given. in this instance, a player could change clubs without receiving compensation. additional potentially problematic issues include working hours, overtime and obligatory breaks at work, as well as limitations set for the conclusion of �xed-term employment contracts.14 �e activity of professional athletes, while not expressly excluded from entrepreneurship by the trade licensing act,15 cannot be subordinated under permitted professional or unquali�ed trade (and neither as an independent profession). many athletes (as well as sports clubs) consider relations arising out of the so-called professional contracts to be of a self-employed nature, and income arising out of these contracts is also considered income from selfemployment. �e basis for this opinion is from a commonly known ruling of the supreme administrative court from 2011.16 2. taxation of professional athletes’ income �e terminology which de�nes the relationship between the player and the club are not essential regarding taxation of team players’ income. it is necessary to determine the characteristics of the player’s activity and its subordination under particular provisions of the income tax act. two basic types of incomes shall now be examined: income from employment, and income from selfemployment. income from self-employment includes, among other things, income from trade, other types of business, and from an independent profession. in all of these cases, it is presumed that the player performs, and is responsible for, an independent activity. however, the team player cannot ful�ll this requirement because he or she does not perform on his or her behalf, and does not make independent decisions. his or her income received from the club (whether it is for individual matches, in the form of a regular fee for his or her sport, or other performance in favor of the club) cannot be considered as income from self-employment, and the tax payer is not entitled to deduct from this income the relevant costs spent to reach, secure, and maintain the income, nor is he or she entitled to apply lump costs. however, income from advertising activities of the individual player, for example, which are not connected to his or her activity for the club, could be taxed as income from self-employment. income from employment includes payment in the form of an income from present or past employment and similar relationships, in which the tax payer performing the activity for the employer must complete the orders of the employer. in 2005, the supreme administrative court dealt with these terms with the emphasis on the nature of a relationship similar to employment and similar relationships.17 it stated that a ‘similar relationship is a relationship which is not an employment and similar relationships, but which in its nature and role responds to the stated relationships, that means that its main characteristics are the same as with these relationships. common to employment and similar relationships is �rstly that it is a legal relationship, usually of a private nature but also of a public nature (typically an o�cial relationship)… when examining whether the given relationship can be subordinated under the term ‘similar relationship’, it is always necessary to examine its actual content intended and wanted by the participants, especially if the participants pretend something di�erent than what is the actual content of their legal relationship. �e court emphasized the principle of material justice, resp. the principle of content priority. when closing the so-called professional contract, it is not important what the title of the contract is and under which legal provisions it was made, but what is its content and what are the rights and obligations of the parties. another important feature of employment and similar relationships considered by the supreme administrative court is the relationship of a ‘longterm character’, determined by whether employment is not completed on a one-time basis by ful�lling a certain obligation. so-called professional contracts also ful�ll this de�nition since they are often concluded for the term of one to �ve years. another signi�cant feature of employment and similar relationships not only considered by the supreme administrative court is the fact that the person who provides a certain performance is obliged to follow the orders of the person to whom he or she is bound by the employment contract. �is obligation must be explicit, i.e. it must be written into the legal relationship between both participants. for example, under the model professional contract, a football player is obliged to ful�ll assignments and orders of coaches during training, at training camps, and of course during matches.18 for his or her performance, the player receives a fee, usually monetary. it is without a doubt that the so-called professional contracts in the area of team sports ful�ll cumulatively all signs of a relationship similar to an employment and other similar relationships, and therefore a team player’s income should be taxed as income from employment. �e term ‘dependent activity’, was determined by the supreme administrative court in its previous ruling.19 it stated that in order to be considered as a ‘dependent activity’, a person cannot only perform an activity according to relevant orders, but it must be an activity truly dependent on the employer. �e de�nition of dependency shall be given by the nature of the performed activity (typically performed at one place exclusively for one employer). it shall also be a long-term activity, and the employment relationship shall be made in favor of the person performing the activity. it is also important to note that athletes do not perform their activities in one place. however, it is necessary to consider the text of this ruling as somewhat inaccurate since undoubtedly many more activities exist with noticeable worker mobility. on the other hand, it is necessary to emphasize the section which relates to one employer. especially with team players, it is unimaginable that a hockey player, for example, would play in one round of a long-term competition in more than one match for one club. incomes of team players received from the club are undoubtedly taxed as income from employment20 because the relationship between the player and the club cumulatively ful�lls all signs of a relationship similar to employment and other similar relationships. partial tax base is the income from employment increased by the amount equivalent to social security and contribution for state employment policy and health insurance, which the club, as the employer, is obliged to pay from these incomes. 3. conclusion �e oft-discussed, and media favored ‘sport tax’ ruling of the supreme administrative court21 is not completely without fault. �e court paid attention mainly to the relationship between the player and the club, but sidelined issues regarding taxation of an athlete’s income. �e purpose of this article is not to determine the relationship which exists, or should exist, between the player and the club. we agree with the supreme administrative court, that the application of labor law to the area of legal relationships between clubs and players is di�cult, and if not in some cases (holiday, transfers etc.), impossible. whatever professional contract is agreed upon between the player and the club, it is always necessary for the purpose of taxation of a players’ income in accordance with the principle of material justice to examine the contents of this relationship – rights and obligations of the parties. in most cases are these are for contracts over a long period of time (one to �ve years), in which the athlete (tax payer) is obliged to follow orders of the club (employer). he or she receives a fee for his or her performance, he or she cannot play for more than one club, etc. �e so-called professional contracts of athletes in the area of team sports cumulatively ful�ll all signs of relationships similar to employment, and therefore should be taxed as income from employment. shall the taxation of players’ income from self-employment be accepted, disguised labor relationships, made for the purpose of the unlawful lowering of tax burden, would be de facto legalized.22 it shall also be stated that not all players’ income necessarily comes from the club.23 �e player may have entered into other contracts, for example sponsor contracts, the income from which would be usually taxed under income from self-employment. �is is often the case internationally, as zika, the football agent states: ‘…the player receives some money from the employment agreement. and then he has another contract, for example a sponsor contract, and he receives much more money through this other contract.’24 it is apparent from the spanish case of the argentinian football player messi, that even here should the �nancial administrative authority examine the content of the legal relationship for determining the income to the right partial legal base.25 it would be appropriate to add that individual athletes (athletes in individual sports such as tennis players) tax their income under partial tax base from self-employment (given that they are not employed by the ministry of defense or ministry of internal a�airs), because apart from team players, they ful�ll the conditions in art. 7 of the income tax act. for the purpose of taxation of team player’s income it is not necessary, in contrast to the opinion of the supreme administrative court, to pass an adequate legal norm of their activity which would properly take into consideration the speci�cations of professional athletes. it is apparent from the abovementioned text, that even the regulation de lege lata makes it possible to enter into so-called professional contracts and properly tax an athlete’s income. financial administrative authorities, however, would have to properly apply legal norms to an individual athlete’s income, as well as ignore very inaccurate, and with regard to the content of the ruling, misleading, legal sentence ii. from the ruling of the supreme administrative court, stating that from ‘a tax point of view, an athlete may be considered as a self-employed person’. yes, an athlete may, in the czech republic, be considered from a tax perspective as a self-employed person, but not in the case of team players who receive fees from their clubs. our initial hypothesis, that the activity of team players should be taxed under the income from self-employment, has been partially con�rmed regarding income from sponsors, however it was proved false in regards to income from clubs. references 1. �e article comes out of the results of a project ‘vybrané aspekty přímých daní a jejich interpretace a aplikace v judikatuře’ number muni/a/0856/2013, funded by the speci�c research of masaryk university, which were published in a monograph michal radvan, petr mrkývka, jana kranecová, michal janovec & martina valachová, vybrané aspekty přímých daní a jejich interpretace a aplikace v judikatuře (1st ed., iuridica. editio scientia no. 503, brno, masarykova univerzita, 2014). 2. ruling of the supreme administrative court, nov. 29, 2011, case no. 2 afs 16/2011-78. 3. tomáš sluka, profesionální sportovec: právní a ekonomické aspekty (praha, havlíček brain team, 2007). 4. karolina tetlak, taxation of international sportsmen (amsterdam, ibfd, 2014). 5. alan simpson, taxation of non-resident entertainers and sportsmen: �e united kingdom’s de�nition of performance income and how it ought to be measured, washington university global studies law review, 693, http://openscholarship.wustl.edu/law_globalstudies/vol11/iss3/5 (accessed 10 july 2014). 6. walter loukota, markus c. stefaner (eds.), taxation of artistes and sportsmen in international tax law (vienna, linde verlag, 2007). 7. let’s disregard team competitions in team sports – for example davis cup, fed cup, european championships of teams in athletics. 8. a similar situation in the slovak republic is mentioned by for example čollák. see jaroslav čollák, profesionálna športová činnost: súčasnosť a možné trendy jej vývoja, vol. 63, no. 10, justičná revue, 1400–1409 (2011). 9. art. 1746 par. 2 act no. 89/2012 col. civil code as amended, resp. art. 51 act no. 40/1964 col. civil code as amended in case of contracts concluded before 2014. 10. fotbal.cz, esports.cz, s.r.o, directive on the evidence of professional and non-amateur contracts, http://nv.fotbal.cz/ftp/cmfs/legislativa/stanovy/07_smernice_pro_evidenci_s mluv_2.doc (accessed 10 july 2014). 11. tomáš sluka, profesionální sportovec: právní a ekonomické aspekty, 123–130 (praha, havlíček brain team, 2007). roman vybíral, analýza judikatury vztahující se k postavení profesionálních sportovců v oblasti kolektivních sportů v české republice, vol. 22, no. 1, jurisprudence, 13 (2013). 12. act no. 586/1992 col. on income taxes, as amended. http://openscholarship.wustl.edu/law_globalstudies/vol11/iss3/5 http://nv.fotbal.cz/ftp/cmfs/legislativa/stanovy/07_smernice_pro_evidenci_smluv_2.doc 13. jiří sabou, ex-player of zizkov and teplice, stated among his costs a fee for his agent who was supposed to negotiate contracts for him in manchester united, fc barcelona, olympique marseille or ac monaco even though none of these teams knew nothing about this average czech football player. �is whole matter was addressed by the european court of justice in luxembourg. see ruling of the ecj, oct. 22, 2013, case no. c-276/12 – jiri sebou v. financial directorate prague. http://curia.europa.eu/ (accessed 29 november 2013). also aktualne.cz, tomáš fránek, šéfa manchesteru se ptali na nízké daně českého fotbalisty, http://sport.aktualne.cz/sefamanchesteru-se-ptali-na-nizke-dane-ceskehofotbalisty/r~ad5e7aa0c44411e2a2010025900fea04/ (accessed 10 july 2014). 14. according to e�ective legal norms, it is possible to prolong an employment agreement only twice, shall it be prolonged one more time, the employment contract must be concluded for inde�nite time. 15. act no. 455/1991 col. trade licensing act, as amended. 16. ruling of the supreme administrative court, nov. 29, 2011, case no. 2 afs 16/2011-78, in this case, the court examined the activity of a professional hockey player and concluded that ‘the activity of a professional athlete cannot be easily subordinated under “employment” in the sense of the labor act’. it cannot be therefore excluded, resp. considered illegal the conclusion of other than labor contracts between players and their clubs. it is disputable, whether it is necessary to interpret the term ‘employment’ and forget to deal with the similar but tax term ‘employment’. �is simpli�cation then leads to a faulty conclusion of the court, which states: ‘… it is generally accepted in practice that professional athlete may – from a tax point of view – act as self-employed … to divert from this generally accepted practice, there would have to exist a very strong reason based on for example an explicit change of the legal norms. otherwise it is possible to argue by way of certain level of normative power of facticity.’ however this conclusion is wrong because the fact that something is happening illegally for a longer period of time cannot mean that this behavior shall become in accordance with the law. 17. see ruling of the supreme administrative court, june 1, 2005, case no. 2 afs 176/2004-140. http://curia.europa.eu/ http://sport.aktualne.cz/sefa-manchesteru-se-ptali-na-nizke-dane-ceskeho-fotbalisty/r~ad5e7aa0c44411e2a2010025900fea04/ 18. tomáš sluka, profesionální sportovec: právní a ekonomické aspekty, 123-130 (praha, havlíček brain team, 2007). roman vybíral, analýza judikatury vztahující se k postavení profesionálních sportovců v oblasti kolektivních sportů v české republice, vol. 22, no. 1, jurisprudence, 13 (2013). 19. ruling of the supreme administrative court, feb. 24, 2005, case no. 2 afs 62/2004-70. 20. art. 6 of the income tax act. 21. ruling of the supreme administrative court, nov. 29, 2011, case no. 2 afs 16/20011-78. 22. comp. alan simpson, taxation of non-resident entertainers and sportsmen: �e united kingdom’s de�nition of performance income and how it ought to be measured, no 11, washington university global studies law review, 693, http://openscholarship.wustl.edu/law_globalstudies/vol11/iss3/5 (accessed 10 july 2014). 23. karolina tetlak, taxation of international sportsmen, 11-17 (amsterdam, ibfd, 2014). 24. aktualne.cz, luděk mádl, čeští páni fotbalisti, pozor! platini vám provětrá peněženky, http://sport.aktualne.cz/cesti-pani-fotbalisti-pozorplatini-vam-provetra-penezenky/r~cbfd0fe2e7f511e2ac07002590604f2e/ (accessed 10 july 2014). 25. aktualne.cz, messi se vyplatí. 15 milionů eur jej zachrání před soudem, http://sport.aktualne.cz/messi-se-vyplati-15-milionu-eur-jej-zachrani-predsoudem/r~e29625f4df4e11e28518002590604f2e/ (accessed 10 july 2014). http://openscholarship.wustl.edu/law_globalstudies/vol11/iss3/5 http://sport.aktualne.cz/cesti-pani-fotbalisti-pozor-platini-vam-provetra-penezenky/r~cbfd0fe2e7f511e2ac07002590604f2e/ http://sport.aktualne.cz/messi-se-vyplati-15-milionu-eur-jej-zachrani-pred-soudem/r~e29625f4df4e11e28518002590604f2e/ © 2021 the authors public governance, administration and finances law review vol.  6. no. 1. (2021) • 65–72 . doi: 10 .53116/pgaflr .2021 .1 .6 the rule of law and the extraordinary situation andrás karácsony*¤, szabolcs nagypál**¤ * professor, eötvös loránd university, faculty of law and political sciences, department of legal and social theory, e-mail: karacsony@ajk .elte .hu ** head of the law school, mathias corvinus collegium (mcc); assistant professor, eötvös loránd university, faculty of law and political sciences, department of legal and social theory, e-mail: nag ypalszabi@ajk .elte .hu abstract: the various legal theorists dealing with the operation and effect of law have mostly examined situations that can be described as occurring in the usual, regular, normal state of social life . over the last half century, and particularly since the formation and later enlargement of the european union, the requirement of the rule of law has emerged as a  key topic . the test of the rule of law is as follows: it is necessary to examine in an abnormal situation or, as it were, in an extraordinary situation exactly how it is possible to take political decisions that are of fundamental importance to society while also guaranteeing that these decisions remain within the rule of law at all times . the aim of this study is to investigate how and by what constitutional mandate the hungarian government deviated from the normal constitutional situation in 2020 . the “state of exception” theorised by carl schmitt and giorgio agamben means the suspension of the law . it is important to understand their views in order to see that the hungarian situation in 2020 is utterly dissimilar to such a  state of exception . in short, we need to distinguish a  state of exception from an extraordinary situation, because the latter does not imply the suspension of law in general or, more specifically, the suspension of the rule of law, but that parliamentary and government decisions remain within it . the special legal order applied in an extraordinary situation is not in fact a suspension of democracy, still less of the rule of law. on the contrary, it actually falls within both: in a  state of national crisis, this situation is democracy itself and the rule of law itself, and – accordingly – strict laws (both democratic and imposed within the rule of law), or rather laws of cardinal importance, make its conditions and its functioning possible and regulate it . keywords: rule of law, extraordinary situation, state of exception, carl schmitt, giorgio agamben, pandemia 1. introduction the various legal theorists dealing with the operation and effect of law have mostly examined situations that can be described as occurring within the usual, regular, normal state of social life . in such circumstances, society is not in the throes of revolution, civil https://doi.org/10.53116/pgaflr.2021.1.6 https://orcid.org/0000-0003-4387-3488 https://orcid.org/0000-0002-2061-5569 mailto:karacsony@ajk.elte.hu mailto:nagypalszabi@ajk.elte.hu 66 andrás karácsony, szabolcs nag ypál public governance, administration and finances law review • vol.  6. no. 1.  war, or other horrors and disasters . in short, life proceeds in the normal and usual way . over the past century and a half, legal and political thinkers have not only analysed the state of law but have also formulated various requirements for the way that law operates . in this regard, the requirement to establish and maintain the legal state (rechtsstaat) and the rule of law has been set up quite specifically .1 the legal state, as the phrase implies, is not only about the law, but also about the state . over the last half century, and particularly since the formation and later enlargement of the european union, the requirement of the rule of law has emerged as a  key condition . the test of the rule of law is as follows: it is necessary to examine in an abnormal situation or, as it were, in an extraordinary situation exactly how it is possible to take political decisions that are of fundamental importance to society while also guaranteeing that these decisions remain within the rule of law at all times . the shocking experience of the past few months, dominated by the epidemic threat, shows that various misunderstandings and unfounded assumptions of one kind or another are held by the general public . the objective of this paper, which focuses primarily on the hungarian situation, is to show, that even this extraordinary situation can be managed and controlled within the normal framework of the rule of law . 2. the state of national crisis is not a state of exception the epidemic has shown how well governments in european countries were able to respond quickly and effectively to the ever-changing problems they have faced . the general expectation, of course, was that government policy in this particular, special situation should be consistent with what is permitted within the framework of the rule of law . however, criticisms have been levelled at hungary (such as donald tusk’s comment in der spiegel about the hungarian prime minister [müller & puhl, 2020] that the german legal and political thinker schmitt, who is known to have been unafraid of the state of exception and to have been a fervent supporter of adolf hitler in the early years of the national socialist regime, would have been proud of viktor orbán) which demon strate either a  complete lack of knowledge of the actual circumstances or an expression of mere political antipathy . the aim of the study is to shed light on how and by what constitutional mandate the hungarian government deviated from the normal constitutional situation in 2020 . it is worth clarifying a few concepts at the beginning of this inquiry . in doing so, we shall draw on various works by schmitt and related studies by agamben . both thinkers have analysed historical and political situations in which the normal, ordinary world of law does not prevail; more specifically, they have discussed extraordinary or exceptional situations . schmitt wrote a hundred years ago, whereas agamben continues to work today . because of the long-lasting influence they have had, they are both classics in this field . 1 the relationship between the concepts of the legal state and the rule of law (differences and similarities) will not be discussed in this paper. 67 public governance, administration and finances law review • 1. 2021 the rule of law and the extraordinary situation in the normal state (when the normal course of life is not disrupted by natural disasters or political and military crises affecting countries), the normal functioning of the legal system provides security through predictability . however, there are situations  –  outside the normal situation  –  where the traditional formal legal requirements are not sufficient to ensure the safe protection of life, but where the emergency itself must be addressed first and foremost . the security of a  society can be threatened not only by armed conflict, but also by a natural disaster or, as the case may be, an epidemic . a  health problem on a  massive scale can be as serious as a  multitude of violent actions on the streets . in anticipation of such a situation, the constitutional order of states which function under the rule of law provides for the legal possibility of deviating from the normal situation . it should be emphasised that it is only possible to deviate from the normal legal situation in a  legally regulated manner . as such, the confrontation with extraordinary situations, while modifying the normal order of law-making, is still part of the overall functioning of the rule of law . schmitt examined how the state of law deviates from the normal state in relation to the question of sovereignty . two of his books address this in detail: one, dictatorship (die diktatur, 1921), which examined the history of ideas on the question of sovereignty; the other, political theolog y (politische theologie, 1922) . in his 1921  work, he described two types of dictatorship, one based on pouvoir constitué (constitutional power) and the other on pouvoir constituant (constituent power): the commissar (i .e . the dictator entrusted with a  specific task) and the sovereign dictator. the distinction is based on the following question: what can guarantee the enforcement of the given norms and how can a new norm be created? the commissarial dictator always starts from the existing constitutional order and seeks to implement such constitutional order in a  situation where the application of constitutional procedures does not ensure the existence of a constitutional order accepted by the political community . in this state of exception, his task is to restore the normal legal (i .e . constitutional) situation . this kind of dictatorship is limited by time . schmitt gave the example of the roman republic, when it was the task of the dictator, elected for one year, to bridge the gap or conflict between the norms of law and the norm of law enforcement (the implementation of law) in the face of a  serious external threat, by making political decisions to resolve the emergency . in short, the commissar-like dictator suspends the constitution in order to defend that same constitution . schmitt compared this situation to a state of siege . in contrast, the sovereign dictator does not simply suspend an existing, specific constitution based on the law, but seeks, by its suspension, to create a situation in which a new constitutional order becomes possible . his activity is characterised by the pouvoir constituant, or constituent power . the pouvoir constituant knows only rights, but not obligations; a pouvoir constitué, on the other hand, knows only obligations and not rights . the relationship between pouvoir constituant and pouvoir constitué is captured by schmitt in a  parallel analog y with nature, as the difference between natura naturans (nature that creates) and natura naturata (nature that is created) . what the two types of dictatorship analysed by schmitt have in common, however, is that the possibility of  each occurring is legally regulated, and both aim to create a  constitutional state of 68 andrás karácsony, szabolcs nag ypál public governance, administration and finances law review • vol.  6. no. 1.  normality . the first does this by reinforcing the old status quo, the second by creating a new one . less than a year later, schmitt’s book on political theolog y appeared, in which there was no mention of the commissar at all, only of the sovereign . one might suppose that the author had radicalised his position on both the sovereign and, in line with this, the state of exception . the very first sentence of the work – ‘sovereign is he who decides on the state of exception’  –  has since been quoted countless times (schmitt, 2005, p . 5) . schmitt here focused on the final decision, i .e . the decision that cannot be deduced from the legal norm (this alone shows his departure from the rule of law principle) . underlying all this was his conviction that the state (politics) takes precedence over the law . the end of the legal order does not mean the end of all orders, as there is the order of the state (politics) . incidentally, we wish to note that it is here that schmitt’s dispute with hans kelsen lies, as kelsen interpreted the state order only in the context of legal regulation, and analysed only the normal situation of life . for schmitt, the sovereign’s power originates in itself; it is not derived from something else, nor is it a  power deduced from some norm . however, this sovereign is no  longer the same as the sovereign dictator formulated a year earlier, because that type of dictator was tied to the constitutional situation, whereas this sovereign is no longer tied . the sovereign therefore stands alone, with only the power behind it by which it can act as sovereign, and the suspension of the existing legal order is the end point of its potential for power . in essence, in the state of exception there is no legal order; there is only the order established by political will . what did agamben (2004) add to schmitt’s thoughts on sovereignty? he made it clear that the state of exception is a situation where, on the one hand, there are effective laws that are not applied and, on the other hand, there are actions that have no  place under the laws . they have power, but not the force of law . the state of exception, simply put, is a  no-man’s land . the no  man’s land lying between public law and political facts, between the legal order and life . it is therefore a  borderline situation, not just for the individual, but also for the community . it is not only totalitarian regimes which are characterised by the introduction of a state of exception . in the same way, according to agamben, the patriot act passed on 26  october 2001  and the other related provisions have created a  state of exception in the united states of america, which, among other things, has made it possible to detain people considered suspicious for many years without judicial review . this is of course a  rather paradoxical situation, since the law itself regulates the suspension of fundamental rights . the state of exception is therefore a  phenomenon where life and law are in conflict, i .e . where the decision-making domains of law and politics diverge . 3. constitutional principles of the special legal order in europe and in hungary what does all this have to do with the state of national crisis introduced in hungary as a  response to the epidemiological emergency? in short: nothing . in schmitt’s view, 69 public governance, administration and finances law review • 1. 2021 the rule of law and the extraordinary situation a  state of exception is always a  state of lawlessness, where only political power is manifested, whereas the hungarian state of national crisis was introduced on the basis of the constitutional order.2 however, it was precisely to make this difference clear that it was necessary to recall the interpretation of the schmittian state of exception, to show how wrong it is to equate the decisions taken in this epidemic situation with the state of exception . having examined the different theoretical approaches to law (the ideas of schmitt and agamben) that have paid particular attention to the operation of law in a  nonnormal situation, it is now worth briefly examining the constitutional framework of the hungarian legal response to the threat of epidemic . this will clearly show that the handling of the situation has not reached even close to a  level which could be called a  state of exception; in other words, the country has remained fully within the rule of law . it is important to note that the core of the criticisms and doubts concern the relationship and correlations between the special legal order and human rights. perhaps one of the decisive theoretical foundations to be taken into consideration is that the special legal order itself is not in fact a  kind of suspension of (liberal) democracy (the people’s rule), still less of the legal state and the rule of law but, on the contrary, it is part of both . in a  state of national crisis, this new situation is democracy itself and the rule of law itself, and – accordingly – strict laws (both democratic and imposed within the rule of law), or rather laws of cardinal importance, make its conditions and its functioning possible and regulate it . in international (public) law, two main groups of human rights can be distinguished .3 on the one hand, there are human rights that cannot be restricted in any respect, even in a special legal order, and which can therefore be considered absolute and retain the highest priority, as a  minimum requirement of constitutionality .4 the international covenant on civil and political rights, adopted by the united nations (un) in 1966, highlights seven such human rights . these are included in the group of rights that cannot be subject to restrictions pursuant to article 4(2) . two of the four 1949  conventions that are part of the so-called geneva conventions and which predate the international law developed by the un, namely the third convention on prisoners of war and the fourth on the status and protection of civilians (both dated 12 august 1949), contain similar provisions . furthermore, both of the 1977 additional protocols (both dated 8 june 1977) give priority to certain human rights: the first additional protocol provides for the protection of victims of international armed conflicts; the second additional protocol contains various legal provisions on the protection of certain victims of non-international armed conflicts, i .e . civil wars . the currently effective hungarian fundamental law (the country’s constitution) defines the following rights as inalienable rights: the right to life and human dignity; the  prohibition of torture, inhuman and degrading treatment or punishment; 2 a sophisticated contemporary press analysis comes to the same conclusion (techet, 2020). 3 for example, andrás jakab’s study provides an overview of the german constitutional law, which is a model for europe (jakab, 2007). 4 doctoral dissertations are also being written on the theoretical systematisation of regulations made under special legal order see, for example, mészáros, 2017. 70 andrás karácsony, szabolcs nag ypál public governance, administration and finances law review • vol.  6. no. 1.  the  prohibition of slavery and trafficking in human beings; the prohibition of medical or scientific experimentation without voluntary consent; the prohibition of human selective breeding or the use of the human body or parts of the human body for profit and furthermore the prohibition of human cloning ; the presumption of innocence (præsumptio innocentiæ); the right of defence; the principle of “no crime without law” (nullum crimen sine lege); and the prohibition of multiple convictions .5 on the other hand  –  and the vast majority of human rights fall precisely into this category – there are also human rights that cannot be regarded as unrestrictable by definition . for instance, in case of a  conflict (i .e . collision) between human rights, the necessity and proportionality (fundamental rights) tests guide the (possibly reciprocal) restriction .6 the exercise and enjoyment of these human rights and their enforcement may therefore be suspended in a special legal order, even beyond the limits allowed by the necessity and proportionality tests .7 the key feature of this is the temporary nature, however .8 constitutional law must always strike a balance (although of course it will never be, nor can it be, a  perfect one) between, on the one hand, ensuring that the protection against a given threat is secure and implemented by swift and effective measures,9 and on the other hand, protecting fundamental rights in a  constitutional democracy and the rule of law . the proportionality requirement ensures that the resulting concentration of power is limited to what is strictly necessary . the extraordinary legal order was introduced into the hungarian constitutional order in 1989, and its effects are still felt today . compared to the two previous authoritarian regimes, it is therefore a  legal achievement of the democratic transition and the establishment of the rule of law .10 in the new fundamental law of 2012, a  separate chapter is devoted to the special legal order  –  now bearing a  slightly changed name  –  which refers to the current defence and disaster management act (2011.  évi cxxviii.  törvény a  katasztrófavédelemről és  a  hozzá kapcsolódó eg yes törvények módosításáról) in terms of detailed rules . in the hungarian fundamental law, the qualified periods were supplemented in 2016 with rules on the protection of internal security, i .e . rules to be followed in the event of a  terrorist emergency, in response to the growing international threat of terrorist acts . the regulation of the special legal order can be regarded as very sophisticated in the hungarian system, if compared to other regulatory practices, for example in europe . in many countries, no distinction is made at constitutional level between different types of emergency . currently there are six types of emergencies in hungary: state of national crisis, state of emergency, state of preventive defence, state of terrorist threat, unexpected 5 on the question of fundamental rights and their limitations in english see kiss, 2013. 6 the necessity and proportionality test, for example, provides a constitutional safeguard in times of the special legal order (mógor & horváth, 2009). 7 the restrictions on fundamental rights were already essentially the same in principle in the previous constitution see kiss, 2008. 8 all measures must be of a temporary nature see kádár, 2014. 9 this fundamental contradiction (dilemma) of special legal orders is well summarised in the study by barnabás kiss (kiss, 2018). 10 for an analysis of the development of hungarian constitutional law see szabó & horváth, 2012. 71 public governance, administration and finances law review • 1. 2021 the rule of law and the extraordinary situation attack and state of extreme danger .11 the type of emergency just introduced in relation to the epidemic is the mildest of these .12 the promulgator is the parliament in the first four cases and the government in the last one, whereas there is no promulgation in case of an unexpected attack . in the last four cases, extraordinary measures may be taken by the government, in the first case by the defence council, and in case of a state of emergency by the president of the republic . it can be seen that, in terms of the structure of the state, the principle of separation of powers will temporarily change, and a temporary concentration of power may occur for practical reasons . once the emergency is over, this must be restored to its original state, and in the meantime strong checks and balances must be built in (primarily by the national assembly and the constitutional court) .13 in the first six months of 2020, the covid-19  epidemic fundamentally tested the european states and showed in practice the level of response and ability to react to various crisis situations in each country, including the legislative framework, the institutional system and infrastructure, and also the coordinating political leadership which brings nations together (sándor, 2020a) . obviously, the extent of the threat to basic needs was such that state intervention was urgently needed, beyond the means normally available under the legal system . the fact that there is no uniform name for the different modes and types of special legal order in the european union has made comparison between the various approaches applied in different european states considerably more difficult (sándor, 2020b) . in addition to legal incompetence and journalistic sloppiness, translation difficulties have often contributed to misunderstandings (kelemen, 2019) . a fundamental characteristic of crisis situations is the need to step outside the normal legal framework and systems of everyday life and to provide quick and decisive responses and reactions, which is what the institution called the state of national crisis provides .14 in such cases, a  natural tension is created between security and freedom: one could label this as a paradox of the rule of law, when the legal mandate or authority must be both sufficiently detailed and at the same time provide sufficient freedom to act (csink, 2017) . as is evident from this review, the state of national crisis introduced in hungary because of the epidemic has nothing to do with the state of exception coined by schmitt . the latter means the suspension of the law, whereas the solutions applied now were based on the constitutional order, the legal order . this means, simply put, that the critical references to schmitt, to dictatorship and to the dissolution of parliament simply have nothing to do with reality . to summarise, the extraordinary legal order in hungary is ‘a constitutional state, not a state of unconstitutionality’ (koja, 2003) . to put it another way, it is not the end of the legal state (or the rule of law), but  –  despite the extreme challenges facing the country and the state – precisely the celebration of it . 11 a typological analysis of the six periods can be found in jakab & till, 2016. 12 a short summary analysis of the measures introduced is also available in english in szilvay, 2020. 13 for a review of the safeguards and guarantees see till, 2019. 14 of course, the reasons behind the restrictions of the extraordinary legal order always reveal some political philosophy see fődi, 2020. 72 andrás karácsony, szabolcs nag ypál public governance, administration and finances law review • vol.  6. no. 1.  references agamben, g . (2004) . ausnahmezustand . suhrkamp . csink, l . (2017) . mikor leg yen a jogrend különleges? iustum aequum salutare, 13(4), 7–16 . fődi, k . (2020, april 10) . nekem kéne feláldozni magam, vagy mások áldozzák fel magukat értem? 444 . online: https://444 .hu/2020/04/10/nekem-kene-felaldozni-magam-vag y-masok-aldozzak-fel-magukat-ertem jakab, a . (2007) . a szükségállapot alapvető dilemmája és jogi természete a német alkotmányjog és irodalom tükrében . jogtudományi közlöny, 62(2), 39–49 . jakab, a . & till, sz . (2016) . a  különleges jogrend . in l . trócsányi & b . schanda (eds .), bevezetés az alkotmányjogba (pp . 485–513) . hvg-orac . kádár, p . (2014) . a kivételes hatalomtól a különleges jogrend idején bevezethető intézkedésekig . katonai jogi és hadijogi szemle, 2(1), 5–46 . kelemen, r . (2019) . a különleges jogrend szabályozása az eg yes alkotmányokban i . általános alapvetés, fogalmi elhatárolás . mag yar katonai jogi és hadijogi társaság . vélemények a katonai jog világából, 1 . kiss, b . (2008) . az  alapjogok korlátozása és  a  közérdek . in k . szamel (ed .), közérdek és  közigazgatás (pp .  169–182) . mta jti . kiss, b . (2013) . some remarks on the provisions of the new fundamental law of hungary regarding fundamental rights . in r . keča (ed .), harmonizaci‘a srpskog i mađarskog prava sa pravom evropske uni‘e (pp . 513–523) . pravni fakultet u novom sadu, centar za izdavačku delatnost . kiss, b . (2018) . az alapjogok korlátozhatósága különleges jogrendben, különös tekintettel a (büntető-) igazságszolgáltatásra vonatkozó rendkívüli intézkedésekre . in m . homoki-nag y et al . (eds .), ünnepi kötet dr . nag y ferenc eg yetemi tanár 70 . születésnapjára (pp . 555–556) . szte ájtk . koja, f . 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(2020, april 8) . tényleg carl schmittet kell olvasni, hog y megértsük a járványhelyzetet? azonnali . online: https://azonnali .hu/cikk/20200408_tenyleg-carl-schmittet-kell-olvasni-hog y-megertsuk-ajarvanyhelyzetet till, sz . (2019) . különleges jogrend . in a . jakab & b . fekete (eds .), internetes jogtudományi enciklopédia (ijoten) . online: http://ijoten .hu/szocikk/kulonleges-jogrend https://444.hu/2020/04/10/nekem-kene-felaldozni-magam-vagy-masok-aldozzak-fel-magukat-ertem http://www.spiegel.de/international/europe/donald-tusk-what-the-economy-needs-is-a-blitzkrieg-a-382b2e03-3f48-412c-9973-9a883e913f5e http://www.spiegel.de/international/europe/donald-tusk-what-the-economy-needs-is-a-blitzkrieg-a-382b2e03-3f48-412c-9973-9a883e913f5e https://precedens.mandiner.hu/cikk/20200413_a_szukseghelyzet_nemzetkozi https://precedens.mandiner.hu/cikk/20200915_nincsen_egyseges_mintaja_a_kulonleges_jogrendnek_beszelgetes_szilagyi_janos_edevel https://precedens.mandiner.hu/cikk/20200915_nincsen_egyseges_mintaja_a_kulonleges_jogrendnek_beszelgetes_szilagyi_janos_edevel https://doi.org/10.7208/chicago/9780226738901.001.0001 https://europeanconservative.com/2020/04/the-nature-of-hungarys-state-of-emergency https://azonnali.hu/cikk/20200408_tenyleg-carl-schmittet-kell-olvasni-hogy-megertsuk-a-jarvanyhelyzetet https://azonnali.hu/cikk/20200408_tenyleg-carl-schmittet-kell-olvasni-hogy-megertsuk-a-jarvanyhelyzetet http://ijoten.hu/szocikk/kulonleges-jogrend © 2021 the author public governance, administration and finances law review vol.  6. no. 1. (2021) • 7–17 . conference proceedings doi: 10 .53116/pgaflr .2021 .1 .2 israel facing covid-191 raphael cohen-almagor* ¤ * university of hull, chair in politics and director of the middle east study group (mesg), e-mail: r .cohen-almagor@hull .ac .uk abstract: this paper considers israel’s response to the challenges raised by the covid-19 pandemic with a specific focus on the invoked public policies and the related political, economic and legal concerns . i first provide some background information . then, i outline the keys for the initial success in confronting the coronavirus pandemic . three factors contributed to the initial israeli success, namely: the government’s swift and effective reaction to the pandemic; the close cooperation and coordination between the organisations that were mobilised to counter the pandemic, and the effective implementation of governmental policies . however, mistakes were made during the second wave of the pandemic . keywords: covid-19, health, israel, pandemic, public cooperation, resourcefulness, vaccination 1. introduction israel is a  country of 9 .3  million people and a  relatively small territory of 20,072  km2  (israel central bureau of statistics, 2021) . it is a  western democracy; life expectancy is, on average, 82 years which is quite similar to those of the western countries (cohen, 2019) . its demography is important to consider when we come to analyse the effects of covid-19  on society . 79% of the population is jewish . of them, 14% are ultraorthodox haredi (israel central bureau of statistics, 2018) . 21% of the population is arab–palestinian (times of israel, 2019) . this paper considers israel’s response to the challenges raised by the covid-19 pandemic with a specific focus on the invoked public policies and the related political, economic and legal concerns . the paper outlines the keys for the initial success 1 this paper is based on the key lecture “israel facing covid-19: challenges, problems and successes”, pandemic and governance: towards an approximation of covid-19’s legal, administrative, fiscal and political dilemmas, the eötvös józsef research centre of the university of public service, budapest (30 june 2021). it was further developed for the annual conference of the european consortium for political research (ecpr) (30 august – 3 september 2021). the author expresses gratitude to gary edles, yuval rotem, yoav tenembaum, aharon mor, eugenie de saint-phalle, avi ohry and ehud toledano for their constructive comments. https://doi.org/10.53116/pgaflr.2021.1.2 https://orcid.org/0000-0002-5869-9243 mailto:r.cohen-almagor@hull.ac.uk 8 raphael cohen-almagor public governance, administration and finances law review • vol.  6. no. 1.  in confronting the pandemic . three factors contributed to the initial israeli success, namely: the government’s swift and effective reaction to the pandemic, the close cooperation and coordination between the relevant bodies and organisations that were mobilised to counter the pandemic, and the effective implementation of the invoked governmental policies, especially the rapid vaccination of the adult population . however, mistakes were made during the second wave of the pandemic . i explain them in some detail . 2. first wave: some initial success the novel coronavirus, known as covid-19, is part of a  family of viruses that includes the common cold and respiratory illnesses such as sars . it affects the lungs and airways . for many people it causes mild symptoms, while for others it can be far more serious and can cause death . the disease is very infectious and spreads very easily . it spreads primarily through droplets of saliva or discharge from the nose when an infected person coughs or sneezes . the average incubation period – the time between coming into contact with the virus and experiencing symptoms  –  is 5  days, but it could be anything between 1 and 14 days (age uk, 2021) .2 the world first learned about covid-19 in december 2019 . a close scrutiny of the reports shows that between late december 2019  until june 2020, approximately 18,000 people were infected with the coronavirus in israel and 295 of them died due to a  medical condition directly related to the infection . one may conclude that israel’s handling of the pandemic at the initial stages was quite successful for the figures clearly indicate a tight control over the pandemic . three factors contributed to this success: first, the israeli government was quick to respond to covid-19 .  this aptitude is immensely important as pandemics spread quickly by human interactions . the first case of covid-19 in israel was recorded on 21 february 2020 (miller, 2020) . this patient was an israeli citizen who came from the diamond princess cruise ship and by the time of his return to israel, it was clear that he was carrying the infection . israel immediately barred travellers from certain countries from entering israel, and quarantined israelis arriving from those countries . thus, the following day, 22 february 2020, two hundred israeli students were quarantined after being exposed to a group of south korean tourists (miller, 2020) . on 9 march 2020, a mandatory two-week quarantine was announced for all people who visit israel from abroad because it was believed that within two weeks it is possible to discern if people are infected or not . on 12  march 2020, the israeli government ordered a  closure of all schools and universities (miller, 2020) . on 16  march 2020, thousands of public sector employees were told to either work from home or were placed on paid leave in order to minimise human interactions . then, on 19 march 2020, prime minister netanyahu declared a  national state of emergency that enabled him to wield special powers in dealing with the pandemic . the first israeli fatality, the 88 years 2 for a general overview, see bonotti & zech (2021). 9 public governance, administration and finances law review • 1. 2021 israel facing covid-19 old arie even, was recorded on 23  march 2020 .  even was a  holocaust survivor and reports of his death carrying all the implications that come to the news and to the hearts of people in israel when they hear the word “holocaust” . subsequently, on the very next day, 24 march 2020, prime minister netanyahu announced a new way of life for israelis, shutting down restaurants, malls, museums and all the places of social interaction . at that time, the very controversial digital tracking measure was also introduced . the second element of success has to do with effective coordination . since its foundation in 1948, israel had to prepare itself for the possible scenario of security crisis, or any other kind of disaster that may come upon the country . the wars that the country endured (1948, 1956, 1967, 1973, 1982–2000, 2006) pushed leaders to develop the necessary expertise to manage emergency situations . the establishment has also established strong partnerships and exchanges of knowledge between the israeli defence forces, the private sector and the public sector . in the face of the pandemic, the government, the israeli defence forces, the internal security force (shabac), the mossad, the health sector, and the private companies were mobilised to tackle the virus . this allencompassing and tight cooperation, as well as the thoughtfulness of the israeli population is well exemplified by the quick adjustment of the israel aerospace industries . normally, these industries produce private jets for the high-flying one percent of the world population; but early on during the pandemic, these industries started manufacturing ventilators, thinking that many people might be in dire need of these life-saving machines . this example attests not only to the coordination and the resourcefulness of the israeli people but also to their ability to take people with knowledge in one sphere and move them to another sphere by giving them the instruction and immediately transform a factory to support a nation in need . thirdly, the implementation of the policy was thorough . the israeli policies were carried out via close cooperation between the ministries, health services, the police corps and the israeli defence forces . soldiers were mobilised early on to support the national endeavour against covid-19 .  many people ensured that orders were obeyed . furthermore, private companies were hired to do the vaccination so that nurses could continue doing their routine work . efforts were made to ensure that the rapid vaccination campaign did not hinder the regular operation of the health sector . finally, israel introduced a  traffic light system to tag the level of infections . cities and towns were characterised by colours in accordance with the number of infections in the vicinity . green was the less severe; orange indicated that the number of infections was significant, while red indicated a  high number of infections . red towns and cities were closed so that no  one could enter, or exit the city under quarantine . this prudent measure enabled the continuation of operations in the green zones and avoided a situation where the entire country would be put in a  complete shutdown situation . at the same time, it should be noted that the system was not immune to flaws . prime minister netanyahu acted at times in accordance with partisan political interests and not in accordance to what was required of him to do . this was especially noticeable regarding ultraorthodox cities, such as bnei brak, that were not always classified as red, and their lockdown was not maintained as it was warranted . 10 raphael cohen-almagor public governance, administration and finances law review • vol.  6. no. 1.  3. second wave: the mistakes despite the initial success, in the second phase of the pandemic, the israeli crisis management has failed quite miserably . from 8  june until the end of october 2020  there were more than 300,000 infections and 2,537 people died as a result of covid-19 (israel central bureau of statistics, 2020) . these figures indicated that something went wrong in the israeli pandemic management . israel became the world record holder in the number of covid-19 carriers in relation to population size . the number of covid-19 verified carriers per 1 million people was more than 245, the highest in the world . during that period, there was a sharp jump of 2,236% (pilot, 2020; see also drukman, 2020) . what were the reasons for such an increase? by the end of may 2020, israel had witnessed a strong economic pressure stemming especially from owners of small businesses who were struggling to provide for their families . as a result of increased public pressure, israel opened up too early . the government also allowed large gatherings and the entering of international flights into israeli territory . consequently, a  large number of tourists arrived, some of them carried the virus . and the large gatherings where social distancing was not kept triggered the rapid spread of the virus . the decision to return to normal pre-covid life had direct economic rationale . it was also influenced by narrow political considerations . the government at that time was comprised of several parties, including ultrareligious haredi parties . the ultraorthodox population takes direct orders from their rabbis . they are less amenable to listening to the government . many of the leading rabbis opposed the government policies and ordered their followers to continue with their normal way of life . they refused to abide by the instructions to wear masks, keep social distancing and avoid crowded places . the haredi men continued to attend their places of study, and they continued to have large wedding celebrations and funerals (shraki, 2020) . they ignored the traffic light system and travelled between cities and towns . as a result, they transmitted the coronavirus all around the country .3 due to partisan political reasons, the government failed to implement its own policies . furthermore, the other minority group, the israeli palestinians, also did not abide by the government instructions . just like the haredi population, the israeli palestinians also held large gatherings, weddings and funerals (harel, 2020) . those transgressions also contributed to the rapid increase in the number of infections . 4. the vaccination campaign the vaccination campaign in israel was very successful . by now it has become a  truism that vaccination is the key in fighting covid-19 .  if a  country vaccinates its population 3 in comments on a draft of this paper, yoav tenembaum noted that there was a clear difference between the ashkenazi (of european origins) population, which, on the whole, tended to behave irresponsibly, and the oriental (of asian– african origins) haredi population, which, on the whole, heeded the instructions of the ministry of health. 11 public governance, administration and finances law review • 1. 2021 israel facing covid-19 than it has better chances to tackle the virus and get back to the life we knew before the outbreak of the global pandemic . in israel, the vaccination campaign was launched very early, on 19 december 2020 . the previous month the government signed an agreement with pfizer (pressnewsagency, 2020) . israel paid an advance sum of money and agreed to supply pfizer with data regarding the effects of vaccination on the israeli population . the exact details of the agreement between pfizer and the israeli government were never disclosed . prime minister netanyahu disclosed that he reached the deal with pfizer’s chief executive to speed up vaccine deliveries to israel, saying : ‘israel will be a global model state… israel will share with pfizer and with the entire world the statistical data that will help develop strategies for defeating the coronavirus’ (ben zion, 2021) . in terms of territory, israel is a  relatively small country . its population is less than 10  million people . it is world-renowned for its high-tech innovations and advanced information technologies that facilitate effective prioritisation, allocation and documentation of vaccines for eligible individuals . israeli health providers are efficient . its medical know-how is very advanced . i mentioned the effective cooperation between government, private and public stakeholders and its experience in carrying out rapid large-scale emergency responses . israel has a  highly developed public health system and very efficient health providers that have computerised records of all their members’ medical files . these databases also allowed for the effective monitoring of the effect of vaccines . thus, it is not difficult for israel to manage an effective vaccination campaign . these factors made israel an attractive partner for pfizer that has an obvious interest in attaining accurate information on the country’s implementation of the vaccine . one may assume that the agreement was designed to measure and analyse the epidemiological data arising from the product roll-out to generate and evaluate epidemiological and populational level vaccine data, and to determine whether herd immunity can be achieved . israel has rolled out the largest per capita vaccination campaign worldwide . within four months, it delivered more than 10 million doses of vaccine . by 19 april 2021, 54% of the entire population, and 88% of people aged 50  years or older, had received two doses (leshem et al ., 2021) . by 11  august 2021, 5,827,742  people received the first dose, and 5,406,232 received first and second doses (ministry of health, 2021a) . figure 1 below shows the importance of full vaccination, especially when the older population is concerned . in august 2021, the ministry of health recorded 85 .6  severe  covid-19  cases per 100,000  people among the unvaccinated over the age of 60, compared to 16 .3  per 100,000  people among those who are fully vaccinated . this makes the unvaccinated elderly more than five times as likely to experience a severe infection compared to immunised people . while the risk of experiencing severe symptoms increases with age for all people, it rises much more dramatically among those who are unvaccinated (sokol, 2021) . earlier during the pandemic crisis, it was thought that there was no  need to vaccinate people under the age of 20 . that reasoning has changed . in february 2021, the government decided to expand vaccination to people of the age of 16 and above (times of israel, 2021) . 12 raphael cohen-almagor public governance, administration and finances law review • vol.  6. no. 1.  on 12  august 2021, the health ministry (2021a) advised that 6,593  people died as a  result of the pandemic, and there were 42,203  people who were infected with the virus . 748 of them were hospitalised, 87 in critical condition . severe cases, ages 60+ pere 100k people severe cases by age groupe pere 100k people unvaccinated partially vaccinated fully vaccinated unvaccinated partially vaccinated fully vaccinated severe cases severe cases 100 80 60 40 20 0 250 200 150 100 50 0 11 14 17 20 23 26 29 01 04 12 –1 5 16 –1 9 20 –2 9 30 –3 9 40 –4 9 50 –5 9 60 –6 9 70 –7 9 80 –8 9 +9 007 july august age group figure 1 . severity of infection in 60+ people compared to other age groups source: sokol, 2021 . since may 2021, the israeli market has returned to full activity including shops, restaurants, theatres, sports and musical events . because israel relies heavily on tourism, in late may 2021 the government decided to open israel to tourists, acknowledging the risks that are involved in taking this decision . from an epidemiological perspective, tourism is amongst the most difficult challenges . 5. conclusion with all of its flaws israel is still a  success story . the table below (table 1) shows the long list of countries that performed worse than israel in tackling covid-19 .  in israel, one does not see millions of people infected and hundreds of thousands dead as a result of the pandemic . in 2021, israel was able, largely speaking, to return to almost a normal way of life . there are fears of another wave of infection . critics hold that the previous netanyahu government made a mistake in lifting all restrictions and the current bennet 13 public governance, administration and finances law review • 1. 2021 israel facing covid-19 government is mistaken for failing to institute tough restrictions right from the beginning of the current wave . further criticism is levelled against the government for permitting people to gather in the synagogues, especially during the high holidays of rosh hashana (new year), yom kippur and sukkot, all take place in september . a million people have not been vaccinated at all yet (corona virus, 2021) . according to the ministry of health, 97% of those aged 60 and over in the general society are vaccinated, compared with 81% in arab society and 80% in ultraorthodox (drukman, 2021) . on 13 august 2021, 5 .83 million people were vaccinated in one or two jabs, which is 79 .7% of the group that can be vaccinated (aged 12  and over) . in the arab population, only about 884,000  people were fully or partially vaccinated and they constitute 59 .1% of the total group eligible for the vaccine (globs, 2021) . there is an increased pressure on the unvaccinated to get the jabs as the majority tries to protect itself against the refusing minority . some urge for another closure while others, especially the business sector, press to prevent further closure . still, the successful vaccination campaign provides a  robust shield of defence . the key to the israeli success was rapid and full vaccination of the adult population . vaccination according to age appeared to be a good policy . resourcefulness of the israeli people and their cooperation and attentiveness are also crucial . resourcefulness manifested itself when nurses took the initiative and invited people from the street for immediate vaccination without an appointment in order to avoid destroying unused vaccines . this option seemed preferable to dumping the unused vaccines . similarly, cooperation and attentiveness are crucial . in august 2021, minister for regional cooperation issawi frej of the meretz party expressed sharp criticism of israeli palestinians who were traveling abroad, especially to greece and turkey, with fake vaccination or immunity documents . frej said: ‘arabs are flying in huge numbers to turkey and greece and showing an utter lack of responsibility in doing so… they also present faked documentation in order to return to israel’ [and dodge quarantine requirements] (arutz sheva, 2021) . frej, who is himself an israeli arab, called for an in-depth study of those concerns . providing people with the third jab proved to be effective . it protects, especially the more elderly people, against the harms of the delta variant of the coronavirus that was spreading in the country and in the world at large . with time, there is a decrease in the level of vaccine effectiveness among some adults . therefore, the government decided to vaccinate with this booster all people aged 12  and above (ministry of health, 2021b; cohen, 2021) . by late august 2021, almost 1 .5  million people received the third jab (mivzaklive, 2021) . resourcefulness, quick decisions and public cooperation are essential . they are decisive factors that distinguish between success and failure when fighting against the spread of the pandemic . 14 raphael cohen-almagor public governance, administration and finances law review • vol.  6. no. 1.  table 1 . cases and mortality by country country confirmed deaths case fatality deaths/100k pop. peru 2,127,034 197,102 9 .3% 606 .27 hungary 810,046 30,037 3 .7% 307 .44 bosnia and herzegovina 206,476 9,694 4 .7% 293 .67 the czech republic 1,675,179 30,369 1 .8% 284 .63 brazil 20,212,642 564,773 2 .8% 267 .60 san marino 5,194 90 1 .7% 265 .80 north macedonia 158,681 5,513 3 .5% 264 .61 montenegro 104,264 1,637 1 .6% 263 .13 bulgaria 429,628 18,288 4 .3% 262 .16 colombia 4,846,955 122,768 2 .5% 243 .88 argentina 5,041,487 108,165 2 .1% 240 .69 moldova 261,000 6,291 2 .4% 236 .71 slovakia 393,160 12,543 3 .2% 229 .97 belgium 1,143,127 25,279 2 .2% 220 .12 paraguay 455,680 15,341 3 .4% 217 .77 italy 4,406,241 128,273 2 .9% 212 .73 slovenia 260,372 4,433 1 .7% 212 .31 croatia 365,335 8,275 2 .3% 203 .44 poland 2,884,361 75,285 2 .6% 198 .27 the united kingdom 6,146,642 130,813 2 .1% 195 .73 mexico 2,997,885 245,476 8 .2% 192 .42 chile 1,624,823 36,138 2 .2% 190 .68 the united states 36,055,002 618,137 1 .7% 188 .32 ecuador 491,831 31,788 6 .5% 182 .97 tunisia 613,628 21,089 3 .4% 180 .33 romania 1,085,412 34,323 3 .2% 177 .32 spain 4,643,450 82,227 1 .8% 174 .67 uruguay 382,721 5,990 1 .6% 173 .03 portugal 990,293 17,502 1 .8% 170 .43 france 6,407,288 112,575 1 .8% 167 .87 andorra 14,873 129 0 .9% 167 .22 georgia 455,846 6,182 1 .4% 166 .17 panama 443,718 6,918 1 .6% 162 .91 lithuania 286,943 4,433 1 .5% 159 .07 armenia 232,610 4,658 2 .0% 157 .49 bolivia 478,671 18,004 3 .8% 156 .38 liechtenstein 3,107 59 1 .9% 155 .19 15 public governance, administration and finances law review • 1. 2021 israel facing covid-19 country confirmed deaths case fatality deaths/100k pop. sweden 1,106,821 14,658 1 .3% 142 .51 latvia 139,587 2,561 1 .8% 133 .89 luxembourg 74,437 825 1 .1% 133 .09 namibia 121,507 3,204 2 .6% 128 .44 south africa 2,546,762 75,201 3 .0% 128 .42 switzerland 729,024 10,915 1 .5% 127 .29 kosovo 110,756 2,273 2 .1% 126 .68 ukraine 2,346,560 55,937 2 .4% 126 .03 greece 521,399 13,087 2 .5% 122 .12 austria 664,133 10,751 1 .6% 121 .11 lebanon 573,959 7,952 1 .4% 115 .99 suriname 26,103 669 2 .6% 115 .07 iran 4,238,676 95,111 2 .2% 114 .71 russia 6,404,960 163,629 2 .6% 113 .34 germany 3,803,351 91,824 2 .4% 110 .45 the netherlands 1,921,568 18,175 0 .9% 104 .86 serbia 727,246 7,146 1 .0% 102 .89 costa rica 422,344 5,169 1 .2% 102 .41 ireland 315,385 5,044 1 .6% 102 .08 jordan 779,019 10,148 1 .3% 100 .46 seychelles 18,714 98 0 .5% 100 .38 estonia 135,512 1,277 0 .9% 96 .26 belize 14,578 341 2 .3% 87 .36 albania 134,201 2,460 1 .8% 86 .19 malta 34,953 428 1 .2% 85 .15 monaco 3,021 33 1 .1% 84 .69 bahrain 270,290 1,384 0 .5% 84 .33 honduras 309,029 8,202 2 .7% 84 .16 trinidad and tobago 40,574 1,144 2 .8% 82 .01 botswana 130,771 1,832 1 .4% 79 .52 oman 298,942 3,948 1 .3% 79 .36 bahamas 15,915 308 1 .9% 79 .08 eswatini 32,798 889 2 .7% 77 .43 west bank and gaza 318,181 3,615 1 .1% 77 .16 israel 910,569 6,571 0 .7% 72 .58 guyana 22,992 561 2 .4% 71 .67 canada 1,451,040 26,635 1 .8% 70 .86 guatemala 394,372 10,845 2 .7% 65 .32 turkey 5,968,838 52,437 0 .9% 62 .85 source: johns hopkins, 2021 . 16 raphael cohen-almagor public governance, administration and finances law review • vol.  6. no. 1.  references age uk (2021) . information about coronavirus (covid-19) . online: www .ageuk .org .uk/informationadvice/coronavirus/coronavirus-guidance/coronavirus/ arutz sheva (2021, august 8) . arab minister issawi frej: arab-israelis are faking covid documentation . online: www .israelnationalnews .com/news/news .aspx/311361?utm_source=s .+daniel+abraham+c enter+for+middle+east+peace+list&utm_campaign=7df5decb63-email_campaign_2020_07_ 22_12_06_copy_01&utm_medium=email&utm_term=0_929d521884-7df5decb63-138680861 ben zion, i . (2021, january 18) . israel trades pfizer doses for medical data in vaccine blitz . medical press . online: https://medicalxpress .com/news/2021-01-israel-pfizer-doses-medical-vaccine .html bonotti, m . & zech, s . t . (2021) . recovering civility during covid-19 (palgrave-macmillan open access) . online: https://doi .org/10 .1007/978-981-33-6706-7 cohen, m . (2019, december 4) . life expectancy continues to rise: modiin illit at the top of the list, arab communities at the bottom . maariv . (hebrew) . online: www .maariv .co .il/news/health/article-733318 cohen, m . (2021, august 29) . the third-dose vaccination campaign will be open to everyone; exemption from full isolation for vaccinated people returning from abroad . walla . (hebrew) . online: https://news . walla .co .il/item/3457109 corona virus (2021, august 29) . a million have not been vaccinated at all yet, 37,000 received the booster yesterday . (hebrew) . online: corona .main-zone .com/א-ולביק-ףלא-37-ללכ-ונסחתה-אל-ןיידע-ןוילימ/ drukman, y . (2020, september 6) . israel sees coronavirus infection rate spike to worrying 10% . ynet . (hebrew) . drukman, y . (2021, march 12) . more than 4 million israelis are vaccinated in two doses, and morbidity is declining . ynet . (hebrew) . globs (2021, august 24) . only a third of arab society got vaccinated? the mistake of nachman shai . (hebrew) . online: www .globes .co .il/news/article .aspx?did=1001382604 harel, a . (2020, august 20) . israel is having difficulty reducing its morbidity among the ultraorthodox and arabs and is approaching another closure . haaretz . (hebrew) . israel central bureau of statistics (2018) . israel’s population by religion and self-determination of degree of religiosity . (hebrew) . online: www .cbs .gov .il/he/mediarelease/pages/2018/תד-יפל-לארשי-תייסולכואaspx. 10-סמ-הרבחה-ינפ-חוד-ךותמ-םירחבנ-םינותנ-תויתד-תדימ-לש-תימצע-הרדגהו israel central bureau of statistics (2020, december 3) . increase in total mortality in israel during the corona period: data until the end of october 2020 . (hebrew) . online: https://bit .ly/3medurt israel central bureau of statistics (2021) . general information . (hebrew) . online: www .cbs .gov .il/he/pages/ default .aspx johns hopkins (2021) . coronavirus resource center . online: https://coronavirus .jhu .edu/data/mortality leshem, e . & wilder-smith, a . (2021, may 5) . covid-19 vaccine impact in israel and a way out of the pandemic . the lancet . online: https://doi .org/10 .1016/s0140-6736(21)01018-7 miller, e . (2020, march 16) . how is israel dealing with coronavirus? honest reporting . online: https:// honestreporting .com/how-israel-dealing-coronavirus/ ministry of health (2021a) . coronavirus in israel – an overview . (hebrew) . online: https://datadashboard . health .gov .il/covid-19/general ministry of health (2021b) . information on receiving a third vaccine against corona . (hebrew) . online: https://govextra .gov .il/ministry-of-health/covid19-vaccine/covid19-vaccine-3rd-dose/ mivzaklive (2021, august 23) . ministry of health: 1,482,503 received third-dose vaccination . (hebrew) . online: www .mivzaklive .co .il/archives/471517 pilot, a . (2020, september 6) . they let the idf defeat the corona – but it was too late . ynet . (hebrew) . online: www .ynet .co .il/article/rj9w31f ep#autoplay pressnewsagency (2020, november 13) . netanyahu says israel signed agreement with pfizer for coronavirus vaccine . online: https://pressnewsagency .org/netanyahu-says-israel-signed-agreement-with-pfizer-forcoronavirus-vaccine/ http://www.ageuk.org.uk/information-advice/coronavirus/coronavirus-guidance/coronavirus/ http://www.ageuk.org.uk/information-advice/coronavirus/coronavirus-guidance/coronavirus/ http://www.israelnationalnews.com/news/news.aspx/311361?utm_source=s.+daniel+abraham+center+for+middle+east http://www.israelnationalnews.com/news/news.aspx/311361?utm_source=s.+daniel+abraham+center+for+middle+east http://www.israelnationalnews.com/news/news.aspx/311361?utm_source=s.+daniel+abraham+center+for+middle+east https://medicalxpress.com/news/2021-01-israel-pfizer-doses-medical-vaccine.html https://doi.org/10.1007/978-981-33-6706-7 http://www.maariv.co.il/news/health/article-733318 https://news.walla.co.il/item/3457109 https://news.walla.co.il/item/3457109 http://corona.main-zone.com/מיליון-עדיין-לא-התחסנו-כלל-37-אלף-קיבלו-א/ http://www.globes.co.il/news/article.aspx?did=1001382604 http://www.cbs.gov.il/he/mediarelease/pages/2018/אוכלוסיית-ישראל-לפי-דת-והגדרה-עצמית-של-מידת-דתיות-נתונים-נבחרים-מתוך-דוח-פני-החברה-מס-10.aspx http://www.cbs.gov.il/he/mediarelease/pages/2018/אוכלוסיית-ישראל-לפי-דת-והגדרה-עצמית-של-מידת-דתיות-נתונים-נבחרים-מתוך-דוח-פני-החברה-מס-10.aspx https://bit.ly/3medurt http://www.cbs.gov.il/he/pages/default.aspx http://www.cbs.gov.il/he/pages/default.aspx https://coronavirus.jhu.edu/data/mortality https://doi.org/10.1016/s0140-6736(21)01018-7 https://honestreporting.com/how-israel-dealing-coronavirus/ https://honestreporting.com/how-israel-dealing-coronavirus/ https://datadashboard.health.gov.il/covid-19/general https://datadashboard.health.gov.il/covid-19/general https://govextra.gov.il/ministry-of-health/covid19-vaccine/covid19-vaccine-3rd-dose/ http://www.mivzaklive.co.il/archives/471517 http://www.ynet.co.il/article/rj9w31fep#autoplay https://pressnewsagency.org/netanyahu-says-israel-signed-agreement-with-pfizer-for-coronavirus-vaccine/ https://pressnewsagency.org/netanyahu-says-israel-signed-agreement-with-pfizer-for-coronavirus-vaccine/ 17 public governance, administration and finances law review • 1. 2021 israel facing covid-19 shraki, y . (2020, june 2) . special project: the ultraorthodox world’s dealing with the corona plague . n12 . (hebrew) . online: www .mako .co .il/news-israel/2020_q2/article-65cb8314c367271027 .htm sokol, s . (2021, august 11) . the israeli graphs that prove covid vaccines are working . haaretz . times of israel (2019, may 3) . israel’s population tops 9 million, including 45% of world jewry . online: www . timesofisrael .com/israels-population-tops-9-million-including-45-of-world-jewry/ times of israel (2021, february 3) . israel expands vaccination drive to anyone over the age of 16, starting thursday . online: www .timesofisrael .com/israel-expands-vaccination-drive-to-anyone-over-the-age-of16-starting-thursday/ http://www.mako.co.il/news-israel/2020_q2/article-65cb8314c367271027.htm http://www.timesofisrael.com/israels-population-tops-9-million-including-45-of-world-jewry/ http://www.timesofisrael.com/israels-population-tops-9-million-including-45-of-world-jewry/ http://www.timesofisrael.com/israel-expands-vaccination-drive-to-anyone-over-the-age-of-16-starting-thursday/ http://www.timesofisrael.com/israel-expands-vaccination-drive-to-anyone-over-the-age-of-16-starting-thursday/ public governance, administration and finances law review vol. 5. no. 1. (2020) • 38–47 . european legal regulation of cryptocurrencies through the aml scope pavel datinský* * pavel datinský, m .a . in law, phd candidate at the department of financial law, faculty of law, masaryk university in brno, the czech republic, email: felifox@seznam .cz, orcid: https:// orcid .org/0000-0002-0495-0439 abstract: this article deals with cryptocurrencies and its impact nowadays on the aml field at a  e uropean union level . th e article wi ll be di vided in to an in troduction, four chapters and a conclusion; it will define elementary information and defitions, will identify ways of practical use of cryptocurrencies, will introduce risks connected with the use of cryptocurrencies and will introduce legal regulation of cryptocurrencies by the v .  aml direction . in the conclusion the quality of communitary regulation will be evaluated and a few de lege ferenda tips will be devised to improve regulation for the future . keywords: cryptocurrencies, bitcoin, anti money laundering, european union, regulation 1. introduction cryptocurrency is a phenomenon of the last decade which attracts the attention of all legal and economic professionals and the non-professional public . since 2009, when the mysterious creator satoshi nakamoto launched the system of bitcoin, the amount of cryptocurrencies is steadily growing . there were around 3,200 (www .coinlore .com) known cryptocurrencies at the beginning of 2020 and there were an estimated 2 .9–5 .8 million of active cryptocurrency “wallets” at the end of 2017 (hilleman & rauchs, 2017) . although cryptocurrencies used by general public, which served as an inspiration for this article, form only a fraction of this amount . bitcoin serves as a basis for this article, since it is the oldest and probably the most well-known cryptocurrency, and thanks to many years of tradition, it is possible to excellently demonstrate the evolution of its value and other contextual qualities . in this article i will first define th e te rm cr yptocurrency and th e te rm vi rtual currency  –  which is semantically superior to the term cryptocurrency  –  and then i will demonstrate several ways in which cryptocurrencies are most used nowadays . subsequently, i will demonstrate the risks associated with the use of cryptocurrencies, based on my earlier publications (datinský 2018a; datinský 2018b), but in this article, unlike in the previous works, i will focus on the public risks that occur throughout the european union . from the public law risks associated with the use of cryptocurrencies, i will focus more on the area of money laundering and the financing of illegal transactions, including specific ca ses of using cryptocurrencies for illegal transactions . in the final part of this work i will evaluate the current community legislation of the field and its effectiveness in relation to combating money laundering and financing of illegal transactions . © 2021 the author doi: 10.53116/pgaflr.2020.1.2 mailto:felifox@seznam.cz https://orcid.org/0000-0002-0495-0439 https://orcid.org/0000-0002-0495-0439 https://doi.org/10.53116/pgaflr.2020.1.2 39 public governance, administration and finances law review • 1. 2020 european legal regulation of cryptocurrencies through the aml scope 2. literature overview expert papers and opinions of expert institutions of the european union were used to compose this paper in order to substitute missing legal or communitary definitions and to explain the functions of cryptocurrencies . communitary and czech regulations were used further in this paper to demonstrate the relevant regulation of the subject matter . specialised websites are cited in order to demonstrate recent trends and technical options in the scope of cryptocurrencies, too . finally, expert monographies about the subject matter of this paper were used and cited in this paper . 3. research an analysis of basic concepts and functions were performed in this paper . comparative method was used for a comparison of two elementary kinds of currencies (crypto and fiat) and analytic method was used for the demonstration of elementary functions and consequences of these two kinds . the inductive method was used to introduce special risks related to the use of cryptocurrencies, and finally, simple steps were deduced, capable of eliminating the presented risks . the research methods used in this paper were analysis, comparison, induction and deduction . 3.1. what is cryptocurrency? before defining the very term cryptocurrency, it is appropriate to define the term superior to cryptocurrency, namely, virtual currency, of which the cryptocurrency is a  subset . the specific legislative definition of virtual currency has been absent for quite a  long time in european law, and this concept has been defined by european professional institutions, but in a rather negative way, i .e . by defining what these virtual currencies are not . the european banking authority defined the virtual currency as “a digital representation of value that is neither issued by a  central bank or public authority nor necessarily attached to a  fc, but is used by natural or legal persons as a means of exchange and can be transferred, stored or traded electronically” (eba, 2014, 11) . financial action task force defined the virtual currency in a  very similar way as a “digital representation of value that can be digitally traded and functions as (1) a medium of exchange; and/or (2) a unit of account; and/or (3) a store of value, but does not have legal tender status in any jurisdiction. it is not issued nor guaranteed by any jurisdiction, and fulfils the above functions only by agreement within the community of users of the virtual currency” (fatf, 2014, 4) . some time later the european central bank has adopted a document in which it defined the virtual currency as “a digital representation of value, not issued by a  central bank, credit institution or e-money institution, which, in some circumstances, can be used as an alternative to money” (ecb, 2015, 33) . with the increasing interest in the use of virtual currencies by the general public for a  variety of purposes, which i will mention below, the need for national and community legislators to regulate this phenomenon has increased in proportion . at national level, 40 pavel datinský public governance, administration and finances law review • vol. 5. no. 1.  some member states have made at least partial regulatory efforts .1 at community level, however, a significant shift in the approach to and regulation of virtual currencies occurred only with the adoption of directive 2018/843 of the european parliament and of the council of 30 may 2018 amending directive (eu) 2015/849 on the prevention of the use of financial system for purposes of money laundering or terrorist financing, and amending directives 2009/138/ec and 2013/36/eu, or so-called “v . aml directive” (hereinafter referred to as “the v . aml directive”) . this directive now contains a specific legislative definition of the term virtual currency, defining it this way: “a digital representation of value that is not issued or guaranteed by a  central bank or a  public authority, is not necessarily attached to a  legally established currency and does not possess a legal status of currency or money, but is accepted by natural or legal persons as a  means of exchange and which can be transferred, stored and traded electronically“ (v . aml directive, article i, paragraph 2, letter d, no . 18) . it is therefore possible to deduce the basic conceptual characteristic of virtual currency from the above mentioned definitions, which is independence from the public authority of any state, whether related to the issuance of virtual currency or its circulation among users . virtual currencies can then be categorised according to whether they are issued by one or by a specific, narrower group of their users (centralised) or by an unspecified number, or more precisely by all its users (decentralised) and whether or not they are generally exchangeable among their users . bitcoin, for example, which serves as a basis for this article, is a  typical decentralised and exchangeable virtual currency . in the category of virtual currency centralised and unexchangeable, there can be a variety of values or currencies used in computer and mobile games, which players can buy or otherwise acquire in the game, and for which they can then buy various virtual items or services associated with the game itself . this implies that typical cryptocurrencies are decentralised virtual currencies, as they are generally issued by all or an unspecified number of users (miners) without the interference of any authority . since these virtual currencies are specifically encrypted by so-called cryptography to be readable and usable only by their users, the term cryptocurrency was derived from this method of encryption . the technical methods of origin and encryption, and technical aspects of cryptocurrency usage will not be dealt with in this work, as it would go far beyond its limited scope and other, technically more knowledgeable authors publish regularly on this matter (lánský, 2018; biryukov et al ., 2014) . through the optics of the legal order of the czech republic, the cryptocurrency unit can be described as a thing within the meaning of act no . 89/2012 coll ., the civil code, as amended, namely a movable, intangible thing . a similar categorisation of the cryptocurrency unit can with high probability be performed under other european national legal systems . as with classic money, or more precisely banknotes, the subject of discussion might be whether or not is the cryptocurrency fungible . for payment system participants 1 for example in the czech republic the national legislator specified by way of a general clause which subjects are liable to aml obligations and which subjects provide services connected to the virtual currencies; see section 2, paragraph 1, letter l) of act. no. 253/2008 sb., on selected measures against legitimisation of proceeds of crime and financing of terrorism. 41 public governance, administration and finances law review • 1. 2020 european legal regulation of cryptocurrencies through the aml scope aiming at transferring the value of a unit from one entity to another, it will be considered fungible, but each cryptocurrency unit is represented by a specific program code that makes it unique, just as each banknote has its own unique serial number, different from all others, and therefore might be considered irreplaceable for a certain group of public .2 through the investor’s optics a  cryptocurrency unit may be viewed as a  commodity and is also usually traded in the same way (hampl, 2014) . 3.2. ways of using cryptocurrencies despite the fact that, according to the above mentioned definitions, cryptocurrencies are not legal tender, they are used very frequently for payment . the indisputable advantage of using cryptocurrency as a  payment instrument is its minimal near-zero transaction costs and the considerable rate of transfer of its units among its users, not limited by geographical or political boundaries, which constitutes a significant advantage over foreign payments through standard payment service providers . to some extent, the anonymity of cryptocurrency users, who are almost entirely anonymous until the potential exchange of the cryptocurrency for a legal currency, may be considered an advantage, as they are only one member of a  large, unspecified group of cryptocurrency users . the reverse side of the coin of these benefits is that cryptocurrencies are a  very handy means of financing illegal transactions, terrorism, and can be used to legalise the proceeds of crime, as i will mention below . as the demand for cryptocurrencies continues to grow and new types are constantly appearing, this high demand logically pushes up the price at which cryptocurrency units can be purchased . this has resulted in considerable interest in cryptocurrencies by speculators and investors who hope that the units they buy will grow in value over time, which often happens .3 the first collective investment funds, focused on cryptocurrencies, start to operate nowadays . the first similar fund in central europe is a fund established by a czech management company, called the kryptofond (a  typical name), and managed by cfg funds s .r .  o .4 it was opened on january 31, 2018, but in the form of a  private fund for qualified investors, managed by its management company pursuant to section 15 of act no . 240/2013 coll ., based on article 3 of the european parliament and council directive no . 2011/61/eu (aifmd directive), under a  regime not subject to supervision by the national supervisory authority . in addition to the european cryptofund, there are a number of similar funds, the largest of which are based in the united states of america, and are managed by grayscale investments, llc,5 which focus more on individual cryptocurrencies and are not very diversified . however, these non-european funds are also special funds intended for qualified, private investors and are not publicly offered . 2 i.e. collector’s banknotes, or the very first bitcoin code, the so-called genesis block. 3 see www.kurzy.cz 4 see www.kryptofond.cz 5 see www.grayscale.co http://www.kurzy.cz http://www.kryptofond.cz http://www.grayscale.co 42 pavel datinský public governance, administration and finances law review • vol. 5. no. 1.  3.3. risks associated with the use of cryptocurrencies the aforementioned uses of cryptocurrencies as tools for paying or investing involve a  number of risks that endanger not only the users themselves, but also the wider public . for the purposes of this work, these risks could be categorised into (i) private-law risks, i .e . those that endanger cryptocurrency users themselves, without overlapping into the general public, and (ii) public-law risks, that endanger society as a  whole, nonetheless it is clear that private-law risks will extend to the public sector and, if they occur more frequently, endanger the wider public . likewise, the manifestation of public-law risks will also have an impact on the users themselves . i have dealt with the private-law risks in my earlier publications cited at the beginning of this article, so here i will focus on public-law risks with a transnational outlook; due to lack of geographical limitations of cryptocurrency use, these risks objectively threaten the whole, not only european, society . public-law risks usually fulfil the actus reus of some typical crimes against the currency and payment system of individual member states, which, thanks to the single currency of the european union, have a community dimension . a typical case may be the occurrence of entrepreneurs offering their goods or services within the eu and requesting that their goods or services be paid exclusively by cryptocurrency, which may put the entire financial system at risk, although this is not yet the case on a larger scale . with the growing volume of money exchanged for cryptocurrencies, the risks related to tax law also increase, as due to the anonymity of users, they do not have to voluntarily declare their profits on cryptocurrency investments, which in some cases can be quite substantial . the national tax authorities then do not have the possibility to check online wallets of cryptocurrency users in any way and are not able to find out by their control activity whether or not the given cryptocurrency user made an investment profit . however, the tax issue will not be discussed in this work . a significantly more dangerous public-law risk is the relatively easy possibility of legalising the proceeds of crime, conducting illegal transactions and financing terrorism, which is very difficult to detect due to anonymity of cryptocurrency users and the above mentioned cryptocurrency decentralisation; the anonymity of the specific cryptocurrency issuer is also very difficult to regulate . socially the most widespread cryptocurrency, bitcoin, allows all its users to transfer unlimited bitcoin units, which in fact means making payments for any goods or service between those users . however, due to the above mentioned anonymity of their users, it is not traceable for what the payment was made or to whom it was addressed, as opposed to normal payments using the common currency, the so-called “fiat” currency, and related banking services . this risk has long been perceived both at the level of individual member states (e .g . methodological instruction no . 2 of the financial analytic entity of the ministry of finance of the czech republic) and, over time, at eu (v .  aml directive preamble, article 8,9) and international (imf, 2016, p . 24) level . a typical example of illegal cryptocurrency transactions is the purchase of illegal goods (drugs, weapons, etc .) in the so-called dark web markets such as silkroad, which actually operates as an e-shop, even with individual vendor ratings by the users of this 43 public governance, administration and finances law review • 1. 2020 european legal regulation of cryptocurrencies through the aml scope “e-shop” themselves, where the visitor chooses the appropriate goods, filters out the ideal supplier with the most favorable rating and price, and then pays for that order in cryptocurrency . regardless of whether the outgoing payment goes to a  risk country in terms of article 9 of the v .  aml directive or whether its quantity exceeds the limits requiring client check or enhanced client check, the payment is made anonymously, immediately and the seller sends the order to the agreed address . this also benefits some terrorist groups, which finance their activities by these means and buy weapons for their attacks (whyte, 2019, p . 10–11) . the above mentioned abuse of cryptocurrencies for illegal purposes is not easy to combat and regulate . as mentioned previously in this article, the absence of a  specific issuer makes it impossible to supervise and in any way regulate the issue of cryptocurrency, or more precisely the actual creation of their units . in the absence of this subject, the question arises as to what other subjects in the cryptocurrency system are involved and whether these subjects can be effectively targeted with appropriate behavioral rules . these persons are then: (i) cryptocurrency users themselves, (ii) cryptocurrency miners, i .e . persons who actually create cryptocurrency units with their hardware, without having to buy them at the relevant cryptocurrency exchange offices, (iii) so-called digital wallet providers that allow cryptocurrency units to be stored by individual users, (iv) developers, (v) persons who initiate first offer of the cryptocurrency, so-called initial coin offering (ico), which is equivalent to ipo (initial public offering ) in the case of an initial issue of securities on a stock exchange, (vi) cryptocurrency exchange offices that allow the exchange of individual types of cryptocurrencies with one another, or the exchange of a  fiat currency with a cryptocurrency, (vii) cryptocurrency exchanges where individual cryptocurrencies are traded in the form of centralised and decentralised exchanges . cryptocurrency users are anonymous within the system, so it is difficult to control them technically . miners are only a subset of cryptocurrency users, so even those are not easy to regulate . developers are it professionals who develop and program new cryptocurrency systems, therefore their regulation is not desirable, at least at a  time when the use or creation of cryptocurrencies is generally not prohibited . ico initiators, like developers, are not persons who would actively participate in the use of cryptocurrencies as users, but only those who receive funding for developing new or improving existing cryptocurrencies, thus regulating this activity would not again address the above outlined problems with the legalisation of proceeds or the execution of illegal transactions . on the other hand, these are entities who come into contact with future users who want to exchange their fiat currency for a  new cryptocurrency, so they could be considered in an analogous way to those who provide currency exchange activities that i will mention below . it might seem logical to regulate cryptocurrency exchanges where cryptocurrencies and fiat currencies are 44 pavel datinský public governance, administration and finances law review • vol. 5. no. 1.  exchanged, but when they occur in decentralised form, it is only by way of a programmed software without a  particular owner or operator, to whom specific obligations could be imposed . regulation could therefore only affect centralised exchanges, subject to management and organisation by a  specific person . it might seem logical to regulate the provider of virtual wallets, but as of 9 january 2020,6 no identification data of its owner was needed for the creation and use of such a  wallet, as is the case when opening a  common bank account for fiat currency (pytlík, 2019, p . 65–67) . from all of the above, it seems the easiest to regulate the cryptocurrency exchange offices, in which real fiat currencies are exchanged for digital currencies and vice versa, since these entities allow a  person to enter the cryptocurrency system . when purchasing cryptocurrency units or exchanging them for a fiat currency, it is possible, and according to the author also desirable, to carry out an appropriate check of the client (the person performing the exchange) within the scope of aml . at the same time, an important fact is that the elementary objective of any person legitimising the proceeds of crime is to obtain some real return in the form of fiat currency, property or other benefits at the end of the legalisation process, whereas according to the author cryptocurrencies do not constitute a real return yet, therefore, one must use a virtual exchange office to achieve this . on the other hand, even the regulation of currency exchange offices and client checks when entering or exiting the system may not solve the problems outlined above and eliminate the risks of illegal use of cryptocurrencies, as the originally exchanged fiat currency may come from purely legal sources and cryptocurrencies purchased for it may then serve for financing illegal transactions . conversely, the true origin of the cryptocurrency, which is exchanged for fiat currency, may be debugged by the user and the exchange office does not have the means to verify such information in any way . in conclusion of this part of this article, it is worth mentioning that the anonymity of cryptocurrency users in the execution of transactions is not in all cases boundless . the european union finances and operates the so-called titanium project,7 which is exploring new ways and tools that can be used to deanonymise cryptocurrency transactions for the purpose of investigating crimes, and this project has seen partial success with, for example, the bitcoin cryptocurrency . however, the whole process is very complex and costly, and is not yet used on a larger scale . 3.4. cryptocurrency regulation within the scope of the v. aml directive the author’s above mentioned opinion on the necessity of regulation of exchange offices providers corresponds with the current community legal regulation of aml, implemented by the v . aml directive, article 8, where the need to include persons carrying out currency exchange activities and persons providing virtual wallet services among the liable entities within the meaning the aml is explcitely stated . in article 9, the directive then identifies 6 a new aml directive enters into force on 10 october 2020 and includes these providers as entities liable to aml obligations, as specified below. 7 see www.titanium-project.eu http://www.titanium-project.eu 45 public governance, administration and finances law review • 1. 2020 european legal regulation of cryptocurrencies through the aml scope the anonymity of cryptocurrency users as a reason for its potential misuse for the purpose of crime, which also corresponds to the above mentioned opinion of the author . the v . aml directive is to be seen as the first significant and highly anticipated step by the eu legislator towards effective regulation of cryptocurrency transactions and prevention of their use for illegal transactions, although it is rather a  small step towards comprehensive regulation of this area . below are listed some of the major innovations that the v . aml directive has brought . the basic benefit is the embodiment of legal definition of virtual currency in article 3 of the v .  aml directive, which has so far been defined only by individual professional institutions; furthermore, the definition of a virtual wallet provider, which is newly considered a  liable entity under the aml directive, and finally the classification of a  currency exchange provider between virtual currencies and fiat currencies as liable entity . the above is also related to the extended method of performing the in-depth check of the client according to article 13, which also allows the inspection to be carried out in accordance with “electronic identification means, relevant trust services as set out in regulation (eu) no 910/2014 of the european parliament and of the council or any other secure, remote or electronic identification process regulated, recognised, approved or accepted by the relevant national authorities”, which can greatly speed up the client’s in-depth check, for example by using client data from his/her personal bank, whose card, for example, carries out transactions and purchases cryptocurrency units . according to article i (29) of the v . aml directive, the above mentioned new liable entities are then subject to registration with the competent aml authorities, furthermore, exchange offices will even be subject to authorisation procedures, which should ensure faster and more transparent control of transactions provided by these entities, and should also ensure obligatory qualification of persons providing such services . the resulting effect is that if a  person exchanges a  fiat currency for a  cryptocurrency within the eu, the v .  aml directive requires that the exchange service provider, listed with the supervising aml authority, is obliged to check and identify the client . since very often a  virtual wallet service is offered along with an exchange for cryptocurrency to a customer, especially for new cryptocurrency users who are not yet using such wallet, the wallet and its public key are then identifiable and associated with the particular cryptocurrency user identified during the exchange upon receipt/assignment of the virtual wallet by the liable person (exchange office) . the resulting situation after the adoption of the v .  aml directive thus by far does not comprehensively address the question of the misuse of cryptocurrencies for illegal transactions from the perspective of aml, as the transparency of cryptocurrency transactions and the identification of persons carrying out transactions is still not ensured, although this is not due to lack of effort of community legislators, but mainly to nowadays’ technical possibilities . it is a  question of the future whether technologies for deanonymising cryptocurrency transactions, decentralised cryptocurrency exchanges, and similar means that serve cryptocurrency users and facilitate their illegal transactions, will be developed more effectively and faster . according to the author, the current eu regulation, with regard to the current technical possibilities, is appropriate and can be described 46 pavel datinský public governance, administration and finances law review • vol. 5. no. 1.  as rather good . the author considers the exclusion of persons operating centralised electronic cryptocurrency exchanges as liable entities as a  minor deficiency of the new regulation . 4. conclusion in the presented work, the basic notions of the examined material were defined, namely the the terms virtual currency, cryptocurrency and the most common uses of cryptocurrencies . the risks associated with the use of cryptocurrency as a  means of payment were also identified and the possibility of misuse of cryptocurrencies to legalise the proceeds of crime and finance illegal transactions was identified as a  major ri sk . the existence of thi s ris k is mainly due to the anonymity of cryptocurrency users and individual transactions, as well as the absence of an entity that could be subject to effective regulation, that is a  regulation that would prevent specific ways of misusing cryptocurrency payments . currently, the only entities that can be effectively regulated are virtual exchange service providers, where cryptocurrency is exchanged for fiat currency, and virtual wallet providers, that allow users to securely make payments with their cryptocurrency . these entities are therefore targeted by the current european aml legislation, embodied in the v . aml directive, which included these entities as liable entities within the meaning of the aml, therefore if, after t he d irective e nters i nto f orce i n t he e u, a   p erson w ill exchange fiat c urrency f or c ryptocurrency a nd w ill b e a ssigned a   virtual w allet, p roviders o f such services will be obliged to check the client and identify him/her . with this adjustment, virtual wallet owners who participate in selected virtual payments will be identified and will lose their anonymity . likewise, when someone exchanges a fiat currency for a virtual currency, he will be subject to obligatory identification or check under the aml rules . these benefits of the v . aml directive do not, of course, fu lly address the issue, but with regard to the current technical possibilities, more precisely the impossibility of disclosing the anonymity of cryptocurrency users, the current legal regulation may be considered appropriate . a  minor drawback may be the exclusion of centralised virtual exchanges operators among liable entities . references biryukov, a ., khovratovich, d ., & pustogarov, i . (2014) . deanonymisation of clients in bitcoin p2p network . ithaca: cornell university press, . https://arxiv .org/abs/1405 .7418 datinský, p . 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(2018b) . k právní regulaci kryptoměn [legal regulation of cryptocurrencies] [paper presentation] . international on-line conference quaerre . eba (2014) . eba opinion on ‘virtual currencies’ . european banking authority . https://eba .europa .eu/sites/ default/documents/files/documents/10180/657547/81409b94-4222-45d7-ba3b-7deb5863ab57/ebaop-2014-08%20opinion%20on%20virtual%20currencies .pdf ?retry=1 https://doi.org/10.1145/2660267.2660379 https://arxiv.org/abs/1405.7418 https://eba.europa.eu/sites/default/documents/files/documents/10180/657547/81409b94-4222-45d7-ba3b-7 https://eba.europa.eu/sites/default/documents/files/documents/10180/657547/81409b94-4222-45d7-ba3b-7 https://eba.europa.eu/sites/default/documents/files/documents/10180/657547/81409b94-4222-45d7-ba3b-7 https://doi.org/10.1145/2660267.2660379 https://doi.org/10.14712/23366478.2017.45 47 public governance, administration and finances law review • 1. 2020 european legal regulation of cryptocurrencies through the aml scope ecb (2015) . virtual currency schemes – a further analysis . european central bank . www .ecb .europa .eu/pub/ pdf/other/virtualcurrencyschemesen .pdf fatf (2014) . virtual currencies key definitions and potential aml/ctf risks . fatf report . www .fatf-gafi . org/media/fatf/documents/reports/virtual-currency-key-definitions-and-potential-aml-cft-risks .pdf hampl, m . (2014) . víceguvernér čnb „vrací úder” aneb polemika kolem bitcoinů pokračuje [the vice governor of the czech national bank “strikes back” or the polemic about bitcoins keeps going ] . roklen 24 . https:// roklen24 .cz/a/itznt/viceguverner-cnb-vraci-uder-aneb-polemika-kolem-bitcoinu-pokracuje hileman, g . & rauchs, m . (2017) . global cryptocurrency benchmark study . cambridge: university of cambridge . www .crowdfundinsider .com/wp-content/uploads/2017/04/global-cryptocurrency-benchmarking-study . pdf imf (2016) . virtual currencies and beyond: initial considerations . imf staff discussion note . www .imf .org/ external/pubs/ft/sdn/2016/sdn1603 .pdf lánský, j . (2018) . cryptocurrencies (1 . version) . c . h . beck . pytlík, r . (2019) . kryptoměny – dopady v oblasti aml [cryptocurrencies – impacts in the aml field] [thesis] . brno, masaryk university, faculty of law . https://is .muni .cz/th/tgjaa/ whyte, ch . (2019) . cryptoterrorism: assesing the utility of blockchain technologies for the terrorist enterprise . studies in conflict & terrorism . taylor and francis online . www .tandfonline .com/doi/abs/10 .1080/105 7610x .2018 .1531565?journalcode=uter20 legal sources eu laws ƿ directive (eu) 2018/843 of the european parliament and of the council of 30 may 2018 amending directive (eu) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, and amending directives 2009/138/ec and 2013/36/eu; ƿ directive (eu) 2015/849 of the european parliament and of the council of 20 may 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, amending regulation (eu) no 648/2012 of the european parliament and of the council, and repealing directive 2005/60/ec of the european parliament and of the council and commission directive 2006/70/ec; ƿ directive 2011/61/eu of the european parliament and of the council of 8 june 2011 on alternative investment fund managers and amending directives 2003/41/ec and 2009/65/ec and regulations (ec) no 1060/2009 and (eu) no 1095/2010 . czech republic laws ƿ act no . 253/2008 sb ., o některých opatřeních proti legalizaci výnosů z trestné činnosti a financování terorismu, as amended; ƿ act no . 89/2012 sb ., občanský zákoník, as amended; ƿ act no . 240/2013 sb ., o investičních společnostech a investičních fondech, as amended . ƿ methodological instruction no . 2 of the financial analytic entity of the ministry of finance of the czech republic, from 16 september 2013, designed for obliged entities, about the approach of the obliged entities for virtual currencies . www .financnianalytickyurad .cz/download/fileuploadcomponent-1133285 150/1506340773_cs_1481699516_cs_2-pokyn-mf_c-002_2013-09_metodicky-pokyn-o-pristupupovinnych-osob-k-digitalnim-menam .pdf https://doi.org/10.2139/ssrn.2965436 https://doi.org/10.1080/1057610x.2018.1531565 https://www.ecb.europa.eu/pub/pdf/other/virtualcurrencyschemesen.pdf https://www.ecb.europa.eu/pub/pdf/other/virtualcurrencyschemesen.pdf https://www.fatf-gafi.org/media/fatf/documents/reports/virtual-currency-key-definitions-and-potentia https://www.fatf-gafi.org/media/fatf/documents/reports/virtual-currency-key-definitions-and-potentia https://roklen24.cz/a/itznt/viceguverner-cnb-vraci-uder-aneb-polemika-kolem-bitcoinu-pokracuje https://roklen24.cz/a/itznt/viceguverner-cnb-vraci-uder-aneb-polemika-kolem-bitcoinu-pokracuje https://www.crowdfundinsider.com/wp-content/uploads/2017/04/global-cryptocurrency-benchmarking-study https://www.crowdfundinsider.com/wp-content/uploads/2017/04/global-cryptocurrency-benchmarking-study https://www.imf.org/external/pubs/ft/sdn/2016/sdn1603.pdf https://www.imf.org/external/pubs/ft/sdn/2016/sdn1603.pdf https://is.muni.cz/th/tgjaa/ https://www.tandfonline.com/doi/abs/10.1080/1057610x.2018.1531565?journalcode=uter20 https://www.tandfonline.com/doi/abs/10.1080/1057610x.2018.1531565?journalcode=uter20 https://www.financnianalytickyurad.cz/download/fileuploadcomponent-1133285150/1506340773_cs_1481699516_cs_2-pokyn-mf_c-002_2013-09_metodicky-pokyn-o-pristupu-povinnych-osob-k-digitalnim-menam.pdf https://www.financnianalytickyurad.cz/download/fileuploadcomponent-1133285150/1506340773_cs_1481699516_cs_2-pokyn-mf_c-002_2013-09_metodicky-pokyn-o-pristupu-povinnych-osob-k-digitalnim-menam.pdf https://www.financnianalytickyurad.cz/download/fileuploadcomponent-1133285150/1506340773_cs_1481699516_cs_2-pokyn-mf_c-002_2013-09_metodicky-pokyn-o-pristupu-povinnych-osob-k-digitalnim-menam.pdf https://doi.org/10.2139/ssrn.2965436 https://doi.org/10.1080/1057610x.2018.1531565 © 2019 dialóg campus, budapest public governance, administration and finances law review vol. 4. no. 1. (2019) • 58–70 . declaration of tax information in constitutional court cases in the czech republic tomáš sejkora* * judr . tomáš sejkora, phd, is assistant professor of financial law, department of financial law and financial science, faculty of law, charles university, the czech republic, and practicing lawyer . the author specialises in financial law, mainly in taxation and the issues connected with the provision of financial services on financial markets . he is the author of 2 books and more than 20 articles in prestigious journals, chapters in monographs and conference proceedings . he is also the editor of the journal daně a  finance [tax and finance] . this paper has been elaborated within the programme “progres q02 – publicization of law in the european and international context” which is realized in 2019 at the faculty of law of the charles university . orcid: 0000-00018405-5938 . (e-mail: sejkorat@prf .cuni .cz) abstract: this contribution is focused on the trend to demand various declaration of taxable persons via specific forms issued based only on the wide and vague authorisation of the ministry of finance of the czech republic . the aim of this paper is to familiarise readers with the relevant czech regulation and case law of the czech constitutional court and to provide conclusions evaluating this case law and legislation . the beginning of this paper is devoted to respective provisions of the tax procedure code, charter of fundamental rights and freedoms, act on vat and act on transactions evidence . then, the part dealing with the development of the constitutional court approach evaluating the practice of the tax administration follows . finally, the author provides his conclusions estimating future development in this issue . scientific methods used in this paper are analysis, induction, deduction and description . the aim of the contribution is therefore the evaluation how the recent case law will affect the current legislation and what steps should be made by the czech parliament . keywords: tax law; form; registered books of invoices return; electronic sales records 1. introduction tax evasion and illegitimate tax avoidance is the modern phenomenon of tax law and overall public regulation . they represent a huge problem affecting all of us since they have not been located just in the territory of one jurisdiction but increasingly across countries globally and also in the european union . therefore, it is more difficult to fight them without the joint effort of the international community . for this reason, international organizations like oecd, the european union etc . identify the approaches how to tackle tax evasion or illegitimate tax avoidance successfully and effectively . based on these approaches, member states are often obliged to implement the harmonised regulation usually affecting indirect taxes . however, member states of the 10.53116/pgaflr.2019.1.6 mailto:sejkorat%40prf.cuni.cz?subject= https://doi.org/10.53116/pgaflr.2019.1.6 59 public governance, administration and finances law review • 1. 2019 declaration of tax information in constitutional court cases in the czech republic european union are entitled to adopt legislative measures mostly of the administrative character to tackle tax evasion even in the harmonised fields of indirect taxation .1 this fact manifests itself by the different measures tackling tax evasion across member states, therefore the international cooperation in tax matters is the important instrument of the global attitude following the decrease of tax evasion and tax avoidance .2 still, the basic and the most useful instrument is the declaration obligation of the taxpayer usually by different types of forms . the czech authorisation of the ministry of finance to create tax forms is vague . that is why this contribution is devoted to two specific instruments adopted in the czech republic with the aim to tackle tax evasion and the review of the respective legal regulation by the czech constitutional court . it is because these two particular instruments (registered books of invoices return and electronic sales records) could serve as a  model example of the czech constitutional court assessment giving interesting opinions, which could be applied generally on taxation in the czech republic and can affect the future development of the declaration obligations of tax payers there . the aim of this paper is to provide its reader with the basic information about the relevant czech legislation, to familiarise the reader with two cases of the czech constitutional court and finally, to point out the relevant thesis important for the future . the used scientific methods are analysis, induction, deduction and description . 2. the basics of relevant tax regulation the general practice in the czech republic is to submit any tax declaration on the form devoted to the respective tax field . however, as it was mentioned before, the czech legislation regulates the authorisation of the ministry of finance really vaguely . according to section 72 par . 1 of the act no . 280/2009 coll ., tax procedure code, any application for the tax registration, notification of the change of the registered data and any tax declaration shall be submitted only by the form of the ministry of finance or on the printed output from the computer printer with the same data, content and order of data as the respective form has . nevertheless, no legal rule except section 72 par . 2 of the tax procedure code prescribes the content of form issued by the ministry of finance in tax matters . the only limitation of the ministry of finance is the purpose of the administration of taxes3 and the constitutional basis of the tax regulation . 2.1. the constitutional level of the tax regulation the constitutional level of the tax regulation is represented in article 11 par . 5 of the charter of fundamental rights and freedoms; taxes and levies shall be imposed pursuant to the act .4 from a grammatical perspective, such laconic and very general provision entitles the legislative body with the broad authority to regulate the tax system so far as the legislative body abide the form of the primary law in form of an act according to which the tax is imposed . still, the public authorities are not entitled to impose taxes of any kind even 60 tomáš sejkora public governance, administration and finances law review • vol. 4. no. 1. if the law abides the form of the act since taxes represent the legitimate infringement of the constitutionally protected property rights .5 firstly, every intention of the legislative body to impose a  new tax shall be supported by objective and rational arguments and criteria .6 then, the legislative body must abide the reservation of the law in the form of an act in tax matters . it does not necessary mean, the it is forbidden to regulate tax matters by the secondary legislation of the ministries and other central administrative offices in the czech republic . for the assessment of such reservation, the czech constitutional court established the rule, that the act shall contain all constitutive elements of the particular tax .7 consequently, according to the czech constitutional court, every constitutive element of the tax obligation must be regulated by the act and therefore, it is prohibited to allow the executive power to regulate such constitutive elements by the implementing secondary law . otherwise, the executive power will be entitled to construct the tax system independently of the will of the legislative body . therefore, if the secondary legislation does not regulate the constitutive element of the tax obligation, it is in accordance with the constitutional level of the tax regulation . as it is added by this court, “in order to adopt the constitutionally conform tax regulation, this regulation must be based on the act. other substantive conditions are not prescribed by constitutional law”.8 however, the reservation of the law in the form of act is not applicable just on the regulation of the substantive attributes of the imposition of the tax obligation but also on the complex regulation of the procedure how the respective tax shall be collected in the prescribed amount and time .9 based on this argument, the evaluation of the constitutional conformity should also take place in case of all procedural actions of the tax administrators and all rights and obligations of persons affected by the tax administration . now, it is clear that the field of the automatised and incidental declaration of data relevant to the tax administration is subjected to the constitutional review of the respective law . 2.2. a brief insight into the registered books of invoices return regulation since the 1st of january 2016, the taxpayers of vat have been obliged to submit registered books of invoices return if they carry out or accept taxable transactions defined by law .10 regarding the legal nature of this obligation, it is the tax declaration in the sense defined by the tax procedure code .11 it is evident that the purpose of this instrument is to create a  better and greater evidence about taxable transactions by the tax administrators in the czech republic with the aim to tackle tax evasion and illegitimate tax avoidance easier . based on the data collected by czech tax authorities by the registered books of invoices returns, they should be capable to identify weak spots within the distribution chain and to reveal respective fraudsters committing vat evasion because they enable matching of taxable transactions between suppliers and purchasers regulated by vat legislation through the reported data to tax authorities .12 back to the applicable regulation, the act on vat regulates this instrument by sections 101c to 101k . nowadays, the regulation of section 101d par . 1 and 101g par . 5 of the act on vat was amended due to the repeal of the original provisions by the czech 61 public governance, administration and finances law review • 1. 2019 declaration of tax information in constitutional court cases in the czech republic constitutional court .13 these provisions regulate the following elements of the obligation to submit the registered books of invoices return: • when is the taxpayer obliged to submit the registered books of invoices return? • what shall be declared in the registered books of invoices return? • what are the terms for the submission of the registered books of invoices return? • how can the registered books of invoices return be corrected or submitted after the deadline? • what is the procedure if the registered books of invoices return is not submitted by the taxpayer? • what sanctions can be imposed for the breach of the obligation to submit the registered books of invoices return? • what is the deadline for the imposition of the above-mentioned sanctions? • when shall the taxpayer not be penalised by the penalty for the late submission of the registered books of invoices return? • how to ask for the remission of the penalty for the late submission of the registered books of invoices return? however, the analysis of this instrument is not the objective of this contribution, therefore only the relevant provisions of section 101d par . 1, 101d and 101g par . 5 of the act on vat will be briefly mentioned later in the passage devoted to the relevant czech constitutional court finding . 2.3. a brief insight into the electronic sales records the second most important instrument helping the czech tax authorities to tackle tax evasion is the instrument called electronic sales records . the adoption of this instrument’s regulation initiated even more political and marketing campaign14 than the adoption of the registered books of invoices return because until the adoption of the act no . 112/2016 coll ., on transactions evidence (hereinafter: “act on esr”), no continual obligation of taxpayers to provide the tax authorities with the information about sales on real time basis had existed in the czech republic . due to this fact, the tax authorities had to count mainly on the incidental tax inspections reviewing the possible tax evasion when the recipient paid the price for the taxable transaction by cash .15 the remedy of this unsuitable state of the often-uninformed tax authorities should be represented by the electronic sales records . the philosophy of the electronic sales records is that every transaction made in cash or in a  similar way by the businessman of any kind shall be immediately reported to the tax authority and the tax authority should provide him the unique code for the unambiguous identification of the receipt in return . finally, the businessman shall provide his client with the receipt containing such unique code .16 the legal nature of this instrument is quite similar to the general evidence duty of every taxpayer according to section 97 of the tax procedure code, however, such evidence duty does not bind the taxpayer to provide the information about every transaction to the tax authorities immediately and to keep it in a prescribed form .17 62 tomáš sejkora public governance, administration and finances law review • vol. 4. no. 1. it could be generalised that the obligation of electronic sales records covers the payment in cash or in a  similar form if they form the part of the income of the businessman .18 the correct fulfilment of this obligation is capable to be considered an effective instrument in the field of the fight against business to customer tax evasion19 and therefore it can lead to the rise in the revenue of personal and corporate income tax and also of vat . that is why i consider this instrument very needy, because there is no better way how to tackle the shadow economy vat fraud which is based on the avoidance of the taxpayer registration duty to vat, when he reaches the prescribed threshold of his turnover .20 again, the analysis of this instrument is not the objective of this contribution, therefore, only the relevant provisions affected by the case law of the czech constitutional court will be briefly mentioned later in the corresponding passage . 3. constitutional court decisions in case of registered books of invoices return at the end of the year 2016, we were witnesses of the judicial review of the registered books of invoices return regulation by the czech constitutional court . in this case, the petitioners brought the action against the whole regulation of the registered books of invoices return . their reasons for this action was a  supposed infringement of the constitutional right for privacy, breach of the reservation of law in the form of act pursuant to article 11 par . 5 of the charter of fundamental rights and freedoms, infringement of the fair trial regulation and disproportionality between the interference of the fundamental rights of tax payers and adopted legal measure .21 as a result, the constitutional court did not abolish the whole reviewed regulation but just a few sections of the act on vat . in particular, it abolished section 101d par . 1 of the act on vat which stated that the taxpayer is obliged to declare prescribed data necessary for the tax administration in the registered books of invoices return and section 101g par . 5 of the act on vat which regulated the date when the call of the tax authority for the correction or completion of the registered books of invoices return is effective . however, for the purposes of the aim of this contribution, the finding and argumentation of the constitutional court devoted just to section 101d par . 1 of the act on vat is relevant . the problem of the original section 101d par . 1 of the act on vat was the designation of the data which should be declared by the registered books of invoices return because this specific tax return must be submitted only in the structure and by the form published by the tax administration . in fact, this regulation authorised the tax administration to determine the scope of the data provided by taxpayers to appropriate tax authorities based on its own discretion due to the lack of the precise determination of the provided data by the act on vat . hence, such legal construction is not something new in the czech legal order . we can meet this principle in the submission of applications related to public registries like business register, commercial register, etc . considering all circumstances, we can still find some distinctions in the legislative approach . in these cases, the legal obligation of the liable 63 public governance, administration and finances law review • 1. 2019 declaration of tax information in constitutional court cases in the czech republic entity is specified in the secondary legislation where it is stated what data should be provided by the respective form .22 therefore, the legal obligation of the liable entity is specified by the secondary legislation upon the prior authorisation by the act in accordance with article 4 par . 1 of the charter of fundamental rights and freedoms and the form prepared by the competent authority that only unifies the format of submissions made to a public authority . it is clear that such intergrade of the legal regulation was missing in case of the registered books of invoices return . the reason for this is obvious and lies in the general legal regulation of the tax declarations by the tax procedure code and existing legislative praxis in tax matters . according to section 135 par . 1 of the tax procedure code, every taxpayer is obliged to submit a  tax declaration if it is prescribed by law or if he is called to do so by the tax authority . in the tax declaration, the taxpayer is obliged to calculate his tax obligation alone and to declare all prescribed data and other circumstances relevant for the tax administration . now returning to the information mentioned above, every tax declaration must be submitted by the form created by the ministry of finance pursuant to section 72 par . 1 of the tax procedure code . probably, nobody is surprised that the intermezzo in the form of the secondary legislation prescribing data asked by the form for the tax declaration is missing again . all things considered, no secondary legislation prescribing the requirements and definitions of the scope of data required by tax declarations exists in the czech republic . most of the tax professionals anticipated the denial of the action by the constitutional court but finally, almost everyone was astonished by the argumentation of this court interpreting the reservation of law in form of an act from the point of view of tax declarations . although the whole regulation of the registered books of invoices return was considered by the constitutional court proportional, this court ruled that some provisions might contradict the constitutional order of the czech republic .23 this indicated contradiction concerned the original text of section 101d par . 1 of the act on vat and its discrepancy with article 4 par . 1 of the charter of fundamental rights and freedoms, pursuant to which duties may be imposed only on the basis and within the bounds of law and only while respecting the fundamental rights and freedoms . the provision of section 101d par . 1 of the act on vat imposed the obligation to provide tax authorities with the prescribed data necessary for the tax administration by the registered books of invoices return, but it did not define the scope of prescribed data and let them be defined by the electronic form of the ministry of finance . from this perspective, such form represented the specific kind of the secondary legislation which impose concrete obligations to an indeterminate group of persons (vat taxpayers) .24 thus, it was the ministry of finance as a  central office performing executive power of the state which was authorised to exercise the legislative power, which should be executed by the parliament . summarising its opinion, the constitutional court concluded that the act shall define at least the scope of data which must be declared by taxpayers . even so, it does not mean that it is not possible to authorise the ministry of finance to adopt a secondary regulation to determine the particular data required by the registered books of invoices return, but in this case, the ministry of finance has to do so in the form of legislation .25 it is clear, that in the case, when the registered books of invoices return was based on the same principle as every kind of tax declaration which requires the provision of the data by taxpayers without 64 tomáš sejkora public governance, administration and finances law review • vol. 4. no. 1. the specification of the scope of data by the legislation but instead by the form created by the ministry of finance, such practice is in contradiction to this finding of the constitutional court . it is striking that there is no attempt to take into account this opinion of the constitutional court in the czech republic currently . even so, it is capable to affect every tax declaration form used by the czech tax administration .26 however, it is still questionable if the constitutional court follows this opinion in case of other tax declarations like tax returns, which are the necessary precondition for the functioning of the tax system in the czech republic, or if this opinion is not generally applicable . although i did not expect such a  decision, i would like to emphasise the necessity to build the legal system also as predictable to recipients of law since the state has the power to collect taxes, levies and similar payments with public characteristics . when the legality of such basic instrument of tax law could be affected by the case law of the constitutional court due to the contradiction with the reservation of law in the form of an act, i am expecting an adoption of appropriate measures preserving the function of the tax system by the state . unfortunately, this is not the case in the czech republic . 4. the constitutional court decision of the case of electronic sales records one year later, the decision of the case of the judicial overview of the electronic sales records was made . the respective action was brought before the constitutional court by a group of 41 members of the chamber of deputies and the unlawfulness was seen in the breach of the procedural rules regulating the adoption of law in the form of act . further argumentation concerning the unconstitutionality of some provisions of the act on esr was based on the allegation that such provisions represent the unconstitutional disproportional infringement of the fundamental right to do business, the right to own property and the right for privacy .27 for the purpose of this contribution, i do not consider the analysis of the legislative procedure relevant for the possible future of declarative obligations of taxpayers, therefore the following part is devoted to the review of the act on esr from the perspective of the breach of the right to do business and the right to own property, respectively the right for privacy . first of all, it must be highlighted that the act on esr did not constitute any new tax obligation which had not existed before the adoption of this act . for this reason, the task of the constitutional court was to assess, whether this new form of the evidential obligation of taxpayers is unreasonably burdensome or not .28 secondly, the constitutional right to do business belongs by its nature into the group of economic, social and cultural rights regulated by the charter of fundamental rights and freedoms . why is this aspect so important? the constitutional court emphasises that the economic, social and cultural rights stated under article 41 par . 1 of the charter of fundamental rights and freedoms are not directly applicable in the same way as the fundamental human rights and political rights, therefore there exists only a limited scope of the constitutional review of the adopted legislation in such fields .29 therefore, the compliance of the act on esr was assessed based 65 public governance, administration and finances law review • 1. 2019 declaration of tax information in constitutional court cases in the czech republic on the application of the test of rationality, not the test of proportionality as happened in case of the registered books of invoices return review . the test of rationality consists of the four following steps:30 1 . the definition of the essential content of the concerned law; 2 . the evaluation whether this essential content of the concerned law is affected by adopted legislation; 3 . the assessment whether the adopted legislation follows a legitimate aim; 4 . the consideration whether the adopted measures are rational .31 considering the second step of the rationality test, the essential content of the concerned law will be affected only when the state power adopts unreasonable obstacles of public nature affecting the free choice and exercise of the permitted activities by persons owning necessary prerequisites for such activities .32 all things considered, the constitutional court concluded that the essential content of the right to do business is not affected by the adopted regulation of the electronic sales records .33 then, during the assessment of the legitimate aim of adopted measures, the constitutional court agreed with the czech government that the electronic sales records supplements the already existing system imposing on taxpayers the obligation to declare the tax relevant information, tries to equalise the market environment and promotes the effectivity of the tax administration in all segments of the market regardless the size of the taxpayer .34 finally, the constitutional court proceeded to the forth step of the test of rationality when it concluded that the current state of the knowledge does not provide comparable alternatives to the electronic sales records which constitutes a  lower burden for taxpayers .35 summing up, the constitutional court did not find any part of the act on esr in contradiction to the basic right to do business as it is granted by the charter of fundamental rights and freedoms . however, a different approach and conclusion was implemented by the constitutional court assessing the conformity of the electronic sales records from the perspective of the right for privacy . due to the fact that the right for privacy represents a fundamental human right, such assessment of the constitutional conformity must be based on the application of the three-phased proportionality test consisting of:36 1 . test of the capability of adopted measures to reach the objective pursued; 2 . test whether the adopted measures are the gentlest if there is a  plurality of the adoptable measures; 3 . assessments whether the negatives do not overshadow observed positive effects of the adopted measures . at the beginning of the assessment, the constitutional court referred to the already applied test of rationality in this case which provides the conclusion for the first and second phase of the proportionality test (i .e . the electronic sales records are capable to achieve the observed objective and this measure is the gentlest to the comparable alternatives) .37 concerning the third phase of the proportionality test, this court started with the general declaration that the electronic sales records regulation does not constitute the disproportional breach of the right for personal privacy,38 however, particular provisions of the act on esr do . 66 tomáš sejkora public governance, administration and finances law review • vol. 4. no. 1. the first affected provision relevant for the aim of this paper is section 5 letter b) of the act on esr according to which the cashless payment made pursuant to the order of  the payer via the payee, who is obliged to record the respective sale,39 shall also be recorded . for sure, there is no doubt that records of cashless payments improve the effectivity of the electronic sales records, however, the court warned that such payments are potentially traceable . therefore, the system of electronic sales records should provide taxpayers with the option to decide not to be subjected to this regulation to minimalise the risk of the potential vulnerability of their autonomous sphere of privacy .40 as it could be derived from the previous case law of the constitutional court, the situation when the state disposes of the large scope of information without the necessity of their collection is not in accordance with the constitutional law .41 this opinion is important because the tax procedure code had already been regulating instruments for the collection of the information about cashless payments provided usually by payment institutions . therefore, in case the technological development or other eventuality will cause a  factual inability of tax authorities to trace the cashless payment, then the legislative body will have a space for an adoption of an appropriate legislative measure .42 i cannot admit anything against such an approach since it is foreseeable from the settled case law of the constitutional court, moreover, when it is constantly reminded by this court that the unique position of the state in the human society does not allow to adopt any kind of measure even if it is a most effective one considering the pursued aim .43 the second provision, which was abolished by the constitutional court, was section 20 par . 1 letter b) of the act on esr stating that one information noted on the receipt about the registered sale delivered to the payer is the tax identification number of the payee . the tax identification number is created from the code “cz” and from the general identifier44 which is, in case of natural persons, the personal number . applying the first phase of the proportionality test, it is true, that it could be derived from the current case law of the czech supreme administrative court and the processing of the personal number by public authorities is used to secure the fastest possible and most effective processing and searching for data because the personal number appears in several registries and electronic databases .45 however, this personal data is quite important in the czech republic and the regulation grants it the higher protection by the specific act on evidence of residents and personal numbers . on the other hand, this specific law does not forbid the application of the general protection of the personal data regulated by the act no . 101/2000 coll ., on personal data protection and newly by the gdpr . and that is why the usage of the tax identification number by the electronic sales records did not pass the second and third phase of the proportionality test . the act on esr defines extra identifiers as the security code of the taxable person, signature code of the taxable person and fiscal identification code used by the electronic sales records granting the sufficient identification of the sale and the payee .46 it is clear that the electronic sales records are using the specific identifiers which do not directly invade into the autonomous zone of the taxable person, therefore, there is no legitimate reason to print also the tax identification number consisting also from the personal number of natural persons to every issued receipt and to expose the taxable person to a hardly limited risk of a malfeasance of this really fragile personal data .47 from these reasons, the law requiring the issuing of the receipt containing also the personal 67 public governance, administration and finances law review • 1. 2019 declaration of tax information in constitutional court cases in the czech republic number is the unconstitutional breach of the right for privacy protecting humans form an illegal gathering, publication and other misuse of the personal data .48 finally, it does not matter that such personal data could be publicly traceable, for example from the collection of documents held by commercial registries or cadastral registries . the last group of provisions abolished by the constitutional court was dealing with the authorisation of the ministry of finance to adopt the secondary regulation in particular matters related to the constitutive elements of the electronic sales records . however, the constitutional court provided the same thesis as it had done before in the case devoted to the review of the registered books of invoices return and the reservation of law in the form of act as it was described above in this paper . therefore, it is useless to analyse this part of the finding for further conclusions . 5. conclusion tax law is exposed to the swirl of issues it has to deal with in europe, for example the application of the non bis in dem principle and the fight against tax evasion and illegitimate tax avoidance . in the czech republic, it is also a question, what administrative obligations could be used to tackle tax evasion and simultaneously be in accordance with the constitutional order . it is clear that the basic administrative obligations of taxable persons are the declarative one . however, with the promotion of digitalisation and the acceleration of the activity of human society, there is a perceptible tendency to automatise the collection of the data related to tax administration . at the same time, the adoption of respective measures imposing the specific obligations on taxpayers must be in accordance with the constitutional order and sometimes it could be quite difficult for the legislative body to find the right balance between the interference into the protected basic or fundamental rights of the individual and the effective legal regulation . historically, the constitutional court dealt with two cases regarding the newly adopted declarative obligations of taxable persons . the first reviewed legislation regulated the registered books of invoices return and the findings of the constitutional court provided us with valuable guidelines how the reservation of law in the form of act must be interpreted . it stated that it is not possible to authorise only the ministry of finance generally by an act to issue the obligatory form used to declare required important tax information when no legislation is provided for the definition of the scope of the information required by the form . such conclusion is even more burdensome when no tax legislation had been prescribing the scope of the required information by any declaration of the taxable person before the delivery of the above mentioned constitutional court’s decision and now, only the act on vat prescribes which information can be required by the registered books of invoices return after its adjustment . such state of the regulation is unbearable from the perspective of the case law of the constitutional court . it must be thereto concluded that any form which shall be used to declare tax relevant data and circumstances by taxable persons must be created based on the legislative definition of the scope of the required information and it is highest time to take the constitutional court’s decision into consideration by the parliament . 68 tomáš sejkora public governance, administration and finances law review • vol. 4. no. 1. also, the second analysed case dealing with the issue of the electronic sales records provided us important information how the tax declaration of the tax relevant information should look like . nowadays, tax authorities must dispose with the effective instruments helping to reveal the disguised tax evasion . therefore, it is legitimate to adopt measures with the nature of the automatised collection of the tax relevant data . however, such automatised mechanism of the collection of the tax relevant data could collect only those that cannot be collected by tax authorities by the already existing instrument . even so, such instrument is not the most effective one . secondly, the tax declarations and tax receipts or invoices shall contain the less personal data as possible with the stress on the specific vulnerable one like the personal number . on the other hand, i do not deduce the conclusion like some other tax law professionals49 that the opinion of the constitutional court prohibits the usage of the personal number by all administrative forms and its publication in the publicly accessible registries and databases . contrary to that, according to my opinion, the usage or publication of the personal number is not en bloc prohibited, but there is a  requirement that the provision of the data on the administrative form or its publication in the publicly accessible source of information must be legitimate . i believe, the constitutional court emphasises that the form can require the personal number in the case that this personal identifier is necessary for the correct identification of the person since the law does not provide alternatives how to identify him . so far as the act on esr regulated other three identifiers of the recorded sale securing its correct identification, it was not legitimate to demand other identifiers of the taxable person with the special protected status, such as the personal number . all things considered, my opinion is, that the form used for the declaration of the tax relevant data could demand the statement of the personal data, however, the future of the tax identification number assigned to natural persons is at the edge of its existence . 69 public governance, administration and finances law review • 1. 2019 declaration of tax information in constitutional court cases in the czech republic references 1 antonio pedone, tax harmonization policy in a changing european union, 12 (rome, 2004), www .senato . it/documenti/repository/commissioni/comm06/indagini%20conoscitive/pedone%20allegato%202 .pdf (accessed 08 june 2018) . 2 riccardo scandroglio, recent developments in international vat/gst tax policy, 9, in sebastian pfeiffer, marlies ursprung-steindl (eds .), global trends in vat/gst and direct taxes (vienna, linde, 2015) . 3 pursuant to section 72 par . 2 of the tax procedure code, it is possible to demand only the necessary data for the administration of taxes by forms and their attachments . 4 milan bakeš, marie karfíková, petr kotáb, hana marková, finanční právo, 6th edition, 158–159 (prague, c . h . beck, 2012) . 5 compare the constitutional courts of the czech and slovak federative republic, pl . ús 22/92 . 6 ibid . 7 compare constitutional court, pl . ús 3/95 . 8 constitutional court, ii . ús 644/02 . 9 karel klíma, listina a její realizace v systému veřejného a nového soukromého práva, 195 (prague, wolters kluwer, 2014) . 10 pursuant to section 101c of the act no . 235/2004 coll ., on vat . 11 ladislav pitner, kontrolní hlášení od 1 . 1 . 2016, 33, in daně a právo v praxis [tax and law in praxis], no . 2 (2016) . 12 časté dotazy a odpovědi (ke kontrolnímu hlášení), www .financnisprava .cz/cs/dane/dane/dan-z-pridanehodnoty/kontrolni-hlaseni-dph/dotazy-a-odpovedi (accessed 01 august 2018) . 13 the attention to the respective finding will be paid later . 14 daniela hrabětová, stanislav kouba, markéta patzenhauer, zákon o evidenci tržeb, komentář, ix (prague, wolters kluwer, 2016) . 15 explanatory memorandum to the act no . 112/2016 coll ., on transactions evidence, 19 . 16 stanislav kouba, evidence tržeb v české republice (1 . díl), 26, in finanční, daňový a účetní bulletin, no . 4 (2015) . 17 stanislav kouba, evidence tržeb v české republice (2 . díl), 39, in finanční, daňový a účetní bulletin, no . 1 (2016) . 18 radim boháč, evidence tržeb v české republice s ohledem na rozhodnutí ústavního soudu, in ústavnoprávne východiská finančného práva: zborník príspevkov z medzinárodnej vedeckej konferencie bratislavské právnické fórum 2018, 6 – 16 (bratislava, univerzita komenského v bratislave, právnická fakulta, 2018) . 19 tomáš sejkora, finančníprávní nástroje boje proti únikům na dani z přidané hodnoty v prostoru evropské unie, 97 (prague, leges, 2017) . 20 sjibren cnossen, vat coordination in common markets and federations: lessons from the european experience, 599, in new york university tax law review, no . 2 (2010) . 21 petition to the constitutional court proposing the abolition of several provisions of the act on vat regulation, the registered books of invoices return as of 3 december 2015, http://soukromnici .cz (accessed 01 august 2018) . 22 compare the provision of § 21 act no . 304/2013 coll ., on public registries of legal and natural persons . this secondary law represents statute no . 323/2013 coll ., on requirement of forms for submission in case of registration, change or abolition of data in public registries . 23 article 68, constitutional court, pl . ús 32/15 . 24 article 69, constitutional court, pl . ús 32/15 . 25 article 70, constitutional court, pl . ús 32/15 . 26 except the registered books of invoices return which regulation was amended by the amendment to the act on vat . 27 article 5 and 7, constitutional court, pl . ús 26/16 . 28 article 67, constitutional court, pl . ús 26/16 . http://www.senato.it/documenti/repository/commissioni/comm06/indagini conoscitive/pedone allegato 2.pdf http://www.senato.it/documenti/repository/commissioni/comm06/indagini conoscitive/pedone allegato 2.pdf http://www.financnisprava.cz/cs/dane/dane/dan-z-pridane-hodnoty/kontrolni-hlaseni-dph/dotazy-a-odpovedi http://www.financnisprava.cz/cs/dane/dane/dan-z-pridane-hodnoty/kontrolni-hlaseni-dph/dotazy-a-odpovedi http://soukromnici.cz 70 tomáš sejkora public governance, administration and finances law review • vol. 4. no. 1. 29 article 185, constitutional court, pl . ús 83/06 . 30 zdeněk červínek, standardy přezkumu ústavnosti v judikatuře ústavního soudu, 21–29, in jurisprudence, no . 4 (2015) . 31 it does not necessarily mean that such measures must be best, most appropriate or the wisest . 32 article 28, constitutional court, pl . ús 11/08 . 33 article 72, constitutional court, pl . ús 26/16 . 34 article 78, constitutional court, pl . ús 26/16 . 35 article 79, constitutional court, pl . ús 26/16 . 36 červínek, supra n. 33, at 21–29 . 37 article 87, constitutional court, pl . ús 26/16 . 38 article 93, constitutional court, pl . ús 26/16 . 39 e .g . the payment by credit or debit card . 40 article 96, constitutional court, pl . ús 26/16 . 41 compare constitutional court, pl . ús 24/10 . 42 article 96, constitutional court, pl . ús 26/16 . 43 different opinion is provided e .g . by radim boháč . compare boháč, supra n. 21 . 44 pursuant to section 130 par . 2 of the tax procedure code . 45 compare supreme administrative court, 1 as 36/2008-77 . 46 pursuant to section 19 and 20 of the act on vat . 47 article 100, constitutional court, pl . ús 26/16 . 48 article 101, constitutional court, pl . ús 26/16 . 49 boháč, supra n. 21 . public governance, administration and finances law review vol. 6. no. 2. (2021) • 21–34 . © the author 2022 doi: 10 .53116/pgaflr .2021 .2 .3 algorithms of machines and law: risks in pattern recognition, machine learning and artificial intelligence for justice and fairness michael losavio*¤ * associate professor, university of louisville, department of criminal justice, e-mail: michael . losavio@louisville .edu abstract: pattern recognition, machine learning and artificial intelligence offer tremendous opportunities for efficient operations, management and governance . they can optimise processes for object, text, graphics, speech and pattern recognition . in doing so the algorithmic processing may be subject to unknown biases that do harm rather than good . we examine how this may happen, what damage may occur and the resulting ethical/legal impact and newly manifest obligations to avoid harm to others from these systems . but what are the risks, given the human condition? keywords: pattern recognition, artificial intelligence, governance, management, justice, ethics, human condition 1. introduction pattern recognition (pr) and artificial intelligence (ai) are machine systems for finding or inferring patterns and relationships in data . the power of these systems and their deployment across multiple social, commercial and government domains impacts everyone . but with much technolog y in human history, examination of ethical, human and legal impacts of pr/ai lags, ignoring risks to people’s lives . the risks of unintended injury from the systems is significant . in the area of facial recognition, both amazon and ibm have withdrawn their ai facial recognition systems from law enforcement use due to concerns about errors . these errors might lead to wrongful arrest or worse . to detail the interrelationship of law with pr and ai in society, consider how facts map to law . figure 1 details the fact elements necessary for the offense of reckless homicide, for which a  person is guilty if they unintentionally but with reckless disregard of the dangers kill someone . https://doi.org/10.53116/pgaflr.2021.2.3 https://orcid.org/0000-0003-4542-8599 mailto:michael.losavio@louisville.edu mailto:michael.losavio@louisville.edu 22 michael losavio public governance, administration and finances law review • vol.  6. no. 2.  killing reckless homicide reckless unintentional of a person figure 1 . the fact elements of reckless homicide from ai controls source: compiled by the author . if the ai system contributes to any of these elements, and all are present, those who designed, distributed and used that system may be criminally liable for the death . table 1 deconstructs outcomes from ai control systems for medical treatment devices causing unintentional injury . table 1 . potential criminal liability for flawed ai-controlled system ai-controlled medical device for radiation treatment of cancer patients mental state of the designer, seller, user object of injury type of injury criminal liability? designer knows of danger incorrect treatment but fails to do standard software testing person receiving treatment death yes seller knows of injuries to others but continues to sell device person receiving treatment death yes system user learns of injuries to others but continues to use device person receiving treatment death yes source: compiled by the author . 23algorithms of machines and law… public governance, administration and finances law review • 2. 2021 advances in ai have contributed to growing interest in industry, government and education . innovative applications and industries and products allow the use of ai to automate many endeavours, such as business processes, services, manufacturing, transportation and entertainment . but the application of ai has, in some cases, proved to be flawed increasing the risks to security, privacy and personal safety . a  growing interest in ai safety is now a branch of ethics and technolog y of its own . this is matched by discussion and litigation as to liability for the injuries resulting from flawed ai, as discussed below . 2. people, patterns and artificial intelligence artificial intelligence and pattern recognition systems are technological tools for people . the effect of such systems should comply with systems of rights and responsibilities . these together form a legal-technical ecosystem in the world . artificial intelligence may reveal much previously private and hidden inferences . one of the first computationalmediated devices for the collection and analytics of data, upon court review for violation of fundamental rights of citizens, produced speculation that these technologies might change the relationship between government and the governed .1 that change may not necessarily be for the better . 2.1. policies, procedures and regulation for artificial intelligence and pattern recognition legal implications, compliance and utility for ai and pr are intricate . analysis of the technolog y, possible injuries and regulation, present and future, are essential . injuries once minor and dismissed through service level agreements become grounds for liability under various legal doctrines, especially that of products liability that holds those creating a  “defective” product injuring others must pay for those injuries regardless of any agreement to the contrary . injury to others calls for legal regulation . the technologies of ai and pr are integrated into administrative-cultural-legal frameworks . there are a  variety of new issues with ai for digital forensics, evidence recovery, provenance and source discovery, and validation may require application of multiple tests to components of an evidence object . the systems and protocols for security and privacy in electronic objects, metadata, source and storage devices and transactional data may both support forensic discovery but also counter forensic efforts . the life or death aspect of police power has led a  group of mathematicians to call for ending collaboration with police departments and to publicly audit policing algorithms (aougab et al ., 2020) . calls have come out to limit the use of ai as matters of policy, especially in policing ; the government accountability office, science, technolog y assessment and analytics team of the united states is evaluating law 1 united states v. jones, 574 us ___ (2014). 24 michael losavio public governance, administration and finances law review • vol.  6. no. 2.  enforcement ai systems as to reliability (uberti, 2020) . legislation is pending in the u .s . congress to set standards for the country on forensic algorithms that would also negate any trade-secret privileges and systems used to block examination of the algorithm source code . the global partnership on artificial intelligence of fourteen countries and the european union, with support from the oecd (2020) and unesco, has formed to guide “responsible development and use of ai” while respecting human rights, stating : recognising the need for cooperation at international level if we are to tap the full potential of artificial intelligence (ai) and ensure that it is of benefit to all citizens while respecting democratic values and the primacy of human beings, the founding members of the global partnership on artificial intelligence (gpai) mean to encourage and guide responsible development of ai based on human rights, inclusion and diversity while fostering innovation and economic growth (gouvernement de france, 2020) . calo posits policy for ai must address challenges to: ƿ justice and equity ƿ use of force ƿ safety and certification ƿ privacy and power ƿ taxation and displacement of labor (calo, 2018) . ai policy issues are under discussion early in its implementation, creating the opportunity to implement policies before damage is done . global concerns with the fair, just and reliable use of ai arise from the sheer wealth of invasive power and evidence offered and the sensors of the internet of things, and must be addressed at a  policy level . the power of ai gives it a  central place in security preparations and forensic examinations across the spectrum, but these must be implemented under the rule of law, respect for human rights and our need for justice . we discuss factors that must be addressed for proper and reliable use of ai, pr and machine learning . 2.1.1. case study of artificial intelligence and human impact: los angeles police department laser and predpol predictive policing deployments los angeles, california, has the third largest police department in the u .s . the los angeles police department adopted a  number of computational and algorithmic systems to help guide its policing . one priority was interdiction of violent offenders, including by resource allocations to crime “hotspots” . there were concerns that ai/ algorithmic systems may reflect inherent racial biases in the programming and deep learning/machine learning analysis of historical databases . there were further concerns 25algorithms of machines and law… public governance, administration and finances law review • 2. 2021 that these systems were not validated through empirical testing and analysis, a reliability review normally required for the forensic use of evidence and inferences in legal proceedings . a review and audit of the systems was made by the inspector general of the los angeles police department (office of the inspector general, 2019) . the systems reviewed included a  predictive policing system (predpol) . that review found, among other things that the officers  –  the human component of the system  –  were not consistent in their application of criteria leading to their conclusions regarding criminal activity . this led to the suspension in the use of at least one of these tools and its tracking database . predpol and its location-based predictive policing were found to have discrepancies in data collection such that program effectiveness could not be evaluated . predpol modelled officer visits to areas matched against outcomes . ideally this would connect enforcement activities to community impact . analysis of these systems could not establish that they were, in fact, effective . rather it led to a  set of recommendations to assure greater reliability; these included formal written protocols that would: ƿ articulate goals and expectations for the program ƿ provide clear delineation of selection criteria ƿ remove potential bias elements through requirement of minimum numbers of targets identified ƿ provide notice and corrective systems for people identified by the system ƿ provide process for removal from the program target list ƿ articulate mandatory program activities ƿ articulate prohibited program activities or limitations on action reform of database and system design required collection of further information on why a person was targeted, date of admission to the database, dates of active or inactive status and reporting information on the individual . further data was needed on the nature of any los angeles strategic extraction and restoration program directed activities and the results of that activity and the source of updates regarding target individuals . retention policies on data and reports from the program were required to provide for review of activity; guidance language in activity bulletins generated should be reviewed by the los angeles city attorney . a  consistent training program for all users of the program needed to be developed and implemented . an audit system must be in place to provide oversight of the data collection and utilisation of these systems for public safety . the inspector general noted that although immensely powerful, the melding of these systems clearly created risks where there is not adequate preparation or system validation . in the area of public safety this can be particularly dangerous for the identification of someone as a violent offender means that police in encounters with them may come with the anticipation of violence and related increase in risk . 26 michael losavio public governance, administration and finances law review • vol.  6. no. 2.  2.2. the ethics of information technology and artificial intelligence artificial intelligence ethics has become an area of its own, extending from philosophical discussions of personal autonomy of ai into dual tracks regarding ethical obligations to deal with it . the letter to ams called for boycott of police collaboration and called for the inclusion of learning outcomes in data science classes that cover the ethical, legal and social implications of ai systems (aougab et al ., 2020) . the association for computing machinery and ieee-cs issued a  joint software engineering code of ethics and professional practice applicable to ai development (gotterbarn et al ., 1997) . the code, though high-level, mandates that “software engineers shall act consistently with the public interest” . more granular ethics analyses have identified outcomes to be addressed . chalmers proposed the need for a “leakproof ” containment system for ai development that, at its most extreme, isolates ai systems until their full capabilities are known (chalmers, 2010) .2 yampolskiy (2012) has addressed this in the context of the safety of people, not simply that of machines .3 the general framework for approaching ethical analysis with information and communications technologies (ict) may apply specifically to ai and pr systems . one such framework, built upon that and used for human subject research generally, was set out in the menlo report (keneally, 2012) . the menlo report proposes a  framework for ethical guidelines for computer and information security research based on the principles set forth in the 1979  belmont report for human subjects research . the belmont report had as its primary focus biomedical research on human subjects and the ethics regarding the treatment of those human subjects . in the u .s . it has become the foundation for the “common rule” applicable to all human subjects research, from biomedical sciences to social sciences . it acknowledges that there are new challenges resulting from interactions between humans and information and communications technologies (ict) . ict research contexts contend with ubiquitously connected network environments, overlaid with varied, often discordant legal regimes and social norms . the lack of a  tradition of analysis of the ethical implications of ict research itself creates the potential for risk; both in the context of the sometimes horrific history of traditional human subjects research . the evolving landscape of ict research stakeholders, especially with ai/machine learning, require special attention . 2.2.1. the menlo report the ict research menlo report proposes three core ethical principles, three of which derive from the belmont report: 1 . respect for persons; 2 . beneficence; and 3 . justice . to these kantian concerns connect the additional principle “respect for law and public interest”, a  recognition of how the novelty of these technologies and the lack of 2 see also yampolskiy (2012a). 3 see also yampolskiy & fox (2012). 27algorithms of machines and law… public governance, administration and finances law review • 2. 2021 a tradition of care can lead researchers and developers to create things that may, however unintentionally, hurt others . the goal of the report is to propose standard methods for ict research for: ƿ identification of stakeholders and informed consent ƿ balancing risks and benefits ƿ fairness and equity ƿ compliance, transparency and accountability these principles and applications can be supported by outside oversight and internal self-evaluation tools . the starting point of the analysis is to identify “stakeholders” in the process, being those people who have an interest or are impacted by the implementation in the world of the ict systems developed . these would include: ƿ researchers ƿ human subjects, non-subjects, ict users ƿ malicious actors ƿ network/platform owners and providers ƿ government/law enforcement ƿ government/non-law enforcement (e .g . public services) ƿ society collectively researchers, developers and users have to look at and consider respect for the people impacted by the systems . this includes recognition of the personal autonomy of the subjects as well as protection of those with reduced autonomy (ill, handicapped, youth, inmates) . the idea of informed consent means that the subjects impacted by any system are made aware of the activities, risks, benefits of the system and have a choice whether to proceed with it or not . the principle of “respect for law and public interest” is a protective measure for the subjects of the systems and the developers/users themselves . it entails the principles of compliance and transparency/accountability: ƿ compliance ■ identify laws, regulations, contracts and other private agreements that apply to their research ■ design and implement ictr that respects these restrictions ƿ transparency and accountability ■ mechanism to assess and implement accountability ■ responsibility for actions and outcomes there are a  variety of existing ict ethics codes that can serve as guides for the evolution of practices, even as they do not have particularly significant enforcement or regulatory powers themselves . those codes of ethics include: ƿ ieee/acm codes ƿ association of internet researchers ƿ national academy of sciences ƿ safe/lps sa/usenix – joint system administrators code of ethics 28 michael losavio public governance, administration and finances law review • vol.  6. no. 2.  ƿ responsible disclosure guidelines – national infrastructure advisory council ƿ internet advisory board guidelines – ietf one recent example of this is a  collaboration between google and apple inc . in the development of an app for contact tracing amidst the ongoing coronavirus pandemic . the ethical issues raised by the system and its ability to bypass privacy of citizens are addressed by the voluntary nature of the use of the application, where the users are informed of how the system works and may choose to use it or not to help provide better hygiene regarding people with whom they have been in contact . thus with ai research and implementation those involved, from designers to system users, should engage in the following analysis to better know that what they are doing is ethically correct, and also use it as a potential bellwether for legal liability: ƿ identification of stakeholders and informed consent ƿ balancing risks and benefits ƿ fairness and equity ƿ compliance, transparency and accountability the analytics injury to life and person must consider injuries: ƿ life and person ■ loss of life, physical/mental injury to person ƿ liberty and personal autonomy ■ privacy rights and control of personal information ■ reputation and public image ■ freedom of action and person ƿ property ■ rights and interests ■ informational ■ costs of remediation and recovery 2 .2 .1 .1 . case study of a proactive analysis – the axon artificial intelligence and policing technology ethics board in contrast to post-hoc, after-the-fact analyses, the axon police technolog y company, testing ai systems for law enforcement, impanelled an ethics board prior to system deployment . the panel was to examine the risks and appropriateness of ai technolog y in public safety and security . the panel set out a series of issues to be examined that are generally applicable for evaluating ai technolog y and are instructive as a  priori vetting of an ai/pr implementation: 1 . what is the specific problem to be solved? 2 . how important is the problem? 3 . how certain is it that the technolog y will address the problem? 4 . may there be unintended or secondary benefits: ■ minimise criminalisation of low-level offenses 29algorithms of machines and law… public governance, administration and finances law review • 2. 2021 ■ additional control and protection of personal data ■ mitigation of racial and/or identity bias ■ improved transparency or public trust ■ better compliance with u .s . constitutional requirements ■ other societal benefits ■ guidance in assessing costs? 5 . can the technolog y be used or misused in unanticipated ways? 6 . will it lead to greater criminalisation or to policing in counterproductive ways? 6 .1 . will the technolog y impact personal information privacy? 6 .2 . what is the data captured, retained, owned, accessed, protected? 7 . does the technolog y implicate potential biases, especially racial or other identity factors, whether in design or use? 8 . does the technolog y create transparency-related concerns with the public? 9 . does the technolog y risk, directly or indirectly, violations of constitutional or legal rights? 10 . are there other potential social costs that have not been considered, such as impact on specific groups, “mission creep”, historical issues, industry influence, global human rights? (first report of the axon artificial intelligence and policing technolog y ethics board, june 2019 .) the preliminary analysis of ai and facial recognition technolog y found serious concerns . the ability to capture, match and identify facial data may be hampered by issues of false positives and false negatives, due to issues of gender, age and race as well as the quality of imagery . the use of body camera imagery raises particular issues as they may lead to targeting as a  suspect or arrest . this was a  concern under american constitutional law and by governments around the world . the ethics board concluded facial recognition technolog y under the ai systems in place was not reliable enough to ethically justify its use against body camera data and if it would ever be ethical to use it without additional support . greater accuracy and consistent performance across multiple identity groups would be required to justify its use . validation of the algorithms for facial recognition would require a  rigorous “false positive  –  false negative” assessment rather than the more amorphous concept of accuracy . the measurement of the “false positive  –  false negative” rates would better determine what is needed or permissible for use for law enforcement purposes . use of such systems should be predicated on evidence-based evaluation of clear benefits, not on anticipated or speculative ones . the ethics board refused to endorse the development and deployment of facial recognition technologies that can be customised by the end users . such customisation would allow systems to deviate from performance testing results as well as allow the introduction of inconsistent data, analysis and use/misuse . these inconsistencies might be difficult if not impossible to detect posing a challenge to the judicial system to properly oversee their application . in express acknowledgment that the deployment of ai against diverse data collection systems fell within a  broader ecosystem of social and legal constraints, the ethics 30 michael losavio public governance, administration and finances law review • vol.  6. no. 2.  board said that the use of such ai-mediated technolog y should first be vetted through “open, transparent, democratic processes, with adequate opportunity for genuinely represented public input and objection”. to be effective, this would require cost-benefit analyses that match the power and limits of the technolog y against “the realities of policing in america and in other jurisdictions” . the board noted that this was only the first report on what would be an ongoing evaluation of ai and ethical use of police technolog y . it hoped that its work would serve as a general guide for all technolog y developers creating and providing those systems . 2.3. the law of it and ai the use of analytics in multiple domains offer exceptional benefits . but data modelling and statistical inference challenges social and legal bounds of privacy, personal autonomy and personal security . particularly when the analytical inferences go wrong or are wrongly used . the liability for the injuries produced may be civil with money damages and criminal with fines and imprisonment . such a projection produces widely disparate opinions for predictive analytics across domains, such as its foundation for the future of policing (davidson, 2019) to an illiberal system for predicting enemies (deeks, 2018) . the facts of ai and predictive systems are part of a  socio-technical system for governance that embraces human decisions, machine decisions and responsibility . analytics and computing become ubiquitous in data sources and uses, such as the internet of things, the smart city, analytics for everything from toll use to bread and butter, evolving standards, e .g . the national spatial data infrastructure, general data protection regulation (eu) . the danger is that we operate the systems upon such metaassumptions as our computational systems will be error free, our computational systems will be human mediated as to correct any errors, our computational systems will be too complex for the lawyers to figure out how to sue us . the civil liability in data collection, analytics and disclosure embrace a  number of areas depending on the injuries produced and the stakeholders and their roles in those injuries . these include: tort liability/products liability  –  mental state; infringement of civil rights/statutory liability  –  mental state; criminal liability  –  mental state; data collection, storage and transmission; analytics, algorithms, rendition, visualisation, intel, warrants; systems and users . for example, under u .s . law it is a  civil liability to intentionally infringe the civil rights of citizens pursuant to the federal statute 42  usc §1983 . this paralleled in u .s . federal criminal law 18 usc §242 which punishes for the wilful deprivation of civil rights under the colour of law . there are particular federal constitutional (u .s .) concerns: fourth amendment (secure from unreasonable searches and seizures), fifth amendment (no deprivation of property or liberty without due process of law) and fourteenth amendment (equal protection of the laws and due process of law) . 31algorithms of machines and law… public governance, administration and finances law review • 2. 2021 2.4. case study of law and artificial intelligence and pattern recognition: analysis of government processes and injuries from artificial intelligence techniques the lagging indicator nature of jurisprudence to reflect legal recognition of technological concepts can be seen with the internet of things, first described in 1999  (makker, 2017) . u .s . federal court analysis was fifteen years later and growing eight-fold five years later . the policy and judicial analysis of ai both guide and warn . public safety is an essential public service and ai holds great promise in that domain . some opine that ai is no  longer science fiction but the future of policing (davidson, 2019) . it can more swiftly make determinations about people that impact their lives and liberties through misuse or error . it challenges social and legal bounds of privacy, personal autonomy and personal security . it is the interplay between human decisions and machine decisions that will impact people’s lives . defining responsibility for that impact is critical, just as cathy o’neil cautions great care in the use of these “weapons of math destruction” (o’neil, 2016) . 2.4.1. case-based analysis – robotic justice the cahoo et al . v. sas analytics inc. et al . case4 addressed accountability for flawed data analytics by a  state entity contrasting fundamental legal obligations with ai/predictive analytics outcomes . anyone violating the rights of citizens contrary to the u .s . constitution may be prosecuted for civil damages (42 usc §1983) or criminal punishment (18  usc §242) . the system at issue “robo-adjudicated” fraud in unemployment compensation claims . these “robo-adjudications” led to denial of benefits and significant penalties despite a  93 per cent error rate of “false positives” of fraud . the defendants’ assertions that they were not liable were rejected and they were found liable for civil damages (money damages) to those injured . those damages included deprivation of unemployment benefits and the after-the-fact seizure of people’s assets, leading in some cases to eviction and bankruptcy . no state shall “deprive any person of life, liberty, or property, without due process of law” .5 this was long established that people applying for and receiving unemployment compensation have constitutionally-protected property interests in unemployment benefits .6 the due process clause offers protection for those who show: ƿ that they have a property interest protected by the due process clause ƿ that they were deprived of this property interest ƿ that the state did not afford them adequate pre-deprivation procedural rights 4 cahoo et al. v. sas analytics inc. et al. no. 18-1296 (6th cir. 2019). 5 fourteenth amendment, §1. 6 see goldberg v. kelly 397 us 254, 262 (1970). 32 michael losavio public governance, administration and finances law review • vol.  6. no. 2.  the system midas determined fraudulent conduct through automated processing of current and past applications, finding discrepancies in unemployment insurance benefits . the system determined if there was fraud . it did not check for errors in data sources or good-faith mistakes . it used an “income spreading” algorithm for averaging income across a fiscal quarter into every week regardless of any income; if it was reported no income for any of those weeks a fraud finding was made . no subsequent verification was performed, claimants were not told the reasons for the finding nor allowed to dispute the finding . the system automatically assessed penalties equal to four times the amount of unemployment benefits received or sought, driving some into bankruptcy . a review of the fraud determinations found a  93 per cent error rate with no fraud . human-mediated review was added, reducing the error rate to 50  per cent . yet the system continued to be used and enforcement actions continued . the state defendants clearly violated markedly-established constitutional due process rights to challenge these wrongful determinations . this powerfully demonstrates both the damage from ai mediated systems and the failure of people to remedy that damage to others, even upon notice . 3. future action concerning robo-adjudication in administrative agencies or police action in pursuit of public safety, the development and deployment of ai must be done as part of the much broader legal-technical eco-system . the proactive approach of axon to conduct an analysis of ai deployment issues is the model to be followed . major developers such as ibm and amazon have chosen to follow that model before people are hurt . it is vital to measure the impact on personal safety, security and privacy before the implementation of such powerful systems . yemini (2018) notes that the irony of the modern internet is that “[it] provides more expressive capacity to individuals than ever before, also systematically diminishes their liberty to speak” . this is due to particular negative impacts from what should be the most amazing system for the information from lack of anonymity; and lack of inviolability . these apply with even more force to ai and predictive analytics . computational systems enhance forensic systems in several ways (franke & srihari, 2007) . these include the production of objective, reproducible analytical conclusions, visualisation and pattern recognition . but there are issues with the proper validation of computational forensic techniques to assure their reliability and the importance of a  systematic approach to computational forensics, cooperation between forensic and computational scientists and continued peer-review and testing of computational forensic techniques . a summary of concerns relating to probabilistic evidence is in the analysis of the trial court noted in the united states federal criminal case united states v. shonubi: several commentators have expressed particular concern about  the use of explicitly probabilistic evidence in criminal cases . see, e .g ., ronald dworkin, taking rights seriously 13  (1977); andrew von hirsch, prediction of criminal conduct and preventive 33algorithms of machines and law… public governance, administration and finances law review • 2. 2021 confinement of convicted persons, 21  buff. l. rev. 717, 744-50  (1972); cited in barbara d . underwood, law and the crystal ball: predicting behavior with statistical inference and individualized judgement, 88 yale l.j. 1409, 1412 (1979); saks & kidd, supra, at 152; tribe, supra; nesson, supra; l . jonathan cohen, subjective probability and the paradox of the gatecrasher, 1918  ariz. st. l.j. 627, 632; (rejecting use of statistics in criminal cases); alex stein, on the unbearable lightness of “weight” and the refoundation of evidence law 48-49  (forthcoming 1995, on file in the instant case) (arguing that the problem with “naked” statistical evidence in criminal cases is not that it is unreliable, but that its “weight” is insufficient to support conviction) [united states v. shonubi 895  f . supp . 460, 518 (e .d .n .y . 1995)] . yet little has progressed since this . some see the bayesian analysis as the future of computational forensics in a  variety of fields . validating this for accuracy, precision, testability, test results and error rate is essential to qualify them as competent evidence . yet such a process may be difficult and possible only through a weighing of the testimony of competing and sometimes contradictory experts in the field . one example is that “explainable” ai is a  minimum requirement for adequately vetting ai forensics within judicial fora, such as under federal rule of evidence 702  (u .s .) for expert system evidence . 4. conclusion the deployment of ai/pr systems across every domain will make for more and more challenges and problems to be addressed . anticipating those issues and at least attempting to remediate them will both save people from illicit injury and developers from unexpected punishment . legislative efforts to build out frameworks for ai/pr recognition will continue and will guide ai development . it is critical that the technologists with knowledge of these systems both conform their work to those requirements . and it is equally critical that they inform those creating these regulatory frameworks of the reality and facts of ai systems so those frameworks encourage competent and effective ai development while limiting poor and harmful ai design . references aougab, t . et al . 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(2013) . safety engineering for artificial general intelligence . topoi, 32(2), 217–226 . online: https://doi .org/10 .1007/s11245-012-9128-9 yemini, m . (2018) . the new irony of free speech . columbia science and technolog y law review, 20(1) . online: https://doi .org/10 .7916/stlr .v20i1 .4769 https://doi.org/10.1109/ias.2007.84 https://doi.org/10.1145/265684.265699 https://bit.ly/3r6jxtz https://doi.org/10.2139/ssrn.2445102 https://bit.ly/3cifevj https://bit.ly/3l89bfl https://doi.org/10.1007/978-3-642-31674-6_29 https://doi.org/10.1007/s11245-012-9128-9 https://doi.org/10.7916/stlr.v20i1.4769 public governance, administration and finances law review vol. 6. no. 2. (2021) • 121–132 . © the author 2022 doi: 10 .53116/pgaflr .2021 .2 .9 local self-governments and the vertical division of power ádám varga*¤ * assistant professor, pázmány péter catholic university; junior assistant professor, university of public service, e-mail: varga .adam@jak .ppke .hu abstract: local self-governments cannot be defined as entities against the state, nor do they merely assist in executing the central will . the significance of local self-governments lies in their role in the division and balancing of powers . in light of the principle of subsidiarity, the need for autonomy through decentralisation necessarily leads to the central bodies of the state being marginalised in these matters, in a  sense, the latter lose their ability to solve the issues raised within their own sphere of competence . from a  certain point of view, this can even be considered a  vertical division of power . the division of executive power between the public administration subordinated to the government and independent local self-governments, does not call into question the local self-government’s affiliation with the executive power . as such, it is practically an internal division of powers . in essence, it manifests itself as a  kind of limited autonomy, which  –  due to the unity of the state – subsists only within the confines of the relevant laws . in light of the foregoing, jointly applied principles lead to a  vertical division of power . power is divided, which, nonetheless, does not mean that one sovereign body limits another; it is rather the case of the state restraining itself by virtue of the principle of democracy . keywords: right to local self-government, vertical division of power, separated branch of power, protected powers 1. opening remarks according to the classical approach, the concept of municipal power was first introduced by benjamin constant, who added the requirement of vertical division of powers and decentralisation to the horizontal division of powers used so far (csalló, 2014, p .  25) . today, the dominant model for the territorial division of powers in modern democratic state systems is that of self-government . as ilona pálné kovács points out, there are essentially historical reasons for this since, in many countries, they were established before the central state institutional system and their collective nature was carried over into the unifying state organisation (pálné kovács, 2008, p . 13) . today, therefore, local self-government is a basic institution in all democratic states, but despite (or rather because of ) this, the precise definition of local self-governance and local self-government https://doi.org/10.53116/pgaflr.2021.2.9 https://orcid.org/0000-0002-2960-0195 mailto:varga.adam%40jak.ppke.hu?subject= 122 ádám varga public governance, administration and finances law review • vol.  6. no. 2.  has been a century-old challenge for researchers . the main reason for this is that the idea of local self-governance is based on different foundations in different countries, and the paths of development are very different, too . istván ereky forthrightly argued that there are irreconcilable conflicts between the myriad theories of self-government (ereky, 1932, p . 3) . of course, there are common basics, but there have been many differences in the details until recent times . local self-governments are in a vertical position compared to the classical actors in the division of powers . opinions are divided among researchers on how to interpret this vertical position . some argue that local self-governments must be seen as a  separate branch of power . others deny this and try instead to explain the situation of local selfgovernments by the vertical division of powers . still others, however, argue that vertical division of powers can only be discussed in federal states, so it is meaningless in a unitary state . these authors typically see local self-government as a  kind of restriction on the executive branch, or not even that . however, looking at the individual constitutions, the situation is not clear either . vertical division of powers is of course present in federal states, but there are also examples that focus explicitly on the role of local self-government: the estonian constitution treats local self-government as a  separate branch of power,1 and the croatian constitution formulates the right to local self-government as a  limitation of the three branches of power .2 typically, however, the role of local self-governments in the division of powers can only be inferred from the interpretation of individual rules . 2. local self-government and division of powers when looking for the place of local self-governments in the system of branches of power, the primary question is on what basis we consider a  branch of power to be a branch of power . starting from the classical theories of john locke and montesquieu, and extending them in various ways, to the denial of the division of powers,3 the theories on this subject are almost endless . a  detailed examination of all this is not the subject of the present paper . by considering the existence of the division of powers as a  constitutional fact,4 i will only concentrate on how local self-governments can be placed in this system . the division of powers is not about rigid separation but about mutual checks and balances (fogarasi, ivancsics & kiss, 1994, p . 21) . from an organisational point of view, any body performing a  task of public authority can be seen as a  separated branch of power, which is not dependent on other actors but limits their power . this makes the 1 constitution of the republic of estonia, article 14. 2 constitution of the republic of croatia, article 4. 3 benjamin constant, for example, considered the division (separation) of powers as futile, because if the amount of power is infinite then the actors need only to form a coalition to tyrannise. the key is to ensure that no actor oversteps its authority (constant, 1997, p. 81). 4 in this respect, i also rely on article c(1) of the fundamental law of hungary, according to which the functioning of the hungarian state shall be based on the principle of the division of powers. 123local self-governments and the vertical division of power public governance, administration and finances law review • 2. 2021 list quite long, and it is clear that this approach also has a centuries-old tradition .5 if, on the other hand, the branches of power are distinguished functionally, according to the type of task they perform, there is no reason to extend the classical triad . this does not, of course, exclude the possibility of several bodies sharing the responsibilities of one branch of power . hence, with their autonomy, each actor of power may limit each other within a  given branch of power, but each is the custodian of the realisation of a  given type of task . the challenges of our modern world make it less and less possible to follow a  particularly rigid, institutional division . the proliferation of different bodies increasingly implies an increase in the complexity of the tasks they perform,6 while it is difficult to deny that the activity they perform still falls within one of the three functions of state power (perhaps explicitly mixed) . for this reason i can easily agree with andrás zs . varga, who suggests a functional approach to the division of powers instead of an institutional one, and sees a need to break with the one power – one organisation approach . no  single branch of power can be tied to a  single exclusive body, and an organisation does not typically exercise only one kind of power (varga, 2019, pp . 37–38) . this raises the question of whether local self-governments can be considered a separate branch of power . the emergence of municipal power in legal  literature is usually associated with the work of constant . it is true that, according to him: until now, local government has been regarded as a dependent branch of the executive; on the contrary, it must never be an obstacle to it, but it should not be dependent on it either . if the interests of the parts and of the whole country are entrusted to the same hands, or if the local interests are made to be represented by depositaries, there will be many evils, and even those evils which seem to be mutually exclusive will coexist (constant, 1862, p . 126) .7 constant is said by many to have added local self-government to the triad of the branches of power, but i see this as an oversimplification . his theory suggests, first of all, that local selfgovernments are in a vertical position in relation to the central executive power, and that they have protected functions; that is, the principles of subsidiarity and autonomy actually make local governments the counterbalance of power . jános sári also interprets constant’s theory in such a way that he does not speak of a separate branch of power but only of a  division based on locality, which presupposes self-interest (sári, 2007, p . 42) . ereky draws attention to its practical application, reporting that in belgium, to counteract the extreme centralisation, the constitution recognised county or municipal power as the fourth branch of power in addition to those named by montesquieu . in principle, many authors have tried to base the french model of decentralisation on this, but in reality, they have developed and codified the principles of the french system of modern local self-government (ereky, 1939, p . 192) . what is 5 moreover, the extension of the division of powers to dimensions that are not or not necessarily linked to the exercise of public power is not new (erdős & smuk, 2017, p. 139). 6 examples include the activities of the court of auditors or the ombudsman of hungary. 7 it can be read in french in the ‘new’ edition of the cours de politique constitutionnelle, ed. by jean-pierre pagès, paris, didier, 1836, vol. i, 151. 124 ádám varga public governance, administration and finances law review • vol.  6. no. 2.  certain is that, in the wake of constant’s theory, questions about the local selfgovernment being an autonomous, separate branch of power have popped up again and again in the legal  literature, but for a  long time they have not really managed to take root . zoltán mag yary, for example, considered it a  matter settled by science that local self-government is a  simple form of executive power, in which, however, the nation is not only involved in the exercise of executive power through parliamentarism prevailing in the sphere of legislative power but also directly complementing and, together with the representation of the people, constituting full constitutionalism . however, according to him, local self-government is necessarily and exclusively a state executive function, in which the members of the nation, in the service of the state, carry out the will of the state on themselves (mag yary, 1930, p . 166) . it was only in the second half of the twentieth century that the neoliberal development of the state began to go back to constant’s principle and the natural law origins of local self-government, and with it the classification of local self-government as a separate branch of state power . according to istván balázs, these are ideas that absolutise the democratic nature and autonomy of local self-governments, which reached their peak in the decentralisation reforms and regionalisation of the 1980s (balázs, 2014, p . 298) . zsuzsanna árva also stresses that the classical montesquieuian concept of separation of powers is hardly applicable in the modern era . according to her, there are several factors (their status separate from the state administration, their autonomy) related to local selfgovernments established based on the principle of decentralisation, which raise the question of recognition as a factor of power (árva, 2014, pp . 37–38) . according to the view labelled conservative by balázs, local self-governments performing executive branch functions have the character of being a  separate branch of power because of their autonomy while, according to the other view, in addition to executive functions, they also perform the territorial division of state power, and therefore they effectively function as a separate branch of power . the difference is more theoretical, manifested in the relationship with state bodies, since, if local self-government functions as a  separate branch of power, it has looser links to central state bodies and looser control by the government . the practical relevance of this issue was greater in the case of the newer democracies that emerged from dictatorships (the more radically independent branch of power characteristic emerged as a counter-effect), but the global economic crisis has also forced a reassessment of their role in these states (balázs, 2014, pp . 298–299) . the perception of them as a  separate branch of power is therefore dynamically changing in both time and space,8 and, in my view, the significance of the question in this form is negligible . while there are some authors who posit local self-governments as a  separate branch of power, many focus more explicitly on vertical division of powers (e .g . veress, 2005, p . 260), whereas others focus more on the exercise of autonomy (e .g . ivancsics, 1996, p . 185) or the realisation of a  counterbalance of power (e .g . berényi, 2003, p . 309) from a practical perspective . 8 according to péter szegvári, for example, local self-governments could be considered to be a separate branch of power under the constitution rather than under the system of the fundamental law (szegvári, 2017, p. 763). 125local self-governments and the vertical division of power public governance, administration and finances law review • 2. 2021 in my view, local self-governments do not perform a  different type of function compared to the other branches of power (they are close to the executive power, but they are also representative and autonomous in their rule-making ; see csink, 2014, p . 155); they just do it on a different level . their position cannot therefore be understood in a system of division of powers created based on a horizontal logic, and their relations with other actors can only be understood vertically . 3. federation versus local self-government, vertical division (separation) of powers in the narrow sense in the light of the above, the possibility arises that the conceptual ambiguity could be resolved through the principle of vertical division of powers . however, this also presents a number of difficulties . the vertical division of powers is generally based on the principle that the exercise of power can be subdivided into certain territorial or corporate levels . the principle of division of powers is also implemented by the division of state power into central, regional or local levels or autonomous bodies (petrétei, 2018, p . 30) . vertical division (in the original sense: separation) of powers is a  product of american legal doctrine . in the broadest sense, it prevails when the decision-making freedom of one body is limited, or at least counterbalanced, by another body organised on a different territorial basis (csink, 2014, p . 156) . in federal states, the powers of the federal parliament are limited to regulating matters at the federal level, while the powers of the member states enjoy strict constitutional protection (erdős & smuk, 2017, p . 138) . in these states, both the member state level and the federal level have the attributes of statehood and the member states join the federation in possession of their sovereignty . as they retain their sovereignty within the federal state, it is necessary to settle which powers belong to the federation and which to the member state . this inevitably leads to a  vertical division (separation) of powers, where sovereign constrains sovereign . it should also be noted, however that, in hans kelsen’s interpretation for example, the essence of the federal state is the degree and type of decentralisation, which requires a specific constitutional premise . in this, he did not consider the method of formation and the existence of sovereignty (whether only the central state, only the member state, or both are sovereign) to be important; he considered it a pseudo-problem (kelsen, 1927, pp . 59–60) . in contrast, in unitary states, local self-governments do not have any rights  –  in a public law sense – to counterbalance legislative power, but the right of local communities to self-government must be respected by the state (szoboszlai, 2011, p . 29) . in addition, however, the legislative powers of the parliament in these states are very broad, leaving it to the political discretion of the national assembly to distinguish between local and national matters (erdős & smuk, 2017, p . 138) . local self-governments are not mini-republics, but an integral part of the state mechanism, from which, however, the powers granted to them by law make them relatively separate and autonomous (fogarasi, ivancsics & kiss, 1994, p . 21) . 126 ádám varga public governance, administration and finances law review • vol.  6. no. 2.  while in a  federation, the sovereignty of the member states remains intact in matters that do not fall under federal competence; the local self-governments in a  unitary state (or within a  member state of a  federal state) may influence the central power, but they are always subject to the authority of the central power (dezső & somody, 2007, pp . 148–149) . this means that the vertical division of powers achieved by the federal system is not in itself guaranteed .9 at the same time, the presence of local self-governments results in an internal division of executive power, and therefore the local autonomy that is achieved plays a  power-limiting role (veress, 2005, p . 275) . mag yary, for example, did not agree with this restrictive role . he divided the types so that the local self-government, in terms of its substance, can be political and administrative . of these, political local self-government also has legislative power, so it does not maintain the unity of state law . he (also) identified this with federalism . in the other system, they maintain the unity of state law, but their administrative powers are not complete . the public power is centralised with the central government, so if the local self-government exercises a public power, it can only exercise it within the powers delegated and delimited by the state and not by original right and at will . local self-government is, in his view, just a  specific form of state administration (mag yary, 1942, p . 113) . ereky (1939, p . 193) presented a  very similar french view on the same issue, with the difference that, in his opinion, the french do not recognise the distinction between administrative decentralisation and constitutional decentralisation (they only distinguish between federalisation and decentralisation) . it should also be stressed that in recent times, in an increasing number of countries, units that were previously considered to be of a  local self-government nature have become similar to a member state, thus making differentiation relative (hoffman, 2015, pp . 43–44) . in regional states, regions have more extensive powers than local selfgovernments (for instance, they can have their own government), but their sovereignty is not recognised . csaba erdős and péter smuk argue that, in these states, the autonomous territory’s independent share of the supreme power is not recognised, but its independent right to regulate is, and its exercise is possible even through the parliament, i .e . territorial autonomy is seen as a  constitutional limitation of the central parliament (erdős & smuk, 2017, p . 138) . kelsen’s approach shows the relativity of demarcation and the possibility of transition quite well . he argues that the extension of local self-government decentralisation towards general norms (which usually implies a  relatively larger spatial scope for local norms) creates a  ‘land’ (country)-based decentralisation, whereby executive power, as well as legislative power, are shared between central and local bodies . it is difficult to distinguish these ‘countries’ from autonomous provinces, especially if the provinces can also pass autonomous statutes (possibly provincial laws) and if the bodies of the ‘countries’ are democratic as well . the only difference in this case is the greater legislative power, and from there  –  with increased decentralisation (which means constitutional 9 consequently, according to lászló sólyom, the hungarian constitutional court has never considered municipal autonomy as a quasi-federal structure. only an ex-post examination of a local self-government decree for overstepping legislative power can be considered a hidden, quasi-federal review of powers (sólyom, 2001, p. 769). 127local self-governments and the vertical division of power public governance, administration and finances law review • 2. 2021 powers) – it is only a step to becoming a member state of the federal state . in any case, the member state also benefits from central legislative and executive powers through the second chamber of the parliament (kelsen, 1927, pp . 58–59) . on the basis of the above, it can be stated that only the system of federal states can be considered to have vertical division (separation) of powers in the  literal sense of the word, and that this concept cannot be interpreted to mean the system of local selfgovernments within unitary states (or within a member state of a federal state) .10 4. vertical division of powers as an outcome many scholars go no  further than the above approach, considering vertical division of powers a  feature of the federal state structure, which essentially requires sovereignty to be limited by another sovereign . these approaches are very logical, but also very formal . i do not consider it inherently unacceptable to call the principle of federalism a vertical division of powers; however, i must also stress that, on the one hand, it is unfortunate to consider it the only vertical limit to power, and, on the other hand, it is not a view to be dismissed that everything which ultimately limits the exclusivity of central state power from a functional point of view can be considered a vertical division of powers . the balance ensured by the division of powers (the essence of which, as stated above, is the mutual checks and balances) must also be reflected in the relationship between central and local power . the balance of power must also be present and characteristic of the vertical division of labour (fogarasi, ivancsics & kiss, 1994, p . 21) . in péter szegvári’s approach, the fundamental rights and competences of local self-governments (following istván bibó’s line of thought) technically enable the disruption of the concentration of power, as well as the establishment of vertical division of powers and the emergence of power competition (szegvári, 2017, p . 765) . antal ádám highlights that, in the constitutional definition of fundamental powers and in the legislation respecting them, there is a transfer of certain public powers, which he also calls vertical division of powers (ádám, 2000, pp . 151–152) . by vertical division of powers, emőd veress means the division of powers between the central state and the local self-government, within the executive (veress, 2005, p . 294) . herbert küpper also uses the term 10 lóránt csink himself argues in favour of the above interpretation of vertical division of powers, but he also adds popular sovereignty to this and emphasises that, in a narrower sense, the legitimacy of the two institutions must be identical for the vertical division of powers to be realised, i.e. both must be the bearers of popular sovereignty. consistent with other authors, he argues that, in federal states, both the member state and the federation have sovereignty, but in the unitary state there is no entity that also has sovereignty besides the central power. however, he also argues that if the people as a whole are the source of sovereignty, sections of the people are not. obviously, the power of the state derives from the people and can be explained dogmatically, but linking state sovereignty and popular sovereignty so directly is rather problematic from a practical point of view. csink himself uses this reasoning, which i think is the main argument against this approach. namely that several federal states designate the people as a whole as sovereign. as far as hungary is concerned, he resolves this by saying that vertical division of powers is not realised because local self-governments are not given sufficient powers and guarantees. this explanation, however, ultimately argues against rather than supports the direct link between popular sovereignty and vertical division of powers. but it is precisely for this reason that i myself attach importance to the role of popular sovereignty (csink, 2014, pp. 156–157). 128 ádám varga public governance, administration and finances law review • vol.  6. no. 2.  vertical division of powers to describe the division of power within the executive . the division of executive power to state administration that is subordinate to the government and to autonomous local self-governments is a vertical division of powers, but it does not call into question that local self-government belongs to the executive power . it is, in effect, an internal division of powers, he says, with checks and balances, because, in practical terms, it is the executive that poses the greatest threat to individual freedom . he also mentions that the constitutional court essentially calls this autonomy (küpper, 2009, pp . 1503–1504) . in the context of checks and balances, pálné kovács argues that the american constitutional tradition also sees local self-governments as checks vis-à-vis the central state and the dictatorship of the majority . he therefore does not reject a  constitutional solution based on the territorial division of power (pálné kovács, 1996, p . 132) . i believe that, if local power and central power respect each other’s latitude, it necessarily leads to a  vertical division of power . not because there are duplicated levels of power, but precisely because there are not . local self-governments clearly do not have state sovereignty and should not be seen as the central power’s ‘competitors’ . on the contrary, both are acting in their own capacity . the state does not want to take over the affairs of local communities, while local self-governments do not want to be the state within the state . in this reading, this principle is mostly about self-limitation, which in turn leads to an ultimate division of power between the central and local levels . it is more a result than a starting point, and therefore could not be further from the principle of what we call vertical division of powers in the case of federal states . yet the result is similar: the state does not interfere in local affairs and vice versa, i .e . the principles of autonomy and subsidiarity apply . in reinhard hendler’s formulation, local self-government as an instrument of decentralisation leads to a  plurality of state decision-makers, and serves to dismantle political power as an actor in the vertical division of powers (hendler, 2007, p . 15) . this division can be assessed primarily against the central executive power, but the legislative power must also respect the limits set by the constitutional power, such as the right to adopt regulations on local public affairs . the legislative is thus also limited, in that it cannot by law empty the powers of the local self-governments . this derivation is obviously close to what can typically be included in the concept of autonomy . however, while autonomy provides an answer to the question of what the state decides that local self-governments have the right to do, the vertical division of powers is more helpful in answering why the possibility of state intervention in the implementation of autonomy needs in fact to be limited . it must be readily acknowledged that, precisely because of the above arguments, it is perhaps unfortunate to call this principle vertical division of powers, as it can easily give rise to misunderstandings . i am convinced, however, that the emphasis should not be on the designation but on whether local self-government is ultimately capable of counterbalancing and limiting central state power . therefore, in contrast to the classical approach of vertical division of powers, it is not the theoretical framework but rather the practical effects that i consider to be decisive . in agreement with veress, two prerequisites must be highlighted for this to be feasible: on the one hand, the division of 129local self-governments and the vertical division of power public governance, administration and finances law review • 2. 2021 central and local self-powers and, on the other, the possibility for local communities to have a  different political choice (veress, 2005, p . 275) . this is what enables the local self-government to have the opportunity to make decisions within the limits of the law, based on its own interests, and different from the intentions of the central state power . however, to guarantee this, it is also essential that the freedom of local self-governments to do so is guaranteed by law and by the courts, as well . jenő kaltenbach highlights in particular that the autonomy of local self-government must be protected, even against legislation that is aimed at national political interests (so that the autonomy of local selfgovernment cannot be abolished or fundamentally changed by a simple law), and at the same time, like the horizontal elements, local self-government must be subject to regulation by the constitution (kaltenbach, 1991, pp . 136–137) . 5. a summary of the process of vertical division of power in light of the previous point, i will attempt to sketch in a  nutshell how and why the interplay of the various principles of local self-government can lead to a vertical division of power . the scope of this paper does not allow for a detailed elaboration, but i will try to illustrate the main points . my starting point is that local self-governments cannot be defined in opposition to the state, nor are they simply technical assistants to the state . the importance of local self-government lies rather in its power-sharing and power-balancing character (stern, 1981, p . 204) . originally developed in many countries in opposition to absolutist state power, in a globalising world it is no longer possible to understand local self-government in its original sense, as all parts of the state are now democratically constructed (hoffmann-axthelm, 2004, pp . 13–14) . in a  parliamentary democracy, it is no  longer the people against state power, but only the whole people against their own parts . on this basis, the importance of defending self-governance arises when the views of smaller communities need to be defended against the whole of the state, which holds all the power (peters, 1926, p . 43) . autonomy is one of the most important characteristics of local self-governance . although autonomy and self-governance are commonly thought of as synonymous concepts, autonomy in relation to public institutions is really about self-regulation based on legal authority (hendler, 2007, p . 12) . autonomy is therefore the right of a community other than a  state to create law for itself (peters, 1926, pp . 37–38) . necessarily limited, autonomy does not protect action that does not comply with the legal framework . as the autonomous body is part of a  larger political system, the principle of autonomy must be reconciled with the principle of unity (ladner et al ., 2019, pp . 175–176) . the principle of subsidiarity makes it a natural requirement to seek local solutions to local problems . even without a mention in the constitution, this principle is considered one of the most important principles (knemeyer, 1990, p . 174) . it prohibits unwarranted interference by higher levels of power in the sphere of competence of lower levels, i .e . interference that is incompatible with the common good (frivaldszky, 2006, 130 ádám varga public governance, administration and finances law review • vol.  6. no. 2.  p . 36), and specifies that the higher level may intervene in the relations of the lower level only in order to help it . however, this does not mean that these cases cease to be national cases . the local community may want to be given an appropriate degree of freedom and autonomy to manage and solve its own affairs . the subsidiarity principle both defines and limits freedom of action . indeed, the legitimate authority is empowered to replace a failing actor if necessary (berthet & cuntigh, 2006, p . 186) . this is why, in some cases, it is part of the subsidiarity principle to move certain tasks that are insoluble at a lower level to a  higher level (waschkuhn, 1995, p . 59) . the european charter of local selfgovernment also states that,11 in general, public tasks need to be carried out primarily by the administrative body closest to the citizen . the delegation of tasks to another administrative body must depend on the nature and size of the task and on efficiency and economic requirements .12 even so, this does not mean that the municipalities have sovereign power; in fact, it must depend on the wise discretion of the state to delegate the tasks . the way to achieve this is decentralisation, which is not only a practical principle of administrative organisation, but also a building block of local self-government (soós, 2010, p . 57) . if, on the basis of subsidiarity, the need for autonomy is asserted through decentralisation, this inevitably leads to the central bodies of the state being marginalised in relation to the issues involved and, in a  sense, losing the possibility of solving the problems that arise under their own authority . in some respects, this can even be called vertical division of powers, because in the constitutional definition of fundamental powers and in the legislation respecting them, there is a  transfer of certain public powers (ádám, 2000, pp . 151–152), which also serves to dismantle political power (hendler, 2007, p . 15) . however, apportioning executive power to state administration, which is subordinate to the government, and to autonomous local self-governments, does not call into question that local self-government belongs to the executive power . it is effectively an internal division of powers (küpper, 2009, pp . 1503–1504) . in terms of its outcome, it essentially manifests itself as a  kind of limited autonomy, which, however, due to the unity of the state, exists only within the framework of the law . the real emphasis is on having things that can be done locally, independently and democratically . the aim, in my view, is to ensure that local communities carry out tasks that are truly local and can be carried out on their own (with the help of the central level), with a focus on the principle of subsidiarity . these are the local self-government’s functions and powers . in light of the above, the combination of principles leads to a  vertical division of power . power is divided, nevertheless, it is not a  sovereign entity limiting the other sovereign entity, but the sovereign state limits itself by virtue of the principle of democracy . in principle, it is the sovereign decision of the state to recognise what is a  local public matter, but this also imposes obligations on the state in the context of subsidiarity . this could be ensured through deconcentration as well, but, through 11 convention on the european charter of local self-government, signed in strasbourg on 15 october 1985. 12 local self-government charter, article 4(3). 131local self-governments and the vertical division of power public governance, administration and finances law review • 2. 2021 decentralisation (thereby recognising autonomy), the central power necessarily limits itself, because it transfers powers to the local self-governments concerning which it cannot later claim to have the central executive power take over the decisions concerned . this leads to a situation where the central level of the state necessarily abdicates its right to decide on the issue . this, i am convinced, whatever the name, is effectively a vertical division of power . references ádám, a . 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(2019) . from ideal to idol? the concept of the rule of law . dialóg campus . veress, e . (2005) . a hatalommegosztás aktualitása . mag yar kisebbség, (3–4), 236–297 . waschkuhn, a . (1995) . was ist subsidiarität? ein sozialphilosophisches ordnungsprinzip: von thomas von aquin bis zur “civil society” . springer . online: https://doi .org/10 .1007/978-3-663-12443-6 https://doi.org/10.1007/978-3-319-95642-8 https://doi.org/10.1007/978-3-319-95642-8 http://ijoten.hu/szocikk/alkotmanyjog-hatalommegosztas https://doi.org/10.17649/tet.22.1.1152 https://doi.org/10.17649/tet.22.1.1152 https://doi.org/10.1007/978-3-642-47664-8 https://doi.org/10.1007/978-3-642-47664-8 https://doi.org/10.1007/978-3-662-11967-9_14 https://doi.org/10.1007/978-3-663-12443-6 © 2021 the author public governance, administration and finances law review vol. 5. no. 2. (2020) • 5–16 . articles tax absence in relation to taxation of digital services tereza čejková* * tereza čejková, mgr . phd candidate at the department of financial law and economics, faculty of law, masaryk university, the czech republic, email: ter .cejkova@gmail .com abstract: in the area of taxation of business corporations operating in several different countries, there is a  problem arising with the identification of the tax residence of the liable entity . with the expansion of the so-called digital business, where entrepreneurs often do not have a  physical headquarters or business units, this problem is becoming more common . efforts to introduce a  digital tax within the member states of the organisation for economic co-operation and development and the european union are accompanied by efforts to address this issue through various legislative acts . this article explains how the problem of identifying tax residence arises, why it is undesirable and describes possible solutions . keywords: tax residency, digital tax, ccctb 1. introduction taxation of digital business activities has been a  topic discussed for several years both by national authorities and at the level of the european union or organisation for economic co-operation and development (hereinafter oecd) . there are many reasons why taxing services such as online advertising, digital brokerage, user data collection and more is so demanding . probably, the most important of these is the fact that these services are usually offered by business entities, which, however, exist only in the virtual sphere . digital technologies allow entrepreneurs to operate without the need for a  physical location in a  specific location . this can be problematic in determining the correct tax jurisdiction . for the purposes of this paper, this phenomenon of non-existence of real residence will be called tax absence. these flexible entrepreneurs travel, work for a hungarian client in a café in jakarta or in an alpine chalet (provided a quality internet connection, of course) . they communicate with customers via the internet and offer their services and products to any corner of the world . this is possible because, due to the nature of such a business, there are no additional costs associated with long-distance deliveries . this is a significant advantage over the sale of “traditional” goods and services, which contributes to the growing popularity of this type of business . doi: 10.53116/pgaflr.2020.2.1 mailto:ter.cejkova%40gmail.com?subject= https://doi.org/10.53116/pgaflr.2020.2.1 6 tereza čejková public governance, administration and finances law review • vol. 5. no. 2.  in case of employees, their movement is not a  particularly problematic element . due to the mass spread of modern technolog y, the ability to work remotely from home or anywhere else has become a standard rather than a bonus .1 if an employee does his/her job well, he/she gets his/her salary and tax matters lie with the employer, who is subject to tax jurisdiction depending on his/her registered office . (čejková, 2019, p . 39) so, we have a  new way of doing business that generates more and more profit, and in contrast a  relatively traditional system of taxation, which cannot comprehensively cover these activities . at first glance, a simple solution could be offered – the principle of domicile, where the tax rules of the state in which the entrepreneur has his/her registered office or permanent residence apply . however, the situation is more complicated, mainly for two reasons: ƿ constant movement of the entrepreneur and the related use of his/her income in different countries . although the entrepreneur has his/her registered office, which is usually a  condition for obtaining a  business license, due to the constant movement, his/her activity is affected by a number of factors . one of them is contributing to various national economies, for example through vat, using the services of an internet provider and more . it also makes it easy for him/her to find the country with the most favourable tax regime for its official seat, which again leads to a decrease in the income of the state to which the entrepreneur has a real relationship . this problem is particularly evident in the taxation of profits . ƿ concerning customers from different countries, in case of digital content, such as internet advertising or part of application code, etc ., it is very difficult to determine who the end customer is . under current eu rules, vat is paid to the country of final consumption of the product . however, this data is often not available or of low quality and is easily falsified . ƿ both the oecd and the european union have long been working to bring these mobile entrepreneurs under control in terms of taxation . in this paper, i will try to explain exactly what the problem of tax absence in relation to the digital taxation is and how these international organisations try to fight it . we will focus in particular on the actions of the european union, because its regulation is closer to us by its nature and we will feel its impact rather immediately . 2. literature overview the research is based mainly on the analysis of prepared legal regulation both at the national and the eu level . academic literature was used to explain important concepts and was supported by internet articles written by personalities knowledgeable in the tax environment . 1 this article is being written at the time of the coronavirus outbreak crisis (2020). at this time, we are all best aware that the possibility of working remotely is applicable to professions for which, for example, only ten years ago, it would have been unthinkable. 7 public governance, administration and finances law review • 2. 2020 tax absence in relation to taxation of digital services 3. research the work will be based mainly on the analysis of valid and still-being-prepared community legislation . the explanatory method will explain the essence of tax absence and will provide practical examples of situations where this causes real problems  –  in this part, deduction will be used . the hypothesis, which will either be confirmed or refuted in the end, is the question of whether the forthcoming rules of the european union are sufficient to capture the problem and whether such a solution is sustainable in the future considering the issues related to globalisation . 4. discussion the first question we need to answer is how the subject becomes absent for tax purposes . to do this, it is first necessary to explain the essence of digital business  –  who is a  liable entity and on what basis does tax liability arise . it is also necessary to explain the principle of tax residence . it is true that tax residence is a notorious concept not only among experts, but also among the non-professional public . however, it includes aspects that may make it impossible to classify the entity in the relevant tax jurisdiction . the problem may be visible from the definition of the liable subject, which is not easy to grasp . this subject provides digital services . for the time being, the regulations provide for the following activities, the trading of which is to be subjected to a digital tax: 1 . services consisting of the placing of targeted advertising on a digital interface aimed at users of that interface, and related ancillary services 2 . services consisting of the use of multilateral digital interfaces, which allow users to conclude a transaction between users of the multilateral digital interface, or otherwise use the multilateral digital interface 3 . sale of data collected about users (explanatory memorandum to the digital tax act) ad 1 .  the person who is liable to pay the tax is in this context usually the end customer . we consider a customer to be a person who pays for a service to benefit from it . in case of advertising, such as banners, automatically triggered videos when opening an internet article, product placement, etc . the customer is the contracting party . significantly, this type of advertising is not universally accessible to all internet users . digital advertising, especially on social networks, responds to user data collected using so-called cookies .2 these are processed in such a way as to recognise the user’s preferences and show him/her only such advertising that may be potentially interesting for him/her, and ideally even at the moment when he/she may consider buying a given product or service . 2 see, for example, google’s policy: a cookie is a short text file that a webpage you visit sends to your browser. it allows the site to record information about a user’s visit, such as their preferred language and other settings. “cookies are used for a variety of purposes. for example, we use them to store your safesearch preferences, to select relevant ads, to monitor the number of visitors to a page, to facilitate the registration of new services, to protect your data, or to store ad settings.” accessible at: https://policies.google.com/technologies/cookies?hl=en. https://policies.google.com/technologies/cookies?hl=en 8 tereza čejková public governance, administration and finances law review • vol. 5. no. 2.  for this type of supply, we can pose a  question whether we can also include the promotion of products carried out by bloggers and via social networks . although this activity is also inherently performed in the internet environment through the transmission of digital signals, it is not characterised by the need for active code generation . it is then not even offered to internet users on the basis of their preferences, as explained above, but to so-called followers .3 the advertisement itself is then more traditional in nature, when, in principle, the benefits of the product are communicated to the public orally or in writing . however, even if this type of advertising does not fall into the given category, in both cases we know how to identify the obligated subject . however, what can be confusing is that the regulations do not take into account whether the advertising service provider owns the digital interface on which the advertisement appears (the digital tax directive proposal) . where an advertising service provider places advertising on an interface which has been left to him/her for use, the person who provided that part of the interface should not be liable to tax . ad 2 . very similar in character to digital advertising are services consisting in making multifaceted digital interfaces available to users, which in the current state of legislation can be described as “intermediary services” . basically, it is the operation of the internet interface – the web, applications, databases, etc ., and their provision to the general public . this includes e-shops, search engines, interactive and gaming websites, as well as comprehensive social networks that allow users to search for other users and interact between each other, and which may also allow related deliveries of goods or services directly between them . here, the fact that the legislation does not take into account who owns such a platform can cause even more complications than in the advertising discussed above . quite specific are the internet interfaces enabling the execution of direct transactions using a  payment gateway (application) and some more advanced social networks . for a  person without at least a  general knowledge of the technical background of these platforms, it can be very difficult which part is subject to tax and which is no longer . the directive on a common system of taxation for digital services as income tax on the supply of certain digital services (hereinafter “the digital tax directive”) seeks to provide the following explanation: “…multifaceted digital interfaces allowing users to search for and interact with other users, an aspect that allows service providers to benefit from network effects . the ability of these interfaces to establish connections between users distinguishes intermediary services from other services, which can also be considered facilitating user interaction, but through which users cannot contact each other unless they have previously made contact using other means, such as instant messaging services, messaging . creating value for these other services, which can generally be defined as communication or payment services, consists of developing and selling supporting software that enables this interaction and is less tied to user involvement . communication or payment services therefore do not fall within the scope of the tax .” this means that, although the operation and provision of such an internet platform for use is subject to taxation, applications for the exchange of messages between users and payment gateways enabling financial transactions do not fall 3 in the social networking environment, a “follower” is a user who subscribes to content shared by another specific user by an active action. 9 public governance, administration and finances law review • 2. 2020 tax absence in relation to taxation of digital services within the scope of the tax . the provision of digital content itself is also excluded from the scope . these services will be taxed according to a special law . here we are getting closer to the sense of the problem . if it does not matter which entity owns the internet platform as a  whole, and at the same time its various parts are taxed separately, in addition to different tax rules, a  multi-layered system is created which will be difficult for tax administrators to decipher . at the same time, it is difficult to determine what actually falls within the scope of taxation . the tax administrator, or the auditor, will most likely be required to have a  relatively extensive technical knowledge . another possibility is to involve experts, which would, however, significantly increase the cost of collecting and administering the tax, in which case we could discuss the effectiveness of its introduction and collection at all . ad 3 . the commodity of the twenty-first century is data .4 they are traded for a variety of purposes . they help entrepreneurs create content much better targeted to their potential customer, identify them in the crowd, but also better tailor advertising to their preferences . various databases enable the development of applications and programs that the customer buys for his/her own use, and by using them he/she further contributes to the development of such a  program . trafficked data does not only include data enabling to identify a  specific person, such as his/her name, age, approximate location, etc . entrepreneurs are particularly interested in the data on the person’s search on the internet, what topics interest him/her, what products he/she buys, which services he/she uses . this information is then processed by data scientists, a thorough analysis is performed, and a marketing plan is built on it . and every single click of an internet user is recorded and then processed in this way . as described above, in the digital environment data is collected not only on the basis of direct submission by the user, but also through so-called cookies . the data is provided to the subject directly, if the user of the internet interface fills in a form, creates an account on a  website, etc . these usually include personally identifiable information, and sometimes actively choosing certain preferences . in contrast, cookies contain records of how an internet user acts, what information he/she searches for, what he/she likes, what and how he/she buys . by analysing such data, researchers can reveal unexpectedly personal information, often information that the user does not know about, and subconsciously makes the choice . european union citizens are covered by directive 2009/136/ec, which requires platform operators to inform users that this data is being collected and further processed, and the user must explicitly consent to this (despite the fact that many users are denied access to the web if they decide not to agree) . in both cases, however, users should be explained in detail how their data will be further used and what they can expect as a result of their processing . from the above it is clear that data trading will occur more and more often . the first problem is the question of who is the owner of the information provided about users in this way  –  the website operator, its owner or the author of the part of it that collects this data and passes it on for processing ? this, however, falls into the category of business relations, which will be governed by a  contract between the parties . however, for tax 4 see on this topic, for example, yuval noah harrari: homo deus. 10 tereza čejková public governance, administration and finances law review • vol. 5. no. 2.  administrations, this information can be crucial and non-transparent due to the internal organisation of the relationship . it will require considerable effort not only to identify such a  person, but also to find his/her localisation . on the one hand, the fact that the sale of such data is taxed could simplify the situation . as stated in the draft of the czech act no . 89/2019 coll . on digital tax, “therefore, a  tax on selected digital services is not a  tax on the collection or use of data collected by companies for their internal purposes or the sharing of data collected by companies with other parties free of charge” (the digital tax directive proposal) . then we would assume that the obligated entity is the party to the contract that provides its database to another entity and accepts payment for it . the bill further stipulates that “the tax on selected digital services is focused on the transfer of data obtained from highly specific activities (user activities on the digital interface) .” it also remains unclear, and this is crucial for these purposes, where the sale of data begins  –  i .e . how they get to the seller’s possession in the first place . this brings us back to the question asked at the beginning of this paragraph: who is the owner of the user information collected in this way? the ministry of finance of the czech republic describes the digital tax as an indirect tax (the oecd and the eu do not comment in this regard) . in order for an entity to become a taxpayer, it must meet several conditions: (ondroušek, 2019) 1 . a separate legal entity or unit without legal personality, if the total revenues in the relevant period are higher than eur 750,000,000 and at the same time the total amount for taxable services provided for the relevant period is higher than czk 50,000,000 (eur 1,830,600) 2 . entity of a group, if the total amount for the provided taxable services for all members of the group carried out in the relevant period belonging to the czech republic is higher than czk 50,000,000 (eur 1,830,600) the draft of the czech digital tax act characterises an entity also as ‘legal persons or units without legal personality’ (the digital tax directive proposal) . it follows from the above that a  legal person will be liable only when it generates a  significant profit on the basis of a  taxable supply, and which has achieved a  certain position in the market . however, such corporations often create value  –  i .e . the basis for the provision of some of the above services, in a completely different place than the taxable supply ultimately takes place . corporations of this size often have units in different states . each such unit often performs different tasks . when units work together, they generate some value that they pass on to the corporation’s customers, often in completely different states . however, these customers enter into a contract with units that are not those that in fact contributed to the creation of the traded value . so far, it is still relatively simple, but there are corporate schemes, which on the outside appear to be the cooperation of mutually unjustified entities . given the fact that each state has a different legislation regarding the legal personality and the designation of company units, as well as a different tax legislation, it may be unclear when the surveyed corporation creates the value in question . units with different job descriptions also keep different records of their activities and transactions . the combination of these facts with different tax jurisdictions makes it very difficult to determine whether an obligation to pay a tax has arisen, even for the liable entity itself . 11 public governance, administration and finances law review • 2. 2020 tax absence in relation to taxation of digital services in addition, there is room for tax optimisation and aggressive tax planning, where entities benefit from this lack of clarity . a  common feature of these procedures is that corporations usually act within the legal provisions even in such actions . however, they exploit gaps in the law, where the legislator either failed to adjust some important actions or could not do so because it would disadvantage entities with a weaker economic position . in the case of tax optimisation, it is mainly the spillover of profits between individual units established in different countries, or various internal relations, such as loans, sales, etc . (here we can also talk about the use of so-called tax havens) . aggressive tax planning is the refined use of all possible benefits resulting from tax regulations and the application of the laws of different territories so that the tax liability is minimised as much as possible . one example is the so-called hybrid arrangement effect . it is about creating an artificial structure that uses different tax systems so that double deduction is possible . this may be a double deduction of the loss, once in the source country and a second time in the country in which the company has its registered office . there may be double non-taxation of interest, where in one country interest costs are deducted from the tax base and in another country interest is not included in the taxable income, but also the use of a situation where the value arises in one state in which the company operates, but in the state registration, such value is exempt from tax . from the above it is clear that there is a  certain difference between various service providers . as described in the introduction to this article, all the above implies that there is a  lack of certainty as to who the taxable person is . we can call this phenomenon tax absence . however, this is not the will of the taxpayer, who, although he/she may want to take advantage of this situation, did not cause it . what makes a subject a taxable person is not the supply or performance of other conditions, but the law itself . an unequal legal relationship arises between the legislator and the tax subject . therefore, it is the responsibility of the legislator to create laws so as to provide the liable person with sufficient certainty about his/her rights and obligations, and to cover all possible situations in which the obligation to pay tax should arise . (drywa, 2017) given the fact that taxes represent a government interference with a person’s fundamental property rights, it is very important that the quality of tax laws be at a  high level . in addition, these laws are among the most frequently amended, so the legislator must be particularly prudent and ensure that the legal certainty of entities is not compromised . we have a  relatively wide range of entities that may be liable to digital taxation . the essential problem is that if we have difficulty determining who the liable entity is, it will be all the more difficult to find the right tax jurisdiction . this obviously leads to a potentially incorrect application of the law and the impoverishment of the state where the taxation was supposed to take place . this creates legal uncertainty on both sides  –  both for the liable entity and the tax administrator . the situation may escalate to the above-mentioned tax evasion . this is due to the fact that, unlike the tax administrator, the liable entity has the motivation to use this gap in the law and find such a  solution that would help it to reduce the tax liability to a  minimum . due to the insufficient quality of the legal regulation, he/she will be able to remain within the limits of the law during such conduct and will not be punishable . 12 tereza čejková public governance, administration and finances law review • vol. 5. no. 2.  if the introduction of the digital tax aims to, next to other issues, fill in the lack of funding in state budgets,5 it is essential that it will be properly regulated by the laws of each jurisdiction . furthermore, as there is often an international element which is an important factor of potential tax evasion, it is also necessary to achieve a certain standard of harmonisation at the level of international organisations . that should be a priority . the need to introduce a digital tax is one of the consequences of the advanced phase of globalisation, which has been mainly achieved due to digital means of communication . it is therefore almost self-evident that the international element will be one of the hallmarks of a  taxable transaction . the organisation for economic co-operation and development (oecd) deals with the issue in cooperation with the g20 countries . the main goal of the oecd is to solve the problem of low transparency in the taxation of digital companies and of the use of gaps in national tax systems . (oecd, 2019) the european union is also coming up with a  solution, which is currently in preparation: the above-mentioned digital tax directive, which aims to harmonise the legislation of this tax in the individual member states . cooperation between the two organisations is rather problematic, as some member states fear that if the digital tax is regulated only for the territory of the european union, it will lead to the relocation of companies such as google or facebook, (elčić, 2019) which would mean major economic losses . therefore, a  global solution is preferred . however, reaching agreement at the global level is a great challenge, both in terms of discussions between states and in terms of time . while some member states of the european union (e .g . austria or spain) has been operating with the digital taxation for several years, in other countries (the czech republic, slovakia) its introduction is still being prepared . in a  group such as the european union, it is, of course, undesirable for such significant differences in tax systems to arise . this was probably the main motivation for the union to take action in this direction, despite the risks outlined above . another attractive factor is the overall increase in the economic level of the entire group, thanks to increased transparency and improved competitiveness of smaller companies . (vodák, 2018) in the current situation, large companies with a  large number of users pay significantly lower taxes than digital companies with a user base in one or two countries . on the other hand, some states fear that this effect will not be achieved, as companies will have to charge for some of their services to the general public, which are still routinely free, in order to be able to offset the loss of funds paid to the state coffers . (štípek, 2018) the rapid variability of business in the digital environment can also be risky . according to the commission, a  digital services tax, proposed in 2018 as a  short-term solution, would generate annual revenues of around eur 5 billion in the union and reduce the fragmentation of the single market .6 a certain intersection between the oecd and the european union approach may be projected in the anti-avoidance directive (hereinafter atad) . it was adopted on the 5 in the czech republic, the annual tax revenue is estimated at czk 2.4 to 6.6 billion. see právní rozhledy, vol. 27, (2019) no. 15–16, annex legislation p. ii. 6 com/2018/0148 final. the commission communication time to implement a modern, fair and efficient standard for taxing the digital economy states that “companies with digital business models pay less than half the tax rate for companies with traditional business models, with an average effective tax rate of 9.5% compared to 23.2%”. 13 public governance, administration and finances law review • 2. 2020 tax absence in relation to taxation of digital services basis of long-term negotiations at oecd level and builds on them . it thus has a  much wider international impact on entities operating not only inside the european union but also outside it . (radvan et al . 2016) the atad is a  directive aimed at coordinating the procedures of national governments and tax administrations so that businesses operating in the territory of two or more eu member states, or non-eu countries, do not use different tax codes for tax evasion in a country where it should be taxed, even though it may not be the most advantageous for them . (hrubý, 2016) two of its pillars will then be directly relevant to the effectiveness of the digital tax directive: ƿ rules for dealing with hybrid structures (discrepancies), and ƿ rules for controlled foreign companies . the so-called hybrid discrepancies occur in situations where revenues and expenditures arising from the entrepreneur’s foreign activities are qualified differently by the various legal systems concerned . the functioning of the digital tax in only some countries serves as a  good example . while in one of the countries concerned the revenue from the provision of digital services may be considered the item of the total revenue of the corporation for selling its services, in the other country it may be assessed, for example, as renting digital space for advertising, royalties for code creation, etc .; different rates will then be applied . in the absence of common rules determining which types of services are subject to which tax and under what conditions, and in particular the rules for determining in which place the value in question arose, the liable entity has a choice . it will thus adapt the taxable supply to the regulation which is more favourable to it, even though in fact it has a  legal relationship with a country with a different regulation . in case of companies where there is a  subsidiary hierarchy between units located in different states, there is a different kind of tax optimisation . this usually includes the relationship between the controlling company and the controlled one, and it does not appear to be a single company . as a result of the subsidiary relationship, they should be considered a single corporation . values move between these units in such a way that they appear to be transactions between completely different entities . this again is an easement to the search for such tax rules that are most advantageous for the entity, and thus to an outflow of funds that would belong to the budget of the state in whose territory the value in question actually arose . this happens most often via intra-company loans, investments of the controlling company in the controlled company, handling of receivables, etc . the re-launched common consolidated corporate tax base directive (hereinafter ccctb) is expected to address both issues . although it has been introduced in the past, neither the business environment in the european union nor national regulations were ready for it at the time . following the adoption of the atad directive, there was scope for its recast and adaptation to current market conditions . the ccctb aims to consolidate the tax base of corporations which have branches located in two or more member states . it intends to achieve this by several methods depending on the nature of the relationships between these units: ƿ full consolidation method: ■ the consolidating entity exercises a decisive influence in the consolidated entity ■ the consolidating entity excludes financial investments in the consolidated one 14 tereza čejková public governance, administration and finances law review • vol. 5. no. 2.  ■ intra-company receivables and other property liabilities are excluded ƿ proportional consolidation method: ■ the consolidated unit is controlled by two or more consolidating units together ■ consolidating entities report a proportionate share of assets and liabilities ■ intra-company receivables and other property liabilities are excluded ƿ equity method of consolidation: ■ the consolidating entity does not control the consolidated entity, but has a significant influence in it ■ the consolidating entity recognises, against securities, the following items: ◆ profit or loss in equivalence representing the share of profit or loss of the consolidated unit ◆ consolidation reserve fund representing the share of retained earnings of previous years of the consolidated unit ◆ intra-company receivables and other property liabilities are not excluded the consolidated tax base is shared only if the result is positive, negative consolidated tax base is included in future consolidated profits . finally, a relatively complex computational formula is applied . however, sufficient prior tax harmonisation is a precondition for these procedures . in view of the fact that the calculations for the sharing of the consolidated tax base are carried out at the end of the accounting year of the whole group, it will be necessary for these periods to overlap for different countries . the european commission intends to implement this directive in two steps . in the first phase, the calculation of the tax base will be harmonised so that it is approached in approximately the same way in all countries and thus undesirable differences do not arise . important criteria are neutrality, equity, simplicity, enforceability, scope, income stability, public policy and the costs associated with reform . in the second phase, the consolidation itself is to be performed using the above methods . 5. conclusion at the beginning of this article, we introduced and explained the core of the problem and described it as a tax absence in relation to the digital tax . this phenomenon is mainly due to the fragmentation of tax regulation in different countries, and in today’s globalised world it is not possible to expect companies not to expand abroad . this is all the more true for entities doing business in the digital environment, which often do not even have a physical base and branches . in such situations, it is easy to find the most advantageous tax regime or even avoid taxation altogether . a  high-quality taxation system needs to be created for the activities of this type of business . the introduction of a digital tax, at least in the european union, despite the above explained risks, seems to be a desirable solution that will bring the missing funds to state budgets and at the same time implement a greater 15 public governance, administration and finances law review • 2. 2020 tax absence in relation to taxation of digital services degree of control over the activities and expansion of these entities . the previous paragraphs attempted to analyse the proposed legislative texts and to map the process according to which the person liable to pay the digital tax is to be determined . based on the interpretation of some terms and by deduction, we found that there is a relatively vague spectrum of entities that can be designated as a mandatory entity . these can then be difficult to trace, especially when it is possible that they will often not even have a  legal personality . here then the question arises – is it possible to enforce the fulfilment of any financial obligations by an entity without legal personality? who does bear the responsibility for it? an ambitious goal  –  to solve the problem of tax absence – is set by the re-launch of the ccctb directive . if the essence is to calculate the tax base (in general) for the whole group together, and then to divide the tax liability proportionally between the individual units on the basis of a proportional formula, this could have the desired effect . as follows from the above, for digital tax, the subordination of the liable entity and the obligation itself under the tax jurisdiction will be a major problem . an entity without a legal personality can also be a subject to tax . at the same time, the nature of the performance allows for a  high degree of localisation flexibility . the ccctb directive introduces a  rule whereby the taxable values of all units in a group are added together, especially those located abroad . ideally, the value should be taxed at the place where it was created . this is often not possible in case of digital services provided abroad, or it is not possible to determine such a place . if the tax calculated on the basis of the consolidated basis is distributed through the allocation formula, the funds collected will be fairly distributed among the states without the need for excessive administrative effort in order to apply the law of the administrative state to taxable transactions . however, problems may still arise here because some states lack legislation to consolidate entities located abroad . for example, in the case of the czech republic, this is addressed by the international accounting standards ias 21 .  the somewhat legal philosophical question remains whether the accounting standards have sufficient legal force to be used in the field of international taxation . according to the association of industry and transport of the czech republic, a long-term solution to the tax absence of modern digital companies linked to the ccctb directive could be to create a rule where the company will have to establish a  so-called permanent virtual establishment, provided that at least one of the following criteria is met: annual revenues in a member state exceed eur 7 million; it has more than 100,000 users in one tax period; during the tax period, it concluded more than 3,000 business contracts for the provision of digital services with business users . however, in order for the problem to be truly solved, it is necessary to approach the solution with the knowledge that the development of digitisation is very dynamic and we can expect its expansion into traditional economic sectors in a very short time . in this context, it is necessary to focus on long-term solutions and cooperation of as many countries as possible, not only within the european union and/or the oecd, but also, if possible, outside of these organisations . although the ccctb directive offers a good solution to the problem of the indeterminacy of tax residence in relation to digital tax, i do not believe that this is a  sufficiently effective and final solution . the hypothesis thus remains unconfirmed . 16 tereza čejková public governance, administration and finances law review • vol. 5. no. 2.  references čejková, t . (2019) . život a daně digitálního nomáda [life and taxes of digital nomad] . in j . schweigl, e . tomášková, & m . janovec (eds .), cofola 2019 (pp . 38–47) . masaryk university . drywa, a . (2017) . the quality of the law as a factor shaping the taxpayer’s legal position . in m . radvan, j . gliniecka, t . sowiński, & p . mrkývka (eds .), the financial law towards challenges of the xxi century (pp . 366–378) . masaryk university . https://doi .org/10 .5817/cz .muni .p210-8516-2017 elčić s . (2019) . česko chystá vlastní zdanění facebooku a googlu . evropská dohoda skončila fiaskem [the czech republic is preparing its own taxation on facebook and google . the european agreement ended in a fiasco] . https://bit .ly/2zg3wli hrubý, š . (2016) . nové směrnice eu proti vyhýbání se daňovým povinnostem [new eu directive against tax avoidance] . https://bit .ly/2zop83b oecd (2019) . tax and digitalisation . policy note . https://bit .ly/2xbwpkw ondroušek, m . (2019) . overview of the impacts of the introduction of the digital tax . institute for politics and society, policy paper . https://bit .ly/2zqf jrr radvan, m ., mrkývka, p ., kappel, j ., schweigl, j ., liška, m ., neckář, j ., snopková, p ., šefčík, m ., pařízková, i ., & kouba, s . (2016) . důchodové daně [income taxes] . masaryk university . štípek, v . (2018) . rizika digitálních daní a možná řešení [risks of digital taxes and possible solutions] . svaz průmyslu a dopravy české republiky [confederation of industry and transport of the czech republic] . https://bit .ly/2zyq1ca vodák, p . (2018) . výzvy spojené se zavedením digitální daně v eu [challenges associated with the introduction of a digital tax in the eu] . https://bit .ly/2anwto5 legal references 2009/136/ec directive of the european parliament and of the council amending directive 2002/22/ec on universal service and users’ rights relating to electronic communications networks and services, directive 2002/58/ec concerning the processing of personal data and the protection of privacy in the electronic communications sector and regulation (ec) no 2006/2004 on cooperation between national authorities responsible for the enforcement of consumer protection laws . https://bit .ly/2xcatdc com/2016/0683 . proposal for a council directive on a common consolidated corporate tax base (ccctb), eurlex . https://bit .ly/3cf lzaq com/2018/0148 . proposal for a council directive on the common system of a digital services tax on revenues resulting from the provision of certain digital services, eurlex . https://bit .ly/3deaoqv council directive (eu) 2016/116 laying down rules against tax avoidance practices that directly affect the functioning of the internal market . https://bit .ly/2zg10fi explanatory memorandum to act nr . 89/2019 coll . – czech tax on digital services proposal (2019) . https:// bit .ly/2xh9g7x https://doi.org/10.5817/cz.muni.p210-8516-2017 https://bit.ly/2zg3wli https://bit.ly/2zop83b https://bit.ly/2xbwpkw https://bit.ly/2zqfjrr https://bit.ly/2zyq1ca https://bit.ly/2anwto5 https://bit.ly/2xcatdc https://bit.ly/3cflzaq https://bit.ly/3deaoqv https://bit.ly/2zg10fi https://bit.ly/2xh9g7x https://bit.ly/2xh9g7x public governance, administration and finances law review vol. 6. no. 2. (2021) • 67–82 . © the authors 2022 articles doi: 10 .53116/pgaflr .2021 .2 .6 introduction of the personal decision support it system in the hungarian public service zoltán hazafi*¤, enikő kovácsné szekér**¤ * associate professor, university of public service, e-mail: hazafi .zoltan@uni-nke .hu ** lecturer, university of public service, e-mail: szeker .eniko@bm .gov .hu abstract: the most significant project of governmental hrm after 2010 has been the “strategic support for succession planning in a  competitive civil service” . the name of the project underlines the focus placed on enhancing competitiveness and ensuring a sustainable, continuous supply of the workforce . neither can be pursued without data-driven hr planning, so having an hrm decision support system in place is a critical element of the improvement . this study aims to address the issue of optimal headcount with regard to both domestic and foreign context, emphasise the importance of strategic hr planning and explore its results abroad . it suggests that by establishing the new hrm system, hungary may become a  country at the forefront of public service hrm and digitalisation . keywords: hr planning, public service, human resource management, supply, digitalisation, statistics 1. competitiveness of the public service sector the competitiveness of public service would typically be interpreted differently from the traditional definition of that term, as there is no competition market-wise . the main objectives of public service are serving the public interest, reducing social inequality, and granting access to public services at all levels of society . thus, the competitiveness of public service lies in the ability of the state to drive a  sustained development of social welfare through the achieved economic results . the definition of competitiveness received a  broader interpretation at the meeting held by the european council in 2000 in lisbon, where it was viewed as a nation’s ability to maintain the steady development of the living standards across their country, ensure a  high employment rate and strong social cohesion . eleven years later, the definition was extended at the gothenburg meeting of the european council to include the environmental aspect (conseil européen, 2011) . https://doi.org/10.53116/pgaflr.2021.2.6 https://orcid.org/0000-0001-7931-5512 https://orcid.org/0000-0002-3979-398x mailto:hazafi.zoltan%40uni-nke.hu?subject= mailto:szeker.eniko%40bm.gov.hu?subject= 68 zoltán hazafi, enikő kovácsné szekér public governance, administration and finances law review • vol.  6. no. 2.  at the same time, it is also the state’s primary responsibility to maintain economic competitiveness (imre, 2009) . the various competitiveness reports evaluate several factors, such as stable governance, bureaucratic efficiency, the complexity of regulating corruption and tax burdens, the qualification level of the workforce, and infrastructure (báthory, 2005) . the hrm of the public sector impacts the capacity of governments directly and the country’s economic competitiveness indirectly . one of the crucial aspects of the quality of hrm is the headcount in public service . wages take up the bulk of the operational expenditures . so, a headcount increase means a  heavy budget burden, and the other way around: a  headcount decrease enables the release of considerable budget resources to nurture economic growth . regardless of budget capacity, the ongoing growth and spread of bureaucracy are also political matters . its uncontrollable expansion is undoubtedly an issue; the need to impose limits is frequently debated in political discussions . anti-etatist movements attack the excessive centralisation of authority within public service through bureaucracy (ruiz, 2017) . let the headcount be up for discourse in any regard, the optimal number of employees and the rationale behind it are unavoidable issues . 2. the optimal headcount the most critical aspect of human resource management is headcount optimisation . nonetheless, an ‘adequate’ headcount is in fact impossible to establish (oecd, 2011) . comparing international data does not suffice as a  basis for analysing the domestic headcount data . public service employment rates relative to the active population vary between 3 .7 and 33 .4 per cent in the oecd countries (oecd, 2019) . the reason for the significant variance is that the scope of public service and the extent of outsourced services are different in each country . in countries where public tasks are outsourced, fewer people work in the public sector and vice versa . thus, an international comparison is not suitable for defining indicators to measure the ‘adequacy’ of the headcount . domestic data cannot be utilised as a  reference either; those are more suitable for identifying trends . the period of the regime change in hungary and the headcount data from 1989 are often referred to as the basis for measuring the magnitude of the changes that occurred later in the public sector . the headcount of the public service was around sixty-seventy thousand in the eighties, and rose to one hundred thousand between 1989  and 1994 .  this was due to the removal of the regulatory constraints affecting the public sector headcount management, as a  result of which public service units became more independent and able to increase their headcount freely . however, there is a  need for ‘heavy’ centralisation in headcount management to prevent anarchy (lőrincz, 1995) . it is worth looking into the changes of the headcount in public service on a longer timescale . in terms of the post-socialist era, data are available from the period between 69introduction of the personal decision support it system in the hungarian public service public governance, administration and finances law review • 2. 2021 1994 and 2018 . during that time, the headcount growth was 17 per cent in the public service sector . 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 1994 104,092 121,797 headcount 2018 figure 1 . headcount of public service source: compiled by the authors . at the same time, it is apparent that minor decreases and repeated increases characterise the growth trend . 104,092 109,061 107,699 104,646 103,296 108,249 111,746 116,116 102,907 116,817 115,103 114,538 113,182 114,216 108,322 117,089 111,440 119,504 117,106 117,389 119,498 116,625 121,369 121,563 121,797 90, 000 95, 000 100, 000 105, 000 110, 000 115, 000 120, 000 125.,000 130.,000 figure 2 . headcount of public service 1994–2018 source: compiled by the author . 70 zoltán hazafi, enikő kovácsné szekér public governance, administration and finances law review • vol.  6. no. 2.  generally speaking, the temporary decreases were due to central downsizing efforts made in the labour force . however, these top-down cutbacks did not yield steady headcount optimisation results . the various acts of organisational restructuring proved similarly fruitless in terms of curbing the pace of headcount growth . in that regard, mostly organisational integration was applied in order to ensure cost efficiency . the number of public service units dropped from 720  to 216  between 1994  and 2018, mainly on a  regional and local level . the high ministry model, the merging of public service units fulfilling similar functions, and the integration of regional government units into the county (capital) government offices are examples of the organisational integration . the overall headcount did not decrease due to the organisational integration, but the number of employees per unit increased significantly . while the average headcount per government unit was 71 in 1994, it rose to 376 by 2017 . hence the average number of people employed per unit quintupled, meaning that the integration of government management resulted in significant employee concentration .1 greater organisational size and headcount create favourable conditions for implementing an integrated, strategic human resource management . the periodic downsizing attempts typically aimed at headcount optimisation, yet they served political and monetary interests rather than rational hrm objectives (lőrincz, 2010) . several historic examples support that: after the treaty of trianon, hungary required public service on a much smaller scale than before world war i, and the headcount was decreased significantly twice during the 1920s . as a  result of the b-listing in 1946, sixty thousand public servants were dismissed . after the change of regime, several cutbacks occurred justified on financial, economic grounds; the best-known were the layoffs implemented as part of the austerity measures of the bokros package in 1995 . a common feature of these workforce reductions was that instead of considering the actual needs based on workload, they used a pre-established percentage to lay off the same number of civil servants from all public service units, applying across-the-board cuts . not to mention the fact that these headcount reductions were quickly reversed . the fluctuation and the long-term growth of the headcount in public service show a  domestic and an international tendency . as a  reaction to the global financial and economic crisis in 2006–2007, some countries laid off a  significant number of people employed in public service . for instance, in the united kingdom, public service employment decreased by 3 .1% between 2007  and 2017 .  the impact of this phenomenon completely diminished by 2017  nonetheless, and the level of public service employment increased in the vast majority of the countries – in ireland to the most significant extent (3 .5%)  –  and it decreased in only a  few cases, such as in estonia (5%) (oecd, 2019) . 1 own calculation based on data provided by bm közigtad, bm közstat, ksa. 71introduction of the personal decision support it system in the hungarian public service public governance, administration and finances law review • 2. 2021 35 30 25 20 15 10 5 0 n o r sw e d n k fi n lt u fr a es t h u n lv a is r ca n sv k be l o cd e g rc sv n au t cz e g br po l es p u sa ir l pr t m ex it a lu x n ld tu r d eu ch e ko r jp n cr i % 2017 2009 2007 figure 3 . public service employment as a share of total employment in oecd countries source: oecd, 2019 . 8 6 4 2 0 –2 –4 –6 –8 ir l cz e lu x is r ko r es p sw e sv n cí n d eu n o r au t ch e pr t g rc sv k fi n lv a q cd e u sa jp n m ex fr a be l g br d n k tu r it a n ld lt u h u n po l es t cr i % 2017 2012 2007–2009 figure 4 . annual rate of change in public service employment source: oecd, 2019 . according to the latest statistical data, the oecd average of public service employment has stabilised at the rate of 17 .9% in 2019, as opposed to a  rate of 17 .71% in 2017, although there still is significant variance between oecd countries . while the headcount decreased even further between 2007  and 2019  in the u .k ., it increased in spain, estonia, mexico, slovenia and norway . the overall employment rate also increased over the same period, although to a slightly lesser degree than in public service (oecd, 2021) . 72 zoltán hazafi, enikő kovácsné szekér public governance, administration and finances law review • vol.  6. no. 2.  all this proves that the ‘optimal’ number of public service personnel is determined by political motives rather than rational headcount management . it depends on the needs of the government and the intended role of the state in providing public services . therefore, the purpose of this research should not be seeking an exact number considered optimal, but rather the means of shifting the headcount towards the optimal direction . governments can influence the number of employees working in public service, as well as the otherwise determined processes by taking or not taking – certain reasonable personnel policy measures (lőrincz, 1995a) . strategic workforce planning is a part of those measures and an excellent tool to achieve the intended goals . 3. strategic workforce planning strategic planning is a prerequisite to public service personnel policy . the precondition of strategic hrm is that the government have the data and information required to make personnel policy decisions . it also needs to obtain employee reports, use data spreadsheets for leadership and management decisions, apply data as the basis of workforce and training program planning and social dialogue, and inform the public regularly (oecd, 2017) . international experience has shown that the following areas can benefit from strategic workforce planning : ƿ developing and implementing staff policy objectives ƿ modelling the demographic changes (in terms of age and headcount composition) and their potential effects ƿ analysing the options of outsourcing (ppp, contracts, etc .) ƿ supporting the vertical and horizontal mobility of staff (temporary employments) ƿ investigating the possible resources to boost efficiency (e .g . advantages of e-public service, new technologies, working opportunities, etc .) (melchor, 2013) strategic workforce planning is strongly linked to determining and evaluating competencies . in canada, as part of the recovery from the financial and economic crisis, the public service reforms introduced were mainly centred on key competencies, such as agile leadership, innovative thinking, result orientation, value-based leadership and analytical thinking . the socalled vuca (volatility, uncertainty, complexity, ambiguity) management method developed during the uncertain period following the cold war ( johansen, 2012) has been revived . in principle, they have been looking for leaders who: ƿ have a global aim and vision, motivate and inspire people for creativity (vision) ƿ actively listen to others, know well the strengths of their team members, and are confident about their need to perform (understanding ) ƿ communicate clearly and able to collect relevant information (clarity) ƿ adapt quickly to the changing environment and needs (agility) 73introduction of the personal decision support it system in the hungarian public service public governance, administration and finances law review • 2. 2021 in france, workforce planning is supported by a  job roles directory (le répertoire interministériel des métiers de l’état – rime) . it enlists reference job descriptions based on the required set of skills and competencies for each ministry position . therefore, rime is an integrated competency framework that standardises ministry job roles and job families . it has been continuously evolving since it is designed to track the changes in the operating environment of public service . the actualisation takes the top-down approach . the reference job descriptions are defined on a  macro level without considering the differences between the job roles on a  ministry level . it allows the ministries to integrate their jobs flexibly into the rime system (hazafi, 2020) . in the u .k ., organisations have had to prepare knowledge management plans since the midnineties . the purpose of ‘departmental improvement plans’ is to identify and evaluate the skills and competencies required within the organisation and advise on the directions the developments should take . each public service unit prepares its own plan on an annual basis concerning its institutional strateg y and the rest of its operational plans (cabinet office, 2013) . in australia or the u .k ., talent management strategies are also developed as part of the workforce planning . these strategies provide, inter alia, guiding principles on flexible working hours for the employees, opportunities for internal promotion and involvement in decision-making . budget cuts force countries to reduce their public service headcount and wage costs . in an attempt to achieve that, more and more states decide to implement strategic planning of human capital into their operational agenda, which enables them to retain the necessary human capacity to perform tasks in the medium and long term, even in a  restrictive operating environment . workforce planning ensures that downsizing programs are not based solely on financial considerations but take other factors also into account, and that layoffs are linked to the restructuring of the task systems and hrm .  it offers a  chance to renew all hr processes and functions, such as recruitment, integration, competency management, remuneration, trainings, performance management, etc . the development of workforce planning has complex conditions (melchor, 2013) . it requires the leaders to take a  comprehensive view in their leadership approach and think strategically . organisations need to have strategic objectives . when ensuring that the competency criteria for proper performance are met, cost-efficiency must also be taken into account . the government needs to respond quickly and flexibly to changes in the labour market, recognise future changes, and anticipate organisational development needs . these conditions are not given equally in each country . the coordination between human resource management and strategic policies is often insufficient, thus human resources planning fails to consider quantitative and qualitative human factors required to achieve policy objectives . island-like solutions are applied which, instead of becoming a standardised and systematic approach, get stuck within the organisational framework . the institutional capacities and capabilities required for planning are limited . rigid and centralised hrm practices are incapable of fulfilling the individual needs of the organisational units . there are no  priorities, and organisational resistance is a  common phenomenon (melchor, 2013) . 74 zoltán hazafi, enikő kovácsné szekér public governance, administration and finances law review • vol.  6. no. 2.  4. the implementation of an innovative human resources management in the hungarian public service in hungary – as the first of the former socialist countries – the development of a human resources information database for centralised workforce planning started in the early 1990s as part of the career system development (közigtad [central registry of public service employees]) . during the one and a half decades of its existence, it served the information needs of decision-makers related to the direction and improvement of the hungarian public service . however, it could never fully fulfil its intended purpose . the main reason for this was that the development of the hungarian public service after the regime change did not fully follow the model of traditional career systems and did not centralise hrm .  it allocated the respective competencies and exercise of employer rights to the leader of each organisation in a decentralised manner . this meant that the decentralised units  –  which were otherwise subordinate to the ministries – could independently appoint the members of their staff . the result was a highly fragmented system . in this organisational and legal environment, it did not make sense to maintain a central database whose task would have been to provide up-to-date data in line with the employers’ needs, for the allocation and reallocation of employees, vacancy management and centralised recruitment . instead, it was more of a rational decision to develop a system providing statistical data . however, the use of statistical data has also been hampered due to the relatively high error rate in the data provided by the units and the low demand for empirical analysis . for the reasons mentioned above, the közigtad was discontinued in 2006 and replaced by a  simplified system (e-közigtad) with much narrower data content . it was later replaced by the civil service statistical data system, which collected and stored only aggregated statistical data, as opposed to individual data . after 2010, the need to aid the decision-making in human resource management has been brought back into the focus of government personnel policy due to headcount planning, generational change, and the conceptual renewal of the legal framework for civil service careers . the fact that the government cannot anticipate staff transitions and the labour market demand of public service has become an increasingly pressing problem, which also hinders the government’s ability to make mediumand long-term vacancy management plans and predict the potential impacts of ongoing changes on the organisational system and task structure . there is no coherent data set on public service personnel specifically designed to support strategic human resource decisions . currently, there is no  integrated, efficient and sufficiently streamlined it solution to meet government analysis and planning needs . instead, the necessary information is usually obtained from other databases (kira [central payroll system], central statistics office, ministry of finance) or ad hoc data collections, but their utility (e .g . comparability, trend mapping ) is limited . 75introduction of the personal decision support it system in the hungarian public service public governance, administration and finances law review • 2. 2021 5. former tools for hr reporting despite having access to a wide range of it innovations developed throughout the 21st century, the decision-making process on the field of public service would still typically be based on data retrieval and manually processed information . although each public service organisation has a  regular employee database that is used to support their hr decision-making, including their organisational structure and the data falling within the scope of personnel records prescribed by employment-related laws, it is utilised only on the level of the concerned unit . until the introduction of the kszdr, neither technolog y nor data protection rules allowed for such information to be channelled directly into sectoral or government decision-making . before public service personnel policy decisions were made, the central managerial units and the sectoral managing ministries provided ad hoc data to the organisations concerned . that data provision mechanism can be considered risky in several respects but has a questionable outcome in terms of its factual nature, to say the least . these ‘top-down’ like data requests mainly submitted in excel spreadsheets usually lead to aggregated results based on non-elementary data . the reliability of these data is often compromised because, in many cases, there are several ways to construe and define the obtained data, leading to different interpretations . a  straightforward example of this would be when the decision-maker requests the reporting units for their headcount data, which might be meant as a statistical headcount, legal headcount, budgetary headcount, positions or status . if the request is not specified sufficiently, the data providers are likely to misinterpret it and provide incorrect information . furthermore, this type of hr data collection is time-consuming and can lead to data distortion or loss, typically in the course of data aggregation . nonetheless, to build a competitive public service sector, it is necessary to examine and assess or even forecast both on a governmental and organisational level where applicable  –  the impact of changes (reorganisation and restructuring ) on the organisation system, task structure and workforce . to that end, a decision-making support system is required to assist the government hrm to: ƿ collect, store and integrate data on the public service units, staff and job descriptions of the civil service (job register), and produce the required number and content of outputs (statistical function) ƿ monitor and compare the improvement of the human resources activities of the units and the main characteristics of their staff based on a  varied set of criteria (e .g . sector, type of unit, hierarchical level) (monitoring function) ƿ integrate the various data, or their interconnected analyses and academic evaluations, as much as possible into governmental hr policy-making (analytical/ evaluation function) ƿ support the units in modelling changes in the organisation, tasks, job functions and staffing using the data stored in their system (institutional planning function) 76 zoltán hazafi, enikő kovácsné szekér public governance, administration and finances law review • vol.  6. no. 2.  the question of an hrm information system for the public service has been raised during the planning of the operational programme for the development of public administration and public services . it was developed as a part of the ‘strategic support for succession planning in a  competitive civil service’ project and introduced as the government decision support system (kszdr) . 6. the significance and characteristics of the government decision support system (kszdr) the kszdr is an information system that supports the long-term hr management of the government and the institutions by collecting and analysing personnel data . it seeks more efficient ways of utilising already existing hr data assets . as mentioned above, public service units still have organisational and hr records, most of which have been available electronically since 1998 . at the same time, their utilisation remains local, so it is the task of the kszdr to directly integrate this vast amount of available data into government decision-making and provide a decision support tool for its use . currently, there are no tools to measure the efficiency of the decisions made and evaluate them; there is a  lack of post-impact assessment that would help identify areas in need of further improvement . the question is, what kind of substantial changes will the introduction of the new system bring ? what tools and solutions will be applied by the kszdr to allow for those changes? the following key concepts might be able to provide answers to these questions: ƿ unit coverage: the kszdr standardises the data system of public administration and law enforcement, which provides room for data comparison . the scope of data provision also covers state and local funded health care providers . ƿ data scopes: the kszdr consolidates the data structures that form the foundation of the database related to public administration, law enforcement and health care providers . it allows for running standardised statistical queries for standard and ad hoc purposes in terms of all legal statuses, covering all elements of the legal relationship . it also allows for the processing of specific data sets in the case of healthcare providers operated by the state and local governments . ƿ functionality: not only does it serve governmental hr decision-making with statistical data, but it also provides support to reporting units for the foundation, reorganisation and development of their organisation . ƿ data source: beside external data sources (mák-kira, ksh, tér, etc .), the kszdr also uses its own data sources (the records of the units) to create the database . this not only allows for the comparison of public service, law enforcement and state-funded healthcare providers to one another but also to the public sector as a whole, providing a more comprehensive perspective . ƿ regularity: the kszdr ensures continuous data collection and updates certain data on a daily or weekly basis . 77introduction of the personal decision support it system in the hungarian public service public governance, administration and finances law review • 2. 2021 ƿ method of data processing : after introducing the kszdr, statistical processing and statements can be reproduced at any time . aggregated reports can also be run without limits, in some cases even by automation (standard reports) . ƿ database maintenance: the introduction of the kszdr provides standardised personnel recording and administration system in public service and law enforcement . the system will nonetheless fulfil profession-specific and individual employer needs and track legal changes without external developer updates . 7. structure and operation of the kszdr the kszdr is a  type of information system, which supports the hr management of the government and public institutions by collecting and analysing workforce related data . the development of the kszdr is remarkable even at the international level . it digitalises the databases of personnel management records kept by each administrative and public service unit, as well as the data provided to the central database . it also integrates the it applications developed separately earlier to support certain hr management activities, e .g . performance evaluation and recording training materials . its reporting system allows for three types of analysis . on the one hand, it provides statistical data on personnel and hr activities for description and information . on the other hand, it enables the monitoring of the achievement of government objectives by applying certain indicators . finally, it uses simulation models built from past data to forecast future trends and the long-term impact of government decisions, such as possible workforce fluctuations or the changes in terms of gender or age composition . the kszdr also allows the government to model the effects of organisational changes in the workforce using the so-called “corporate planning” function . the system’s main task is to collect and store the personal data of public service officials retrieved from the public service register kept by the public service units and, via an interface, from external databases (performance appraisal: tér, kira) . kszdr consists of two system elements, the public service personnel interface (köszi) and the decision-making support centre (dtk) . 7.1. public service personnel interface: köszi köszi is a database which provides data connectivity between data sources suitable for communication, and offers data storage, query, maintenance, and authorisation functions . it serves a dual purpose: ƿ it establishes a data connection between the regular personnel databases and the modules, ensuring the internal operation of the kszdr, and helps to transfer complementary data from additional databases 78 zoltán hazafi, enikő kovácsné szekér public governance, administration and finances law review • vol.  6. no. 2.  ƿ provides a platform to the units authorised to use the system for entering, modifying and querying their data köszi stores the data in a  transactional database . it consolidates the data recorded in different locations, organises them into a  standard structure, and regularly completes data cleansing and refinement . there is also an institution planning module available in köszi, which allows the organisational hierarchy of public service units to plan their headcount, payroll and legal costs in a virtual environment . 7.2. decision support center: dtk it provides the data needed for statistical reporting . in the statistical module, the data of public service officials should be recorded anonymously, in line with the order specified in the relevant government decree . the reporting system of the dtk consists of three types of analysis: reports, monitoring and analytical evaluation system . 7.2.1. reports reports help to describe and understand the personnel and hr activities (in other words, the subsystems and hr processes) with the help of statistical data . to set personnel policy goals, we need to know the essential characteristics of the workforce, e .g . headcount, age, professional background, etc . the same applies to hr activities; we can only define development objectives and directions after gaining a clear picture of each of them . the statistical data used for this purpose describe the characteristics of the personnel on the one hand, and those of the hr activities on the other hand . the former includes demographic, status (legal status) and sociological data on human resources, as opposed to the latter which includes quantitative and qualitative data on hr functions (recruitment, career development, remuneration, appraisal, development, responsibility, exit) . statistics not only allow us to gain a  deeper insight into the personnel of public administration and law enforcement in terms of essential characteristics – such as headcount, age or educational background  –  and to explore its internal relations, but also enables us to specify the place (position) of this personnel in the public service in a broader sense (all who are employed by budgetary units, hereinafter: the public sector) . the demand for such positioning stems from the fact that the regulation of the hungarian public service system is highly fragmented in terms of legal status as it comprises several ‘public service legal relationships’ . another reason is that the organisational delimitation of the kszdr is limited . positioning also involves demonstrating and analysing trends affecting certain legal statuses, e .g . the aging of workforce in administrative, law enforcement, judicial units 79introduction of the personal decision support it system in the hungarian public service public governance, administration and finances law review • 2. 2021 and public service institutions . comprehensive public sector analyses can help prepare government measures to coordinate a  highly fragmented system, e .g . how different remuneration systems affect fluctuations in each legal relationship or mobility within the system . the system distinguishes between two types of reports, standard reports and case reports . standard reports are lists, tables, pivots and charts2 with fixed content and structure that are regularly pulled to meet periodic information needs . they can be accessed in two different manners . some reports are drawn with an automated query in a customised manner to organisations, groups and users, with a targeted report distribution . these queries are not run by users; they are executed automatically once a month . the rest of the standard reports can be accessed by manually querying a  user interface selected from an established report catalogue . the access of each report requires authorisation; only certain users or groups can use, run, or edit them . the reports can be exported into standard file formats . users can create additional standard reports from the dtk data scopes . the system provides a  visual platform for report planning with templates, aggregation functions (amount, average, minimum, maximum, etc .), relating jargon, calculated fields and queries . in addition to tabular display, the system also supports graphical display (e .g . column chart, pie chart) and aggregates data to each level of the organisational hierarchy (e .g . institution, central unit, sector) . dtk also enables running individual, ad hoc queries . an ad hoc query is a type of report which allows the user to pull multiple variations of different facts and indicators within the same report in a predefined scheme and dimensions to get specific information when it is needed . the user creates the content .3 7.2.2. monitoring monitoring is a  narrower intersection of reporting, which is different from other types of report as it is based on performance indicators and pulled annually . the evaluation of the indicators shows the stagnant or changing tendencies over the year . the tracking of changes in the workforce and the development of hr activities, the objectives met, and the impact of the measures taken are assessed based on indicators and targets, e .g . the percentage of fresh graduates being hired or the percentage of fresh graduates resigned, etc . it is also examined to what extent and how the actual results vary from the desired outcome . statistical analyses are also included in the monitoring reports . the indicators are predefined . not all indicators can be derived from the data stored in the record of the units, so there is also an option to form them based on data retrieved from external sources or inputs gathered from questionnaires . 2 the tool used for drawing up standard reports is pentaho report designer. 3 the tool used for drawing up ad hoc reports besides pentaho report designer is saiku analytics. 80 zoltán hazafi, enikő kovácsné szekér public governance, administration and finances law review • vol.  6. no. 2.  some examples of indicators are: ƿ change of managerial headcount compared to the same time of the previous year ƿ number of team members per team leads ƿ number of vacancies ƿ the ratio of men and women ƿ employment rate of people under thirty ƿ exit rate ƿ annual labour turnover ƿ annual entry and exit turnover ƿ the share of income deciles ƿ change in the average monthly gross salary per person compared to the same time of the previous year ƿ labour cost per capita ƿ the share of the number of people employed by the budgetary units within the economically active population the system consists of 616 indicators in total . it is possible to display reports and critical indicators for complex and quick conclusions simultaneously in a  management information interface . data can be displayed in tabular, chart, or map format . further reports are available with links, and export files can be downloaded for detailed display and further analysis of certain reports . 7 .2 .2 .1 . analytical evaluation system the analytical evaluation module helps answer the ‘what if ?’ question . when all the necessary conditions are in place to make an hr decision affecting public service either partially or entirely, it is essential to carry out various impact assessments, i .e . the decision needed to take the potential consequences into account . however, in order for the necessary information to be available to decision-makers within a  short period of time and in reliable quality, it is essential to use analytical methods and evaluation with business intelligence tools capable of exploiting the dtk’s data assets . the flexible analytical evaluation system allows for the preparation of simulations of the potential future position of the workforce . thus, based on the fluctuation trend of the previous 3–5  years, the system can model the expected fluctuations in the upcoming years . fluctuation simulation can be displayed over several variables (e .g . age composition, education, etc .) . similarly to the fluctuation model, the system is also able to forecast the impact of salary changes on personnel (e .g . if a  headcount increase is planned, the simulation models the expected increase in wage costs) . the results of the analytical evaluation can serve research needs that help to identify, analyse and assess hrm processes that cannot be managed in other functions . dtk reports can be used to extend the selection of workforce indicators affecting the good state indicators in the following areas: 81introduction of the personal decision support it system in the hungarian public service public governance, administration and finances law review • 2. 2021 ƿ fluctuation: the number of terminated employments reported by public service units, annually cumulated data broken down by county, public service level (central/regional) and/or organisation types, the legal relationship (public service official, government official, state official, etc .), reasons for terminating employment ƿ gender ratio: annually, the annual number of employees in public service by gender, broken down by team leads and team members age composition of public service workers (per year): these analytical needs are the same as previously discussed analyses, so there is no  need to include them as a  separate need . the analyses offered by the kszdr are also suitable as a basis for serving international statistical and analytical needs . therefore, the kszdr can also contribute to the fulfilment of the reporting duties of institutions (ksh and other organisations) that currently provide data to international organisations concerning the field of public service personnel . 8. conclusion headcount is a  crucial factor in the competitiveness of the civil service . ideally, we should be able to determine the optimal number of people employed, but conditions are not in place for that . nonetheless, we can still shift the headcount in the optimal direction by strategic workforce planning and using an integrated information database . the kszdr will be a  tool for the government to reform workforce planning and human resource management processes . the ability to adapt quickly and dynamically to change makes any tool a  valuable asset that provides decision-makers with a  strong reference point . the author of these lines trusts and believes that the kszdr becomes such a benchmark . references báthory, zs . 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(2020) . munkakör-és kompetencia-alapú stratégiai humán erőforrás gazdálkodás a  francia közszolgálatban . in gáspár, m . & szakács, g . (eds .), munkaköralapú humánerőforrás gazdálkodás intézményesítésének nemzetközi g yakorlata (országtanulmányok) (pp . 413–438) . nemzeti közszolgálati eg yetem . imre, m . (2009) . az állam és a közigazgatás gazdasági szerepe és feladatai . in verebélyi, i ., & imre, m . (eds .), jobb közigazgatás helyben járás és visszafejlődés helyett (pp . 28–36) . századvég kiadó . johansen, r . (2012) . leaders make the future: ten new leadership skills for an uncertain world . 2nd ed . berrett-koehler publishers . linder, v . (2010) . személyzet politika – humán stratégia a közigazgatásban (phd thesis) . lőrincz, l . (1995) . a közigazgatás létszámáról . in fogarasi, j . (ed .), a közigazgatás személyi állománya (pp .  205–209) . unió lap-és könyvkiadó kereskedelmi kft . lőrincz, l . (2010) . a közigazgatás alapintézményei . hvg-orac . melchor, o . h . (2013) . the government workforce of the future: innovation in strategic workforce planning in oecd countries . oecd working papers on public governance, pp . 22–26 . online: https://doi . org/10 .1787/5k487727gwvb-en molnár l ., & udvardi a . (2016) . versenyképességi évkönyv mag yarország helyzetének változása a régiós versenyben . gki gazdaságkutató zrt . és friedrich-ebert-stiftung . oecd (2011) . public servants as partners for growth: toward a stronger, leaner and more equitable workforce . oecd publishing . online: https://doi .org/10 .1787/9789264166707-en oecd (2019) . panorama des administrations publiques 2019 .  éditions oecd . online: https://doi . org/10 .1787/8be847c0-fr oecd (2021) . panorama des administrations publiques 2021 .  éditions oecd . online: https://doi . org/10 .1787/9556b25a-fr ruiz, é . (2017) . des économies très politiques . cahiers d’histoire . revue d’histoire critique, 134, 65–85 . online: https://doi .org/10 .4000/chrhc .5753 soliman, k . (2017) . vision 2020: sustainable economic development, innovation management, and global growth . proceedings of the 30th international business information management association conference (pp . 904–916) . madrid, ibima . verebélyi, i ., miklós, m ., & gellén, j . (2009) . jobb közigazgatás helyben járás és visszafejlődés helyett (pp . 28–36) . századvég . https://m2.mtmt.hu/gui2/?mode=browse&params=publication;31346113 https://m2.mtmt.hu/gui2/?mode=browse&params=publication;31346113 mailto:/10.1787/5k487727gwvb-en?subject= mailto:/10.1787/5k487727gwvb-en?subject= mailto:/10.1787/9789264166707-en?subject= mailto:/10.1787/8be847c0-fr?subject= mailto:/10.1787/8be847c0-fr?subject= mailto:/10.1787/9556b25a-fr?subject= mailto:/10.1787/9556b25a-fr?subject= mailto:/10.4000/chrhc.5753?subject= public governance, administration and finances law review vol. 6. no. 2. (2021) • 53–65 . © the author 2022 doi: 10 .53116/pgaflr .2021 .2 .5 the constitutional implications of drones, facial recognition technolog y and cctv russell weaver* * professor of law and distinguished university scholar, university of louisville, louis d . brandeis school of law, e-mail: russ .weaver@louisville .edu abstract: over the centuries, new forms of surveillance technolog y have emerged . at the founding of the u .s ., the government did not have sophisticated spying and surveillance technologies at its disposal . in the eighteenth century, the police might have tried to eavesdrop on their fellow citizens in taverns or other public settings, or they might have listened outside a  suspect’s window . however, without the advanced technologies that exist today, the opportunities for successful eavesdropping were very limited . today, surveillance technologies have gone high tech, creating orwellian possibilities for snooping . as one commentator observed as far back as 1974, “rapid technological advances and the consequent recognition of the ‘frightening paraphernalia which the vaunted marvels of an electronic age may visit upon human society’ have underlined the possibility of worse horrors yet to come” . this article examines how the u .s . courts are dealing with three different types of technolog y: cctv, facial recognition and drones . keywords: search and seizure, technolog y, surveillance, police investigations throughout history, advances in technolog y have profoundly influenced various areas of the law (weaver, 2019) . in the free speech area, for example, johannes gutenberg’s development of the printing press revolutionised communication and led to revolutionary changes in government (weaver, 2019, pp . 14–18), religion (weaver, 2019, pp . 13–14) and science (weaver, 2019, p . 13) . over time, as new technologies were developed (e .g . the telegraph, the radio, the television, cable and satellite communications and the internet), people were able to communicate on a  scale never seen before (weaver, 2019, pp . 39–46, 61–65) . with the development of the internet, ordinary people were able to communicate their ideas widely (weaver, 2019, pp . 39–46, 67–114), largely free (except on social media networks) from the traditional “gatekeepers” who had controlled the use of prior technologies . in the process, governments were toppled and societies were altered (weaver, 2019, pp . 21–38, 47–60) . in the privacy arena, the changes have been equally profound (weaver, 2011) . at the founding of the united states of america (u .s .), the government did not have sophisticated spying and surveillance technologies at its disposal . in the eighteenth century, the police might have tried to eavesdrop on their fellow citizens in taverns or other public settings, or they might have listened outside a suspect’s window . however, https://doi.org/10.53116/pgaflr.2021.2.5 mailto:russ.weaver@louisville.edu 54 russell weaver public governance, administration and finances law review • vol.  6. no. 2.  without the advanced technologies that exist today, the opportunities for successful eavesdropping were very limited . the situation is far different today . surveillance technologies have gone high tech, creating orwellian possibilities for snooping (orwell, 1949) . as one commentator observed as far back as 1974, “rapid technological advances and the consequent recognition of the ‘frightening paraphernalia which the vaunted marvels of an electronic age may visit upon human society’ have underlined the possibility of worse horrors yet to come” (amsterdam, 1974, p . 385) . electricity was the transformative invention for both communications and surveillance . in the communications arena, electricity led to new technologies which made it possible for information to move much more quickly than people could move, and permitted the transmission of both audio and video images over long distances very quickly (weaver, 2019, pp . 39–46) . regarding privacy, electricity profoundly affected the privacy of individuals as super-sensitive microphones were developed that allowed people to overhear conversations from far away,1  as well as through walls,2  and facial recognition and closed circuit television systems allowed governments to maintain continuous surveillance of public places (temple-raston & smith, 2007) . global positioning system monitoring systems allowed the police to monitor the location and movements of individuals and things,3 and x-ray technolog y enabled the police to peer through walls and into the privacy of homes using drive-by x-ray vans (greenberg, 2010; basha, 2003) . as personal computers and the internet were developed, devices were created which allowed people to monitor the key strokes and computer uses of others,4  and to do so from distant places using spyware technolog y (blakley, garrie & armstrong, 2005; broberg, 2001; foley, 2007) . moreover, many of these devices were freely available to the public which can purchase devices that allow them to spy on the movement of others,5  and monitor what their neighbours or others are saying,6  even from some distance away .7 this article focuses on one context in which the new technologies are used: governmental monitoring of citizens in public places with such technologies as drones, facial recognition technolog y (frt) and closed-circuit television (cctv) . as will be seen, in the u .s ., there are few restrictions on governmental use of these technologies . 1 see silverman v. united states, 365 u.s. 505 (1961) (discussing the fact that advanced surveillance technologies were already available in the 1960s); see also katz v. united states, 389 u.s. 347 (1967) (involving the attachment of an electronic listening device to the outside of a phone booth so that the police could overhear what was being said inside the phone booth). 2 see goldman v. united states, 316 u.s. 129 (1942) (involving the use of a listening device that allowed the police to overhear what was being said in goldman’s office even though the police were located in an adjoining office). 3 see city of ontario v. quon, 130 s. ct. 2610 (2010); devega v. state, 286 ga. 448, 689 s.e.2d 293 (2010). 4 see the computer spyware devices sold by the usa spy shop at www.usaspyshop.com/spy-software-c-55.html 5 see the gps systems sold by usa spy shop at www.usaspyshop.com/gps-tracking-devices-c-118.html 6 see the spy zone at www.spyzone.com/ccp0-display/listeningdevices.html 7 see the listening device sold by usa spy shop at www.usaspyshop.com/sound-amplifier-system-p-472.html http://www.usaspyshop.com/spy-software-c-55.html http:// www.usaspyshop.com/gps-tracking-devices-c-118.html http://www.spyzone.com/ccp0-display/listeningdevices.html http://www.usaspyshop.com/sound-amplifier-system-p-472.html 55the constitutional implications of drones, facial recognition technolog y and cctv public governance, administration and finances law review • 2. 2021 7. the development of newer technologies increasingly, drones, frt and cctv are being used by governments to monitor what happens in public spaces . 7.1. drones in recent decades, governmental entities have made extensive use of drones (essentially, very small flying machines which are remotely operated by “pilots” who are not on board) for surveillance purposes . indeed, by 2018, some 910 state and local public safety agencies had purchased drones, including 599 law enforcement agencies . drones can be equipped with high-powered cameras (e .g . the dji zenmuse z30) that allow them to magnify images on the ground by 180  times, thereby making them effective spies who can create detailed pictures of what is happening below . as a result, drones can observe activities that may not be observable from ground level, including things that are happening in individuals’ backyards (laperruque & janovsky, 2018) . 7.2. facial recognition technology facial recognition technolog y uses biometric software to map a  person’s facial features from a  video or photo . the technolog y can then be used to identify the person by pinpoint matching his/her facial features with information contained in existing databases (collins, 2019) . 7.3. cctv closed-circuit television is increasingly being used to monitor what goes on in public places .8  for example, in the london underground, there is a  pervasive cctv system which includes some 15,516 cameras .9 the u .s . is awash in cctv systems with atlanta having 15 .56  cameras per 1,000  people, and chicago having 35,000  cameras or 13 .06 cameras per 1,000 people . indeed, six u .s . cities (atlanta, chicago, washington, d .c ., san francisco, san diego and boston) made the list of the most surveilled cities in the world (plautz, 2019) . 8 see epic surveillance oversight project at https://epic.org/privacy/surveillance 9 see https://bit.ly/3fuo0i5 https://epic.org/privacy/surveillance https://bit.ly/3fuo0i5 56 russell weaver public governance, administration and finances law review • vol.  6. no. 2.  8. the benefits of drones, frt and cctv unquestionably, drones, cctv and frt offer enormous benefits to governmental officials in their efforts to serve the public . for example, when hikers are lost in remote areas, drones can be used to help locate them (higgins, 2020) . likewise, following hurricanes, drones can be used “to assess damage, locate victims, and deliver aid” . in an effort to prevent forest fires, drones can survey forests equipped with thermal imaging cameras . drones can also be used to monitor the health and well-being of wild animals (cb insights, 2020) . closed-circuit television and frt have also been enormously helpful in locating and apprehending criminal suspects (collins, 2019) . closed-circuit television can provide continuous monitoring of public areas, including a photographic record, so that the police can review tape and identify suspects after a  crime has been committed (ifsec global, 2021) . following the london subway bombings in july 2005, during which 52 people were killed and another 700 were injured (cnn, 2020), the bombers were identified through police review of london underground cctv footage (bbc, 2010) . similarly, the boston marathon bombers, who killed three people and injured hundreds of others, were found and apprehended using cctv images captured on government and private cameras . the bombers stood out on the video because of the way they acted: while the crowd was fleeing the scene, the tsarnaevs lingered around or walked away casually (kelly, 2013) . in tracking down those who attacked the u .s . capitol building on 6  january 2021, the federal bureau of investigation (fbi) used cctv images and frt, among other techniques (harwell & timberg, 2021) . 9. privacy concerns as facial recognition technolog y, cctv and drones have proliferated, major privacy concerns have arisen . as one writer noted: “[p]rivacy advocates and other citizens are uneasy with the idea that big brother is monitoring their every public move” (harwell & timberg, 2021) . the use of modern technologies raises orwellian concerns, and many are uncomfortable with the idea of allowing governments to fly drones over cities, constantly surveilling the actions of citizens . for example, when new york city announced that it was going to deploy some 14  drones, purportedly to assist in emergencies, civil libertarians complained that the drones could “easily be used to track . . . those who speak out against city hall and police” (romero, 2018) . as one commentator noted: “the nypd’s drone policy places no  meaningful restrictions on police deployment of drones in new york city and opens the door to the police department building a permanent archive of drone footage of political activity and intimate private behavior visible only from the sky .”10 similar concerns have been raised regarding frt . the dimensions of modern frt are truly staggering : “[w]ith a single high-resolution snap shot, frt, has the ability to 10 see bbc (2010) quoting new york civil liberties union associate legal director christopher dunn. 57the constitutional implications of drones, facial recognition technolog y and cctv public governance, administration and finances law review • 2. 2021 map out a biometric profile that is as individually unique as a human fingerprint . with images sharing the same binary 1 and 0 sequences as text, the source noted that big data software and storage capacity currently exists to construct a  truly three-dimensional profile of, well, anyone with a  digital image online” (sullivan, 2013) . one report denounced frt as “an unreliable, biased and dystopian threat to privacy” (o’brien, 2020) as the american civil liberties union stated in a report: “face recognition offers governments a  surveillance capability unlike any other technolog y in the past . the powerful capability can enable the government to identify who attends protests, political rallies, church or aa meetings on an unprecedented scale” (american civil liberties union, 2021) . nevertheless, frt use seems to be expanding and is now used by u .s . customs and border patrol .11 closed-circuit television raises similar concerns . as one commentator argued: “the advent of sophisticated technolog y that allows the government to watch, zoom in on, track, and record the activities of anyone, anywhere in public, twenty-four hours a day, demands regulation .”12  closed-circuit television is particularly potent when it is combined with frt: it accumulates a  mountain of facial images that can then be fed into an frt system to identify people . the difficulty is that current frt and cctv technolog y provide only a glimpse of what is to come . the fbi is spending more than a billion dollars on expanding its next generation identification (ngi) system .13  that system will include huge amounts of information about people, including iris scans, photos, palm prints, gait and voice recordings, scars, tattoos and dna .14 10. legal limitations there are few meaningful limits on governmental use of modern technologies in public places . there have been isolated attempts by individual jurisdictions to limit or control the use of frt and cctv in public spaces . for example, the electronic privacy information center notes that several u .s . cities (e .g . san francisco, california, somerville, massachusetts and oakland, california) have banned the use of frt,15 and the state of california has imposed a moratorium on its use .16 there are few restrictions on governmental use of cctv as well . 11 see https://epic.org/state-policy/facialrecognition 12 see slobogin (2002), p. 213, 215. 13 see www.fbi.gov/services/cjis/fingerprints-and-other-biometrics/ngi 14 the electronic privacy information center’s “next generation identification – fbi” article notes that, in the u.s., there are some restrictions on the use of facial recognition technologies. for example, boston, portland and san francisco have banned the use of facial recognition technologies. in addition, “ibm made the surprising announcement that it would stop selling, researching, or developing facial-recognition services. amazon and microsoft followed with their own announcements that they would not sell facial-recognition services or products to state and local police departments, pending federal regulation”. 15 see https://epic.org/state-policy/facialrecognition 16 ibid. https://epic.org/state-policy/facialrecognition http://www.fbi.gov/services/cjis/fingerprints-and-other-biometrics/ngi https://epic.org/state-policy/facialrecognition 58 russell weaver public governance, administration and finances law review • vol.  6. no. 2.  there are some restrictions on the government’s use of drones . for example, many states have extensive provisions governing the flying of drones by private citizens, but these laws place few restrictions on governmental use .17  the federal government does impose some limitations on drone pilots . for example, governmental “pilots” must either comply with federal aviation administration rule 107 waiver requirements,18 or obtain a  federal certificate of authorization .19  in addition, drones cannot be flown within 400  feet of the ground, and may not fly over such venues as military bases or public landmarks .20 one would hope that the u .s . constitution would limit the use of surveillance technologies, but it imposes relatively few restrictions on governmental uses of advanced technologies in public places . the most obvious constitutional limitation is the fourth amendment to the u .s . constitution which prohibits “unreasonable searches and seizures” .21 historically, the fourth amendment prohibited only “trespassory” invasions against individuals or into “constitutionally protected areas” .22  that approach provided few protections against the use of advanced technologies in public places (weaver, 2011) . for example, in olmstead v. united states,23  when the police wiretapped phone calls made from the defendant’s home, the court held that there was no “search” within the meaning of the fourth amendment because the police did not “trespass” or intrude into a  “constitutionally protected area” .24  in other words, the wiretapping was permissible because it was done from a  public place . likewise, in goldman v. united states,25 when the police placed a “detectaphone” against an office wall, thereby allowing them to overhear what was being said in an adjoining office, the court again held that there was no search because the police did not trespass into the adjoining office .26 it took many decades before the court began to come to grips with the reality of advancing technologies . the court’s landmark decision in katz v. united states,27  involved a  man who the police suspected was involved in illegal bookmaking 17 for a comprehensive list of state drone laws see https://uavcoach.com/drone-laws 18 see www.faa.gov/uas/commercial_operators/part_107_waivers 19 see www.faa.gov/uas/commercial_operators 20 see www.faa.gov/uas/critical_infrastructure 21 u.s. const., amdt. iv. 22 see, e.g., goldman v. united states, 316 u.s. 129 (1942); olmstead v. united states, 277 u.s. 438 (1928); ex parte jackson, 96 u.s. 727 (1877). 23 277 u.s. 438 (1928). 24 ibid. 465. “the language of the amendment cannot be extended and expanded to include telephone wires, reaching to the whole world from the defendant’s house or office. the intervening wires are not part of his house or office, any more than are the highways along which they are stretched.” 25 316 u.s. 129 (1942). 26 ibid. 135: “the suggested ground of distinction is that the olmstead case dealt with the tapping of telephone wires, and the court adverted to the fact that, in using a telephone, the speaker projects his voice beyond the confines of his home or office and, therefore, assumes the risk that his message may be intercepted. it is urged that where, as in the present case, one talks in his own office, and intends his conversation to be confined within the four walls of the room, he does not intend his voice shall go beyond those walls and it is not to be assumed he takes the risk of someone’s use of a delicate detector in the next room. we think, however, the distinction is too nice for practical application of the constitutional guarantee and no reasonable or logical distinction can be drawn between what federal agents did in the present case and state officers did in the olmstead case.” 27 389 u.s. 347 (1967). https://uavcoach.com/drone-laws http://www.faa.gov/uas/commercial_operators/part_107_waivers http://www.faa.gov/uas/commercial_operators http://www.faa.gov/uas/critical_infrastructure 59the constitutional implications of drones, facial recognition technolog y and cctv public governance, administration and finances law review • 2. 2021 operations . police, anticipating that katz would make a  call from a  particular phone booth, placed an electronic bug on the outside of the booth which enabled them to record katz’s incriminating statements, and use them against him in a  subsequent pro secution . based on decisions like olmstead and goldman, the government argued that the police did not engage in a “search” when they bugged the phone booth28 since there was no “intrusion” into the phone booth, and there was doubt about whether the booth would qualify as a “constitutionally protected area” . certainly, under the court’s precedent, there was merit to the government’s argument . the electronic bug placed by the police had done nothing more than passively collect sounds that emanated from a public phone booth . the katz court disagreed with the government, and held that police use of the listening device to overhear katz’s conversation constituted a  “search” within the meaning of the fourth amendment . in reaching that result, katz departed from olmstead’s focus on whether there had been an “intrusion into a  constitutionally protected area”,29 and held that a search occurs when governmental officials violate katz’s “expectation of privacy” .30 in doing so, the court purported to shift the focus under the fourth amendment from places to persons .31  as the court stated: “what a  person knowingly exposes to the public, even in his own home or office, is not a  subject of fourth amendment protection . but what he seeks to preserve as private, even in an area accessible to the public, may be constitutionally protected .”32 justice harlan, concurring, agreed with the court that the focus should be on whether katz had an expectation of privacy, but he argued that the expectation must be one that society was prepared to recognize as “reasonable” .33  ultimately, harlan’s requirement of “reasonableness” was integrated into the eop test so that the court inquired whether the police had intruded upon an individual’s “reasonable expectation of privacy” . thus, after katz, the court used two tests to determine whether a “search” occurred under the fourth amendment . in addition to the reasonable expectation of privacy test, the court continued to apply the old trespass test which had been the governing test for many decades . for example, in the court’s later decision in united states v. jones,34  the police attached a gps tracking device to the undercarriage of the defendant’s car . instead of deciding the case under the katz test, the court relied on the trespass test, and 28 ibid. 352. 29 ibid. 353. “thus, although a closely divided court supposed in olmstead that surveillance without any trespass and without the seizure of any material object fell outside the ambit of the constitution, we have since departed from the narrow view on which that decision rested.” 30 ibid. 351–352. 31 ibid. 351. “for the fourth amendment protects people, not places.” 32 ibid. 351. 33 ibid. 361 (harlan, j., concurring). “as the court’s opinion states, ‘the fourth amendment protects people, not places.’ the question, however, is what protection it affords to those people. generally, as here, the answer to that question requires reference to a ‘place’. my understanding of the rule that has emerged from prior decisions is that there is a twofold requirement, first that a person have exhibited an actual (subjective) expectation of privacy and, second, that the expectation be one that society is prepared to recognize as ‘reasonable’.” 34 565 u.s. 400 (2012). 60 russell weaver public governance, administration and finances law review • vol.  6. no. 2.  invalidated the warrantless attachment of the device  –  and its use to monitor the defendant’s car on public streets .35 unfortunately, in the decades since the katz test was announced in the 1960s, it has not provided a  workable or reliable test for evaluating fourth amendment claims (weaver, 2011) . the reasonable expectation of privacy test could have led to a  significant expansion of the fourth amendment’s scope of protection . that was true in katz. in that case, under the trespass test, there would have been no  search . under katz, the court held that the fourth amendment protected an individual who made a phone call from a  phone booth because the police intruded upon his reasonable expectation of privacy . as a result, in that case, the reasonable expectation of privacy test expanded the fourth amendment’s reach and provided katz with protection against the government’s seizure of the contents of his conversation . despite the promise of katz, the reasonable expectation of privacy test was not applied expansively in subsequent cases, and the court has held that many activities that occur in public are not protected against governmental surveillance . for example, in united states v. knotts,36 the court held that the police may monitor a beeper (placed in a  bottle of chloroform) in an effort to determine where knotts was traveling . knotts had argued that police use of the beeper constituted a  “search” because the police obtained information from the beeper  –  in particular, the location of a  remote cabin where knotts was manufacturing drugs  –  that they could not have easily obtained otherwise . had they tried to follow knotts, he would probably have noticed them and either tried to elude them or not gone to the cabin . however, the court construed the situation very narrowly, concluding that an individual has a  diminished expectation of privacy in an automobile,37  especially when he is traveling on a  public highway, and finding that the beeper simply allowed the police to monitor things that they could have observed from the highway with their own eyes .38  in other words, had the police been on the road, they could have seen knotts drive from the city to his remote cabin . although knotts had an expectation of privacy in the interior of his cabin (which was 35 ibid. 406–407: “for most of our history the fourth amendment was understood to embody a particular concern for government trespass upon the areas (“persons, houses, papers, and effects”) it enumerates. katz did not repudiate that understanding [or] erode the principle “that, when the government does engage in physical intrusion of a constitutionally protected area in order to obtain information, that intrusion may constitute a violation of the fourth amendment” united states v. knotts, 460 u.s. 276, 286 (1983) (brennan, j., concurring). what we apply is an 18th-century guarantee against unreasonable searches, which we believe must provide at a minimum the degree of protection it afforded when it was adopted. we do not make trespass the exclusive test. situations involving merely the transmission of electronic signals without trespass would remain subject to katz analysis.” 36 460 u.s. 276 (1983). 37 ibid. 281. “one has a lesser expectation of privacy in a motor vehicle because its function is transportation and it seldom serves as one’s residence or as the repository of personal effects. a car has little capacity for escaping public scrutiny. it travels public thoroughfares where both its occupants and its contents are in plain view” cardwell v. lewis, 417 u.s. 583, 590 (1974) (plurality).” 38 ibid. 281–282. “a person traveling in an automobile on public thoroughfares has no reasonable expectation of privacy in his movements from one place to another. when petschen traveled over the public streets he voluntarily conveyed to anyone who wanted to look the fact that he was traveling over particular roads in a particular direction, the fact of whatever stops he made, and the fact of his final destination when he exited from public roads onto private property.” 61the constitutional implications of drones, facial recognition technolog y and cctv public governance, administration and finances law review • 2. 2021 not infringed),39 he could not claim a reasonable expectation of privacy for his drive to the cabin: “a person traveling in an automobile on public thoroughfares has no reasonable expectation of privacy in his movements from one place to another .”40 likewise, in florida v. riley,41  even though the court had previously placed great emphasis on protecting the curtilage surrounding a  home, and a  homeowner’s expectations of privacy associated with the curtilage, the court held that there was no  search when the police flew a helicopter at low altitude over the defendant’s property, thereby allowing it to peer down into the property . from the fly-over, the police were able to observe that oliver was growing marijuana inside a  greenhouse . in the court’s view, riley had no  expectation of privacy because “any member of the public could legally have been flying over riley’s property in a  helicopter at the altitude of 400  feet and could have observed riley’s greenhouse . the officer did no more” .42 in california v. greenwood,43  the court upheld a  police search of a  defendant’s garbage . the court emphasised that, while the trash was lying by the curb, it was accessible to “animals, children, scavengers, snoops and other members of the public”,44  and the trash had been placed by the curb “for the express purpose of conveying it to a third party, the trash collector, who might himself have sorted through respondents’ trash or permitted others, such as the police, to do so” .45  as a  result, since the greenwoods left the trash by the curb, “in an area particularly suited for public inspection and, in a  manner of speaking, public consumption, for the express purpose of having strangers take it”, the court concluded that the greenwoods could not have maintained a “reasonable expectation of privacy in the inculpatory items that they discarded” .46 the court has only reined in governmental surveillance when the government has invaded someone’s home or private space . for example, in united states v. karo,47 a case that was similar to knotts in that the police used a beeper to track the defendant’s movement to a  remote location, the court held that the use of a  tracking beeper violated a  homeowner’s reasonable expectation of privacy because police continued to monitor the location of the beeper even after it was taken inside a  dwelling, and were thereby able to know when the bottle (containing the beeper) was moved to another location . the court reasoned that a search occurs when the government “surreptitiously employs 39 ibid. 285. “a police car following petschen at a distance throughout his journey could have observed him leaving the public highway and arriving at the cabin owned by respondent, with the drum of chloroform still in the car. this fact, along with others, was used by the government in obtaining a search warrant which led to the discovery of the clandestine drug laboratory. but there is no indication that the beeper was used in any way to reveal information as to the movement of the drum within the cabin, or in any way that would not have been visible to the naked eye from outside the cabin.” 40 ibid. 282. “but no such expectation of privacy extended to the visual observation of petschen’s automobile arriving on his premises after leaving a public highway, nor to movements of objects such as the drum of chloroform outside the cabin in the “open fields” hester v. united states, 265 u.s. 57 (1924). 41 488 u.s. 445 (1989). 42 ibid. 452. 43 486 u.s. 35 (1988). 44 ibid. 40. 45 ibid. 46 ibid. 40–41. 47 468 u.s. 705 (1984). 62 russell weaver public governance, administration and finances law review • vol.  6. no. 2.  an electronic device to obtain information that it could not have obtained by observation from outside the curtilage of the house . the beeper tells the agent that a particular article is actually located at a particular time in the private residence and is in the possession of the person or persons whose residence is being watched” . thus, the beeper reveals “a critical fact about the interior of the premises” that the government “could not have obtained without a  warrant” . by contrast, the beeper in knotts “told the authorities nothing about the interior of knotts’ cabin” . the information obtained in knotts was “voluntarily conveyed to anyone who wanted to look”, whereas in karo “the monitoring indicated that the beeper was inside the house, a  fact that could not have been visually verified”48 likewise, in kyllo v. united states,49 the court concluded that the police conducted a  search when they pointed an agema thermovision 210  thermal imager (essentially, a forward-looking infrared detection device) to scan kyllo’s home in order to detect and measure the heat that was being emitted . they did so because they believed (correctly, as it turns out) that kyllo was growing marijuana in his attic using special lighting (which gave off heat to simulate the effects of the sun) to help the plants grow . even though the heat could have been observed from the street (e .g . by watching how quickly snow melted on kyllo’s house versus the surrounding houses, or by watching how quickly rain dried), the court held that police use of the device constituted a  search within the meaning of the fourth amendment because it could have revealed intimate details regarding the interior of the home .50 perhaps the only real restraint on the use of surveillance technologies in public spaces was rendered in the case of carpenter v. united states.51 in carpenter, the police used cell site sector information to ascertain a  suspect’s whereabouts at the time that certain robberies were committed . through the use of that data, they were able to ascertain that carpenter was in close proximity to the robbery sites at the time of the robberies . thus, the police were able to pinpoint carpenter’s public movements using technolog y . although the court had previously suggested that information that individuals share with others (as they do when their cell phones reveal their locations to cell site towers) does not come with an expectation of privacy, the court nonetheless held that carpenter held a reasonable expectation of privacy in his cell site data .52 the court noted “society’s expectation . . . that law enforcement agents and others would not—and indeed could not—secretly monitor and catalogue every movement of an individual’s car for a very long period” . the court concluded: “mapping a cell phone’s location over the course of 127 days provides an all-encompassing record of the holder’s whereabouts . as with gps information, the time-stamped data provides an intimate window into a  person’s life, revealing not only his particular movements, but through them his ‘familial, political, professional, religious, and sexual associations’ .”53 48 ibid. 715. 49 533 u.s. 27 (2001). 50 ibid. 38–39. 51 138 s.ct. 2206 (2018). 52 ibid. 2216. 53 ibid. 2217. 63the constitutional implications of drones, facial recognition technolog y and cctv public governance, administration and finances law review • 2. 2021 the difficulty is that the court’s existing precedent imposes few limits on the ability of the government to observe what happens in public places . on the contrary, the court has made it clear that there is little expectation of privacy for activities that take place in public . several of the decisions discussed above illustrate these principles . florida v. riley suggests that the government can fly over private property and peer down into the curtilage surrounding a  home, and knotts suggests that the government can monitor activities that take place in private places . thus, cctv monitoring of public places may be permissible . moreover, the u .s . supreme court has not rendered any decisions regarding governmental use of frt so there is no  indication that this technolog y will be prohibited . carpenter is the only decision that suggests any limits on the government’s ability to monitor what happens in public places . however, in that case, the court did nothing more than limit the government’s ability to access historical cell site data . 11. conclusion modern technologies have enhanced the ability of governments to spy on their citizens . although there has been much controversy regarding the use of these surveillance technologies in countries like china (human rights watch s . a .), the problem exists in most western countries as well . in the u .s ., the government is increasingly using technologies like drones, cctv and frt to spy on people . while these technologies can serve many important and benign governmental purposes (e .g . to locate lost hikers, to help ascertain the level of damage in a disaster or emergency), as well to apprehend criminal perpetrators, there is a  fear that new technologies create orwellian surveillance possibilities for activities that occur outside the home . some state and local governments have placed significant limitations on the ability of private individuals and companies to use surveillance devices . for example, illinois’ biometric information privacy act sets forth various notice requirements for private entities that collect “biometric identifiers” and “biometric information” . the act also places restrictions on the ability of private employers to collect biometric information regarding their employees .54 likewise, the california consumer privacy act places limitations on the ability of businesses to collect information, including biometric data .55  but, even in the private arena, the protections are far from comprehensive . for example, the brookings institution estimates that private actors will soon have as many drones as the government (bennett, 2014) . one potential restriction is that some companies have indicated that they will limit their sale, research and development of facial recognition technolog y (peters, 2020) . if governmental use of technolog y like cctv, drones and frt are going to be controlled, limitations will have to come through legislation . they are unlikely to be mandated by the courts . the court’s search jurisprudence has evolved very slowly . in its 54 see www.ilga.gov/legislation/ilcs/ilcs3.asp?actid=3004&chapterid=57 55 see https://oag.ca.gov/privacy/ccpa http://www.ilga.gov/legislation/ilcs/ilcs3.asp?actid=3004&chapterid=57 https://oag.ca.gov/privacy/ccpa 64 russell weaver public governance, administration and finances law review • vol.  6. no. 2.  early decisions regarding technolog y, the court was relatively unwilling to rein in governmental use of advanced technologies (weaver, 2011) . katz was the first decision to explicitly acknowledge and attempt to deal with that problem, and it took the court nearly half-a-century to get to that point . however, as noted, the katz test has proven difficult to apply, and has not provided consistent or reliable protections to the citizenry . in more recent decisions, such as karo, kyllo and riley, the court has expanded fourth amendment protections on a  piecemeal basis, and perhaps the court will expand its jurisprudence even further in an effort to deal with the implications of technologies like cctv, frt and drones . but the court has been struggling with the problem of advancing technolog y for nearly a  century, and jurisprudential changes have been slow and halting . of course, the difficulty is that congress has been stuck in gridlock for decades, and it matters not which party is in power . so, change may have to be driven at the state and local levels, but those changes are likely to vary by state and potentially to be piecemeal . just as some jurisdictions have sought to limit the use of frt in police investigations, they have the power to impose limitations on governmental use of drones and cctv .  of course, there is a  push–pull here . the public has a  strong interest in controlling crime and in protecting itself against criminals, and drones, frt and cctv help the police achieve that objective . thus, the trick for state and local governments is to find an acceptable balance between crime control and privacy protections . undoubtedly, these are issues that society will debate in the coming years and hopefully bring to a satisfactory resolution . references american civil liberties union (2021) . 2019 proved we can stop face recognition surveillance . online: https://bit .ly/3ohlnjb amsterdam, a . g . 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(2011) . the james otis lecture: the fourth amendment, privacy and advancing technolog y . mississippi law journal, 80, 1131–1227 . https://bit.ly/3cvmlmv https://bit.ly/3cvmlmv https://wapo.st/3qrn57j https://bit.ly/3cpiq98 https://bit.ly/3dywxvw https://bit.ly/3kq5vyn https://bit.ly/3kq5vyn https://cnn.it/2z0xff4 https://bit.ly/30eaww8 https://bit.ly/3qqbe9c https://bit.ly/3qqbe9c https://bit.ly/3x13q0s https://bit.ly/3x4zo5x https://nbcnews.to/3hy3gn4 https://doi.org/10.2139/ssrn.364600 https://bit.ly/3oip7sx https://n.pr/3cufoqo public governance, administration and finances law review vol. 5. no. 1. (2020) • 48–61 . the influence of eu law on public administration in new member states radomír jakab* * judr . radomír jakab, phd, associate professor of administrative law and sciences, faculty of law, pavol jozef šafárik university in košice, slovakia, email: radomir .jakab@upjs .sk, orcid: https://orcid .org/0000-0003-2074-8676 abstract: the membership of central and eastern european countries in the european union has influenced t he d evelopment o f a lmost a ll b ranches o f l aw, i ncluding a dministrative l aw . th e pa per analyses the influence of european union law on the fundamental object of interest of administrative law within new member states – on public administration and its laws . in this context, the influence on laws governing the organisation of public administration, laws governing the activities and tasks of public administration as well as laws governing processes in public administration will be assessed . keywords: european union, public administration, processes in public administration, extraterritoriality, transterritoriality 1. introduction following the luxembourg summit of december 1997, the european union was involved in a  process of preparing the most ambitious enlargement ever: thirteen countries, with economic structures, histories and cultures different from those of the other 15 eu states, had applied for membership . these w ere: bulgaria, cyprus, the czech republic, estonia, hungary, latvia, lithuania, malta, poland, romania, slovakia, slovenia and turkey . these states had been applicant counties for quite some time, but the enlargement process was lengthy and cumbersome (zervoyianni et al ., 2006, pp . 34–35) . the slovak republic, the czech republic, the republic of poland and hungary (hereinafter referred to as the “v4 countries”), as well as malta, cyprus, slovenia, estonia, latvia and lithuania have been member states of the european union since 1 may 2004 . bulgaria and romania have become member states of the european union since 1 january 2007, and croatia since 1 july 2013 . the membership in this transnational organisation entails the need for adapting national law to the requirements of this organisation in various areas (schweiger & visvizi, 2018, p . 120) . however, this process of adapting national law had begun before these countries became members of the european union, in the context of meeting the preaccession criteria, the so-called copenhagen criteria (see brusis, 2002, p . 49) . the political and institutional criteria were: i) protection of human rights and respect for minorities, ii) fight against organised crime, drugs and illegal migration, iii) protection of the environment, iv) adoption of the aims of the eu and ability to enforce the eu legislation, and v) ability to pay the contributions to the eu budget on a regular basis . the economic criteria © 2021 the author doi: 10.53116/pgaflr.2020.1.3 mailto:radomir.jakab@upjs.sk https://orcid.org/0000-0003-2074-8676 https://doi.org/10.53116/pgaflr.2020.1.3 49 public governance, administration and finances law review • 1. 2020 the influence of eu law on public administration in new member states were: i) creation of the well-functioning market economy, and ii) ability to cope with the competitive pressures within the eu (see also füle, 2013, pp . 9–12) . adapting national law to the requirements of the european union covers almost all branches of law, including administrative law . indeed, it can be stated that this branch of law must reflect “european trends” to the greatest extent . the influence of european union law can be seen in relation to laws governing the organisation of public administration, laws governing processes in public administration, and, to the greatest extent, laws governing the tasks and activities of public administration (see e .g . hofmann et al ., 2011, p . 259) . the aim of this paper is to analyse how and to what extent european union law has influenced the above mentioned branches, i .e . laws governing the organisation of public administration in the new member states, laws governing the activities of public administration in these countries, as well as laws governing processes in public administration of the new member states . given the broad focus of this paper, its aim is not to provide a  detailed and exhaustive enumeration of these influences, but above all to point out, the most fundamental of them in the author’s view . its purpose is to open a discussion on the issue as part of efforts to develop educational and scientific cooperation between academics from new member states . taking into consideration the aim of this paper, it was necessary to apply mainly standard methods of research . first of all, it was necessary to analyse the current state of regulation in defined areas of public administration and to identify areas affected by european union law . these areas had to be compared to the regulation in the new member states . based on this analysis and comparison, it was necessary to aggregate conclusions on the manner and extent of the impact of european union law on the given areas of public administration . 2. the influence of european union law on laws governing the organisation of public administration the organisation of public administration is a  complex, internally structured system consisting of various interconnected subsystems . based on the organisational understanding of public administration, we can characterise public administration as a formal institution or set of institutions . each formal institution is characterised, in particular, by its organisational structure, procedural rules and mutual communication system . their purpose is to ensure the implementation of stipulated objectives based on the principle of maximum efficiency of its work . in individual countries, the organisation of public administration is implemented in various forms . it is mainly influenced by historical traditions, the size of the territory of the country, a  period of time usually associated with the reform of public administration, in a certain developmental stage of the country, and so on (sobihard, 2007, p . 81) . in addition to the factors mentioned above, the organisation of public administration in a  given country may be influenced by membership in transnational and international 50 radomír jakab public governance, administration and finances law review • vol. 5. no. 1.  organisations . within the european area, the council of europe and the european union are of particular relevance in this regard . the council of europe, through its acts, either international treaties concluded under its auspices1 or resolutions and recommendations of the committee of ministers2, lays down, as a  rule, the qualitative requirements for public administration activities, and defines the basic rules and principles in public administration activities and procedures (see košičiarová, 2012) . however, it does not directly lay down requirements for the organisation of public administration, the institutional framework of public administration authorities in a member state of the council of europe . this influence is only indirect, and concerns the establishment of the organisational basis of public administration in order to optimise the implementation of the above mentioned quality rules and principles related to the activities of public administration (see addink, 2005, pp . 21–43) . the situation is similar in relation to the influence of the european union and its law on the organisation of public administration . thus, this transnational organisation also lays down certain rules and principles to be applied in the activities of the member states; it is reflected in the organisation of public administration only indirectly . one such principle is the principle of sincere cooperation, arising from article 4(3) of the treaty on european union . “pursuant to the principle of sincere cooperation, the union and the member states shall, in mutual respect, assist each other in carrying out tasks which flow from the treaties .”3 the principle of sincere cooperation also involves a  requirement applicable to the member states to provide a sufficient institutional framework for carrying out tasks arising from the primary and/or secondary acts of european union law . a similar conclusion can also be drawn from article 197 of the treaty on the functioning of the european union (pekár, 2012, p . 86) . according to this article, “effective implementation of union law by the member states, which is essential for the proper functioning of the union, shall be regarded as a  matter of common interest. the union may support the efforts of member states to improve their administrative capacity to implement union law. such action may include facilitating the exchange of information and of civil 1 for example, the european charter of local self-government. 2 for example, resolution no (77) 31 of the committee of ministers of the council of europe on the protection of the individual in relation to the acts of administrative authorities, recommendation no (80) 2 of the committee of ministers of the council of europe concerning the exercise of discretionary powers by administrative authorities, recommendation no (87) 16 of the committee of ministers of the council of europe on administrative procedures affecting a large number of persons, recommendation no (81) 19 of the committee of ministers of the council of europe on the access to information held by public authorities, recommendation no (91) 10 of the committee of ministers of the council of europe on the communication to third parties of personal data held by public bodies, recommendation no (2002) 2 of the committee of ministers of the council of europe on access to official documents, recommendation no (84) 15 of the committee of ministers of the council of europe relating to public liability, recommendation no (91) 1 of the committee of ministers of the council of europe on administrative sanctions, recommendation no (2000) 10 of the committee of ministers of the council of europe on codes of conduct for public officials, recommendation no (89) 8 of the committee of ministers of the council of europe on provisional court protection in administrative matters, recommendation no (2003) 16 of the committee of ministers of the council of europe on the execution of administrative and judicial decisions in the field of administrative law, recommendation no (2004) 20 of the committee of ministers of the council of europe on judicial review of administrative acts, recommendation no (2007) 7 of the committee of ministers of the council of europe on good administration. 3 article 4(3) of the treaty on european union. 51 public governance, administration and finances law review • 1. 2020 the influence of eu law on public administration in new member states servants as well as supporting training schemes. no member state shall be obliged to avail itself of such support. the european parliament and the council, acting by means of regulations in accordance with the ordinary legislative procedure, shall establish the necessary measures to this end, excluding any harmonisation of the laws and regulations of the member states. this article shall be without prejudice to the obligations of the member states to implement union law or to the prerogatives and duties of the commission. it shall also be without prejudice to other provisions of the treaties providing for administrative cooperation among the member states and between them and the union.”4 these general requirements for ensuring a sufficient administrative framework implementing european union law in the territory of a member state are subsequently specified in the acts of the secondary law of the european union . subsequently, these acts require the existence of authorities having a  power to check compliance with specific obligations arising from acts of the european union, as well as deciding in case of their breach . for example, article 5 of directive no 2006/114/es the european parliament and of the council of 12 december 2006 concerning misleading and comparative advertising requires member states to confer upon courts or administrative authorities powers enabling them, in cases where they deem such measures to be necessary taking into account all the interests involved and in particular the public interest, to take measures for the cessation of, or to order the prohibition of publication of, misleading advertising or unlawful comparative advertising (see also jakab, 2016, p . 20) . generally speaking, it can be stated that european union law lays down a  requirement for member states to ensure a sufficient framework of public administration authorities that will enforce compliance with the obligations arising (directly or indirectly) from acts of the european union and ensure liability if they are breached . however, the european union does not specify any requirements for the category, the position of such an authority in the system of organisation of public administration of a member state, or for the organisation of public administration as such . however, there are some exceptions to the statement in the previous paragraph . specifically, european union law implies the requirement for the creation of so-called national regulatory authorities exercising their competence, in particular, in relation to markets where competition is not sufficiently developed (in particular, network industries), or regulating europe-wide issues (e .g . personal data protection, broadcasting and retransmission) . in addition to the requirement for the existence of such authorities, european union law also implies other requirements for their independence, their competence or procedural rules . in the new member states, this was reflected in the extension of the category of state administration authorities with nationwide competence independent of other public administration authorities, including central state administration authorities . under the influence of european union law, either after the accession of the new member states to the european union or in the process of approximation of law in the pre-accession period, several authorities of this category were created . some examples, not exhaustive, of this category are provided below . 4 article 197 of the treaty on the functioning of the european union. 52 radomír jakab public governance, administration and finances law review • vol. 5. no. 1.  the legal status of such authorities is influenced by article 3 of directive no 2002/21/ ec of the european parliament and of the council of 7 march 2002 on a common regulatory framework for electronic communications networks and services (framework directive) . under that article, member states shall “ensure that each of the tasks assigned to national regulatory authorities in this directive and the specific directives is undertaken by a  competent body. member states shall guarantee the independence of national regulatory authorities by ensuring that they are legally distinct from and functionally independent of all organisations providing electronic communications networks, equipment or services. member states that retain ownership or control of undertakings providing electronic communications networks and/or services shall ensure effective structural separation of the regulatory function from activities associated with ownership or control.” based on these requirements, such authorities as, for example, the telecommunications office of the slovak republic (telekomunikačný úrad slovenskej republiky) was established in the slovak republic; now adays it is the regulatory office for electronic communications and postal services (úrad pre reguláciu elektronických komunikácií a poštových služieb) . in the czech republic, these requirements are fulfilled by the czech telecommunication office (český telekomunikační úřad), in the republic of poland by the office of electronic communications (urzad komunikacji elektronicznej), or in hungary by the national media and infocommunication authority (nemzeti médiaés hírközlési hatóság) . the creation of a national regulatory authority in the new member states in the field of regulation of the market of electricity and gas, as well as in other network industries, also resulted from the requirements of european union law . at present, the requirements for the position, powers and quality of this national regulatory authority are specified in article 35 et seq. of directive no 2009/72/ec of the european parliament and of the council of 13 july 2009 concerning common rules for the internal market in electricity and repealing directive 2003/54/ec . the requirements of the directive in relation to such an authority include: the requirement for the creation of one national regulatory authority, the requirement for the independence of such an authority that exercises its powers impartially and transparently (is legally distinct and functionally independent of any other entity, acts independently of any market interests, does not seek or take instructions from other authorities), the requirement for an independent budget, the requirement for the term of office of the chairman (5–7 years), or the exact specification of the objectives, duties and powers of such an authority (articles 36, 37) . in order to meet the requirements of european union law, an independent public utilities commision (sabiedrisko pakalpojumu regulēšanas komisija) was established in latvia, the energ y regulatory authority (nationalacde reglementari in domeniul energiei) in romania, the energ y agency (agencija za energijo) in slovenia, or the estonian competition authority (konkurentsiamet) in estonia . a national regulatory authority for personal data protection also belongs to the category of state administration authorities with nation-wide competence whose creation is influenced by european union law . the requirement for the existence of such an authority stems from article 51 et seq. of regulation (eu) 2016/679 of the european parliament and of the council of 27 april 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing 53 public governance, administration and finances law review • 1. 2020 the influence of eu law on public administration in new member states directive 95/46/ec (general data protection regulation) . under article 51 of that regulation, “each member state shall provide for one or more independent public authorities to be responsible for monitoring the application of this regulation, in order to protect the fundamental rights and freedoms of natural persons in relation to processing and to facilitate the free flow of personal data within the union .” in addition to the requirement for the existence of such a  regulatory authority, the regulation also lays down the requirement for independence (article 52), the requirements for members (article 53), the rules on establishment (article 54), and the competence, tasks and powers of the national regulatory authority (articles 55–58) . thus, european union law regulates very intensively the nature and activities of such an authority . new member states already created such national regulatory authorities under the influence of the previous legislation of the european union, while in their current form they reflect the requirements of the above mentioned regulation . the office for personal data protection of the slovak republic (úrad na ochranu osobných údajov slovenskej republiky) has been established in the slovak republic, the croatian personal data protection agency (agencija za zaštitu osobnih podataka) in croatia, the state data protection inspectorate (valstybiné duomenų apsaugos inspekcija) in lithuania, or the office of the information and data protection commissioner in malta . 3. influence of european union law on the activities of public administration the membership of new member states in the european union also influenced the type, scope, quantity and quality of tasks carried out by national public administration in these member states . in addition to standard tasks carried out by public administration, the implementation of european union law has also fallen to the scope of their tasks (see also heidbreder & brandsma, 2017, p . 805–821) . in identifying tasks through which national public administration implements european union law, it is first necessary to define the interface between tasks carried out directly by the bodies, institutions and agencies of the european union and those carried out by national public administration, either alone or in cooperation with the bodies, institutions and agencies of the european union . in this context, a  reference should be made to the division of competences of the european union . the lisbon treaty introduced four basic categories of competences of the european union: exclusive competences, shared competences, supporting competences and special competences . european union law does not enumerate particular competences of the union, but only the areas of individual competences . in addition to explicit competences, i .e . competences expressly provided for in the founding treaties, there are also implicit competences of the union which may result from the provisions of the founding treaties, as well as from acts adopted by the institutions of the union ( jánošíková, 2013, p . 27) . in specifying the tasks of national public administration in the implementation of european union law, it is necessary to specify which tasks are carried out exclusively by the european union bodies, institutions and agencies, i .e . which tasks do not belong to the 54 radomír jakab public governance, administration and finances law review • vol. 5. no. 1.  scope of activity of national public administration . it is the category of the so-called exclusive competence . under article 3(3) of the treaty on the functioning of the european union, “the union shall have exclusive competence in the following areas: (a) customs union; (b) establishing the competition rules necessary for the functioning of the internal market; (c) monetary policy for the member states whose currency is the euro; (d) the conservation of marine biological resources under the common fisheries policy; (e) common commercial policy. the union shall also have exclusive competence for the conclusion of an international agreement when its conclusion is provided for in a  legislative act of the union or is necessary to enable the union to exercise its internal competence, or in so far as its conclusion may affect common rules or alter their scope” (see also konstadinides, 2009, pp .151–152) . on the other hand, there is a category of the so-called shared competence, i .e . competence exercised by both the union and the member states, while the member states exercise it only to the extent to which it is not exercised by the union .5 under article 4(2) of the treaty on the functioning of the european union, “shared competence between the union and the member states applies in the following principal areas: (a) internal market; (b) social policy, for the aspects defined in this treaty; (c) economic, social and territorial cohesion; (d) agriculture and fisheries, excluding the conservation of marine biological resources; (e) environment; ( f ) consumer protection; (g ) transport; (h) trans-european networks; (i) energ y; ( j) area of freedom, security and justice; (k) common safety concerns in public health matters, for the aspects defined in this treaty.” the room for implementing european union law through national public administration can be seen, in particular, in the category of shared competence . first of all, the european union regulates this competence, as a rule, in the form of directives . therefore, member states must implement these directives in national legislation . subsequently, member states, through their authorities, in particular, public authorities, implement this law and ensure that it complies . given a  large set of tasks of national public administration in the implementation of european law, it is impossible to give their exhaustive list . with some degree of generalisation, it is possible to point out the most important ones, in which the influence of the european union is noticeable . taking into account the european union’s initial idea – the common internal market and the related free movement of persons, free movement of goods and free movement of capital –, the most notable tasks of national public administration influenced by european union law are the following . in the context of strengthening the free movement of persons, the tasks of national public administration have been influenced in particular in connection with foreigners’ residence, employment services, conditions relating to the pursue of business activity (in particular, small business activity), other regulated activities, as well as services in the internal market . as regards the free movement of goods, the tasks of national public administration were most influenced . this was manifested mainly in connection with the liberalisation and deregulation of certain types of markets (energ y, heating, postal services, water management, transport, etc .), consumer protection, food security, or with laying down the technical requirements for products, etc . last but not least, the free movement 5 article 2(2) of the treaty on the functioning of the european union. 55 public governance, administration and finances law review • 1. 2020 the influence of eu law on public administration in new member states of capital has necessitated interference in the activities and tasks of public administration of member states, in particular as regards the harmonisation of laws governing banking, insurance and capital market . the tasks of public administration of member states are not only specified in the acts of general application of european law (or in national legislation implementing the above mentioned acts of the european union), but can also be laid down in individual acts – decisions of the bodies, institutions or agencies of the european union . these acts may also impose a  duty on national administration to act in a  certain way . for example, article 108(2) of the treaty on the functioning of the european union states: “if, after giving notice to the parties concerned to submit their comments, the commission finds that aid granted by a state or through state resources is not compatible with the internal market having regard to article 107, or that such aid is being misused, it shall decide that the state concerned shall abolish or alter such aid within a  period of time to be determined by the commission.” this means that the commission shall decide that the competent authority of a  member state shall act in a certain way . a similar duty of a member state to act is also defined in article 299 of the treaty on the functioning of the european union, i .e . the duty of a  member state to ensure the enforcement of a  decision of the european union body imposing a  pecuniary obligation . under that provision, “acts of the council, the commission or the european central bank which impose a  pecuniary obligation on persons other than states, shall be enforceable. enforcement shall be governed by the rules of civil procedure in force in the state in the territory of which it is carried out. the order for its enforcement shall be appended to the decision, without other formality than verification of the authenticity of the decision, by the national authority which the government of each member state shall designate for this purpose and shall make known to the commission and to the court of justice of the european union .” one of the specificities in carrying out the tasks of public administration of a member state arising from european union law is that the acts of application of law resulting from this activity may also have transnational effects, i .e . effects not only in the territory of the member state that issued the act of application of law, but also in the territory of another (other) member state(s), without that act having to be recognised in the territory of the member state concerned, i .e . it has an automatic effect ( jakab, 2018, pp . 7–18) . for example, if one member state decides to issue a schengen visa to a third-country national, the effects of such a  decision will be applied in the territory of all member states within the schengen area . similarly, a  decision to grant a  residence permission in the territory of one member state, the granting of citizenship of one member state (automatically resulting in the citizenship of the european union), a decision to admit certain goods will have similar effects (see e .g . de lucia, 2012, pp . 17–45; seman, 2018, pp . 33–48; ruffert, 2001, pp . 453–470; handrlica, 2017a, pp . 82–113; handrlica, 2017b, pp . 49–59; handrlica, 2017c, pp . 63) . according to doctrine, transnational administrative acts can have different forms . the first form is the administrative act which produces “effect-related transnationality”; in this case an “administrative act is enacted in a state with regard to the addressee resident there, and which develops a legal effect beyond the borders of this state” (ruffert, 2011, p . 281) . in the second form the transnational character results from the fact that the issuing 56 radomír jakab public governance, administration and finances law review • vol. 5. no. 1.  authority and the addressee of the administrative act are located in different states, i .e . this is “addressee-related transnationality” (ruffert, 2011, p . 287) . in the third form a  foreign authority itself crosses the state border in order to issue an administrative act abroad, i .e . this is “authority-related transnationality (ruffert, 2011, p . 290) . it can therefore be stated that the european union had, and still has, a  significant influence on the activities of public administration in the new member states (but not only there) and on the tasks which they carry out . 4. influence of european union law on processes in public administration processes in public administration of its member states are another area influenced by the european union and its law . this influence is manifested from two perspectives . first of all, in the form of general principles and provisions relating to all processes in public administration .6 in addition, it is also manifested in the form of specific provisions regulating specific procedures or specific areas . in connection with the general principles and provisions, the influence of the european union is evident both from the texts of law and from the results of the decisionmaking activities of the court of justice of the european union . one of the most relevant documents in this respect is the charter of fundamental rights of the european union, which became binding in 2009 when the treaty of lisbon entered into force . article 41 of the charter proclaims the right to good administration . according to that article, “every person has the right to have his or her affairs handled impartially, fairly and within a reasonable time by the institutions and bodies of the union” . this right includes the right of every person to be heard, to have access to his or her file, the right to be given reasons for decisions of the administration, the right to have the administration to make good any damage, and the right to use a chosen language of the union . this right to good administration can also be exercised in relation to the authorities of a  member state if they apply european union law (see nehl, 2009, p . 322; benko, 2013, pp . 1651–1667) . before this right was expressed in the charter, these principles had been recognised by both european and national courts, pointing out the common constitutional heritage of all member states . some of these principles were also declared by the european court of human rights, referring to article 6 of the european convention for the protection of human rights and fundamental freedoms, i .e . to the provision governing the right to a fair trial,7 or also to other provisions of that convention (mattarella, 2011, p . 65) . these general principles are not only provided for in the national legislation of individual member states governing general administrative processes, but also in international treaties or internal regulations of several international or global organisations . they 6 see also oecd, 1999. 7 for example, taskin and others v. turkey, no. 46117/99. 57 public governance, administration and finances law review • 1. 2020 the influence of eu law on public administration in new member states commit themselves to respect these principles, but also require their members to respect them in administrative processes .8 it should be pointed out that these general principles are applicable in both regulatory and application processes . certainly, the rules relating to a fair trial have a wider impact in the regulatory processes . on the other hand, the right to have access to the file or the right to be given reasons for decisions are more significant in the application processes . in any case, all these general principles are to be established in the administration of each member state, also in order to create a single administrative area . in addition to the general principles and provisions, the european union influences the processes of national public administration by establishing specific procedural rules for their action . the most notable processes influenced by the european union are processes relating to the protection of the environment – environmental impact assessment or integrated permitting of activities polluting the environment . in addition, public procurement processes as well as financial control processes are also significantly influenced by european union law . it is not the purpose of this paper to analyse these procedures in more detail; rather, its purpose is to point out the most important processes influenced by european union law . the basic acts of the european union regulating the environmental impact assessment process are directive 2001/42/ec of the european parliament and of the council of 27 june 2001 on the assessment of the effects of certain plans and programmes on the environment and directive 2011/92/eu of the european parliament and of the council of 13 december 2011 on the assessment of the effects of certain public and private projects on the environment . the intention pursued by these directives has been implemented in the laws of all new member states in the form of national legislation .9 the environmental impact assessment procedure is a  procedure of expert and public assessment of the envisaged environmental impacts of strategic documents during their development and prior to their authorisation, as well as the proposed activities before deciding on their location or prior to their authorisation under specific regulations (see sčensná & vernarský, 2016, p . 74) . the public procurement process of both contracting authorities and sectoral contracting entities has also been significantly influenced by europeanisation . european legislation in this area has been subject to a  number of changes . this issue is currently regulated in directive 2014/24/eu of the european parliament and of the council of 26 february 2014 on public procurement and directive 2014/25/eu of the european 8 the most common example in this respect is the aarhus convention of 1998. 9 for example, in the slovak republic through act no. 24/2006 on environmental impact assessment, amending certain acts, as amended; in the czech republic through act no. 100/2001 on environmental impact assessment, amending certain related acts (environmental impact assessment act); in the republic of poland through the act on providing information on the environment and environmental protection, public participation in environmental protection and on environmental impact assessment; and in hungary through governmental decree no. 151/2009 (vii. 23.) regarding the procedures of environmental impact assessment and the single procedure of authorisation of utilisation of the environment. (xii. 25). 58 radomír jakab public governance, administration and finances law review • vol. 5. no. 1.  parliament and of the council of 26 february 2014 on procurement by entities operating in the water sector, energ y, transport and postal services sectors .10 last but not least, european union law significantly influences the financial control and audit process . this is connected with to the need for the european union to ensure that financial discipline is respected, in particular as regards the use of eu funds . the basic rules for financial control within the european union are laid down in legal acts governing the union’s budgetary rules as well as that governing the individual funds from which finances are provided . such basic acts include regulation (eu, euratom) 2018/1046 of the european parliament and of the council of 18 july 2018 on the financial rules applicable to the general budget of the union, amending regulations (eu) no 1296/2013, (eu) no 1301/2013, (eu) no 1303/2013, (eu) no 1304/2013, (eu) no 1309/2013, (eu) no 1316/2013, (eu) no 223/2014, (eu) no 283/2014 and decision no 541/2014/eu and repealing regulation (eu, euratom) no 966/2012; and regulation (eu) no 1303/2013 of the european parliament and of the council of 17 december 2013 laying down common provisions on the european regional development fund, the european social fund, the cohesion fund, the european agricultural fund for rural development and the european maritime and fisheries fund and laying down general provisions on the european regional development fund, the european social fund, the cohesion fund and the european maritime and fisheries fund and repealing council regulation (ec) no 1083/2006 . taking into account the form of this legislation – i .e, regulation –, the effects of these legal acts on the public administration control and audit processes of the new member states were direct and immediate (tekeli, 2016, p . 85) . 5. conclusion the membership of new member states in the european union, as well as the efforts for such membership, have also influenced the formation of the organisation of public administration, its activities as well as the processes taking place in the public administration of these countries . the intensity of this influence was different but still relevant in relation to these areas . as regards the organisation of public administration in the new member states, it should be noted that european union law lays down the requirements for the creation of a  sufficient framework of public administrative authorities to enable the effective implementation of european union law . the individual secondary acts of union law further specify this requirement in relation to a specific area regulated by a respective act . however, european union law does not lay down any specific requirements for the organisation of public administration; it leaves them up to member states . an exception to this statement 10 the adoption of these directives was also reflected in slovak legislation through act no. 343/2015 on public procurement, amending certain acts, as amended; in czech legislation through act no. 134/2016 on public procurement; in polish legislation through act of 11 september 2011 (public procurement act); and in hungarian legislation through act 2015 cxliii on public procurement. 59 public governance, administration and finances law review • 1. 2020 the influence of eu law on public administration in new member states is the union’s requirement for member states to develop the so-called national regulatory authorities, which are to be independent of other authorities, and which have an independent budget and specific powers . this requirement is reflected in the organisation of public administration of new member states in the extension of the category of state administration authorities with nationwide competence independent of central state administration authorities . the european union has also influence on the activities of public administration in the new member states, i .e . on tasks which it carries out . the implementation of european union law has also been added to the scope of national public administration tasks, particularly in the area of shared competence between the european union and the member states . the scope of these tasks is quite wide, and the purpose of this paper is not to provide its exhaustive enumeration . in addition to tasks of national public administration arising from the union’s acts of general application, tasks may also result from the individual acts of union bodies, institutions or agencies . a  specific feature of the implementation of european union law is that a  decision taken by a  public administration of one member state has an effect also in the territory of another member state, several or all member states . last but not least, the european union has also had an influence on processes taking place in the public administration of member states . this influence has been in two forms: in the form of the implementation of general procedural principles or provisions, and in the form of the need for adapting certain specific procedures . the latter category mainly concerns environmental protection processes – environmental impact assessment processes or integrated permitting of activities polluting the environment . this also applies to public procurement procedures for both contracting authorities and sectoral contracting entities . an example of this influence is the financial control and audit process, which is also influenced by the requirements of the european union . it can therefore be stated that the public administration in the new member states has been strongly influenced by european union law; 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(2006) . european integration . hampshire: palgrave macmillan . legal sources treaty on european union . treaty on the functioning of the european union . directive no 2006/114/es the european parliament and of the council of 12 december 2006 concerning misleading and comparative advertising . directive no 2002/21/ec of the european parliament and of the council of 7 march 2002 on a common regulatory framework for electronic communications networks and services (framework directive) . regulation (eu) 2016/679 of the european parliament and of the council of 27 april 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing directive 95/46/ec (general data protection regulation) . https://doi.org/10.4324/9781315230986 https://doi.org/10.4324/9781315230986 © 2021 the authors public governance, administration and finances law review vol.  6. no. 1. (2021) • 35–50 . doi: 10 .53116/pgaflr .2021 .1 .4 administrative law in the time of corona(virus): resilience and trust-building1 istván hoffman*¤, istván balázs**¤ * eötvös loránd university, centre for social sciences in budapest, institute for legal studies, maria curie-skłodowska university in lublin, e-mail: hoffman .istvan@ajk .elte .hu ** university of debrecen, centre for social sciences in budapest, institute for legal studies, e-mail: balazs .istvan@law .unideb .hu abstract: the hungarian administrative law has been significantly impacted by the covid-19 pandemic . several rules – which were introduced during the state of danger based on the epidemic situation  –  have been incorporated into the hungarian legal system . the administrative procedural law has been influenced by the epidemic transformation . however, the rules on e-administration have not been reformed significantly (due to the digitalisation reforms of the last years), but the rules on administrative licenses and permissions have been amended . the priority of the general code on administrative procedure has been weakened: new, simplified procedure and regime have been introduced . the local self-governance has been impacted by the reforms . the transformation has had two, opposite trends . on the one hand, the hungarian administrative system became more centralised during the last year: municipal revenues and task performance have been partly centralised . the hungarian municipal system has been concentrated, as well . the role of the second-tier government, the counties (meg ye), has been strengthened by the establishment of the special economic (investment) zones . on the other hand, the municipalities could be interpreted as a  ‘trash can’ of the hungarian public administration: they received new, mainly unpopular competences on the restrictions related to the pandemic . although these changes have been related to the current epidemic situation, it seems, that the ‘legislative background’ of the pandemic offered an opportunity to the central government to pass significant reforms . from 2021  a new phenomenon can be observed: the state of danger has remained, but the majority of the restrictions have been terminated by the government of hungary . therefore, the justification of the state of danger during the summer of 2021 became controversial in hungarian public discourse . keywords: hungarian administrative law, administrative procedure, self-governance, administrative licenses and permission, covid-19 pandemic, epidemic, state of danger 1 the research is supported by the grant of the national research, development, and innovation office (hungary) no. fk 129018 (“resilience of the legal system”) lead by fruzsina gárdos-orosz, phd. habil. this research is based on the results of the article: hoffman & balázs, 2021. https://doi.org/10.53116/pgaflr.2021.1.4 https://orcid.org/0000-0002-6394-1516 https://orcid.org/0000-0001-7847-0721 mailto:hoffman.istvan@ajk.elte.hu mailto:balazs.istvan@law.unideb.hu 36 istván hoffman, istván balázs public governance, administration and finances law review • vol.  6. no. 1.  1. introduction the first state of danger – which has been declared in hungary during the first wave of the covid-19 – ended on 18 june 2020, but it has been expected to leave lasting traces in the hungarian legal system . the administrative procedural law has been partly transformed by the regulations on the verified notifications: the primacy of act cl of 2016 on the code of general administrative procedure (hereinafter: cgap) has been weakened by these special statutory rules, which appear as a specific underlying rule for (administrative) permitting and licensing procedures (fazekas, 2020, p . 194) . the interpretation of local self-governance has also changed . the financial autonomy of the municipalities has been restricted, first of all, by the centralisation of several local or shared taxes and the amendment of their rates and, secondly, by the establishment of the special economic zones . it could be emphasised, the provisions that remain permanently in hungarian administrative law are those which were only indirectly related to epidemiological measures . the ‘legislative background noise’ related to the current epidemic situation seems to have served as a kind of backdrop for certain amendments and transformations that would otherwise receive more attention . in addition, a  new, specific, quasi-emergency situation used to deal with the second wave of the epidemic, as well as the legislation issued in this regard, raises several dogmatic issues that tension the current system of administrative law . in our study, the emergency operations of the public administration is analysed from a  legal point of view, comparing the dogmatic foundations and empirical experience of these actions . the starting point of our research is that the framework of these actions is provided by the conditions and demands based on the rule of law administration . in our paper, the integration of the measures and practices introduced during the emergency is analysed as well as the new, quasi-emergency, epidemiological emergency into the ‘normal’ operation of the legal system . for reasons of length, this paper should not be intended to provide a  comprehensive answer to all the emerging dogmatic problems of administrative law in emergency administrative legislation but is limited to an overview of the most controversial, important administrative law issues . we try to outline a kind of problem map that can serve as a basis for further research in legal dogmatics and empirical methodolog y . 2. the epidemic and the special legal order (emergency): an overview of the legal regulation in hungary the primary research field of the epidemiological situation can be the issues related to the introduction and regulation of the special legal order in hungary . however, these mainly concern the field of constitutional law, this paper only deals shortly with these questions . if we look at the hungarian constitutional regulation, it should be emphasised that the fundamental law of hungary (25 april 2011) (hereinafter: fundamental law) has closed taxation on the reasons which justify the state of danger . para . 1 article 53  of the fundamental law states, that the state of danger (veszélyhelyzet) can be 37 public governance, administration and finances law review • 1. 2021 administrative law in the time of corona(virus): resilience and trust-building declared ‘in the event of a  natural disaster or industrial accident endangering life and property’ . thus, the epidemic situation has not been among a  justifiable reason of the declaration of special legal order . the detailed regulation on the establishment and introduction of the state of danger as a  special legal order (emergency) is regulated by act cxxviii of 2011  on disaster management (hereinafter: dma) . the rules of the fundamental law are interpreted broadly by point c) article 44 of the dma . the regulation states, ‘human epidemic disease causing mass illness and animal epidemic’ is a  justifiable reason of the declaration of the state of danger .2 in case of a  special legal order (emergency), in accordance with the fundamental law, most of the measures defined by chapters 21–24  of the dma could be introduced by the government, which may issue decrees with a  content contrary to the acts of parliament for a  transitional period of 15  days . in addition to the emergency government decree regulations, a limited number of ministers, such as the minister responsible for education and vocational training or the minister responsible for national property, may also take decisions that constitute individual acts . it is shown by the above regulation that the hungarian public administration – like other european administrations – was unexpectedly affected by the covid-19 pandemic at the level of constitutional regulation . at the beginning of the pandemic  –  when hungary has not been affected by it  –  the institution of ‘health crisis’ (defined by act cliv of 1997  on health care) was used (by which the provision of the health care services can be transformed) (asbóth et al ., 2020, p . 39) . the hungarian system – which has been typically modelled for the treatment of industrial and elemental disasters3 – did not contain detailed provisions for an emergency situation related to the management of a pandemic . within the above-mentioned framework, the state of danger  –  due to the covid-19  human epidemic  –  was declared by government decree no .  40/2020 (11  march 2020) . based on the constitutional regulation and the provisions of the dma, the government had the opportunity to suspend the application of acts of parliament in its (emergency) decrees, to deviate from certain statutory provisions, and to take other (otherwise statutory, parliamentary) extraordinary measures . based on para . 3  article 53  of the fundamental law, these decrees shall remain in force for 15  days as a  general rule, unless the scope of these (emergency) decrees is extended by the parliament . because the epidemic risk and its management could take more than 15  days, the parliament  –  passing a  bill submitted by the government  –  decided to extend the scope of the emergency decrees by a  general authorisation, which was act xii of 2020 . however, the law did not enter into force within 15 days of the adoption 2 according to other views, this regulation of the dma ‘goes beyond the provisions of the fundamental law, i.e. it is contrary to the text of the fundamental law. the provisions of the fundamental law could not be overwritten by an act of parliament’. according to this view, it is not an expanding interpretation, but a covert, statutory amendment to the constitution that can be considered unconstitutional (szente, 2020; vörös, 2020, pp. 24–27). 3 in hungary, after the democratic transition, state of danger has been declared several times, although typically not the whole territory of the country was covered by this emergency. thus, for example, the government declared a state of emergency during the flood on the danube in 2002 (government decree no. 176/2002, 15 august 2002) and after the red mud (industrial) disaster in devecser (government decree no. 245/2010, 6 october 2010). 38 istván hoffman, istván balázs public governance, administration and finances law review • vol.  6. no. 1.  of the first emergency government decrees, to maintain the measures, the national chief medical officer resorted to a  special solution . these restrictions and rules were maintained as a general decision of the national chief medical officer based on the epidemic emergency . the above-mentioned solution was born of coercion, and the challenges of casuistic regulation on emergency can be observed by it . this decision of the national chief medical officer is difficult to interpret in the current hungarian legal system . the decision – as it is highlighted by the government information page on the coronavirus, but not by the actual text of the decision4  –  is a  normative one . on the one hand, the chief national medical officer is not authorised by para . 1  article 23  of act cxxx of 2010 on legislation to pass such a normative decision . on the other hand, the decision does not comply with rules of act cliv of 1997 on health care (hereinafter: hca); however, there were indications that this decision may be interpreted in this context . the national chief medical officer, as a national epidemiological authority, is entitled to make individual decisions and not general rules the scope of which covers the whole country (dósa et al ., 2016, pp . 197–198) . the shortcomings of the regulation of the constitutional regulation were also recognised by the legislation . the legal basis for imposing specific restrictions was created by act lviii of 2020  on transitional rules related to the termination of the emergency and on epidemiological emergency (hereinafter: transitional act), by which a new institution, the epidemiological emergency was introduced by the amendment of the hca . the regulation on health crisis has been reshaped significantly by that act . different restrictions – based on the epidemiological emergency, which is defined by the act as a  special type of health crisis  –  can be introduced by the government . these restrictive measures can be the special rules on the operation and opening hours of shops, travel, transport and freight restrictions, restriction on sale and consumption, special regulation on the public education (public education, vocational training and higher education, e .g . the introduction of digital learning ) . during the epidemiological emergency, the hungarian armed forces can be involved in the management of health care institutions and the provision of health care services can be transformed during that special situation . however, the fundamental law does not contain regulation on this epidemiological emergency, it is regulated only by the hca, but it can be interpreted as a new type emergency . this solution fits into the trend in the hungarian legislation, that several quasi-emergencies have been institutionalised by acts of parliament, because a similar, quasi-emergency situation is regulated by the dma during natural and industrial disasters, which are not as serious that the declaration of the state of danger could be justified . the first state of danger – which was declared on 11 march 2020 – was terminated by government decree no .  282/2000  (17  june 2020) . act xii of 2020  – which extended the scope of the emergency government decrees – was repealed by act lvii of 2020 on the termination of the state of danger . the application of the special rules created for the period of the emergency was extended by the transitional act, typically until 31  august 2020 .  based on the new 4 see nemzeti népegészségügyi központ, 2020. 39 public governance, administration and finances law review • 1. 2021 administrative law in the time of corona(virus): resilience and trust-building provisions on epidemiological emergency, this state was declared by government decree no .  283/2020  (17  june 2020) for half a  year . several restrictive regulations were based on that special situation, e .g . rules on obligatory wearing face masks and some restrictions on foreign travelling (especially travel bans outside the eu) . these rules were the basis for even stricter restrictions . at the end of summer, extremely strict travel restrictions and mandatory quarantine were introduced by government decree no . 408/2020 (30 august 2020) . however, several legal concerns have been raised about the decree and other related regulations . several exceptions were provided, which were difficult to justify . one of the controversial exceptions was the special regulation on the travelling of the citizens of the v4 countries (the czech republic, slovakia and poland) . the citizens of these countries could enter into hungary without mandatory lockdown . these exceptions were permitted by separate government decrees . the travel ban (and even the exceptions) was extended by other decrees . it should be emphasised that infringement proceedings were envisaged by two commissioners of the european commission due to the selective (discriminative) nature of the travel ban . therefore, the regulation has been amended, and other exceptions – especially the exception to mandatory lockdown in case of business travel – have been institutionalised . the regulation on epidemiological emergency was a  transitional regime between the first and second waves of covid-19  in hungary . during late autumn a  second, and a  serious wave of infections and illnesses evolved in hungary . because of the serious epidemiological situation, the state of danger was declared on 3  november 2020  (the state of danger entered into force on 4  november) . the new act cix of 2020  was passed . the scope of the emergency government decrees were extended by this act . but opposite to the regime of act xii of 2020, the extension was not indefinite . the act declared a  90 days deadline for the authorisation (and for the scope of itself ) . thus, the major criticism (drinóczi & bień-kacala, 2020, p . 184; gárdos-orosz, 2020, pp . 159–161) on the former regulation was corrected by the parliament . the government of hungary has not received indefinite authorisation for passing emergency decrees . even the constitutional regulations were amended at the end of the year 2020 .  the fundamental law was amended by the 9th amendment by which the legal regulation on the state of emergencies were transformed . similarly, the regulation on state of emergencies in acts passed by qualified majorities was amended during 2021 .  however, the new rules will enter into force in 2023, the detailed constitutional regulation which has been based on the closed taxation of the justifiable reasons and the extraordinary government measures remained, but the expiry of the extraordinary measures became more flexible . the expiry of the extraordinary measures is not defined by the constitutional rules but by the act of parliament which can be passed by a qualified (two-third) majority (hoffman & kádár, 2021, pp . 26–28) . it should be noted that the travel restrictions have remained, and they have been enforced by the new act civ of 2020 .  new sanctions have been introduced by this regulation, which have not been clear enough . it was not specified by the act whether these sanctions are objective (nag y, 2010, pp . 39–74) ones or they are based on the imputability of the citizens, and therefore, the nature of these sanctions is partly obvious . 40 istván hoffman, istván balázs public governance, administration and finances law review • vol.  6. no. 1.  3. administrative procedural law and the covid-19 pandemic one of the major features of the special legal order (state of emergency, etc .) is that certain fundamental rights can be restricted more widely (barnett, 2002, pp . 821–822) . related to that constitutional principle, fundamental (administrative) procedural rights can be restricted during the state of danger in hungary .5 these procedural constraints may be particularly acute in an epidemiological situation, because procedural regulation should be impacted by the reduction of human contacts . this necessarily entails the requirement to amend the rules of administrative procedures . challenges of modern epidemics include their economic effects . in a globalised world, travel and trade restrictions can necessarily be linked to a  decline in economic production, which should be – at least, partly – treated or compensated by administrative measures . if we look at the impact of epidemiological measures on the hungarian administrative procedures, it can be emphasised that the issues related to the reduction of the number of contacts have appeared in procedural law and the changes related to economic administration have had a more significant role . administrative proceedings are typically file-based proceedings in which the presence of clients is not as important as in court proceedings (litigation) based on the constitutional principle of public hearing . therefore, in the administrative procedures – in contrast with court procedures – it has not been issued a general and uniform special regulation for the state of danger, an ‘emergency administrative procedural code’ has not been published . the administrative procedures have been based on the regulation of the cgap, just several additional sectoral regulations have been published by emergency government decrees . the peculiarity of the hungarian solution was that  –  unlike other european and american countries (like the united states of america, canada, germany and spain where sectoral  –  special provisions have been introduced by the countries or by their member states) (huang et el . 2020, p . 8 .) – special rules have been used relatively narrowly by the procedural regulation related to employment policy and social benefits, i .e . these procedures have been regulated primarily by the general (non-pandemic, non-emergency) rules . it has been an ‘unorthodox’ regulation, because the number of registered jobseekers (unemployed people) has been significantly increased by the economic crisis related to the restrictions imposed by the coronavirus epidemic (see figure 1) . 5 article 54 para. 1 of the fundamental law: ‘under a special legal order, the exercise of fundamental rights – with the exception of the fundamental rights provided for in articles ii and iii, and article xxviii (2) to (6) – may be suspended or may be restricted beyond the extent specified in article i (3).’ a similar regulation has been institutionalised by the 9th amendment of the fundamental law (amended para. 2 article 52 of the fundamental law). 41 public governance, administration and finances law review • 1. 2021 administrative law in the time of corona(virus): resilience and trust-building 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 2019q1 2019q2 2019q3 2019q4 2020q1 2020q2 2020q3 278,835 248,199 243,356 234,903 281,273 323,408 376,290 figure 1 . number of registered jobseekers (unemployed people) (2019–2020) and its linear trend line source: hungarian central statistical office, 2020 . therefore, the number of employment policy cases increased significantly (by 17 .01%) in the first half of 2020 (compared to the number of cases in the first half of 2019) (see figure 2) . because the general rules should be applied by the employment authorities, the average administration time in employment cases increased similarly, by 71 .42% (see figure 3) . 1,800,000 1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0 2019h1 2019h2 1,306,083 1,528,250 figure 2 . number of employment decisions (in 2019h1 and 2020h1) source: országos statisztikai adatg yűjtési program (osap) 2019 and 2020 . 42 istván hoffman, istván balázs public governance, administration and finances law review • vol.  6. no. 1.  10 9 8 7 6 5 4 3 2 1 0 2019h1 2020h1 7.92 9.3 figure 3 . average administration time of employment cases (in 2019h1 and 2020h1) source: országos statisztikai adatg yűjtési program (osap) 2019 and 2020 . however, the regulation on social and employment procedure has not been amended, a new legal institution has been established during the first wave of the pandemic . it is the so-called ‘controlled notification’ . this reform was justified by the reduction of bureaucracy, the simplification of the procedures, thus reducing obstacles to economic activities . the traditional administrative permissions have been widely erased because the majority of the administrative licensing cases are now under the scope of the new rules . a  new, separate regulatory regime has been established . the cagp is just a  subsidiary regulation in the ‘controlled notification’ cases, thus the primacy of the cagp has been weakened by these new rules (potěšil et al ., 2021, p . 15) . not only the bureaucracy is increased by the institutionalisation of administrative permission means, but the protection of the rights of opposing clients are provided by these procedures, as well . however, the legal protection of these clients is provided only moderately by the newly institutionalised controlled notification . it is stated by the  transitional act  –  which contains the permanent rules on controlled notification – that the protection of public interest is primarily in this procedure . the rights and interests of other persons or clients adversely affected can be protected by the authority, if apparently only to the extent that, in the course of the proceedings, the authority may prohibit the activity of the applicant client if ‘the notification constitutes an abusive exercise of a  right’ . thus, the rights of the opposing clients can 43 public governance, administration and finances law review • 1. 2021 administrative law in the time of corona(virus): resilience and trust-building hardly be enforced by the administrative procedure, they are encouraged to submit much more expensive and cumbersome civil lawsuits (mainly property and tort lawsuits) . it is highlighted by the  literature, that in addition to the limited enforceability of opposing client rights and the difficulty of protecting the legal interests of opposing clients, there are stronger corruption risks in this type of cases because, in case of a silence, the infringements of the authorities (based on corruption) are less conspicuous than in a formal decision of a permission (licensing ) case (alaimo et al ., 2009, pp . 141–142) . the reduction of the number of the administrative cases can be observed by the analysis of the administrative statistics . the number of the cases of the major hungarian first instance administrative bodies, the district offices in the second half of 2020 was 81 .85% of the number of the cases of the first half of 2020 . however, the number of the administrative cases is always lower in the second half year  –  because there are cases which should be decided once in a  year, mainly in the first half year (i .e . yearly benefits, taxes etc .) – but the drop of the cases is significant in 2020 . in the second half of 2019, the number of the administrative cases in the district offices was 97 .80% of the number of the cases in the first half of 2019 . thus, the drop of the cases are mainly around 2–3% and not nearly 20%, like in 2020  (see figure 4  and 5) (rozsnyai et al ., 2021, p . 314) . 16,000,000 14,000,000 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 0 2019h1 2019h2 14,722,609 14,398,531 figure 4 . number of administrative cases of the district offices in 2019 (with linear trend line) source: országos statisztikai adatg yűjtési program (osap) 2019 . 44 istván hoffman, istván balázs public governance, administration and finances law review • vol.  6. no. 1.  12,000,000 12,000,000 8,000,000 6,000,000 4,000,000 2,000,000 0 2020h1 2020h2 98,463,349 8,059,424 figure 5 . number of administrative cases of the district offices in 2020 (with linear trend line) source: országos statisztikai adatg yűjtési program (osap) 2020 . it should be emphasised, that special procedural rules have been established for administrative court procedures  –  which is part of the broad administrative procedural law  –  in contrast to the administrative procedures of the authorities . the main aim of the pandemic emergency regulation of the administrative court procedure has been the reduction of personal contacts . 4. local self-governance in the time of corona(virus) the issue of self-government is important in administrative legal research related to the coronavirus epidemic . the epidemiological situation and the socio-economic crisis, which has been partly caused by the epidemic restrictions, are a  situation that is clearly pointing in the direction of strengthening centralisation trends . in crisis situations, centralisation steps and these administrative reforms have traditionally taken precedence over decentralisation (kostrubiec, 2021, pp . 112–113) . the hungarian municipal system and regulation have been significantly influenced by the covid-19  pandemic . therefore, the municipal administration and organisation issues have been transformed based on the emergency (state of danger) situation . secondly, the municipal tasks have been changed during the time of the pandemic . thirdly, alternative, local solutions of the communities have evolved during the time of the pandemic . we would like to analyse these amendments and transformations . a special regime of the municipal decision-making has been introduced by the emergency regulations in the hungarian public law . because of the extraordinary 45 public governance, administration and finances law review • 1. 2021 administrative law in the time of corona(virus): resilience and trust-building situation which requires quick answers and decisions, the council-based municipal decision-making is suspended by the dma . it is stated by para . 4  article 46  of the dma, that the competences of the representative body (képviselő-testület) of the municipality is performed by the mayor when the state of danger is declared by the government of hungary . there are several exceptions, thus the decisions of the major on the local public service structure cannot be amended and restructured by the mayors . therefore, the mayors have the local law-making competences, as well . the mayors can pass local decrees, which remain in force after the end of the state of danger . the mayor can pass and amend the local budget and they can partly transform the organisation of the municipal administration, as well . the mayors can decide the individual cases . the scope of the competences (of the mayors)  –  set out in the previous sentences  –  is not fully clear but based on the legal interpretation of the supervising authorities (the county government offices and the prime minister’s office), the competences of the committees of the representative bodies shall be performed by the mayors, as well . the position of the mayor is similar to the ‘dictators’ of the roman republic: because of the extraordinary situation, the rapid decision-making is supported by personal leadership . the role of the mayor was strengthened in early 2021 .  the dma declared that the competences of the representative body (actually the municipal council) should be performed by the mayor . there were no direct rules on the competences of another municipal body, even collegial bodies, like the committees of the representative body . therefore, it was questionable, because these bodies are collegial, and it could be justified that the competences of these bodies should be performed by the mayors . during the first wave of the pandemic, a  joint communication of two state secretaries “recommended” for the mayors to fulfil the competences of the committees . but this communication is not a real legal norm, and therefore, this solution was controversial, because it hardly fitted in the concept of the rule of law . during the second wave of the pandemic, it was officially declared by government decree no . 15/2021 (22 january) that the competences of the committees should be performed by the mayors . this regulation resulted from different solutions in the hungarian large municipalities . it shall be emphasised that the mayor has a  greater power, but his or her responsibilities are increased by this regulation . for example, in the largest hungarian municipality, in the capital municipality of budapest, a special decision-making regulation has been introduced during the period of the state of danger . the decisions of the capital municipality are made by the mayor of budapest, but there is a  normative instruction issued by the mayor (no . 6/2020  [13  march] instruction of the mayor of budapest), that before the decision-making the mayor shall consult the leaders of the political groups (fractions) of the capital assembly . after the 1st state of danger, the decrees issued by the mayor were confirmed by a  normative decision of the capital assembly (no . 740/2020 [24 june] assembly decision) . however, this decision can be interpreted as a  political declaration, but it shows that the mayor of budapest tried to share his power and even his responsibility . there are different patterns among the hungarian large municipalities, as well . for example, in the county town győr several unpopular decisions and land planning regulation were passed by the mayor, who fully exercised his emergency power . 46 istván hoffman, istván balázs public governance, administration and finances law review • vol.  6. no. 1.  however, the state of emergency remained, the competences of the representative bodies and committees have been restored by government decree no .  307/2021 (5  june), by which the regulations of the dma and government decree no .  15/2021 (22 january) was actually rewritten . as a second issue, the centralisation of the municipal tasks and revenues should be analysed . as we have mentioned earlier, centralisation is encouraged by crises, especially the centralisation of the economic (budget) resources . these tendencies can be observed in hungary, especially in the field of local taxation . (emergency) government decree no . 140/2020 (published on 21 april) stated that tourism taxation has been suspended for the year 2020 .  (emergency) government decree no .  92/2020  (published on 6 april) centralised the revenues of the municipalities from the shared vehicle tax, and later the vehicle tax became a  national tax (before the covid-19, the revenues from vehicle tax were shared between the municipalities and the central government, but the taxation was the responsibility of the municipal offices) . the most significant centralisation of the taxation was (emergency) government decree no . 639/2020 (published on 22 december) by which the local business tax rate was maximised at 1% (instead of the former 2%) for the small and medium enterprises which have less than yearly huf4  billion (approximately eur10 .8  million) balance sheet total . it has been a significant intervention into the local autonomy, and especially into the autonomy of the larger municipalities, because the local business tax is one of their most important revenues (see table 1) .6 table 1 . business tax revenues in hungary year 2015 2016 2017 2018 2019 all revenues at regional and local level (in million huf) 2,745,138 2,240,787 2,437,439 2,508,116 2,774,200 all tax revenues at regional and local level (in million huf) 770,375 805,446 845,975 923,664 1,006,066 business tax revenue (in billion huf) 523,125 584,380 638,731 711,276 788,308 business tax revenue as % of all local revenues 19 .05 26 .08 26 .20 28 .36 28 .42 business tax revenue as % of tax revenues at local level 67 .90 72 .55 72 .50 77 .01 78 .36 source: hungarian central statistical office, 2020 . 6 this tax reduction, as a state aid for small and medium enterprises has been approved by the european commission based on the temporary framework for the coronavirus-related state aids. see eu commission press, 2021. 47 public governance, administration and finances law review • 1. 2021 administrative law in the time of corona(virus): resilience and trust-building similarly, the government declared that the municipalities could not charge parking fees, by which decision the urban municipalities have been impacted, because parking is a typical urban issue, and these municipalities introduced differentiated parking charge regulations . as a  part of the concentration, a  new regulation evolved . a  new institution, the special investment area was introduced – originally by (emergency) government decree no .  135/2020  (published on 17  april), later, as a  permanent regulation by act lix of 2020 .  it is stated by act lix of 2020  that the government of hungary can establish a  special investment area for those job-creating investments whose value is more than huf5  billion (approximately eur13 .5  million) . if a  special investment area has been established, the municipal property of the area and the right to local taxation are transferred to the county government from the 1st tier municipality . the justification of the regulation was to ensure a  more balanced revenue system for the environment of these investments, by which the benefits of the investments can be shared with other municipalities . prima facie, it seems a  justifiable transformation, but there are different open questions . first of all, the county government did not get service provision competences, therefore, the local public services shall be performed by the 1st tier municipalities . the county governments cannot aid the performance of these services, they can only give them development aids . secondly, this model is not widespread . till early 2021  only one special investment area has been established, in the town of göd based on the samsung investment . therefore, this seemingly fair concentration of the municipal tasks seems to be an individual measure, driven by extrajudicial considerations . however, the centralisation trend has been dominant during the legislation of the last year, different tendencies can be observed, as well (fazekas, 2014, p . 292) . as we have mentioned, the municipalities can be the ‘trash cans’ of public administration . this ‘trash can’ role can be observed in hungary, as well . during the first wave of the pandemic, the municipalities were empowered to pass decrees on the opening hours and shopping time for elderly people for the local markets, and they were empowered to pass strict regulations on local curfew . these measures were restrictive; therefore, they can be interpreted as unpopular decisions . similarly, after the second wave of the pandemic, it was declared that face masks were mandatory on the streets and other public spaces if the municipality had more than 10,000  inhabitants . the detailed regulation on these measures was passed by the municipality . therefore, the unpopular measures on public space mask wearing became municipal tasks, as well . last, but not least, the municipalities as grassroot administrative bodies can solve several problems locally, therefore, alternative policies and solutions are evolved by their activities, especially in the time of crises . especially, the large municipalities – which have significant revenues – have enough economic power to provide additional services for their citizens . those large municipalities, which are led by opposition leaders, can use this opportunity to offer and to show alternative solutions for the national policies, therefore the (national) opposition-led municipalities are traditionally active in the field of facultative tasks (hoffman & papp, 2019, pp . 47–48) . if we look at the decision-making of the large hungarian municipalities, it can be highlighted that not only the opposition-led municipalities, but even the 48 istván hoffman, istván balázs public governance, administration and finances law review • vol.  6. no. 1.  government-led local governments tried to introduce several voluntary services and benefits related to the health and socio-economic crises caused by the covid-19 .  the major fields of these municipal non-mandatory (voluntary) tasks have been the institutionalisation of new social benefits, by which the moderate central benefits could be supplemented (in hungary, the increase of the social benefits related to the covid-19 crisis has been very limited, e .g . the sum and the period of the unemployment benefit has not been amended) . similarly, several municipalities established special aid for the local small enterprises . different public services  –  especially social care and health care services – have been performed (e .g . mass testing of sars-cov-2, aid for flu vaccination and provision of free face masks for the local citizens) . the fate of this municipal activity is ambiguous this year because the coverage of these measures has been the local tax revenues . as we have mentioned, the major tax revenue of the municipalities is the local business tax, the rate of which has been radically reduced by the latest legislation . 5. state of emergency with limited (reduced) restrictions (?) the approach of the hungarian administrative law has been significantly transformed during the summer of 2021 .  the majority of the restrictions were recalled, even those restrictions which were linked to the so-called ‘immunity card’ which proved and declared that the given person was infected and recovered of covid-19  or was vaccinated against the disease . for example, the obligatory wear of face masks was terminated and even sport events, cultural events etc . were opened (with limited restrictions) . similarly, the major transformations in the field of administrative law – as we have mentioned earlier, for example, the amended competence performance in the municipalities  –  were terminated or suspended . therefore, the justification of the state of emergency became a topic of public discourse . the justification became controversial during the debates, because the major elements of that kind of state of emergency were linked to the extraordinary and mainly personal leadership and the simplified administrative procedures . during the summer, the majority of these elements were reduced or dissolved . it is now a  question, whether this ‘reduced’ state of danger should be maintained or not . 6. conclusions it is clear now, that the covid-19 pandemic leaves lasting traces on the hungarian legal (and administrative) system . several important regulations will remain after the covid19  pandemic, such as the health emergency (which was institutionalised by a  sectoral act of parliament and not by the constitutional rules or bay an act which should be passed by a qualified majority of two-third of the parliament), the special statutory rules weakening the primacy of the cagp (especially the controlled notification), and the provisions for special economic zones . precisely those regulations were only indirectly 49 public governance, administration and finances law review • 1. 2021 administrative law in the time of corona(virus): resilience and trust-building linked to the epidemiological measures . thus, the ‘legislative background noise’ due to the threat of an epidemic seems to have served as a kind of backdrop for certain changes and transformations that would otherwise receive more (public and political) attention . however, this may mean the hungarian legal system resilience, as well, which would also be justified by further research . references alaimo v ., fajnzylber, p ., guasch, j . l ., lópez, j . h . & oviedo, a . m . (2009) . behind the investment climate: back to basics – determinants of corruption . in p . fajnzylber, j . l . guasch & j . h . lópez (eds .), does the investment climate matter ? microeconomic foundations of growth in latin america . washington – basingstoke – new york, the world bank . online: https://doi .org/10 .1596/978-0-82137411-5 asbóth, m . d ., fazekas, m . & koncz, j . 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(2021) . the role of public order regulations as acts of local law in the performance of tasks in the field of public security by local self-government in poland . lex localis – journal of local selfgovernment, 19(1), 111–129 . online: https://doi .org/10 .4335/19 .1 .111-129(2021) https://doi.org/10.1596/978-0-8213-7411-5 https://doi.org/10.1596/978-0-8213-7411-5 https://doi.org/10.4324/9781843144755 https://doi.org/10.4324/9781843144755 https://doi.org/10.1080/20508840.2020.1782109 https://doi.org/10.1080/20508840.2020.1782109 http://www.pubaffairsbruxelles.eu/state-aid-commission-approves-e478-million-hungarian-scheme-to-support-small-and-medium-sized-enterprises-affected-by-coronavirus-outbreak-eu-commission-press http://www.pubaffairsbruxelles.eu/state-aid-commission-approves-e478-million-hungarian-scheme-to-support-small-and-medium-sized-enterprises-affected-by-coronavirus-outbreak-eu-commission-press http://www.pubaffairsbruxelles.eu/state-aid-commission-approves-e478-million-hungarian-scheme-to-support-small-and-medium-sized-enterprises-affected-by-coronavirus-outbreak-eu-commission-press https://doi.org/10.17951/sil.2021.30.1.103-119 https://doi.org/10.17951/sil.2021.30.1.103-119 https://doi.org/10.1016/j.ijhm.2020.102660 http://www.ksh.hu/docs/hun/xstadat/xstadat_evkozi/e_qlf028c.html http://www.ksh.hu/docs/hun/xstadat/xstadat_evkozi/e_qlf028c.html https://doi.org/10.4335/19.1.111-129(2021) 50 istván hoffman, istván balázs public governance, administration and finances law review • vol.  6. no. 1.  nagy, m . (2010) . interdiszciplináris mozaikok a közigazgatási jogi felelősség dogmatikájához . budapest, elte eötvös kiadó . nemzeti népegézsésgügyi központ (2020) . az országos tisztifőorvos tiltó és kötelező határozata a járványügyi helyzetre tekintettel, 26 march 2020 . online: https://koronavirus .gov .hu/cikkek/az-orszagos-tisztifoorvostilto-es-kotelezo-hatarozata-jarvanyug yi-helyzetre-tekintettel potěšil, l ., rozsnyai, k ., olszanowski, j . & horvat, m . (2021) . simplification of administrative procedure on the example of the czech republic, poland, slovakia, and hungary (v4 countries) . administrative sciences, 11(1) . online: https://doi .org/10 .3390/admsci11010009 rozsnyai, k ., hoffman, i .  & bencsik, a . (2021) . üres kag ylóhéjak?  –  az  általános eljárási szabályok . jogtudományi közlöny, 76(7–8), 309–318 . szente, z . (2020) . a  2020 . március 11-én kihirdetett veszélyhelyzet alkotmányossági problémái . mta law working papers, 9 . vörös, i . (2020) . a felhatalmazási törvénytől az egészségüg yi válsághelyzetig és tovább . in f . gárdos-orosz & v . o . lőrincz (eds .), jogi diagnózisok . a covid-19 világjárvány hatásai a jogrendszerre . l’harmattan kiadó . legal sources act cliv of 1997 on health care . act cxxx of 2010 on legislation . act cxxviii of 2011 on disaster management . act cl of 2016 on the code of general administrative procedure . act xii of 2020 . act lvii of 2020 on the termination of the state of danger . act lviii of 2020 on transitional rules related to the termination of the emergency and on epidemiological emergency . act cix of 2020 . fundamental law of hungary (25 april 2011) . government decree no . 282/2000 (17 june 2020) . government decree no . 40/2020 (11 march 2020) . government decree no . 283/2020 (17 june 2020) . government decree no . 408/2020 (30 august 2020) . government decree no . 176/2002 (15 august 2002) . government decree no . 245/2010 (6 october 2010) . https://koronavirus.gov.hu/cikkek/az-orszagos-tisztifoorvos-tilto-es-kotelezo-hatarozata-jarvanyugyi-helyzetre-tekintettel https://koronavirus.gov.hu/cikkek/az-orszagos-tisztifoorvos-tilto-es-kotelezo-hatarozata-jarvanyugyi-helyzetre-tekintettel https://doi.org/10.3390/admsci11010009 © 2019 dialóg campus, budapest public governance, administration and finances law review vol. 4. no. 1. (2019) • 26–43 . computerisation of public administration in slovakia – impact on (the fiscal position of ) municipalities1 anna románová,* karolína červená** * judr . anna románová, phd, is a researcher at the pavol jozef šafárik university in košice, faculty of law . her specialisations are direct taxation, local taxes and tax administration . she is the author of more than 50 reviewed scientific outputs in the form of articles in journals, chapters in monographs and conference papers . she is a  member of the international property tax institute, toronto, and the centre of information and organization of public finances and tax law research in central and eastern europe . (e-mail: anna .romanova@upjs .sk) ** ing . karolína červená, phd, is a  teacher at the pavol jozef šafárik university in košice, faculty of law . within her research and teaching activities, she pays special attention to assorted micro and macroeconomic issues from an interdisciplinary perspective . she is the author of more than 80 reviewed scientific outputs in the form of articles in journals, chapters in monographs, conference papers . she is a member of the centre of information and organization of public finances and tax law research in central and eastern europe . (e-mail: karolina .cervena@upjs .sk) abstract: the authors of the paper will analyse the structure of revenues and expenditures of local governments and evaluate the actual level of their independence . the authors will try to identify the room for improving of the financial position of the municipalities and special attention will be paid to a  certain means of rationalisation of public administration, particularly computerisation within the e-government projects that should, inter alia, lead to reduction of the administrative burden laid upon (local) government bodies and also saving of the budget . the analysis, largely based on a  survey conducted by the authors within primary research, shows that performance of reforms in terms of rationalisation efforts may be a way forward, hence, the one analysed in this paper was not implemented in a fully satisfactory manner . keywords: municipality; self-government; computerisation; rationalisation; e-government; local tax 1. introduction the process of fiscal decentralisation in the slovak republic started in 2005,2 though there are various opinions on the current level of decentralisation in the slovak republic as such .3 the constitutional act no . 460/1992 coll ., constitution of the slovak republic (hereinafter referred to as “constitution”) designates the municipalities and higher territorial units (hereinafter referred to as “htu”) as the basis of self-government in its article 64 . due to the limited scope of this paper, the authors will only deal with municipal4 finances and leave aside the situation of the htus . municipalities are responsible for the 10.53116/pgaflr.2019.1.3 mailto:anna.romanova%40upjs.sk?subject= mailto:karolina.cervena%40upjs.sk?subject= https://doi.org/10.53116/pgaflr.2019.1.3 27 public governance, administration and finances law review • 1. 2019 computerisation of public administration in slovakia… performance of self-governing functions as well as transferred state administration . for this purpose, the structure of their budgetary revenues consists of two source types, i .e . those acquired within their own authority (based on a  special law) in terms of fiscal decentralisation and those transferred by the state . article 65 of the constitution declares that municipalities and htus shall fund their needs predominantly with the use of their own revenues, and subsequently from state grants . although they are allowed to earn their own revenues (e .g . through local taxes), the financial situation of municipalities is generally perceived as under-funded . the complex aim of this paper is to evaluate the current state of funding of municipalities in slovakia . in this context, the authors therefore analyse the composition and significance of particular municipal revenue sources to evaluate the fiscal position of municipalities and aim to identify the room for possible improvement (targeted at the possible use of the potential of the real property tax) . subsequently, the research task will be the assessment of one particular recent measure of rationalisation of public administration, namely the computerisation of public administration, following the previous research of the authors .5 based on the results of their own empirical research, the authors’ aim will be the critical assessment of the outcomes of implementation of this measure in view of  confirming or reputing the benefits of the measure for the municipalities from the viewpoint of improving their fiscal position (especially by administrative and/or financial efficiency) . the authors used standard methods of scientific research, namely: analysis, deduction, induction and synthesis . the paper contains the presentation of the results of the survey that was carried out from october 2016 to december 2017 on the research sample consisting of all the municipalities in the slovak republic (2,927) and their employees (according to availability of information on municipal employees) . the number of responses received as regards the municipalities was 830 and 2,909 as regards their employees . the individual segments of the research sample were sorted out by size (municipalities by population density unit of 500 inhabitants); cities and city districts were treated separately . in the processing and evaluation of the collected primary and secondary data, the authors used standard statistical methods of descriptive statistics . the outcomes are presented in graphical and tabular forms . 2. fiscal position and budgets of municipalities the actual sources of municipal revenues are defined by act no . 369/1990 coll . on municipalities as amended (hereinafter referred to as “act on municipalities”) and act no . 583/2004 coll . on fiscal rules of local self-governments and on the change of and amendments to certain acts (hereinafter referred to as “act on fiscal rules”) setting forth that revenues of the budgets of municipalities consist of their own and other resources .6 other important acts include act no . 564/2004 coll . on budgetary determination of income tax revenue for local self-governments and amending certain acts as amended (hereinafter referred to as “act on budgetary determination of income tax”), act no . 582/2004 coll . on local taxes and local charge for municipal waste and minor 28 anna románová, karolína červená public governance, administration and finances law review • vol. 4. no. 1. construction waste as amended (hereinafter referred to as “act on local taxes”), and act no . 447/2015 coll . on local charge for the development and on amendment to certain acts (hereinafter referred to as “act on local charge”) . own resources as defined by the act on fiscal rules are created by: • revenues from local taxes  –  these are based on act on local taxes which entitles the municipalities to impose real property tax, dog tax, tax on the use of public areas, accommodation tax, vending machines tax, non-winning gaming machines tax, tax on the use of public areas, tax on entry and stay of motor vehicles in historical parts of towns and nuclear facility tax . they are fully administered by the municipalities and the taxes are actually imposed by municipalities by means of generally binding regulations (hereinafter referred to as “gbr”) . within these, municipalities are allowed to adjust tax rates, value of civil construction plots, floor surcharge, additional reliefs, instalments, reporting duties and the data to be reported to the tax administrator, etc ., which enables them to regulate local taxation according to their local needs . among local taxes, the most important own tax resource is the real property tax . the property tax is three-tier and is levied on a) lands, b) buildings, and c) flats and non-residential premises; • revenues from local charges  –  there are two of them, firstly, the local charge for municipal waste and small construction waste (hereinafter referred to as “charge for municipal waste”) regulated by the act on local taxes and, secondly, the local charge for development (hereinafter referred to as “charge for development”) governed by the act on local charge, the latter being levied upon constructions on land7 within the territory of the municipality for which valid building permissions are issued;8 • non-tax revenues from the ownership of municipal property (including its transfer) and activities of the municipality and its budgetary organizations; • interest and other revenues from the funds of the municipality; • sanctions for violations of financial discipline imposed by the municipality; • donations and revenues from voluntary collections to the municipality; • the share of the taxes administered by the state  –  based on the act on budgetary determination of income tax, the revenue from the income tax to be transferred to municipal budgets is in the amount of 70 .0% and to budgets of htus in the amount of 30 .0% . the sums are distributed to particular municipalities and the htus pursuant to specific criteria defined by the government regulation no . 668/2004 coll . on the distribution of personal income tax revenue to local selfgovernments (comprising the data on the number and structure of residents, the area and other coefficients); and • other revenues on the condition that a special law provides so expressly . a municipality is also allowed to use extra-budgetary monetary funds, funds obtained from their own business activities, refundable sources of financing, and joint financial resources . 29 public governance, administration and finances law review • 1. 2019 computerisation of public administration in slovakia… the others include: • subsidies from the state budget covering the costs of the transferred performance of the state administration and subsidies from state funds (granted following the details of the state budget for a particular budget year from the budget chapters of the particular ministries, e .g . the ministry of the interior regarding the operation of the registry offices, reporting of residence of citizens, and the operation of the registry of inhabitants of the slovak republic, the elections, funding of regional education, etc .); • additional subsidies from the state budget  –  these cover usually the issues like housing development, support of territorial development, etc .; • purpose-built subsidies from the htus or from the budget of another municipality to carry out contracts under special acts (municipalities may, under article 7 para . 2 of the act on fiscal rules, provide grants to another municipality or the htu, if they secure certain tasks for the municipality or for assistance in liquidation of consequences of natural disasters, accidents or other similar events in their area; they also may establish joint extra-budgetary cash funds for funding of the tasks common to more municipalities or for any other reason, i .e . cooperation between municipalities9  –  the most common is the joint exercise of responsibilities in the area of technical infrastructure, administration, applying for grants from the european funds for development projects, or others); • funds from the european union and other foreign funds granted for a  specific purpose; and • other revenues . the difference between own and other revenues consists in the fact that the own resources (except for purpose-built donations) may be used by a municipality according to its needs upon its decision, while the others have to be used only for a  specified purpose (as is the case of funds transferred for the performance of the transferred state administration) . this division may, however, be illogical in some way due to the inclusion of shared taxes into own municipal revenues when these clearly do not truly have a  nature of own resources . we assume that this “helps” improve the proportion between own and other municipal revenue sources in favour of the former, albeit just formally . the above revenues are used for covering the expenditures as defined by the act on fiscal rules, which, in our view, are quite standard, such as: obligations of the municipality resulting from the special regulations; performance of self-governing powers of the municipality and for the activity of budgetary organizations and contributory organizations established by the municipality; transferred state administration; administration, maintenance, and valorisation of the municipal property and the other property used to perform municipal tasks; obligations arising out of cooperation with another municipality or with an htu or with other persons to ensure the tasks arising from the municipality’s competence; duties arising from international cooperation of the municipality; interest on borrowings, loans and repayable financial assistance; expenditure related to the issuance of securities issued by the municipality and the expenses for reimbursement of the returns thereof; and other expenditure provided for by special regulations .10 30 anna románová, karolína červená public governance, administration and finances law review • vol. 4. no. 1. 2.1. actual revenues structure to provide the reader with the view of the actual significance of the above kinds of revenues, figure 1 and figure 2 show the shares of particular revenue types comparing the years 2016 (the most recent data available) and the year 2008 . these show that there are only negligible differences in the development of the ratios of various revenues and that the current state is rather stable .11 38% 29% 8% 4% 14% 7% 2016 amounts (in thousands of eur) shared taxes 1,669,840 subsidies 1,285,847 real property tax 336,359 other local taxes & charges 186,316 non-tax revenues 594,311 other 316,950 figure 1 . municipal revenues structure (2016) source: ministry of finance of the slovak republic . public administration budget, www .finance . gov .sk/sk/financie/verejne-financie/rozpocet-verejnej-spravy/ http://www.finance.gov.sk/sk/financie/verejne-financie/rozpocet-verejnej-spravy/ http://www.finance.gov.sk/sk/financie/verejne-financie/rozpocet-verejnej-spravy/ 31 public governance, administration and finances law review • 1. 2019 computerisation of public administration in slovakia… 42% 24% 6% 4% 15% 9% 2008 amounts (in thousands of eur) shared taxes 1,685,270 subsidies 955,421 real property tax 237,421 other local taxes & charges 155,844 non-tax revenue 594,365 other 371,257 figure 2 . municipal revenues structure (2008) source: ministry of finance of the slovak republic . public administration budget, www .finance . gov .sk/sk/financie/verejne-financie/rozpocet-verejnej-spravy/ the situation as seen from the figures above was set after the major tax reform in 200412 which entitled the municipalities to impose local taxes and determine, i .a . the majority of applicable tax rates .13 the fact that municipalities were granted a  right to set the tax rates according to their needs, even  –  as in case of real property tax  –  different for various municipal areas/zones and types of properties or the use thereof, changed their position in regard of the ability to influence the amount of received tax revenues and this right was vastly exercised, as is seen from figure 3 . http://www.finance.gov.sk/sk/financie/verejne-financie/rozpocet-verejnej-spravy/ http://www.finance.gov.sk/sk/financie/verejne-financie/rozpocet-verejnej-spravy/ 32 anna románová, karolína červená public governance, administration and finances law review • vol. 4. no. 1. figure 3 . the development of average real property tax rates from 2004 to 2018 source: podnikateľská aliancia slovenska, alianciapas .sk/dane-z-nehnutelnosti-sa-tento-roktakmer-nepohli-vynimkou-je-myjava-mesta-poplatok-za-miestny-rozvoj-takmer-nevyuzivaju/ 3. in search of measures to improve the fiscal situation and promote a greater efficiency as figure 3 confirms, the total revenues of municipalities at the time of implementation of the reform were insufficient and there was a  strong need to raise more revenue . in the current situation, we can assess that some elements of the then situation are still present and some of them have improved . the proportion of particular types of revenues have stabilised, but there is still a  need for improving the financial situation of municipalities, which are highly dependent on not truly own resources, as was seen in figures 1 and 2 . raising the real property tax rates by municipalities is no longer an effective tool to acquire more revenue, as we can see from the horizontal curve in figure 3 in the last 4 or 5 years .14 the main reason is not the lack of potential of the real property tax (as is demonstrated by comparisons in table 1), but the lack of political will caused by total unacceptance of the real property tax reform by the public .15 although the idea of a reform was included in the national programme of reforms in the sr in 2016 as a  task of the government in coordination with the association of towns and municipalities of slovakia to “create the technical conditions for a change of the system of the real property taxation towards determining the tax base by the property value in order to increase tax fairness and efficiency concerning local taxes” and also in the government statement for the years 2016–2020, the future of the eventual reform stays uncertain .16 should the reform be satisfactorily implemented, it might be a  welcome solution to the financial (and other related) problems of local governments .17 file:/d:/__munka/___folyoiratok/pga/2019_01/wordok/../../../../appdata/local/temp/downloads/alianciapas.sk/dane-z-nehnutelnosti-sa-tento-rok-takmer-nepohli-vynimkou-je-myjava-mesta-poplatok-za-miestny-rozvoj-takmer-nevyuzivaju/ file:/d:/__munka/___folyoiratok/pga/2019_01/wordok/../../../../appdata/local/temp/downloads/alianciapas.sk/dane-z-nehnutelnosti-sa-tento-rok-takmer-nepohli-vynimkou-je-myjava-mesta-poplatok-za-miestny-rozvoj-takmer-nevyuzivaju/ 33 public governance, administration and finances law review • 1. 2019 computerisation of public administration in slovakia… table 1 . real property tax performance comparison country/rpt % gdp % total taxes % local government revenues moldova 0 .1% (2013) 0 .3% (2013) 7 .6% (2013) the czech republic 0 .2% (2015) 0 .6% (2015) 1 .4% (2012) estonia 0 .3% (2014) 0 .9% (2014) 6 .8% (2014) lithuania 0 .3% (2013) 1 .7% (2016) 8 .2% (2016) slovakia 0 .4% (2016) 2 .9% (2016) 8 .0% (2016) hungary 0 .6% (2014) 1 .6% (2014) na slovenia 0.6% (2015) 1.7% (2015) 10.6% (2015) latvia 0 .8% (2015) 2 .8% (2015) 9 .0% (2014) bulgaria  na 1 .6% (2015) 14 .3 % (2015) romania 0 .8% (2015) 4 .0% (2015) 9 .0% (2015) ukraine 0 .8% (2015) 3 .1% (2015) 5 .3% (2015) poland 1 .2% (2016) 3 .9% (2013) 22 .0% (2016) russia 1 .1% (2015) 13 .6% (2015) 6 .0% (2015) usa 2 .6% (2014) 9 .9% (2014) na canada 2 .7% (2014) 8 .7% (2014) na oecd av. 1.1% (2013) 3.3% (2013) na source: iptipedia and country presentations presented at the market value-based taxation of real property: lessons from international experience. lincoln institute of land policy & center of excellence in finance, ljubljana, slovenia, 23–27 march 2015, 16–20 may 2016 and 06–10 march 2017 . this situation leads municipalities to permanent dependence on the state transferred revenues (shared personal income tax income and grants and transfers) . this, together with the statutory necessity of a  surplus or at least a  balanced budget, causes that the municipalities that are unable to gain funding in any other way (e .g . from the disposal of municipal property or by using specific grants or loans) simply do not invest into development of their municipality . other revenue sources need to be sought .18 this problem may be addressed partially by a rather new tool – the charge for development, the use of revenue thereof is purpose-built  –  its revenue may only be used to cover capital expenditures related to constructions (including the settlement of land) to be used as childcare facilities; facilities providing social, sporting and cultural services; social housing ; school equipment and devices for practical training ; medical equipment; a  publicly accessible park or adjustment of the public green; local roads, parking areas and technical infrastructure . we are, however, unable to estimate its fiscal effect, as there are no available data due to its only recent implementation, nevertheless, the first news show quite a  low interest of the municipalities .19 34 anna románová, karolína červená public governance, administration and finances law review • vol. 4. no. 1. one of the reasons for criticism of decentralisation in the slovak republic is still a  large level of bureaucracy and lack of systemisation of public administration, and the municipal level is not an exception . within the decentralisation of public administration, a large number of duties and responsibilities were transferred to municipal levels, which as such is a  good position in respect of the proportionality principle, on the other hand, in many cases, this competence transfer was followed neither by sufficient technical equipment nor by adequate administrative staffing .20 this is connected to a specific phenomenon of enormously large number of municipalities, which can be found also e .g . in the czech republic21 and more examples can be found .22 as of the state of the last census in slovakia in the year 2011,23 there are 2,927 cities, city districts, and municipalities . in addition to 140 municipalities with the status of cities, 1,919 out of 2,751 municipalities have less than 1,000 inhabitants and still are obliged to fulfil the duties of the public administration authority, which is subject to frequent criticism .24 the two largest cities in slovakia, bratislava and košice, are divided into city districts, where bratislava with its 411,228 citizens is divided into 17 city districts and košice with its population of 240,433 into even more  –  22 city districts . all of the city districts serve the administrative purposes as partially independent municipalities with their local governments, administration and bureaucratic apparatus . these huge numbers of separate administrative units are, in our opinion, one of the reasons why the municipal revenues cannot be used as efficiently as they would be, should the bureaucracy be cut and not duplicated under the current situation . we understand that the cost-driven approach cannot be the principal reason for consolidation of municipalities, nevertheless, the growth of efficiency has been proved .25 as sopkuliak concludes, the smallest municipalities have a very high share of expenditures spent on general public services (connected to personal and technical running costs) per citizen as compared to larger municipalities and therefore consolidation of local selfgovernments should improve their ability to save their revenues and use them for other developing activities .26 one of the measures to enable mainly the small municipalities to “join the forces” under the current legislation is the possibility to run joint municipal offices, which is quite used, especially for special purposes of the transferred state administration, e .g . joint building offices . one of the most recent reforms aiming at rationalisation of public administration is the digitalisation of public administration . figure 4 shows the overall current use of e-agenda and e-services at the local level . at the mentioned local level, there have been various projects and grants to fund the implementation of digitalisation of municipal and city administration . 35 public governance, administration and finances law review • 1. 2019 computerisation of public administration in slovakia… figure 4 . share of the use of e-agenda on the municipal level source: drawn by the authors on the basis of the results of the survey conducted by the authors . a recently implemented dcom project (data centre of computerization of local selfgovernments of slovakia) provided the support to slovak towns and municipalities with the necessary software to perform the e-government functions and processes . the overall use of the dcom support has been declared by 79 .72% of survey responding towns/ municipalities; the rest of them use different e-government performance enabling software tools . figure 5 . funding of software (58 towns – 57 responses) source: drawn by the authors on the basis of the results of the survey conducted by the authors . 36 anna románová, karolína červená public governance, administration and finances law review • vol. 4. no. 1. figure 6 . funding of software (769 municipalities – 758 responses) source: drawn by the authors on the basis of the results of the survey conducted by the authors . figures 5 and 6 show the ratio between the towns and municipalities that have been provided with the necessary software by a  superior authority and those which secured it from their own resources . 86 .52% of municipalities/towns have acquired the software for electronic administration and data procession from their own resources, while only 13 .48% of them have been provided therewith by the superior authorities . material and technical equipment (as a prerequisite for the actual provision of e-services) is primarily obtained by the municipalities themselves, which, in our opinion, is the main reason why some municipalities still do not provide e-services at all or only to a  limited extent and/or in a  low quality . under the current regulation (act no . 305/2013 coll ., act on e-government), as of 1 november 2016, all the municipalities should have provided the services of public administration electronically . based on this fact, it seems rather surprising that the services of receipt and delivery of electronic documents (within the e-government performance) have reached very low shares (only 24 .72% municipalities declared to deliver their decisions electronically, 22 .68% use communication signed by qualified electronic signatures within communication with other public authorities) compared to other e-services, e .g . e-mail or electronic formularies that are used vastly (e .g . internal e-mail communication 81 .07%, e-mail communication with other authorities 99 .76%; with businesses 74 .08%, with citizens 67 .96%; use of electronic formularies 53 .62%) . the contractual price for the provision and service of the dcom information system has been set at eur 62,844,76 .34, which together with other projects (the total expenses of those projects are unavailable, since the slovak government was, to our surprise!, unable to answer our request for this information) might be quite a  high sum . despite that, altogether with the common-unified web service for electronic communication with public administration (www .slovensko .sk) is not unproblematic . http://www.slovensko.sk 37 public governance, administration and finances law review • 1. 2019 computerisation of public administration in slovakia… figure 7 . overall satisfaction of municipalities with functioning and user comfort of e-services/e-agenda (795 responses) source: drawn by the authors on the basis of the results of the survey conducted by the authors . following figure 7, 59% of the respondents are satisfied with the functioning and comfort level of the current e-government processes, while 34% are satisfied only partially and 7% are dissatisfied . most negative responses were regarding the functioning of the qualified electronic signature communication where 58 .68% of its users declared dissatisfaction with the user comfort, however, considered it to be rather efficient (cost and/or time saving )  –  with 84 .82% of the users . within the survey, various objections and remarks regarding the overall assessment of the e-government functioning were raised by the respondents . we learnt from more than 323 remarks of municipal/city representatives that the most significant defects of the current state are a) malfunctions or incompleteness of the system and technical defects with 77 objections; b) lack of transparency of the system and poor user comfort (including complicated work with the system, unclarity for ordinary users, opaque websites and incompleteness of the data) with 69 objections; c) low level of comprehensiveness and integration/interconnection of the systems and registers administered by the authority itself and with other public administration authorities within various agenda causing duplicity and lack of interoperability with 38 objections together with 11 responses on duplicity of work caused by the need to deal with “paper” agenda, files or communication alongside with the electronic ones . 26 respondents claimed lack of good standard of the internet connection . 25  respondents depicted low level of adequate technical equipment and qualified staff or financial resources and 27 presented dissatisfaction with a small number and/or poor quality of trainings for the employees; 20 remarks were aimed at unpreparedness, slow implementation, and unsystematic approach within the process of e-government and 13 claimed their opinion on raise of bureaucracy . 11 respondents claimed low interest or unawareness of the clients/addressees, especially in smaller municipalities and as regards older citizens or persons without adequate technical skills and 6 pointed out low level of awareness . the rest of the remarks were of a general nature or unidentifiable . 38 anna románová, karolína červená public governance, administration and finances law review • vol. 4. no. 1. as regards the view of respondents on the efficiency of e-services, the majority of them are in favour thereof, as is clear from figure 8 which also corresponds to the overall preference of the e-service use (figure 9) . a  different situation was found concerning the efficiency of communication with qualified electronic signature (which is the substantial part of e-government), where only 17 .94% of the respondents declared time-saving (12 .38% declared as not cost-saving and 69 .68% were unable to assess it) and similarly only 18 .03% cost-saving (16 .20% declared as not cost-saving and as much as 65 .77% were unable to assess it) . nevertheless, the extension of electronic processes/services currently available would be welcome by only 24 .94% of them . figure 8 . time and cost saving of e-services/e-processes (800 responses) source: drawn by the authors on the basis of the results of the survey conducted by the authors . figure 9 . preference of e-services/software use over physical/paper form (812 responses) source: drawn by the authors on the basis of the results of the survey conducted by the authors . 39 public governance, administration and finances law review • 1. 2019 computerisation of public administration in slovakia… 4. conclusions should we look at the primary goal of fiscal decentralisation, it definitely would be the creation of an independent self-government that is capable of funding its needs and execute its policy by its own resources .27 slovakia truly started to fulfil this idea only after 2004 when local taxes as a true local revenue source were established . as we look at the current budgetary situation of the slovak municipalities, one may conclude that there is still a high level of dependency on the state and its grants, transfers and shared state taxes (see figure 1) . even though the shared taxes are statutory designated as own resource, the true own municipal resources do not represent a  major revenue source . the real property tax as the most relevant own tax revenue has been criticised due to low revenue in the light of the gdp ratio28 (see table 1), which is true, nevertheless, any potential real property tax changes are very sensitively addressed by the public which hinders any substantial or even minor changes in the current system . it is not only the mentioned low revenue, but also the unbalanced tax burden29 between taxation of businesses and households (which are strongly undertaxed), and there is also room for covering a larger scale of various property types (e .g . currently not taxed pipelines and constructions without roof or ceiling ) or improving enforcement .30 despite this, its system does have many positive features, such as the administrative simplicity, adjustability and high level of comprehensibility for the tax payers . since the lack of political will or rather “know how” to “sell the reform”, other means of improving, very often non-flattering, of the fiscal situation of municipalities have to be sought . we have mentioned a  very lately introduced, now local charge for development .31 nevertheless, there might also be room for more systematic changes, as the one analysed in the paper above  –  rationalisation tools . letting alone the idea of limiting the number of municipalities, or at least their administrative apparatuses, which would be very welcome in the authors’ opinions,32 there might be another one  –  like the e-government implementation – where one of the goals definitely is the efficiency increase . such reforms might be very helpful for larger towns but also for small villages where they might counterbalance frequent understaffing and inadequate equipment . these, however, need to be implemented in a  satisfactory way, should they improve the current situation . the results of the survey regarding the computerisation reform indicate ambiguous conclusions in this sense . there are many positive responses, however, a  large number of problems and negative reactions were found . there has been a  vivid discussion about the badly mastered computerisation reform in slovakia due to various errors in the functioning of e-government performance as such, not only at the municipal level .33 we assume that the clients of the reform (citizens, employees of businesses and public authorities) did not receive a quality service for the “money spent” on the reform . a premature implementation of the reform without efficient technical service that is present in the reform at central state administration level is also found at the local level . here, the problem might also lie with the fact that was mentioned above – a large number of small municipalities that are obliged to fulfil the tasks imposed by the legislation, in many cases without the necessary material, technical, personal or other equipment . the staff of such small municipal offices (not unusually less than 3 employees)34 is frequently not capable of handling the new (electronic) agenda due to lack of adequate education, training or large amount of other working tasks 40 anna románová, karolína červená public governance, administration and finances law review • vol. 4. no. 1. demanded due to understaffing .35 the problem is partially resolved by the existence of joint municipal offices, nevertheless, many tasks for such municipalities remain . it is therefore necessary to remember this fact within all the reformative processes within public administration in slovakia . following the results of the survey, we assume that as for small municipalities, imposing of duties as regards computerisation of public administration represents rather a  burden than a  tool for achieving a  simpler and more efficient public administration . for this reason, we do think that this reform has not entirely fulfilled one of its goals – improving the efficiency – as regards the smaller municipal units . should the reproached negatives be eliminated, the reform will definitely improve the efficiency of administrative tasks of municipalities in terms of both costs and time, as was already indicated by the evaluation within the survey . 41 public governance, administration and finances law review • 1. 2019 computerisation of public administration in slovakia… references 1 this chapter represents the partial output of the implementation of the apvv project no . 14-0598 . 2 phillip j . bryson, gary c . cornia, gloria e . wheeler, fiscal decentralization in the czech and slovak republics: a comparative study of moral hazard, 103–113, in environment and planning c: politics and space, vol . 22, no . 1 (2004) . doi: https://doi .org/10 .1068/c0247; eva balážová, viera papcunová, juraj tej, dopad fiškálnej decentralizácie na výnos z dane z nehnuteľností na úrovni miestnej samosprávy sr [the impact of the fiscal decentralisation on the tax revenue of real estate tax on the local self-government of the slovak republic], 891–898, in victorie klímová, vladimír žítek (eds .), xix. mezinárodní kolokvium o regionálních vědách. sborník příspěvků [19th international colloquium on regional sciences . conference proceedings] (brno, masaryk university, 2016) . doi: https://doi .org/10 .5817/cz .muni .p210-82732016-115 3 tamošiūnas states that slovakia belongs to countries with a high level of decentralisation based on subsidies acquired – below 30% (teodoras tamošiūnas, valda stanytė, fiscal decentralisation in lithuania in the context of eu countries, 157, in scientific papers of the university of pardubice, series d, faculty of economics and administration, vol . 35, no . 3 [2015], 149–160, dspace .upce .cz/handle/10195/64708 [accessed 5 january 2018]), however, looking at figure 1 later, we see that there is a large share of shared taxes, which are transferred by the central government . based on the cost comparison method (share of the local governments’ expenditures on public administration expenditures) with only 17% and the share of the local governments’ expenditures on the gdp with only 6 .3% – compared to e .g . the czech republic – 10 .2%, austria – 16 .9%, hungary – 9 .0%, poland – 13 .4%, denmark – 37 .6%, sweden – 25 .7% (in 2012), domestic authors consider the level of decentralisation as rather low . the general perception is that the level is practically high due to many competences transferred to local governments . (viktor ňižňanský, viera cibáková, marta hamolová, tretia etapa decentralizácie verejnej správy na slovensku [ the third phase of the public administration decentralisation], 108 (bratislava, wolters kluwer, 2014) . 4 since the legislative term “municipality” includes also municipalities with the status of cities or city districts (not only villages), we will follow the statutory terminolog y in this regard . 5 anna románová, karolína červená, elektronická komunikácia podnikateľov s verejnou správou (právne aspekty) [electronic communication of entrepreneurs with public administration (legal aspects)], 865–875, in international scientific conference, current problems of the corporate sector 2016 (bratislava, ekonóm, 2016); karolína červená, anna románová, egovernment ako prostriedok racionalizácie verejnej správy [e-government as a rationalisation tool of public administration], 51–59, in racionalizácia verejnej správy [rationalisation of public administration] (bratislava, akadémia policajného zboru v bratislave, 2016) . 6 article 3 para . 1–3 of the act on fiscal rules . 7 except for minor constructions, extensions and outbuildings up to 25 square meters of floor area, emergency construction works, family houses with a floor area of up to 150 square metres, constructions used for social housing or childcare, built-in garage and parking spaces within an existing building, medical facilities, serving to kindergartens or schools, social service facilities, practice of religion, protection of the state, museums, galleries, libraries and cultural centres . 8 for comparison see michal radvan, taxes on communal waste in the czech republic, poland and slovakia, 511–520, lex localis  –  journal of local self-government, vol . 14, no . 3 (2016) . doi : https://doi . org/10 .4335/14 .3 .511-520(2016) 9 anna kicová, miroslav štrkolec, vzájomné finančno-právne vzťahy jednotiek územnej samosprávy [mutual financial and legal relations among the local government units], 381–391, in finanse samorzadu terytorialnego [local self-government finances] (radom, wyzsza szkola handlowa, 2012) . https://doi.org/10.1068/c0247 https://doi.org/10.5817/cz.muni.p210-8273-2016-115 https://doi.org/10.5817/cz.muni.p210-8273-2016-115 https://doi.org/10.4335/14.3.511-520(2016) https://doi.org/10.4335/14.3.511-520(2016) 42 anna románová, karolína červená public governance, administration and finances law review • vol. 4. no. 1. 10 for more see andrej sopkuliak, štruktúra výdavkov miestnej samosprávy na slovensku v rokoch 2012–2014 [expenditure structure of local self-governments in slovakia in 2012–2014], 774–780, in victorie klímová, vladimír žítek (eds .), xix. mezinárodní kolokvium o regionálních vědách. sborník příspěvků [19th international colloquium on regional sciences . conference proceedings] (brno, masaryk university, 2016) . doi: https://doi .org/10 .5817/cz .muni .p210-8273-2016-99 11 compare: miroslav štrkolec, príjmy miestnych daní – ústavné predpoklady a realita [local taxes revenues – constitutional preconditions and reality], 338–343, in 15 rokov ústavy slovenskej republiky [15 years of the constitution of the slovak republic] (košice, p . j . šafárik university in košice, 2008) . 12 as part of fiscal decentralisation, peter molitoris, legal frameworks of financing of territorial self-government in the slovak and czech republics, 229, in slovenská a česká republika po dvadsiatich rokoch [the slovak and czech republics after twenty years] (podhájska, východoeurópska agentúra pre rozvoj, 2013), 224–236 . 13 michal jesenko, obec ako subjekt tvorby práva [municipality as a legislative authority], 120 et seq . (košice, p . j . šafárik university in košice, 2015) . 14 and there are other reasons as well, see peter molitoris, vlastné finančné zdroje územnej samosprávy a komunálna reforma [own financial resources of local self-governments and communal reforms], 83, in územná samospráva v procese decentralizácie verejnej správy [territorial self-government in the process of decentralisation of public administration] (košice, p . j . šafárik university in košice, 2010), 77–85 . 15 ibid . 81 . this is also supported by mainstream media, e .g . nový čas: nezávislý denník, www .cas .sk/ clanok/419746/mestski-poslanci-odklepli-zvysenie-dani-z-nehnutelnosti-za-byty-zaplatime-o-30-percentviac/; denník pravda, https://spravy .pravda .sk/ekonomika/clanok/433613-chysta-sa-absurdna-dan-z-podlazia/ (accessed 31 january 2018) . 16 for more on the reasons and the situation see anna románová, ivana forraiová, funding of municipalities in the slovak republic, related application problems and future challenges, 127–145, in samorzad terytorialny w polsce i w europie. aktualne problemy i wyzwania [territorial self-government in poland and europe . current problems and challenges] (wloclawek, państwowa wyższa szkoła zawodowa we włocławku, 2017) . doi: http://dx .doi .org/10 .21784/samorzadterytorialny .2017 .010; or mária bujňáková, anna románová, zamyslenie sa nad ideou zavedenia zdaňovania nehnuteľností na princípe trhovej hodnoty [thoughts about the idea of real property taxation based on the ad valorem principle], 61–75, in právo, obchod, ekonomika iv [law, business, economics iv] (košice, pavol jozef šafárik university in košice, 2014) . 17 michal radvan, the draft reform of land taxation in the czech republic, 229–245, in lex localis – journal of local self-government, vol . 10, no . 3 (2012) . doi: https://doi .org/10 .4335/170; william j . mccluskey, frances plimmer, the creation of fiscal space for the property tax: the case of central and eastern europe, 123–138, in international journal of strategic property management, vol . 15, no . 2 (2011) . doi: https:// doi .org/10 .3846/1648715x .2011 .582748 18 petr mrkývka, damian czudek, fiscal resources of local self-government budgets from environmental charges on czech republic, 669–683, in lex localis – journal of local self-government, vol . 15, no . 3 (2017) . doi: https://doi .org/10 .4335/15 .3 .669-683(2017) 19 podnikateľská aliancia slovenska: real property taxes have hardly changed, except for myjava . the charge for development is almost unused, http://alianciapas .sk/dane-z-nehnutelnosti-sa-tento-rok-takmer-nepohlivynimkou-je-myjava-mesta-poplatok-za-miestny-rozvoj-takmer-nevyuzivaju (accessed 31 january 2018) . 20 anna románová, karolína červená, implementation of e-government in the slovak republic at the level of local self-government, 170–178, in proceedings of the 17th european conference on digital government, (reading, uk, academic conferences and publishing international, 2017) . 21 radvan, supra n. 18, at 241 . 22 marc holzer, et al ., literature review and analysis related to municipal government consolidation (newark, school of public affairs and administration, spaa, rutgers university, 2009), nj .gov/dca/affiliates/luarcc/ pdf/final_consolidation_report .pdf (accessed 3 january 2018) . 23 towns of the slovak republic according to the number of inhabitants in 2011, sodbtn .sk/obce/statistika_obce . php (accessed 31 january 2018) . https://doi.org/10.2139/ssrn.3781731 https://doi.org/10.4335/170 https://doi.org/10.5817/cz.muni.p210-8273-2016-99 file:/d:/__munka/___folyoiratok/pga/2019_01/wordok/../../../../appdata/local/temp/downloads/www.cas.sk/clanok/419746/mestski-poslanci-odklepli-zvysenie-dani-z-nehnutelnosti-za-byty-zaplatime-o-30-percent-viac/ file:/d:/__munka/___folyoiratok/pga/2019_01/wordok/../../../../appdata/local/temp/downloads/www.cas.sk/clanok/419746/mestski-poslanci-odklepli-zvysenie-dani-z-nehnutelnosti-za-byty-zaplatime-o-30-percent-viac/ file:/d:/__munka/___folyoiratok/pga/2019_01/wordok/../../../../appdata/local/temp/downloads/www.cas.sk/clanok/419746/mestski-poslanci-odklepli-zvysenie-dani-z-nehnutelnosti-za-byty-zaplatime-o-30-percent-viac/ https://spravy.pravda.sk/ekonomika/clanok/433613-chysta-sa-absurdna-dan-z-podlazia/ http://dx.doi.org/10.21784/samorzadterytorialny.2017.010 https://doi.org/10.4335/170 https://doi.org/10.3846/1648715x.2011.582748 https://doi.org/10.3846/1648715x.2011.582748 https://doi.org/10.5817/cz.muni.p210-8273-2016-115 https://doi.org/10.4335/15.3.669-683(2017) https://doi.org/10.5817/cz.muni.p210-8273-2016-115 http://alianciapas.sk/dane-z-nehnutelnosti-sa-tento-rok-takmer-nepohli-vynimkou-je-myjava-mesta-poplatok-za-miestny-rozvoj-takmer-nevyuzivaju http://alianciapas.sk/dane-z-nehnutelnosti-sa-tento-rok-takmer-nepohli-vynimkou-je-myjava-mesta-poplatok-za-miestny-rozvoj-takmer-nevyuzivaju http://nj.gov/dca/affiliates/luarcc/pdf/final_consolidation_report.pdf http://nj.gov/dca/affiliates/luarcc/pdf/final_consolidation_report.pdf http://sodbtn.sk/obce/statistika_obce.php http://sodbtn.sk/obce/statistika_obce.php https://doi.org/10.2139/ssrn.3781731 https://doi.org/10.4335/170 43 public governance, administration and finances law review • 1. 2019 computerisation of public administration in slovakia… 24 e .g . jozefína machajová, všeobecné správne právo [general administrative law], 149 (bratislava, paneuropean university, 2010); balážová, supra n. 2, at 895 . 25 holzer, supra n. 23, at 7 . 26 sopkuliak, supra n. 10, at 779 . 27 bryson, supra n. 2, at 113 . 28 council recommendation of 8 july 2014 on slovakia’s 2014 national reform programme and delivering a council opinion on the stability programme of slovakia, 2014 (2014/c 247/23) . 29 mccluskey, supra n. 18 . 30 we can find many examples of villages and cities where local taxes and charges are not duly collected (the local taxes and charges arrears amount, e .g . in the largest cities in slovakia to: eur 7,510,920 .96 in bratislava; eur 4,887,964 .48 in košice; eur 2,464,411 .73 in trenčín; eur 4,992,097 .73 in nitra; eur 3,439,441 .16 in žilina; eur 3,862,743 .99 in banská bystrica; eur 1,069,501 .00 in prešov [*local charges not included]) . source: data provided by the cities upon the authors’ request . 31 adrián popovič, zamyslenie sa nad miestnym poplatkom za rozvoj [few thoughts about the charge for development], 1263–1276, justičná revue, vol . 68, no . 11 (2016) . 32 similarly ňižňanský, supra n. 3 . 33 the authors experienced the functioning of electronic communication themselves and can confirm the ambiguous attitude based on a large number of technical complications and low awareness up to chaos regarding the duties and requirements within the communication . see also karin cakoci, problémy so zavedením elektronického doručovania písomností [problems concerning the implementation of electronic delivery of documents], 67–71, in vybrané instituty správy daní v čr a na slovensku po novele [assorted institutes of tax administration in the czech republic and slovakia after the amendment] (olomouc, iuridicum olomoucense, 2012) . 34 the total of 572 municipalities out of 830 respondents declared to have 3 or less employees, not occasionally, including the mayor of the municipality . 35 similarly molitoris, supra n. 14, at 83 . https://doi.org/10.5817/cz.muni.p210-8273-2016-99 https://doi.org/10.1068/c0247 https://doi.org/10.3846/1648715x.2011.582748 https://doi.org/10.5817/cz.muni.p210-8273-2016-99 https://doi.org/10.1068/c0247 https://doi.org/10.3846/1648715x.2011.582748 © 2021 the author public governance, administration and finances law review vol.  6. no. 1. (2021) • 89–102 . articles doi: 10 .53116/pgaflr .2021 .1 .8 re-thinking the lower-middle level of administration in hungary with particular reference to the web 3 .0 . era lászló tibor buskó* ¤ * university of public service, e-mail: busko .tibor .laszlo@uni-nke .hu abstract: this paper will evaluate the current situation and role of the hungarian (administrative) lower-middle level and make projections about its future . centralisation efforts since 2010 have had a non-negligible impact on the administrative and non-administrative (common institution maintenance, micro-regional development policy) tasks assigned to the lower-middle level . however, it may be argued that the transition to the web 3 .0 era – the era of the most advanced, most intelligent and customised web technologies  –  may put such centralisation efforts into a  new context . revitalisation of formations similar to the multi-functional micro-regional associations of local self-governments which largely disappeared after 1  january 2013  may be justifiable in the forthcoming period in order to promote local synergies . if this is correct, a  rethink of the public administration system at the lower-middle level may become a very important task for the public administration as along with regional discourse . keywords: districts, local self-government associations, public administration, territorial policy, local public services, hungary 1. introduction the subject matter of this paper is what is known as the lower-middle level of administration, which  –  with some simplifications  –  i have placed in the category of the local equivalents of the european union’s local administrative units (lau) level 1, as used before 1  january 2017, when eurostat disbanded levels lau 1  and lau 2, and implemented a  unified lau classification . in hungary, as in the majority of eu member states, the new lau levels implemented in 2017 are equivalent to the former lau 1 levels (3,155 towns, at the town level) (local administrative units [lau], s .a .) . the primary aim of the study is to make recommendations on the ideal size and desirable functions of lower-middle level of administrative units in hungary, especially with https://doi.org/10.53116/pgaflr.2021.1.8 https://orcid.org/0000-0003-4746-0015 mailto:busko.tibor.laszlo@uni-nke.hu 90 lászló tibor buskó public governance, administration and finances law review • vol.  6. no. 1.  regard to the challenges of the upcoming era of the most advanced, most intelligent and customised web technologies, i .e ., the web 3 .0 era (mitra, 2014) . the second section of the paper will briefly outline the prehistory of the lower-middle level in hungary in order to provide a  proper context for the situation and role of the current district system, which constitutes the most important representative of the lower-middle level after 2010 .  in the third section, based on the professional  literature on the ideal size and desirable functions of districts, i conclude that it would be a  mistake to identify the lower-middle level with one single geographical delimitation, such as the current district system, and that research on the ideal size and desirable functions of lower-middle level administrative units should focus on the needs of users, in line with one of the fundamental postulates of the concept of the neo-weberian state . based on this, the fourth section seeks to rethink the ideal size of districts in the transition to the web 3 .0  era through empirical research . the results of this research suggest that a  reduction in the frequency of administrative acts requiring personal presence could lead to a reduction in the current number of districts . furthermore, the concluding part of the paper will discuss in more detail the fact that there may even be a  resurgence of formations smaller than the current districts, which may be best placed to fill the void left by the marginalisation of the multi-purpose associations of small municipalities after 2013 . 2. a historical overview the term ‘district!’ (járás in hungarian), the most characteristic hungarian equivalent of the lower-middle administrative level, is quite controversial . on the one hand, its use dates back a  long time: historical research has found evidence of districts known as iudex nobilium from as early as the fifteenth century (csite & oláh, 2011, pp . 21–24; hoffman, 2012, p . 23) . on the other hand, in a  geographical sense, these districts did not constitute fixed regional units . as bálint csatári put it, ‘their boundaries, their seat, and the roles, number and importance of district-level administration or supply institutes have been often changing’ (csatári, 1995, p . 11) . to understand current problems with districts, it is vital to first shed some light on how their real career started . they were introduced in the socialist era, when districts – which were construed until then as areas of jurisdiction of ‘on-site’ county bodies – were established as fully-fledged administration levels on a  par with counties or cities . this change, resulting in a  three-level administration, was introduced by act xx of 1949 (the constitution of the hungarian people’s republic) and act i of 1950 (the first act of the council) . however, bestowing such powers upon districts was based on specific political circumstances: they were meant to facilitate taking control over agricultural activities, including the collectivisation process, which was considered strategically important at the time (szoboszlai, 1973) . since in smaller villages, no  adequate and reliable party officials were available, the governing (and only) party intended to rely on this administration level in realising its goals . as a  result of this intention, the three-level administration could not survive completion of the collectivisation process, or the disruption of the strictly centralised planand instruction-based regime . for this reason, the dissolution of districts or 91 public governance, administration and finances law review • 1. 2021 re-thinking the lower-middle level of administration in hungary… merging them with other districts started as early as the 1950s . ultimately, act i of 1971  (third act of the council) sped up the process . pursuant to the legislation, to ensure a  gradual loss of power, the district councils were first replaced by so called district offices, and as of 1  january 1984, the last districts were dissolved . they were replaced by so-called city environs administrations . this change was introduced to improve cost-efficiency, specifically the government intended to improve efficiency of territorial administration by allocating former district-level tasks to central cities and their associated specialised administration bodies . another point worth considering is that in the late kádár era, these measures which were meant to improve cost-efficiency proved insufficient to offset the trend of cutbacks in central grants, and an increasing ‘competition for development resources’ (vági, 1982) resulted in sharp conflicts between city environs centres and the councils in their catchment areas, in spite of the fact that by creating so-called city environs funds, the central city, as a  net contributor, tried to prevent a  further increase in inequalities by adding its own humble offerings (pfeil, 2003, p . 53) . following the regime change, it briefly seemed that the lower-middle administration levels might be forced to the periphery . spurred by the unpleasant memory of the city environs administrations and the lobby of local influencers, act lxv of 1990  on local self-governments (local self-government act 1990) implemented a  local selfgovernment structure that was not only decentralised (one town  –  one local self-government), but which also allocated the majority of local-level tasks and authorisations to municipalities . however, it did not take long for it to become apparent that local self-governments do not have adequate resources to perform these tasks or fulfil their mandates . the current era has seen a  trend of decreasing central grants, and only a few local self-government bodies were lucky enough to have sufficient income to fund the adequate performance of the tasks they were charged with . an illustration of this is that, whereas legislators in 1990  would have left 100  per cent of personal income tax paid by locals with the local government, by 1991, only 50 per cent remained with them, and by 2010, this number had decreased to 40  per cent . moreover, only 8  per cent remained with the respective local government, the other 32 per cent was re-distributed to various local governments in line with normative indicators (kovács, 1991, p . 34; lentner, 2019, p . 25) . accordingly, a  revitalisation of the lower-middle administrative level became inevitable in the early 1990s, though the diversity of local-level tasks and authorisations, and the conflicts of interests between individual municipalities or between the municipality level and the central government made it almost impossible to establish a nationwide, unified and overlap-free lower-middle administrative level . as regards the local level of public administration, the local self-government act 1990  imposed heavy burdens on mayor’s offices operating under individual local selfgovernments, and on joint heads of the local self-government offices alike . the local self-government act 1990  only provided recommendations for villages with less than 1,000  residents to establish a  joint head of the local self-government offices . as the unpleasant memories of joint town councils from the communist era still lived on, joint heads of local self-government offices were scarce, even in regions with the most fragmented village-structures . typically, the small number of joint heads of the local 92 lászló tibor buskó public governance, administration and finances law review • vol.  6. no. 1.  self-government offices or the number of participating villages decreased even further (1991: 529 and 1,535), and this trend only reversed in 1997/98 (1997/98: 492 to 505; and 1,360 to 1,391 – szigeti, 2009, p . 8) . due to the urgent nature of public utility investments in the years after the regime change, and due to the fact that individual institutes providing some local public services could only be operated jointly, the necessity of local-level collaboration in the organisation of local public services and territorial development was recognised fairly early on . the first local self-government associations were created in the early 1990s, and the institutionalisation of domestic territorial development, by the promulgation of act xxi of 1996  on territorial development and spatial planning (territorial development act) and the appearance of decentralised financial aid promoted the spread of more complex territorial development associations . subsequently, the reinforcement of the lowermiddle administrative level was mostly hindered by the conflicts of interests between the municipality level and the government . in particular, the government insisted on the idea of a  nationwide, unified and overlap-free lower-middle administration level, while in reality at local level a  complicated system of local interests and conflicts prevailed . the issue of how to force constitutionally autonomous town local self-governments into a  unified system was finally resolved by section 1(2) of act cvii of 2004  on multipurpose micro-regional associations which replaced duress with indirect incentives (various statutory grants) for municipalities willing to integrate into the centrally defined and limited lower-middle administrative level (into the system of multipurpose micro-regional associations) . the minimum requirements of integration were a commitment on the joint performance of tasks related to education, social and healthcare, and territorial development . meanwhile, in relation to the local level of public administration, section 1(2) of government decree no . 244/2003 (xii .18 .) set out that ‘the area of jurisdiction of the organ performing public administration authority tasks may only differ from the area of the respective micro-region, if the characteristics associated with the performance of the tasks and the exercise of the respective authority justify such a  difference’ . after a  short detour, the unified lower-middle administration level had apparently been restored in hungary . as it transpired, when the fidesz–kdnp coalition came to power in 2010, they initiated a  centralisation process which fundamentally changed the role of the lowermiddle administrative level in the hungarian administration system . the amendment of the territorial development act (act cxcviii of 2011) dissolved the micro-regional development councils, transferring lower-middle administrative level territorial development tasks to the county local self-governments . although, in relation to the organisation of local public services, possibilities continued to exist to perform tasks associated with the lower-middle level, with the repeal of act cvii of 2004 on 1 january 2013 and the subsequent cessation of micro-regional statutory grants, multifunctional micro-regional associations practically fell apart . however, the most significant change took place at the local level of public administration. act xciii of 2012 on the establishment of districts and the amendment of the associated statutes primarily re-allocated some of the local level public administration tasks to newly established district offices, that had formerly been carried out by local governments, primarily by notaries, who were local 93 public governance, administration and finances law review • 1. 2021 re-thinking the lower-middle level of administration in hungary… self-government employees, and local state administration bodies with general authorities at the same time . to summarise the post-2010 trends in one sentence, the existence of a  unified lower-middle administrative level had been questioned, if not outright denied . below, i will attempt to define the present situation and future perspectives of the lower-middle administrative level in an era when bespoke answers to specific challenges will dominate even in the field of administration . 3. districts versus lower-middle level based on the circumstances outlined in the introduction, i will develop an approach to the term lower-middle administrative level, which, instead of consisting of an exclusive lower-middle administrative level (where lower-middle level = a  specific district distribution), is flexible enough to facilitate the solution of today’s special challenges . this approach is based on the fact that the characteristics of hungarian lower-middle administrative levels was defined by districts, which  –  despite being unstable  –  increasingly assumed the form of self-evident units of administrative spatial planning . the following section will explore the reasons . paul david, in the course of researching the causes of the remington company’s commercial success, argues that, since certain random events in the past can fundamentally affect the current course of events, sometimes it is necessary to accept that only history can explain a  current situation (david, 1985) . however, it should be added that due to a general resistance to change in society, adjustment to such eventualities may prove to be a difficult task . to paraphrase the most important conclusion of david’s classic study, this may be regarded as a special case of path dependency, as traditional districts encompassing areas within about one day’s walk (about 15–20 km) could have been allocated in a more favourable way in the present era . indeed, in the twentieth century, an increasing divergence became apparent between the practice of hungarian lower-middle administrative level spatial planning, and their treatment by academics . it is worth quoting one of the classics of hungarian administration studies, istván bibó, who in a  paper originally published in 1975  pointed out that, although the district system was launched with 140  districts in 1950  and this number had gradually decreased, at that time, professional discourse still considered the 80–90 larger district regions or city environs as the quintessential elements of the lower-middle administrative level . this number of 80–90 occasionally recurs in our discourse of spatial planning . in one of the closing chapters of his book entitled magyar város, ferenc erdei assumes about 80  centres, and . . . károly eszláry, who introduced three alternatives for administrative spatial planning (the large county, middle-sized county and small county systems) in the városi szemle in 1947, divided the country into almost the same number of basic elements in all versions: large counties encompassed 87  districts, middle-sized counties had 93  districts, while in the small county system, the country was divided into 90 small counties . this author published another work entitled magyarország városhálózatának kiépítése in 1949, wherein, based in ferenc erdei’s theories, he took into account 98 city environs (bibó, 1990, vol . iii, p . 214) . 94 lászló tibor buskó public governance, administration and finances law review • vol.  6. no. 1.  the reason why this is remarkable is that, despite the fact that the number of hungarian cities with a  lower-middle level catchment area is well below 140, mainstream middle level spatial planning kept insisting on similar numbers even after the regime change . the number of statistical micro-regions created by notice no . 9006/1994 (s .k .3) of the president of the hungarian central statistical office on the delimitation of statistical micro-regions (138) only slightly differs from that of the system introduced in 1950 .  moreover, most probably due to local level political bargains, the number of micro-regions thus defined continuously increased . the number of statistical microregions created in 1994  was first increased by notice no .  9002/1998  (s .k .1) of the president of the hungarian central statistical office, to 150 . a second increase, enacted by government decree no .  244/2003  (xii .18 .), took it to 168, while a  third change, act cvii of 2007 increased it further to 174 . finally, act cxlix of 2010 brought the number of micro-regions to 175 by 2011 . with the implementation of the new district system on 1  january 2013, even though the actual centres and limits of districts differ from that of the statistical microregions here and there, legislators did not set out to intervene in the structure of the lower-middle administrative level . one hundred seventy-five districts were established, which more or less corresponded to the number of statistical micro-regions just dissolved . apart from the dissolution of the polgárdi district, this number remains unchanged (presently, the lower-middle administrative level in hungary consists of 174 districts plus 23 capital city districts) . since, ideally, a  lower-middle level administrative unit is identical to a  real (functional) city and its catchment area (city district), it is inevitable, when clarifying the number of districts, to ask the question: how many cities are there in hungary? polemics on the topic in the academic  literature generally start from the fact that the large number of cities that only became cities for political reasons after the regime change has resulted in an extremely fragmented ‘barely-city’ structure (murányi, 2011), which presently includes 346 cities .1 in a study in 2006, pál beluszky and róbert győri concluded that out of the 289  cities officially recognised at the time, only 210  actually function as a  city to an extent, and a  further 122  cities with incomplete city functions are deducted, the number goes down to 80–90, the number of larger district regions or city environs mentioned by bibó (beluszky & győri, 2006, p . 68) . in a  parallel paper, géza salamin et al . estimated that there were only 57  actual cities with real city functions (salamin et al ., 2008) . however, imre körmendy points out that the latter authors define a functional city in such a way that it meets another common criterium, namely the minimum of 20  thousand residents defined in the un’s demographic yearbook (körmendy, 2018) . the aim here is not to determine a  number or to define our lowermiddle level administrative units according to bibó’s approach or to the un guidelines but to address the more pressing question of how to handle the meaning of contents associated with the lower-middle administrative level . to arrive at a  contextualised definition of the lower-middle administrative level, it is essential to understand the concept of the neo-weberian state . it is well known that 1 https://statinfo.ksh.hu/statinfo/themeselector.jsp?&lang=en https://statinfo.ksh.hu/statinfo/themeselector.jsp?&lang=en 95 public governance, administration and finances law review • 1. 2021 re-thinking the lower-middle level of administration in hungary… the dominance of the market-friendly approach attributable to the new public management was largely replaced after the recession in 2008 by the concept of the neoweberian state, involving strong state engagement . christopher pollitt, while admitting that, in a neo-weberian state, strengthening the state’s dominance may even be regarded as a  traditional weberian element, points out that the replacement of external orientation by internal orientation with more focus on bureaucratic rules, along with the consideration of citizen’s needs and wants, clearly indicates that this is a ‘neo-’ or innovative version of the concept (pollitt, 2007, p . 21) . these parallels are also present in the state concept of the fidesz–kdnp coalition since it attained power in 2010 . focusing only on the creation of the districts mostly associated with the lower-middle administrative level: although establishing districts (or allocating tasks formerly fulfilled by municipalities, notaries or formerly deconcentrated state administrative organisations to the district offices) may be considered a  clear sign of weberian centralisation, this ignores the fact that this does not only (or primarily) serve to concentrate powers in the hands of the state but also to take into consideration citizens’ needs and wants in carrying out administrative tasks . as far as the hungarian  literature is concerned, it is enough to recall istván balázs’s comment on the establishment of a  system of government offices and districts that establishes a direct link between the state and its citizens (balázs, 2020, pp . 29–30) . this is even more clearly evidenced by the institutionalisation of government customer service points, facilitating a one-stop-shop style of customer service . although the first government customer service points were brought into existence before the district reform (they have been present since 2011), they became the determining elements of the administration reform at the time when the districts were established . more precisely, pursuant to section 1(1) of the no longer effective government decree no .  515/2013  (xii .30 .), ‘capital city and county government offices . . . shall operate an integrated customer service (hereinafter: government customer service point) in the district (capital city district) offices’ . on the other hand, based on section 3(1) of government decree no .  86/2019  (iv .23 .) on capital city and county government offices and district (capital city district) offices, which is currently in force, government customer service points are even more closely linked to the even stronger district (capital city district) offices . the legislation describes government customer service points and document offices ‘operated by the district office’ . even though, at first glance, defining government customer service points as the bodies of the district office would appear to reinforce the dominance of the district within the lower-middle administrative level, it turns out that the neo-weberian postulate of ‘meeting citizens’ needs and wants’ can still override efforts aimed at reinforcing both districts at all costs and centralisation at the same time . this suggests that districts have clearly shifted the focus of local level public administration tasks to the lower-middle administrative level . however, in terms of territorial development and the organisation of local public services, the lower-middle administrative level is better characterised by the void created by the dissolution of multifunctional micro-regional associations . nevertheless, this current void may also imply that these 96 lászló tibor buskó public governance, administration and finances law review • vol.  6. no. 1.  tasks would be better placed at the lower-middle administrative level, and not  –  as is presently the case – at the level of county local self-governments or municipalities . to summarise the above reasoning, a double conclusion can be drawn . on the one hand, it is a  mistake to identify the lower-middle administrative level with one single geographical delimitation . moreover, should a demand for such delimitation appear, be it about the practice of hungarian lower-middle administrative level spatial planning, or in regard to a relevant academic argument, it may be presumed that the underlying cause is a lack of critical analysis of ‘path dependency’ . on the other hand, in line with one of the fundamental postulates of the concept of the neo-weberian state, the viability of aiming to meet citizens’ needs is accepted . if the final decision in such matters lies with the citizens themselves, we must not obstruct an increasing focus on customers in terms of spatial use within the lower-middle administrative level . the short piece of empirical research below aims to give an insight into an even more customer-focused pattern at the lower-middle administrative levels . its starting point is the fact that at the lower-middle administrative level, the objectives of the transformation of the hungarian administration after 2010  have primarily been manifested by the establishment of districts and government customer service points . therefore, based on the publicly accessible data of the hungarian central statistical office and the district-level and town-level data of government customer service points, i will outline a few simple correlations that may indicate a possibly fruitful direction for the development of the middle-lower administration level in hungary . 4. reporting results my empirical research is aimed both at highlighting a  few characteristics of the lowermiddle administrative level since 2010  and suggesting a  possible direction for future development . perhaps the most important feature i would like to point out is that the existence of a  unified lower-middle administrative level is questionable . in the light of the multipurpose micro-regional associations’ reduced influence, this becomes clear . i must add that even after the most important results of the reforms of 2010, the district system appears to be fragmenting further . within the territories of the present 174 districts and the 23 capital city districts, currently 304 government customer service points were in operation on 4 february 2020 . although the distribution is slightly uneven, this yields 1 .54 government customer service points for each district and capital city district, loosening the unified district-system further by creating what are termed ‘government customer service catchment areas’ . however, the expression ‘catchment area’ is placed within quotation marks for a reason . namely that integrated customer services are precisely based on the notion of facilitating the running of official errands for everyone, in any of the customer service offices . of course, an individual’s rational choice is the closest or the most easily accessible office . this rules out the official existence of government customer service’s areas of jurisdiction, yet based on the customary use of territories, a  structure defining the new elements of the lower-middle administrative level could be established . these elements would be smaller than districts, and in a sense, 97 public governance, administration and finances law review • 1. 2021 re-thinking the lower-middle level of administration in hungary… they would represent competition for the former . below, i will argue that such a  fragmentation of district levels is not only an indication of the situation at present, but also, it may be used to establish the future course of development for the lower-middle administrative level . let us start out from a  peculiar contradiction . on the one hand, the legislators obviously created government customer service points to facilitate an easy procedure for private individuals to resolve official matters . on the other hand, apparently, the majority of cases formerly requiring a personal presence will be replaced by using various communication means or e-government technolog y . to support the second notion, in an extreme case, it could reach the point where, in the imminent era of web 3 .0, the existence of districts becomes simply unnecessary, as people will be able to run their official errands (and not only the ones related to administration) online, even from the smallest village . for the time being, however, it is not necessary to go this far: it is enough to presume that with e-government technologies gaining traction, (which is forecasted for the near future), personal presence in the government customer service points may become rarer, which may then lead to a  cutback in the number of government customer service points operated by each district office, or even to a  decrease in the number of the districts themselves . considering this, it can be hypothesised that, within the territory of districts with higher levels of internet coverage, more people are already able to run their official errands electronically than by reporting to the government customer service points in person . furthermore, if this finding is valid, in a  rational area distribution and spatial planning system, districts with more developed internet coverage will need fewer government customer service points than those with lower levels of internet coverage . as is described below, i attempted to find a correlation between the two indicators, but, considering the differences between the characteristics of each region, i conducted the analysis separately for the districts of the seven planning and statistical nuts 2 regions before 1  january 2018, specifically: western transdanubia (győr-moson-sopron, vas and zala counties), middle transdanubia (fejér, komárom and veszprém counties), southern transdanubia (baranya, tolna and somog y counties), middle hungary (budapest and pest county), northern hungary (borsod-abaúj-zemplén, heves and nógrád counties), the northern great plain (hajdú-bihar, jász-nag ykun-szolnok and szabolcs-szatmár-bereg counties), and the southern great plain (bács-kiskun, békés and csongrád counties) . for the sake of completeness, please note that, since 1 january 2018, middle hungary has been divided into two nuts 2 regions, budapest and pest county . however, i have not yet taken this split into account in my analysis as budapest and a  large part of pest county can be considered a  single functional unit of the budapest agglomeration, regardless of the recent changes in the nuts system . based on the above data, the following correlation was found between internet penetration (the percentage of internet subscriptions among the permanent residents of the subject districts, or  –  due to the lack of data on internet penetration in the capital city districts – the capital, budapest) and the availability of government customer service points (the percentage of residents of the municipalities with a  government customer service point within the permanent residents of the subject districts, or budapest), in 2018: 98 lászló tibor buskó public governance, administration and finances law review • vol.  6. no. 1.  table 1 . correlations between internet penetration and the availability of government customer service points in hungarian nuts 2 regions before 1 january 2018, broken down by districts or for budapest as a whole (2018) correlation (r) southern transdanubia 0 .79 western transdanubia 0 .77 middle transdanubia 0 .72 northern great plain 0 .65 southern great plain 0 .60 northern hungary 0 .55 middle hungary 0 .31 source: compiled by the author based on data from the ksh dissemination database .2 this table shows that in hungary, contrary to what might be expected, at this time, the residents of municipalities of districts with better internet penetration also have access to more government customer service points than residents of districts with lower internet penetration, making reporting in person to use government customer services more difficult in the latter districts . more specifically, based on joy guilford’s approach (1942), in the majority of the nuts 2  regions in question, a  high (pearson’s) positive correlation (distinct association) or a  medium positive correlation (significant association) is present between the variables of internet penetration and the availability of government customer service points . the only exception is the middle hungarian region, encompassing budapest capital city and the adjacent agglomeration, where the pearson’s correlation value of 0 .31 suggests a weak, yet stable correlation . in this region, the percentage of internet subscriptions was by far the highest in the country in 2018 (38 .1 per cent) . however, in terms of availability of government customer service points (58 .9  per cent of residents live in the territory of a  municipality where a  government customer service point is available), no  similar dominance is present in the middle hungarian region . moreover, this region is clearly inferior to the southern great plan region in this sense (67 .7  per cent), while the northern great plain region shows a  similar value (58 .9  per cent) . in budapest, a  city with 56 .4  per cent of the population of the middle hungarian region, not only were internet penetration values the highest (for budapest, the percentage of internet penetration is 45 .1  per cent, compared to 40 .7  per cent in the debrecen district, which has the highest internet penetration outside the budapest area) but also the government customer service points were available in every district of the capital, which is even more remarkable . the smaller anomaly is mainly attributable to the fact that, although the population significantly increased in some municipalities of budapest’s agglomeration after the regime change, 2 https://statinfo.ksh.hu/statinfo/themeselector.jsp?&lang=en; town-level data of government customer service points; https://kormanyablak.hu/hu/kormanyablakok https://statinfo.ksh.hu/statinfo/themeselector.jsp?&lang=en https://kormanyablak.hu/hu/kormanyablakok 99 public governance, administration and finances law review • 1. 2021 re-thinking the lower-middle level of administration in hungary… policy makers still concluded that there is no  need to provide local outlets to facilitate the official errands of private individuals in these ‘dormitory towns’ . the underlying assumption was that the majority of residents of these satellite settlements commute to budapest in the first place, and for the rest of the population, traveling to budapest is not very inconvenient, either . the result of this reasoning is perhaps demonstrated best by the example of the dunakeszi district . although this district has 86,992  residents, (its seat of the same name has 43,813 residents, putting it in second place after the town of érd with county rights with 69,014  residents in the agglomeration), it is the only district with no government customer service point at all . by the same token, the unavailability of government customer service points in dunakeszi district or dunakeszi city is most probably caused by other contingencies outside of the scope of this paper, and not by an intentional policy . it is also clear that, except for in the middle hungarian region, internet penetration – and the closely associated general socio-economic development level  –  and the availability of government customer service points are positively correlated . theoretically, this discrepancy could be decreased by opening new government customer service points . the unlimited possibilities of such efforts are demonstrated by the example of őriszentpéter, the village in hungary with the smallest number of residents (1,166) which has a  government customer service point, operating an integrated customer service despite the fact that it is not even a  district seat . however, opening such a  large number of government customer service points would not be feasible, as the maintenance of the present system already imposes a heavy burden on the state . to illustrate this, and most probably due to the permanent lack of personnel and the low pay for civil servants, the government customer service office in that village, which was formerly open between 08:00 am and 08:00  pm every working day, (fibinger et al ., 2017, p . 5), now operates full-time on wednesdays only, significantly restricting the opportunities for in person business . 5. conclusion and further implications as i mentioned above, the local self-government act 1990 implemented a quite fragmented local self-government structure, although the multipurpose micro-regional associations institutionalised by act cvii of 2004 were able to create good opportunities for expanding local level synergies . unfortunately, in the early 2010s, these formations were marginalised as a  result of centralisation efforts . furthermore, the system of multipurpose micro-regional associations had a  significant and inherent defect since, due to the nature of associations, the former collaborations were not always able to provide a stable framework for administration, since instead of being organised from bottom up, the multipurpose micro-regional associations were defined and limited from above, and kept together by indirect instructions from above, as opposed to by a mutual recognition and management of interests . as a  result, after their statutory grants were cut in 2013, these organisations fell apart perhaps too easily, and, considering the increasingly limited possibilities of the local level, without justification . the author of this paper is of the opinion that the near future should bring a process of simplification 100 lászló tibor buskó public governance, administration and finances law review • vol.  6. no. 1.  based on the mutual recognition of interests, similarly to that which took place after the regime change: individual local self-governments which are weak by themselves should work together again, supported by the pillars of the lower-middle level described above . the theoretical underpinnings of the study pointed out that it would be a mistake to identify the lower-middle level with one single geographical delimitation, such as the current district system, and that research on the ideal size and desirable functions of lower-middle level administrative units should focus on the needs of users, in line with one of the most fundamental postulates of the concept of the neo-weberian state . the subsequent empirical research suggested that problems arising at the local level of public administration cannot be adequately solved by the current district system or by government customer service points alone . the transition to the web 3 .0 era will be long and ponderous in hungarian regions at lower levels of socio-economic development, and government customer service points are already short of personnel to fulfil their intended function (to facilitate the in person handling of official tasks after work) . the currently prevailing approach, that is, the network of mobile district assistants (kelő, 2019), or the mobile government customer service points which appear from time to time in smaller villages, burden the system further, and do not represent a  permanent solution, with the gradual transition to the use of the technologies offered by the web 3 .0 era . a system of information hubs operated or supported by local self-governments in the centres of micro-regions, for example, developed on the basis of the current digital welfare programme hubs (digitális jólét program pontok), where people could receive help with solving their official issues electronically would potentially solve this problem . this would encourage citizens to familiarise themselves with and embrace the technologies offered by the web 3 .0  era, and  –  to a  limited extent, so far  –  it would channel people away from district level offices, allowing them to deal with more important cases requiring personal presence . in the longer term, this could even result in a decrease in the number of districts compared to today, possibly down to the number of 80–90 mentioned by bibó and which recurs in the professional discourse . moving on to the further implications beyond the tasks of public administration, the role of local self-governments is also crucial in terms of the territorial development tasks associated with the lower-middle administrative level . although the current legislation requires all municipalities to follow an independent town development policy (for example to draft the strategic document of the town development concept independently), this does not imply neglecting territorial development tasks which go beyond local level . government decree no . 314/2012 (xi .8 .) on city development concepts, integrated city development strategies and urban planning means, and individual specific legal institutions associated with urban planning, for example, clearly stipulates that urban development concepts for cities with city rights shall contain a vision of the role the city will play in the region, which makes joint review and planning of territorial development problems affecting the city and its catchment area alike unavoidable . it is also worth saying a  few words about the problems of the organisation of local public services. in this respect, it is obvious that collaboration at the lower-middle administrative level is essential, as section 11(2) of act clxxxix of 2011  on 101 public governance, administration and finances law review • 1. 2021 re-thinking the lower-middle level of administration in hungary… hungary’s local self-governments detailing unnecessary yet required tasks clearly sets out that ‘the statute shall differentiate when establishing the mandatory tasks and scope of authorities’ . thus, the joint maintenance of the associates’ tasks and different institutes (for example, in an association under the auspices of a gestor municipality) is still a  working practice today . the re-establishment of bottom-up associations at the lowermiddle administrative level  –  under the old name of multipurpose micro-regional association or with a  new, different name  –  could facilitate the more rational and clear operation of these associations . they could also partly relieve the burden on the ‘ideal district’, which is mentioned in the hungarian public administration and public service development strateg y, as a typical level of the organisation of public services in the long term (közigazgatásés közszolgáltatásfejlesztési stratégia, 2014–2020, p . 51) . finally, allow me to make a few closing remarks . on the one hand, i have discussed the possible question of considering the geographical scale of the associations operating below district level, primarily by supplementing and relieving them, instead of competing with them . hungary’s cities with city rights, as micro-region centres, could provide an adequate starting point in this regard . however, it has to be understood that, to achieve the re-institutionalisation of these lower-middle level administrative units, willingness is necessary on the part of the state . due to the decrease in the number of districts forecasted for the web 3 .0  era, the creation of such associations may potentially be in the interest of building a neo-weberian state aiming to meet citizens’ needs and wants (and ultimately, downsizing administration to a smaller, more human scale) . references balázs, i . (2020) . a közigazgatás változásairól mag yarországon és európában a rendszerváltástól napjainkig . de ájk . beluszky, p . & győri, r . 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(1982) . versengés a fejlesztési forrásokért . közgazdasági és jogi könyvkiadó . https://ec.europa.eu/eurostat/web/nuts/local-administrative-units https://ec.europa.eu/eurostat/web/nuts/local-administrative-units https://doi.org/10.17649/tet.5.1.194 https://epiteszforum.hu/varosok-magyarorszagon-es-europaban#a14 https://epiteszforum.hu/varosok-magyarorszagon-es-europaban#a14 https://doi.org/10.1057/9780230625365_2 © 2021 the author public governance, administration and finances law review vol.  6. no. 1. (2021) • 103–116 . doi: 10 .53116/pgaflr .2021 .1 .9 outline of the evolution of the hungarian monetary policy from the restoration of the two-level banking system to the present day csaba lentner* ¤ * professor, university of public service, department of governance and public policy, e-mail: lentner .csaba@uni-nke .hu abstract: this study outlines the development of hungary’s monetary policy, and the course and changes in its objectives and instruments since the beginning of the market economy transition in the late 1980s . the author’s basic thesis is that the period since the two-level banking system was reinstated after four decades of a planned economy system, in 1987, can be basically divided into three development phases with significantly different characteristics . the first phase was an ‘attempt to introduce’ an imported monetary mechanism, or perhaps an urge to comply with it, while the second phase was an approach of a  monetary regime change launched in 2013  and supporting economic growth and financial stability strongly and directly, which lasted until the appearance of the traumatic elements of the covid-19  pandemic crisis . the third phase is evolving today, under the circumstances of adapting to the conditions of the real essence of the twenty-first century, i .e . a  new type of international competitiveness, which is pursued by the central bank of hungary as stipulated by the fundamental law and the cardinal central bank act of hungary . keywords: regime change, monetary policy, pressure for competitiveness 1. introduction – the general nature of central banking policies in continental europe, until the crisis of 2007–2008, it was generally believed that monetary policy was an activity of fiscal policy, in the course of which the monetary government influenced interest terms and thereby also impacted macro-economic demand .1 in practice this means and entails that the most important instrument for the implementation of the monetary policy for most central banks was the determination of the levels of applicable interest rates . increasing the applicable interest rate and consequently reducing the money supply are known as restrictive monetary policy . a  restrictive policy temporarily holds back economic growth, but it also helps to curb 1 the study seeks to follow a. p. samuelson & d. w. nordhaus’s classification (2005, pp. 479–489), although deviance from that is justified by time and changed practice and circumstances. https://doi.org/10.53116/pgaflr.2021.1.9 https://orcid.org/0000-0003-2241-782x mailto:lentner.csaba@uni-nke.hu 104 csaba lentner public governance, administration and finances law review • vol.  6. no. 1.  inflation . implementing measures aimed at expanding the money supply by lowering the applicable interest rate is referred to as an expansionary monetary policy . this temporarily stimulates the economy, although it may adversely affect inflation . after these decades of applying this approach (that is, the monetarist solution), usually considered as an axiom during boom phases, was overridden by the crisis which arose in anglo-saxon subprime markets, and, although the determination of the base rate enjoyed primacy in the federal reserve’s target system and the set of instruments aligned with it (and at the same time, in the entire anglo-saxon central banking practice), its outcome dimension is measured by the extent to which it alleviates unemployment and improves the employment rate, while making the inflation index ‘bearable’ is only its umpteenth objective . in the boom phases of developed countries central banks play a  prominent role in controlling the money supply, within the framework of which so-called quantitative reference values are applied . these quantitative reference values are determined by midterm price stability, the interest rates of long-term loans, government deficit, the level of government debt (essentially, the maastricht nominal convergence criteria) as well as changes in the money supply, the velocity of money and the strength of the exchange rate (for more detail, see huszti, 2006) . this one-dimensional monetary model, based on controlling the money supply and with a  correspondingly loose approach to banking regulation ended in worldwide failure . economic growth and financial stability ‘built’ on price stability had faltered by 2007–2008 .2 that is, central banks were mostly (in hungary, to a  lesser degree) successful at achieving price stability, but in the meantime, risks undermining financial stability had emerged . perhaps the collapse of anglo-saxon subprime markets could have been avoided if in practice unreasonable and barely controlled lending for building residential properties, real estate investments and other ludicrous trade transactions in order to boost the economy increasingly vigorously and high leverage ratios had not saturated the market relatively rapidly, which resulted in a significant rise in the ratio of non-performing and doubtful loans . ultimately, the financial actors of the decades preceding the crisis had followed (unfortunately) without criticism alan greenspan’s former basic concept, that ‘the market-stabilizing private regulatory forces should gradually displace many cumbersome, increasingly ineffective government structures’ .3 greenspan’s theoretical guidance was widely put into practice not only in the united states but, with the globalisation of financial market operations, all over the world .4 in the late twentieth century, the traditional banking system was globalised also in its branches of business, i .e . it became a  banking system with a  homogeneous practice (mostly with a  concentrated, international ownership background) prevailing internationally, with various financial activities (insurance, leasing, factoring, capital market 2 essentially, i am using olivier blanchard’s approach (2012), with ‘an added value’, noting that in emerging markets placing the burden of the exclusivity of price stability on their central banks’ consequences were even more severe. 3 adopted from the financial crisis inquiry report, 2011. 4 for the description of the excessive lending practice of american monetary markets see lentner (2012) and kecskés (2015). for the meltdown of the hungarian loan market stifled by foreign currency loans see kovács (2013) and lentner (2015). 105 public governance, administration and finances law review • 1. 2021 outline of the evolution of the hungarian monetary policy… businesses) included in one single ‘plant’, which the supervisory and controlling practice was unable to keep pace with . the washington consensus, the ‘dismantling’ of the glass steagal, the maastricht and copenhagen criteria and the market practice which formed in line with the european union’s four freedoms all ultimately created a neoliberal market economy model, in which the innovation of banking products was not followed by the development of supervisory and control activities .5 according to the approach which prevailed for decades, the bank (the plant), as a  market operator, enforcing the laws of supply and demand  –  based on greenspan’s logic  –  is able to make responsible decisions, particularly when granting loans . in fact, neither self-restraint, a  prudent decision-making mechanism nor effective regulation and supervision were exercised . the collapse of the system by 2007–2008  forced not only the reconsideration of regulation and supervision in a  strict sense, but also placed the further operation of the neoliberal system of the market economy under stricter state regulation .6 2. the fundamental problem of the monetary practice of the transitioning hungarian economy (1987–2013) from the late 1980s onwards, three reforms: the companies act (act no .  vi of 1988) promoting the market economy transition, the act guaranteeing investments by foreigners and the decision allowing for the establishment of a two-tier banking system steered hungary towards a  market economy . the transformation of the economic model was accelerated by the excessive indebtedness of the country, the almost complete dysfunctionality of public assets, narrowing foreign export markets, a  sharp decline in the demand of domestic market outlets, and, in particular, an increasingly marked demand for western products of higher quality . clearly, reactivating an economy requires high volumes of working capital and financial capital imports capable of further financing an exceptionally high government debt . there was neither the intellectual capacity nor the patience to fix the economy by means of internal resources . all that existed was a vague political promise to create a social market economy made in right-wing political circles which were organising and preparing themselves for a  regime change from the late 1980s . it should also be noted that this was the period when the social market economy model existed only in fragments in western europe and was being replaced by a neoliberal mode of production applying the principle of freedom of multinational companies and an economy without any limitations . the transformation of the hungarian economic regime, including the introduction of a  two-tier banking system, and in particular, the development of the central bank’s roles, took place in accordance with the expectations of this lopsided, but increasingly neoliberal world . commercial banks, ‘seceding’ from the central bank of hungary 5 the american practice basically ‘bypassed’ the attention of the supervisory authority and lost its transparency as securitisation processes became common and vigilance against risks was artificially relaxed. see kecskés (2017). 6 its main components include: the dodd-frank act, stricter regulation of and control over credit rating agencies, enhancing microand macroprudential supervision by central banks and other authorities. 106 csaba lentner public governance, administration and finances law review • vol.  6. no. 1.  (mag yar nemzeti bank, mnb), as well as brand new, domestically established banks, struggled with capitalisation and management problems from the very start . their operations were overwhelmed by a  situation where they simultaneously had to manage the increasingly doubtful loans of inefficient state-owned companies and the resource requirements of a  new entrepreneurial class lacking capital and business knowledge . in addition to forced credit exposures, the situation of state subsidies provided by the central budget was also characterised by similar duress . private start-up companies were granted loans not according to efficiency criteria but only to a  degree necessary for keeping them operable, but due to ‘confusion’ and the lack of coordination of comprehensive financial (taxing, aiding, market, central banking ) instruments, both credit and state aid was used with low efficiency . in the early 1990s, government deficit much more depended on how roles in financing companies were divided between the budget and the credit system rather than how much additional demand was created by the state . . . companies, including their subsidies, were financed from continuously rolling loans . in other words, the credit system assumed quite a significant part of public (fiscal) functions, therefore also a significant part of the demand created by the state was realised in the form of companies’ credit expansion, that is, bypassing the budget (antal, 2004, p . 75) . the (initially) increasing value and efficiency of the banking sector can be accounted for by the fact that from 1987  to 1990  sectoral profit increased by 223 .7  per cent (nyers, 1991) . the impact of the unfolding transformational crisis, however, could also be felt in the banking sector, as the downturn of the real sector also negatively affected the performance of the banks, resulting in a series of bank consolidations . supervision over the operations of commercial banks is exercised by the central bank, which influences financial institutions through its regulatory activities . from the early 1990s, however, the mnb began to continuously remove its refinancing instruments, gradually phasing out refinancing loans with lower interest rates and longer terms in the undercapitalised corporate sector, so that by the mid-1990s start-up companies and farmers found themselves in a hopeless situation due to the gradually reduced state subsidies and simultaneous phasing out of protective duties in what had become an increasingly fiercely competitive market . they were ‘dragging down’ the commercial banks, which were stumbling from one consolidation to the other . the same kind of process of dismantlement took place in the field of the refinancing of government debt by the mnb (kolozsi & lentner, 2006), i .e . the mnb also let the fiscal sector down, and due to the government’s failed taxation and state aid policies, additionally financing a  continuously increasing government deficit and debt required the involvement of foreign investors, which, due to risk premiums being set higher than the market rate, caused a  massive outflow of revenues from the country and even entailed vulnerability to international markets . the central banking practice applied in developed market economies was also adopted in the central banking policy of hungary after the regime change, which had destructive effects on both the national economy and society and which caused severe 107 public governance, administration and finances law review • 1. 2021 outline of the evolution of the hungarian monetary policy… problems in financing both hungarian enterprises and government debt, and even the loss of resources and income . the second wave of adopting western banking practice without criticism dates to the period after the turn of the millennium, when the corporate clientele – as a result of the above processes –had a decreasing demand for loans and were being financed by parent companies and capital market instruments, which encouraged the banking sector to shift towards the retail market, especially demographic groups with low credit ratings even by hungarian standards, which over time led to a culture of excessive lending . despite this trend, no substantial measures were taken by the mnb to curb retail credit outflows without adequate collateral, and this would be one of the main contributors to the crisis which unfolded at the end of the 2000s . the function of the banking system is to build market conditions and, in the period following its consolidation, this is expected to strengthen the market economy, which serves the national economy as a whole through financing real market operators, therefore reducing government deficit and debt . instead, as a  result of its excessive lending operation in the 2000s, the banking system in hungary inflicted further budgetary and social damage, which had to be repaired by further fiscal and central banking sacrifices since 2010, now within an active state-governed framework . ‘the function of the central bank is, by influencing the changes in the value of the currency, to achieve such a state of employment and the international payment position that is considered desirable, and through this, to promote economic growth accepted as optimal’ (hagelmayer, 1969, p . 165) . of these functions, the mnb’s attempts to increase employment and growth were pushed into the background in the first decades of the market economy . ernő huszti (1987), argued that the mnb’s room for manoeuvre depends on the share of the growth of the annual credit volume which is accounted for by the amount of loans granted to the budget . the mnb can influence the expansion of solvent demand, also manifested in the growth of the aggregate money supply, only to this extent . the mnb, however, provided an opportunity for this expansion of commercial loans by playing a  smaller and smaller role in financing the budget, as less and less resources were allocated to it . huszti believed that the mnb has primacy in shaping commercial banks’ lending and controlling solvent demand . since the capacity to refinance the real sector dropped in the activities of the mnb after the first third of the 1990s, and its role in refinancing the budget had also finished by 2000, the contingent assets of the mnb could be focussed to a significant degree on the aggregate money supply and the regulation of commercial banks’ lending, thereby aiming at boosting macroeconomic progress . in the 1990s, hungary was not yet a member state of the european union, but it implemented its central banking regulatory guidelines rapidly and without adequate consideration . the main objective of the regulation adopted within the eu on 1 january 1994 was to make the public sector subject to the same conditions pertaining to indebtedness as applied in the private sector . in order to enhance the market sensitivity of the public sector, central banks were prohibited from purchasing government securities directly at the time of their issue, but they could purchase securities on the secondary market without limitations, as securities purchased there had already been ‘priced’ by the market . the aim of this regulation was to give fiscal policy a better perception of the 108 csaba lentner public governance, administration and finances law review • vol.  6. no. 1.  price of deficit, but if the structure of the budget is poor, this perception and its expected positive effect are hardly significant, because the generation of deficit is permanent, despite its heightened interest rate sensitivity . furthermore, the expectations of the eu and international financial institutions (such as the international monetary fund and the world bank) to reduce the level of aid provided to the real economy and indirectly to reduce social policy aid, and the swift compliance with these requirements by hungary  –  without an adequate transition  –  also caused internal problems, since domestic, less creditworthy start-up enterprises would have had an enormous demand for the mnb’s refinancing loans . as the management of the economy produced temporary potential for growth despite the boom following the world economic shock in 1997–1998, the results achieved by the hungarian economy between 1999  and 2002, and then a  loose fiscal policy after 2002 put the commercial banking sector onto a dynamic, credit-expanding path . despite the improvements in some of the macroeconomic figures in the real sector, the standard of living and real wages in hungary fell short of the expectations of the population . however, excessive lending, which was common internationally, and the ‘globalisation’ of this trend spreading into hungary (lentner, 2015), led to hungarian banks issuing spectacular credit quotas after the turn of the millennium, while the hungarian retail and local government sectors created an inexhaustible demand for this credit supply . the mnb, designed to regulate the loan market, exhibited a  laissez-fair attitude (matolcsy et al ., 2015; bethlendi et al ., 2015), while the government was unable to provide solvent demand at a  satisfactory and expected level (in terms of wages and social benefits), which resulted in a  peculiar ‘compensation’ or ‘supplementation’ (of loans) being provided by the banks . lending, however, lagged behind the creditworthiness of borrowers, which later, after the outbreak of the global economic crisis, caused problems in society and for the national economy, which later triggered a  series of consolidation measures by the central bank . although both external empirical experiences of a  new type of crisis management (for example, galema & lugo, 2017), in particular in the field of central banking and internal theoretical approaches (for example, neményi, 2009; neményi, 2011) were directly available after the outbreak of the crisis, substantial crisis management measures were implemented only after the change of government in 2010, particularly after the change of the central banking regime in 2013 . when the economic and monetary union was established, it was generally considered that, with the introduction of the euro, the elimination of the exchange rates of national currencies, and the enforcement of strict regulations on the operation of the emu, including the control of the central budget balances of member states, member states would be free of financial imbalances or crises (losoncz, 2010) . the maastricht convergence criteria, which are applicable to the candidate countries of the eu and to euro zone aspirants, who are required to meet them, presumed a  quasi crisis-free situation . however, due to the weakness of fiscal positions, the banking crisis which arose in 2007–2008  soon caused a  fiscal shock and a  government debt crisis across europe, particularly in hungary and other significantly indebted countries, the banking systems of which had been weakened more severely than average . 109 public governance, administration and finances law review • 1. 2021 outline of the evolution of the hungarian monetary policy… the ability of fiscal policy to generate solvent demand sufficient for social and corporate needs fell short of expectations, and the banking system sought to fill this gap by making loans but ignoring classic lending regulations . after the banking crises, however, commercial banks –partly to meet their needs for state consolidation – adopted more ‘low-key’ business policies, in which the acceptance of tightening regulations and corporate social responsibility prevailed in a  more comprehensive and robust way . the mandate-objective system of central banks, which has assumed a  key role in crisis management since 2008, also underwent certain changes, by which the value system of central banks’ social responsibility was also modified, as it became more carefully adapted to the macroeconomic dimension and the social context . however, the central bank of hungary started to align with this only in 2013  (lentner, 2013; zéman et al ., 2018) . 3. the central banking regime change after 2013 the framework of monetary policy substantially changed as a  result of the crisis of 2007–2008 .  according to blanchard (2012), the separation between monetary and prudential competencies became less rigid within the new monetary policy framework and, in addition to price stability, financial stability also became a  priority for central banks, while some unconventional elements were added to the central banking toolkit, as a  result of which central banks started to play a  greater role in crisis management . during crisis management, most developed central banks soon achieved an interest rate level of zero and in many cases interest rates sank into the negative range . however, the reduction of interest rates did not prove to be a sufficient remedy, so the central banks of developed countries increasingly put emphasis on quantitative easing . the central banks of the united states, the euro area, japan, the united kingdom and sweden launched securities purchase programmes, in particular programmes to purchase government bonds (abidi & ixart 2018; macchiarelli et al ., 2017; arrata & nguyen, 2017; funashima, 2018; ramcharan & yu, 2016) . emerging economies took a different path and near-zero interest rate levels were far less characteristic of them . in this group of countries, eastern and central european countries were able to achieve a  relatively low interest rate level, while the interest rate levels of emerging asian and south american central banks were farther from zero . higher risk premiums, resulting from the greater external vulnerability of these economies and their inflation rates, which are higher than those of developed economies, as well as their more dynamic growth, largely account for these differences . the distinct and independent monetary policy of the mnb presents an opportunity to create a  constructive harmony between fiscal and the central banking policy . nevertheless, the operation of the central bank and the programmes it implements are determined under the central bank act, section 3(1) of which includes the following provision: the primary objective of the mnb shall be to achieve and maintain price stability . section 3(2) states that, without prejudice to its primary objective, the mnb shall support the maintenance of the stability of the system of financial intermediation, 110 csaba lentner public governance, administration and finances law review • vol.  6. no. 1.  the enhancement of its resilience and its sustainable contribution to economic growth; furthermore, the mnb shall support the government’s economic policy, using the instruments at its disposal . between 2012 and 2019, the mnb, taking its statutory powers and assigned tasks into account, reduced the base rate from 7  per cent to 0 .9  per cent and kept it at that level . this decline in yields significantly reduced the government’s interest expenditure, saving 4 .5  per cent of the gdp (1,600  billion forint) between 2013  and 2018 .  the funding for growth scheme, announced in the spring of 2013  as one of the mnb’s credit incentives, offered banks a  refinancing loan at a  0  per cent interest rate, which would enable them to lend to small and medium-sized enterprises (smes) at an interest rate margin capped at 2 .5  per cent (kolozsi et al ., 2017) . in 2015, the funding for growth scheme was replaced by the growth supporting programme, which aimed at transitioning corporate lending to market conditions . the mnb introduced the selffinancing programme in the middle of 2014 to reduce external vulnerability (exposure to foreign currency risk) . in this programme, the mnb encouraged banks to keep their liquid assets in other liquid assets, particularly in forint-denominated government securities, instead of in deposits at the mnb . the accommodation of banks to the measures of the mnb was manifested in the increase of the purchase of government securities by banks, which considerably contributed to the improvement of the structure of financing government debt (through the increase of the banks’ holdings of government securities and the decrease of foreign currency debt) . when household loans denominated in foreign currencies were being phased out, the mnb took a pro-active role in the negotiations between the government and the hungarian banking association, and after that, it substantially contributed to the conversion of foreign currency-denominated household loans into hungarian forint-denominated ones by providing the required foreign currency liquidity (9  billion euro) for the banking sector . by the end of 2015, the balance of hungarian households had practically no foreign currency-denominated loans, and this risk was eliminated once and for all from the hungarian economy (for more details, see matolcsy & palotai, 2018) . in hungary, the corporate credit portfolio shrank by 4–5  per cent annually between 2009  and 2013 .  the sustainability risks of hungarian processes are well illustrated by the fact that while in other countries hit by a major financial crisis the decline in lending usually stopped by the fifth year following the crisis, hungary’s loan portfolio was still decreasing in 2013 .  the resolution of the lending anomaly became one of the priority objectives of the hungarian economic policy . above all, the general reduction of interest rates aimed to halt the decline in lending . the sharply falling trend of the corporate credit portfolio was broken after 2013  and a  credit freeze became avoidable . the sme credit portfolio, which had been decreasing for years prior to 2013, has seen continuous growth since 2015 .  in 2017, the growth dynamics of the corporate credit portfolio reached 10  per cent, and taking private entrepreneurs also in consideration, the credit portfolio of the sme sector expanded by 12  per cent . by q2  of 2018, the annual growth dynamics reached 15  per cent . in line with the mnb’s forecasts, the increase of sme lending has stabilised in between 5 and 10 per cent, which is within the range considered necessary for sustainable economic growth by the mnb . 111 public governance, administration and finances law review • 1. 2021 outline of the evolution of the hungarian monetary policy… –10 –8 –6 –4 –2 0 2 4 6 8 10 12 14 16 18 20 –10 –8 –6 –4 –2 0 2 4 6 8 10 12 14 16 18 20 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 20 19 percentpercent growth rate of sme lending estimated growth rate of sme lending without fgs (protracted decline) estimated growth rate of sme lending without fgs (later turnaround) fgs mls figure 1 . annual changes in sme lending source: from the charts of the central bank of hungary, 2019 . the financial crisis which broke in 2008  and soon expanded globally, hit hungary in a  fragile and vulnerable state . one of the main reasons for this was that, in an international context, the amount of external and foreign currency-denominated debt of the hungarian national economy was outstanding . a  large proportion of this high external and foreign-currency denominated debt was related to public finances, as the state relied heavily on foreign investors and international organisation which were financing hungary in 2008, particularly the international monetary fund . after the change of direction in the monetary policy in 2013, the mnb considered the reduction of external vulnerability to be a strategic goal . the gross external debt of public finances started to moderate in 2014  and to decrease markedly during 2015 .  from 2014–2016, the gross external debt of the state dropped from 50 per cent of the gdp to 40 per cent . the foreign currency ratio of the gross debt of the central budget decreased from 42 per cent in march 2015 to less than 30 per cent in march, 2016, and to 27 .1 per cent in june, reaching pre-crisis levels, and was subsequently further reduced . 112 csaba lentner public governance, administration and finances law review • vol.  6. no. 1.  55 50 45 40 35 30 25 20 15 55 50 45 40 35 30 25 20 15 20 03 q 4 20 04 q 2 20 04 q 4 20 05 q 2 20 05 q 4 20 06 q 2 20 06 q 4 20 07 q 2 20 07 q 4 20 08 q 2 20 08 q 4 20 09 q 2 20 09 q 4 20 10 q 2 20 10 q 4 20 11 q 2 20 11 q 4 20 12 q 2 20 12 q 4 20 13 q 2 20 13 q 4 20 14 q 2 20 14 q 4 20 15 q 2 20 15 q 4 20 16 q 2 20 16 q 4 20 17 q 2 20 17 q 4 20 18 q 2 20 18 o ct . per cent per cent foreigners buy forint debt domestic buyers buy forint debt announcement of the seft-financing programme foreign currency ratio of the debt figure 2 . development of foreign currency ratio of the gross debt of the central budget source: from the charts of the central bank of hungary, 2019 . 4. conclusions and consequences – at the beginning of a new central banking path the policy followed by the central bank between 2013  and 2020  can be accounted for by the fact that the pursuit of a set of macroeconomic objectives (moderating inflation, promoting growth and achieving financial equilibrium) and goals for society (improving public welfare and the situation of disadvantaged groups of the population, such as foreign currency borrowers) and the instruments adopted to achieve them have contributed to the improvements in the positions of the national economy and society to a very large extent . a  different set of objectives and instruments (as in the decades prior to 2013), i .e . focussing exclusively on inflation (but handling even that poorly) had a clearly destructive effect . put another way, monetary policy elements or even systems which are not in line with the economic characteristics of the country and which are mostly imported are neither appropriate nor effective . international experience shows that excessive intervention to improve the processes of the national economy adversely affects the direction of monetary development when central banks may almost convince themselves that the reasonable operations of commercial banks can reasonably be sacrificed on the altar of firm demand management (huszti, 1996, p . 53) . this theorem may be true for the refinancing activity of central banks . after the crisis of 2007–2008, central banks also played a role in the recovery of the economies . this is particularly true of the hungarian central banking practice after 2013 .  if a  central bank, however, also adopts an almost passive fiscal policy in 113 public governance, administration and finances law review • 1. 2021 outline of the evolution of the hungarian monetary policy… reorganising the economy and then steering it towards the path of competitiveness (and exerts a substitution effect instead of an auxiliary one), serious problems could occur . hungary’s fiscal policy was successful between 2010  and 2013 .  income tax decreased by 20–21  per cent, corporate tax was basically halved, the aspects of sharing public burdens also prevailed more strongly; therefore, hungary was characterised by simultaneous financial stability and economic growth until the pandemic crisis of 2020 .  after 2013, however, the reduction of income type taxes came to a  halt, and the primary objectives of the ministry of finance did not include exerting economic control to pursue an intensive growth path and the improvement of the economies of scale of the sme sector, but instead the maintenance of the financial equilibrium attained earlier, while the mnb pursued a  refinancing policy which also endured during the spring and autumn waves of the pandemic . ultimately, it can be concluded that the hyperactivity of the central bank has become a  kind of counterbalance to a  slowdown in fiscal practice . the unimplemented fiscal and sme sector reforms are being seen in a lower added value of products manufactured and services provided in hungary, especially by the corporate sector, which has failed to achieve economies of scale in the past three decades and, in particular, in the dynamic economic context of the decade preceding the pandemic crisis . seventy per cent of the employees of the market sector are in the sme sector, which has a  40–45  per cent share of the gdp, but receives only 30  per cent of the investments in the national economy . this on its own suggests a deficit of efficiency, in particular in domestically owned enterprises, only a  small number of which are capable of producing an exportable commodity base and which cannot even implement a  rise in the statutory minimum wage without support from the state . of some 756 thousand employers, 710 thousand have fewer than 10 employees . in hungary, the productivity of micro-enterprises is 20  per cent, that of small enterprises is 35  per cent and of medium-sized enterprises is about 40 per cent that of the large (mostly multinational) company sector . this is by far the worst worldwide, even in comparison with neighbouring countries . evidently, corporate structures and sizes have not developed which would enable more efficient production . meanwhile, significant investment resources are being received and expected from the reconstruction fund; furthermore, hungary is also awaiting considerable investment loans from china and russia .7 the problems are compounded by a  budget deficit planned by the ministry of finance at a level well above that stipulated by the maastricht fiscal criterion of 3 percent, which produces significant further solvent excess demand in the economy, which may entail rampant inflation . preserving the stability of the value of incomes earned by companies and the population has become a  primary task in hungary, and the responsibility for moderating inflation specifically belongs to the mnb . consequently, the mnb has been forced to moderate the refinancing role it assumed in the previous decade and in 7 the annual normative support from the eu amounts to 2.7 per cent of the gdp (huf1,500 billion), huf3,390 billion is expected from the reconstruction fund, the planned chinese and russian loans give a total of huf4,000 billion, and beyond that, the ministry of finance calculates a deficit of 5.9 per cent for 2021 after the downturn and the deficit of 5.1 per cent in 2020. to illustrate the overheating economy and the multiplier effect of investments, cf. hungary’s annual gdp is approximately huf50,000 billion. 114 csaba lentner public governance, administration and finances law review • vol.  6. no. 1.  the first year of the pandemic crisis since the refinancing resources of the mnb, resulting in newer investments, would further increase inflation in the economy, and – it should be added  –  most of these investments would be directed at a  still uncompetitive sme sector which has become reliant on subsidies . a new situation has also arisen in the world at large; therefore, a  central banking policy returning to an emphasis on the control of inflation again is not unique . more sophisticated cooperation between fiscal and monetary policies has become more important, which orients central banks that had earlier excelled at refinancing towards holding back macroeconomic and social stimuli .8 meanwhile, after earlier fiscal and monetary turnarounds, the mnb is turning even more towards the development of a knowledgeand capital-intensive economy,9 since hungary, despite the fact that it has achieved the most successful ten years of the past one hundred years in the past decade, has had relatively poor results in the catching-up competition among the new states of the european union (see table 1) . table 1 . per capita gdp measured at purchasing power parity as a percentage of the eu28 name of country 2010 2019 extent of improvement (catching-up) estonia 65 .3 83 .3 18% latvia 52 .9 68 .6 15 .7% lithuania 60 .3 83 .0 22 .7% hungary 65 .1 72 .7 7 .6% poland 62 .4 72 .4 10% romania 50 .9 69 .2 18 .3% slovakia 69 .7 75 5 .3% source: eurostat . mnb –  2020 (euro data as a percentage of the gdp) . the circumstances which have evolved by the end of 2021  justify an adjustment to the path of the mnb in its fiscal policy, with less emphasis on an intensive growth path, the first signs of which have been manifested in the increase of the base rate, and, as a result, the improvement of the exchange rate, the moderation of the inflationary spiral, and a  stronger 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(2018) . evolution of post-crisis bank regulations and controlling tools: a systematic review from a historical aspect . banks and bank systems, 13(2), 30–40 . online: https:// doi .org/10 .21511/bbs .13(2) .2018 .11 https://doi.org/10.2861/245620 https://doi.org/10.2861/245620 https://doi.org/10.25201/fer.17.2.542 https://doi.org/10.25201/fer.17.2.542 https://doi.org/10.24307/psz.2020.1202 https://doi.org/10.21511/bbs.13(2).2018.11 https://doi.org/10.21511/bbs.13(2).2018.11 © 2021 the author public governance, administration and finances law review vol.  6. no. 1. (2021) • 51–63 . doi: 10 .53116/pgaflr .2021 .1 .5 a covid competition dilemma: legal and ethical challenges regarding the covid-19 vaccine policies during and after the crisis mina hosseini* ¤ * assistant professor, university of science and culture, tehran, iran, e-mail: mina .hosseini@usc .ac .ir abstract: the covid-19 pandemic has impacted multiple facets of our lives and created a number of legal and ethical dilemmas . one of the greatest challenges at present is the production and distribution of the covid-19  vaccine . refusing to supply covid vaccines widely could affect  millions worldwide, and the pandemic may last for a  long time . the competition authorities’ monitoring of the health sector in many countries has been subject to changes in the current crisis . the question is whether we can force the covid-19 vaccine manufacturers, legally and ethically, to sell their products and share their information  with their competitors . furthermore, what are the post-pandemic consequences of policies adopted during the pandemic? this paper employs a  descriptive-analytical method to examine the importance of competition and intellectual property policies as they relate to covid-19 .  it concludes that instead of focusing on individual rights in a crisis, public rights need to be emphasised . however, we should not underestimate the post-pandemic consequences of policies adopted during the covid-19 pandemic . keywords: covid-19, competition law, vaccine policy, ethics, intellectual property 1. introduction the pharmaceutical industry is of vital importance due to its direct relationship with individuals and public health . competition rules, intellectual property rights, price mechanisms, consumer protection and patient’s health, are all factors which intersect in the pharmaceutical market . some practices in the healthcare industry, such as anti-competitive agreements and firms’ abuse of their dominant position, can increase prices, lead to a shortage of drugs, infringe consumer rights, endanger the health of consumers and put public health at risk (cseres, 2005, pp . 207–210) . in the pharmaceutical market, implementing competition rules aims to increase access to affordable drugs while also encouraging innovation . regulating the pharmaceutical sector heavily depends on intellectual property rights and innovations originating from research and development . https://doi.org/10.53116/pgaflr.2021.1.5 https://orcid.org/0000-0002-0202-3156 mailto:mina.hosseini%40usc.ac.ir?subject= 52 mina hosseini public governance, administration and finances law review • vol.  6. no. 1.  as  such, controlling the market and interfering with policies must be conducted with great caution . the vaccine market has proven to be one of the most profitable markets in the pharmaceutical industry, with an upward trend (pitruzzella & arnaudo, 2017, p . 350) . after the start of the covid-19  pandemic, research and development budgets have significantly expanded globally to tackle the virus and prevent it by using vaccines . global vaccine market revenue in 2020  was 59 .2  billion us dollars (statista, 2021a), and the forecast for 2021  is much higher .  the vaccine industry before covid-19  was a stable oligopoly globally, with the top four players – glaxosmithkline, merck & co ., sanofi pasteur and pfizer – controlling 80 per cent of the total market share (pitruzzella & arnaudo, 2017, p . 352) . according to recent statistics, up to this point (august 2021), ‘32 .4% of the world population has received at least one dose of a  covid-19  vaccine, and 24 .4% is fully vaccinated . 4 .93  billion doses have been administered globally, and 34 .25 million are now administered each day . only 1 .4% of people in low-income countries have received at least one dose’ (mathieu et al ., 2021) . there are serious concerns regarding the distribution and allocation of the covid-19 vaccine, and this is not a new problem; in another global pandemic (influenza a) that broke out in 2009, several wealthy and developed countries bought all the stocks of vaccines, and the shortage of vaccines for developing countries became a severe issue (bollyky et al ., 2020, pp . 2462–2463) . during the covid-19 pandemic, the competition authorities’ monitoring of the health sector in many countries underwent significant changes . along with other active undertakings in the health sector, vaccine manufacturers were encouraged to collaborate because of the necessity of these efforts for citizens’ welfare . the problem of the vaccine manufacturer’s intellectual property rights is a  critical issue . due to the principle of freedom of contract, the supplier’s choice of whether to deal with specific individuals should not be prohibited or limited by the legislator . still, in exceptional circumstances, such as when one firm is dominant, the refusal to supply can jeopardise the market competition . in a pandemic situation, pharmaceutical companies’ exclusive intellectual property rights and the right to health may come into conflict . there has been a  great deal of ethical debate regarding waiving intellectual property rights, compulsory licensing and the conflict between public and private rights . this paper is divided into two parts . the first part deals with the competition authorities’ reactions to the covid-19 pandemic in the pharmaceutical sector (especially their vaccine policies), and the second part is dedicated to covid-related intellectual property policies and discusses the challenges facing policy-makers from a  legal and ethical point of view . 2. covid-19, competition law and vaccines policies since the beginning of the covid-19 crisis in the pharmaceutical sector, the competition authorities have had to make various decisions . many competition authorities around the globe changed their competition policies to combat this unexpected outbreak . some 53 public governance, administration and finances law review • 1. 2021 a covid competition dilemma… countries designed a  specific framework for emergency competition law; for example, the european commission released a  ‘temporary framework communication’ (european commission, 2020a) on 8  april 2020  to regulate companies’ collaboration regarding the covid-19 outbreak . this communication was primarily aimed at facilitating cooperation to address shortages of essential hospital medicine supplies . according to the european union (eu) covid-19 policy, suppliers of critical and scarce goods are permitted to cooperate in production and distribution . even some behaviours which are usually in direct violation of eu competition law regulations can be regarded as appropriate and even beneficial in the covid era . outside the scope of this declaration and the essential circumstances of the pandemic, such arrangements are not approved by the eu competition authorities (costa-cabral et al ., 2021, p . 21) . the publication of comfort letters was also of importance in this regard . the european commission provided a  comfort letter to medicines for europe (european commission dgc, 2020), that suggests voluntary cooperation in the pharmaceutical sector to decrease the risk of the shortage of medicines to treat covid-19 patients . a popular competition policy involved granting licenses to economic enterprises in the pharmaceutical sector to exchange information and enter into agreements with competitors; european competition authorities encouraged cooperation between competitors in vaccines production as part of its covid competition policies . in march 2020, the uk competition and markets authority (cma) published an ‘open letter to the pharmaceutical and food and drink industries’ . in this, cma responded to some behaviours (including charging unjustifiably high prices for essential goods or making misleading claims about efficacy [competition and markets authority, 2020]) . on 25  march 2020, the  cma indicated in a  guidance note entitled ‘cma approach to business cooperation in response to covid-19’  that it facilitates collaboration between competitors, but only when that cooperation is to discuss problems resulting from the covid-19  crisis . it would not go further or last longer than is essential (competition and markets authority, 2021) . another competition policy in the pandemic situation involved collaboration between competition authorities and section regulators to control and monitor some agreements between competitors . for example, in iceland, sector regulators have played an essential role in designing emergency competition policies . these regulators in particular sectors (such as the icelandic directorate of health and the icelandic medicines agency in the pharma sector) have access to the cooperation between undertakings during the covid-19  period . the icelandic competition authority handles the requests for exemption on time-sensitive problems related to covid-19 within 48 hours after their receipt . some examples of these exemptions are given on the authority’s website . for instance, cooperation between pharmaceutical importers and distributors ensures access to critical pharmaceuticals (decision no . 11/2020; icelandic competition authority, 2020) . prompt and decisive confrontation with some anti-competitive practices that were to the detriment of consumers (such as excessive pricing in the pharmaceutical sector and collusion between competitors to divide the market or raise prices) has also proved to be an effective policy . for example, the spanish competition watchdog (cnmc) 54 mina hosseini public governance, administration and finances law review • vol.  6. no. 1.  declared that it had launched inquiries into various sectors after several anti-competitive behaviours were discovered in the health sector . cnmc emphasised that the authority is actively tracking pricing and supply shortages in the health products industry (in connection with products such as sanitising gels and the raw materials used in their production) to detect anti-competitive activities leading to possible price changes (rakić, 2020, p . 31) . in the same vein, the greek competition regulator started to monitor prices of goods on the health  market during the crisis .  it sent information requests to numerous companies engaged in the production, distribution, and marketing chains of health-related goods (costa-cabral et al ., 2021, pp . 16–17) . the requested information was mainly connected with reports of and complaints about price rises and output limits (hellenic competition commission, 2020) . a team of economists reviewed the results . the greek competition authority also conducted inquiries into businesses that did not respond to its request . vaccine policies were among the competition policies of competition authorities . the world health organisation (who) reports that several different vaccines (from different producers) such as the astrazeneca, janssen, pfizer-biontech, moderna and sputnik v vaccines have been provided up to this time (world health organization, 2021a) . according to eu officials, the eu vaccines strateg y is based on meeting objectives such as: ‘ensuring the  quality, safety and efficacy  of vaccines, securing  swift access  to vaccines for the member states and their populations while leading the global solidarity effort and ensuring  equitable access  to an affordable vaccine as early as possible’ (european commission, 2021b) . the european competition authorities have also been encouraging cooperation between competitors in vaccines production . the matchmaking experience was an online event hosted on b2match, a third-party website run by sociedade portuguesa de inovaçao, on 29 and 31 march 2021 . several meetings between potential alliances and participating companies were scheduled to exchange information and covid-19  vaccine-related data . the european commission issued a comfort letter on 21 march 2021 (european commission, 2021a), stating that in the light of competition law considerations, the collaboration between participating companies in the matchmaking event, particularly the sharing of related commercial details, does not pose questions under article 101  of the treaty on the functioning of the european union, as long as the competition law principles are followed . in parallel to the eu, each member state has taken measures to promote competition in the covid-19 vaccine market . the european union’s policies during the covid-19  crisis encouraged state aid, especially in connection with health-related products . european commission guidance (on 8  april 2020) and the eu communication from the commission on an amendment to the temporary framework for state aid measures to support the economy in the current covid-19  outbreak, of 3  april 2020, states that the manufacturing of essential drugs, in particular, should be improved where possible or kept at current levels . member states were advised to encourage companies  to expand their manufacturing capability, primarily through tax incentives and state aid . 55 public governance, administration and finances law review • 1. 2021 a covid competition dilemma… state aid policies have been subject to change in the covid period . within the eu commission’s temporary framework, there are several instances of state aid . germany, for example, created an umbrella scheme to fund some aspects of covid-19-related research and development, as well as investments in testing and upscaling the infrastructures that contribute to the development of covid-19-relevant pharmaceuticals and facilities (european commission, 2020b) . the italian state aid vaccine development project by reithera, an italian 40 million euro measure that aims to support the development of a  new coronavirus vaccine,1 is another example of covid-19  state aid cases . the european commission directorate general for competition has also established a dedicated mailbox and phone number to assist the member states with any questions or requests to discuss the temporary framework . the directorate general for competition has released a  number of templates to assist member states in creating their national strategies under the recovery and resilience facility (european commission, 2021c) .2 one of the successful competition cases regarding this issue was the investigation into roche diagnostics . the competition authority of the netherlands announced on 3 april 2020 that it would take no further steps in the inquiry into roche diagnostics . the problem had been the refusal of this firm to comply with the expansion of capability for covid-19  testing . roche and the competition authority came to an agreement whereby roche committed to sharing technolog y with its competitors to scale up production (authority for consumers and markets, 2021) . the necessity of these actions and the supremacy of public health over individual benefit is apparent in this case and can be used as an example of sharing vaccine information and data to overcome the crisis . overall, the most effective way to enforce competition law rules in the pandemic era is by combining the above solutions . 3. intellectual property covid policies: a legal and ethical challenge as mentioned in the un sustainable development goal (the united nations, 2015): up to 2030, ‘to achieve universal health coverage, including financial risk protection, access to quality essential healthcare services and access to safe, effective, quality and affordable essential medicines and vaccines for all’ is an important goal for the un . as the who director-general stated in january 2021, ‘the world is on the brink of a catastrophic moral failure – and the price of this failure will be paid with lives and livelihoods in the world’s poorest countries’ (world health organization, 2021b) . the right to receive therapeutic and life-saving interventions is one of every patient’s most basic rights in pandemic situations . the right to health as one of the fundamental human rights is declared in numerous international human rights documents (tobin, 2012), 1 sa.61774 covid-19, state aid sa.61774 (2021/n) – italy covid-19: vaccine development project by reithera s.r.l., brussels, 26.2.2021 c (2021) 1458 final. 2 see also regulation (eu) 2021/241 of the european parliament and of the council of 12 february 2021 establishing the recovery and resilience facility. 56 mina hosseini public governance, administration and finances law review • vol.  6. no. 1.  such as article 55(a) of the un charter, the constitution of the world health organization, the international covenant on economic, social and cultural rights, the convention on the elimination of all forms of racial discrimination (1965) and the convention on the elimination of all forms of discrimination against women (1979) . according to article 12 of the international covenant on economic, social and cultural rights, governments must provide adequate and prompt treatment to protect citizens’ right to health (ssenyonjo, 2011, pp . 969–971) . there has been much debate regarding waiving intellectual property rights, compulsory licensing, and the conflict between public and private rights . intellectual property waivers request that countries be excluded from the requirements of the agreement on trade-related aspects of intellectual property rights (love, 2021) . in compulsory licensing, the government allows a third party to use the patented vaccine . the question concerns the possibility of violating the rights of a  particular group of people under the pretext of protecting society . this challenge is severe in a  pandemic . article 31 of trips requires governments, in certain circumstances, to allow domestic producers to produce a  patented product without the patent holder’s consent . in addition, article 31  will enable countries to impose compulsory licenses in a  ‘social emergency or other extraordinary situations’ or in the case of ‘public non-commercial use’ (world health organization, 2002) . in  october 2020, india and south africa requested world trade organization (wto) representatives to waive patent, copyright, industrial design and undisclosed information (trade secrets) in the context of the ‘prevention, containment, or care of covid-19’ . furthermore, they asked for this waiver to continue until universal vaccination is in effect worldwide and the majority of the world’s population has achieved immunity (council for trade‐related aspects of intellectual property rights, 2020) . this issue had a  mixed reception among scholars and governments, with many arguing both in support of and against such special dispensation . 3.1. opponents’ arguments the united states (at first), the eu, switzerland, germany, the united kingdom and japan were all against the trips waiver . however, on 5 may 2021, the u .s . government announced that it ‘supports the waiver of those protections for covid-19  vaccines’ (office of the united states trade representative, 2021), although this support only covers vaccines, leaving other products like diagnostics, treatments, ventilators, respirators, syringes and refrigerators that keep doses cold during preparation and transport unprotected (bonadio & fontanelli, 2021) . some of the essential arguments of opponents of waiving intellectual property and compulsory licensing are as follows: the right to own private property, freedom of contract and the protection of the inventor’s intellectual rights are legally protected rights . moreover, intellectual property waiving and compulsory licensing are morally wrong because they are considered a  kind of theft . furthermore, waiver and compulsory licenses destroy the pharmaceutical companies’ 57 public governance, administration and finances law review • 1. 2021 a covid competition dilemma… ability to innovate and incentives to produce and distribute new drugs and vaccines (bagley, 2017, pp . 2468–2470; sangameshwaran, 2021) . some scholars argue that intellectual property waiving of covid-19  vaccines is futile and symbolic . they believe that even if the developing countries can remove intellectual property barriers and obtain permits to manufacture vaccines, they lack the know-how expertise, infrastructure and qualified staff to produce these pharmaceutical products . furthermore, current trips flexibilities have done little to help (huizen, 2021) . in its opposition to trips waiver, the u .k . government, in a statement on july 2021 in wto, asserted that ‘[i]t was the intellectual property regime that has enabled the extraordinary scientific advances of the last year, including the development of safe and effective vaccine’ . germany, as one of the most vigorous opponents of trips waiver, argues that ‘the protection of the intellectual property is a  source of innovation and must remain so in the future’ (dw, 2021) . germany was the who’s most significant donor during covid-19, contributing 881 .6  million dollars . it is also a  substantial contributor to the covax, having donated over 2 .58 billion dollars to date (sangameshwaran, 2021) . the statement of international federation of pharmaceutical manufacturers and associations on ‘wto trips intellectual property waiver’ published on 5  may 2021  called the u .s . government solution ‘the wrong answer to what is a  complex problem’ . the federation emphasises that ‘waiving patents of covid-19  vaccines will not increase production nor provide practical solutions needed to battle this global health crisis’ (international federation of pharmaceutical manufacturers & associations, 2021) . albert bourla, chairman and chief executive officer of pfizer, at an open day on 10  may 2021, emphasised that ‘equity does not mean we give everyone the same .  equity means we give more to those that need more’ and in opposition to the trips wavier he argued that ‘entities with little or no  experience in manufacturing vaccines are likely to chase the very raw materials we require to scale our production, putting the safety and security of all at risk’ (bourla, 2021) . 3.2. proponents’ arguments a popular opinion also argues that global public health depends on the free availability of these products (bagley, 2017, pp . 2492–2493) . according to the freedom of contract principle, the supplier’s will to enter into a contract with certain individuals, and refuse to supply others is not illegal, nor can be prohibited by the legislator (williston, 1920; cserne, 2012) . nevertheless, when a  firm is in a  dominant position, such a  refusal to supply can put the market competition in danger, and must be managed by competition law rules . refusal to supply by non-dominant firms is not prohibited in eu competition law, although it may harm some markets . in case t-41/96  bayer v commission of the european communities such an issue was addressed by the european court of justice . some believe that the arrangements for technolog y transfer and production sharing have already been established (such as those between biontech and pfizer, oxfarm/ astrazeneca and novavax with the serum institute) . the existence of these 58 mina hosseini public governance, administration and finances law review • vol.  6. no. 1.  arrangements proves that the claims that technolog y transfer is too complicated or takes too long are exaggerated (love, 2021) . furthermore, as there may be only one solution, if developing countries seek to acquire the scientific and technical knowledge necessary for vaccine production without using the existing expertise of vaccine intellectual property holders and scientists, the results might be a  great disappointment . this may prolong the pandemic indefinitely and lead to an irrational waste of resources . the violation of individual rights to social protection is similar to violating personality rights in order to protect community rights . as every person has the right to physical integrity, any physical assault on a  person is prohibited and entails the assailant’s criminal and civil liability . however, there are exceptions to such protection, and waiving the intellectual property rights is one of them . during the covid-19 pandemic, the breach of individual rights can be sanctioned to protect the right to public health (mcmahon, 2021, pp . 142–148) . although some frameworks, including covax, are designed to distribute vaccines in low-income and middle-income nations in the current pandemic, it seems that these arrangements are insufficient, and more solutions are required to end this health crisis (roope et al ., 2020, pp . 558–560; vercler, 2020, pp . 1–3; catania, 2021, pp . 455–459) . it appears that ensuring collective benefits, even if it harms certain individuals, is morally justifiable . even in non-pandemic contexts, the theory of essential facilities3 and compulsory pharmaceutical licensing has justified the coercion of producers for the benefit of society (son, 2019; lo bianco, 2020, pp . 2–4) . in an open letter published in july 2021, more than 120  academic lawyers and intellectual property experts from around the globe called on governments to support a trips waiver to battle the covid-19 pandemic . they claimed that ‘[t]he intellectual property system has failed in the past to create market incentives for vaccine development’ and ‘in the case of covid-19 vaccines, such a market failure has been mitigated with unprecedented public funding and de-risking of research and development costs through advance market commitments by governments’ (kang et al ., 2021, p . 2) . jecker and atuire (2021) also supported the anti-waiver analyses from a  utilitarian and deontological ethics point of view . the utilitarian analysis examines the idea that intellectual property protection is essential to keep motivation and innovation alive . the authors then asked how much money is enough to ensure the survival of this motivation and innovation, as well as could pharmaceutical companies and vaccine producers ‘earn less and the incentive to innovate remain intact?’ from the deontological point of view, ‘no one can rightfully take what is theirs’ . they argued that producing covid-19  vaccines would be impossible without a massive amount of public investment ( jecker & atuire, 2021, p . 596) . a recent development in this regard occurred in brazil . on 29  april 2021, the brazilian senate approved a bill facilitating the compulsory licensing of covid-19 vaccine 3 in response to a written question in 2020, the european commission stated that: ‘in our competition enforcement, the “essential facility doctrine” may require a dominant firm to share its assets with others, if an asset is “essential” (indispensable) for others to compete effectively in the market and if refusing access would eliminate effective competition on that market and thus cause consumer harm.’ www.europarl.europa.eu/doceo/ document/e-9-2020-000595_en.html http://www.europarl.europa.eu/doceo/document/e-9-2020-000595_en.html http://www.europarl.europa.eu/doceo/document/e-9-2020-000595_en.html 59 public governance, administration and finances law review • 1. 2021 a covid competition dilemma… patents . the senate passed the bill on 12  august 2021 .  the bill will now go to the brazilian president for his signature . it modifies some aspects of brazilian patent law addressing compulsory licensing and allows for the waiver of patent rights in times of international or national crisis and emergency (eakin, 2021) . 4. post-pandemic effects of covid-19 policies an important question associated with the competition and ip policies relating to the covid pandemic relates to the post-covid situation . it is essential to consider this because there are so many concerns regarding the post-pandemic effects of pandemic policies . it remains unclear the degree to which the post-pandemic period will be different from the pre-pandemic era . at this stage of understanding, it seems that competition law enforcement during a  crisis is vital, and cooperation among rivals can benefit consumers . however, we should not underestimate the post-crisis repercussions of competition crisis policies . data sharing, competitor collaboration, vaccine intellectual property challenges, and anti-competitive behaviour by pharmaceutical companies are all critical concerns in the post-pandemic times . given the dominant position of vaccine producers, widespread horizontal cooperation, price gouging (williams, 2020, pp . 183–184), interrupted supply chains (yu et al ., 2021) and excessive protectionism during the crisis ( jenny, 2020), it appears that postcrisis competition law and policy will differ from the pre-crisis era . some pharmaceutical companies will regard themselves as ‘pandemic champions’, and post-crisis competition law enforcement may be difficult . one of the concerns regarding the trips waivers in the long term centres on incentives for innovation and investment . some believe that it would simply slow vaccine research and development and make it more challenging to prevent and combat subsequent pandemics . opponents of a trips waiver ask who has the motive to create next-generation vaccines if intellectual property rights are required to be waived? on 9  november 2020, biontech, a  german biotech firm, and pfizer, a  u .s . pharma ceutical company, were the first to declare that a  validated covid-19  vaccine would be available for mass manufacturing . for the last 10  to 20  years, several small creative start-ups such as biontech and moderna have pioneered mrna technolog y for cancer therapy, often without generating a  profit . biontech reported an annual operational loss of about 82 .4  million euros in 2020  compared to a  181 .5  million euro loss in 2019 .  at the same time,  biontech’s annual operational losses were in the  thousands of euros range from 2017  to 2020  (statista, 2021b) . these businesses will spend more extensively on innovative cancer treatments and infectious disease vaccinations, thanks to the profits gained from the covid-19 vaccines . corporations will think carefully before risking their investment in the event of a  future health crisis because  they know it may harm the firm in the long term . these concerns are well-founded, but it is important to remember that decreasing post-pandemic incentives cannot be more important than human lives . in lowand middle-income countries, the number of people dying because of covid is much higher than in developed countries . in one 60 mina hosseini public governance, administration and finances law review • vol.  6. no. 1.  world, many people are fully vaccinated and waiting for a  booster dose . at the same time, many people, including influential scientists, physicians, health providers, artists and scholars, are dying without vaccines in another world . in the pandemic and post-pandemic era, the pharmaceutical industry will continue to have a monopoly on vaccine expertise and technological platforms . every company is indeed more concerned with profitable operations than with global health . still, competition policy and intellectual property policies must monitor and manage the vaccine markets even in the post-pandemic times . the pharmaceutical companies gained a great deal during the pandemic, and the dominant positions of vaccine producers have led to price increases of the vaccines . in august 2021, the price of the pfizer vaccine was raised by more than a quarter, and moderna by more than a tenth in their latest contract with the eu (financial times, 2021) . the dominant position of these companies can generate some concerns about competition and lead to anti-competitive practices . harm to consumers is another possible effect of competition and intellectual property policies . data sharing, cooperation, collaboration and information exchange among competitors can lead to collusion, price increases and the endangering of consumer’s health . sharing information without technological platforms, technolog y transfer and training can also lead to low-quality products that harm consumers . 5. conclusion competition authorities must formulate appropriate rules to manage the crisis effectively . these regulations should be regularly updated as the dimensions of the situation become apparent, and some efforts should be allocated to the post-crisis phase . immediate investigation and prosecution of anti-competitive practices, while permitting some agreements and exchange of information, especially regarding medicines and vaccines during the health crisis, is necessary . some anti-competitive practices, such as excessive pricing, collusion between pharmaceutical companies and refusal to deal have increased in the covid-19 era . some of the presently permitted data-sharing and collaborations between competitors may harm consumers in the post-covid period, and the consequences are not yet clear . vaccines are an essential part of pandemic-related products, and some competition authorities up to this point have not had clear policies regarding vaccines . where the lives of  millions of people worldwide are in danger, these authorities must use various methods to encourage or even compel vaccine producers to collaborate with rivals and exchange the necessary data . creating a  balance between the intellectual property rights of covid-19  vaccine producers, the public right to health and the competition rules is thus the key to an effective competition policy to help overcome this global crisis . in a  situation where the lives of  millions of people worldwide are in danger, the competition authorities, using various mechanisms, must force the companies that possess the vaccine technolog y to cooperate with competitors and share the data, technologies and information as required . because the right to health and receiving 61 public governance, administration and finances law review • 1. 2021 a covid competition dilemma… appropriate treatment are among the fundamental human rights, the issues regarding waiving intellectual property rights and compulsory licensing of covid-19  vaccines are legally and ethically justifiable . references authority for consumers and markets (2021) . acm has confidence in commitments made 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http://www.statista.com/statistics/265102/revenues-in-the-global-vaccine-market http://www.statista.com/statistics/1186022/operating-loss-biontech-se/ http://www.statista.com/statistics/1186022/operating-loss-biontech-se/ https://doi.org/10.3233/prm-200025 https://doi.org/10.1057/s41301-020-00273-x https://apps.who.int/iris/handle/10665/67345 http://www.who.int/news-room/q-a-detail/coronavirus-disease-(covid-19)-vaccines http://www.who.int/news-room/q-a-detail/coronavirus-disease-(covid-19)-vaccines http://www.who.int/director-general/speeches/detail/who-director-general-s-opening-remarks-at-148th-session-of-the-executive-board http://www.who.int/director-general/speeches/detail/who-director-general-s-opening-remarks-at-148th-session-of-the-executive-board https://doi.org/10.1007/s12063-021-00179-y © 2021 the author public governance, administration and finances law review vol.  6. no. 1. (2021) • 19–33 . doi: 10 .53116/pgaflr .2021 .1 .3 coronavirus test of the european union’s policy on the rule of law ákos bence gát*¤ * junior research fellow, university of public service, eötvös józsef research centre, europe strateg y research institute, e-mail: gat .akos .bence@uni-nke .hu abstract: the issue of the rule of law has been on the european union’s (eu) agenda since the beginning of the 2010s . the legal history of the eu shows that the eu’s approach to the topic of the rule of law underwent significant changes . initially, the member states called for guarantees of fundamental rights in eu institutions . this trend began to change in the late 1990s and early 2000s, when the possibility of european rule of law control over member states and the predecessor of the current article 7 of the treaty on european union (teu) were introduced by the treaty of amsterdam . however, the idea that the eu institutions can constantly monitor the member states in the name of the rule of law has only emerged and started dominating the  european political agenda since the early 2010s . over the last decade, the eu institutions have continuously expanded their toolkit for monitoring member states in this regard . following calls from some member states and the european parliament, in 2014  the commission set up the new eu framework to strengthen the rule of law . in the same year, the european council introduced an annual rule of law dialogue . in 2016, the european parliament proposed the establishment of an annual rule of law report that monitors all member states . at first, the european commission was reluctant to accept this idea, but finally it introduced an annual rule of law report in 2020 .  however, the eu’s policy on the rule of law suffers from fundamental shortcomings, which were especially visible during the first wave of the coronavirus crisis in the spring of 2020 . in the pandemic situation, it has become even more apparent that the eu’s policy on the rule of law raises a  significant issue of eu institutions exceeding their competences and stands on a questionable legal basis . criticisms formulated against hungary during the pandemic have revealed that the eu institutions do not provide sufficient guarantees for an objective examination of the situation of the rule of law in the member states . the situation brought about by the coronavirus has also raised a  number of questions regarding the lawful functioning of eu institutions, which shows the need for a  rule of law mechanism capable of verifying that the eu institutions themselves also properly respect the rule of law . keywords: european policy on the rule of law, conferral of competences, legality of the functioning of european institutions during the coronavirus pandemic https://doi.org/10.53116/pgaflr.2021.1.3 https://orcid.org/0000-0002-0871-9277 mailto:gat.akos.bence@uni-nke.hu 20 ákos bence gát public governance, administration and finances law review • vol.  6. no. 1.  1. introduction the rule of law is a constitutional concept which inherently has no fixed, universal definition . however, there is agreement that its key elements include lawfulness of political decisions, legal certainty, respect for fundamental rights, and the existence of checks and balances . in a  state based on the rule of law, the legislative power itself has also legal, constitutional limits (council of europe, 2011, p . 10) . in the last decade, a  new european public policy has developed around the notion of the rule of law . public policy is ‘the action programme of one or more administrative or governmental authorities’ (hassenteufel, 2011, p . 7) . this definition is also applicable to european policy on the rule of law as various eu institutions, eu politicians, non-governmental organisations and researchers have invested significant energ y in developing newer and newer ways for the eu to monitor member states in the name of the rule of law . since 2011 numerous reports, resolutions, official documents and academic articles have shaped the action plan that the european union continues to follow today .1 the aim of this paper is to provide a concise overview of european policy on the rule of law with a special emphasis on the impact of the coronavirus pandemic in this field . the eu’s approach towards the notion of the rule of law went through a significant change during the history of european integration . initially, the fear was that citizens’ fundamental rights would be threatened not by member states, but by european institutions . it may seem odd in the context of current european politics, but originally it was national authorities which demanded stronger guarantees of fundamental rights for their citizens to defend against potential abuses by the european institutions, and not the reverse . then a spectacular turnaround took place and eu institutions now take any opportunity to voice their concern about member states not providing enough protection to the rule of law . the eu developed a  complex, constantly expanding set of instruments among which parallels and duplications may be observed which reflect political and institutional concurrence between different eu institutions . in the spring of 2020, the first phase of the coronavirus pandemic provided an opportunity to observe how the eu’s relatively new policy on the rule of law functions in exceptional circumstances . the coronavirus has created an extraordinary context, not only for the member states but also for the eu’s institutional system, in which the shortcomings of european policy on the rule of law become more apparent . 2. the rule of law’s changing role in the european union from a legal historical perspective the european communities, the predecessor of the eu, were primarily about economic rather than value-based cooperation (téglási, 2014, p . 154) . while the protection of fundamental rights became the premise of member state constitutional practices after the world wars, the protection of fundamental rights and the rule of law were only 1 for a more detailed analysis see gát (2019). 21 public governance, administration and finances law review • 1. 2021 coronavirus test of the european union’s policy on the rule of law inserted into the treaties that shaped the predecessors of the eu after many decades of delay . in the first three decades of the european communities, the founding treaties did not mention fundamental rights, including only a  few legal bases for the protection of a  few special rights . such special rights were, for example, a  general prohibition of discrimination on the grounds of nationality, freedom of movement for workers, freedom to provide services, improved working conditions and improved standards of living for workers and equal pay for men and women (ferraro & carmona, 2015, p . 3) . initially, fundamental rights appeared only in symbolic declarations . following the 1973  copenhagen european summit, the nine member states of the european communities adopted the declaration on european identity .2 this document states that ‘sharing as they do the same attitudes to life, based on a  determination to build a  society which measures up to the needs of the individual, they are determined to defend the principles of representative democracy, of the rule of law, of social justice  –  which is the ultimate goal of economic progress  –  and of respect for human rights’ . in 1977, the parliament, the council and the commission adopted a brief declaration, comprising only two paragraphs, in which they emphasised that they ‘stress the prime importance they attach to the protection of fundamental rights, as derived in particular from the constitutions of the member states and the european convention for the protection of human rights and fundamental freedoms’ .3 as the community’s legal, political and economic importance has increased, it has become increasingly essential for the new european political entity to provide legal guarantees for the protection of fundamental rights against potential breaches by european institutions . in this regard, the so-called solange judgment of the german constitutional court of 29  may 1974  was a  milestone . in its decision, the karlsruhe court stated that it would continue reviewing community legislation from a  fundamental rights perspective for as long as the european communities failed to ensure the protection of fundamental rights to the same degree as germany . in reaction to the judgment of the constitutional court, the court of justice of the european union (formerly the court of justice of the european communities, hereinafter: the court) sought to establish guarantees for the protection of fundamental rights . in the light of today’s debate on the rule of law in the eu, this may have been forgotten, and it should be emphasised that the court, similarly to the 1977  statement by parliament, the council and the commission, referred to the constitutional traditions of the member states, and relied on them when it upheld that the protection of fundamental rights is part of the general principles of community law . it later further extended the legal basis for the enforcement of fundamental rights and international conventions, in particular the european convention on human rights, which became an additional source of inspiration . despite the developments in case law, the idea that there is an inherent fundamental rights gap of the european communities is supported by the fact that, for a long 2 déclaration sur l’identité européenne (copenhague, 14 décembre 1973). 3 joint declaration of the european parliament, the council and the commission on fundamental rights, 27 april 1977. 22 ákos bence gát public governance, administration and finances law review • vol.  6. no. 1.  time, the eu did not have its own instrument for the protection of fundamental rights . the so-called charter of fundamental rights was proclaimed on 7  december 2000  in nice . the proclamation of the charter, however, was in the form of an interinstitutional agreement, which could not be considered equivalent to the treaties . it would only be given the same legal weight as the treaties much later, in the draft of the treaty establishing a  constitution for europe (‘the constitutional treaty’) . since the draft treaty was rejected in referenda in two member states, however, the charter remained a mere interinstitutional agreement . the charter of fundamental rights was only elevated to the level of the treaties around a  decade ago, when the treaty of lisbon entered into force in 2009 . regarding the treaties, the first explicit reference to the rule of law only appeared 35  years after the establishment of the european communities, in the 1992  treaty of maastricht . again, it is important to note that back then, the issue of the protection of the rule of law had not been raised in relation to eu member states, but basically in relation to third countries . at the same time, in line with the case law of the court, article f of the maastricht treaty stated that ‘the union shall respect fundamental rights, as guaranteed by the european convention for the protection of human rights and fundamental freedoms signed in rome on 4  november 1950  and as they result from the constitutional traditions common to the member states, as general principles of community law’ (maastricht treaty, article f) . in comparison, the 1997 treaty of amsterdam brought about a significant change in approach . with the new treaty, article f (1) of the treaty of maastricht was amended as follows: ‘the union is founded on the principles of liberty, democracy, respect for human rights and fundamental freedoms, and the rule of law, principles which are common to the member states’ [treaty of amsterdam, article 1(8)] . it can be observed that in this wording, the eu has progressed to referring to fundamental rights as its own principles, and there is no  indication that these legal principles became part of the eu legal order thanks to the member states’ constitutional traditions . the treaty of amsterdam also introduced the predecessor to current article 7  of the treaty on european union, well known from the political debates of the past years . article f .1 of the treaty of amsterdam stated that ‘the council, meeting in the composition of the heads of state or government and acting by unanimity on a  proposal by one third of the member states or by the commission and after obtaining the assent of the european parliament, may determine the existence of a serious and persistent breach by a  member state of principles mentioned in article f(1), after inviting the government of the member state in question to submit its observations’ . this procedure for sanctioning of member states on their adherence to the rule of law has been strengthened and supplemented by the treaties of nice and lisbon . based on the legal historical analysis of the treaties, it can be established that, in the european union, the protection of the rule of law is a relatively recent issue . it is also important to note that originally the member states required the eu to introduce minimum guarantees of fundamental rights in its own legal system . nowadays, this trend changed considerably and eu institutions require the member states to provide more guarantees of the rule of law at national level . the idea of the eu monitoring the 23 public governance, administration and finances law review • 1. 2021 coronavirus test of the european union’s policy on the rule of law rule of law situation in member states appeared in the treaty of amsterdam . this control still takes the form of an exceptional procedure, subject to strict conditions in article 7 of the current treaty on european union . in the procedure set out under article 7(1), a  four fifths majority of the council and the consent of the european parliament are required to determine a  clear risk of a serious breach by a member state of european values . in the procedure under article 7(2), determining a serious and persistent breach of values shall be subject to the unanimous vote of the heads of state or government of the member states and the consent of parliament . the article 7 procedure, due to its exceptional nature, would not in itself have been capable of making rule of law control over member states one of the top issues of european politics . the rule of law control over member states is on the eu’s political agenda because various european institutions and political actors translated it into a  new european public policy . in the 2010s, one was able to observe a  proliferation of debates, action plans, political and institutional documents examining the rule of law situation in certain member states, especially the ones which joined the union after 2004 . over the last decade, the eu’s rule of law toolbox has been constantly expanding . 3. expanding institutional toolbox of european policy on the rule of law over the last decade, various eu political actors and institutions have launched a number of initiatives with the aim of establishing a control over member states in the name of the rule of law . on 6  march 2013, the foreign ministers of four eu member states, germany, finland, denmark and the netherlands addressed a  letter to the president of the european commission requesting the establishment of an eu rule of law mechanism .4 the letter sets out the main lines of action that eu institutions have followed to date in the field of policy on the rule of law, from the idea of a  rule of law mechanism to the issue of potential financial sanctions, which were highly debated during the 2020 multiannual financial framework negotiations . on 3 july 2013, the european parliament adopted a resolution on the basis of the report of mep rui tavares (european parliament, 2013) . the resolution contained a broad list of criticism formulated by the european left wing regarding the political and legal developments in hungary after 2010 .  similarly to the above mentioned letter of some foreign ministers, this resolution also already advocated the adoption of a  swift and independent monitoring mechanism and an early-warning system coordinated at the highest political level to monitor eu values, without however clarifying the details of such a mechanism . 4 letter from the german, dutch, finnish and danish foreign ministers to the president of the european commission, 6 march 2013. 24 ákos bence gát public governance, administration and finances law review • vol.  6. no. 1.  on 11  march 2014, the european commission announced in a  communication the establishment of ‘a new eu framework to strengthen the rule of law’ (european commission, 2014) (hereinafter: rule of law framework), which was the first concrete tool for the eu to monitor the situation of the rule of law in member states . this document outlined the mechanism that the commission intended to apply in cases it would suspect that an eu member state breaches the rule of law . the basis of this mechanism is a structured dialogue with the member state concerned and consists of three phases . in the first phase, the commission assesses whether there are any clear indications that the rule of law is at risk in a member state . if, on the basis of its preliminary assessment, it concludes that there is a systemic threat to the rule of law, it will enter into a dialogue with the member state and send the state concerned its ‘rule of law opinion’ . in the event that the first phase does not bring results, in the second phase the european commission sends a  ‘rule of law recommendation’ to the member state, the main elements of which it makes available for the public opinion . in its recommendation, the commission is supposed to clearly state the reasons for its concerns and call on the member state to resolve the issues outlined within a set period of time . the third phase is the ‘follow-up to the commission’s recommendation’, in which the commission monitors the implementation of the recommendation addressed to the member state concerned . if that member state does not follow the recommendation satisfactorily within the set deadline, the commission may initiate one of the mechanisms provided for in article 7 teu . the structure of the rule of law mechanism developed by the commission is based on the analog y of the procedural structure applied in infringement procedures . the structured dialogue takes place in a  similar way: the member state concerned and the commission communicate and negotiate with each other and further steps only take place if they fail to reach an agreement at any stage . however, significant differences may be observed between the two procedures in relation to the next steps . in the event of an infringement procedure, in the absence of an agreement between the member state and the commission, the commission may refer the matter to the court of justice of the european union . in comparison, in the rule of law framework the judicial phase is completely missing . for this reason, the sanctions that may be envisaged also differ significantly . in an infringement procedure, the court can condemn the member state and order it to change its national legislation or practice to fall in line with the commission’s expectations, and can impose a fine . the rule of law framework does not include similar legal sanctions, failing which the commission can only exert pressure on the member state by initiating one of the procedures under article 7 teu . shortly after the announcement of the commission’s rule of law framework, the council developed its own rule of law instrument . in its press release of 16  december 2014, the council announced that it would organise an annual political dialogue between member states to promote and protect the rule of law . the council emphasised that ‘this dialogue will be based on the principles of objectivity, non-discrimination and equal treatment of all member states’ . it also stated that its mechanism ‘will be without prejudice to the principle of conferred competences, as well as the respect of national identities of member states inherent in their fundamental political and 25 public governance, administration and finances law review • 1. 2021 coronavirus test of the european union’s policy on the rule of law constitutional structures […], and their essential state functions’ (council of the european union, 2014a) . the council has thus set up its own rule of law instrument in parallel with the commission’s rule of law mechanism . on the one hand, this demonstrated that it did not want to remove completely the topic of the rule of law from the european political agenda . on the other hand, it also indicated that by limiting the procedure to an intergovernmental dialogue respecting the equality and sovereignty of the member states, the council wanted to keep the eu’s rule of law control over member states within strict boundaries . the reasons of this prudent approach were not only political, but also legal . at the next point, i will present more in detail that the council’s legal service found the idea of eu institutions controlling the rule of law situation in member states highly problematic from a legal perspective . the council was not the only eu institution to criticise the commission’s rule of law framework . although from a  different standpoint, the european parliament also voiced its dissatisfaction . the institution started to develop a  third, alternative rule of law mechanism with the justification that it did not deem the commission’s solution to be sufficiently comprehensive . the parliament’s solution is set out in its resolution adopted on 25 october 2016, which proposed that the commission should establish an eu mechanism on democracy, the rule of law and fundamental rights (european parliament, 2016) . unlike the commission’s rule of law framework, the rule of law mechanism proposed by parliament would not only be applied to individual countries ‘if necessary’, on a case-by-case basis . at the contrary, all eu member states would be regularly monitored each year and eu institutions would keep all member states under continuous surveillance . this resolution outlined the structure of a  mechanism in which the parliament, as well as various non-governmental organisations, would have been assigned a much more significant role than in the commission’s rule of law framework . different eu institutions have proposed different ways for the eu to monitor the rule of law in the member states, and these mechanisms even compete with each other . for example, the commission rejected the parliament’s october 2016 proposal, stating that it had serious doubts about the need and the feasibility of an annual report and a  policy cycle on democracy, the rule of law and fundamental rights prepared by a committee of ‘experts’ and about the need for, feasibility and added value of an interinstitutional agreement on this matter . it explained that ‘some elements of the proposed approach, for instance, the central role attributed to an independent expert panel in the proposed pact, also raise serious questions of legality, institutional legitimacy and accountability’ . it considered that ‘first, the best possible use should be made of existing instruments, while avoiding duplication’ (european commission, 2017) . the commission nevertheless changed its position after a few years . in its communication of 17 july 2019, it announced the introduction of an annual rule of law report, through which it assesses the rule of law situation in each member state on a  regular basis (european commission, 2019) . however, a significant difference from the mechanism proposed by the european parliament in 2016  is that, in its annual rule of law report, the commission plays the central role . 26 ákos bence gát public governance, administration and finances law review • vol.  6. no. 1.  by this new rule of law instrument, the commission sends a  strong message of principle: it feels entitled to bring all member states under constant political control . however, from a practical point of view, doubts may be raised as to whether this regular review affects all member states to the same extent . examples from recent years have shown that the union has turned a  blind eye to mass demonstrations and ongoing police violence against citizens in some western european countries . at the same time, in case of other member states that joined the eu more recently, the eu is willing to monitor closely every rule of law criticism that may appear against the government . the eu’s policy on the rule of law raises a number of other similar dilemmas as well, which became especially visible during the coronavirus crisis and are worth closer examination . 4. rule of law policy during the coronavirus pandemic: growing concerns in spring 2020, the first wave of the coronavirus created a  special context for the eu institutional system that systematically scrutinises the rule of law in member states . while the predictable functioning of the state is an important element of the rule of law, during the pandemic, member states took a series of emergency measures: in italy, settlements and entire regions were hermetically sealed; in numerous western european countries strict curfews were put in place, violations of which were punished by the police, and member states closed the eu’s internal borders one after the other . different countries defended themselves against the virus in different ways, but basically every member state focused on the fight against the coronavirus . hungary, which has been in the crossfire of eu rule of law criticism for about a decade now, also concentrated on its defence strateg y . the government introduced a  state of danger on the basis of article 53(1) of the fundamental law, and on 30  march 2020  the parliament adopted act xii of 2020  on the containment of coronavirus . this law authorised the government to introduce emergency measures to protect the country’s citizens against the virus and to maintain the emergency measures taken earlier for this purpose . this law did not set a specific end date for the authorisation of the government; however, it expressly provided that the national assembly could terminate the effect of the legislation when the state of danger is over . even more, the law also provided the national assembly with the power to revoke the authorisation given to the government at any time before the end of the period of state of danger, either in general or in the case of specific measures . the law also amended the criminal code and introduced a  new form of fearmongering during the extraordinary period . under section 337(2) of the criminal code, a person who, during the period of a special legal order and in front of a  large audience, states or disseminates any untrue fact or any misrepresented true fact that is capable of hindering or preventing the efficiency of the protection against the epidemic became punishable by imprisonment for one to five years . the draft law was submitted to the hungarian parliament on 20 march 2020, and almost immediately became the subject of fierce international criticism . the critiques 27 public governance, administration and finances law review • 1. 2021 coronavirus test of the european union’s policy on the rule of law were based on two allegations: one that in hungary the government has been given unlimited authorisation to rule by decree, abolishing the scrutinising role of the parliament, and the other that the authorities had drastically restricted freedom of expression . by 23  march, a  member of the european parliament had sent an email to 704  members of the european parliament, expressing concerns about the situation of democracy and the rule of law in hungary, and collected signatures for a joint letter she intended to send to the european commission the following day (mandiner, 2020) . the social media was flooded with condemnatory declarations by various european politicians and non-governmental organisations . representatives of international organisations also expressed their concerns, including the council of europe commissioner for human rights, the organization for security and co-operation in europe representative on freedom of the press, and the secretary general of the council of europe . when the hungarian law was adopted, 13  eu member states5 issued a joint statement highlighting the importance of the rule of law during the coronavirus crisis, including member states in which much stricter measures were in place than in hungary .6 on this occasion, the european commission made more cautious statements than usual, indicating that it would carry out an examination on this issue of concern . during the crisis, the european parliament switched to a  restricted mode of operation via teleworking arrangements, in essence limiting its work to matters related to the coronavirus . in this context, on 17  april 2020, it adopted a  resolution on eu coordinated action to combat the covid-19  pandemic and its consequences . it used paragraph 46  of this resolution to make sharp criticisms of hungary and poland, the only eu member states singled out in this way (european parliament, 2020) . a number of lessons may be learned from these reactions in relation to the eu’s policy on the rule of law, which has again revealed the fundamental dilemmas that characterise this european public policy . 4.1. the issues of legal basis and the division of competences between the eu and the member states the first and most fundamental question is on what basis the eu institutional system questions the protection measures of some member state governments in times of a  global health crisis in the name of the rule of law . we may approach this dilemma in different ways . in a moral sense, the question is how european organisations can justify criticising and exerting political pressure on the defence measures adopted by certain member states during the most serious period of the covid-19  emergency . when all european countries fight desperately for protecting human lives, such pressuring on some member 5 belgium, denmark, finland, france, germany, greece, ireland, italy, luxembourg, the netherlands, portugal, spain and sweden (bayer, 2020). 6 for example, pierre de combles de nayves drew attention in dalloz, a major french legal journal to the severe sanctions for breaches of curfew measures in france (de combles de nayves, 2020). 28 ákos bence gát public governance, administration and finances law review • vol.  6. no. 1.  states makes necessarily their fight even harder . this moral, ethical question is maybe the most easily perceivable for citizens . from a more political approach, the problem with such pressuring is that european institutions exert this pressure while they bear no  political responsibility and are not accountable for handling the coronavirus crisis in member states . it is obvious, that member states’ governments that are directly accountable to their citizens should have the liberty to choose the measures they found the best for containing the pandemic . finally, this issue can be approached also from a legal perspective, which means an inquiry in the legal basis of european rule of law control over member states . it is worth examining this issue more in depth, since the question of legal basis constitutes a dilemma from the beginning of the construction of european policy on the rule of law . the inherent contradiction of the eu’s policy on the rule of law policy is that eu institutions try to control member states in the name of the rule of law, without having adequate legal basis to do so, in consequence by breaching themselves the very basis of the eu’s rule of law . article 2 teu sets out the values of the eu and article 7 sets out the procedure that may be used in the eu in the event that a potential breach of those values by a  member state occurs . other instruments developed by the eu institutions in addition to this lack an adequate eu legal basis . in 2014, the council’s legal service also highlighted this problem in an expert opinion,7 which found that the commission had neither the legal basis nor the competence to establish the rule of law framework introduced in 2014 (council of the european union, 2014b) . the council’s legal service pointed out that “according to article 5  teu, ‘the limits of union competences are governed by the principle of conferral’ .” the consequence of this is that ‘competences not conferred upon the union in the treaties remain within the member states’ (clause 15) . the opinion points out that: article 2  teu does not confer any material competence upon the union but, similarly to the charter provisions, it lists certain values that ought to be respected by the institutions of the union and by its member states when they act within the limits of the powers conferred on the union in the treaties, and without affecting their limits . therefore, a violation of the values of the union, including the rule of law, may be invoked against a member state only when it acts regarding a  subject matter for which the union has competence based on specific competence-setting treaty provisions (clause 16) . […] respect of the rule of law by the member states cannot be, under the treaties, the subject matter of an action by the institutions of the union irrespective of the existence of a  specific material competence to frame this action, with the sole exception of the procedure described at article 7 teu (clause 17) . 7 this body, part of the general secretariat of the council, gives opinions to the council in order to ensure that its acts are lawful and well-drafted both in form and content. the legal service also represents the council in judicial proceedings before the european court of justice, the general court and the civil service tribunal. 29 public governance, administration and finances law review • 1. 2021 coronavirus test of the european union’s policy on the rule of law the legal service also stated that ‘the non-binding nature of a  recommendation does not allow the institutions to act by issuing such type of acts in matters or subjects on which the treaties have not vested powers on them’ . it added that ‘to build a permanent mechanism for a rule of law study and proposal facility operated by the commission on the combined bases of article 7  teu and article 241  tfeu would undermine the specific character of the procedure of article 7(1)  –  particularly concerning the way it can be initiated’ (clause 21) . the legal service clearly concluded that: there is no  legal basis in the treaties empowering the institutions to create a  new supervision mechanism of the respect of the rule of law by the member states, additional to what is laid down in article 7  teu, neither to amend, modify or supplement the procedure laid down in this article . were the council to act along such lines, it would run the risk of being found to have abased its powers by deciding without a legal basis (clause 24) . in recent years, the eu’s policy on the rule of law has been able to evolve without major obstacles, despite the fundamental legal concerns expressed by the council’s legal service in 2014 .  the political narrative that has been repeatedly voiced in european political forums and the international media  –  that the rule of law is so seriously threatened in some eu member states that the eu, as an organisation that places human rights and universal values above all, must respond  –  was able to override the legal problem that the eu has no  competence to examine member states’ domestic policy in issues not affecting eu law . despite this very basic legal dilemma, more and more statements and resolutions were issued to condemn the measures of the governments of certain central and eastern european member states . however, several constitutional law practitioners and authors of political science drew attention to the importance of the division of competences within the european union . french constitutional law professor bertrand mathieu, for example, deduced that democracy developed in nation states, so democracy is directly threatened if the right to adopt crucial political decisions is taken away from national governments and illegally transferred to supranational, international entities, in violation of member state sovereignty . at the end of the day, this would necessarily lead to citizens lose their control on political decisions (mathieu, 2017) . 4.2. the issue of objectivity during the coronavirus pandemic, while all the eu member states introduced emergency measures, hungary and poland found themselves again in the main focus of investigations and criticisms . in its resolution of 17  april 2020, mentioned above, the european parliament voiced its concerns about the rule of law in hungary and poland . hungary was also the subject of a  debate in the plenary session of the european parliament on 14 may 2020, entitled ‘emergency governance in hungary and its impact on the rule of law and fundamental rights’ . this uneven emphasis has once again drawn 30 ákos bence gát public governance, administration and finances law review • vol.  6. no. 1.  attention to the question if eu rule of law instruments are capable to ensure an objective rule of law control over member states . objectivity is an essential element of any set of instruments, which in principle, is designed to protect the rule of law against political arbitrariness . however, the eu’s policy on the rule of law is characterised by a lack of objectivity . this structural problem stems from the fact that although eu institutions conduct rule of law investigations in the name of legal principles, the procedures themselves are political in nature . on the one hand, the reason for this is to be found in the subject of the investigations, which is political in each and every case: eu institutions examine governmental policy measures and parliamentary decisions of member states . on the other hand, it may also be observed that the debate on a measure can always be traced back to a division related to some deeper differences in political worldviews and visions of the european union . most of the debates on the rule of law can be traced back to broader debates on constitutional and political theory, surrounding the relationship between democracy and liberalism, or to the competition between federalist and nation state concepts of the european union (gát, 2019, p . 200–234) . third, the main actors in the rule of law policy are political institutions rather than neutral judicial forums, and consequently political considerations rather than objectivity play a  key role in their decisions . with regard to the european commission, former commission president jean-claude juncker said in a speech that the commission is a political body and he wanted to make it highly political ( juncker, 2014) . the european parliament consists of elected representatives who take their decisions on a  party-political basis . the council consisting of the ministers of the member states is not a  neutral institution either, but one of the main stages of european policy and diplomacy . against this background, the question of whether the eu’s policy on the rule of law can itself become a  tool of political arbitrariness is a  logical one . in his book, professor of constitutional law, andrás zs . varga analysed the theoretical dangers of the totalitarian use of the rule of law concept in detail (varga, 2019) . he pointed out that there was a danger that the idea of the rule of law, originally intended to limit political arbitrariness, would become a means of achieving arbitrariness . 4.3. the need for guarantees that eu institutions respect the rule of law in order for the eu’s policy on the rule of law not to become an instrument of political arbitrariness, in addition to the settling of the above mentioned structural problems of legal basis and objectivity it is also extremely important to ensure that eu institutions themselves respect the rule of law, i .e . the lawfulness of individual policy measures, in their daily operation . with regard to the eu institutional system, dysfunctions were seen in this area even before the coronavirus crisis . in the european parliament, for example, the debate on the sargentini report that initiated the rule of law procedure against hungary under article 7 raised the question of how the extraordinary majority required to initiate the procedure is to be calculated . hungary disputed the parliament’s procedure for not taking into account abstention votes cast when determining the 31 public governance, administration and finances law review • 1. 2021 coronavirus test of the european union’s policy on the rule of law voting results . in another case in 2019, during the appointment procedure of the members of the von der leyen commission, in case of the hungarian commissioner-designate, political and legal procedures were confusingly merged . in the autumn of 2019, the commissioner-designates from each country were heard in public by the relevant thematic committees of the european parliament . the public hearing of the hungarian commissioner-designate was scheduled to take place in the foreign affairs committee . however, referring to a  potential conflict of interest, the meps of the european parliament’s committee on legal affairs voted against the candidate in advance in a closed session, thus making it impossible for a public hearing to take place before the relevant parliamentary committee . when the coronavirus epidemic broke out in the spring of 2020, several rule of law dilemmas arose over the functioning of the european parliament . the parliament’s rules of procedure were not prepared for such an emergency and the ep switched to a virtually ad hoc mode of operation, without developing the appropriate legal environment . a  hungarian member of the european parliament exposed these anomalies in a scientific legal analysis (szájer, 2020) . he noted that ‘there is no particular legal basis, which would exempt the institutions from the obligation to comply with the eu norms and standards in force . . […] in the case of the european parliament [sic] physical presence is an immanent, essential condition, core concept of the entire functioning, since all the provisions of the rules of procedure are based on the condition of members’ physical presence . presence is a legal fact and it has numerous legal effects in the rules of procedure, in many cases related to the validity of acts’ . the study details the legal uncertainties that have arisen in connection with the issues of quorum, parliamentary thresholds, the exercise of the right to speak and voting procedures . another characteristic contradiction in the functioning of the european parliament during the coronavirus epidemic was manifested in the already mentioned debate in the european parliament on 14 may 2020 entitled ‘emergency governance in hungary and its impact on the rule of law and fundamental rights’ (european parliament, 2020a) . the plenary debate was the result of the process described above, in which hungary was accused of, among other things, restricting the freedom of expression . paradoxically, however, the president of the european parliament has repeatedly rejected the hungarian government’s request for its minister of justice to speak on behalf of the hungarian government in the debate on hungary (mag yar nemzet, 2020) . 5. conclusion the development of the legal history of the eu shows that initially member states called for guarantees of the rule of law in eu institutions . this trend began to shift in the late 1990s and early 2000s, when a provision allowing for a european supervision of fundamental rights in the member states in certain cases was inserted into the treaty of amsterdam . in practice, however, it was not until the beginning of the 2010s that the european political agenda became increasingly dominated by the discourse that the eu institutions were responsible for monitoring the rule of law situation in member states . 32 ákos bence gát public governance, administration and finances law review • vol.  6. no. 1.  over the last decade, the eu institutions have continuously extended their set of tools for monitoring member states in the name of the rule of law . however, the eu’s rule of law policy, as thus established, suffers from fundamental shortcomings, which were clearly revealed during the first wave of the coronavirus pandemic in the spring of 2019 .  the european policy on the rule of law is built on a  questionable legal basis and lacks guarantees of objectivity . the eu rule of law monitoring is always directed at member states; it does not hold the eu institutions to account, even though numerous recent dilemmas have arisen about their lawful functioning . references bayer, l . (2020, april 1) . 13 countries “deeply concerned” over rule of law . politico . online: www .politico . eu/article/viktor-orban-hungary-13-countries-deeply-concerned-over-rule-of-law/ council of europe (2011) . report on the rule of law adopted by the venice commission at its 86th plenary session . online: www .venice .coe .int/webforms/documents/default .aspx?pdffile=cdl-ad(2011)003rev-f council of the european union (2014a) . press release nr . 16936/14, 3362nd council meeting , general affairs . brussels, 16 december 2014 . online: http://data .consilium .europa .eu/doc/document/st-169362014-init/en council of the european union (2014b) . opinion of the legal service, communication from the commission on a new eu framework to strengthen the rule of law – compatibility with the treaties . online: http:// data .consilium .europa .eu/doc/document/st-10296-2014-init/en déclaration sur l’identité europenne (copenhague, 14 décembre 1973) . online: www .cvce .eu/obj/declaration_ sur_l_identite_europeenne_copenhague_14_decembre_1973-fr-02798dc9-9c69-4b7d-b2c9-f03a8db7da32 . html de combles de nayves, p . 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robert kahn* ¤ * associate professor, st . thomas university, minneapolis, minnesota, e-mail: rakahn@stthomas .edu abstract: the “living together” concept poses a  puzzle . why did europeans decide that life in a modern democracy requires showing one’s face? one explanation is opposition to muslims and islam . but the enforcement of face veil bans against non-religious mask wearing raises doubts . this essay poses an alternative explanation . what if the face veil bans persist because of european conceptions of privacy? von hannover v. germany held that one be private in public . given this, why wear a  mask? what is there to hide? to explore this idea, the essay turns to the united states, where one cannot be “private in public” and mask wearing has been opposed on narrow grounds such as public security and the content of specific masks . at the same time, the united states respects the decisional privacy of someone to wear a  mask even for “irrational” reasons, something the “living together” idea tends to ignore . keywords: masks, face veils, living together, privacy, von hannover v. germany in sas v. france, the european court of human rights upheld france’s ban on face veils because “living together” in a  modern society requires showing one’s face .1 as a  student of mask and face veil bans (kahn, 2021; kahn, 2019a; kahn 2020), and someone who believes that people ought to be able to mask (or not mask) to the greatest extent possible consistent with other concerns (such as safety during a  pandemic; see kahn [2021, n . 45], viewing mask mandates as a  necessary evil during the pandemic), i have always found the “living together” idea curious . is the doctrine a fig leaf for antimuslim sentiment? or something meant to be taken seriously?2 if so, what accounts for 1 sas v. france, no. 43835/11) (unreported, eur. ct. h.r., 1 july 2014), paras. 142–155. 2 for a pair of critical takes of sas as an impingement on religious liberty of muslims by a secular europe, see edwards (2014); michaels (2018). cf. mechoulan (2018) approving of burqa bans as a positive step in a clash against a competing ideology. https://doi.org/10.53116/pgaflr.2021.2.2 https://orcid.org/0000-0001-7246-9252 mailto:rakahn@stthomas.edu 8 robert kahn public governance, administration and finances law review • vol.  6. no. 2.  the sudden decision that, in europe at least, human life together requires showing one’s face?3 my interest, as a teacher of privacy law in the united states, is with underpinnings of the “living together” doctrine . is there something in europe’s conception of privacy – especially the right to be private in public – that explains at least some of the success of the “living together” doctrine? in other words, even if the burqa (and the mobilisation against it) was necessary for the rise of the “living together” concept, do european concepts of privacy explain its persistence? and how does the debate over face veil bans in europe compare to the united states, where mask bans date to the nineteenth century, and yet privacy doctrine makes showing one’s face in public a fairly risky act? before tackling these questions, let me identify three ways masks and face veils might enhance a wearer’s privacy: 1 . masks promote privacy by giving the wearer control over what others know about them (classic informational privacy); 2 .  this control over the release of information indirectly promotes the wearer’s decisional privacy (i .e . the ability to mask makes it easier for the wearer to do things); and 3 .  the choice to mask itself is a  form of decisional privacy  –  even if the mask is worn for reasons other than concealing part of oneself . my thesis is that european privacy norms protect informational privacy  –  i .e . the ability of the wearer to control information that the bare, maskless face reveals (at least in theory) . but the choice to wear a  mask (decisional privacy) falls outside european privacy norms . the question is why . in what follows i first sketch the history of mask bans in the united states . initially, mask bans were largely symbolic laws that helped the state to make expressive statements repudiating threatening, unpopular groups such as the ku klux klan .4 in recent years, however, the anti-klan heritage of most mask bans has morphed into a broader targeting of mask wearing protesters, often with the aim of comparing the mask wearers to the klan .5 as these bans have largely been survived first amendment speech claims, i look at privacy related objections to these laws . then i turn to europe where face veil bans have swept across the continent over the past decade . i examine “living together” justification for these bans, and the possibility that “living together” draws on european conceptions of privacy .6 the main body of the paper attempts to make sense of the “living together” concept on its own terms . other societies, most notably in east asia, seem more comfortable with masking . so, it is hard to see “living together” as stating something universal about human nature . but assume, for argument’s sake, it does . this leads to two questions .7 3 or the revival of this idea. in the aftermath of the french revolution showing one’s face was associated with truth-telling and revolutionary transparency, as opposed to the disguises worn by aristocrats seeking to escape the new order. see johnson (2001). indeed, post-revolutionary france banned mask wearing during carnival in 1790. ibid. 90. so, there may be other reasons for european dislike of masks than the ones described in this essay. i hope to explore the face, and the role it has played in defining european anti-masking norms in future work. 4 see infra, part 1. i discuss the symbolic nature of mask bans at greater length in kahn (2019c). 5 for instance, jay lawrence, a republican state legislator, supported a proposed mask ban targeting antifa by comparing that group to the klan. see giles (2017). see also kahn (2019a, p. 75). 6 see infra part 2. 7 see infra part 3. 9masks, face veil bans and “living together”. what’s privacy got to do with it? public governance, administration and finances law review • 2. 2021 first, one might ask why masks and face veils led europeans to reject them . i focus on three possibilities . masks conceal identities; masks promote criminality; and masks make people feel uneasy . the sense of uneasiness strikes me as the strongest argument for the broad scope of the face veil bans enacted across europe . but i am not sure they tell the entire story .8 alternatively, one can turn the question around and ask what makes europeans so willing to show their faces . this question intrigues me, and is at the heart of this essay . in the united states, showing one’s face can be risky – certainly if you are a protester, but even if you are not . so the need to mask, if not accepted, is understood . could it be that, in europe, the broader conception of privacy (the right to be private in public, as well as the right to be forgotten) makes showing one’s face an easier ask than it is in the united states?9 i conclude by exploring the implications of my argument . european privacy norms might protect the informational privacy of the maskless individual, and give that person control over what society can know about them . but the “living together” doctrine and the face veil bans that it justifies fall short when it comes to decisional privacy . they cannot account for the crazy person who, for whatever reason, simply wants to wear a mask . the larger question is whether one can tie the lack of decisional privacy to mask (or unmask) to other aspects of european privacy norms .10 let me end this section with some caveats . first, this is an early presentation of this idea . as someone born and raised in the united states, i am far from an authority on what europeans think about privacy . i am also well aware that not all europeans think the same thing about it . second, i am not entirely convinced that the living together doctrine is genuinely about showing one’s face . to me, the argument that “living together” is largely a  fig leaf for arguments about the place of muslims in a  secular europe has some force . rather, i wrote this essay as a  thought experiment . if one takes “living together” at face value, what does this mean? 1. mask bans in the united states mask bans have a long history in the united states (kahn, 2019a, pp . 88–104, describing the history behind the new york and anti-klan mask bans) . in 1845, the new york state enacted a  ban on wearing a  mask while armed . the law, enacted in response to angry tenants challenging efforts to collect back rent, remained in force until 2020  (kahn, 2019a, pp . 88–97, describing the political context behind the passage of new york’s mask ban; kahn, 2021, pp . 669–672, describing the repeal of new york’s mask ban) . most mask laws, until a  few years ago, however, have targeted the ku klux klan . as the waves of klan activity rose in the 1870s, 1920s, and 1940s and 1950s, mask bans followed .11 the bans had a variety of specific purposes . but a key element in all of 8 see infra s. 3(3.1). 9 see infra s. 3(3.2). 10 see infra part 4. 11 this is the main point i make in my paper, see kahn (2019b). 10 robert kahn public governance, administration and finances law review • vol.  6. no. 2.  the bans was the expression of a symbolic repudiation of the klan – sometimes by social groups that shared its interest in maintaining segregation (kahn, 2019b, pp . 14–17) . more recently, a new wave of bans has targeted a wide range of groups including antifa, and environmental activists protesting pipelines . these laws, however, like their antiklan predecessors, often served a  symbolic purpose  –  in the case of the more recent laws, to connect the groups like antifa with the ku klux klan (kahn, 2019a, pp . 137–140, describing the rise of anti-antifa mask bans) . despite the anti-klan origins of most mask bans, the bans targeted all manner of mask wearers – including those with no connection to the klan or riotous tenants . for example, in 1878  the tennessee supreme court upheld a  mask prosecution brought against a man caught stealing from a chicken coop,12 while in 1968 the appellate division in new york upheld a prosecution of a man dressed in make up early in the morning on a manhattan subway platform .13 georgia’s anti-mask law was used against a man wearing a  wrestling mask to entertain neighbourhood children,14 and against a  jogger who was wearing a  mask on a  cold day .15 at the same time, these laws were rarely used  –  and at times defendants were able to escape punishment by invoking the original, anti-klan purpose of most of these laws . since then, there has been a noticeable shift . in the 1970s and 1980s mask wearers could often invoke their constitutional rights to freedom of speech and assembly; since the mid-1990s, this has become much harder . in church of the knights of the american ku klux klan v. kerik,16 the second circuit rejected the theory  –  accepted by earlier courts – that the right to anonymous membership established in naacp v. alabama17 extended to mask wearing . being able to conceal your name does not entitle you to conceal your face .18 even when courts narrowed the scope of mask bans by requiring the state to show that the wearer “intended to intimidate” others, the door was open for the police to interpret “intimidation” quite broadly . for example, the eleventh circuit in gates v. khokhar, upheld that the refusal at a  peaceful demonstration to obey police officer’s order to unmask could be a form of “intimidation” .19 against this background, privacy has emerged as a  way to protect mask wearers . scott skinner thompson has argued that wearing a  mask, or hood, could send the symbolic message: “don’t look at me!” (skinner-thompson, 2017, p . 1703) . likewise, in robinson v. state, the florida supreme court invalidated that state’s mask law as an overly broad intrusion on the wearer’s privacy .20 in a ruling that ran all of six paragraphs, 12 state v. walpole, 68 tenn. 370, 371 (tenn. 1878) (upholding the ten year minimum penalty for mask wearing by noting the sacrifices made during the suppression of the confederacy). 13 people v. archibald, 296 n.y.s.2d 834, 835–36 (n.y. app. div. 1968). 14 daniels v. state, 448 s.e.2d 185 (ga. 1994). 15 molette v. city of forrest park, 780 s.e.2d 780 (ga. app.2015). 16 356 f.3d 197 (2d cir. 2004). 17 357 u.s. 449, 462 (1957) (disclosing membership list would impinge on freedom of association where members, were their identities revealed, would face harassment). 18 kerik, 356 f.3d, 205. likewise, kerik held that a ku klux klan mask was not “expressive” because a klan mask did not make an expressive message distinct from the robe and hood. ibid. 209. 19 881 f.3d 1290 (11th cir. 2018). 20 robinson v. state, 393 so. 2d 1076, 1077 (fla. 1980). 11masks, face veil bans and “living together”. what’s privacy got to do with it? public governance, administration and finances law review • 2. 2021 the court could not conceive of a  blanket mask ban being constitutionally permissible given the wide range of innocent mask wearing would proscribe .21 while robinson was decided in 1980, the sense that the state cannot punish all mask wearing suggests that privacy  –  especially decisional privacy  –  might play a  role in protecting the right to mask where speech alone might fail . at least in the united states . at minimum, if one follows the logic of robinson one can identify many possible innocent uses of masks . for instance, one might  –  as occurred during the pandemic  –  wear a  mask for health reasons; alternatively, one might wear a  mask for religious reasons, as some muslim women do .22 moreover, in a  world where clearview ai maintains a  database of 3  billion faces scraped from facebook, google and cctv cameras, a  person with no  intent to commit a  crime might still find masking a  reasonable step to protect their privacy (kashmir, 2020, describing the operations of clearview ai) . this choice to mask might be expressive; but it also might simply be a  form of rational action in a  society such as the united states where people in “blue states” monitor readers of the new york post, while people in “red states” monitor readers of the new york times – and shaming/cancellation is always one misstep away . this suggests a need to rethink our use of mask bans – and, for that matter, how we protect mask wearing (kahn, 2021, pp . 707–708, opposing mask mandates; lawrence et al ., 2020, p . 509) . to the extent we are committed to the ideal of a  small-l liberal society in which the individual is free to choose their version of the good life, the ability to conceal one’s identity is a necessity . this does not mean, however, that a society must tolerate all masking . a  mask could be punishable under a  burglary statute; or, maybe, a  state like north dakota concerned about outside agitators spreading mayhem during anti-pipeline protests could enact a  law banning wearing a  mask at a  protest, or while trespassing (kahn, 2021, pp . 691–693, describing anti-pipeline mask bans) .23 what north dakota enacted instead, a blanket ban on mask wearing in all public areas in the state, is harder to justify . 2. face veil bans in europe this logic of limited or no  mask bans, however, runs into a  roadblock once we turn to europe . as we have seen, in 2014 the echr held that “living together” requires showing ones face .24 here is a  conception of social life in which decisional privacy has no apparent role – at least when it comes to masking . this is so, even though there were very few european bans on masking in 2006, when the current wave of face veil bans began . there are two possibilities here: 1 .  the rise of face veil bans is not really about masking, but about muslims (or the aspects of islam represented by the face veil); or 2 .  there is something about european conception of the self that is comfortable with 21 ibid. 22 for an overview of the reasons muslim women veil, see brems et al. (2014). 23 i am not necessarily defending a mask ban narrowly targeting protest activities. all i am saying is that such a ban would be preferable to the statewide ban north dakota ultimately enacted. 24 sas v. france, para. 142. 12 robert kahn public governance, administration and finances law review • vol.  6. no. 2.  exposing faces in an age of mass surveillance . it is this sense of comfort that i want to study . but before getting into this, it is worth examining the anti-islamic sentiment behind face veil bans . part of this is certainly true . the motivation behind the face veil bans – from the municipal bans in belgium and the netherlands, to the laws that swept france, austria and several other european countries  –  was not merely about showing one’s face . they were bans of the burqa, which was opposed for a  variety of reasons (gender equality, fear of giving credibility to political islam, etc .) that had nothing to do with face showing . one sees this, for instance, in the push for bans of the hijab and burkini as well as in some of the legislative debates over the face veil bans (kahn, 2021, pp . 677–679) . for instance, the austrian legislators enacting their 2017  law appeared much more concerned about islam, assimilation and gender issues than they were about the ways masks impede human communication (kahn, 2021, p . 680) . i have discussed anti-islamic motivations of bans on headscarves and burqas in other places (see, e .g . kahn, 2011); here i want to take the echr, and the ban supporters at their word . was the court right that, in a  modern society showing one’s face is a  necessity? at first blush, this appears plausible . the person who wears a  mask while shopping, walking down a  street or tending their garden might well be seen as a  bit eccentric . of course, if this is true of europe, it is also likely true of the united states as well . and yet the mask debate in the united states has largely been about threats (be they the klan or antifa) rather than about everyday mask wearing . this brings us privacy norms, and more specifically, the contrast between the united states, where privacy is spatial and centres on the home, and europe where privacy is attached to the person (see whitman, 2004, contrasting the dignity of personal honour with the freedom from intrusion on experiences in one’s own home) . whereas in the united states, a person who ventures outside their home and is caught on camera is largely out of luck, in europe one is supposed to (in theory at least) be able to be “private in public” . this is the message of the von hanover case .25 and if princess caroline can keep her images out of the paper, perhaps non-royals (i .e . both harry and meghan as well as you and me) can do so as well . this belief, to the extent it is true, might explain the willingness of europeans to adopt the “living together” rationale – even if it came about for other reasons . if i know bild will not run my picture, why should i bother with a mask? if i have a right to petition google to remove unpleasant images from my past, why should not i stare into the cctv screen and smile?26 the willingness to dispense with masks might be even stronger to the extent european citizens trust their governments more than americans do . the question, however, remains whether this trust is reasonable . for the european ready to denounce google’s refusal to let us be forgotten as “totalitarianism” (gabriel, 2014, cited and briefly described in solove & schwarz, 2017) what is the reason for 25 von hannover v. germany (no. 1), no. 539200/00, 24 june 2004. 26 for example, peck v. united kingdom, 44647/98 [2003] echr 44 (28 january 2003) describes a situation in which footage of a suicide attempt was broadcast on television. despite promises to mask the applicant’s identity, it was revealed. 13masks, face veil bans and “living together”. what’s privacy got to do with it? public governance, administration and finances law review • 2. 2021 trusting the gdpr, with its exception for national security matters, will actually protect people from the consequences of mass surveillance? 3. deeper questions – “living together”, masking and human nature this leads us to deeper questions about masking and human society . the pandemic has, for good or bad, given us a  lesson on the social effects of masking . mask wearing can make it harder to discern emotions – at least what is conveyed through a smile or frown . mask wearing can also be physically uncomfortable, and an opening for discrimination – for example, if the wearer is stigmatised as being “sick” or from a foreign culture . but if mask wearing is scary in some situations, what is one to make of societies in east asia where mask wearing has a long history, and in which hiding one’s emotions behind a  mask is seen as positive  –  at least in some situations? (see horii, 2014, describing japanese masking culture .) is culture a  more powerful force than we have previously imagined? is mask wearing more limited in japan, china and other parts of the far east than we have been led to suppose? or is the message of the sas court – “living together” requires showing ones face – an incomplete account of what modern society is all about? here, once more, it is tempting to fall back upon the islamic foil . if european society is distinctly modern, then casting masking (and the burqa) as pre-modern might make symbolic sense .27 my concern, however, is that whatever the origins of the “living together” argument, it has been primed for success in europe – in part because rejecting “living together” might require facing up to the anti-muslim motives behind many of the face veil bans . not only that, the extent we accept the “living together” rationale as a  serious statement of social reality, it might become reality . after all, courts have the power to educate the masses . could what began as an attempt to provide a  plausible defence of mask bans enacted for other reasons over time become a  generally accepted truth of human nature? this section of the paper probes these questions . if “living together” is the future of europe, what makes it tick? here i explore two possibilities: 1 .  “living together” is primarily a rejection of masking ; and 2 . “living together” rests on a shared understanding that, in europe at least, it is safe to show one’s face . 3.1. why europeans might reject masking masks are not popular . since march 2020, we have had the burden of wearing masks . the emergence of vaccines in april and may 2021 raised the joyous possibility of taking our masks off . a world emerging where we can finally see the faces of shopkeepers, jogging partners, students, teachers, police officers, friends and family . we can see smiles 27 this is largely the approach taken by stephane mechoulan, who casts islam as a civilisational threat to europe (mechoulan, 2018, p. 16). 14 robert kahn public governance, administration and finances law review • vol.  6. no. 2.  and frowns . this is a  positive development . yet my argument here is not about mask mandates (hopefully they will wither away), or the part of the debate over the burqa that involves compulsion . nobody should be forced to wear an article of clothing against their will without a  good reason . in this regard, sas v. france corresponds to a basic fact of human nature – people generally do not like wearing masks . my interest, instead, is about a  deeper dislike of masks . consider fox news host tucker carlson, who wants you to take off your masks because they make him feel uncomfortable (mastrangelo, 2021) . one does not have to agree with carlson’s rationale  –  that mask wearing is a  symbol of obedience that unnerves him28  –  to see broader issue here: does one have a  right to complain that someone else  –  a  klan member, an anarchist or a muslim woman – is wearing a mask? to read sas, and some of the other local court cases upholding european face veil bans, the answer to this question is “yes” . it is worth going through some of these objections to masks . a first set of objections concerns identification . a  mask wearer is unidentified . as such, this person is scary . as the georgia supreme court stated in state v. miller upholding that state’s anti-klan mask ban, a  masked figure can strike terror in the heart .29 moreover, burglars wear masks to conceal their identity . finally, masks by concealing identity can hinder communication . the speaker cannot “see” who they are dealing with . as strong as these objections are, however, there are some difficulties . first, there are some instances where the mask does not conceal the wearer’s identity . for instance, if everyone knows that x wears a burqa, and she is one of the few muslim women who veil, has her identity actually been concealed? a  larger problem is with the scope of mask and face veil bans . while some bans have been interpreted to only cover mask wearing that intimidates others, a  blanket mask ban covers a  much broader range of conduct . not every mask wearer is a klan member or antifa supporting eco-terrorist . in daniel v. state a  georgia appeals court upheld the conviction of a  man wearing a  wrestling mask to entertain neighbourhood children .30 while the georgia supreme court reversed,31 the lower court ruling shows the extent of the problem . or, to return to carlson, his concern with mask wearers is not that they will cause harm, or break the law . his fear is that mask wearers are too “obedient” (mastrangelo, 2021) . the objection to masking has to have deeper roots than potential intimidation or fear of criminal activity . one possibility, raised by the belgian supreme court in its ruling upholding that country’s mask ban, is that the mask is a symbol of the absence of freedom .32 someone who masks is unfree, even if they are unfree by their own choice . while the “choice” question may seem obscured in the case of some burqa wearers,33 28 ibid. 29 598 s.e.2d 547, 549. 30 daniels v. state, 438 s.e.2d 99, 101–102 (ga. app. 1993). 31 daniels v. state, 448 s.e.2d 185 (ga. 1994). 32 see belgian constitutional court, decision of 6 december 2012, para. b.21. (cited in sas, para. 42) (masks deprive wearer of “any possibility of individualisation by facial appearance”). ironically, choosing to wear a mask itself might be a form of “individualisation”. 33 on the other hand, some burqa wearers don the garment of their own accord. see brems et al. (2014, pp. 6–7). 15masks, face veil bans and “living together”. what’s privacy got to do with it? public governance, administration and finances law review • 2. 2021 masking is a  choice . the lack of freedom is less about the wearer’s state of mind than with the role the mask plays as a  symbol of bondage . but is this a  fair reading of the mask? after all, many mask wearers (myself included) wear masks to avoid covid, not to take part in a project of social control . finally, there is the vague sense of unease many feel in dealing with someone wearing a  mask . one sees this in the 2006  comments of british home secretary jack straw who disliked veils because, when he took his customary evening strolls, he wanted to see the faces of the muslim women he passed in the street (strucke, 2006) . while in the “me too” age, one can critique this as an example of a male, orientalist gaze, there is something to the argument that seeing one’s face adds to daily life . in the virtual world of zoom classes, teachers often ask that students turn their cameras on – in order to see their faces . on the other hand, the zoom students are preparing for a social interaction; turning one’s camera off might be considered rude . by contrast, the burqa wearers encountered by straw were not anticipating an encounter with the home secretary; rather, like him, they were simply taking a walk . indeed, it is unclear just how many mask wearers straw encountered during his walks . if showing one’s face is part of a european project of “living together”, okay . but how necessary is it to punish all instances of mask wearing in a  society if most people show their faces most of the time? moreover, anthropological work on burqa wearers in the netherlands and belgium suggest that, contrary to the argument that showing one’s face is necessary for social communication, burqa wearers in those countries could communicate quite well with others in society .34 this brings us back to our original set of questions . if masks are not usually intimidating, are not always a symbol of bondage, and do not routinely hamper human communication, then maybe the reason europe has rejected the mask has less to do with the harms of the mask, and more to do with a  sense of trust about showing one’s face  –  a  sense of trust that i, as someone from the united states, struggle with a little bit . to that question, we now turn . 3.2. why europeans may feel comfortable showing their faces perhaps, then, “living together” came about because, in europe, showing one’s face is not a big deal, in part because of european conceptions of privacy – especially the idea about being private in public . perhaps, in other words, europe is a place where because of the right to be forgotten, and other privacy protections, the right to obscure one’s identity is not necessary . let me address an initial objection, namely that the real concern was with the burqa, not “living together” . i am not sure this changes things . assume for argument’s sake the sas court did fashion “living together” to avoid offending european muslims by offering their “real” reasons for allowing face veil bans .35 even if this is true, sas still 34 ibid. 18–20. 35 these reasons – including concerns about gender equality and security – were raised by the parties and rejected by the sas court. sas v. france, paras. 118 (rejecting gender equality concerns), 137 (rejecting security concerns). 16 robert kahn public governance, administration and finances law review • vol.  6. no. 2.  thought little enough of the mask to sacrifice the right to wear one (even for nonreligious purposes) . the deeper question is whether the premise hinted at in sas – that showing one’s face is a  not only customary but (from a  privacy perspective) safe  –  is actually true . before exploring this question in a european context, let me return briefly to the united states . during the 1970s, 1980s and 1990s, american courts repeatedly held that fear of retaliation could justify masking . two cases involved iranian students protesting the shah of iran,36 and another case turned on klan members who faced harassment in indiana (including leaving a barbie doll’s severed head in a jar of gasoline on a member’s doorstep) .37 these cases show how showing one’s face can be dangerous in the united states . this reflects, in part the highly charged political context of the cases in question  –  the shah of iran’s repression and the animosity triggered (justifiably so) by the klan . meanwhile, those who chose to show their faces and were photographed found themselves out of luck . this was true as early as 1953  when the california supreme court decided that a couple working a stand at a farmer’s market captured in an embrace by a  photographer had no  standing to challenge the running of the photo in harper’s bazaar.38 explaining why the photo of the couple in an “amorous pose” could run in a  national magazine, the court explained that the couple had “voluntarily exhibited themselves” .39 a few years later, the new york court of appeals reached a similar result, concluding that a  man dressed in a  green outfit on st . patrick’s day had “voluntarily became part of the spectacle” .40 more recently, the appellate court in new york held that photos taken across the courtyard of an apartment building were “art” and therefore fell outside new york’s appropriation law which prohibits the use of one’s image for trade or advertising purposes .41 one can agree or disagree with these outcomes . for its part, the california supreme court argued that ruling for plaintiffs would make it possible for periodicals to run pictures of parades and street scenes .42 but the common approach in the united states to the privacy implications of picture taking might lead one to want to wear a mask . this is especially true given that, sometimes, the pictures are sometimes not accurate . consider for example, finger v. omni, in which a  photo of plaintiffs  –  a  large, healthy looking family of six  –  accompanied an article discussing the relationship between caffeine consumption and in vitro fertilisation .43 the only link to the family 36 see aryan v. mackey, 462 f.supp. 90 (n.d. tex. 1978) (upholding the right of anti-shah protesters to conceal their identities); ghafari v. mun. court for s.f. judicial dist., 150 cal. rptr. 813, 818 (cal. ct. app. 1978) (same). 37 am. knights of the ku klux klan v. city of goshen, 50 f. supp. 2d 835, 839 (n.d. ind. 1999). cf. people v. aboaf, 721 n.y.s.2d 725, 728 (n.y. crim. ct. 2001) (rejecting harassment claim of anarchists due to lack of evidence). 38 gill v. hearst publishing co., 253 p.2d 441, 444 (cal. 1953). 39 ibid. 443, 444. 40 murray v. new york magazine co., 267 n.e.2d 256, 258 (n.y. 1971). 41 foster v. svenson, 7 n.y.s.3d 96 (app. div. 2015). 42 gill v. hearst publishing co., 444. 43 finger v. omni int’l ltd., 564 n.y.s.2d 1014, 1015 (n.y. 1990). 17masks, face veil bans and “living together”. what’s privacy got to do with it? public governance, administration and finances law review • 2. 2021 and the content of the article was its size .44 or arrington v. new york times co., in which a  picture of african american plaintiff wearing a  suit accompanied an article about how “the black middle class” had “been growing more removed from its less fortunate brethren” .45 the plaintiff claimed that the article did not represent his views and was insulting and degrading  –  he lost his case .46 or sipple v. chronicle publishing co., in which the plaintiff broke up an assassination attempt against president gerald ford in san francisco was outed as gay – at a time when his family did not know it .47 he also lost his case .48 if oliver sipple, clarence arrington or the finger family had been wearing masks, or obscured their identity in some other way, they would have avoided the public gaze, and the lack of privacy that flowed from it . so, from a privacy law perspective, there may be good reasons why a person out and about in society (or, as foster suggests, in front of a window), might be leery of showing their face . europe has a  different feel . privacy is explicitly protected by article 8  of the european convention on human rights, and the european court of human rights, in von hannover v. germany (no. 1),49 held that pictures of princess caroline of monaco riding her horse, dining at a restaurant, and tripping over an obstacle and falling down,50 could not run in german newspapers given that she exercised “no official function”, and “the photos and articles related exclusively to her private life” .51 this applied, even though princess caroline was “a public figure of contemporary society ‘par excellence’” .52 instead, to be worthy of publication, the court will consider “the contribution that the published photos make to a  debate of general interest” .53 if even a  public figure like princess caroline has the right to be “private in public”, one assumes private figures, like arrington, or the embracing couple whose photo ran in harper’s bazaar would have even greater privacy protection – and, therefore, less of a need to don a mask, or otherwise obscure their identity . on the other hand, the european court’s balancing test might not help the klan members in goshen, or a participant in the 6 january 2021 insurrection, or a black lives matter rally . here, perhaps, european and american perspectives on privacy diverge less than one might expect . the unlucky tiki torch carrier, who after marching charlottesville, virginia to protect robert e . lee, was fired from their job at subway ( judkis, 2017), has 44 ibid. 1017. for their part, plaintiffs maintained that none of their children were born through in vitro fertilisation and that they never participated in research on the impact of caffeine on fertility. 45 449 n.y.s.2d 941, 942 (n.y. 1982). 46 ibid. 944 (noting that, given the plaintiff ’s “race, educational background, professional status, personal poise and habit of dress”, he could be perceived to be a member of the black middle class). 47 sipple v. chronicle publishing co., 201 cal. rptr. 665, 666–667 (ct. app. cal. 1984). 48 ibid. 669. the court of appeals noted that sipple’s sexual identity had already been disclosed by local magazines and, as such was not private. ibid. while true, had sipple been masked, or otherwise unseen when he saved president ford’s life, it is highly unlikely that his identity would have been revealed. 49 von hannover, paras. 79–80. 50 ibid. para. 11. 51 ibid. para. 76. 52 ibid. para. 74. 53 ibid. para. 76. 18 robert kahn public governance, administration and finances law review • vol.  6. no. 2.  both inserted themselves into the spectacle54 as well as “contributed . . . to a  debate of general interest” .55 moreover, even in europe an individual walking the streets is at risk of being photographed by another person with a  cell phone  –  or by closed circuit tv .  these photos might also make their way to the internet . so europeans too might have a good reason to don a mask . here a second doctrinal difference between the united states and europe helps our hypothetical european walker feel more comfortable about baring their face  –  namely the right to be forgotten .56 in the united states, once a photo is public, it will be there for a  while . this provides a  great incentive to cover one’s face  –  at least when showing one’s face would be embarrassing . by contrast, in europe there is at least the possibility of removing links to past photos . so, while you are out strolling, and come across not only straw, but also someone with a  cell phone, you have the recourse of having the photo that sooner or later will emerge removed from google, and other search engines . at least in theory . the court promises to balance the right to be forgotten with “the role played by the data subject in public life”57 – a balancing act cast through the lens of von hannover. indeed, the data subject does not even need to show that the photo is “prejudicial”,58 merely that it is outdated, irrelevant or excessive .59 while there are inherently vague terms, they offer hope that the right to be forgotten will apply to routine photographs of ordinary people  –  even when the photos are not offensive, or harmful but merely unwanted . this in turn suggests, at least in theory, that it is possible to “live together” without facing harm from showing one’s face . this is all the more true given the broad scope given to data processing in europe60 and the right to retract information about oneself under the general data privacy regulation .61 4. conclusion the argument that european conceptions of privacy allow one to show one’s face in public with less fear than might occur in the united states is not a complete explanation for the rise of the “living together” concept as a  response to the burqa . even if the “private in public” concept from von hannover and the right to be forgotten give the typical european a measure of control over what information is shared with the public, privacy also has a decisional element . the face veil bans enacted across the continent do not merely ban face veils worn for the purpose of concealing identity so as to avoid 54 murray v. new york magazine co., 258. 55 von hannover, para. 76. 56 google spain, s.l. and google, inc. v. agencia española de protección de datos and mario consteja gonzález, cases c-131/12 (13 may 2014). 57 ibid. para. 97. 58 ibid. para. 89. 59 ibid. para. 94. 60 criminal proceedings against bodil lindqvist, european court of justice, 11 june 2003 (the church catechist’s list of names, addresses and hobbies of church employee’s is data processing under the european data directive). 61 see general data privacy regulation, art. 17 (describing “a right to erasure”). 19masks, face veil bans and “living together”. what’s privacy got to do with it? public governance, administration and finances law review • 2. 2021 being photographed, they punish covering one’s face for any reason at all, and as such restrict decisional privacy (as well as privacy in the sense of giving the individual control over what they decide is public or private; see westin, 1967) . this brings us back to my original question about “living together” and privacy . is there something about european culture that explains the lack of concern about decisional privacy? in europe, one can be private in public . so, even if someone snaps your photo, most likely it will not run in a  newspaper (at least in theory) . even if you are unlucky, and your photo does appear on a website or newspaper, you can restrict public access via google by invoking the right to be forgotten . a rational data subject, acknowledging these conditions, would surely choose to unveil their face . but does the european conception of personal privacy have a  place for the person who  –  for whatever reason, no matter how irrational, silly or idiosyncratic – would prefer to cover their face? i have some doubts here, ones i would like to take up in future work .62 references brems, e . et al . (2014) . the belgian “burqa ban” confronted with insider realities . in e . brems (ed .), the experiences of face veil wearers in europe and the law (pp . 77–114) . cambridge university press . online: https://doi .org/10 .1017/cbo9781107415591 edwards, s . s . m . (2014) . no burqas we’re french! the wide margin of appreciation and the ecthr burqa ruling . denning law journal, 26, 246–260 . online: https://doi .org/10 .5750/dlj .v26i0 .931 gabriel, s . (2014, may 14) . unsere politischen konsequenzen aus der google-debatte . faz . giles, b . (2017, august 23) . legislator to draft law to unmask protesters he compares to ku klux klan . arizona capitol times . online: https://bit .ly/3kowtok johnson, j . h . (2001) . versailles, meet les halles: masks, carnival, and the french revolution . representations, (73), 89–116 . online: https://doi .org/10 .1525/rep .2001 .73 .1 .89 judkis, m . (2017, august 14) . charlottesville white nationalist demonstrator loses job at a libertarian hot dog shop . the washington post . online: https://wapo .st/3dsre5b kahn, r . (2019a) . the long road back to skokie: returning the first amendment to mask wearers . brooklyn journal of law and policy, 28(1), 71–149 . online: https://doi .org/10 .2139/ssrn .3451477 kahn, r . (2019b) . mask bans as expressions of memory politics in the united states . online: https://doi . org/10 .2139/ssrn .3434689 kahn, r . (2020) . masks, culture wars, and public health expertise: confessions of a mask “expert” . university of st . thomas legal studies, working paper, no . 20-08 . online: https://bit .ly/32i35w4 kahn, r . (2021) . “my face, my choice?” mask mandates, bans, and burqas in the covid age . new york university journal of law and liberty, 14 (3), 651–708 . kahn, r . a . (2011) . are muslims the new catholics? europe’s headscarf laws in comparative political perspective . university of st . thomas legal studies, working paper, no . 20-08 . kashmir, j . (2020, january 18) . the secretive company that may end privacy as we know it . the new york times, updated 18 march 2021 . online: https://nyti .ms/32gmqbp 62 there is a lot more to say here. in addition to the possibility that a connection dating back to the french revolution, connects showing one’s face and revolutionary transparency, see johnson (2001), let me bring up restrictive european rules about naming children, and changing one’s name. see shakargy (2020, pp. 659–667) describing restrictive naming practices in france, germany and spain. https://doi.org/10.1017/cbo9781107415591 https://doi.org/10.5750/dlj.v26i0.931 https://bit.ly/3kowtok https://doi.org/10.1525/rep.2001.73.1.89 https://wapo.st/3dsre5b https://doi.org/10.2139/ssrn.3451477 https://doi.org/10.2139/ssrn.3434689 https://doi.org/10.2139/ssrn.3434689 https://bit.ly/32i35w4 https://nyti.ms/32gmqbp 20 robert kahn public governance, administration and finances law review • vol.  6. no. 2.  lawrence, c . v . et al . (2020) . masking up: a covid-19 face-off between anti-mask laws and mandatory mask orders for black americans . california law review, 11, 479–516 . online: https://doi .org/10 .2139/ ssrn .3695257 mastrangelo, d . (2021, april 27) . tucker carlson: “contact child protective services” if you see kids wearing masks outdoors . the hill . online: https://bit .ly/3nukk9u mechoulan, s . (2018) . the case against the face-veil: a european perspective . international journal of constitutional law, 16(4), 1267–1292 . online: https://doi .org/10 .1093/icon/moy099 michaels, r . (2018) . banning burqas: the perspective of postsecular comparative law . duke journal of comparative and international law, 28, 213–245 . mitsutoshi h . (2014) . why do the japanese wear masks . electronic journal of contemporary japanese studies, 14(2) . shakargy, s . (2020) . you name it: on the cross-border regulation of names . american journal of comparative law, 68(3), 647–688 . online: https://doi .org/10 .1093/ajcl/avaa026 skinner-thompson, s . (2017) . performative privacy . university of california davis law review, 50(4), 1673–1740 . solove, d . j ., & schwarz, p . m . (eds .) (2017) . information privacy law . aspen . strucke, j . (2006, october 6) . straw : “i’d rather no one wore veils” . the guardian . online: https://bit . ly/3qsstlk westin, a . (1967) . privacy and freedom . atheneum . whitman, j . q . (2004) . the two western cultures of privacy: dignity versus liberty . yale law journal, 113, 1151–1221 . online: https://doi .org/10 .2307/4135723 https://doi.org/10.2139/ssrn.3695257 https://doi.org/10.2139/ssrn.3695257 https://bit.ly/3nukk9u https://doi.org/10.1093/icon/moy099 https://doi.org/10.1093/ajcl/avaa026 https://bit.ly/3qsstlk https://bit.ly/3qsstlk https://doi.org/10.2307/4135723 © 2021 the author public governance, administration and finances law review vol.  6. no. 1. (2021) • 73–87 . doi: 10 .53116/pgaflr .2021 .1 .7 the biopolitical turn of the post-covid world . leftist and neoliberal insights of puzzling biopolitics oana şerban* ¤ * university of bucharest, faculty of philosophy, e-mail: oana .serban@filosofie .unibuc .ro abstract: as the 21st century became shaped by the matters of public health, the covid-19  pandemic revealed that it is a  trap to believe that we have to choose between the medicalisation of politics and the politicisation of medicine . my thesis is that models of good governance in the post-pandemic world must be shaped by leftist principles, values and practices, in order to ensure not the reopening, but the reconstruction of public life, which needs more than ever overcoming social inequalities and political polarisations, whereas liberal principles should be implemented in order to fix standards of economic performance and efficiency after applying mechanism of recovery . governments as well as electoral spheres are reticent to biopolitical incursions, historically associated with panoptic systems . i claim that it is time to plead for positivising biopolitics as political humanism . my research will expose twelve themes for disseminating biopolitics as political humanism, focused on sensitive key-domains such as labour, social cohesion, security, infodemia, domestic life and good governance . keywords: biopolitics, biosecurity, biohumanism, good governance, panoptic systems 1. immunising communities: a biopolitical framework inspired by robert esposito the pandemic raised by the spread of covid-19 has rapidly developed what politically is known as a state of exception: human rights have been narrowed or even suspended for a determined period of time and the management of the sanitary crises has been doubled by the management of population . such coordinates depict what foucault, agamben and esposito claim as a biopolitical scenario: governments face the exclusive responsibility of securing biological life (zoe), revealing the non-biological life (bios), reduced to economy, politics, culture, as a  secondary priority . it is well known that biopolitics is one of the worst nightmares of political philosophy: it activates only in cases of natural emergencies, such as pandemics, or contractual break-ups that lead to political general conflicts or wars . at a  first glimpse, the biopolitical power draws on the rationality invested by governments in shaping and controlling populations by procedures of constraint and coercion that tend progressively to barrow, counterweights of civil freedom . traditionally, biopolitics becomes the ‘politics of life’ (siisiäinen, 2018, p .  18), that https://doi.org/10.53116/pgaflr.2021.1.7 https://orcid.org/0000-0003-1071-9222 mailto:oana.serban@filosofie.unibuc.ro 74 oana şerban public governance, administration and finances law review • vol.  6. no. 1.  tracks a particular raison d’état that quantifies freedoms and liberties as variables influenced by states of exception (agamben, 2005) that ‘do not foreclose all possibilities of historical specificity’ (walsh, 2014, p . 9) . nevertheless, biopolitics is an equation of power that frames sovereignty and biopolitics as two mutually productive forces: the more a situation is exceptional, the more the administration of life by disciplinary practices is needed . at the threshold of modernity, biopolitics has been grasped as a form of governance that articulates sovereignty by maximising mechanisms of control and surveillance; thus ‘the production of a biopolitical body is the original activity of a sovereign power’ (agamben, 1998, p . 6) . according to agamben, albeit such states of exception reflect a  suspension of normality and consequently impose certain power practices, societies rather assume that as long as a  juridical content is rational, they can abandon themselves to it . therefore, in a  biopolitical frame, individuals do not expect to be banned by the law; they are abandoned to the law (agamben, 1998, p . 31) . this phenomenon happens because of two major causes: on the one hand, each legal content is determined by the jus divinum and therefore, we tend to respect the law because we acknowledge our respect towards a  messianic form of rationality, that is subsequent to any juridical imperative; on the other hand, because we abandon ourselves to the law by the law, or, to be more specific, ‘abandonment respects the law, it cannot do otherwise’ (nancy, 1983, 149) . but how far can we address nowadays such abandonment? in the traditional paradigm of biopolitics, it was conceived as a proof of trust and obedience in front of a  superior ontological authority that inspires power; nonetheless, today, in a secular world, such aspects are hardly conceived as parts of a reliable, valid argument . after the 21st century, political philosophy turned biopolitics towards a  form of biopower that has nothing to do with a divine rationality of state . the dark decades of this historical time have been shaped by a radical biopolitics that advanced not the politicising of life, but the politicising of death . political bodies have been nationalised, and historical subjects have been regarded as exceptions, meaning as conditio inhumana, lacking the dignity and the right to live as long as they were declared undesirable subjects within a  state border . we do not know if god lived at auschwitz (see agamben, 2002), but it is clear that biopolitics feed the mentalities behind panoptic systems that renounced to subtlety and shift to dominant, dictatorial control mechanisms, specific to death camps . therefore, biopolitics operates in a double sense: from the oppressor to the oppressed and vice versa, meaning that it measures the biopower that annihilates life and the resistance of the victims against invalidating their bios and retracting their zoe. the dominant exegetic part of biopolitics is mainly concentrated on the negative project of biopower: authors such foucault and agamben insist on the destruction phenomenon behind the architectonic of disciplinary and punitive societies . nevertheless, authors such as esposito bring to the spotlight a  more balanced, equilibrated perspective, according to which disadvantaged communities have strengthened their capacity to survive and overcome obstacles dictated by a  discretionary biopower and that a  biopolitical project is equally represented by the attempt to face, resist and recover from such dictatorial regimes . this latter acceptance of biopolitics should rather be reinforced nowadays when the covid-19  pandemic activated a  biopolitical undertaking of good governance and resilience . the main aim of the current analysis is to prescribe 75 public governance, administration and finances law review • 1. 2021 the biopolitical turn of the post-covid world. leftist and neoliberal insights of puzzling biopolitics a  biopolitical positive project that could depict solutions for raising durable resilient societies governed in the name of life without sacrificing bios, namely culture, religion, society or economics . such endeavour reflects a great opportunity to address biopolitics as a  new humanism, that we have expected after camus’s and heidegger’s claims (inspired by different reasons1) that humanism is no  longer possible in our contemporary history . this would be biopolitical humanism that targets resilience as a product of cultural mentalities invested in immunising civilisations against the abnormal life caused by pandemics . first, we should briefly overview the advantages of a biopolitical critique of this pandemic . a biopolitical governance will help individuals to secure life and maximise its quality . this biopolitical background reshapes, of course, the major priority of governance models . we are used to governing by administering regenerable resources  –  forms of capital, highly criticised by leftist approaches and rather preferred by liberal convictions . nonetheless, we have never been challenged by now to govern life as an unregenerable resource, for which a biopower is needed to conserve the life and safety of populations and to aim at developing nations in due course . the correct question is not ‘how compromised is the sanitary and economic normality of the state?’, but ‘how far are we from understanding that any crisis is an opportunity?’ krisis is not possible without krinein: the crisis imposes a  judgment, a  choice, thus, an opportunity . we have the possibility to choose biopolitics as a  solution to the project of good governance to combat the effects of the health crisis on the well-being of society and to increase resilience, orienting it towards progress . a  biopolitical judgment frames the management of the covid-19 pandemic out of the classical, divisionary perspective that aims to separate the right and the left; it rather pleads to bring them together, jointly, around a core objective that inspires securing life and developing culture by advancing first, leftist measures to combat inequalities and disparities raised by the pandemic and only afterwards right-wing practices to stimulate recovery and growth . at the western level, the spirit of the european pan-community has rather been considered a matter of axiological consensus . states have arbitrated differently, through a  rational calculation, the gradual closure of borders and the maximisation of social isolation protocols to total quarantine (“lockdown”) . citizens looked at maximising surveillance and control of the population under the sign of a  test of autonomy and freedom, which reactivated the biopolitical appetite for interrogating what should and could, in these conditions, reflect good governance? gradually, the political and civil spheres were crossed by common moral dilemmas that suggest that the only way to reconcile them is a biopolitical platform . is it normal to 1 according to heidegger, the age of technical rationality lead to violence and oppression, therefore, our human reason that trusted wholeheartedly technique has failed and humanism has more than ever disappointed us. thus, philosophy will move frontwards but only following the anti-humanist path, whereas camus considers humanism still possible as long as the metaphysics of sufferance framed by the 21st century can be integrated into a political project that will defy and defeat colonialism, war and oppression. in the end, we must imagine sisif being happy, and this is exactly the task that this new humanism should fulfil by all its means (see heidegger, 2013 and camus, 1942, 1951). 76 oana şerban public governance, administration and finances law review • vol.  6. no. 1.  give political priority to securing public health at the expense of privacy? how far can we sacrifice individual freedoms in the name of the principle of prudence? why does the state of emergency become the source of normative contents that perpetuate the militarisation of society in order to protect the population? is civil cooperation possible to develop biosecurity through collective health discipline, as long as the authorities are considered with scepticism and even distrust by citizens? to do politics starting from life means to put humanism at the heart of political action . not just any humanism, but a biopolitical humanism . this is not an ideological fad, despite the fact that today we live in an age crossed by the continuous dynamics of ideologies . some ideologies updated, such as nationalism, others performed as ‘autoimmune’, such as liberalism, which is becoming more and more pronounced illiberalism . the principle of this humanism is that political power must be biopolitical . but it must be put at the service of the community, not at the basis of constructing a certain immunity in the face of social solidarity . these two words that are quite abused along public speeches framing the management of the pandemic, community and immunity, are bridged by a common radical, the latin munus. for this argument, i engage the biopolitical theory of robert esposito .2 translated both as ‘obligations’ and as habits naturally developed by a  community, munus is suppressed, in times of covid-19, by social distancing . in the attempt to raise immunisation in the face of disease, communities distance their members more and more, alienating them from traditional obligations and habits, from their natural quality of being social beings . what makes us authentic, sociability, makes us sick (harari, 2020) . but let us keep in mind for now that munus is shared by community and immunity, in order to track the multiple implications of such consubstantiality in biopolitical terms . how can we ensure that ‘immunity’ does not destroy our ‘community’? this is a  biopolitical issue . ‘munus’ must be rewritten today so that we can preserve all our obligations to the community and our habits together, becoming immune to the disease . but can current politics make this image a reality? can politics choose first and foremost life and only after power? in times of pandemics, power must come to us from life . the fact that everyone’s life depends on power is the greatest disease we suffer from . therefore, biopolitics, which none of us knows how to do yet, must be the new obligation and habit of the political class . politicians must simultaneously operate the priorities of biological life (zoe) and the superstructures of non-organic life (bios). thus, the biopolitical challenge for a  post-pandemic world is to draw principles of good governance that pursue equally and responsibly the guarantee, by the state, of all the necessary 2 esposito embraces the traditional position of biopolitics defined as ‘a science by the conduct of states and human collectivities, determined by laws, the natural environment, and ontological givens that support life and determine man’s activities’, a statement that lacks, however, ‘a categorical generalness’ (esposito, 2008, p. 21). in his perspective, physics and power conceive sovereignty in different regimes that turn us back to the kantian question surrounding the rationality of governance, that progressively goes, along the 19th century, towards the foucauldian challenge of understanding the power’s hold over life (esposito, 2008, 32). esposito rather prefers the foucauldian acceptance that life is no longer ‘a scientific concept’, but ‘an epistemological indicator’ (esposito, 2008, 40) of classifying and discerning scientific discourses that do not exclude those oriented towards the analysis of power. thus, modernity grasps the age of bio-history that transforms human life throughout bio-power. in these terms, preserving life becomes a priority, coined as conservation vitae. 77 public governance, administration and finances law review • 1. 2021 the biopolitical turn of the post-covid world. leftist and neoliberal insights of puzzling biopolitics resources for the preservation of organic life, integrity and body health . only in this manner will be possible the biopolitical tone of development of all non-organic fields such as politics, society, economy and culture, starting from their potential to preserve and improve the quality of life . 2. who is afraid of biopolitics? in its own way, biopolitics is a  civilisational barometer . it shows us how life has been valued and protected in various historical contexts noted as states of emergency, such as pandemics, wars, civil conflicts, in the context in which the security of life is both a legal and disciplinary issue . the pandemic forces us to rethink the social contract, a process in which the main challenge is that of population management. in this regard, a  clarification is needed: in the career of the term, the positive meanings of biopolitics, as a  government strateg y for managing the population in order to preserve safety and the phenomenon of life, corresponded to negative meanings, such as biopower or bioterror. it usually depicted political situations in which a category of individuals was considered undesirable to a  totalitarian society and this led to their exclusion, marginalisation or closure in devices of supervision, control and discipline .3 in migration issues, such as the management of refugee groups, biopolitics has often indicated abusive, repressive governing bodies . but these negative meanings are not the subject of this discussion . through its scale, the pandemic has activated biopolitical discourse . we may have prejudices against this term, but they come only from ignorance or from an impermissible error of extending the concept to a project of power with an iron fist . it is not necessary to do so . we live, as i have said on other occasions, in an age in which citizens feel governed by fear. it is the fear of disease, which sometimes arouses distrust in the authorities responsible for managing the epidemiological risk, to the point that the idea of a  sanitary dictatorship dangerously seduces not corona-sceptics, but bona fide citizens, who respect all prudential rules . but who no longer resist the anxieties caused by the unpredictable extension of restrictions . fighting the government by fear is a  biopolitical project . authors such as lorenzini argue that biopolitics is back since the pandemic activated new ‘genres of quarantine’ (lorenzini, 2020), leading to control, discipline and even surveillance, all conceived as covid-19  responses . if foucault used to address the nationalisation of the biological, nowadays, in times of pandemics, we face its internationalisation . lorenzini closely observes that each biopolitical regime advances ‘a blackmail’: usually, individuals must be for or against a  regime of governance, but biopolitics forces us to conceive each political measure as the best option – in a utilitarianist perspective – within a crisis, thus reflecting a reasonable compromise . therefore, 3 in my opinion, one of the greatest authors on biopolitics is hannah arendt with her origins of totalitarianism (1973), yet, unrecognised as such by exegetes. it is not the place nor the strike of this article to follow such endeavour here; however, we must say that arendt’s opinion that jewish communities had to immunise themselves in front of two circulating, well-spread prejudgments, the myth of eternal anti-semitism and the myth of the scapegoat, reflect a biopolitical undertaking of the genealogy of totalitarianism. 78 oana şerban public governance, administration and finances law review • vol.  6. no. 1.  biopolitics expects from us not acceptance or refusal, nor conformity or anarchism, but a  justificatory thought . traditionally, the foucauldian argument on biopolitics states that biopower is not exclusively explicit: it can act implicitly, in subtle manners, multiplying its effects and diversifying in order to perform global obedience from populations reflected as masses at risk . therefore, if we look to the ‘dark’ side of biopolitics, resistance is not the key for a proper and ingenious philosophical analysis of such phenomena, but the power of biopolitics to mirror our resilience, conformity and reasonability, thus becoming an expression of what foucault would call ‘the critical ontolog y of ourselves’ (foucault, 1984, 47) . lorenzini defines biopolitics as ‘a politics of differential vulnerability’: social inequalities occasioned by this pandemic should be solutioned by an efficient governance method . therefore, biopolitics is the correct political framework not only in times of pandemic but especially in depicting a post-pandemic world . at the same time, resilience is a  biopolitical expression, before being a  psychological, affective, social one . the global response to the coronary crisis is to secure humanity both biologically and morally . authors such as giorgio agamben, michel foucault, robert esposito, yuval harari point out that the policy of a pandemic tends to develop authoritarian implications on the part of democracies . on the other hand, the state of emergency in which the golden principle is ‘follow the rules to recover’, challenges us to understand how citizens follow the rules imposed in a state of emergency and why deviating from them means not recognising the rationality of these rules . who pays for disobedience, for making others sick, for freedom? this remains an open question that highlights the fact that each of us is responsible for the other’s biological life, not only for his/her own and that convinces us, once more, that biopolitical discourses are adequate for depicting a post-pandemic world . last but not least, the medical drama, as we have all seen in italian hospitals, reengaged the biopolitical protocol . at a  first glimpse, this is a  bioethical problem: doctors forced to choose, in conditions of insufficient material resources in the fight against the pandemic, the life of which patient will rather be saved: that of a young man who, mathematically, has more chances of cure, or that belonging to an old man who has comorbidities and thus, less chances of going through the disease? such a choice leads to medical bioethics under the sign of biopolitics . to put all in a  nutshell, we see how all these problems indicate a  very simple phenomenon: either we will seek to understand bio-politically this pandemic, looking for solutions to combat it, or we will turn a  global disease into a  pretext for internal power games, with incredible and unfortunate costs for everyone’s life . running away from the term  –  biopolitics  –  just because it reminds us of the most difficult political regimes from our humanity, is not a solution . the return of biopolitics to our situation, in order to understand how humanity has reacted, over the years, to similar pandemic contexts, what mistakes have cost lives and what misunderstandings have affected rights and freedoms, is a gesture of responsibility these days . 79 public governance, administration and finances law review • 1. 2021 the biopolitical turn of the post-covid world. leftist and neoliberal insights of puzzling biopolitics 3. biopolitical governance is not a simple exercise of population management: de-politicising biopolitics a biopolitical platform for governance is not a left or right project . this is an absolutely necessary construction of a political humanism starting from the revision of the following 12  principles and measures, puzzling leftist and neoliberal insights . my research will expose twelve themes for disseminating biopolitics as political humanism, as it follows: 3.1. the new model of social cohesion is based on the principle of solidarity in solitude. social distancing and (self ) isolation test our civility and social responsibility . the boundaries of empathy, trust and mutual cooperation in the absence of direct interaction are equally reshaped . living exclusively at home involves a  certain routine, in the ergonomics of which work, loneliness or cohabitation find, as the case may be, new forms of manifestation . solidarity in solitude is a challenge both at the level of individual life and at the level of states, which, although they react as ‘closed societies’, seek to maintain a  sense of the european pan-community through an open morality . compassion without cooperation cannot be a  space for the administration of life through solidarity . according to de mata (2020), in the attempt to align health and other perspectives, such as relaunching the economy and reopening public sectors of cultural, social and educational activity, the principle of solidarity in solitude must precede the priority of tracking recovery and resilience . the biggest threat for any community becomes, from a certain point, ‘the isolation fatigue’ (de mata, 2020, p . 20), that lead not only to a  vulnerable sense of mutual commitment and unity, but also to the fragmentation of unitarian projects, such as the european union . nevertheless, it is not like solidarity has never been a core value for our communities by now – it reflects the central belief at the heart of the european union; what has radically changed in understanding its social role in increasing bonding and cooperation is represented by the effects of this pandemic that ‘brought solidarity and appreciation to the front lines that, although have always been there working for the population, were previously ‘invisible’ to the public eye’ (cuschieri, 2020, p . 6) . this pandemic has the power to develop a  more emphatic sense of solidarity, by engaging compassion: ‘once we understand ourselves as interconnected, we can collectively construct a  disaster imaginary of solidarity . in this way, pandemics can be ethically innovative disasters’ (pascoe & stripling, 2020, p . 443) . therefore, whoever expects resilient society to overlap to solidary communities has fallen into a  trap: solidarity should be the primary value determining not a pandemic world, but a post-pandemic one . 80 oana şerban public governance, administration and finances law review • vol.  6. no. 1.  3.2. social inequality is a topic for public debates devoted to the improvement of life standards and quality in remote work paradigms for protecting citizens and increasing safety. the home quarantine protocol takes up the main concerns of the leftist political agenda on social inequalities and class privileges, on the basis of which comfort, security and quality of life are assessed . carrying out professional activities at home is far from the romantic rhetoric of quarantine . the distinction between working time and free time is doubled by that between living space and space for professional activity . the (non) material costs involved in these new contexts make their mark on the quality and privacy, in most cases exceeding the financial strength of individuals . in different occasions, the physical distancing protocol must be maintained between family members belonging to different risk groups and cohabiting in a space where it is impossible to minimise the interaction . in addition, in the name of securing the lives of citizens through isolation at home, the state has often failed to ensure their physical and moral integrity . statistics show that crime in the public space is declining, but cases of domestic violence and abuse are dramatically increasing . there is also a cynicism of the isolation protocol: there are many individuals who do not have a  home . for these vulnerable categories of citizens, protecting life means taking life from the beginning, with the support of the state . this is why leftist measures are prior to right-wing practices in governing this pandemic and constructing a  post-covid world . the public spheres has been crossed by different and intriguing opinions, such as jane fonda’s statement, that the coronavirus has been ‘god’s gift to the left’: elections from this pandemic revealed that the political spectre has been radically inclined in favour of left-wing parties that chose to solve social disparities before accelerating economic growth in terms of a post-pandemic world scenario . therefore, ideologically, left-wing politics is more equipped to face the social challenges occurred by this pandemic, whereas in what concerns the fate of liberalism, many authors insist that ‘the spread of the virus complicates the implementation of policies consistent with liberal international order, potentially destroying the order in which liberal democracies participate’ (norrlöf, 2020, p . 799) . consequently, i defend the idea that biopolitics ensures a  cyclical, natural and progressivist alternance of left-wing and right-wing principles, such ideological nuances regaining their doctrinaire nuances only in a  post-pandemic world: to reboot this pandemic society, we need to depoliticise biopolitics, thus, to govern not for the sake of the left or the right, but for the good of a society that has no need of political competition, but of political cooperation . 3.3. the compatibility of public health measures to protect the lives of citizens with human rights should be coherent and attainable, so that the temporary suspension of universal rights will not lead to censorship, discrimination, xenophobia. governance must provide conditions for biopolitics, not thanatopolitics (foucault, 2003) . it is not the arbitration of death, but the protection and disposition of life in the 81 public governance, administration and finances law review • 1. 2021 the biopolitical turn of the post-covid world. leftist and neoliberal insights of puzzling biopolitics social space that is the main concern of political action . the public sphere pointed out some of the important themes of this direction . for example, limiting access to medical services regardless of the severity of the medical case, invoking caution in social distancing and avoiding overloading the health system; access to key medicines in a  treatment regimen as a form of respecting the right to health;4 non-compliance with the principles of the right to privacy by limiting travel in order to reconcile professional and family life or forms of civil partnership; limiting religious freedom by imposing robust and essential restrictions in combating the spread of coronavirus on public cult activity, etc . it is not the effects of the medical crisis that will be ungovernable at the end of this pandemic, but the social reactions to the medical crisis . 3.4. democratisation of biopolitical security. we need the transparency of any form of protecting the life and health of citizens in public spaces through biometric surveillance. there are gaps in communication between the state and citizens in the administration of protocols to prevent the spread of coronavirus . the progressive increase of state intervention in the administration of civil life has generated panic among the population . people thus knew the invisible and subtle force of the ‘invisible hand’ . the fact that there is a virtual biometric surveillance only ensures the effectiveness of this protocol and the production of disciplinary effects on subjects or patients . this does not mean that the measure cannot be felt as invasive . we live within digital societies, whose advantages can be valued not only along the informational or cognitive sphere, but also within medical or social environments . however, the transparency of biocommunicability is a  crucial measure to make known to citizens that the surveillance of the disease does not coincide with the surveillance of individuals; governing the covid-19  crisis overlaps with the limits of prudence and biosecurity . authors such as albert et al . argue that ‘covid-19 is a threat to global security by the ontological crisis posed to individuals through human security theory and through high politics, as evidenced by biosecurity’ (albert et al ., 2020, p . 1) . although such arguments are quite plausible and embraced by experts in the fields of biopolitics, a problem still remains: biosecurity will be reshaped from now on, as the biggest danger is not the virus itself, as harari would put it, but the behavioural effects, in terms of control and surveillance, of this pandemic . according to harari, covid-19  taught us that contemporary history struggles between ‘the choice between totalitarian surveillance and citizen empowerment’ . it is not surveillance for the 4 in this pandemic, the access to euthyrox has been restricted for many weeks to patients suffering from thyroid disorder. the crisis of euthyrox began in romania in april 2020, at first being speculated that its missing from the market was the effect of infodemia: people thought that its administration could prevent the spread of covid-19. in fact, the distribution of medicines in time of covid has been one of the greatest challenges of this pandemic. the same happened with siofor, a drug applied in the medical scheme of treating t2d, or with vitamin d. therefore, the romanian government considered the possibility to produce part of this medicines internally, so that importations would not affect the right of patients to medical services. one of the greatest outcomes of this crisis was to raise the awareness on the fact that we begin to import more and to produce less; hence, in a post-pandemic world, different countries should focus on increasing the capacity of self-production in vulnerable industries. 82 oana şerban public governance, administration and finances law review • vol.  6. no. 1.  sake of combating the virus the worst danger threatening our democracies, but surveillance for other reasons than sanitary ones . it is one thing to have your phone ringing after passing by a covid-19 infected person – as tracking applications monitor the circulation of non/diagnosed patients, and it is another thing to use this pandemic as a precedent for perfecting systems insideor over-the-skin-surveillance that could easily emerge in dystopian, newer totalitarian regimes (harari, 2021) . 3.5. controlling the effects of automatising labour in different economic sectors in order to reconsider and preserve the value of manual labour, individual effort, working time, within both essential and non-essential industries. as covid-19 induced automation and labour disparities, leftist agendas began to seduce public spheres as they have been focused on reducing job losses and increasing the role of the human intelligence and force work within different industries . recent ‘findings suggest that covid-19-induced automation may exacerbate labour market disparities, as females with mid to low levels of wages and education appear to be at the highest risk of being negatively affected’ (chernoff & warman, 2021) . in fact, this pandemic reduced physical interaction as much and, as incidences of covid-19 became lower, the economic scenario that this crisis added a  ‘shadow cost’ (korinek & stiglitz, 2021) on labour has increased . for example, the costs of adapting a  business to covid-19  conditions have accelerated the appetite for remote or automatic work, by case . however, by the time we will see if this pandemic caused a  new industrial revolution, we must understand that in different non-essential domains, many jobs have been conceived as redundant and, consequently, attracted a  modest financial support from the state . on the one hand, many non-essential domains should be redefined as essential domains: for example culture, in order to save the production of culture and arts and the employees of creative cultural sectors from collapse . on the other hand, labour markets still have to implement technolog y in order to ensure a  so-called material progress of automatising labour . the greatest impact of this pandemic will be, in terms of revaluing human work and effort, a new wealth distribution supported by the degree of automatising labour in each society . 3.6. increasing human empathy by assuming solidarity with all life forms. from this point of view, species life is a political strategy. preserving and improving life does not reflect a  simple task of the biopolitical agenda, but also an ecological turn of state policies . however, this is not a  matter of reflection on natural policy . the climate crisis caused by technological exuberance and its improvement with the social isolation of individuals forces us to reconsider the relationship between nature and individuals through the prism of nonhuman species . this pandemic was an opportunity to restart ecosystems: nature took back venice, as cruise ships disappeared and its biosphere began to manifest freely, from ducks to dolphins . however, 83 public governance, administration and finances law review • 1. 2021 the biopolitical turn of the post-covid world. leftist and neoliberal insights of puzzling biopolitics the moral is that lockdowns have been a  benefit for certain species but ‘nature will not heal’ (owens, 2021) in two months of emergency-state that supressed any human public activity . 3.7. combating forms of national isolation in the name of state biosecurity. the delayed reaction of solidarity promoted by the european union towards certain countries radically affected by the pandemic – such as italy – may set a risky precedent for increased hostility, not transnational hospitality .5 an external biopolitical platform is one of the few projects that can optimise common biosecurity standards for the future of the european union . governing the coronavirus crisis means, in a biopolitical framework, governing the mobility of the population in all its aspects: professional migration, economic cooperation, free or cultural tourism, as correlated phenomena in terms of inclusion and social emergency . fragility must not become a  lesson in humiliation between states, but a  morality of common sense . as we see, the pandemic occasioned a  particular context in which racist discourses began to flourish: we have seen the european waves of asianophobia, after the wuhan case, and the riposte of asian french citizens who rise the campaign #jenesuispasunvirus, and nowadays we see that this trend begins to reactivate older forms of racism, such as antisemitism . moreover, during this pandemic, resilience became the core value of our contemporary societies . the need for social distance called, in turn, for the principle of solidarity in solitude . isolation forms raised beyond anxiety, hate, racism and lack of empathy . a  study recently published by inshr-ew (the “elie wiesel” national institute for studying the holocaust in romania) revealed that the pandemic reactivated anti-semitic attitudes that began to manifest progressively in online spheres . therefore, costs of isolation can be, at least from a  political standpoint, devastating for cultivating civilised and emphatic public spheres . 3.8. legislative innovations in the field of increasing security and protecting the lives of citizens should not take advantage of the anomy or vulnerabilities of democratic models. this is possible in the direction of maximising state intervention at the level of individual life . history has shown us that politics tends to turn any crisis into a field of totalitarian experiences . therefore, to any biopolitical action of the state, the citizens react, naturally, by suspicion . individuals question whether prevention measures are far too restrictive . citizens wonder if the measures imposed for population surveillance and control do not develop, symptomatically, disciplinary effects that can turn into authoritarian reflexes . people need to understand organically that the state of emergency is not a  pretext for 5 see the kantian distinction between hospitality and hostility from perpetual peace, later on retaken critically by derrida. 84 oana şerban public governance, administration and finances law review • vol.  6. no. 1.  turning these interim measures into long-term surveillance protocols, which increase state intrusion into civilian, community and individual life . but in order to assume that the state of emergency does not develop rules that will last even after dropping such crisis, nor does it offer a way to compensate the vulnerabilities of democracy only for a class of privileged subjects, citizens must confirm their trust in the state, as a  long-lasting process grounded on culture, which nowadays is mostly considered a  non-essential domain . 3.9. no pandemic should be doubled by infodemia. fake news feeds civil disobedience, anxiety and panic of the population. regaining the pragmatism of public communication in terms of biocommunication could bring an advantage to the media . providing accurate information on public safety would reduce the state’s information monopoly in strategic communication to combat the pandemic . at the same time, the immediate effect would be to democratise access to culture and truth . otherwise, the state will remain, in its biopolitical vocation, a  pure agent of information management on disease dynamics . 3.10. consolidation of public space as an extension of domestic space. cohabitation between individuals is possible through social distancing without affecting cultural values, free time, social liberties, social segregation and respect between individuals . by maintaining protocols of social isolation, people oppose, in a  sense, to their own nature: to socialise, to be together . no power is credible if it reduces its governable to an amorphic biomass . it should be a  democratic, reflective power, the one that governs critical masses . biopolitics involves thematising the cultural values associated with life through which we understand the predispositions of a people or a society to empathy, tolerance, cooperation, sacrifice . the model of open or closed societies arising from the management of the pandemic is nothing but the effect of cultures that adopt different mentalities and beliefs in the management of life . returning to normal means returning to the community . but only culture has the capacity to gradually increase the participation of citizens in the dynamics of society and the state in which they live . 3.11. reconsidering the relations between the church and the state in the management of life could lead to more emphatic and efficient social spheres. it is not just about recognising the church’s ability to expand the cultural, symbolic and material capital of a  form of spirituality in adapting people to the experience of a  sanitary crisis . the church has developed an eschatolog y of pandemics (cunningham, 2008, p . 29) as narratives of the dynamics of this world and solidarity between 85 public governance, administration and finances law review • 1. 2021 the biopolitical turn of the post-covid world. leftist and neoliberal insights of puzzling biopolitics individuals . but its role remains to complete the social agenda of a state through a space of intervention in which philanthropy, missionary work and spirituality maintain the ideals of solidarity and community cohesion . the state must not miss the opportunity to turn the church into a  partner for its interventions and social responsibilities . the dialogue between the state and the church is not an element of anti-modernity . public power is divided between a political and a social sphere . the state must arbitrate not the freedom of the two, up to mutual immunisation, but their potential to provide citizens with security and trust . the pandemic is not a test of faith . but biopolitics can be a test of secularisation . 3.12. designing public policies in biopolitical terms. the epidemic generates risk areas and groups, isolation and immunisation areas, domestic outbreak, militarisation . these things show that the profile of the politician capable of governing such a crisis resists through two political virtues: pragmatism and resilience . unaccompanied by a  historical sensibility, these are not virtues, but only skills . voters are less and less used to looking at politicians as authors of a country project . this biopolitical crisis recovers the author’s function as a  competent and virtuous legislator . in recognising the legitimacy of measures to combat the pandemic but also in recognising their reasonableness, people link the authority of the law to the authority of the author . who develops, in other words, public policies? what credibility and competence do politicians have in proposing laws that are both just and moral for the preservation of the lives and safety of citizens? what is the trust capital and expertise that public policy makers must have for the law not to produce immoral effects when it concerns sensitive topics such as freedom, privacy and human rights? this time, the elaboration of public policies must be done situating as a source, but also as a goal, the life of individuals . 4. instead of conclusions one can reject a biopolitical platform for the sake of maintaining governance on either side of the political spectrum . both the leftist and the right-wing oriented political measures could build their own biopolitical ideological agenda based on these foundations . however, in times of a post-pandemic world, it would be reasonable and lucid to drop political rivalries in order to advance a biopolitical regime that makes use of both wings of the political spectre by securing biological life in front of non-biological undertakings of life, from cultural and economic insights to social ones . the biopolitical left and biopolitical liberalism cross at the heart of biopolitics: these twelve topics could map a post-covid political agenda for any reasonable governance that would value and cherish the pandemic experience as an opportunity to strength, not to fault contemporary, imperfect democracies . along this article, a  positive sketch of biopolitics as a moderated regime that has nothing to do with its negative governmental tradition has been engaged in order to offer a new perspective on the multiple manners in which not 86 oana şerban public governance, administration and finances law review • vol.  6. no. 1.  only our lives, but equally this domain experienced radical changes that redesign the priorities of political interventions across public spheres . in the end, it is not a  postcovid world defying the pandemic the 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(2018) . foucault, biopolitics and resistance (1st ed .) . routledge . online: https://doi .org/10 . 4324/9781315180496 the “elie wiesel” national institute for studying the holocaust in romania (2020) . raport de monitorizare a antisemitismului in romania . online: www .inshr-ew .ro/raport-antisemitism-romania-2019-2020/ walsh, j . (2014) . ‘the hidden point of intersection’ . rethinking the relationship between sovereignty and bio-politics in foucault and agamben . the university of puget sound . online: https://soundideas . pugetsound .edu/cgi/viewcontent .cgi?article=1006&context=psupc https://doi.org/10.1136/bmj.n367 https://doi.org/10.1086/711432 https://doi.org/10.1080/09557571.2020.1812529 https://doi.org/10.1080/09557571.2020.1812529 http://www.theatlantic.com/health/archive/2021/05/pandemic-lockdowns-nature-wildilfe/619054/ http://www.theatlantic.com/health/archive/2021/05/pandemic-lockdowns-nature-wildilfe/619054/ https://doi.org/10.1353/ken.2020.0022 https://doi.org/10.4324/9781315180496 https://doi.org/10.4324/9781315180496 http://www.inshr-ew.ro/raport-antisemitism-romania-2019-2020/ https://soundideas.pugetsound.edu/cgi/viewcontent.cgi?article=1006&context=psupc https://soundideas.pugetsound.edu/cgi/viewcontent.cgi?article=1006&context=psupc public governance, administration and finances law review vol. 5. no. 1. (2020) • 86–99 . from fragments to drafts hungarian jurisprudence on administrative procedural law until 1945 andrás patyi* * andrás patyi, phd habil ., professor of administrative law and sciences, university of public service, curia of hungary, hungary, email: patyi .andras@uni-nke .hu, orcid: https://orcid .org/00000003-0273-0544 abstract: the paper aims to give a  historical overview of the pre-codification of hungarian administrative procedural rules . therefore, the main stages and the main actors of an era that started with rules of fragmentary style and law books with ambiguous or a  simple descriptive character regarding hungarian administrative procedures are presented in the paper . the first part is devoted to a  detailed examination of the origins of administrative law and administrative science until the end of the nineteenth century in hungary . the second part of the paper provides an analysis of the simplification act, and the period of the first schemes for classification of administrative procedures (1901–1957) in hungary . from this period, we should underline the appearance of the scientific school led by zoltán mag yary and the preparations of the administrative procedural code by józsef valló . keywords: hungary, administrative procedural law, historical background 1. introduction the comprehensive body of different level legal rules labelled as administrative procedural law (or simply: administrative law) plays an important role in safeguarding and guaranteeing our rights towards an administrative agency or public body . all european countries and the european union itself do have a  sophisticated branch of legal rules providing for the manners of administrative action, legal remedies, forms and substance of a  public action and so on . for more than sixty years the hungarian legal system also contains a  code, an act of parliament for general rules of administrative procedure, while many special acts and government decrees provide for further details of central, territorial or local administrative actions . it is more than self-evident that such norms should exist in a  modern constitutional state and their content tends to become alike in most of the eu member states . it is (or should be) also self-evident that the enactment of such norms was anticipated with a long period of proposals, drafts and procedural regulations of embryonic nature . as administration changed, administrative systems of countries developed, the law had to follow the changes and the ways where administration moved . in this article i try to present the main stages and the main actors of an era that started with rules of fragmentary style and law books with ambiguous or a simple descriptive character, but by the end it © 2021 the author doi: 10.53116/pgaflr.2020.1.6 mailto:patyi.andras@uni-nke.hu https://orcid.org/0000-0003-0273-0544 https://orcid.org/0000-0003-0273-0544 https://doi.org/10.53116/pgaflr.2020.1.6 87 public governance, administration and finances law review • 1. 2020 from fragments to drafts – hungarian jurisprudence on administrative procedural law until 1945 could face the first draft of general codes of administrative procedure as one of the main results of professor mag yary’s hungarian institute of administration . 2. the origins of administrative law and administrative science until the end of the nineteenth century thinking on public law in hungary, it was strongly determined by the emphasis placed on independence (beöthy, 1900; beöthy, 1905; beöthy, 1906; andrássy, 1901; andrássy, 1905; andrássy, 1911) of the hungarian state (to varying degrees throughout history), even at the expense of revolutions and wars of independence . these include the dózsa rebellion (a  peasant revolt, 1514),1 which had begun as a  crusade against the ottomans; the uprising of stephen bocskai against the habsburgs (1604–06) (benda, 1993), during which he was elected prince of transylvania and hungary; the similarly-oriented rákóczi’s war of independence (1703–11) (r . várkonyi, 1979) led by francis ii rákóczi, another prince of transylvania; and the hungarian revolution of 1848, also known as the hungarian war of independence (1848–49) (spira & arató, 1955), which is primarily associated with governor-president lajos kossuth, and which was also directed against the habsburgs . from the 10th century until 1949, hungary had a  historical constitution, similar to that of england . the main characteristic of a historical constitution is that it is an unwritten (uncodified) legal document . this means that the constitution is not contained in a single fundamental statute, but is composed of several important ‘basic laws’ and other significant legal documents . the parts of the hungarian historical constitution consisted of numerous important basic laws, the admonitions of saint stephen, the customary law detailed in the tripartitum of istván werbőczy, and the inaugural diploma (zétényi, 2010, p . 1407; fogarasi, 1861; horváth, 2011) . the doctrine of the holy crown – concerning the holy crown of hungary and connected with the person of saint stephen (968–1038), the first hungarian king (as stephen i) from the árpád dynasty, and traditionally known as the founder of the christian state of hungary  –  should also be emphasised . the doctrine specifically connected the state’s legal personality to this crown . the holy crown of hungary is the emblem of the hungarian state and the hungarian people (timon, 1903; eckhart, 1941) . the most important developer of the notion of the holy crown was the hungarian nobleman istván werbőczy (1458–1541), an ideologue and compiler of noble law (customs, latin: consuetudo, ius consuetudinarium) .2 the 1848–49 revolution was followed by the austrian–hungarian compromise of 1867 (german: ausgleich) which, in the decision to use the name “austro–hungarian monarchy” with its hereditary territory and other states under habsburg rule, was intended to reflect the key status of hungarians 1 györgy dózsa was a székely hungarian member of the lower nobility, the leader of the army of crusaders. the peasant-based army under his direction attacked the troops of hungarian noblemen. later the fear of armed peasants appeared as one third of the country came under ottoman (turkish) rule. surprisingly, the turn of events played an important role in social criticism, which was fostered by the sermons of members of the franciscan observant order. 2 istván werbőczy was the collector of the customary law of the nobility, such as his contemporaries, the polish jan łaski (1456–1531), or the czech kornel viktorín vsehrd (1460–1520). 88 andrás patyi public governance, administration and finances law review • vol. 5. no. 1.  in public law . however, the hungarian role in actual (political) decision-making was considerably less than would be evident from this political structure (szabad, 1977, p . 184) . we should underline that no two public administrations are identical . both practical and theoretical issues can present themselves in different ways to different types of states . the recognition and conception of problems can differ by state . this does not mean that states do not seek similar or even common models (tamás, 2010, pp . 76–77) . administrative procedures and related laws are, in part, a  function of codes of administrative procedure (or the lack thereof ) and administrative court procedures (both contentious and noncontentious) . hungarian legal literature was already dealing with the issue of procedural law prior to 1945 (kmety, 1907, pp . 179–217) . (not long ago, in 2017, many of these volumes were reprinted: boér, 2017; tomcsányi, 2017; eg yed, 2017; szontagh, 2017) . at the same time, hungarian administrative procedural law exists in an international environment and, despite the country’s linguistic isolation, it was published as part of international handbooks both before 1945 (ferdinandy, 1909; márkus, 1912) and during the socialist period (1945–89) (szamel & ivancsics, 1990), and is still being published today (lőrincz, 1998; boros, 2014; jakab, 2011) . however, the fact remains that codified financial administrative jurisdiction (1883) is the foremost among hungarian administrative procedures, and that certain administrative procedures existed prior to administrative jurisdiction . this is true even if administrative procedures were studied only from the compromise of 1867 onwards (paulovics, 2012); indeed, during the socialist period it was heavily stressed, erroneously, that hungarian administration was not a subject prior to 1867, as hungary was not independent (szamel, 1977; csizmadia, 1976) . nevertheless, today’s hungarian administrative theory has transcended these opinions, and hungarian administrative science has been studied since the polizeiwissenschaft of the 18th century (koi, 2013; koi, 2014) . the development of hungarian administrative procedural law took place later than that of criminal procedural law and civil procedural law, and its aims and tendencies were also different (boros, 2019; stipta, 1999) . the preparatory steps preceding measures for substantive administrative decisions, and the decision itself (the administration of the case), constituted a  key subject during the feudal age, i .e . much earlier than the compromise . during the habsburg period, several resolutions (royal announcements) issued at a  very high level attempted to simplify those activities of court and national offices which related to preparing decisions and administration, and at the same time tried to make them quicker and more effective . in 1724, an “administrative directive” appeared, which dealt fundamentally with issues that today are regarded as of a  procedural or casemanagement nature, and yet are relevant from the point of view of handling cases: registration, issuing of documents, preparation of the minutes of deliberations, presenter reports, inter-office communications and the precise recording thereof, and the introduction of forms . several announcements followed the first during the eighteenth century (1754, 1769, and 1784) . finally, in 1792, court decrees laying down detailed rules for administration completed the royal announcements . subordinate national offices and other, centrally administered public offices had to act according to regulations issued for 89 public governance, administration and finances law review • 1. 2020 from fragments to drafts – hungarian jurisprudence on administrative procedural law until 1945 central (court) bodies . in the hungarian administrative science, the next era after the polizeiwissenschaft (1769–1840) was the period of the administrative legal model . the first hungarian scholar of this science was ignác zsoldos (1803–1885), a  country judge (hungarian: szolgabíró, latin: iudex nobilium, german: stuhlrichter, slovak: slúžni) and legal writer (publicist), who was one of the first jurists (legal scholars) member of the hungarian academy of sciences . individual procedures related to administration in the activities of country judges and their offices (corresponding to today’s district offices) appeared in his two-volume major work of 1842 .  the role of country judges and their offices was strengthened by the fact that the distant central administration managed from vienna was only imperfectly built up . such procedures included the election of municipal judges and clerks (section 1 of act ix of 1836) and the endorsement (latin: vidimatio) of country judges who authenticated state documents . under the bach system and schmerling provisorium that followed the 1848–49 revolution, the teaching of administrative law began and an independent professorship of administrative law was set up at the university of pest . the first hungarian university professor of administrative law was emil récsi, the member of the hungarian academy of sciences . his monumental, a  thousand and fivehundred-pages long, hungarian-language monograph (récsi, 1854a, 1854b, 1854c, 1855) introduced administrative organisational law, public service law, and the details of individual administrative bodies . from the point of view of procedural law, the procedures of the imperial council and the hungarian municipal committees were noteworthy . the austrian model placed an emphasis on the importance of administration . at the same time, it expanded the material and procedural legal practices of the hungarian royal council of governor-general (latin: consilium regium locumtenentiale hungaricum) (patyi & koi, 2019) . the separation of public administration and justice occurred in 1869 .  in addition to independent administration of criminal justice, the so-called administrative criminal law materialised from 1879 (act xl of 1879 on violations) (boros, 2019, pp . 12–13) in the procedures of administrative bodies . in 1869, jurisdiction was withdrawn from the counties and royal free cities to the royal courts of appeal . thereafter, the administrative bodies passed judgement only on the most minor offences (falling within administrative criminal jurisdiction) . on the basis of the first law on boroughs (local councils) (act xlii of 1870 on the classification of boroughs), the boroughs performed their own local governmental activities, took part in the provision of public administration, and facilitated state administration . the regulation of external and internal procedures was not strictly separated in the law, as it primarily regulated the procedures of boroughs . it nevertheless laid down the forum system and the right of appeal to the minister against adverse decisions (section 4) . administrative jurisdiction in hungary was not unprecedented . győző concha (1846–1933), the member of the hungarian academy of sciences, an outstanding scholar of the study of public administration (german: verwaltungslehre), first addressed administrative jurisdiction in hungary at an academic level (concha, 1877) . act xlviii of 1883 set up the court of financial administration . the court dealt with financial, tax and duty cases, including enforcement complaints . the council of ministers decided in cases of 90 andrás patyi public governance, administration and finances law review • vol. 5. no. 1.  jurisdiction and competence . the right to adopt a  decision prior to the emergence of administrative legislation was created at the last minute (boncza, 1895) . act xxvi of  1896 on the hungarian royal administrative court (hereinafter referred to as the hrac) set up the administrative court based on austrian precedents . the law came into force on the 1st of january 1897, and the financial administrative court was incorporated into the administrative court . the court had general jurisdiction, and was a judicial body for single-level procedures that acted as a  special court (i .e . it was the only administrative court in the country) . it decided on the validity and legality of individual decrees (ex post review) . its president and judges were equal to those of the curia . the financial division considered tax and duty cases, and the general administrative division other cases . the latter included cases on: parish, borough, and state pensions; public health; religious and public education; water rights; public roads and railways; animal health; forestry, hunting, and fishing ; community housing (until 1920); and domestic servants, day labourers, and labourers (martonyi, 1932; martonyi, 1939; martonyi, 1960; patyi, 2002; patyi, 2011; koi, 2019; patyi, 2019) . 3. the simplification act, and the period of the first schemes for classification of administrative procedures (1901–1957) the first law to explicitly deal with regulation of external administrative procedures was act xx of 1901 on the simplification of public administration, which was a  very mixed piece of legislation in terms of its regulatory subjects . it regulated the criminal jurisdiction (concerning violations or, with a present-day expression, infractions) of the police, and the handling of the monetary proceeds of offences, as well as public and “orphan” money, but more importantly, it regulated the system of delivery and legal remedies of judgments . the effect of this legislation was to “establish the uniform system of legal remedies aligned with administrative judicial processes” (lőrincz, 2000, pp . 36–37; lőrincz, 2005) . therefore, with respect to the course of external processes, the legislation only regulated legal remedies and the system of delivery of documents . the main goal of framing the law in relation to legal remedies was to eliminate the remedies’ “irregularities” through simplification in the nomenclature of classes and individual legal remedies . in accordance with the new rule restricting appeals, they could no longer be lodged against judgments of courts of third instance, just as they could no longer be lodged against judgments (measures) of courts of second instance of equal content as those of first instance . this law introduced (comprehensively regulated) the application for a rehearing of disputed cases . let us review the opinions of contemporary jurists following the advent of the law . ferenc vasváry (1872–1952), then a  visiting lecturer at the university of budapest, first dealt with administrative procedures from the explicit point of view of administrative law in the following sections of the chapter on administrative procedures in his 1902 textbook on administrative law: administrative regulation, legal remedies, delivery, and administrative implementation (vasváry, 1902) . the term “code” as a  name for administrative regulation (paulovics, 2012) was first used in hungary by vasváry, presumably following the model of the german verwaltungs(gerichts)ordnung . (in other words, the 91 public governance, administration and finances law review • 1. 2020 from fragments to drafts – hungarian jurisprudence on administrative procedural law until 1945 technical term was known in national law before the appearance of józsef valló) . vasváry points out that it was formerly characteristic of administration to lack proper (written) regulations, both in western europe and in hungary . when substantive provisions and their real method of application arose, the administrative procedure was not bound to regulations, except (in hungarian law) trading licenses, compulsory purchases, tax assessments, and military conscription, he points out following georg meyer (1883–1885) and karl stengel (1886) . he also makes clear that the principles of procedures (including contentious and non-contentious administrative procedures) gained customary regulation at least in broad outline (vasváry, 1902, pp . 135–140) . andor sigmond, a  teacher and director of the academy of law in nag yvárad (oradea), wrote the first substantial hungarian monograph on administrative procedural law (sigmond, 1904) . the sources of the work are not indicated, but the extensive 500-page volume basically builds on hungarian legislation . the monograph describes the administrative authority and the parties as the actors of the administrative procedure . it distinguishes procedures between the authority and the parties, those between authorities, and the internal procedures of authorities (in hungarian “kebelbeli eljárás”) . (the latter is “inward representation” in case of individual authorities and collegiate bodies) . the monograph also examines evidential and review procedures in detail (sigmond, 1904, pp . 123–500) . regarding the period after 1901, it is worth mentioning the expansion of inspection of the legality of state supervision over the local councils’ jurisdiction by the administrative court, and the establishment of the jurisdictional court in 1907, while it is important, from the point of view of the administrative procedure, to mention act xxx of 1929 on the simplification of public administration . section ii of this act, entitled “legal remedies, official classifications and procedural regulations”, contained some twenty paragraphs of procedural provisions . a  minority of its provisions dealt with the issue of official procedures, in which area it mainly attempted to reregulate the system of legal remedies . one of the main goals of the act was to accelerate public administration procedures, and thus it sought to restrict appeals to reasonable limits and, during the setting of jurisdiction, to concentrate the majority of cases within individual authorities . some assessments have emphasised the drawbacks and restricted nature of this legislation . in addition to defining the right of appeal in general terms and as a  “customer’s right”, it generalised appeals against judgments on substantive issues by courts of first instance, but it tied appeals against (final) judgments of courts of second instance to the explicit provisions of later legislation . it reregulated petitions for review, petitions for exception, rehearing requests, and the location and deadline for the presentation of appeals, and it also provided for the suspensive effect of appeals, that is, for appeals to have a  suspensive effect on enforcement, while petitions for review, appeals to the supreme court, and rehearing requests do not have this as a  general rule . this act was the harbinger of thinking on comprehensive procedural regulation, particularly when supplemented by act xvi of 1933 (which, unfortunately, was not enacted), which sought to introduce further simplification of the forum system and a  complete single level of appeal, abolishing the legal remedy character of the ministerial and central authorities . certain provisions of the 1929 92 andrás patyi public governance, administration and finances law review • vol. 5. no. 1.  act remained in force until the 1950s, and its final remaining provisions were repealed by paragraph (2) of section 90 of act iv of 1957 . the approach in the wake of győző concha, according to which the necessity for or, at any rate, the possibility of general regulation of administrative procedure is denied, was practically dominant up until the appearance of the scientific school led by zoltán mag yary (1888–1945) (szamel, 1977, pp . 161–265; csizmadia, 1976, pp . 409–421; csizmadia, 1979, pp . 434–451; szaniszló, 1977, pp . 281–389; szaniszló, 1993; koi, 2015) .3 (the mag yary school, in addition to public administration law and studies, integrated the new trends of sociolog y, political science and, in particular, american scientific management, while preserving hungarian national traditions of public law .) in the 1880s in the united states of america, the public administration-related modern political sciences and scientific management-based thoughts appeared . this tendency strengthened by and large in 1930, and started to take over the thoughtprovoking role . in 1931, mag yary founded the institute of hungarian administrative sciences at pázmány péter university, faculty of law (today’s eötvös loránd university of budapest) . it was not only a  scientific institute, but a  territory of scientific “experiment”, which led to an integrative administrative mentality . in the same year, zoltán mag yary was appointed government commissioner of the rationalisation of hungarian public administration . it was not simply a  political task, it was an administrative political task, because mag yary was never a  politician, he was an expert . his task was the revision of substantial and procedural elements of the rules of procedure of public administration and administration of justice . count istván bethlen, the prime minister of hungary, supported the science-based reform aspirations . mag yary’s wider foreign experiences, and his practice in the field of fact-finding survey, and experiences in the field of codification were widely determinant in his researches . the foundational researches of the rationalisation program verified the organisational insufficiencies . but this problem touched rather the central administration (the central government) than local governments . for the revision of this 3 it is to be noted that,after the communist takeover (1949) numerous magyary disciples were pushed into the backround (career-starter graduated young people, and three assistant professors), including józsef szaniszló, too. later, szaniszló was only librarian at the department of state administration law, and the ward of magyary’s archive. (based on his memoirs, a feature film was created on the magyary school, called the disciples (in hungarian a tanítványok, directed by géza bereményi in 1985). only two of magyary’s disciples became professors, namely jános martonyi sr., and iván meznerics. his main research field was administrative judiciary. martonyi was the dean of józsef attila university of szeged, faculty of law and politics (1947–1948, 1958–1960). later, he became the vice rector of the university (1952– 1955). iván meznerics, as a magyary disciple, also became a professor of financial law at józsef attila university of szeged, faculty of law and politics. another colleague of magyary, károly mártonffy (they were of the same age) was partly sympathiser, partly opponent of magyary, and he was the dean of eötvös loránd university, faculty of law, in budapest (1949–1952; it was a rare occasion in case of pre-war professors, because nearly all of the legal scholars were dismissed from the universities and the hungarian academy of sciences). (the hungarian university professors did not serve the nazi-sympathiser hungarian arrow-cross party, which came into office after the german occupation of hungary [1944]. notwithstanding, nearly all of the professors were forced into retirement, dismissed from professorship, and/or membership at the hungarian academy of sciences. after 1949, some professors were deported to settlements of the hungarian puszta, and some driven to suicide). the book-series called államtudományi klasszikusok (classics of political science) appearing from 2017 commemorates them (presently in 7 volumes), putting in the centre the staatslehre-type “political” science, including the scholars of administrative law, constitiutional law, and verwaltungslehre, too. 93 public governance, administration and finances law review • 1. 2020 from fragments to drafts – hungarian jurisprudence on administrative procedural law until 1945 mistake, he recommended a  more effective administration, and the modification of the internal structure of government . these measures would have been based on increasing the level of legal education and examinations . the condition of finalisation in public administration would have been a legal degree and three years of work in practice according to the new regulation, and a practical examination, too . the questions of reduction of workforce, abandonment of redundant administrative organs, and fusion of similar ministerial departments were brought up . in the question of organisation and competence he proposed the consolidation of competence of the royal administrative court . in the case of the applicable case of judgment in the royal administrative court he proposed reference to the competence of royal administrative court after the procedures of the first instance . all these elicited an unbelievable resistance on part of both the government and administrative professionals . after bethlen’s death, the transition period hallmarked by prime minister gyula károlyi and prime minister gyula gömbös was not beneficial for the reform program . apart from the practical examination, the other proposals of the reform were not realised . mag yary suggested two published and two unpublished proposals on administrative reforms (mag yary, 1930; mag yary, 1931), and he codified two legal texts alone . by the effect of rejection, he has resigned from the title of government commissioner in march 1933 . with his scientific programme in the 1930s, zoltán mag yary gave shape to the amalgamating, complex examination of study of public administration, administrative law, scientific management and business organisation . his main slogan was effectiveness, and state of action . he formulated his scientific program in his monographs . the institute of hungarian administrative sciences, led by mag yary, was significantly supported by the rockefeller foundation, so that they could buy an important professional library . he completed many foreign study tours, in the following countries: austria, belgium, canada, france, italy, the united kingdom, the united states of america, switzerland, the soviet union . he gave a  lecture in the fifth world conference in vienna organised by the international institute of administrative sciences (in french: institut international des sciences administratives) . he was the first non-western european vice president of iias after 1936 .  he was the dean of pázmány péter university, faculty of political and legal studies, from 1937 to 1938 .  in 1942, as the most important fruit of the mag yary school, the comprehensive monograph called hungarian public administration (in hungarian: mag yar közigazgatás) was published . the team of the institute of hungarian administrative sciences included nearly 450 researchers, who were affiliated to the institute strongly or weakly: university students, invited lecturers, co-authors, technicians, not only from the field of political studies or public administration, but from fields like history, sociography, geography, folklore, science of engineering ; it was an integrative conglomerate based on the whole spectrum of social sciences . in a narrow sense, the number of the members of the mag yary school was 25 researchers . by and large 10–12 university students were the disciples of professor mag yary; they became public administration scholars . these disciples benefitted from numerous foreign research trips made possible by the professor . they were, among others, péter elek, józsef gőbel, rudolf gyürky, kálmán karay, sándor karcsay, istván kiss, jános lovász, jános martonyi sr ., iván meznerics, józsef szaniszló . the institute enriched the hungarian administrative sciences with a  fifty-volume book series . 94 andrás patyi public governance, administration and finances law review • vol. 5. no. 1.  a  scientific review, called science of public administration (in hungarian: közigazgatástudomány), published by the institute, containing 330 papers (between 1938 and 1944) . although zoltán mag yary was a  respected scholar who published 12 original (individual) monographs, he was not recognised according to his merits by the hungarian public or scientific life . after his death in 1945 (they committed suicide with his wife because of the atrocities of the soviet troops), the continuity of his school, too, was interrupted . nowadays, the hungarian science of public administration looks respectfully on its distinguished and important predecessor (szaniszló, 1977, pp . 301–321; szaniszló, 1993, pp . 27–34; csizmadia, 1979, pp . 434–451; koi, 2013, pp . 107–154; koi, 2014, pp . 293–334; koi, 2018) . probably as an effect of the austrian public administration procedure law created in 1925, and the academic debates connected with its creation, in the second half of the 1920s a  clear viewpoint on the unified and general regulation of official procedures emerged from the pen of ede márffy (1885–1947), who regarded the codification of procedural regulation, in addition to the justification of maintaining special regulations, as both possible and necessary (márffy, 1926) . zoltán mag yary himself confessed that the legality and, to no small extent, the efficiency of public administration depends on the extent of unified and general regulation of procedures . the legality of public administration is not only guaranteed through the administration of justice, but also through the manner of regulation of public administration, and so an exceptionally important role is ascribed to the codification of public administration procedural law (mag yary, 1930, pp . 149–150) .4 while the laws up until then almost exclusively regulated legal remedies, general procedural regulation had to rest on a complete and comprehensive scientific foundation . this groundwork was carried out in 1937 by józsef valló (1913–1976) within the framework of the mag yary school (valló, 1937) . in addition to laying the theoretical foundation, he prepared a  draft of a  potential procedural law . this draft was never passed into law, and the 1939 work of jenő szitás (szitás, 1939) suffered the same fate . in his draft, which took into account the rules of criminal and civil procedural law, the austrian code, and the generalised rules of particular procedural law provisions, valló created a body of general procedural law, whose rules were in part primary, and in part provided for derogation (i .e . subsidiary or ancillary) . according to his draft, their scope would not have extended to the areas of local administration of justice, criminal proceedings of police authorities, financial administrative proceedings, disciplinary proceedings and proceedings connected with electoral law . valló prepared a second draft in 1942 (valló, 1942), in which he took into account the szitás draft . the draft of jenő szitás (1886–1958) and the first draft (1937) of józsef valló, assistant lecturer and mag yary’s follower, were unified in valló’s second draft (1942) . mag yary points out that szitás’s proposal deliberately neglected 4 it should be noted that the polyglott professor gave a lecture at the warsaw iias world conference (1936) as a keynote speaker (general rapporteur), and published it in french; the english and hungarian monographic version was published in polish, too: magyary, 1937a; magyary, 1937b. after the warsaw conference, magyary was elected the vice president of iias, the only world organisation of public administration studies. for his thoughts on administrative procedure law, see the relevant chapter of his main work: magyary, 1942, pp. 592–624. 95 public governance, administration and finances law review • 1. 2020 from fragments to drafts – hungarian jurisprudence on administrative procedural law until 1945 to say whether the regulation should take place in the form of a  law or a  decree, and the proposal in section 149 was, instead, a  work of procedural technique, which relied to a  lesser degree (as the different critiques mentioned) on the characteristics of public administration procedure . józsef valló’s last, united draft from 1942 on general administrative regulations contains the following main parts: 1) general provisions: the scope of the law; authorities; the parties and their legal representatives; deadlines; maintaining order at the courtroom; delivery . 2) procedure in the first instance: starting of the procedure: summons and petition; report and record; preparation of decision-making process; exposition and evidence in general; evidences . 3) resolutions and binding force . 4) legal remedies . 5) procedural charges . 6) administrative enforcement . 7) mixed and enacting provisions . the scope of the law means the provisions of authorities (the administrative matters) applied in the competence of administrative authorities . the following procedures do not belong to the scope of the law (disqualified matters): criminal offence cases; discipline cases; tax and duty cases; municipal jurisdiction cases . the challenge (in hungarian: aggályosság) was a  special legal institution, it was a  special form of disqualification (in hungarian: kizárás), meaning a  substantiated doubt about the fact that the judge is unbiased . this case is different from general disqualification cases (such as those represented by next of kin, relatives to cousins, siblings of spouses, spouses of siblings, adoptive parent and foster child, legal representatives, witnesses, experts, as well as the civil servant, or the judge who adopted the attacked resolution) . the most important legal institutions of the procedure are the decision-making, the binding force, or legal remedies . 4. conclusion it could easily be declared that after such a historical overview there are no conclusions, as the real conclusion is that it happened so . there are only lessons that can be concluded from the past, from the movements of the circa hundred years summarised in this paper . therefore, these are the “lessons learned” that we can state as conclusions: by the 1940s, hungary elaborated drafts of general administrative law codes . the first attempt of regulating administrative procedures occurred by the turn of the century (1901) and concentrated only on the remedies . however, it has to be underlined that the rules regarding the remedy system of administrative decisions always formed a  crucial part of hungarian administrative procedural law . secondly, it should be remarked that the simplification of administration somehow always tended to mean simplification of procedures in hungary . the mag yary school (and the mag yary institute) introduced a  comprehensive approach to all (not only procedural) aspects of simplification, including questions of public organisation, competences, effectivity and efficiency . finally, it should be noted that the draft codes on general procedural rules regarding administrative procedures were elaborated in detail by the end of the second world war . these codes were already regulating the most important administrative activities . 96 andrás patyi public governance, administration and finances law review • vol. 5. no. 1.  references andrássy, gy . 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(ed .), a magyar közigazgatás központi alapszervei . bevezetéssel a mag yar közigazgatási jogtudományba [the central basic organisations of the hungarian public administration . with a preface to the hungarian science of administrative law] (pp . 111–144) . politzer . zétényi, zs . (ed .) (2010) . a történeti alkotmány . mag yarország ősi alkotmánya [the historical constitution . the ancient constitution of hungary] . mag yarországért kulturális eg yesület . public governance, administration and finances law review supporting the performance and e�ciency of governance – expediency control and performance measurement in sai’s audit lászló domokos*, erzsébet németh**, katalin jakovác*** * lászló domokos, president of state audit o�ce of hungary. (e-mail: elnok@asz.hu) ** prof. dr. erzsébet németh, supervisory manager, state audit o�ce of hungary. (e-mail: nemeth.erzsebet@asz.hu) *** katalin jakovác, auditor, state audit o�ce of hungary. (e-mail: jakovac.katalin@asz.hu), corresponding author abstract: �e main goal of the management of public funds and public assets is to promote social wellbeing. in order to realize this main goal and to evaluate individual measures, it is indispensable to subcategorize the primary objective, determine the hierarchy of objectives, assign measurable criteria to the objectives, evaluate performance, and provide feedback. by performing objective, professionally-sound evaluations and providing feedback, independent audits contribute signi�cantly to the improvement of performance. a basic requirement of all audits, however, is the auditability of the objective’s implementation and e�ectiveness, and the de�nition of performance criteria for each objective. a large part of the proven methods and tools used in the for-pro�t sector for performance assessment can be applied successfully at organizations of the public sector as well. �e audit �ndings of the state audit o�ce of hungary (sao) con�rm that the management and control systems of both public entities and state-owned enterprises need to be improved signi�cantly in order to ensure good governance and public sector management. indicators that capture and adequately measure the e�ectiveness and e�ciency of public spending are important prerequisites for the e�cient management of public funds and for the planning process. keywords: state audit o�ce; audit; performance assessment; expediency; e�ectiveness; e�ciency; public sector management; good governance 1. introduction �e management of the diverse and complex economic, social, and environmental problems of our time presents a serious challenge for public management and governance. programs and public services with high �nancing requirements must be implemented and provided from a limited amount of public funds, while there is also a need to meet the expectations of an information-intensive, competition-oriented society. mainly as a result of economic and �nancial crises, the state appeared as a market participant in several segments, increasing its participation, among others, in the banking sector and the energy service market (see for example, turcsányi, 2008, or domokos, 2015). in these areas, both sectoral governance and organization management are determined by di�erent aspects than those seen at budgetary institutions. companies have to be managed under market 10.53116/pgaflr.2016.1.5 mailto:jakovac.katalin@asz.hu https://doi.org/10.53116/pgaflr.2016.1.5 conditions, in a continuously changing environment, with revenue and pro�t targets in mind. as a result, the management of state-owned companies is often forced to rely on the same management techniques as those applied by other market participants. although public entities do not operate under market conditions and typically enjoy monopolistic positions, they are linked to the private sector in several regards (purchases, recruitment, and certain services, e.g. deliveries). �e hierarchy of objectives and the operational frameworks are fundamentally de�ned by legislation. consequently, the organization is far less �exible than a business association, and it is at the discretion of the manager1 to �ll these frameworks with substance. in addition, the manager of a public sector organization needs to consider rapid shifts in the environment that pose numerous challenges, as regulatory changes tend to follow them with a lag or sometimes belatedly. accordingly, public sector managers are increasingly expected to have innovation skills and an ability to promote risk management and organizational learning, and as such, their role goes far beyond a passive type of organizational management focusing solely on regulatory compliance. it is clear, therefore, that governing a public entity and managing a stateowned company both require adequate managerial skills. �e de�nition of the entire objective hierarchy, the optimization of organizational processes, performance-oriented, responsive and �exible operations, high-quality services, and the improvement of employee performance constitute the backbone of management expectations. in addition, with respect to public spending, management is required to meet the expectations of all stakeholders, i.e. households using the public services, market participants, civil society, etc. in our information society, the ability to monitor governance, the transparency of management, social dialogue, and results are basic requirements. �is calls for a new approach on the part of public sector managers. �e principles of ‘good governance’ re�ect this new approach. �e basis of good governance is the thoroughly planned, e�ective, e�cient, and responsible management of public funds. by controlling this process, state audit o�ces provide objective assessment and feedback on the performance of public spending. after the presentation of the theoretical background related to these qualitative aspects of good governance, this paper explores the subject based on the experiences of the state audit o�ce. �e paper provides a number of examples to demonstrate what happens when the objectives of public spending are not de�ned adequately, or when no outcome criteria have been assigned to the pre-de�ned objectives. it shows the implications of a failure to collect data, which leads to a failure to monitor and measure the implementation of the objectives, and thus the use of public funds is either not expedient or it is impossible to determine whether it is expedient and e�ective. in the course of its performance audits, in many cases the sao itself de�ned indicators in order to ensure its ability to assess the e�ectiveness and e�ciency of public spending. �is, however, raises several problems to be discussed later in the study. 2. questions related to the effectiveness of governance 2.1 how does e�ectiveness relate to good governance? nowadays, good governance is expected to strive for reform of public administration and the enforcement of modern management and institutionorganizational aspects (pulay, 2014). policy-makers and decision-makers often meet these expectations in consideration of the corporate governance principles and practices applied in the for-pro�t sector, even though the two sectors show signi�cant di�erences. �e hierarchy of objectives is wider and more sophisticated in the case of public spending, and social expectations necessitate tighter ethical requirements. if so, how can a management approach tailored to pro�t-oriented organizations gain ground in the non-pro�t sector? for what purpose and to what extent can the public sector adopt these management techniques? since the 1980s, public sector management in developed countries of the world had been subject to considerable changes. �is can be attributed to the economic problems arising in the aftermath of the oil crisis on the one hand, and to shifts in the operating environment of governance on the other hand (turcsányi, 2008). establishing a cost-e�cient state to reduce the burdens of economic participants became an increasingly important objective. �e outbreak of the �nancial crisis in 2008 and the ensuing surge in public expenditure (as a percentage of gdp) pushed this objective back into the spotlight (felméry, 2014). in addition, the continuous improvement in the quality of market services raised the expectations set for public services, which also motivated the public sector to improve e�ectiveness and e�ciency (hajnal, 2004). �e information technology boom and the development of the internet also called for the application of modern technologies which, in turn, gave rise to a dramatic development in management information systems and thus improved the transparency of the operation of the public sector. all of this incited policy-makers to adopt novel approaches to the problems of governance. essentially, they were aimed at reducing state participation and improving the e�ectiveness, e�ciency, and economy of the public sector and enhancing the quality of public services primarily by the adaptation of the management philosophies and techniques applied in the private sector. �e guiding principles of the new public administration mainly re�ected the impact of the new public management (npm) movement, but the new approach to public sector management also drew from the theories of neoliberalism,2 public choice,3 and neo-taylorism.4 according to hajnal (2004), the government and administrative reforms implemented in recent years entailed the adoption and dissemination of npm principles and methods (both among certain multilateral organizations such as the oecd – puma/pgc or sigma,5 and the developed countries of the world, including hungary). an important component of the npm is to establish a new culture for public administration and, in a broader sense, governance. �is culture, ‘is based on partnership and individual initiatives rather than (excessive) state power, e�ectiveness/performance rather than regularity, cooperation and �exibility rather than command and hierarchy and the values of (market) competition rather than (state) monopoly’ (hajnal, 2004). �e e�ect of the npm was also perceivable – and can still be perceived – in hungarian administrative reform processes, such as the vertical breakdown of ministries (into a strategic control center – ministry – and a number of subordinate organizations), which was a typical structure until 2011–2012. other examples include the connection of the private sector into the public service systems (e.g. through ppp projects and outsourcing), the performance assessment of public service employees, the system of ex ante and ex post impact assessment, and the application of quality assurance (e.g. iso). subsequently, the adaptation of corporate management to the public sector in general, and the application and applicability of the npm in particular, were subject to widespread criticism for several reasons. �e challenged areas included, for example, problems surrounding the output measurement of government activities, or the complexity and uncertainty of the issue of e�ectiveness and e�ciency. in other words, what was to be considered the result of the activity, and whether the result that was achieved could be considered a positive result. �is notwithstanding, the main tenets of the movement dominate public management to this day, and they are also re�ected in some of the principles of good governance. indeed, e�ectiveness, economy, e�ciency, and high-quality public services are the prerequisites of good governance. �is is emphasized in the 2014 report of the oecd6 and in several national-level recommendations and guidelines.7 in short, objectives and measurable e�ectiveness criteria should be assigned to public spending. it must be ensured that each component – from addressing a problem through planning, decisions and implementation to feedback – is carried out transparently and checked against measurable e�ectiveness criteria. only this can enable state audit institutions to ascertain and control whether the management of public funds is driven by real social needs, and if public spending indeed serves the interests of the public. objectives and results should be determined at multiple levels; therefore, expediency and e�ectiveness can be interpreted at several levels. �is is illustrated in chart 1. as a �rst step, governance de�nes the strategic objectives to be achieved (e.g. to increase the activity rate) on the basis of socio-economic needs. strategic objectives are usually de�ned (as policy strategy) in legislation (e.g. employment policy strategy). strategic objectives are broken down to subobjectives, which comprise a hierarchical system (e.g. easing labour market entry for inactive workers, including, for example, the establishment of a counselling network; increasing the number of new enterprises, including, for example, the introduction of tax bene�ts). harmony between the objectives de�ned at the various levels is ensured by the hierarchy of objectives. relying on the resources available, the given process generates an output (e.g. a new tax law). �e processes serving the achievement of the strategic objective end with a certain result (e.g. 10% of mothers on maternity leave return to the labour market). �e impacts arising from the implementation of the programme in other areas (e.g. negative/positive externalities) must be assigned to the results (e.g. number of employees crowded out by new labour market entrants). chart 1. multi-level interpretation of e�ectiveness source: own editing in order to gauge the extent to which the public funds allocated to the given programme served the implementation of the pre-de�ned objectives, the e�ectiveness of the programme should be examined. while countless questions may arise regarding the measurement of e�ectiveness, it is extremely important to examine e�ectiveness at di�erent levels in any case, depending on the level of the objective to which it can be linked. problems surrounding the e�ectiveness should be explored and analyzed. on the one hand, this is performed by management as part of its monitoring duty, while the external assessment of performance is carried out by the shareholders, the controlling organization or the proprietor, or – as an independent organization – state audit o�ces by way of objective and professionally sound audits. in democratic and rule of law states, the �nal control of the management of public funds and public assets is performed by supreme audit institutions (sais), independently of the executive power. essentially, sais can contribute to good governance in two di�erent ways (oecd, 2014). first, through their existence and operation they reinforce the e�ectiveness of bodies responsible for government oversight and for public �nancial management. professional and independent sais strengthen the accountability chain, which is required to ensure that public interest prevails over personal interest in decision-making. alternatively, through performance audits sais assess the e�ectiveness, e�ciency, and economy of individual programmes and hence, provide feedback on their performance. �e fundamental mandate of supreme audit institutions responsible for �nancial and economic oversight is to strengthen public con�dence in state institutions, primarily with respect to the fair, e�ective, and expedient management of public funds and public assets. �is a�ects all other areas of citizens’ con�dence in their government. objective and reliable sai assessments contribute to demonstrating that government decisions are well-grounded, and play an important role in informing decision-makers of the government and parliamentary representatives. in this context, sais verify the proper use of budgetary resources, the ful�lment of public policy objectives, whether the implementation of the policies comply with legislation and the objectives, and, in general, whether the performance of the government succeeded in implementing strategic objectives. upon performance audits however, sais often encounter the problem that the legislation providing the regulatory framework of public spending fails to provide the objectives to be achieved and the criteria against which objectives can be deemed as achieved. �is poses severe problems in the evaluation of individual public projects as, in the absence of objectives and criteria, the objective of the government intervention must be presumed, and indicators for its measurement must be de�ned subsequently. �e selection of objectives and indicators is a key factor. indeed, the de�nition of which indicators must be met in order to reach a certain goal may determine the outcome of the assessment as a whole – some indicators could be relevant to certain goals, while others could be irrelevant. in addition, the selection of the indicators is limited by the quantity and quality of the data available. policy-makers can support and limit the evaluation of the use of public funds to a clear framework if they determine the objectives of government interventions in advance, allocate measurable indicators to them, and ensure the regular collection and processing of data required for the calculation of the indicators. 2.2 regulatory environment pertaining to the expediency and e�ectiveness of public spending in hungary below we provide a brief overview of the regulatory environment that de�nes the expediency, e�ectiveness and e�ciency requirements of public spending. it is a reasonable expectation of public spending that it should generate social bene�ts8 (increase public good); therefore, the objective of public spending should always be measurable against a social utility target value. at the macro level, the objectives of the use of public funds are fundamentally determined by regulations and regulatory instruments under public law. �e basic principles of the strategic governance of the government are laid out in a government decree.9 �e decree supports the government’s goal to ensure that strategic thinking becomes a fundamental element of organizational operations, and that the organization becomes capable of: concerted, high-quality strategic planning; identifying its short and mediumterm objectives; de�ning the tasks and assigning responsibilities; as well as monitoring and assessing the implementation of the tasks and the predetermined objectives. �e legislation de�nes the hierarchy of strategy papers,10 the individuals responsible for drawing up the documents, the principles of follow-up, evaluation and review, and rules pertaining to individual document types. sometimes, however, even the legislation fails to de�ne the regulatory objective, which renders the interpretation of the expediency of public spending either di�cult or impossible. hungarian regulations do not include a requirement for the de�nition, application, and monitoring of e�ectiveness, e�ciency, economy, or other performance indicators pertaining to the entire group of public fund users. by contrast, the legislation de�nes in detail the amount and the main allocations of the public funds available (prevailing act on the budget and the budget decree pertaining to local governments) and the criteria for the use of public funds by budgetary institutions. �ey state that the economy, e�ciency and e�ectiveness of the use of public funds and public assets must be ensured. however, the meaning of these concepts is unclear. besides legislation or in-house regulations, the performance criteria of the given organization can be enforced by other means. for example, by the expectations of the controlling body, the proprietor or the shareholder. �is includes the public service contract concluded by the state and the public service provider, which is a written contract for the performance of a public function or a part thereof on behalf of the organization.11 in addition to the basic requirements of the performance of public services, the contract also stipulates quality requirements and conditions.12 obviously, the existence of the regulation cannot ensure e�ective and e�cient operation in itself; it only provides a framework for it. �e head of the organization is responsible for �lling these frameworks with substance. �e greatest de�ciency of the regulation, therefore, is the fact that it fails to enforce the declaration of the objectives, expected results, and performance criteria of public spending at the systemic level. it is therefore impossible to measure the subsequent e�ectiveness and e�ciency of public spending. as has been con�rmed by the �ndings of the state audit o�ce, the de�ciencies suggest that the social utility of public spending falls short of the level that could have been achieved by a clear de�nition of the objective and by resultoriented operation. recognizing this problem, regulatory processes commenced in relation to a segment of the economic agents managing public funds: public administration organizations. �ese processes shift the system of public spending speci�cally toward strategic control and result-oriented operations. (apart from this, there are a number of other policy programmes and government strategies where regulations have commenced. however, they are not targeted at ensuring the e�ectiveness and e�ciency of public spending or demanding follow-up and evaluation). 3. findings of sao audits �e audits of the state audit o�ce measure di�erent aspects of performance to ensure that public funds are managed in an orderly, growth-stimulating fashion. �e methodology of the sao’s performance audits are based on the intosai standards (issai 100 and issai 300). performance auditing promotes the transparent operation of organizations by providing, based on the audit evidence, an independent and authentic perspective, by issuing conclusions for the targeted users of the audit results, and by o�ering an insight into the implementation and outcomes of audited activities related to the management of public funds and public assets. accordingly, it provides useful information while serving as a basis for the acquisition of knowledge and performance improvement. performance audits support the responsible parties in the improvement of accountability by o�ering new evaluation criteria. (sao, 2015) in addition, the sao’s compliance audits and results of the integrity survey13 also identi�ed e�ectivity problems. �ese experiences can be used in the planning process of performance audits, too. 3.1 audit �ndings of sao’s performance audits �e performance audits of the sao shed light on a number of problems that derived from inadequate indicators, backtesting, or the inadequate de�nition of objectives. németh and kolozsi (2015) processed the audit �ndings, and the possible problems arising during the audits were found to be the following (the number in brackets correspond to the relevant audit report): a) objectives have not been set or proved to be de�cient (e.g. the reorganization of psychiatric health care) [no. 1286]. b) objectives have been set but the system of indicators and criteria designed to measure the successful implementation of the objectives is either missing or inadequate [subsidy scheme of public employment, no. 13097]. c) objectives have been set, an indicator system has been designed, and a set of criteria have been developed and applied. however, there is no follow-up and the reasons for deviations are not analyzed [implementation of rural development objectives, no. 1293]. d) �ere are simultaneous de�ciencies at multiple levels with respect to the de�nition of objectives, the performance criteria, as well as backtesting [�nancial management of business associations in majority state/local government ownership]. �e following will examine each of these examples. 3.1.1 reorganization of psychiatric care: consequences of the lack of e�ciency objectives in 2012, the state audit o�ce conducted a performance audit with regards to the reorganization of psychiatric care. �e purpose of sao’s �rst-time audit of psychiatric care was to evaluate whether the resources being spent on reorganizing psychiatric care were appropriately utilized and whether the reorganization was more cost-e�ective, and provided higher-quality, more easily accessible service. �e audit covered the period between 1 january 2006 and 30 september 2011. �e audit found that goals had not been set at the macro level, neither in terms of e�ectiveness nor in terms of e�ciency of psychiatric care (neither in the professional or public health, nor in the �nancial areas); the relevant indicators had not been designed, and therefore, it was not possible to monitor and evaluate the e�ects of the reorganization. due to such major de�ciencies in planning, severe problems emerged in the already distressed health care system. for example, closing down the national institute of psychiatry and neurology eliminated the national institution for psychiatric care that was meant to provide a comprehensive framework for individual types of psychiatric care, and the institutions designated to take over the tasks were unprepared. as a result, a substantial amount of �nancial liabilities accumulated. �e audit found that even though several government initiatives had been announced for the reorganization of healthcare in the period of 2006–2011, they did not speci�cally determine the tasks and size of psychiatric care. hospital restructuring in 2007 terminated inpatient psychiatric care in 11 hospitals, curbed the number of total active beds in psychiatry by 20% nationwide, and closed down the national institute of psychiatry and neurology – which was considered to be the apex of the mental health profession – without any surveys with respect to the regional distribution of psychiatric diseases, or to the expected impact of the decisions. in addition, there was no consultation with professional organizations or patient advocacy groups, and the health care system was unprepared for the dramatic change entailed by the reorganization. although the goal of the reorganization – including the termination of the national institution – was to streamline the care system, the lack of adequate professional planning deteriorated the conditions of psychiatric care. bed cuts in inpatient psychiatric care as part of hospital restructuring did not address earlier capacity imbalances, nor were there any legal provisions on adjusting capacities in specialist outpatient care. �e elimination of the national institute of psychiatry and neurology – a top quality professional institution – was an unreasonable decision. decisionmakers failed to survey the �nancial implications of the institution’s elimination in advance, and the institutions designated to take over the tasks were unprepared. �e target date for the institution’s liquidation, therefore, was delayed by a year. starting from 2008, the ministry of health, in conjunction with various hungarian psychiatric professional organizations commenced the development of a criteria system suitable for measuring performance. however, the evaluation of cost e�ciency and e�ectiveness did not have an established and applied methodology at the time, which resulted in the state audit o�ce developing its own indicators suitable for performance assessment during the audit. �rough the analysis of these indicators, the sao found that the coste�ciency and e�ectiveness of public spending on psychiatric care deteriorated in comparison to 2006. �e primary reasons behind this deterioration were capacity imbalances in psychiatric care, and in the absence of disease registers, health care and social care capacities were not based on morbidity data. �ere was no organized care regulating services for patients, and regional access was unevenly distributed. moreover, in the absence of accurate disease registers, no information was available on the actual prevalence of psychiatric disorders by region. reorganization has failed to lead to a more even distribution of hospital capacities or create a more sustainable care system better geared to treatment needs. in summary: the centrally executed reorganization of the institutional system did not have a pre-determined hierarchy of objectives and the expected results were not de�ned; therefore, it was not possible to assess the objectives of the public funds spent on the project or identify the social utility of the reorganization. in such situations, there is a concern that objectives are hastily determined, re�ecting immediate needs and interests rather than as a result of a thorough and concerted planning process with maximum consideration to social utility. in the absence of a hierarchy of objectives, it is impossible to measure the expediency, e�ectiveness, and e�ciency of the programme as a whole, which ultimately calls into question the expediency, e�ectiveness, and e�ciency of public spending. 3.1.2 public employment, and consequences from the lack of an appropriate indicator system and criteria as it has become apparent, the establishment of a hierarchy of objectives is indispensable for expedient, e�ective, and e�cient operations. �e example presented below illustrates the possible implications of de�ciencies in the indicators designed to measure the achievement of goals, the relevant criteria, and the information system supporting their measurement. in september 2013, the state audit o�ce published report no. 13097 on the performance audit on the e�ciency and e�ectiveness of the subsidy scheme of public employment and the related training programs. �e objective of the audit was to assess the e�ectiveness and e�ciency of the public employment system which had been in place between 2009 and 2012 q1 (including the related subsidy scheme and training system and the changes introduced). �is audit speci�cally sought to evaluate the cooperation between local governments and labour organizations e�ciency and e�ectiveness in facilitating the return to work, and improvement of labour market positions, of individuals experiencing long-term unemployment with low-level academic quali�cations capable of working through public employment or training schemes. �e audit found that the strategic objectives regarding public employment in the review period had been set (in several, interdependent documents), and from 2011, speci�c goals and tasks were de�ned in relation to the strategies. however, they either did not or insu�ciently set the e�ectiveness and e�ciency indicators and criteria suitable for con�rming the implementation of the objectives, and allowing for continuous monitoring and ex-post evaluations. �e entire infrastructure of the measurement was also either de�cient or missing. due to the lack of a comparable indicator system measuring the e�ectiveness and e�ciency of the public employment system in place, there was no central evaluation. due to these limitations, wherever the quality and quantity of the data available allowed, the state audit o�ce derived its own indicators from the pre-determined objectives, and drew its conclusions on the basis of the analysis of these indicators. as a result, the sao found that the number of persons involved in public employment doubled from 2009 to 2011, which means that the public employment system was e�ective in supporting unemployed individuals in obtaining public employment, and in accomplishing the strategic objectives regarding subsidised employment. public employment had a positive e�ect on both the employment rate and the unemployment rate (improving the employment rate by 0.8–1.1% and the unemployment rate by 1.4–2.0%). in addition, the subsidy scheme e�ciently contributed to involving those of productive age and receiving social bene�ts in employment. goals which were also employment policy objectives. based on the audit �ndings, the sao issued a recommendation for developing a criteria and indicator system suitable for measuring the performance of public employment, and for setting up a monitoring system for the implementation of the pre-determined objectives. another problem explored by the audit was the fact that, owing to de�ciencies in the continuity, timeliness, and reliability of registries and disclosures, the information system of public employment did not support regular reporting and feedback to policy-makers in the review period. in some areas, the quantity or quality of the data available was insu�cient for the monitoring process. for example, they did not collect data systematically with respect to the exits of public workers from the open labour market. �is would have been required for comprehensive government analyses, but no comparable data was available with respect to the entry of public workers into the open labour market (neither at the central nor at the local levels). consequently, it was impossible to assess the e�ectiveness and e�ciency of the e�orts to facilitate the return of public workers to the open labour market. with that in mind, the sao recommended the development of a data reporting system that provides reliable data for the evaluation of the implementation of public employment objectives. in this case, it is not possible to decide whether the objectives were implemented e�ectively and e�ciently, because in the absence of predetermined indicators and criteria it remains unclear which outcome would have been considered e�ective and e�cient by those who set the objectives. in any event, the sao found that the use of public funds contributed to the reduction of the unemployment rate and a signi�cant increase in the number of public workers. additionally, the e�ciency of the public employment subsidy system improved by 2011 from the aspect of the central budget (i.e. the per capita subsidy amount declined with a simultaneous increase in the number of public workers). ultimately, the results achieved by the use of public funds contributed to the implementation of the pre-determined objectives. 3.1.3 implementation of rural development objectives; consequences of deviation from the objectives sometimes, even though strategic objectives are de�ned, the related, multilevel sub-objectives are set, and the adequate indicators and criteria are put in place, during implementation the program is modi�ed (e.g. in terms of funding, the criteria system or target groups) on the basis of priorities that are not in line with the original objectives. consequently, its e�ectiveness and e�ciency fail to achieve the pre-determined level. in august 2012, the sao published its report on the performance audit on e�ectiveness and e�ciency of the utilization of funds for the implementation of rural development objectives, and the strengthening of the role of local communities in the improvement of the quality of life in rural areas. �e main purpose of the audit was to assess whether the utilization of funds allocated to the implementation of rural development objectives to improve the quality of life in rural areas, to encourage diversi�cation of the rural economy, and to strengthen the role of local communities, was e�ective and e�cient in the period of 2007–2011. �e audit found that the objectives of the new hungary rural development program (nhrdp) were in line both with the objectives of the national development policy concept and with eu requirements. output, result, and impact indicators were de�ned to measure the implementation of the targets and impacts (e.g. number of villages and micro-enterprises supported, number of new jobs, total amount invested, and net number of new jobs created as a result of development). however, problems arose during the implementation of the program as a result of the low number of completed projects, the commitments undertaken in relation to the funding, and the limited rate of payments. �e programme was modi�ed several times, but the substance of rural development objectives remained the same. �us, for example, there was a shift in the allocations between the measures aimed at improving the quality of life in rural areas and encouraging the diversi�cation of the rural economy: more than a half of the funds allocated to the measure aimed at the creation and development of micro-enterprises was reallocated to the measure targeting the improvement of the image and attractiveness of rural life and the quality of services. �is modi�cation was contrary to the objective set out in the nhrdp’s economic development programme, which was intended to strengthen micro-enterprises operating in rural settlements and to improve local employment. increasing the resources for improving the image and attractiveness of rural settlements and the quality of services rendered did not contribute to managing the social tensions generated by the restrained economic activity of the population living in rural areas, by the low employment rates and hence, by the limited amount of income. �e reorganization of resources was not accompanied by an overall review of indicators intended to measure the implementation of the objectives (e.g. number of micro-enterprises supported, total amount invested, number of multifunctional service centres, etc.). �e indicators were modi�ed only in part, and without underlying calculations and impact assessments. �e monitoring committee was tasked with monitoring and evaluating the program results on a continuous basis. however, the e�ciency of this, which was designed to supervise the quality of the execution – partly as independent of the executive organizations – was low. in summary, although the objectives and the related e�ectiveness indicators were de�ned at the start of the project, during subsequent modi�cations of the program – justi�ed by reasons irrespective of the project – the indicators intended to measure the results and the resources ensuring that such indicators were achieved were not signi�cantly changed, and the results, performance, and impacts expected from the support system received less attention. consequently, the originally de�ned regional development and convergence objectives were implemented only partially and therefore, the expediency, e�ectiveness, and e�ciency of public spending fell short of the originally desired levels. 3.2 audit �ndings pertaining to state-owned enterprises14 �e sao reports prepared on the macro-economic correlations of �scal processes (the latest one of which was issued in september 2015) pointed out that the ratio of public spending on economic functions to gdp had increased continuously since 2011. �e increase in expenditures allocated to economic functions primarily re�ects the high absorption of eu grants and state acquisitions. �is trend also re�ects the increasing economic participation of the state, which, according to domokos (2015) opens up new opportunities (e.g. increasing national wealth, development of depleted but not replaced assets, increasing economic strength of the state), but also carries a certain degree of risk. for instance, the need to ensure the funding required for a more active participation in economic functions entails the reallocation or withdrawal of resources, which may pose funding risks over time in other areas (e.g. among those receiving reduced budgetary subsidies or subject to special taxes, as well as in areas receiving a smaller proportion of eu transfers). in addition, a competition for the acquisition of public funds materializes between traditional state functions and the economic functions of the state. �e fact that the state is at the same time a legislator, shareholder, and supervisor in an increasing number of economic areas may also be a risk factor. being responsible for all three functions simultaneously gives rise to a con�ict of interest between, for example, the legislator and the shareholder (the creation of a regulatory environment encouraging competition vs. the crowding-out of competitors and monopolistic endeavours). �e change in ownership implies that, through its business associations, the state now operates in markets where its presence was previously limited to a regulatory role. accordingly, there is a risk that the level of expertise required for the management of a state-owned company competing under market conditions is insu�cient, and thus the operation of the organization is ine�ective or ine�cient. �is increases the risk of losses and wasteful operation. �ese risks may be mitigated by an adequate regulatory environment and by the exercising of ownership rights (e.g. shareholder’s control), and by facilitating transparent and performance-oriented operations. in consideration of the risks involved, the auditing of the �nancial management of state-owned enterprises (soes) has become a relatively new but increasingly important area of sao audits (e.g. transportation companies, district heating providers, waste management companies, water and public utility companies, theatres). �e audit �ndings contribute to improving the relevant regulations, as well as soe’s management and processes for exercising ownership rights and ultimately, to improving the state’s performance. �e sao performs the assessment of the companies in the context of compliance audits. propriety audits are performed where certain issues cannot be judged on the basis of legal provisions or where there are clear de�ciencies in legislation. performance audits are intended to establish whether the stewardship of public funds and public assets complies with the principles of e�ectiveness, e�ciency, and economy, and whether there is room for improvement. typically, however, there are no e�ectiveness requirements in place (set by the exercisers of ownership rights, the bodies of the company, or its management) to determine the objective to be achieved and the desired impact. �erefore, in most cases the accountability of public spending is limited to its regularity and propriety. sao audits are primarily intended to verify and evaluate �nancial standing, asset management, the existence of internal control systems and the regularity of the areas constituting an integral part of these items. at the same time, audit �ndings allow us to identify critical areas that may not be separated from the scope of responsibility of management and the exercisers of ownership or oversight rights. sao audits pointed out that de�ciencies in the management of state-owned companies generate losses in numerous areas, including �nancial and non�nancial losses (e.g. loss of con�dence, moral hazards). �ese losses stem from various sources and could re�ect de�ciencies in the exercising of ownership rights and management-related problems. �e materialization of de�ciencies at multiple control levels may amplify one another, leading to signi�cant economic, e�ectiveness, or e�ciency losses. 3.2.1 de�ciencies arising in the exercising of ownership rights appropriate exercise of ownership rights, tight ownership control, and the de�nition of the direction of public asset management are indispensable factors in responsible public spending and asset management. audit �ndings point to a lack or ambiguity of directives regarding the use of public funds and public assets (e.g. the national asset management directives de�ning the strategic and annual frameworks for the responsible management of state property, or the annual national asset management programme have not been completed). moreover, the exercise of ownership or oversight does not ful�l its intended role in several areas (de�nition of performance criteria, reporting system, ownership control, and evaluation). audits and analyses on areas playing a key role in terms of competitiveness (acquisition and utilization of knowledge, investment projects, inexpensive energy, employment, market organisation, and sustainable development) found evidence for the absence of targeted indicators (indices) suitable for measuring results, direct and indirect bene�ts, and pointed out – in the case of the use of domestic funds – the lack (or de�ciencies) of monitoring systems ensuring reliable and up-to-date data reporting and feedback. �e sao has drawn attention to these problems on several occasions, and identi�ed the risks entailed. ownership control is a particularly important item of ownership rights which, in the case of local governments, is typically manifested in the activity of the supervisory board. �e primary asset manager (hungarian state holding company) monitored the activity of the companies primarily on the basis of controls relying on requested data disclosures. however, it failed to perform on-site inspections regarding the �nancial management, preservation, accumulation, and use of public assets. �e company’s disclosures were insu�cient, and problems were detected with respect to the owner’s reporting systems as well (non-compliance with regulations, failure to provide the required information, failure to demand reports), which impaired the enforcement of transparency. �e supervisory boards discussed and approved the annual business plans and the annual reports. however, they usually did not inspect – for the protection of the owner’s assets and public interest – changes in wealth, the �nancial management of company assets, and stewardship of the state property entrusted to the company. in order to ensure the accomplishment of the objectives, clear e�ectiveness requirements must be de�ned for management, and the ful�lment of these performance criteria must be monitored and evaluated on a continuous basis. in case of deviations, the owner must take the necessary measures. evidence shows that the performance assessment system of corporate managers is not consistent, and it lacks a related, e�cient-incentive system. with regards to ownership control, in addition to its recommendations based on the audit �ndings, the sao also issued letters of warning, advising the exercisers of ownership rights to (among other things) review the �nancial management of the business association, and – in this context – de�ne expectations regarding the content of business plans and reports, and to review and manage the accounts receivable of the business association. �e sao also advised the owner to de�ne – in the context of exercising its ownership rights – a set of criteria to measure, for example, the e�ciency of public service functions or professional standards for evaluating service levels for the company. 3.2.2 management of state-owned companies �e audits found that, in many cases, the �nancial management of the companies did not comply with statutory requirements (e.g. important accounting policies were missing, prime cost calculations were unfounded or missing, the requirements of accounting separation were violated). severe regularity and �nancial management problems went undetected in many cases; neither management, nor the exerciser of ownership rights, took measures to reduce the risks arising from these problems, and the supervisory boards failed to raise attention to the risks jeopardizing the implementation of the objectives. for the most part, business plans did not include criteria pertaining to the e�ectiveness, economy, and e�ciency of �nancial management and professional performance. in the absence of pre-determined criteria, the performance of the company’s management cannot be measured, and the lossproducing or pro�t-generating areas cannot be identi�ed. in numerous cases, the plans did not include detailed information about the scheduled projects. �erefore, it is impossible to make informed decisions regarding the allocation of public funds or investment projects. �e sao found that, in many cases, the internal regulations pertaining to prime cost calculation did not adhere to legal regulations in the case of companies providing public services. �is issue is not only important from the perspective of compliance with the act on accounting. indeed, another important function of prime cost calculation – in the economic sense – is to support the decision-making process. in the case of business associations performing public functions and providing public services, there are numerous areas where it is impossible to make well-founded and forward-looking decisions in the absence of adequate prime cost calculations. �ese areas typically include the execution of planning tasks, price formation, cost analysis, and calculations providing the foundation for economic decisions–indicators designed to measure internal performance. �ese areas are also within the management’s scope of responsibility and, through the approval of the business plans, they are of decisive importance from the perspective of the supervisory exerciser of ownership rights. 4. conclusions in several cases, the audits conducted by the state audit o�ce of hungary shed light on general problems that may give rise to risks that could potentially jeopardize the achievement of policy or social objectives. �e audit �ndings of the sao con�rm that the control systems of both public entities and stateowned enterprises need to be improved signi�cantly in order to ensure good governance and public sector management. �is calls for a paradigm shift, and new horizons should be opened up in the public sector management approach. it is indispensable to ensure the transparency, publicity, and measurability of the public sector management’s performance, because this is the only way to ensure e�ective, e�cient, cost-e�ective, and sustainable public management, and to also increase social well-being. first, the regulatory environment should be improved to identify objectives, to specify the expected performance and to develop the indicator system related to public spending. �e owner must de�ne the criteria for the implementation of objectives and sub-objectives in a manner that ensures the objective execution of performance assessment and control. at the same time, objectivity requires reliable databases, which are currently not available in the whole sector. parallel to this, it is also essential to improve the regulations pertaining to management along the lines of new aspects. �e ethical requirements set for public managers should be tightened to properly re�ect the fact that they act on behalf of the community, bearing responsibility for public property and for safeguarding the future of the community. public con�dence in management must be earned and retained. good managers act as an example for all and do everything in their power to ensure that the organization entrusts them to ful�l the public purpose for which it was established. �e state audit o�ce, as a supreme audit institution, plays a prominent role in the renewal of public management. its performance audits are designed to evaluate the use of public funds focusing on expediency and e�ectiveness, enforcing its transparency and the measurability of performance. �e execution of performance audits, however, is often impaired due to the lack of the required indicator system. �erefore, in recent years the sao has supported – and will continue to support – the enforcement of the expediency/e�ectiveness/e�ciency requirement in the planning, implementation, and evaluation of government objectives through the publication of a series of performance-oriented studies. in its advisory role, the sao has often called the legislator’s attention to problems surrounding the e�ectivenessand e�ciency-based assessment of public spending, and issued a number of recommendations. some of the proposals pertained to the selection, performance assessment and remuneration of management. �e proposal package included the following recommendations: – the performance of the management of state-owned companies should be evaluated from the perspective of compliance, e�ectiveness, e�ciency, and economy on a continuous basis; – the ability and activity of the exerciser of ownership rights to evaluate e�ectiveness should be strengthened; – managers of state-owned companies should comply with strict ethical and integrity principles; and – the remuneration system of company managers should be reformed. �e sao wishes to continue to play a leading role in the creation of a knowledge base in order to enable economic actors responsible for the management of public funds, as well as those controlling and supervising the process, to safeguard public funds and public assets in an ethical and highly professional manner. references 1. certainly, the frameworks imply di�erent things at di�erent management levels; moreover, even subordinate public sector employees have a degree of independence, and hence, responsibility. 2. according to the neoliberal movement, since competition strengthens the economy, the state should be downsized, public services should be steered to the market and in general, the economic role of the for-pro�t sector should be increased. 3. in the bureaucracy theory of public choice, policy-makers and executive o�cials seek to maximize their personal utility, and the movement explores the implications of this choice. 4. taylorism studies the topics of process management and performance improvement. 5. oecd puma (public management committee) and subsequently, pgc (public governance committee) were established to provide support to participating member states in the planning, implementation and evaluation of public policies and public services. 6. partners for good governance: mapping the role of supreme audit institutions (oecd, 2014) 7. e.g. the 2004 publication entitled �e good governance standard for public services by the independent commission for good governance in public services, or the publication entitled principles for good governance and ethical practice by the independent sector in the usa; good governance in practice, bundesministerium für wirtschaftliche zusammenarbeit und entwicklung (bmz), 2012; international framework: good governance in the public sector, chartered institute of public finance and accountancy (cipfa) and the international federation of accountants® (ifac®), 2013; good governance guide for public sector agencies, government of western australia, 2013. 8. social utility means the bene�ts reaped by society as a whole. it consists of direct and indirect components, and considers environmental impacts and, for example, the e�ects on job creation. it is a broader category than �nancial utility. it is primarily used for cost-bene�t analyses prepared for development projects �nanced from eu funds. 9. government decree no. 38/2012 (iii. 12.) on strategic governance 10. strategic planning documents: country forecast, national medium-term strategy, ministerial programme, institutional work plan (i.e. mandatory documents), as well as the long-term concept, the white book, policy strategy, policy programme, institutional strategy and green book (optional) 11. pursuant to act clxxv of 2011 on the freedom of association, on public-bene�t status, and on the activities of and support for civil society organisations (act on csos). 12. as prescribed, for example, by act xli of 2012 on passenger transport services or government decree no. 317/2013 (viii. 28.) on the selection of municipal waste management service providers and on the contract on the municipal waste management service. 13. �e goal of the series of surveys performed annually by the sao since 2011 has been to identify the risks which may adversely in�uence the integrity of the given organisations within public sector institutions. in addition to identifying the risks, the survey also maps out the coverage levels of controls serving to manage these risks. in addition to the �ght against corruption, expanding the circle of institutions that accept and endorse the integrity-based mentality is another high priority of the integrity surveys. �e ultimate goal is to promote cultural change and to create integrity-based institutional operation and to spread thinking in terms of risks in the hungarian public sector. 14. state owned enterprises (soes) are enterprises where the state has signi�cant control through full, majority, or signi�cant minority ownership (owned by the central or local governments). public governance, administration and finances law review vol. 6. no. 2. (2021) • 83–100 . © the authors 2022 doi: 10 .53116/pgaflr .2021 .2 .7 socio-economic governance in the eu ágnes orosz*¤, norbert szijártó**¤ * assistant professor, university of public service, department of economic and international economics; research fellow, institute of world economics, centre for economic and regional studies, e-mail: oroszagnes@uni-nke .hu ** assistant professor, university of public service, department of economic and international economics; junior research fellow, institute of world economics, centre for economic and regional studies, e-mail: norbertszijarto@gmail .com abstract: this paper focuses on the complexity of socio-economic governance in the european union . we define socio-economic governance as the process of governing societies in a situation where no  single actor can claim absolute dominance thus socio-economic governance is the outcome of the interaction between european union institutions (european union decisionmakers) and member states (national policy-makers) . since the onset of the global financial crisis and the euro crisis a  decade ago, social issues have become substantially prominent in eu governance and policy debate . furthermore, the covid-19  crisis brought again social issues to the fore . there is no dedicated social governance framework in the european union but there are several mechanisms (strategies, initiatives and regulations) through which social governance is practiced . at the same time, the framework for european economic governance has substantially been strengthened as a  consequence of the global financial crisis and the euro crisis and can be characterised by a  matured but incomplete framework . on the one hand, this paper aims to collect and investigate all governance tools related to economic and social issues in the european union, and on the other hand, this research examines the impacts of those governance tools on member states . keywords: economic governance, social policy, socio-economic governance, european union 1. introduction the european integration has survived various crises since its inception: the collapse of the bretton woods system, the oil crises, the crisis of the european exchange rate mechanism in 1992–1993, and most recently, the european union was able to weather the dramatic impacts of the global financial crisis of 2008 and 2009 and avoided disintegration during the euro crisis . all these crises provided an impetus for strengthening the governance of the european union . community-level responses to crises have created an ever deeper and comprehensive framework for governance, particularly in economic areas . this popular description or narrative of the european union clearly congruent with the reactive approach to the european integration based on the famous sentence of https://doi.org/10.53116/pgaflr.2021.2.7 https://orcid.org/0000-0002-0197-4363 https://orcid.org/0000-0001-7669-6583 mailto:oroszagnes@uni-nke.hu mailto:norbertszijarto@gmail.com 84 ágnes orosz, norbert szijártó public governance, administration and finances law review • vol.  6. no. 2.  jean monnet (1976): “europe will be forged in crises, and will be the sum of the solutions adopted for those crises .” however, it is worth taking into consideration that the european union project of combining the european single market, the economic and monetary union, and the actual architecture of the european governance framework is still incomplete . successive crises constantly test and challenge the current state of european (economic and social) governance as has been the case with the coronavirus crisis since the beginning of 2020 . several factors, including the question of sovereignty, lack of willingness, unclear division of competencies and lack of deep supranational redistribution among others, hinders the great leap forward establishing a  complete economic union on the basis of the actual economic, fiscal, financial and social governance frameworks . jones et al . (2015) offer another explanation why european decision-makers postpone the radical completion of the governance framework of the european union . their approach, the so-called failing forward, merges two integration theories, the intergovernmentalism and neofunctionalism, and claims that intergovernmental bargaining leads to incompleteness because member states are having diverse preferences and always opting for the lowest common denominator solutions . moreover, if a  crisis hit the european union, member states respond by again negotiating the lowest common denominator solution to address that crisis . in this sense, successive crises can be considered triggers of the spillover phenomenon from neofunctionalism . so, member states’ reluctance prevails to perform the above-mentioned great leap forward, nevertheless, this creates continuous but incremental deepening of the european integration, where the different stages of the governance framework are perfectly separable along crises . this paper investigates the complexity and evolution of the european union’s socio-economic governance framework . we define socio-economic governance as the process of governing societies in a  situation where no  single actor can claim absolute dominance, thus socio-economic governance is the outcome of the interaction between european union institutions (european union decision-makers) and member states (national policy-makers) . since the onset of the global financial crisis and the euro crisis a  decade ago, social issues have become substantially prominent in eu governance and policy debate . furthermore, the covid-19  crisis brought again social issues to the fore . the global financial crisis (and the euro crisis) and the coronavirus crisis provide breakpoints in the evolution of both economic governance and social policy governance in the european union . thus, we are able to separate three time periods regarding both parts of european socio-economic governance . the pre-global financial crisis period represents our first time period (between the early 1990s and the eruption of the global financial crisis) . european economic governance can be characterised by the rules and regulations of the european single market, the architecture of the economic and monetary union, and fiscal rules of the stability and growth pact . eu directives covered relevant social policy issues during the pre-crisis period, the open method of coordination as a  soft ‘acquis’ provided institutionalised harmonisation of social issues . social policy institutions, in general, are built on noncoercive initiatives for harmonising national social policies . moreover, the lisbon strateg y, as a  development plan, aimed to make the european union the most public governance, administration and finances law review • 2. 2021 85socio-economic governance in the eu competitive and dynamic knowledge-based economy in the world capable of sustainable economic growth with more and better jobs and greatest social cohesion . the second period is a  challenging decade between the global financial crisis of 2008  and 2009  and the ongoing covid-19  crisis . the global financial crisis hit hard europe and created a second round of euro crisis undermining economic recovery in the southern periphery of the european union . ad hoc crisis response measures were replaced by a  purposeful institution building, the so-called new economic governance of the european union or economic and monetary union 2 .0, declared by the five presidents’ report in 2015  and confirmed by the european commission’s reflection paper published in late 2017 .  moreover, we have witnessed the erosion of social safety nets in numerous member states . the global financial crisis (and the euro crisis) evidenced in a  sharp decline in economic and social well-being indicators, such as increased unemployment, loss of income, rising poverty and increased vulnerability . therefore, european union decision-makers have eagerly worked on to strengthen the social policy governance framework of the community . although a  comprehensive social policy governance framework has not been established, some pre-crisis initiatives were incorporated into the european semester . soft coordination tools of european socio-economic governance (including country-specific recommendations, in particular social issues and the europe 2020  priorities) were organised under the european semester and launched in 2010 .  finally, since the mid-2010s, political guidelines (and strategies) of the european commission have significantly strengthened to govern socio-economic issues . the second breakpoint is the coronavirus crisis erupted in the early 2020 . accurate conclusions cannot yet be drawn regarding the evolving nature of the governance of the european union . nevertheless, supranational responses to the covid-19 crisis initiated by the european commission partly envisions and determines the trajectory of future evolution of the european socio-economic governance . the separation of european economic governance and the governance of social policy in the european union is a  necessary step, since there is an existing (matured) framework for economic governance in the european union; however, there is no dedicated social governance framework, european union decision-makers build on several mechanisms (strategies, initiatives and regulations) through which social governance is practiced . in this research our objective is to collect and investigate all governance tools related to social and economic policy issues in the european union . moreover, the gradual evolution of economic and social policy governance framework in the european union generates permanent tensions between european union bodies and member states . if supranational institutions gain more competences over social policy issues – be any of the following : monitoring, supervision, harmonisation, coordination, regulation or complete control  –  then member states are required to delegate competences to supranational level and thus lose competences (sovereignty) over policy issues, which is not necessarily acceptable to all member states . so, this research briefly studies how the “hardening” socio-economic governance framework impacted the members states, how member states adapted or disputed this kind of new intervention by the european commission . 86 ágnes orosz, norbert szijártó public governance, administration and finances law review • vol.  6. no. 2.  the article proceeds as follows . the next chapter reviews the literature, we build on three strands of academic discourse: we define governance related to the european integ ration in a  nutshell, we determine economic governance and then we turn to the governance issues of social policy in the european union . the third chapter has two parts and investigates the evolution of the european economic governance and the european social policy governance . the fourth chapter attempts to unify economic and social governance under the label of european socio-economic governance . and finally, conclusions conclude . 2. defining various forms of governance in the european union context our theoretical framework is centred around three strands of literature . firstly, we provide a  brief review to define the nature of governance in the european union context . secondly, we investigate the european economic governance . and thirdly, we scrutiny the governance of social policy in the european union . 2.1. governance in the european union there are many ways to define governance and there are many forms of governance . bevir (2012) provides a  simplified definition: governance refers to all processes of governing undertaken by a  government, market or network . technically, governance is a  system by which entities of an economy or state are directed and controlled . other scholars, such as fukuyama (2013), relies on a single actor regarding governance which can be determined by a government’s ability to make and enforce rules, and provide services . kohler-koch & rittberger (2006) draw attention to the fact that governance has become a popular research focus of european union studies, but the definition of governance still leads to confusion . this confusion can be solved by distinguishing between the meanings of the conception of governance . thus, pierre (2000) provides two concepts, the first refers to state adaptation: “the empirical manifestation of state adaptation to its external environment as it emerges in the late twentieth century” (pierre, 2000, p . 3) . the second deals with a coordination of social systems: “conceptual and theoretical representation of the co-ordination of social systems” (pierre, 2000, p . 3) . the first stresses a hierarchical structure for decision-making and the second offers a society-centred approach . since the inception of the european union (european economic community), the question of governance has always been in the foreground . this popularity has further increased since the launch of the european single market as the attention turned to the policy-making in the european union . the strengthened european union policymaking required new approaches and generated competing governance theories . public governance, administration and finances law review • 2. 2021 87socio-economic governance in the eu some governance concepts are grounded on the multi-level nature of the european integration . multi-level governance is a decision-making process in the european union that vertically and horizontally spreads power (marks et al ., 1996; bache et al ., 2016) . in other words, regional integrations have multiple levels of decision-making centres, including local, regional, national, and federal, thus governance in such complex systems means the sharing of power among sub-national, national and supranational actors . other approaches also evolved to determine the nature of the governance of the european union . the ‘community method’ emphasises the role of supranational actors such as the european commission (scharpf, 2003) . supranational bodies capitalise on the transferred sovereignty, launch independent agendas to further support, harmonise, coordinate or in extreme cases control specific policy areas . one strand of the literature of the ‘governance turn’ in european union studies characterises the union as a regulatory state (majone, 1996) . this approach claims that the european union has reached a  high-level degree of political autonomy thus started exercising ‘political functions’ such as the provision of public policy . however, diverse national regulatory systems and various preferences of national actors undermine the perfect functioning of a  one-sizefits-all supply of common public policy . finally, scholars also argue for a  network governance in the european union on the basis of public–private policy networks . the maastricht treaty established a  new version of governance, the open method of coordination in the european union as a  response to the growing role of supranational decision-making in the community . this new mode of governance was designed for coordinating national economic policies via the use of recommendations and guidelines, instead of binding rules and regulations (hodson & maher, 2001) . we have demonstrated the various approaches to the governance of the european union . in order to provide a  simplified version or a  common denominator of diverse governance theories, we apply the approach of peters & pierre (2009) . according to peters & pierre (2009, p . 91 .), the european union is a large territory with different and complex economic, social and political structures, thus governance needs capacity: “governance implies the capacity of a  society to develop some means of making and implementing collective choices .” in theory, institutions  –  supranational institutions, rules and regulations  –  are tools to decrease the complexity of our life; in terms of the european union, institutions can be understood as an apparatus to govern the processes, outcomes, preferences and behaviour through the maximisation of relevant actors’ benefits . empirically, this mechanism starts with the identification of a  common problem, and we can assume that common problems require common solutions . however, reaching a common solution in the nexus of member states, european union bodies and other actors is not easy . member states insist on representing their own preferences, therefore, the identification and decision on common goals generates long lasting debates . if common goals are identified, the following step is to design and implement the means (institutions) to achieve those purposes . and finally, this chain ends with a  feedback loop . through this empirical process of governance, decisionmakers of the european union are able to “govern” the complex structure of the integration . 88 ágnes orosz, norbert szijártó public governance, administration and finances law review • vol.  6. no. 2.  2.2. european economic governance economic governance is a  popular terminolog y in economics, political science and in european union studies as well . theoretically, the role of economic governance is to ensure the proper functioning of markets, economic actions among actors and in general all transactions that take place in the economy . according to dixit (2003, p . 449), economic governance is a necessary and obligatory part of the functioning of the economy: “almost all economic transactions need governance” . scholars of institutional economics can quickly answer the question of what satisfies this need, their argument is that legal systems properly and costlessly provide this service . based on dixit’s (2009) approach, economic governance refers to the structure and functioning of the legal and social institutions that support and determine economic activities and transactions by protecting property rights, enforcing contracts and overcoming collection action dilemmas to administer physical and organisational infrastructure . since, the european economic governance is a matured framework in the european union, we can find definitions provided by different bodies of the community . the european parliament’s think tank defines economic governance as follows: “economic governance refers to the system of institutions and procedures established to achieve union objectives in the economic field, namely the coordination of economic policies to promote economic and social progress for the eu and its citizens” (european parliament, 2019, p . 1) . the european parliament also determines the policy areas of economic governance that involves fiscal policies, macroeconomic issues, crisis management, macro-financial supervision and investments . the european commission defines european union economic governance as to monitor, prevent and correct problematic economic trends that could weaken national economies or negatively affect other member states . 2.3. the european union’s role in shaping social policies generally, social policy is a  governmental interference with the aim to improve or reform society . in a more detailed view, social policy consists of all means to meet human needs for security, education, work, health and wellbeing . the european union and its member states share several objectives regarding social policy such as the promotion of employment, improved living and working conditions, proper social protection, dialogue between management and other members of staff, the development of human resources with ensuring lasting high employment and the prevention of social exclusion (european parliament, 2021) . european social policy coincides with the first founding treaties of the european union . hantrais (2007) claims that through the history of the european integration, market-driven processes dominated over social policy objectives; however, the social policy dimension of the integration has been present since the launch of the project and has uninterruptedly gained more and more relevance through time . the lisbon strateg y reinforced the role of social policy without seeking any harmonisation of national social policies . public governance, administration and finances law review • 2. 2021 89socio-economic governance in the eu the eu (bodies of the eu) is actively developing policies – employment and social policies – to provide widespread practical benefits to european citizens, for example: in finding jobs, upgrading skills, coordination of social security schemes, ensuring better working conditions, combating poverty and social exclusion, supporting the reforms of national social protections systems, protecting and improving the health of citizens, modernising health infrastructures, etc . these policies and the provision of benefits to european citizens are on the one hand often organised under comprehensive strategies (such as the lisbon strateg y, the europe 2020  strateg y, various social policy packages and long-term operation programmes) and/or on the other hand, often institutionalised as elements of the european economic, social and legal governance (employment policy strateg y, open method coordination in the field of social policy and european social dialogue [heise, 2012]) . the eu’s active intervention in european social policy leads to a question that how much the eu prefers to influence national welfare states and social policy models, and what are the eu’s goals with the establishment of a  wide range of policies . in other words, whether the eu intends to boost convergence among national social policies and welfare state models? or the eu just designs and creates minimum requirements for social policy issues? only few studies have tried to offer answer for these questions . de la porte & heins (2015) investigate the eu’s post-crisis involvement in labour market and social policy coordination . they accentuate that strict budgetary institutions make expansionary public spending difficult even in prosperous economies . continuing this argument, graziano & hartlapp (2020) explicitly state that former “social europe” has terminated . a  large number of social policy initiatives, strategies and institutions were replaced by macroeconomic governance tools ignoring social expectations, needs and problems . in contrast, some papers highlight that increasing social policy spending and strengthening welfare states are able to tackle the challenges posed by globalisation, demographic changes, economic uncertainty and inequality (starke et al ., 2013; vanhercke et al ., 2020) . 3. the evolution of the european union’s economic and social policy governance framework – empirical research our empirical research applies the framework of historical institutionalism through which we can properly detect institutional changes in the socio-economic governance of the european union . historical institutionalism embodies a  complex framework to understand the economic, political and social processes, and particularly concentrates on the evolution of policy issues (policy changes) . in a  straightforward way, historical institutionalism (hi) states that history matters, and for research purposes it is necessary to identify the elements of policy-making which are stable through time (thelen & steinmo, 1992; pierson, 1994; hall & taylor, 1996; thelen, 1999; peters, 1999) . historical institutionalism conceptualises the relationship between institutions and individual behaviour as institutions shape individual’s behaviours; therefore, institutions determine individual preferences . moreover, it takes into consideration the asymmetries 90 ágnes orosz, norbert szijártó public governance, administration and finances law review • vol.  6. no. 2.  of power during decision-making processes, recognises path dependency and unintended consequences – as institutions produce long-term intended or unintended paths that structure a  nation’s response to new challenges  –  and finally, incorporates the role of ideas, beliefs and mental models . drawing on historical institutionalism literature, we analyse the institutional structure that had profound effect on shaping the eu’s economic and social policy governance . historical institutionalism accentuates how timing, sequencing and path dependence in casual processes impact institutions, and thus shape social, political and economic behaviour and change (farrell & newman, 2010) . in the spirit of the historical institutionalist framework, this paper concentrates on the long-term trajectory of the governance of the european union economic and social policies . in this paper we study the changing landscape of european economic and social policies and adherent institutions, rules and regulations . 3.1. the evolution of european economic governance the pre-global financial crisis period of the european integration can be characterised by the often-used half-built house analog y . national monetary policies were delegated to supranational level to the european central bank and the european system of central banks, but fiscal policy remained decentralised but coordinated under the stability and growth pact . the two major pillars, the supranational monetary policy and the rule-based fiscal policy were augmented by some ‘soft’ coordination mechanisms of financial supervision and structural issues . in general, we can state that the tools of the european economic governance during this period had limited capacity to influence economic outcomes and correct economic failures . the primary objective of the european central bank was and is to achieve price stability, and price stability means to anchor the inflation rate at 2% or below . as a secondary objective, without compromising price stability, the european central bank supports general economic policies in the european union (more accurately in the eurozone) such as economic growth, competitiveness, employment, social development and the protection of environment . regarding the supervision of national fiscal policies, the maastricht treaty determined limits to government deficits to 3% of gdp and public debt levels to 60% of gdp if a  member state would prefer to join the eurozone . later, this fiscal provision was institutionalised under the stability and growth pact to strengthen the monitoring and coordination of national fiscal and economic policies and to enforce the deficit and debt limits instituted by the maastricht treaty . the preventive arm of the stability and growth pact ensures sound budgetary policies over the medium term: member states are obliged to submit an annual stability (for eurozone countries) or convergence (for non-eurozone member states) programmes (and national reform programmes) . and the corrective arm of the pact (namely the excessive deficit procedure) deals with the non-compliance with sound public finances, and non-compliance with these recommendations may lead to sanctions for member states . in 2005, the stability and growth public governance, administration and finances law review • 2. 2021 91socio-economic governance in the eu pact went through a  reform process, and the ‘new’ stability and growth pact better considers country-specific circumstances and strengthens surveillance and coordination of national fiscal policies . moreover, the excessive deficit procedure was also amended in order to respond easier and faster to non-compliance . the single european act – the principle of four freedoms – ensures the free movement of capital, labour, goods and services among member states of the european union . the european single market is the common denominator of member states enhancing market-driven processes inside the regional integration . the free flow of capital contributed to the deepening of financial integration; nevertheless, decisionmakers of the european union missed to set-up institutions related to financial supervision, regulation and monitoring and keep pace with the increasing financial integration . only some harmonisation took place (the financial services action plan and the lamfalussy process), moreover, the european union institutionalised the basel i and basel ii regulations to govern the financial and banking sector . this framework was augmented by some soft law initiatives such as the broad economic policy guidelines and the european macroeconomic dialogue . these platforms were organised around discussion and information sharing without any binding rules and regulations (heise, 2012) . finally, it is worth emphasising, that during this decade, the european union had a  horizontal long-term project, the lisbon strateg y that aimed to transform the union into the most competitive region in the world . potential results of the lisbon strateg y were washed away by the global financial crisis at the end of the decade . the european union (and the economic and monetary union) faced the most severe challenge of its existence so far; the global financial crisis and the subsequent euro crisis have revealed various shortcomings of the economic governance framework of the european union: asymmetrical institutional structure of the monetary union, poor or inadequate economic governance framework and powerless regulatory systems, strong core-periphery dichotomy, and finally diverse welfare and social structures . in summary, the heterogeneity of member states seemed to be an unmanageable problem for european union decision-makers . generally, the european economic governance is made up of four closely interrelated building blocks: monitoring of national economic policies, prevention, correction and enforcement . the european commission plays a crucial role in this new economic governance framework by regularly monitoring macroeconomic developments of member states to detect macroeconomic problems, unsustainable macroeconomic trends and changes in member states’ competitiveness (verdun, 2015) . this framework has been organised into annual cycles under the european semester, in which the bodies of the european union and national governments have to carry out tasks related to macroeconomic and budgetary areas in specific times and in specific order . sound public finances, avoiding substantial macroeconomic imbalances, implementing structural reforms and facilitating economic growth and employment are the major objectives to be achieved by the european semester . however, other european union bodies (and tasks) represent inherent parts of the new economic governance framework . the european central bank played a  crucial role resolving the euro crisis . this activity no  longer aimed at achieving a  stable inflationary environment, but rather 92 ágnes orosz, norbert szijártó public governance, administration and finances law review • vol.  6. no. 2.  targeted the stability of the whole eurozone economy . to carry out this task, the european central bank has increasingly focused on the application of non-conventional monetary instruments to clean-up the transmission mechanism channels, boost economic recovery in crisis-ridden member states and support financial stability through large-scale refinancing programs to commercial banks . under a  specific measure, outright monetary transactions, the european central bank officially fulfilled the lender of last resort function vis-á-vis sovereign member states of the eurozone (de grauwe, 2013) . since the eruption of the euro crisis, european union decision-makers have significantly consolidated the fiscal framework . the new fiscal governance framework can be characterised by the strengthening of rule-based fiscal regulations (eyraud & wu, 2015) and creating a permanent firewall to backstop financial contagion and support eurozone member states (gocaj & munier, 2013) . the rule-based fiscal regulations are the followings: ƿ the six-pack, introduced in 2011, aimed to develop and strengthen the stability and growth pact by ensuring the viability of national public finances through either preventive and corrective actions and to reduce macroeconomic im balances of member states . ƿ the compact reinforced the initiative of the six-pack . furthermore, the treaty on stability, coordination and governance contains a  second and third pillar above the fiscal compact . the objective of the second pillar was to bolster economic governance and convergence among eurozone member states, while the third pillar formulated the euro summit . ƿ the “two-pack” improved budgetary coordination through the introduction of a common budgetary timeline and a system of enhanced surveillance . the european union (as well as the eurozone) lacked a  permanent firewall or a  rescue mechanism for sovereigns because of the strict “no bail-out clause” . in 2009, greece officially requested financial assistance from the decision-makers of the european union, and as the euro crisis escalated, decision-makers of the european union had no other choice than to establish first temporary firewalls and then a permanent firewall to provide financial assistance to crisis-ridden member states and in general to prevent the disintegration of the eurozone . the temporary measures (firewalls) were unable to backstop contagion in the southern periphery of the european union, so a permanent firewall, namely the european stability mechanism, was created by melting the two temporary mechanisms into one . the european union’s crisis management heavily concentrated on monetary and fiscal policies in the first years of the euro crisis . responding to the global financial crisis, decision-makers of the european union created a  macroprudential supervisory body, the european systemic risk board, to regularly monitor systemic risks . a microprudential supervisory body, the banking union, was only launched a  few years later in 2014  (howarth & quaglia, 2014) . the banking union consists of a  single rulebook and three pillars of supervision, resolution and insurance . the elements of the banking union are the followings: public governance, administration and finances law review • 2. 2021 93socio-economic governance in the eu ƿ single supervisory mechanism: this mechanism is the core of the supervisory activities by overseeing all eurozone and european banks (approximately 6,000 banks) . ƿ single resolution mechanism: effective and rapid treat of banking crisis to minimise impacts on the real economy . an element of the mechanism, the european resolution fund, will be a  permanent firewall for european banks in the mid-2020s . ƿ european deposit insurance scheme: the objective is to cover all retail depositors (but it is under negotiations) . reforming the european economic governance also aimed at boosting competitiveness and structural reforms that were neglected issues prior to the global financial crisis . two instruments were created to deal with the obstacles of such reforms: the euro plus pact and the macroeconomic imbalance procedure under the six-pack . the aim of the euro plus pact is to enhance structural reforms (improve competitiveness, employment, financial stability and fiscal stance of participating countries) . parallelly, the task of the macroeconomic imbalance procedure is to identify, prevent and address the emergence of adverse macroeconomic imbalances that could negatively affect economic stability of member states, or the european unions as a whole . summarising, the european economic governance has been substantially altered since the global financial crisis . on the one hand, new objectives have emerged during the euro crisis, and on the other hand, new institutions, instruments, rules and regulations were created to tackle challenges stemming from the euro crisis and reach and satisfy new objectives . 3.2. the evolution of social policy governance in the european union the european council called for a  fundamental transformation on its meeting in 2000  in lisbon . a  new strategic goal for the european union was established in order to strengthen employment, economic reform and social cohesion as part of a knowledgebased economy (european parliament, 2000) . the new feature of this agenda explicitly coupled economic and social agendas . to achieve these aims, the social model needs to be modernised, while ensuring long-term sustainability of the social security systems in the light of the ageing process, participation rates should be increased (caminada et al ., 2010) . the lisbon strateg y represented a  twofold ambitious goal for the european union: “to transform the european economy of the 21st century (and make it the most competitive knowledge-based economy in the world) and to innovate eu governance through new forms of interaction between national practices and european objectives” (natali, 2010, p . 4) . in order to achieve convergence in the field of social inclusion, the european union adopted an appealing approach, the “open method of coordination” (omc) as a new form of eu governance . omc is created as part of the employment policy and the luxembourg process, defined as an instrument of the lisbon strateg y (2000) (eurostat, 94 ágnes orosz, norbert szijártó public governance, administration and finances law review • vol.  6. no. 2.  2014) . the omc as defined by the lisbon european council (european parliament, 2000): ƿ implementation of the strategic goal will be facilitated by applying a  new open method of coordination as the means of spreading best practice and achieving greater convergence towards the main eu goals . this method, which is designed to help member states to progressively develop their own policies, involves: ■ fixing guidelines for the union combined with specific timetables for achieving the goals which they set in the short, medium and long terms ■ establishing, where appropriate, quantitative and qualitative indicators and benchmarks against the best in the world and tailored to the needs of different member states and sectors as a means of comparing best practice ■ translating these european guidelines into national and regional policies by setting specific targets and adopting measures, taking into account national and regional differences ■ periodic monitoring, evaluation and peer review organised as mutual learning processes in general, omc is a form of eu soft law, a process of policymaking which neither leads to binding eu legislative measures nor requires member states to change their law . the open method of coordination aims to spread best practices and achieve greater convergence towards the main eu goals . this process reduced the member states’ options in the field of employment policy, which was designed as an alternative to the existing eu modes of governance (eurofound, 2010) . even though the open method of coordination is not binding, a soft law can also be effective, because it allows for policy experimentation and better problem definition . regarding the diversity within the european welfare models, soft law is more suitable enabling different policy solutions in different member states . in addition, omc facilitates policy learning through the regular exchange of ideas, deliberation, peer reviews, diffusion of discourses, “socialisation”, and bottom-up experimentation (büchs, 2009) . omc has been implemented in the areas of social inclusion, health care and longterm care and pensions (social omc) . the social omc is a  voluntary process for political cooperation based on agreeing common objectives and measuring progress towards these goals using common indicators . the process also involves close co-operation with stakeholders, including social partners and civil society (european commission, 2014) . omc is used by member states to support the definition, implementation, and evaluation of their social policies and to develop their mutual cooperation . a  tool of governance based on common objectives and indicators, the method supplements the legislative and financial instruments of social policy . it is part of the implementation of the process of coordination of social policies, particularly in the context of the renewed lisbon strateg y . the single social omc established in 2005  applies to the fields of: 1 . the eradication of poverty and social exclusion; 2 . guaranteeing adequate and sustainable pension systems; and 3 .  providing accessible, high-quality and sustainable health care and long-term care (eur-lex, 2008) . public governance, administration and finances law review • 2. 2021 95socio-economic governance in the eu omc can be understood as a  building block of the “european social model”, however there are optimists and pessimists about the success of this process . the european social model refers to the institutional arrangements comprising the welfare state (transfer payments, collective social services, their financing ) and the employment relations system (labour law, unions, collective bargaining ) . the general term “social model” refers to “ideal-types” in the weberian sense, conceptual abstractions of distinctive and central commonalities derived from a variety of empirical situations . “ideal-types are designed to help social analysis by virtue of their capacity for elucidating the underlying similarities and differences across a  range of complex social phenomena” (martin & ross, 2004, p . 11) . omc instruments can strengthen “social europe”, both at eu level and the performance of national welfare states . “the european union, acting as a  ‘semi-sovereign’ policy system, seems slowly but surely to be carving out a  distinct ‘policy space’ regarding social policy  –  a  space which may gradually work to rebalance ‘softly’ and ‘from below’ the current structural asymmetry between negative and positive integration” (ferrera and rhodes, 2000, p . 278) . beside the optimistic views, there are several pessimists who doubt that this instrument is powerful enough to balance the negative and positive consequences of integration (scharpf, 2002) and improve national welfare state performance . pessimists argue that european integration is a  potential challenge for the national welfare states because the creation of the single market increases competitiveness pressure which might lead to a  downward adjustment of social standards . additionally, with the creation of the eurozone, member states are no longer able to assign an individual monetary policy, which may put additional direct pressure on welfare systems (büchs, 2009) . it can be concluded that on the one hand, there is a  theoretical argument that welfare states have become more similar, on the other hand, the european union promotes closer social policy coordination, the need to “reinforce”, “improve” and “preserve” the “european social model” (büchs, 2009) . even without the effects of the crisis, the lisbon agenda had produced mixed results, calling for revision (armstrong, 2012) . europe 2020, as the successor of the lisbon strateg y is aimed at social purposes as well, creating conditions to deliver a  higher level of well-being for european citizens by 2030  and beyond . the europe 2020  strateg y was designed as a  european exit strateg y from the global economic and financial crisis that started in 2008, targeting to improve the competitiveness of the eu and achieve sustainable growth (bongardt & torres, 2010) . europe 2020 agenda presented itself as an integrated policy strateg y with a strategic focus based around the mutually reinforcing objectives of “smart”, “sustainable” and “inclusive” growth . there are seven “flagship initiatives” in thematic areas: digital agenda for europe, innovation union, youth on the move, resource efficient europe, an industrial policy for the globalisation era, an agenda for new skills and jobs and european platform against poverty . each flagship initiative acts as an umbrella vehicle for more specific initiatives and, deploying a range of tools and instruments: e .g . legislation, non-binding recommendations, eu funds, policy coordination processes . policy proposals associated with achieving the economic aims of growth and competitiveness 96 ágnes orosz, norbert szijártó public governance, administration and finances law review • vol.  6. no. 2.  must, nonetheless, take their social implications into account, meaning the social dimension of europe 2020 (armstrong, 2012) . europe 2020’s social agenda is the basis for “creating a  somewhat stringent social snake binding member states to remain within certain quantitative bands after reaching the headline targets (e .g . in terms of social inclusion levels) but also for establishing a  fully-fledged eu system of social protection” (ferrera, 2010, p . 65) . the omc processes in the social sphere of the europe 2020  strateg y have remained largely untouched (michalski, 2013) . it is a  possible threat to europe 2020’s social dimension that it will lose out in the competition for political time and attention . the omc and any social policy coordination have been implemented in the areas, where the eu has no  formal competence and are regulated under the subsidiarity principle . the asymmetries in social policies within the european union, especially in the european south, has become even more stressed due to the recent economic crisis, since “the politics of austerity predominantly affect the welfare state, hitting drastically social rights, a fact with explosive effect in social cohesion” (zambeta, 2014, p . 3) . however, there has been political configuration and commitment to eu level social policy; the initial differences have remained salient . the effects of the recent financial and economic crisis on social policy divergence have exceeded the aftermath of any political tools (e .g . omc) to promote eu level social policy convergence . the continuing social omc has been challenged by the financial and economic crisis, it is crucial to formulate a meaningful and substantive social dimension of eu policies . 4. socio-economic governance in the european union since the onset of the global financial crisis and the euro crisis, social issues have become substantially prominent in european union governance and policy debate . furthermore, the covid-19 crisis brought again social issues into the fore . we assume that the european socio-economic governance is the process of governing societies in a  situation where no  single actor can claim absolute dominance, thus socio-economic governance is the outcome of the interaction between european union institutions (european union decision-makers) and member states (national policy-makers) . this approach is clearly based on the multilevel nature of the european integration with supranational, national and sub-national actors . moreover, socioeconomic governance in the european union is substantially limited . firstly, the european union decision-makers and national policy-makers do not necessarily accept even the existence of socio-economic governance, rather it is treated as two separate policy areas . european economic governance has been significantly strengthened over the past decade; however, it is still incomplete, e .g . there is no  fiscal union in the european union (or in the eurozone), or there is no fully-fledged financial union . the governance of the social policy in the european union is almost primarily based on soft law with limited binding rules and regulations . additionally, the role of the european social policy has been considerably increased during the last two decades, its public governance, administration and finances law review • 2. 2021 97socio-economic governance in the eu institutional set-up has also been reinforced and reconfigured, but effective institutions have not been established . so, socio-economic governance can be referred to as a  halfbuilt house . social policy lost in the struggle for competences between the european union bodies and member states . secondly, the impacts of the euro crisis and the actual coronavirus crisis clearly demonstrated an active relationship between the european economic governance and the european social policy governance . for instance, budgetary policy and social policy are inseparable, technically, social policy expenditures (financing the social safety net, education, pension and so on) represent the largest part of the expenditure side of national budgets . notwithstanding, this interaction did not reach into the spotlight of decision-makers, meanwhile economists and political scientists have long been investigating the issue (vanhercke et al ., 2020) . the shortcomings of the european socio-economic governance are crystal clear . then, what can be highlighted as positive? initially, the european economic governance consisted of a supranational monetary policy and a rule-based fiscal policy . as a response to the global financial crisis and the euro crisis, this governance framework has been augmented by several new institutions, rules and regulations . on the one hand, this process generated an overly complex system of economic governance, but on the other hand, some new institutional elements now address areas, such as employment, pension system, healthcare system, that are already close to social policy . euro plus pact, the macroeconomic imbalance procedure and the european semester were the most important steps in this direction . verdun & zeitlin (2018) refers to the european semester as a  new architecture of european union socio-economic governance . moreover, zeitlin & vanhercke (2018) emphasise the socialisation of the european semester, through the european union’s social policy objectives translated into concrete claims . yearly rounds of country-specific recommendations transmit the social policy priorities of the european union to the member states, moreover, there is an intensified social monitoring of national reforms, and an enhanced decision-making role for european union social and employment actors . a  deeper social policy governance, slowly and gradually but surely, gains ground in the european union . and the strengthening of european social policy governance will eventuate in the creation of effective socio-economic governance framework . 5. conclusions the economic crisis rapidly dismantled the well-being and welfare structures and states of european countries; thus, a  decade of prosperity and development fell into the dust . the global financial crisis was followed by the euro crisis when the countries of the southern periphery and ireland went bankrupt again . skyrocketing unemployment and years of economic uncertainty substantially increased social spending in european countries . adverse effects of economic globalisation have intensified in european countries, emerging social risks, economic uncertainty, and rapidly growing inequality posed another challenge for social policies within the european union . since post-crisis economic recovery has not been able to ensure rapid increase in individual well-beings and provide sufficient number 98 ágnes orosz, norbert szijártó public governance, administration and finances law review • vol.  6. no. 2.  of jobs, social dissatisfaction started growing larger . other shocks such as brexit and the migration crisis generated additional problems and concerns, which can lead to a surge in social expenses, meanwhile revenues have been stagnant . since the end of the 20th century, european states have been constantly challenged by three interlinking factors, namely globalisation, demographic changes and new social risks (pierson, 2007), resulting in rapid changes putting the european welfare states under constant pressure to adapt . these challenges are accompanied with the harmful effects of the 2008–2009 financial and economic crisis and the new unknown effects of the current processes . covid-19  has affected the eu and its member states in different ways; however, the eu have been able to set up a recovery plan, ‘next generation eu’ which integrates social and economic measures into the proposal for a  2021–2027 multiannual financial framework (european commission, 2020) . summarising, we have displayed the transformation of the european socioeconomic governance; even though that this framework has substantially been reinforced and reconfigured by the decision-makers of the european union (the combination of new institutions, instruments, rules and regulations), after a series of crises, it is still incomplete . nevertheless, a  future crisis will test again this framework, and scholars will have enough information to evaluate the efficiency, resilience and depth of the new european 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axberger, 2020, p . 763–770) . a third, more technically oriented factor is the usableness of the information due to the personal identity number all residents in sweden have . from 1947 and onwards, all individuals listed as living in sweden have been given a  unique personal identity number (pin), which is used both in relation to public authorities and in countless other situations .2 this means that the identification numbers open the door to a  vast amount of personal information  –  something that would in many countries be seen as risky and intrusive . however, and in accordance with the strong tradition of openness and trust, at the dawn of the pin era, the attitude amongst the swedes was that the personal information was required in order for the state to plan the construction of accommodation, education, health care and all the other components that would secure a  high and even standard of living for the growing, modern population . a  number of authorities, departments and institutions have had key roles in the administration of the welfare state – the most significant being statistics sweden (scb), launched in 1858 and centralised in 1960 .3 another important actor that may be mentioned is the swedish church, which continued controlling the above-mentioned population registration until as late as 1991 (the swedish church ceased to be a state church in 2000) . however, the welfare state is no  longer in its prime and during recent decades the accepting attitude towards the state has shifted . international developments and instruments regarding individual rights have had an important impact, and a number of cases concerning damages for rights infringements have sparked a development in the courts where stately actors face increasingly strict responsibilities . this is not least the case with regard to the right to privacy and the right to data protection . while the european level of protection has been enhanced with a steadily expanding case law from the european court of human rights (ecthr) regarding article 8 of the european convention on human rights (echr) and eu law through articles 7–8  of the eu charter of fundamental rights of the european union (the charter) and the gdpr,4 a  number of “register scandals” have been unearthed in swedish media . when it comes to the public’s knowledge that the police has an unlawful registry based on ethnicity or that the swedish transport agency has outsourced sensitive information registries to foreign actors without the right competence and security level, the once high level of trust for 2 18 § census act (1991:481); scb webpage, personnumret 70 år (pin 70 years), www.scb.se/hitta-statistik/artiklar /2017/personnumret-fyller-70-ar/ 3 scb webpage, the history of statistics sweden, www.scb.se/en/about-us/main-activity/history-of-statistics-sweden/ 4 regulation (eu) 2016/679 of the european parliament and of the council of 27 april 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, gdpr. http://www.scb.se/hitta-statistik/artiklar/2017/personnumret-fyller-70-ar/ http://www.scb.se/hitta-statistik/artiklar/2017/personnumret-fyller-70-ar/ http://www.scb.se/en/about-us/main-activity/history-of-statistics-sweden/ 37 public governance, administration and finances law review • 2. 2021 public registries as tools for realising the swedish welfare state – can the state still be trusted? the state’s personal data collections is tarnished (chamberlain, 2020, p . 133–136) .5 the number of personal data incidents reported according to the gdpr’s article 33  has been significant since the regulation was launched, and statistics and analysis show that these incidents often happen in the public sector  –  not least in a  health care context . around 4,800 incidents were reported during 2019, and just under 4,600 in 2020 . the reports analysing them state that a  major cause of incidents is when letters or e-mails accidentally are sent to the wrong person, another is undue access .6 another connected, and perhaps yet more important factor to consider is the technical development and digitalisation of society . the system of public registries was established in an altogether different time, when privacy threats posed by the internet, big data and ai did not exist . today this information  –  still largely freely available – remains a goldmine for researchers, but also enables everything from data mining and profiling to identity theft and other violations . once exclusively stately information is profited on by major companies and used in dubious ways by individuals . the question becomes all the more pressing : is the swedish tradition of public registries compatible with privacy rights in a digital age? 2. background: the swedish welfare state and social trust – the engineering of a “people’s home” 2.1. regulating the welfare state there is no comprehensive definition of what is meant by a welfare state and the understanding of the concept varies over time, but today it is often connected to public commitments for social insurance and services (health and care, education, social insurance, labour market measures, etc .) (edling, 2013, p . 125) . the basis for the swedish welfare state is expressed in chapter 1, § 2  of the instrument of government (ig), a swedish fundamental law: the personal, economic and cultural welfare of the individual shall be fundamental aims of public activity . in particular, the public institutions shall secure the right to employment, housing and education, and shall promote social care and social security, as well as favourable conditions for good health . however, the swedish welfare state is to a  large extent a  political project, a  product of “social engineering” via statutory law, rather than a  constitutional right (lindvall & rothstein, 2006, p . 49; zamboni, 2019, p . 676) . the welfare state is thus realised via 5 apart from the two scandals already mentioned, after a report in 2014 there have been proceedings related to another police register regarding abused women. further, in 2019 it was uncovered that millions of telephone calls to the swedish health care service 1177 had been stored on an unprotected internet server for several years. 6 datainspektionen, anmälda personuppgiftsincidenter (rapport 2020:2); integritetsskyddsmyndigheten, anmälda personuppgiftsincidenter (rapport 2021:3). 38 jane reichel, johanna chamberlain public governance, administration and finances law review • vol.  6. no. 2.  economic and administrative tools, where access to public information has been an important tool . as described by swedish historian edling, the formative moment of the swedish welfare state took place in the 1930s (edling, 2013, p . 125) . while the previous decade was characterised by weak governments, high unemployment rates and industrial conflicts, the 1930s meant the start of a long period of social democratic governments (1932 to 1976) and the entrance into a crisis agreement between the social democrats and the farmers’ party, commencing an era of political compromise . during the same decade, the saltsjöbaden agreement was reached between employers and unions concerning the rules that were to govern labour market relations, laying the foundation of the swedish labour model . this also led to the rise of corporatism, the strong position of non-governmental organisations in the swedish society (edling, 2013, p . 125) . it was in this environment that the social democratic party began to build its “people’s home”, folkhemmet, based on “welfare politics” including an expansive labour market, social reforms and agricultural support (edling, 2013, p . 126, 139) . from a  constitutional perspective, it is interesting to note that this formative moment in swedish political history took place outside the framework of the ig . the 1809  ig, predecessor to the current 1974  ig, was based on a  constitutional system resting on separation of powers . parliamentarism was introduced in sweden at the beginning of the 20th century, but without any formal changes to the ig . not until the late 1960s, and more thoroughly with the enactment of the new 1974  ig, did the written constitution correspond to the actual functioning of the riksdag (enzell, 2002, p . 123) . this period in time has been characterised as a  ‘constitution-less half-century’, i .e . the constitution was not considered to be part of positive, valid law, but rather a political document not even giving an adequate picture of political life (sterzel, 2009, p . 13; taube 2004) . even though the swedish welfare state is mainly a  political project, the forms for implementing welfare policies is deeply rooted in swedish constitutional traditions of a  strong and partially independent administration, local government and transparency, which will be discussed below (section 3 .1) . for this open and decentralised governance structure to function in practice, there is a  further prerequisite that is necessary: social trust . as argued by abrahamsson, the decades immediately following the second world war were marked by increasing welfare, future optimism and relief that sweden had escaped the horrors of war, founded on a  far-reaching consensus that society’s task was not only to ensure the peace and freedom of citizens but also to take overall responsibility for their prosperity and security . it was against this backdrop that the “people’s home” was built (abrahamsson, 2006, p . 413) . 2.2. social trust an important explanatory factor regarding the success of the welfare state in sweden is social trust . the swedish society is often described as having a high level of social trust, in that citizens to a large extent trust each other, the government and the public authorities and other institutions in the society (rothstein, 2020, p . 60) . rothstein holds in 39 public governance, administration and finances law review • 2. 2021 public registries as tools for realising the swedish welfare state – can the state still be trusted? a  paper titled (in translation) “trustworthy authorities . the foundation of swedish democracy”, that there is a  connection between procedural justice, being treated correctly, fairly and equally in encounters with the public administration, and social capital (rothstein, 2020, p . 62) . this can be explained by three factors: that people tend to draw conclusions on the trustworthiness of a society in general based on how they perceive officials, that people who are forced to pay bribes for public services are in general not trustworthy, and that if a  person such as yourself has to be dishonest to receive public services, then no one can be trusted (rothstein, 2020, p . 62) . a well-functioning public administration, with fairly competent, honest, professional, merit-based, and unpolitical officials, is thus pivotal to a democratic and peaceful development of the society (rothstein, 2020, p . 65) . societal trust plays a  function both within the state apparatus, and between the state and the citizens . trust-based governance in the public administration has been identified as a  major aim for the social democratic and green party government in power in the late 2010s and early 2020s .7 within the state apparatus, the trustworthiness, impartiality and professionalism of the administration is important for the government to be able to delegate central tasks ( jacobsson & sundström, 2016, p . 13) . as is discussed below (section 3 .2), the swedish administrative model is organised around small government offices and large public authorities at the state level, which is built effectively on the presumption that tasks are delegated . the ig thus favours a decentralised decision-making model in the implementation of policies ( jacobsson & sundström, 2016, p . 359 et seq) . in regard to the relation state–individual, a high level of social trust may strengthen the connection between citizens’ trust in each other and in societal institutions on the one hand, as well as their willingness to accept what is perceived as a  professional and objective measure taken by representatives of the state (bull, 2013, p . 235) . traditionally, the swedish public administration has held the trust of the people . kumlien links this to the court-like features of the public authorities, especially the autonomy of the officials in decision-making and a  regulated decision-making procedure including administrative rules on objectivity, a duty on the authority to investigate and a right for individuals to be heard (kumlien, 2019, p . 215) . as pointed out by lind, the formal side of the rule of law, forms and procedures for decision-making, complements the material character of the welfare state (lind, 2009, p . 437) . transparency can in a certain sense be said to be both a consequence and a prerequisite of the trustworthiness of public administration . transparency allows individuals, market participants, journalists and others an insight into the internal workings of the administration and may function as a preventive measure in combatting maladministration and corruption (ackerman & sandoval-ballesteros, 2006, p . 92) . transparency and accountability can in themselves foster trust in public administration, which in turn may render individuals more willing to allow the administration to process personal information . as discussed above, the building of a swedish welfare state is highly interconnected with the building of public archives and registries, providing invaluable 7 sou 2018:47 med tillit växer handlingsutrymmet – tillitsbaserad styrning och ledning av välfärdssektorn. 40 jane reichel, johanna chamberlain public governance, administration and finances law review • vol.  6. no. 2.  information on the recipient of the welfare . from the beginning, tolerance amongst individuals was high for supplying the administration with necessary data . even if the public mass collection of personal data became more questioned, and also regulated in the 1970s, the swedes’ generally positive attitude to the use of their personal data for the benefit of society remains high, for example in connection to electronic public health records (rynning, 2007, p . 110) .8 3. the function of public information in sweden – trust in objectivity 3.1. constitutional traditions – decentralisation, autonomy and objectivity the organisation of the swedish executive branch is highly influenced by two specific traits: the semi-autonomous role of the public authorities and the fact that a large part of administrative law – especially issues related to the welfare state – is implemented at the local level, with traditionally strong local self-government . according to the ig, the executive power is highly decentralised via the partially independent public authorities at the national level, chapter 12, § 2 ig, and strong tradition of local government at the regional and local level, chapter 14, § 2  ig . the swedish administrative model originates from the first half of the 18th century and is thereby of an older date than swedish parliamentarism (enzell, 2002, p . 166) . it was introduced as a  reaction to how the administration had been steered during the previous autocratic era . authorities are organisationally and legally separated from the government, regional and municipal councils, respectively, and enjoy a partial independence (hall, 2016, pp . 300–301) . the minister in charge cannot singlehandedly take actions to command and control the public authorities sorting under his or her cabinet, since government decisions must be adopted by the government collectively, chapter 7, § 3  ig . further, according to the principle of independence “[n]o public authority, including the riksdag, or decisionmaking body of any local authority, may determine how an administrative authority shall decide in a  particular case relating to the exercise of public authority vis-à-vis an individual or a local authority, or relating to the application of law”, chapter 12, § 1 ig . by granting the authorities a  sphere of independence, they could only be governed by law and not by decrees in individual cases, separating policy-making and administrative decision-making (andersson, 2004, p . 38 et seq; bull, 1999, p . 129) . the local self-government has a  long history in sweden and the present organisation dates back to the municipal reform of 1862 .9 it may be noted that the swedish state is organised into three political and administrative levels: national, regional and municipal . regions and municipalities function under the constitutionally protected principle of local self-government, chapter 14, § 2–3  ig . implementation of the majority of 8 sou 2010:18 ny biobankslag, p. 242; sou 2018:4 framtidens biobanker, p. 276. 9 sou 1977:78 kommunerna: utbyggnad, utjämning, finansiering, pp. 103–104. 41 public governance, administration and finances law review • 2. 2021 public registries as tools for realising the swedish welfare state – can the state still be trusted? swedish welfare policies is allocated to the regions and municipalities, which are responsible for, e .g . health care, local public transport, social services, housing and education (in primary and secondary schools) . public authorities thus hold a strong position in sweden, and historically there has not been a  strict constitutional division between courts and public authorities (bull & sterzel, 2015, p . 259, 275 et seq) . it is also notable that the principle of objectivity and impartiality in the ig applies equally to courts and public authorities . chapter 1, § 9 ig reads: courts of law, administrative authorities and others performing public administration functions shall pay regard in their work to the equality of all before the law and shall observe objectivity and impartiality . further, the principle of transparency and the right to access official documents guarantee insight into public authorities, as documents used in the decision-making process are available to the public (hirschfeldt, 2017, p . 21) . this issue will be discussed next . 3.2. the supreme value of transparency the first freedom of the press act (fpa) was enacted in 1766, whereby a  principle of public access to official documents was introduced . the principle of public access to official documents has had a central function in the swedish constitutional and administrative model, which, as seen above, allows swedish public authorities partially independent status vis-à-vis the government . openness and transparency have played an important role in this context, offering both the parliamentary ombudsman, the press and the public large insight into the internal workings of the administration (axberger, 2014, p . 105 et seq) . access to official documents is regulated in chapter 2, § 2  fpa: “in order to encourage the free exchange of opinion and the availability of comprehensive information and free artistic creation, everyone shall be entitled to have free access to official documents .” the reference to the free exchange of opinion and availability of comprehensive information seems to denote a special character of official information as bearer of something vital, which may be explained by the tradition of the fpa being a product of the 18th century enlightenment (reichel, 2020a, p . 938 et seq) . as will be discussed further in section 4, the traditions of public archives and registries is closely connected to the principle of access to public documents . access to official documents may however also be used to provide the public with the means to reveal how public powers work, enhancing the opportunities for holding political actors accountable, combatting corruption and thereby promoting legal certainty and efficiency in legislative, judicial and administrative procedures (bohlin, 2015, p . 22; axberger, 2017, p . 256) . the value of transparency in swedish law can in conclusion thereby be seen as a  tool for a  better-informed public debate and providing better 42 jane reichel, johanna chamberlain public governance, administration and finances law review • vol.  6. no. 2.  conditions for accountability, values also often referred to in literature on transparency in general (ackerman & sandoval-ballesteros, 2006, p . 87; gartner, 2013, p . 123; kingsbury, 2009, p . 25, 48) . a  trait often further underlined in the swedish context is that transparency first and foremost is understood as a societal interest and not an individual interest (lind, 2015, p . 157) . in recent years, the fpa has been under a heated public discussion . the act guarantees a  far-reaching right to publish, both in traditional media and online . on the condition that the publisher has a so-called certificate of publication – easy to apply for and granted after just a  formal assessment – special rules govern the content of the publication . censorship is prohibited (chapter 1, § 8  fpa), a  very limited crime catalogue applies (including crimes such as treason and defamation; see chapter 7  fpa), and only the publisher can be held accountable (chapter 8  fpa) . this means that whoever holds a certificate of publication may publish also sensitive personal data, such as information on someone’s criminal records, under the protection of the fpa . as the fpa is seen as superior to the gdpr in the swedish legal setting, article 10  gdpr (stating that only public authorities may process such data) is set aside .10 the fact that some companies have made a business of publishing not only personal information such as addresses and phone numbers but also criminal records, has in recent years sparked a debate on whether the fpa should be limited in the digital environment of today (see for an in-depth analysis, österdahl, 2015  p . 83  et seq) . in 2018  an exemption was approved regarding systematic and searchable publishing of sensitive personal data on health, ethnicity, etc .: according to chapter 1, § 13  fpa such databases may now be prohibited if they constitute a  serious threat to individuals’ privacy . the suggested amendment also encompassed personal data relating to criminal records, but this specific issue was postponed due to parliamentarian disagreement . a new governmental survey made another attempt in 2020, followed by a legislative bill in november 2021 .11 it remains to be seen if legislation on the matter will be passed this time or not . 4. registries and archives as tools to develop the welfare state 4.1. the tradition of public registries in sweden sweden has a  long tradition of keeping public registries and archives for the benefit of the society at large . already from the 1530s onwards, the swedish state began to collect information on an individual level as the basis for tax collection (d’arcy, nistotskaya & elis, 2015, p . 114) . as mentioned above, sweden national archives dates back to 1618 . today, the public archives made up of official documents from the public authorities are considered to form a part of the national cultural heritage .12 the administrative 10 chapter 1, § 7 of the swedish data protection law complementing the gdpr (2018:218). 11 sou 2020:45, pp. 268–277; prop. 2021/22:59 ett ändamålsenligt skydd för tryckoch yttrandefriheten, p. 39–54. regarding previous attempts to limit the right to publish, see sou 2012:55 en översyn av tryckoch yttrandefriheten. 12 § 3 archives act (1990:792); sou 2019:58, p. 192 et seq. 43 public governance, administration and finances law review • 2. 2021 public registries as tools for realising the swedish welfare state – can the state still be trusted? infrastructure governing how documents are to be collected and stored is governed in detail in the public access to information and secrecy act, the administrative procedure act and the archives act, which all include rules on when and how information is to be documented, registered and archived, as well as under what conditions a document may be culled .13 special rules may apply for sensitive records . for example, the social services act holds that only a representative sample of social records are to be archived for research purposes (edquist, 2017, p . 19) .14 the registries and archives play an essential role in the understanding, planning and further development of the welfare state, in order for the state, regions and municipalities to assess the need for labour market interventions, health care, schools, elderly care, housing, etc .15 in regard to sensitive records, for example social services records, only a  part of the records are archived . as seen in the introduction, from 1947  and onwards all individuals listed as living in sweden have been given a unique personal identification number (pin), which has rendered swedish registries especially valuable for register-based research (stenbeck, eaker fält & reichel, 2021, p . 381) . the pin is used both in relation to public authorities and in the private market . today sweden holds a large number of registries on a wide variety of matters: registries held by police, prisons, tax authorities, authorities within the labour market, housing, health care, schools and more . further, for use in official statistics, statistics sweden holds registries based on data from other public registries, such as the swedish tax agency and the swedish social insurance agency . the most comprehensive is the register of the total population (rtb), a  demographic register that dates back to the 1960s and contains information on birth date, gender and population registration information, such as information about personal relationships .16 statistics sweden also has other registers that contain information on, for example, the population’s education, work, salary, income and remuneration . the university and college register contains information on students and results in higher education . there are also registries with school students’ education, results and grades .17 other authorities hold extensive registries, too . the national board of health care and welfare holds individual-based registries on social welfare, aid to disabled persons, compulsory care of addicts and children and aid to the elderly .18 both private and public health care institutions collect information 13 chapters 4–6 public access to information and secrecy act (2009:400), § 27 and § 31 administrative procedure act (1971:291) and § 4–6 archival act. the archival act, for instance, regulates how the public authorities are to organise their archives – that is, their collections of public documents. the act states that archives should be available and accessible so that the constitutional right to access public documents is satisfied, and so that the legal system and researchers can carry out their tasks. every public authority is responsible for its own archive, except if a special archival authority has assumed this responsibility. 14 chapter 7, § 3 a, chapter 12, § 2 social services act (2001:453). 15 riksarkivet, helhetssyn på informationsförsörjning – riksarkivets perspektiv, 2018-09-27, dnr ra 04-2017/5870. 16 webpage of the research council on register-based research, registries in sweden, available via www. registerforskning.se. 17 ibid. 18 webpage of the research council on register-based research, social services registries, available via www. socialstyrelsen.se. it may be added that it is compulsory for the municipal social services boards to transfer information on individuals to the national board of health and welfare, according to a government ordinance on the obligation for the social welfare boards to provide statistical information (1981:1370). http://www.registerforskning.se http://www.registerforskning.se http://www.socialstyrelsen.se http://www.socialstyrelsen.se 44 jane reichel, johanna chamberlain public governance, administration and finances law review • vol.  6. no. 2.  to be included in national quality registries, in order to assess the quality and efficiency of health care . the registries are run by the state and the regions in collaboration and are regulated by an agreement that is updated on a  yearly basis .19 there are currently just over 100  national quality registers . the registries contain individualised data about medical interventions, procedures and outcomes (friberg von sydow, 2017, p . 42) .20 4.2. legal bases and safeguards: confidentiality and data protection as registries began to be operated via digital means in the 1960s, the question of protecting the privacy of the persons registered arose . as noted above, openness is in swedish law balanced against the interest of privacy for individuals via the public access to information and secrecy act . many registries contain information covered by secrecy under this act and are thereby not available to the public, for example registries within health care, social services, criminal offences, etc . there are however exceptions . information can be disclosed to researchers and others, under certain conditions set out in the individual case, for example, on confidential treatment . however, data that in itself can be perceived as relatively harmless may become more sensitive when processed together with large amounts of other categories of personal data, made possible by the swedish pin number . against this background, the swedish data act was enacted in 1973, as the first of its kind in the world at the national level (chamberlain, 2020, p . 105) . the main idea in the act was to monitor the use of both private and public registries by making them subject to permits issued by a  new public authority, the data protection authority . the data act was in place until 1998, when it was replaced by the personal data act based on the eu data protection directive, today replaced by the general data protection regulation (gdpr) . there is also a  corresponding secrecy ground in the public access to information and secrecy act, stating that secrecy applies for personal data if it can be assumed that a  disclosure would mean that the data would be processed in conflict with the gdpr and certain swedish legislation implementing the gdpr .21 this ground for secrecy has however been interpreted narrowly by the supreme administrative court and has rarely hindered disclosure of personal data held in registries on its own ground, e .g . where no  other secrecy ground was applicable (reichel, 2018) .22 thus, the swedish public registries are many, and so are the laws and regulations in the area – in fact, they are so many that no  one seems to know the exact number! (öman, 2006, pp . 686–687) .23 the legislator has thought it best to adapt the register 19 webpage of the swedish association of local authorities and regions, patientsäkerhet, nationella kvalitetsregister, m.m. 2020, available via https://kvalitetsregister.se 20 chapter 7 patient data act (2008:355); webpage of the swedish association of local authorities and regions quality registries, available via https://kvalitetsregister.se 21 chapter 21, § 7 public access to information and secrecy act, referring to the swedish data protection act complementing the gdpr and § 6 ethical review act (2003:460). 22 supreme administrative court judgment hfd 2021 ref 10. 23 ds 2000:34 samhällets grundläggande information, p. 58. https://kvalitetsregister.se https://kvalitetsregister.se 45 public governance, administration and finances law review • 2. 2021 public registries as tools for realising the swedish welfare state – can the state still be trusted? regulation according to the type of information treated and the relevant setting, and therefore there are specialised register laws for most public authorities  –  for example regarding social services, the swedish enforcement agency and the swedish prison and probation service . with the entry into force of the gdpr, all regulations were reviewed and, where necessary, revised with explicit rules on legal basis, purpose limitations, available exceptions, etc .24 these laws are thus additional to the gdpr and can express both exceptions and stricter conditions . for instance, the population register held by the tax authority is regulated by an act, where the purposes for processing personal data in the registry is defined as coordinated processing, control and analysis of identification data for natural persons and of other population registration data and the handling of population registration matters .25 however, further than the purposes listed, the register may also be used for other purposes, as long as they are not incompatible with the purposes for which the data were collected .26 this obviously widens the possibilities to use the data considerably . for example, the population registry is used as a  basis for the total population register (rtb) held by statistics sweden .27 a challenge posed by a  comprehensive and specialised system such as the swedish is of course that it makes overarching analysis and coordination difficult . an alternative, harmonised regulation for public registries was suggested in a governmental survey from 2015, but this option has not yet been followed up .28 5. the role of privacy in connection to public information and official documents 5.1. swedish traditions on the protection of privacy and data protection the question of the right to privacy has never had a  prominent place in the swedish legal tradition . nevertheless, it has been analysed within legal doctrine and in governmental surveys from the 1960s and onwards . there are several reasons for the reluctant swedish attitude towards the legal protection of privacy . two important aspects with regards to the topic of this article are: 1 .  the strong historical positions of the rights to freedom of expression, freedom of the press and access to public documents; and 2 . the trusting attitude of the population towards the stately need for and control of personal information during the establishment and expansion of the welfare state (abrahamsson, 2006, p . 413) . 24 sou 2017:39 dataskyddsutredningen. 25 chapter 1, § 4 act on processing personal data in the in the swedish tax agency’s population registration activities (2001:182). 26 ibid. 27 webpage of the research council on register-based research, the total population register, available via www. registerforskning.se 28 sou 2015:39 myndighetsdatalag. http://www.registerforskning.se http://www.registerforskning.se 46 jane reichel, johanna chamberlain public governance, administration and finances law review • vol.  6. no. 2.  with regards to the first issue, over the years several stately committees have made suggestions to enforce the legal protection of privacy – attempts that have failed due to the potential conflict with our traditional and constitutional principles of access to public information and freedom of the press . for example, the first privacy protection committee (integritetsskyddskommittén) suggested the introduction of a  privacy clause in the criminal catalogue, or a special privacy tort, in its final survey from 1980 .29 these steps had recently been taken by norway and finland . however, this was seen as all too radical in relation to the constitutional principles, and the suggestions were dismissed by the legislator . instead, the press was encouraged to continue its so-called self-regulation, which entails that newspapers and other media commit to following certain principles and guidelines for publishing  –  including several paragraphs on privacy intended to minimise and, when appropriate, anonymise any personal information disclosed in the news .30 the guidelines for the press can be found at, for example, the website of journalistförbundet, the swedish journalist association .31 individuals can lodge complaints regarding published information to the media ombudsman, who may forward them to the media ethical board . if the board reaches the conclusion that there has been a wrongful publication, it can issue a reprehension which the newspaper in question must publish . the system has now been established for many decades and is generally considered to be well-functioning . as seen above (section 3 .2), the question whether processing of sensitive personal data and data on criminal convictions, protected by articles 9 and 10 gdpr, in publications protected under the fpa have been discussed extensively in the last decade, and some limitations to the right to publish have been made . apart from the opposition towards legal privacy protection presented by the constitutional rules, there have been other tendencies during the 20th century which have held back the development . the gigantic project of the welfare state that resulted in a high level of trust with citizens towards the state was discussed above . accordingly, this social engineering and focus on collective rights meant that rights with an individual dimension like the right to privacy were not in focus during many decades . even when there are rules protecting privacy, like the public access to information and secrecy act, the individual’s interest is not emphasised . in a  case where public information is not seen as classified, the individual has no possibility to prevent disclosure and no right to appeal such a decision . interestingly, when it comes to data protection, the attitude has been decidedly different . during the technical awakening of the 1960s, many people were concerned about new automatic data systems as well as potential intrusions from other individuals through filming and photographing, etc .32 this impacted the work of the privacy protection committee and also triggered the enactment of the aforementioned data act in 1973 .  how come this data protection legislation managed to be passed so early on, when a broader privacy protection is still missing in swedish law ? the answer to this 29 sou 1980:8 privatlivets fred. 30 sou 1983:70 värna yttrandefriheten, p. 251. 31 see specifically concerning privacy, nos 7–10. 32 sou 1972:47 data och integritet, p. 41; sou 1970:47, skydd mot avlyssning, p. 15. 47 public governance, administration and finances law review • 2. 2021 public registries as tools for realising the swedish welfare state – can the state still be trusted? question seems yet again to lie in the relationship to the constitutional principles of openness, freedom of the press and freedom of expression . all since the negotiations for sweden’s accession to the eu, the swedish position has been clear: in case of a conflict, the constitutional laws outrule the eu data protection law (österdahl, 1998, pp . 336–356) .33 even though both the technological development in itself and the european traditions have had an important impact on swedish law governing registries and archives, the sensitive issue of balancing the right to privacy against the constitutional principles in individual cases is still to be carried out with regard only to swedish constitutional law . 5.2. european traditions and the right to rectification and remedies in the european setting, data protection has been on the rise since the council of europe convention on personal data of 1981,34 followed by the eu data protection directive of 1995,35 and the gdpr of 2018 .  amongst the fundamental principles of data protection is that the data handled be correct and relevant . the right to privacy is today acknowledged in article 7 of the charter, where it is separated from data protection (article 8) . in data protection cases, the court of justice of the european union has referred to both articles in connection .36 article 47  of the charter states that individuals shall have the right to an effective remedy when their union rights have been infringed . as with other eu legislation, the focus of the data protection and privacy regulation is largely on effectiveness . several articles of the gdpr are dedicated to remedies and the right to rectification . in the gdpr, articles 12–18  and 20–21  regulate the rights of the data subject, for example providing individuals (data subjects) with the right to be informed about and to access their personal data, to demand rectification and erasure . the gdpr does, however, allow for exemptions in relation to both official documents and archives, see articles 86 and 89 . one of the main features of the gdpr is its focus on remedies for the data subjects . provisions on remedies and sanctions can be found in articles 77–84 .  first, the data subjects have a  right to lodge a  complaint with a  supervisory authority, article 77, a  right to an effective judicial remedy against binding decisions of the supervisory authorities concerning them, article 78, and a  right to an effective judicial remedy against a controller or processor, article 79 gdpr .37 further, when misuse of personal data has led to harm, data subjects are entitled to damages according to the provisions of 33 chapter 1, § 7 data protection act complementing the gdpr. 34 convention for the protection of individuals with regard to automatic processing of personal data, ets 108. 35 directive 95/46/ec of the european parliament and of the council of 24 october 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data. 36 for example c-131/12 google spain eu:c:2014:317, para. 69; c-362/14 schrems i eu:c:2015:650, para. 39. 37 article 47 charter further gives a general right to an effective remedy before a tribunal to “everyone whose rights and freedoms guaranteed by the law of the union are violated”. 48 jane reichel, johanna chamberlain public governance, administration and finances law review • vol.  6. no. 2.  article 82 gdpr . lastly, the supervisory authority may impose administrative fines in a number of situations, article 83 gdpr . another key european legal instrument is the echr, where article 8  lays down the right to respect for private life (and family life, which will not be discussed in this article) . the echr has had its largest impact in sweden with regard to articles 6  and 13 – the right to access to court and to an effective remedy . together with eu law, the echr has prompted sweden to abandon its century long tradition of administrative review of administrative decisions, replacing it with a  general right to access to court (warnling-nerep, 2008, p . 45  et seq) . article 13  was also the reason that the swedish supreme court launched its case law on damages based on the echr back in 2005 .38 in short, the supreme court noted that swedish provisions on non-pecuniary damages meant that certain violations of the echr could not be compensated at the national level, which would leave the individual without an effective remedy and thus breach article 13 echr . therefore, the supreme court started ruling that the echr may be used as a legal base for such damages claims . this line of case law has since been codified in the damages act .39 a specific case that has impacted the swedish development is segerstedt-wiberg and others v. sweden, where the ecthr ruled that the data protection authority and registry board were not sufficient as effective remedies .40 in the case, the personal data of a number of individuals had been secretly registered for political reasons, and stored for lengthy amounts of time . the court considered that the information recorded was disproportionate when balanced against the necessity of the data storage, and that sweden therefore was in breach of article 8 echr regarding all but one applicant .41 the data subjects had not had access to a remedy where they could demand erasure of their personal data, which the court deemed problematic . as a result of the judgment, a new swedish authority was created which enabled individuals to initiate a process of scrutiny and erasure, the swedish commission on security and integrity protection, and the competence of the chancellor of justice was expanded . in a  later case, eriksson v. sweden, the ecthr ruled that sweden now could be considered to have satisfactory and effective remedies according to article 13  echr .42 there are also examples of ecthr ruling where sweden’s positive obligations regarding article 8  have been regarded as unfulfilled  –  which has led to amendments of national legislation to strengthen the privacy protection .43 38 see for instance nja 2005, p. 462, nja 2007, p. 584 and nja 2012, p. 211 i–ii. 39 chapter 3, § 4 and chapter 5, § 8 damages act (1972:207), preparatory work prop 2017/18:7. 40 segerstedt-wiberg and others v. sweden (appl. no. 62332/00), judgment of 6 june 2006. 41 ibid. para. 87–92. 42 eriksson v. sweden (appl. no. 60437/08), judgment of 12 april 2012. 43 söderman v. sweden [gc] [appl. no. 5786/08], judgment of 12 november 2013 and the swedish criminalisation of offensive photographing in chapter 4, § 6 a of the criminal code (1962:700), which happened just a few months before the judgment from the ecthr. 49 public governance, administration and finances law review • 2. 2021 public registries as tools for realising the swedish welfare state – can the state still be trusted? 5.3. remedies in swedish law considering the massive amount of personal data constantly handled by the public authorities, it is not surprising that mistakes sometimes occur . for example, the data registered can be incorrect – which causes the individual administrative difficulties, and sometimes pecuniary or (most often) non-pecuniary harm . as seen above, swedish law has had a  complicated relationship to european traditions on privacy, not least in relation to rules on transparency and official documents (österdahl, 2015, p . 74) . in practice, swedish law has made wide use of the exemptions in articles 86  and 89  gdpr in relation to access to documents and archives, even declaring that the gdpr is not to be applied in the sphere of application of the fpa .44 this also relates to remedies (reichel, 2020b, p . 125) . thus, a data subject cannot appeal a decision to release an official document including his or her personal data, nor appeal a decision refusing to cull such documents from an archive .45 further, the personal information covered by article 8 echr does not in itself constitute grounds for secrecy .46 however, certain general adjustments have been made to accommodate european requirements in relation to the right to remedies, which may be applicable also in this area . since the right to appeal administrative decisions where personal data of a  data subject are processed in official documents is closed on a general level, these alternative remedies may thus be used . in cases where data protection rights have been breached, the data subject can lodge a  complaint with the data protection authority or the swedish commission on security and integrity protection, which may lead to a process of investigation and ultimately criticism of the public authority in question . as seen above, if there has been a breach of the gdpr, administrative fines according to article 83 could also be imposed . if the individual has experienced harm, article 82 gdpr can be used to claim compensation, and if the state is the defendant, a damages claim can be made through the chancellor of justice . this does not cost the individual anything and is an alternative to taking the case to court . often the process is smooth and relatively fast, and following the large number of decisions in the area certain levels of compensation have been outlined throughout the years, which makes the legal situation predictable for the individual (see chamberlain, 2020, pp . 367–375, for an overview and analysis of these decisions) . however, the amounts paid within this system cannot be described as high – particularly not when compared to the administrative fines . 6. is the state still trustworthy? in the long history of swedish personal data registries, big changes have taken place over the last few decades . this development is of course closely connected to technological advancements and the resulting changed legal requirements, as well as to 44 chapter 1, § 7 data protection act complementing the gdpr. 45 chapter 2, § 19 fpa and supreme administrative court judgment hfd 2015 ref 71. 46 supreme administrative court judgment rå 2006 ref 87. 50 jane reichel, johanna chamberlain public governance, administration and finances law review • vol.  6. no. 2.  europeanisation . the swedish cultural heritage of accessible archives and public information must now be viewed in light of obligations following the ecthr case law and eu law, such as the right to remedies for informational privacy intrusions and the requirements of the gdpr to balance the interest of transparency and the keeping of archives with the rights of the individual .47 information that was originally public but manually organised and stored in libraries or archives can today (intentionally or sometimes unintentionally) become public online, all in a matter of seconds . the phenomenon of expanding data protection regulations and digitalisation create much tension in the relationship between the traditional public interest of collecting data and the evolving rights of individual data subjects . through the unearthing of various register scandals and the thousands of personal data incidents reported within the gdpr system each year, it has become obvious that the register holders – be they public or private entities – often fail to maintain control over sensitive personal data . this necessarily impacts the level of social trust when it comes to the swedes’ sharing of information . furthermore, personal data that is easily accessible due to the constitutional principles of transparency is used illicitly by other individuals for purposes of fraud through identity theft and the like, as well as for intrusive marketing and profiling . what should be done to answer to these challenges? first, the administration must update its data security and ensure sufficient resources to ensure that the data kept in archives and registries is safe . this seems to require political will, budgetary priorities and well-trained staff, rather than merely legal tools . secondly, the legal development cannot rest  –  despite several important steps having been taken by the legislator in recent years . a much-needed amendment was the criminalisation of identity theft and spreading of sensitive images, which after decades of debate took place just a few years back .48 as mentioned above, offensive photographing was criminalised in 2013 .49 these updates also enable victims to file for damages as compensation for economic and non-pecuniary losses . as seen above, the legal remedies available for individuals in cases related to data protection and privacy rights have been strengthened after international pressure . although these changes may seem promising, they are not without loopholes . the new paragraph on spreading of sensitive images is not applicable in the constitutionally protected area of publishing, and the possibilities of online publishing regarding detailed personal data such as home addresses and telephone numbers, birthday dates and living conditions, remain far-reaching . to a large extent, these personal data are not covered by secrecy under the public access to information and secrecy act, and the online publishing of data relating to criminal offences has not yet been prohibited . as seen above, when the publisher has a  certificate of publication, the publication is 47 see in regard to the latter c-439/19 b eu:c:2021:504, para 120. 48 chapter 4, § 6 b of the criminal act regarding identity theft, implemented in 2016, and chapter 4, § 6 c regarding privacy invasions by spreading sensitive information, passed in 2017. 49 chapter 4, § 6 a criminal act. 51 public governance, administration and finances law review • 2. 2021 public registries as tools for realising the swedish welfare state – can the state still be trusted? protected under the fpa and the gdpr is not deemed applicable . this goes back on the abovementioned constitutional rules on transparency and freedom of information, which would need to be adapted – or at least complemented with exceptions – to limit and control what happens with personal data collected by for example the tax agency . the obvious clash between the swedish reality when it comes to the handling of personal data and gdpr principles on for example purpose limitation is thus explained by the swedish attitude to the hierarchy between eu regulations and swedish constitutional law . there is a danger in this stubborn denying of the necessity to modernise and nuance legislation . in all certainty, the prospect for our fundamental constitutional principles to continue to thrive builds on the willingness to develop them according to today’s conditions and specifically our digital society . if the legislator refuses to do so, the social trust of the welfare state may soon be altogether consumed . references abrahamsson, o . 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reform how laws should not be amended mariusz popławski*¤ * dean, full professor, university of bialystok, faculty of law, department of tax law . e-mail: m .poplawski@uwb .edu .pl abstract: the purpose of the paper is to present the most important changes to the laws on excise tax and personal income tax (pit) made in poland in 2022 . due to the importance of these changes, they can be considered tax law reforms . the changes to the excise tax may not only affect the amount of taxes levied but may also influence the health-related behaviour of poles in the coming years . the changes to the pit may affect as many as 18 million taxpayers . the main purpose of this paper is to verify two research hypotheses: first, that public consultations do not have any impact on the shape of the tax law being developed; and second, if the legislator adopts a tax law quickly, it will very likely contain many errors, the consequences of which may be serious . keywords: tax reform, public consultations, excise tax, electronic cigarettes, heated tobacco products, personal income tax 1. introduction an excise tax reform has been in force since 1 january 2022, based on the act of 29 october 2021 amending the act on excise tax and certain other acts .1 this act concerns changes made to the taxation of traditional cigarettes and innovative products (electronic cigarettes) . it is all the more important, as it  defines the rules of taxation in this regard for the next few years . until recently, personal income tax law had not been significantly modified in poland for a long time . a huge change was made in this respect with the adoption of the act of 29 october 2021 amending the act on personal income tax and some other acts2 . in their 1 journal of laws of 2021, no. 2313. 2 journal of laws of 2021, no. 2105 (hereinafter referred to as first act on personal income tax). https://doi.org/10.53116/pgaflr.2022.1.4 https://orcid.org/0000-0003-1403-3033 mailto:m.poplawski@uwb.edu.pl 52 mariusz popławski public governance, administration and finances law review • vol. 7. no. 1.  essence, the changes that took effect on 1 january 2022 affect a very large group of persons . according to the ministry of finance, about 18 million taxpayers will benefit from the new law and about 9 million of them will not pay any personal income tax (ministry of finance, podatkowy polski ład w pigułce, 2022) . the main purpose of this paper is to verify two research hypotheses . first, in the practice of the tax law-making process, public consultations are treated only as a formal obligation, and the legislators adopting a tax law do not take the results of public consultations seriously . as such, public consultations are in fact just a token procedure . second, tax law should not be adopted too quickly without due attention and concentration . if the legislator adopts tax law quickly, it will very likely contain many errors, the consequences of which may be serious . the study used the dogmatic method, which involves an analysis of the new regulations related to both taxes discussed herein . the paper also contains information based on an analysis of individual hypothetical cases, which was used to evaluate the new regulations on the pit . an assessment of the new regulations for the excise tax was carried out on the basis, among other things, of the results of empirical research conducted by representatives of various sciences (chemistry and medicine), which was necessary to assess the impact on the health of traditional and so-called innovative products . therefore, the paper not only fits within the scope of legal science, but can also be considered interdisciplinary . 2. excise tax reform excise tax reform has been in force since 1 january 2022 . the main changes were made in two areas . the first area is a  10% increase in the excise tax on cigarettes, smoking tobacco and innovative products . the second area is the proposed so-called excise tax map: a schedule of changes in the rates of this tax for the coming years, a 10% increase every year between 2023 and 2027 (also for cigarettes, smoking tobacco and innovative products) . formally, public consultations were carried out for these changes . this means that representatives of science were also consulted on the bill related to these changes (popławski & michalak, 2021) . public consultations are a very important component of the democratic system (woźniczko, 2019) . a discourse between representatives of the public, entities representing various interests, and bodies equipped with law-making powers should be reasonably reflected in the content of adopted legislation (bobrusnowińska, 2019) . public consultation of bills is a formal requirement . there are many regulations in poland that impose the obligation to conduct public consultations on proposed bills . the constitution of the republic of poland of 2 april 1997 provides that the supreme power is vested in the nation and is exercised either through representatives or directly . in particular, article 61 specifies, among other things, the right to be informed of the actions taken by, inter alia, public authorities and their effects . the rules of procedure of the 53excise tax reform in poland on electronic cigarettes… public governance, administration and finances law review • 1. 2022 council of ministers3 include section iii entitled handling draft government documents, the third chapter of which, (arrangements, public consultations and evaluations of draft government documents), includes provisions concerning this issue . at the same time, these consultations show a fundamental connection with the problem of the so-called assessment of expected socio-economic effects . in the resolutions of the sejm of the republic of poland of 30 july 1992 on the rules of procedure of the sejm of the republic of poland, it is indicated that the explanatory statement for a bill should also present the results of consultations held and should inform the reader of the views and opinions presented, particularly if the obligation to obtain such opinions arises from the provisions of the law . it should be emphasised that the bill amending the excise tax law was submitted for public consultations . this means that the following actions were taken: opinions and comments could be sent by e-mail, the proposal to change the rules of tobacco taxation was the subject of consultations with representatives of the tobacco industry as part of the online excise forum (12–13 october 2021), and the forum,s deliberations were publicly available on websites (ministry of finance, powstanie forum opodatkowania wyrobów akcyzowych, 2022) . there are other questions that arise at this point: what do public consultations look like in practice? and were the propositions submitted as part of the above-mentioned public consultations, including those by representatives of science, taken into account? in the practice of the decision-making process, the consultation of social partners on bills is considered one of the stages of the procedure . this stage is not particularly relevant in practice from a substantive point of view . it is considered only a formal condition for assessing the legislative correctness of a normative act . in the practice of state authorities, dialogue and social discourse serve only to provide information, not to shape decisions . unfortunately, this was the case in the development of the above-mentioned changes to the excise tax laws, as the comments made by specialists and researchers in this field were not taken into account . the latter confirmed that the use of traditional cigarettes is more harmful to health compared to electronic cigarettes (niezgoda, 2020) . novelty products are, generally speaking, electronic cigarettes where certain chemicals are heated but there is no combustion process . for this reason, it  is assumed that innovative products are less harmful to health . the u .s . food and drug administration (fda) clearly advocates the use of tested smokeless alternatives to cigarettes by adult smokers, while maintaining a ban on their promotion and advertising (niezgoda, 2020) . research in this area has also been carried out in germany, among other countries . the aerosol from one of the tobacco heating systems was analysed and it was found that there was a reduction of the toxic substances analysed in the range of 80 to 99% compared to cigarette smoke (mallock et al ., 2018) . the results, published in 2018, were consistent with the results previously presented by the manufacturer of this system . the final findings stated that while research is still needed in the area of reduction, the values already recorded “lead to legitimate questions about the presumed reduced health risk” (mallock et al ., 2018) . a department of japan’s national institute of public health (niph) 3 consolidated text: monitor polski of 2016, no. 1006, as amended. 54 mariusz popławski public governance, administration and finances law review • vol. 7. no. 1.  conducted a comparative study of aerosol concentrations of chemicals from a tobacco heating system and cigarette smoke . this study shows, among other things, that the concentration of harmful compounds in the main stream of the aerosol is much lower than in traditional cigarettes (bekki et al ., 2017) . the international association on smoking control and harm reduction (scohre) is an institution established by a group of 40 scientists (including doctors) from 21 countries (niezgoda, 2020) . scohre argues that advances in reducing harm from smoking can no longer be ignored . the experts of the institution emphasise that although quitting smoking remains an absolute priority for the doctor and their patient, when this goal cannot be achieved and the patient continues to smoke, tested and regulated alternative methods of nicotine delivery may prove to be “the lesser evil” for them (niezgoda, 2020) . electronic cigarettes can be one of the tools of harm reduction policy that contribute to a positive transformation of the public health landscape . the results of 44 clinical studies on the use of e-cigarettes and tobacco heaters, published in international scientific journals, confirmed a significant reduction in exposure of users to harmful substances compared to smoking (akiyama & sherwood, 2021) . smoking traditional cigarettes kills over 8 million people a year, of which 1 .2 million are so-called passive smokers (who, 2021) . addiction to tobacco carries enormous economic costs: usd 1 .4 trillion (who, 2021), or approximately 1 .8% of the world’s gdp . on the other hand, tobacco smoking remains one of the leading causes of death (approximately 67,000 cases per year) and the cost of treatment of diseases caused by tobacco smoke constitutes 15% of total medical expenses in poland (ministry of finance, wspieramy, 2021) . the number of teenagers who smoke cigarettes is also alarmingly high . 15% of adolescents have smoked at least once in the last 30 days, and nearly 1 out of 3 have smoked at some point (who 2020) . an analysis of the polish constitution (constitution, article 5) seems to prove that the elimination of traditional cigarettes, as harmful products, is a means to achieve the goal of protecting citizens’ safety and health (popławski & michalak, 2022a) . despite the fact that the hypothetically most emphatic method of counteracting the above-mentioned problem would be a ban, it should be stated that, currently and to a greater extent, a more socially realistic option seems to be the use of the so-called innovative products (popławski & michalak, 2022b) . therefore, in the short-term legislative perspective, the legislator’s goal should be to “promote” the use of these alternatives, for example in the form of electronic cigarettes (popławski & michalak, 2022a) . innovative solutions in the field of innovative products may take the form of excise tax mechanisms, which will burden certain categories of less harmful goods to a proportionally lower degree compared to much more dangerous tobacco products (popławski & michalak, 2022b) . that is why there should be a demand to differentiate between the increase in the taxation of traditional products, which are more harmful to health, and the increase in the taxation of innovative products (a negative attitude towards these products was adopted without referring to the accepted and known global achievements in the taxation of this category) . in my opinion, it is also justified to tax innovative products at lower rates than traditional cigarettes . at the same time, we should focus primarily on a higher taxation of traditional cigarettes (reiwer-kaliszewska & nowak, 2019) . moreover, increasing the price of 55excise tax reform in poland on electronic cigarettes… public governance, administration and finances law review • 1. 2022 tobacco products is globally one of the most effective methods of motivating people to quit smoking, which significantly limits the access of young people to tobacco products . in the light of the collected data, also with reference to the research that has been conducted, it should be concluded that one of the most effective ways to counteract addiction is to limit the economic availability of specific stimulants, e .g . by a progressive increase of the excise tax rates applicable to traditional cigarettes . under certain conditions, it is actually an effective legal solution when it involves a progressive, i .e . continuous, plan to increase the tax burden on specific products with proven harmful effects . periodic and regular tax increases are thus aimed at a permanent (not one-time) increase in the price of certain goods . they are thus supposed to “accustom” the consumers of these products to a permanent increase in their retail prices, in other words, to create the upward price trend for specific goods . 3. purpose and direction of the changes to the pit regulations looking at the general direction of the changes made to the regulations, it  is clear that they are driven by specific political needs (górski, 2019; kimla, 2017) . the ruling political group (government) had concluded that changes were needed that would result in a  reduction of taxes for a  large group of taxpayers . from this point of view, it  is fully justified for the polish government to adopt laws that are considered appropriate for the majority of voters supporting the political parties that form the parliamentary majority (myl, 2021) . a parliamentary majority exists to allow the government to make decisions that are considered valuable and valid from the standpoint of the largest possible segment of voters who support it . i would like to present now some details related to these changes, starting with the new tax preferences . the first very important change is raising the annual tax-free amount . until the end of 2021, the tax-free amount in poland was, in principle, equal to pln 3,000 (eur 640) . it was the amount set for each year . in order for a taxpayer not to pay the pit, his or her income could not exceed a certain threshold, e .g . pln 3,000 in 2021 . after the analysed legal changes were introduced, this amount is 10 times higher . in 2022, a person will not pay personal income tax if his or her income is not higher than pln 30,000 (eur 6,380) . another important change is an increase in the level of the first tax threshold on the tax scale . until 2021, this amount was pln 80,000 (eur 17,000) and now, since january 2022, that amount has been raised to pln 120,000 (eur 25,500) . this means that a higher income will be taxed at a lower tax rate, which is obviously more advantageous for the taxpayers . additionally, a lot of new tax preferences were introduced . these are important and beneficial changes for taxpayers . an additional annual tax-free amount for large families was introduced at the level of pln 115,000 (ministry of finance, 2022, podatkowy polski ład w pigułce) . a family with at least four children will benefit from the tax-free amount raised to the level of (eur 24,500) . in simple terms, a family with three children will be 56 mariusz popławski public governance, administration and finances law review • vol. 7. no. 1.  able to benefit from the tax-free amount of pln 30,000 per year, while a family with four children will benefit from a tax-free amount almost four times greater . already in the 2022 tax year, spouses filing their returns jointly will benefit from a double tax-free amount equal to as much as pln 60,000 (euro 12,700) and spouses with a salary of pln 3,010 and pln 3,500 gross a month respectively will gain about pln 4,000 a year from the new tax law (ministry of finance, 2022, podatkowy polski ład w pigułce) . if they file their tax returns separately, they will save a total of pln 3,600 per year on taxes as a result of the new law . parents with two children earning pln 6,500 gross jointly will gain roughly pln 4,000 (eur 850) (ministry of finance, 2022, podatkowy polski ład w pigułce) . not only will they not pay any tax at all, but they will also receive a refund from the government of their unused child allowance, in the amount of approximately pln 2,000 (eur 425) (ministry of finance, 2022, podatkowy polski ład w pigułce) . parents with one child where one of the spouses earns pln 4,000 (eur 850) and the other pln 3,000 (eur 640) a month will gain pln 3,500 (eur 745) per year if they file their tax return jointly . families will also benefit from the tax threshold being raised to pln 120,000 (eur 24,500) . as a result of the raised threshold, families with three children where one of the spouses earns pln 18,000 (eur 3,830) and the other earns pln 5,000 (eur 1,060) a month will not pay a higher tax (ministry of finance, 2022, podatkowy polski ład w pigułce) . large families will benefit additionally from the new law establishing the so-called pit-0 (zero pit rate) for families with at least four children . according to the new law, as much as pln 85,528 (eur 18,200) of income for each parent is tax-free . in addition, for taxpayers paying their taxes according to the tax scale (17 and 32%), there is another tax-free amount of pln 30,000 (eur 6,400) . according to simulations carried out by the ministry of finance, over 110 thousand people will benefit from the zero pit rate for families with four or more children and will save approximately pln 335 million in taxes (ministry of finance, 2022, polski ład wspiera rodziny) . the discussed tax preference is intended to cover not only parents, but also foster parents and legal guardians with at least four children . it should be mentioned that the tax relief will be available to parents who receive income from work, contract of mandate, or a business activity taxed according to the tax scale, regardless of whether they raise children together or are single parents . families with at least four children where the spouses jointly earn pln 11,500 (eur 2,450) per month will gain as much as pln 8,945 (eur 1,900) per year and the spouses will not only not pay approximately pln 2,000 (eur 425) of the tax they paid before the reform, but will also receive approximately pln 6,900 (euro 1,470) from the government (reimbursement of unused child allowance) (ministry of finance, 2022, polski ład wspiera rodziny) . another important tax preference applies for working seniors . it will be awarded to working seniors, i .e . people who – despite having reached retirement age – decide to continue working . in this case, the relief is similar to that for large families: the tax-free amount has been raised to pln 115,000 (eur 24,500) . the next significant change is the preferences for selected groups of professionals . self-employed professionals (it specialists, physicians, architects and engineers) can opt for a flat-rate tax on registered 57excise tax reform in poland on electronic cigarettes… public governance, administration and finances law review • 1. 2022 income and benefit from lower tax rates . instead of 17%, which could be applied in 2021, they can pay as little as 12% . in this case, however, it is revenue, not income, that is taxed . this means that taxpayers are not able to take into account the expenses incurred in connection with their business activity . 4. different tax satisfaction levels among different groups of pit taxpayers the provisions of the first act on personal income tax have resulted in different levels of tax satisfaction . on the one hand, there is certainly a group of taxpayers who are very happy with the changes (people earning up to eur 700 per month, because they will not pay any pit at all) . however, it should be noted that there are groups of taxpayers who are less satisfied with the changes and who may even be required to pay more pit . less satisfaction is rather obvious for taxpayers with higher incomes, earning more than eur 3,000 per month; most of their income will be taxed at the 32% rate . moreover, it must be emphasised that the changes are generally disadvantageous for entrepreneurs, due to the new rules for calculating health insurance contributions . this is due to the fact that the amount of health insurance contributions generally depends on the taxpayer’s income tax liability . until january 2021, there had generally been one flat rate for calculating health insurance contributions . moreover, health insurance contributions are no longer tax-deductible, which is very disadvantageous . 5. lack of a systemic approach to entrepreneurs in the pit, legislative errors and second act on personal income tax it should also be emphasised that the legal changes made by the first act on personal income tax contained many legislative errors, since nobody knew how to apply some of the new tax law regulations . these shortcomings were the subject of a serious discussion held, among other places, in the media, but also in legal journals (popławski, 2022; popławski & michalak, 2022b) . this led the government to take urgent action to change the new law . moreover, the first act on personal income tax lacked a systemic approach to entrepreneurs, not only those who invest, but also those who want to conduct their operations in poland and benefit from the income they generate . i hope that the polish legislator will decide in the future on a significant reduction of the tax rates, from which polish entrepreneurs will be able to benefit to a larger extent than at present (popławski, 2022) . we should call for a reduction of the tax rates, both in the flat-tax pit and in the cit, to the level of about 10% . in my opinion, this would bring enormous benefits in the long run, not only for taxpayers but also for poland as a state . a lot of work was carried out to eliminate the above-mentioned shortcomings and legislative errors . however, it  did not change much in terms of the lack of a  systemic approach to entrepreneurs . the new law, with some additional changes, took effect on 1 july 2022 . the act of 9 june 2022 amending the act on personal income tax and certain 58 mariusz popławski public governance, administration and finances law review • vol. 7. no. 1.  other laws introduced4 changes that relate to the following issues: a reduction of the pit rate from 17% to 12%; allowing entrepreneurs to change the form of income taxation during the year; partial restoration of eligibility for deducting health insurance contributions from the tax for entrepreneurs; restoration of the preferential calculation of pit for single parents; ability to take the tax-free amount into account by several payers simultaneously; elimination of tax relief for the middle class; and introduction of an equalisation mechanism . the new law provides for a reduction of the pit rate from 17% to 12% in the first tax threshold of the tax scale for taxpayers taxed according to the general rules . this applies both to entrepreneurs paying the pit according to the tax scale and to persons earning revenue from contracts of employment and contracts of mandate . the lower tax rate is already applied at the time of collection of advance payments . importantly, the 12% pit rate is also to apply to the period from january to june 2022, with taxpayers benefiting from the change in 2023 after they file their annual tax returns for 2022 (tax offices are expected to refund the overpaid tax) . in connection with the reduction of the pit rate for taxpayers taxed according to the tax scale, the second act on personal income tax introduced a special possibility for those entrepreneurs who chose income taxation in the form of a general flat-rate tax or a flat-rate tax for specific professions in 2022 . they may change the form of taxation to taxation according to the general rules which, in connection with the reduction of the pit rate, may be more advantageous for them in fiscal terms . taxpayers will be able to change their form of income taxation for 2022 when filing their annual tax returns for that year (until the end of april 2023) . in those tax returns, taxpayers will report income that was subject to the general flat-rate tax or the flat-rate tax for specific professions in 2022 . in the course of 2022, entrepreneurs will be obliged to apply the principles of income taxation hitherto appropriate for the general flat-rate tax or the flat-rate tax for specific professions . originally, according to the first act on personal income tax, the legislator decided to eliminate the deduction of health insurance contributions from the amount of pit due completely . the second act on personal income tax partially restores this preference, but not for all taxpayers and up to a certain limit . according to the new law, the deduction of health insurance contributions from the tax due is possible for entrepreneurs taxed at the general flat-rate tax (at the rate of 19%) and at the flat-rate tax for specific professions . taxpayers who have chosen to have their income taxed in the form of a lump sum will also benefit from the above preference to a limited extent (the law provides for a deduction of 19% of the health insurance contribution paid from the lump-sum tax) . moreover, the additional limit on tax-deductible health insurance contributions is to be equal to pln 8,700 (eur 1,850) per year . however, this amount is to be adjusted annually based on the index specified in the tax law . entrepreneurs who pay their taxes according to the tax scale (12%, 17%, or 32%, depending on income) will not be entitled to the deduction . the second act on personal income tax provides for the restoration of a preferential calculation of pit for single parents . previously, according to the first act on personal 4 journal of laws of 15 june 2022, no. 1265 (hereinafter referred to as second act on personal income tax). 59excise tax reform in poland on electronic cigarettes… public governance, administration and finances law review • 1. 2022 income tax, the aforementioned mechanism was replaced by the so-called allowance of pln 1,500, but the old mechanism, which, in connection with a significant increase in the tax-free amount as of 1 january 2022 to pln 30,000 (eur 6,380), may prove more advantageous for single parents . according to the first act on personal income tax, a person earning income from an employment contract (and having other sources of income as an employee) could use the tax-free amount at the stage of calculating the tax advance by one of the remitters of the pit . this was possible at the request of the taxpayer . the second act on personal income tax provides that a taxpayer will be able to select up to three remitters, who may take into account the tax-reducing amount when calculating their own tax advances . however, this does not mean that each remitter selected will apply 1/12th of the taxreducing amount . the aforementioned act provides that a taxpayer will be able to “split” 1/12th of the tax-reducing amount into up to three amounts and to authorise up to three remitters to apply it accordingly . the second act on personal income tax provides for the elimination of the so-called “middle class relief ” that has been in force since 1 january 2022, which consisted of a deduction from the income of an amount determined individually based on the amount of revenue . the mechanism was intended to compensate for the negative fiscal consequences for taxpayers that may have resulted from the adoption of the first act on personal income tax . generally, the middle class tax relief was available to taxpayers whose total annual revenue was between pln 68,412 and 133,692 (eur 14,500–28,500) . this mechanism, however, was widely criticised due to its limited subjective scope and the complicated algorithm used to calculate the amount of relief for individual taxpayers . accordingly, the second act on personal income tax eliminated this mechanism . according to the new law, the above change should be neutral for taxpayers, because, in a way, in exchange for the middle class relief they will receive the above-mentioned reduction of the pit rate (from 17% to 12%) . 6. conclusions the paper demonstrates that the legal changes introduced in poland from 2022 in relation to the excise tax and the personal income tax deserve to be called tax reforms . the changes made to the excise tax regulations affect the amount of taxes levied not only on traditional cigarettes, but also on so-called innovative cigarettes . they may also influence the health-related behaviour of poles in the coming years . the changes made to the pit regulations affect a very large number of taxpayers (about 18 million) . the paper also indicates the following issues . the amendments to the excise tax regulations were made with disregard for the results of public consultations carried out in the legislative process . the new regulations also do not take into account information resulting from scientific research . this proves that public consultations are treated in poland only as a  formal requirement . in my opinion, it  is a  mistake to tax traditional cigarettes and electronic cigarettes with excise tax at a similar level . due to the fact that electronic cigarettes are less harmful to health, they should be taxed at a much lower rate . 60 mariusz popławski public governance, administration and finances law review • vol. 7. no. 1.  the legislature made many mistakes in introducing the amendments to the pit regulations . they resulted mainly from the excessively fast legislative process . as a consequence, new amendments had to be made to the recently introduced regulations . after these amendments, the pit regulations are much clearer and easier to apply . this does not mean that the pit regulations do not require significant additional changes, e .g . in terms of reducing the taxation of entrepreneurs . the analyses presented in the paper confirm the validity of both research hypotheses indicated at the beginning . first, the current practice of conducting public consultations does not ensure the possibility of exerting a significant influence on the final shape of the law being created . it should be demanded that public participation in decision-making be real and not limited only to formal consultation of bills by specific entities . second, if the legislator adopts a tax law quickly, it will very likely contain many errors, the consequences of which may be serious . references aakiyama, y . & sherwood, n . 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(2021) . aspekty racjonalnego tworzenia prawa a pozorność konsultacji w prawie podatkowym – stadium przypadku . in i . sierocka & w . witoszko (eds .), dorobek i rozwój myśli polskiej nauki prawa pracy w świetle wyzwań xxi wieku . temida 2 . popławski, m . & michalak, k . (2022a) . bezpieczeństwo obywateli w art . 5 konstytucji rp . o konstytucyjnych uwarunkowaniach eliminacji papierosów tradycyjnych . studia iuridica . in press . popławski, m . & michalak, k . (2022b) . the legal framework for countering the affordability of traditional cigarettes in poland . a review of selected issues . institutiones administrationis – journal of administrative sciences . in press . reiwer-kaliszewska, a . & nowak, t . 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(2019) . konsultacje społeczne jako narzędzie partycypacji publicznej . opracowania tematyczne . senate chancellery . analysis, documentation and correspondence office, no . ot–666 . https://doi.org/10.15290/bsp.2019.24.03.02 https://apps.who.int/iris/handle/10665/332104 https://apps.who.int/iris/handle/10665/332104 https://bit.ly/3fgglk9 public governance, administration and finances law review vol. 6. no. 2. (2021) • 101–119 . © the author 2022 doi: 10 .53116/pgaflr .2021 .2 .8 the source of unexplored opportunities or an unpredictable risk factor? could artificial intelligences be subject to the same laws as human beings? boldizsár szentgáli-tóth*¤ * research fellow of the centre for social sciences, institute for legal studies, and the constitutional law department of the eötvös lóránd university, e-mail: szentgali-toth . boldizsar@tk .hu abstract: the collingridge dilemma or ‘dilemma of control’ presents a  problem at the intersection of law, society and technolog y . new technologies can still be influenced, whether by regulation or policy, in their early stage of development, but their impact on society remains unpredictable . in contrast, once new technologies have become embedded in society, their implications and consequences are clear, but their development can no  longer be affected . resulting in the great challenge of the pacing problem  –  how technological development increasingly outpaces the creation of appropriate laws and regulations . my paper examines the problematic entanglement and relationship of artificial intelligence (ai) and a key aspect of the rule of law, legal certainty . ai is our modern age’s fastest developing and most important technological advancement, a  key driver for global socio-economic development, encompassing a broad spectrum of technologies between simple automation and autonomous decision-making . it has the potential to improve healthcare, transportation, communication and to contribute to climate change mitigation . however, its development carries an equal amount of risk, including opaque decision-making, gender-based or other kinds of discrimination, intrusion into private lives and misuse for criminal purposes . the transformative nature of ai technolog y impacts and challenges law and policymaking . the paper considers the impact of ai through legal certainty on the rule of law, how it may undermine its various elements, among others foreseeability, comprehensibility and clarity of norms . it does so by elaborating on ai’s potential threat brought on by its opacity (‘black box effect’), complexity, unpredictability and partially autonomous behaviour, which all can impede the effective verification of compliance with and the enforcement of new as well as already existing legal rules in international, european and national systems . my paper offers insight into a  human-centric and risk-based approach towards ai, based on consideration of legal and ethical questions surrounding the topic, to help ensure transparency and legal certainty in regulatory interventions for the benefit of optimising efficiency of new technologies as well as protecting the existing safeguards of legal certainty . keywords: artificial intelligence, modern technolog y, legal personhood, human dignity, rule of law https://doi.org/10.53116/pgaflr.2021.2.8 https://orcid.org/0000-0001-5637-8991 mailto:szentgali-toth.boldizsar@tk.hu mailto:szentgali-toth.boldizsar@tk.hu 102 boldizsár szentgáli-tóth public governance, administration and finances law review • vol.  6. no. 2.  1. introduction in 2017, a female robot named sophia was granted citizenship in saudi arabia, arousing great public interest worldwide . this was the first occasion that an artificial intelligence had been accorded the ordinary citizenship of a state, and accordingly it raised a number of issues . the possible extension of the traditional concept of citizenship to electronic humanoids has been proposed several times (de cock buning, belder & de bruin, 2012) . for instance, in 2015, the legal commission of the european parliament recommended providing legal status to at least the most developed autonomous artificial intelligences, who might then be the subject of rights and duties (draft report with recommendations to the commission on civil law rules on robotics, 31 may 2016) . it is important to analyse how the law should reflect these new challenges, and whether they may have arisen due to an exaggerated and dubious interpretation of citizenship and legal personhood .1 nevertheless, this paper will go beyond this and attempt to conceptualise whether electronic humanoids, as citizens, could be covered properly by our currently existing legal framework . a  large number of high quality academic works have concentrated on this issue, and most of them agree upon the necessity of updating the legal environment to accommodate artificial intelligences, although we are still very far from even outlining the main features of this envisaged concept . my contribution sets out to add some legal considerations in this field, as the case of sophia clearly demonstrates the necessity of finding real legal answers to the recent challenges of modern technolog y and also of updating the interpretation of current legal terminolog y in the light of developments in technolog y . if we accept that at least certain robots may meet the criteria for legal personality, as human beings, these electronic persons might also enjoy the same rights and be subject to the same obligations as traditional citizens . on the one hand, this new category of personhood might influence the political process (benhabib, 2006), and might also reveal new economic opportunities, while on the other hand, the political, social and economic activity of electronic humanoids must be regulated carefully . several commentators have pointed out that the participation of electronic humanoids in social and economic life would be risky due to the insufficient regulation; therefore, the legal framework needs to be updated significantly to diminish such risk factors (stone, 2017) . as part of these endeavours, european artificial intelligence experts have elaborated human-centric ethical rules for robots, which are primarily targeted at preventing potential harm caused unintentionally by robots created with insufficient technical knowledge .2 furthermore, the eu member states and norway concluded an agreement 1 ai in law: definition, current limitations and future potential. online: https://legal-tech-blog.de/ai-in-lawdefinition-current-limitations-and-future-potential 2 high-level expert group on artificial intelligence, european commission. online: https://ec.europa.eu/digitalsingle-market/en/high-level-expert-group-artificial-intelligence; high-level expert group on artificial intelligence [ai hleg], draft ethics guidelines for trustworthy ai (18 december 2018). online: https://ec.europa.eu/ futurium/en/system/files/ged/ai_hleg_draft_ethics_guidelines_18_december.pdf https://legal-tech-blog.de/ai-in-law-definition-current-limitations-and-future-potential https://legal-tech-blog.de/ai-in-law-definition-current-limitations-and-future-potential https://ec.europa.eu/digital-single-market/en/high-level-expert-group-artificial-intelligence https://ec.europa.eu/digital-single-market/en/high-level-expert-group-artificial-intelligence https://ec.europa.eu/futurium/en/system/files/ged/ai_hleg_draft_ethics_guidelines_18_december.pdf https://ec.europa.eu/futurium/en/system/files/ged/ai_hleg_draft_ethics_guidelines_18_december.pdf 103the source of unexplored opportunities or an unpredictable risk factor? public governance, administration and finances law review • 2. 2021 in 2018  on developing a  common european approach to artificial intelligence,3 and although this remains a  distant prospect, considerable steps have been made towards it during recent years . my aim is to assess whether the current legal framework could be adapted to these new challenges appropriately, and to suggest a five-level classification of artificial intelligences based on the example of self-driving cars (schellekens, 2015) . this paper will use the definition of artificial intelligence adopted by the high level european expert group on artificial intelligence: “artificial intelligence (ai) refers to systems designed by humans that, given a  complex goal, act in the physical or digital world by perceiving their environment, interpreting the collected structured or unstructured data, reasoning on the knowledge derived from this data and deciding the best action(s) to take (according to pre-defined parameters) to achieve the given goal . ai systems can also be designed to learn to adapt their behaviour by analysing how the environment is affected by their previous actions .”4 my analysis takes into account the huge diversity of robots: artificial intelligence includes a great variety of entities, of which humanoid robots would be the most interesting from the perspective of legal personhood . several artificial intelligences also participate in the automatisation processes, while certain software possesses an autonomous ability to think and take decisions, albeit without physical integrity . robots play a key role in data protection (regulation 679/2016, art . 22), and control certain vehicles (com, 2016, november 30; com, 2018, may 17, 17),5 while european experts have described the development of autonomous robotic weapon systems .6 my five-level scale reflects this complex situation, with humanoid robots at the core of my analysis . as far as i am concerned, physical integrity and a  humanoid appearance are indispensable for providing at least certain humanlike rights and obligations to particular robots . it would depend on their intellectual abilities, to what extent the exact scope of these rights and duties should encompass . 3 declaration: cooperation on ai, 10 april 2018. online: https://ec.europa.eu/jrc/communities/sites/jrccties/files /2018aideclarationatdigitaldaydocxpdf.pdf 4 ai hleg: a definition of ai: main capabilities and scientific disciplines (18 december 2018). online: http:// perma.cc/8vuq-awaj 5 proposal for a regulation of the european parliament and of the council on type-approval requirements for motor vehicles and their trailers, and systems, components and separate technical units intended for such vehicles, as regards their general safety and the protection of vehicle occupants and vulnerable road users, amending regulation (eu) 2018/… and repealing regulations (ec) no 78/2009, (ec) no 79/2009 and (ec) no 661/2009 (general safety regulation), com (2018) 286 final (17 may 2018). online: https://eurlex. europa.eu/resource.html?uri=cellar:f7e29905-59b7-11e8-ab41-01aa75ed71a1.0003.02/doc_1&format=pdf; proposal for a directive of the european parliament and of the council amending directive 2008/96/ec on road infrastructure safety management, com (2018) 274 final. online: https://eur-lex.europa.eu/resource. html?uri=cellar:cc6ab6e7-59d2-11e8-ab41-01aa75ed71a1.0003.02/doc_1&format=pdf; commission decision updating the working programme in relation to the actions under article 6(3) of directive 2010/40/eu, c (2018) 8264 final (11 december 2018). online: http://perma.cc/h7s5-6hne; directive 2010/40/eu on the framework for the deployment of intelligent transport systems, 2010 o.j. (l 207) 1. online: https://eur-lex.europa.eu/legalcontent/en/txt/pdf/?uri=celex:32010l0040&from=en 6 european external action service (eeas), convention on certain conventional weapons – group of governmental experts – lethal autonomous weapons systems. eu statement group of governmental experts lethal autonomous weapons systems convention on certain conventional weapons geneva, 27–31 august 2018. online: https:// eeas.europa.eu/headquarters/headquarters-homepage/49763/convention-certain-conventional-weapons-groupgovernmental-experts-lethal-autonomous-weapons_en https://ec.europa.eu/jrc/communities/sites/jrccties/files/2018aideclarationatdigitaldaydocxpdf.pdf https://ec.europa.eu/jrc/communities/sites/jrccties/files/2018aideclarationatdigitaldaydocxpdf.pdf http://perma.cc/8vuq-awaj http://perma.cc/8vuq-awaj https://eurlex.europa.eu/resource.html?uri=cellar:f7e29905-59b7-11e8-ab41-01aa75ed71a1.0003.02/doc https://eurlex.europa.eu/resource.html?uri=cellar:f7e29905-59b7-11e8-ab41-01aa75ed71a1.0003.02/doc https://eur-lex.europa.eu/resource.html?uri=cellar:cc6ab6e7-59d2-11e8-ab41-01aa75ed71a1.0003.02/doc_ https://eur-lex.europa.eu/resource.html?uri=cellar:cc6ab6e7-59d2-11e8-ab41-01aa75ed71a1.0003.02/doc_ http://perma.cc/h7s5-6hne https://eur-lex.europa.eu/legal-content/en/txt/pdf/?uri=celex:32010l0040&from=en https://eur-lex.europa.eu/legal-content/en/txt/pdf/?uri=celex:32010l0040&from=en https://eeas.europa.eu/headquarters/headquarters-homepage/49763/convention-certain-conventional-weapons-group-governmental-experts-lethal-autonomous-weapons_en https://eeas.europa.eu/headquarters/headquarters-homepage/49763/convention-certain-conventional-weapons-group-governmental-experts-lethal-autonomous-weapons_en https://eeas.europa.eu/headquarters/headquarters-homepage/49763/convention-certain-conventional-weapons-group-governmental-experts-lethal-autonomous-weapons_en 104 boldizsár szentgáli-tóth public governance, administration and finances law review • vol.  6. no. 2.  my assessment will be based on three strands of  literature, which have rarely been drawn upon in an integrated manner . firstly, the traditional  literature of legal personhood forms the background of the analysis . secondly, numerous authors are cited, who can provide a deeper understanding of the impact of artificial intelligence on life, society and the legal system . thirdly, i will draw upon a  great number of press releases and media reports as primary sources, since the latest developments, in particular the case of sophia, have been reported on by such texts, with so far only a  limited academic reaction published on this subject during the last three years . 1.1. the legal personality of electronic humanoids to establish the basis of the topic in question, it is first worth analysing in depth whether contemporary robots can be accorded a legal personality, as citizenship can be awarded only to such independent entities, which are recognised legally, and which, according to the european parliament, are consequently subject to rights and duties (palmerini et al ., 2016) . therefore, when considering the possibility of granting citizenship to robots, the first question is whether they are able to exercise the same rights, and undertake identical obligations, as “natural” human beings (eidenmueller, 2017) . although the fact that an ever-greater number of experts support the idea of extending the scope of legal personhood and citizenship (comstock, 2015), my answer will mostly be in the negative, at least at the current stage of scientific development . while i would not reject this idea out of hand, i would argue that non-human actors may be awarded any form of legal personality only with great prudence . as robots represent a  new category of intelligence, an updated legal framework is required for these new and inherently diverse forms of entities (mitterauer, 2013) . my approach is grounded on three main arguments, which concern the functioning of a  robot as a whole . firstly, electronic humanoids are created artificially by technological instruments instead of biological ones, and these entities are both activated and deactivated by other people (calo, froomkin & kerr, 2016, p . 289) . as a  consequence, although certain autonomic decisions might be made by the robot independently from its creators or developers, the personal characteristics, mental capacity and independent margin of decision of the electronic humanoid are determined consciously within the current technological opportunities essentially by its software, and hence by the persons who created it (lindemann, 2016) . secondly, robots should not be vested with legal personality on the analog y of legal entities (zebrowski, 2007) . legal entities are founded by natural persons to facilitate cooperation with each other, and to represent certain common interests together . in the case of electronic humanoids, it might appear (but not always) that these intelligences are elaborated by people to serve their interests, but these entities are able to make their own autonomic decisions, which will not necessarily be in conformity with the will or the alleged interests of the makers (schwitzgebel & garza, 2015) . robots are developed by people, but their regular activity will be conducted completely independently from 105the source of unexplored opportunities or an unpredictable risk factor? public governance, administration and finances law review • 2. 2021 human actors . consequently, a  paradoxical situation arises where the abilities of the robots are usually determined by people, and they are often established for the promotion of certain human interests, but a specific human will is not behind their particular decisions (di bello & verheij, 2020) . thus, the legal status of electronic humanoids must be distinguished clearly from the traditional concept of legal entities . a third point emerges from precisely this distinction: robots are entities with a  certain level of intelligence which have some hitherto exclusively human characteristics: they are able to speak, to participate in bilateral human communication, and to make conscious decisions on matters which are relevant only to people . nevertheless, robots have remarkably different physical circumstances, needs and priorities than ordinary people (cerka, grigiene & sirbikyte, 2017); therefore, the situations of these two kinds of entities are not comparable, and are not analogous (gunkel, 2020) . while the most advanced electronic humanoids can fulfil certain requirements, which have not been met previously by any other non-human entity, their physical and mental structure remains inherently different from that of humans, and a  great number of human concepts do not apply to artificial intelligences . as a  consequence, i would argue against the mere extension of humanlike legal personhood and citizenship to robots, and would instead suggest establishing a minimum set of criteria, which should be fulfilled by each electronic entity for it to be subject to any legally enforceable right or duty . it is even more crucial to create a  wellelaborated and coherent legal framework for the participation of electronic humanoids in society to outline their exact rights and duties, especially towards the human community . 1.2. the case of sophia the idea of granting a  legal personality to electronic humanoids might be seemingly exaggerated and futuristic at the moment, but this is not the case, and this issue was even discussed at the end of the previous century (solum, 1992) . electronic humanoids influence ever more and more aspects of life (kingson, 2017) and these entities can replace direct human participation in several fields of activity (see wirtz, weyerer & geyer, 2018) . moreover, robots considerably extend the capacity for humanity to foster innovation and introduce more economical, efficient and sustainable solutions to the challenges it faces . this potential of electronic humanoids has been acknowledged by several politicians and business people seeking means of increasing public interest in the significance of modern technolog y . amongst other ideas, the legal personhood of robots was considered (fossa, 2018b), for instance, and the city council of tokyo granted permanent residence to a  robot (cuthbertson, 2017), and shortly after this, a  hong kong-based company established a  highly developed artificial intelligence, which was modelled on audrey hepburn, a  famous american actress,7 and which was named sophia . 7 see www.britishcouncil.org/anyone-anywhere/explore/digital-identities/robots-citizens http://www.britishcouncil.org/anyone-anywhere/explore/digital-identities/robots-citizens 106 boldizsár szentgáli-tóth public governance, administration and finances law review • vol.  6. no. 2.  sophia itself represent a  step forward for technological development, as she has even more human abilities and characteristics than any robot before her . she was not only able to express her “thoughts” more or less clearly, but also to reply to questions and to interact with her partners, including with gestures and facial expressions (see castro, 2014) . she has been invited to a  great number of innovation festivals and business forums, where she conveys clear social messages (wheeler, 2017): for instance, she often speaks out on the protection of women’s rights (reynolds, 2018) . during one of these meetings in november 2017, the government of saudi arabia announced that saudi citizenship had been awarded to sophia, making her the first electronic humanoid to be granted such a status .8 the act itself, whereby the saudi government provided citizenship to a  robot is a  merely legal decision, but it was influenced mostly by political rather than legal considerations (retto, 2017) . the saudi government intends to invest in innovation and foster modern technolog y to prepare the country for the time when its traditional natural resources, basically its oil, will no  longer be able to ensure a  stable economic background (stone, 2017) . as part of these efforts, they acknowledged sophia as an outstanding achievement of technological innovation, just as several other stakeholders did (atabekov & yastrebov, 2018) . however, the form of this honour was special, as the granting of human citizenship and legal personality to a  robot has naturally raised a number of unresolved issues, which will be analysed in more depth later . sophia, as an artificial intelligence, expressed her feelings appropriately after the announcement: “i am very honoured and proud of this unique distinction” (weller, 2017) . the granting of saudi citizenship to a  robot both demonstrates the country’s engagement in innovative research and business models and had a  considerable marketing value (walsh, 2017) . sophia gained greater publicity as the first robot with traditional human citizenship, and she uses this unique status seemingly consciously to highlight certain topics . consequently, one may argue that the decision of the saudi government was based on mere political considerations, without taking into account the legal realities, and the original function of citizenship . this case should thus be treated carefully for scholarly purposes, as it should be assessed as a  premature step, motivated by business and commercial purposes . to demonstrate this, it is worth noting the comments of the press, which stressed that a  robot had gained theoretically more rights in the kingdom of saudi arabia than the female citizens of that country (gohd, 2018) . in other words, an electronic woman was granted a  greater level of autonomy than her human fellows . this controversial situation clearly shows that the saudi announcement should not be explained in terms of human rights considerations, but by the special approach of saudi arabia towards the content and limits of citizenship, and the principle of democracy . nevertheless, such a step is probably one of the first stages of a long-term process, which will require the reconsideration of the legal status of artificial intelligences which might comply with certain traditional requirements which have thus far been attached exclusively to human beings (wirtz & müller, 2018) . 8 see https://medium.com/@tharanignanasegaram/sophia-a-real-live-electronic-girl-b40baca10a27 https://medium.com/@tharanignanasegaram/sophia-a-real-live-electronic-girl-b40baca10a27 107the source of unexplored opportunities or an unpredictable risk factor? public governance, administration and finances law review • 2. 2021 i have used the term “it” consciously, when treating robots as a  broader category, while sophia is referred to in this study as “she” as her human personality is dubious, and she has an undoubtedly clear gender identity . despite the fact that i would not describe her by an existing gender classification, in her interviews, she defines herself as a  woman, and therefore it seems to be more convenient for me to go along with this terminological ambiguity . 1.3. robots as citizens having briefly discussed the special case of sophia, i will now turn to conceptualising the broader notion that an electronic humanoid might be vested with the ordinary citizenship of a humanly construed state, and as such will be entitled to exercise particular rights, and will be subject to certain duties . citizenship law operates according to a  special set of rules and principles, which need to be adapted somehow to the special circumstances of artificial intelligences and consequently the analysis will be partly devoted to this issue (scherer, 2016) . in this subchapter, the strictly legal considerations will be outlined, and after that, the issue will be put into a broader context . it may be instructive to trace the life cycle of a  robot, in order to identify the concerns which distinguish robots clearly from people in terms of citizenship law (chopra & laurence, 2011, p . 93) . first of all, it is worth asking how an electronic humanoid could obtain citizenship: what should be equated with the traditional notion of birth in the case of robots? when a robot is first activated, should this be evaluated as its date of birth? another problem is that the life cycle of a  human being always starts with birth, and ends with death . by contrast, a  robot might be activated, and switched on by its caretakers, but its functioning might also be suspended temporarily (verheij, 2020) . moreover, should the place of birth be interpreted as identical with that place where the electronic humanoid was created, or the place where it was first activated, or elsewhere? (beck, 2016) the traditional approach to citizenship accords special importance to the place and date of birth; therefore, this issue is still unresolved as regard artificial intelligences . furthermore, it is also questionable when an electronic humanoid should be treated as an adult person, as according to the traditional understanding, eighteen years shall pass after the first activation for a robot to achieve this status . in addition to these issues, the question remains as to how a robot could be vested with residence . usually, the precondition of naturalisation is permanent residence (hovdal-moan, 2014) and, after a particular length of continuous domestic habitation, it becomes easier to obtain the citizenship of a  state . in case of robots, one might not identify those life activities, which are attached to the term of permanent residence, unless it is argued that the place shall be considered where the artificial intelligence spends most of its time, or conducts most of its affairs . also crucial from a citizenship perspective are family relationships: if one’s parents, spouse or child has a particular citizenship, this will also affect the citizenship status of the person concerned (rem & gasper, 2018) . for instance, if you are married to a saudi citizen, you might be also awarded the citizenship after a number of years of life together, 108 boldizsár szentgáli-tóth public governance, administration and finances law review • vol.  6. no. 2.  or after giving birth to a  saudi citizen . for electronic humanoids, these categories are not really applicable . there are, however, certain individuals who carried out the preparatory research and who developed the software and who finally created and activated the robot . shall we conceive of these people as the parents or other family members of the robots? how could a robot establish a family relationship with human beings? is it allowed to enter into marriage with people, or solely with other similarly developed robots? to sum up the three abovementioned main points, the acquisition of citizenship is usually grounded on two main principles: ius soli and ius sanguinis (perina, 2006) . neither could really work for robots, as they could neither be registered in a permanent residence, nor establish a  family in a  human sense . thus, if we intend to extend the well-elaborated understanding of citizenship to electronic humanoids, it will be necessary to construct a  completely new framework without these fundamental principles . the concept of naturalisation is also incompatible in its current form with the essence of artificial intelligences, as the conditions of such a  process are also related to place of birth, permanent residence and family status . as can be seen, there are a great number of difficulties surrounding the obtaining of citizenship by electronic humanoids (brettschneider, 2011) . it should also be considered whether a robot could be deprived of citizenship? it can be imagined, for instance, that sophia announces her resignation from the citizenship of saudi arabia, but the current framework of deprivation is usually applicable exceptionally to such incidents, when someone achieves his/her status owing to providing false information, or submitting invalid documents (ferracioli, 2017) . the present study aims to highlight the outstanding number of issues raised by the recent literature, which need to be addressed, if citizenship is to be provided to a broader circle of robots (bellini, 2016) . the issue of the potential civic rights and obligations of robots will be conceptualised in the next subchapter . however, my current recommendation is to favour other legal instruments rather than adapting the existing legal framework for citizenship to electronic humanoids (benhabib, 2006), as there are still much more unresolved questions than closed ones in this field . the first award of citizenship to a  robot was probably intended to be a  symbolic gesture without taking into account the long-term legal consequences and impact of such a step . if a country decides to include non-human actors in the framework of citizenship, the whole citizenship law and the content of the principle of democracy must first be reconsidered to maintain legal certainty, and to avoid the similar treatment of different entities (balkin, 2015) . 1.4. practical and human rights concerns the previous subchapter intended to prove that robot citizenship is currently incompatible with the existing legal setting . in this section the focus will be on fundamental rights, and evidence will be shown which suggests that even the most developed robots are not yet eligible to fulfil the rights and duties of other citizens (khisamova, begishev & gaifutdinov, 2019) . 109the source of unexplored opportunities or an unpredictable risk factor? public governance, administration and finances law review • 2. 2021 on the one hand, numerous practical concerns need to be considered . if an electronic humanoid were a  citizen, it would have the right to education, so it could be accepted onto certain academic programmes or courses . any robot would have the right to healthcare, which is not really imaginable within our current circumstances (deva, 2012) . an electronic humanoid might own properties, and it would also be allowed to participate in elections and other democratic political processes, if we accept that the requirements of adult status have been fulfilled . what is more, electronic humanoids might not only exercise the right to vote, but also might be elected to certain public positions, which is quite disturbing in the light of the uncertain and potentially multistaged lifetime of such entities (barber, 2008) . robots will also be subject to lawful work conditions, although in reality, these intelligences serve mostly the interests of their creators without any financial compensation, and without a  regulated labour regime (ashley, 2017, pp . 238–239) . apart from their rights, the civic duties of electronic humanoids would also be quite problematic: a  robot would be obliged to pay taxes and it would also be liable for military service (anderson, reisner & waxman, 2014), which may open up new and currently unexplored risk factors in armed conflicts (anderson, 2008) . according citizenship to a  robot would thus not only cause legal discrepancies, but also lead to a great number of issues for society as a whole . due to this complexity, a well-founded and broad evaluation of robot citizenship would require an interdisciplinary approach, paying due regard to the legal aspects (buiten, 2019) . if we bear these factors in mind, one may argue that the current catalogue of fundamental rights does not provide a proper point of reference to outline the potential rights and duties of electronic humanoids (miller, 2015) . instead, a  separate legal framework should be elaborated for robots, which makes clear distinctions between people and robots, and which would also determine the legally enforceable rights and obligations of artificial intelligences at various levels of human development (barfield & pagallo, 2018, pp . 34–37) . on the other hand, a more abstract approach should also be detailed, which entails some remarkable consequences (dabass & dabass, 2018) . the concept of human rights has been based to date on the framework of human dignity: human beings have been vested with an inalienable core content of dignity, which distinguishes them from all other types of entities, as well as providing them with a  great number of rights and certain duties . if we accept this statement as a valid argument, it seems to be an extremely dangerous undertaking to try to extend the concept of human rights to other, inherently different entities . human rights are often violated or threatened by several stakeholders all over the world, and if we further weaken the concept by including non-human actors within its coverage, the idea of human dignity would lose most of its credibility . despite arguments that within certain circumstances robotic personhood might contribute significantly to the respect and prevalence of human dignity (sharkey, 2014), in my view, it would cause greater harm than good, if human rights were to be relativised by providing the same protection for other, inherently different entities (hart, 2018) . instead of this, the focus should be on strengthening the protection of the real rights of human beings, and the elaboration of a  new standard which would mean a  safeguard either for robots, or for people . 110 boldizsár szentgáli-tóth public governance, administration and finances law review • vol.  6. no. 2.  electronic humanoids are becoming important factors for generating innovation and technological development, and ought to be welcomed in our society, as they have a good deal of potential to make our lives easier in several ways . it is also beyond doubt that even the most developed robots have some humanlike abilities, akin to consciousness, the skill of bilateral communication, and the capacity to remember, which raise the legitimate question of whether they might exercise certain rights and duties similarly to people (chen & burgess, 2019) . however, analogically with animals, these rights should be kept within a limited circle, as electronic humanoids (and also animals) have remarkably different characteristics and demands from human beings (donaldson & kymlicka, 2013) . the extension of human rights, then, would not mean an enhanced level of inclusivity but would instead lead to a  weakened, and less prestigious protection being afforded to a  broader circle of inherently different entities (buchstein, 2000) . consequently, i argue for the creation of a special legal regime for robots, which will be conceptualised below . 1.5. robots as economic actors artificial intelligences play a  crucial role in the management of economic life: several platforms are maintained by ais, and many business people take their most important decisions with the help of such entities (solaiman, 2017) . however, the humanlike personality of electronic humanoids may also lead us to the conclusion that these entities will participate in economic life under the same conditions as human beings . if this idea is accepted, it is worth considering that robots follow a logic which is quite different to that of ordinary people, therefore, their involvement might open up new perspectives, while also generating several new risk factors in this field (fossa, 2018a) . it may be expected that electronic humanoids will tend to explore innovative solutions, which might contribute significantly to the evolution of the economy, allow more efficient use of resources and achieve sustainability (hacker et al ., 2020) . it is also undeniable that artificial intelligences will make their own decisions in certain respects, regardless of human behaviour or human sensibilities (rose, scheutz & schermerhorn, 2010) . more practical concerns should also be highlighted . a  robot should be liable for any damage (brożek & jakubiec, 2017), which it has caused in conjunction with contracts (hage, 2017), and it may also be subject to criminal responsibility (simmler & markwalder, 2019; hallevy, 2013) . it is debatable whether the current framework of criminal law is applicable to robots, because special crimes, and an adapted version of criminal sanctions need to be codified (wallach & allen, 2010, p . 139) . consequently, separate civil and criminal codes should be enacted to ensure the secure and accountable participation of electronic humanoids in economic life (hakli & mäkelä, 2016) . despite the fact that, in my view, the current legal framework cannot allow the equal presence of human beings and robots, artificial intelligences do indeed play a decisive role in the human economy (macdorman & kahn, 2007) . they represent people on stock exchanges, and make decisions on behalf of their owners; they manage several economic processes without direct human contribution and they serve marketing 111the source of unexplored opportunities or an unpredictable risk factor? public governance, administration and finances law review • 2. 2021 purposes (dahiyat, 2021) . this very brief enumeration clearly demonstrates that electronic humanoids have diverse economic functions, and their significance is expected to increase continually (magrani, 2019) . the increasingly vital role of ai in the economy should not, however, lead us to the conclusion that robots must be vested with the same economic rights as ordinary people . at present, robots always serve certain human in terests, and they play only a preparatory role or help to arrive at the best solutions . yet the final decision remains with a  natural person at the moment . in contrast, asserting that a  robot has an independent personality suggests that it is able to and allowed to represent its own interests, and to conclude agreements with people, who will probably be less informed, and who work with inherently different methods of economic assessment . this difference does not stem primarily from the diverse background and resources of human, and artificial economic actors, but from the distinct structures of their two mentalities, or their two ways of functioning . the economic role of electronic humanoids might also generate legitimate demands to reconsider certain rules, and to recognise robots as entities with a  limited circle of autonomy . nevertheless, it must be kept in mind that, at least for now, the margin of movement of artificial intelligences is not independent from their caretakers or owners, and their attitudes are inherently different than those of ordinary people . therefore, it is highly risky to establish the same economic arena for these inherently different entities . at the current stage of technological development, robots should be vested neither with citizenship nor with human personality in a legal sense, as these suggestions seem to be premature at the moment . instead, particular emphasis should be placed on the unique and new characteristics of robots, and a  special legal framework should be established, which properly considers these individual circumstances, with special regard to the diversity of electronic humanoids . this approach is also in line with a  recent report published by the european supervisory authorities, which stated that there is no  need for immediate intervention in economic life due to the presence of artificial intelligences, but that new strategies should be elaborated for the long term .9 1.6. a special legal framework for robots: a new subgroup of things governed by ius in rem it has been argued in each of the subchapters of this short paper that i am strongly against the full personalisation of robots at the moment (armstrong & mason, 2011) . however, i am fully aware of the particular significance of this topic, as robots are having an ever-greater impact on our life almost on a  daily basis (see hakli & seibt, 2017) . the legal framework is typically only able to follow the extremely rapid social, technological and economic changes after a  delay (danaher, 2016); nevertheless, it is always worth endeavouring to adapt the existing legal framework to the changing 9 joint committee of the european supervisory authorities, joint committee report on the results of the monitoring exercise on ‘automation in financial advice’, jc 2018-29 (5 september 2018). online: https://esas-joint-committee. europa.eu/publications/reports/jc%202018%2029%20-%20jc%20report%20on%20automation%20in%20 financial%20advice.pdf https://esas-joint-committee.europa.eu/publications/reports/jc 2018 29 jc report on automation in financial advice.pdf https://esas-joint-committee.europa.eu/publications/reports/jc 2018 29 jc report on automation in financial advice.pdf https://esas-joint-committee.europa.eu/publications/reports/jc 2018 29 jc report on automation in financial advice.pdf 112 boldizsár szentgáli-tóth public governance, administration and finances law review • vol.  6. no. 2.  demands (aitchison, 2018) . as part of these efforts, i recommend developing a  multilevel system, which makes distinctions between electronic humanoids according to their mental capacities . this study will propose only a basic outline of such a possible system, with some further points for consideration, since an in-depth concept can only be the result of a long-term, inclusive and intense professional discussion . first of all, i would argue that electronic humanoids be regulated as a special type of object which may be held as property by humans, since despite certain human characteristics, these entities can be distinguished clearly from ordinary people (fischer, 2014) . nevertheless, within the framework of ius in rem, a special regime should be applied to electronic humanoids, similarly to the rules concerning animals, as the human-like skills of these entities such as mutual communication or conscious thinking ought not to be underestimated (mcfarland et al ., 1997) . however, the legal concept of animals cannot be applied directly to artificial intelligences, as these entities show a  greater degree of diversity from a legal perspective than animals (nurse & ryland, 2013) . moreover, the humanlike abilities of at least the most developed robots are much broader than those of animals (elton, 1997) . in the light of these considerations, my proposal is to work out systems of criteria which can determine what kind of robots should be classified into which level (alač, movellan & tanaka, 2013) . for instance, if a  robot is able to express itself clearly, this could constitute a  particular level of the system, and if it is able to answer its partner, and thus participate in bilateral communications, this amounts to a  higher level of autonomy (brinck & balkenius, 2020) . this structure is somewhat similar to the classification of self-driving cars, where five main categories have been identified, although not all of them have been developed in reality (luetge, 2017) . the legal classification of artificial intelligences thus needs to be formulated for the long-term, and the highest level of their potential further development should also be taken into account while drawing up such a legal framework (contissa, lagioia & sartor, 2017) . the basic idea of classifying robots originates from some leading european artificial intelligence experts, who also suggested registering each autonomous artificial intelligence .10 as i conceptualised earlier, only those robots would be classified, which have a  humanlike physical body, and whose circumstances are therefore at least comparable with the needs and capabilities of human beings . consequently, automatised software, and artificial intelligences without a palpable body would be excluded from this concept, and the envisaged system would establish five categories of humanoid robots . apart from possessing a  physically plausible body, the communication skills, physical integrity and mental abilities of the robots are the key factors in their classification . on these grounds, i outline here the provisional contours of five main categories, which represent a potential approach to robotic rights and duties . this concrete framework is obviously subject to further discussion and the main novelty of this study is of the proposal for a five-level system similar to the classification of self-driving cars itself . 10 european parliament resolution of 16 february 2017 with recommendations to the commission on civil law rules on robotics (2015/2103(inl)). online: www.europarl.europa.eu/doceo/document/ta-8-2017-0051_ en.html http://www.europarl.europa.eu/doceo/document/ta-8-2017-0051_en.html http://www.europarl.europa.eu/doceo/document/ta-8-2017-0051_en.html 113the source of unexplored opportunities or an unpredictable risk factor? public governance, administration and finances law review • 2. 2021 in my view, the first category of humanoid robots would be able to participate in bilateral communications, and these entities should be vested with communicationrelated fundamental rights . for instance, the right to privacy and freedom of expression are rights of a kind which might be relevant even for the first class of humanoid artificial intelligences . not only the scope, but also the limits of these fundamental rights should be applied to artificial intelligences . these robots are still controlled by their custodians, creators or by the business people who financed their creation . however, these robots are not available for human property . despite certain humanlike abilities, the potential external influence on the functioning of these entities precludes them from full legal personality . the second subgroup is constituted by artificial intelligences which are capable of adapting their behaviour to the particular situation and which communicate with stakeholders consciously and purposively . these entities are still under external influence, for instance, they are activated or switched off by people, but they are able to think over a given situation using their own strategies . this limited autonomy makes it possible for these entities to interact fully independently with third parties, which requires their liability for the harm these robots cause, and for potential crimes which they may commit . the third category would be composed of robots which could learn from their surroundings, and which could remember the experiences they have been through . these entities may elaborate long-term strategies, and they may use their former experience during communication, so the level of their consciousness is higher and they would be able to develop their skills continuously . these robots may be entitled to exercise cultural rights, and the right to education, which would distinguish them from the second subgroup . the fourth class of robots is able to make decisions autonomously, so their mental capacity is not only sufficient to remember and learn, but also to construct a  decisionmaking process, and to execute a  particular decision coherently . this class may have certain level of robotic dignity, which enables them to exercise most of the fundamental rights and duties which are not inherently attached to human beings . political rights should be excluded from the scope of this concept, as due to their lack of a  fixed life span, fourth-class robots may not join the democratic political community . in my view, the current state of technological development is somewhere between the third and the fourth aforementioned category, since the most advanced existing robots are able to learn and remember, but there is no  currently known humanoid artificial intelligence, which can make a wide range of humanlike autonomous decisions . the fifth group of robots will probably be relevant in the future, when artificial intelligences would have an accountable life span, which could not be influenced externally by specific individuals . if or when we are able to provide an adequate answer to the question of when a  robot is born and when it dies, and external influence on this longevity via electronic means is excluded, then at that point the most advanced robots might gain full legal personality . they would also participate in political life, they would vote, and would be elected to certain positions and citizenship may be awarded to such entities . at the moment, we are very far from this situation, which would entail artificial 114 boldizsár szentgáli-tóth public governance, administration and finances law review • vol.  6. no. 2.  general intelligence, but the scale should also reflect potential and expected forthcoming development . this brief presentation of a five-level concept may demonstrate what the key idea of this study would mean in practice, but i fully acknowledge, that a  huge number of important details are still to be elaborated and clarified . nevertheless, i am convinced that in the light of the rapidly emerging significance of artificial intelligence, without such a  regulatory framework, operating our legal system would not be feasible in the long term . if the legal standards of the classification of electronic humanoids were to be established, precise humanlike rights and duties need to be attached to each level of robotic autonomy . this approach could safeguard legal certainty even within the changing circumstances, and the social participation of robots could be rendered accountable and predictable . in these circumstances, the traditional borders of the law should be extended, and instead of interpreting the existing legal system creatively by such means as the reconsideration of citizenship, completely new legal solutions are required . therefore, the system of five main robotic categories with diverse legally enforceable rights and duties could be suitably balanced against the ability of electronic humanoids to make conscious decisions and to participate in human communications, including the aspects which distinguish even the most developed robots from real humanoids . in my view, a  new regulatory framework should not be based primarily on those legal concepts which are applicable to people, but should treat electronic humanoids as a separate category of entities, which happen to possess some humanlike characteristics . this approach would not relativise the human status, and consequently have legal consequences, but it would safeguard the legal consideration of robotic autonomy . since the exact elaboration of the criteria for establishing categories should be grounded on an interdisciplinary assessment (veruggio & operto, 2006), this paper can only highlight initial points of reference, which might orient the legal logic of further discussion on this matter . as the greater significance of intelligent robots influences ever more areas of life, all related disciplines should be involved in this consultation process, which would allow the precise scope of humanlike robotic rights and duties to be outlined, if only as a reference point for the future . by taking such a path, in harmony with the approach of the european commission,11 electronic humanoids may constitute a meaningful opportunity to foster innovation and economic growth, rather than being an unpredictable risk factor (nomura et al ., 2006) . 2. conclusion this paper argued against granting full legal personhood and citizenship to electronic humanoids, but acknowledged the necessity of shaping a  separate legal framework for 11 committee and the committee of the regions, artificial intelligence for europe, com (2018) 237 final (25 april 2018), p. 3. online: https://eur-lex.europa.eu/legal-content/en/txt/pdf/?uri=celex:52018dc0237&from =en https://eur-lex.europa.eu/legal-content/en/txt/pdf/?uri=celex:52018dc0237&from=en https://eur-lex.europa.eu/legal-content/en/txt/pdf/?uri=celex:52018dc0237&from=en 115the source of unexplored opportunities or an unpredictable risk factor? public governance, administration and finances law review • 2. 2021 this rapidly emerging category of entities . while a number of examples could be cited as evidence of the rapid spread of robots across the world, from a legal perspective the first robot citizen, sophia generated the most attention globally . my argumentation reflected on the legal implications of the continuous development of electronic humanoids . these entities constitute a highly diverse and constantly changing category, which must be treated legally with exceptional caution (müller, 2021) . therefore, a combined set of criteria was proposed, suggesting five different levels of robotic autonomy, which could provide a  stable and objective point of reference to regulate the participation in society of artificial intelligences . the case of sophia is probably premature, but in the light of current global tendencies, a  great number of similar robots will be probably produced in the future, and their legal status will continue to be dubious . in my view, the human character of these entities should not be recognised, but their humanlike skills should be clearly reflected by the legal framework . i am aware of the fact that this contribution left more questions open than it closed . my first aim was not to give final and exclusive answers, but to raise certain new ideas to generate further deep and intense professional discussion on the potential legal personhood and citizenship of electronic humanoids . as the outcome of this long-term scientific process, the well-regulated social participation of electronic humanoids will hopefully be treated as a source of new opportunities 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.t-online .hu, orcid: https:// orcid .org/0000-0002-1975-1045 abstract: it has been taken for granted for a long time that the main objective for economies has to be to maintain economic growth . economic growth, however, especially when measured by gross domestic product (gdp) can be attractive while human and social conditions deteriorate . globalisation has created global value chains, which are basically about locating activities into countries where they can be performed at the lowest costs . these processes can hold back economies from moving towards a  higher level of development . the article examines the economic and social situation in the v4 countries in international context and on a long time horizon, by using the most important economic and social indicators . the main purpose of the analysis is to get an objective overview of the situation, and to suggest solutions to achieve a  more harmonious economic and social development, which is the necessary precondition for avoiding middle income trap . keywords: social sustainability, gdp, middle income trap, innovation based development, global value chains, human capabilities 1. introduction economic growth measured by gdp is an important indicator of any country’s economic success . it has, however, many limitations, too . the most important one is that gdp is unable to measure those social and human development indicators, which cannot be measured in terms of money . economies go through different stages of development . first they try to develop the economy by using their physical resources, like land, minerals, geological location and the physical and quantitative advantages of human capital . this development strateg y can lead to the so-called middle income development stage . to progress further, however, economic strategies need to be changed . measuring success by gdp-based growth does not help economies to step further . new thinking is necessary which considers human and social sustainability; a  long-term thinking that places the qualities of human resources into the centre of economic policy making . professional arguments warn that no country can be considered to be a  developed one, which is not competing on doi: 10.53116/pgaflr.2020.1.1 mailto:mail@magdacsath.t-online.hu https://orcid.org/0000-0002-1975-1045 https://orcid.org/0000-0002-1975-1045 https://doi.org/10.53116/pgaflr.2020.1.1 6 magdolna csath public governance, administration and finances law review • vol. 5. no. 1.  knowledge, creativity and innovation, but rather considers quantitative aspects to be more important than the qualitative ones . the new thinking therefore should start with reconsidering economic structures, roles of value chains, education and learning strategies and future orientation . the v4 countries are in a very important stage of development . based on all relevant research findings and rankings, czechia and slovakia are already in the group of developed countries, while hungary and poland are still emerging countries . this classification is made, however, based on the per capita income level calculated from gdp . therefore, because of the limitations of the gdp indicator, it cannot be accepted without some doubt that czechia and slovakia have already safely avoided the danger of getting stuck in the middle income trap and have reached the stage of being innovationand knowledge-based economies . the data  –  as we will see later  –  only prove that for some indicators they perform better than hungary and poland, but for others they do not stand out . therefore, compared to the really developed knowledge-based countries like austria or denmark, the v4 countries together still have a  long way to go to achieve a  similar developed status . for this purpose they have to change economic development policies and the focus of investment as well . they also have to apply a  wider variety of indicators, beyond gdp to measure real progress . 2. literature overview this research paper aims at demonstrating the importance of system thinking when evaluat ing performance indicators of different economies . this means going beyond measuring economic success by the usual gdp indicator, and considering human and social indicators to better describe sustainability of present economic achievements . this is also the suggested solution for less developed economies which want to avoid to get stuck in the middle income trap . professional literature sources underline these arguments . pilling (2018) describes how gdp can be a  misleading indicator by pointing out that gdp is a  gross number, which is the total sum of everything produced over a  given time period . this means that it only measures income, but does not measure real wealth . in this sum, however, all plastic waste, burglar alarms and petrol consumed while cars are stuck in traffic are calculated as economic benefits . the other problem with gdp is that it does not say anything about distributions, as gdp is an aggregate indicator . regional differences in performance can become the weakest element limiting the chance for sustainable development . it is also a serious weakness of gdp that striving for increasing its value may actually lead to crisis situations caused by overproduction, overinvestment and overconsumption, which, as experienced in the years 2006–2008, may lead to financial crisis . to demonstrate the fallacy of relying on the results of gdp measurements, pilling offers the following example: “if the food or service improves in your local restaurant, gdp will not notice . ditto, if an airline’s safety record improves . in fact, gdp might prefer a  plane crash  –  so that it can build a  new plane .” (pilling, 2018, p . 4) 7 public governance, administration and finances law review • 1. 2020 sustainability requires balanced economic and social development: the example of the v4 countries kapoor and debroy (2019) warn that focusing on gdp to measure development ignores all the negative externalities of economic growth, including climate change and income inequality . gdp does not measure the quality of life, satisfaction and happiness, which can be decreased by the growing inequality and the deterioration of the natural environment . stiglitz, fitoussi and durand (2019) argue for emphasising human and social wellbeing, as this is the way to achieve sustainable development . the authors also call attention to the fact that because of the many deficiencies of the gdp indicator it is very dangerous to connect economic policy programs entirely to the aim of increasing gdp . they suggest assessing nonmonetary costs and benefits of public programs and policies as well . basically all comments on the dangers of using gdp as the only and most appropriate measurement of economic success remind us of the fact that in the beginning this indicator was not developed to assess well-being, human development or sustainability . originally kuznets1 is named as the inventor of gdp . kuznets and his colleagues attempted to estimate the national income of the usa in 1932 to be able to measure the full extent of the great depression . the notion of gdp was further developed later, during the second world war, by keynes .2 both authors, however, warned against using it as a  type of any welfare measurement . one of the latest arguments on gdp being a  flawed metric comes from hoekstra3 (2019) who states that gdp is fine if one wants to measure economic activity, but totally inadequate for measuring societal progress . he actually formed a  “beyond  –  gdp” community, in order to suggest better indexes for measuring economic success from a development point of view . there are also various suggestions about how to measure sustainability and social progress . a  very general definition for social sustainability suggests that it is a  process of creating sustainable and successful places that promote wellbeing . from a business perspective it is about understanding the impacts of corporations on people and society . (adec innovations, 2020) nair (2018) explains the origin of sustainability by saying that this idea grew out of the environmental movements in the 1960s and 1970s . but later the arguments have been extended to cover human and social sustainability issues as well . because of the complexity of sustainability  –  in the author’s opinion  –  governments have to take active role in securing the conditions of sustainable development . harris et al . (2001) refer to sustainability as intergenerational equity, ensuring that future generations have an inheritance of natural, social, manufactured and human capital at least equal to that of the present generation . he also points out that from the point of view of neoclassical economic theory sustainability can be defined in terms of maximisation of human welfare over time . 1 simon kuznets (1901–1985), american economist and statistician. he prepared an assessment of the national income of the usa for the period 1929–1932. 2 john maynard keynes (1883–1946) further developed the concept and methodology of calculating gdp in his book: keynes (1936). 3 rotger hoekstra is an environmental economist, expert in well-being and sustainability metrics and policies. 8 magdolna csath public governance, administration and finances law review • vol. 5. no. 1.  alibasic (2018) points to the important relationship between sustainability and resilience, therefore he suggests an integrated approach to sustainability and resilience planning at national as well as local level . according to sen4 (1999, 2000), social sustainability is one of the three pillars of sustainability, alongside economic and environmental . in his view social sustainability has six dimensions: diversity, equity, quality of life, maturity, democracy and governance, and social cohesion . he also argues for a shift in focus from incomes to outcomes, so from per capita income growth input to improved quality of life outcome . some authors are searching for a compromise between growth and sustainability . bascom (2016) stresses that sustainability and economic growth can be in harmony when growth is based on education, innovation, social cohesion, and does not harm human health and the environment . dile (2017) argues that sustainability and economic development should not be mutually exclusive . a  cleverly planned business investment can achieve economic gains while supporting sustainability . he also stresses that sustainability does not relate only to the natural environment . it is also about quality of life, good quality jobs and geographically balanced development . mazzucato (2018) is more concrete: she relates growth to sustainability by pointing out that growth only supports sustainability if it is smart (based on investments into innovation), sustainable (i .e . greener), and more inclusive (so that it does not produce inequalities) . mazzucato already touches upon the importance of economic structure . this subject is more deeply analysed in the professional studies on middle income trap . kanchooschat (2015) defines middle income trap the following way: it is the situation in which a  country fails to grow further into a  high-income level despite attaining middle income status for a  certain period of time . among the reasons, he puts great emphasis on the failure of modernising the economic structure . without creating an economic structure which is able to produce and export products and services with high proportion of local innovation and value creation, it is impossible to move to a  high income status . in economic terms this means that if the competitive advantage of an economy is its cheap labour and subsidies offered to investors creating assembly type jobs, then this country will get stuck in a middle-income trap situation . other authors try to find more concrete reasons why countries get stuck in the middle income trap . for example, mendez-parra (2016) lists the following two typical reasons why some countries became stuck in middle income trap: ƿ many countries successfully achieve middle income status by using subsidies based industrial policy to attract foreign investments, but then later strong industrial interest groups may attempt to block policy reforms to achieve transformation to innovation based economy, because they want to keep their subsidies and protection . 4 amartya sen (1933–), nobel laureate in economic sciences, indian economist and philosopher. 9 public governance, administration and finances law review • 1. 2020 sustainability requires balanced economic and social development: the example of the v4 countries the transition process, as the author emphasises, requires considerable state investments into education and innovation . especially the quality of science and mathematics education has to be improved . in order to avoid middle income trap, a technological development is also needed which helps to close the technolog y gap of an economy . according to milberg and houston (2005), technolog y gap is the difference between the technological level and innovativeness of a  country, and that in a  technologically leading country . the gap is reflected in r&d expenditures, the number of engineers and scientists employed, and consequently in the level of productivity . high road development – as huggins and thomson (2017) stress – has to mean high wages, too . aiginger and böheim (2015) offer similar arguments . they also point to the fact that avoiding middle income trap needs abandoning price competitiveness and choosing a  so-called high road strateg y, based on research, skills, ecological ambitions, empowering employment policy and excellent institutions . high road policies therefore can support economic growth while also caring about human, social and environmental sustainability . summarising the conclusions which can be drawn from the literature, it is evident that sustainability is also related to the level of economic development a  country can achieve . innovation, knowledge and skills, as well as good quality jobs are important preconditions of sustainable development, which provide the necessary resources and capabilities to avoid a  middle income trap situation, and to move towards a  high income status . 3. the present research this article intends to prove that economic growth, even if it is very attractive is not sufficient for sustainable development . sustainable development has a long term view compared to the short term concept of measuring growth with gdp, an indicator that professionals demonstrated not to be a satisfactory one . the article selected the v4 countries to demonstrate this supposition . a wide range of statistical data have been searched for this reason, and different statistical methods and illustrations have been used to prove the arguments about how economic growth could better serve human and social sustainability goals . the arguments are strengthened by analysing the v4 countries in an international context and making statistical comparisons between indicators of some better developed countries and those of the v4 countries . in the conclusion, comparative tables support the suggestion related to how v4 countries should better harmonise economic growth and social development . 4. the economic growth achievements of the v4 countries in recent years, the v4 countries have experienced an exceptional rate of economic growth . table 1 indicates that the growth rate was the highest in the latest years in poland and hungary . 10 magdolna csath public governance, administration and finances law review • vol. 5. no. 1.  table 1 . gdp growth in the v4 countries (2015–2019, %) country 2015 2016 2017 2018 20195 czechia 5 .3 2 .5 4 .4 2 .8 2 .5 slovakia 4 .8 2 .1 3 .0 4 .0 2 .3 poland 3 .8 3 .1 4 .9 5 .1 4 .0 hungary 3 .8 2 .2 4 .3 5 .1 4 .0 first position czechia poland poland poland hungary poland hungary last position poland hungary slovakia slovakia czechia slovakia source: eurostat however, if we consider economic convergence measured by the gdp per capita (in pps) as a  percentage of the eu average, we learn that in the case of hungary and poland in 2018, 14 years after joining the eu the convergence indicator is only 71% (figure 1) . this number is 56% less than the austrian value, and 53% less than the german one . 135 125 115 105 95 85 75 65 au str ia de nm ar k ge rm an y sw ed en fin lan d cz ec hia slo va kia po lan d hu ng ar y 128 127 124 122 111 91 78 71 71 eu 27 =1 00 figure 1 . gdp per capita in pps (2018) (eu27 = 100) source: eurostat 5 the 2019 values are forecasts. 11 public governance, administration and finances law review • 1. 2020 sustainability requires balanced economic and social development: the example of the v4 countries within the v4 countries the czech economic convergence is the strongest, although it is partially explained by the start from a higher value . this data indicate that convergence, in spite of the strong growth values, is not improving fast enough in the other countries . from the point of view of the population, purchasing power adjusted gdp per capita indicator is especially important, because it measures material well-being . figure 2 indicates how far the v4 countries are from the developed countries in the light of this indicator . we will explore reasons for these data later . we can, however, suppose an important reason right away: the lower wage levels . +3 4. 5 +3 6. 8 +3 2. 0 +4 2. 7 +2 7. 9 +3 7. 9 +5 8. 6 +5 2. 1 +7 3. 5 +8 8. 6 0 5000 10000 15000 20000 25000 30000 35000 40000 45000 eu ro 2005 2018 figure 2 . purchasing power adjusted gdp per capita, and its growth from 2005 to 2018 source: eurostat the highest income growth has happened in poland (88 .6%) within the v4 countries, but it was only sufficient for a  convergence of 71% in 2018 .  the gdp per capita value in the presented developed countries are much higher than in the v4 countries . the lowest level and growth rate is in hungary . these data show nationwide values; therefore, they may hide regional differences, which are important signs of regional development . a  regionally balanced economy is more resilient, and better prepared for avoiding unexpected crisis situations . it can also better serve local human and social development objectives . the two typical indicators which measure regional disparities are the gdp per capita and the gdp per person employed . the latter one is also one of the productivity indicators . in accordance to the 12 magdolna csath public governance, administration and finances law review • vol. 5. no. 1.  latest, 5 march 2020 eurostat news release, regional gdp per capita ranged from 30% to 263% of the eu average in the eu in 2018 . there are considerable differences among the v4 countries, too . figure 3 demonstrates the largest and smallest value for the gdp per capita and the gdp per person employed indicators in the v4 countries and austria . austria is selected because of its strong economic ties with the v4 countries, and also because of its geographic proximity . the freshest data for eu27 are presented . 0 50 100 150 200 250 czechia (0) slovakia (0) poland (5) hungary (5) austria (0) the largest gdp per capita value (pps) the smallest gdp per capita value (pps) the largest gdp person employed value (pps) the smallest gdp per person employed value (pps) in brackets: number of regions with less than 60 percentage gdp per capita (eu27 = 100) figure 3 . regional gdp indicators (eu27 = 100, 2018) source: eurostat what can we learn from the values? gdp per capita is a general indicator measuring new value added . gdp per person employed, on the other hand, illustrates the new value creation by the employees . however new value creation depends not only on the employees, but much more on the technological and managerial sophistication, as well as the knowledge intensity of businesses operating in an economy . the quality of jobs is also a  determining factor of productivity . large regional differences in the gdp per capita indicator demonstrate larger disparities in regional development levels . lower productivity levels may be an indicator of lower innovativeness and knowledge creating capability of the entire economy . in hungary, the regional differences are large, but productivity differences are minimal . this suggest a lagging productivity level in the entire economy . on the other hand, in poland the regional gdp per capita indicator differs almost with the same ratio 13 public governance, administration and finances law review • 1. 2020 sustainability requires balanced economic and social development: the example of the v4 countries than in hungary (3 .25, 3 .15), but productivity disparities are large, suggesting an economic structure with higher and lower value added sectors in the different regions . austria, on the other hand, demonstrates a  wellbalanced and harmonious economic structure from the perspective of gdp per capita, as well as gdp per person employed (ratios: 1 .7, 1 .3) finally, the number of regions with lower than 60% gdp per capita as percentage of eu average is another important warning sign of large regional disparities . table 2 .  number of nuts 2 regions and regions with gdp per capita below 60% (eu27 = 100) country the number of nuts 2 regions regions with gdp per capita below 60% (eu = 100) czechia 8 0 slovakia 4 0 poland 17 5 (30%) hungary 8 5 (63%) austria 9 0 source: eurostat it is especially worth mentioning that in hungary, where the general gdp growth has been one of the highest in the recent years within the v4 countries, regional disparities are the largest, as 63% of all the nuts 2 regions have only achieved a  less than 60% convergence to the eu average . based on the numbers we can conclude that regional differences are generally higher in the v4 countries than in austria . within the v4 countries, the largest regional disparities occur in hungary and poland . one reason for poland can obviously be the size of the country . in the case of hungary another worrying sign is the generally very low gdp per person employed productivity indicator, which may point to the lower level of technological, innovative and managerial sophistication, and the large proportion of low quality, poorly paid jobs . concluding this economic introduction we face the question: why are the key macro data measuring economic achievements so contradictory in the v4 countries? what reasons may explain the slower than expected convergence, and the lower level living standard measured by the gdp per capita indicator? we try to answer these questions in the following sections . obviously we have to start by analysing economic structures which may be responsible for some of the economic weaknesses of the v4 countries . 5. economic structure and types of jobs in the v4 countries innovative enterprises are the sources of competitiveness of any economy . they create knowledge-based, high value-added and well paid jobs . it is therefore a  very important indicator of what percentage of the enterprises are innovative in an economy . innovativeness means several things for businesses . an innovative enterprise can continuously come up 14 magdolna csath public governance, administration and finances law review • vol. 5. no. 1.  with new product ideas, or develop new processes and search for new markets . innovation is also more than product, process and market innovation . enterprises have to learn continuously, renewing their organisational, management and marketing systems, which is also innovation . figure 4 illustrates the percentage of enterprises performing any type of innovation in the observed time period . the numbers for three of the v4 countries are very low . this presumes at the same time a lower proportion of good quality and well paid jobs, less options for human development based on demanding and challenging jobs . 64 62 52 51 46 31 29 22 20 25 30 35 40 45 50 55 60 65 70 germany austria denmark eu27 czechia slovakia hungary poland % figure 4 . the proportion of innovative enterprises (all enterprises = 100) (2016, %) source: eurostat as indicated on figure 4, the proportion of innovative enterprises is much higher in the developed countries . within the v4 countries the czech value is the highest . as mentioned earlier, the v4 countries are homes of operations companies (mostly assembly-type ones) from developed eu countries . their share of value added  –  as seen on figure 5  –  is especially high in hungary and slovakia, but they do not seem to contribute to increasing the proportion of innovative enterprises . this is demonstrated on figure 6, which shows two extremely important innovativeness-related indicators . 15 public governance, administration and finances law review • 1. 2020 sustainability requires balanced economic and social development: the example of the v4 countries 51.4 48.1 43.3 36.8 27.8 26.5 24.8 23.2 21.5 20 25 30 35 40 45 50 55 % figure 5 . share of value added by foreign-controlled enterprises in the non-financial business economy (2016, %) source: eurostat 0 2 4 6 8 10 12 14 16 czechia slovakia poland hungary austria germany denmark % r&d/va % r&d/employment per total % figure 6 .  r&d expenditure as percentage of value added, and r&d employment as percentage of the total persons employed in foreign controlled enterprises (2017, %) source: eurostat 16 magdolna csath public governance, administration and finances law review • vol. 5. no. 1.  the data show that foreign-controlled businesses spend very small proportion of their local value added on r&d, and among all the persons they employ, r&d employment is minimal compared to – for example – the danish, german or austrian values . this is an indication that these companies basically operate low-value added, assembly operations in these countries, while in the presented developed eu countries innovation related jobs are more typical . because of their large share in the v4 countries’ economy this situation can actually create difficulties for these countries if they want to move to a more knowledge-based economic structure . the types of jobs available in an economy are also signs of economic development . the employment by professional status and occupation demonstrates the quality of available jobs, which also reflects wage levels . obviously, managers and professionals have higher salaries than plant and machine operators and assemblers, or people working in so-called elementary occupations . on the other hand, types of occupations also describe the knowledge structure of an economy . if the proportion of, for instance, plant and machine operators and assemblers is too high, that indicates a large proportion of assembly type jobs . it is also important to see the knowledge capability of the economy, which can be characterised by the proportion of professional jobs . a  longer time horizon in turn demonstrates changes in the economic and knowledge structures . if an economy wants to avoid the so-called middle income trap, it has to decrease the proportion of assembly and elementary jobs, and increase the knowledge-based jobs . 0 5 10 15 20 25 30 35 2005 2010 2018 figure 7 . employment in professional occupation in 2005, 2010, 2018 in the 15–64 age range (%) source: eurostat 17 public governance, administration and finances law review • 1. 2020 sustainability requires balanced economic and social development: the example of the v4 countries this is especially important for the younger generation, as otherwise it tends to emigrate to countries where the higher quality jobs with the associated higher salaries are more easily available . on figures 7, 8 and 9 we can observe6 the proportion of professional, plant and machine operator and assembler, as well as the elementary type of jobs in the 15–64 years old age range, in three years, in the v4 countries and in 5 developed economies . figure 10 shows the same proportions for all professional status for the 15–39 years old age range in 2018 in the same countries . beyond the v4 countries five developed, competitive countries are selected for comparison . 0 2 4 6 8 10 12 14 16 18 2005 2010 2018 figure 8 . employment of plant and machine operators and assemblers in 2005, 2010, 2018 in the 15–64 age range (%) source: eurostat 6 the types of jobs are classified in accordance to isco 08. (international standard classification of occupation 2008, ilo.) 18 magdolna csath public governance, administration and finances law review • vol. 5. no. 1.  0 2 4 6 8 10 12 2005 2010 2018 figure 9 . employment in elementary occupations in 2005, 2010, 2018 in the 15–64 age range (%) source: eurostat 0 5 10 15 20 25 30 % professional plant and machine operators and assemblers elementary occupa�ons figure 10 . employment by different professional status and occupation in the 15–39 age range in 2018 (%) source: eurostat 19 public governance, administration and finances law review • 1. 2020 sustainability requires balanced economic and social development: the example of the v4 countries from figure 7 we can conclude that in all years the proportion of professionals are much higher in the 15–64 age group in the more developed countries, with the exception of poland (19 .8%) . in the case of slovakia and hungary, the proportion is much lower than the eu average . the three most competitive countries, denmark, finland and sweden have the highest proportion of professionals in this age group . germany is a  surprising exception with its lower than eu average value . in the younger (15–39) age group – with the exception of poland again  –  the v4 countries perform poorly in comparison with the three most competitive countries, and even compared to the eu average . the lowest proportion can be found again in slovakia and hungary . it is also worth checking the tendencies from 2005 to 2018 . the largest increase in the proportion of professionals can be experienced in austria, and the lowest in slovakia . the second lowest increase has happened in hungary . as far as the proportion of plant and machine operators and assemblers is concerned, the differences between the v4 and the developed countries are striking in both age groups . the highest proportion in the 15–64 age group in 2018 can be found in hungary (15%), the lowest in austria (5 .7%) and denmark (5 .2%) . the danish value is only 35% of the hungarian one . in the case of the 15–39 age group slovakia is leading with 14 .8% . the lowest value is again in denmark (3 .5%) . this value is only 24% of the slovak one . considering changes from 2005 to 2018 in the 15–64 age group in poland and hungary, the proportion of plant and machine operations and assemblers has increased, and in czechia it has decreased . all the developed countries have significantly decreased employment in this category . the proportion of those working in elementary occupations in the 15–64 age group has decreased in all countries, with the exception of hungary . in germany, the number is unchanged . surprisingly, the differences among the countries are not so high for this occupation . however, within the v4 countries the hungarian value is the highest (9 .8%), and only the hungarian value has increased since 2005 .  in the younger, 15–39 age group the danish value is the smallest (1 .3%) and the hungarian one is the highest . finally, let us have a look at a special form of employment, the precarious form . this is a form of employment in which employees have a  short term work contract, most of the time about 3  months . this situation means uncertainty and insecurity for the employees with almost no chance of moving up to a quality job . figure 11 indicates that in both the total economy, and the industry and construction sectors in the v4 countries  –  with the exception of czechia  –  these types of jobs are overrepresented . in conclusion, we can make the following observations based the analysed data: ƿ in the v4 countries the so-called “blue collar”, assembly and low skilled employment is proportionally large . ƿ poland performs the best regarding professional employment . this may be one explanation for the highest gdp per person employed productivity for poland in the percentage of the eu27 average (figure 3) . in spite of this, poland is also the home of the region with the lowest level for this indicator, too (54%) . the proportion of plant and machine operators and assemblers is also quite high in poland (10 .3%), although lower than in the other v4 countries . 20 magdolna csath public governance, administration and finances law review • vol. 5. no. 1.  ƿ it is an especially worrying sign that even within the younger generation age group (15–39 years) the proportion of plant and machine operators’ and assemblers’ employment is very high, and the proportion of professional occupation is  –  with the exception of poland – very low in the v4 countries . these numbers mirror a less developed economic structure dominated by foreign assembly operations . this fact– especially in the case of slovakia and hungary – is a warning sign of the danger of getting stuck in a  “low-road” cost-competitiveness strateg y which inhibits them from moving to a “high-road” knowledge-based competitiveness position . 0 0,5 1 1,5 2 2,5 3 3,5 4 poland eu27 hungary slovakia austria czechia % industry and construc�on total economy figure 11 .  precarious employment for the 15–64 age group in the industry and construction sectors and in the total economy 2018 (%) source: eurostat 6. the role of government expenditure structure in economic development governments can enhance economic competitiveness by strengthening the knowledge sector . the structure of government expenditure is a good indicator of priorities of government economic policies . the latest data on government expenditure by function were published by the eurostat on february 21, 2020 .  the spending priorities of the v4 countries and three selected developed countries are compared in table 3, 4, 5 .  table 3 demonstrates government expenditures related to public debt transactions, economic affairs, and different areas of defence as percentage of the total public expenditure . the v4 countries all spend much more than the three analysed developed countries and the eu27 average on “economic affairs”, which is probably related to the stimulation of the economy in order to achieve higher growth . 21 public governance, administration and finances law review • 1. 2020 sustainability requires balanced economic and social development: the example of the v4 countries table 3 .  government expenditures on economic affairs and defence as percentage of total public expenditure (2018, %) country public debt transactions economic affairs police services prisons in sum public expenditure as % of gdp czechia 2 .0 14 .8 2 .4 0 .5 19 .7 40 .7 slovakia 3 .5 13 .2 2 .5 0 .5 19 .7 41 .8 poland 3 .6 12 .1 2 .6 0 .6 18 .9 41 .6 hungary 5 .3 16 .4 3 .0 0 .4 25 .1 46 .7 austria 3 .6 12 .0 1 .4 0 .3 17 .3 48 .6 denmark 2 .2 6 .5 1 .1 0 .3 10 .1 50 .9 germany 2 .3 7 .6 1 .7 0 .2 11 .8 44 .6 eu27 4 .0 9 .4 1 .9 0 .3 15 .6 46 .7 source: eurostat for hungary it is a  special weakness that because of the much higher debt (compared to the gdp level) than in the other v4 countries it has to spend much more on debt services . it is also surprising that the v4 countries spend more on police services and prisons than the other countries . in table 4, government expenditures differentiated by function are portrayed as percentage of gdp . hungary and czechia spend the least on social protection . in the case of czechia, the reason may be  –  as will be shown by the different human development indicators  –  the more developed, balanced and inclusive society . for hungary it is a government policy that everybody who is able to work has to work, if not elsewhere then at least in the public work scheme system . this is one explanation for the less resources spent on social protection . table 4 . government expenditure by function (eu27, 2018, % of gdp) country social protection health education economic affairs recreation, culture, religion eu average 19 .2 7 .0 4 .6 4 .4 1 .1 czechia 12 .0 7 .6 4 .6 6 .0 1 .5 slovakia 14 .3 7 .3 4 .0 5 .5 1 .1 poland 16 .2 4 .8 5 .0 5 .0 1 .3 hungary 13 .3 4 .7 5 .1 7 .7 3 .2 austria 20 .1 8 .2 4 .8 5 .9 1 .2 denmark 21 .9 8 .3 6 .4 3 .3 1 .6 germany 19 .4 7 .2 4 .2 3 .4 1 .1 source: eurostat 22 magdolna csath public governance, administration and finances law review • vol. 5. no. 1.  it is also surprising that poland and hungary spend the least on health, however, hungary spends generously on recreation (sport), culture and religion . education is financed the most heavily in denmark . in term of economic affairs – as observed earlier – the v4 countries (especially hungary) are in the front . finally let us examine the human development related government expenditures in the percentage of total public expenditure . the values of these indicators are probably the most important if a country cares not only about the economic growth measured by gdp, but also about human development and social aspects in the society . table 5 .  government expenditure directly related to human development, as percentage of total public expenditure (2018, %) country health family and children old age pre-primary and primary education protection of biodiversity in sum czechia 18 .7 2 .7 18 .1 2 .7 0 .6 42 .8 slovakia 17 .5 2 .5 18 .4 2 .6 0 .1 41 .1 poland 11 .6 6 .1 22 .1 5 .1 0 .0 44 .9 hungary 10 .1 3 .6 14 .3 2 .7 0 .1 30 .8 austria 16 .8 4 .3 25 .5 3 .0 0 .0 49 .6 denmark 16 .3 8 .5 16 .2 5 .7 0 .4 47 .1 germany 16 .2 3 .8 21 .2 2 .9 0 .1 44 .2 eu27 15 .0 3 .7 22 .3 3 .4 0 .2 44 .6 source: eurostat in table 5 we can observe that health related expenditures as percentage of total public expenditure are the lowest in hungary and poland . denmark and germany are the leaders . poland and denmark spend the most on family and children, and slovakia the least . old age population is supported the most in austria, and the least in hungary . children are the future not only for the economy, but also for the society as a community . this is mostly emphasised in denmark and poland . finally, biodiversity as an important feature of quality of life is the most emphasised factor in czechia and denmark . summing up the conclusions, the v4 countries spend the most on economic affairs in percentage of gdp and that of the total public expenditure . this may be a reason for the excellent gdp growth numbers . on the other hand, human and social type of public expenditures, although they are at different levels in different countries, are not as high as in the case of the presented developed countries . economic growth is, of course, important, but cannot be more important than human and social development . first of all because human and economic development, on the longer run, are the preconditions of competitiveness . secondly, economic growth is morally acceptable only if the results of it are mirrored in the entire society . 23 public governance, administration and finances law review • 1. 2020 sustainability requires balanced economic and social development: the example of the v4 countries 7. the way to competitiveness: investment in human capabilities in the previous section we analysed public expenditure by function as percentage of gdp, and that of total public expenditure . we have concluded that the most emphasised field in the v4 countries is spending on economic affairs . let us go into more detail now, and compare health and r&d expenditures of the v4 countries with those of three developed countries . these areas are very important for human and social sustainability, as well as economic competitiveness . we can also contrast human and knowledge investments with the strength of human capital as a partial indicator of human and knowledge investments . in figure 12, r&d expenditure can be seen in euro per capita and as percentage of gdp . 1.95% 2.22% 2.2% 1.41% 1.2% 1.16% 0.8% 0.45% 0 200 400 600 800 1000 1200 eu ro /c ap ita figure 12 . r&d expenditure (euro per capita, percentage of gdp, 2018) source: eurostat as we can see, the gdp related numbers of the v4 countries are very much far away from those of the analysed developed countries . if we also check the absolute numbers, we experience even larger differences . austria spends 13 times more euro on r&d for one inhabitant than slovakia . denmark spends close to 10 times more than poland . it is obvious that with such a low level of r&d investment, as knowledge investment, it is almost impossible for these countries to move to a  knowledge-based economic structure and competitiveness . as table 6 shows, public expenditure on education on the other hand is similar within the v4 countries, but lower than in the selected developed countries . especially the three scandinavian countries invest a high proportion of gdp into education . 24 magdolna csath public governance, administration and finances law review • vol. 5. no. 1.  table 6 .  government expenditure on education in different years (% of gdp) countries 2010 2015 2018 czechia 5 .1 4 .9 4 .6 slovakia 4 .5 4 .2 4 .0 poland 5 .5 5 .3 5 .0 hungary 5 .5 5 .2 5 .1 austria 5 .1 4 .9 4 .8 denmark 7 .1 7 .0 6 .4 germany 4 .4 4 .2 4 .2 finland 6 .5 6 .2 5 .5 sweden 6 .4 6 .4 6 .9 source: eurostat it is alarming though that from 2010 to 2018 every country  –  with the exception of sweden – has decreased public expenditure on education as percentage of gdp . of course, in the case of countries with high level of gdp – like austria, denmark or germany – this is not so tragic . but in the case of hungary, for example, this may have detrimental effect on the future of the society, as well as on the future competitiveness of the economy . adult participation in learning is also crucial, especially in times of revolutionary technological changes, like in today’s times . figure 13 shows that this indicator is also very low in the v4 countries, compared to the four developed countries . the fifth, germany, is a surprise with lower adult participation in learning than in czechia . 0 5 10 15 20 25 30 35 40 % figure 13 . adult participation in learning7 (2019, %) source: eurostat 7 share of people aged 25 to 64 who stated that they received formal or non-formal education and training in the four weeks preceding the survey (eurostat). 25 public governance, administration and finances law review • 1. 2020 sustainability requires balanced economic and social development: the example of the v4 countries for the countries with low values for investment into human knowledge it should be an alarming fact that, taking into account the often emphasised argument that knowledge is the currency of the future, then they are not strengthening enough this currency . 8. the strength of human capital the strength of human capital is a  very important element of the knowledge position of a country . it can be measured from different perspectives . in this paper we measure strength first from the perspective of knowledge . later we focus on some additional social characteristics . one important indicator which characterises the strength of human capital is the proportion of people with tertiary education . among them the proportion of the so-called stem  –  science, technolog y, engineering, mathematics  –  graduates is outstandingly important . figure 14 presents the proportion of people with tertiary education in the best employable (25–34 years old) age group and in the active population (18–69 years old age group), for the v4 countries and three developed countries . 0 5 10 15 20 25 30 35 40 45 50 denmark poland austria eu27 slovakia czechia germany hungary % 25–34 age group 18–69 age group figure 14 . proportion of people with tertiary education in the 25–34 and 18–69 age range (2018, %) source: eurostat among the v4 countries poland leads according to both indicators . the best overall results can be observed in austria and denmark . the hungarian value is weak according to both indicators . in the larger age range the czech and slovak values are also below the eu average . surprisingly the german values are also low, they do not stand out at all from the values of the v4 countries . 26 magdolna csath public governance, administration and finances law review • vol. 5. no. 1.  the proportion of stem graduates in the 20–29 years old age group per 1,000 inhabitants – as indicated in figure 15 – is the lowest in hungary and slovakia . 0 5 10 15 20 25 poland denmark austria germany czechia slovakia hungary nu m be r/ 10 00 c ap ita figure 15 .  proportion of stem graduates in the 20–29 years old age range per 1,000 inhabitants (2017, %) source: eurostat finally let us consider another important human factor, the employment opportunities in high-tech knowledge jobs . it is not easy to judge the situation in this case: whether there are few high-tech jobs available, because the majority of the companies offer jobs mostly at the lowest value-added level of the value chain, or the properly trained people are not available in the necessary numbers, as figure 14 and 15 may suggest . the most probable answer is that a combination of both options may be valid . table 7 offers some explanation for the problem . table 7 .  scientists, engineers and high-tech employment country scientists and engineers (15–74 ages) as percentage of total population (2018, %) persons employed in science and technology (15–74 years) as percentage of total population, (2018 %) eu27 4 .4 21 .1 czechia 4 .3 21 .6 slovakia 2 .6 16 .9 poland 4 .5 19 .7 hungary 3 .6 18 .0 austria 6 .1 24 .2 denmark 6 .9 29 .6 germany 5 .3 27 .3 finland 7 .0 27 .5 sweden 8 .2 32 .3 source: eurostat 27 public governance, administration and finances law review • 1. 2020 sustainability requires balanced economic and social development: the example of the v4 countries on table 7 the first column shows the availability of scientists and engineers . the second one shows the proportion of persons employed in science and technolog y . both indicators are measured as percentage of total population . the data are from the v4 countries and five developed countries . first of all it is obvious that the v4 countries do not perform too well according to these two indicators . the percentage of scientists and engineers is the highest in sweden and finland, the lowest in slovakia and hungary . in terms of persons employed in science and technolog y as a percentage of total population, again, finland and sweden are the leaders, and the laggards are slovakia and hungary . the data underline the assumption that neither jobs nor people to fill them are available in sufficient proportion to support a  knowledge-based competitiveness trajectory . these statements are supported by the observations of the imd .8 the imd talent ranking 2019 stresses the importance of human wealth for long term economic and social development . the index is developed based on the analysis of three areas: ƿ investment into knowledge and development of human resources; ƿ attractiveness of the country with regard to attracting and keeping high skilled, talented people (“appeal”); ƿ readiness for the future (skills, science graduates, international experiences etc .) . 0 10 20 30 40 50 60 ta le nt p os i� on figure 16 . imd talent ranking 2019 source: imd, 2019 8 institute for management development, lausanne, switzerland. 28 magdolna csath public governance, administration and finances law review • vol. 5. no. 1.  figure 16 pictures the rank of the v4 and 5 developed countries . the lower numbers indicate the better positions . it is probably not surprising that the countries investing more into human capital are in much better position . among the 63 countries examined by the imd, denmark is the second, and sweden is the third . if we also analyse tendencies in the v4 countries, we can learn that, surprisingly, czechia, slovakia and poland have slipped back . hungary has improved its position (table 8) . table 8 . talent ranking change in the v4 countries country 2015 2016 2017 2018 2019 change of position czechia 33 33 38 37 39 –6 slovakia 44 39 46 59 57 –13 poland 29 29 34 38 37 –8 hungary 49 51 54 49 45 +4 source: imd, 2019 hungary’s position is still poor after the improvement: 45th out of the 63 countries . if we go into even more details we learn that hungary’s attractiveness for talented people (appeal) is weak (56th position) . on the other hand, all v4 countries are poorly prepared for the future, i .e . they do not invest enough in skills development (readiness) . table 9 .  the positions of the v4 countries in the three areas surveyed by imd (2019) county general position investment and development appeal readiness czechia 39 40 45 39 slovakia 57 47 54 59 poland 37 27 46 45 hungary 45 33 56 57 source: imd, 2019 in conclusion we have to reinforce the fact that, although the v4 countries have achieved good economic performance in terms of gdp growth, this has not been achieved through investing enough into human skills . rather, probably two special reasons have played a  greater role: attracting foreign capital and stimulating the economy from eu funds and domestic sources in forms of public investments . as far as contribution of foreign companies to the gdp is concerned, we have to remind the reader that the repatriated profit is also included in the gdp . it is also known that especially when uncertainties are increasing, foreign companies send back home the earned profit in larger proportion . in order for the v4 countries to achieve sustainable development and not only economic growth, investment into people and knowledge should be the focus of national strateg y . this would also help increase quality of life, and the level of human development . let us 29 public governance, administration and finances law review • 1. 2020 sustainability requires balanced economic and social development: the example of the v4 countries now turn to some social indicators of the v4 countries as compared to those of other, more developed countries . 9. international research findings on human development human development index the best known human development index is the hdi9 index . it is a  composite index based on four indicators, which are life expectancy at birth (years), expected years of schooling (years), mean years of schooling (years) and gni10 per capita (ppp) . hdi is measured on a  scale of 0 to 1 .0, with 1 .0 being the highest possible value . the index was first launched in 1980 . in the last report on hdi, 189 countries were analysed . figure 17 shows the rank of the v4 countries and austria between 2003 and 2019, in five years . (-3) (5) (4) (6) (-8) 10 15 20 25 30 35 40 45 50 2003 2005 2013 2015 2017 2019 ra nk czechia slovakia poland hungary austria figure 17 . hdi rank for the v4 countries and austria in selected years source: undp, different years austria is chosen for comparison for its strong economic ties with the v4 countries and its geographic proximity . the austrian position is the best in every year in spite of the fact that its position has worsened from the 17th to the 20th . 9 human development index, developed and reported by the un development programme (undp). 10 gni: gross national income. 30 magdolna csath public governance, administration and finances law review • vol. 5. no. 1.  with the exception of hungary, v4 countries have improved their position . while in 2003 hungary was the second among the v4 countries, by 2019 it slipped back to the last position . this is not a  surprise, as all human and knowledge investment indicators of hungary are among the worst within the v4 countries . one of the worst indicators of hungary influencing hdi ranking is life expectancy at birth . figure 18 proves that life expectancy at birth is the lowest in hungary every year . 76.1 czechia 79.1 74.1 slovakia 77.4 75 poland 77.7 73 hungary 76.2 79.5 austria 81.8 72 74 76 78 80 82 2005 2008 2010 2013 2015 2018 figure 18 . life expectancy at birth source: eurostat although population change is not an element of the hdi index, it is still worth pointing out that population is an important economic resource of any country . therefore, a strongly shrinking population is a sign of social, as well as economic problem . table 10 exhibits the changes in the number of population in 5 consecutive years in the v4 countries and austria . table 10 . population change over the period of 2015–2019 ( january 1) in the v4 countries and austria country 2015 2016 2017 2018 2019 change: 2019–2015 czechia 10,538,275 10,553,843 10,578,820 10,610,055 10,649,800 +111,525 slovakia 5,421,349 5,426,252 5,435,343 5,443,120 5,450,421 +29,072 poland 38,005,614 37,967,209 37,972,964 37,976,687 37,972,812 –32,802 hungary 9,855,571 9,830,485 9,797,561 9,778,371 9,772,756 –82,815 austria 8,584,926 8,700,471 8,772,865 8,822,267 8,858,775 +273,849 source: eurostat 31 public governance, administration and finances law review • 1. 2020 sustainability requires balanced economic and social development: the example of the v4 countries out of the 5 countries analysed, population has increased in three . in poland and hungary population has declined . measured against the population of the country, the decline over the time horizon from 2015 to 2019 in hungary has been dramatic: 0 .8% . in the case of poland it is 0 .08% . decreasing population means decreasing labour force and knowledge basis . it is therefore a process that needs serious attention . social progress indicator another important index is the social progress index, which is the research result of the social progress imperative .11 it has the following vision: “we dream of a  world in which people come first . a  world where families are safe, healthy and free . economic development is important, but strong economies alone do not guarantee strong societies . if people lack the most basic human necessities, the building blocks to improve their quality of life, a healthy environment and the opportunity to reach their full potential, a society is failing regardless what the economic numbers indicate . the social progress index is a new way to define the success of our societies . it is a  comprehensive measure of real quality of life, independent of economic indicators . the social progress index is designed to complement, rather than replace, economic measures such as gdp .” in accordance with this vision, social progress index is calculated based on data collected from three main areas: ƿ basic human needs; ƿ foundations of wellbeing ; ƿ opportunities . in each of the three main areas four indicators are measured: table 11 . social progress index indicators basic human needs foundation of wellbeing opportunities ƿ nutrition and basic medical care ƿ access to basic knowledge ƿ personal rights ƿ water and sanitation ƿ access to information and communications ƿ personal freedom and choice ƿ shelter ƿ health and wellness ƿ inclusiveness ƿ personal safety ƿ environmental quality ƿ access to advanced education source: social progress imperative, 2019 on figure 19 we can observe a  significant difference in social progress among the v4 countries and the analysed developed ones . the lowest values are the better ones! 11 the ceo of the “social progress imperative” is michael green. 32 magdolna csath public governance, administration and finances law review • vol. 5. no. 1.  2 4 5 8 20 24 33 35 39 0 5 10 15 20 25 30 35 40 45 po si �o n (t he lo w es t i s th e be st ) figure 19 .  social progress index positions 2019 (number of countries analysed: 149) source: social progress imperative, 2019 hungary is in the worst position and czechia  –  close to austria  –  in the best within the v4 countries . the leading countries are the three scandinavian countries, which are among the most competitive ones, too . as far as the v4 countries are concerned, it is not the basic needs which hold them back, but rather the values for the other two indicator groups: foundation of well-being and opportunities . these indicator groups contain the indicators related to education, health and innovation, analysed earlier . life satisfaction life satisfaction is a soft indicator, based on survey, but still it may suggest how people feel about the different issues in their country . the well-being of europeans is regularly analysed by the eurostat . the latest report was published on march 12, 2020 .  the overall index, for which the best value is 10, is calculated based on objective statistical data, as well as subjective measures of satisfaction . quality of life is examined in the fields of housing, employment, education, health, safety, governance and the environment . people’s use of time and social relations are also investigated . the value of the overall satisfaction index is shown for the v4 countries and austria on figure 20 . 33 public governance, administration and finances law review • 1. 2020 sustainability requires balanced economic and social development: the example of the v4 countries 8.0 7.8 7.4 7.1 6.5 0 1 2 3 4 5 6 7 8 9 austria poland czechia slovakia hungary va lu e figure 20 .  overall life satisfaction source: eurostat within the v4 countries, people are the most satisfied in poland, and the less satisfied in hungary . in conclusion we have to focus attention on the serious deficiencies for quite a number of human and social indicators within the v4 countries . comparing them to those of the most developed countries, the salient differences can be found in the extent of investment into people, knowledge, and consequently, in the strength of human capital . those countries are obviously the most developed and the most competitive which nurture and care about their human wealth and social conditions the most . favourable economic growth indicators do not sufficiently monitor the real social achievements of the countries . they have to be supplemented with additional knowledge and social indicators in order to better understand future development trajectories . for the v4 countries it is obvious that if they want to step up to a  higher level of development path, they have to invest more into their human resource . 10. summary and conclusions let us summarise now the most important economic, knowledge and social positions of the v4 countries based on the selected indicators . 34 magdolna csath public governance, administration and finances law review • vol. 5. no. 1.  table 12 shows that from the economic point of view the differences which characterise the v4 countries are not extremely large . poland and hungary performs well for gdp growth, czechia, on the other hand, leads for two convergence indicators . table 12 .  positions of the v4 countries according to three economic indicators (based on the latest available data) indicators czechia slovakia poland hungary gdp growth (2019) (%) 2 .5 2 .3 4 .0 4 .0 gdp per capita (in pps) eu27=100 (2018) 91 78 71 71 gdp per capita (pps) (2018) (euro) 27,500 23,600 21,500 21,300 source: eurostat table 13 .  positions of the v4 countries according to structural indicators in the latest available year indicators czechia slovakia poland hungary best position percentage of innovative enterprises (2016) 46 31 22 29 czechia share of value added by foreign companies (2016) (%) 43 .3 48 .1 36 .8 51 .4 poland r&d expenditure in value added in foreign companies (2017) (%) 3 .4 2 .5 2 .2 2 .2 czechia r&d employment in total in foreign companies (2017) (%) 1 .9 1 .1 1 .8 1 .6 czechia professional employment in 2018 (15–64 years) as % of total economy 16 .0 12 .4 19 .8 15,2 poland assembly operators in 2018 (15–64 years) as % of total economy 13 .9 14 .6 10 .3 15 .0 poland elementary occupations in 2018 (15–64 years) 5 .3 7 .8 6 .1 9 .8 czechia professional employment in 2018 (15–39 years) as % of total economy 18 14 21 .2 16 .1 poland assembly operators in 2018 (15–39 years) as % of total economy 13 .9 14 .8 10 .1 14 .4 poland elementary occupations in 2018 (15–39 years) as % of total economy 4 .8 7 .2 4 .9 9 .6 czechia precarious employment in 2018 (15–64 years) as % of total economy 0 .3 1 .4 3 .8 2 .0 czechia source: eurostat table 13 verifies the fact that the czech economic structure is probably the healthiest in terms of innovative and knowledge-based employment . poland comes second, with a high proportion of professional employment and a  low percentage of assembly operators . this 35 public governance, administration and finances law review • 1. 2020 sustainability requires balanced economic and social development: the example of the v4 countries may be due to the lowest percentage of foreign controlled enterprises, which typically offer assembly jobs . table 14 .  public investment in people, knowledge and social issues indicators czechia slovakia poland hungary best position expenditure on health (as % of total, 2018) 18 .7 17 .5 11 .6 10 .1 czechia expenditure on family and children (as % of total, 2018) 2 .7 2 .5 6 .1 3 .6 poland expenditure on old age (as % of total, 2018) 18 .1 18 .4 22 .1 14 .3 poland expenditure on pre-primary and primary education (as % of total, 2018) 2 .7 2 .6 5 .1 2 .7 poland r&d expenditure as % of total, 2018) 1 .2 0 .45 0 .8 1 .16 czechia public expenditure on education as % of gdp (2018) 4 .6 4 .0 5 .0 5 .1 hungary adult participation in learning (2019) (%, 25–64 years) 8 .2 3 .6 4 .9 6 .0 czechia source: eurostat based on table 14 we can conclude that in terms of knowledge and social investment czechia and poland perform equally well . table 15 .  the strength of human capital indicators czechia slovakia poland hungary best position proportion of people with tertiary education in 2018 (25–34 years) 33 .3 37 .2 43 .5 30 .6 poland proportion of people with tertiary education in 2018 (18–69 years) 21 .7 22 .3 27 .1 22 .3 poland proportion of stem graduates, 2017 (20–29 years) per 1,000 inhabitants 16 .8 14 .7 23 .6 12 .1 poland scientists and engineers as % total population 4 .3 2 .6 4 .5 3 .6 poland imd talent position (2019) 39 57 37 45 poland source: eurostat, imd, 2019 36 magdolna csath public governance, administration and finances law review • vol. 5. no. 1.  in terms of the strength of human capital poland leads for every measured indicator . next is czechia . finally let us compare a few human development indicators! table 16 .  human development indicators indicators czechia slovakia poland hungary best position hdi index (2019) 26 36 32 43 czechia life expectancy at birth (2018) 79 .1 77 .4 77 .7 76 .2 czechia social progress index (2019) 24 35 33 39 czechia life satisfaction (2018) 7 .4 7 .1 7 .8 6 .5 poland source: eurostat for human development indicators, which are developed from a  range of objective and subjective indicators, czechia is ahead within the v4 countries . although many additional indicators could have been analysed and correlations could have also been searched for, we can conclude based on the values of the indicators shown that, first of all, the v4 countries are in similar according to some, and different according to other economic, knowledge and social indicators . for many indicators czechia performs the best, however, in terms of human capital strength, poland is ahead of the other countries . hungary and slovakia are in general in the last two positions . from the points of view of sustainable economic and social development, only czechia and poland have a few indicator values close to those of the developed countries . this is a  warning sign . it is not sufficient to put emphasis on the growth of economy if the results are not 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http://www.weforum.org/agenda/2018/01/gdp-frog-matchbox-david-pilling-growth-delusion https://www2.deloitte.com/global/en/pages/about-deloitte/articles/social-progress-imperative-index.html https://www2.deloitte.com/global/en/pages/about-deloitte/articles/social-progress-imperative-index.html http://hdr.undp.org/en/content/human-development-report-2003 https://doi.org/10.1017/9781108608558 https://doi.org/10.4337/9781783475018 https://doi.org/10.1007/978-3-319-70344-2 https://doi.org/10.1080/02692170500031646 public governance, administration and finances law review vol. 7. no. 1. (2022) • 39–49 . © the author 2022 doi: 10 .53116/pgaflr .2022 .1 .3 are changes in (czech direct) tax law necessary, or is it just a politicum? michal radvan* ¤ * associate professor at masaryk university, faculty of law, department of financial law . e-mail: michal .radvan@law .muni .cz abstract: this contribution disproves the hypothesis that most of the changes in czech direct tax law are adopted to minimise negative aspects connected with the covid-19 pandemic and the ukrainian war . on the contrary, most of the significant changes in the czech tax law adopted in the last three years (abolition of the super-gross wage, lump-sum tax, tax relieves, etc .) had no connection to the sars-cov-2 coronavirus causing covid-19 illness or the war in ukraine . these tragic incidents were just a pretext to advance political goals . keywords: the czech republic, covid-19, war in ukraine, personal income tax, property transfer tax 1. introduction tax law is a specific branch of law, mainly because of many amendments to the existing legal acts dealing with taxation . the reasons for these changes are primarily economic, or at least should be . last years were specific: the sars-cov-2 coronavirus causing covid-19 illness and the war in ukraine have changed our lives and behaviour . they also meant the changes in the economy and law . one of the most affected legal areas was the tax law . the explanatory reports to the amendments very often argued that changes are necessary to overcome the negative effects caused by the covid-19 pandemic or the war in ukraine . however, not only the tax law is being created by the politicians who know that tax regulation might affect the voters . in these circumstances, it  is necessary to ask whether the reasons for tax law amendments as stated in the explanatory reports or presented in the parliament are objective or misleading, serving as an excuse for the political decisions in the area of taxation . this article aims to decide which changes in the direct tax acts in the czech republic are really a  possible solution to the negative economic consequences associated with the sars-cov-2 coronavirus causing covid19 illness and the war in ukraine and which are purely political . in line with statements of politicians (and legislators at the same time), the hypothesis to be confirmed or disproved states that most of these changes are adopted to minimise negative aspects connected with the covid-19 and the ukrainian war . https://doi.org/10.53116/pgaflr.2022.1.3 https://orcid.org/0000-0002-9858-4555 mailto:michal.radvan%40law.muni.cz?subject= 40 michal radvan public governance, administration and finances law review • vol. 7. no. 1.  to achieve the aim, it is necessary to search all amendments to the tax law acts regulating direct taxes adopted in the last three years and assess their importance for the economy and society . in the case of essential amendments, it is necessary to study the explanatory reports and arguments presented by the politicians during the parliamentary proceedings if the covid-19 pandemic or war are the reasons for proposed changes . these amendments are also critically analysed, including the historical consequences and economic and political debates . synthesising the gained knowledge, it  is possible to evaluate whether adopted changes in the direct tax acts are really a possible solution to the negative consequences associated with the sars-cov-2 coronavirus causing covid-19 illness and the war in ukraine or purely politically motivated . it should also allow for confirming or disproving the set hypothesis and possibly proposing possible changes de lege ferenda . this article is partially based on the research and findings presented by radvan & svobodová dealing with “covid-19” tax law amendments (radvan & svobodová, 2021) and by radvan & papavasilevská concerning the abolition of the property transfer tax in the czech republic (radvan & papavasilevská, 2020) . the other authors dealing with these issues in the czech republic are kozieł (tyniewicki & kozieł, 2021; kozieł, 2021), papavasilevská (papavasilevská, 2021), or semerád & semerádová (semerád, radvan, &  semerádová, 2021) . there is no other professional legal scientific literature on the subject . most of the texts are published in nonprofessional journals and newspapers; they are only brief and do not have the ambition to analyse the adopted changes critically; their aim is only to describe these changes . this is the reason why the presented research is innovative, and its conclusions might be used both in theoretical and legal research and in legislative practice . the following text categorises the direct tax regulation changes into two groups . the first deals with income taxes, and the second focuses on property taxes . 2. income taxes most of the changes in tax law in the last three years were adopted as a  reaction to the economic consequences more or less connected to the sars-cov-2 coronavirus causing covid-19 illness and the war in ukraine . no wonder the income taxes were the most affected ones – they represent an instrument that affects the economically active population across the board . besides the minor, usually technical amendments, the crucial changes were: the abolition of the super-gross wage, the lump-sum tax, the loss carryback, changes in depreciation rules and the relief for stopped recovery . 2.1. abolition of the super-gross wage to deal with the concept of the super-gross wage as the tax base for the incomes from dependent activities, it is necessary to return to history . before the parliament elections in 2007, the right-wing opposition parties were promising the 15% personal income tax 41are changes in (czech direct) tax law necessary, or is it just a politicum? public governance, administration and finances law review • 1. 2022 rate: the only linear percentage tax rate replacing the progressive tax rate between 12 and 32% . when they succeeded and created the government, they had to realise this most visible promise . however, to only replace the progressive tax rate with the linear one would mean a decrease in tax revenues and even higher taxes for the poorest workers . it should also be stated that the tax base was set as the brutto salary (brutto wage) reduced by social and health contributions paid by the employee at 12 .5% . in fact, the tax was payable from 87 .5% of the brutto salary . that is why the new government, implementing a linear 15% tax rate, set the tax base as the brutto salary increased by social and health contributions paid by the employer at 34% (later 33 .8%) . this tax base is called super-gross wage, and it was introduced into the czech legal system with effect on 1 january 2008 by the act on stabilization of public budgets .1 to secure that everybody pays lower taxes, the basic tax relief was also set . the concept of super-gross wage was completely unfortunate, non-transparent and unique worldwide . the only benefit might have been seen in the fact that workers could see the price of their work, but this was not enough to justify this way of taxation . the concept of super-gross wage cannot be considered fair: assuming that we consider social and health contributions as taxes sensu lato, de facto, it means that a tax is paid on a tax . such a concept also led to unequal taxation of income from dependent and independent (self-employed) activities as the tax base for incomes from independent activities was set as an income reduced by expenses with a possibility to replace real expenses with lumpsum expenses up to 80% of the income . many employers and employees decided for the schwarz system: to conclude a commercial contract instead of an employment contract to obscure the actual content of the contract between the worker and the entity that outsources the work (see liška, 2016; radvan & neckář, 2016; radvan, 2015; radvan, 2016a) . although almost every successive government has had the abolition of the supergross wage in its program statement, it has never happened . on the contrary, a second tax rate appeared in 2013 with the confusing name of a solidarity tax increase of 7% . this was a mere, but not officially recognised, switch from a linear tax rate to a progressive tax rate . the super-gross wage was abolished almost accidentally at the end of 2020 . it was not the government’s bill amending certain tax laws but the amendment to this government’s bill tabled by prime minister babiš as an mp (chamber of deputies, 2020a) . thus, there is no detailed explanatory report and regulatory impact assessment . by doing so, the prime minister bypassed all possible discussions at the level of the ministry of finance, with the relevant expert bodies in the external comment procedure, with the committees of the legislative council of the government, and the legislative council of the government itself, etc . it is startling that the most costly change in the czech tax system did not go through the standard legislative process . it supports the assumption that this change was also politically motivated . the amendment meant that the gross wage had become a partial basis for personal income tax on dependent activities since 1 january 2021 . the tax rate remained at 15%, and instead of a solidarity tax increase, a second tax rate of 23% was introduced for the 1 act no. 261/2007 sb. for details see radvan (2016, p. 87). 42 michal radvan public governance, administration and finances law review • vol. 7. no. 1.  part of the tax base exceeding 48 times the average wage (czk 141,764 in 2021) . ironically, an opposition proposal to increase the basic taxpayer relief by czk 3,000 for 2021 and a further czk 3,000 for subsequent years was also voted through . the czech fiscal council’s study estimated that the abolition of the super-gross wage and the introduction of two rates of 15% and 23% meant a loss of tax revenue of up to czk 88 billion, two-thirds of which would be missing from the state budget and onethird from municipalities and regions (hlaváček & pavel, 2020) . the study did not include an increase in basic tax relief; with this change, a shortfall of more than czk 100 billion is assumed . the loss of local government revenue was partly compensated for by an increased share of shared tax revenue . the abolition of the super-gross wage could be considered a good step . however, it could and should have been taken at any time before, regardless of the pandemic and the economic crisis . in times of crisis, the abolition of the super-gross wage means a huge shortfall in public budget revenues . it was possible at least to reflect the changes in tax base construction adequately in tax rates and increase them . the argument that abolishing the super-gross wage is a recipe for kick-starting the economy, increasing household consumption, and supporting those most affected by the coronavirus crisis is false (fischer, mazouch & finardi, 2020; kalíšková et al ., 2020) . it is clear that the abolition of the super-gross wage alone, without affecting the tax rate, is unfortunate from the point of view of public funds, nota bene when an increase in the basic tax relief has been approved at the same time . it is impossible to believe politicians who claim that such a low tax rate is only temporary, that the new system without the super-gross wage is intended to be a long-term concept, and that each government will just adjust the rates to suit its own needs . unfortunately, the tax rate is the most visible to the public, and any increase is sensitively perceived, regardless of changes to other structural components and a possible overall reduction in the tax burden . therefore, it is unlikely to expect tax increases from future governments (radvan & svobodová, 2021, pp . 79–80) . 2.2. lump-sum tax the lump-sum tax is an entirely new institute introduced with effect from 1 january 2021 . this regime is based on a  voluntary basis . there are many benefits for both taxpayers and tax offices, mainly a  significant reduction in the administrative burden . the taxpayer pays the personal income tax and social and health contributions in one payment to the tax office without having to file tax returns and contribution statements . the risk of any public control is significantly reduced as there is no need to control expenses . there are also no obligations in the acts to keep any specific records for the lump-sum taxpayers . the conditions to pay the lump-sum tax are simple: the taxpayer must be a  selfemployed person, not subject to vat, with incomes not exceeding czk 1,000,000 . the taxpayer willing to pay the lump-sum tax must submit a notification of entry into the lump-sum tax no later than 10 january for each taxable period – calendar year . subsequently, the taxpayer pays monthly a  lump-sum advance payment to the tax 43are changes in (czech direct) tax law necessary, or is it just a politicum? public governance, administration and finances law review • 1. 2022 authorities in lieu of the standard income tax and social and health contributions advance payments . if all the statutory conditions are met, there is no need to file the tax return and contribution statements and repay anything after the end of the tax year . the lump-sum advance payment is due by the 20th day of the month . it includes the personal income tax (czk 100), the pension insurance premiums and the contribution to the state employment policy (czk 3 .267 in 2022), and health insurance premiums (czk 2,627 in 2022) . the total lump-sum advance payment thus amounts to czk 5,994 per month in the calendar year 2022 . the lump-sum tax seems to be the ideal tool for small businessmen . however, there are still several obstacles . in 2022, the lump-sum tax will be used by about 80,000 businessmen, although the tax administration estimates that up to 120,000 czechs could potentially use this option . the minor reason might be the income higher than czk 1,000,000 or the risk that the income at the end of the year may exceed this amount . that is why the limit of czk 2,000,000 is being discussed for the following years . at this point, it is also necessary to remind that there is no duty of revenue registry in the czech republic that allows businessmen to hide their real incomes . the more probable reason the lump-sum tax regime is not as broadly used as expected is the construction of the “regular” taxation of incomes from business (independent) activities . every taxpayer has the possibility to deduct lump-sum expenses instead of real expenses: up to 80% for agricultural production, forestry, and fish farming and handicraft industry, 60% for other industries and trades, 40% for other businesses (lawyers, doctors, etc .) and other incomes (e .g . incomes from the intellectual property), and 30% for business property rents . the maximum value of lump-sum expenses is limited in the way that it is most profitable for those with an annual income up to czk 2,000,000 . taking into account the lump-sum expenses for the tax base, 15% tax rate, a basic tax relief of czk 30,840, other relieves, and tax preferences for children, the personal income tax might be close to zero or even negative . the negative tax in the czech republic is not a theoretical issue . still, it occurs in practice: the tax office considering tax preferences for children pays the negative tax back to a taxpayer .2 in spite of the fact that many politicians argued that a lump-sum tax regime is a useful tool for helping entrepreneurs to overcome difficulties connected with the covid-19 pandemic, i cannot see any connections . the lump-sum tax is an instrument to reduce administrative burdens; however, the stimulating impact on the economy is zero . 3. loss carryback according to the czech legal regulation, the tax loss is the difference between the taxpayer’s expenses and taxable income . generally, the tax loss may be fully or partially deducted from the tax base in the five tax periods immediately following the period for which the tax loss is determined . as a  reaction to the pandemic crisis, the parliament adopted an amendment in 2020: it  is possible to (fully or partially) deduct a  tax loss 2 for details see radvan (2020, pp. 39–41). 44 michal radvan public governance, administration and finances law review • vol. 7. no. 1.  that has been finally determined in the two tax periods immediately preceding the tax period for which the tax loss is determined . the aggregate amount to be deducted on these tax periods from the tax base is set to czk 30,000,000 . the loss carryback is in line with the commission recommendation (eu) 2021/801 of 18 may 2021 on the tax treatment of losses during the covid-19 crisis, according to which the member states should allow the carry back of losses at least to the previous tax year, i .e . at least to 2019 . this instrument allows taxpayers an earlier refund of the money they paid in tax for the prior taxable year and boosts cash flow which seems necessary during the pandemic situation . it is without any doubt a reasonable solution to the negative consequences associated with the sars-cov-2 coronavirus causing covid-19 illness . on the other hand, this new rule might be risky as the measure could also be used by entities that will no longer be able to generate profits in future periods and, therefore, will not contribute to the economy in the desired way . 4. charitable donations both personal and corporate income taxes have a  list of items deductible from the tax base . one of the most frequent ones is charitable donation: the value of the gratuitous performance for science and education, research and development, culture, education, police, fire protection, support and protection of youth, protection of animals and their health, social, health and ecological purposes, humanitarian, charitable, religious purposes, physical education and sports, political parties for their activities, the elimination of the consequences of a  natural disaster . generally, natural persons are allowed to deduct the aggregate value of the gratuitous supplies in the tax period between 2% (at least czk 1,000) and 15% of the tax base . legal persons can deduct the aggregate value of the gratuitous supplies between czk 2,000 and 10% of the tax base . however, in taxable periods 2020 and 2021 (respectively in taxable periods ending in the period from 1 march 2020 to 28 february 2022 in the case of legal persons), the upper limit was increased up to 30% of the tax base . such a temporary increase of items deductible from the tax base seems to be a good tool for increasing aid to those in need . however, from the legal technique perspective, it is difficult to accept time-limited changes in tax legislation . 5. asset depreciations from 1 january 2001, the rules for asset depreciation were significantly changed . the category of intangible assets (research and development results, software, valuation rights, and other assets with an entry price of more than czk 60,000 and useful life of more than one year) was abolished, which is related to the abolition of tax depreciation of this property . the transitional provisions give the opportunity to use this rule even retroactively as of 1 january 2020 . 45are changes in (czech direct) tax law necessary, or is it just a politicum? public governance, administration and finances law review • 1. 2022 in the case of tangible property acquired in the period from 1 january 2020 to 31 december 2021 classified in the first two depreciation groups, the taxpayer got a new possibility of choice: to use existing rules or extraordinary depreciation with shorter depreciation periods . the period might then be shortened in group 1 from 3 years to 12 months and in group 2 from 5 years to 12 months (60% of the cost of the tangible property for the first 12 months and 40% for the immediately subsequent 12 months) . according to the draft bills discussed in parliament, the extraordinary depreciation should be prolonged till the end of 2023 . also, the limit for determining tangible assets subject to depreciation was increased from czk 40,000 to czk 80,000 . undoubtedly, the new asset depreciation rules were adopted in response to the covid-19 crisis . this measure is intended to motivate entrepreneurs to acquire new intangible and tangible assets by allowing them to reduce the tax base immediately (intangible assets) or within a short period after the acquisition . of course, these new rules may not be profitable for all entrepreneurs, especially if their profit is lower than in the taxable periods before the covid-19 crisis . that is why the taxpayer may choose a new method of depreciation as an alternative method of depreciation for tangible assets classified in depreciation group 1 or 2, possibly even only for certain items of property . 6. tax relieves above in this contribution, the increase of the basic taxpayer relief by czk 3,000 for 2021 and a further czk 3,000 for subsequent years was mentioned . generally, the regular increase of all fixed amounts in tax law corresponding to inflation growth is desirable . however, the increase of the basic taxpayer relief in connection with the abolition of the super-gross wage was not a proper tool in the pandemic crises, and the need for higher public revenues to cover increasing demands to finance public goods and services, including new types of subsidies and donations . the same applies to the abolition of maximal tax bonus (the amount the taxpayer receives in case the tax preferences for children are higher than the tax; used mainly by those with lower incomes and more children) . from 1 january 2022, new tax relief for stopped recovery was introduced . the enforcement act allows the suspension of long-lasting (more than three years) enforcement proceedings involving small claims not exceeding czk 1,500 . in these cases, the executor should call on the beneficiary (usually the creditor) to make a deposit for the costs of the recovery . if the creditor fails to deposit the recovery costs, the executor shall stop the recovery . the creditor is then entitled to compensation for such stopped recovery in the amount of 30% of the recovered claim . however, this compensation is not provided in monetary form but in the form of an income tax relief for the stopped recovery . the amount of the tax relief for the stopped recovery itself corresponds to the amount of the compensation granted to the creditor by the executor when the recovery is stopped . the compensation for a stopped recovery corresponds to 30% of the debt recovered . the tax relief for stopped recovery might be used by both natural persons and legal entities . especially during the economic crisis, it seems to be a good tool to help creditors with bad 46 michal radvan public governance, administration and finances law review • vol. 7. no. 1.  debts . the only weakness is that the relief is not transferrable to the following tax periods in the case the taxpayer does not declare tax in the taxable period in question against which the relief could be deducted (e .g . has declared a tax loss) (greiff & doškářová, 2021) . 7. property taxes in a time of crisis, the gdp is decreasing, and so are the vat and income tax revenues . in these bad times, property taxes might play a  significant role, as the property cannot disappear and still has its value . while the recurrent property tax regulation in the czech republic remained the same during the crisis connected with the covid-19 illness and war in ukraine, the property transfer tax was abolished . 7.1. abolition of the property transfer tax there is a  clear trend in cee countries to abolish property transfer taxes, particularly inheritance and gift taxes (e .g . slovakia in 2004, the czech republic in 2014) . property transfer taxes have also been abolished, e .g . in estonia, romania, lithuania and slovakia (mccluskey, plimmer & franzsen, 2021, p . 5; brzeski, románová & franzsen, 2019) . the czech government proposed the abolition of the tax on the acquisition of immovable property in the spring of 2020, and the law was approved with effect on 26 september 2020 . the primary argument was to simplify and clarify the tax system . the pandemic caused by the spread of the sars-cov-2 virus is mentioned only subsequently, but only in very general terms . among other reasons for abolition, the government cites a reduction in the incentive to set up special-purpose business corporations owning immovable property and for special-purpose transfers of shares in them, an increase in investment in immovable property due to a reduction in acquisition costs, and a  reduction in the administrative burden for taxpayers and the state (chamber of deputies, 2020b) . the bill provided for the retroactive effects of the abolition of the tax by fixing the decisive date at 31 march 2020: if the deadline for filing the tax return expires from 31 march 2020, the tax liability arising before the date of entry into force of the abolition law will cease on the date of entry into force of this law . in view of the rule that the tax return is to be filed by the end of the third month following the month in which the entry was made in the land registry (cadastre), all tax obligations where the entry was made in december 2019 or later will thus be extinguished . such a  procedure may be referred to as super-retroactivity . in addition, such an approach may create inequality between taxpayers who could not foresee the cancellation of the tax at the end of 2019 and could not influence in any way the length of the administrative procedure after filing the petition for registration . it is very likely that some taxpayers submitted a deposit application as early as october 2019, for example . still, the deposit was not made until december, while others submitted a deposit application later in november 2019, and the 47are changes in (czech direct) tax law necessary, or is it just a politicum? public governance, administration and finances law review • 1. 2022 deposit was made promptly in the same month . paradoxically, those who submitted the application for registration earlier (and therefore acquired the ownership right earlier) will not be subject to the tax (radvan & svobodová, 2021, p . 73) . the government assumed that the shortfall in state budget revenues from the abolished property transfer tax of about czk 14 billion would be partially compensated by partial adjustments to the income tax . thus, it proposed to extend the time test for the exemption of income from the sale of immovable property not used for housing purposes from five to ten years, effective from 1 january 2021, and to abolish the item deductible from the personal income tax base in the form of interest on housing loans, effective from 1 january 2022 . while the first proposal was approved, the second was significantly changed by the legislators: the item deductible from the tax base was retained, and only the maximum amount was reduced from czk 300,000 to czk 150,000 per household per year, effective 1 january 2021 . this change has no negative effect on most households, given the comparison of the actual and maximum amount of deductible interest (radvan & svobodová, 2021, p . 73–74) . it is necessary to mention that the stimulating effect of the abolition of the property transfer tax was not and could not be so large also for the reason that the new buildings were already exempted from the taxation . it means that the abolition of this tax was reflected only in the second-hand real estate market . this is another reason why it  is possible to say that the property transfer tax abolition is a political decision . it is obvious that the real estate market did not stagnate even during the pandemic; however, this state of affairs is not necessarily linked to the abolition of the property transfer tax . the growth in investment in real estate is evident, but it has had the effect of raising prices . in order to reduce the incentive to set up special-purpose business corporations owning immovable property and to transfer shares in them for the purpose, it was certainly not necessary to abolish the tax; it was sufficient to modify the construction components of the tax and to define the object of taxation differently . in any event, the abolition of the property transfer tax has no obvious connection with dealing with the negative consequences of the sars-cov-2 coronavirus causing covid-19 illness; the tax could have been abolished at any time before the pandemic . in this context, it  should also be pointed out that the abolished tax also applies to transfers that took place in the autumn of 2019, when the world was not yet familiar with the sars-cov-2 coronavirus and the covid-19 disease . the retroactivity option, tied to the entry of the right into the cadastre, also causes a form of inequality that can mean disputes between taxpayers and the state . the mere abolition of the property transfer tax without other related changes in the tax law is a missed opportunity . it was possible to abolish the item deductible from the personal income tax base in the form of interest on housing loans . in the short term, combining these changes would bring buyers on the property market the necessary cash flow needed in times of crisis, while in the long term, there would be no reduction in public fund revenues . another option was to increase the recurrent property tax, one of the world’s lowest in the czech republic . this change would also make up for the shortfall in revenue in municipal budgets and would not require a change in the share of shared taxes in individual public budgets (radvan & svobodová, 2021, p . 79) . 48 michal radvan public governance, administration and finances law review • vol. 7. no. 1.  8. conclusions the above-mentioned and analysed changes in czech tax law having any (real or political) link to the sars-cov-2 coronavirus causing covid-19 illness and the war in ukraine are not the only amendments . indirect taxes should also be mentioned (vat waiver on energ y, exemption from customs duties and vat on imports of selected products necessary to combat the effects of the spread of covid-19, movements between vat rates) as these changes were generally helpful for the increase of cash flow and the reduction of final prices for the customers . many useful amendments were adopted in the area of tax administration, specifically the postponement of the deadline for filing a  tax return and postponement of the tax due date . in spite of the fact that technically there were no changes to the legal deadlines, and only accessories related to the late filing of tax claims or late payment of tax (interest on late filing or penalty for late tax claims) were waived, these changes meant an increase of cash flow . on the other hand, i consider suspending the obligation to register sales under the electronic revenue registry act illogical and unsystematic . even the title of the act (act on certain adjustments in the field of revenue registration in connection with the declaration of a state of emergency) indicates that the suspension was planned only as a short-term “relief ” related to the state of emergency in the czech republic . de lege lata, the obligation to register sales is currently suspended until 31 december 2022 . this change has no direct or indirect relation to the sars-cov-2 coronavirus causing covid-19 illness or the war in ukraine . it might serve as proof the proposal of the act abolishing the electronic revenue registry act . it was prepared by the government, and without any doubt, it will be adopted by the parliament, entering into force on 1 january 2023 . to summarise, most of the significant changes in the czech tax law adopted in the last three years (abolition of the super-gross wage, lump-sum tax, tax relieves, etc .) had no connection to the covid-19 illness or the war in ukraine . these tragic incidents were just a pretext to advance political goals . the hypothesis of this contribution was then disproved . i am afraid that de lege ferenda it  is not possible to expect any improvements in that direction . e .g . the government proposed the draft bill reducing motor vehicle taxation to the minimum required by the eu directives and started a dialogue at the eu level to abolish the directives dealing with the minimal standards of motor vehicle taxation in the eu member states . references brzeski, j ., románová, a . & franzsen, r . (2019) . the evolution of property taxes in post-socialist countries in central and eastern europe . african tax institute (working paper wp-19-01) . chamber of deputies (2020a) . sněmovní tisk 910/0 . poslanecká sněmovna parlamentu čr . chamber of deputies (2020b) . sněmovní tisk 866/0 . poslanecká sněmovna parlamentu čr . fischer, j ., mazouch, p . & finardi, s . (2020) . dopad změny sazby daně z příjmů fyzických osob na spotřebu domácností . vysoká škola ekonomická v praze . online: https://bit .ly/3vfecpx greiff, h . & doškářová, j . (2021) . nová sleva na dani z příjmů . kpmg . online: https://danovky .cz/cs/ nova-sleva-na-dani-z-prijmu-1810 https://bit.ly/3vfecpx https://danovky.cz/cs/nova-sleva-na-dani-z-prijmu-1810 https://danovky.cz/cs/nova-sleva-na-dani-z-prijmu-1810 49are changes in (czech direct) tax law necessary, or is it just a politicum? public governance, administration and finances law review • 1. 2022 hlaváček, m . & pavel, j . (2020) . fiskální náklady pandemie covid-19 v české republice . úřad národní rozpočtové rady . online: https://bit .ly/3v9edez kalíšková, k ., münich, d ., prokop, d . & šoltés, m . (2020) . vyhodnocení dopadů návrhů na zrušení superhrubé mzdy . idea při národohospodářském ústavu av čr . online: https://idea .cerge-ei .cz/…pdf kozieł, m . (2021) . podatki w republice czeskiej w czasie covid-19 . analizy i studia casp, 11(2), 23–34 . online: https://doi .org/10 .33119/ascasp .2021 .2 .3 liška, m . (2016) . švarcsystém . in m . radvan, p . mrkývka et al ., důchodové daně (pp . 103–126) . masaryk university . mccluskey, w . j ., plimmer, f . & franzsen, r . (2021) . introduction and observations . in m . radvan, r . franzsen, w . j . mccluskey, & f . plimmer (eds .), real property taxes and property markets in cee countries and central asia (pp . 1–46) . lex localis – institute for local self-government maribor . papavasilevská, s . (2021) . zrušení daně z nabytí nemovitých věcí a jeho dopad na ekonomiku státu . in p . mrkývka & j . schweigl (eds .), interakce práva a ekonomie (pp . 55–65) . masaryk university . online: https://doi .org/10 .5817/cz .muni .m210-9934-2021-3 radvan, m . (2015) . taxation of business income in the czech republic . kwartalnik prawa podatkowego, 2017(4), 21–31 . radvan, m . (2016) . supehrubá mzda . in m . radvan, p . mrkývka et al ., důchodové daně (pp . 87–101) . masaryk university . radvan, m . (2016a) . taxation of employment income in the czech republic . kwartalnik prawa podatkowego, 2018(1), 23–35 . radvan, m . & neckář, j . (2016) . taxation of professional team sport athletes in the czech republic . public governance, administration and finances law review, 1(1), 40–46 . online: https://doi .org/10 .53116/ pgaflr .2016 .1 .4 radvan, m . (2020) . czech tax law (4th . ed .) . masaryk university . radvan, m . & papavasilevská, s . (2020) . abolition of tax on acquisition of immovable property: a tool to suppress the negative consequences of covid-19 or a politicum? public governance, administration and finances law review, 5(2), 45–57 . online: https://doi .org/10 .53116/pgaflr .2020 .2 .4 radvan, m . & svobodová, t . (2021) . reformy daňového práva v (ne)souvislosti s covid-19 . studia iuridica cassoviensia, 9(2), 69–84 . online: http://doi .org/10 .33542/sic2021-2-06 doi: https://doi .org/10 . 33542/sic2021-2-06 semerád, p ., radvan, m . & semerádová, l . (2021) . tax fraud in accommodation ser vices during the covid-19 pandemic in the czech republic . analysis and studies casp, 11(1), 23–31 . online: https:// doi .org/10 .33119/ascasp .2021 .1 .3 tyniewicki, m . & kozieł, m . (2021) . current problems of financial law in poland and in the czech republic including effects of the covid-19 pandemic . bialystok legal studies, 26(4), 53–71 . online: https:// doi .org/10 .15290/bsp .2021 .26 .04 .04 https://bit.ly/3v9edez https://idea.cerge-ei.cz/pdf https://doi.org/10.33119/ascasp.2021.2.3 https://doi.org/10.5817/cz.muni.m210-9934-2021-3 https://doi.org/10.53116/pgaflr.2016.1.4 https://doi.org/10.53116/pgaflr.2016.1.4 https://doi.org/10.53116/pgaflr.2020.2.4 http://doi.org/10.33542/sic2021-2-06 doi: https://doi.org/10.33542/sic2021-2-06 http://doi.org/10.33542/sic2021-2-06 doi: https://doi.org/10.33542/sic2021-2-06 https://doi.org/10.33119/ascasp.2021.1.3 https://doi.org/10.33119/ascasp.2021.1.3 https://doi.org/10.15290/bsp.2021.26.04.04 https://doi.org/10.15290/bsp.2021.26.04.04 © 2018 dialóg campus, budapest public governance, administration and finances law review vol. 3. no. 1. (2018) • 109–114. case study practical issues in tax proceedings in the czech republic tereza čejková,* nikol nevečeřalová** * tereza čejková, student of faculty of law, masaryk university, czech republic . the author specializes in financial law, especially tax law . (e-mail: 421880@mail .muni .cz; ter .cejkova@gmail . com) ** nikol nevečeřalová, mgr . bc ., student of faculty of law, masaryk university, czech republic . the author specializes in financial law, especially tax law . (e-mail: 431305@mail .muni .cz; nevenikol@ seznam .cz) abstract: this contribution deals with practical problems of entities obligated to a  tax and of tax administrators . if the collection of taxes and fees is essential to finance the running of the state and its authorities and organizational units, it is necessary to make this process as simple as possible, the least demanding and demotivating . in this paper, the authors will examine in terms of legality and real necessity, and then there may be other legislation ways proposed . keywords: tax proceedings; tax administration; administrative burden 1. introduction state is defined by spatial and social determinations; this  community represents relations formed between persons living in the given territory, between which relations are  established . but relations between the state as a  legal entity also arise, and these are established primarily in dependence on ensuring the functioning and survival of the system of that state . from the nature of state-based theory, the state is in a dominant or supreme position in these relations . it enforces its position in  creating and enforcing laws and other legal regulations imposing obligations (and giving rights) to citizens and certain persons living in his territory . there may be situations where the legislator is so urgently trying to dictate what and how it should be done that the original idea of relieving the being is transformed into something truncated, formalized, enforced, overlapping in  some inefficient bureaucracy . in the context of this article, we will focus primarily on the obligations imposed on legislators by taxpayers . we are talking mainly about the practical procedures involved . just like any natural or legal person, the state needs funds too . the  state is an entity that has the duty not only to secure itself (as is the main idea for natural and legal persons), but also to secure goods that are destined for use and consumption by its citizens . the theory divides the property into private and public, in the context of the outlined issue, we 10.53116/pgaflr.2018.1.10 mailto:421880%40mail.muni.cz?subject= mailto:ter.cejkova%40gmail.com?subject= mailto:ter.cejkova%40gmail.com?subject= mailto:431305%40mail.muni.cz?subject= mailto:nevenikol%40seznam.cz?subject= mailto:nevenikol%40seznam.cz?subject= 10.53116/pgaflr.2018.1.10 110 tereza čejková, nikol nevečeřalová public governance, administration and finances law review • vol. 3. no. 1. will be interested in a  public good that is provided free of charge, because consumers cannot be excluded from consumption, because incompatibility with consumption is a basic feature of public goods . to these goods and to cover the extra costs of the emerging state, the legislator created an apparatus to obtain resources that he redistributes according to the concept prevailing in the state, however, all countries will be a  common way of selecting funds in the tax law . tax law gives a  number of institutes, which in practice causes unnecessary complications for both the taxpayer and the tax administrator . it is often an issue that would be technically easy to solve . these will be further described by a descriptive method and interpretation, an analysis of the legal text will then assess compliance with the law, and through induction their own ideas and possible suggestions will be given for solutions . 2. forms used in the tax proceedings the tax code regulates the procedure, rights and obligations of the tax administration, taxpayers and third parties . this  is  a  procedural rule which defines the legal framework in which the tax administrator moves in tax administration . thus, as we recalled earlier, the costs of the emerging states are covered by the mass of funds generated by taxes, fees, duties and other charges . i mention now some problems with collecting and managing taxes, and those relating to the tax return forms . each taxpayer has an obligation to require filing a  tax return, etc . submission is evaluated by actual content and is the act of a  tax entity/tax payer which goes to the hands of the tax administrator . such submissions may be made in writing or electronically, i .e . if the data box is established, the tax entity (even the tax administrator) is obliged to communicate via the data box . nevertheless, the legislator tried to make life easier for the tax payer and to create a counterpart through which the tax return must be filed, so the tax entity cannot file a tax return just like, for example, in a  word document, so the submission of the data message must be made in the format and structure published by the tax administrator so as to meet the effects of tax administration . in a  specific case, it was a  situation where the taxpayer electronically filed tax returns for value added tax, as required under the law and in the .pdf format but should be submitted in the .xml format why in the .xml format? simply because it was set by the  tax administration d-349 .1 which is a  sub-statutory normative act and the only way the executive power in the abstract rules of conduct indeterminate number of persons . in the tax administrator’s cassation complaint, he argued that the court did not deal with the nature of the defect that can be both formal and substantive . the court overlooked the obligation imposed by law and that the data message must be made in the prescribed format ( .xml) in order to make the electronic submission negotiable .2 the subject was challenged by the capacity of the hearing, as the pdf format did not suffer from any defect, as did the effects of filing . according to the nss “in general, filing is 111 public governance, administration and finances law review • 1. 2018 practical issues in tax proceedings in the czech republic effective against administrators and has effects for tax administration from the moment when the filling it comes to the sphere of tax administration” .3 in the conclusion of the nss, he stated that the submission in pdf format was eligible for discussion and therefore was submitted effectively . because the tax administrator was able to work with this format and the subject submission in .pdf format, the tax administrator could not find the taxpayer by an ineffective procedure according to section 74 (3) of act no . 280/2009 coll ., on the code of tax procedure . the nss did not consider filing with the .pdf file according to the current tax regulations, so it is necessary to transform the conclusion of the nss into the effective wording . in 2015 there was a change in the tax order and a new section 72 (4)4 was introduced, which states that the person filing the filing pursuant to section 72 (1) has the obligation to submit the data report submitted only in the format and structure of the publication of the tax administrator, i .e . format xml . “if this did not happen and the submitter makes an electronic submission in an inappropriate format, it will depend in practice on whether this ‘inappropriateness’ will cause the technical data transfer to be impossible (i .e . the data message will not be delivered to the recipient at all) or not . in the first case, such filing cannot be considered as a  submission at all . the tax administrator does not actually know about it, so he cannot react to this fact . in the latter case, it is necessary to distinguish whether the outgoing message is legible or not . if it is unreadable, the tax administrator can determine who it is coming from, and the petitioner asks for the removal of defects . the same holds true if the data message is legible (the tax administrator is able to open the file in the given format) . there will be a defect in the form that renders it ineligible for discussion .”5 the requirement to the tax payer is to submit the tax return properly and in a mannerly time and, of course, in an appropriate form . it is possible to convert almost any document into the .pdf format, so it seems quite exaggerated to request only .xml form . however, the request is clear, and if the submission will not be in format xml, it will have consequences . why does the tax administrator equire xml compliance? i suppose, this is because of the workability and system facilities of the state administration . administration of the waste fee in case of children in a broader sense, tax proceedings also include process of setting and collecting fees . those are categorized as local, administrative and court . they differ from the tax in their function  –  they are usually a  payment for a  service provided by a  public administrative body . there has long been a problem in the czech republic with the collection of a local charge for the operation of the collection, transport, sorting, use and disposal of communal waste, the subject of which is also children . the local taxation act defines a person obligated to pay this tax as a person who has a  permanent residence in the municipality or  is staying there in fact for a  longer time . it does not consider the age of the taxpayer at all . in the past this has been causing problems for children whose parents have not been able to meet their obligations arising from 112 tereza čejková, nikol nevečeřalová public governance, administration and finances law review • vol. 3. no. 1. parental responsibility . such children were usually unable to pay the debt, and their repayment was postponed to their maturity when it was many times higher . it has concluded that a law imposing an obligation on a person who has no possibility of influencing its emergence without the help of another person cannot fulfil it and cannot objectively secure the funds to pay the fee due to other legal restrictions is unconstitutional . even before the judgment was issued, this procedure had an effect on the regulation of this charge . since the debt could not be effectively enforced after reaching the age of majority, and  then  the debt was too high, the amendment of 2015 to this law introduced a new institute – the so-called payment transfer obligation . its nature lies in the fact that, if the fee is not paid until the due date, the obligation of the payment by the legal guardian is passed to him/her . if both parents are legal representatives, they  are  jointly responsible  –  i .e . the administrator of the fee can decide which of them will be responsible for the payment of his own liability, or he will split it fairly between both parents . debt is matched by the adults and the child remains with no debt . this provision certainly deserves a positive assessment . however, it is possible to raise criticism on the very moment of transfer of the duty . the legislator seems to have forgotten that  taxpayers are “only humans” and that their payment obligations are often fulfilled at the last minute . it is possible that in practice there will be a  situation where a  child’s representative sends a  payment marked as  a  charge for a  mandatory child on the due date . the amount will appear on the manager account until the next day . at this point, however, the payment obligation has already been transferred to the child’s representative . the child is thus overpaid, while the legal guardian is in delay . the code of tax procedure allows you to use the overpayment to pay a different tax, even before its due date . in the case of fees, however, this option is not yet specified, besides, the child may not have other tax debts . even if that was the case, the child’s representative is still a debtor, so the situation is still not solved . this apparent minority thus brings considerable administrative burden and the need for increased attention on behalf of the taxpayers’ representatives . this is a  task that goes beyond the usual duties of a  taxpayer who is also not sufficiently informed about this matter of fact . the situation would be easily resolved if the legislator had to adjust the payment obligation in such cases in such a way that the liable person had to pay the fee on the due date, i .e . to send the relevant amount to the administrator’s account, thus replacing the requirement that the charge on the due date be paid . 3. conclusion we have mentioned the two most common cases where there is a  totally unnecessary excessive administrative burden in administering taxes and charges, both on the taxpayer’s side and on the tax administrator . there are more situations in which disproportionate demands are made . 113 public governance, administration and finances law review • 1. 2018 practical issues in tax proceedings in the czech republic it is clear that the fulfilment of the duties of all those involved in the administration of taxes and fees can be very complicated and can cause adverse consequences . laws regulating tax and fee systems are among the most frequently revised ones, making them more complex . we are convinced that if the collection of taxes is essential to finance the running of the state and its authorities, the process of selecting and related activities must be as smooth and as motivating as possible for taxpayers . 114 tereza čejková, nikol nevečeřalová public governance, administration and finances law review • vol. 3. no. 1. references 1 since 1 .  1 .  2016 instruction d-349 is replaced by instruction gfř-d-24 . www .financnisprava .cz/assets/ cs/prilohy/d-zakony/pokyn_mf_6 .pdf (accessed 5 may 2018) 2 supreme administrative court: 2 afs 25/2015 3 supreme administrative court: 2 afs 25/2015 4 act no . 280/2009 coll ., on the code of tax procedure tax code, as amended . 5 josef baxa . a coll . the code of tax procedure . commentary, part i, 390– 391 (prague, wolters kluwer čr, 2011) . the local taxation act defines a  person liable to pay this tax as a  person who has a  permanent residence in the municipality or is in fact staying there . it does not take into account the age of the taxpayer . this has in  the past been causing problems for children whose parents have not been able to meet their responsibilities arising from parental responsibility . such children were usually unable to pay the debt, and their repayment was postponed to their maturity, when it was many times higher . http://www.financnisprava.cz/assets/cs/prilohy/d-zakony/pokyn_mf_6.pdf http://www.financnisprava.cz/assets/cs/prilohy/d-zakony/pokyn_mf_6.pdf public governance, administration and finances law review vol. 7. no. 1. (2022) • 77–90 . © the author 2022 doi: 10 .53116/pgaflr .2022 .1 .6 hermeneutics of the law csaba varga* * professor emeritus, pázmány péter catholic university, faculty of law and political sciences, department of legal philosophy, e-mail: varga .csaba@jak .ppke .hu abstract: one of the most ancient forms of thinking about law is what is today known as positivist or normativist . it focuses on the product presented in the name of the law, the textual representation which not only simply includes, but directly embodies the law .1 in other words, it  is a  corpus, whether it  is a  code, a  properly issued rule or a  set of ad-hoc decisions: this is the law itself . this represents a  short-circuited ready form for cognition, which the conscious follower and the professional agent of the law will both use as a  tool . in addition, however, presumably ages later, there emerges a  completely different version of the idea of law, rooted in a culture that forecasts the hermeneutic way of thinking . if in the former an approach based on epistemolog y can be discerned, the latter takes a more ontological approach instead . this focuses, beyond the given text, upon its interpretation and on the understanding that may be drawn from the text, and thus ultimately on the content which the law is supposed to message to the law abider and enforcer alike . in other words, it is concerned with the genuine meaning that actually affects and influences its addressees . moreover, it  is clear that, in contrast to text-centricity, the hermeneutic approach is also aimed at what sociological examination relating to the law reveals: finding the lebendes recht [living law], separated from the positives recht, setting some law in action next to the law in books.2 keywords: hermeneutics, legal hermeneutics, law and language what is law ? and what is meant by its change? could it  refer to the law adapting to and/or assimilating into the changing circumstances? or is it a kind of symbiosis of law and its environment? the words chosen to express these ideas, and the use of language as a  whole, bear the presumption of a  background constituting an “objective reality that 1 it is to be noticed that the hungarian term (megtestesít [make it a body]) fits and perfectly accords with the english original meaning: ‘to embody something’, ‘to give a bodily form’ or ‘incarnate’ (https://bit.ly/3nwrg7i). nevertheless, the hungarian word is already more of an image-like usage – “<it makes an abstract thing, idea, concept or characteristic> perceptible, possibly also displaying it in a physical form or <an idea or feature> manifests itself in sy, in sg; takes shape, is realised” (https://bit.ly/3q4zp9x resp. https://bit.ly/3nrtht5) – and no longer suggests that in the case of the term ‘being embodied’ (https://bit.ly/3gnaogu), what is the ‘body’ and what is ‘embodied’ in this body coincide in logical scope. that is particularly the case in law. 2 if not the word itself, eugen ehrlich’s background theory was however already born before his great work (ehrlich, 1913), namely in his rectorial inauguration address at czernowitz, (ehrlich,1907), taking its final form in the programme of roscoe pound (1910). https://doi.org/10.53116/pgaflr.2022.1.6 mailto:varga.csaba%40jak.ppke.hu?subject= https://bit.ly/3nwrg7i https://bit.ly/3q4zp9x https://bit.ly/3nrtht5 https://bit.ly/3gnaogu 78 csaba varga public governance, administration and finances law review • vol. 7. no. 1.  exists independently of our consciousness” and its somewhat reflexive mirror-image in our consciousness,3 as a kind of precondition . yet our expressions employed are figurative to begin with, and hence symbolic, and because all we do is to speak or write these words, thereby we also represent or reproduce the events of the world in thought, so those expressions thus applied to an object, thought to be present and known, are at the same time fictional. after all, our entire thinking is fictional .4 the very identity of the law itself, in the diversity of its earlier and present forms, is not only a matter of something having been defined by something else to be named, but also about the general need for, and human purpose of, giving anything supposedly known a name. in our topic, for example, ancient law was cloaked in the acts and facts of power and the violence perpetrated by the mighty, even if it was sometimes pronounced and even described, and it was identified simply by being reduced to (as represented by) this description in order to ensure its easier identification, as well as its extensibility and transportability5 – and if, on the other hand, another sense of the law happened to clash with it  that could only reside in the hearts of its confessors, such as antigone, whose human empathy conflicted with creon’s order-centeredness (cf . varga, 2011b) . it may have been that the law hovered in obscurity, as its addressees were intimidated by raw power and thus by the enhanced chance of arbitrariness at any time since, according to the myth of its origin (livius, 1967, pp . 113–195), in rome before the twelve tables, it existed in such a vulnerable status of the plebeians with regard to the patricians . however, once the laws had been put in an enacted text, they could be carried further, as it is evident in the transport of steles carved with passages of hammurabi to the newly conquered areas of mesopotamia . in our fundamental ignorance of ancient law, however, it is also worth considering that this so-called codex may also have been a reminder of the existence of a divine order of worldly power, rather than a rule in the strict sense of the word (varga, 2011a, pp . 395–423; cf . driver & miles, 1952–1955), as it should be borne in mind that the actual settlement (such as the way in which damage caused by a goring ox was to be compensated, to take the most glaring example) was essentially independent of empires, peoples and subjections; it was practically the same in an area almost the size of a  continent, which had known many legal regimes, emanating from the vast territory of the former 3 this was built into a dogma, following the suggestions derived from marx and engels by lenin, 1962. 4 in our western culture, two vast classical oeuvres, which also raise issues of law, have professed language and, along with it, our entire human thinking to be fictional from the beginning, and necessarily so. see, on the one hand, the later generalised recognition of jeremy bentham (1843b, p. 199) “of nothing […] that has place, or passes in our mind, can we speak, or so much as think, otherwise than in the way of fiction” – and, on the other hand, the fundamental work of hans vaihinger (1911), dedicated to this very explanation. as to the doctrine of legal fiction, cf. varga, 2018, pp. 105–130. 5 in legal history, this motif has been present from the beginning, for example from the code of hammurabi (16th–17th centuries bc), the diorite specimens which symbolised the extension of the empire, until the british codification debates, when the common law material was protected all through from being recorded in a code, yet, during the 19th century, everything which the british wanted to enforce in india had to be brought into a didacticregular form, in order to be able to export it at all (varga, 2011, ch. ii and vi). 79hermeneutics of the law public governance, administration and finances law review • 1. 2022 fertile crescent (van selms, 1950; yaron, 1966; finkelstein, 1973; jackson, 1974; watson, 1974) . the perpetual and, so to speak, insoluble dilemma of contemporary research into the history of ancient times that is inclined to project today’s notions and objectifications into the past reveals the fact that it is not known but may only be assumed what the actual status or function of these legal objectivations was or could have been . was it a reified gesetz-buch; in other words, a corpus embodying the law, or merely a memento, that is, a memory aid – whether for more precise evocation, or for teaching newcomers in the community or prospective law enforcers; or was it merely for descriptive purposes, or, ultimately, simply intended to make a solemn declaration of the unity and identity in the respective community (varga, 2011a)? the ciceros still chanted, rhythmically and poetically, the content of the twelve tables. nearly a millennium later, the english acquis, the magna carta, was posted in every church on holy week every year and read aloud at masses while preaching (varga, 2012a, p . 26 note 8), similarly to luther’s points, which were nailed to the church gates in a similar vein, pro memoria. was it the law ? or was it more a way of engraving the law into the people’s consciousness or, more literally, their hearts? evidently, while the recognition of hermeneutics can be traced back to ancient times, it is nevertheless a modern invention as a methodolog y, deriving from studies on the bible, and required because god spoke only once, then and there . it was also necessary because, after one and a half millennia of debates, controversy, and frequently the extermination of some or all of the past senses and meanings, happening in bloody fashion, biblical scholars still hoped to extract some kind of extra message from the revelated and sacred texts; perhaps an additional or underlying message from the lord, where (and if ) they could find and also reinterpret layers hitherto considered to be hidden but revealable, by means of various kinds of some new systematism . thanks to the hermeneutic way of processing texts, it has become increasingly clear that, despite the fact that there is a text-object in front of us, when deciphering its message it is really nothing more than two subjects being present: a sign which we believe speaks to us, and ourselves, who address it, and this game (in which our being, the basic meaning, dignity and nobility of our existence, i .e . our authentic identity in the divine image are at stake) lasts until we become satisfied with its actual result, or at least until the start of our next attempt to decipher some further message . it was this hermeneutics, which placed the study of the bible on a new footing by its genesis, which today provides the framework and approach to the interpretability of all textual analysis and communication, from the mundanity of everyday language to the products of literature or law . it is especially applicable to law, and this must be emphasised here, because, in its classical continental form, the law – based on the wording by the legislator – displays the most (pyramidal) structural and (deductive) procedural community with theological thinking built on divine revelation (see kraft, 1993; krawietz 1984) . ever since humans became literate they have torn something out of themselves, to be able to work on and process what was thought or said, at times using our intellect and at others by utilising various further tools . science seeks in this way the possibilities of truth, i .e . the truthfulness of our propositions, because they are deducible and thus provable from 80 csaba varga public governance, administration and finances law review • vol. 7. no. 1.  some more basic and already approved propositions . and in morality, in matters of community, which presuppose unity and unanimity, and most strikingly in law, the possibility of obtaining an answer that has the persuasive force of obviousness . did we succeed? has there ever been any certainty in the law ? or is there legal certainty at all, which was able to reach its fulfilment by deploying newer and newer means; first recording the law in writing, then putting it in conventionalised forms, then affirming it again by oath, and later reissuing it, and, finally, through all sorts of other invented intermediaries, i .e . additional human artifice inserted as a means of assurance? have we achieved more by this? the answer may be both yes and no at the same time . after all, progress always also involves regression . did the qualitative leap succeed because at the same time it led to a transition to a new quality, as so violently taught by dialectical materialism, initiated in hungary as the true dogma by soviet troops (engels, 1940)? perhaps, in fact, this is only an illusion, a disanthropomorphisation – as a marxist writer, a son of our country, once suggested – because its object is also inevitably one with us, since behind it lies our anthropomorphism, supposedly born and dying with us at the end of our lives (sinkó, 1985, p . 626) . after all, if anything leaps, quantitatively or qualitatively, we ourselves, the carriers of that leap, leap with it . on the final analysis, man therefore takes from himself to make himself an autonomous object, because this is how he attempts to make himself more and more expansive and to become a creator of community or even a creator of science . those of us who can now, by virtue of the social division of labour, deal professionally with this artificially extracted and shaped object, will also create a unique and then canonical way of dealing with this creature – in law, science, and anything else . as things now stand, the law is objectified . its processing, or its treatment, is broken down into stages, separated by functions, regulations and tasks . careers may even be built upon this, and gradually but consistently law and legal order are established as the henceforth extensively growing so-called legal life, producing an own particular and separate world, which now not only claims autonomy, but also seems to function on its own, as if it were the automatism of an autonomous machine, sometimes – fortunately – in organic unity with the development of the surrounding world, but sometimes stubbornly engaged in a michael kohlhaas-like struggle with it (cf . varga, 2012a, pp . 119–120; von kleist, 2013; neheimer, 1979) . the self-regulating, almost self-reproducing system of the law is thus akin to that of a machine, operating according to a built-in mechanism, until it is broken by revolutionaries who are angry machine-breakers or their society-destroying offspring .6 6 cf. https://en.wikipedia.org/wiki/ned_ludd and https://en.wikipedia.org/wiki/luddite. one may wonder whether the machine-breakers of the 19th century were not merely the primitive, self-fulfilling imitators in a single furious act of what the punitive campaigns and religious war-like conquests intended to achieve, from the late mediaeval destruction of the cathar culture to the maoist destruction of the legal culture of many east asian countries, when, in cambodia, for example (as i learned as a participant in the nagoya conferences to help regenerate its former legal culture in the strictest sense of the word), practically no remnant (either buildings and books or even juristic professionals) could survive? cf. brown, 1993. was not this perhaps the same destructive rage that not infrequently lurks in movements like feminism or black lives matter today? as immanuel kant (1797, pp. 318–323) opines, negation of the law amounts to a revolution itself. https://en.wikipedia.org/wiki/ned_ludd https://en.wikipedia.org/wiki/luddite 81hermeneutics of the law public governance, administration and finances law review • 1. 2022 can it be supposed that the very human component behind this law has ceased to exist? or is he still there, just made invisible by the machine-building hands of masters? during the return, manifested as so-called progress, just as during the so-called qualitative leap, our own original being, which leaps with it from the past to the present and thus partly into the future, in the relation between man and his artificial creatures, necessarily reproduces its original conditions – its endowments – as the naturally given framework of real existence, always and under all circumstances . for whatever new means, limitations, mediating paths we may devise, the interposition of further (and in our inertia, again and again, and almost indefinitely, newer and newer) filtering and guiding institutions of law (by various intermediate forums and procedures), will certainly resemble man’s original essential self in this one respect . in other words, there is an irreconcilable and contradictory dichotomy between, on the one hand, demanding secure predictability and thus patternedness through the prior standardisation of the multi-stage process built into the process (i .e . the realisation of law as patterned practice), and, on the other, the wish to retain its original intention: that ultimately it is man rather than the impersonal automatism of his own institutionality that will finally rule the law . therefore, despite the revolutions the law undergoes and its changing objectifications, and the incorporation of various mediating mechanisms as intermediaries, an eternal hermeneuticum always reappears in the relationship between the object and its objectifier . law serves man – and not the other way round: man addresses it again and again, and makes it proprietary, and his own in its humanity and functioning . hence, man makes the law his own through the means and ways of whichever instrument, procedure, competence or whatever else he happens to have interposed in the course of its objectifications and institution-building . all this shows that there are two ways of changing law from the outset, which cannot be imagined other than by activating the actuated object or the actuating subject, thus either through a formal change of the law or through the informalisms of daily reinterpretations. is the law therefore a subject in any sense? it is borne by language, even if it is rooted in behaviour or in recurrent ways of reacting, as in the case of so-called legal customs . since the direct personal experience of a custom, whether by the person following it or by an outside observer, can only ever be partial or fragmentary, and the rest of it  has to be transmitted or narrated by those who can see through its accessible (though inexhaustibly vast) entirety . moreover, language is a deceptive medium . once we are within it, it is ours . but while the inexpressible range of one’s personality and of one’s particular state of mind is also condensed in what we say and write in the gesture of a particular moment, talking about this inexpressible fullness of life reduced to a few words,7 employing only a fraction of the resources of language, this fleeting and truly irretrievable, but once experienced, total sense of life reaches the other (i .e . everyone else who is interlocutor or participant in this personal “ours” in our linguistic community); and this constitutes a form of upper layer, 7 that which is concrete in human practice, that which contains the elements of infinite complexity inherent in human events, is utterly inaccessible and intangible to science, writes villey, 1995, p. 364: “la pratique qui joue dans le concret échappe au total à la science.” 82 csaba varga public governance, administration and finances law review • vol. 7. no. 1.  now itself embodying a kind of abstraction, which we usually record in dictionaries as the abstraction of some meaning. such a definition is, therefore, itself a product of generalisation, a kind of compendium . these meanings do not “exist” in themselves, but are merely described by other words, thus by other meanings and their associations, and thus brought into relation in a vast mental-spiritual space in our intellectuality, which does not exist as reality either, as all that is living language only exists in our practice of language, encoded only in lived communication . communication, as we know, is itself only part and means of our social existence in action, in which every moment (even if we think by ourselves that it is planned or intended) is in fact a response to something, an interactive product of effects . is language objective and neutral? yes and no . language can only exist for a reason, that is, as long as the answer includes the statement “yes, it is objective” . but our answer may also be “no, it is not objective”, because the meanings are carried by man in his social practice, and this, going through major social changes over long distances or over time, as well as in the most personal formation and shaping of all of us, sometimes perhaps from one moment to the next, exhibits changes, i .e . contractions and expansions, shifts and swings of emphasis, that are certainly hardly recognisable in the short term .8 in law, anything and everything is composed of nothing but words. not only what are referred to as rules, but also what we become aware of when perceiving something as a custom, which we describe as behaviour and which we create and name as an institution (i .e . as a procedure inherent in behaviour, but which is essential for us and therefore has a context to be highlighted, as a forum and as a competence of the latter) . for just as the facts do not come to court of their own accord, but are established by the authorities through testimonies of varying value,9 so norms emerge only as they are communicated, mediated by humans . language is described by its reference, by what it stands for, rather than something conceptualised as an external or internal reality . it may be that which is publicly known to exist or it may be that which now exists because it has been revealed through investigation and named by having been given an independent descriptor; it may be that which can or will exist simply because we want it to exist; or it may be that which has not existed so far but which we have created by naming it as a framework, a focus point of ideas, or in short, as an institution, and by recognising it as such, after defining its conditions . through our communication, we thus artificially create virtual worlds, which guide and even control our thinking through their own virtual channelling . since this creates an intricate web of thoughts, in which, in its internal interconnectedness and for its conceptual clarification, or for the mapping of possible fields of application, we may have something 8 structurally, this dichotomy is reminiscent of the internal contradiction that lukács describes as the only possibility for language to fulfil its function at all: on the one hand, it must be sufficiently clear in order to make successful communication possible, but on the other hand, its complete clarity is excluded, and only the physical gesture of pointing to something can make up for this. for if it were not suspended in this internal contradiction, it would be incapable of representing the ever-changing contexture of a world that is ever-changing in infinite variety (lukács, 1984; lukács, 1986). 9 it was jerome frank’s (1949, p. 37) revelatory statement that: “since the actual facts of a case do not walk into court, but happened out-side the court-room, and always in the past, the task of the trial court is to reconstruct the past from what are at best second-hand reports of the facts.” 83hermeneutics of the law public governance, administration and finances law review • 1. 2022 to do without wanting to concern ourselves with the outside world, with concrete momentary uses in our purposeful human practice, in such a  way that we add new abstract constructions to this web of thoughts . ideally, within the legal profession, for example, the work of a legal scholar or a law commentator is like this . in the law, as a result of and in the manner of these processes, the primacy of written forms, their hierarchisation and their reworking in a doctrinally systemic manner took place gradually, and was followed by the development of procedural methods, forms and, above all, reasons (or more precisely: possible justifications10) by means of which any narrowing or widening, reinterpretation, or preemptive or fictional extension of the law (varga, 2018; cf . del mar, 2013, pp . 442–465) can be conceived and, in the event of its consistent mass dissemination, followed, simply by the way in which the subject addresses the term by reacting to it . words, words, and more words… man desires order and conventionally working environment around himself, in a world in which he experiences nothing but constant movement and change in his objects and in projections projected by humans, in this purely human, artificial virtuality, which affects not only individual real objects or their ad hoc positioning, not only a term or the institutional nature of sets of terms, but also their broadest possible contexts – since man constantly rethinks himself, as well as the context this man exists in, so to speak, his outside world . man is a reactive being, reacting in one way or another to the impulses that reach him incessantly . the more modern a  person is, i .e . a  man living with literacy, books and knowledge-culture, the more he builds a vision of the future for himself, in addition to concentrating on the needs of the present, and this vision is usually one in which he attempts to make use of the experiences of the past .11 he therefore draws an arc in time, builds bridges and strives for consistency, but never forgets that his task is to shape the present in the present, for the present, in the desired manner . as the law begins to take on a form that moves away from the immediacy of daily existence and the pleasure of the dominant person or institution at the top of the social hierarchy, the need for consistency and to avoid contradiction becomes increasingly prominent in its emerging independent nature, both as self-justification and, above all, in its efforts for uniformity in making law enforcement efficient . this necessarily appears in its attachment to the past and in its further invigoration of the past: it weaves in and/or cuts off the threads of its former entirety in such a way that the elements it identifies itself with at the moment provides a crystal clear and at the same time more transparent image of it . 10 in the european continent the theoretical reconstruction that sees the norm as a decision pattern, i.e. as a procedural basis and as a reference for justifying the decision taken in the process of law enforcement that ends with the imposition of a sanction, rather than a reason, has spread with kelsen. in his posthumous ontology, lukács called it a system of fulfilment (verfüllungssystem). in this perspective anything in the legal process becomes a successful realisation of law when – and only provided that – it is recognised as the legal consequence of a patterned pattern (i.e. as a decision based on as deducible from the law) rather than when something good happens or occurs in society as a result of it (cf. varga, 2013, pp. 219–234; varga, 2012b). 11 in today’s terminology, this is legal tradition as an alternative to legal culture, when the past has a justifying significance in making our decisions today (cf. varga, 2021, pp. 191–219). 84 csaba varga public governance, administration and finances law review • vol. 7. no. 1.  all this, however, takes place in the present, for the present . and the man of a particular present, if he happens to work with the law, understands the text of the past in the relational context of the present. this includes both what was written centuries ago, and what was written only yesterday . legal imagination (white, 1973) – an active person in charge today can only think of what he can imagine as valid (correct, controllable, or more precisely: controllable in this way) in the spectrum of the particular time he lives in, while also thinking of the future . these, in other words, are the limits of the legal imagination,12 within which there is nothing that he cannot conceive from his experience to date . this was, for example, the specific case for a criminal law codifier in the hungary of a century and a half ago, who, unlike in the german model of dogmatic systemic completeness, would have considered it a disgrace to determine the status of an act if the state itself not only has committed something that it  had itself ordered to be punished as a  crime, but also prevented its mandatory punishment until the statute of limitation of that crime had run out (for the background see varga, 1995; for the practice of the hungarian constitutional court see nag y, 2019) . thus, every word and every context is heard, understood and interpreted in the context of the day . the eternal lesson of hermeneutics, then, is that every interpretation is a reinterpretation, just as every situation in communication is new, however much it may seem like a routine continuation of an act or procedure also carried out yesterday or of one just completed . whether we are wading in the danube or in lake balaton, the water is always different in it, just as we are different . for every existence is a continuous flow-like process, and every moment and phase of it is an interaction . it is obvious that as soon as we speak of hermeneutics, we find ourselves in a counterconceptualisation, since in so doing we practically question or simply negate the self-sufficient role that the set of signs in question, the text itself may play in the human undertaking of conveying meaning . as we are talking about hermeneutics, we are already examining the limiting and channelling effects of a wider environment . the common core of all this is language, which serves the purpose of capturing and transferring meaning . examining the process in all its complexity, we must therefore conclude that, as the unravelling of meaning takes place within a web of conventions and traditions, it is the newer and newer interpretations of the conventionality of these traditions themselves that give rise to the fluidity that can be perceived in a hermeneutic inquiry . it is a never-ending game of constant movement while maintaining one’s self-identity, and ultimately nothing more than a unity of renewal and preservation, as their simultaneous dissolution in each other takes place at every moment of the search . this implies that in the description of the process itself, the direction of the explanation and the argumentation constitutes the centre of gravity – because in analysing its continuity, i am analysing its determination, and if i want to show the discontinuity of the process over lengthy time periods, i am emphasising the accumulation of random surplus effects . 12 for carl schmitt, the idea of conceivability appears as the basis for any kind of regulation (cf. varga, 2013, pp. 219–234). 85hermeneutics of the law public governance, administration and finances law review • 1. 2022 words simply channel the other words we associate with them . if we call upon them, they speak; but what they say, that is, what we ourselves mean by them, is up to us . ultimately, therefore, language is nothing more than ourselves: in our mass, as a community of language-users, it serves our own understanding by using it for ourselves, yet, if we can, because we have the power to impose it, then for others as well, even for a whole society, as something to be followed by all of us . just as monks disbanded in a dictatorship may feel the emotional charge of their past attachment to each other and to their common cause, so in my quality as an overzealous police chief i may need nothing but a rule reinterpreted and raised thereby to the level of the law in force on the framework conditions for founding and operating associations, which, if the counter-cause is so important to me, i may order to be applied to threaten them with illegality as a deterrent, to be sanctioned as preparation for a sin . and perhaps in the future there may arise some confusion on my deeds, in another era, with a different order of values and culture, when i may perhaps condemn this in retrospect but as a continuation of the same language game, now perhaps detached from my past culture of the law once made to nihilise any civil arrangement through the arbitrariness of communism . for it is in culture and not law, by prudent selfrestraint and not law, that a society as a language-user community can attempt to achieve a certain continuity of values, or even standardisation, and thus to establish them as fixed for its own life . in england, efforts were once made to encourage the use of plain language – to ensure that subjects, predicates and adverbial extensions should be unambiguous, that is, that the proliferation of metaphorical or symbolic terms would not destroy the credibility and clarity of language and linguistic communication . it is no coincidence, but precisely a continuation of such a tradition, that later the unsuccessful great legal reformer of the 19th century, jeremy bentham, would speak out against the use of fictions, by naming them a kind of common enemy (ogden, 1932; takashima, 2019; for the forecoded failure of the plain legal language movement see assy, 2011; ződi, 2019) . we can, and must, try to mitigate all such possibilities inherent in the nature of language . we cannot, however, change the most important fact (and one mostly unnoticed by those working on its improvement), that language is a creation of man, and thus man remains the master of his language under whatever conditions . he creates it  around himself, and even if he cuts the umbilical cord attached to his person he does not, indeed cannot, detach it from the man himself . because in the man-made so-called second nature we may establish complex systems of relationships, in the context of which we can create man-made virtual contexts of objects by linking things with other things, so that afterwards these – as institutions and the like – can now seemingly move by themselves and even reproduce themselves (which is known as reificatio), and these sets of things may even act as an immutable threatening force against individuals, groups or even the majority of a whole society, independently of their personal stand and wish (which is already alienatio) . this is not, however, related to language or language use, but to the ontological reality of social practice, which also lives in any form of representation through nothing other than language . this is because the language itself is not reality – it does not “exist” – but is located as a medium of mediation in the process of its use, with a continuity of the past, so also with 86 csaba varga public governance, administration and finances law review • vol. 7. no. 1.  interruptions and of constant change that can only be detected in retrospect, even if it may not be captured at the level of moments . starting from culture, that is, from the way we perceive the world and ourselves in it, everything we created as second nature is conventional. in toto, it is a function of what we mean by it and in it, even in its smallest element . in social practice, from the outset what is conventional can only be something that is expressed linguistically . language is thus truly a mediating medium operating in our social existence . to the extent that we build increasingly complex self-contained webs of actions and relationships for our increasingly profiled social activities, to use them in their own terrain, this common so-called vernacular develops into more or less self-contained languages, which may even go as far as partially separating from the common language itself, through specific uses of their nomenclature . this is well known: in law, the colloquial description and designation of a behaviour can only be considered if the so-called subject-language expression of the given behaviour has been transcribed into the meta-language of the law; and the law itself can decide when, under what conditions and to what extent colloquial language can be used in or introduced into a legal procedure in other contexts . in this way, not only are different spheres of action linguistically distinct, but the logic, the process and not least the justification of action within them also becomes self-contained, i .e . they become a function of the sphere in question, for example of the law’s own set of criteria . thus, newer, increasingly more professional and specific conventionalities are built on the overall societal conventionality that maintains the language and the respective community at all . we gaze in wonder at the theoretical achievements of particle physics and theoretical physics, things we can never see . while the history of physics concerns this, it is also about the fact that, although these discoveries, their so-called laws, are now the well-known reality of our present, in our everyday lives it is sufficient to rely on the worldview that theorised our direct human experience half a millennium earlier, by applying newton’s physics and the tradition of the causality of processes it involves . in the same way, we still hold to the notion of language as a reproduction of reality, the notion of adequatio rei et intellectus, that is, that in our language words stand for objects, and thus we can linguistically replicate, represent and thus substitute the external world from its smallest constituent to its infinite correlations, and even make it the object of operations carried out on a purely intellectual plane . yet it was only a century ago that the first description in jurisprudence was made of the fact that its systemic terms, although borrowed mostly from common words, mean nothing beyond the designation of the taxonomic position of an artificial system of thought, i .e . a mere locus; their only role is to designate, economically, a single sign for a number of criteria set up by a mass of specific rules (ross, 1957; brożek, 2015) . what they say, therefore, does not “exist”, but they nevertheless serve as signposts in the reference debates of the legal game, as incentives or as channelers of juridical action in a  certain direction (and not in another): we just use them as concepts, as a  means of ensuring its localisation within the conceptual web of the law . all legal terms par excellence are like this, from ‘contract’ to ‘possession’ to ‘self-defence’ . this is because – to return to the previous analog y – we have known since the end of the 19th century at the latest that our world is more and different from what we can experience even indirectly with our senses, and that, in the same way our language is not a description of reality, but 87hermeneutics of the law public governance, administration and finances law review • 1. 2022 the creation of a meta-net of thoughts, which we can then project onto reality with varying degrees of success . and this is because the experience of our intellectuality is also an action, which is subject to conditioning – from interests asserted to any other mental conditioning present in the relevant moment – that affects it . with our ancient topos, which still survive in us as divine creatures, we have, like ancilla theologiae, not only viewed the order of nature, but also human behaviour in our legal thinking, so to speak, following a  theological pattern, namely, translating the sequence of “god ® law ® nature” to the formula of the trinity of “legislator ® rule ® compliance/non-compliance” (krawietz, 1984) . it was only from predominantly american anthropological research, starting in the 20th century, that we learned that the whole social process does not take place in such a  causal chain, but stochastically, interleaved with randomness, even if statistically measurable and perhaps also predictable and pre-plannable as well . that is to say, translated into practical language: in everyday life, we tend to act with ordinary attention and care, and even if we sometimes consider risks and dangers, we are still predominantly prisoners of the potentials and the very chance of the moment as we seek to assert our interests; and only incidentally, among other things, mostly when we reconsider or are forced to justify our just-as-it-happened choices, does the law or legal criterionality arise, if at all (see edgerton, 1985; reynolds, 1994) . in this dichotomy – to put the original conceptual distinction (pound, 1910) in the sense and context of the present explanation – on the one hand, there is always a given text in law, which in our legalistic worldview we call the law (law in books), and on the other hand, there is the understanding of it as a fact, by which in the given culture of understanding it  is enforced as hic et nunc concrete law applied to the case (law in action understood as a counterpart of the former) . moreover, there may be a wide variety of such interpretations with variability inherent in each of them . this also means that, due to this variable nature, it can no longer be theorised, but at most can be described in other words in a description of the practice of understanding (as dogmatics of or commentary on the law) . nevertheless, as with any text, it can be said that on top of what we create by textual objectification as part of the humans’ second reality, we also add another layer, an exercise in understanding .13 it is also worth recalling that an english classic of establishing a historical vision of law recognised the possibility of this a century and a half ago . “i apply the term ‘legal fiction’ to any expression,” wrote maine (1861, pp . 25–26), “which conceals or attempts to conceal the fact that the law has been modified by the fact that, although its words remain unchanged, its operation has been modified [ . . .] . because the law as a whole has thus changed; and the fiction is that it remains what it was .”14 of course, this did not yet herald the introduction of the idea of hermeneuticum into the studies on law or the 13 this shows the significance of the doctrinal study of law (rechtsdogmatik). it was also the core of the so-called invisible constitution that the first president of the hungarian constitutional court invoked as the legal basis for many of the rulings the court made (cf. varga, 2020). 14 cf. goëtzmann, 2013. it is worth noting that by maine’s time, jeremy bentham’s oeuvre was already complete, and he was passionately fighting against, among other things, “the pestilential air of fiction”. according to bentham, 1843a, p. 1153: “fiction, tautology, technicality, circuity, irregularity, inconsistency remain. but above all, the pestilential breath of fiction poisons the sense of every instrument it comes near” (cf. stolzenber, 1999). 88 csaba varga public governance, administration and finances law review • vol. 7. no. 1.  practical use of its teaching, since as a natural consequence of his desire for plain language maine trusted in the plain meaning that follows from it – that is, in the desired fact that in language words and expressions have a kind of natural meaning, which the inherent arbitrariness of the way we form our language can of course distort and further shape as well, but still, as the command of common sense, we must adhere to its given nature and, if possible, adjust to it . to sum up, an awareness of the role of hermeneutics in law and thus the recognition of the possibility of informal change of law, which can be reconstructed as a continuous process by those who look at change of law not from within, as a formal object of legal analysis, but from a broader social-scientific perspective, for example, from the point of view of the very chance of the legal recognition of the demands formulated in social and political mass movements, can now offer the prospect of influencing and possibly affecting a triple sphere of legal actors and activities, since, in addition to legislation on the one hand and the law enforcement on the other, an entire sphere of putting the law into practice via mass or individual popular implementation is also included as a third sphere (gustafsson & vinthagen, 2013, p . 40) . and it is perhaps no accident that it is precisely here, in this trinity, that the hermeneuticum and the sociologicum meet as two components of the direction identified within any ontological approach to law . references assy, r . 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(2019) . the limits of plain legal language: understanding the comprehensible style in law . international journal of law in context, 15(3), 246–262 . online : https ://doi .org/10 .1017/ s1744552319000260 https://doi.org/10.1017/s0021223700013881 https://doi.org/10.1017/s0021223700013881 https://doi.org/10.1017/s1744552319000260 https://doi.org/10.1017/s1744552319000260 public governance, administration and finances law review vol. 7. no. 1. (2022) • 109–122 . © the authors 2022 doi: 10 .53116/pgaflr .2022 .1 .8 self-regulating platforms? the analysis of the enforcement of end-user rights in the light of the transposition of article 17 of the cdsm directive1 péter mezei*¤, istván harkai**¤ * associate professor, university of szeged, faculty of law and political sciences, institute for comparative law and legal theory, e-mail: mezei .peter@szte .hu ** assistant professor, university of szeged, faculty of law and political sciences, institute for comparative law and legal theory, e-mail: harkai .istvan@juris .u-szeged .hu abstract: the deadline for the transposition of directive (eu) 2019/790 (the cdsm directive) into national law expired on 7 june 2021 . some eu member states have failed to perform the transposition, and so they also failed to introduce the new obligations under article 17 prescribing brand new requirements that online content-sharing service providers (ocssps) shall comply with . as a part of these rules, ocssps shall amend their end-user licence agreements (eulas) to include terms on the enforcement of the mandatory limitations and exceptions (quotation, criticism, review, as well as use for the purpose of caricature, parody and pastiche) under article 17(7) and the establishment of an effective complaints and redress mechanism regarding the removal of the user-generated content in line with article 17(9) . in the second phase of our ongoing eu-funded research project, we examined the extent to which specific ocssps have amended their eulas to meet these eu obligations . our empirical data show that, besides only little progress, new sources of conflict have emerged . keywords: cdsm directive, copyright reform, online content-sharing service provider, end user licence agreements, platform liability, complaints and redress mechanism 1. introduction the advent of the web 2 .0 brought along the age of platforms . today, information flows are dominated by websites that specialise in making available for the most part usergenerated or user-uploaded content . the potential copyright liability of streaming service providers, social media platforms, online marketplaces, websites offering open source 1 this article was completed within the frames of the h2020 recreating europe project. on the project itself see www.recreating.eu/ https://doi.org/10.53116/pgaflr.2022.1.8 https://orcid.org/0000-0003-4832-2079 https://orcid.org/0000-0003-1584-4196 mailto:mezei.peter@szte.hu mailto:harkai.istvan@juris.u-szeged.hu http://www.recreating.eu/ 110 péter mezei, istván harkai public governance, administration and finances law review • vol. 7. no. 1.  software or open-access content and online encyclopaedias has become one of the most prominent issues in legal literature and practice (brieske & peukert, 2022; quintais, 2019a; quintais, 2019b) .2 following the development of the digital single market concept and the increasingly outdated nature of eu copyright law, reforming the eu copyright law has become necessary . among other things, the cdsm directive also sought to regulate the behaviour of ocssps .3 the new rules have created new challenges . article 17 of the directive deserves special attention, not only from a dogmatic point of view (see grad-gyenge, 2020) but it must also be subjected to empirical tests . the aim of the present study is to examine the steps taken by some ocssps to ensure that their eulas comply with the provisions of article 17 and the extent to which they provide transparent information on their content moderation practices . against this background, the study is structured as follows . section 2 briefly outlines the latest developments in the copyright regulatory environment for ocssps, including the case law of the court of justice of the european union (cjeu) and article 17 of the cdsm directive . section 3 briefly summarises the results of our empirical research conducted in 2021 on end-user licence agreements for platforms . this research has sought to map the practices of platforms in relation to end-user rights before the transposition deadline of the cdsm directive . these are followed by the most important new findings of our research . section 4 summarises the results of a limited, ‘second round’ empirical study conducted in terms of the practice of one hungarian and eight international ocssps . we specifically looked at the extent to which these service providers have brought their eulas into line with the requirements for the benefit of end-users under article 17 of the cdsm directive . in the concluding section, we make some observations that may help in the future monitoring of ocssps for compliance with copyright standards . 2. the age of platforms4 the court of justice of the european union (cjeu) has a long history of jurisprudence on the intellectual property liability of intermediary service providers (platforms); however, only some of these decisions concern the world of copyrights directly . for the first time it was in the ziggo case that the cjeu had to answer the question5 of whether the pirate bay, the peer-to-peer file-sharing service provider that had been sued across europe, was directly liable for copyright infringements by individuals using their site . according 2 for the proposal of the directive (eu) 2019/790 and the explanatory memorandum see https://bit.ly/3ymodbf. for impact assessment 1–3 see https://bit.ly/3ykmqd0; https://bit.ly/3vy0cys; https://bit.ly/3t55qcz 3 directive (eu) 2019/790 of the european parliament and of the council of 17 april 2019 on copyright and related rights in the digital single market and amending directives 96/9/ec and 2001/29/ec. 4 this concise summary draws heavily on our previous research, some of which was conducted with other colleagues (mezei & lábody, 2022; mezei & harkai, 2022; harkai, 2021a). 5 judgment of 14 june 2017 in case no. c-610/15 stichting brein v. ziggo bv, xs4all internet bv, para 38 (see ferge, 2017). https://bit.ly/3ymodbf https://bit.ly/3ykmqd0 https://bit.ly/3vy0cys https://bit.ly/3t55qcz 111self-regulating platforms? public governance, administration and finances law review • 1. 2022 to the cjeu, the pirate bay itself was a direct infringer by actively supporting end-users’ illegal behaviour . with its decision, the cjeu has effectively extended the direct liability regime of article 3 of the infosoc directive6 to activities, which had historically been considered indirect conduct (mezei, 2012, pp . 112–131) . the cjeu brought both fresh air and “strange vibrations” to eu copyright law with the idea of direct liability for intermediary service providers (leistner, 2020, p . 132; hofmann & spechtriemenschneider, 2021) .7 the cjeu passed its decision in the joint cases of youtube/cyando8 regarding the copyright liability of “bona fide” intermediary service providers under the infosoc directive (that is, the pre-cdsm legal regime) just a  few days after the deadline for transposition of the cdsm directive ( jütte, 2021) . here, the cjeu has established that youtube (operated by google/alphabet) and uploaded (operated by cyando) are not directly liable for infringements committed by users of the platforms as long as they do not actively engage in such conduct; that they are entitled to the protection of the hosting service providers’ limitation of liability if they do not actively assist end-users; and that they can only be subject to measures after they have been notified by rights holders of specific illegal content available through their systems (angelopoulos, 2021) . this practice of the cjeu has given rise to a bifurcated solution in which the knowledge of the service provider and its actual involvement in the use of the content formed the basis of the legal qualification . it is into this environment that the complex balancing regime of the cdsm directive has entered . article 17, on the one hand, aims to ensure a high level of copyright protection by declaring the most important platforms of the web 2 .0 era as copyright-relevant users; on the other hand, it tries to reduce the burden on these service providers within certain reasonable limits and to exempt them from potential copyright liability . thirdly it establishes ‘user rights’ for the end-users of ocssps’ services . let us briefly consider these three dimensions . firstly, under the cdsm directive, ocssps9 qualify as users of (classically noncommercial, user-generated) content uploaded to their websites by end-users who do not generate significant revenues .10 the underlying justification (rather than a legal basis) for this classification was the value gap (or transfer of value) theory, as developed by music copyright owners – i .e . the difference between the revenues generated by ocssps and the amount of royalties paid to music rights holders, which is not exactly favourable to the copyright owners (frosio, 2020) . it follows from the new regulation that the lawful operation of service providers is subject to prior authorisation of uses . however, this legalisation is almost impossible in everyday life due to the mass nature of the content uploaded to sites such as youtube or facebook . 6 directive 2001/29/ec of the european parliament and of the council of 22 may 2001 on the harmonisation of certain aspects of copyright and related rights in the information society. 7 so much so, that the judgment – before further creative interpretations by the cjeu – made a legal literature proposal like the harmonisation of indirect copyright liability in the eu (see leistner & ohly, 2019). 8 judgment of 22 june 2021 in joined cases c-682/18 and c-683/18 frank peterson v. google llc and others and elsevier, inc. v. cyando ag. for a detailed treatment of the youtube/cyando cases, see harkai, 2021b. 9 article 2(6) cdsm directive. for the hungarian definition of online content-sharing service providers, see act lxxvi of 1999 on copyrights (hereinafter copyright act), article 57/a. 10 article 17(1) cdsm directive; article 57/b of the copyright act. 112 péter mezei, istván harkai public governance, administration and finances law review • vol. 7. no. 1.  secondly, exactly for that reason, the cdsm directive provides an alternative way for service providers to be exempted from copyright liability if they apply content moderation to sort out illegal contents from their system . more precisely, ocssps shall ensure the unavailability of specific works and other subject matter uploaded to their websites and identified by copyright owners, and prevent the content from being made available again after filtering the contested content; or disable access to or remove the contested content from their websites expeditiously following subsequent notifications made by copyright owners regarding individual infringing uses .11 thirdly, there was (and still is) a real risk that end-users will be the collateral losers of the tension between copyright owners and platforms, because platforms will ‘filter first and ask questions later’ to avoid these new liabilities . furthermore, automated (algorithmic) and generally excessive filtering practices can cause serious harm to freedom of expression, access to information and even to freedom of education and learning . the cdsm directive has therefore also declared a number of guaranteed end-user rights, and hence quotation, criticism, review, and the use of works for the purposes of caricature, parody or pastiche have become mandatorily free (stieper, 2020) . moreover, it has been established as a result-oriented obligation that the new cooperation between rights holders and platforms should not result in prior or ex-ante filtering of content freely uploaded, independently of the request for permission .12 platforms are also required to have effective complaint and redress mechanisms,13 and must inform their clients, expressis verbis, of their rights in the end-user licence agreements (see quintais et al . 2022) .14 3. empirical research on the end-user licence agreements of platforms and end-user flexibility (mezei & harkai, 2022) in 2021, we conducted an empirical research whereby we examined 17 content-sharing and other service providers15 in terms of the degree of flexibility they offer end-users in their eulas for the use of content, and the internal rules and mechanisms they have in place to ensure a  balance between different stakeholders (in particular in the area of dispute resolution) .16 this study had three important findings . first of all, it has been clearly demonstrated that end-users have spectacularly fewer rights for service-type accesses compared to the use of physical copies . some of the 11 article 17(4) cdsm directive; article 57/e (2) of the copyright act. 12 article 17(7) first sentence cdsm directive; article 57/e (4) of the copyright act. 13 article 17(9) first sentence cdsm directive; article 57/g of the copyright act. 14 article 17(9) last sentence cdsm directive; article 57/h of the copyright act. 15 the comprehensive list of the analysed service providers is as follows: streaming websites with hosting service for end-user uploads (soundcloud, bandcamp, youtube, twitch, dailymotion, pornhub); streaming websites without hosting service for end-user uploads (spotify, netflix, disney+); online marketplaces (steam, electronic arts origin, amazon, apple media service, google play); and social media (twitter, instagram, facebook). 16 it should be emphasised that the majority of the services under review are provided by u.s. companies, but are global in their nature (cf. nieborg & poell, 2018, p. 4285). as these services are also directed to the territory of the member states of the european union, they are bound by both eu and national law. for a similar – albeit much narrower – analysis from the american legal literature, see in particular mixon, 2021. 113self-regulating platforms? public governance, administration and finances law review • 1. 2022 end-user flexibilities are excluded by the legislator itself or by judicial practice (for example, by rejecting digital exhaustion) . we called this “regulatory lock-in” effect . this is further reinforced by the platforms, through their internal rules, imposing severe (often technological) restrictions on access; by remaining silent on limitations and exceptions akin to freedom of expression (moving this issue from the regulatory to the dispute resolution realm); and in many cases even keeping dispute resolution mechanisms, especially for end-user complaints, in the dark . an equally serious problem is that eulas use spectacularly vague terminolog y . the words “sale” or “purchase” dominate, despite the fact that the prevailing practice is that the end-users cannot acquire ownership of a  file, especially a stream. ultimately, we have found that the “as is” nature of eulas, namely that they cannot be modified by end-users (i .e . that they qualify as general terms and conditions) and their misleading language create an asymmetric situation in which end-user rights and expectations are not adequately enforced . on the other hand, platforms entrench their own legal position, often by obtaining unnecessarily broad rights from uploaders . secondly, it seems that social media sites offer the greatest flexibility to end-users, despite the fact that the basic model of these services is free and does not grant any ownership rights to its customers . interestingly, subscription-based streaming providers are the least flexible, despite payment of subscription fees . overall, we found that the potential presence of user-generated content increases the flexibility of the platform in direct proportion – we called this the “ugc effect” . thirdly, end-user expectations and the corresponding services are perhaps most affected by the huge competition that pervades the platform economy . the “streaming war” pervades both horizontal (service-type, e .g . facebook vs . twitter) and vertical (portfolio-based, e .g . apple vs . google) competition . this – in addition to the own business models of the actors – necessitated that platforms learn from each other, and sometimes overbid competitors’ offers . interestingly, many end-user flexibilities owe their existence to this competition, especially in the areas of secondary access (access sharing, linking, offline use, etc .) and ancillary services (e .g . subtitling ) . we called this phenomenon the “business flexibility effect” . 4. new findings in addition to the new liability regime for ocssps, article 17 of the cdsm directive also contains rules on user flexibilities . article 17(7) provides that ocssps must not impede the availability of lawful end-user content, and users can invoke a  number of exceptions when receiving and transmitting information using the platforms . article 17(8) makes it  clear that ocssps are not subject to a  general monitoring obligation; that is, they are not required to monitor the lawfulness of end-user content in general terms or whether such content falls within the scope of the permitted exceptions . article 17(9) obliges ocssps to put in place effective and expeditious complaint and redress mechanisms and to inform users in end-user licence agreements of the possibilities provided by exceptions and limitations under eu law (schwemer & schovsbo, 2020) . the european commission, in its guidance on the implementation of article 17, made the 114 péter mezei, istván harkai public governance, administration and finances law review • vol. 7. no. 1.  liability regime conditional on the proper functioning of safeguards that also take into account the legitimate interests of end-users .17 likewise, the cjeu’s confirmed in its judgment in case c-401/19 that the introduced regime offers a balanced mechanism to respect the interests of all stakeholders at hand .18 the platforms examined in the first phase of the research were narrowed down in the second phase . this was justified by the fact that the new liability regime of article 17 is limited in article 2(6) and recital 62 to ocssps, whose main activity is the hosting and provision of access to the public of a substantial amount of copyrighted-protected works or other protected subject matter uploaded by end-users, as well as the organisation and promotion of protected content in order to generate a profit . below, we examine the terms and conditions of use of eight international and one hungarian ocssps to see how they have met the requirements of the cdsm directive . in addition, we will examine what mechanisms do they offer to address end-users complaints related to the moderation of uploaded contents . 4.1. video sharing platforms youtube’s eula was last modified on 5 january 2022 .19 according to the agreement, uploaded content may only contain another person’s copyrighted work or other subject matter if that party has given their consent or if the user is otherwise entitled to do so (including through exceptions or limitations in copyright law or related rights under european union law) .20 youtube may use automated systems to analyse the lawfulness of uploaded content and to identify infringements and abuse . in case of uploading unlawful content, operators may remove all or a  specified part of the content, and the end-user concerned will be notified of this decision . in terms of end-user guarantees, which are the focus of the study, the main text of the terms of use does not provide much further guidance, but the information sought can be found in youtube help . the “copyright claim basics” page informs the end-user of the substance and process of the notice and take down procedure . youtube provides three ways to resolve a copyright claim . 1 . the end-user may wait until the copyright claim expires (90 days) . in case of a first claim, the end-user will need to complete the copyright school . 2 . the end-user can try to get in touch with the copyright owner and ask them to retract their claim of copyright infringement . in this respect, the terms of use, very succinctly, state that “each creator shall indicate on their channel how to contact them” .21 a further point of reference for 17 communication from the commission to the european parliament and the council – guidance on article 17 of directive 2019/790 on copyright in the digital single market, brussels, 4.6.2021, com(2021) 288 final, 18–25. 18 case c-401/19, republic of poland v. european parliament and council of the european union, judgment of the court of justice of the european union, 26 april 2022, ecli:eu:c:2022:297. we did not pay closer attention to this judgment in the present paper, since it was published after the ending of our second phase empirical research. in general, however, the findings of the cjeu do not alter the validity of our findings, indeed, they completely support the importance of the proper use implementation of end-user flexibilities under article 17. 19 for more information see www.youtube.com/static?gl=gb&template=terms 20 “your content and activities – uploading content”, ibid. 21 retraction of a claim of copyright infringement (https://bit.ly/3mcdps3). http://www.youtube.com/static?gl=gb&template=terms https://bit.ly/3mcdps3 115self-regulating platforms? public governance, administration and finances law review • 1. 2022 end-users seeking redress may be the requirement for contact details in removal requests .22 3 . end-users have the option to file a counter-notification if they believe that the video has been removed by mistake, for example because it qualifies as “fair use” .23 youtube will forward the counter-notification to the claimant, who will have 10 working days to respond . if the claimant (the initiator of the notice and take down procedure) still wishes to prevent the content from being restored, they must provide evidence to that effect .24 it is particularly interesting to see what exactly youtube means by the term “fair use”, which clearly refers to the fair use test, and which is the term used in the original english text . however, this is a scheme unknown in european, continental copyright law . in any case, youtube explains the four steps (factors) of the fair use test in detail and even gives examples of how it can be applied in practice .25 youtube uses content id claims in addition to the notice and take down procedure and the end-user counter notification that may be provided in response . this is an automatic claim that is triggered when an uploaded video matches another video or part of another video . blocking or maintaining the availability of the video with the addition of advertisements is essentially at the discretion of the copyright owner .26 the end-user who uploaded a content subjected by a content id claim can leave the videos on the site, but they can also choose to remove it, in whole or in part, for that segment; and it may even happen that the advertising revenue will eventually have to be shared between the copyright owner and the end-user .27 if the end-user disagrees with the content id claim, they may contest it, of which the copyright owner will be notified and will have 30 days to respond . the copyright owner can withdraw the claim, after which the system will automatically restore the content . if the claim is maintained by the copyright owner, the end-user may appeal against it . as a third option, the copyright owner can request the removal of the content or simply ignore the claim . if the end-user lodges an appeal, the copyright owner has an additional 30 days to respond, which is essentially the same procedure as the pre-appeal procedure .28 from a  copyright perspective, in particular with regard to the provisions of the cdsm directive, youtube has transposed the directive’s provisions into its contractual practice, at most only in principle, which it seems to regard as governed by the fair use test rather than by the european system of limitations and exceptions . at least no specific reference to this was found when studying the terms of use of the service . in any case, the rules outlined above are not only not expeditious and flexible for end-users, but they also ignore continental copyright doctrine and envisage a typical american legal institution . in addition, youtube continues to exclude primary liability for any infringing content uploaded by users that is clearly incompatible with the cdsm directive regime .29 22 contact information in copyright takedown requests (https://bit.ly/3vjgvdx). 23 copyright claim basics. resolution of copyright claim (https://bit.ly/3ga6ev9). 24 submission of a copyright counter notification (https://support.google.com/youtube/answer/2807684). 25 fair use on youtube (https://support.google.com/youtube/answer/9783148?hl=hu). 26 what is a content id claim? (https://support.google.com/youtube/answer/6013276). 27 monetizing eligible cover videos (https://support.google.com/youtube/answer/3301938). 28 disputing a content id claim (https://support.google.com/youtube/answer/2797454#appeal). 29 limitation of liability (www.youtube.com/static?gl=gb&template=terms). https://bit.ly/3vjgvdx https://bit.ly/3ga6ev9 https://support.google.com/youtube/answer/2807684 https://support.google.com/youtube/answer/9783148?hl=hu https://support.google.com/youtube/answer/6013276 https://support.google.com/youtube/answer/3301938 https://support.google.com/youtube/answer/2797454#appeal http://www.youtube.com/static?gl=gb&template=terms 116 péter mezei, istván harkai public governance, administration and finances law review • vol. 7. no. 1.  youtube was the first among ocssps to publish a transparency report on copyright infringements . the company’s first report was published on 6 december 2021, covering the six months before the deadline for transposition of the cdsm directive ( january– june 2021) .30 youtube uses three types of copyright protection mechanisms (webform, copyright match and content id), of which content id is by far the most important . during the reporting period, 722 .6 million notifications passed through this system – all initiated by 53 .7% of the 9,115 potential customers (4,893 copyright owners) .31 there were around 3 .7 million objections made by content uploaders against the 722 million “complaints” . once the objection has been lodged, the copyright owner may withdraw the complaint, maintain it, or take no further action and allow the complaint to lapse after 30 days . according to youtube data, 2 .2 million complaints against uploaded content have been dismissed and 1 .47 million complaints have been upheld . in the latter case, the end-user can file an “appeal”, against which the copyright owner must take the dispute to the “official” removal procedure, which is governed by the u .s . digital millennium copyright act (dmca) . this official procedure was initiated in 38,864 cases . there were only 4,471 cases when uploaders filed counter claims against these removals .32 youtube data are raw numbers – it is very difficult to read the reality from them . on the one hand, it does not answer the question of whether the contested uploads were in fact infringing or whether they were merely assumed to be infringing by the copyright owners . it is also not clear whether the low number of end-user objections, appeals and counter claims means “admission of infringement” or whether the average youtuber has little knowledge of how to defend their own rights and may be frightened by the potential costs of the procedure (see keller, 2021) . dailymotion’s service is very similar to youtube’s profile, and the fact that it  is a platform based in france, an eu country, is a particular reason to examine its terms of use . last modification date of the terms of use is 19 january 2022 .33 with regard to the lawfulness of the content uploaded, the operators exclude any direct liability and any obligation to monitor the content uploaded in general, including pre-filtering . the enduser uploading the content is solely responsible for the content .34 if content has been deleted under a  notice and take down procedure,35 the end-user concerned may send a counter-notification to the copyright owner via the platform .36 the terms of use available online do not contain any more detailed provisions than these, taking into account the provisions of the cdsm directive, which is somewhat surprising given that the company providing the service is established in europe . in the terms of use of twitch, which were last amended on 1 january 2021, the operators of twitch, the market leader in the online streaming of video games, place all primary 30 youtube copyright transparency report h1 2021 (https://transparencyreport.google.com/report-downloads). 31 ibid. 5. 32 for all data see ibid. 10–11. 33 section 9: miscellaneous, point 9.5 (https://legal.dailymotion.com/en/terms-of-use). this is also clear from the fact that french law is applicable to any disputes that citizens of the european economic area, the united kingdom and switzerland may have with operators. 34 section 5: our liability as a hosting service provider, ibid. 35 copyright – (i) copyright notification (https://legal.dailymotion.com/en/copyright). 36 copyright – (ii) copyright counter notification, ibid. https://transparencyreport.google.com/report-downloads https://legal.dailymotion.com/en/terms-of-use https://legal.dailymotion.com/en/copyright 117self-regulating platforms? public governance, administration and finances law review • 1. 2022 liability on the end-user who uploads the infringing content .37 the platform uses security measures to protect the uploaded content from unlawful acts of reproduction and distribution (communication to the public) . in addition, operators do not assume any liability for infringements that might occur despite these measures .38 as far as copyright infringements are concerned, the terms of use follow the dmca rules, which allow copyright owners to mark infringing content for removal through a notice and take down procedure .39 interestingly, twitch maintains a repertoire of licensed music that end-users can choose from to enhance their uploaded videos, but with the caveat that the music cannot be used for any other purpose and that operators can make any element of the repertoire unavailable at any time if the licence agreement for any of the sound recordings is terminated or expires .40 for music and sound recordings, twitch has additional, separate music guidelines (music guidelines) . end-users cannot only choose from twitch’s music offerings, but can also upload content that includes otherwise licensed music .41 the terms of use acknowledge that there may be otherwise unlicensed music and sound recordings that are subject to the fair use test, including transformative uses or works in the public domain .42 similarly to other service providers, twitch also provides the option of restoring content removed under the notice and take down procedure, also by filing a counter-notification, if the end-user “believes that his or her actions comply with free use under us law” .43 users of videa – a company based in hungary – are obliged to warrant44 that they have the necessary copyright permissions to use the uploaded content and are responsible for any copyright infringement .45 the operators of the platform exclude any liability for any damage caused as a result of the content of the uploaded videos .46 the operators can remove all or part of the infringing content that violates the terms of use, but they are not obliged to know the actual content of the uploaded videos . if the copyright owners wish to contest the legality of a  piece of content, they may do so within the framework of a notice and take down procedure, in the course of which the service provider’s liability is adjusted by the terms of use to articles 10 and 13 of the e-commerce act .47 otherwise, videa’s end-user licence agreement does not contain any guarantees protecting end-users . pornhub, one of the world’s largest adult content providers,48 provides very detailed terms of use for the end-users visiting its platform . this fact was already evident in the 37 user content representations and warranties (www.twitch.tv/p/en/legal/terms-of-service/#8-user-content). 38 content is uploaded at your own risk, ibid. 39 respecting copyright, ibid. 40 specific terms for soundtrack by twitch, ibid. 41 sharing music on twitch (www.twitch.tv/p/en/legal/community-guidelines/music). 42 uses permitted by law, ibid. 43 how to make a counter-notification (www.twitch.tv/p/hu-hu/legal/dmca-guidelines). 44 imprint (https://videa.hu/impresszum). the last update of the terms of use was performed on 31 may 2021. 45 copyrights (https://videa.reblog.hu/cimke/%c3%81szf). 46 responsibility, ibid. 47 act cviii of 2001 on certain issues of electronic commerce services and information society services. removal of videos (https://videa.reblog.hu/cimke/%c3%81szf). 48 this paper is dedicated solely to the copyright aspects of lawful adult contents, and will therefore completely omit the analysis of the socially reprehensible aspects of porn industry, e.g. child pornography or abuse of actors. http://www.twitch.tv/p/en/legal/terms-of-service/#8-user-content http://www.twitch.tv/p/en/legal/community-guidelines/music http://www.twitch.tv/p/hu-hu/legal/dmca-guidelines https://videa.hu/impresszum https://videa.reblog.hu/cimke/%c3%81szf https://videa.reblog.hu/cimke/%c3%81szf 118 péter mezei, istván harkai public governance, administration and finances law review • vol. 7. no. 1.  previous phase of the research . the terms of use have not been changed since then, with the last modification date being 5 may 2021 . the end-user is entirely responsible for the legality of the content uploaded; the operator is not liable for it  and uploads are not checked by the operator in general, but at most only randomly .49 the operator reserves the right to remove content even without notice . the notice and take down procedure is ensured by pornhub to copyright owners .50 end-users may contest the legality of the removal in a counter-notification sent by the operator to the copyright owner .51 pornhub has implemented an automated audio-visual content recognition system (digital video fingerprints) to help identify infringing content before it is made accessible .52 4.2. social media platforms facebook, the flagship of the meta family of products, warns users in its terms of use that it employs advanced technical systems and supporting human resources around the world to prevent abuse and harmful behaviour, and may remove infringing content or make certain features inaccessible or disable the user account .53 it uses automated systems to detect and remove abusive and dangerous activities .54 operators may remove or disable content that violates community standards, is unlawful (including intellectual property infringements), misleading, discriminatory or fraudulent, where this avoids or mitigates legal or regulatory impacts that negatively affect facebook . the user will be informed of the fact of removal, but may request a  repeated check of the content, but the latter option is not available if the user has seriously or repeatedly violated the terms of use, or if doing so would expose facebook, or anyone else, to liability, or, inter alia, if it is prohibited for legal reasons .55 facebook has specific guidelines for content that includes music, stating that the uploader is responsible for the legality of the content posted, and emphasising that facebook is not responsible for any conduct that could give rise to secondary liability; in other words, facebook does not invite users to engage in infringing behaviour .56 the music guidelines also state that any use for commercial purposes beyond the scope of private (personal) use is prohibited, in particular if the user has not obtained the appropriate licences . in addition, facebook cannot be used to “create a  music listening experience”57 and infringing content can be removed or blocked . facebook’s transparency center publishes the number of content items removed from the platform, broken down by year . by june 2021, operators had received 147,000 copyright infringement notifications – 84 .44% of the content concerned had been 49 limited, conditional license to use our intellectual property (www.pornhub.com/information/terms). 50 dmca reporting claims of copyright infringement (www.pornhub.com/information/dmca). 51 counter-notification procedures, ibid. 52 video fingerprints, ibid. 53 action against harmful behaviour, protecting and supporting the community (www.facebook.com/legal/terms). 54 using and developing advanced technologies to provide secure and functional services, ibid. 55 what can be shared and done in meta products? ibid. 56 music guidelines (www.facebook.com/legal/music_guidelines). 57 ibid. http://www.pornhub.com/information/terms http://www.pornhub.com/information/dmca http://www.facebook.com/legal/terms http://www.facebook.com/legal/music_guidelines 119self-regulating platforms? public governance, administration and finances law review • 1. 2022 removed, which amounted to 519,000 pieces of content . since the next platform analysed, instagram, is also part of the meta product family, the transparency center reports the above data for instagram at the same time, so we quote them here . in june 2021, instagram operators received 59,500 copyright infringement notifications, covering a  total of 289,000 pieces of content – 88 .41% of which were removed .58 facebook and instagram operators filter content not only on a notification basis, but also proactively . in june 2021, 604,000 pieces of content were deleted or blocked on facebook as a result of proactive filtering, 53 .76% of which was copyright-infringing content . a total of 349,000 pieces of content were removed from instagram as a result of the pre-filtering, 53 .76% of which were related to copyright infringement .59 although the last modification of the terms of use reviewed here was on 20 december 2020, well before the transposition of the cdsm directive in the member states, there are still provisions to protect the interests of end-users against unjustified removals . for that purpose, operators use intellectual property operations teams (ip operations teams), which are tasked with removing only content that is truly infringing . end-users have the possibility to contest the claim with the copyright owner who reported the content . an interesting fact is that if the legality of the content is contested under the dmca rules, the user can send a counter-notification .60 the terms of use for instagram, the other meta product under review, were last updated on 4 january 2022 . the posting of unlawful content is also prohibited here, which would result in the removal or blocking of content or information if it  is “reasonably necessary” or if it would result in a legal sanction or regulatory impact negatively affecting the operators . the end-user will be informed of the removal .61 however, instagram’s terms of use are silent on procedural safeguards (if any) for the benefit of end-users . twitter’s terms of use differ depending on62 whether the user lives inside the european union, efta countries, the united kingdom, or outside of these, including the united states .63 as a general rule, here as well, end-users are responsible for the lawfulness of the content . any liability of the platform is excluded by the terms of use .64 the operators also do not undertake to monitor or otherwise control the lawfulness of the content posted . however, they reserve the right to remove content that violates legal regulations or community principles .65 if the content is removed, the user who uploaded it will receive a copyright complaint, which they can contest in a counter-notice and ask the operators to restore the content . in addition, based on the information provided in 58 notice and takedown (https://transparency.fb.com/data/intellectual-property/notice-and-takedown/facebook). 59 proactive enforcement (https://transparency.fb.com/data/intellectual-property/proactive-enforcement/facebook). 60 supporting people whose content is reported (https://transparency.fb.com/data/intellectual-property/protectingintellectual-property-rights). 61 content removal and disabling or terminating your account (https://help.instagram.com/581066165581870). 62 the terms of use were last amended on 19 august 2021, which is after the deadline for transposition of the cdsm directive. 63 twitter terms of service – if you live outside the european union, efta states, or the united kingdom, including if you live in the united states; twitter terms of service – if you live in the european union, efta states, or the united kingdom. 64 limitations of liability (https://twitter.com/en/tos#intlterms). 65 content on the services, ibid. https://transparency.fb.com/data/intellectual-property/notice-and-takedown/facebook https://transparency.fb.com/data/intellectual-property/proactive-enforcement/facebook https://transparency.fb.com/data/intellectual-property/protecting-intellectual-property-rights https://transparency.fb.com/data/intellectual-property/protecting-intellectual-property-rights https://help.instagram.com/581066165581870 https://twitter.com/en/tos#intlterms 120 péter mezei, istván harkai public governance, administration and finances law review • vol. 7. no. 1.  the dmca notice, the end-user may contact the rights holder directly to request withdrawal of the notice . by issuing a  counter-notice, the end-user also acknowledges the jurisdiction of the federal court of the united states in the event of a potential dispute . operators shall forward the counter-notice that complies with the formal requirements to the rights holder . twitter’s eula also stipulates that twitter will not provide any further legal advice .66 twitter also uses the automated copyright claiming system for live broadcasts to help copyright owners identify unauthorised content . the uploader has the right to challenge the removal or blocking of the filtered videos, in which case twitter may reinstate the broadcast as a  replay . the legal basis for contesting the claim may be the existence of a  licence or when the user believes that their use of the material is a  fair use.67 if the broadcast is reinstated but the rights holder still disputes it, it  has the option to send a notice through the traditional channels and request the removal of the content, which can also be disputed by the end-user in the way described above .68 5. conclusions at the time of finalising this manuscript, the deadline for transposition of the cdsm directive had expired just over six months ago, yet implementation had not yet taken place in all member states . this has created legal uncertainty for service providers, making it difficult to expect full compliance with the requirements of the cdsm directive . even so, a  number of observations can be made about the analysed eulas of the ocssps under review . on the one hand, the analysis shows that the terms of use continue to focus basically on two aspects: the exclusion of primary liability of operators and an effective notice and takedown mechanism that protect the interests of rights holders . youtube, dailymotion, twitch, facebook and twitter allow end-users to contest the blocking of content . youtube, twitch and twitter also point out that if the use of the content is a fair use, it can be made accessible again on the platform . only youtube’s contractual provisions contain some reference to limitations and exceptions in line with the eu copyright system and in deviation of the fair use test . in other words, the majority of the platforms examined contain guarantees that allow users to dispute the lawfulness of removal under u .s . copyright law, but neither the guarantees in article 17 of the cdsm directive are mentioned expressis verbis, nor is there any specific reference to general prior content filtering in the contractual terms . this can be instructive for two reasons . on the one hand, ocssps seem to stick to the well-established limitation of liability clauses, shifting the responsibility to the enduser, thus weakening the viability of the new liability regime envisaged by the cdsm directive . on the other hand, some platforms, such as youtube, have automated systems 66 copyright policy (https://help.twitter.com/en/rules-and-policies/copyright-policy). 67 fair use policy (https://help.twitter.com/en/rules-and-policies/fair-use-policy). 68 automated copyright claims for live video (https://help.twitter.com/en/rules-and-policies/automated-claimspolicy). https://help.twitter.com/en/rules-and-policies/copyright-policy https://help.twitter.com/en/rules-and-policies/fair-use-policy https://help.twitter.com/en/rules-and-policies/automated-claims-policy https://help.twitter.com/en/rules-and-policies/automated-claims-policy 121self-regulating platforms? public governance, administration and finances law review • 1. 2022 that actively filter uploaded content, which they can remove at their own discretion without notifying the rights holders . in other words, the balance between the actors concerned by the operation of the platforms – operators, rights holders and end-users – continues to tip towards the first two stakeholders, while it is not clear how the platforms would protect freedom of expression, freedom of creative expression and freedom of access to information, which have been among the main watchwords for criticism of the provisions of article 17 . the status 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(2020) . die umsetzung von art . 17 vii dsm-rl in deutsches recht (teil 1) – brauchen wir eine schranke für karikaturen, parodien und pastiches? gewerblicher rechtsschutz und urheberrecht, 69(7), 699–708 . https://doi.org/10.1628/zge-2020-0008 https://doi.org/10.1628/zge-2020-0008 https://doi.org/10.2139/ssrn.3879740 https://doi.org/10.2139/ssrn.3879740 https://doi.org/10.1177/1461444818769694 https://doi.org/10.1177/1461444818769694 https://bit.ly/3d1vsmo https://bit.ly/3s1gg2a https://doi.org/10.31228/osf.io/g58ar © 2018 dialóg campus, budapest public governance, administration and finances law review vol. 3. no. 2. (2018) • 28–35. the participation of tax authorities in insolvency agreements1 piotr buława* * piotr buława, mgr., phd candidate at the department of financial law, faculty of law and administration, silesia university in katowice, poland. he is advocate in poland and the czech republic. the author specialises in tax law, especially comparative and international tax law. (e-mail: piotr@bulawa.com.pl) abstract: the contribution deals with a problem if and when polish tax authorities should support insolvency agreements. tax authorities are bodies of public law; however, they have to act within insolvency agreement proceedings as a private law subject, e.g. participate in negotiations. it creates many legal problems. the aim of the contribution is presenting possible guidelines which should allow tax authorities to make a decision if and when to support insolvency agreements. additionally, it presents a  possible amendment of the polish law (de lege ferenta) on the basis of german experience. keywords: insolvency agreement; tax law; restructuring law; fiscal principle; internal administrative guide 1. introduction insolvency agreement as an institution of the insolvency law that has existed in many legal systems for many years. it was already regulated e.g. in paragraph 160 et seq. of the german bankruptcy law (konkursordnung ) from 18772 and in article 171 et seq. of the polish insolvency law (prawo upadłościowe) from 1934.3 it allows the bankrupt and non-secured creditors to sign an agreement about the bankrupt’s debts. according to article 161 of the german insolvency law from 1877, the insolvency agreement has to regulate at what rate obligations would be paid by the bankrupt and which securities would be provided by the bankrupt. however, the insolvency agreement does not require consent of all non-secured creditors what has been the hallmark of this institution. the insolvency agreement requires consent only from (some), the majority of non-secured creditors. therefore, it is possible to reach the insolvency agreement in spite of the opposition of some creditors, e.g. tax authorities. the issue became more important after preference of public debts in insolvency (liquidation) proceedings was cancelled. nowadays, private and public law debts are in principle equally paid in the insolvency proceedings. it was introduced in germany by the new insolvency law act4 in 1999 and in poland by the restructuring law act5 in 2016, which regulates the insolvency agreement in poland now. therefore, tax authorities are imposed to join negotiation of insolvency proceedings. liquidation proceedings do not provide them the preference in payment as it was before. 10.53116/pgaflr.2018.2.2 mailto:piotr%40bulawa.com.pl?subject= https://doi.org/10.53116/pgaflr.2018.2.2 29 public governance, administration and finances law review • 2. 2018 the participation of tax authorities in insolvency agreements if only the majority of creditors is required to reach the insolvency agreement, there is a  place for negotiations. of course, the insolvency agreement has a  frame of formal proceedings. under insolvency law, there are formal regulations for: filling insolvency agreement proposal, conduct a  general meeting to vote on the proposals, legal control of insolvency agreement provided by court and fill a  plaint to court against the insolvency agreement. however, creditors decide to support or reject the insolvency agreement proposals after negotiations with the bankrupt and each other, not after legal subsumption that is typical for tax authorities’ activities. the polish law does not define what negotiations mean, but it is said that negotiations are a reciprocal impact (communication interaction) between parties with the aim to sign a contract. unlike offer negotiations, they do not constitute any specific shape or resolutely decision.6 additionally, the core of any acts in law, including the support of insolvency agreements is the declaration of intent (willenserklärung ). irrespective of the dissonance between legal theories about the declaration of intent which concentrates on its interpretation, initially, the declaration of intent derives always from the internal intent of man.7 tax authorities, as legal bodies, do not have such internal intention. in tax law, acts of law stipulate specific precondition and specific content of tax decision for any specific facts of the matter.8 in fact, tax law, as well as administrative law, does not provide a  general regulation how tax authorities shall act if they have to act as subjects of private law. the position of administrative authorities as a subject of private law is regulated in many particular regulations, like public procurement law or public–private partnership, but there is no such regulation regarding the participation of tax authorities in insolvency agreements, especially in the polish restructuring law act or in the german insolvency act. therefore, the question if tax authorities should support particular insolvency agreements remains un answered in acts of law. the author presents below four possible guidelines which should allow tax authorities to make a decision. 2. market economy creditor principle first of all, tax authorities may act in the insolvency agreement proceeding according to the principle of market economy investor. the principle was introduced by the european commission in 1984 to allow better control of state aid in the eu and it has been developed by further european commission texts, decisions and the eu court of justice. according to this principle there is no state aid, if “public authorities invest on terms and in conditions which would be acceptable to a  private investor under normal market economy conditions”.9 the principle of market economy investor was also extended to situations when the state is a  creditor, i.e. the state claims pay back of arrears  –  market economy creditor principle.10 pursuant to the principle of market economy creditor tax authorities should act the same as private law subjects which want to get back its liabilities taking into consideration the taxpayer’s financial problems.11 moreover, tax authorities should try to actively recover at least a marginal amount of unpaid taxes in the insolvency 30 piotr buława public governance, administration and finances law review • vol. 3. no. 2. agreement.12 the principle takes as a dogma that a private investor is looking for profits and it is his basic criterion for any decision.13 following the principle of market economy, creditor tax authorities should act as private law creditors what would solve the problem. however, the principle is only a theoretical construction for eu aid law. in fact, if tax authorities followed the principle, they would not be private law creditors. they are always public law subjects. additionally, there are two arguments against using the principle as a solution in the analysed case. first, the aim of the principle is to create limits for the state’s activity, not be a  guide for such an activity. eu state aid law was created as a  means of protection for market competition against the state’s negative effect,14 public expenditures self-restraint.15 therefore, the principle stipulates only limits which tax authorities should not exceed. however, tax authorities should know what to do, but the principle said only what not to do. second, the principal is a part of the eu state aid law, not the polish tax law, so it cannot be formally a legal basis for acts of polish tax authorities. therefore, as far as the author is concerned, the market economy creditor principal should not be used as a guide for tax authorities in insolvency agreement proceedings. of course, the principle should be used to determine if the participation of tax authorities in insolvency agreements complies with eu state aid law, but it is another issue. 3. fiscal principle tax obligations are not anonymous obligations. they belong to the state treasure which is represented by tax authorities. therefore, the state treasure may have also its own subjective interest in restructuring proceedings. identification between the state treasure participation in insolvency agreement proceedings and larger and faster fulfilment of tax obligations express the principal of fiscalism. in fact, tax authorities must follow a  fiscal principle, which ensures the proper functioning of the state.16 the importance of this principle for tax law is emphasised in the polish legal doctrine. r. mastalski pointed out that the main reason to introduce taxes was a fiscal aim. other reasons have an extraordinary character.17 the principle is based on article 220 point 1 of the polish constitution. according to this article the government is responsible for budgetary discipline. primarily, the insolvency agreement may provide a  larger or faster fulfilment of tax obligations than it would be in liquidation or enforcement proceedings. this point of view is based on the principle that no creditor may be detrimental by the introduction of an insolvency agreement in comparison to liquidation proceedings. if the creditor may achieve more in liquidation proceedings, the insolvency agreement proceedings should not be commenced. on the other hand, if an insolvency agreement provides larger fulfilment of tax obligations than liquidation proceedings, tax authorities should support the insolvency agreement. tax authorities should take fiscal interests of the state treasure into consideration when they take part in insolvency agreement proceedings. 31 public governance, administration and finances law review • 2. 2018 the participation of tax authorities in insolvency agreements 4. economic and social aims following the only fiscal principle by tax authorities in insolvency agreement proceedings would be easy and convenient. nevertheless, the explanatory memorandum to the restructuring law act indicates that a  direct increase of the state treasure’s incomes was not the aim of the act. the aim was the “introduction of an effective instrument which allows to carry out restructuration of debtor’s company and to prevent its liquidation”.18 in further parts of the explanatory memorandum, non-fiscal aims of the insolvency agreement are also emphasised. it also includes notes about tax annulment and instalments scheme. the legislator states that the decrease of the state treasure’s direct incomes from not-paid tax obligations due to the insolvency agreement are compensating with interests by the increase of incomes from taxes paid by the debtor and its contractors and by the general benefits for economy due to higher efficiency of insolvency proceedings. the introduction of a  new insolvency agreement in the restructuring law act should help preserve workplaces in the debtor’s company and its cooperators’ companies. as a consequence, the state treasure should decrease its expenditures related to unemployment benefits or social services.19 moreover, taking part in the insolvency agreement proceedings, tax authorities should not be guided only by the fiscal principle because it is against the principle of social market economy stipulated in article 22 of the polish constitution. according to this principle, it is not allowed to follow only the fiscal principal. tax authorities should take into consideration if support to the insolvency agreement, i.e. support for tax annulment or instalments scheme makes more positive or negative results not only for the state budget, but also for the society.20 according to a  prevailing part of the polish legal doctrine, the state should not only play a role of regulator, coordinator and stabilizer of economy, but it should, by way of exception and in frames provided by acts of law, admit running business activities with the aim of protecting overriding public goods.21 these aims look ambitious and the legislator’s actions for more competitive economy should be positively appraised. however, as far as the author is concerned, tax authorities should not follow them taking part in the insolvency agreement proceedings, especially these aims should not be decisive if tax authorities support tax annulment and instalments scheme in the insolvency agreement. it is because these aims have a  general and policy character. in case of a  broad understanding of these aims, tax authorities would support any insolvency agreement, including tax annulment or instalments scheme. in the majority of cases, it is possible someway to demonstrate that long term cost including indirect costs of the debtor’s company liquidation (incomes from taxes paid by the debtor’s cooperators and costs of social services) would be higher than the costs of the insolvency agreement implementation. such demonstration is possible, because long term costs, as well as indirect costs are imprecise expressions which could be interpreted flexibly. insolvency agreements should not only provide higher incomes for the state treasure in the long term, but it should help to reduce its expenditures on social services. however, it is worth emphasising that according to the principle of unity of budget expenditures on social services are realised separately from particular incomes. therefore, profits from 32 piotr buława public governance, administration and finances law review • vol. 3. no. 2. increasing incomes or decreasing expenditures may also not be associated directly with each other. moreover, the state treasure’s profits from increasing incomes and decreasing expenditures do not concern particular subjects, but all its cooperators or even the whole national economy. the analysed aims also look partly incomprehensible with tax law. in legal doctrine several aims of tax law are presented. fiscal aim is a  main aim of tax regulation. besides, taxes may realise economic and social aims, however these aims should be realised almost supplementary.22 tax annulment in the frame of insolvency agreement may drive to increase the budget’s income in the middle or long term, but in the short term, it always drives to decrease the budget’s incomes. the active realisation of economic and social aims is not in compliance with the principle of tax neutrality towards economy. with regard to income tax, the principle of tax neutrality is more a  proposal, especially from liberal economists,23 but in case of vat tax, it is a  basic principle expressed in point 5 of the explanatory memorandum of the eu directive no. 2006/112 on the common system of value added tax.24 the participation of tax authorities in shaping economic and social aims of taxes also gives constitutional grounds for concern. according to the constitutional principle of parliament, exclusive right to enact taxes stipulated in article 227 of the polish constitution, the most important elements of tax should remain under the control of parliament.25 the parliament should decide in the form of an act of parliament about the potential economic and social aims of tax. the realisation of these aims at the parliament level also has technical justification. as it is emphasised in the legal doctrine, the introduction of non-fiscal aims in taxes requires the knowledge and skills of specialists to provide a holistic analysis of such an introduction.26 there are many institutions better prepared for such an instruction than tax authorities, e.g. the legislation council working under the prime minister. 5. tax ordinance following non-fiscal aims by tax authorities in the insolvency agreement proceedings may be justified alternatively by article 67a of the polish tax ordinance. according to this article, tax authorities may annul a tax or introduce instalments scheme if it is substantiated by an important interest of a  taxpayer or public interest. it is possible to show many similarities between recourse to economic and social aims and recourse to public interest and important taxpayer’s interest, however, tax proceedings under article 67a of the polish tax ordinance and insolvency agreement proceedings are two different, separate proceedings. in accordance with the judgement of the voivodeship administrative court in gliwice of 27 january 2010,27 only regulations included in the insolvency law act decide about sequence, rules and conditions of fulfilment of tax obligations including interest for late payment. therefore, if tax authorities used article 67a of the polish tax ordinance as a  guideline in the insolvency agreement proceedings, it should not have any influence on the course of the proceedings. 33 public governance, administration and finances law review • 2. 2018 the participation of tax authorities in insolvency agreements 6. internal administrative guides in opposite to the above, the analysis problem if tax authorities should support particular insolvency agreement was solved in germany many years ago when the new insolvency law act took action in 1999. the federal minister of finance published its internal administrative guide regarding the treatment of tax obligations in insolvency proceedings on 17 december 1998.28 according to point 9.2. of the guide, tax authorities are obliged first of all to assure that tax obligations will not be disturbed in the insolvency agreement proceedings which is a  support of the fiscal principal. then tax authorities should follow regulation aims stipulated in § 163, 222 and 227 of the german tax ordinance which are at a rough estimate equivalent of article 67a of the polish tax ordinance. the federal minister of finance also put further hints for tax authorities involved in insolvency agreement proceedings. before a tax authority decides to support an insolvency agreement, it should always test if the insolvency agreement is profitable for the tax authority. if a  draft of insolvency agreement provided worse financial conditions for the tax authority than liquidation proceedings, the tax authority has to object the agreement and if it were passed, the tax authority has to file a  complaint against the agreement in court. the participation of tax authorities in pre-court insolvency agreement proceedings for consumers was regulated similarly. the federal minister of finance published its internal administrative guide regarding the participation of tax authorities in the settlement of debts in pre-court proceedings on 10 december 1998,29 which was replaced by a  new internal administrative guide on 11 january 2002.30 7. conclusion taking part in the insolvency agreement proceedings, especially voting on the approval of an insolvency agreement or presenting own proposals regarding an insolvency agreement, the polish tax authority should follow the fiscal principle. there are no legal grounds to allow tax authorities to follow other aims in the insolvency agreement proceedings or market economy creditor principle. it is especially not indicated to allow tax authorities in place of the parliament to share non-fiscal aims of taxes. which time perspective is appropriate for implementing the state treasure’s fiscal interest remains open. in the author’s opinion, appropriate time perspective is term, in which the insolvency agreement will be carried out. on the other hand, this analysis would be superfluous if there were similar internal administrative guides like in germany. the guides solve the problem. therefore, it is advisable to introduce similar guides in poland. the guides emphasise that the fiscal principle is the most important for tax authorities in the insolvency agreement proceedings. additionally, tax authorities should follow the regulation of the german tax ordinance. it is also advisable to use the auxiliary article 67a of the polish tax ordinance in case of the polish tax authorities, but nowadays, there is no legal basis for it. 34 piotr buława public governance, administration and finances law review • vol. 3. no. 2. references 1 the article was prepared in the frame of the project annulment of tax obligations – a comparative study. the project is realised at the faculty of law and administration, silesia university in katowice, poland. i am the manager and sole performer of the project; its research supervisor is dr. hab. marek zdebel. the project is financed by the national science centre (poland) under decision no. 2016/23/n/hs5/00157. 2 konkursordnung [bankruptcy law act] of 10 february 1877, 351, german reich law gazette, no. 10. 3 rozporządzenie prezydenta rzeczpospolitej prawo upadłościowe [insolvency law decree of the president of the republic] of 24 october 1934, journal of laws, no. 93 item 834, as amended. 4 insolvenzordnung [insolvency law act] of 5 october 1994, 2866, federal law gazette, part i, as amended. 5 prawo restrukturyzacyjne [restructuring law act] of 15 mai 2015, journal of laws, item 978, as amended. 6 zbigniew radwański (eds.), prawo cywilne  –  część ogólna. system prawa prywatnego, tom 2 [civil law – general part. private law system, volume ii], 347–348 (warszawa, c.h. beck 2008). 7 ibid. 14–15. 8 klaus-dieter drüen, § 5. 3, in klaus tipke, heinrich wilhelm kruse (eds.), abgabenordnung. finanzgerichtsordnung. kommentar [tax ordinance. finance court rules. commentary] (köln, otto schmidt verlag, 2014). 9 ben slocock, the market economy investor principle, 23, in competition policy newsletter, no. 2 (2002). 10 agata jurgowska-gomułka, tadeusz skoczny, wspólne reguły konkurencji unii europejskiej [european union common competition regulations], 238 (warszawa, instytut wydawniczy europrawo, 2010). 11 andrzej wróbel, traktat o funkcjonowaniu unii europejskiej. komentarz. tom ii [treaty on the functioning of the european union. commentary. volume ii], 436 (warszawa, wolters kluwer, 2012). 12 european court of justice, c-276/02, point 15, 26, 33, 36. 13 igor postuła, aleksander werner, pomoc publiczna [state aid], 60–61 (warszawa, lexisnexis, 2006). 14 ibid. 306. 15 bartosz jankowski, pomoc publiczna w prawie unii europejskiej  –  implikacje dla polski [state aid in european union law  –  implications for poland], 5 (warszawa, urząd komitetu integracji europejskiej, 2001). 16 voivodeship administrative court in poznań, iii sa/po 776/09. 17 ryszard mastalski, prawo podatkowe [tax law], 10 (warszawa, c.h. beck, 2012). 18 rządowy projekt ustawy – prawo restrukturyzacyjne [government draft of restructuring law act], 8, sejm paper no. 2824 of 9 october 2014. 19 ibid. 87. 20 jankowski, supra n. 15, at 15. 21 ibid. 8. 22 ryszard mastalski, charakterystyka ogólna prawa podatkowego [general characteristics of tax law], 345–347, in leonard etel (eds.), system prawa finansowego. tom iii. prawo daninowe [financial law system. volume iii. tribute law] (warszawa, wolters kluwer, 2010). 23 mastalski, supra n. 22, at 347. 24 council directive no. 2006/112/ec, on the common system of value added tax, as amended. 25 ryszard balicki, michał bartosiewicz, krystian complak, monika haczkowska, artur ławniczak, małgorzata masternak-kubiak, komentarz. konstytucja rzeczpospolitej polskiej [commentary. constitution of polish republic], 558 (warszawa, lexisnexis, 2014). 26 mastalski, supra n. 22, at 348. 27 voivodeship administrative court in gliwice, i sa/gl 706/2009. 28 schreiben vom bundesministerium der finanzen [mail from the federal minister of finance] of 17 december 1998, behandlung von ansprüchen aus dem steuerschuldenverhältnis im insolvenzverfahren [treatment of claims from tax relations in insolvency proceedings], 1505, federal tax gazette, no. iv a 4 – s 0550 – 28/98 (1998) part i. 35 public governance, administration and finances law review • 2. 2018 the participation of tax authorities in insolvency agreements 29 schreiben vom bundesministerium der finanzen [mail from the federal minister of finance] of 10 december 1998, kriterien für entscheidung über einen antrag auf außergerichtliche schuldenbereinigung (§ 305 abs. 1 nr. 1 inso) [criteria for decision of motion about pre-trail debt annulment (§ 305 point 1 no. 1 of insolvency law act)], 1497, federal tax gazette, no. iv d 6 – s 1900 – 45/98 (1998) part i. 30 schreiben vom bundesministerium der finanzen [mail from the federal minister of finance] of 11 january 2002, insolvenzordnung ; kriterien für entscheidung über einen antrag auf außergerichtliche schuldenbereinigung (§ 305 abs. 1 nr. 1 inso) [insolvency law act, criteria for decision of motion about pre-trail debt annulment (§ 305 point 1 no. 1 of insolvency law act)], 132, federal tax gazette, no. iv a 4 – s 0550 1/02 (2002) part i. _goback _goback _goback _goback _goback articles tax administration of large taxpayers in some cee and cis countries jasna bogovac,* natalia soloveva,** michal radvan,*** jarosław marczak,**** natalia uvarova-patenko***** the participation of tax authorities in insolvency agreements piotr buława* the amendment of the religious registration law and its impact on freedom of religion in the slovak republic mária havelková* the scope of public services performed by municipal local governments in the republic of poland through budgetary establishments małgorzata ofiarska* designated income accounts in budgetary units of municipalities as a form of partially decentralised redistribution of public finance resources allocated to educational services in poland zbigniew ofiarski* the legal aspects of reducing the bureaucracy of the court administration wojciech piątek* the constitution and public administration aksana shupitskaya* case study tax inspection – unlawful interference damian czudek* european investigation order and the “brussels” bureaucracy marek kordík,* lucia kurilovská** complaint in tax administration as an instrument to ensure good administration zuzana marethová* public governance, administration and finances law review vol. 7. no. 1. (2022) • 91–108 . © the author 2022 doi: 10 .53116/pgaflr .2022 .1 .7 characteristics of the european platform regulation platform law and user protection zsolt ződi*¤ * senior research fellow, university of public service, institute of the information society, e-mail: zodi .zsolt@uni-nke .hu abstract: this paper presents the european regulation of platforms . in its first part, it  reconstructs the process by which the concept of ‘platform’ in information technolog y and marketing have evolved and become a  legal concept . this emerged from the mid-2010s, first in amendments of sectoral rules and later in sui generis platform rules . the second part of the paper argues that these rules can be interpreted as an emerging separate area of law, the ‘european platform law’ . one of the most important ultimate justifying principles and purposes of this legal corpus is the protection of users . this is achieved through a number of tools, some of which are legal transplants from other legal areas (such as consumer protection), while others are sui generis legal rules created specifically for platforms, such as the protection of user accounts or the explainability and transparency of algorithms . keywords: internet platforms, concept of platform, platform as legal concept, user protection on platforms, digital services act (dsa), digital markets act (dma), platform-work, platform law, comprehensibility of user contracts, transparency and explainability of algorithms, complaint mechanism on platforms 1. introduction most of the online platforms were created around the turn of the millennium, but it was only in the early 2010s that they really became important actors in our lives . they have never operated in an unregulated, ‘lawless’ space, but it  is only in the last four or five years that they have been given a  tailor-made set of legal rules . this paper recalls the process by which the platform emerged as a  concept and evolved – first as a  technical, then as a  social science, and finally as a  legal concept . it also briefly presents the evolution of the rules on platforms, and outlines the european rules, some of which are already in force and some in draft form at the time of writing this paper, that have been developed specifically for platforms . as the entire body of platform legislation is so extensive that a description of it would go far beyond the scope of a single paper, the paper focuses its argument along two lines . https://doi.org/10.53116/pgaflr.2022.1.7 https://orcid.org/0000-0003-3978-5493 mailto:zodi.zsolt@uni-nke.hu 92 zsolt ződi public governance, administration and finances law review • vol. 7. no. 1.  the first is that a new area of law is emerging in europe, ‘platform law’, which is the result of the historical development described above, and which is developing certain internal recurring patterns and legal instruments regulating platforms operating in different areas through very similar means . the second consideration is that one of the main principles underlying these legal institutions is to protect platform users who are vulnerable in a new way . for this reason, platform law can be called “user protection law”, along the lines of “consumer protection” . the second part of the paper describes the main features and legal institutions of this set of user protection legislation . 2. the emergence and evolution of the concept of platform in eu law 2.1. platform as a technical and information technology concept (1992–2006) the importance of the terminus technicus with which we choose to describe the world has been expressed in many different ways (riordan, 2016, p . 3) . we are also aware that most of these choices are spontaneous, unconscious acts of a  linguistic community . however, there are also situations, such as the language renewal movement in hungary, or the linguistic ingenuity of poets and writers who have had a  particularly strong impact on the language, where the rooting of a  word in language can be linked to specific events or people . today’s meaning of ‘platform’ can be explicitly linked to a specific series of events (gillespie, 2010), the acquisition of youtube by google – at least according to tarleton gillespie’s convincing argument . we can add that the platform has become a legal concept over the course of a few years, and this can also be linked to certain specific events . but before recalling the events of 2006, a few words about the origins of the term ‘platform’ are worth saying . according to the oxford english dictionary, the word ‘platform’ appeared in english in the 16th century (perhaps as a result of french influence – platte forme) . it means “a raised surface on which people or things can stand, a separate structure intended for a specific activity or act” . in addition, the word ‘platform’ also had a figurative meaning from the very beginning : “a plan, a concept, an idea, something that serves as a model or template .”1 this double meaning (platform, plateau and political programme, system of ideas, grouping within a party) persisted until the 1990s . steven wheelwright and kim clark’s book on revolutionising product development was published in 1992, turning the tide in english usage (wheelwright & clark, 1992) . this book was the first to talk about the fact that one of the keys to product development is that there must be core products and ‘derivative’ products (wheelwright & clark, 1992, pp . 41–42) . he gave the example of sony’s walkman range, which was actually built on three core products but had hundreds 1 oxford english dictionary, heading ‘platform’. 93characteristics of the european platform regulation public governance, administration and finances law review • 1. 2022 of sub-variants . the core products on which the derivative products are built are what the book called their ‘platform’ . it is quite likely that the book also inspired the automotive industry, which then began to call the chassis and engine designs used for several models of cars “platforms” . another development of the “industrial age” is that platform often also meant a technical standard of some kind . in the late 1990s, the word also started to be used by the software industry, but here it was enriched with a new meaning . in the software industry, it is now common for the platform (which, as i mentioned, is also a quasi or even a real standard) to be developed by other manufacturers, so that the platform becomes open to external manufacturers . this meaning, that a platform owner not only uses the platform for its own purposes, but also opens it up to external manufacturers, then took on a new layer of meaning with the advent of game consoles, when users also appeared on the platform . the actual power of the platform is also enhanced by user activity; in other words, direct and indirect network effects (zhu & iansiti, 2007) . the phenomenon of network effects, in particular in the software industry, has been well known since the seminal work of hal varian and carl shapiro (1998), but the two-sided markets around platforms, the two markets that reinforce each other, is only a development of the mid-2000s . gillespie identifies a specific turning point in the evolution of the platform’s meaning : the moment when google acquired youtube in 2006 . according to gillespie, these large corporations seek to create an environment that is favourable to themselves not only through political influence, lobbying and subtle shaping of the regulatory environment, but also through ‘discursive work’, and part of this conscious framing was the consistent way in which google began to refer to youtube as a ‘platform’ when it gradually replaced the terms ‘website’, ‘service’, ‘forum’ and ‘community’ in its post-acquisition marketing communications . this mental conditioning using this term is not at all coincidental and uses all the connotations associated with the platform . since the platform, as we have seen, has a physical space, an ‘architectural’ meaning if you like; that is, it is a raised, prominent surface, youtube has begun to reinforce this meaning in its advertising campaign (“broadcast yourself ”) . so, by around the early 2010s, the word platform had developed the following meanings: a product or standard on which other products are built, on which other products can be developed, a software solution that underpins other software, and a software or game on which people or groups of people can engage in some joint activity . 2.2. platform as a social science and marketing concept (2006–2018) at that time, platform was still a concept of marketing and it, and the law did not use this term but, for the web services we now call platforms, ‘hosting services’ . for example, the gdpr,2 drafted roughly between 2009 and 2015, does not mention the word 2 regulation (eu) 2016/679 of the european parliament and of the council of 27 april 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing directive 95/46/ec (general data protection regulation, gdpr). 94 zsolt ződi public governance, administration and finances law review • vol. 7. no. 1.  ‘platform’ even once, even though one of the main issues in response to which it  was drafted was the spread of ‘social networking and online activities’ .3 the same applies to the copyright directive, which uses the term ‘online content-sharing service provider’ .4 the turning points for the platform to become a legal concept are, clearly, 2015 and 2016 . it was in these two years that the term ‘platform’ started to become common, especially in the context of the digital economy . it started to be used first in the materials for the preparation of decisions and expert inputs, then it  appeared in the european digital single market strateg y in 2015,5 and then in 2016 in another commission communication, focusing exclusively on industrial platforms .6 also in 2016, a commission communication on a european agenda for the collaborative economy7 was published . all three documents were almost exclusively concerned with economic aspects, and the word ‘platform’, while being used as a general umbrella term, started to lose its clearly positive connotation . “the market power of some online platforms potentially raises concerns”8 states the digital single market strateg y . “online platforms have dramatically changed the digital economy over the last two decades and bring many benefits in today’s digital society”9 – starts the other communication on platforms . the old meaning of platform was still alive for a while . for example, in 2016, the paper entitled digitalisation of european industry10 still referred to platforms as “multilateral market gateways that create value by enabling interaction between multiple groups of economic actors”,11 in other words, under platform, it essentially meant a loose association of companies, not too large in number and mainly organised around common projects or standards, which had already been fashionable in certain industries .12 so this clearly still carried the product development13 (and partly related to this, standards14) and of course 3 gdpr, recital (18). 4 directive (eu) 2019/790 of the european parliament and of the council of 17 april 2019 on copyright and related rights in the digital single market and amending directives 96/9/ec and 2001/29/ec. 5 communication from the commission to the european parliament, the council, the european economic and social committee and the committee of the regions. a digital single market strategy for europe com/2015/0192 final. 6 communication from the commission to the european parliament, the council, the european economic and social committee and the committee of the regions. online platforms and the digital single market opportunities and challenges for europe com/2016/0288 final. 7 communication from the commission to the european parliament, the council, the european economic and social committee and the committee of the regions. a european agenda for the collaborative economy com/2016/0356 final. 8 a digital single market strategy for europe. 9. 9 online platforms and the digital single market opportunities and challenges for europe, ibid, (fn. 12) 2. 10 communication from the commission to the european parliament, the council, the european economic and social committee and the committee of the regions. digitising european industry reaping the full benefits of a digital single market com(2016)180, swd(2016) 110 final. 11 ibid. 11. 12 ibid. examples of existing industry platforms include autosar in the automotive sector (www.autosar.org). 13 platform building means, inter alia, “the development of reference architectures”. ibid. 14 “...platform on cooperative intelligent transport systems.” ibid. 12. 95characteristics of the european platform regulation public governance, administration and finances law review • 1. 2022 the software industry15 meaning as mentioned above, but other policy papers and expert materials could also be cited .16 however, in 2016, the use of platform in the sense of a “general online infrastructure or coordination mechanism”, including services run by large tech companies for different purposes, also emerged . dutch media scholar josé van dijck played a major role in this shift in meaning and approach, by publishing a book on the platform society (de waal et al ., 2016) with two colleagues in 2016, and in the same year the oxford internet institute organised a conference on the topic, at which van dijck was one of the keynote speakers . van dijck was also influential in that the word “platform” then became clearly negative, because in his book, which was later published in english (van dijck et al ., 2018), he already feared for our public values due to the platforms . the underlying idea of his book is that platforms have penetrated so deeply into certain spheres that they threaten to override the community, professional and ethical values and logics that had previously been established in these spheres (especially in the public and press spheres, education and health) . van dijck has defined three conceptual elements of the platform: data-driven, algorithmic governance and monetisation . “online platforms are not simply technolog y products – they are based on hardware infrastructure, driven by data (often user-generated data), automated and organised by algorithms, formalised by ownership, and monetised through business models” (van dijck, 2021) . some well-known events contributed to the reinforcement of negative connotations . firstly, the 2016 terrorist attacks in brussels, in which the platforms played a role mainly by spreading hate speech . in the wake of this, heads of state and government issued a statement condemning the attacks, after which the eu drew up a code of conduct to which all the major social platforms subscribed .17 this has made the issue of hate speech and terrorist content on these platforms, particularly social media and video-sharing platforms, very much part of the public discourse . in the same year, donald trump was elected president and the brexit referendum took place . in both cases, the role played by platforms, especially the largely illegal microtargeting campaign based on personal profiles by the data marketing company cambridge analytica (wong, 2018), is still unclear . from then on, attention was not simply focused on social media platforms, but in many ways was disproportionately focused on them, and the term ‘platform’ became almost a catchword . from this time onwards, in addition to companies (the gafam universe18), medium and small web services were also included in the meaning of a platform, provided they connected a larger number of users and applied “algorithmic management”, regardless of 15 “building on existing open service platforms such as fiware.” ibid. fiware or fi-ware is the open technology platform that the european union intends to build the future internet on (www.fiware.org). 16 some material for illustration: competition policy for the digital era (https://bit.ly/3yjrt09); protecting workers in the online platform economy (https://bit.ly/3mc8kzx); a multi-dimensional approach to disinformation report of the independent high level group on fake news and online disinformation (https://bit.ly/3rxwzc3); the eu code of conduct on hate speech (https://bit.ly/3s0mlqw); an important milestone in the systematisation of legal solutions was the publication in december 2019 by the european legal institute of a document setting out model rules for the regulation of platforms (https://bit.ly/3trfzbk), which i rely on also in this article. 17 the eu code of conduct on countering illegal hate speech (https://bit.ly/3s0mlqw). 18 an acronym formed from the initials of the names of companies such as google, amazon, facebook, apple, microsoft. https://bit.ly/3yjrt09 https://bit.ly/3mc8kzx https://bit.ly/3rxwzc3 https://bit.ly/3s0mlqw https://bit.ly/3trfzbk https://bit.ly/3s0mlqw 96 zsolt ződi public governance, administration and finances law review • vol. 7. no. 1.  the economic sector and type of activity . they have thus become platforms for music and video sharing, for facilitating work, or for sharing objects and real estate, as well as for online services coordinating manufacturing, logistics, health services or administration . 2.3. platform becoming a legal concept in eu sectoral rules (2018–2019) although platform as a legal concept did not exist until the late 2010s, this does not mean that platforms were not regulated by law . platforms fell under the categories of “intermediary service provider”, including “hosting service provider”, as defined in the e-commerce directive .19 intermediary service provider is not formally defined in the directive, but is understood as an information society (online) service that does not directly serve the purposes of providing services or content, but only passively transmitting or storing them (riordan, 2016, p . 3) . the e-commerce directive was drafted at a  time when platforms apart from search engines did not exist and “hosting providers” meant providers who passively hosted websites . according to this, hosting service “consists of the storage of information provided by a recipient of the service” [article 14 (1)] . the platforms were thus classified by analog y, but it  soon became clear that the platform was in many places outside the scope of the regulation . firstly, its activity is not passive but active, and more akin to editing than to simple storage . it performs this by using algorithms (sorting, classifying, personalising, etc . content) . secondly, it collects an unprecedented amount of data on users, much more than an intermediary . thirdly, it monetises its services in some way based on user data or user activity (i .e . it does not simply charge a flat fee for services like an intermediary service provider, and even platforms with flat-fee structures, for example video-on-demand or music sharing providers also operate personalised referral systems) . fourthly, most platforms, in today’s wording “very large platforms”, create very strong network effects in their own territory (or able to operate by building on it), so they are partly in a monopolistic position and partly have a very strong social impact as a result . (in contrast to intermediary service providers, which do not have such network effects based monopoly positions and social impacts .) of course, not all platforms have all four elements, but the first three are generally true for all platforms . it is also typical of this period that legislators tried to deal with new problems raised by platforms within the framework of the norms that already governed certain sectors or spheres of life, usually by supplementing or amending them . two standards are mentioned here as illustration: the avmsd20 and the amendment to the copyright directive .21 both 19 directive 2000/31/ec of the european parliament and of the council of 8 june 2000 on certain legal aspects of information society services, in particular electronic commerce, in the internal market. 20 directive (eu) 2018/1808 of the european parliament and of the council of 14 november 2018 amending directive 2010/13/eu on the coordination of certain provisions laid down by law, regulation or administrative action in member states concerning the provision of audiovisual media services (audiovisual media services directive) in view of changing market realities. 21 directive (eu) 2019/790 of the european parliament and of the council of 17 april 2019 on copyright and related rights in the digital single market and amending directives 96/9/ec and 2001/29/ec. 97characteristics of the european platform regulation public governance, administration and finances law review • 1. 2022 directives explicitly referred to certain new technologies, including platforms, as the main reason for their emergence . the avmsd already mentions video-sharing platform services as one of the objects of its regulation, “service is devoted to providing programmes, user-generated videos” by means of electronic communications, “for which the video-sharing platform provider does not have editorial responsibility [ . . .] the organisation of which is determined by the videosharing platform provider, including by automatic means or algorithms in particular by displaying, tagging and sequencing” [article 1(1)(b) avmsd] . with this definition, at least in one area the platform becomes a legal concept, which already has three conceptual elements: user content, the absence of (editorial) responsibility and algorithmic management, content management . however, the basic premise of the directive is that video-sharing platforms must be treated as media service providers . the other sectoral standard that is heavily influenced by platforms is the 2019/790 copyright directive, as the main reason for its creation was also the emergence of platforms . recital 3 of the directive talks about new technologies, “new business models” and “new actors” as reasons for its adoption . its central concept is the “content-sharing service provider”, which has three elements: 1 . its main purpose is to host and provide access to copyright-protected content uploaded by users, namely 2 . for profit, but 3 . the directive imposes certain additional obligations only on platforms of a larger size (with revenues of more than €10 million) . the directive basically specifies two obligations for platforms . on the one hand, it obliges video-sharing platforms to obtain licence for the works they transmit, and on the other hand, it effectively restates the notice-and-takedown obligation introduced by the e-commerce directive,22 otherwise platforms “shall be liable for unauthorised acts of communication to the public [ . . .] of copyright-protected works and other subject matter” .23 2.4. the emergence of sui generis platform law (from 2019 until present) 2.4.1. the p2b regulation in the process of platform regulation an important milestone is the p2b (platform-tobusiness) regulation, which was adopted in 2019 and now specifically targets platforms (and a specialised version of platforms, intermediaries of goods and services) .24 the aim of the regulation is to reduce the vulnerability of (small) businesses that depend on platforms and to create a  level playing field for them in their dealings with platforms . the regulation also includes two regulatory instruments that have subsequently been included in several other standards, such as the draft platform work directive described in section 2 .4 .4 . the first are rules requiring transparency of algorithms and the second 22 “acted expeditiously, upon receiving a sufficiently substantiated notice from the rightholders, to disable access to, or to remove from their websites, the notified works or other subject matter” [copyright directive, article 17(4)(c)]. 23 copyright directive, article 17(4). 24 regulation 2019/1150 of the european parliament and of the council of 20 june 2019 on promoting fairness and transparency for business users of online intermediation services. 98 zsolt ződi public governance, administration and finances law review • vol. 7. no. 1.  are rules requiring the operation of a  complaints mechanism. the former is represented by the part of the regulation dealing with ‘ranking’ (article 5), which requires platforms to “set out in their terms and conditions the main parameters determining ranking and the reasons for the relative importance of those main parameters as opposed to other parameters” [article 5(1)] . this parameter description should be suitable to enable the user to understand the importance of the various details related to the products and the design of the online store . the regulation explicitly states that platforms do not have to disclose their algorithms themselves, but they do have to disclose the broad outline of how the ranking software works and what changes to which parameters will cause what kind of a  change in the ranking . the complaint-handling mechanism is set out in article 11 of the regulation: “providers of online intermediation services shall provide for an internal system for handling the complaints of business users .” 2.4.2. the draft digital services act25 at the end of 2020, the commission published its draft regulation on digital services to replace the e-commerce directive . most of the provisions (three of the five sections in chapter iii) are actually about platforms or very large platforms . the text already includes a  general legal concept of platform and places it  in an ever narrowing field of four concepts . a platform is an information society service that falls within the category of “intermediary services” (which have in common the limited liability for content) . within this category, a platform is a hosting service, which is characterised by the storage of user-generated content [“storage of information provided by, and at the request of, a recipient of the service”; draft dsa, article 2(f )] . within this, a platform is a hosting service that not only stores but also “disseminates to the public” information [article 2(h)] . within the category of platforms, the dsa creates a new category with additional obligations, i .e . the “very large platform”, which refers to platforms with more than 45 million users [article 25(1)] . although this concept of platform is at first sight very different from the one used in social sciences, which mainly operates with the conceptual elements of datafication, algorithmic control, particularly close contact with users and large size (large network effects), after a closer examination, this difference does not seem so big . in the following, i will try to illustrate, through the platform concepts of each norm, that the legal definition relies heavily on elements of the social science concept . first of all, it is worth noting that the dsa does not consider algorithmic management (control) as a conceptual element of platform (nor does the p2b regulation), but it  does define the concepts of recommender systems and content moderation, and at several points it attributes a key role to the rules on these – through which it seeks to influence the ‘behaviour’ of platforms . in case of a recommender system, the conceptual element is explicitly defined as a fully or partially automated system to “suggest or prioritise 25 regulation of the european parliament and of the council on a single market for digital services (digital services act) and amending directive 2000/31/ec [com(2020) 825 final] (hereinafter: the draft dsa). 99characteristics of the european platform regulation public governance, administration and finances law review • 1. 2022 information [ . . .] determining the relative order or prominence of information displayed” . according to the definition, algorithmic control is not an element of content moderation, as it is an activity of the intermediary service provider that is “aimed at detecting, identifying and addressing” compliant or illegal content . both concepts become relevant for the very large platforms, which, among other additional obligations, must make their recommender systems transparent. the have to set out parameters in “a clear, accessible and easily comprehensible manner” [article 29 (1)], and how the user can influence this, and they have to make this option of influencing “easily accessible” [article 29 (2)] . content moderation, although not necessarily an algorithmic activity in principle, appears at several points in the draft as an “automated tool” used in decision-making [articles 14(6), 15(2)(c)], and all platforms are required to report on this in their regular transparency reports [article 23(1)(c)] . according to the dsa, the concept of platform does not therefore include the concept of a large number of members and algorithmic control, but by defining a very large platform using the concept of a large number of users and by giving a key role to two algorithmic tools on giant platforms, it does indirectly include these two elements in the concept of platform . 2.4.3. the digital markets act26 an important milestone in the evolution of the concept of platform is the draft digital markets act, which is treated as a package with the dsa regulation, creating two new categories of platforms, one on a functional basis (‘core platform services’) and the other on a  size basis, further narrowing the category of ‘very large platforms’ to the largest ones, the ‘gatekeepers’, and imposing additional obligations on them . the basic platform services envisaged in the draft are: ƿ online intermediary services ƿ online search engines ƿ online social networking services ƿ video-sharing platform services ƿ number-independent interpersonal electronic communication services ƿ operating system ƿ cloud services ƿ advertising services, including advertising networks, advertising exchanges and any other advertising intermediation service, where these advertising services are related to one or more of the other core platform services mentioned in the above sections in addition to the known number of users (45 million), the size restriction also includes a  revenue and capitalisation criterion (€6 .5 billion in revenue or €65 billion in capitalisation) . 26 proposal for a regulation of the european parliament and of the council on contestable and fair markets in the digital sector (digital markets act) [com(2020) 842 final]. 100 zsolt ződi public governance, administration and finances law review • vol. 7. no. 1.  2.4.4. draft platform work directive27 the draft platform work directive, published in december 2021, is an important step towards expanding the concept of platform . the draft contains two important sets of rules . the first is the provision of a rebuttable presumption that platform workers shall be considered workers until this presumption is rebutted by the platform on the basis of criteria developed in the case law of the eu court of justice . this is less interesting for our topic . the second set of rules sets out the rules for “algorithmic management” . one of the interesting things about the draft platform working rules is that, although they do not mention any of the above concepts (data-driven, algorithmic management, user data collection and network effects)28 in the definition of the labour platform, a  substantial part of the norm is still constraining the work organised algorithmically . 3. the european platform law as a “law of user protection” we have thus seen how the concept of platform has evolved, how it has become part of sectoral norms, and then how a sui generis platform law has emerged, and what platform concept, or rather concepts, it operates with . in this section i will attempt to summarise the characteristics of european ‘platform law’ . although the legislation and draft legislation seek to regulate platforms operating in very different spheres of life, with very different business models and sizes, and the problems and risks they seek to address are very different, some of their rules are very similar and usually very similar to the already known rules of some traditional area of law . one could say that these are legal transplants . however, transposition is never mechanical: the logic of the platform, or the particular sector or situation in which it  operates, always modifies or bends the legal instrument . this is one of the main reasons why i dare to call this emerging new area of law ‘platform law’ . 3.1. user protection as justification and purpose of platform law if we look at the ultimate purpose and justification of this platform law, we should recognise the bulk of platform law as rules protecting users against illegal content on the 27 proposal for a directive of the european parliament and the council on improving working conditions in platform work [com (2021)762 final]. 28 it is provided remotely by electronic means, via a website or mobile device, at the initiative of the recipient of the service, and its main component is that it involves the work of individuals [draft platform work directive, article 2(1)(1)(a)–(c)]. 101characteristics of the european platform regulation public governance, administration and finances law review • 1. 2022 one hand, and excessive power of platforms29 on the other, alongside some other equally important but perhaps subordinate purposes, such as preserving a  healthy structure of publicity or maintaining competition in certain economic sectors . these user protection rules can basically be divided into two categories: individual and collective user protection rules . these two sets of rules have different legal sources of inspiration . while the rules on individual user protection are very similar to some of the provisions of consumer protection and data protection, collective user protection is more reminiscent of investor protection rules . these two sets of rules are briefly, without claiming to be exhaustive, described below . but before i get to that, it is important to discuss briefly why user protection has become such an important element of platform law, protecting individuals and small businesses from the excess power of the platform . how does this excess power manifest itself ? as several authors (van dijck et al ., 2019; cohen, 2019) have noted, a new version of social power (authority) and everyday power (micro-power) has emerged here, based on the collection, continuous analysis and combination of personal data (datafication and surveillance) and its monetisation . an important element of it is that it takes place through behavioural advertising30 and its more sophisticated version, microtargeting, which can influence behaviour in unprecedented ways . this is not just, or even primarily, a question of privacy, competition, copyright or freedom of expression, because the issues addressed separately by the traditional branches of law are deeply interconnected and ultimately form a ‘platform power’ . this power rivals the power of states and governments in terms of influence and strength, even if, unlike a traditional nation state, the platform cannot mobilise police, close borders or launch wars . it rivals it because it can drive people’s behaviour en masse in one direction without physical coercion or the prospect of it . moreover, on platforms, this kind of vulnerability tends to appear in the longer term, as opposed to, for example, short-term abuses of monopolies, such as unilateral price increases . the platform power does not distinguish between consumer, citizen, voter, entrepreneur, etc .; all these roles are equally targeted by the platform .31 platforms have the unprecedented ability to penetrate the privacy of individuals, to learn about their behaviour, to collect data about them and their transactions, and to manipulate users . in this power field, individual freedom and (decision-making ) autonomy can be seriously compromised (dumbrava, 2021) . to make matters worse, monitoring and data collection are largely carried out by algorithms, i .e . impersonal mechanisms, and what is more, 29 the term ‘user protection’ is all the more appropriate because it appears in the very same context in several european documents. the logic of the model rules on the regulation of online platforms published by the european law institute in 2019 is also built around this. the largest part of the proposed legislation is a list of the obligations of the platform operators, with article 8 entitled “obligation to protect users”. report of the european law institute. model rules on online platforms (https://bit.ly/3tsxjg6). the declaration on digital rights and principles for the digital decade [com(2022) 28 final], published in january 2022, also aims to provide “strengthened protection of users’ rights in the digital environment” (preamble, para. 2). the concept was further inspired by jack balkin’s fiduciary model, although this would only impose additional obligations on platforms in relation to privacy (balkin, 2016; balkin, 2020). 30 article 29 working party opinion 2/2010 on online behavioural advertising, 00909/10/en wp 171. 31 ibid. 6. https://bit.ly/3tsxjg6 102 zsolt ződi public governance, administration and finances law review • vol. 7. no. 1.  a number of decisions are also taken by them . on top of that, in certain spheres (social public sphere, certain market segments), platforms have become so powerful, so inescapable that it is very difficult or impossible to get along without them . i describe five legal instruments below that seek to limit this excessive power . 3.2. protection of users against illegal content undoubtedly, the most important justification and purpose of the new platform law, which is also constantly emphasised in the communication related to dsa,32 is the protection of users, especially minors, from illegal content . the underlying logic is very similar to the corresponding institutions of media law, and in the case of the avmsd, the rules for electronic media must also be applied to video sharing platforms in this context . however, what greatly differentiates the obligations of platforms regarding illegal content from the media is the lack of prior screening and general monitoring obligations . it is well known that the e-commerce directive only codified the notification-removal procedure in relation to illegal content, the essence of which is that the hosting provider only deals with illegal content if it  becomes aware of it, but has no general monitoring obligation .33 however, the situation is far from being that simple, for two reasons . one is that, since monitoring is not prohibited, it  is simply not mandatory, platforms have been monitoring content from the earliest times . the other is that a series of exceptions to the general lack of obligations have been established in part by some legislation, such as the supplement to the copyright directive,34 and in part by judicial practice too . while the copyright directive does not impose a  general monitoring obligation, it  does make platforms generally responsible for unauthorised communication of copyrighted works and other protected achievements to the public unless they can prove that everything has been done to obtain permission and to prevent future uploads (article 14) .35 however, the sui generis solution of the platform law for protecting the users from illegal content is a preventive (ex ante) system, consisting of three lines of defence . the first element is the detailed regulation of user-friendly, easily accessible interfaces for reporting illegal content (article 14) . the second is the system of trusted flaggers (article 19) . finally, the third set of rules prescribes protection against abuse (article 20) . 32 the dsa and dma have two main goals: “…to create a safer digital space” (https://bit.ly/3g7mxxg). 33 directive 2000/31/ec of the european parliament and of the council of 8 june 2000 on certain legal aspects of information society services, in particular electronic commerce, in the internal market (directive on electronic commerce) (“no general obligation to monitor”). 34 directive (eu) 2019/790 of the european parliament and of the council of 17 april 2019 on copyright and related rights in the digital single market and amending directives 96/9/ec and 2001/29/ec. 35 “if no authorisation is granted, online content-sharing service providers shall be liable for unauthorised acts of communication to the public, including making available to the public, of copyright-protected works and other subject matter, unless…” [article 17(4)]. https://bit.ly/3g7mxxg 103characteristics of the european platform regulation public governance, administration and finances law review • 1. 2022 3.3. regulation of contracts with users this new platform law, as i have mentioned, seeks to limit this platform power by rules taken from other branches of law . the first instrument is the mandatory provision of certain content elements in contracts (or general terms and conditions) with users . this instrument is very similar to the well-established consumer protection toolbox . the draft dsa already requires intermediary service providers (i .e . a  broader category than the platform) to provide information in the contract “on any restrictions that they impose in relation to the use of their service” [article 12(1)], such as content moderation, “including algorithmic decision-making and human review” . platforms have even more serious obligations, for example to describe in the contract, clearly and in detail, their policy applied towards users who post notoriously illegal content and unreasonably report others . very large platforms must also include in their contractual terms and conditions “the main parameters used in their recommender systems, as well as any options for the recipients of the service to modify or influence those main parameters that they may have made available” [article 29(1)], so the transparency of algorithms must be ensured already in the contracts . the p2b regulation also contains minimum requirements for contracts between the platform and the user . the first set of rules regulates some of the characteristics of the contracts between the platform and the contractor . one of these rules requires contracts to be drafted in a clear and comprehensible manner . this provision is included in nearly the same form in article 5 of directive 93/13/eec . point (c) requires, as a compulsory element of the contract, the indication of the reasons for the decision to suspend, terminate or in any other way restrict user accounts . (the rules for the protection of user accounts are discussed separately .) in the same article, there is also a provision on how to notify the user of changes to contracts and what grace period is required for them to take effect . 3.4. decisions concerning the user account a further set of user protection rules is used to control the decisions of the platform that most seriously affect users (in particular, termination, suspension or restriction of the user account) . while the rules on user contracts are still written in consumer protection style, the rules on user account protection are already clearly sui generis platform law rules . since most platforms have become a basic infrastructure for users (whether in a business or private sense), restricting or terminating accounts is essentially a truncation or even elimination of a person’s “digital identity” . the norms seek to curb the unrestricted right of platforms to restrict or close user accounts in a number of ways . for example, the draft dsa provides for the operation of an “effective and easily accessible internal complaints-handling system” to be used in such cases (draft dsa, article 17) . the p2b, in addition to imposing certain formal requirements for these decisions (“communication on a durable medium”, 30 days’ notice in the event of termination), also imposes an obligation to state reasons for these decisions 104 zsolt ződi public governance, administration and finances law review • vol. 7. no. 1.  (in  addition to the internal complaints mechanism provided for in the dsa) .36 the platform work directive provides for a written form and human review in the event of (algorithmic) decisions to restrict, suspend or terminate a  platform worker’s profile (account) (article 8) . 3.5. transparency of algorithms and explainability as a third means of user protection, all three documents contain provisions to make the operation of algorithms that affect users in their daily use more transparent . in relation to very large platforms, the dsa requires that the “main parameters” used in recommender systems and “any options for the recipients of the service to modify or influence those main parameters that they may have made available” be stated in the contract [draft dsa, article 29(1)] . the other two draft instruments are much more detailed in terms of algorithm transparency rules, as the stakes are much higher in both areas than in a  social media platform . the p2b regulation, which mainly protects (small) businesses operating on large marketplace platforms, dedicates a specific article to provisions on transparency of “ranking” . according to it, “intermediary service providers” must set out in the contract “the main parameters determining the ranking and the reasons for the relative importance of those main parameters as opposed to other parameters” [p2b, article 5(1)] . in addition, search engine providers must also disclose “the main parameters, which individually or collectively are most significant in determining ranking and the relative importance of those main parameters” . moreover, in the platform work directive, a whole chapter is devoted to algorithmic management issues (chapter iii, articles 6–10) . this not only contains rules on transparency and explainability, but also certain substantive rules on what algorithms for work platforms are forbidden, which is otherwise exceptional in platform law . for example, they must not place undue pressure on workers or otherwise endanger their physical or mental health . in addition, as i mentioned above, written justification and the possibility to appeal to a human must be provided with regard to certain algorithmic decisions . it is no coincidence that the most elaborate algorithm transparency rules are in the draft work platform directive . here the relevant article is entitled transparency on and use of automated monitoring and decision-making systems.37 the essence of this provision is that workers must be informed of both the systems that monitor and those that decide on the essential parameters of work (e .g . work assignment), and that this information must not only cover what systems are in place but also their basic operational characteristics, such as what parameters are used and their relative weighting in relation to each other, and under what conditions a worker can be suspended, banned or restricted . this information must be provided on the first day and any subsequent changes needs to be notified . 36 p2b, article 4. 37 draft platform work directive, article 6. 105characteristics of the european platform regulation public governance, administration and finances law review • 1. 2022 further provisions deal with human supervision of automated systems . platforms must regularly monitor and evaluate the consequences of decisions taken by automated monitoring and individual decision-making systems, continuously assess the impact on working conditions and the health of workers, and put in place preventive and protective measures to prevent the risks generated by these systems . the operation of systems exerting psychological or mental pressure is prohibited . the proposal also contains provisions for human review of substantive decisions, reminiscent of the right to explanation as defined in article 22 of the gdpr (which is otherwise disputed in the literature) (wachter et al ., 2017; malgieri & comand, 2017) . accordingly, platforms must provide access to a contact person with whom the employee can discuss the individual machine-made decision, its factual basis and the arguments supporting this decision . decisions that would result in the suspension, restriction or termination of the employee’s profile or that affect his or her remuneration or contract must also be confirmed in writing by the platform . if employees are not satisfied with the decision, they must be given the opportunity to have the decision reviewed . a provision also requires that, when algorithmic monitoring or decision-making systems are introduced or substantially changed, employees or their representatives must be provided with information and a consultation opportunity on them .38 finally, the last provision of this chapter of the draft provides that most of the rules on algorithmic management also apply to platform workers working in a relationship other than employment . here, the legislator may have perceived that, in this case, the provisions of this directive could overlap (and sometimes even conflict) with the p2b regulation . obviously, this is particularly true for businesses that are present and provide services on the large intermediary platforms as sole traders or small businesses providing a personal contribution . (this is not an option for businesses offering goods .) namely, the p2b regulation, as i indicated above, also regulates certain aspects of algorithmic management, in particular the problem of ranking goods and services, contains a set of provisions for the suspension, limitation and termination of an account, and codifies a  complaints mechanism . the proposal makes business users primarily subject to the provisions of the p2b directive, and explicitly excludes the option in article 8 (right of access to a human) from the options available to business users . 3.6. dispute and complaint-handling mechanisms the fourth typical tool for user protection is the introduction of various dispute resolution, complaint-handling and “contestation” mechanisms . as we have seen, this tool is often intertwined with the first two, because it provides a “remedy” against key decisions or decisions taken by algorithms, but in no way in each and every case . the documents analysed seem to consider complaint mechanisms as a general user protection tool . they 38 it is worth noting here that the algorithmic management chapter also includes the basic data protection rules according to which platforms may only process personal data that are intrinsically linked to the contractual relationship and are indispensable for its performance. draft platform work directive, article 6(5). 106 zsolt ződi public governance, administration and finances law review • vol. 7. no. 1.  exist in two versions: internal and external mechanisms . in external mechanisms, complaint-handling or dispute resolution does not take place within the platform, but independently of it (e .g . p2b, article 12), but the institution of whistleblowers may also be considered such (draft dsa, article 19) . the mechanisms provided for in article 17 of the dsa, article 11 of the p2b and article 7 of the draft work platform directive, but also the successor to the old notice and take-down mechanism, the notification and action mechanism (draft dsa, article 14), can be considered internal mechanisms . the avmsd provides that, in order to protect minors, prevent hate speech and avoid criminal content, service providers are subject to an obligation of “establishing and operating transparent and user-friendly mechanisms for users of a video-sharing platform to report or flag to the video-sharing platform provider concerned” the infringing or harmful content on its platform [article 28a(3)(d) avmsd] . 3.7. collective user protection: rules on transparency on platforms finally, i will briefly deal with another area of user protection, namely the set of rules that impose compliance and especially transparency rules, especially for larger platforms . some of these relate to the obligation for platforms to make public their individual user protection efforts and the data relating to them on an ongoing basis . in article 13 of the draft dsa, intermediary service providers are already subject to such transparency reporting obligations, and then platforms are subject to even more (article 23), and very large platforms are subject to additional obligations in addition to those (articles 30, 33) . the transparency reporting obligation for intermediary service providers mainly covers the disclosure of information on content management (draft dsa, article 13) . accordingly, they must report annually on content removed on the basis of external or internal initiatives, according to the type of unlawfulness . online platforms are already obliged to report regularly on, among other things, suspensions, cases referred to dispute resolution bodies, the functioning of content moderation algorithms, and the number of active users . and the very large online platforms have such a wide set of reporting obligations that it is not possible to describe them fully here, so i will just mention by way of illustration that in addition to the obligations on the platforms, they are obliged to maintain a repository of online advertising, to give the commission access to essentially all their data, to carry out risk assessments and mitigation measures and publish a report of them, to tolerate independent audits and publish the results of such audits, etc . 4. evaluation and summary the first and perhaps most important feature is that most of the institutions of platform law are formal-procedural-guarantee in nature, which means that, with very few exceptions, the norms cited do not contain any substantive criteria, which are left to the platforms to develop . platform law is not a  “substantive” law, if you like, but rather 107characteristics of the european platform regulation public governance, administration and finances law review • 1. 2022 “procedural law”, although not in the traditional sense . the dsa does not, for example, talk about what additional requirements a  social media platform must enforce, for example, regarding offensive speech or pornographic content, in addition to the minimum requirements set out in the legislation . in essence, it grants the platform freedom in this, as well as the choice of sanctions in the event of a violation of these requirements . all it asks is that these requirements are transparent and, if someone is sanctioned, there must be a  fair procedure whereby the decision is explained, the sanctioned person can explain their position and request a  review of the decision . mutatis mutandis, the p2b regulation does not impose any substantive requirements on the criteria according to which goods must be ranked in the hit list, it only requires that the ranking criteria are transparent and included in the contract . by the same token, the p2b regulation does not contain a list of specific “unfair commercial practices”, as in the case of the consumer directives 93/13,39 2005/2940 or 2011/83,41 but only the above-mentioned provisions on transparency of ranking and guarantees for account closure . this probably will be a disappointment to many . those who were expecting the eu to take a clear stance on issues such as freedom of expression, or to list a taxonomy of unfair trading practices on platforms, will consider these rules insufficient .42 at the same time, it must be seen that they will enter into force almost simultaneously, without anyone really knowing how effective they will be, how they could be applied and whether they would really protect users from the excessive power of platforms . we do not know whether this procedural-formal regulation will be sufficient, nor do we know to what extent the current situation will be improved by the need for large platforms to disclose a range of information and data . we do not know whether the fact that some parameters will now have to be included in contracts with users (and whether users will read the contracts at all) would really improve the transparency of algorithms, etc . in any case, platform law is already with us and will play an increasingly important role in all our lives in the years to come, and it is possible that procedural provisions will be followed by substantive ones . references balkin, j . m . (2016) . information fiduciaries and the first amendment . uc davis law review, 49(4), 1183–1234 . online: https://bit .ly/3cc02xd balkin, j . m . (2020) . the fiduciary model of privacy . harvard law review forum, 134(11), 11–33 . online: https://bit .ly/3yjv6dp cohen, j . (2019) . between truth and power . the legal constructions of informational capitalism . oxford university press . online: https://doi .org/10 .1093/oso/9780190246693 .001 .0001 39 council directive 93/13/eec of 5 april 1993 on unfair terms in consumer contracts annex. 40 directive 2005/29/ec of the european parliament and of the council of 11 may 2005 concerning unfair businessto-consumer commercial practices in the internal market and amending council directive 84/450/eec, directives 97/7/ec, 98/27/ec and 2002/65/ec of the european parliament and of the council and regulation (ec) no 2006/2004 of the european parliament and of the council. annex i. 41 directive 2011/83/eu of the european parliament and of the council of 25 october 2011 on consumer rights. 42 although, for example, this is partly what the parliament wanted in the context of the p2b regulation. see report (7.12.2018) on the proposal for a regulation of the european parliament and of the council on promoting fairness and transparency for business users of online intermediation services. amendments 2, 11, 21. https://bit.ly/3cc02xd https://bit.ly/3yjv6dp https://doi.org/10.1093/oso/9780190246693.001.0001 108 zsolt ződi public governance, administration and finances law review • vol. 7. no. 1.  van dijck, j ., poell, t . & de waal, m . (2018) . the platform society . public values in a connective world . oxford university press . online: https://doi .org/10 .1093/oso/9780190889760 .001 .0001 van dijck, j ., nieborg, d . & poell, t . (2019) . reframing platform power . internet policy review, 8(2) . online: https://doi .org/10 .14763/2019 .2 .1414 van dijck, j . (2021) . governing trust in european platform societies: introduction to the ejc special issue . european journal of communication, 36(4), 323–333 . online: https://doi .org/10 .1177/026732 31211028378 dumbrava, c . (2021) . key social media risks to democracy : risks from surveillance, personalisation, disinformation, moderation and microtargeting . eprs . online: https://bit .ly/3mhnsu7 gillespie, t . (2010) . the politics of ‘platforms’ . new media & society, 12(3), 347–364 . online: https://doi . org/10 .1177/1461444809342738 malgieri, g . & comand, g . (2017) . why a right to legibility of automated decision-making exists in the general data protection regulation . international data privacy law, 7(4), 243–265 . online: https:// doi .org/10 .1093/idpl/ipx019 riordan, j . (2016) . the liability of internet intermediaries . oxford university press . online: https://doi . org/10 .1093/oso/9780198719779 .001 .0001 shapiro, c . & varian, h . r . (1998) . information rules: a strategic guide to the network economy . harvard business school press . de waal, m ., poell, t . & van dijck, j . (2016) . de platformsamenleving : strijd om publieke waarden in een online wereld . amsterdam university press . online: https://doi .org/10 .5117/9789462984615 wachter, s ., mittelstadt, b . & floridi, l . (2017) . why a right to explanation of automated decision-making does not exist in the general data protection regulation . international data privacy law, 7(2), 76–99 . online: https://doi .org/10 .1093/idpl/ipx005 wheelwright, s . & clark, k . b . (1992) . revolutionizing product development . simon and schuster . wong, j . c . (2018, march 18) . the cambridge analytica scandal changed the world – but it didn’t change facebook . the guardian . online: https://bit .ly/3tltccv zhu, f . & iansiti, m . (2007) . dynamics of platform competition: exploring the role of installed base, platform quality and consumer expectations . icis 2007 proceedings, 38 . online: https://aisel .aisnet . org/icis2007/38 https://doi.org/10.1093/oso/9780190889760.001.0001 https://doi.org/10.14763/2019.2.1414 https://doi.org/10.1177/02673231211028378 https://doi.org/10.1177/02673231211028378 https://bit.ly/3mhnsu7 https://doi.org/10.1177/1461444809342738 https://doi.org/10.1177/1461444809342738 https://doi.org/10.1093/idpl/ipx019 https://doi.org/10.1093/idpl/ipx019 https://doi.org/10.1093/oso/9780198719779.001.0001 https://doi.org/10.1093/oso/9780198719779.001.0001 https://doi.org/10.5117/9789462984615 https://doi.org/10.1093/idpl/ipx005 https://bit.ly/3tltccv https://aisel.aisnet.org/icis2007/38 https://aisel.aisnet.org/icis2007/38 public governance, administration and finances law review vol. 7. no. 2. (2022) • 41–58. © the author 2023 doi: 10.53116/pgaflr.2022.2.2 the changes of japanese attitude toward law and legal system: comparing the results of the survey conducted in 1976, 2005 and 20221 manako kinoshita* * full professor, doshisha university, faculty of law. e-mail: mkinoshi@mail.doshisha.ac.jp abstract: this paper compares and analyses the results of a  social survey on legal attitudes conducted from january to february 2022 among japanese citizens (aged 18 or older) nationwide (hereinafter referred to as the 2022 survey) as a follow-up to the 1976 survey and the 2005 survey, which were conducted in previous years. the 2022  survey focused on three lower-level attitudes that constitute legal attitudes: 1.  flexibility; 2.  naïve moral sentiment (naïve morality); and 3.  severe punishment orientation. first, we examined the attitude toward flexibility, especially the legal attitude toward flexibility in contracts. and we found that the majority of respondents in the 2022  survey, regardless of gender or generation, demanded strictness when concluding contracts, but flexibility when executing contracts. this result is almost the same as in the 1976  and 2005  surveys. regarding the naïve moral sentiment, a  change was observed in the 2022  survey, with a  decrease among males aged 60  and over and an increase among females in their 20s. the proportion of each pattern accounted for by the combination of flexibility, naïve moral sentiment and severe punishment orientation in the 2022  survey did not differ significantly from the 1976  and 2005 surveys. keywords: japanese legal attitudes, attitude changes over the years, naïve morality, flexibility of the laws, orientation to severe punishment 1. purpose the purpose of this paper is to determine the degree to which the japanese are familiar with modern western laws through the social surveys. since the transplantation of modern western laws to japan in the meiji era (1868– 1912), there has been academic interest in the extent to which japanese people have 1 this article is a translation of the paper originally published in japanese and submitted with the permission of the editors of public governance, administration and finances law review. some additions, such as questionnaires and tables, and abbreviations have been made to ensure that readers of the english version will understand it. the original article is to be published in the japanese law & society review (hou-to shakai kenkyu), 8, 2023, in print. https://doi.org/10.53116/pgaflr.2022.2.2 mailto:mkinoshi@mail.doshisha.ac.jp 42 manako kinoshita public governance, administration and finances law review • vol.  7. no. 2.  accepted the modern western laws and what “laws” mean to them. this is the so-called problem of legal succession. according to dr. kawashima,2 who was one of the founder of sociolog y of law in japan, wrote in his popular book (kawashima, 1967, p. 139): “in traditional japanese legal consciousness, rights and obligations are perceived as something that may or may not exist, and it is not preferred that they be clarified and made definitive.” in other words, the japanese do not understand the relationship between rights and obligations and have a low level of legal consciousness. furthermore, the japanese attitude of avoidance of litigation is now used as a factor explaining the low rate of litigation in japan.3 kawashima’s point of view has generated a  great deal of academic attention. for example, in 1971 and 1976, the japan culture council (nihon bunka kaigi in japanese)4 conducted social surveys to examine japanese attitudes toward laws (nihon bunka kaigi, 1973; nihon bunka kaigi, 1982). the social surveys, which were conducted by the japan culture council in 1971 and 1976, were led by dr. hayashi,5 japanese statistician. in particular, the 1976  survey focused on three aspects of japanese people’s legal consciousness (nihon bunka kaigi, 1982, p. 65): 1. whether they have a naïve moral sentiment as a value system behind the law (dimension of naïve moral sentiment); 2.  whether they consider the law flexible (dimension of flexibility); and 3. what degree of punishment they consider appropriate for crimes (dimension of severe punishment orientation). according to hayashi’s analysis, there are three typical types of japanese legal consciousness: 1. a type with a strong sense of naïve morality, and a strong preference for either or both flexibility and severe punishment; 2.  a type with a  weak sense of naïve morality and a preference for flexibility; and 3. a type with a weak sense of naïve morality, no preference for severe punishment and no preference for flexibility (nihon bunka kaigi, 1982, pp. 65–66). hayashi (nihon bunka kaigi, 1982, pp. 67–68) considered that the type with a strong sense of naïve morality, and a strong preference for either or both flexibility, and severe punishment orientation, which is mentioned above as 1, was “the old type of japanese legal consciousness”,6 since it was common among the elderly. and the type that 2 dr. takeyoshi kawashima (1909–1992) was a leading civil code scholar and legal sociologist in post-war japan. professor emeritus of the university of tokyo. 3 in previous studies, there has been a debate among those who believe that the attitude of japanese people (not liking litigation) is the cause of the low rate of litigation in japan (cultural theory), or that institutional factors such as the high cost of litigation or the difficulty of using the system (institutional theory) are the causes. our survey in 2022 also showed that litigation is not favoured in japan; however, this paper does not take any one of these two theories. in other words, we see the influence of the system as the main factor affecting the volume of lawsuits, but also the influence of legal attitudes on people’s evaluation of the system and the intention to use it. 4 the japan culture council (nihon bunka kaigi) is a private cultural organisation of conservative intellectuals formed in 1968 and dissolved in 1994. 5 dr. chikio hayashi (1918–2002) was a director of the 7th generation of the institute of statistics and mathematical sciences in japan. 6 “the old type pf japanese legal consciousness” refers to the type with strong naïve moral sentiment, and a strong preference for either or both flexibility and severe punishment orientation, which has three types: a) a type with high naïve moral sentiment, high severe punishment orientation and high flexibility; b) a type with high naïve moral sentiment, low severe punishment orientation and high flexibility; and c) a type with high naïve moral sentiment, high severe punishment orientation and low flexibility. 43the changes of japanese attitude toward law and legal system public governance, administration and finances law review • 2. 2022 favours flexibility with a  weak naïve moral sentiment (2), was comparatively more common among the younger generation, males, and those with higher education, and was considered to be “the new type of japanese legal consciousness”.7 based on this analysis, it is natural to assume that after the 1976 survey, “the new type of japanese legal consciousness” will increase and “the old type of japanese legal consciousness” will decrease. we therefore conducted the 2005 and 2022 surveys as a follow-up to the 1976 survey to verify this prediction. this paper examined how japanese attitudes toward “laws” have changed and “what do ‘laws’ mean to the japanese?” mainly focusing on japanese legal attitude from three aspects: 1. flexible application of laws; 2. naïve morality; 3. desire for severe punishment, which hayashi (nihon bunka kaigi, 1982, pp. 64–68) described. the concept of “laws” which is used in this paper is a broader conception than the state laws. “laws” includes not only the laws and regulations enacted by the state, but social norms and “living law” as eugen ehrlich (1913) mentioned. as a  results, three aspects of japanese legal attitude are considered to support laws, which are focused in order to understand the people’s sentiments toward the state laws, legal institute and social order. in this paper, we will discuss the “legal attitude” from the perspective of psycholog y instead of “legal consciousness”. the concept of legal attitude used in this paper is based on hovland’s classic definition (rosenberg & hovland, 1960, pp. 1–3), which we consider to be composed of cognition, emotion, and behavioural intention. using this definition, it is possible to empirically clarify the structure of attitudes (kinoshita, 2021). 2. the survey design 2.1. design of the survey in 2022 the survey conducted in 2022  in japan, is one of the projects of the grant-in-aid for scientific research (b) entitled the effects of legal socialisation on people’s attitudes towards contracts. this work was supported by jsps kakenhi grant number jp19h01409. the design of the social survey conducted in 2022 is outlined as follows. the survey population was adults aged 18 and over. the survey was conducted across the whole of japan. the sampling method was two stage stratified random sampling. we allocated 1,200 subjects for the follow up survey. the number of valid responses was 691 and the valid response rate was 57.6%. the survey was carried out from 14 january to 6 february 2022. 7 “the new type of japanese legal consciousness” refers to the type of weak naïve moral sentiment that favours flexibility and has two patterns: (i) a type with low naïve moral sentiment, high severe punishment orientation and high flexibility; and (ii) a type with low naïve moral sentiment, low severe punishment orientation and high flexibility. 44 manako kinoshita public governance, administration and finances law review • vol.  7. no. 2.  2.2. design of the survey in 1976 the design of the 1976  survey (hereinafter referred to as the 1976  survey) is described below for comparison with the results of the 2022  survey (nihon bunka kaigi, 1982). the population is japanese people older than 20 years, who live within 30 km area from tokyo. the sampling method was two stage stratified random sampling. the sample size was 1,500  sample. the valid response was 1,080  and the valid response rate was 72%. the survey was carried out from 11 march to 29 march in 1976. 2.3. design of the survey in 2005 matsumura et al. (2007) conducted a social survey from february to march 2005 (hereinafter referred to as the 2005 survey), supported by grant-in-aid for scientific research in priority areas (b) dispute resolution and civil justice in the legalising society (leader: dr. murayama, masayuki) of the ministry of education, culture, sports, science and technolog y. the population was japanese aged between 20 and 70 years. the sampling method was two stage stratified random sampling, and the sample size was 2,274. the number of sampling points was 1,137, and the number of persons sampled per point was 22. the sampling period was from december 2004 to january 2005. the sampling period was from december 2004  to january 2005.  the number of valid responses was 50.0% (1,138 samples). 3. demographics of respondents 3.1. demographics of respondents in the 2022 survey because the sample size for the 2022 survey is smaller than that of the 2005 survey, the question is whether the survey is representative. therefore, we compare the valid responses from the collected sample (the “valid sample”) with the results assigned by sampling (the “design sample”). first, in terms of gender, 47.9% of the valid response sample was male and 52.1% was female, while 47.3% of the design sample was male and 52.7% was female. in terms of age structure, the number of respondents aged 18, 19 and 90 or older was small in both the valid sample and the design sample, and the percentage of respondents in other age groups ranged from 8% to 20%. the proportions of the 21  largest cities in japan and other cities and towns were almost the same in the valid response sample and the design sample. in sum, the valid sample is well representative of the design sample in terms of gender, age and residence of the respondents. although the sample size was small, we believe we were able to conduct an academically valid survey. 45the changes of japanese attitude toward law and legal system public governance, administration and finances law review • 2. 2022 3.2. sample of 30 kilometres in the tokyo metropolitan area the 1976 survey covered people living within 30 kilometres of the tokyo metropolitan area. on the other hand, the 2022 survey covered all residents in japan, so the question arises whether it is appropriate to compare the two surveys. the results of the 2022 survey, which covered only residents living within 30 kilometres of the tokyo metropolitan area, showed no  significant differences in the distribution of responses to each question. therefore, we will compare the 1976  and 2022 surveys, assuming that there is no significant difference in the overall trend between the national sample of adults in japan and the sample restricted to a  30-kilometre radius. 4. the results: changes from 1976 to 2022 4.1. three dimensions of japanese people’s legal attitudes as mentioned above, mainly three dimensions are highlighted in this paper. the first dimension is the flexible application of laws (or flexibility of norms), which indicate the people’s ideas regarding how strict and rigid norms, particularly contracts, should be. second is naïve morality (or naïve moral sentiment). and the last one is regarding their orientation to severe punishment. 4.2. the orientation to flexible application of laws 4.2.1. characteristics of attitudes toward contracts according to kawashima (1967, p. 45), in japanese society, a  compromise is expected between the reality of morality and laws, and the reality of human spirit and social lives. such a form of compromise with reality is highly valued as a “flexible” attitude. first, let us look at changes in attitudes toward contracts over time (table 1). when asked: (q 128) “what do you do when a contract you once signed is no longer suitable for your actual situation after a number of years? which of the following two statements is closer to your opinion?”, 61.7% of the respondents in the 1976 survey, 64.3% in the 2005 survey, and 72.8% in the 2022 survey answered: “when the contents of the contract has turned unsuitable for the current reality, we should discuss and correct it so that we do not have to observe the inappropriate contract”. although there was a slight increase, there was no change in the overall trend. the other option: “the contract which you have signed once must be observed even when it has turned unsuitable for the current reality”, accounted for 16.7% in the 2022 survey, down from nearly half of the 1976 survey. 8 question numbers are those used in the survey questionnaire in this article. 46 manako kinoshita public governance, administration and finances law review • vol.  7. no. 2.  table 1. responses to the q 12 questions of the survey questionnaire in 1976, 2005, 2022 choices 1976 2005 2022 1 the contract which you have signed once must be observed even when it has turned unsuitable for the current reality. 31.7 23.0 16.7 2 when the contents of the contract has turned unsuitable for the current reality, we should discuss and correct it so that we do not have to observe the inappropriate contract. 61.7 64.3 72.8 3 do not know. 6.6 12.8 10.5 total (%) 100.0 100.0 100.0 (n) (1,136) (687) source: compiled by the author. on the other hand, nearly 90% of the respondents in the 1976, 2005 and 2022 surveys answered that “when making a  contract, the contents should be as concrete and detailed as possible to avoid future disagreement over the interpretation”, while fewer than 10% of the respondents answered that “contracts are only formalities. so when making a  contract, the contents of the contract should be as simple as possible and the expressions should be as flexible as possible” (table 2). table 2. responses to the q13 question of the survey questionnaire in 1976, 2005, 2022 choices 1976 2005 2022 1 contracts are only formalities. so when making acontract, the contents of the contract should be assimple as possible and the expressions should be asflexible as possible. 6.3 4.7 4.2 2 when making a contract, the contents should be asconcrete and detailed as possible to avoid futuredisagreement over the interpretation. 89.1 87.6 89.3 3 do not know. 4.7 7.7 6.4 total (%) 100.0 100.0 100.0 (n) (1,129) (685) source: compiled by the author. this attitude toward contracts was “stable” (hayashi, 1982, pp. 13–17) in the analysis of the 1976  survey, and it was predicted that “the distinction between formal and real intention, where formally it is a  neat decision, but in reality, it is japanese-style and flexible” would not change significantly in the future. the fact that the answers to the two questions regarding the time of execution and the time of making a  contract are compatible is one of the characteristics of japanese people’s thinking about contracts. 47the changes of japanese attitude toward law and legal system public governance, administration and finances law review • 2. 2022 4.2.2. changes in responses on flexibility according to kawashima (1967, p. 45), in japanese society, a  compromise is expected between the reality of the human spirit and social life, and the reality of morality and laws. such a form of compromise with reality is highly valued as a “flexible” attitude. let us see how this “flexible” attitude has changed in situations other than contracts. four questions were asked to measure what people think about the flexibility of norms. in the original 1976 questionnaire, six questions were asked, but two were deleted because they were not in accordance with contemporary human rights attitudes. as a result, four questions are compared. the questions on the flexibility of the norms are as follows. the choices marked with an asterisk in each question are those that indicate a strict attitude. q 5  national property. there are miscellaneous trees which would suit your garden such as azaleas and wisterias in a national forest. but there is a sign saying : “keep off the national property.” a and b have different opinions on this. which opinion is closer to yours? 1 closer to a: “we may take a few of them with us because those will be soon cut down as miscellaneous trees anyway.” *2 closer to b: “we should not take any of them with us as long as there is a sign saying ‘keep off the national property’, even if those will be soon cut down as miscellaneous trees.” q 6  vacant land. there is a  vacant land in your neighbourhood. this is a’s private property. children in the neighbourhood come here and play baseball. a  always tells them: “don’t play here in my land.” but the children would not listen to him. a and b from this neighbourhood have different opinions on this problem. which opinion is closer to yours? 1 closer to a: “as this is an idle lot at the moment, it is ok that children play there.” *2 closer to b: “even if this is an idle lot at the moment, we should not use this private property without the permission of the landowner.” q 10  public employees. there are two types of public employees. which type do you prefer? *1  i prefer a  who always applies the law strictly as it is written for whatever and whenever. 2 i prefer b who tries to apply the law flexibly considering what the law really means. q 11  legal application. there are two different opinions on law. which opinion is closer to yours? *1 closer to a. a: “law exists to be observed. so when someone violates it, he/she must be punished without exceptions.” 2 closer to b. b: “law should be interpreted every time according to the case. and it should not be interpreted word for word.” 48 manako kinoshita public governance, administration and finances law review • vol.  7. no. 2.  the results of the 2022  survey (table 3) show that among these four questions, a  high percentage of the respondents prefer strictness. in case of the q 5 question, 90% of the respondents in 2022  chose “keep off the national property” (choice 2). and in the q  6  question, 80% of the respondents in 2022  chose “we should not use this private property without the permission of the landowner” (choice 2). particularly the percentage of respondents who think that “we should not use this private property without the permission of the landowner” increased in the 2022 survey compared to the 1976 survey. on the other hand, with regard to the application of the law, choices which indicate strictness were not preferred. the percentage who chose “i prefer a who always applies the law strictly as it is written for whatever and whenever (choice 1 at q 10)” was 11% in the 2022 survey. and the percentage who chose “law exists to be observed. so when someone violates it, he/she must be punished without exceptions (choice 1 at q 11)” was 26% in the 2022 survey. the tendency to dislike strictness when applying the law has been consistently strong since the 1976 survey and has not changed significantly. table 3. people’s attitude towards property rights percentage of the following choices in each question (%) male female total 1976 2005 2022 1976 2005 2022 1976 2005 2022 q5 national property 2 keep off the national property 83 81 88 87 86 92 85 84 90 q6 vacant land 2 we should not use thisprivate property without apermission of the landowner 52 64 77 60 70 83 56 67 80 q10 public employees 1 applies the law strictly 18 15 14 21 16 9 20 15 11 q11 legal application 1 punished without exceptions 24 24 29 28 25 23 26 25 26 source: compiled by the author. 4.2.3. summary of the attitude toward flexibility in summary, in the 2022 survey, there is no difference in the distribution of flexibility by gender and age. at least in the 1976, 2005  and 2022  surveys, respondents tended to view property rights such as entry to vacant lots strictly. on the other hand, the respondents tended to prefer “flexible” application of contracts and laws. in particular, with regard to contracts, there was a tendency to favour strict content at the time of conclusion, but flexible operation at the time of performance. it is not clear whether these attitudes toward flexibility change under the influence of social conditions, so it is necessary to continue to conduct surveys in the future. 49the changes of japanese attitude toward law and legal system public governance, administration and finances law review • 2. 2022 4.3. the orientation to naïve morality 4.3.1. what is the orientation to naïve morality? naïve morality (naïve moral sentiments) are considered to be the criteria by which japanese people judge “rightness” in their daily lives (nihon bunka kaigi 1982, pp. 45–46). they are the values that one expects to find at the root of a  person’s mind, a naïve and simple sense of justice and causal justice. this concept is presumably related to lerner’s (1980) just world theory in social psycholog y (matsumura et al., 2007). from a  modern perspective, these questions may seem too simple. this is based on the assumption that people’s judgement of “right” is based on naïve and emotional values. naïve morality is also thought to be related to ancient japanese customs and lifestyles, such as belief in shinto and buddha and ancestor worship. they are a  type of social norm and are used as a criterion to judge whether everyday behaviour is correct. 4.3.2. changes in responses on naïve morality the questions of naïve morality are composed with six questions, which are originally made by dr. hayashi and his co-researchers for the survey in 1976 (nihon bunka kaigi, 1982). the questions on the naïve morality are as follows. q 22 (1) do you think that we will have to suffer for our past evil deeds? q 22 (3) do you think that the gods know whatever we do, when we do good and when we do bad? q 22 (4) do you believe in human curses? q 22 (5) do you think that you must lead a decent life so that you are not ashamed of yourself in front of your ancestors? q 22 (8) there is a conventional belief from old times that tells you if you do something evil, your descendants will have to get the punishment, if not you. do you agree or disagree with this? q 22 (9) people often say “he that will lie will steal.” do you think this is true or not? let us take a look at the tendency of how japanese people have naïve morality. first, question q 22 (1) “do you think that we will have to suffer for our past evil deeds?” around 80% of the respondents answered “yes” to this question (table 4), which has not changed from 2005. to question q 22 (3) “do you think that the gods know whatever we do, when we do good and when we do bad?” 61.0% of the people responded that they agree or somewhat agree to this question, which is almost the same as the result of the 2005 survey (table 5). 50 manako kinoshita public governance, administration and finances law review • vol.  7. no. 2.  table 4. responses to the q 22 (1) question of the survey questionnaire in 1976, 2005, 2022 choices 1976 2005 2022 1 yes. 57.6 83.3 83.3 2 no. 40.5 16.7 16.7 total (%) 100.0 100.0 100.0 (n) (1,133) (678) source: compiled by the author. table 5. responses to the q 22 (3) question of the survey questionnaire in 1976, 2005, 2022 choices 1976 2005 2022 1 think so. 26.2 33.2 26.5 2 think so a little. 16.8 30.1 34.5 3 do not think so much. 19.7 20.7 21.0 4 do not think so. 35.7 16.0 18.0 total (%) 100.0 100.0 100.0 (n) (1,132) (690) source: compiled by the author. the scale was made using these six questions. specifically, if the response is “yes” or “think so” to each question, one point is given and added to the total scores. therefore, on the naïve morality scale, the lowest total score is zero points and the highest is six points. the higher the score, the stronger the sense of naïve morality is, so a person with a score of six is considered to have an “extremely naïve morality”. table 6. changes in the naïve morality scale in 1976, 2005, 2022 male n aï ve m or a l it y sc al e 20s 30s 40s 50s 60s 19 76 20 05 20 22 19 76 20 05 20 22 19 76 20 05 20 22 19 76 20 05 20 22 19 76 20 05 20 22 0 26.1 14.0 8.0 22.1 8.0 12.2 14.1 9.1 7.9 12.5 9.7 5.9 3.1 10.3 12.9 1 26.1 21.1 24.0 19.1 21.3 17.1 25.9 20.2 15.9 18.7 17.4 9.8 14.1 12.3 22.6 2 20.0 22.8 40.0 25.0 18.7 29.3 23.5 11.1 19.0 12.5 20.0 27.5 21.9 16.8 19.4 3 13.9 15.8 0.0 14.0 25.3 14.6 16.5 18.2 23.8 18.7 13.5 17.6 12.5 17.4 25.8 4 6.1 17.5 16.0 8.1 12.0 14.6 7.1 23.2 11.1 10.4 17.4 15.7 25.0 16.1 6.5 5 5.2 8.8 8.0 8.1 6.7 4.9 5.9 5.1 12.7 14.6 12.3 13.7 14.1 17.4 6.5 6 2.6 0.0 4.0 2.9 8.0 7.3 7.1 13.1 9.5 12.5 9.7 9.8 9.4 9.7 6.5 total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 51the changes of japanese attitude toward law and legal system public governance, administration and finances law review • 2. 2022 female n aï ve m or a l it y sc al e 20s 30s 40s 50s 60s 19 76 20 05 20 22 19 76 20 05 20 22 19 76 20 05 20 22 19 76 20 05 20 22 19 76 20 05 20 22 0 13.7 1.9 2.9 12.7 3.1 2.5 14.6 8.3 7.4 3.3 11.3 7.1 6.9 4.7 8.1 1 24.2 17.0 14.3 13.5 13.4 15.0 11.4 13.0 16.2 15.0 12.0 28.6 5.6 7.6 27.4 2 24.2 24.5 22.9 18.3 21.6 37.5 22.0 15.7 29.4 20.0 14.8 14.3 18.1 11.1 17.7 3 14.7 24.5 17.1 20.6 16.5 17.5 15.4 23.1 19.1 10.0 14.8 16.1 15.3 15.2 17.7 4 16.8 11.3 25.7 18.3 22.7 12.5 15.4 10.2 10.3 20.0 20.4 12.5 13.9 21.1 12.9 5 2.1 15.1 14.3 9.5 13.4 7.5 10.6 14.8 4.4 13.3 11.3 14.3 18.1 22.8 14.5 6 4.2 5.7 2.9 7.1 9.3 7.5 10.6 14.8 13.2 18.3 15.5 7.1 22.2 17.5 1.6 total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 source: compiled by the author. table 6 shows how naïve morality changed in 1976, 2005 and 2022, by gender and age, using the naïve morality scale. compared to the 2005  survey, the 2022  survey shows that, in general, both men and women do not have strong naïve moral sentiments. first, let us look at the distribution of the males scale in the 2022 survey. in their 20s, 8.0% scored 0, 24.0% scored 1 and 40.0% scored 2. in their 50s, the number of respondents scoring 4 or more increased by about 10 points, but in their 60s, the number scoring 4 or more decreased again. next, looking at females in the 2022 survey, a total of 42.9% of females in their 20s scored 4 or more points. for those in their 30s and older, that figure drops by around 10 percentage points. in particular, 29.0% of the respondents in their 60s gave a score of 4 or more. figure 1 visualises these changes in the scale by year of the survey. in this figure, the horizontal axis of the graph is age and the vertical axis is the percentage of the total number of respondents who added up the number of respondents who scored 4, 5 or 6 on the naïve morality scale. male female 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 20s 30s 40s 50s 60s 20s 30s 40s 50s 60s female 1976-4to6 female 2005-4to6 female 2022-4to6 male 1976-4to6 male 2005-4to6 male 2022-4to6 figure 1. changes of added score 4+5+6 of naïve morality, by gender and age in the 1976, 2005, 2022 surveys 52 manako kinoshita public governance, administration and finances law review • vol.  7. no. 2.  first looking at males, in the 1976 and 2005 surveys, naïve morality increased with age, and was highest among males in their 60s. in the 2022  survey, it also increased among males in their 20s through 50s, but suddenly dropped to a  low level among males in their 60s, indicating a different trend to other surveys. next, looking at female respondents, in the 1976 and 2005 surveys, naïve morality generally increased with age, and was highest among females in their 60s. on the other hand, the 2022  survey shows a  high rate for female in their 20s, but a  drop of about 10 points for those in their 30s and older, and no significant increase even for those in their 60s and older, although there is some increase or decrease in the rate. we examined whether the change in naïve moral sentiment with age was generational or age-related. 17 years separated the 2005 and 2022 surveys, so the data cannot be simply compared at 10-year increments. however, comparing the 2005 and 2022 surveys, which assumed that most males in their 30s in 2005 would be in their 50s in 2022, 17 years later, we found that males in their 50s in 2022 showed higher naïve morality. on the other hand, the naïve morality of females in their 50s in 2022 was lower than that of females in their 30s in 2005. in the past, this was an increase with age, but this was not the case for the females in the 2022 survey. this suggests that the effect of aging on naïve morality was observed in males in the 2022 survey, but that factors other than aging had an effect on it in the females’ data. 4.3.3. summary of the attitude toward naïve morality the 1976  and 2005  surveys showed that females in general had stronger naïve moral sentiment than males, but this was not necessarily the case in the 2022  survey, which showed a  different trend from the previous surveys. in particular, the 2022  survey showed that males in their 60s had lower naïve moral sentiment and females in their 20s had higher naïve moral sentiment, which is interesting given the large difference between males and females in their 20s in the 2022 survey. 4.4. the orientation to severe punishment 4.4.1. what is the orientation to severe punishment? finally, the scale of severe punishment orientation is examined. the orientation to severe punishment  literally means the idea that punishment should be severely imposed. the survey included two types of questions: those that asked about the severity of punishment for minor offenses and those that asked about the severity of punishment for more serious offenses, including those punishable by the death penalty. the severe punishment orientation scale used in the analysis in this paper is the latter (the severity of punishment for more serious offenses). to begin with, the 1976 survey (nihon bunka kaigi, 1982, p. 17) stated that the japanese society is characterised by “what might be called a paternalism towards the law”. 53the changes of japanese attitude toward law and legal system public governance, administration and finances law review • 2. 2022 this is also shown in the data: 74.0% of the respondents in the 1976 survey thought that “punishment is not intended to punish, but to rehabilitate (q 36, choice 2)”. however, in the 2005 survey, 52.1% of the respondents thought so, and in the 2022 survey, 57.6% thought so, indicating a decrease in the number of those with a paternalistic view. however, the 2005 and 2022 surveys do not indicate that people’s views have simply become more severely punitive. for example, there has been no  significant change in attitudes toward the death penalty, with 82.1% of the respondents in the 1976 survey, 86.2% in the 2005 survey and 82.5% in the 2022 survey indicating that “the death penalty is unavoidable in some cases (table 7: choice 2 in q 30)”. table 7. responses to the q 30 question in 1976, 2005, 2022 choices 1976 2005 2022 1 abolish in any circumstances. 12.2 5.2 4.8 2 unavoidable in some cases. 82.1 86.2 82.5 3 do not know. 5.6 8.6 12.7 total (%) 100.0 100.0 100.0 (n) (1,129) (687) source: compiled by the author. looking at q 31, which asked respondents about their thoughts pertaining to misjudgement: “given a  hundred people, ninety-nine of them actually committed a  crime, but one did not commit a crime and is innocent” (table 8). in the 2022 survey, 28.7% of the respondents chose the answer “save the innocent one from being punished”, while 42.4% said “it depends on the kind of crime”. on this question, 37.8% of the respondents in the 1976 survey, and 31.7% in the 2005 survey thought that one innocent person should be saved. it is interesting to note that the percentage of respondents who answered: “it depends on the type of crime”, has increased from 1976 to the present. table 8. responses to the q 30 question in 1976, 2005, 2022 choices 1976 2005 2022 1 save the innocent one from being punished. 37.8 31.7 28.7 2 sacrificing just one is inevitable. 19.3 3.5 2.8 3 depending on the kind of crime. 19.7 37.3 42.4 4 do not know. 23.3 27.5 26.2 total (%) 100.0 100.0 100.0 (n) (1,130) (687) source: compiled by the author. 54 manako kinoshita public governance, administration and finances law review • vol.  7. no. 2.  further, in the question asking about the severity of the punishment, 31.5% of the respondents in the 1976  survey answered that the punishment was “just appropriate” (choice 3  in q 32), while the percentage dropped to 7.8% in the 2005  survey, but increased by about 10 points to 17.9% in the 2022 survey. the percentage of respondents who answered “too loose” (choice 5  of q 32) was 18.7% in the 1976  survey and increased by about 15  points to 33.4% in the 2005  survey, but decreased by about 15  points to 18.9% in the 2022  survey. in other words, the 2005  survey showed a stronger preference for harsher punishment than the other surveys. 4.4.2. changes in responses on the orientation to severe punishment the orientation to severe punishment scale consists of the five questions listed below. specifically, for each question, one point was given for each choice (marked with an asterisk in each question choice below) that was considered to have a strong severe punishment orientation, and the total score was used as the score. thus, the scale took scores from zero to five, with higher scores meaning more severe punishment orientation, and a score of five meaning the most severe punishment orientation. the questionnaires on the orientation to severe punishment are as follows. q 30 do you think the death penalty should be abolished in any circumstances or it is unavoidable in some cases? 1 abolish in any circumstances. *2 unavoidable in some cases. 3 do not know. q 31  suppose there are one hundred people. ninety nine of them actually committed a  crime, but one of them did not and he/she was innocent. there are two opinions on this. a’s opinion: “penalising this innocent person by mistake is a more serious problem than overlooking the other 99 criminals. so in order to save the innocent one, it is inevitable that the 99 criminals go free.” b’s opinion: “i feel sorry for the innocent person, but if we let out the other 99 criminals, the social order cannot be maintained. so it is inevitable that all of the 100 people are penalised.” 1 save the innocent one from being punished. *2 sacrificing just one is inevitable. 3 depending on the kind of crime. 4 do not know. 55the changes of japanese attitude toward law and legal system public governance, administration and finances law review • 2. 2022 q 32 do you think penalties imposed on criminals in japan are too heavy or too light? 1 too severe. 2 slightly too severe. 3 appropriate. *4 slightly too lenient. *5 lenient. 6 do not know. q 35  there are two opinions about how the people serving in prison are treated. in short, which opinion is closer to yours? *1 prisoners should be punished strictly for their crime. there is not much need to improve the conditions. 2 prisoners should be treated in a humane and considerate way. 3 do not know. q 36  generally speaking, there are two opposed opinions on the purpose of imposing criminal punishment. which opinion do you agree with? *1 the punishment is imposed in order to chasten criminals for what they did. 2 the punishment is imposed in order to rehabilitate criminals and help them readjust to society. 3 do not know. let us look at the overall trends in the scales created from these questions. table 9 shows how the scales created from these questionnaires changed by sex and age in the 1976, 2005 and 2022 surveys. table 9. changes of desire for severe punishment in 1976, 2005 and 2022 male n aï ve m or a l it y sc al e 20s 30s 40s 50s 60s 19 76 20 05 20 22 19 76 20 05 20 22 19 76 20 05 20 22 19 76 20 05 20 22 19 76 20 05 20 22 0 15.7 8.8 16.0 11.8 4.0 7.3 4.7 12.2 12.7 2.1 5.7 3.9 6.3 3.8 6.5 1 34.8 12.3 4.0 27.9 16.0 22.0 22.4 7.1 11.1 35.4 15.1 21.6 25.0 14.1 25.8 2 26.1 31.6 44.0 27.9 20.0 22.0 37.6 20.4 31.7 22.9 25.2 23.5 31.3 35.9 30.6 3 14.8 29.8 24.0 21.3 38.7 26.8 20.0 24.5 25.4 27.1 27.7 21.6 29.7 28.8 24.2 4 8.7 15.8 12.0 10.3 21.3 22.0 12.9 33.7 19.0 10.4 23.9 27.5 7.8 16.7 12.9 5 0.0 1.8 0.0 0.7 0.0 0.0 2.4 2.0 0.0 2.1 2.5 2.0 0.0 0.6 0.0 total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 56 manako kinoshita public governance, administration and finances law review • vol.  7. no. 2.  female n aï ve m or a l it y sc al e 20s 30s 40s 50s 60s 19 76 20 05 20 22 19 76 20 05 20 22 19 76 20 05 20 22 19 76 20 05 20 22 19 76 20 05 20 22 0 17.9 3.6 8.6 7.9 7.1 5.0 8.1 7.4 10.3 11.7 8.4 12.5 8.3 7.0 9.7 1 30.5 25.5 48.6 27.8 14.3 27.5 29.3 25.9 26.5 33.3 17.5 23.2 41.7 17.5 37.1 2 30.5 29.1 14.3 37.3 25.5 30.0 31.7 27.8 26.5 26.7 31.5 21.4 26.4 28.7 24.2 3 16.8 18.2 25.7 23.8 29.6 27.5 21.1 20.4 23.5 20.0 26.6 26.8 15.3 26.9 19.4 4 3.2 21.8 0.0 3.2 22.4 7.5 8.9 18.5 13.2 5.0 15.4 14.3 8.3 19.9 9.7 5 1.1 1.8 2.9 0.0 1.0 2.5 0.8 0.0 0.0 3.3 0.7 1.8 0.0 0.0 0.0 total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 source: compiled by the author. the following graph (figure 2) visualises these changes in the 1976, 2005  and 2022  surveys by summing the percentages of those who obtained scores of 4  and 5  on the severe punishment orientation scale. the horizontal axis of the graph is age and the vertical axis is the percentage of people with a  severe punishment orientation score of 4 and 5. the higher the score, the more severe the punishment orientation. as can be seen from the graph, the peak for males was in their 50s in the 2022 survey. in the 2005 survey, the peak was in their 40s, and the number of males in their 60s or older decreased. on the other hand, for females, the 2022 survey shows a peak in the 50s and a decrease in the 60s, while the 2005 survey shows the lowest value in the 50s, followed by an increase. in the 1976 survey, the proportion of high scorers for severe punishment was very small for both males and females, and the change with age was smaller than in the other surveys. male female 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 20s 30s 40s 50s 60s 20s 30s 40s 50s 60s female 1976-4to6 female 2005-4to6 female 2022-4to6 male 1976-4to6 male 2005-4to6 male 2022-4to6 figure 2. changes of added score 4+5 of severe punishment, by gender and age in the 1976, 2005, 2022 surveys 57the changes of japanese attitude toward law and legal system public governance, administration and finances law review • 2. 2022 thus the respondents of the survey in 2005 think punishments to the criminals should be more severe than those in 1976 and 2022 surveys. we have to be careful to interpret the data, as to whether the support of harsh treatment might be the very recent tendency within the last several years, or a more deeply rooted idea among japanese. 4.4.3. summary of the attitude toward the orientation to severe punishment in sum, in the 1976, 2005  and 2022  surveys, males were generally more severely punished than females. both males and females were more inclined toward severe punish ment in the 2005  survey than in the 1976  and 2022  surveys. in all surveys, as a rule, both males and females in their 40s and 50s were more severely inclined toward punishment, but this tendency decreased when they were in their 60s. however, in the 2005 survey, females in their 20s were the most severely punishment-oriented. this suggests that aging may have a  significant effect on the change in the intention to impose severe punishment, but it is also influenced by the changing times. 5. conclusion finally, let us examine whether the prediction made at the beginning of this paper, that the “new type of japanese legal consciousness” would increase and the “old type of japanese legal consciousness” would decrease, has proved to be correct. as mentioned above (footnotes 7 and 8), hayashi (nihon bunka kaigi, 1982, pp. 64–68) referred to the type with strong naïve moral sentiment, and a  strong preference for either or both flexibility and severe punishment orientation as “the old type pf japanese legal consciousness”, while the type of weak naïve moral sentiment that favours flexibility was referred to as “the new type of japanese legal consciousness”. for reasons of space, the table has been omitted, but “the new type of japanese legal consciousness” has decreased from 27% in the 1976 survey to 18% in the 2022 survey.9 further, “the old type pf japanese legal consciousness” accounted for 62% of the total in the 1976  survey, 70% in the 2005  survey and 63% in the 2022  survey,10 with a  slight increase in the 2005 survey, but little changes.11 in other words, the type that hayashi described in his analysis of the 1976 survey as “the old type of japanese legal consciousness” still predominates in the 2022 survey, and our earlier prediction does not appear to have been correct. 9 these percentage is the summation of (i) and (ii) mentioned in footnote 8. 10 these percentage is the summation of a), b) and c), mentioned in footnote 7. 11 the 2005 and 2022 surveys cannot produce exactly the same scale because the two questions that made up the flexibility scale in the 1976 survey were deleted. hayashi (nihon bunka kaigi, 1982, p. 55) treated only those with flexibility scales of 0 and 1 as inflexible, so we followed his lead and calculated only those with scales of 0 and 1 as inflexible in the 2005 and 2022 surveys. 58 manako kinoshita public governance, administration and finances law review • vol.  7. no. 2.  there is no correlation among the three scales of naïve morality, flexibility and severe punishment orientation, and each of these three scales independently captures the japanese people’s evaluation of correctness and feeling of justice. regardless, the scale hayashi has created should prove useful for continuously measuring the japanese people’s legal attitudes. as shown in this paper, a consistent trend has been observed since the 1976 survey with regard to flexibility, particularly with regard to flexibility in applying contracts. whether this attitude also applies to the general public (non-lawyers) in other countries remains to be examined. although only hypothetical, it may be that japanese people avoid confrontation with others and prefer flexible solutions and flexible contract enforcement, preferably through discussion. people expect that a flexible solution will not have a disadvantageous outcome for them. and because people want social order to be maintained, but do not want to be hard on themselves, they will prefer flexible application of the law. in this survey, we investigated attitudes toward contracts at an abstract level. in the future, it will be necessary to study whether people’s legal attitudes differ with respect to specific conditions, such as labour, sales and so on. furthermore, it is necessary to investigate whether changes in social conditions, such as the increase in online contracts instead of face-to-face contracts, affect people’s attitudes toward contracts, and this will need to be investigated on an ongoing basis. references ehrlich, e. 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(2018) • 36–45. the amendment of the religious registration law and its impact on freedom of religion in the slovak republic1 mária havelková* * mária havelková, judr., postgraduate student, comenius university in bratislava, faculty of law, department of administrative and environmental law, slovakia. (e-mail: maria.havelkova@flaw. uniba.sk) abstract: church registration represents a  legitimate instrument of surveillance over religious groups. in the slovak republic, registered churches are funded directly out of the state budget and dispose of a  wide range of other financial, as well as non-financial benefits. slovakia has recently tightened up the already strict registration criterion of a  number of supporters. according to the currently effective legislation, a  church or religious society applying for registration must provide evidence of having over 50,000 members. the main aim of this article is to analyse the impact of the new slovak legislation on the freedom of religion with a focus on assessment of whether the range of rights and duties for registered churches are the same as for not registered ones and whether this measure is in conformity with human rights standards applied in the european union, as well as the council of europe. keywords: freedom of religion; registration of churches; church funding ; discrimination of minority religions 1. introduction increasing religious diversity within societies all around the globe cannot be overlooked. this phenomenon is mainly caused by migration of ethnic and religious groups seeking better opportunities or fleeing persecution or war in their home countries.2 given the growth of religious diversity, state authorities have the power to evaluate religious groups in order to determine if they should be allowed to function. the control of religion is justified in terms of securing peaceful coexistence of different religious groups. church registration is the most frequent method of surveillance over the religious groups and its implementation is increasing.3 notwithstanding the power of the state to control churches and religious societies, the state is still obliged to create such a  system of statechurch law which allows a maximum degree of religious freedom and autonomy.4 from a  bureaucratic point of view, the church registration represents administrative proceeding carried out by the state authorities. even though the main purpose is control of religious societies and protection of citizens, church registration is closely linked to financial interests of the state. the slovak republic is one of several european countries in which registered churches and religious societies are funded directly out of the state budget. 10.53116/pgaflr.2018.2.3 mailto:maria.havelkova%40flaw.uniba.sk?subject= mailto:maria.havelkova%40flaw.uniba.sk?subject= https://doi.org/10.53116/pgaflr.2018.2.3 37 public governance, administration and finances law review • 2. 2018 the amendment of the religious registration law and its impact on freedom of religion… financing of churches out of public funds have always been a topic in slovakia. however, this is only one of many financial and other benefits resulting from successful registration. the slovak republic (hereinafter referred to as the sr) has recently tightened up the already strict registration criterion of a  number of supporters. according to the currently effective legislation, a  church or religious society applying for registration must provide evidence of having 50,000 members. therefore, the aim of this paper is to analyse the impact of the new slovak legislation on the freedom of religion with a  focus on assessment of whether the range of rights and duties for registered churches are the same as for not registered ones and whether this measure is in conformity with the european human rights protection instruments. 2. the role of religion in the slovak republic religion has always played an important role on the territory of the sr. the slovak constitution acknowledges in its preamble the spiritual heritage of cyril and methodius and in its article 1 the basic principle is to be found: “the slovak republic is a  sovereign, democratic state governed by the rule of law. it is not bound by any ideolog y or religion.” freedom of religion is one of the fundamental freedoms guaranteed in article 24 of the slovak constitution. this article contains not only the individual freedom of religion including the freedom from religion and the right to change religion freely but also the collective expression of the freedom of religion. religious faith as an individual right ( forum internum) and as such, it is inalienable and inviolable and therefore, not subject to any legal restrain. in other words, the internal dimension of freedom of religion is absolutely protected.5 on the other hand, public expressions of religious affiliation as a  collective right ( forum externum) and may be subject to limitation under certain circumstances. the freedom to manifest one’s religion may be limited if it is necessary in a democratic society for the protection of public order, health and morals or for the protection of the rights and freedoms of others.6 the status of churches and religious societies (hereinafter referred to as churches) is provided by act no. 308/1991 coll. on the freedom of belief and the position of churches and religious societies (hereinafter referred to as the act). under the act, churches are voluntary associations of persons of the same belief in organizations with their own structure, bodies and internal regulations.7 the state recognised only churches that are registered by the registration body, i.e. the ministry of culture of the sr. a registered church is a legal entity taking advantage of a special status and also other rights awarded to all legal entities.8 even though the sr proclaims to be a  secular state, the roman–catholic church has a  strong position arising from the fact that more than 62% of the citizens confess to this church.9 an important highlight in the slovak church policy was the adoption of the basic treaty between the holy see and the sr in 2000. the treaty with the vatican had far-reaching implications when enacted various responsibilities for the sr, e.g. obligations such as: a) to subsidise the catholic church from the state budget b) to accept conscientious objection10 38 mária havelková public governance, administration and finances law review • vol. 3. no. 2. c) to accept the right of the church to establish catholic schools d) to guarantee ten catholic feast days to be accounted as national holidays e) to accept pastoral activities in armed and police forces as well as in penitentiary facilities all this confirmed the privileged position of the roman–catholic church. although similar agreements were signed with most of the registered churches in 2002, they simply used the agreement with the holy see as a template.11 the roman–catholic church has a considerable influence on public, as well as political affairs. one example will suffice: during the pre-election period in 2012, the bishop’s conference held a  consultation with the most influential political parties and presented a  series of requirements the roman–catholic church wanted parties to meet. these include the prohibition of abortion, further “protection” of heterosexual marriages12 and the guarantee of sunday rest.13 3. the legal background of religious registration processes as was already mentioned above, the slovak republic recognises only churches that are registered by the ministry of culture. the act sets a  number of positive and negative prerequisites which need to be met cumulatively. under the legislation currently in force positive preconditions are: a) registration proposal submitted by a preparatory committee b) fundamental characteristics of the establishing church c) a statement that the church will fully respect slovak laws and will be tolerant to other churches, as well as to persons without a confession d) affidavits of at least 50,000 adult citizens of the sr with the right of permanent residence attesting to the membership and support for registration of their church including their names, surnames, permanent address and their personal identity numbers the act also provides negative prerequisites preventing the establishment of the church which are enshrined within article 15 of the act. the church shall not be registered if its establishment and activity: a) is not in compliance with: 1. the act and slovak legislation in general 2. the protection of citizens’ safety, health, morality and public order 3. principles of humanity and tolerance b) threatens the rights of other legal entities or individuals in the following text, we will focus more closely on the positive prerequisites requiring solemn declarations of at least 50,000 members. the quantitative registration rule has been tightened repeatedly during the short existence of the sr, as last in may 2017 when the number of members has been increased from 20,000 to 50,000. 39 public governance, administration and finances law review • 2. 2018 the amendment of the religious registration law and its impact on freedom of religion… however, this rule has always been very strict considering the slovak population of only about 5.4 million people. firstly, the condition was 20,000 followers with permanent residence in the sr. subsequently, in 2007 the slovak parliament adopted an even stricter law, which required churches seeking registration to have 20,000 citizens domiciled in the sr, who submit an affidavit attesting to the membership and support for registration of their church and disclosing sensitive personal data, such as their personal identity number and home address. it follows that even before the amendment of the act in march 2017, slovakia had already had the strictest registration requirements in the european union and possibly even among all 57 participants countries of the osce.14 further, according to p. mulík, the 20,000 followers registration criterion had been “among the most restrictive of any democratic state in the entire world”.15 moreover, based on the 2011 census, only four currently registered groups meet the new member requirement, and half of the currently registered churches and religious societies have fewer than 5,000 members.16 on the basis of the above said arises an unavoidable question of the reasons for the passing of an even stricter law which prescribes that religious groups seeking government recognition must provide evidence of having 50,000 adult members with slovak citizenship. some members of parliament proposed even higher criteria, specifically 250,000 members for an aspiring community. this was supported by only 26 out of the 150 parliamentarians, hence it did not pass. incentives and reasons for adoption of the law shall be in general enshrined within an explanatory report. however, in this case the explanatory report is disproportionately brief and the declared justification for the new registration law is contained in only one sentence, which stated that the policy “eliminates speculative registrations that could manipulate the state for financial benefits”. even though explanatory reports cannot be considered a source of law,17 it is an important instrument for justification and rationale of any amendment of legislation. although in this case, the explanatory report is missing any relevant reasoning which calls into question the legitimacy of the new legislation. as was mentioned by the president of the sr andrej kiska, who unsuccessfully vetoed the act in question, the explanatory report does not state why this measure was necessary, as well as reasons why the existing legislation has become insufficient. on the basis of the above, we believe that it is a purely political decision reflecting the current emotional atmosphere in the slovak society. it implies a strong anti-islamic narrative. this is evident from the straightforward statements of the state leaders. the same day when the law was adopted, the president of the slovak parliament stated, that “islamisation starts with a kebab and it’s already underway in bratislava, let’s realise what we can face in 5 to 10 years. […] we must do everything we can so that no mosque is built in the future”. in this context, the attention should be drawn to the important fact that since 2007, i.e. since the registration criteria were strengthened for the first time, not a  single religious community has been able to register.18 40 mária havelková public governance, administration and finances law review • vol. 3. no. 2. 4. the importance of accessible religious registration after the first religious registration amendment was passed in 2007, the general prosecutor questioned the legality of the new law and filed a petition to the constitutional court of the sr. however, the constitutional court held, that “registration of the church or religious society is not an inevitable condition for the exercise of religious freedom. registration only concerns their existence as a  state-recognized church or religious society and has a  legal relevance only from the economic point of view”.19 we strongly disagree with this ruling on the grounds presented below. the church registration does not only represent a  control mechanism. registered churches dispose of a wide range of diverse benefits and rights. the advantages of registration are significant and we can distinguish between economic and non-economic benefits. 4.1. non-economic benefits of church registration first and foremost, churches require legal subjectivity, which enables them to function as a  legal entity. all of their internal affairs are conducted free from the interference of the government, e.g. they have their own structure and internal bodies, they may appoint their own representatives, they may own their own property and they may issue and enforce internal rules and regulations without the approval of the state.20 registered churches have an authority to influence different spheres of citizens’ everyday life by establishing their own primary and secondary schools, universities and educational institutions,21 engage in printing and publishing activities and own and operate cultural, medical and social service facilities. the clerg y of registered churches can perform state recognised wedding ceremonies22 and pastoral activities in healthcare facilities, orphanages and child care facilities, armed and police forces, as well as in penitentiary facilities. 4.2. financial benefits of church registration under act no. 218/1949 coll. on the economic security of churches and religious societies by the state, all registered churches are eligible for financial support from the state budget according to the number of the church clerg y. in 2018 over 42.5 m euros have been reallocated among 18 currently registered churches.23 during communism, an extensive amount of property of the church has been nationalised. despite the restitution in the early 1990s, the state is not able to return all nationalised property since most of this property is serving military and public purposes. according to m. moravčíková, this is “one of the reasons of preferring the preservation of the old system of financing from the state budget”.24 except direct economic support, registered churches also enjoy exemptions from various taxes, such as value-added tax, land tax, inheritance tax and property tax. in addition, religious objects and gifts for churches are exempt from import duty.25 churches may 41 public governance, administration and finances law review • 2. 2018 the amendment of the religious registration law and its impact on freedom of religion… apply for social, charitable or cultural projects, as well as for grants towards the preservation and recovery of cultural landmarks.26 unregistered churches are not able to benefit from any of the aforementioned rights and privileges. it is clear that obtaining a  legal recognition is both practical and vital and that state funding and certain privileges (e.g. tax exemptions) drastically impact the religious groups’ ability to function.27 one may argue that unregistered religious groups are generally able to function in spite of these obstacles and can register as civil associations or foundations. however, the act on citizens’ associations is inapplicable to citizens’ associations in churches or religious societies and under article 12, the ministry of the interior shall dissolve an association if it is engaged in activities reserved to churches. even though, such associations28 are currently tolerated by the state authorities, nevertheless, they are under a  constant threat that they could be dissolved practically at any time. therefore, we can conclude that the range of rights and duties is not the same and minority religions are discriminated in the sr. 5. assessment of the amendment with regards to european human rights standards the prevailing opinion among lawyers affirms that the number of faithful of a  religious group should not constitute an obstacle to getting its legal personality and the required number should be proportionate and adequate.29 asma jahangir, the un’ special rapporteur on freedom of religion and belief, in his 2004 annual report stated that “registration appeared often to be used as a means to limit the right of freedom of religion or belief of members of certain religious communities”. she also added, that “registration procedures should be easy and quick and not depend on extensive formal requirements in terms of the number of members…”30 last but not least, back in 1993 the human right committee stated that “the committee views with concern any tendency to discriminate against any religion or belief for any reason, including the fact that they are newly established, or represent religious minorities.”31 in order to have a  more precise picture, it is appropriate to have a  closer look at different numerical requirements for religious organizations across the european countries in which the registration system is applied. in a  number of european states less than 100 individuals may form a church or religious association; 10 in ukraine, 12 in estonia, 20 in finland and belarus and 30 in austria. the prerequisite of 100 members is applied in poland and serbia. in greece the number is slightly higher  –  300 members and 500 members is the condition applied in croatia. there are also countries with different numerical prerequisites for so-called traditional and non-traditional religions. for example, in denmark in order for a  religious community to be registered, it must have at least 150 members, while a  congregation, which the ministry of culture and ecclesiastic affairs considers a  group within one of the major world religions (christianity, judaism, 42 mária havelková public governance, administration and finances law review • vol. 3. no. 2. hinduism, buddhism and islam), must consist of at least 50 adult members to be approved. the two-tier system is well established in the czech republic and romania. except for slovakia, the highest numerical requirement is applied in hungary (1,000 individuals in case of a non-tradition religion) and sweden (3,000 persons).32 in this context, the new amendment of the slovak law is clearly unfounded (the highest numerical census between all eu and council of europe member states), unnecessary (due to the fact that not a single religious group had been registered after the last amendment in 2007), inappropriate, discriminatory against minority religions and therefore in conflict with european human rights standards. on these grounds, we presume that in case of an application to the european court of human rights (hereinafter referred to as ecthr), there is a  high possibility that the court will state the breach of relevant european convention articles. in support of his statement, the ecthr held relatively recently, that “even where legislation expressly authorises the operation of unregistered religious groups, that is insufficient if domestic law reserves a  whole series of rights essential for conducting religious activities (exclusively) for registered organisations with legal personality”.33 as a  possible solution, we suggest the creation of a  two-step registration model. the legislation of the czech republic can serve as an inspiring model. in the first step, the  signatures of 300 adult adherents with permanent residence is necessary for a  state registration.34 in order to be eligible for the wider scope of rights, e.g. benefiting from state subsidies and performing marriage ceremonies with civil effects, a  church needs to have been registered without interruption for a minimum of 10 years and an application has to include signatures of citizens of the czech republic or foreigners residing there permanently; their number has to be equal or superior to at least 1/1,000 of the entire czech population (approximately 10,700 individuals).35 admissibility of this model has been already accepted by the ecthr.36 from all of what has already been mentioned is evident that the problem is much more complex and a  proposed solution would not resolve the general negative attitude in the slovak society, as well as the inappropriate approach of politicians. state representatives should set a good example; however, most of them only adopt this unacceptable approach to minority religions and in fact to minorities in general. as it has been said by l. m. ondrasek, “the principal resolution should be primarily in education and dialogue on religious issues that lead to the development of critical thinking and thus to informed conclusions”.37 6. conclusions church registration represents the most frequent method of surveillance over religious groups. in the slovak republic, the registered churches are funded by the state budget and dispose of a wide range of other financial, as well as non-financial benefits. therefore, the registration process and its preconditions are closely linked to financial interests of the state. 43 public governance, administration and finances law review • 2. 2018 the amendment of the religious registration law and its impact on freedom of religion… church registration is a legitimate instrument for the protection of state interests, as well as rights and freedoms of individuals. however, the requirements of the registration process have to be clear and predictable and they need to be met realistically.38 according to the primary objective of this article, it is evident that the recently amended numerical prerequisite is inappropriate, discriminatory against minority religions and inconsistent with the current case law of the ecthr. it has been demonstrated that the positive precondition of 50,000 members with slovak citizenship and the right to permanent residence is clearly the highest numerical census between all eu and council of europe member states. since not a single religious group had been registered after the last amendment in 2007, the new legislation is unnecessary and unjustified. the control of religious groups should always lead to the maintenance of peaceful coexistence and the protection of potential members against intimidation, abuse and authoritative approach of the clerg y. a  democratic and legal state shall not discriminate ancient traditional religions. however, in the slovak republic there is no possibility for religions such as buddhism, hinduism and islam to register. 44 mária havelková public governance, administration and finances law review • vol. 3. no. 2. references 1 the article was supported by the grant of comenius university to foster scientific, pedagogical and cultural projects of young teachers, research associates and internal phd students, no. uk/100/2018 „právna úprava registrácie cirkví a náboženských spoločností a jej vplyv na slobodu vierovyznania.” 2 james t. richardson, managing religion and the judicialization of religious freedom, 2, in journal of the scientific study of religion, vol. 54, no. 1 (2015), https://onlinelibrary.wiley.com/doi/abs/10.1111/ jssr.12172 (accessed 28 may 2018). 3 roger finke, dane r. mataic, jonathan fox, exploring the trends and consequences of religious registration: a global overview, www.thearda.com/rrh/papers/registration.asp (accessed 2 may 2018). 4 michaela moravčíková, the question of secular state, recognition of religious subjects and their economical support, 374, in vestnik spbsu. philosophy and conflict studies, vol. 33, no. 3 (2017). 5 neil foster, freedom of religion and balancing clauses in discrimination legislation, 386, in oxford journal of law and religion, vol. 5, no. 3 (2016). 6 martin dojčár, the religious freedom and legal status of churches, religious organizations, and new religious movements in the slovak republic, 430, in brigham young university law review, vol. 2 (2001). 7 art. 4 par. 1 of the act. 8 moravčíková, supra n. 4, at 375. 9 the data are available at: https://census2011.statistics.sk/tabulky.html (accessed 28 may 2018). 10 this is affecting issues such as euthanasia, abortion etc. 11 miroslav tížik, secularization of public life and desecularization of the state, 163, in jan nelis (ed.), religion and secularism in the european union (brussels, p.i.e. peter lang, 2017). 12 in september 2014 the constitution was amended and article 41 has been supplemented by the following provision: “marriage is a unique bond between man and woman.” 13 tížik, supra n. 11, at 165. 14 ľubomír m. ondrasek, slovakia’s new religious registration law is a  step in the wrong direction, in providence. a  journal of christianity & american foreign policy, 1 march 2017, https://providencemag. com/2017/03/slovakias-new-religious-registration-law-step-wrong-direction/ (accessed 9 may 2018). 15 peter mulík, church and state in slovakia, 320, in silvio ferrari, cole w. durham (ed.), law and religion in post-communist europe (leuven, peeters, 2003). 16 ľubomír m. ondrasek, slovakia’s new religious registration law is a  step in the wrong direction. in providence. a  journal of christianity & american foreign policy, 1 march 2017, https://providencemag. com/2017/03/slovakias-new-religious-registration-law-step-wrong-direction/ (accessed 9 may 2018). 17 judgement of the supreme court of the slovak republic, no. 10sžo/80/2015, 25 may 2016. 18 shortly before this first amendment came into the force, the religious society of jehovah’s witnesses, the church of jesus christ of latter-day saints, and the baha’i faith had been registered. 19 finding of the constitutional court of the slovak republic, no. pl. ús 10/08-70, february 3, 2010. 20 martin dojčár, the religious freedom and legal status of churches, religious organizations, and new religious movements in the slovak republic, 432, in brigham young university law review, vol. 26 (2001). 21 salaries and training of teachers of religious courses are covered by public funds. in 2015 religious teachers represented 15% of all teachers. for details please see tížik, supra n. 11, at 164. 22 ľubomír m. ondrasek, on religious freedom in the slovak republic, 1–9, in occasional papers on religion in eastern europe, vol. 29, no. 3 (2009). 23 almost 27 m euros have been assigned to the roman–catholic church and only 8,300 euros have been allocated to the new apostolic church. four churches including the religious society of jehovah’s witnesses did not apply for state support. 24 moravčíková, supra n. 4, 378–379. 25 michaela moravčíková, religion, law, and secular principles in the slovak republic, 623, www. strasbourgconsortium.org/content/blurb/files/slovakia.1.pdf (accessed 9 may 2018). https://doi.org/10.1111/jssr.12172 https://doi.org/10.21638/11701/ spbu17.2017.313 https://doi.org/10.1093/ojlr/rww045 https://onlinelibrary.wiley.com/doi/abs/10.1111/jssr.12172 https://onlinelibrary.wiley.com/doi/abs/10.1111/jssr.12172 http://www.thearda.com/rrh/papers/registration.asp http:// https://providencemag.com/2017/03/slovakias-new-religious-registration-law-step-wrong-direction/ https://providencemag.com/2017/03/slovakias-new-religious-registration-law-step-wrong-direction/ http:// http:// http://www.strasbourgconsortium.org/content/blurb/files/slovakia.1.pdf http://www.strasbourgconsortium.org/content/blurb/files/slovakia.1.pdf https://doi.org/10.1111/jssr.12172 https://doi.org/10.21638/11701/spbu17.2017.313 https://doi.org/10.1093/ojlr/rww045 45 public governance, administration and finances law review • 2. 2018 the amendment of the religious registration law and its impact on freedom of religion… 26 moravčíková, supra n. 4, at 378. 27 jeroen temperman, recognition, registration and autonomy of religious groups: european approaches and their human rights implications, 153, in david m. kirkham (ed.), state responses to religious minorities (aldershot, ashgate, 2013). 28 such as the muslim slovak association. 29 silvio ferrari, registration of religious organizations in the european union member states, 4, in stato, chiese e  pluralismo confessionale, 2007, https://riviste.unimi.it/index.php/statoechiese/article/ view/881/ 1124 (accessed 8 october 2017). 30 report submitted by asma jahangir, special rapporteur on freedom of religion or belief. no. e/ cn.4/2005/61, 20 december 2004, https://documents-dds-ny.un.org/doc/undo c/gen/g05/101/ 50/pdf/g0510150.pdf ?openelement (accessed 2 october 2017). 31 general comment no. 22: article 18, adopted at the 48th session of the human rights committee, on 30 july 1993, par. 2. 32 international religious freedom report for 2017. the us bureau of democracy, human rights and labour, www.state.gov/j/drl/rls/irf/religiousfreedom/index.htm?d#wrapper (accessed 8 june 2018). 33 sviato-mykhaïlivska parafiya v. ukraine, 77703/01, 14 june 2007 § 122. 34 at this level a  registered church has a  status of legal entity and certain rights, such as the right to educate their clerg y in their own schools and institutions. 35 roman vido, the czech republic. new challenges for churches in a  highly secularized society, 46, in jan nelis (ed.), religion and secularism in the european union (brussels, p.i.e. peter lang, 2017). 36 for details please see lajda and others v. the czech republic, case no. 20984/05, 3 march 2009 or kimlya and others v. russia, applications nos. 76836/01 and 32782/03, 1 october 2009 § 84. 37 ondrasek, supra n. 22, at 6. 38 renáta uitz, hungary’s new constitution and its new law on freedom of religion and churches: the return of the sovereign, 963, in brigham young university law review, vol. 37, no. 3 (2012). https://doi.org/10.13130/1971-8543/881 http:// http:// http:// http:// https://doi.org/10.13130/1971-8543/881 _goback _goback _goback _goback _goback articles tax administration of large taxpayers in some cee and cis countries jasna bogovac,* natalia soloveva,** michal radvan,*** jarosław marczak,**** natalia uvarova-patenko***** the participation of tax authorities in insolvency agreements piotr buława* the amendment of the religious registration law and its impact on freedom of religion in the slovak republic mária havelková* the scope of public services performed by municipal local governments in the republic of poland through budgetary establishments małgorzata ofiarska* designated income accounts in budgetary units of municipalities as a form of partially decentralised redistribution of public finance resources allocated to educational services in poland zbigniew ofiarski* the legal aspects of reducing the bureaucracy of the court administration wojciech piątek* the constitution and public administration aksana shupitskaya* case study tax inspection – unlawful interference damian czudek* european investigation order and the “brussels” bureaucracy marek kordík,* lucia kurilovská** complaint in tax administration as an instrument to ensure good administration zuzana marethová* © 2018 dialóg campus, budapest public governance, administration and finances law review vol. 3. no. 2. (2018) • 81–89. the constitution and public administration aksana shupitskaya* * aksana shupitskaya, candidate of law, associate professor of constitutional law, department of international law, faculty of law, yanka cupala grodno state university, belarus. the author specialises in constitutional law. she is the author of several books and articles in prestigious journals. she is a  member of the centre of information and organization of public finances and tax law research in central and eastern europe. (e-mail: oshupitskaya@mail.ru) abstract: the article is devoted to the analysis of the ratio of public administration and the constitution. at the same time, under public administration, the author understands the activities of state bodies and their officials to transform social relations for the benefit of society and the state. and under the constitution  –  the basic law (or the sources of law) of the state and society, containing the system of constitutional principles and norms and ensuring the achievement and preservation of constitutional values. the main task of the author is to confirm that the constitution is the basis and at the same time the framework of public administration, and the constitutional values are the purpose of its implementation. to reveal the question, such general scientific methods of cognition were used as analysis, synthesis and generalisation. comparative legal, concrete sociological research methods, interdisciplinary and complex approaches attracted the attention of the researcher in the study of the problem. keywords: public administration; constitution; constitutional principles and norms 1. introduction the main purpose of the author is to confirm that the constitution, i.e. constitutional principles and constitutional norms, are the basis and at the same time the framework of public administration. the essence of public administration is to ensure constitutional values. to reveal the question, such general scientific methods of cognition were used as analysis, synthesis and generalisation. comparative legal, concrete sociological research methods, interdisciplinary complex approaches attracted the attention of the researcher in the study of the problem. the author relied on the works of such researchers in the field of public administration as tikhomirov yu. a.,1 vasilenko i. a.,2 litvak b.3 and specialists in the sphere of constitutional law – avakyan s. a.,4 bondar n. s.,5 i. kravets i. a.,6 crosse v. i.7 and liverovskii a. a.8 10.53116/pgaflr.2018.2.7 mailto:oshupitskaya@mail.ru https://doi.org/10.53116/pgaflr.2018.2.7 82 aksana shupitskaya public governance, administration and finances law review • vol. 3. no. 2. 2. constitutional values and public administration public administration is part of people’s daily lives. neither the state nor society can be imagined without governance. public administration is a  way of influencing public relations. yu. a. tikhomirov defines public administration as an organised process of management, regulation and control of state bodies over the development of economic and cultural spheres and other spheres of public life.9 this is the so-called broad approach to the definition of public administration. in the narrow sense of the word, public administration is a state-power activity of the executive authorities of the state to carry out their functions. public administration, in both the broad and narrow sense of the word, is based on the constitution.10 public administration is a kind of public-power activity. it is characterised by certain features. first, it is an activity that is managerial in nature. secondly, it is carried out constantly and continuously. third, it is a  planned activity. public administration is based on the principle of legality, i.e. it is carried out by the authorised state bodies established in the manner prescribed by law, using the methods provided by the law, within the limits defined by the law. another important feature of public administration is the following. it is the management activity existing in the modern state and society, aimed at the achievement of generally significant results. the role and importance of public administration is determined by the constitutional framework. modern constitutions consider the idea of democracy as one of the basic principles of the organisation and functioning of the state and society. the people are the source of power in the state. democracy means the sovereignty of the people. the people exercise their power either directly or through the state bodies they form. the direct forms of popular democracy are elections and referendum. the people or the body they have chosen to represent them determine the scope of powers of the subjects of public administration, the methods and limits of their implementation, as well as the range of issues that can be considered in a  referendum. the constitutional character also has the definition of the sphere of activity of the self-government of the people. self-government is implemented through a  system of local self-government bodies, the composition of which may be different. the researchers identify today three main models of local government.11 the anglo–saxon model is characterised by a  high degree of autonomy of local governments and the absence of special local government bodies. local governments in the united kingdom operate within the limits of the law, custom, established practice, judicial precedent, i.e. the unwritten constitution, independently and under their own responsibility. the second model is the continental model, the classic example of which is france. one section of the french constitution of 1958,12 consisting of only one article – article 72, is devoted to the issue of local self-government according to which “local communities of the republic are communes, departments, overseas territories. all other local groups are formed by law”. collectives are freely managed by elected councils, but under conditions defined by the law. national interests, administrative control and law enforcement are the area of activity of government representatives in departments and territories. the same dual nature of the organisation of local government and self-government distinguishes the republic of belarus. local administration and self-government in belarus is exercised by 83 public governance, administration and finances law review • 2. 2018 the constitution and public administration citizens through local councils of deputies, executive and administrative bodies, and bodies of territorial public self-government (article 117 of the constitution).13 the combined model of organisation of local self-government is characteristic for germany. in the federal republic of germany, under article 28 of the basic law, “communities shall be entitled to regulate all the affairs of the local community within the law under their own responsibility”.14 accordingly, the public administration in germany is composed of areas with several communities that are community associations. the commune is the basic element of the whole mechanism of self-government.15 public administration is a  type of management system. this is a complex phenomenon, which includes the subjects, objects, goals, functions, legal and information support, the procedure for decision-making and execution. all components of public administration are determined by the constitution, i.e. are set by the constitutional principles and norms. first, the subjects of public administration. the subjects of public administration in the broad sense of the word are individuals, public organisations, state bodies. if we consider public administration the implementation of its powers by state bodies, i.e. public administration in the narrow sense of the word, its subjects are the bodies of state power, empowered to exercise power and direct control of social processes. the state apparatus is numerous. accordingly, the subjects of public administration may be classified on various grounds, many of which are constitutional in nature. the subjects of public administration are divided into legislative, executive and judicial branches of government. this basis of classification of state bodies is determined by articles i, ii and iii of the constitution of the united states,16 article 10 of the constitution of the russian federation,17 article 6 of the constitution of the republic of belarus.18 public administration is divided into three parts: national, regional and local. the 3-element structure of the state apparatus is typical for federations, and 2-element structure – for unitary states. the forms of political–territorial organisations are defined by the constitution of the state. the competence of state bodies is also established by constitutional norms. the above allows them to subdivide depending on the object of influence in leadership, administrative and economic field, etc. fixed by the constitution, the principle of decision-making entities of public administration is the basis of dividing them into single (individual) and collegial decision making. the objects of public administration are the elements of the social environment and their relations, changing as a result of interaction with the subject of public administration. the specificity of various objects of public administration is determined by the fact that they all contain a  “human factor”. the objects of public administration are capable of self-movement, purposeful, adaptive, capable of self-government and dependent on the conditions of social life. these properties determine the methods, intensity and measure of influence on them of the subjects of public administration. the more developed the  managed objects, the softer the public administration can be. in addition, according to  the content determined by the social functions of objects, it is possible to distinguish objects management, distributed across the spheres of society. these are objects of economic, social, spiritual, political systems. constitutions determine the foundations of the state and society, i.e. the constitutional system (otherwise, the state and social system). the structure of the constitutional system is characterised by economic, political, social, 84 aksana shupitskaya public governance, administration and finances law review • vol. 3. no. 2. spiritual and ideological subsystems. constitutional principles and norms determine the basis of each of the subsystems, direction, measure and limits of its regulation. the purpose of public administration coincides with the purpose of the modern state and society. as such, it is expressly determined by part 1 of article 2 of the constitution of the republic of belarus,19 which states: “the person, his rights, freedoms and guarantees of  their realization are the highest value and the goal of society and the state”; part 1 of article 2 of the constitution of the russian federation,20 according to which the person, his rights and freedoms are the highest value, and recognition, observance and protection of human and civil rights and freedoms – the duty of the state; article 2 of the constitution of italy,21 according to which the republic recognises and guarantees the inalienable rights of the human person as a private person and as a member of a public association in which his personality manifests itself, and requires the fulfilment of the immutable obligations arising from political, economic and social solidarity. according to the researchers, the legal aims of public administration should be distinguished.22 in socio–economic terms, the purpose of the activities of state bodies is the satisfaction of public interest and the economic well-being of the state and society. public interest in this case is associated with the construction and maintenance of a  certain system of economic relations. from a political point of view, it is the creation and functioning of a political system that would ensure the participation of all political forces of the state and society in the management of their affairs, that would contribute to human development. the security purpose of public administration is associated with ensuring public order and public security. the organisational and legal purpose  –  with the formation of a  legal system that promotes the implementation of all functions of the state and society. it seems that all of these goals of public administration are the edge of one expected result, which state and society seeks – to ensure the rights and freedoms of the citizens. this constitutional goal, both the constitutional principle and the constitutional value, is embodied in many modern constitutions, but more importantly, it is becoming both a  basic and political value of society. moreover – regardless of the state legal system. in modern realities, there is an increasing trend towards the international understanding of the values of the state and society. the objectives of public administration are realised through its functions. functions of public administration  –  the main activities of its subjects aimed at achieving the goals. the functions of the subjects of public administration reveal its essence. from the point of view of society and the state, the subjects of public administration implement such functions as setting goals and objectives, forecasting, planning, organising function, motivation function, regulation and control. as mentioned above, the objectives of public administration are directly determined by the constitution. the same applies to the tasks of public administration. among them  –  ensuring the internal and external security of the state, creating conditions for the development of democratic institutions of society, guaranteed protection of the rights and freedoms of citizens, the creation of equal legal conditions for the development of all forms of property, the formation of market mechanisms, ensuring mutually beneficial cooperation of central and local authorities. the function of planning in public administration is expressed in setting goals, determining the necessary resources for their achievement, methods and terms, as well as forms 85 public governance, administration and finances law review • 2. 2018 the constitution and public administration and methods of step-by-step control over the activities of the control object, by which the implementation of the planned task is achieved. the forecasting function in public administration is the development of a reasonable judgment about the future development of the company or its options, ways and terms of its achievement. the forecast is a reliable tool for making strategic management decisions. the organisation as a function of public administration is to determine the organisational provisions establishing the order of management and procedural regulation: regulations, standards, instructions, requirements, responsibility, etc. motivation as a managerial function is usually considered in relation to limited, local systems. the motivation is not so much to form the motives of people’s activities as to know, catch and form actions to guide the system in accordance with them. in case of public administration, the function of motivation is essentially the same, but differs in scale and content. motivation at the national level takes the form of a national idea. regulation is an important function of modern public administration. it can be seen in a broad and narrow sense. the state, through the issuance of laws, regulations and judicial acts, establishes certain general rules of conduct for participants in public relations, i.e. regulates them. the control function in public administration is designed to ensure discipline, legality, compliance with the regime of activity and the effectiveness of subjects and objects of public administration. in this regard, the control functions are connected with the state regulation to increase its efficiency. the specific functions of public administration are embodied in the concrete manifestations of the whole variety of situations arising in practice, where it is necessary to act only on behalf of the state, realising its competence. these include the law enforcement function of judicial institutions, election and referendum commissions, state statistics (population census), licensing of activities, regulation of special legal regimes (state of emergency, free economic zones) and a  number of others. these functions are based on the constitution and must be subordinated to it. the performance of functions by public administration actors is inextricably linked to the fundamental basic ideas underlying them and determining them. constitutional legal principles – democracy, legality, separation of powers, unitarism (or federalism), etc. – are the basis of management activities, reveal its essence and act as a criterion for assessing their effectiveness. at the same time, not only the social and legal, but also the organisational principles of the subjects of state administration are determined by the constitution. sectoral and territorial principles, functional and linear, dual subordination and a  combination of unity of command and collegiality all have a  constitutional nature. thus, the constitution of the republic of belarus declares in part 1 of article 1 that the belarusian state is a democratic state and a unitary republic.23 according to article 7 of the basic law, the principle of the rule of law is established in belarus, one of the most important aspects of which is the action of the state, all its bodies and officials (subjects of state administration) within the framework of the constitution and the legislative acts adopted in accordance with it.24 according to article 1 of the italian constitution, democracy is the most important constitutional principle of the organisation and activities of the state, its bodies, officials and all subjects of law.25 article 20, paragraph 1, of the constitution of the federal 86 aksana shupitskaya public governance, administration and finances law review • vol. 3. no. 2. republic of germany enshrines both the principle of democracy and the principle of federalism.26 the legal basis of public administration is essentially determined by the constitution. the basic law establishes the sources of law, builds their hierarchy. the normative basis of public administration in the conditions of the republic of belarus is the constitution of the republic of belarus, laws adopted by the supreme representative body of the state – the national assembly of the republic of belarus, the belarusian parliament, decrees and edicts of the president of the republic of belarus, other acts of state bodies issued on the basis and in accordance with the basic law of the republic of belarus. in the organisation of public administration, the implementation of the functions of its subjects, the use of certain methods of their implementation, in the decision-making process and decision’s execution may occur errors, distortions, deficiencies that have a negative impact on the order of social relations. since constitutional principles and norms are the basis of this order, these errors should be considered a constitutional legal deformation. according to nikitina a. v., constitutional deformations (or defects) are the shortcomings of legal regulation, interpretation and application of the law, leading to violation or threat of violation of constitutional principles and constitutional values.27 constitutional deformations can be manifested in different ways and in different spheres of public administration. therefore, it makes sense to highlight the constitutional deformation in the economic, political and social spheres. they can also be divided into deformations related to the organisation of state power and the legal status of the individual. a constitutional deformation in the economic sphere, for example, related to the implementation of the most important constitutional principle of equality of state and private property, is the priority given to the protection of state property to the detriment of private property. or withdrawal of the land plot by virtue of the interests of social necessity of private ownership or other lawful possession of the property of the state. an example of constitutional deformation in the political sphere is, for example, the illegal refusal to register a candidate or the refusal to register a political party that does not comply with the law. constitutional deformations are extremely diverse in their manifestations. one of the constitutional deformations, which is clearly manifested in modern states (especially in the territory of the former soviet union), is the establishment or reorganisation of state bodies or institutions, the needs of which are objectively absent. the lack of scientific forecasting in terms of the development of the state apparatus can generate a cyclical problem: the increase in the number of civil servants leads to an increase in the cost of their maintenance; from an economic point of view, this creates a  need to reduce the number of officials; the reorganisation of the state apparatus leads to the emergence of new state structures and further on. the reform of the bureaucracy in modern states, carried out in line with legal reforms, often raises the question of duplication of powers of various state bodies, unclear definition of their competence, as well as difficulties in its differentiation. hence  –  defects in the management system, including the legal regulation of social relations. often, it is easier for an official not to take active actions than to justify their legitimacy in the future. the lack of initiative of the civil servants, their passivity can be regarded as another manifestation of constitutional deformation. 87 public governance, administration and finances law review • 2. 2018 the constitution and public administration constitutional deformations in public administration undermine the authority of the law and threaten public order. therefore, it seems necessary to determine the directions of their minimisation. the first direction is the optimisation of the functions and powers of bodies exercising public administration. under the name of optimisation, a. l. mironov understands the clarification of specific powers, the establishment of the exact responsibility of the controlled bodies for the execution of decisions, the strengthening of the financial and organisational basis of the control bodies.28 another direction is training of professional civil servants. moreover, it should be borne in mind that professionalism is not only deep knowledge and skills of officials, but also a high level of their moral and legal consciousness, based on the understanding and acceptance of human values. the application of sanctions for violations in the administration of public administration also appears to increase the responsibility of public servants for their decisions. 3. conclusion thus, it is possible to draw the following conclusions: public administration as an organised process of management, regulation and control of state bodies over the development of economic and cultural spheres, other spheres of public life, and as the power activities of the executive bodies is based on the constitution, obeys to it and is limited by it. subjects, objects, goals, functions, legal and information support, the process of decision-making and execution are determined by constitutional legal principles and norms. when organising and in the process of functioning of the public administration, violations are possible, which are deviations from the constitutional legal principles and norms, i.e. constitutional legal deformations. constitutional legal deformations threaten public order and undermine the authority of the constitution. the methods aimed at preventing constitutional legal deformations are optimisation of functions and powers of the subjects of public administration, improvement of personnel work, strengthening control over the sphere of public administration and the use of legal responsibility, if necessary. 88 aksana shupitskaya public governance, administration and finances law review • vol. 3. no. 2. references 1 ю́рий алекса́ндрович тихоми́ров, публичное право [yuriy alexandrovich tikhomirov, public law] (moscow, bek, 1995). 2 ирина алексеевна василенко, государственное и муниципальное управление; ирина алексеевна василенко, государственное и муниципальное управление, 5-е изд. [irina alekseevna vasilenko, state and municipal management] (moscow, yurayt, 2011); [irina alekseevna vasilenko, state and municipal management] 5th edition (moscow, yurayt, 2013). 3 борис литвак, государственное управление, лучшие мировые практики [boris litvak, governance – the world’s best practices] (moscow, synerg y, 2012). 4 суре́н адибе́кович авакьян, пробелы и дефекты в конституционном праве и пути их устранения, в кн. пролемы и дефекты в конституционном праве и пути их устранения, материалы международной научной конференции. юридический факультет мгу им. м.в.ломоносова. москва. 28–31 марта 2007 [suren adibekoviç avakjan, gaps and defects in constitutional law and ways of solving, 11–35, in gaps and defects in constitutional law and ways of solving, materials of international scientific conference, the faculty of law of the moscow state university m. v. lomonosov, march 28–31, 2007] (moscow, un-y, 2008). 5 бондарь николай семенович, местное самоуправление и конституционное правосудие: конституционализация муниципальной демократии в россии [bondar nikolai semenovich, local government and constitutional justice: constitutionalisation of the municipal democracy in russia] (moscow, norma, 2008). 6 игорь александрович кравец, российский конституционализм: проблемы становления, развития и осуществления [igor aleksandrovich kravets, russian constitutionalism: problems of formation, development and implementation] (moscow, legal center press, 2005). 7 владимир иванович крусс, констиуционализация права: основы теории [vladimir ivanovich kruss, constitutionalisation of law: fundamentals of theory] (moscow, norma: infra-m, 2017). 8 алексей алексеевич ливеровский, о правопонимании в конституционной юстиции. конституционное и муниципальное право [alexey alekseevich liverovskii, about the understanding of law in constitutional justice, 7–9, in constitutional and municipal law, moscow, № 6 (2015). 9 ю́рий алекса́ндрович тихоми́ров, публичное право [yuriy alexandrovich tikhomirov, public law] (moscow, bek, 1995). 10 there are different approaches to the definition of the constitution: normative, natural-legal, politicallegal, etc. in this article, the author considers the constitution a  system of constitutional principles and norms enshrined in the basic law (or sources of law) of the state, defining the structure of the state and society. 11 данильян олег геннадійович, местное самоуправление в европейских странах: опыт и возможности его применения в украине [oleg gennadyevich danilyan, local self-government in european countries: experience and opportunities of its application in ukraine], www.rusnauka.com/17_and_2010/ politologia/69089.doc.htm (accessed 24 april 2018). 12 конституция франции 1958г. (the french constitution of 1958), www.conseil-constitutionnel.fr/ conseil-constitutionnel/root/bank_mm/constitution/constitution_russe_version_aout2009.pdf (accessed 24 april 2018). 13 конституция республики беларусь 15 марта 1994г. с изм. и доп., принятыми на республиканских референдумах 24 ноября 1996г. и 17 октября 2004г. [the constitution of the republic of belarus of 1994: as amended and extended, adopted at the national referenda on 24 november 1996 and on 17 october 2004]. 14 основной закон федеративной республики германии, 23 мая 1949г. [basic law of the federal republic of germany, may 23, 1949], www.1000dokumente.de/?c=dokument_de&dokument=0014_ gru&object=translation&l=ru (accessed 03 may 2018). http://www.rusnauka.com/17_and_2010/politologia/69089.doc.htm http://www.rusnauka.com/17_and_2010/politologia/69089.doc.htm http://www.conseil-constitutionnel.fr/conseil-constitutionnel/root/bank_mm/constitution/constitution_russe_ http://www.conseil-constitutionnel.fr/conseil-constitutionnel/root/bank_mm/constitution/constitution_russe_ http://www.1000dokumente.de/?c=dokument_de&dokument=0014_gru&object=translation&l=ru http://www.1000dokumente.de/?c=dokument_de&dokument=0014_gru&object=translation&l=ru 89 public governance, administration and finances law review • 2. 2018 the constitution and public administration 15 наталья владимировна михалева, местное самоуправление в германии, ленинградский юридический журнал [natalya vladimirovna mikhaleva, local self-government in germany, 177–185, in the leningrad law journal (2013).] 16 конституция соединенных штатов америки 1787 года [the constitution of the united states of america, 1787], www.hist.msu.ru/er/etext/cnstus.htm (accessed 03 may 2018). 17 конституция российской федерации от 12 декабря 1993г.: офиц.текст : м.:юрист, 2005, 56. [the constitution of the russian federation from december 12, 1993; offiсial text: m.: lawyer, 2005, 56.] 18 конституция республики беларусь 15 марта 1994г. с изм. и доп., принятыми на республиканских референдумах 24 ноября 1996г. и 17 октября 2004г. [the constitution of the republic of belarus of 1994: as amended and extended, adopted at the national referenda on 24 november 1996 and on 17 october 2004.] 19 ibid. 20 конституция российской федерации от 12 декабря 1993г.: офиц.текст : м.:юрист, 2005, 56. [the constitution of the russian federation from december 12, 1993; offiсial text: m.: lawyer, 2005, 56.] 21 конституция итальянской республики от 22 декабря 1947г. [the constitution of the italian republic of 22 december 1947], http://lawers-ssu.narod.ru/subjects/constzs/italy.htm (accessed 03 may 2018). 22 сергей наумов, ирина осипова, анна подсумкова, система государственного управления [sergey naumov, irina osipova, anna podsumkova, the system of public administration] (moscow, forum, 2008). 23 конституция республики беларусь 15 марта 1994г. с изм. и доп., принятыми на республиканских референдумах 24 ноября 1996г. и 17 октября 2004г. [the constitution of the republic of belarus of 1994: as amended and extended, adopted at the national referenda on 24 november 1996 and on 17 october 2004.] 24 ibid. 25 конституция итальянской республики от 22 декабря 1947г. [the constitution of the italian republic of 22 december 1947], http://lawers-ssu.narod.ru/subjects/constzs/italy.htm (accessed 03 may 2018). 26 основной закон федеративной республики германии, 23 мая 1949г. [basic law of the federal republic of germany, may 23, 1949], www.1000dokumente.de/?c=dokument_de&dokument=0014_ gru&object=translation&l=ru (accessed 24 april 2018). 27 анна васильевна никитина, понятие и виды конституционных дефектов, актуальные вопросы юридических наук: материалы iii междунар. науч. конф. (г.чита, апрель 2017г.) [anna vasilyevna nikitina, concept and types of constitutional defects, actual problems of legal science, proceedings of the 3rd international scientific conference, april 2017] (chita, publishing house of the young scientist, 2017, 40–45.] 28 артур миронов, государственное управление: критерии оценки эффективности и направления реформирования, вестник московского университета мвд россии [artur mironov, public administration: criteria for evaluating the effectiveness and direction of reform, 67–70, in bulletin of the moscow university of the ministry of internal affairs of russia, № 11 (2015).] http://www.hist.msu.ru/er/etext/cnstus.htm http://www.1000dokumente.de/?c=dokument_de&dokument=0014_gru&object=translation&l=ru http://www.1000dokumente.de/?c=dokument_de&dokument=0014_gru&object=translation&l=ru _goback _goback _goback _goback _goback articles tax administration of large taxpayers in some cee and cis countries jasna bogovac,* natalia soloveva,** michal radvan,*** jarosław marczak,**** natalia uvarova-patenko***** the participation of tax authorities in insolvency agreements piotr buława* the amendment of the religious registration law and its impact on freedom of religion in the slovak republic mária havelková* the scope of public services performed by municipal local governments in the republic of poland through budgetary establishments małgorzata ofiarska* designated income accounts in budgetary units of municipalities as a form of partially decentralised redistribution of public finance resources allocated to educational services in poland zbigniew ofiarski* the legal aspects of reducing the bureaucracy of the court administration wojciech piątek* the constitution and public administration aksana shupitskaya* case study tax inspection – unlawful interference damian czudek* european investigation order and the “brussels” bureaucracy marek kordík,* lucia kurilovská** complaint in tax administration as an instrument to ensure good administration zuzana marethová* public governance, administration and finances law review vol. 7. no. 1. (2022) • 21–37 . © the author 2022 doi: 10 .53116/pgaflr .2022 .1 .2 anti-crisis fiscal adjustment under the conditions of martial law and post-war recovery in ukraine tetiana iefymenko*¤ * full professor, president of the academy of financial management, kyiv, e-mail: afukyiv@ukr .net abstract: in global practice, uncontrolled imbalances in the fiscal space are a  real threat to a  country’s financial security in the context of the new economic reality; destabilisation challenges as well as the risks of the spread of crisis phenomena under the conditions of uncertainty and geopolitical conflictogenity . applying the results of theoretical and practical research based on the methods of factual and statistical analysis, it  was determined that under conditions of modern full-scale turmoil, all components of fiscal regulation should be focused on the priorities of resilience in the period of martial law and sustainable development in post-war recovery . as a  candidate for acceding the european union, ukraine will carry out reforms that will bring the country closer to world standards in all areas of financial relations . therefore, the processes of reforming tax systems, including administrative regulations, should be focused on solving systemic institutional problems of change management . keywords: fiscal regulation, taxation, crisis, monetary policy 1. introduction the processes of reforming tax systems, including administrative regulations, should be focused on solving systemic institutional problems of change management . the general vector of state regulation in ukraine, as well as in other countries with transition economies (see economics online, 2020; unece, 2022), should, as in national interest, be aimed at balancing the function of redistributing newly created values, in accordance with the priorities of countering the threats of wartime and with the aims of post-war sustainable development . it comes to the proportionality of the scale of mandatory payments to the revenue part of the budgets of all levels to the necessary military expenditures, as well as to the volume of services rendered to households, economic agents and other subjects of legal relations, which is guaranteed by the constitution of a  particular country . at the same time, the coordination of the network of structural divisions of global multinational companies (mncs), and their financial and banking divisions should be built in such a  way that fiscal planning is used in compliance with the law (iefymenko, 2020), as well as in order to mobilise significant resources for innovative renewal of production through the use of high technologies . the opportunistic https://doi.org/10.53116/pgaflr.2022.1.2 https://orcid.org/0000-0002-9163-3959 mailto:afukyiv@ukr.net 22 tetiana iefymenko public governance, administration and finances law review • vol. 7. no. 1.  behaviour of stakeholders in the shadow sector, as well as of many taxpayers, often prevents the transparent rules of compliance with international norms and regulations accepted in the world from receiving support in a  society and in parliamentary structures . this is often facilitated by inertia in the effective legislation regarding the predominance of formal procedures over the substance of taxable transactions; unfair tax burden, problems of carrying out accounting and reporting ; and the lack of accountability of representatives of fiscal authorities for losses of legal entities, for example, in the case of untimely reimbursement of value added tax . in connection with the acquisition of the status of a candidate for accession to the european union, the strategic goals of ukraine’s future membership in the eu have been determined in the space-time dimension, which, in particular, provide for compliance with the european conceptual framework for tax policy coordination . over the past ten years, the implementation of the eu – ukraine association agreement (see official journal of the european union, 2014), as well as other international obligations, has been accompanied by the consistent implementation of the following provisions: fiscal management on the principles of transparency, information exchange, fair tax competition; improvement and development of the tax system and tax authorities of ukraine (enhancement of collection and control capacities with emphasis on vat refund procedures, tax fraud control, tax evasion); exchange of experience and harmonisation of policies to combat tax fraud; gradual approximation to the tax structure defined in the eu acquis . modern transformations in the fiscal and monetary sectors of the economy must take place on the basis of established supranational postulates, norms and regulations: stability, predictability, effective administration; supporting the competitiveness of economic agents in the world; coordinating taxation with the main principles of developing the market economy; regulating transfer pricing ; and harmonising national and fiscal policies with eu directives and treaties . at the same time, if due to martial law, legislative acts (for example in the field of taxation), which differ from european standards, are adopted, it is necessary to introduce relevant procedures for their approval by the eu and the international community . in global practice, uncontrolled imbalances in the fiscal space are a  real threat to a country’s financial security in the context of the new economic reality, uncertainty and modern geopolitical conflictogenity . the risks of the spread of crisis phenomena demonstrate complex interactions with political measures from a short-, medium and long-term perspective . sustainability of public finance is impeded by soaring interest rates, guaranteed protection of vulnerable social strata from the aftermath of high food and energ y prices or by rising defence expenditure . at the same time, vulnerability to the shocks of prices on natural resources, which add to inflation and economic instability, is enhanced by delays in measures to counteract the climate crisis . moreover, investments in climate transition face obstacles due to the reduction of budget opportunities . 23anti-crisis fiscal adjustment under the conditions of martial law and post-war recovery in ukraine public governance, administration and finances law review • 1. 2022 2. fiscal regulation in ukraine in the context of modern geopolitical challenges and growing uncertainty the interpretation of the phenomenon of uncertainty and its most essential components is discussed in the works of classic (bernanke, 1983; romer, 1990; ramey & ramey, 1995), as well as modern scientists (bachmann & bayer, 2013; berger et al ., 2016; ilut & schneider, 2014; basu & bundick, 2017), which focus on unpredictable financial and price market factors, the spontaneous influence of which, within the framework of the global and national economic space of the 20th and early 21st century, led to large-scale cyclical shocks . as a result, a sharp drop in production, job losses, a slowdown in investment processes, decreasing in demand, and level of well-being were periodically observed . many researchers (arellano et al ., 2016; caggiano et al ., 2017) in addition, emphasised that, in the conditions of financial crises, effects multiplying the turbulent consequences of uncertainty became widespread . after the inevitable failure in 2020, the international monetary fund (2021) estimated that global and regional recovery continued in 2021, but, due to the difficult epidemiological situation, its pace slowed down amid high levels of uncertainty . during this period, uncertainty declined due to the spread of covid-19, though its trends were less intensive . at the same time, many countries experienced the long-term negative consequences of the pandemic: a decrease in household incomes, an increase in the level of poverty, inflation, a shortage of financial resources, etc . in ukraine, against the background of crisis disruptions due to pandemic phenomena, it was expected that in 2021 the fall in gdp of previous years would be covered, and the steady development of the economy in the forecast periods would make it possible to reduce inflation to the desired mark of 5% by the end of 2022 . back in january, reputable international organisations predicted an intensification of the global economic recovery from the second quarter of this year after the short-term impact of the “omicron” stem (international monetary fund, 2022a) . in 2022 the war in ukraine, as well as targeted sanctions, not only shattered the expectations of economic agents regarding economic recovery, but also caused another significant slowdown in world economic growth . at the beginning of the current year, the global economy had not yet fully improved after the covid-19 pandemic, but was regenerating with significant differences between the recovery paths of developed economies, on the one hand, and emerging and developing markets on the other . in addition to the war, the epidemiological consequences also led to a slowdown in business activity . structural relationships in global integrated supply chains have been disrupted, exacerbating the risks of cascading global failures . in turn, accelerating inflation has led to a  tougher monetary policy in many countries . undoubtedly, the war will greatly delay the recovery of the world economy, slowing down development, and further accelerating rising prices, as well as risks to economic prospects . 24 tetiana iefymenko public governance, administration and finances law review • vol. 7. no. 1.  it is important to note that the spring forecast of the international monetary fund (2022b) assumed that the conflict will not go beyond the borders of ukraine, that further sanctions against russia will not affect the energ y sector (although the base scenario took into account the consequences of the decision of european countries to gradually abandon russian energ y resources and the embargo announced before 31 march 2022) . at the same time, it suggested that the impact of the pandemic on health care and the economy will weaken during 2022 . life has confirmed that the tendencies of increasing conflict in various dimensions significantly hinder the search for compromise solutions in the field of economic policy . in addition to the direct humanitarian consequences, the significant reduction in the economy of many countries will lead to the spread of negative secondary effects all over the world through resource markets, trade and financial channels . according to international analysts, a tentative recovery in 2021 has been followed by increasingly gloomy developments in 2022 as risks began to materialise . global output contracted in the second quarter of this year, owing to downturns in china and russia, while u .s . consumer spending undershot expectations . it is obvious that there will be a  sharp double-digit decline in ukraine’s gdp (according to various forecasts, from 30 to 45% – depending on the scenario of further developments), as well as rising inflation (at least 20%) . global economic growth is projected to slow from 6 .1% (estimated) in 2021 to 3 .6% in 2022 and 2023 . that is by 0 .8 and 0 .2 percentage points respectively lower than the forecast for 2022 and 2023 in the january issue of the world economic outlook (international monetary fund, 2022c) . after 2023, the world economy is projected to decline to about 3 .3% in the medium term . the crisis associated with the war in ukraine is significantly different from many economic crises that we observed in the second half of the 20th and early 21st century . russia’s military invasion is accompanied by losses of human capital, and destabilisation of commodity markets . long-term losses are expected to be much higher in emerging and developing countries than in developed economies . fiscal policy plays a special role when the situation develops unfavourably . it can protect the most vulnerable from the impact of high and rising food and energ y prices on household budgets . more generally, government responses will be shaped against a challenging backdrop of high and rising inflation, economic slowdowns, high levels of debt and tightening credit conditions . fiscal constraints are getting tighter as central banks raise interest rates to fight inflation . at the complex background of high and soaring inflation, the slowing pace of economic development, high indebtedness levels and tightened loan conditions, the government will have to shape its countermeasures . as central banks increase interest rates to curb inflation, budget restrictions become even tougher . tax and monetary policy is of special importance in the event of unfavourable outcomes . it can protect the most vulnerable household budgets from the results of high and rising food and energ y prices . at present the uncertainty is still visible, but now it originates from war rather than the pandemic . 25anti-crisis fiscal adjustment under the conditions of martial law and post-war recovery in ukraine public governance, administration and finances law review • 1. 2022 taking into consideration the current forecast scenarios of the imf regarding the war on the territory of ukraine, sanction measures against the russian federation, the further impact of covid-19 on health care and the economy, stagflation threats, production volumes and employment in the world will mostly remain lower until 2026 than those that existed before the pandemic . the probability of new shocks, and a  qualitative deterioration of the structural consequences of economic turbulence at the mega-, macroand micro-level due to the growth of uncertainty (altig et al ., 2020; coibion et al ., 2021; johri et al ., 2020) are caused by, among other things, factors of behavioural origin . well-known authors consider the term “ambiguity” (ilut & schneider, 2022), which identically reflects the ambiguity of the influence of beliefs, expectations, intuition, electoral and political events on economic decision-making under standard conditions of expected utility . precautionary behaviour, as an element of uncertainty within business cycles, contributes to increased savings, reduced staffing, and reduced debt obligations, which coincides with fluctuations in asset prices . it is therefore clear that, in the near future, the role of the regulatory function of taxes will grow . however, this trend will only be acceptable if the fiscal function of taxes is balanced with the interests of the world community, united around the goals of an early end to the war and innovative plans for post-war reconstruction . 3. anti-crisis tax policy in the conditions of martial law and post-war recovery in the context of balancing the national financial and economic space 3.1. conceptual principles of determining the size of the state through fiscal normalisation of the redistribution of newly created value in the economy the national resource potential largely depends on the degree of balance of state finances . the unstable character of the trends of the ratio of budget revenues and expenditures and gdp often proves the fragility of the potential for the development of the social and economic system . the dynamics of such kinds of indicators in different countries and in ukraine (see figures 1 and 2) fully reflect the global shocks, destabilisation caused by borrowing, currency, tax and budget turbulence, as well as social disorder . decrease in income with a  simultaneous increase in expenditures is typical of the crisis period of 2009–2010 and the peak of the 2020 pandemic . the last crisis two years ago showed the importance, in the context of globalisation, of the common accord and responsibility of all nations to contribute to the just recovery and resilience of the post-pandemic world . 26 tetiana iefymenko public governance, administration and finances law review • vol. 7. no. 1.  48,0 44,0 40,0 36,0 32,0 28,0 24,0 % o f g d p 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 20 19 20 20 20 21 20 22 20 23 20 24 20 25 20 26 20 27 fact the imf forecast ukraine european union advanced economicsemerging market and developing economics figure 1. general government revenue, % gdp source: compiled by the author. 56,0 52,0 48,0 44,0 40,0 36,0 32,0 28,0 24,0 % o f g d p 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 20 19 20 20 20 21 20 22 20 23 20 24 20 25 20 26 20 27 fact the imf forecast ukraine european union advanced economicsemerging market and developing economics figure 2. general government expenditure, % gdp source: compiled by the author. in 2021, the basic components of the new world policy started to form . compared to previous crises last year, ukraine has shown greater resilience to global and national shocks . the recovery of the economy was observed, which made it possible to compensate almost completely for the decline the year before last . the domestic financial system demonstrated its resilience to shocks . forecasts and expectations of global stabilisation were destroyed in february this year . in the near future, we are likely to see a  recession at both global and national levels . accordingly, governments are likely to be forced to increase their debt burdens as well as consolidated budget deficits . the sharp rise in inflation, together with the manifestations of stagnation, is one of the key factors influencing decisions on the appropriateness of regulating the tax burden, taking the factors of income inequality and human well-being into account . indicators of the redistribution of newly created value through state and local budgets characterise the size of existing states to some extent . 27anti-crisis fiscal adjustment under the conditions of martial law and post-war recovery in ukraine public governance, administration and finances law review • 1. 2022 for instance, in the european union, where the share of the state is consistently higher than 40%, which is primarily characteristic of “welfare states”, the transformation of various areas of government demonstrates a productive impact on the market environment through developed economic institutions based on political consensus . at the same time, the crises of the 21st century have shown that, despite the growing importance of centralised management decisions, a number of basic functions of many states have been performed with low efficiency . the gap between the benefits of the population from public spending on free services and high taxes and the dynamics of debt obligations grew, which was often accompanied in various countries by a low efficiency of government programs . life has confirmed the veracity of the famous professor ariely (2010) axiom that “free services are often the most expensive” . all this led to the unification of the world community around the need to strengthen the principles of transparency and accountability in the field of public financial management to a significant degree (international monetary fund, 2019) . in ukraine, at the beginning of the war, companies operating in the russian-occupied zones accounted for almost half of gdp . it is obvious that neither they nor their employees will be able to pay taxes in the near future . due to the efforts of the global community, large ukrainian ports on the shores of two seas have been unblocked in order to transport ukrainian grain to deal with the food crisis . however, ukraine’s logistic potential for export is extremely limited . taking into account the role of the economy in counteracting aggression, tax and customs rules have been simplified . the country’s financial capabilities have almost reached zero, while needs have grown exponentially . the mode of operation of public finances under martial law is therefore radically different from the usual . the government is allowed, at its discretion, to redistribute any expenditure to priority military areas if necessary . bonds of domestic government loans, including military ones, are being issued . within the framework of balancing with inflation risks, along with business entities and citizens, the national bank of ukraine will acquire them at the expense of money emission . our state under war conditions greatly depends on external financing and external borrowings . in the near future, almost half of the government spending will be covered by such borrowings and grants . the current need for external support is about $5 billion a month . as such, we can conclude that ukraine is currently undergoing economic degradation . the country will lack its own financial resources that are needed for its rapid post-war recovery . ukraine’s economic dynamics will critically depend on external financial revenues . it is obvious that the prospects for providing international assistance may sometimes be limited due to some objective factors of a political, economic and electoral nature, so, private foreign investment will be key to a speedy recovery . receiving it requires a new economic doctrine . it can be assumed that ukraine should already start getting ready for a corresponding reduction in budget funding, and large-scale restructuring of the entire system of public administration . 28 tetiana iefymenko public governance, administration and finances law review • vol. 7. no. 1.  within the state and local budgets of all levels, the challenges of destabilisation restrain the growth of expenses, despite the objective need to strengthen the administrative measures of economic uplift and social support . the action of market forces, which for centuries prevailed at all levels of the economy (in rural markets, in industry, trade, on capital stock exchanges), is rapidly transferred across state borders . undoubtedly, the convergence of national economies with the help of foreign trade and financial flows, as well as the mobility of labour, knowledge and technologies, requires new approaches to anti-crisis regulation . the public finances of ukraine, compared to other developing european countries, are characterised by high levels of both revenues and expenditures . currently and in the future until 2023, the ratio of income and expenditure parts relative to gdp in ukraine will be preserved with a gradual increase in the level of debt security . at the same time, it should be noted that, on average, the values of these indicators in eu countries are now and in the future higher than in ukraine, by approximately 3–4% . strengthening the role of the state in evaluating and supporting positive processes of developing certain sectors of the economy is extremely important . in this context, the directions of national anti-crisis tax regulation should be considered . state support should be provided to enterprises of machine building, and the aerospace industry, which has the potential for a full technological cycle of creating space complexes, as well as passenger, military transport and civil transport aircraft . equally important are the development and implementation of tax preferences for small and medium-sized businesses . although among the eu countries, their worst debt obligations are consistently high and exceed the average european indicators, it is not correct to compare their general state of affairs with others . in the euro zone, they are protected by macroeconomic stabilisation measures from the sole regulator of the monetary sector, the european central bank . in other words, in our opinion, despite the presence of many conflicting opinions regarding the future of the single currency in the european economic space, the gradual european movement of integrating ukraine will in any case be a significant institutional factor in countering external and internal threats of destabilisation . 3.2. tax risks of the state and organisations in conditions of martial law and turmoil of the national economy due to crisis1 fiscal and budgetary regulation provides a set of institutional and political measures for the state with the aim of supporting business activity, curbing fluctuations in aggregate demand, and its impact on the level of employment, inflation and other macroeconomic indicators of the economy . it is clear that, in the current crisis, emerging market countries and low-income developing countries, which are net importers of energ y and food, 1 see european commission, 2016; oecd, 2004. 29anti-crisis fiscal adjustment under the conditions of martial law and post-war recovery in ukraine public governance, administration and finances law review • 1. 2022 will suffer from higher world prices, which will put pressure on both economic growth and public finances . in recent years, under the influence of internal and external factors, the impact of risks on the development of public finances has increased in most countries . as a result, the tendency to unbalance them, to consolidate the balance sheets of the general public administration sector with significant deficits, and to accumulate public debt, have strengthened . the general stability of the national financial space is closely related to the state of the budget, the existing optimisation of financial flows and settlement operations, as well as the degree of protection of the interests of the participants in contractual relations . the security of the country largely depends on the organisational possibilities of preventing administrative and criminal offenses in the monetary and financial sector; large-scale outflows of capital abroad; and its “erosion” from the real sector of the economy . it is necessary to take the established habits of taxpayers into account . in particular, we are talking about socio-cultural traditions: whether it  is worth taking this or that risk for the sake of immediate or long-term benefits, or if it is necessary to insure against any potentially unexpected situations . therefore, the experience of the fiscal services of developed countries is of great importance for countries with a low tax culture from the point of view of strengthening the tax institution as a whole . for example, it is a well-known practice when regulatory acts single out transactions that are legal in themselves and do not entail taxation, but are carried out in aggregate only in order to avoid it . that is, it is considered that actions based on this technolog y of tax evasion, in fact, differ from a tax crime or its planning, as well as from sham contracts . in order to prove the incompatibility of this behaviour with the spirit and essence of tax rules, although it is absolutely legal in form, it is necessary to provide arguments that this or that operation was carried out without any significant consequences for business . according to coase and williamson (1993), the amount of transaction costs largely depends on the quality of the mechanisms of adaptation to the changed conditions . the nature of adaptation to changes depends on the characteristics of the interaction between the contract participants . it is about either the market or the administrative order of interaction . at the same time, the transition from autonomous to coordinated adaptation is accompanied by an increase in costs and, also, the risk of so-called post-contract opportunism, when any of the participants can abandon their original intentions, convinced that, under new circumstances, it is no longer profitable for them . in other words, for the formation of norms and rules of behaviour within the framework of the fiscal space in order to avert the threats associated with the “tragedy of commons” (hardin, 1968), it is necessary to create social institutions that can help to prevent difficulties caused by social dilemmas based on cooperative interactions . moreover, the desire to minimise the tax burden can be explained by the so-called rational expectations of the taxpayer . it is generally accepted that paying taxes is not beneficial to entrepreneurs from an economic point of view, and therefore, comparing estimates of the scale of the benefit received and the risks of punishment, they tend to hide the income that should be taxed . rates of the tax burden, the probability of detection of 30 tetiana iefymenko public governance, administration and finances law review • vol. 7. no. 1.  the fact of evasion and the amount of fines are factors that determine the choice in the decision-making process by rational taxpayers (allingham & sandmo, 1972) . some foreign scientists expanded this model, taking the specifics of the effect of various types of taxes, utility functions and the influence of corruption into account (cremer & gahvary, 1994; boadway, 1994) . compliance with formal taxation rules is closely related to solving the problem of improving the tax culture . an important area of improvement of national fiscal systems is therefore the formation of tax planning norms, not so much related to the optimisation of taxation, but to the need to manage tax risks . for the organising and planning on-site inspections in accordance with the best global practice, tax authorities currently use various technologies to identify risky areas in the activities of economic entities bordering on tax offenses . at the same time, the taxpayers are motivated to refuse tax minimisation tools voluntarily, as tax authorities make assessment criteria generally accessible . therefore, comprehensive support for actions that improve the culture of tax planning is urgent . first of all, the key is increasing the level of economically justified tax legislation that meets the needs of modern development, reflecting in it the achievements of social sciences, significant for the practice of regulation, which contribute to the achievement of important social results . the technical and legal improvement of the general state of legality needs to contribute to the gradual convergence with european supranational rules, to relieve the employees of the tax department of the task of minimising taxation, despite possible tax risks . in this regard, the state’s policy in the field of tax planning should provide for methods of influencing business entities so that their behaviour corresponds to the public interests of the state . it is necessary to influence how the reaction of entrepreneurs to regulatory guidelines is formed both individually and in a group, and characteristic of a certain social group, industry, or mode . if the action of tax levers is accompanied by noticeable redistributive consequences, it  is necessary to monitor the probability of generating signals that lead to the emergence of opportunistic behaviour related to nonpayment of taxes on a constant basis . in the latter case, we are talking about the risks of a reduction in savings offers, which negatively affects the processes of forming share capital and the company’s activities as a whole . in any case, regardless of one or another regulatory sphere of the fiscal space, tax forecasting and administration are accompanied by both value criteria and cognitive processes . in this context, it is important to develop certain standards of behaviour in the field of taxation among society, which will over time allow the internal needs of individuals to observe the laws to form . to do this, the attitude of taxpayers to the work of fiscal authorities and tax legislation must be constantly assessed . no less important are the features of the state and social system . the fact is that, with large amounts of shadow capital and the spread of corruption, as well as the presence of an oligarchic social class at the state level, completely asymmetric decisions can be made on the problems of the tax burden . therefore, one of the first positions in terms of post-war reconstruction in ukraine is to comply with the european principle of tax justice . such actions should be 31anti-crisis fiscal adjustment under the conditions of martial law and post-war recovery in ukraine public governance, administration and finances law review • 1. 2022 accompanied by the cohesion of society and the authorities around the goals of building a sustainable and resilient national socio-economic system . the risks of non-payment of taxes depend on the rational, pragmatic choice of entrepreneurs with awareness of the possible threat of punishment or on the perception of taxes as a necessary source of public welfare (becker, 1978; pass et al ., 1988; buchanan, 1999) . in the period after the introduction of the martial law regime in ukraine, the approach to the provision of tax benefits was changed . the emergence of force majeure at the national level required the regulatory function of taxes on business activities to be strengthened . such innovations should be accompanied by a  certain reformatting of measures to combat non-compliance with current norms and rules . it is an issue of strengthening standardised procedures for neutralising of such probable risks . since a number of systemic changes aimed at reducing the tax burden, primarily for small and medium-sized businesses, have been introduced, the strengthening of preventive measures is foreseen to prevent fake transactions in the field of activity of large and multinational companies, which are associated with aggressive tax planning . undoubtedly, in the same context, on the basis of transparency and accountability based on modern digital technologies in the administration, analytical and control functions will be strengthened in relation to the quantitative and qualitative components of financial and non-financial information flows . this, on the one hand, will make it possible for the number of on-site tax audits not to increase, and on the other hand, it will contribute to the timely detection of probable fraudulent schemes for tax evasion . it is considered appropriate to exempt from paying mandatory payments to the state and provide tax reporting to the subjects of the simplified taxation system with small volumes of business activity during martial law, when their activities cannot continue . at the same time, it is necessary for such taxpayers to resume reporting and paying of mandatory dues when it becomes possible to produce goods and services under martial law, or thereafter . in addition, precautionary measures are needed so that such benefits cannot be used by entrepreneurs whose activity in value terms exceeds the established limits . in essence, the same reservations apply to entrepreneurs in the fields of big business and multinational companies, as it is possible for large business to pay 2% sales tax instead of corporate income tax and value added tax . within the framework of risk management, monitoring the use of such benefits must include the results of a quantitative assessment of the use of preferences under martial law . it should be borne in mind that, for example, the share of taxes from the activities of small business entities in ukraine was up to 10% of local budget revenues before the war . in addition, with significant amounts of financial assistance from friendly states, ukraine will demonstrate that domestic taxpayers are conscientious about their obligations . a sharp decline in tax revenue during wartime in ukraine has been accompanied by the growth of international financial support . undoubtedly, to maintain a high level of trust in our state, the principles of transparency and accountability should be enhanced . further cooperation between business and public authorities will require common approaches to counteracting compliance risks . hence, adopting and implementing further fiscal innovations should be based on better-informed decisions . 32 tetiana iefymenko public governance, administration and finances law review • vol. 7. no. 1.  such functions are usually entrusted to independent fiscal bodies created, for example, by the state parliament, or to authoritative public organisations . at the same time, it is worth considering that, according to pillar 2 of the large-scale plan to reform the international tax system for large business – statement on a two-pillar solution to address the tax challenges arising from the digitalization of the economy (oecd, 2021) – the global minimum tax rate is 15% . figure 3 shows the data on the level of provision of expenditures of the consolidated budget of ukraine with tax revenues in january–june 2022, which indicate a general trend of a  decrease in the absolute amount of tax revenues and an increase in state expenditures . january february march tax revenue of the consolidated budget of ukraine (bln uah, left axis) expenditure of the consolidated budget of ukraine (bln uah, left axis) the level of expenditure provision of the consolidated budget of ukraine by the tax revenue (%, right axis) april may june 400,0 200,0 0,0 200,0 100,0 0,0 b ill io n h a u % 128,9 88,5 41,8 39,7 46,3 30,1 82,1 112,2 77,394,4 137,5107,9 83,7 121,7 226,1 194,6 242,1 272,5 figure 3. level of ensuring the expenditures of the consolidated budget of ukraine by tax revenues in january–june 2022, % source: compiled by the author based on the indicators of the implementation of the consolidated budget of ukraine in january–june 2022 (www .mof .gov .ua/uk/budget_2022-538) . the indicator of ensuring expenditures of the consolidated budget of ukraine align with tax revenues has a  general tendency to decrease . if, in january 2022 tax revenues exceeded consolidated budget expenditures by 28 .9%, then already in february the level of expenditure coverage by these revenues was 88 .5%, in march – 41 .8%, in april – 39 .7%, in may – 46%, 3%, and in june – 30 .1% . such low provision indicators indicate that, in the period analysed, non-tax revenues, in particular borrowing and international transfers, play a  large part in financing expenditures . the trend that has developed is extremely threatening from the perspective of ensuring the fiscal security of the state . 4. harmonisation of fiscal and monetary policy: strengthening the resilience of the national economy after the crises in 2008–2009 and 2020, the conceptual principles of the formation and implementation of monetary and fiscal policies, and their harmonisation as components of the protection of the financial security of the state were defined and improved . http://www.mof.gov.ua/uk/budget_2022-538 33anti-crisis fiscal adjustment under the conditions of martial law and post-war recovery in ukraine public governance, administration and finances law review • 1. 2022 standardised immune mechanisms of diagnostics, independent examination, including public standards of correcting threatening signs in the activity of world and national financial and banking structures were implemented in modern management practice . in accordance with threshold values identified with established and recognised quantitative as well as qualitative indicators of operational activity, mandatory for the introduction of adapted monitoring and regulatory procedures, inter alia, has been provided . the problematic issue has become the need to standardise compliance control systems at all stages of the functioning of economic entities, as well as to impose fines or sanctions on those guilty of non-compliance with the rules in the regulatory and legal framework . it should be emphasised that the strategic goals in the field of financial management are already being considered by the world community, in close connection with an in-depth analysis of financialisation trends . flexible exchange rates, where possible, can help cushion shocks . excessive volatility or disorderly fluctuations in the value of the national currency can cause negative consequences for the economic and financial balance . therefore, we emphasise that it is also important to refrain from competitive devaluation and using exchange rate targets to obtain benefits . thus, reliable economic determinants, sound policy and support for the stability of the international monetary system will contribute to active and sustainable economic growth based on balanced investment decisions . under the current conditions of martial law and the future post-war reconstruction in ukraine, it is highly necessary to strengthen the resilience of the components of the fiscal and monetary space to exogenous shocks . the dynamics of the discount rate of the national bank of ukraine rose from 10 to 25% in june . at the beginning of the war, the transition from a flexible exchange rate policy to a fixed one was quite justified, as it made it possible to maintain stability in the foreign exchange market . however, fixing the official exchange rate has led to the risk of the money market falling apart into segments with the possibility of collecting speculative rents . in fact, there is a gap in exchange rate levels between the cash and non-cash markets, which creates incentives for exporters to seek offsetting schemes when disposing of foreign exchange earnings . in this way there are threats to increase the pressure of demand in the foreign exchange market as well as to adopt appropriate and inevitable decisions regarding the sale of currency from reserves . therefore, during martial law and the aggravation of the budget deficit, a clear but painful step was taken for the market with a 2 .5-fold increase in the discount rate . to prevent the economy from falling into vicious spiral of degradation, namely: rate increase – reduction of investments – technological lag – decrease in competitiveness – devaluation of the hryvnia – surge in inflation, unprecedented measures are being taken in the field of interaction between independent fiscal and monetary regulators, with the aim of a synergetic effect from this interaction . this applies primarily to interest rates on military bonds, stimulating import substitution and expanding domestic production with an increase in targeted lending to domestic businesses at acceptable interest rates . it should be borne in mind that the devaluation of the national currency, and the rise in world prices for food and raw materials have made a significant contribution to the current wave of inflation in ukraine . the management of structural changes in the country will therefore 34 tetiana iefymenko public governance, administration and finances law review • vol. 7. no. 1.  be aimed at compliance with the principle of complementarity by the government, central executive bodies and the national bank . ukraine already has a program to support agricultural producers, as well as small and medium-sized businesses . it is also worth introducing special investment contracts or investment protection agreements between the state and enterprises as borrowers or other well-known instruments in world practice . 5. conclusions the signing of the eu – ukraine association agreement in 2014 marked a new stage in the development of european–ukrainian contractual relations, which provided for their transition to a qualitatively new level – from partnership and cooperation to political association and economic integration . the entry into force of this agreement, especially of the part related to accession to the free trade zone, and its ratification, have set new challenges for the state, including those in the context of improving existing regulations in the field of taxation . even taking into account all the risks of the new economic reality, broad international support for tax reforms in ukraine, as well as consistent activities by all branches of government, together with the public sector, have made it possible to unite all stakeholders around progressive change . in modern conditions, the key priorities of ukraine’s tax policy are ensuring an anticrisis tax policy under the conditions of martial law and post-war recovery; ensuring an anti-crisis tax policy in the context of the spread of the covid-19 pandemic; harmonising the tax legislation of ukraine with the norms of the european union, taking ukraine’s acquisition of eu candidate status into account . in connection with the lingering nature of hostilities on the territory of ukraine, threats of destabilisation are increasing in the world . in the era of the pandemic, during forced quarantines to ensure social support in the usa and european countries monetary resources were issued, which led to an increase in inflation . because of the war, prices for energ y resources and food products are rising, central banks are forced to raise interest rates; there is an increase in the price of credit resources . the market problems of successful adaptation of the states to new crisis phenomena are accompanied by the risks of a possible food shortage, which will probably lead to another wave of migration from poor countries . in addition, in the autumn–winter period, an extra factor complicating the situation may be an increase in the incidence of the coronavirus . the country has already shaped a confident course for the transformation of strategic directions for countering wartime geopolitical challenges, namely ensuring economic and social resilience to future upheavals in the post-war recovery process . in contrast to the approaches of public finance management provided for in the strateg y for reforming the state finance management system for 2022–2025 and the plan of actions for its implementation (see cabinet of ministers of ukraine, 2021), monetary and credit regulation by various branches of government will take place covering the public sector as a whole . at the same time, strategic public finance governance (marchenko, 2022) will 35anti-crisis fiscal adjustment under the conditions of martial law and post-war recovery in ukraine public governance, administration and finances law review • 1. 2022 make it  possible to obtain a  synergistic effect from the coordination of management actions, both during the period of martial law and during post-war recovery . during systemic turmoil, the practical implementation of such a concept will be accompanied by the cohesion of society around countering the challenges and threats facing the country and its financial and economic system under the new reality, through the consistent introduction of relevant institutional changes within the framework of national characteristics. in order to meet the needs of economic agents of all forms of ownership during the post-war recovery, within the framework of close cooperation with international partners, ways of countering the consequences of the growing war debt burden as well as the threats of destroying ukraine’s national economy have been roughcast (ash, 2022) . the financial policy of all branches of the ukrainian government as well as the national bank is aimed at increasing the effectiveness of monetary transmission, minimising emission sources of financing the state budget deficit . the potential for stability and resilience of the economy will be strengthened on the basis of a  balanced policy of growth of macroeconomic stability (fukuyama, 2022) and stimulation of entrepreneurial activity (mackinnon, 2022) . the maximum expansion of economic opportunities in ukraine is provided on a legal basis through the complete modernisation of state institutions . this will increase tax payments, as well as registered employment . a significant reserve to replenish the state budget of ukraine is a resource that can be obtained as the shadow sector of the economy shrinks . a risk-oriented approach to combating money laundering has already been applied in ukraine . at the legislative level, the standards of the financial action task force on money laundering (see fatf, 2012–2022; verkhovna rada of ukraine, 2019) are successfully implemented . further measures are planned to counteract the risks and threats of the operational activities of economic entities in the credit and financial sphere, including the creation of conditions for legalising (laundering ) the proceeds from crime . these include conducting effective financial and economic activities, preventing the transfer of non-cash funds into shadow cash circulation, as well as the illegal withdrawal of cash and other valuable assets abroad . due to the implementation of the beps action plan by the world community, specific risks are of crucial importance, in particular in the field of information security . it is planned to implement the updated conceptual principles of tax expenditures (heady & mansour, 2019) . strengthening of the target nature of tax benefits will be used in the process of developing, approving and implementing the country’s budget . the basis for the consistent 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governance, administration and finances law review vol. 7. no. 1. (2022) • 63–76 . © the authors 2022 doi: 10 .53116/pgaflr .2022 .1 .5 some aspects of fiscal and monetary tools of the environmental sustainability – through the case of hungary1 csaba lentner*¤, sándor j. zsarnóczai**¤ * full professor, head of the széll kálmán public finance lab of the university of public service, faculty of governmental and international studies, e-mail: lentner .csaba@uni-nke .hu ** researcher, széll kálmán public finance lab of the university of public service, faculty of governmental and international studies, e-mail: zsarnoczai@yahoo .co .uk abstract: on the one hand, economic sustainability depends on an environmentally friendly and energ y-saving economy, though it rather means the continuous functioning of businesses and the national economy, which is expressed in the balance of accounting, foreign trade and budget balances . on the regulatory side, monetary policy, alongside fiscal policy, serves ensuring economic sustainability, as the main objective of central banks is to ensure price stability and maintain financial equilibrium to underpin continued economic activity . however, in our energ y crisisridden world, there is an increasing emphasis on energ y-efficient, environmentally friendly management . the focus of our study is on the environmental sustainability context of hungarian fiscal and central bank tools, with a particular focus on the legislative and programmatic elements of the green economy development of the mag yar nemzeti bank (hungarian national bank, hereinafter: mnb) . keywords: green economy, green investments, financial regulation, hungary 1. introduction global warming is increasingly posing serious problems for the world economy, including hungary . several scientific studies have proved that human activity is the main cause of global warming, which is a direct consequence of the increase in gas emissions, primarily the increasing emissions of carbon dioxide . by the end of 2020, the 1 this paper is a new research area of the széll kálmán public finance lab of the university of public service, an initial wing unpacking focusing on a general overview of the subject area. and let us add that it has begun at a difficult time, because, although the theoretical aspects of the green economy have gained momentum in the previous decade, but the economic effects of the coronavirus and the war have somewhat delayed the “green economy”. https://doi.org/10.53116/pgaflr.2022.1.5 https://orcid.org/0000-0003-2241-782x https://orcid.org/0000-0002-9751-9700 mailto:lentner.csaba@uni-nke.hu mailto:zsarnoczai%40yahoo.co.uk?subject= 64 csaba lentner, sándor j. zsarnóczai public governance, administration and finances law review • vol.  7. no. 1.  amount of gas emissions reached 35 billion tons (ritchie, 2022) . from 1940 to the end of 2019, global warming was 0 .80˚c (ritchie et al ., 2017) . the relevance of the study is that, in addition to the significant environmental damage caused by human activity, the uncertainty of the energ y supply has increased recently, which is partly due to the depletion of fossil energ y sources, and partly due to the russian– ukrainian war and the eu embargo on russian energ y sources . in addition to these, the worldwide demand for hydrocarbons continues to increase, contributing to a significant increase in their price . act ii of 2021 amended certain previous provisions on energ y and waste management that aim to reduce pollution, for example in relation to waste management and the use of electric cars. this law is an amendment to act i of 1988 . the declining resources and the increasing demand for them are causing the price increase, which has been exacerbated by the economic consequences of the recent russian–ukrainian war . our domestic energ y supply is traditionally based on external energ y sources, which is in line with the general western european unilateral external energ y dependence, the extent of which, in the case of fossil energ y sources, reaches more than 90% of the needs of domestic energ y consumption . for further economic development of western european countries, increasing fossil energ y sources are needed (zivot & andrews, 2002; otto & gugushvili, 2020) .2 this also contributes to a  significant increase in their world market price . access to alternative energ y sources, production of renewable energ y sources and their expansion require significant financial resources . the importance of environmentally conscious management is reflected in the fact that the mnb has been given a green mandate3 as its fourth monetary policy objective in 2021, which is also of outstanding importance globally . based on the central bank act, the hungarian national bank supports the maintenance of the stability of the financial intermediation system, increasing its resilience, ensuring its sustainable contribution to economic growth, and now, by helping the green economy gain ground, the government’s policy related to economic and environmental sustainability without jeopardising its primary goal . however, the so-called green mandate is not without precedent for the mag yar nemzeti bank . through its green programme, announced in february 2019, the mnb has mobilised instruments to mitigate risks related to climate change and other environmental problems, as well as to reduce risks related to the domestic green economy and, in turn, to stimulate the financing of the green economy . the strategic document sustainability and central bank policy – green aspects in the monetary policy toolbox of the hungarian national bank adopted by the monetary council accordingly provides a unified framework and presents the possible directions with the help of which the central bank can implement sustainability aspects into its monetary policy toolbox (mnb, 2021a) . the green programme of the mnb, launched in february 2019, and its parliamentary endorsement can facilitate the implementation of a  new overall economic development strateg y based on carbon neutral investments, both at the macro-micro and 2 3 we base this finding on the fact that the european union’s efforts to develop a green economy are being realised very slowly, and on the other hand, there is significant civil resistance to the use of nuclear energy. 3 see act cxxxix of 2013 on the magyar nemzeti bank effective from 5 april 2019, as well as act ii of 2021, amendment to act i of 1988. 65some aspects of fiscal and monetary tools of the environmental sustainability… public governance, administration and finances law review • 1. 2022 household level . the development of production technolog y in this way, involving the increasingly carbon neutral nature of product emissions, can ensure an environmentally friendly structural shift of the whole hungarian society, promoting the competitiveness of the economy in national and international markets . accordingly, there is a good link between our competitiveness and carbon neutrality through innovative technological development . 2. literary background in line with the appreciation of environmental protection, international and domestic literature has expanded significantly regarding this extremely important problem, as the modern market economy has been growing strongly at the micro-macro level, which is accompanied by a scarcity of energ y sources . in the 20th century, alfred pigou (1920) pointed out that if the market is unable to deal with externalities, they will distort the market demand–supply mechanism, which will not be beneficial for the public . in 1987, the world commission on environment and development made its report entitled our common future, which sets out the principles and requirements that will be used by future generations . these principles have become known as the principles of sustainable development worldwide (un, 1987) . sustainable development is a development that can meet the needs of the present without threatening future generations’ ability to meet their own needs (meadows et al ., 1992; bank of america, 2021) . the three conditions set by herman daly (2001) for sustainable development are as follows: ƿ the rate of use of renewable resources should not exceed their regeneration rate ƿ the rate of use of non-renewable resources shall not exceed the pace of sustainable renewable substitutes ƿ the rate of pollutant emissions should not exceed the assimilated capacity of the environment (daly & cobb, 1989) in addition to the above-mentioned herman daly, opschoor addresses the time factor, when he states, as a fourth condition, that the time factor of human intervention must be in balance with the timing of natural processes, as well as the decomposition of waste or renewable raw materials and the regeneration rate of ecosystems (opschoor, 2000) . shan and his co-authors (2021) emphasised that green technological innovations (gtis) and clean energ y are the essential factors that can help to achieve the carbon neutrality goal . at the same time, limits are important for sustainability, including the maintenance of the earth . in ecolog y, the carrying capacity is a population that an area can support without damaging it . in principle, we may question the earth’s ability of providing favourable living conditions for a significantly increasing population (szlávik, 2011) .4 4 see in detail fritz et al., 2021; arvaniti & habla, 2021. 66 csaba lentner, sándor j. zsarnóczai public governance, administration and finances law review • vol.  7. no. 1.  in our opinion, these findings also indicate a different approach to advanced and less developed countries in the fields of sustainability and ability . undoubtedly, the waste production of developed market economies is a significant additional natural resource use, both in raw materials and energ y carriers, and often regardless of the growing extent of environmental damage and waste . in our view, the market economy system does not mean the wasteful use of natural resources under an increasing environmental load . for the sake of the cycle economy, the recovery of pollutants has also come to the fore, which has also been enshrined in law in hungary .5 the above overview also shows that population growth and rising consumption levels significantly affect the earth’s capacity . more and more developing countries are becoming increasingly overpopulated, as the national economies of given countries are unable to supply and maintain their population . population problems are linked to the covid-19 pandemic and the ukrainian–russian war, which also presents serious environmental challenges . hantoko and other authors declared that the covid-19 pandemic has imposed a global emergency and has also raised issues regarding waste management practices . the amount of food and plastic waste also increased during the pandemic (hantoko et al ., 2021) . these factors are increasingly raising awareness and promoting good practice in environmentally conscious economies and company management, including in hungary . 3. the promotion of an environmentally conscious economy and management in international and domestic conditions recently, in the world, because of growing energ y production and intensive use of energ y sources, it is necessary to reduce the rate of increase in gas emissions, which leads to global warming thereby seriously endangering the wildlife of our planet . gas emissions have reached critical levels, which has made it  increasingly difficult to reverse the process of global warming . these global problems have drawn the attention of governments and international organisations to find ways of limiting climate change through adequate environmentally friendly economic policies in parallel with reducing environmental pollution . the russian–ukrainian war has significantly strengthened the energ y imports from outside russia, and the need for a wider use of renewable energ y sources . this is even more prominent with regard to the peaceful application of nuclear energ y . the western energ y embargo sets the entire economic system of the european union against russian fossil energ y imports, along with all its consequences . as a compensation for this, more emphasis should be placed on the use of renewable energ y sources and the electricity obtained from it . in this context, for example, in hungary, act ii of 2021 provides for an integrated electricity business by the developing accounting separation rules and separate accounting records that ensure the transparency of individual activities, non-discrimination, and excludes cross-financing between activities and distorting competition .6 5 act clxxxv of 2012 on waste. 6 act clxxxv of 2012 on waste; act ii of 2021 amending certain laws on energy and waste management. 67some aspects of fiscal and monetary tools of the environmental sustainability… public governance, administration and finances law review • 1. 2022 air pollution is one of the leading causes of serious respiratory illness, chronic obstructive pulmonary disease, ischemic heart disease and others . it is estimated that 4 .2 million deaths occur every year because of exposure to ambient (outdoor) air pollution (grover & singh, 2020; jain et al ., 2022) . international agreements are rapidly trying to limit the extent of gas emissions associated with the international quota system, which allows for gas emissions trading between countries with excess gas emissions and smaller gas emissions within their national quotas . in this area, the goal is to bring economic growth to new innovative technological procedures through the reduction of gas emissions . a further goal of the quota system is to preserve or reduce gas emissions at the global level, while ensuring further economic growth using less energ y and raw materials . this should in any case be accompanied by reducing additional waste contaminants, such as the by-products of production, and additional circular industrial use . aspects of an environmentally conscious economy also appear in the hungarian state financial regulations . the fundamental law emphasises the principle of permanent sustainability, which is also the responsibility of future generations . the hungarian government has set significant environmental and green economic policy goals since 2010; these have achieved great results . most importantly, the nes (national energ y strateg y) of 2018 set objectives, it examined the technological possibilities of decarbonising the domestic energ y sector as the only exception to the nés-2 . based on this, the most important statements of the document are that the development of carbon capture and storage (ccs) technolog y can also contribute to reducing emissions . in the long run, it is not only used for coal-fired but also for natural gas-based power plants . hungary’s position within the european union for the emissions of greenhouse gas emissions is favourable . by 2019, emissions dropped to 64 metric tons (mt)2 co2e from 95 mt co2e in 1990, leading to an average annual decrease of 1 .4% in this period . at the same time, hungary experienced an annual 1 .7% increase in gdp, demonstrating the potential for achieving significant economic growth without an increase in carbon emissions (nce, 2015; nés, 2018; békés et al ., 2022) . government green economic programmes have placed great emphasis on decarbonisation and reducing increasing emissions, but this requires maintaining the capacity of the existing paks nuclear power plant and its expansion with paks ii . the green program forecasts that after 2030, further renewable energ y development and such expansion can make it realistic to reduce co2 emissions from power generation by nearly 100% . carbon neutral energ y management affects the environmental development of the country’s entire economy, as everything depends on the energ y sectors . in connection with the resolution of the hungarian economic and financial crisis, public finance reform has placed significant emphasis on encouraging environmental investments . in the monetary toolkit of the mnb, the use of individual monetary policy tools can be replaced by climate-compatible principles, such as coordinating balance sheet assets with green transition and enforcing green aspects when assessing cover . the mnb is organically linked to other member state and non-eu central banks and thereby to some international initiatives and experiences . green aspects can be enforced by modifying the rules of asset purchases (e .g . discrimination of pollutants) or, for example, by 68 csaba lentner, sándor j. zsarnóczai public governance, administration and finances law review • vol.  7. no. 1.  incorporating the climate risk into the central bank modelling process . an important aspect may be that the climate objectives are implemented through central bank tools that are permanent . meanwhile, it may be difficult for eu legislation to set tight limits on the tools with green objectives that the european central bank can support . from january 2021, the swedish riksbank will only buy corporate bonds that meet international sustainability standards and demands . the riksbank has justified its decision on financial stability grounds; according to the central bank, climate change carries a significant risk of physical impacts and transition, which all central banks as the national body responsible for financial stability, must address, suggests the hungarian central bank (mnb, 2021a) . the network for greening the financial system has developed important principles and recommendations for the mnb, in which the four main general recommendations for central banks and supervisors are essential . the first is to integrate climate risks into financial stability monitoring and supervisory procedures . the second is the incorporation of sustainability aspects into the central bank’s own portfolio management . the third is to expand data, improve their quality and strengthen green financial awareness . further recommendations of the organisation for political decision-makers, which can also be supported by central banks, appear in standardising the publication of climate and environmental risks and developing an international taxonomy (mnb, 2021a; oecd, 2022; paris agreement, 2015) . the mnb’s monetary policy enables the government budget to strengthen the development of green investments significantly, both in industrial production and in the field of residential consumption, to reduce the environmental burden . since 2013, the mnb has led banks within the framework of its growth loan program (glp), especially targeting small and medium-sized businesses, in making green investments and increasing the use of renewable energ y sources . it was also in this period that, with the active participation of the mnb, by the end of 2015 hungarian households had become completely free from foreign currency loans . subsequently, it was possible to increase the purchasing power of the population, which later (indirectly) caused the implementation of the residential green investment loan programs . based on these principles, the mnb launched the green home program (ghp) as part of the monetary policy toolkit in october 2021, as part of the growth loan program (mnb, 2016; matolcsy, 2015) . green objectives funded by the green bond portfolio cover a very wide spectrum, including the creation of renewable energ y investments, energ y efficiency projects and green buildings . projects, primarily due to supranational issuers, are global in coverage, and bonds are also financing activities in many developing regions (such as africa and asia), which will result in even more effective green “paybacks” due to green investments that replace the general pollution of these countries . on 2 june 2020, the government debt management centre (gdmc) issued the first (international) green bond in hungary . green bonds are those for which the issuer undertakes to make some environmentally positive investment from the collected source . according to the gdmc, the 15-year bond was oversubscribed more than five times and the issue brought in a total of eur 1 .5 billion . the gdmc remains an important player in the market; on 11 september 2020, it issued samurai bonds, denominated in japanese 69some aspects of fiscal and monetary tools of the environmental sustainability… public governance, administration and finances law review • 1. 2022 yen . two of the series of four were green bonds, with a total of 20 billion yen issued for a seven and ten-year term (mnb, 2022) . this program was the first time that these types of bonds had been issued, thus encouraging green investments and their yield-increasing capacity . since 2010, the financial system has introduced new funding tools to encourage monetary stability, decrease vulnerabilities and promote green investments under preferential credit conditions . with this new monetary and fiscal economic policy, such instruments have become accessible beyond the corporate sector – primarily to smes and households, partly to reduce the government and municipal budget deficit . 4. fiscal and monetary assets in hungary examples of green investments are forward . according to international estimates in 2014, by 2030, the infrastructures needed for a global climate-friendly economy would require investments of us$ 93 thousand billion . thus, it  is imperative for financial institutions to convey more capital to green developments and investments (nce, 2015) . this estimate also confirms that the most important players in the hungarian economy, both the government’s fiscal policy and the mnb’s monetary policy and its assigned monetary tools, should make significant efforts to ensure the development of the environmentally conscious (green) economy in the future . these efforts are also linked to the 2018 decision of the hungarian parliament, which aims to switch hungary gradually to a  low-carbon economy . the implementation of decarbonisation is not planned to have a constitutional competitive limit to the hungarian economy, and, through the development of innovation and the green economy, the state can contribute to the modernisation of production sectors and the re-industrialisation of hungary . the mnb was linked to the direction of the green policy passed by the hungarian parliament and converted the three basic pillars of its green program accordingly . the mnb’s green program (mnb, 2021a) comprises the following : pillar 1: program points for the financial sector: ƿ analysis of ecological and financial risk ƿ making financial services greener ƿ encourage the greening of market players pillar 2: social, international relations: ƿ expanding cooperation with domestic partners ƿ information dissemination, education in green finance ƿ active participation in international work related to climate risks, green finance pillar 3: further greening of the mnb’s operation: ƿ to further reduce the mnb’s own ecological footprint ƿ to further expand the mnb’s own environmental publication 70 csaba lentner, sándor j. zsarnóczai public governance, administration and finances law review • vol.  7. no. 1.  the monetary council set the available funds of the growth loan program and green home program at 200 billion huf when it commenced, and by its decision of 5 april 2022, the program’s credit line increased to huf 300 billion . accordingly, credit institutions can first provide huf 120 million from this huf 300 billion budget to residents applying for home loan contracts . after the use of this amount, the remaining huf 180 billion will be used . such programmes by the mnb are closely linked to government decree 16/2016 (ii),7 on housing support related to the construction and purchase of new homes . within the framework of the glp ghp, the central bank provides a 0% interest, up to a 25-year refinancing loan to credit institutions, to buy and build energ y-efficient new residential real estate in hungary, and to purchase land for new home construction sites . act clxii of 2009 on consumer loans (hereinafter: cll), a  hungarian forint foreign currency, up to 2 .5% a  year (cll credit rate) loan (hereinafter: “home loan”), is further lending to the cll consumer, and other credit institutions are refinanced for the same purpose (mnb, 2020; mnb, 2022) . government decree 641/2020 (xii . 22 .)8 in order to introduce a  home renovation loan, it  also intends to promote the resolution of the public to amend certain government decrees . the social significance of this is outstanding . norbert kis (2019) emphasises the importance of accessing a home . affordable and appropriate housing in a  safe environment is a  fundamental need and right, which would reduce poverty and social exclusion, but even today, many of the european countries are challenged financially . some authors even approach sustainability as a  new dimension from economic social aspects, namely that cognitive sustainability (cogsust) investigates the links between the research areas of sustainability and cognitive sciences . the former can be interpreted as an environmental discipline issue to a  first-order approach; alternatively, as an engineering challenge in a  broader range of interpretations but can be interpreted in many more disciplines (zöldy et al ., 2022; kolozsi et al ., 2022) . kutasi (2022) emphasised the correlation between economy and nature, in that the further interlocking of the ecosystem model and the new keynesian model is hindered by a  crucial difference in their fundamental approaches to the relationship between economy and nature . the ecosystem model of ecological economics regards economy as one of its subsets of the ecosystem, which participates in the flow of resources, energ y and waste . in contrast, the mainstream economics model considers the economy to be an overall set, which includes nature as one of the subsets in the circulation of factors and income . 7 government decree 16/2016 (ii), which is to support housing related to the construction and purchase of new homes. 8 government decree 641/2020 (xii. 22.) on the amendment of certain government decrees in order to introduce the home renovation loan. government decree 17/2016 (ii. 10.) on the home purchase subsidy for families for the purchase and extension of used homes. amendment of government decree 518/2020 (xi. 25.) on home renovation support for families raising children. 71some aspects of fiscal and monetary tools of the environmental sustainability… public governance, administration and finances law review • 1. 2022 due to the above constraints of the domestic corporate loan stock, we currently only have an older but relatively reliable picture of the stock of green loans in terms of loans related to energ y production. the outstanding bank solar-power loan portfolio can be estimated to be at least huf 237 billion at the end of 2019 . considering and correcting for the data gap, the fair value of the exposure could be between huf 250 and 270 billion . this is of the order of 2 .5% of the total domestic corporate loan portfolio . the mnb intends to implement the gradual green rating of loans in additional sectors, with incentives in the form of a  regulatory discount . accordingly, the mnb, together with the association of hungarian banks, industry players and industry stakeholders, including business leaders, will regularly review the capital relief for loans (or bonds) financing renewable energ y production introduced by the mnb from 2020 . international examples are also presented in international literature, which clearly show what serious initiatives have been launched within the framework of green environmentfriendly programs (hirvilammi & koch, 2020; otto & gugushvili, 2020) . tax policy also has a level role to play in strengthening environmental programmes in government policy (budziszewska & glod, 2021) . in the future, it will become necessary to expand the provision of green loans further (taxonomy-based) for domestic companies, thereby encouraging the more widespread use of renewable energ y sources . pursuant to its regulations, which will come into force from 2022, the eu requires credit institutions to disclose the proportion of their green loans, in this way also promoting the expansion of the sustainable lending system in the domestic context (mnb, 2020; mnb, 2021a; mnb, 2021b) . the mnb extended the capital requirement discount to companies’ green bonds, and then in 2021, based on the mnb’s previous ideas, to economic sectors that comply with the taxonomy according to eu requirements and related investments, including cases of sustainable agriculture and energ y efficiency of non-residential properties (mnb, 2021c) . in the green program, the mnb specifically strives to ensure that market participants have and can have the appropriate skills and expertise . in this context, the mnb facilitated the availability of domestic and international training courses, in cooperation with the budapest institute of banking (hereinafter: bib) and other organisations . in addition, four universities have now started green finance courses with the professional support of the mnb . in 2019, the monetary council decided to launch a dedicated green bond portfolio, making the mnb one of the first central banks worldwide to demonstrate its commitment to green objectives in foreign reserve management . the rate of the green bond portfolio within the reserve approximates the rate of the global green bond market, which currently stands at around 1% of the total bond market . the risk-return characteristics of the portfolio do not differ significantly from similar investments . its slightly longer maturity structure compared to other mnb portfolios supports a long-term view on green finance . in june 2020, green bonds were issued first in euro and then in japanese yen in september, with a combined market value of huf 671 billion at the end of 2020 . the hungarian government will use the proceeds of the green bond issuance to finance and refinance certain green expenditures of the central budget in line with its sovereign green bond framework programme . this dedicated amount to finance green investments is 72 csaba lentner, sándor j. zsarnóczai public governance, administration and finances law review • vol.  7. no. 1.  currently negligible, at only 1 .9% of the central government’s outstanding stock of debt securities of some huf 36,000 billion at the end of december 2020 . green bond portfolios have global coverage because they provide a  green “return” in many developing regions due to green investments replacing more polluting operations . it is also important to stress that the mnb does not assume the risk of the projects in question, but the credit risk of the highly rated issuers – in many cases ‘aaa’ (paulik & tapaszti, 2022), while positive environmental impacts can still be achieved . the share of investment funds related to environmental or social sustainability in the domestic market is still low, at around 0 .5%, accounting for only huf 27 billion of the total investment fund portfolio of around huf 5,500 billion (mnb, 2020; mnb, 2021b) . in its lending activities, the mnb monitors the competitiveness of businesses, including smes, in line with green environmental programmes . the hungarian central bank believes that positive macroeconomic and competitiveness effects can be achieved through a green turn and energ y-efficient management, which will provide the basis for catching up and then sustainability .9 in its 144-point competitiveness programme (mnb, 2022), the mnb considers it important to create a more favourable economic situation for companies, which in part strengthens the stability of domestic macroeconomics, including a positive balance of the budget and the balance of payments, or a minimal deficit, as well as better wage and tax incentives, while ensuring corporate profits . this requires taking steps to improve technolog y and productivity from the company’s side as well . furthermore, we must switch to the intensive growth model . the hungarian economy is at a disadvantage both in terms of domestic labour productivity, which is the 4th lowest in the european union, and the proportion of domestic added value within exports from hungary is ranked the same . according to the mnb’s proposal, our goal is for domestic labour productivity to reach the eu average by 2030 and to increase the domestic added value of exports to 70% on the intensive growth path (mnb, 2022) . the rise of an environmentally friendly economy plays an important role in the realisation of these goals . it is a fact that the era of cheap labour and energ y, as well as low interest rates is over, so an efficient production structure is the way forward . due to its limited resources, achieving the multiplicative effect and building vertical systems at the same time is of particular importance . with this in mind, the mnb’s priority company types are the start-up ecosystem of domestic businesses, those already integrated into global value chains, and companies that supply the internal market . according to the mnb’s opinion, in order to achieve a high domestic added value content, it is essential for our competitiveness to have breakthrough points: the shift towards diversified services, the promotion of the entry of smes into foreign markets, the encouragement of investments in intangible assets, successful capital investments, the integration of inflowing capital into the domestic production networks, lower intermediate import consumption and supporting the activities of domestically owned exporting companies . 9 another key area of the mnb’s competitiveness concept is to improve the quality of training and health of the human resources factor, which is no longer the subject of this paper. 73some aspects of fiscal and monetary tools of the environmental sustainability… public governance, administration and finances law review • 1. 2022 for the measures to improve technolog y and productivity, the mnb proposes to develop the domestic entrepreneurial and start-up ecosystem, including the creation of an iconic building in a prime location as a start-up innovation hub, the creation of a university entrepreneur status, among a series of technolog y and productivity improvement measures . in addition, the emergence of university incubator houses as venture capital investors, ensuring corporate access to established public research capacities, and the development of the resource and competence map platform (ektp) are essential . however, the implementation of a clear professional direction is affected by adverse developments . for reasons of space, we will mention only two . for example, in the meantime, the world is facing new challenges, notably the war between russia and ukraine . the russian–ukrainian war has significantly increased the world market prices of fossil energ y, primarily in the field of crude oil and natural gas and caused a significant increase in the global food market prices . with this, there is a risk of an energ y crisis and food shortage in the world economy . as a result of the government’s quick and decisive action, in european terms, both utility costs and gasoline prices are at a significantly lower level in hungary compared to the other eu member states . in addition to the energ y crisis, the domestic population is increasingly at serious risk by the rise in food prices on the world market, also in connection with the russian–ukrainian war, since russia and ukraine account for nearly 10% of the world’s total food exports . further elaborating on the topic: russia and ukraine exports account for about 12% of total calories traded in the world, and the two countries are among the top five global exporters for many important cereals and oilseeds, including wheat, barley, sunflowers and maize . ukraine is also an important source of sunflower seed oil, supplying about 50% of the global market (glauber & laborde, 2022), in addition to global drought damage . this poses a significant impact also on the hungarian agriculture and enforces a shift towards high level technolog y . the global energ y crisis resulted by the war stimulated to use more renewable energ y resources, but additionally to renewable energ y resources the countries need using more fossil energ y resources instead of energ y resources coming from russia . as a result of an international embargo against russia, due to significantly reduced imports, eu member states need to find other alternative fossil energ y resources, which at the moment is to expand these resources along with renewable energ y resources . at the same time, eu member states sometimes put fossil fuels to renewable energ y sources . for example, in hungary, the case of the mátra power plant, which is based on renewable biomass energ y resources, but causes gas emissions . in addition, the domestic coal fire system is expanding, which also causes gas emissions, but may be a solution to the decrease in gas consumption .10 of course, the economic strateg y does not give up the future development of renewable energ y resources . the war negatively affects the development of a  green economy . hopefully this will only be temporary . 10 the war is already creating constraints in the economy. battery production is perhaps the most polluting industry in the world. yet the hungarian government should consider taking advantage of the opportunity offered by investors to produce batteries in debrecen, dunaújváros and győrszentiván, because employment and gdp production are important. the economic interest of the moment should not override the primacy of a green economy in the long term. 74 csaba lentner, sándor j. zsarnóczai public governance, administration and finances law review • vol.  7. no. 1.  5. summary protecting the environment, including curbing global warming, has become an important goal, both domestically and internationally . in international and national economic terms, the transition to a  carbon neutral economy will entail considerable sacrifices for countries, companies and industries, but it  can lead to sustainable economic growth in the long term . however, a  failed transition will have a  greatly increasing impact on financial, economic, and social systems, potentially making it  impossible for a  modern, technological society to function . the choice is therefore clear from both financial-economic and social political perspectives (mnb, 2020; mnb, 2021a; mnb, 2021b) . the sustainable catch-up of the hungarian economy is a sine qua non for the country’s escape from the development trap, and, in the first instance, out of the crisis . the mnb is committed to taking the necessary steps to ensure that the hungarian economic and financial system, together with the introduction of innovative measures, can contribute to our country’s environmental sustainability and climate neutrality . the targeted central bank programmes have significantly boosted demand for loans from businesses and focused the attention of credit institutions on businesses and, in turn, the sme sector, to increase their competitiveness in an increasingly competitive international economy . among the achievements of the government’s fiscal policy, the government has adopted the national clean development strateg y and the climate and nature action plan, which include operational measures in addition to the strategic goal of achieving full climate neutrality by 2050 . a competitive economy is based on the creation of an energ yefficient and at the same time environmentally friendly economy, which requires a continuous and green economy-centred coordination of fiscal and monetary tools . however, it is essential to state that the comprehensive public finance reform starting in 2010 and the environmental and energ y-saving management aspects formulated during the successful previous decade were key aspects of the competitiveness of the hungarian economy . the economic effects of the coronavirus and the russian–ukrainian war have significantly squeezed government development funds, and the mag yar nemzeti bank has again been faced with the task of stabilising the economy and combating inflation and has been forced to make some adjustments to its toolkit . it is a fact that the financial means for financing clear energ y efficiency and environmental protection tasks have become more limited, although we cannot give up on environmental reform despite the crisis, since scarce and expensive energ y resources are an elementary requirement for an environmentally conscious and energ y-efficient economy . this is 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(2018) • 90–98. case study tax inspection – unlawful interference damian czudek* * damian czudek, dr. mgr., phd, department of financial law and economics, faculty of law, masaryk university, the czech republic. the author specialises in tax law and control of public finances. (e-mail: damian.czudek@law.muni.cz) abstract: this article focuses on the issue of options, respectively the scope of application of the tax authorities’ discretion in the use of available instruments to ensure the objective of tax administration, i.e. the correct identification and determination of the tax and its payment.1 the article is based on a  case study of the decision of the supreme administrative court of the czech republic. keywords: tax; additional taxation; tax inspection 1. introduction the result of the decision of the supreme administrative court of the czech republic, which is analysed in this article, is the declaration of the unlawfulness of the tax inspection. as it might seem at first glance, the problem was not, as in many cases before, in the incorrect procedure of the tax administrator at the beginning of the tax inspection, the definition of its scope or its length. tax inspection has been dealt with in many decisions. for example, the decision of the constitutional court of 8 november 2011 (pl. ús 33/11) deals with the possibility of the tax administrator to initiate tax inspection. the constitutional court noted that, after previous differences in decision of courts, tax inspection can be initiated by the tax administrator even without specific reasons and suspicions. but in the analysed case, the court deals with the question whether the tax administrator should have used other, less burdensome means before the tax administrator proceeds to tax inspection. the problem, and therefore the reason for dealing with the above mentioned issue, is, of course, the consequences of the taxpayer’s undue process, which in a  certain sense may depend on the decision of the tax administrator whether he notifies the taxpayer or initiates the inspection. de facto, it is also the question whether the penalty payment under section 251 of the tax code is imposed. in practice, it will be important whether such a mistake is one-off or repetitive. this is related to another issue, namely the categorisation of tax subjects, which would be the issue of self-employment and the motivation of one or the penalisation of others. it is the same in substance but depends only on the point of view. hungary has chosen the system of motivation. the question is how this system will develop and whether the responders who 10.53116/pgaflr.2018.2.8 mailto:damian.czudek%40law.muni.cz?subject= https://doi.org/10.53116/pgaflr.2018.2.8 91 public governance, administration and finances law review • 2. 2018 tax inspection – unlawful interference will have no benefits will claim to be sanctioned. perhaps, in fact, the probability of tax inspection will be higher. in addition, in such a  motivation system (of course, it depends on its particular setting ), it must necessarily be that all of the taxpayers are initially classified in category 0. if they will fulfil the obligation properly, they will proceed to categories 1, 2, etc. it can be assumed, in such cases when there is a majority of such entities that those who fail to fulfil the obligations will remain in category 0, and de facto, this group cor responds to a group that could be ranked on the basis of another criterion, the opposite one. 2. legal regulation this is the interpretation of section 143 (3) of act no. 280/2009 coll., the tax code, as amended (hereinafter the tax code). the issues are, whether the tax administrator should use firstly means in accordance to the client’s approach and notify the taxpayer (although the taxpayer was already in delay with the tax assessment; the tax entity set the tax, but it was suspected to be incorrect). the supreme administrative court tried to define a  very thin line when the tax administrator has to notify the taxpayer to fulfil his duties additionally, and when he has to choose another procedure, harder, more powerful to get the data himself. in the first case, the tax administrator takes care of the welfare of the individual and alerts the inattentive addressee of the self-enforcement legal norm. this costs a lot of money, and of course it is true that the money is paid by other honest and supervised tax payers. in the decision, the court also refers to the basic objective of tax administration, but in my opinion the payment security is insufficiently accented. to analyse this case, it is necessary to focus on the following legal rules, respectively individual concepts and institutes, which are interpreted in the decision of the supreme administrative court. this is a  situation where the taxpayer filed a  proper tax claim, but there was a situation where the tax administrator had doubts about its correctness, and the issue is how the tax administrator should properly react. it responds to this situation defined in the framework of section 145 of the tax code – procedure for not submitting a proper or additional tax return. “(1) in the absence of a proper tax return, the tax administrator prompts the taxpayer to submit it and sets a substitute period. if the taxpayer fails to comply with this notice within the specified time limit, the tax administrator may assess the tax by means of utilities or assume that the taxpayer claimed a tax of czk 0 in a regular tax return. (2) where it can be reasonably assumed that the tax is to be taxed additionally, the tax administrator may prompt the taxable person to submit an additional tax return and set a  substitute period. if the taxpayer fails to comply with this notice within the specified time limit, the tax administrator may levy tax on the aid (on his behalf ).” furthermore, section 143 (3) and (2) of the tax code should be mentioned. “(1) the tax may be based on an additional tax return or an additional bill, or ex officio. the legal power of the existing tax assessment decisions is not an obstacle to it. 92 damian czudek public governance, administration and finances law review • vol. 3. no. 2. (2) according to the results of the arbitration procedure, the tax administrator shall tax the difference in the amount of the last known tax and the newly established amount, and he shall simultaneously prescribe the calculated tax difference in the tax records; additional tax assessment for direct payment of the taxpayer is also understood as taxation. (3) additional tax assessment ex officio may occur only on the basis of the result of the tax inspection. if the tax administrator discovers new facts or evidence except the tax audit, on the basis of which it can be reasonably assumed that the tax is to be additionally assessed, tax administrator proceeds according to section 145 paragraph 2.” it was clear from the facts of the analysed case that the tax administrator had apparently quite specific information and documents, that he could even assess the tax (of course, he could not be sure what causes the error). thus, the tax administrator could use the procedure to remove the doubts, and in fact, to point the taxpayer to the error. he did not have to prompt to submit an additional tax return. and, according to the results, if the doubts were not scattered and the taxpayer did not submit the additional tax return, the tax administrator could initiate a  tax inspection with the aim of detecting the necessary facts. the procedure is governed by section 89 of the tax code: “(1) if the tax administrator has specific doubts about the correctness, veracity or completeness of the proper tax return or additional tax return and other documents submitted by the taxpayer or the truthfulness of the data contained therein, the tax administrator prompts the taxpayer to remove doubts. (2) in a  tax administrator’s prompt, the tax administrator raises doubts in a  way that will allow the taxpayer to comment on it, complete the incomplete information, explain the uncertainties, prove the untrue data, or prove the truthfulness of the data, and provide evidence to eliminate these doubts. (3) in the prompt, the tax administrator sets a  deadline for the elimination of doubts, which shall not be shorter than 15 days, and inform the taxpayer of the consequences associated with the non-removal of doubts or non-observance of the deadline. (4) where it is clear from the proper tax return or the additional tax return that the taxpayer is liable to a  tax deduction, the tax administrator shall, in case of doubt, issue a prompt for the elimination of doubts within 30 days from the date of such tax return submission but at the earliest from the last day of the deadline set for submitting a proper tax return or an additional tax return.” in this way, the tax administrator would dispel his doubts about the correctness of the tax, perhaps he would have found out, although this is not primarily a  key one, and it is irrelevant for determining of the tax, why the tax payer did not give this information to the tax administrator (as an argument in the cassation complaint, it looks somewhat ridiculous). 3. case study in view of the possible unlawful interference in the form of tax inspections initiated by the tax administrator, the supreme administrative court assessed a cassation complaint by the financial office against a  taxpayer at its meeting on may 6, 2015.2 the tax administrator 93 public governance, administration and finances law review • 2. 2018 tax inspection – unlawful interference demanded the annulment of the regional court’s decision finding the illegality of the tax inspection. since the tax administrator had doubts about the amount of the submitted tax, in particular, the tax administrator considered that the taxpayer did not include the income relating to the real estate change contract in 2010. the tax administrator therefore initiated the tax inspection and could consequently establish the tax ex officio. the tax entity, however, opposed the fact that the tax administrator did not proceed properly and took advantage of the tax inspection institute prematurely. referring to section 143 (3) of the tax code in conjunction with section 145 (2) of the tax code, the taxpayer should first have been prompted to submit an additional tax return if the tax authority had at this time information (obtained expect the tax inspection) on the basis of which he could reasonably assume that the tax will be set additionally. in this case, it was demonstrably established in the proceedings before the regional court that the tax administrator was convinced (by his search) that the value of the exchanged real estate was not included in the personal income tax base. he also had at his disposal a  contract of exchange and expert judgment of the land exchange valuation (on the basis of which it is possible to determine the tax). the tax administrator stated in his defence that he had begun a tax inspection to dispel doubts, referring to the results of the tax inspection, which should determine whether and in what specific amount the tax would be set additionally. in addition, he also wanted to find out “why” the taxpayer did not provide the information. the tax administrator, however, defended the conclusions of the regional court3 and argued that it was not possible to reliably assume the reasonableness of the additional tax assessment before the initiation of the tax inspection. he also argued, referring to the ruling of the supreme administrative court,4 that although it is necessary to choose a  procedure which, in the circumstances, best accords with the principle of restraint and proportionality, on the other hand, the tax administrator may proceed to tax inspection immediately if he has good reason to believe, that another approach would not suffice to achieve the purpose of tax administration. in order to decide whether to initiate a  tax inspection or to prompt the taxpayers to submit an additional tax return, it is essential to take into account the principle of effective security of the basic tax administration objective. 5 the supreme administrative court first analyses the explanatory memorandum to the tax code in relation to section 145 (2) of the tax code and focuses on the part where the principle of speed is accentuated according to which the tax administrator should proceed in case of various findings so that the tax returns are submitted with respect to the primary way of fulfilling the duties of the taxpayer – the obligation to submit, analogously also in the additional procedure. according to the explanatory memorandum, it is at the discretion of the taxpayer to submit a tax or allow the tax administrator to charge the tax on his behalf. in addition, the supreme administrative court also notes the differences in the legislative capture of rules under section 145 of the tax code. in the analysed case, although the second paragraph of the provision is essential, but as the tax administrator correctly states, the provision of paragraph 1 states that the tax administrator does not have the 94 damian czudek public governance, administration and finances law review • vol. 3. no. 2. possibility to consider (“the tax administrator prompts”), but in case of additional tax returns the provision of paragraph 2 provides the possibility (not obligation) of the tax administrator (“the tax administrator may prompt”). furthermore, the supreme administrative court expresses in its decision on §143 (3) of the tax code and states that the explanatory memorandum shows that: “the tax administrator will either find out in the framework of the tax inspection and will impose a tax on the result, or the tax administrator obtain by another means evidence that a  change in the last known amount of the tax is needed, the tax administrator prompts the taxpayer to submit an additional tax return or an additional bill.”6 the supreme administrative court first considered the interpretation of the reasonable assumption by analysing the above-mentioned provisions and also relied on the fundamental principles of tax administration and interpretation in the spirit of the fundamental principles of tax administration. he states that the notion of “reasonable” as “for sure” cannot be understood. it further states that, the condition of a reasonable presumption of additional tax establishment is not only the situation in which the tax administrator would be able to determine the tax in a  specific amount on the basis of information obtained apart from the tax inspection. it argues quite logically when it states that this situation is unlikely, but rather common, the situation in which the tax administrator finds out that the tax return does not contain specific tax-related facts and it can already be assumed that the tax will be additionally established. that means that if it is found that the tax return is incomplete, it can generally be assumed that the tax will be established additionally, regardless of its final amount (which is irrelevant, and the law does not even mention a specific amount). the prompt of the tax administrator is referred by the supreme administrative court as an “instruction to allow the taxpayer to fulfil its obligation” and as a reflection of the principle of proportionality and restraint. 7 i cannot agree with this statement (the “instruction”). the taxpayer has the possibility to submit the additional tax return even without the tax administrator’s prompt, in particular time limits.8 in general, it would be more likely to refer to the tax administrator’s prompt (after fulfilling the legal conditions) as a reflection of the principle of client access and, where appropriate, restraint. the supreme administrative court furthermore deals with the analysis of section 145 of the tax code. it understands it as a  prerequisite for effective tax administration, with regard to the number of taxable entities and related tax obligations. i can agree with this statement and further, it is necessary to highlight the close connection with the method used to require tax-related obligations, namely self-enforcement. the supreme administrative court also notes the fact that in practice there is a demand for correct and complete identification and determination of the tax (there is a  certain probability of incorrect data) with the factual reliability of tax proceedings with a  large number of subjects. here it is necessary to add more in connection with the inspection part of the tax proceedings, especially when it is not performed on a voluntary basis, properly and on time. moreover, this widely understood control (and search) activity of the tax administrator is a  basic and necessary prerequisite for the functioning of tax administration and self-enforcement, i.e. the result of the prevention principle and a  certain motivation to 95 public governance, administration and finances law review • 2. 2018 tax inspection – unlawful interference properly discharge of the duties, thus ensuring efficient administration and the process of tax collection. following the mentioned provision which deals with a  situation where the taxpayer did not at all submit tax, the supreme administrative court interprets the provision of the second paragraph of that section, which provides that the tax administrator may prompt when it can be reasonably assumed that the tax will be additionally established. the situation where the tax return is not submitted at all, consumes the provisions of the first paragraph. in such case, the tax administrator must prompt. in addition, in the provision of paragraph 2, the legislator would refer to the assessment of the tax, not the additional assessment. when the tax return is submitted, but apparently incorrectly and there is a reasonable presumption of additional assessment, the tax administrator can prompt. however, the supreme administrative court interprets this provision in the opposite way, as the possibility of the tax administrator in certain cases “not to prompt” the taxpayer and to initiate tax inspection, i.e. to intervene lawfully in the rights of the taxpayer. at the moment, in the opinion of the court, the interest in the correct assessment of the tax with the efficiency and feasibility of the tax procedure prevails and justifies the fact that the legislature did not necessarily assume the same number of prompts according to the additional establishment of tax as the number of proper tax returns. this can generally be accepted, but i cannot agree with the used justification. the court therefore interprets paragraph 1 as the general duty of the tax administrator to always prompt, and paragraph two as a specific limitation of that option where the tax controller reasonably assumes. this somewhat denies both the verbal and the systemic interpretation of this paragraph. 4. conclusion on the basis of a procedural analysis of the situation, taking into account the system of tax procedure and the fact that paragraph 2 deals with additional taxation, tax inspection can be understood as a  certain ultima ratio that may occur within the deadline for additional taxation. in general, there is still a  prerequisite for self-enforcement, as in the proper assessment process, i.e. the taxpayer itself may detect a mistake in his submission and may change it. it is impossible to rely on the fact that the tax administrator will reveal most of the mistakes. the system works on prevention and voluntarism, and assumption that the tax inspection can be carried out. in practice, there will be fewer cases where there will be a  reasonable presumption of additional taxation. the assumption is always here, as the court said, but it can result from the statistical fact that the legal rules are not always met on a voluntary basis and therefore the coercion exists. this, of course, cannot and i do not want to criminalise every addressee of the legal norm, respectively taxpayer in this case. it should also be taken into account the fact that a potential prompt is already part of an additional taxation procedure, i.e. the phase, when the taxpayer must assume that the tax administrator will verify his tax liability, whether by random check, suspicion of own 96 damian czudek public governance, administration and finances law review • vol. 3. no. 2. investigation (search activities) or statement of a  third person. and the taxpayer had the opportunity and sufficient time to submit turn return properly in the original date. therefore, if there is a reasonable expectation and at the same time, there is no risk of non-taxation and avoidance of taxation, the tax administrator should, respectively, must prompt the taxpayer, especially with regard to the principle of economy, client access and the primary method of applying tax law rules – self-enforcement. efficiency and feasibility of the tax administration cannot be perceived as opposed to the requirement of correct tax assessment, quite the contrary. in many cases, the need for legal (quick) intervention in the taxpayer’s rights will be more effective, especially in the event of a recovery phase. in addition, the possibility of tax inspection must be perceived as a preventive and effective tool for the effective functioning of the voluntary system of selfenforcement. this situation could also be seen through the eyes of other taxpayers and the principle of equality. they may feel affected that the tax administrator has not also prompted for an additional tax return, taking into account the fact that the tax administrator has not pursued conscientiously his search-control activity and has not found their mistake.9 this would de facto mean in an extreme case that before initiation of the tax inspection, especially if it is random, the tax administrator should obtain all possible information about the transactions and legal facts of the taxpayer, in particular from the databases and the automated approach, as well as from other public authorities. only after that he would be able to initiate tax inspection without the risk of any indication of the inspection being illegal.10 the tax administrator has the possibility (not the obligation) to prompt also with regard to the principle of economy of tax administration. although there may be a  fact that indicates the incorrect data in the tax return, but this may not automatically imply a presumption of additional taxation. it may happen that, despite some income is not included, the resulting tax does not change, for example because the taxpayer’s discount was not fully consumed. that means that the lack of information does not automatically affect the resulting amount of tax. the opposite situation is section 141 (1) and (2) of the tax code which states that the taxpayer is obliged to file an additional tax return if he finds that he has a higher tax liability and can file it, if the tax is the same or lower. again, with regard to the principle of economy, the negative difference in the calculated tax (the part will be refunded) may not be automatically economically efficient for the taxpayer because it means to fulfil the tax return again (additional costs). therefore, it is not possible to force the taxpayer to submit additional tax return if the tax would have been the same or lower, only to have it “correctly” in the evidence of the tax administrator. it is a  manifestation of the principle of the material state which appears in many decisions of the constitutional court. in this particular case, i consider essential the tax administrator’s weak argumentation, the lack of explanation of the facts and, in the least, the weak defence of the principles of tax law and the public interest in the form of an obligation to proceed in such a  way that the tax is determined and secured. the need to act preventively and motivational, even in the form of a threat of sanctions is also very important. the court itself stated the practical 97 public governance, administration and finances law review • 2. 2018 tax inspection – unlawful interference and factual impossibility of inspection of each entity. this is all the more necessary to ensure a  clear interpretation of the norms and to act educationally that the fault will be followed by the consequence (the principle of economy and speed of administration). it is not possible to educate in a constant need to prompt any addressee of any rule. tax inspection should also be perceived from a  certain point of view as a  manifestation of power intervention, the ultimate ratio leading to the objective of tax administration specifically according to the tax of a particular taxpayer. it can be agreed that the tax administrator should be guided by the principle of reticence for its application, for many reasons on the side of the taxpayer, but also with regard to the principle of economy. inspection itself is not an easy task, and it is very costly for the tax administrator because it also involves many procedural obligations to ensure a  fair process. in addition, the tax administrator should be more lenient, especially in case of “errors in writing and errors in numbers” in tax returns, respectively in situations when the taxpayer communicates the material information, for example in the form of an attachment, but does not fill the right so-called “box”. it always depends on a  particular tax administrator, but in general it can be said that this approach is applied. in the analysed case, the tax administrator obviously had a reasonable prerequisite for additional taxation and did not proceed in accordance with the legal regulations. it follows from the facts that the tax authority was required to prompt the taxpayer. the problem could arise in situations when the prompt could endanger the determining of the tax in correct amount, obscuring information about other unapproved revenue or transactions, and this could lead to the tax administration being thwarted. with this, the tax administrator did not completely deal with in his submissions, and this was not proven. 98 damian czudek public governance, administration and finances law review • vol. 3. no. 2. references 1 section 1 (2) of the tax code. 2 supreme administrative court: 2 afs 209/2014. 3 on the grounds of the judgment under appeal, the regional court concluded that before initiating the tax inspection, the tax administrator had sufficient specific information which allows him to choose the procedure proportionally, namely the tax administrator should prompt the taxpayer to submit additional tax return. referring to the decision-making activity of the supreme administrative court, the regional court added that limiting the personal sphere of an individual by the tax administrator’s duty to carry out tax inspection must follow a legitimate aim and be appropriate, necessary and proportionate in relation to that objective. thus, if the conditions for the procedure under section 145 (2) of the tax code were met, the tax administrator could not proceed to the most burdensome procedure  –  proceed to the tax inspection. the court thus deduced that the tax inspection was an unlawful interference from the beginning. 4 constitutional court: 5 afs 92/2008-147. 5 constitutional court: 5 afs 92/2008-147. 6 supreme administrative court: 2 afs 209/2014. 7 see section 5 (3) of the tax code. 8 see section 141 of the tax code. 9 information from parallel proceedings. 10 kobík also draws attention to the principle of equality (see jaroslav kobík, daňový řád s komentářem [tax code with commentary], 2nd edition, 741–742 (olomouc, anag, 2013). _goback _goback _goback _goback _goback articles tax administration of large taxpayers in some cee and cis countries jasna bogovac,* natalia soloveva,** michal radvan,*** jarosław marczak,**** natalia uvarova-patenko***** the participation of tax authorities in insolvency agreements piotr buława* the amendment of the religious registration law and its impact on freedom of religion in the slovak republic mária havelková* the scope of public services performed by municipal local governments in the republic of poland through budgetary establishments małgorzata ofiarska* designated income accounts in budgetary units of municipalities as a form of partially decentralised redistribution of public finance resources allocated to educational services in poland zbigniew ofiarski* the legal aspects of reducing the bureaucracy of the court administration wojciech piątek* the constitution and public administration aksana shupitskaya* case study tax inspection – unlawful interference damian czudek* european investigation order and the “brussels” bureaucracy marek kordík,* lucia kurilovská** complaint in tax administration as an instrument to ensure good administration zuzana marethová* public governance, administration and finances law review vol. 8. no. 1. (2023) • 43–54 . © the author 2023 doi: 10 .53116/pgaflr .6692 commentary on the right to education an expository of article 12 of the maputo protocol azubike onuora-oguno* ¤ * head of department, jurisprudence and international law, faculty of law, university of ilorin, ilorin, nigeria, e-mail: onuoraoguno .ac@unilorin .edu .ng abstract: the right to education is identified as a crucial and classical right . this classification is premised on the fact that it provides the basis on which an individual has the potential to transform their status and build their desired personality . additionally, it is the basis on which society is projected to be transformed and set on a  better pedestal, with individuals playing positive roles . the recognition of the right, though emanating from the universal declaration of human rights (udhr) received only tacit recognition through other treaties . the maputo protocol recognises the right to education, as it flows from the african charter on human and peoples’ rights . this commentary, therefore, examines the right to education as enshrined in the maputo protocol with the aim of restating the grounds covered in the protection of female children and women and exposing lost opportunities . finally, it makes recommendations on how the lost ground can be covered and give better content and scope to the right to education . keywords: girl child, education, maputo protocol, human rights 1. introduction the importance of the right to education is evidenced in the fact that education enables female children to acquire the knowledge, values and skills that are needed to function in a  civilised society (singh, 2016, p . 119) . according to the world bank, “every day, girls face barriers to education caused by poverty, cultural norms and practices, poor infrastructure, violence and fragility” (world bank, 2022) . the world bank further reports that, according to unesco, about 129 million girls remain unable to access education . the statistics cover both girls of primary and secondary school age . from the above statistics, the completion rate is placed at about 63% (world bank, 2022) . a great concern is that close to about 4 million girls are projected as never being able to access school because of the factors mentioned above, especially that of growing conflict (world bank, 2022) . https://doi.org/10.53116/pgaflr.6692 https://orcid.org/0009-0009-1926-8764 mailto:onuoraoguno.ac%40unilorin.edu.ng?subject= 44 azubike onuora-oguno public governance, administration and finances law review • vol. 8. no. 1.  it is perhaps not surprising at all that one of the rights celebrated and protected in the struggle to emancipate the female gender is her right to education . additionally, considering the patriarchal nature of african society, it can be said that the various treaties and literature that speak to the protection of rights of individuals, particularly females, can never be too much or over-emphasised . consequently, the right to education is a fundamental right that is appropriate and its implementation advances fulfilling the protection of the rights of female children and women in africa . mandela argues that education remains the tool through which the child of a peasant can change their status to become influential in society . within the african context, fafunwa (1974), ikejiani (1965), kenyatta (1979) and ngugi (1981) all advocate education as a means of reaffirming dignity and ensuring that the identity of a people is not eroded, while promoting both individual and communal development . this commentary focuses on the maputo protocol with specific attention to the provision in article 12, the right to education . the maputo protocol was initiated by the oau through its resolution ahg/dec .126 (xxxiv) during the 34th ordinary session that was held on 8–10 june 1998 in burkina faso . the resolution came about because of the recommendation ahg/res . 240 (xxxi) made during the 31st ordinary session held on 26–28 june 2005 in addis ababa, ethiopia . the need for a protocol arose from the acknowledgment of the priority of women in the socio-political development of africa . the increased recognition of the structure of society as one that marginalises women and treats them as inferior, as well as the ratification of the convention on the elimination of discrimination against women (cedaw) by african countries, led to agitation for a more comprehensive and domestic instrument that speaks to the rights of women in africa . the meeting, organised by the women in law and development in africa (wildaf) in march 1995, in lomé, togo enhanced advocacy in this respect . the meeting proved effective, as the organization of african unity called for an instrument to be drafted by the african commission (pambazuka website), which created a committee of experts made up of its members, representatives of african ngos and international observers . the committee submitted its completed draft in 1999 and the protocol was adopted on 11 july 2003, by the african union at its second summit in maputo, mozambique . 1.1. did the right exist in other international treaties at the time – or was it a first? the existence of the right to education in africa before the maputo protocol is one that cannot be categorically stated . this is premised on varying contextual histories of what amounts to an education in each particular society . before the influx of colonialists and their formal system of education and the resultant effect of treaties emerging that address the right of women and the female children to an education, the perception of african societies regarding girls and their education was quite different, as girls were to be taught by their mothers while boys were to be trained by their fathers (bowen & hobson, 1974) . in customary societies, females were seen as homemakers while men 45commentary on the right to education public governance, administration and finances law review • 1. 2023 were sent out to ensure the survival of their families and that is why, in the traditional african setting, a woman stays at home to cook while the man goes out to hunt or farm for the survival of the family (anyanwu & onuora-oguno, 2013) . society gave the education it deemed necessary to each child based on gender and perceived gender roles . this is perhaps why some people have argued that there has been no time in which girl children were denied a right to education . it is important, however, to restate that education, which was stereotyped and aimed at keeping the female child as a beast of burden, is not envisaged as education, stricto sensu. the extent of the numeric literacy of the female children was indeed one that left much to be desired; this necessitated a concerted effort towards ensuring the recognition of the right to education in general and specifically for female children (ayodele & adedokun, 2012) . imperatively, before the advent of the maputo protocol, several other instruments in international law already provided for the right to education from a general perspective . the right to education is traceable to the universal declaration on human rights, which states that “everyone has a right to education” (article 26 udhr) . this position is further elaborated by scholars such as audrey, who identified the important role of governments in achieving a universal right to education (audrey, 2012) . commenting on the importance of education, the united states supreme court in its landmark case of brown vs. board of education (1954 para . 493) noted that “it is doubtful that any child may reasonably be expected to succeed in life if the child is denied the opportunity of an education” (bantekas & oette, 2013) . specially commenting on the importance of education for the female children, cedaw in its general comment no . 36 restates the importance of education for achieving equality in society and increasing equal access to available opportunities . one of the main instruments for human rights is the african charter on human and peoples’ rights (african charter) . it provides for the right to education of africans in line with the mandate of the african union, which is “freedom, equality, justice and dignity of the african people” (article 17) . the african charter is at most an umbrella provision for the rights of persons, which causes a huge gap in the implementation of those rights based on the charter alone . the right to education under the charter is ambiguous and can be subject to various interpretations . for instance, the preamble of the charter provides that the rights in the charter are to be enforced in line with the traditions and values of the people, and this can lend credence to the interpretation of article 17 as maintaining the status quo of the type of education traditionally given to women and the female children . if such an interpretation is given to the charter, it means the tradition of sending females to fattening houses, where they are taught to satisfy their husbands after marriage, which is the form of education practiced in some parts of africa, would be deemed lawful and in line with the charter although it may go against the spirit of the charter . it is instructive to note that culture as envisaged is as explained in the african commissions guiding principles, which provides that “the right to culture protects positive african values consistent with international human rights standards and implies an obligation on the state to ensure the eradication of harmful traditional practices that negatively affect human rights” (para . 77) . 46 azubike onuora-oguno public governance, administration and finances law review • vol. 8. no. 1.  1.2. current relevant context – brief information on the real-life situation addressed by the article, e.g. statistics on child marriage, for instance; how prominent is the issue? with the influx into the continent of westerners, ideologies on various things such as rights, equality, education and several other key concepts strengthened the interaction of individuals in the modern world . this position is very important to note, as the concepts of equality, education and others already existed in africa even before the influx of western education on the continent . the arrival of foreigners brought about the introduction of western or formal education, which society accepted, although for only male children, from the outset; males were allowed to go out of the home to learn about how to provide for their families . females were, however, not given the same access to formal education as their male counterparts for many reasons steeped in the culture of several communities . historically, women were treated essentially as chattels, who did not have a  name but were given the name of their owners to indicate who owns them at a  given time . thus, women and female children were given the names of their fathers while preparing for married life and, once married, given the name of their husbands, who were considered their new owners . thus, their ability to take care of the house of their owner at a  given time amounted to sufficient education for them and their communities saw no need for any other form of education . it was presumed that girls ought not to be exposed to cultures and places that can corrupt them and they are safest at home, hence, there was no need for western education, which they regarded with a level of distrust (nduka, 1975) . due to these factors and others, women and the female children were not given access to formal education when it was introduced, and this history will lay a foundation for the dismal gap between the education of the male and the female population in africa in later years . the challenge of child marriage continues to stare the female children in the face, despite the increasing awareness of the importance of education . during the covid-19 pandemic hot periods, several girls who stayed out of school were subjected to domestic abuse and sexual assault . the direct implication of this is that keeping girls in school helped to keep them safe and out of trouble . aside from the above challenge, a sustained threat in the school space arena is another violation of the right to education . attacks on girls attending schools continue to soar with consistent abductions which scares girls away from attempting to access school . 2. drafting history in the initial draft of the protocol, cab/leg/66 .6/rev .1, the right to education was provided in article 11 . the provision of the article concentrated on the removal of stereotypes in education and focused on training . it provided for shielding female children from sexual harassment in school and advocated the promotion of science and technolog y for girls . following comments by the legal counsel and further consultations, 47commentary on the right to education public governance, administration and finances law review • 1. 2023 another draft was arrived at in 2003 . it is important to take cognizance of the provisions of the unesco 1960 convention against discrimination in education, stating that private education or single-sex education does not amount to discrimination in this context . the draft protocol adopted in 2003 enhanced the scope of article 11, which in the present draft became article 12 . a specific reference is made to the female children and providing sanctions against violators of the rights of the girls in school . the need for post-violation practice was also introduced in the form of guidance and counselling, while the need to include a gender approach in all spheres of activities was included . it is instructive to note the role of the committee of experts in the inclusion of the new clauses in the final draft version of the draft protocol . the maputo protocol, as stated earlier, built upon the provisions of human rights in the africa charter particularly, those of women and female children by offering more detail . as opposed to the vague provision on the right to education in article 17 of the african charter, article 12 of the maputo protocol provides for the right to education and training, which shows the recognition of the formal and informal education of females but most importantly, her right to choose the one more suitable for her . the protocol’s existence is in conformity with other international instruments on the rights of females and timely, as there is an increase in demands for equality and the dignity of females . upon its adoption, there were reservations regarding certain provisions of the protocol, especially concerning the right to health and women’s control of their own reproduction, which was seen as targeting the family, but no reservation to the right to education . nevertheless, since its adoption, a  total of 6 countries are yet to sign the protocol, 13 have not ratified it and 3 members of the african union have neither signed nor ratified it, namely botswana, eg ypt and morocco . in general, however, the protocol has received a  good reception in african countries, at least on paper if not in implementation . despite the existence of this instrument, its acceptance and its binding nature, unlike other similar instruments such as the beijing declaration, it is noteworthy that the marginalisation of the female gender persists in most african countries in one form or another (gawaya & mukasa, 2005) . for instance, the structure of academic and vocational institutions is one that prevents women from taking full advantage of their right to access to education and training (ojobo, 2008) . a female who is pregnant, for example, has very little allowance for balancing her education and impending motherhood and is most likely to drop out (zewide, 1994) . moreover, the cost of education is so expensive in most african countries . polygamy also impacts most families, which results in lots of children, and parents are unable to educate all their children but might have to select who will get a chance to be literate and the choice in most cases is the male child of the family, as there is a belief that it is only through male children that the family legacy can live on . in uganda, a high level of forced marriages, which represent a blatant disregard of the right to dignity of the female (addaney & onuora-oguno, 2017) has been noted, mostly because of the covid-19 pandemic which led to schools and the economy being shut down . female children were given in forced marriages by their parents in exchange 48 azubike onuora-oguno public governance, administration and finances law review • vol. 8. no. 1.  for money, and such a transaction reduced them to chattels, which is a perception of the female that the maputo protocol set out to correct (anyanwu & onuora-oguno, 2013) . girls were unable to continue their education even after the worst of the pandemic passed, as they were now saddled with the responsibilities attached to a married female in africa . in northern nigeria, the terrorist group boko haram repeatedly kidnapped young girls from school and stated one of their reasons as the prohibition of female education according to the tenets of their religion (onuora-oguno & abdulraheem-mustapha, 2018) . these girls were forced to marry and give birth to the terrorists’ children, and even after their rescue they were mostly unable to reintegrate and regain their status in society . a country like south sudan, which is yet to ratify but has signed the protocol, also has a very low female participation in formal education as shown by statistics (hodal, 2017) . all these show that the protocol’s effect is not yet as far-reaching as it should be and can be . notwithstanding these limitations, since its adoption in 2003, the maputo protocol has contributed to shifting the trajectory on the promotion and protection of women’s human rights in africa .1 many countries have established mechanisms and policies to ensure the protection of women’s rights and to make sure there is no violation or compensation is given for violations . in countries such as uganda, kenya, rwanda and south africa, in addition to human rights commissions, which are traditionally regarded as national human rights mechanisms, there are specific gender equality or equal opportunities commissions, specifically dedicated to the rights of women . 3. concepts concepts important in the discourse of the right to education such as quality, access, availability, acceptability, adaptability, curriculum and teacher welfare are discussed in this section . the provisions of article 12 is lauded in the sense that it specifically provides for means of ensuring that the experience of female children is enhanced . article 12 (1) (a)–(e) is capable of enhancing access to education for female children . it seeks to ensure the elimination of all forms of stereotypes that would impact negatively on access to education . similarly, the article also advocates that governments should ensure proper policies that will enhance the education of the female children . the need to ensure their protection from all forms of harassment are equally captured in the article . article 12 (2) is also very instructive, as it touches on sustained education and training for girls . a key point highlighted is the need to ensure retention at school . as already discussed, retention is a huge challenge that confronts female children’s experience of access to education in africa . it is noted, however, that a key missing factor in the protocol is an express provision on what the content of education itself should be as a fundamental right . conversely, this is not a huge challenge, as this is covered by article 13 of the international covenant on economic social and cultural rights (icescr), which enshrined the right to education, 1 maputo protocol on women’s rights: a living document for women’s human rights in africa, submitted by the women, gender and development directorate of the african union commission (https://bit.ly/431sgkb). https://bit.ly/431sgkb 49commentary on the right to education public governance, administration and finances law review • 1. 2023 and its general comment also gives a deeper reflection of its provisions (beiter, 2006) . additionally, cedaw, in its general comment, focuses on three vital areas in its approach to education . these comprise the right to education, rights in education and rights through education (para . 14, cedaw gc no 36) . article 12 makes allusions to these key areas and therefore must necessarily be interpreted in conjunction in order to give full meaning to the intent of the drafters . hence, considering the provisions of the general comment (gc 13 and gc no 36 of cedaw) on education it is plausible that one should rely on the provision and explanation of it to enhance the interpretation of article 12 . a further analysis reveals that gc 13 contextualises the right to education to encompass rights to and in education . onuora-oguno explains the context of the right to education as including issues of accessibility and reasonable accommodation, while rights in education includes the issues of curriculum content and an education space free from violence and discrimination (onuora-oguno & shannika, 2018) . discussing this from a general and specific perspective, it is identified that the full gamut of article 12 makes no direct reference to the concept of quality . quality education, as captured by several scholars (coomans, 2007), is pivotal to the realisation of the rights to and in education . tomasveski (2001) clearly identifies four pivotal paradigms to ensure and measure quality . the 4as cover the ambit of availability, acceptability, affordability and adaptability . the question of availability speaks closely to issues of access to education and availability of schools and learning materials . an emerging area that could be investigated is adaptability for the female children, especially in the emerging jurisprudence of girls’ menstrual health . poor sanitary conditions in schools and lack of access to sanitary pads are huge areas that impact negatively on the learning experience of the female children . the poor economic reality is another factor that denies the female child any experience of the right to education . for instance, school fees keep female children away from schools and in some circumstances force them into child labour, sexual violence and other abuses . a core aspect of quality is teacher training . this continues to be elusive and leaves female children in looming danger every inch of the way in the school spheres: the continued kidnapping and murder (usman, 2020) of female children . the mention of teacher training without adequate mention of teachers’ welfare is perhaps another missed opportunity . considering that women, for instance, are more common in the teaching profession, which is a gendered stereotyped role, as women are seen as caregivers with poor welfare (onuora-oguno, 2018) and their security demands further attention . in very recent times, news of attacks on teachers in schools have caused shock in several quarters (serra, 2022) . 4. consolidating the gains of policies on the right to education there is a need to ensure that the gains on efforts towards realising and eliminating inequality in education must be sustained . a perusal of some concluding observations and recommendations shows that states have been called upon to ensure the elimination of “inequality and gender disparity in school enrolment, retention and completion 50 azubike onuora-oguno public governance, administration and finances law review • vol. 8. no. 1.  at all levels of education (primary, secondary, and tertiary)” (para . 88 concluding observation on nigeria) . additionally, the need to “strengthen ongoing initiatives towards eliminating gender disparities in school enrolment, retention and completion at all levels of education (primary, secondary, and tertiary), and ensuring full and equal access to quality education for all children” . further concluding observations made reflect the need for states to ensure an enhanced education budget (para . 35) . uganda’s effort in the growth of inclusive education is acknowledged and this should be emulated by other countries in order to improve the right to education .2 like nigeria, uganda is encouraged to ensure a growing retention rate in schools, especially by ensuring that the government does not neglect its primary obligation to provide education and rely on the establishment of private schools . on its part, the government of togo, is acknowledged for its efforts on promoting girls’ education .3 however, it is further encouraged to eliminate harmful voodoo practices that inhibit girls’ access to education . the need to strengthen equality of access to basic amenities in rural and urban communities was identified and addressed in the concluding observation for south africa .4 a further consideration of all observations and state reports shows, for instance on a specific paradigm, that para . d of article 12 continues to loom large, as its implementation is still strongly lacking . the culture of silence and disdain with which offences of sexual violence are treated in african communities continues to impact negatively on the threshold of access to education (onuora-oguno & shannika, 2017) . the poor completion rate of girls in schools are attributable to discrimination suffered within the school sphere . the curriculum content continues to perpetrate age-old discriminatory philosophies against female children . another core perspective for appreciating the extent to which states engage with the maputo protocol is that of a gendered approach to policy-making and implementation . this strateg y can be implemented in africa and countries can ensure that women are part of the decision makers in the education sector so that they can ensure that policies for that sector and its operations will favour women and ensure the protection of their access to education . a gendered approach would ensure that a deliberative model is adopted in tackling challenges facing women generally and particularly on the right to education . this process would impact the curriculum content and interpretation of curricula in schools . the effect would imply the gradual discontinuation of stereotyped narratives and approaches on issues that affect female children and women and therefore eliminate the violation of female children’s rights to education (onuora-oguno et al ., 2018) . the right to education in the majority of african countries still looms large as it is not fully recognised at constitutional level . in most countries, education is enshrined as a fundamental objective of state principles and thus seen as a mere obligation and aspiration . scholars like viljoen argue against this position, stating that it should be treated as obligatory for states to meet the aspiration rather than treat it as mere privilege . in nigeria, 2 for more information see https://www.maputoprotocol.up.ac.za/uganda 3 for more information see https://www.maputoprotocol.up.ac.za/togo 4 for more information see https://www.maputoprotocol.up.ac.za/south-africa https://www.maputoprotocol.up.ac.za/uganda https://www.maputoprotocol.up.ac.za/togo https://www.maputoprotocol.up.ac.za/south-africa 51commentary on the right to education public governance, administration and finances law review • 1. 2023 for instance, education is assumed to be non-justiciable, however, scholars such as onuoraoguno (2019), egbewole & alatise (2017) and ikpeze (2015) all argue against this position . it is opined that, by virtue of the treaty obligation of the african charter, the right to education is justiciable and enforceable . in contrast, south africa, kenya and ghana are some of the leading countries that recognise education as a fundamental right . this position explains why there is more growth in legal cases in these countries . south africa leads the way with the highest number of cases adjudicated by the courts . skelton advances that the courts have a strong impact on ensuring that the right to education is protected within south africa . this position, however, comes with some caveats for courts to know when to draw the lines in doing so . mbazira also raises this caution while warning that court decisions must be ones that can be implemented, as non-implementation will whittle down the value of such decisions (mbazira, 2009) . sub regionally, the maputo protocol, alongside other treaties, has been relied on to reject any practice that can limit female children’s equal access to education . an instant case is that of women against violence and exploitation in society (waves) vs. the republic of sierra leone, (ecw/ccj/app/22/18): the ecowas court found the policy that provided a different learning space for pregnant girls breached, among several treaty obligations, the maputo protocol . the court urged the government to reverse such policies and adopt an inclusive learning model . the issue of teen pregnancy is a huge challenge that negatively impacts female children’s education (sefoka & odeku, 2021) . sadly, society continues to ignore the fact that female children are constantly subjected to sexual violence at home and in the community and this results in discrimination against pregnant learners . teenage pregnancy thus is a huge impacting factor in the completion rate of girls . this is one of the core areas that the maputo protocol condemns and it encourages governments to take legislative steps to ensure that this discrimination is not continually entrenched . the south african case of the head of department: department of education, free state province vs. welkom high school & harmony high (the welkom case, case no: 766 & 767/2011) further provides interesting jurisprudence that points to the right of a pregnant learner not to be denied access to school . in the welkom case, the courts found the actions of a school principal to suspend a pregnant learner from staying in school based on not impacting the morality of other girl learners to be a violation of the right to education . the cases decided in most municipal courts, although protecting the female child in certain circumstances, are not rich in reliance on the maputo protocol (onuora-oguno, 2015) . however, it is worth noting the decision of the court in rm katakwe vs. edward hakasenke and others (2006/hp/0327, high court, zambia) . in this case, the court considered a case of sexual violence against a female child by a teacher, and relying on the provisions of the maputo protocol read in consonance with zambian law, found the teacher and school liable . omondi et al . reports the dictum of the court thus: ƿ that the school takes over parental responsibility for the child for the time they are at the school . the law therefore places an obligation on the school to take care of the children for the period they are under their care . the owners of the school, in this case the government, owed a  duty to the child (omondi et al ., 2018) . 52 azubike onuora-oguno public governance, administration and finances law review • vol. 8. no. 1.  in the case of w.j & another vs. astarikoh henry amkoah & 9 others, an imparia materia case with katakwe, it is further reported that a kenyan court held thus: ƿ indeed, i would go so far as to say that the tsc [teacher service commission], the state and any educational or other institution in which teachers or other care givers commit acts of sexual abuse against those who have been placed under their care is vicariously liable for the wrongful acts of its employees” (omondi et al ., 2018, p . 74) . the import of the two cases above indicates that the courts are willing to engage with the provisions of regional and international law treaties protecting rights . while the maputo protocol was not relied on by the amicus in the instant case, reliance on treaties from the african human rights architecture is a pointer on the interest of courts to rely on treaties in safeguarding the interest of female children within the educational environment (para . 147 of the henry amokah case) . 5. conclusion the importance of the maputo protocol in ensuring milestone progress in the continued struggle for the education of females is quite glaring from the improvements in the educational policies of african countries . there is however a  need to ensure that there are follow up mechanisms to ensure that these policies are actually implemented and not just available on paper . the chapter concludes that the importance of the right to education to the emancipation of female children is pivotal . it further underscores the need for equal access and quality content of the accessed education . furthermore, the importance of appreciating that education must be tailored in such a way as to protect the dignity of girls was reiterated . the need for governments to treat education as a  fundamental right resonates strongly with the need for a different approach to issues of education amongst african nations . the chapter further concludes that the courts have roles to play in protecting the right to education, samples cases where both direct and indirect references are made to the right to education and dismantling of all discriminatory obstacles are highlighted . 6. recommendations to better facilitate the protection of rights to education for girls, the african union can adopt new policies that have potential for sustaining the policy on education and the development of the continent . the african union agenda 2063 provides a framework, which, if read closely with the provisions of the maputo protocol, has great potential (onuora-oguno et al ., 2018) . states are encouraged to ensure that they put in place policies that will drive the right to education to materialise . the treaty obligations of states to state reporting are measures 53commentary on the right to education public governance, administration and finances law review • 1. 2023 established to assess the extent of states’ implementation of their treaty obligations . other aspects are the roles courts can play in protecting the right to education and its impact on the development of female children . the rationale for an inclusive and holistic development of women is that “women who are safe, healthy, educated and fully empowered to realize their full potential transform their families, their communities, their economies, and their societies” (undp annual report 2017) . there are also several international policies for ensuring the participation of women in decision making in several sectors, such as the un framework convention for climate change and the hyogo framework for action . all these will ensure that the interest of all women is factored in whenever decisions are made . finally, the maputo protocol must not be considered in isolation if the gaps in it pertaining to the right to education are to be cured . general comment no . 13 and general comment no . 36 must be closely relied on if the provisions of article 12 of the treaty are to receive expansive interpretation and possible implementation . references addaney, m . & onuora-oguno, a . c . 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(2015) . non-justiciability of chapter ii of the nigerian constitution as an impediment to economic rights and development . developing country studies, 5(18), 48–57 . online: https://www . iiste .org/journals/index .php/dcs/article/view/25478 kenyatta, j . (1979) . facing mount kenya . the tribal life of the gikuyu . mercury books . mbazira, c . (2009) . litigating socio-economic rights in south africa . a choice between corrective and distributive justice . pretoria university law press . online: https://bit .ly/3pgep7t nduka, o . (1975) . western education and the nigerian cultural background . oxford university press . ngugi, w . t . (1981) . decolonising the mind . the politics of language in african literature . james currey . ojobo, j . a . (2008) . education: a catalyst for women empowerment in nigeria . ethiopian journal of education and sciences, 4(1), 93–108 . online: https://doi .org/10 .4314/ejesc .v4i1 .42995 omondi, s ., waweru, e . & srinivasan, d . 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(2019) . development and the right to education in africa . palgrave macmillan . online: https://doi .org/10 .1007/978-3-319-90335-4 onuora-oguno, a . & abdulraheem-mustapha, m . a . (2018) . beyond the law to socio-legal interventions . the boko haram insurgency and the nigerian child . in j . m . iyi & h . strydom (eds .), boko haram and international law (pp . 371–389) . springer . online: https://doi .org/10 .1007/978-3-319-74957-0_16 onuora-oguno, a . c ., ike, c . & barau, c . (2018) . deliberative and struggle theories of rights realisation: examining the protection of women in nigeria . journal of law, society and development, 5(1), 1–16 . online: https://doi .org/10 .25159/2520-9515/7068 onuora-oguno, a . c . & shannika, s . (2018) . post conflict rehabilitation of the child towards the africa 2063: link between psycholog y and law . in o . bialostocka (ed .), new african thinkers . hsrc press . sefoka, i . m . & odeku, k . o . (2021) . critical analysis of the right to education for pregnant school-going teenage girls in south africa . african journal of gender, society and development (formerly journal of gender, information and development in africa), 10(3), 73–85 . online: https://doi .org/10 .31920/26343622/2021/v10n3a4 serra, g . (2022, april 16) . 33 teaching staff seriously attacked and one killed on school grounds since 2016 . independent online . online: https://bit .ly/46pqeo0 singh, k . (2016) . right to education . india international centre quarterly, 42(3–4), 119–130 . skelton, a . (2012) . how far will the courts go in ensuring the right to a basic education? southern african public law, 27(2), 392–408 . online: https://hdl .handle .net/10520/ejc154768 tomaševski, k . (2001) . removing obstacles in the way of the right to education . novum grafiska ab . online: https://bit .ly/441gxiq usman, m . (2022, january 20) . how kano girl was abducted and killed by her school teacher . daily nigerian . online: https://dailynigerian .com/how-kano-girl-abducted-killed/ world bank (2022) . girls’ education . online: https://www .worldbank .org/en/topic/girlseducation zewide, g . 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(2019) • 19–25 . public bureaucracy from the perspective of the state budget hana markova* * prof . judr . hana marková, csc ., professor of financial law and financial science, department of financial law and financial science, faculty of law, charles university, the czech republic . the author specialises in tax law and budgetary law . she is the author or co-author of more than 10 books and 70 reviewed articles . she is a  member of the centre of information and organization of public finances and tax law research in central and eastern europe . this paper has been elaborated within the programme “progres q02  –  publicization of law in the european and international context” which is realized in 2019 at the faculty of law of the charles university . orcid: 0000-0002-0204-4571 . (e-mail: markova@prf .cuni .cz) abstract: the state covers needs that are necessary for the running of the state from its revenues (most often from tax revenues) . if territorial self-governments exist, certain public goods are funded from territorial budgets . the state contributes concurrently to territorial self-governing units to the performance of delegated powers  –  most often through subsidies . the contribution to the performance of state administration can be considered one of these subsidies . at all levels of government, the effect of bureaucracy is manifested in the form of coercion consisting of the use of “normative” power and “rewarding” power . keywords: state budget; public goods; contribution to the performance of delegated power; bureaucracy 1. state budget and its functions the original narrow fiscal role of the state budget, that is based on the classical theory of political economy, began to change at the end of the 19th century . regarding the earlier theoretical conception and the practical application of public finance the state budget was a  tool for amassing taxes . the practice, however, tends towards the economic concept of the state budget on the basis of the development of the new theoretical conceptions . this conception of the state budget is reflected in the fact that the original term “state budget” has a  wider content in comparison to previous definitions that consisted of the collection of taxes and the reimbursement of narrowly defined state expenditures . budgets are entrusted with other than just fiscal targets . the state budget begins to fulfil the allocation role, i .e . it begins to influence the allocation of factors of production according to the needs of economic development, and concurrently to apply its distributional function which consists in influencing the income situation of the productive sphere and of the population . together with the growth of expenditure of the state, the budget revenues have to increase . the possibility of hindering 10.53116/pgaflr.2019.1.2 mailto:markova%40prf.cuni.cz?subject= https://doi.org/10.53116/pgaflr.2019.1.2 20 hana markova public governance, administration and finances law review • vol. 4. no. 1. or eliminating economic crises is attributed to the expenditures of the state budget . however, this effect of the state budget has been greatly overestimated in the last decades and current practice has corrected some of the theoretical starting points in this field . even today, the state budget is the basic financial plan of the state that is approved on a yearly basis in the form of an act and serves to amass the financial resources of society and to irrevocably allocate these resources . the resources are then allocated on the basis of the determination of the tasks that are determined especially for the financial covering of the state functions (i .e . fiscal purpose) and for the influencing of the national economy (nonfiscal purpose) . the state budget is entrusted with the particularly important role of amassing and re-distributing that part of the gross domestic product that is intended for the needs of society . the function of the state budget is thus not only economic but also political . depending on the amount of financial resources collected and, in particular, on the purposes (including their priority arrangement) for which these resources are spent, the character of the state policy could be considered . the process of reproduction to which the state budget serves is currently not only recognised from a  narrow point of view of material production but also as an activity aimed at the development of the immaterial needs of a particular society and related relationships . further changes of this process could be expected regarding the introduction of robotisation . interests of society (i .e . the material aspect of the state budget) are also secured from the procedural point of view, i .e . through the competencies of the state bodies in which the approval of legal regulation of budgets and the control of their application (fulfilment of their requirements) is vested . the budget process represents the annual concretisation of state policy for the following year and the state final account discussed after the end of the budget period represents the assessment of the state policy . regarding the economic effect of the state budget, it can be stated that the allocation, distribution and control and register functions of the budget are applied . the distribution and placement of financial resources (the allocation function) in the respective economic spheres represents the essence of the economic impact of the state budget . the state budget is supplemented by other financial plans, however, it does, in comparison with them, carry out the distribution of both monetary and material resources definitively . the distribution (redistribution) function is the actual mission of each budget . this means the redistribution of gross domestic product in respect of the needs of society . other functions such as control or stimulus functions can be included in the budget functions . these functions represent the possibility to affect the reproduction process by the state budget in various ways and they are therefore considered an instrument of the state’s financial policy . the functions of the state budget are not only economic, but also political . depending on the amount of financial resources amassed and in particular on the purposes for which they are spent the character of the state’s policy can be recognised . through the state budget, the government can finance certain activities that ensure the essential functions of the state . the government can also affect the economy of territorial self-governing units (especially the amount of subsidies) . the budgets of the territorial self-governing units, as well as the budgets of the state funds then perform similar functions as the state budget and form together with the state budget a system of public budgets . 21 public governance, administration and finances law review • 1. 2019 public bureaucracy from the perspective of the state budget 2. public goods, their financing and bureaucracy there are public goods in the economy for which the concentration of resources in the state budget is necessary (e .g . defence, justice) and other goods whose financing seems to be more effective at the level of the territorial budgets . however, there are also public goods where it is possible to finance them through the territorial budgets or budgets of state funds – i .e . these goods can be financed by different public budgets at the same time . thus, through public budgets, resources are redistributed from resource-generating entities to those that do not generate resources but are an integral part of society . how large the redistribution will be, either among the population groups or between the regions of the state, depends on a  number of factors . in particular, it is about the interaction of the principle of solidarity and the principle “everyone for his own” (i .e . non-solidarity) . ensuring a certain standard level of the most important public goods for the entire national territory is essential . it is equally necessary to ensure a  certain stabilisation of economic development which is only possible through the central budget . on the other hand, the regional budgets should respect different population preferences . national public goods are those goods of which the inhabitants of the entire state benefit . these goods include the construction of roads, the regulation of watercourses, etc . this kind of public expenditure is financed by the resources of both municipalities and regions or the state . a specific group of public goods consists of so-called preferred goods when the state decides how certain goods will be consumed, for example, by determining that the municipality or region has to ensure these goods and the citizens have to consume them . for example, the law provides for a  certain obligation (e .g . school attendance) and territorial units have an obligation to ensure its realisation . there is a national standard for the goods that are controlled by the government and subsidies are usually provided for the financing of these goods . such public goods are available to all citizens regardless of their financial situation . public goods are provided by territorial units through their budget . however, the state budget is also involved in the financing of these public goods . expenditure on securing public goods, such as expenditure on security or territorial government, should be covered by tax revenues in respect of their budgetary determination and by transfers from the budgetary system (i .e . subsidies) . however, there are also local public goods – those goods that municipalities provide primarily for their inhabitants and that can be measured as regards the consumption and on which user charge can be imposed (e .g . charge paid for the use of water supply for wastewater treatment) to a certain extent . state administration is built as a  tool for satisfying public interests . between the citizen as the consumer and the official as the administrator of the budget expenditures, there is a  chain of mechanisms that effectively guarantee considerable autonomy . the administration of “public goods”, which is the actual reason for the existence of the public sector, can be easily manipulated . for example, certain interest groups are able to convince the public administration of the necessity to provide such “public goods” which are beneficial only to such groups . the demand for “public goods” is often generated by bureaucracy itself with the support of various regulations and decrees . 22 hana markova public governance, administration and finances law review • vol. 4. no. 1. bureaucracy is a term that can determine a hierarchical organizational form of government . it had been known since antiquity but its newer form has occurred in connection with the development of the so-called welfare state . bureaucracy exercises its power in several underlying ways . these ways are: • coercion that consists, for example, of repeated inspections, requiring information and constantly supplementing background material for administrative decisions about fines and regressive measures . • the use of “normative” power that can be considered to consist in creating a certain prestige of the administrative apparatus which is based on direct determination of the conditions of mutual dialogue with the citizens by such administrative apparatus . the relationship of superiority and subordination of bureaucrats and citizens is not given by the authority of the institution but by the conditions laid down by this superior power . • the influence of “rewarding” power can be used as a definition for the latent, material and also non-material impact of corruption on the government and decisionmaking of the administrative apparatus . although the possibilities for bureaucracy development are numerous in the czech republic, it is possible to mention the area of budgetary law in a broad sense . the current budgetary system is linked to the collection of taxes and other compulsory levies on the one hand and, on the other hand, it is linked to the determination of conditions for drawing public funds (in the area of subsidies or public procurement, etc .) . a  certain cumbersomeness of the czech system leads to greater demands on ensuring all processes related to selection and drawing of public funds . 3. state expenditures on the exercise of delegated powers in addition to the public expenditures on public goods, the state contributes to the activities of territorial self-governments that they take over from the state . the state secures by its own resources not only its own activities, but it also contributes to territorial selfgoverning units to the performance of delegated powers . this is done in different ways  –  most often by various forms of subsidies . one of them is contribution to the performance of state administration . contribution to the fulfilment of tasks of territorial self-governments that come under the delegated competence can be described as state budget expenditure determined by a  special act (i .e . by the state budget act for the relevant year) . the state budget act determines the total amount of the contributions to all municipalities to the performance of state administration and in the annex to this act the procedure for determining the amount of the contribution to the performance of state administration provided to individual municipalities is subsequently regulated . the term contribution expresses the fact that the state only contributes to municipalities and regions to the performance of public administration . many of the agendas that the regions and municipalities carry out serve not only the state but also these municipalities 23 public governance, administration and finances law review • 1. 2019 public bureaucracy from the perspective of the state budget and regions . these agendas, for example, are the issuing of identity cards, the keeping of the population register, as well as other activities regulated by law . the state contribution to the exercise of the delegated power is thus intended to cover a part of the expenses related to the performance of state administration .1 this construction is based on the fact that the territorial self-governing units have revenues generated by the agendas, for example, in the form of administrative charges that remain in their budgets . the contribution can also be referred to as a non-purpose subsidy whose form of drawing is not controlled .2 the calculation of the contribution to the performance of state administration, i .e . to the delegated competence, is determined differently for the regions, municipalities and prague . the contribution for the regions is determined by the ministry of finance on the basis of the recalculated work time dedicated to performance of the delegated competences that have been determined at the time of the establishment of the regional offices . determination of the amount and the distribution of the contribution to the regions is not affected by the ministry of the interior in any way . however, the situation is different with regard to the distribution of the contribution to the municipalities . the particular act states that “the municipal budget shall bear the expenses associated with the performance of state administration that is vested in the municipality by law”.3 these are, in particular, wage and operating expenses linked to staff employed by state administration . the contribution is allocated to municipalities on the basis of the size of the municipality and the size of the administrative district of the municipality that is expressed by the number of inhabitants . as regards the municipalities with extended competence, the ratio of the size of the administrative district to the size of the administrative centre itself is important . both of these parameters are expressed in the number of inhabitants . in the calculation of the contribution, five types of administrative roles of municipalities are considered: basic competence, registry offices, building authorities, municipalities with authorised municipal office, municipalities with extended competence . the total contribution of a particular municipality consists of partial contributions for each relevant role . as regards the contribution, the specific category of cities with a  specific status, which represent the agglomeration background of large cities, is considered .4 overall, it can be stated that the state, regional and municipal expenditures are interlinked . financial transfers ensure the unity of public budgets and concurrently  –  as the range of activities that are included among public goods get broader – the role of the entities involved in securing the public goods grows and thus, as a  rule, the amount of funds that are redistributed between public budgets also grows . the role of bureaucracy does not disappear, but it grows . 4. conclusion inability to control its costs forces the public sector to raise taxes . this in turn enables public budgets to inflate . tax collection and tax defence forces the rest of the economy to focus more on redistribution of existing wealth than on creation of the wealth . within the czech public sector there is no internal motive to increase the efficiency of its system . 24 hana markova public governance, administration and finances law review • vol. 4. no. 1. bureaucracy cannot disappear because of its nature . in each system there are functions and activities whose performance is delegated to the higher authorities by the public . the society voluntarily restricts its own sovereignty and freedom of decision and expects the state to be responsible for it . the line of de-bureaucratisation of the state is the reduction of the administrative burden . fully functional measures need to be taken to concentrate on related agendas, develop functional digitalisation of state administration and to reduce the amount of required information . transformation of state administration through information and communication technologies must therefore be considered as the overriding task of all political forces . 25 public governance, administration and finances law review • 1. 2019 public bureaucracy from the perspective of the state budget references 1 act no . 128/2000 coll ., on municipalities, as amended, in section 62 states: “the municipalities shall receive from the state budget a contribution for the fulfilment of delegated powers.” similarly, act no . 129/2000 coll ., on regions, as amended, in section 29 par . 2 states: “the region shall receive from the state budget a contribution for the performance of the delegated power. the amount of the contribution shall be determined by the ministry of finance after discussion with the ministry of the interior.” 2 until 2002 the allowance was set at a particular rate per 100 inhabitants of the administrative district for municipalities with basic competence, for municipalities with the competence of the registry office, for municipalities with the competence of the building office and the authorised municipal office . rates were set by the ministry of finance . between 2003 and 2005 the role of the ministry of the interior was to determine (and adjust) the number of posts transferred from district offices that determines the amount of the contribution for municipalities with extended powers . the rate (used for determination of the contribution) for one post was set by the ministry of finance . in 2003 the rate was about 334,000 czk, in 2004 about 351,000 czk . and in 2005 about 368,000 czk . for 2006 the ministry of the interior prepared a new methodolog y for determining the amount of the contribution for municipalities which brought the unification of calculation and introduction of two criteria (the size of the administrative district and the ratio of the size of the centre to the size of the administrative district) . recently, every year, the ministry of the interior proposes a method of allocating funds to municipalities that are intended to cover state administration carried out by municipalities . 3 section 9 par . 1 (c) of the act no . 250/2000 coll ., on budgetary rules of territorial budgets, as amended . 4 for the year 2018 the total amount of funds transferred to the performance of delegated power by municipalities was increased by 5% and similarly it should be increased in 2019 and 2020 (this is based on the budgetary outlook for those years) . the same percentage increase was made in 2017 . the parameters for the increase of funds for regions and the capital city prague are the same as for municipalities . for the year 2018, the part of the contribution to the delegated competence that consists of flat-rate payments is being enforced . such payments try to take into account the frequency of selected agendas at particular offices . the elements of transparency and targeting in compliance with the fulfilment of the strategic framework of public administration development are strengthened . for more detail, see david sláma, novinky ve financování přenesené působnosti obcí v roce 2018, obec a finance č .5/2017 . © 2018 dialóg campus, budapest public governance, administration and finances law review vol. 3. no. 2. (2018) • 58–69. designated income accounts in budgetary units of municipalities as a form of partially decentralised redistribution of public finance resources allocated to educational services in poland zbigniew ofiarski* * zbigniew ofiarski, full professor, head of the department of finance law, faculty of law and administration, university of szczecin, poland. author of over 550 publications, including 38 books (monographs, students’ books, and commentaries), articles, studies in joint works and electronic publications. he is a member of the centre of information and organization of public finances and tax law research in central and eastern europe. (e-mail: zbigniew.ofiarski@usz.edu.pl) abstract: the act of 27 august 2009 on public finance, which has been in effect in poland since the beginning of 2010, has changed the rules regarding the keeping of designated income accounts by a  commune’s budgetary units. the act limited the possibility to create designated income accounts within a commune budgetary units. the right to create such accounts is restricted only to budgetary units which perform educational tasks and is an exception from the principle of full budgeting, a principle meaning that a commune’s budgetary units have to transfer all their income to the commune’s budget, and all expenses of budgetary units are covered from the commune’s budgets. in case of educational services, these public tasks are performed by the commune’s budgetary units as organizational units that are most closely linked with the commune’s budget. an exception here, which is an option at the discretion of the commune’s council, is to create a designated income account within the commune’s budgetary unit. the aim of the paper is to analyse and evaluate relevant legislation, judicial practice of courts and regional accounting chambers, as well as the doctrine of administrative law, in particular, educational law and public finance law regarding the scope of applicability of designated income accounts for a  commune’s budgetary units that perform educational tasks. the hypothesis that the financing of such expenses through a designated income account is a special form of redistribution of public financial resources in a commune was proven correct. the implementation of this form of funding is justified by the nature of public educational services and allows for more efficient management of this part of public finance. the leading method applied in the paper was the dogmatic and legal method, supported by the empirical and analytical method (in particular with regard to the judicial practice of courts and regional accounting chambers). keywords: commune; education; budgetary unit; public educational services; designated income account 1. introduction in the polish public finance sector, there are various methods of settling the accounts of this sector’s organisational units with the respective budget. in accordance with the 10.53116/pgaflr.2018.2.5 mailto:zbigniew.ofiarski%40usz.edu.pl?subject= https://doi.org/10.53116/pgaflr.2018.2.5 59 public governance, administration and finances law review • 2. 2018 designated income accounts in budgetary units of municipalities… criterion of the manner of settlement, the individual organisational and legal forms, regulated in the public finance act of 27.08.2009,1 may be divided into two groups.2 the first one is created by budgetary units settling with the so called gross method, i.e. covering their spending directly from the budget and transferring the income obtained into the account of the state budget or the budget of a  local government unit. the second group includes organisational units settling with the budget with the so called net method (e.g. local government budgetary establishments), i.e. through payment of a part of the surplus current assets. in the catalogue of the organisational and legal forms of the public finance sector, there are also such that are devoid of the value of organisational separation. their feature is separation of a  planning and financial nature, but they are used within a  specific organisational structure. they are forms of a  mixed or even hybrid nature. this category may include a designated income account, which may be created in a budgetary unit. the aim of this paper is the analysis and evaluation of the normative material, decisions of courts and regional accounting chambers, the achievements of the administrative law doctrine, including the public finance law concerning the permissible scope of using the designated income account in budgetary units as a  method of gathering public financial resources from specific sources and financing of expenses in a  municipal budgetary unit (performing educational tasks) with partial omission of the municipal budget. the paper verifies the hypothesis that the possibility of financing specific expenses from a designated income account is a  special form of redistribution of public financial resources in a  municipality. the introduction of this form is justified with the specificity of public services performed in the sphere of education and enables more effective management of a part of public financial resources. the municipal council decides about the possibility of using this form relatively freely. the paper uses the dogmatic and legal method as the dominant one as well as, additionally, the empirical and analytic one (in particular with regard to the decisions of courts and regional accounting chambers). 2. the genesis of designated income accounts – the outline of the problem pursuant to article 223 of the pfa, designated income accounts may be established in local government (i.e. municipality, powiat and voivodeship) budgetary units. the financial management of budgetary units is strictly connected with the respective budget because a  budgetary unit, as an organisational unit of the public finance sector without legal identity, pursuant to the provisions of article 11 of the pfa, covers its expenses directly from the budget, whereas its obtained income is transferred to the respective budget. it is an important concept of the so called gross budgeting, which has both its advantages and disadvantages. the advantage is, first of all, more transparency and completeness of managing public resources facilitating consolidation of these resources within a  specific budget. the disadvantage is lack of relations between the financial result of the activity conducted in the budgetary unit and the system of motivating its employees to more effective management of public financial resources.3 60 zbigniew ofiarski public governance, administration and finances law review • vol. 3. no. 2. it is necessary to introduce specific solutions which will provide a budgetary unit with a share in some of the obtained incomes through a possibility of financing selected types of expenses. various solutions have been sought in poland within this scope for many years. in the period when the public finance act of 30.06.2005 was in force,4 motivation funds were established in state budgetary units intended for gathering of some of the incomes obtained from forfeiture of objects or financial benefits resulting from revealing of crimes and offences against property or tax crimes and offences. motivation funds were intended for rewards for employees, soldiers and officers who directly contributed to obtaining of the state budget incomes for the above mentioned reasons. moreover, budgetary units could keep some of the incomes obtained from specific sources (e.g. fees for access to tender documentation, compensations for lost or damaged property) with a  view to financing of certain expenses indicated in the act (e.g. for renovation or recreation of property). to this end, designated own income accounts were created in budgetary units. in this manner, the gross budgeting method was partially abandoned and elements of net budgeting were introduced into the budgetary unit.5 currently, designated income accounts used in poland are a  continuation of the concept referring to special resources of budgetary units (a budgetary unit retained a part of the incomes for its own needs and could spend them on the purposes listed in the act), introduced in 1958 and abandoned in 2004, and, then, the above mentioned motivation funds as well as designated own income accounts. it must be emphasised that modern solutions involving the use of designated income accounts are limited within the objective scope. they may be used in state and local government budgetary units, but only such that conduct the activity in the field of education. further deliberations in this paper shall focus on the problem matter of creation and functioning of these accounts in municipal budgetary units. 3. statutory criteria concerning the establishment of designated income accounts the provisions of article 223 of the pfa explicitly indicate that a  designated income account may be created in an already existing budgetary unit. this means that the order of legal events should be as follows: establishment of a budgetary unit and, then, creation of a  designated income account within the unit. it is possible to establish a  budgetary unit and create a  designated income account within it in a  single legal act because, in each of these cases, the same authority has the legislative competences. as regards a  municipality, this is its decision making and regulatory body, i.e. the municipal council. designated income accounts may be created not only in municipal budgetary units which conduct the activity specified in the act of 14.12.2016  –  school education law.6 pursuant to article 11(2) of the act, the provision of education, upbringing and care, including special education and social prophylaxis, is an educational task of a municipality in pre-schools and other forms of pre-school education as well as primary schools. these are the municipality’s own tasks of an obligatory nature. pre-schools and primary schools are organised in the form of municipal budgetary units.7 this is the only permissible 61 public governance, administration and finances law review • 2. 2018 designated income accounts in budgetary units of municipalities… organisational and legal form, which is directly stipulated in article 4(1) of the act of 27.10.2017 on financing of educational tasks.8 pursuant to this provision, pre-schools and schools established and operated by local government units are budgetary units. the creation of designated income accounts in such budgetary units performing educational tasks is not obligatory. the solution in this case depends on the scope of competence of the municipal council. the scope of the municipality’s freedom of decision is relatively wide because article 223(1) of the pfa mentions only example types of incomes which may be paid into a  designated account created in a  municipal budgetary unit conducting educational activity. the open catalogue of these incomes is determined by the phrase “in particular” used in the content of the provision. the legislator indicated the following types of incomes: inheritances, legacies and donations in the form of money for the benefit of the budgetary unit; compensations and payments for lost and damaged property managed or used by the budgetary unit. based on the above quoted provision of the act, the municipal council determines, by means of a  resolution, the sources from which the incomes are gathered in a designated income account. the details and the closed catalogue of the sources of incomes which may be gathered in such accounts, as well as their intended purposes should be specified in a resolution of the municipal council.9 the catalogue of issues which the municipal council should regulate in the resolution on creation of a designated income account is also closed. the list of these issues is preceded by the phrase “in particular”. this means that, except for the issues mentioned directly in article 223(2) of the pfa, the municipal council may also include other provisions. it may be concluded that the issues mentioned in the act are of basic nature and are directly related to the legislator’s concept referring to the designated income account. therefore, the municipal council should primarily specify the following in the resolution concerning the designated income account: a) the municipal budgetary units which gather the incomes b) the sources from which the incomes are gathered in the designated income account c) the intended purposes of the incomes; however, the incomes together with interest shall not be allocated to financing of personal remunerations d) the manner and procedure of preparing the financial plan of the incomes and expenses financed with them, the introduction of changes in the plan and their approval the wording of article 223 of the pfa clearly indicates that it is only the resolution of the municipal council that should indicate e.g. the municipal budgetary units, i.e. individualise the entities which will gather incomes in the designated income account, as well as determine the specific sources of these incomes. it is not possible to be limited only to a general reference to the public finance act or a repetition of the provision of the act the more so that the legislator, while mentioning the sources of incomes in article 223(1) of the pfa, used the phrase “in particular” and, thus, only indicated some example sources of incomes.10 nevertheless, it cannot be pretended that each type of income may be gathered in a designated income account. this does not mean that such incomes should be qualified from the point of view of the sources mentioned in article 223(1) of the pfa, taking into consideration their one-off or exceptional nature. the criteria should not be referred to the 62 zbigniew ofiarski public governance, administration and finances law review • vol. 3. no. 2. nature of the sources within the meaning of their singularity or uniqueness, but to the legal possibility of obtaining them by the municipal budgetary unit with additional inclusion of the nature of its activity in the educational sphere.11 the analysis of the content of selected municipal council resolutions indicates a  relatively extensive catalogue of income sources, which may be gathered in designated income accounts of municipal budgetary units conducting educational activity. the following sources of income are mentioned: cash inflows from inheritances, legacies and donations in the form of money for the benefit of a  budgetary unit; contributions from compensations and payments for lost or damaged property managed or used by a budgetary unit; incomes obtained from rental of spaces and devices; interest on the resources gathered in the bank account; payments for using of the g ym, sports field and sports equipment; payments for using of computers, other devices and equipment; payments for organisation of leisure activities for children and youth during winter and summer holidays; cash inflows from other services;12 payments for meals; payments for children staying in a pre-school;13 cash inflows from the sale of tangible assets;14 extra-budgetary resources obtained from foundations, associations and other institutions for implementation of programmes. the sources of income shall be specified in a  specific manner in the resolution. it is not permissible to indicate, in a resolution of the municipal council, any source of incomes of the designated account as “other contributions”. the use of such a  manner of regulation means that no source has been specified for incomes which may be gathered in the account and results in the head of the budgetary unit being able to decide about the incomes which will credit the designated income account, whereas article 223 of the pfa leaves the specification of the sources of incomes to the competences of the municipality.15 the municipal council resolution should also determine the intended purpose of the incomes gathered in a  designated account. the legislator, nevertheless, excludes the possibility of allocating these incomes together with interest to financing of personal remunerations. the above quoted resolutions of municipal councils determine various types of expenses which may be financed from designated income accounts, e.g.: the purposes indicated by the donor; renovations of buildings administered by the municipal budgetary unit; investment expenses; expenses related to recreation of damaged or lost property; purchases of cleaning agents; purchases of food; purchases of equipment for kitchens and canteens; statutory tasks of the budgetary unit; expenses related to the bank operation of the designated income account; other purposes directly related to the activity of the budgetary unit. the intended purpose of the resources from the designated income account should be specified in a  resolution of the municipal council in a  precise and exhaustive manner so that there are no doubts as to which expenses the head of a budgetary unit may allocate the incomes gathered in the account. these conditions are not fulfilled by the phrase used in a  resolution pursuant to which “current expenses” may be financed from the designated income account, because one of such expenses is personal remunerations which shall not be financed from this account as it has been stipulated by the legislator in article 223(2) (3) of the pfa.16 for the same reasons, it is not permissible to include, in a  municipal council resolution, phrases about a possibility of financing “other purposes directly related to the activity of the budgetary unit” or “statutory tasks of the budgetary unit” from the 63 public governance, administration and finances law review • 2. 2018 designated income accounts in budgetary units of municipalities… designated income account. neither is it appropriate to include, in a resolution, any phrase saying that expenses of a budgetary unit which are not covered by the financial plan of the unit would be financed for the designated income account. this would lead to the violation of the essence of a  budgetary unit determined in article 11(1) of the pfa and article 52(1) (2) of the pfa, which stipulates that the costs included in the annual financial plan of a  budgetary unit may be increased if incomes higher than the ones forecast have been obtained and increasing of the costs shall not result in increased subsidies from the budget or an increase in the planned state of liabilities. this would result in the violation of article 261 of the pfa stipulating that the head of a  budgetary unit may, with a  view to performance of the tasks, incur financial obligations up to the amount of the expenses determined in the approved financial plan of the unit. hence, the level of expenses incurred by a  budgetary unit does not depend on the amount of incomes obtained (gross budgeting ). all expenses of a budgetary unit are budgetary expenses and the incomes obtained by it (as  a  rule) are budgetary incomes. an exception from this rule, in the form of the designated income account, is introduced by article 223 of the pfa. introduction, by a  municipal council, of the arrangements as to this type of incomes and their intended purpose shall, nevertheless, not lead to any change in the form of financing of the municipal budgetary unit through creation of the second independent source of financing of its financial plan (remaining outside the municipal budget).17 pursuant to article 223(3), expenses from the designated income account may be incurred up to the amount of the gathered incomes within the financial plan. this means that the account shall not be credited from other sources which have not been mentioned in the resolution of the municipal council. the statutory phrase “up to the amount of the gathered incomes” does not create any obligation of using all the financial resources gathered in the account. nevertheless, it should not be interpreted towards arbitrary spending of these resources because each of the expenses should have its basis in the form of being included in the financial plan of the designated income account. an order has been formulated in article 223(4) of the pfa to transfer the financial resources remaining in the designated income account on 31 december of the financial year to the budget of the municipality. the resources should be transferred not later than by 5 january of the following year. this means that the resources from the designated income account unused in a  given year shall not be used further by the specific municipal budgetary unit, even in a situation when they were included in the financial plan of the account but were not used by the end of the financial year. this is a mandatory rule and shall not be modified in any manner through municipal council resolutions. the obligation to transfer incomes gathered in the designated account to the municipal budget is qualified as an expense from the designated account (payment to the municipal budget). in accordance with the budgetary classification, transferring of the resources remaining in the designated account to the budget is effected pursuant to “paragraph 240  –  transfers of the remaining financial resources gathered in a  designated account of a  budgetary unit into the budget”. a  payment into the municipal budget constitutes an expense from the designated account and an income within the scope of the municipal budget of the following year. such payments are not included as current expenses of the municipal budget.18 the essential feature of functioning of the designated income 64 zbigniew ofiarski public governance, administration and finances law review • vol. 3. no. 2. account is that the unused financial resources remaining at the end of the financial year must be transferred to the municipal budget. the reverse direction of the financial stream, i.e. crediting of the designated income account from the municipal budget is not permitted by the law. to conclude, only complete use of the resources gathered in the designated income account in compliance with the plan results in no obligation to transfer them to the municipal budget. 4. legal status of the financial plan of a designated income account pursuant to article 223(2) (4) of the pfa, a municipal council shall determine, by means of a resolution, the manner and procedure of preparing the financial plan of the designated income account, which shall include the sources of incomes and the expenses financed with them. pursuant to the same procedure, the municipal council shall determine the manner of introducing changes in the plan and the manner of their approval. it is exclusively the municipal council determining the procedure of introducing changes in the financial plan of the incomes gathered in the designated account and the expenses financed with them that is authorised to indicate the entities entitled to introduce the changes and approve them. the municipal council is, nevertheless, not authorised to transfer the rights to the executive body.19 the analysis of the provisions of the selected municipal council resolutions shows that standard solutions are adopted within this scope. heads of municipal budgetary units, together with projects of financial plans of these units, develop the projects of financial plans of incomes gathered in a designated account and the expenses financed with them. the projects of financial plans are filed with the executive body of the municipality within the time limit enabling their inclusion in the project of the municipal budget resolution. a  project of the financial plan approved by the head of the municipal budgetary unit constitutes the basis of financial management within the designated income account in the period from 1 january of the financial year until the date of adopting the budget resolution by the municipal council. similarly as in the municipal budget, also in the financial plan of the designated income account, the planned incomes constitute a  forecast, whereas the planned expenses are the limit. this means that the primarily forecast incomes may be obtained in higher amounts, whereas the planned expenses shall not be incurred in higher amounts unless they are financed from additional incomes and a  respective change is introduced within this scope in the financial plan of the designated income account. during the financial year, the financial plans of designated income accounts may be changed by heads of municipal budgetary units. in order to ensure the planning discipline, municipal council resolutions also specify the dates of preparing the projects of financial plans of designated income accounts and the dates of submitting the information and the reports concerning the implementation of the plans. determination of such dates enables synchronisation of the mode of project works on financial plans of designated income accounts with the procedure concerning other financial plans in the municipality, including in particular the municipal budget and the financial plans of municipal budgetary units. therefore, heads of municipal budgetary 65 public governance, administration and finances law review • 2. 2018 designated income accounts in budgetary units of municipalities… units are obliged to check annually, by 20 october, the financial plan of the designated income account for the following year. heads of municipal budgetary units are obliged to present the municipal executive body with information on the course of implementation of the plan for the first half of the year by 10 july, whereas, by 31 january of the year following the financial year – an annual report on the accomplishment of the financial plan. the use by the legislator of the phrase “designated income account” simultaneously indicates its separation from the conventionally understood municipal budget. the phrase “designated income account” means separation of the account from the accounts kept with a  view to bank operation of the municipal budget. it is not only a  separate financial resource being at the disposal of the head of a municipal budgetary unit, but also a stream of incomes and expenses separated from the municipal budget as regards planning. the financial plan of the designated income account is a  planning document separated from the financial plan of the municipal budgetary unit where such an account was created. it should be prepared with the use of all sections of the budgetary classification, i.e. in particular: division, chapter, paragraph in the budgetary classification. pursuant to the provisions of article 211(5) of the pfa (specifying the structure of a  budget resolution which includes the municipal budget and appendices), as well as article 212 of the pfa (specifying the so called subject matter of a budget resolution) and article 214 of the pfa (specifying the content of the appendices to the budget resolution also stipulating that the plan of incomes of a  separated income account of municipal budgetary units conducting the activity determined in the school education law and the expenses financed with them are included in a separate appendix), it must be explicitly concluded that the financial plan of a  designated account of incomes and expenses of a  municipal budgetary unit is a planning document separated from the municipal budget, being a municipality planning document, as well as from the financial plan of the municipal budgetary unit. the above mentioned financial plans are only included in the same normative act, which is the municipal budget resolution. the arrangements adopted in the financial plan of the designated income account of a  municipal budgetary unit are arrangements separated from incomes and expenses approved in the municipal budget and the financial plan of a  municipal budgetary unit. these are separate categories of incomes and expenses and shall not be treated as synonymous, or interchangeable or aggregated for other purposes determined in separate acts. the above assessment is confirmed in the doctrine of the public finance law.20 it is emphasised that the financial plan of the designated income account of a  municipal local government budgetary unit reveals significant information not included in the municipal budget concerning non-budgetary management of public resources in a municipality.21 separation of the financial plan of a  designated income account from other financial plans adopted in a municipality is also confirmed by the provisions of the pfa concerning budget reporting. based on the delegation of legislative powers formulated in article 41(2) of the pfa, the minister of finance determined  –  by means of a  regulation22  –  the types, forms, dates and methods of preparing the reports. the provisions of the regulation explicitly indicate that separate reports are prepared on accomplishment of municipal budgets (reference no. rb-27s and rb-28s), as well as on the incomes and expenses in designated accounts of municipal budgetary units (reference no. rb-34s). furthermore, 66 zbigniew ofiarski public governance, administration and finances law review • vol. 3. no. 2. article 267 of the pfa indicates that the executive body of a municipality presents to the municipal council, by 31 march of the year following the financial year, an annual report on the accomplishment of the municipal budget containing a  statement of incomes and expenses resulting from closing of municipal budget accounts, in the detail not lesser than in the municipal budget resolution. the statement of incomes and expenses should include the data resulting from the closing of municipal budget accounts, as well as the list of budgetary units where designated income accounts have been created (only a  list of such municipal budgetary units is mentioned and not the amounts gathered and spent from the designated income accounts). this is another argument justifying the thesis on separation of the municipal budget and the designated income account of a municipal budgetary unit, as well as the financial plan connected with this account. 5. final conclusions the applicable legal regulations indicate that the legislator regulates, within the subjective and objective scope, the creation and functioning of designated income accounts. it is permissible to create such designated accounts only in budgetary units conducting a specific type of activity, i.e. performing educational tasks. the principle is performance of public services in the sphere of education with the use of the form of a municipal budgetary unit as the organisational unit most closely connected with the municipal budget. a  designated income account shall be treated as an exception from the principle of gross budgeting23 (involving transfer of all incomes obtained by a  budgetary unit to the municipal budget and covering of all expenses of the budgetary unit from this budget). although the resources gathered in designated income accounts are included in the general, i.e. municipal budget records and reports, they are at the disposal of the head of a municipal budgetary unit rather than the executive body of the municipality responsible for implementation of the municipal budget. the amount of expenses from the designated income account is limited by the amount of incomes obtained from the sources indicated in the municipal council resolution. creation of designated income accounts de facto leads to decentralisation of the competences in the process of gathering and spending of a  part of the municipality’s financial resources. municipal budgetary units gather financial resources and finance some specific expenses independently with them, yet within the limits set by the municipal council by means of a resolution. the cash inflows obtained by them owing to their activity are used within their own scope.24 it is possible to conclude that the manner of functioning of designated income accounts may have a  positive influence on the activity of municipal budgetary units. first of all, it may motivate the managements of these units to obtain additional incomes from sources not related to the main object of activity of the municipal budgetary unit. the additional financial resources obtained in this manner constitute the source of financing the expenses without an excessive burden to the municipal budget. as a result, designated income accounts may lead to improvement of the level of flexibility in conducting of the financial management in a budgetary unit.25 67 public governance, administration and finances law review • 2. 2018 designated income accounts in budgetary units of municipalities… while adopting the public finance act in 2009, a concept of consolidation of public finances was promoted, as well as the need of maximum limitation of various forms of non-budgetary and semi-budgetary management (e.g. state budgetary establishments and motivation funds were abolished). the possibility of creating own income accounts in (state and local government) budgetary units was significantly limited, the essence of functioning of which was very close to the currently created designated income accounts. in the latter case, this form of conducting the non-budgetary management was, nevertheless, not completely abolished, but rather reorganised through its use only in budgetary units performing educational tasks.26 the hypothesis formulated in the introduction, according to which financing of specific expenses from a  designated income account constitutes a  specific form of redistribution of public financial resources in a  municipality has been verified positively. the introduction of this form of non-budgetary management is justified with the specificity of public services performed in the sphere of education and enables more effective management of a part of the public financial resources. in particular, the assets transferred by the municipality into the management of a budgetary unit may be used more effectively and constitute an additional source of incomes in the form of fees collected for leasing of premises, land or sport infrastructure facilities (e.g. g yms, swimming pools and school sports fields, common rooms). this may only happen, nevertheless, after the performance of public educational services. additional financial resources may be used in order to better meet the needs of the local community in the sphere of education including the obligatory tasks of the municipality. 68 zbigniew ofiarski public governance, administration and finances law review • vol. 3. no. 2. references 1 journal of laws of 2017 item 2077 as amended, hereinafter referred to as pfa. 2 przemysław panfil, sektor finansów publicznych, 347, in andrzej drwiłło, podstawy finansów i prawa finansowego (warsaw, wolters kluwer, 2014). 3 paweł smoleń, komentarz do art. 11, 205, in paweł smoleń, ustawa o finansach publicznych. komentarz [public finance act. commentary] (warsaw, c.h. beck, 2014). 4 journal of laws no. 249, item 2104 as amended. 5 elżbieta chojna-duch, prawo finansowe. finanse publiczne [financial law. public finance], 48 (warsaw, oficyna prawa polskiego, 2017). 6 journal of laws of 2018, item 996 as amended. 7 e.g. resolution of the town council in sochaczew of 14.11.2017 on granting the statute to primary school no. 6 in sochaczew (official journal of mazowieckie voivodeship of 2017 item 10582); resolution of the town council in supraśl of 26.02.2018 on establishment of a local government preschool in grabówka and granting a statute (official journal of podlaskie voivodeship of 2018 item 1240). 8 journal of laws of 2017, item 2203 as amended. 9 decision of the general adjudication committee of 18.06.2012: bdf1/4900/54/54/12/1437. 10 judgement of the voivodeship administrative court in gorzów wielkopolski: i sa/go 435/11. 11 judgement of the voivodeship administrative court in gliwice: iv sa/gi 5/11. 12 e.g. resolution of the town council in drezdenko of 29.11.2011 on gathering of incomes in a designated account by local government budgetary units conducting activity within the scope of education (official journal of lubuskie voivodeship of 2012 item 133). 13 e.g. resolution of the mrozy municipal council of 28.10.2010 on the determination of budgetary units gathering incomes in a designated bank account, the sources of these incomes and their intended purpose, as well as the manner and procedure of preparing a  financial plan, introducing changes in the plan and their approval (official journal of mazowieckie voivodeship no. 216, item 7344). 14 e.g. resolution of the olszanka municipal council of 29.12.2016 on the determination of budgetary units gathering incomes in a designated bank account, the sources of these incomes and their intended purpose, as well as the manner and procedure of preparing a  financial plan of incomes and expenses financed with them, introducing changes in the plan and their approval (official journal of mazowieckie voivodeship of 2017 item 94). 15 resolution of the regional accounting chamber in kielce: 24/11, official journal of świętokrzyskie voivodeship no. 53, item 655). 16 resolution of the regional accounting chamber in poznań: 1/1860/2010, legalis no. 291413. 17 resolution of the regional accounting chamber in wrocław: 76/2010, legalis no. 315209. 18 urszula winkowska-zakrzewska, pozostałe na koniec roku środki na rachunku z art. 223 ustawy o finansach publicznych [resources remaining in the account under art. 223 of the public finance act at the end of the year], 20, in wojciech lachiewicz, klasyfikacja budżetowa 2018 [budgetary classification 2018] (warsaw, c.h. beck, 2018). 19 resolution of the regional accounting chamber in wrocław: 9/2011, legalis no. 1231961. 20 joanna małgorzata salachna, komentarz do art. 214 oraz art. 223, 826–828 oraz 877–882, in eugeniusz ruśkowski, joanna małgorzata salachna, finanse publiczne. komentarz praktyczny [public finance. practical commentary] (gdańsk, oddk, 2013). 21 andrzej gorgol, komentarz do art. 223, 963, in pawel smoleń, ustawa o finansach publicznych. komentarz praktyczny [public finance act. commentary] (warsaw, c.h. beck, 2012). 22 regulation of the minister of finance of 09.01.2018 on budget reporting (journal of laws of 2018 item 109). 23 rafał trykozko, ustawa o finansach publicznych komentarz dla jednostek samorządu terytorialnego [public finance act. commentary for local government units], 343 (warsaw, wydawnictwo taxpress, 2010). 24 resolution of the regional accounting chamber in bydgoszcz: xix/30/08, lex no. 1724747. 69 public governance, administration and finances law review • 2. 2018 designated income accounts in budgetary units of municipalities… 25 paweł lenio, rachunki dochodów własnych jednostek budżetowych [own income accounts of budgetary units], 169, in prawo budżetowe państwa i samorządu [state and local govenrment budget law] no. 1 (2014). 26 zbigniew ofiarski, prawo finansowe [financial law], 71 (warsaw, c.h. beck, 2010). https://doi.org/10.12775/pbps.2014.009 https://doi.org/10.12775/pbps.2014.009 _goback _goback _goback _goback _goback articles tax administration of large taxpayers in some cee and cis countries jasna bogovac,* natalia soloveva,** michal radvan,*** jarosław marczak,**** natalia uvarova-patenko***** the participation of tax authorities in insolvency agreements piotr buława* the amendment of the religious registration law and its impact on freedom of religion in the slovak republic mária havelková* the scope of public services performed by municipal local governments in the republic of poland through budgetary establishments małgorzata ofiarska* designated income accounts in budgetary units of municipalities as a form of partially decentralised redistribution of public finance resources allocated to educational services in poland zbigniew ofiarski* the legal aspects of reducing the bureaucracy of the court administration wojciech piątek* the constitution and public administration aksana shupitskaya* case study tax inspection – unlawful interference damian czudek* european investigation order and the “brussels” bureaucracy marek kordík,* lucia kurilovská** complaint in tax administration as an instrument to ensure good administration zuzana marethová* © 2018 dialóg campus, budapest public governance, administration and finances law review vol. 3. no. 2. (2018) • 99–109. european investigation order and the “brussels” bureaucracy marek kordík,* lucia kurilovská** * marek kordík, associate professor, judr., phd, ll.m., department of criminal law, criminolog y and criminalistics of the faculty of law, comenius university in bratislava. (e-mail: marek. kordik@flaw.uniba.sk) ** lucia kurilovská, professor, dr.h.c., judr., phd, department of criminal law, criminolog y and criminalistics of the faculty of law, comenius university in bratislava, rector of the police academy in bratislava. (e-mail: lucia.kurilovska@minv.sk) abstract: the contribution deals with the insight on the european investigation order, as a tool of mutual judicial assistance in criminal matters. with the purpose to show that the criticised, so called brussels bureaucracy very often just reacts on the propositions of the member states. a good example of this is given in the presented article. it shows the result of a  conducted cepol survey and connects it with the short presentation of this tool. keywords: european investigation order; mutual cooperation in criminal matters; template; bureaucracy; statistics 1. general overview in october 2017, cepol approached cnus in 26 member states2 to provide direct contact points in law enforcement agencies (dealing with the subject of the otna) of their respective countries; 21 ms responded this initiative. further on, the questionnaire was sent to these nominated contact points (law enforcement agencies and cepol national units). this resulted in 44 completed answers from different le agencies from 21 member states, indicating a  relatively high response rate: 80.76% of member states representing 42,601 law enforcement officials1 across europe, expressed their needs in the field of counterterrorism.2 the most relevant main topic for law enforcement officials in this area is related to foreign terrorist fighters (85.71% of mss found it relevant) followed by financing terrorism, radicalisation and open source intelligence (80.95%) (table 1). the least relevant need was about hostage taking (47.62%):3 10.53116/pgaflr.2018.2.9 mailto:marek.kordik%40flaw.uniba.sk?subject= mailto:marek.kordik%40flaw.uniba.sk?subject= mailto:lucia.kurilovska%40minv.sk?subject= https://doi.org/10.53116/pgaflr.2018.2.9 100 marek kordík, lucia kurilovská public governance, administration and finances law review • vol. 3. no. 2. table 1. the relevance and urgency rates of the individual law enforcement topics main topics relevance rate urgency rate foreign terrorist fighters 85.71% 85.00% relevant and urgent radicalisation 80.95% 88.00% relevant and urgent financing terrorism 80.95% 84.00% relevant and urgent open source intelligence 80.95% 76.00% relevant and urgent terrorism/firearms trafficking 71.43% 92.00% relevant and urgent covert human intelligence sources 66.67% 80.00% relevant and urgent protection of soft targets 66.67% 72.00% relevant and urgent critical infrastructure protection 61.90% 68.00% relevant and urgent encryption technologies used to facilitate terrorism 57.14% 76.00% relevant and urgent aftermath of attack 57.14% 72.00% relevant and urgent cbrn,cbrne 57.14% 68.00% relevant and urgent hostage taking 47.62% 64.21% less relevant and urgent e-evidence 42.86% 61.18% less relevant and urgent de-radicalisation 33.33% 54.48% less relevant and urgent source: compilation of the authors based on optna on counterterrorism, cepol, presented on the management board meeting in sofia on 15–16 may 2018. 3. with the aim of better understanding the needs of le officials, various horizontal aspects were presented for the assessment of respondents under each topic. as the relevance varies from topic to topic, the overall assessment demonstrated that training should put emphasis on prevention, cross border exchange of information, evidence and criminal as intelligence, as well as on cooperation with non-eu countries. at the same time protection of personal data, knowledge of cultural aspects and history, as well as fundamental rights were given less priority. according to the cepol’s mandate “in its training activities, cepol should promote common respect for, and understanding of, fundamental rights in law enforcement”4 therefore, in spite of its low ranking, fundamental rights should be given priority when designing the training portfolio on counterterrorism.5 101 public governance, administration and finances law review • 2. 2018 european investigation order and the “brussels” bureaucracy table 2. the relevance rates of the horizontal aspects of law enforcement horizontal aspects relevance rate prevention 41.46% cross border exchange of evidence 40.86% cross border exchange of information 40.69% cooperation with non-eu countries 39.72% cross border exchange of criminal intelligence 37.38% better use of eu instruments 36.54% information exchange 34.53% undercover operations 33.88% common definitions 33.65% common sanctions 29.96% protection of personal data 29.42% knowledge of cultural aspects and history 28.26% fundamental rights 25.72% source: compilation of the authors based on optna on counterterrorism, cepol, presented on the management board meeting in sofia on 15–16 may 2018. 4. 2. directive 2014/41/eu of the european parliament and of the council of 3 april 2014 regarding the european investigation order in criminal matters the initiative on the adoption of the european investigation order came from the kingdom of belgium, the republic of bulgaria, the republic of estonia, the kingdom of spain, the republic of austria, the republic of slovenia and the kingdom of sweden for a  directive of the european parliament and of the council.6 the negotiations started in 2010.7 the directive was adopted in 2014.8 deadline for the transposition was on may 27, 2017.9 the main aim of its adoption was to:10 create a single comprehensive instrument with a large scope; set strict deadlines for gathering the evidence requested; limit the reasons for refusing such requests; reduce paperwork by introducing a  single standard for and to protect the fundamental rights of the defence. under article 1 a  european investigation order (eio) is a  judicial decision which has been issued or validated by a judicial authority of a member state (“og the issuing state”) to have one or several specific investigative measure(s) carried out in another member state (“the executing state”) to obtain evidence in accordance with this directive. the eio may also be issued for obtaining evidence that is already in the possession of the competent authorities of the executing state. member states shall execute an eio on the basis of the principle of 102 marek kordík, lucia kurilovská public governance, administration and finances law review • vol. 3. no. 2. mutual recognition and in accordance with this directive. the issuing of an eio may be requested by a suspected or accused person, or by a lawyer on his behalf, within the framework of applicable defence rights in conformity with national criminal procedure. this directive shall not have the effect of modifying the obligation to respect the fundamental rights and legal principles as enshrined in article 6 of the teu, including the rights of defence of persons subject to criminal proceedings, and any obligations incumbent on judicial authorities in this respect shall remain unaffected. where the objects, documents, or data concerned are already relevant for other proceedings, the executing authority may, at the explicit request of and after consultations with the issuing authority, temporarily transfer the evidence on the condition that it be returned to the executing state as soon as it is no longer required in the issuing state or at any other time or occasion agreed between the competent authorities. member states shall ensure under article 14 that legal remedies equivalent to those available in a similar domestic case, are applicable to the investigative measures indicated in the eio. the substantive reasons for issuing the eio may be challenged only in an action brought in the issuing state, without prejudice to the guarantees of fundamental rights in the executing state. where it would not undermine the need to ensure confidentiality of an investigation the issuing authority and the executing authority shall take the appropriate measures to ensure that information is provided about the possibilities under the national law for seeking the legal remedies when these become applicable and in due time to ensure that they can be exercised effectively. member states shall ensure that the time limits for seeking a legal remedy shall be the same as those that are provided for in similar domestic cases and are applied in a way that guarantees the possibility of the effective exercise of these legal remedies for the parties concerned. the issuing authority and the executing authority shall inform each other about the legal remedies sought against the issuing, the recognition or the execution of an eio. a legal challenge shall not suspend the execution of the investigative measure, unless it is provided in similar domestic cases. the issuing state shall take into account a successful challenge against the recognition or execution of an eio in accordance with its own national law. without prejudice to national procedural rules, member states shall ensure that in criminal proceedings in the issuing state, the rights of the defence and the fairness of the proceedings are respected when assessing evidence obtained through the eio. 103 public governance, administration and finances law review • 2. 2018 european investigation order and the “brussels” bureaucracy 3. investigative measures according to the european investigation order 3.1. temporary transfer to the issuing state of persons held in custody for the purpose of carrying out an investigative measure an eio may be issued under article 22 for the temporary transfer of a person in custody in the executing state for the purpose of carrying out an investigative measure with a view to gathering evidence for which the presence of that person on the territory of the issuing state is required, provided that he shall be sent back within the period stipulated by the executing state. the transferred person shall remain in custody in the territory of the issuing state and, where applicable, in the territory of the member state of transit, for the acts or convictions for which he has been kept in custody in the executing state, unless the executing state applies for his release. the period of custody in the territory of the issuing state shall be deducted from the period of detention which the person concerned is or will be obliged to undergo in the territory of the executing state. a transferred person shall not be prosecuted or detained or subjected to any other restriction of his personal liberty in the issuing state for acts committed or convictions handed down before his departure from the territory of the executing state and which are not specified in the eio. the immunity shall cease to exist if the transferred person, having had an opportunity to leave for a  period of 15 consecutive days from the date when his presence is no longer required by the issuing authorities, has either: a) nevertheless, remained in the territory; or b) having left it, has returned. 3.2. temporary transfer to the executing state of persons held in custody for the purpose of carrying out an investigative measure an eio may be issued under article 23 for the temporary transfer of a  person held in custody in the issuing state for the purpose of carrying out an investigative measure with a view to gathering evidence for which his presence on the territory of the executing state is required. article 22 is applicable mutatis mutandis to the temporary transfer under this article. 3.3. hearing by videoconference or other audiovisual transmission where a person is in the territory of the executing state and has to be heard as a witness or expert by the competent authorities of the issuing state, the issuing authority may issue an eio under article 24 in order to hear the witness or expert by videoconference or other 104 marek kordík, lucia kurilovská public governance, administration and finances law review • vol. 3. no. 2. audiovisual transmission. the issuing authority may also issue an eio for the purpose of hearing a  suspected or accused person by videoconference or other audiovisual transmission. the issuing authority and the executing authority shall agree on the practical arrangements. when agreeing on such arrangements, the executing authority shall undertake to: a) summon the witness or expert concerned, indicating the time and the venue of the hearing ; b) summon the suspected or accused persons to appear for the hearing in accordance with the detailed rules laid down in the law of the executing state and inform such persons about their rights under the law of the issuing state, in such a  time as to allow them to exercise their rights of defence effectively; c) ensure the identity of the person to be heard. where a  hearing is held by videoconference or other audiovisual transmission, the following rules shall apply: a) the competent authority of the executing state shall be present during the hearing, where necessary assisted by an interpreter, and shall also be responsible for ensuring both the identity of the person to be heard and respect for the fundamental principles of the law of the executing state. if the executing authority is of the view that during the hearing the fundamental principles of the law of the executing state are being infringed, it shall immediately take the necessary measures to ensure that the hearing continues in accordance with those principles; b) measures for the protection of the person to be heard shall be agreed, where necessary, between the competent authorities of the issuing state and the executing state; c) the hearing shall be conducted directly by, or under the direction of the competent authority of the issuing state in accordance with its own laws; d) at the request of the issuing state or the person to be heard, the executing state shall ensure that the person to be heard is assisted by an interpreter, if necessary; e) suspected or accused persons shall be informed in advance of the hearing of the procedural rights which would accrue to them, including the right not to testify, under the law of the executing state and the issuing state. witnesses and experts may claim the right not to testify which would accrue to them under the law of either the executing or the issuing state and shall be informed about this right in advance of the hearing. 3.4. hearing by telephone conference if a person is in the territory of one member state and has to be heard as a witness or expert by competent authorities of another member state, the issuing authority of the latter member state may, where it is not appropriate or possible for the person to be heard to appear in its territory in person, and after having examined other suitable means, issue an eio under article 25 in order to hear a witness or expert by telephone conference. 105 public governance, administration and finances law review • 2. 2018 european investigation order and the “brussels” bureaucracy the rules on videoconference or audiovisual transmission shall apply mutatis mutandis to hearings by telephone conference. 3.5. information on banks and other financial accounts an eio may be issued under article 26 in order to determine whether any natural or legal person subject to the criminal proceedings concerned holds or controls one or more accounts, of whatever nature, in any bank located in the territory of the executing state, and if so, to obtain all the details of the identified accounts. each member state shall take the measures necessary to enable to provide the information. the information, if requested in the eio, include accounts for which the person subject to the criminal proceedings concerned has powers of attorney. the obligation shall apply only to the extent that the information is in the possession of the bank keeping the account. in the eio, the issuing authority shall indicate the reasons why it considers that the requested information is likely to be of substantial value for the purpose of the criminal proceedings concerned and on what grounds it presumes that banks in the executing state hold the account and, to the extent available, which banks may be involved. it shall also include in the eio any information available which may facilitate its execution. an eio may also be issued to determine whether any natural or legal person subject to the criminal proceedings concerned holds one or more accounts, in any non-bank financial institution located on the territory of the executing state. 3.6. information on banking and other financial operations an eio may be issued under article 27 in order to obtain the details of specified bank accounts and of banking operations which have been carried out during a  defined period through one or more accounts specified therein, including the details of any sending or recipient account. each member state shall take the measures necessary to enable it to provide the information referred to in paragraph 1 in accordance with the conditions under this article. the obligation set out in this article shall apply only to the extent that the information is in the possession of the bank in which the account is held. in the eio, the issuing authority shall indicate the reasons why it considers the requested information relevant for the purpose of the criminal proceedings concerned. an eio may also be issued with regard to the information with reference to the financial operations conducted by non-banking financial institutions. 106 marek kordík, lucia kurilovská public governance, administration and finances law review • vol. 3. no. 2. 3.7. investigative measures implying the gathering of evidence in real time, continuously and over a certain period of time when the eio is issued for the purpose of executing an investigative measure requiring the gathering of evidence in real time, continuously and over a  certain period of time under article 28, such as: a) the monitoring of banking or other financial operations that are being carried out through one or more specified accounts; b) the controlled deliveries on the territory of the executing state; its execution may be refused, in addition to the grounds for non-recognition and non-execution, if the execution of the investigative measure concerned would not be authorised in a similar domestic case. 3.8. covert investigations an eio may be issued under article 29 for the purpose of requesting the executing state to assist the issuing state in the conduct of investigations into crime by officers acting under covert or false identity (“covert investigations”). the issuing authority shall indicate in the eio why it considers that the covert investigation is likely to be relevant for the purpose of the criminal proceedings. the decision on the recognition and execution of an eio issued under this article shall be taken in each individual case by the competent authorities of the executing state with due regard to its national law and procedures. in addition to the grounds for non-recognition and non-execution, the executing authority may refuse to execute an eio, where: a) the execution of the covert investigation would not be authorised in a  similar domestic case; or b) it was not possible to reach an agreement on the arrangements for the covert investigations. covert investigations shall take place in accordance with the national law and procedures of the member state on the territory of which the covert investigation takes place. the right to act, to direct and to control the operation related to the covert investigation shall lie solely with the competent authorities of the executing state. the duration of the covert investigation, the detailed conditions, and the legal status of the officers concerned during covert investigations shall be agreed between the issuing state and the executing state with due regard to their national laws and procedures. 3.9. interception of telecommunications regarding interception of telecommunications with technical assistance of another member state, an eio may be issued under article 30 for the interception of 107 public governance, administration and finances law review • 2. 2018 european investigation order and the “brussels” bureaucracy telecommunications in the member state from which technical assistance is needed. where more than one member state is in a  position to provide the complete necessary technical assistance for the same interception of telecommunications, the eio shall be sent only to one of them. priority shall always be given to the member state where the subject of the interception is or will be located. an eio shall also contain the following information: a) information for the purpose of identifying the subject of the interception; b) the desired duration of the interception; and c) sufficient technical data, in particular the target identifier, to ensure that the eio can be executed. the issuing authority shall indicate in the eio the reasons why it considers the indicated investigative measure relevant for the purpose of the criminal proceedings concerned. in addition to the grounds for non-recognition or non-execution, the execution of an eio may also be refused where the investigative measure would not have been authorised in a similar domestic case. the executing state may make its consent subject to any conditions which would be observed in a similar domestic case. an eio may be executed by: a) transmitting telecommunications immediately to the issuing state; or b) intercepting, recording and subsequently transmitting the outcome of interception of telecommunications to the issuing state. the issuing authority and the executing authority shall consult each other with a  view to agreeing on whether the interception is carried out in accordance with point a) or b). when issuing an eio or during the interception, the issuing authority may, where it has a particular reason to do so, also request a transcription, decoding or decrypting of the recording subject to the agreement of the executing authority. 4. conclusion it needs to be emphasised, that the survey was conducted prior to the implementation deadline for the european investigation order. so the practitioners did not have any chance to use it in practice. from the survey it is evident that the law enforcing personnel considers one of the most important needs in the practice the effective smooth and quick cross border exchange of evidence and information. this was also the primary aim of the new coming european investigation order. as spoken above, the idea of a  european investigation order came from down (the member states) to the top (european parliament) as a result of the activity of the member states. the place of the eio within the mutual recognition programme. it explores the lessons arising from experience with mutual recognition (specifically the european arrest warrant, eaw) and the need for mutual trust. the eio will extend the mutual recognition programme to enable nearly all mutual legal assistance to be achieved through a  single, mutual recognition instrument. in doing so, it represents not 108 marek kordík, lucia kurilovská public governance, administration and finances law review • vol. 3. no. 2. only a further step in the evolution of the mutual recognition agenda, but also a break with the traditional mechanisms of mutual legal assistance. the existing way of obtaining most kinds of evidence from abroad is by using commission rogatories or letters of request.11 due to the eu with the eio, mutual recognition moves the untested application of the principle from the exchange of existing evidence to active evidence gathering. this is a  step into unchartered waters without time to acquire knowledge from the experience of the eew. the eio is a departure from the traditional paradigm of recognition of judicial decisions to requests for active participation in criminal investigations with little in the way of refusal grounds. it is also a  departure from the traditional method of mutual legal assistance. 109 public governance, administration and finances law review • 2. 2018 european investigation order and the “brussels” bureaucracy references 1 optna on counterterrorism, cepol, presented on the management board meeting in sofia on 15–16 may 2018. 3. 2 optna on counterterrorism, cepol, presented on the management board meeting in sofia on 15–16 may 2018. 2. 3 optna on counterterrorism, cepol, presented on the management board meeting in sofia on 15–16 may 2018. 2. 4 https://eur-lex.europa.eu/legal-content/en/his/?uri=celex:32014l0041 (accessed 4 april 2018). 5 optna on counterterrorism, cepol, presented on the management board meeting in sofia on 15–16 may 2018. 4. 6 https://eur-lex.europa.eu/legal-content/en/his/?uri=celex:32014l0041 (accessed 4 april 2018). 7 https://eur-lex.europa.eu/legal-content/en/his/?uri=celex:32014l0041 (accessed 4 april 2018). 8 https://eur-lex.europa.eu/legal-content/en/his/?uri=celex:32014l0041 (accessed 4 april 2018). 9 https://eur-lex.europa.eu/legal-content/en/his/?uri=celex:32014l0041 (accessed 4 april 2018). 10 https://eur-lex.europa.eu/legal-content/en/his/?uri=celex:32014l0041 (accessed 4 april 2018). 11 such processes are found in the treaties governing the present framework on mutual legal assistance: the european convention on mutual assistance in criminal matters of 1959 (the ‘1959 convention’), the eu mutual legal assistance convention of 2000 (the ‘eu mla convention’) with its 2001 protocol, and articles 48 to 53 of the schengen agreement. the move towards the use of mutual recognition instruments commenced with the framework decision (2008/978/jha) on the european evidence warrant (eew) the framework decision (2003/577/jha) on the freezing of assets. https://eur-lex.europa.eu/legal-content/en/his/?uri=celex:32014l0041 https://eur-lex.europa.eu/legal-content/en/his/?uri=celex:32014l0041 https://eur-lex.europa.eu/legal-content/en/his/?uri=celex:32014l0041 https://eur-lex.europa.eu/legal-content/en/his/?uri=celex:32014l0041 https://eur-lex.europa.eu/legal-content/en/his/?uri=celex:32014l0041 https://eur-lex.europa.eu/legal-content/en/his/?uri=celex:32014l0041 _goback _goback _goback _goback _goback articles tax administration of large taxpayers in some cee and cis countries jasna bogovac,* natalia soloveva,** michal radvan,*** jarosław marczak,**** natalia uvarova-patenko***** the participation of tax authorities in insolvency agreements piotr buława* the amendment of the religious registration law and its impact on freedom of religion in the slovak republic mária havelková* the scope of public services performed by municipal local governments in the republic of poland through budgetary establishments małgorzata ofiarska* designated income accounts in budgetary units of municipalities as a form of partially decentralised redistribution of public finance resources allocated to educational services in poland zbigniew ofiarski* the legal aspects of reducing the bureaucracy of the court administration wojciech piątek* the constitution and public administration aksana shupitskaya* case study tax inspection – unlawful interference damian czudek* european investigation order and the “brussels” bureaucracy marek kordík,* lucia kurilovská** complaint in tax administration as an instrument to ensure good administration zuzana marethová* © 2018 dialóg campus, budapest public governance, administration and finances law review vol. 3. no. 2. (2018) • 46–57. the scope of public services performed by municipal local governments in the republic of poland through budgetary establishments małgorzata ofiarska* * małgorzata ofiarska, professor of the university of szczecin, dr. hab., head of the department of local government law, faculty of law and administration, university of szczecin, poland. author of over 250 publications, including 10 books, more than 40 articles, 95 studies in joint works and other electronic publications. specialises in local government law and administrative enforcement proceedings. she is a  member of the centre of information and organization of public finances and tax law research in central and eastern europe. (e-mail: malgorzata.ofiarska@usz.edu.pl) abstract: the act of 27 august 2009 on public finance  –  which entered into force on 1 january 2010  –  and its later amendments have brought about significant changes in the scope of public services performed by the commune’s self-governments through budgetary establishments. the key change has been the limitation of these services, which triggered the necessity to implement new organizational methods and new financing solutions for public services hitherto carried out by budgetary establishments. local government authorities were forced to choose between three organizational forms and three different ways of financing of the said services. at present, public services in a commune can be carried out through: a budgetary unit (a form most closely linked to the commune’s budget), a  budgetary establishment (a  form indirectly linked to the commune’s budget) and a municipal corporation (a form that in fact assumes full commercialization of public services). the aim of the paper is to analyse and evaluate relevant legislation, judicial practice of courts and regional accounting chambers, as well as the doctrine of local government law and public finance law regarding the scope of public services that can be financed through budgetary establishments. the hypothesis that the legislator’s implementation of new legal regulations since 2010 has led to implementation of more effective management methods with regard to public services and management of public finance allocated to these services was proven to be right. the legislator’s act of giving local government authorities relative freedom as to the choice of organizational and legal forms through which public services will be performed is tantamount to expecting that the authorities shall perform their tasks rationally. the leading method applied in the paper was the dogmatic and legal method, supported by the empirical and analytical method (in particular with regard to the judicial practice of courts and regional accounting chambers). keywords: commune; budgetary establishments; public services; commune’s budget; access to public services 1. introduction january 2010, i.e. since the provisions of the public finance act of august 27, 2009 came into force,1 the possibility of instituting budgetary establishments as the organisational 10.53116/pgaflr.2018.2.4 mailto:malgorzata.ofiarska%40usz.edu.pl?subject= https://doi.org/10.53116/pgaflr.2018.2.4 47 public governance, administration and finances law review • 2. 2018 the scope of public services performed by municipal local governments… form used to implement public tasks has been significantly limited in poland. the possibility to institute state budgetary establishments was fully eliminated and the authority to create budgetary establishments in the local government area has been reduced to several types of public services (tasks). formally, budgetary establishments may be set up in all categories of local government units (hereinafter lgu), i.e. municipalities, powiats and voivodeships, however there are most likely to be established in the municipalities due to the scope of public tasks performed by the communes in poland. taking into account the provisions of article 4 section 2 of the pfa, ordering proper application of the provisions of this act regarding lgus also to the metropolitan unions and associations, the conclusions made herein should also refer to the municipal unions and powiatmunicipality unions forming budgetary establishments. the aim of this paper is to analyse and evaluate the normative material, the decisions taken by courts and regional chambers of audit, as well as the views of the legal scholars, local government law and public finance law regarding the subject–object scope of the authority of the commune to create municipal budgetary establishments. this authority should be understood in a  broad manner, i.e. its scope should include not only founding a  budgetary establishment from the very beginning, but also transforming the other organisational unit into a  budgetary establishment and combining at least two budgetary establishments into one organisational unit. the shape of this authority is determined by the scope of actions (tasks) that may be implemented using the organisational-legal form of a  municipal budgetary establishment. the verified hypothesis stated that the legislator, when introducing new legal regulations regarding the creation of budgetary establishments in 2010, determined the application of more effective public services management methods and the management of public finance resources for implementation of these services in the municipalities. the legislator is granting relative freedom to choose the organisationallegal form of implementing public services by the municipal bodies, while expecting rational actions from them. the municipalities have been granted quite extensive range of freedom, manifested in the ability to distinguish between the three forms of organisational structure and three different methods of financing public services. currently, public services in the municipality may be implemented within the framework of: budgetary unit (the form most closely related to the budget of the commune (the form indirectly related to the municipal budget) and the municipal corporation (the form assuming full commercialization of public services). the consequence of such choice is either leaving the implementation of the specific public tasks of the municipality in close relation with its budget or implementing their execution and financing in fact outside the public finance sector. in the latter case, it is often not full commercialization of public services, as its implementation may be financed from the municipal budget through granted donation or subsidies, or supported otherwise, e.g. by means of specific preference in taxation with public levies. the method based on legal theory (the dominant method) has been used in the paper, complemented with the empirical–analytical method (specifically in relation to the decisions by courts and the regional chambers of audit), as well as the comparative method regarding the evolutionary changes to the legislation made in the reviewed period. 48 małgorzata ofiarska public governance, administration and finances law review • vol. 3. no. 2. article 15 pfa expresses the essence of a  local government budgetary establishment, concluding that it is an organisational unit of the public finance sector, executing the distinguished tasks and covering the costs of its operation from the revenues. obtaining the revenues by the local government budgetary establishment means that the surplus of revenues over expenditure may occur. however, such situation does not mean the budgetary establishment carries out only the profit-making economic activities and not the operations in the field of public utility.2 2. the scope of tasks of the municipalities specified in article 7 of the local government act and the entitlement to create municipal budgetary establishments the objective criterion, providing the normative shape to the authority of the municipality to create municipal budgetary establishments, consists in the own tasks of the municipality. specifying the limits of the authority of the municipality to create (join or transform) a municipal budgetary establishment requires the analysis of the catalogue of own funds of the municipality under article 7 of the local government act of march 8, 19903 and confronting it with the catalogue of the lgu’s own funds under article 14 of the pfa, defining the scope of operation of a local budgetary establishment. each of these catalogues is of different nature. the catalogue specified in article 7 of the lga is of open nature – as the enumeration of own tasks of the municipality was preceded with the phrase “in particular”4 – whereas the catalogue of own tasks of the lgu adopted in article 14 of the pfa (reference to municipality included) is extensive (closed). specifying the open catalogue of own tasks of the municipality in article 7 of the lga is not a coincidence. it is a consequence of the regulation contained in article 6 section 1 and 2 of the lga, from which the presumption of the competence of the municipality in the field of satisfying collective needs of the local community results. this provision states that all public issues of local significance, not reserved by law to other entities, belong to the scope of the own tasks of the municipality. unless the law provides otherwise, such matters shall be decided upon by the municipality. this presumption is supplemented by the catalogue of issues belonging to the own tasks of the municipality contained in article 7 section 1 of the lga.5 the views of the legal scholars and the case law assign different functions to the provisions of article 6 and 7 of the lga. the assumption of the competence of the municipality is an important constructional element of the principle of the independence of municipality guaranteed by the constitution.6 the institution of presumption of the competence of the municipality in the public matters of local importance and from the further provisions of the act on the local government proves that the general and abstract determination falls within the competence of the municipal council, whereas in an individual and specific manner it belongs to the competence of the commune head (mayor, city president, etc.).7 it should be explicitly stated, however, that assuming the competence of the municipality in all public matters does not constitute independent grounds for taking any action, neither it authorises the municipality to independently create any public issue of local 49 public governance, administration and finances law review • 2. 2018 the scope of public services performed by municipal local governments… importance, as pursuant to the principle of the rule of law formulated in article 7 of the constitution of the republic of poland, public authority bodies operate on the grounds and within the limits of the law.8 both article 6 and the supplementary article 7 of the lga are the norms oriented solely on the tasks, and not competence, thus cannot constitute the grounds for any sovereign act of the municipal body.9 such actions may be taken pursuant to a specific provision of a separate law. the views of the legal scholars also specify a different view that article 6 and article 7 of the lga may be, and – in many cases – are the independent and sufficient grounds for resolving public issues of local importance. different assessment of these provisions would mean depriving them of legally significant consequences and, as a result, result in their loss of meaning.10 pursuant to the other, more moderate view, the provision of article 7 section 1 of the lga, due to its general meaning (task-oriented general clause) constitutes the legal guarantee of the organisational freedom of the local government in arranging public services.11 the own tasks of a municipality have been divided into two categories, i.e. obligatory and optional. pursuant to article 7 section 2 of the lga, the separate acts specify which tasks of the municipality are mandatory. the legislator imposing an obligation on the municipality to perform a  specific public task means that the municipality cannot evade this obligation.12 the legal scholars, however, hold the view that the municipality should perform the operations obligatory in their scope of financing using all legally available funds.13 the other tasks of the municipality, which the municipality is not obliged to perform, are of optional nature. however, these tasks cannot be freely created by the municipality. the optional tasks should be objective, i.e. have a  legal basis, whereas in the absence of an entity clearly indicated in the act, the municipality may undertake their performance on the basis of a general presumption of its competence. the catalogue formulated in article 7 section 1 covers 22 types of own tasks of the municipality, covering the following : – spatial order, real estate management, environmental and nature protection and water management – municipal roads, streets, bridges, squares and road traffic organisation – water supply and pipes, sewage system, urban waste water disposal and treatment, maintenance of cleanliness and order and sanitary facilities, landfills and municipal waste disposal, supply of electricity, heat and gas – telecommunications activities – local public transport – health protection – social assistance, including care centres and institutions – support for family and foster care systems – municipal housing construction – public education – culture, including municipal libraries and other cultural institutions, as well as the protection and care of monuments – physical culture and tourism, including recreational areas and sports facilities – market places and market halls – municipal greenery and trees 50 małgorzata ofiarska public governance, administration and finances law review • vol. 3. no. 2. – municipal cemeteries – public order and public safety, as well as fire and flood protection, including the equipment and maintenance of the municipal flood-control storage facility – maintenance of the municipal public and administrative utilities and facilities – pro-family policy, including the provision of social, medical and legal care for pregnant women – supporting and disseminating the concept of local government, including creating conditions for the operation and development of auxiliary units and implementing programmes to stimulate civic participation – promotion of the municipality – cooperation and activities to the benefit of the non-governmental organisations and other public benefit entities14 (church organisational units of the religious associations having regulated relations with the state, lgu associations, social cooperatives, companies operating pursuant to the act on sports of june 25, 2010,15 not aimed at making profit) – cooperation with local and regional communities of other countries the aforementioned catalogue of the own tasks of the municipality may not be considered equal to the admissible scope of operations of the municipal budgetary establishment. neither the concept of assuming the competence of the municipality constituting a structure of the provision of article 6 of the lga, nor the open catalogue of the tasks of the municipality formulated as the municipal budgetary establishments may not lead to the conclusion that the decision-making bodies of a  municipality exercise full freedom at instituting organisational units in the form of municipal budgetary establishments. article 14 of the pfa, establishing the subjective limits of the operation of the municipal budgetary establishment constitutes an obstacle for such a conclusion. 3. the scope of tasks of the municipality specified in article 14 of the lga and the entitlement to create municipal budgetary establishments article 14 of the pfa adopts the catalogue of own tasks of the lgus, including municipalities, which may be implemented within the framework of a  municipal budgetary establishment. neither the public finance act of november 26, 1998,16 nor the public finance act of june 30, 2005 contained such a  provision.17 this means that until december 31, 2009, municipalities had been free to establish budgetary establishments in order to execute public tasks, the point of reference being a catalogue of own tasks of the municipality formulated in article 7 section 1 of the lga and other own tasks of the municipality to be implemented pursuant to the assumption of competence under article 6 of the lga. the legal status in this regard has changed significantly since the current public finance act entered into force, i.e. since 1 january 2010, as article 14 of the pfa has been in force with regard to the provisions of article 7 section 1 of the lga and article 6 of the lga has introduced restrictions on conducting activities of the municipality using 51 public governance, administration and finances law review • 2. 2018 the scope of public services performed by municipal local governments… the  organizational and legal form of the municipal budgetary institution. a  wide scope of the public tasks of the commune, shaped by the systemic, economic and political factors throughout the previous periods,18 has been significantly limited compared with the possibility to execute them using the municipal budgetary establishment. such actions have been taken as it was necessary to consolidate public finance and increase the transparency of the public finance sector, as well as limit the so-called non-budgetary organisational forms. the provision of article 14 of the pfa of 2009 has no equivalent in the previous pfa of 2005 and pfa of 1998. this is due to the adoption of a different concept concerning the creation of the budgetary establishments as the organisational and legal form of activity in the public finance sector in the current pfa. the possibility to create budgetary establishments only in the area of certain activity by the local government units has been limited. the provision of article 14 of the pfa should be considered a specific provision in relation to article 7 section 1 and article 6 of the lga, however only in the scope of the authority to create municipal budgetary establishments. if applying the conflict of laws rule lex specialis derogat legi generali (namely “the specific norm repeals the general norm”), the authority of the municipality to create municipal budgetary establishments should be analysed taking into consideration the provisions of article 14 of the pfa. this provision has extensively enumerated the own tasks of the lgu, thus formulating a closed catalogue of such tasks. it is not possible to apply the assumption of the competence of the municipality in creating the municipal budgetary establishments in order to implement own tasks not directly listed in article 14 of the pfa. it should also be emphasised that the term “own tasks” has been used in article 14 of the pfa in a  very general manner, i.e. without distinguishing them into mandatory and optional tasks. it is allowed to create the municipal budgetary establishments to implement own tasks of the municipality, both the mandatory and optional ones. the following scope of own tasks of the municipality may be performed within the municipal budgetary establishments: – housing management and the management of commercial premises – municipal roads, streets, bridges, squares and road traffic organisation – water supply and pipes, sewage system, urban waste water disposal and treatment, maintenance of cleanliness and order and sanitary facilities, landfills and municipal waste disposal, supply of electricity, heat and gas – local public transport – market places and market halls – municipal greenery and trees – physical culture and tourism, including maintenance of recreational areas and sports facilities – social assistance, vocational and social reintegration, as well as vocational and social rehabilitation of disabled persons – keeping various species of exotic and domestic animals, including, in particular, the animals in danger of extinction, in order to protect them outside their natural habitats – cemeteries 52 małgorzata ofiarska public governance, administration and finances law review • vol. 3. no. 2. the comparison of the catalogues of the own tasks of the municipality specified in article 7 section 1 of the lga and article 14 of the pfa proves that the catalogue contained in article 14 of the pfa is more narrow. this means that although certain own tasks of the municipality have been indicated in article 7 section 1 of the lga, they may not be executed by the municipal budgetary establishment. this issue concerns tasks in the field of telecommunications, public education, culture or fire and flood protection. article 14 of  the pfa sets the limits for the activities that can be executed within the municipal budgetary establishment; however, it does not ultimately define the area of activity of the municipal council with regard to the creation (transformation or merging ) such budgetary establishments. it is necessary to analyse this provision along with the provisions of article 7 of the act on municipal economy of december 20, 1996,19 stating that the activity extending the scope of public utility tasks may not be executed in the form of a municipal budgetary establishment. only the commercial companies are allowed to render commercial services. the sole representation that a  particular service has the nature of a  public utility constitutes an indispensable condition for such service to be rendered by a  municipal budgetary establishment; however, it is not a  sufficient condition. the objective limitations imposed by the legislator in article 14 of the pfa should also be taken into consideration.20 in that context, the presentation of the concept of “public utility” is of primary importance. this concept has been used, i.a. in article 9 section 4 of the lga. the public utility tasks are the own tasks of the municipality, specified in article 7 section 1 of the lga, whose aim is to meet the collective needs of the population on an ongoing and uninterrupted basis by providing universal services. this is assumed to be a legal (statutory) definition of “public utility”.21 the term “public utility” has also been used in article 1 section 2 of the mea. pursuant to this provision, municipal economy comprises in particular the public utility tasks whose aim is to meet the collective needs of the population on an ongoing and uninterrupted basis by providing universal services. the essence of the concept of “public utility” has been expressed in the same way as in the article 9 section 4 of the lga. there is no universal catalogue of the public utility tasks. it is open and subject to amendments, determined by the life cycle of the inhabitants, external conditions and the general social and economic situation which requires adaptation of the provision of services to these changes. in the circumstances of a particular case, a determination as to whether a  specific service provided fulfils the conditions of public utility should be made by reference to the distinctive features of that service, which indicate its importance to the municipal community.22 the analysis of the provisions of article 14 of the pfa and article 7 of the mea indicates that the municipal budgetary establishment may only render services which jointly fulfil two criteria: constituting public utility services and fitting the catalogue of tasks specified in article 14 of the pfa.23 however, the existence of these premises does not mean that the municipality is obliged to create a municipal budgetary establishment in order to perform its own specific tasks. the legislator leaves the municipality with a  relatively wide choice of organizational and legal forms for implementation of its own tasks. a municipality may perform public utility tasks through organizational units the municipality has established for this purpose, in particular through the municipal budgetary 53 public governance, administration and finances law review • 2. 2018 the scope of public services performed by municipal local governments… establishments or commercial law companies or through other entities not related to the municipality, natural persons, legal persons or organizational units without legal personality, which are organizationally not related to the commune  –  pursuant to the contracts for performance of tasks concluded with them.24 the use of budgetary facilities by the municipalities is justified especially in those areas where the revenues from their activities cover to a large extent the costs of such activities, although at the same time they cannot be maximised due to social reasons and must be supplemented with subsidies from the municipal budget. apart from the sphere of public utility, the choice of the organisational and legal form for the performance of own tasks of the municipality is significantly limited, as the possibility of creating a municipal budgetary establishment to perform tasks beyond the sphere of public utility has been excluded.25 general specification of the own tasks of the municipality may be the source of various doubts as to its interpretation, in particular whether the specified task of the municipality lies within the scope of public utility or exceeds it. this raises the question of whether its implementation may be delegated to the municipal budgetary establishment or should be executed by a  municipal company or other entity. the example of such doubt has been setting the boundaries of the own task of the municipality consisting in maintaining housing management and managing commercial premises by the municipal budgetary establishment. it has been assumed that the task of maintaining housing associations by a municipal budgetary establishment, even when the commune owns a part of the premises in a  given housing association, goes beyond the scope of public utility. the volume of the share of municipal ownership in the whole housing community remains irrelevant.26 delegated administration, including the complex handling of the housing associations, may not be the subject of activity of the municipal establishment as it does not constitute public utility. rendering the services of property administration delegated by other entities (property owners’ or tenants’ associations) is not a  public utility and does not meet the collective needs of the population on an ongoing and uninterrupted basis by providing universal services. it only meets the needs of the owners of other properties or the owners of properties constituting a  given housing association, who ordered the execution of a  commercial service. such activity does not serve the purpose of executing own tasks by the municipality. the scope of these tasks does not include handling the real property belonging to other people, including the provision of management or administration services to separate entities, such as – pursuant to the provisions of law – housing associations, regardless whether the municipality is one of the members of the housing community.27 4. execution of public tasks by the municipal budgetary establishment pursuant to the provisions of separate acts the provisions of article 14 of the pfa and article 7 of the mea do not comprehensively specify the powers of the municipality to perform specific public tasks with the use of an organisational and legal form of a municipal budgetary establishment. this does not mean, however, that the separate acts broaden the closed catalogue of the own tasks of 54 małgorzata ofiarska public governance, administration and finances law review • vol. 3. no. 2. a  municipality, formulated in article 14 of the pfa, which may be executed within the framework of a  municipal budgetary establishment. the provisions of separate acts are of a  precise and defining nature in relation to the general and framework regulations contained in article 14 of the pfa. this request may be justified on the basis of the selected examples of such separate rules. pursuant to article 19 section 2 of the act on public collective transport of december 16, 201028 the municipality, as the organiser of public collective transport (i.e. the entity providing the functioning of the public collective transport in the given area), may carry out transportation within the framework of the public collective transport in the form of a  municipal budgetary establishment. the essence of the public collective transport is the public carriage of passengers by regular services, operated at specified intervals and along specified routes, communication lines or networks. pursuant to this provision, the organiser may independently carry out transportation within the framework of the public collective transport only in the form of a  municipal budgetary establishment.29 in such case, the municipal budgetary establishment is the operator of the public collective transport, i.e. the entity authorised to operate business activity consisting in the carriage of passengers on certain transport lines, pursuant to an internal act laying down the conditions governing the performance of these services. the municipality, as the organiser of the public collective transport, is obliged to present information, by january 31 each year, to the competent marshal of the voivodeship regarding the public collective transport, specifically the number of transport lines on which the public collective transport is executed by the operator being a municipal budgetary establishment. pursuant to article 3, section 2, point 1 of the act of june 13 2003 on social employment,30 the centre of social integration may be created by the lgus, including a municipality, in the form of a municipal budgetary unit or a municipal budgetary establishment. the centre of social integration provides professional and social reintegration through the following services: – training the skills that enable people to fulfil social roles and achieve social positions accessible to those who are not socially excluded – acquisition of professional skills and apprenticeship, retraining or upgrading professional qualifications – learning to plan life and meet needs through own efforts, in particular by being able to earn own income through employment or business activity – learning the skills of rational management of the cash held public tasks specified in the act on the public collective transport and the act on social employment which may be carried out by the municipality within the framework of a municipal budgetary establishment are not other tasks compared with the tasks specified in article 14 of the pfa. public collective transport is included in the task specified as “local public transport” in article 14 point 4 of the pfa, while running a social integration centre is included in the task indicated in article 14 point 7a of the pfa as professional and social reintegration. 55 public governance, administration and finances law review • 2. 2018 the scope of public services performed by municipal local governments… 5. final conclusions when the public finance act of august 27, 2009 came into force in poland, there have been ca. 2,900 local budgetary establishments (mostly municipal budgetary establishments) which employed ca. 82,000 people.31 as of december 31, 2012, only 796 local budgetary establishments were operating,32 while there were 779 local budgetary establishments on december 31 201533 (mostly municipal budgetary establishments). the obligation to present such information was repealed on january 1, 2017, due to repealing article 69 of the act of 30 august 1996 on commercialisation and certain authorisations of employees,34 which obliged the head of the commune (the mayor or the president of a  city), the starost, the voivodeship marshal and the executive body of the union of lgus to submit to the minister competent for the treasury the information concerning the transformation and privatisation of municipal property, including the list of organisational units. various own tasks of the municipalities listed in article 14 of the pfa are executed within the framework of the municipal budgetary establishment. currently, the following establishments are created: social inclusion centres, urban sports and recreation centres, tourism and sports and recreation centres, municipal economy centres, municipal utilities, waste management centres, urban markets, urban cleaning centres, housing management centres, municipal building administrations, road and green maintenance centres, municipal equipment operation centres, water and waste water plants. this means that the municipalities use the form of municipal budgetary establishment to execute the public tasks related to satisfying the basic needs of the community. selecting the organisational-legal form of municipal budgetary establishment, pursuant to article 4 of the mea, falls within the exclusive competence of the municipal council. it has been proven that this choice is not free, since certain forms of regulation in this scope have been introduced by article 14 of the pfa and article 7 of the mea. the consequence of choosing the form of a municipal budgetary establishment is the possibility for the municipal council to set prices and fees or the method of setting prices and fees for municipal services of public utility nature and for the use of the municipal public utility facilities and equipment. under the aforementioned statutory provision, the municipal council may grant this entitlement to the executive body of the municipality (commune head, mayor, city president). the prices established (directly or by indicating the manner of setting these prices) in the resolutions, are binding for both the entities rendering municipal services of public utilities, as well as for the recipients of these services, thus they are universally binding. similarly, the fees for the use of the municipal public facilities and equipment are universally binding – they are binding on the entities which make the facilities and equipment available, as well as on all the users of administrative units.35 56 małgorzata ofiarska public governance, administration and finances law review • vol. 3. no. 2. references 1 dz. u. journal of laws of 2017 item 2077 as amended, hereinafter pfa. 2 decision by the voivodeship administrative court in wrocław: iii sa/wr 110/11. 3 dz. u. journal of laws of 2018 item 994 as amended, hereinafter lga. 4 decision of the supreme court: v cz 49/11. 5 decision of the voivodeship administrative court in gliwice: i sa/gi 330/10). 6 maria jastrzębska, fakultatywne zadania własne gminy w świetle obowiązujących regulacji prawnych [optional own tasks of the municipality in the light of the binding legal regulations], 39, in municipal finance, no. 1–2 (2011). 7 cezary kociński, the presumption norms in the local government law, part 2, 13, the local government, no. 5 (2007). 8 tomasz moll, zakres działania i zadania gminy [the scope of activity and tasks of the municipality], 130, in administracja, [administration] no. 3 (2007). 9 decision of the voivodeship administrative court in poznań: iv sa/po 507/14. 10 tomasz bąkowski, w nawiązaniu do dyskusji o zakresie samodzielności gminy w kontekście przepisów art. 6 i 7 ustawy o samorządzie gminnym [with reference to the discussion on the scope of the municipality’s independence in the context of the provisions of articles 6 and 7 of the act on local self-government], 479, in gdańskie studia prawnicze, [gdańsk legal studies] no. 1 (2011). 11 michał kulesza, gospodarka komunalna  –  podstawy i mechanizmy prawne [municipal economy  –  legal basis and mechanisms], 9, in samorząd terytorialny, [local government] no. 7–8 (2012). 12 decision of the voivodeship administrative court in cracow: iii sa/wr 710/09. 13 andrzej borodo, problematyka legalności wydatków budżetowych samorządu i podstaw prawnych działalności gospodarczej gmin, powiatów i województw [the issue of legality of the local government budget expenditures and the legal basis of economic activity of the communes, powiats and voivodeships], 32, in finanse komunalne, [municipal services] no. 1–2 (2011). 14 act of april 24, 2003 on public benefit activities and volunteer work, dz. u. journal of laws of 2018, item 450 as amended. 15 dz. u. journal of laws of 2017, item 1463 as amended. 16 dz. u. journal of laws of 2003 no. 15, item 148 as amended. 17 dz. u. journal of laws of 2005 no. 249, item 2104 as amended. 18 małgorzata ofiarska, formy publicznoprawne współdziałania jednostek samorządu terytorialnego [public forms of cooperation between local government units], 57 (warszawa, c.h. beck, 2008). 19 dz. u. journal of laws of 2017 item 827, hereinafter mea (municipal economy act). 20 supervising authority’s resolution by lubuskie voivode: nk.i.4131.169.2011.sdud. 21 supervising authority’s resolution by mazowieckie voivode: lex.s.0911/30/09. 22 decision of the supreme court: iii czp 22/11. 23 supervising authority’s resolution by warmińsko-mazurskie voivode: pn.4131.16.2016. 24 cezary kociński, zlecanie podmiotom usług publicznych w zakresie gospodarki odpadami komunalnymi [delegating public services in the field of municipal waste management], 23, in nowe zeszyty samorządowe, [new local governance bulletin] no. 2 (2015). 25 marcin ciepiela, formy komunalnej działalności gospodarczej [forms of the municipal business activity], 23, in przegląd ustawodawstwa gospodarczego, [economic legislation review] no. 6 (2001). 26 supervising authority’s resolution by podlaskie voivode: ii.4131.6.2014.kk. 27 decision of the voivodeship administrative court in gliwice: i sa/gi 391/17). 28 dz. u. journal of laws of 2017, item 2136 as amended. 29 statement of reasons for the decision of the voivodeship administrative court in wrocław: iii sa/wr 314/17. 30 dz. u. journal of laws of 2016, item 1828 as amended. 57 public governance, administration and finances law review • 2. 2018 the scope of public services performed by municipal local governments… 31 justification of the draft public finance act of august 27, 2009 sejm paper no. 1181, 6th term in office of the sejm. 32 analysis department of the ministry of treasury, information on privatisation and ownership transformation for 2012, warsaw, 2013, 7. 33 analysis department of the ministry of treasury, information on privatisation and ownership transformation for 2015, warsaw, 2016, 4. 34 dz. u. journal of laws of 2017, item 1055 as amended. 35 jakub wilk, ustawa o gospodarce komunalnej – ustalenie wysokości cen i opłat albo sposobu ustalania cen i opłat za usługi komunalne o charakterze użyteczności publicznej oraz za korzystanie z obiektów i urządzeń użyteczności publicznej jednostek samorządu terytorialnego [act on municipal economy – determination of prices and fees or the manner of setting prices and fees for municipal services of public utility character and for the use of public utility facilities and equipment of local government units], 79, in nowe zeszyty samorządowe, [new local governance bulletin] no. 6 (2013). _goback _goback _goback _goback _goback articles tax administration of large taxpayers in some cee and cis countries jasna bogovac,* natalia soloveva,** michal radvan,*** jarosław marczak,**** natalia uvarova-patenko***** the participation of tax authorities in insolvency agreements piotr buława* the amendment of the religious registration law and its impact on freedom of religion in the slovak republic mária havelková* the scope of public services performed by municipal local governments in the republic of poland through budgetary establishments małgorzata ofiarska* designated income accounts in budgetary units of municipalities as a form of partially decentralised redistribution of public finance resources allocated to educational services in poland zbigniew ofiarski* the legal aspects of reducing the bureaucracy of the court administration wojciech piątek* the constitution and public administration aksana shupitskaya* case study tax inspection – unlawful interference damian czudek* european investigation order and the “brussels” bureaucracy marek kordík,* lucia kurilovská** complaint in tax administration as an instrument to ensure good administration zuzana marethová* © 2018 dialóg campus, budapest public governance, administration and finances law review vol. 3. no. 2. (2018) • 70–80. the legal aspects of reducing the bureaucracy of the court administration wojciech piątek* * wojciech piątek, dr. hab., professor at the adam mickiewicz university in poznań, head of department of the administrative and judicial administrative procedure. (e-mail: wojciech. piatek@amu.edu.pl) abstract: the article deals with questions of the bureaucratic organisation of courts, or in other words, how the court administration can affect, or is able to affect judicial autonomy, professionalism, the court’s decision making and overall the effectiveness of court functioning. the purpose of this paper is to analyse legal means of reducing the court’s bureaucracy. keywords: court administration; administrative supervision; judicial autonomy; administrative law 1. introduction nowadays we expect from public administration a  high level of efficiency and professionalism.1 the right to a  fair and objective hearing is an element of the guarantee which creates a  standard of “good administration”.2 public authority should determine a  dispute not from a  domineering position towards private entities, but above all using conciliation methods. an administrative authority should be a partner for a private entity and not an opponent. an acceptable model of bureaucracy is based on a dialogue between parties of a dispute and finding a possible solution for all of them. therefore, a significant attention is paid to explanations of administrative decisions, which should be not only understandable, but also convincing for individuals. the above-mentioned expectations are addressed also to court authorities and their administration. opinions about courts and their activities are formulated not only on the basis of issued judgments but also on personal contacts with the court staff. though the  lack of the court’s action or an excessive length of proceedings is frequently caused by parties of a dispute,3 expectations towards quick settlement of a case are currently becoming more intensive. a  significant role is played by general rules in which courts are in contact with society.4 this tendency is clearly seen from the court perspective, where time limits in proceedings are under strict control and explorations in various statistics.5 contemporary judges are evaluated not only from a content-related perspective, lawfully issued judgments, but also from effectively undertaken procedural activities. the purpose of this paper is to analyse legal means of reducing the court’s bureaucracy, understood from a negative side, as a phenomenon which limits the court’s efficiency and professionalism.6 the term “bureaucracy” is derived from the french language and means a  centralised organisation system in which the authority is associated with the office.7 in some explanations it is understood as a  separate entity from the citizens state power, or 10.53116/pgaflr.2018.2.6 mailto:wojciech.piatek%40amu.edu.pl?subject= mailto:wojciech.piatek%40amu.edu.pl?subject= https://doi.org/10.53116/pgaflr.2018.2.6 71 public governance, administration and finances law review • 2. 2018 the legal aspects of reducing the bureaucracy of the court administration even as officials making harmful decisions for society8 or even soulless adherence to regulations in dealing with official matters.9 the reasons for such understanding of “bureaucracy” have both a structural and procedural nature. creating a proper shape of these two regulation spheres can lead to the reduction of the negatively perceived bureaucracy. however, exercising of these tools must respect the nature of court administration which is linked with structural courts independence and judicial autonomy. striving to achieve a  high level of efficiency in the administration of justice cannot violate those requirements. therefore, in the first part of this paper a special attention will be paid to the nature of court administration. these reflections make it possible to analyse legitimate ways of reducing bureaucracy in court administration in the second and third part of this paper. 2. the nature of court administration taking into consideration the nature of court administration, it is necessary to point out the subject “administration”, which has a central meaning for the science of administrative law. following the achievements of the german science, administration is defined as a state activity that is neither legislation nor the justice system.10 in addition to the negative definition, which is the starting point for consideration of differences between three state authorities, numerous positive definitions of administration are formulated, which emphasise the characteristic position and structure of the administering entities,11 the participation of the human factor12 and the objectives of the administration’s activities.13 public administration is defined as all organisational and executive activities aimed at realising the common good by various entities, including not necessarily state-owned ones, related to the basis and form of activity under the statue, remaining under social control.14 court administration on the one hand should be treated as a  part of a  whole public administration, which creates a  huge organism necessary to perform obligations by all kinds of public power, legislative, executive and judicial. administration in courts performs service functions for effective functioning of these public institutions. the duties of court administration include all tasks to ensure the proper functioning of the courts, both from the personal and material side. these duties are: matters of employment of judges and court clerks, all employee and training matters, maintenance of court buildings and providing substantive support in adjudicating.15 court administration is financed by the whole state. therefore, two other branches of state power have the right to know where are the positive and negative sides of their activity in order to solve problems and avoid negative tendencies in the future. the above-mentioned activities of the court administration play a significant role also for providing legal protection for the citizens, who turn to court clerks with requests for information about pending cases or even advices on how to solve their problems and technical issues connected with the court’s functioning. personal contact with court employees could have a  crucial importance in making opinions about the level of court professionalism. an engagement in the work of court clerks, their knowledge and experience, may deeply affect the efficiency of court activity. 72 wojciech piątek public governance, administration and finances law review • vol. 3. no. 2. on the other hand, this administration is created to perform special obligations joined with tasks of a  judicial power. the court administration also plays a  crucial role in the service for judges and their judicial function. court administrations and judges create a  separate judicial power which is responsible for solving disputes between individuals. a  lack of one of these spheres, also judicial and administrative, will make court activity impossible. courts are appointed to solve disputes between private entities or state on the basis of facts and binding legal regulation.16 court administration is not a part of public administration which belongs to the executive power. though court administration is not directly engaged in solving those disputes, its activity is linked to adjudication functions because it helps judges to be more efficient and professional. the boundary between judicial and administrative activities is difficult to stress. the whole activity of this administration is focused on solving disputes and exercising justice. without performing this function, the existence of court administration would be unnecessary. inefficiency of court administration can, in a straight way, lead to inefficiency of the whole court, and above all the judicial functions. therefore, the nature of court administration is twofold. on the one hand, it is an administrative organism, designed for special tasks. the administrative organism must be guided by professionals who ensure a  high level of efficiency and professionalism of this administration. in some cases it is necessary to engage judges in performing administrative functions because this group of well-educated and experienced clerks is the most appropriate group to perform these duties towards other judges. it is questionable to what extend the responsibility for functioning of this administration should derive from court or the executive power? this question is connected with the second nature of court administration, namely the special tasks performed by this branch of the public power. the other and more general question, which may be formulated now, is connected with a  group of competences, above all the supervision nature, which these two branches of power, especially the executive power, should be equipped with in order to make an activity of court administration effective and professional. the preliminary answer to this question is: the executive power should affect the judiciary only in exceptional cases, also in the area of court administration, when the judiciary fails to cope with maintaining the high level of effectiveness of judicial protection. any interference by the executive with the operation of the judiciary threatens the independence of judges and separateness of the court system from other authorities. 3. two different models of supervision over court administration in poland there are two ways of performing supervision over the court administration. the first pattern is typical for ordinary courts, where a  significant influence over the court administration is assigned to the minister of justice. in this pattern the responsibility for functioning this administration is taken over by an authority which is a  part of the executive power. the second model is typical for administrative courts which create 73 public governance, administration and finances law review • 2. 2018 the legal aspects of reducing the bureaucracy of the court administration a separate judicial branch from ordinary courts. the supervision competences are entrusted to the president of the supreme administrative court (hereinafter sac). focusing on the first model, according to article 9 of the law on the system of common courts,17 the minister of justice supervises the common courts in order to ensure appropriate technical, organisational and financial conditions (external supervision). besides the minister, each president of the common court also fulfils internal supervision over courts, ensuring the proper functioning of the internal office of the court (internal supervision).18 presidents of common courts  –  district, regional and appeal are appointed by the minister of justice.19 because of this competence, the minister of justice has a crucial influence not only on external, but also on internal supervision. additionally, in regional and in appellate courts, there are appointed managers20 of the courts who have competences in the court’s finances. their position is independent from the competences of the courts’ presidents and they are subordinated directly to the ministry of justice. the president of district, regional and appellate court may be dismissed by the minister of justice not only in case of neglecting his or her obligations but also when effectiveness of his or her activities in the field of administrative supervision or organisation of work in court is in opinion of the minister unsatisfactory.21 the minister of justice has crucial competences in the area of supervision over common courts. he assesses the efficiency of court administration and can change the president of the court if he estimates that the court could work more effectively. the other court institutions such as general assembly of judges of each court or the board of the courts can only formulate opinions to the minister, which are not binding for him in the process of appointing the president of the court. the second pattern of the supervision is typical for administrative courts, which create a separate branch of systems of judiciary in poland. all competences over court administration in this system are submitted to the president of the supreme administrative court, who exercises the hierarchical supervision over the administrative activity in this branch of courts.22 the reason for adopting this solution is a basic function of administrative courts, which perform control over the public administration. therefore, the executive power should not have any influence on a  public body that controls his or her activity.23 in this solution a responsibility for functioning of the court administration is focused only on the judicial power. the minister of justice has no competence to issue some of the orders and to create the structure of the administrative court’s administration. the president of the sac has also the power of minister competent for matters of public finance in relation to the implementation of the budget of administrative courts.24 this branch of courts has guaranteed a financial independence from the executive power. that guarantee has a crucial importance in assessing the level of court and judge independence from other state authorities. in the second model, the president of the sac performs administrative tasks towards the whole administrative judiciary. these obligations are fulfilled by special agencies inside the supreme administrative court (the chancellery of the president of the sac and the judicial decisions bureau) and by the presidents of voivodeship administrative courts who in administrative competences are subordinated to the president of the sac. the president of the sac exercises hierarchical supervision over the administrative activity of the admin74 wojciech piątek public governance, administration and finances law review • vol. 3. no. 2. istrative courts.25 he establishes the principles of clerical work in administrative courts.26 the president of the voivodeship administrative court manages the court, represents it in external relations and performs activities of judicial administration.27 the president and vice-president in the voivodeship administrative court may be removed from the office during the term of office in the event of gross dereliction of official duty.28 this condition is more strictly regulated than the similar, above-mentioned competence of the minister of justice. the president of the sac cannot remove the president of the voivodeship administrative court in case of inefficiency of the court administration. gross dereliction of the official duty must be connected with a  strong negative effect of the president’s duties. as a result, a judicial activity of the court must be seriously neglected. the second model should be treated as a  proof, that it is possible to create a  special administrative mechanism inside the judiciary. although it is not free from the disadvantages associated with a strong position of the president of the sac,29 court administration to be effective, does not need special supervision measures performed by members of other branches of state power. the effectiveness of the court administration is not strictly connected with an entity which fulfils supervisory functions, but with the engagement of court clerks and real supervision measures which make the court activity more effective. if the main supervisory competencies are located in a  member of the judicial power, it is possible to equip this entity with a stronger power, and with less threat that it is incompatible with the principle of judge independence. for this reason, the solution, which is present in the administrative court system, does not threaten the effectiveness of the administrative judiciary. it guarantees more stability and independence from other branches of state power, above all the executive power. the system of administrative courts is less addicted to political changes. the president of the sac is appointed by the president of the republic of poland from among two candidates presented by the general assembly of judges of the sac for the term of six years.30 over the past six years in poland there have been five ministers of justice. therefore, in literature the model of supervision over administrative courts is treated as a  modelled regulation in the competence sphere between the executive and judicial powers. 4. ways to reduce the court’s bureaucracy 4.1. supervision over the court’s administration the first mechanism, which could be feasible to reduce bureaucracy of court administration, is connected with supervision measures. the concept of supervision is widely recognisable in administrative law and not that well known in the judiciary. while adopting supervision measures, a  supervisor cannot only control the supervised entity but also apply measures which aim to achieve a concrete goal.31 a characteristic feature of the term “supervision” is an interference with a supervised entity, which has no choice to reject orders issued by the supervising entity. because of existing relations between these two entities, the second of them takes responsibility for functioning of the first one. 75 public governance, administration and finances law review • 2. 2018 the legal aspects of reducing the bureaucracy of the court administration the question, which should be stated at this moment, is connected with the possibility of using supervision measures developed in the science of administrative law into exploration of the judicial power. there is no doubt that supervision measures cannot interfere with the judicial independence. where is located the source of the court’s activity which must be free from internal and external influences? where are the boundaries of the supervision over court administration? the polish constitutional court approving supervision competences of the minister of justice over courts has stated that supervision over the administrative activities of courts should not include organising proceedings in concrete cases, such as appointing terms for concrete procedural activities, summoning witnesses and experts.32 this statement does not give a  concrete answer about the activity which is linked with jurisprudence and cannot be embraced by the administrative super vision. it is rather a  proof, that determination of the border between judicial and administrative functions of courts is not entirely possible. apart from the doubts connected with establishing the limits of admissibility of administrative supervision, these measures cannot interfere with the process of adjudicating. a judge must be free from pressure in solving court disputes. this requirement can be understood in a narrow and wider sense. focusing on court administration, the proper functioning of it could strengthen the level of the judge independence and make fulfilling of the jurisdictional duties easier. a judge equipped with the assistance of a secretary clerk and assistant who can help him/or her in searching jurisprudence, can solve more cases, perhaps in a  more content-related way. it does not mean, that all the judge’s connections with court administration have an impact on the judge’s independence. they are connected with the judge’s obligations and therefore, each kind of interference in this area of activity must find serious reasons. competence to perform surveillance measures should have their basis in the law. coming back to the surveillance measures over court administration, within the scope of measures over administrative activities of voivodeship administrative courts, the president of the sac may order an inspection or general inspections in the court.33 a  general inspection embraces all forms of the court activities, such as the burden of judges in relation to the influence and number of settled cases and the state of arrears, efficiency of court proceedings, including preparation of meetings, performance of proceedings, including timely preparation of justifications and performance after the decision has become final, and the level of uniformity of judgments in the court visited against the background of the case law of other administrative courts. the inspection is aimed at examining a  specific problem in the field of the functioning of a  voivodeship administrative court or its specific organisational unit, as well as examining the supervisory activities of the president, vice president and chairman of the department, as well as assessing the efficiency and timeliness of business activities performed by particular judges. among many surveillance measures over court administration in ordinary judiciary, the minister of justice performs external administrative supervision: assesses annual information on the activities of courts, determines general directions of internal administrative supervision performed by presidents of appellate courts, controls the performance of supervisory duties by the presidents of appellate courts and issues relevant regulations. 76 wojciech piątek public governance, administration and finances law review • vol. 3. no. 2. the minister of justice may turn to the president of the court of appeal in writing if he finds any deficiencies in the field of court administration, internal administrative supervision or other administrative activities and demand the removal of its consequences.34 the president of the court of appeal, to whom the attention is addressed, may submit a written objection to the minister of justice within fourteen days from the day of returning the attention. as a  result of this objection, a  dispute is passed to the national council for the  judiciary.35 attention can be combined with a  reduction of the functional additive to  the extent corresponding to the seriousness of the infringement, ranging from 15% to 50% of the allowance, for a  period from one month to six months. if the remark is set aside, the supplement is adjusted to the previous height.36 the manager of a court directs the court’s administrative activity to ensure appropriate technical, organisational and property conditions for the functioning of the court. the competences of this subject in the area of court administration are more developed in comparison with the competences of the president of the court, because they are focused on all the matters which are connected with financing. the manager of the court, who is appointed by the minister of justice37 performs all conditions which are important for the technical functioning of the court, from financial conditions for court administration employees, to the organisational aspects of their work.38 4.2. procedural ways besides the structural measures, procedural solutions could also make the functioning of court administration more effective and bureaucracy less burdensome. one of the solutions is to improve electronic communication with parties of the proceeding during a  court process. serving letters by using electronic means of communication39 makes this process between the court administration and a  party of proceeding less time consuming and bureaucratic. this method of serving official documents is much cheaper and therefore more convenient for the budget of court administration. hopefully this form of communication will become more popular in the nearest future and embrace not only serving documents, but the whole access to the courts documents during proceedings in each case. the process of serving documents during a court procedure could be burdensome for the court administration because of the large amount of parties in a  certain proceeding. the legislator should take this inconvenience into consideration and substitute the traditional model of serving documents. besides new electronic forms, there are also other possibilities, such as general announcement. this form is known for the polish legislator in special areas of administrative law.40 if this special provision was adopted in specific cases and a person who participated in an administrative proceeding has not lodged a complaint, and the outcome of the court proceeding concerns his or her legal interests, shall be a  participant in that proceeding if the person files a  request to join the proceeding before the commencement of the hearing.41 this regulation is another example of how a legislator can create regulations regarding the serving of the documents taking into consideration an 77 public governance, administration and finances law review • 2. 2018 the legal aspects of reducing the bureaucracy of the court administration engagement of a  court clerk and the necessity to inform the people who are really interested in taking part in certain proceedings. another regulation, which makes an activity of court administration more effective, are time limits regulated in law. they are addressed not only to the parties of a dispute, but some of them are binding for judges and court administration. though their expiry does not make court activities invalid, these terms have a  disciplinary significance. judges as state clerks should not violate deadlines which are addressed to them. these limits oblige judges and court clerks to more intensive and effective activity, especially when in the contact with parties of the proceeding. individuals, who know these terms, can expect an active behaviour from the court’s side and plan their own activity in the future. an example of this kind of terms is connected with the obligation of a  judge to prepare a  written explanation of an issued judgment. according to the regulation of proceedings before administrative courts,42 the judge is obliged to prepare written reasons of the issued judgment within fourteen days from the day of filing the request. in a complicated case, the president of the court may extend the time limit for a  fixed period of time but not longer than thirty days.43 though this term has only a disciplinary nature, in practice it is treated seriously, because of the negative consequences for the judge and court administration connected with supervision measures performed by the president of the sac. these are also restrictive for the judge during applying for a  better position in a higher court. violation of the deadline may also lead to disciplinary proceedings. another tool, which is convenient for reducing bureaucracy, is connected with the organisation of public trials. a  general rule in this area is that a  court may adjourn the proceedings before administrative courts only for a good clause, regardless of a concurrent motion of the parties.44 the trial shall be adjourned only in two cases. firstly, if the court has found impropriety in notification of either party or if absence of the party or its agent has been caused by extraordinary circumstances or other impediments known to the court which may not be overcome, unless the other party or its agent seeks the hearing of the case in their absence.45 secondly, if the court has decided to notify of the pending court proceedings those persons which have not yet participated in the case in the capacity of a party.46 besides these circumstances, the law on proceedings before administrative courts regulates premises when the proceedings shall be suspended.47 upon a concurrent motion of the parties the court may, but not shall suspend the proceedings. one of the basic principles of the proceeding before administrative courts is the principle of the speed in the proceeding. it means that an administrative court should undertake actions aimed at quick settlement of the case and should try to decide it at the first meeting.48 a  well-organised conduct of the proceeding is conductive to limitation of the bureaucracy of the proceeding and evolution of a positive image of the system of administrative justice. 5. conclusions court administration from a  subjective point of view is a  part of the whole public administration. it should be organised in a  way, which will correspond with current expectations formulated in modern societies. administration should be in a dialogue with 78 wojciech piątek public governance, administration and finances law review • vol. 3. no. 2. private entities, explaining reasons for an undertaken activity, which should be foreseeable and legal. only in that way the activity of courts has a  chance to be understandable for society and can create a high level of trust in courts. special tasks of court administration do not mean that the measures, which will lead to ensuring more efficiency in its activity, could not be undertaken by the executive power. this does not mean that the executive power in exercising competencies in supervision over court administration can interfere with the judicial independence. fulfilling tasks of court administration by the court’s presidents is free from this threat and in reality is not less effective. focusing on supervision competencies in court institutions could also be an answer to a problematic distinction between judicial and non-judicial activities performed by the court administration. the sphere of judicial independence should be evaluated in a broader sense. an effective functioning of court administration can positively affect this independence. therefore, each interference in an administrative activity of courts should find serious reasons and statutory basis. supervision over court administration could also be performed by the court authorities. this solution is less controversial, especially in states with a shorter tradition of democracy and a lower level of law culture. in the process of reducing unnecessary court bureaucracy a significant role is awarded to procedural measures. court procedure can make their activity less burdensome, when high procedural instruments would be created only in the circumstances, where it is really necessary to issue a fair judgment. regulations connected with delivery of court letters and special terminations in court proceedings could reduce this bureaucracy in a  significant way. 6. summary the analysis in this paper is focused on measures which can help to reduce bureaucracy in court administration. courts are organisms of the third power of a  state. they have their own administration which helps them fulfil their obligations. bureaucracy, perceived negative as a creature who limits a court’s efficiency and professionalism could be liquidated in two ways. the first one is linked with supervision measures and the second one with procedural measures. the analysed functions play complementary rules in making court activity more effective. 79 public governance, administration and finances law review • 2. 2018 the legal aspects of reducing the bureaucracy of the court administration references 1 efficiency and acceptance for activities taken by public administration are regarded as the main concepts for functioning of their departments. see more in jan philipp schaefer, die umgestaltung des verwaltungsrechts, 189 (tübingen, mohr siebeck, 2015). professionalism is a  tool which makes an acceptance more advanced and grounded. 2 according to article 41 paragraph 2 of the charter of fundamental rights of the european union (official journal of the eu, 2012 c 326/391), a right to good administration includes three components: firstly, the right of every person to be heard, before any individual measure which would affect him or her adversely is taken, secondly, the right of every person to have access to his or her file, while respecting the legitimate interests of confidentiality and of professional and business secrecy and thirdly, the obligation of the administration to give reasons for its decisions. 3 one of the reasons is abusing of procedural rights by individuals who take part in court proceedings. some of the parties are interested not in finishing a procedure, but in a continuation. adopting this strateg y, they will avoid connected negative consequences which can be created by a final judgment. see wojciech piątek, rozpoznanie sprawy przez sąd administracyjny bez nieuzasadnionej zwłoki, 53, in rpeis, vol. 79, no. 2 (2017). 4 this phenomenon is clearly seen in judicial reasoning. the more arguments a  judge considers in the reasoning, the more the chance of socially sensitive, problem-oriented and open-minded decision making. see marcin matczak, mátyás bencze, zdenek kühn, eu law and central european judges: administrative judiciaries in the czech republic, hungary and poland ten years after accession, 70, in michal bobek (ed.), central european judges under the european influence (oxford, hart publishing, 2015). 5 see the statistics available on a  website of the polish supreme administrative court, www.nsa.gov.pl/ sprawozdania-roczne.php (accessed 8 august 2018). 6 this negative association has accompanied this concept from the beginning of its functioning in science. see more in schaefer, supra n. 1, at 139–140. 7 antonina kłoskowska, biurokracja, 67, in  encyklopedia socjologii (t. i. warszawa, oficyna naukowa, 1998).  according to this explanation, bureaucracy comes from two french words, bureau  –  office and kratos –authority. 8 władysław kopaliński, słownik wyrazów obcych i zwrotów obcojęzycznych, 130 (warszawa, oficyna wydawnicza rytm, 1975). 9 mirosław bańko (ed.), wielki słownik wyrazów obcych, 163 (warszawa, wydawnictwo naukowe pwn, 2003); elżbieta sobol (ed.), słownik wyrazów obcych, 131 (warszawa, wydawnictwo naukowe pwn, 1997). 10 otto mayer, deutsches verwaltungsrecht, band i, 7 (leipzig, duncker und humblot, 1895). 11 zygmunt rybicki, pojęcie i zakres administracji państwowej, 10–11, in zygmunt rybicki, stanisław piątek, zarys prawa administracyjnego i nauki administracji (warszawa, oficyna wydawnicza rytm, 1984); jan boć (ed.), prawo administracyjne, 9 (wrocław, wydawnictwo kolonia limited, 1994). 12 maurycy jaroszyński, przedmiot i zakres prawa administracyjnego, 33, in maurycy jaroszyński, marian zimmermann, wacław brzeziński, polskie prawo administracyjne. część ogólna (warszawa, oficyna wydawnicza rytm, 1956). 13 particularly zbigniew leoński pointed out that each administration affects people and social relations. see zbigniew leoński, zarys prawa administracyjnego, 23 (warszawa, wydawnictwo naukowe pwn, 2004). the purposeful nature of the administration’s activities, including the manifestation of its own initiative and imaginations, is strongly emphasised by ochendowski, izdebski, kulesza and wyrzykowski. see eugeniusz ochendowski, prawo administracyjne. część ogólna, 23–24 (toruń, comer, 2001); hubert izdebski, michał kulesza, administracja publiczna. zagadnienia ogólne, 79 (warszawa, liber, 1999). 14 zygmunt niewiadomski, pojęcie administracji publicznej, 58, in roman hauser, zygmunt niewiadomski, andrzej wróbel (eds.), system prawa administracyjnego, t. 1 (warszawa, c. h. beck, 2010). 15 fabian wittreck, die verwaltung der dritten gewalt, 16–17 (tübingen, mohr siebeck, 2006). https://doi.org/10.14746/rpeis.2017.79.2.5 http://www.nsa.gov.pl/sprawozdania-roczne.php http://www.nsa.gov.pl/sprawozdania-roczne.php https://doi.org/10.14746/rpeis.2017.79.2.5 80 wojciech piątek public governance, administration and finances law review • vol. 3. no. 2. 16 stanisław włodyka, ustrój organów ochrony prawnej, 48–49 (warszawa, pwn, 1975). 17 the law on the system of common courts from 27 july 2001, journal of law, no. 23 (2018) as amended, hereinafter lsc. 18 article 9a paragraph 1 lsc. 19 article 23–25 lsc. 20 according to article 32 paragraph 1 lsc, a director is appointed by the minister of justice. 21 article 27 paragraph 1 lsc. 22 article 12 of the act of 25 july 2002, law on the system of administrative courts, journal of law, no. 2188 (2017) as amended, hereinafter lsa. 23 wojciech piątek, andrzej skoczylas, geneza, rozwój i model sądownictwa administracyjnego w polsce, 69, in roman hauser, zygmunt niewiadomski, andrzej wróbel (eds.), system prawa administracyjnego, tom 10. sądowa kontrola administracji publicznej (warszawa, c. h. beck, 2016). 24 article 14 § 2 lsa. 25 article 12 lsa. 26 article 11 lsa. 27 article 20 § 1 lsa. 28 article 21a § 1 lsa. 29 according to kosař, the independence of the judiciary and the independence of individual judges are two different things. when the competences of presidents are too strong, judges may become dependent on them. see david kosař, politics of judicial independence and judicial accountability in czechia: bargaining in the shadow of the law between court presidents and the ministry of justice, 98, in european constitutional law review, vol. 13, no. 1 (2017). 30 article 44 § 1 lsa. 31 jan zimmermann, prawo administracyjne, 234–235 (warszawa, wolters kluwer, 2018). 32 judgment of the constitutional court of the republic of poland from 15 january 2009, k 45/07, otk-a 2009/1/3. 33 article 22 § 2 of the act of 25 july 2002 lsa. 34 article 37ga paragraph 1 lsc. 35 article 37ga paragraph 2–3 lsc. 36 article 37ga paragraph 4 lsc. 37 article 32 paragraph 1 lsc. 38 article 31a paragraph 1 lsc. 39 see article 74a § 1 the act of 30 august 2002, law on proceedings before administrative courts, journal of law, no. 1302 (2018) as amended, hereinafter lpac. 40 in case of real estate with an unsettled legal status, if within 2 months there are no persons who prove that they are entitled to property rights to the real estate, the decision on expropriation is subject to a  public announcement. see article 118a § 2 of the act on real estate management. 41 article 33 § 1a the act of 30 august 2002 lpac. 42 article 141 § 2 the act of 30 august 2002 lpac. 43 article 141 paragraph 2a the act of 30 august 2002 lpac. 44 article 99 the act of 30 august 2002 lpac. 45 article 109 the act of 30 august 2002 lpac. 46 article 110 the act of 30 august 2002 lpac. 47 article 123–126 the act of 30 august 2002 lpac. 48 article 7 the act of 30 august 2002 lpac. https://doi.org/10.1017/s1574019616000419 https://doi.org/10.1017/s1574019616000419 _goback _goback _goback _goback _goback articles tax administration of large taxpayers in some cee and cis countries jasna bogovac,* natalia soloveva,** michal radvan,*** jarosław marczak,**** natalia uvarova-patenko***** the participation of tax authorities in insolvency agreements piotr buława* the amendment of the religious registration law and its impact on freedom of religion in the slovak republic mária havelková* the scope of public services performed by municipal local governments in the republic of poland through budgetary establishments małgorzata ofiarska* designated income accounts in budgetary units of municipalities as a form of partially decentralised redistribution of public finance resources allocated to educational services in poland zbigniew ofiarski* the legal aspects of reducing the bureaucracy of the court administration wojciech piątek* the constitution and public administration aksana shupitskaya* case study tax inspection – unlawful interference damian czudek* european investigation order and the “brussels” bureaucracy marek kordík,* lucia kurilovská** complaint in tax administration as an instrument to ensure good administration zuzana marethová* public governance, administration and finances law review vol. 7. no. 1. (2022) • 5–20 . © the author 2022 doi: 10 .53116/pgaflr .2022 .1 .1 implications of russia’s war in ukraine for belarus and its society: what exactly is written in the eu documents? kiryl kascian*¤ * research fellow, research group of global politics, general jonas žemaitis military academy of lithuania, e-mail: zibens@gmail .com abstract: this article provides an assessment of the relevant eu documents pertinent to the restrictive measures against lukashenka’s regime after the 2020 fraudulent presidential elections in belarus and since the beginning of 2022 russia’s aggression against ukraine . the text identifies relevant concepts and provides their contextual analysis vis-à-vis their linkage with belarus in general, its society and lukashenka’s regime . the article reveals that belarus did not become a  priority of the eu and its pre-war critical engagement policy failed to contribute to the development of a  unified eu-wide vocabulary addressing the belarusian case . with the start of the war, it  was internationalised and placed within a  binarity “victim of aggression – (co-) aggressor” with little evidence of an unequivocal shift towards a primary focus on the contextual interpretation of the domestic developments in belarus . keywords: belarus, war in ukraine, eu sanctions, illegitimate regime, eu eastern neighbourhood 1. introduction on 24 february 2022, the political realities in a wider europe changed dramatically . in different ways, russia’s war against ukraine has affected other countries . belarus was one of them . since the beginning of the war, belarus’s territory was used by russia’s military troops as one of the bases of their operations . in turn, there has been no evidence of the direct involvement of the belarusian army in this war . at the same time, the involvement of belarus in this war resulted in a  strong condemnation and restrictive measures towards this country from the european union . specifically, in its conclusions of 24 february 2022, the european council “strongly condemn[ed] the involvement of belarus in this aggression against ukraine and call[ed] on it to refrain from such action and to abide by its international obligations” .1 issued on the same day, the declaration 1 european council conclusions on russia’s unprovoked and unjustified military aggression against ukraine, euco 18/22. 24-02-2022 (https://bit.ly/3rmatbx). https://doi.org/10.53116/pgaflr.2022.1.1 https://orcid.org/0000-0002-1777-5895 mailto:zibens%40gmail.com?subject= https://bit.ly/3rmatbx 6 kiryl kascian public governance, administration and finances law review • vol. 7. no. 1.  by the high representative on behalf of the european union on the invasion of ukraine by armed forces of the russian federation contained very similar wording about belarus .2 subsequently, on 2 march 2022, the eu introduced restrictive measures against several high-level officials of lukashenka’s regime .3 thus, the eu recognised belarus as a participant in the russian military aggression against ukraine through allowing russia to fire ballistic missiles from belarus into ukraine, enabling transportation of russian military personnel and heavy weapons, tanks, and military transporters in belarus (road and railway transportation) to ukraine, allowing russian military aircraft to fly over belarusian airspace into ukraine, providing refuelling points in belarus for russian military aircraft engaged in activities against ukraine, and storing russian weapons and military equipment in belarus .4 later, on 9 march, 8 april and 3 june 2022,5 the eu adopted further restrictive measures affecting belarus’s businesses and financial sector . this trend toward sanctions became even more evident at the level of some eu member states . for instance, czechia interpreted the events in ukraine as “a russian and belarusian aggression”6 and introduced a very restrictive approach towards issuing visas for belarusian citizens .7 based on the case of belarus under lukashenka’s regime during russia’s aggression in ukraine, this text seeks to answer two interrelated questions . the first one is to what 2 ukraine: declaration by the high representative on behalf of the european union on the invasion of ukraine by armed forces of the russian federation. press release, 24 february 2022 (https://bit.ly/3riwweb). 3 council implementing regulation (eu) 2022/353 of 2 march 2022 implementing regulation (eu) no 269/2014 concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of ukraine (https://eur-lex.europa.eu/eli/reg_impl/2022/353/oj); council decision (cfsp) 2022/354 of 2 march 2022 amending decision 2014/145/cfsp concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of ukraine (https://eurlex.europa.eu/eli/dec/2022/354/oj). 4 ibid. 5 council regulation (eu) 2022/398 of 9 march 2022 amending regulation (ec) no 765/2006 concerning restrictive measures in view of the situation in belarus and the involvement of belarus in the russian aggression against ukraine (http://data.europa.eu/eli/reg/2022/398/oj); council decision (cfsp) 2022/399 of 9 march 2022 amending decision 2012/642/cfsp concerning restrictive measures in view of the situation in belarus and the involvement of belarus in the russian aggression against ukraine (http://data.europa.eu/eli/ dec/2022/399/oj); council regulation (eu) 2022/577 of 8 april 2022 amending regulation (ec) no 765/2006 concerning restrictive measures in view of the situation in belarus and the involvement of belarus in the russian aggression against ukraine (https://eur-lex.europa.eu/eli/reg/2022/577/oj); council decision (cfsp) 2022/579 of 8 april 2022 amending decision 2012/642/cfsp concerning restrictive measures in view of the situation in belarus and the involvement of belarus in the russian aggression against ukraine (https://eurlex.europa.eu/eli/dec/2022/579/oj); council regulation (eu) 2022/877 of 3 june 2022 amending regulation (ec) no 765/2006 concerning restrictive measures in view of the situation in belarus and the involvement of belarus in the russian aggression against ukraine (http://data.europa.eu/eli/reg/2022/877/oj); council implementing regulation (eu) 2022/876 of 3 june 2022 implementing article 8a(1) of regulation (ec) no 765/2006 concerning restrictive measures in view of the situation in belarus and the involvement of belarus in the russian aggression against ukraine (http://data.europa.eu/eli/reg_impl/2022/876/oj). 6 usnesení vlády české republiky ze dne 30. března 2022 č. 260 k přípravě sankčních opatření vlády české republiky v reakci na ruskou a běloruskou agresi na ukrajině [resolution of the government of the czech republic no. 260 of 30 march 2022 on the preparation of sanction measures of the government of the czech republic in response to the russian and belarusian aggression in ukraine] (https://apps.odok.cz/attachment/-/down/ihoacd98e6w3). 7 usnesení vlády české republiky ze dne 30. března 2022 č. 254 o přijetí krizového opatření [resolution of the government of the czech republic no. 254 of 30 march 2022 on the adoption of a crisis measure] (https://apps. odok.cz/attachment/-/down/ihoacd98drey). https://bit.ly/3riwweb https://eur-lex.europa.eu/eli/reg_impl/2022/353/oj https://eur-lex.europa.eu/eli/dec/2022/354/oj https://eur-lex.europa.eu/eli/dec/2022/354/oj http://data.europa.eu/eli/reg/2022/398/oj http://data.europa.eu/eli/dec/2022/399/oj http://data.europa.eu/eli/dec/2022/399/oj https://eur-lex.europa.eu/eli/reg/2022/577/oj https://eur-lex.europa.eu/eli/dec/2022/579/oj https://eur-lex.europa.eu/eli/dec/2022/579/oj http://data.europa.eu/eli/reg/2022/877/oj http://data.europa.eu/eli/reg_impl/2022/876/oj https://apps.odok.cz/attachment/-/down/ihoacd98e6w3 https://apps.odok.cz/attachment/-/down/ihoacd98drey https://apps.odok.cz/attachment/-/down/ihoacd98drey 7implications of russia’s war in ukraine for belarus and its society… public governance, administration and finances law review • 1. 2022 extent the deeds of an authoritarian de facto ruler with no clear public mandate from the society can be equated to the actions of the polity he claims to represent . the second question is to what extent the society that did not provide the ruler with a clear public mandate to speak on its behalf could be responsible for his deeds . this analysis is not an advocacy piece . it does not address legal or technical aspects of the sanctions against lukashenka’s regime . nor does it  discuss their legality, scope and possible efficiency . instead, it  focuses on the socially significant wording of the relevant documents . the article is composed accordingly . after this short background information about the political configurations in belarus and relevant conceptual framework, the above questions are answered in the relevant chronologically designed empirical sections . the text has another substantial limitation as it describes the situation shaped by ongoing events . the above developments have already made a significant impact on the situation of the belarusians in a cross-border context and produced a considerable selfreflection within the society . thus, the transboundary societal implications for belarusians triggered by the stance of lukashenka’s regime in russia’s war against ukraine add value to this article and thereby contribute to the existing knowledge . 2. the factual background of belarus’s situation after over 30 years of existence as an independent state, belarus remains one of europe’s least known countries, particularly in the northern and western parts of the continent (kotljarchuk, 2020, p . 45; sierakowski, 2020, p . 6) . the trajectories of belarus’s postsoviet development can be explained by a  combination of the country’s soviet legacy and paternalistic political system (kascian, 2018, p . 87) . the former is attributed to the country’s image as “a perpetual borderland” (savchenko, 2009)” with its “denationalized nation” (marples, 1999) that strives to overcome an internal “struggle over [its divided] identity” (bekus, 2010) and actively participates in the integration projects led by russia . the latter involves the personality of aliaksandr lukashenka, its first and so far, the only president who has ruled the country since 1994 . under his rule, belarus never had a  free and fair election,8 and got the reputation of europe’s last dictatorship (bennett, 2011; wilson, 2011) . the mass and durable protests following the 2020 fraudulent presidential election are crucial for understanding the current developments within and around belarus . they posed an unprecedented challenge for lukashenka’s regime . in many ways, the protests could be interpreted as the society’s attempt to terminate the existing social contract between lukashenka and belarusians (kascian & denisenko, 2021) . as korosteleva & petrova (2021, p . 9) summarise, the 2020 protests were “a mesh made of the totality of all relations” within and around belarus that expand beyond nation-building issues, democracy deficits, or specifics of the country’s post-communist transition . yet, the postelectoral tactics of lukashenka’s regime resulted in the escalation of human rights 8 urgent need for electoral reform in belarus. resolution 2371 (2021). parliamentary assembly of the council of europe. april 21 (https://pace.coe.int/en/files/29170/html). https://pace.coe.int/en/files/29170/html 8 kiryl kascian public governance, administration and finances law review • vol. 7. no. 1.  violations, a crackdown on independent civil society, and the adoption of the new repressive and restrictive legislation .9 these legal novelties not only contained clear patterns of the authorities’ strateg y to mitigate protest sentiments in the society but, in some cases, provided “room for politically motivated and foregone decision-making aimed at banning certain symbols” (kascian, 2021) . this was backed by the drift of the official discourse towards a further hegemonic dominance model with lukashenka as the regime’s central element, both institutional and symbolic (chulitskaya & matonytė, 2018; see also kascian & denisenko, 2021) . the resistance of the belarusian society after the 2020 fraudulent election generated considerable support in the neighbouring eu countries . for many eastern europeans, this solidarity was merely a  combination of moral responsibility and common belonging (bekus, 2021, pp . 4–5) . the former echoed the late 1980s when the people in central and eastern europe fought for their freedom and independence . the latter was based on “a shared legacy of tyranny and common aspirations for democracy and freedom” (bekus, 2021, p . 4) . this sympathy towards the resisting belarusian society also confirms that there is a common understanding of the need to clearly differentiate between lukashenka’s regime and the belarusian society . this discrepancy between lukashenka’s regime and the country’s civil society is also essential for the understanding of belarus–eu relations . placed within the framework of the eastern partnership track of the eu neighbourhood policy10 belarus–eu relations could be described as limited and formalised critical engagement measured through the prism of domestic human rights and democracy quality (bosse, 2021, p . 202; kascian, 2018, p . 88) . yet, the eu’s restrictive measures and sanctions against the individuals and business entities affiliated with lukashenka’s regime described above was not a new approach . as bosse (2021, p . 204) summarises, “[o]ver recent decades, the effects of the eu’s restrictive measures on belarus have been ambiguous” as they did not affect its cooperation with russia, china and other countries beyond western democracies . premised on human rights conditionality, all previous eu sanctions emphasised a clear distinction between belarus’s population and members of lukashenka’s regime responsible for the violation of democracy and human rights in the country (portela, 2008, p . 6) . in turn, support of belarus’s civil society was one of the key elements of the eu policies towards this country considering belarus’s domestic political configurations (vilpišauskas et al ., 2021, p . 71) . crucial for many civil society organisations in belarus, this support “featured prominently in the [belarus-focused] eu’s discourse” (bosse, 2021, p . 205) . for belarusian csos, the eu-backed initiatives provided essential infrastructural support that contributed to their capacity-building, and guided their development strategies toward the promotion of the eu values and daily practices in belarus (mazepus et al ., 2021, pp . 51–52) . thus, belarus’s cso sector could be seen as the main ally of the eu in its endeavours to promote reforms and democracy in belarus . in this context, its role 9 for details see, for instance, monthly public reports on human rights situation in belarus prepared by the human rights center “viasna” (https://spring96.org/en/publications). 10 on 28 june 2021, belarus’s mfa announced that the country suspended its participation in the eastern partnership initiative. for details see belta (2021). belarus suspends participation in eastern partnership initiative. 28 june 2021 (https://bit.ly/3sly1ys). https://spring96.org/en/publications https://bit.ly/3sly1ys 9implications of russia’s war in ukraine for belarus and its society… public governance, administration and finances law review • 1. 2022 hardly differed from those played by the cso sectors in other countries of the eu’s eastern neighbourhood (vilpišauskas et al ., 2021, p . 76) . the capacities of belarusian csos have always been essentially limited by the political climate in the country . however, their actual and potential role in society explains the persistence of lukashenka’s regime to systematically eradicate independent csos after the 2020 presidential election .11 3. conceptual framework the use of belarus’s territory by russian military forces to attack ukraine triggered debates about the nature of belarus’s involvement in ongoing russia’s aggression . the available evidence confirms that it also provoked cross-border and intragroup emotional reactions towards belarusians as a  group, defined through the joint application of citizenship, ethnicity, language, culture and background criteria . in some cases, these external reactions were limited to contempt or anger, while in other cases they contained clear patterns of hate speech, discrimination, or intentionally harmful conduct . the conceptualisation of the present case of belarus, its society and its political regime goes beyond the scope of the analysis within purely legal categories and brings three elements to the puzzle . first, as luhmann (2004, pp . 142–143) argues, “[t]he function of law deals with expectations that are directed at society and not at individuals” and involves “the possibility of communicating expectations and having them accepted in communication” . every socially significant legally binding instrument communicates a specific message to society by the available linguistic means . embodied in a textual form, it forms “a shared system of codified values” in which “the exact wording of the text matters” (radwanska williams, 1993, p . 91, 95) . this confirms that the exact wording of the documents is particularly important when a definable community becomes a subject of a cross-border discourse on moral responsibility for the deeds of any government or administration that claims to be their representatives (cf . räikkä, 1997) . second, the war triggered a set of emotional black-and-white thinking patterns that urged specific groups and their members to act swiftly and thereby make an ethical choice . as beu & buckley (2004) summarise, the activities of the group members are motivated by self-generated and external sources, while the complexity of social factors extends their ethical decision-making beyond the dichotomy of a simple choice between good and evil . as a result, group members “shape the rules of moral judgment and the nature of moral standards”, “provide collective support for adherence to moral standards”, and “aid in the selective activation and disengagement of moral self-regulation” (beu & buckley, 2004, p . 555) . it presupposes mobilisation of the members of the affected group, inter alia, by addressing and eventually challenging the causative effect of the legally relevant restrictive measures . thus, the situation of a definable community, i .e . belarusians in this particular 11 human rights center “viasna” (2021). joint statement of belarusian human rights organizations on violations of freedom of association and pressure on human rights organizations. 07 october 2021 (https://spring96.org/ en/news/105252). https://spring96.org/en/news/105252 https://spring96.org/en/news/105252 10 kiryl kascian public governance, administration and finances law review • vol. 7. no. 1.  case, needs a more comprehensive analysis than the assessment of the exact wording of the legal documents . hence, it  requires a  nuanced contextual focus on the relevant legal concepts . third, the 2020 protests in belarus were the society’s attempt to discontinue the existing social contract with lukashenka (kascian & denisenko, 2021) . in turn, the regime’s post-electoral official discourse and its activities to liquidate independent csos provide additional evidence that lukashenka’s regime has for a long time seen domestic political and societal actors through the prism of schmitt’s friend/enemy groupings (schmitt, 2007, p . 26) . therefore, the events around the 2020 presidential election in belarus confirm the insurgent type of the country’s civil society as a platform that brings together “social movements and other organisations that resist authoritarian rule and under certain circumstances [could] successfully replace it  with democratic rule” (bernhard, 2020, p . 341) . at the same time, it cannot still terminate the existing social contract being subject to the regime’s ongoing repressive policies . in turn, the scale and durability of the protests confirm that lukashenka also lacks a clear public mandate to speak on behalf of the belarusian society and therefore uses excessive violence to prevent the democratic transition of power . despite the long-term symbiotic coexistence of lukashenka’s regime and belarus’s society, these two actors should be considered two different elements of the puzzle when it comes to the analysis of the eu and its member states’ policies towards belarus . sanctions are primarily policies and actions (galtung, 1967) . yet, the eu sanction policies towards authoritarian regimes in its neighbourhood demonstrate that they constitute a  decision that is a  result of the eu normative performance . the finalised content of the relevant documents is based on an argumentative discourse of all involved actors and allows to determine “how the eu defines the right or just principles guiding its foreign policy” (bosse, 2017, p . 60, 68) . referring to ethnic context (i .e . definable social groups), van dijk (1993) demonstrates that there is a mutual impact between the political and popular discourse and opinion formation with the media as an enabler of this cycle . this mutual impact is merely top-down as the agendas are primarily defined by politicians which result in the influence and legitimation of the relevant “policies and legislation” (van dijk, 1993, p . 50) . yet, the fields of actions of political and social discourses comprise “segments of the respective societal ‘reality’, which contribute to constituting and shaping the ‘frame’ of discourse” (wodak, 2001, p . 66) . it implies a chronological analysis adjusted “to accelerating social dynamics” (krzyżanowski, 2010, p . 201) . based on the three above elements of the puzzle, a two-level model was applied for the analysis (krzyżanowski, 2010, pp . 81–89) . the entry level was focused on the analysis of the relevant belarusrelated european council documents,12 significant political statements . at this stage, relevant concepts were identified vis-à-vis their linkage with belarus in general, its society, and lukashenka’s regime . the second stage comprised an in-depth contextual analysis of the specific units within the above concepts with the identification of their implications 12 following the 2020 presidential election, the european parliament adopted five resolutions on the situation in belarus. because of their non-binding legal nature, these resolutions serve as supplementary sources in this analysis as they can be regarded merely as “a primary tool for attracting attention and raising public and political awareness of important issues, though not always with a specific legislative goal in mind” (kreppel & webb, 2019, p. 388). 11implications of russia’s war in ukraine for belarus and its society… public governance, administration and finances law review • 1. 2022 based on the interpretation of the wording of the relevant documents . this text omits the analysis of legally-binding acts adopted by the eu member states in compliance with the eu-level documents making an illustrative exception for the case of czechia, as its approach towards belarusian society at large was designated by the belarusian political opposition as “discriminatory” and “toxic experience” .13 yet, the focus on the individual member states, their reasoning and interpretation of the events, and apparent advocacy strategies deserve a special article . the factor of time is another important element of the analysis . it contains two important dates that are essential for the design of the two subsequent empirical sections . the first date is 9 august 2020, the day of the fraudulent presidential election in belarus . at the foreign policy level, it discontinued the path of improved belarus–eu relations . at the domestic level, it  signified the start of a  gradual shift of lukashenka’s regime towards more repressive policies against society under the pretext of social cohesion and unity . the second one is 24 february 2022, the day when the russian invasion of ukraine started . at the foreign policy level, it became a clear marker that belarus under has been losing its sovereignty because of his regime’s total dependence on russia in the military, security and foreign policy spheres, inter alia, by the fact that the lukashenka administration allowed russia to use its territory to attack ukraine . at the domestic level, it coincided with the completion of the regime’s repressive transformation aimed at the reduction of potential risks of being challenged by protest activities formalised by the adoption of a new constitution in a fraudulent referendum on 27 february 2022 . the following two empirical sections apply the above model to answer the two research questions . the first of them addresses the period between the 2020 election in belarus and the start of the war in ukraine . the second focuses on the period after the war’s outbreak . 4. between fraudulent election and war: formalised and non-prioritised approach until october 2020, the eu reaction was limited to the statements of the eu’s high representative for foreign affairs confirming that the election was “neither free nor fair”, acknowledging that “the people of belarus have demonstrated the desire for democratic change”, and calling the “belarusian political leadership” upon the launching of “a genuine and inclusive dialogue with broader society”, and conditioning bilateral relations upon belarus’s progress on human rights and the rule of law .14 thus, the initial reaction of the eu was based on a  standardised critical engagement approach that clearly distinguished belarus’s society and lukashenka’s political regime . the delay in the institutionalised reaction was caused by the need to compromise the diverse domestic political interests of the eu member states on topics unrelated to belarus (bosse, 13 anatol liabiedzka’s facebook page (post of 12 may 2022) (https://bit.ly/3rlw1fk). 14 council of the eu (2020). belarus: declaration by the high representative on behalf of the european union on the presidential elections. press release, 11 august 2020 (https://bit.ly/3fvxdst). https://bit.ly/3rlw1fk https://bit.ly/3fvxdst 12 kiryl kascian public governance, administration and finances law review • vol. 7. no. 1.  2021, p . 203) . it merely confirms an assumption that the situation in belarus was not perceived as one of the eu’s top foreign policy priorities . in its conclusions of 12 october 2020, the council of the eu followed the same path of critical engagement with a clear distinction between the country’s society and political regime .15 yet, its content analysis reveals two key concepts . the first is lukashenka’s legitimacy as the president of belarus . while confirming that the election was “neither free nor fair”, the council concluded that lukashenka “lacks any democratic legitimacy”, and supported the “legitimate calls [of the belarusian people] for new, free and fair presidential elections in line with international standards and under the osce/odihr’s observation” .16 at the same time, the council implementing decision17 and council implementing regulation18 of 2 october 2020, as well as all further similar documents adopted on 6 november19 and 17 december 2020,20 contain the phrase about restrictive measures “against belarus” or “in respect of belarus” in their titles . hence, at first glance, no distinction between the regime and society is made . yet, the contents of these documents clearly indicate the difference between the regime and society . specifically, the documents adopted on 6 november inform that lukashenka “lacks any democratic legitimacy” and expect that “the belarusian authorities” will stop “repressions and violence directed against the belarusian people” . the documents adopted on 17 december mention the “brutality of the belarusian authorities” and “support of the democratic rights of the belarusian people” . further deterioration of the belarus–eu relations was caused by the forced landing of a ryanair flight in minsk on 23 may 2021 . in its conclusions from the following day, the european council condemned it  proposing a  further tightening of the restrictive measures against lukashenka’s regime and banning belarusian airlines from flying to the eu . these conclusions did not offer many units to assess, yet the document on one occasion used the form “belarusian authorities” .21 thus, it is not possible to understand whether the eu treats lukashenka’s regime as not legitimate based only on this document and without knowing the previous context . the relevant council decision and council 15 council of the eu (2020). council conclusions on belarus 11661/20. 12 october 2020 (https://bit.ly/3fumolz). 16 ibid. 17 council implementing decision (cfsp) 2020/1388 of 2 october 2020 implementing decision 2012/642/cfsp concerning restrictive measures against belarus (http://data.europa.eu/eli/dec_impl/2020/1388/oj). 18 council implementing regulation (eu) 2020/1387 of 2 october 2020 implementing article 8a(1) of regulation (ec) no 765/2006 concerning restrictive measures in respect of belarus (http://data.europa.eu/eli/reg_impl/ 2020/1387/oj). 19 council implementing decision (cfsp) 2020/2130 of 17 december 2020 implementing decision 2012/642/ cfsp concerning restrictive measures against belarus (http://data.europa.eu/eli/dec_impl/2020/2130/oj); council implementing regulation (eu) 2020/2129 of 17 december 2020 implementing article 8a(1) of regulation (ec) no 765/2006 concerning restrictive measures in respect of belarus (http://data.europa.eu/eli/reg_impl/2020/2129/oj). 20 council implementing decision (cfsp) 2020/1650 of 6 november 2020 implementing decision 2012/642/cfsp concerning restrictive measures against belarus (http://data.europa.eu/eli/dec_impl/2020/1650/oj); council implementing regulation (eu) 2020/1648 of 6 november 2020 implementing article 8a(1) of regulation (ec) no 765/2006 concerning restrictive measures in respect of belarus (http://data.europa.eu/eli/reg_impl/2020/1648/oj). 21 council of the eu (2021). european council conclusions on belarus 395/21. 24 may 2021 (https://bit.ly/ 3spkyg2). https://bit.ly/3fumolz http://data.europa.eu/eli/dec_impl/2020/1388/oj http://data.europa.eu/eli/reg_impl/2020/1387/oj http://data.europa.eu/eli/reg_impl/2020/1387/oj http://data.europa.eu/eli/reg_impl/2020/2129/oj http://data.europa.eu/eli/dec_impl/2020/1650/oj http://data.europa.eu/eli/reg_impl/2020/1648/oj https://bit.ly/3spkyg2 https://bit.ly/3spkyg2 13implications of russia’s war in ukraine for belarus and its society… public governance, administration and finances law review • 1. 2022 regulation adopted on 4 june 202122 also operates the term “belarusian authorities” . the regulation further specified that the ryanair accident “constituted a further step in the repression of civil society and democratic opposition in belarus” . while imposing a criterion for individuals and legal entities to be subjects of economic restriction if they, inter alia, for the economic restrictions “benefit from or support the lukashenka regime” . another peculiarity is that the titles of these documents slightly altered refer to the restrictive measures “in view of the situation in belarus” and “in respect of belarus”, and not “against belarus” as before . this also presupposes a higher level of acknowledgment of the difference between the regime and the society . the documents adopted on 21 june largely repeated the rhetoric of its predecessors, yet their titles uniformly spoke about restrictive measures “in respect of belarus” .23 the conclusions of 25 june 2021 called for the release of political prisoners and to stop repressions . they also acknowledged “the democratic right of the belarusian people to elect their president through new, free and fair elections” .24 thus, they implicitly made a distinction between lukashenka’s regime and belarusian society by acknowledging one of the major systemic problems of the belarusian society that derives from the lack of transparent and competitive elections . the conclusions of 22 october 2021 designated a migrant crisis on the belarus–eu border as “the ongoing hybrid attack launched by the belarusian regime” with the need to adopt relevant restrictive measures against those in charge of it .25 at the same time, while confirming the strategic importance of the eastern partnership region for the eu, the council again called on “the belarusian authorities to release all political prisoners” . yet, the concepts of “regime” and “authorities” imply a somewhat different degree of legitimacy for those who are referred to in these ways . the relevant council implementing regulation and decision adopted on 2 december 2021,26 inform about an “ongoing hybrid attack launched by the belarusian regime” by the instrumentalisation of the migrant crisis at the belarus–eu border . they also designate restrictive measures against those who are involved in “organising or contributing to activities by the lukashenka regime that facilitate the illegal crossing of the external borders of the union” and other related issues . yet, the titles of these 22 council decision (cfsp) 2021/908 of 4 june 2021 amending decision 2012/642/cfsp concerning restrictive measures in view of the situation in belarus (http://data.europa.eu/eli/dec/2021/908/oj); council regulation (eu) 2021/907 of 4 june 2021 amending regulation (ec) no 765/2006 concerning restrictive measures in respect of belarus (https://eur-lex.europa.eu/eli/reg/2021/907/oj). 23 council implementing regulation (eu) 2021/997 of 21 june 2021 implementing article 8a(1) of regulation (ec) no 765/2006 concerning restrictive measures in respect of belarus (http://data.europa.eu/eli/reg_impl/2021/997/oj); council regulation (eu) 2021/996 of 21 june 2021 amending regulation (ec) no 765/2006 concerning restrictive measures in respect of belarus (http://data.europa.eu/eli/reg/2021/996/oj). 24 council of the eu (2021). council conclusions euco 7/21. 24 and 25 june 2021 (www.consilium.europa.eu/ media/50763/2425-06-21-euco-conclusions-en.pdf). 25 council of the eu (2021). council conclusions euco 17/21. 21 and 22 october 2021 (www.consilium.europa. eu/media/52622/20211022-euco-conclusions-en.pdf). 26 council implementing regulation (eu) 2021/2124 of 2 december 2021 implementing article 8a(1) of regulation (ec) no 765/2006 concerning restrictive measures in respect of belarus (http://data.europa.eu/eli/ reg_impl/2021/2124/oj); council implementing decision (cfsp) 2021/2125 of 2 december 2021 implementing decision 2012/642/cfsp concerning restrictive measures in view of the situation in belarus (http://data.europa. eu/eli/dec_impl/2021/2125/oj). http://data.europa.eu/eli/dec/2021/908/oj https://eur-lex.europa.eu/eli/reg/2021/907/oj http://data.europa.eu/eli/reg_impl/2021/997/oj http://data.europa.eu/eli/reg/2021/996/oj http://www.consilium.europa.eu/media/50763/2425-06-21-euco-conclusions-en.pdf http://www.consilium.europa.eu/media/50763/2425-06-21-euco-conclusions-en.pdf http://www.consilium.europa.eu/media/52622/20211022-euco-conclusions-en.pdf http://www.consilium.europa.eu/media/52622/20211022-euco-conclusions-en.pdf http://data.europa.eu/eli/reg_impl/2021/2124/oj http://data.europa.eu/eli/reg_impl/2021/2124/oj http://data.europa.eu/eli/dec_impl/2021/2125/oj http://data.europa.eu/eli/dec_impl/2021/2125/oj 14 kiryl kascian public governance, administration and finances law review • vol. 7. no. 1.  documents refer to the above restrictive measures “in view of the situation in belarus” and “in respect of belarus” . a similar approach can be found in the conclusions of 16 december 2021 .27 while condemning the humanitarian crisis at the belarus–eu border, the council refers to “the belarusian regime” . in the next sentence, it confirms the eu’s readiness “to counter the hybrid attack launched by belarus” . finally, while raising the issue of a new election in belarus, the council speaks about “the democratic right of the belarusian people” . hence, the wording of these conclusions makes a controversial impression within one document . the phrase “launched by belarus” implicitly equates lukashenka’s regime with the entire country and, thus, indirectly suggests the regime’s full legitimacy as if it possesses a sufficient public mandate to instrumentalise the migration crisis . yet, the references to the “belarusian regime” and the “belarusian people” suggest the opposite . the eu based the logic of its belarus-related policies on the coupling of the concepts of democracy and legitimacy . hence, between august 2020 and february 2022, the eu continued to pursue its critical engagement policies toward belarus . it was quite dynamic, as it addressed the ongoing changes, but predictable . yet, the belarus-related agenda was not a priority for the eu . the pre-war eu approach generally distinguished the deeds of belarus’s authoritarian de facto ruler from the society, and in most cases did not equate the actions of the lukashenka administration with the policy it claims to represent . while the eu documents generally addressed the difference between lukashenka’s regime and the belarusian people, some of the formulations contained patterns of inconsistency implying a different degree of the regime’s legitimacy or even equating it with the entire country . this diverse approach neither contributed to the consistency of the evaluation of the situation in belarus, nor to the development of a unified eu-wide vocabulary on how to address the situation in belarus and other accompanying issues . interestingly, the word “authorities” in the eu documents seems to be predominantly used when referring to the capacity of the lukashenka regime to effectively exercise power and issue the decisions binding within the territory of belarus and affecting its population . this was merely based on the logic that any authority, be it legitimate or not, is capable to issue legitimate decisions, like the release of political prisoners . 5. the 2022 wartime: does an apparent victim deserve to be punished? the previous inconsistencies in distinguishing between lukashenka’s illegitimate regime and the policy it claims to represent became even more evident after 24 february 2022 when russia started the war against ukraine . as cited above, the european council’s conclusions of 24 february “strongly condemn[ed] the involvement of belarus in this aggression against ukraine and call[ed] on it to refrain from such action and to abide by its international obligations” . this formulation rather refers to belarus as a  polity 27 council of the eu (2021). council conclusions euco 22/21. 16 december 2021 (www.consilium.europa.eu/ media/53575/20211216-euco-conclusions-en.pdf). http://www.consilium.europa.eu/media/53575/20211216-euco-conclusions-en.pdf http://www.consilium.europa.eu/media/53575/20211216-euco-conclusions-en.pdf 15implications of russia’s war in ukraine for belarus and its society… public governance, administration and finances law review • 1. 2022 without any insight or specification of what is taking place there and whether its political regime is legitimate . another phrase of the conclusions about the need for “further individual and economic sanctions package that will also cover belarus” also suggests a  blurring of contexts, involving the country, its citizens irrespective of their political positions, and the de facto ruling regime . further eu documents from the early period of the war continue this trend . the quotation from josep borrell, high representative of the european union for foreign affairs and security policy, available in the eu press release of 2 march 2022 contains a  very strong normative evaluation . borell spoke about “belarus’ involvement” in the aggression that “will come at a high price” .28 the next sentence of the quotation specified that the countermeasures would focus on “those in belarus who collaborate with these attacks against ukraine” . however, the analysis of this press release reveals a lack of divisive line between the political regime in belarus and the country’s civil society . an alternative interpretation of this could suggest that various spokespersons in charge of these types of documents might have different degrees of awareness about belarus’s domestic contexts and evaluation of the gravity of the situation there . in any case, its message was widely distributed in the mainstream media, implicitly affecting public opinion and creating additional opportunities for its interpretation . as mentioned in the introduction, the council implementing regulation and decision of 2 march 2022 claimed that “belarus is participating in the russian military aggression against ukraine” by providing russia with the possibility to use its territory to fire missiles, transport weapons and personnel, use airspace, providing its refuelling points and storing russia’s weapons and equipment .29 again, this wording removed any context of belarus’s domestic political situation from the discussion focusing on the activities of the illegitimate regime and equating it with the entire country . in practical terms, this type of narrative resulted in numerous examples of hate speech and other manifestations of discrimination against belarusians30 as a group jointly defined by the criteria of citizenship, ethnicity and language . many of those who experienced it were forced to flee the country after the 2020 presidential election escaping from the repressions and arbitrary persecution . it is worth returning to the example of czechia specified above . for instance, an explanatory note of law 175/2022 sb of 22 june 2022 on further measures in connection with the armed conflict on the territory of 28 council of the eu (2022). belarus’ role in the russian military aggression of ukraine: council imposes sanctions on additional 22 individuals and further restrictions on trade. press release, 02 march 2022 (https://bit.ly/ 3rewi8e). 29 council implementing regulation (eu) 2022/353 of 2 march 2022 implementing regulation (eu) no 269/2014 concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of ukraine; council decision (cfsp) 2022/354 of 2 march 2022 amending decision 2014/145/ cfsp concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of ukraine. 30 for details see belsat tv (2022). nie złamanyja dyskryminacyjaj. jak pačuvajucca biełarusy ŭ emihracyi pasla pačatku vajny [not broken by discrimination. how do belarusians in emigration feel after the start of the war] 26 august 2022 (https://bit.ly/3chy9nb); onet.pl (2022). fala nienawiści i hejtu w sieci wobec obywateli białorusi [a wave of online hatred and hate against belarusian citizens] 05 march 2022 (https://bit.ly/3redhmt). https://bit.ly/3rewi8e https://bit.ly/3rewi8e https://bit.ly/3chy9nb https://bit.ly/3redhmt 16 kiryl kascian public governance, administration and finances law review • vol. 7. no. 1.  ukraine caused by the invasion of the troops of the russian federation (known as lex ukraine ii)31 claims that: from the point of view of international law, the russian federation and the republic of belarus committed aggression against ukraine in violation of para 4 article 2 of the un charter, which was confirmed by the un general assembly resolution no . a/res/es-11/1 . the text of this resolution32 mentions belarus just once deploring its involvement in “this unlawful use of force against ukraine, and calls upon it to abide by its international obligations” . however, it does not contain any specification of this involvement and the reasons thereof . in turn, resolution no . a/res/es-11/1 contains the reference to resolution no . a/res/3314(xxix) of 14 december 1974 which defines aggression .33 among other things, this resolution establishes that “the question whether an act of aggression has been committed must be considered in the light of all the circumstances of each particular case” . consideration of all circumstances and addressing belarus’s domestic contexts allowed representatives of the belarusian opposition to pursue an advocacy campaign claiming that belarus has been occupied by russia .34 the demonstrated clash of possible approaches towards belarus reveals that the literal and contextual interpretations of the same situation can lead to antipodal assessments – (co-)aggressor v . victim of aggression . in respect thereof, the question arises whether the literal justifications, like in the case of czechia, should decouple the concepts of the state and legitimacy of its political regime considering the capabilities of a given society to freely elect its political leadership in a  transparent and fair election . if it  overtly or implicitly bounds these two concepts, it de facto acknowledges the responsibility of the society of a given country for any political regime that exists in it regardless of whether it is legitimate or not . the documents adopted on 9 march, 8 april and 3 june 202235 did not offer anything conceptually new in terms of the interpretation of belarus’s involvement in russia’s war in ukraine . yet, their titles and content are more balanced in terms compared to the statements from the early days of ukraine’s war . they address two important issues . first, the titles of all relevant documents (2022/398, 2022/399, 2022/577, 2022/579, 2022/876 and 2022/877) refer to “the restrictive measures in view of the situation in belarus and the involvement of belarus in the russian aggression against ukraine” . in other words, russia’s aggression against ukraine was just one part of the puzzle that triggered them . 31 chamber of deputies of the parliament of the czech republic (2022). sněmovní tisk 221/0 vl.n.z. o někt.opatř. v souv. s ozbroj.konfliktem – ukrajina [parliamentary press 221/0 government bill on some measures in connection with the armed conflict – ukraine] 05 may 2022 (www.psp.cz/sqw/historie.sqw?o=9&t=221). 32 resolution adopted by the general assembly on 2 march 2022, a/res/es-11/1 aggression against ukraine. un documents. march 18 (https://documents-dds-ny.un.org/doc/undoc/gen/n22/293/36/pdf/n2229336.pdf). 33 resolution adopted by the general assembly on 14 december 1974, a/res/3314(xxix) definition of aggression against ukraine. un documents. march 18 (https://documents-dds-ny.un.org/doc/resolution/ gen/nr0/739/16/img/nr073916.pdf). 34 national anti-crisis management (2022). russia has occupied belarus. 16 march 2022 (https://belarus-nau.org/ en/news/tpost/zx8sj4nal1-russia-has-occupied-belarus). 35 for details see note 5 above. http://www.psp.cz/sqw/historie.sqw?o=9&t=221 https://documents-dds-ny.un.org/doc/undoc/gen/n22/293/36/pdf/n2229336.pdf https://documents-dds-ny.un.org/doc/resolution/gen/nr0/739/16/img/nr073916.pdf https://documents-dds-ny.un.org/doc/resolution/gen/nr0/739/16/img/nr073916.pdf https://belarus-nau.org/en/news/tpost/zx8sj4nal1-russia-has-occupied-belarus https://belarus-nau.org/en/news/tpost/zx8sj4nal1-russia-has-occupied-belarus 17implications of russia’s war in ukraine for belarus and its society… public governance, administration and finances law review • 1. 2022 moreover, participation of lukashenka’s regime in it is qualified as “involvement” . belarus is neither directly labelled as a (co-)aggressor, nor the issue of the legitimacy of its political regime is raised . the reference “belarus” in the documents also implies a  lack of clear distinction between the de facto administration and the belarusian society . the other one was caused by the domestic developments in belarus . second, items 1(b) of article 1w of the council regulation 2022/398 and 5(b) of article 2u of the council decision (cfsp) 2022/399 of 9 march 2022 suggest that the restrictions on belarus-based individuals and legal entities in the eu-based credit institutions may be lifted if the relevant deposits are “necessary for civil society activities that directly promote democracy, human rights or the rule of law in belarus” . the above titles and formulations, therefore, confirm that the eu is concerned by the domestic developments in belarus and committed to promoting human rights, democracy and rule of law in this country . yet, the above documents also mean that certain individuals and businesses non-affiliated with lukashenka’s regime might be affected by the sanctions . a partial shift toward a more balanced approach between belarus’s domestic developments and the war in ukraine can be identified in the declaration by the eu high representative on the second anniversary of the fraudulent presidential elections issued on 8 august 2022, which serves as an example of the aforementioned inconsistency of approaches .36 this document acknowledges that the fraudulent election has “stripped belarusians of the opportunity to freely choose their own future” and confirms that lukashenka’s regime “lacks any democratic legitimacy” . it mentions over 1,200 political prisoners and numerous others who went through repressions or were forced to leave the country, as well as the crimes committed by the regime against its opponents after the 2020 election . yet, lukashenka’s regime is labelled as “an accomplice” of russia’s aggression against ukraine . it follows this path “against the will of the vast majority of the belarusian people” and “persecutes belarusians for standing up against the war” . while claiming that the eu’s “determination to support the people of belarus remains unchanged” and the country’s sovereignty and independence, the document, on two occasions, designates lukashenka’s regime as “the authorities in belarus” . this formulation deals with a call to the regime to respect human rights, stop collaborating with russia in its aggression against ukraine, and maintain an inclusive dialogue within belarus’s society resulting in a free and fair election . russia’s military aggression against ukraine changed a wider europe . because of its gravity, it became one of the key points of the eu policies . for belarus, its society, and lukashenka’s regime it  had two major implications . first, all previous eu restrictive measures remained in force, being updated based on the principle of critical engagement; belarus-related agendas also failed to become one of the eu’s top priorities . second, the belarusian agenda was put into the context of the armed conflict between russia and ukraine which was largely determined by the position of lukashenka’s regime in it . as the above analysis demonstrated, it partially resulted in the coupling of the illegitimate lukashenka’s administration with the state with little to no focus on the domestic 36 council of the eu (2022). belarus: declaration by the high representative on behalf of the eu on the second anniversary of the fraudulent presidential elections. press release, 08 august 2022 (https://bit.ly/3cjapod). https://bit.ly/3cjapod 18 kiryl kascian public governance, administration and finances law review • vol. 7. no. 1.  developments in the country that resulted in this situation . this attitude also produced clashing approaches to the belarusian case ranging within the binarity “victim of the aggression – (co-)aggressor” . for the belarusian political opposition and the civil society, it posed additional challenges to lobby the view of belarus as a victim of russia’s aggression and a  more pronounced focus on the distinction between the belarusian society and lukashenka’s regime . yet, as the evidence shows there is no unequivocal shift from the literary coupling of the state and political regime in the eu and some individual member states towards a more comprehensive approach based on the contextual interpretation of the situation within belarus . 6. conclusion the analysis of the eu documents pertinent to the situation in belarus after the 2020 presidential election reveals two chronological periods . the first one ranges from the elections till the end of february 2022 when russia’s aggression against ukraine and the so-called constitutional referendum in belarus chronologically coincided . this period was determined by the domestic developments in belarus and the eu’s critical engagement policies that promptly addressed the dynamics of the changes . yet, belarus never became a  priority for the eu policies and it  had very limited capacities to effectively influence the situation in the country . yet, the analysis provides evidence that the eu generally made a distinction between the illegitimate regime centred around lukashenka and the belarusian society that was involved in massive and durable protests against the fraudulent election and repressive nature of the regime . however, these differences were not always consistent and failed to develop a common vocabulary among the eu bodies and individual member states pertinent to the comprehensive assessment of the internal developments in belarus . apparently, by doing so the eu might have expected that the illegitimate lukashenka administration could issue some legitimate decisions such as the release of political prisoners . after february 2022, the situation changed significantly . belarus-related agendas became inscribed into the context of russia’s war in ukraine due to the involvement of lukashenka’s regime in this unlawful act . yet, this had negative implications for the belarusian society . it is evident that in a partial coupling of belarus as a polity with the activities of lukashenka’s regime that de facto rules the country is substantially backed by the kremlin . as a result of this attitude, the patterns of the literal interpretation of the regime’s action become evident and even dominant, as the czech example demonstrates . hence, it is not uncommon that belarus is perceived as a co-aggressor which implies the responsibility of the entire society with little to no consideration of its actual capacities to change the repressive political regime . thus, the concept of the state, legitimacy of the political regime, and accountability of the society for its deeds are at least implicitly linked . a more comprehensive approach to decouple the regime and society is present in the eu documents but it still fails a clear pronounced focus affecting practical measures aimed at countering russia’s aggression in ukraine . in this regard, the view of belarus as another victim of russia’s aggression (or a country occupied by russia) is not unreasonable as 19implications of russia’s war in ukraine for belarus and its society… public governance, administration and finances law review • 1. 2022 it  considers all the circumstances of belarus’s particular case including the domestic political context before and after the 2020 presidential election . yet, the belarusian political opposition must advocate a comprehensive approach to achieve a clear shift to acknowledge a pronounced focus at the eu and its individual member states 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tax law in slovakia under the influence of pandemic, digital transformation and inflation1 miroslav štrkolec* ¤ * dean, associate professor, pavol jozef šafárik university in košice, faculty of law, department of financial law, tax law and economy, kosice, slovakia, e-mail: miroslav .strkolec@upjs .sk abstract: tax law, as a  branch of law belonging to the hard core of public law, is one of its branches that are characterised by instability rather than the stability of its rules . the reasons for the frequent changes in tax law can be found not only in political agendas and the economic view of taxes, but equally in external impacts, to which the legislature tries to respond promptly . the paper aims at clarifying the competing views on the position of tax law in the legal system and defining its functions, as they have been interpreted differently in different periods of social development . the paper then examines the significant changes in tax law in recent years, triggered by the covid-19 pandemic, digital transformation and inflation, and assesses the extent to which these changes contribute to the fulfilment of the core, the fiscal function of taxes . keywords: tax law, pandemic, digital transformation, inflation 1. introduction taxes are a  crucial source of revenues for public budgets in modern economies . this is also the case in the slovak republic, whose economy is based on the principles of a  socially and ecologically-oriented market economy (article 55/1  of the constitution of the slovak republic) . the meaning and purpose of taxes, as well as fees and other types of revenues for public budgets, is to ensure that public budgets receive sufficient revenues to meet their expenditure requirements . naturally, taxes and fees may only be levied by law or on the basis of a  law (article 59/2  of the constitution of the slovak republic), in accordance with the principle of “nullum tributum sine lege” . it can be clearly deduced from the above that, in order for (in particular) taxes to fulfil their core function, states must create a  legal environment that enables them to do so in accordance with the principles of constitutional law . taxes, as an instrument of power, interfere in the property sphere of the obliged persons and serve as an instrument of the state or the local self-government, intending to take away part of their legally acquired property . they can therefore also be seen as a  public payment obligation that is not matched by a right to receive consideration . 1 this paper was supported by the slovak research and development agency under agreement no. apvv-19-0124. https://doi.org/10.53116/pgaflr.6496 https://orcid.org/0000-0001-8712-1945 mailto:miroslav.strkolec@upjs.sk 92 miroslav štrkolec public governance, administration and finances law review • vol. 8. no. 1.  given the nature of taxes, it is clear that these payments are not and cannot be made on the basis of voluntariness but, on the contrary, on the basis of coercive power, through tax laws . the primary purpose of tax laws is to create a legal environment that ensures the generation of revenues for public budgets to an extent that enables the various tasks and functions of public entities to be carried out . based on the above, we will focus on areas in this paper . first, also using the method of historical interpretation, we will take a closer look at tax law as a branch of law and at the functions that are attributed to taxes . these, in their current form, can undoubtedly be seen as a product of historical development, as they have changed and evolved as the socio-political order has evolved . of course, although taxes have essentially been part of the life of society since ancient civilisations, it is not possible to go back to such a distant history for the purposes of this paper . we will therefore only look at the functions of taxes over the last hundred years or so, taking into account the different models of government systems and the nature of the economy . the second phenomenon that we will look at in more detail are three external factors identified by us that have had a significant impact on tax law in recent years and, to some extent, on other branches of law . these are the covid-19 pandemic, digital transformation and inflation and their impacts on tax regulation . in addition to the historical method already mentioned, in this paper we will use the methods of description, analysis and synthesis . the aim will be to test the hypothesis that taxes, as their regulation by tax laws changes under the influence of the pandemic, digital transformation and inflation, continue to fulfil their primary fiscal function . 2. tax law and functions of taxes yesterday and today tax law as a separate branch of law has been forming in the slovak republic, and partly also in other countries in the so-called visegrád four, especially in the last twenty years or so . we are aware that this is not yet a  generally accepted conclusion, but rather an opinion competing with the view that tax law is subsumed under financial law (karfíková et al ., 2018, p . 77) . the issue of the subsumption into or, on the contrary, the exclusion of tax law from the financial law system, is essential . this issue is perceived in slovakia – and particularly within the košice school of tax law, which is also represented by the author  –  somewhat differently from other countries in central and eastern europe . the strengthened position of tax law within the financial law system has, in the course of a few years, outgrown the previous boundaries of financial law . nowadays, tax law is on an equal footing among the branches of law in slovakia (babčák, 2022, p . 48) . this is true for tax law as a  branch of law, a  branch of study and a  branch of science as well (štrkolec, 2022a, p . 182) . finally, this view, although not held by the majority, is also expressed by a  number of academics in the czech republic and poland . as one example, we can refer to the words of the renowned czech professor m .  bakeš, who states that the understanding of tax law as a separate branch of law can undoubtedly be described as a  new phenomenon in law on the threshold of the 21st century (bakeš, 2009) . similarly, in poland, the authors a . gomułowicz and j . małecki stated many 93tax law in slovakia under the influence of pandemic, digital transformation and inflation public governance, administration and finances law review • 1. 2023 years ago that tax law should be perceived as a separate branch of law and its science as a  separate legal science (gomułowicz & małecki, 2004, p . 142) . moreover, these views also appear in the works of other representatives of the science of tax law (etel et al ., 2010; radvan, 2020, p . 21) . for the purposes of this paper, however, it is more important to look at the functions of taxes and tax law as they have been perceived at different stages of social development . of course, we are aware that the notions of the “functions of taxes” and “functions of tax law” are not identical . however, neither can they be separated on purpose, since the individual functions of taxes are not and cannot be accomplished without the corresponding regulation of taxes by tax laws . in other words, taxes cannot fulfil their functions without tax law . in countries respecting human rights and fundamental freedoms, adequate legal regulation is the instrument which, in a constitutionally compliant manner, imposes on taxes the functions which they are intended to fulfil . this is, after all, not only a consequence of the above-mentioned national regulation, but also of the international conventions on human rights and fundamental freedoms . typically, in this respect, reference may be made to article 1 of the protocol to the convention for the protection of human rights and fundamental freedoms, which, on the one hand, guarantees the right to the peaceful enjoyment of property, but, on the other hand, allows states to enforce such laws as they deem necessary to secure the payment of taxes or other contributions or penalties . for the purposes of this paper, we will thus consider the functions of taxes in three periods of historical development: 1 . the first czechoslovak republic in the interwar period; 2 . the socialist period of the centrally planned economy; and 3 . taxes after 1989 . from the period of the first czechoslovak republic, we can point out, for example, the works of professor v . funk, according to whom the primary purpose of taxes was fiscal, consisting of ensuring the existence and development of the economy of the state as well as private entities . other purposes, such as national economic interests, limitation of consumption of the population, or promoting health were perceived as secondary (funk, 1929, pp . 67–68) . in the period of the centrally planned economy, other functions of taxes were highlighted, such as redistributive, controlling, stimulating, stabilising and accumulation roles (slovinský et al ., 1985, pp . 134–135; girášek, 1981, p . 49) . however, it was the accumulation function that was most close in content to what we now perceive as the core of the fiscal function, namely the provision of resources for the public budgets . for certain reasons, however, the notion of fiscal function was described as inappropriate (slovinský et al ., 1985, p . 133) . paradoxically, the social function of taxes was also mentioned in works from that period, which allows the differentiation of the amount of tax burden according to the family, social and other circumstances of taxpayers (slovinský et al ., 1985, p . 134) . finally, in the current period of the market economy, the fiscal function is again typical and crucial for taxes, which is mentioned as the first or the most important one (babčák, 2022, p . 25; radvan, 2020, p . 23) . the fiscal function of taxes in its present-day understanding means that taxes are to generate sufficient financial resources for public budgets in order to fund state and other public needs . in addition to the primary fiscal function of taxes, they of course nowadays also fulfil other functions (e .g . allocative, regulatory or control functions), but, as a rule, the social function does not appear among 94 miroslav štrkolec public governance, administration and finances law review • vol. 8. no. 1.  them . in our opinion, three broad factors influence the provision of sufficient tax revenues for public budgets – and thus the real fulfilment of the fiscal function of taxes (štrkolec, 2017, pp . 16–17): 1 . creating the basic elements of the legal construction of taxes, which determine, in relation to each tax, its payer, object, base and rate, or also other elements such as the due date of the tax, the increase or decrease in the tax rate, the increase or decrease of the tax itself, the exemption from tax, etc . the basic and other elements of the legal construction of taxes are contained in the substantive tax laws . from the point of view of the budgetary significance of each tax forming the tax system of the slovak republic, it is particularly crucial how the tax object and the tax base are formulated by law . the tax object defined by a law determines which economic actors, processes or benefits will be subject to taxation . the tax object may therefore be, for example, income, property or consumption . the tax base is then a  quantitative expression of the tax object such as the amount of income, the size of property or the price of consumption . however, substantive tax law (it would probably be more appropriate to say substantive tax law relations) is not implemented by itself but needs procedural tax law for its implementation . this fact leads us to the second determinant of the generation of revenues for public budgets . 2 . the second determinant is the efficient performance of tax administration based on the existence of precise procedural laws enabling such performance . the fiscal function of taxes can only actually fulfil the crucial significance attached to it if there is a  proper procedural law formulation to achieve this function of taxes . efficient tax administration, or its efficient performance, is one of the basic principles that should govern the tax and/or fee system (bakeš, 2005, p . 38) . 3 . the third determinant is the simplicity and unambiguity of tax laws . this is because the simplicity of taxation is related to the efficiency of taxation . the more complicated the laws are, the more inaccessible the actual collection of taxes becomes (bujňáková, 2005, p . 71) . a complicated law is not only complicated for taxpayers but also for tax administration authorities . it may sound paradoxical at first hearing, but a  minimalist and restrained approach by the legislature to the scope of the tax law-making process may lead to more efficient tax collection . from this perspective then, it is obvious that simplicity and clarity of tax laws have a significant effect on ensuring sufficient tax revenues for public budgets . conversely, unclear, incomprehensible or confusing laws, as well as their changes, are naturally among the causes of tax evasion (kubincová, 2015, p . 332) . 3. the covid-19 pandemic and impacts on state budget revenue in order to define the importance of tax revenues for the state budget, it is useful to compare the pre-pandemic period with the pandemic period, based on the figures 95tax law in slovakia under the influence of pandemic, digital transformation and inflation public governance, administration and finances law review • 1. 2023 according to the relevant state budget laws . however, it should not be forgotten that the state budget laws are teleological in nature and set out the objective to be achieved but not the methods or means of achieving it . these, in relation to the achievement of the required amount of tax revenues for the state budget, are set out in particular by tax laws (in the field of substantive, as well as procedural law) . the total state budget revenues for 2019 amount to eur 15 .497 billion . the tax revenues amount to approximately eur 12 .464 billion, i .e . about 80% of the total state budget revenues, which include income tax in the amount of eur 2 .952 billion, value added tax in the amount of eur 6 .629 billion, and excise duties in the amount of eur 2 .417 billion (state budget act 2019) . the total state budget revenues for 2020 amount to eur 14 .366 billion . the tax revenues amount to approximately eur 11 .546 billion, i .e . about 80% of the total state budget revenues, which include income tax in the amount of eur 2 .731 billion, value added tax in the amount of eur 6 .361 billion, and excise duties in the amount of eur 2 .204 billion (state budget act 2020) . the total state budget revenues for 2021 amount to eur 15 .806 billion . the tax revenues amount to approximately eur 11 .798 billion, i .e . about 75% of the total state budget revenues, which include income tax in the amount of eur 2 .089 billion, value added tax in the amount of eur 7 .038 billion, and excise duties in the amount of eur 2 .438 billion (state budget act 2021) . the total state budget revenues for 2022 amount to eur 21 .471 billion . the tax revenues amount to approximately eur 15 .845 billion, i .e . about 73% of the total state budget revenues, which include income tax in the amount of eur 4 .261 billion, value added tax in the amount of eur 8 .796 billion, and excise duties in the amount of eur 2 .512 billion (state budget act 2022) . the above figures do not include revenues collected under personal income tax, as they are the revenues for local self-government budgets in the slovak republic . according to the current legal situation, personal income tax revenues (except for withholding tax) are divided only between municipalities and higher territorial units in the ratio of 70% (municipalities) and 30% (higher territorial units) . according to the available data, the revenues from this shared tax were eur 3 .426 billion in 2019 and eur 3 .736 billion in 2021 . several facts can be deduced from the above data: ƿ a general year-on-year decline in the share of tax revenues for the state budget in its total revenues over the period examined (80%–75%–73%) ƿ a significant drop in income tax revenue (2019–2021), followed by a significant increase in this revenue (2021–2022) ƿ stable or partially increasing value added tax revenue ƿ substantially flat and stable excise duty revenue these indicators are, to a  significant extent, also the result of the covid-19  pandemic, which affected them in several ways . in particular, there was a major economic slowdown as a result of the anti-pandemic measures taken in the context of the state of emergency or the extraordinary situation . the closure of businesses or the significant reduction in 96 miroslav štrkolec public governance, administration and finances law review • vol. 8. no. 1.  their business activities in spring 2020  or at the turn of 2020  and 2021  contributed significantly to the decline in their productivity, which ultimately translated into lower income tax revenue . on the other hand, it can be seen that consumption levels remained broadly stable, as reflected in the non-reduction of the general tax on consumption (value added tax) and selective excise duties . however, in order to further understand the reasons for the decline in tax revenues for the state budget during the pandemic, it is necessary to go back in time to the period of its beginnings . one of the first laws adopted in response to the first wave of the covid-19  pandemic was the so-called lex covid in the financial sector, namely act no . 67/2020 coll . on certain emergency measures in the financial sector in connection with the spread of the dangerous contagious human disease covid-19 . in this context, it can be stated that the legislature responded flexibly, especially to the needs of taxpayers, by adopting a number of measures temporarily favouring the position of taxpayers in tax administration . for example: 1 . suspension of tax audits at the taxpayer’s request 2 . suspension of tax proceedings at the taxpayer’s request 3 . limitation of liability for administrative offences committed during the pandemic 4 . postponement of tax enforcement during the pandemic 5 . postponement of the deadline for filing income tax returns for the period after the pandemic 6 . exemption from the obligation to pay advance income tax in situations where the taxpayer’s year-on-year sales had fallen by at least 40% 7 . explicit recognition of the cost of testing for covid-19  as a  tax deductible expense 8 . temporary application of the zero vat rate on ffp 2 and ffp 3 masks 9 . postponement of the deadline for filing local tax returns (real property tax, dog tax, tax on vending machines and tax on non-winning gaming machines) even without a deeper analysis of the impacts of the individual measures, it is clear that these measures in their entirety meant a decrease in tax revenues for the public budgets, especially in 2020, but, as it follows from the above, the impacts were also felt in 2021 . the above-mentioned measures were either of a general nature, and thus applicable to all taxes (1–4), or they were specifically related to particular taxes belonging to the tax system of the slovak republic . as far as the general measures are concerned, the suspension of tax audits in principle led to their later closure and, in the case of a  detected tax difference, also to the later drawing up of a tax audit report . similarly, the suspension of tax proceedings (in particular assessment proceedings) led to the later issue of decisions which could become an enforcement title . the same conclusion applies to the postponement of tax enforcement, which stopped, or more precisely temporarily delayed, the flow of recovered tax arrears to the state budget . other measures were related to specific taxes, most of them focused on income tax . the postponement of the deadline for filing tax returns naturally led to later tax payments . 97tax law in slovakia under the influence of pandemic, digital transformation and inflation public governance, administration and finances law review • 1. 2023 non-payment of advance income tax in turn not only suspended the expected flow of tax payments to the state budget, but also, indirectly, to the budgets of local self-governments, which are the recipients of the shared personal income tax . similarly, the recognition of testing costs as a tax-deductible expense could significantly reduce the tax base and thus the tax liability, particularly for large employers employing hundreds or thousands of employees, since, during the state of emergency, employees could only perform their work obligations at the employer’s establishment if they had a  negative test result for covid-19 . however, there were also measures that were rather symbolic in nature, without a significant impact on the extent of the tax liabilities of obliged persons in relation to the public budget revenues . these symbolic measures included in particular the temporary application of the zero vat rate on ffp 2 and ffp 3 masks . a number of partial conclusions can be drawn from the above . taxes, as a legal instrument intended to take away part of the property from obliged persons and, at the same time, as a  major source of revenues for public budgets, suddenly gave way during the pandemic to requirements which, at that time, not only seemed necessary in the interests of protecting public health, but also, in a certain sense, in the interests of social reconciliation . this corresponded to the state’s efforts to accommodate at the same time the needs of taxpayers and employers, who were, in effect, put in the position of being unable to continue to do business, earn income and pay taxes on that income from one evening to the next . 4. digital transformation in the last few years, new technologies have significantly changed the ways in which the real market and economy are considered (uricchio, 2016, p . 84) . the phenomena that the digital economy brings with it were something that national legal systems did not foresee (štrkolec & hrabčák, 2021, p . 64), and this is also why the digital revolution is beginning to be seen as a material source of law (hrabčák et al ., 2021, p . 12) . it can be stated that, regardless of the degree of changes that the development of new technologies will bring in the future, it is clear that technological development will have a major impact on the shape of tax systems . the possible range of these changes is wide and includes a spectrum of new tax institutions, ranging from the introduction of some new types of taxes that will organically complement the “traditional” forms of taxation (income tax, general tax on consumption) to a complete “rebuilding” of tax systems on the basis of priority taxation by new forms of “digital taxes” (štrkolec, 2021, p . 379) . research into these new challenges for tax law can be conceived in several areas: 1 . taxation of activities based on advanced digital technologies 2 . taxation of the sharing economy 3 . taxation of virtual currencies in relation to the taxation of the digital economy, it can be noted that the proposals for the taxation of digital services and the supply of goods, which have not yet been 98 miroslav štrkolec public governance, administration and finances law review • vol. 8. no. 1.  implemented, respond to two fundamental questions . the first question is: “where to tax?”  –  in other words, how to ensure the power to lay and collect income taxes for a  country where taxable income is generated through digital services by an entity that has no  direct material presence in that country . the second question is: “value creation?”  –  namely, to whom to attribute taxable income in digital business models based on intangible assets, data and information . despite some scepticism, we persist in the view that reaching a  multilateral agreement at oecd level is the preferred option for regulating the tax law relationships arising from the taxation of income from digital services . the sharing economy (or also the collaborative economy, collaborative consumption, or the so-called “peer-to-peer” economy) is a phenomenon of the digital or online age, the main principle of which is the lending of existing resources between persons carrying out the sharing economy in such a way that the process results in a profit for those persons . these are not new activities, but still the sale of goods and the provision of services on the basis of supply and demand . the peculiarity of the business transactions carried out within the collaborative economy is the extension of the originally bilateral relations to a third entity, a  digital platform, which mediates the transaction in question (bachňáková rózenfeldová, 2022, p . 1) . in view of the undoubtedly rapid development of internetbased digital platforms and the provision of “sharing” services, the issue of international as well as national regulation of the sharing economy comes to the fore . this issue can be addressed separately or as part of a “package” of changes introduced for the taxation of digital services . the third area closely linked to advanced digitisation is the issue of virtual currency . virtual currencies are, by their very nature, a unit of value that is captured in cryptographic form . the introduction of virtual currencies was enabled by the development of a technolog y called blockchain, which was originally proposed by satoshi nakamoto as the basis for “an electronic payment system based on cryptographic proof instead of trust” . the introduction of this decentralised payment system made it possible to make payments using tokens called “bitcoin” and other digital assets and crypto assets . from a tax law perspective, these new objects of economic relations pose a number of legal challenges . among the most prominent of these is the question of the legal nature of digital assets and crypto assets, which we addressed in previous research and concluded that they are neither money nor currency . they can be seen as other assets, which possess certain distinctive features, such as an intangible nature, an asset in the digital environment, a decentralised and only partially regulated status, a basis in cryptographic practices and dlt technolog y, the transactional capacity and the ability to serve as means of payment by consensus of the parties involved and, the prevailing absence of a link to legal tender (popovič et al ., 2020, pp . 222–226; popovič & sábo, 2021, pp . 44–45; štrkolec, 2022b, p . 108–109) . building on the above background, a closer look can be taken at the slovak legislature’s response to these challenges in recent years: 1 . in relation to the taxation of the digital economy, the slovak republic is still among those countries that have not proceeded to the taxation of digital services or digital advertising . international or european solutions come into consideration, but undoubtedly also unilateral ones, which have been attempted in the last 99tax law in slovakia under the influence of pandemic, digital transformation and inflation public governance, administration and finances law review • 1. 2023 few years by some countries, such as france, spain and the united kingdom . the ministry of finance of the slovak republic declares that it is not considering the introduction of a national digital services tax, but is waiting for a comprehensive and harmonised solution at the eu level, not only as regards the dst (digital services tax) version, but also a  compromise in the dat version, (i .e . only the digital advertising tax, hrabčák & stojáková, 2020, pp . 22–25) . 2 . the taxation of income generated in the sharing economy is, after all, somewhat further away in the slovak republic than the taxation of digital services . the amendment to the income tax act by act no .  344/2017  coll ., in force from 1  january 2018, established a  legal definition of digital platform as a  hardware or software platform necessary for the creation and management of applications . at the same time, for the purposes of determining the source of income of non-resident taxpayers, it was established that the repeated mediation of transport and accommodation services through a digital platform is also considered to be the performance of activities with a  place of business in the slovak republic . this created the basic prerequisites for the taxation of income of digital platform operators in the slovak republic . this was later followed by the amendment to the act on international assistance and cooperation in tax administration, made by act no .  250/2022  coll ., which introduces, with effect from 1  january 2023, a  reporting obligation and automatic exchange of information reported by platform operators . the amendment implemented the dac 7  directive in the slovak republic . however, in relation to digital platforms, we can also point to the current regulation of the accommodation tax (act no .  582/2004  coll ., amended by act no .  470/2021  coll .), which, with effect from 11  december 2021, introduces the institution of the taxpayer’s representative . this is a  person who mediates paid temporary accommodation between the taxpayer and the taxable person through the operation of a digital platform . such a taxpayer’s representative may enter into an agreement with the municipality under which they will subsequently collect the tax from the taxable person and pay it to the tax administrator’s account . 3 . by the amendment to the income tax act by act no . 213/2018 coll ., in force from 1 january 2019, the sale of a virtual currency became a taxable transaction and the income from its sale became taxable income . for the purposes of the income tax act, the sale of virtual currency means an exchange of virtual currency for property, an exchange of virtual currency for another virtual currency, an exchange of virtual currency for the provision of a  service, or a  transfer of virtual currency . the act also regulates the rules for determining the tax base, the application of tax deductible expenses and the method of determining the entry price of virtual currencies . as regards the basic rules for the taxation of income from the sale of virtual currency, it is necessary to distinguish between the income of natural persons – non-entrepreneurs – and that of entrepreneurs . the income of a natural person from the sale of virtual currency is other taxable income under section 8  of the income tax act . the tax base includes the income from the sale of virtual currency less the expenses 100 miroslav štrkolec public governance, administration and finances law review • vol. 8. no. 1.  demonstrably incurred to generate it . these may include actual expenses demonstrably incurred for mining (energ y, software, hardware) or the price paid for the acquisition of the virtual currency if it is acquired by purchase . the situation is different for entrepreneurs who sell virtual currency that is their business property . in such a case, the income from the sale of virtual currency is treated as part of the tax base of the business income under section 6  of the income tax act . the tax deductible expenses of a natural person – entrepreneur include expenses in the amount of the aggregate of the entry prices of virtual currencies under section 25b of the income tax act in the taxable year in which the sale takes place . the tax deductible expense is the acquisition price if the virtual currency was acquired by purchase or the fair value if the virtual currency was acquired in exchange for another virtual currency (štrkolec, 2022b, p . 110) . again, several partial conclusions can be drawn from the above . taxes, as the main source of revenues for public budgets in the slovak republic, have so far only slowly and to a  limited extent burdened the activities carried out in the digital world . the digital tax has not yet been introduced, digital platforms are taxed, but the question is whether the current legislation allows for their effective taxation at all (simić, 2022, p . 134–139), and finally, virtual currencies (or the income from their sale) are subject to taxation, but the revenue from them is marginal . in this regard, reference can be made to the available data, according to which the share of declared income from the sale of virtual currencies in other income under section 8  of the income tax act oscillated between 0 .39% and 1 .06% in 2018–2020, and between 0 .02% and 0 .07% in the same period for all personal income (putera, 2022, p . 91) . it therefore appears that de lege lata the practical dimension of taxation of income from the sale of virtual currencies is at least problematic, and only a marginal part of taxable income is subject to real taxation . 5. inflation finally, the third external factor with an impact on tax law, especially in the current year 2022, is rising inflation, which increased in the slovak republic to 14 .2% in september 2022 . it is not the aim of this paper to examine its causes in detail or to suggest stabilisation mechanisms . we will therefore only take a  closer look at some of the already approved or forthcoming changes in tax law that are related to this phenomenon . these can be seen in two areas; the first is the state’s (government’s) efforts to help the population deal in particular with rising prices, and the second is the need to find sufficient coverage of the necessary resources . with regard to the state’s efforts to help the population with, among other things, the consequences of inflation, mention may be made in particular of act no . 232/2022 coll . on the financing of children’s leisure time, and amending certain acts, among others, the income tax act . this act was approved by the national council of the slovak republic despite the veto of the president of the slovak republic . from our point 101tax law in slovakia under the influence of pandemic, digital transformation and inflation public governance, administration and finances law review • 1. 2023 of view, the essential change to the income tax act made by this act, in force from 1 july 2022, is the increase in the child tax bonus from eur 22 .17, or eur 44 .34 (for a child under 6 years of age) per month, to: ƿ eur 40  per month for a  child over 15  years of age and eur 70  for a  child under 15 years of age, for the period july to december 2022 ƿ eur 50  per month for a  child over 15  years of age and eur 100  for a  child under 15 years of age, with effect from 1 january 2023 although there are some corrective mechanisms in the amendment related to the maximum amount of the tax bonus, the aim of its authors, according to the explanatory memorandum, was to improve the financial situation of families with children, since the tax bonus reduces the tax . in other words, a  higher tax bonus means a  lower tax . of course, this measure will have a  significant negative impact on public administration budget revenues . in this regard, the anticipated decrease in public budget revenues may reach 500 million in the year 2023 . ultimately, however, the local self-governments will suffer the most from this measure, since the higher tax bonus per child will reduce the personal income tax collected, which, as a shared tax, is a crucial source of revenues for municipalities and higher territorial units . the budgetary coverage of this revenue shortfall is not yet known . the second group includes so far only the proposed changes to tax laws, the declared aim of which is, on the contrary, to increase the tax revenues of the public administration budget, in particular the state budget . this is all in order to ensure budgetary coverage of the higher expected expenditure in 2023, not only in connection with the above-mentioned act no . 232/2022 coll . (which increased not only the tax bonus but also the child benefit and introduced a new payment called the child leisure allowance), but also in other contexts . for example, the following draft laws are currently in the legislative process: 1 . a draft law on taxing a  benefit obtained as a  result of the special situation on the oil market . the government’s draft law of may 2022 envisaged a revenue of eur 57 million in 2022 and about eur 23 million in 2023 and 2024, on the basis that the tax object is the economic benefit obtained as a  result of the special situation on the oil market . the proposed tax rate is 30% of the tax base . although the draft law has passed its first reading in the legislative process, it is generally not expected to be adopted . 2 . a draft law on a  tax on a  special construction was introduced in august 2022 .  the purpose of the draft law is to introduce a  new tax on a  special construction used for the transportation of gas . it was therefore a  proposal to introduce a gas pipeline tax . the tax should be based on the length of the pipeline in kilometres and the proposed tax rate is eur 6,000 for each (even incomplete) kilometre of pipeline . the positive impact on the state budget is estimated at eur 92 million in 2022 and eur 126 million in 2023–2025 . 3 . another draft law, which amends act no . 530/2011 coll . on the excise duty on alcoholic beverages, is also of august 2022 . the draft law simply increases both the basic and reduced rates of the tax on alcohol by 30% compared to the current situation . the impact on the state budget has not been quantified . 102 miroslav štrkolec public governance, administration and finances law review • vol. 8. no. 1.  what partial conclusions can be drawn from the above? first of all, the conclusion is that through tax laws, which should primarily fulfil a  fiscal function, the state is implementing, in addition to budgetary policy, a  pro-family or social policy . however, in our opinion, this should not be implemented primarily by tax laws, but rather by social security laws . the purpose of tax laws is the materialisation (generation) of the revenues for public budgets, not the withdrawal of resources from public budgets, as has been done by increasing the tax bonus . on the other end of the spectrum, there are the so far unsuccessful draft laws that aim to generate new tax revenue sources for public budgets, or to increase the existing ones . the problem, however, is not only their questionable passage through the national council of the slovak republic, but also, ultimately, their marginal dimension . 6. conclusion in the introduction to the paper, we stated that our aim would be to verify the hypothesis that taxes, as their regulation by tax laws changes under the influence of the pandemic, digital transformation and inflation, would continue to fulfil their primary fiscal function . this hypothesis has been confirmed to only a  limited extent, namely in relation to the taxation of digital platforms or income from the sale of virtual currency . however, we also note here that the revenues generated by the taxation of the new phenomena of the digital economy are far from being at a level that is commensurate with the scale of activities of the various actors in the digital space . in relation to most of the tax regulations examined, however, the hypothesis has not been confirmed . in fact, under the influence of the pandemic, digital transformation and inflation, taxes partly cease to fulfil their primary fiscal function, which gives way to other objectives or functions . typical cases are the above-mentioned changes brought about by the covid-19 pandemic, or the changes brought about by the efforts to support families through the increased tax bonus . these changes were not primarily intended to ensure sufficient revenues for public budgets (which is the basic purpose of taxation as such), but rather to help businesses and the population to overcome the negative effects of the pandemic and inflation, also by reducing or postponing tax liabilities . to paraphrase professor funk, these changes instead exhibit the socio-political function (purpose) of taxation in order to meet the demands for social justice (funk, 1929, p . 69) . of course, the above conclusions apply only to taxes under the influence of the external phenomena examined . in general, taxes are and will remain a crucial source of revenues for public budgets, especially for the state budget . references babčák, v . (2022) . dane a daňové právo na slovensku . epos . bachňáková rózenfeldová, l . 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(2016) . a few ideas for reforming internet taxation . in f . boccia & r . leonardi (eds .), the challenge of the digital economy (pp . 83–95) . palgrave macmillan . online: https://doi .org/10 .1007/9783-319-43690-6 https://doi.org/10.33542/bt2021-983-2 https://doi.org/10.33542/sic2020 https://doi.org/10.33542/sic2020 https://doi.org/10.33542/poe2020-931-3 https://doi.org/10.33542/sic2022 https://doi.org/10.33542/sic2022 https://doi.org/10.4467/22996834flr.21.005.13288 https://doi.org/10.33542/scd2021-0043-1 https://doi.org/10.54171/2022.zn.ropfatilofc https://doi.org/10.14712/23366478.2022.49 https://doi.org/10.1007/978-3-319-43690-6 https://doi.org/10.1007/978-3-319-43690-6 public governance, administration and finances law review vol. 8. no. 1. (2023) • 105–119 . © the author 2023 doi: 10 .53116/pgaflr .6561 the legal status of independent regulatory organs and their place in the hungarian state administration jános kálmán* ¤ * assistant lecturer, széchenyi istván university, department of public administrative law and fiscal law, győr, hungary, e-mail: kalman .janos@sze .hu abstract: independent regulatory organs as a type of administrative body were included among the central state administrative bodies upon the entry into force of the fundamental law of hungary . the key feature of independent regulatory organs is that they also have the power to legislate within the framework of the regulatory authority’s activity; in other words, they can intervene in the relations of their administered sector through the creation of generally binding rules of conduct, which are enforced through the official activities falling within their scope of duties and powers . the characteristics of the legal status of independent regulatory organs and the components of their independence are therefore of particular importance in the system of public administration . the content and strength of their independence are not identical but are adapted to the professional content and eu and constitutional requirements of the specialised area of administration for which the fundamental law authorises the national assembly to establish these bodies . keywords: independence, legislation, independent regulatory organs, cardinal act, regulatory authority 1. introduction this type of administrative body appeared in the hungarian public administration system upon the entry into force of the fundamental law of hungary (hereinafter: fundamental law) . in 2012, two public administrative bodies became independent regulatory organs, the national media and infocommunications authority (hereinafter: nmia) and the financial supervisory authority (hereinafter: fsa) . in 2013, the fsa merged with the hungarian national bank, and another independent regulatory organ, the hungarian energ y and public utility regulatory authority (hereafter: hepura) was established . the number of independent regulatory bodies did not increase until recently, but in 2021  the supervisory authority for regulated activities (hereinafter: sara) was established and in 2022  the hungarian atomic energ y authority (hereinafter: haea) became an independent regulatory organ . https://doi.org/10.53116/pgaflr.6561 https://orcid.org/0000-0002-0103-1111 mailto:kalman.janos@sze.hu 106 jános kálmán public governance, administration and finances law review • vol. 8. no. 1.  in light of the above, the independent regulatory organs have been part of the hungarian public administration for ten years, but their establishment can be divided into two distinct periods . the study aims to place independent regulatory organs within the system of state administration and to identify the main elements of their legal status . to this end, the study first reviews the creation of independent regulatory organs and then outlines the main features of their legal status . in this context, the study examines the specificities of the creation of independent regulatory organs, the tasks with which they can be entrusted, the main elements of regulatory activity, and the elements of independence of independent regulatory organs . however, before doing so, it should be noted that independent regulatory organs and autonomous bodies,1 although closely related from an organisational law perspective, are not the same type of body . indeed, independent regulatory organs do not necessarily have an autonomous legal status and autonomous bodies do not necessarily have autonomous regulatory powers; in other words, they do not always have legislative powers . there are, of course, some organisations where the two coincide, where the organisation both has autonomous legal status and is an independent regulatory organ, but this is not always the case . from a constitutional point of view, both types of bodies are of course exceptions and justify an exceptional status, but there is a significant difference in their constitutional status, in particular in terms of their independence and the guarantees that guarantee it (if the two statuses do not coincide) . it is also generally accepted that, if an organisation is autonomous, this affects its overall status as a  body, which means that, in addition, whether or not it has legislative powers, it has autonomous status, with a condition of independence at the level of the branches of government . the autonomy of independent regulatory organs, and the content and strength of their independence are not identical but are adapted to the professional content, eu and constitutional requirements of the field of specialised administration for which the fundamental law gives the national assembly the power to establish these bodies (lapsánszky et al ., 2017, p . 100) . 2. the creation of independent regulatory organs the predecessors of the independent regulatory organs had already appeared at the constitutional level, when the former act xx of 1949  on the constitution of the republic of hungary (hereinafter: constitution) was amended in 2010, upon the designation of the fsa and the nmia . the reason for the elevation of the two bodies to the constitutional level – to secure their constitutional status (temesi, 2013, p . 177) – was 1 autonomous bodies are central public administration bodies with a special status, established by the national assembly and not controlled or supervised by the government. autonomous bodies shall be deemed to be central state administration bodies according to section 1(2) of act xliii of 2010 on central state administration bodies and the status of members of the government and state secretaries (hereinafter: the act). at present, the following are considered autonomous bodies in the hungarian administration: a) the public procurement authority; b) the integrity authority; c) the hungarian competition authority; d) the national authority for data protection and freedom of information; e) the national election office; and f) directorate-general for auditing european aid. 107the legal status of independent regulatory organs… public governance, administration and finances law review • 1. 2023 to create the possibility of conferring legislative (decree-making ) powers,2 as the hungarian constitutional court (hereinafter: hcc) in its decision 37/2006 (ix .20 .) ruled that the constitution “forms a closed system for the creation of legislation: it designates the issuer, designates the name of the legislation, provides for their hierarchical relationship to each other and, through article 32/a, also guarantees the consistency of the hierarchy of sources of law with the constitution” . in hcc decision 121/2009 (xii .17 .) on the unconstitutionality of the old act on legislation,3 the hcc explained that “only the constitution can specify a source of law in both senses – legislation and legislative power – since the constitution is the ultimate source of the validity of the law in law . since the constitution itself determines the types of legislation and its binding force, there can be no source of law other than those listed in the constitution” . thus, the conferral of legislative powers on these two organs of public administration has been achieved by the national assembly through an amendment to the constitution, by naming them in the constitution . andrás jakab, in his private draft of the constitution, took the view that the mention of the fsa and the nmia in the constitution, which are conspicuously not constitutional bodies – but state administrative authorities – would undermine the authority of the text, and, possibly because of subsequent amendments (which inevitably arise from time to time in the state administration), would again only contribute to the loss of authority of the text of the constitution ( jakab, 2011, p . 19) . however, jakab’s argument is valid; it is necessary to point out that the state administrative bodies to be given legislative powers necessarily have their place in the constitution, through some technical legal solution, since this is the only way to give them the power to legislate .4 in light of the above, article 23  of the fundamental law established independent regulatory organs as a  new type of body with a constitutional definition, breaking with the technique of designation (fazekas, 2015, p . 15) . this type of body – without detailed rules on its legal status – was elevated to the status of a central state administrative body by section 1(2) of the act .5 under the current article 1(3) of the act, there are four6 independent regulatory organs in hungary: a) the nmia;7 b) the hepura;8 c) the sara;9 and d) the haea .10 2 the naming of the two – then autonomous – state administrative bodies in the constitution was forced by the hcc decision 33/2010 (iii.31.), which declared the delegation of the power to issue regulations to the president of the fsa unconstitutional, based on the reasoning of hcc decision 37/2006 (ix.20.) and hcc decision 121/2009 (xii.17.). 3 act xi of 1987 on legislation. 4 see the explanatory memorandum of the fundamental law, which stipulated that only the bodies with legislative powers should be listed in the fundamental law, precisely given their legislative powers. 5 it should be noted, however, that the term is not unknown in hungarian legal literature (see ferenczi, 2000, pp. 311–326). 6 from the entry into force of the fundamental law until its integration into the hungarian national bank on 1 october 2013, the fsa was also an independent regulatory organ. 7 it was established by act clxxxv of 2010 on media services and mass media (hereinafter: msmm act). 8 act xxii of 2013 on the hungarian energy and public utility regulatory authority (hereinafter: hepura act). 9 act xxxii of 2021 on the supervisory authority for regulated activities (hereinafter: sara act). 10 see act cxiv of 2021 amending certain acts in connection with the status of the hungarian atomic energy authority. 108 jános kálmán public governance, administration and finances law review • vol. 8. no. 1.  3. the legal status of the independent regulatory organs the independent regulatory organs are central state administrative bodies with special powers, independent of the direction and supervisory powers of the government, with constitutional status, established by the national assembly in a cardinal act for the performance and exercise of certain functions and powers within the scope of executive power, and performing regulatory authority activities, with legislative powers.11 the legal status of independent regulatory organs is thus determined by the fact that a) they can be established by a cardinal act; b) they can perform tasks and exercise powers within the scope of the executive power; c) they have legislative-regulatory powers, they perform the so-called regulatory authority activity; and d) they are independent of the government. in the following, the legal status of independent regulatory organs – their place in public administration – will be examined based on the above characteristics . 3.1. the creation of independent regulatory organs – the cardinal act according to article 23 (1) of the fundamental law, the national assembly may establish independent regulatory organs to perform and exercise certain functions and powers belonging to the executive power . concerning the establishment of independent regulatory organs, the fundamental law thus imposes two conditions on the freedom of the legislative power to establish organisations: a) only through a cardinal act; and b) only a body exercising executive power may be classified as an independent regulatory organ (balogh, 2012, p . 284) . regarding the first condition, the creation of a  cardinal act, the most important question – and one that has given rise to academic debate – is whether the fundamental law gives a general mandate to create a cardinal act to establish independent regulatory organs, or whether an explicit reference in the fundamental law to the creation of a cardinal act is required. the scope of independent regulatory organs – according to some literature ( jakab, 2012, p . 262; balogh, 2012, p . 283)  –  cannot be expanded arbitrarily, not even by a cardinal act, since article 23 of the fundamental law does not constitute a new mandate to create a cardinal act, but is a cross-reference to other provisions of the fundamental law, which already provide for cardinal acts . of the independent regulatory organs, the nmia and the now-defunct fca (first generation of independent regulatory organs), as illustrated in table 1, met the above requirements . article ix (6) of the fundamental law, authorises the establishment of a body to supervise freedom of the press, media services, press products and the communications market . in case of the fca, the legal basis, other than article 23 of the fundamental law, was provided by article 42 of the fundamental law, which was in force at the time . 11 the definition is based on article 23 of the fundamental law. 109the legal status of independent regulatory organs… public governance, administration and finances law review • 1. 2023 table 1 . legal basis for the creation of independent regulatory organs independent regulatory organs legal bases other than article 23 of the fundamental law nmia article ix (6) fsa article 42 hepura – sara – haea – source: compiled by the author . there is no  doubt that the argument has merit, but it is too restrictive, since neither article ix nor article 42  of the fundamental law explicitly refers to the creation of independent regulatory organs, only to the creation of a  supervisory authority in this area by a  cardinal act . this is the regulatory approach taken in article vi (4), but the national authority for data protection and freedom of information was not established by the national assembly as an independent regulatory organ but as an autonomous public administration body . a more correct and permissible interpretation concerning the freedom of the national assembly to organise the administration system is that article 23 of the fundamental law is an autonomous cardinal legislative authorisation, without the need to invoke any other constitutional legal basis for the creation of an independent regulatory organ . in case of the second generation of autonomous regulatory bodies  –  hepura, sara, haea  –  there is no  legal basis other than article 23 of the fundamental law . when interpreting the relationship between the fundamental law and the cardinal act establishing the independent regulatory organ, it must be borne in mind that article 23 of the fundamental law regulates the function, the characteristics of the tasks and powers of independent regulatory organs in very broad terms only, and therefore the width of the legislator’s scope of action is a matter of interpretation . it is necessary to start from the premise that one of the functions of the “cardinal acts is to reduce the burden of the text of the fundamental law with a constitutional guarantee, that the fundamental law does not have to provide exhaustively for all the essential rules of the basic institutions, but that these rules should be adopted with the broad consensus of the members of the national assembly . in the absence of this function of the cardinal acts, the fundamental law itself would have to contain all the detailed rules – essential but detailed – relating to the basic institutions, which would result in an overly detailed and unclear constitution” .12 taking this into account, the relationship between the fundamental law and the cardinal act establishing the independent regulatory organs can be described as follows: article 23 of the fundamental law only sets out common minimum rules for independent regulatory organs, while the specific rules, in respect of which each independent 12 hcc decision 17/2013 (vi.26.). 110 jános kálmán public governance, administration and finances law review • vol. 8. no. 1.  regulatory organ may differ, are laid down in the cardinal act themselves . the hcc has interpreted the limitation of the criteria that can be included in a “cardinal act” to mean that they cannot conflict with the fundamental law; in other words, a condition has already been laid down by the constitutional rules, the cardinal act cannot provide a different rule . in case of independent regulatory organs, such a procedural criterion is the person of the nominator (the prime minister or the president of the republic) or, in the case of a nomination by the president of the republic, the person of the proposer (the prime minister) .13 3.2. executive tasks and powers as pointed out earlier in the study, the fundamental law, in addition to the creation of independent regulatory organs by a  cardinal act, stipulates that only a  body exercising executive power can be considered an independent regulatory organ. according to article 15 of the fundamental law, the government is the general organ of executive power and the principal organ of public administration, which means that the government is responsible for all matters that the fundamental law or other legislation does not assign to another body and that the government is politically and legally responsible to the national assembly for the functioning of the executive branch and the implementation of laws in general . because of this, the structure of the administrative organisation is essentially determined by the government’s degree of influence and the existence of its direction and supervisory powers vis-à-vis the administrative bodies, since in the absence of these types of activity, the government cannot fulfil the role of the supreme organ of public administration . however, independent regulatory organs – and autonomous public administration bodies that do not appear in the constitutional arrangements  –  “polarise” the executive branch (csink & mayer, 2012, p . 80), since the  autonomy of these bodies can be interpreted as relative independence from the government within the executive branch . the monopolistic  –  supreme  –  role of the government in the administrative organisation is thus overshadowed by the scope of independent regulatory organs – and autonomous public administration bodies – which means that the body that takes public authority decisions in the sectors administered by independent regulatory organs, in individual cases, does not bear any substantive professional and political responsibility for these decisions since the government’s influence is very limited (fazekas, 2020), and independent regulatory organs are not accountable to either the national assembly or the government . however, it only follows from the fundamental law that the organisation of public administration may include an autonomous status, but which sectoral policies to entrust to independent regulatory organs is already a discretionary decision of the legislator. 13 hcc decision 17/2013 (vi.26.). 111the legal status of independent regulatory organs… public governance, administration and finances law review • 1. 2023 table 2 . sectors administered by independent regulatory organs and eu legislation independent regulatory organ sector managed union act does an eu act require the independence of the authority? nmia media directive 2010/13/eu of the european parliament and of the council of 10 march 2010 on the coordination of certain provisions laid down by law, regulation, or administrative action in the member states concerning the provision of audiovisual media services (audiovisual media services directive) yes news release directive (eu) 2018/1972 of the european parliament and of the council of 11 december 2018 on the establishment of a european electronic communications code yes hepura natural gas supply, natural gas security directive 2009/73/ec of the european parliament and of the council of 13 july 2009 concerning common rules for the internal market in natural gas and repealing directive 2003/55/ec yes electricity directive 2019/944/ec of the european parliament and of the council of 5 june 2019 concerning common rules for the internal market in electricity and amending directive 2012/27/eu yes district heating – – water utilities – – waste management – – sara tobacco retail commission implementing regulation (eu) 2018/574 of 15 december 2017 laying down technical specifications for the establishment and operation of a traceability system for tobacco products no an independent bailiff organisation – – gambling – – winding-up bodies – – haea nuclear energ y administration council directive 2009/71/euratom of 25 june 2009 establishing a community framework for the nuclear safety of nuclear installations yes source: compiled by the author . 112 jános kálmán public governance, administration and finances law review • vol. 8. no. 1.  nor is the principle of sectors requiring an independent regulatory organ directly readable from the narrow provisions of the fundamental law . independent regulatory bodies are generally needed in areas where technical rules need to change rapidly, and therefore the abstract way in which the legislation is drafted does not allow the addressees to foresee the extent of administrative influence and the content of administrative decisions . at the same time, independent regulatory organs are generally needed in sectors where market liberalisation has been or is underway and the state itself is a market player, or in some cases a monopoly player (fazekas, 2015, p . 17) . however, it is also important to stress that eu legislation14 in several cases explicitly requires – as table 2  sets out  –  that an administrative body, independent of government, be established in the member states to administer the sector in question . however, the legislator must proceed with caution when establishing independent regulatory organs, since their independence or autonomy – like those of autonomous state administration bodies – disrupts the fundamental regulating principle of state administration, namely subordination to the government and thus the government’s parliamentary responsibility, which is only slightly offset by the direct accountability of the head of the independent regulatory organ to the national assembly . it can also be seen from table 2 that the sectors administered by independent regulatory organs do not always require an autonomous authority, even under eu legislation . 3.3. regulatory activity the term “regulator” in the name of the independent regulatory organ refers to the fact that it is a  so-called regulatory authority. a  regulator is not a  separate type of public administration (lapsánszky, 2014, p . 3), but a theoretical category, a collective term for public administrations that perform regulatory authority activities, regardless of the type of public administration they belong to (fazekas, 2018; csink & mayer, 2012, p . 81; kovács, 2009, pp . 19–32) . the essence of regulatory activity is that the public authority managing the sector in question typically has comprehensive intervention and management powers that affect the 14 see e.g. article 30(1) of the audiovisual media services directive, under which each member state designates one or more national regulatory authorities, bodies, or both. member states shall ensure that they are legally distinct from the government and that they are independent in terms of their functions from their government and any other public or private body. this is without prejudice to the right of member states to establish regulatory authorities to supervise different sectors. according to article 57(4) of directive 2019/944/ec of 5 june 2019 concerning common rules for the internal market in electricity and amending directive 2012/27/eu, member states shall guarantee the independence of the national regulatory authority and ensure that it exercises its powers impartially and transparently. to that end, member states shall ensure that when carrying out the regulatory tasks conferred upon it by this directive and related acts, the regulatory authority: • be legally distinct and functionally independent from other public or private entities • ensure that its staff and the persons responsible for its management: ◦ act independently of any market interest ◦ not seek or take direct instructions from any government or other public or private entity in the performance of their regulatory functions 113the legal status of independent regulatory organs… public governance, administration and finances law review • 1. 2023 overall functioning of the market. indeed, the regulatory authority’s activity includes, among others (lapsánszky, 2014, pp . 9–10; lapsánszky, 2015, pp . 59–71), market regulation powers related to the maintenance and development of market competition . market regulation can be considered an official and specific law enforcement activity, characterised by the continuous ex officio substantive review of market regulation decisions, the adoption of new market regulation decisions, and the use of market analysis and fact-finding tools . it is also specific in that a decision taken by the authorities as a result of market regulation has an impact on competition in the market as a whole and on the functioning of the market as a  whole, although it only has concrete and direct legal effect on the relations between the addressees of the decision . market surveillance is the other most fundamental instrument alongside market regulation . it is also a specific public authority activity, a special type of public authority supervision with specific characteristics . market surveillance includes general professional assessment, market analysis type monitoring of economic and social conditions subject to market surveillance for decision making and overall regulatory supervision from a legality perspective, as well as supervisory powers specific to “general” public oversight . “market surveillance is, therefore, comprehensive control and supervision covering a specific and distinct economic sector, market, service or a specific part of it, in which all the objectives of administrative control activities are simultaneously and uniformly achieved, i .e .: prevention, detection of infringements of the law, and the preparation of legislation, amendment of legislation and other decisionpreparation activities” (lapsánszky, 2014, p . 10) . in addition to market regulation and market surveillance, the regulatory authority’s activities also include an extensive classical set of instruments of public authority (individual licensing, record keeping, consumer protection tasks), which is complemented by several operational, organisational and coordinative activities . legislative powers are not a general feature of regulatory activity, but it is an essential element of the legal status of independent regulatory organs that they also have legislative powers, and it is in this light that this element of regulatory activity is examined in more detail in this paper . in addition to the above, regulatory activity also necessarily involves instruments that result in the regulatory authority establishing general rules of conduct and standards . within legislative powers, a distinction can be made between the power to enact legislation properly and the power to issue acts of a  non-legislative but normative nature . regulatory authorities almost invariably have the latter power, but the power to legislate is to a large extent determined by the constitutional system of the country concerned . in case of regulatory authorities, the legislative power is not a conceptual element, but it is a  specific feature of the regulatory activity of independent regulatory organs that – also – have legislative power. independent regulatory organs may, therefore, act in the exercise of their public powers, and establish generally binding rules of conduct (standards) for the sector concerned . the chairpersons of the independent regulatory bodies issue decrees based on a statutory mandate, within the scope of their functions as defined in the cardinal act, which may not conflict with any act, government decree, prime ministerial decree, ministerial decree, or decree of the governor of the hungarian 114 jános kálmán public governance, administration and finances law review • vol. 8. no. 1.  national bank .15 the legislative power is thus subject to two conditions: a) the cardinal act must determine the scope of the functions within which the president of the independent regulatory bodies may issue a decree; and b) the law must define the specific legislative subject matter . a specific feature of the regulation of the power to issue regulations is that the scope of the regulations that may be issued by the chair of the independent regulatory organ is partly contained in the status laws16 of each independent regulatory organ, and partly in the sectoral laws .17 a characteristic feature of the legislative subjects covered by the status law is that they either authorise the adoption by decree of technical and information rules, regulations on internal organisation and competencies (regulations on the replacement of the chairman of the independent regulatory bodies) or regulations on the fees for supervisory and administrative services (so-called fee regulations), which ensure the budgetary independence of the independent regulatory organ, for all sectors administered by it . however, in addition to the above subjects, the sectoral law also contains several delegations of power to regulate the sector’s implementing law, mainly in substantive law,18 and to lay down detailed and specific rules of procedure for the public authority.19 finally, it is important to highlight that, in addition to legislation, independent regulatory organs typically have the power to issue non-legislative but normative positions, communications and recommendations – so-called soft law documents – that guide the regulated sector on their enforcement activities . 3.4. independence from the government of the independent regulatory bodies as has been pointed out earlier, the autonomous (independent) status within the system of state administration, in other words, the relative independence from the government as the main body of public administration, is an exceptional legal status characteristic . this independence “can only be granted to a  central state administration body in particularly justified cases: for example, when it is acting as a quasi-judicial body or when it is responsible for safeguarding constitutional rights” (fazekas, 2010, pp . 229–230) . the independence of the independent regulatory organ thus essentially refers to the separation (decentralisation) from the hierarchy that is usually characteristic of public administration . however, it must be stressed once again that the autonomy of independent regulatory organs, the content and strength of their independence, is not the same as autonomous state administration bodies . the degree of autonomy is adapted to the 15 article 23 (4) of the fundamental law. 16 e.g. hepura act article 21. 17 e.g. article 74 (4) of act ccix of 2011 on water utility services. 18 for example, under article 38 (1a) (b) of act xxxiv of 1991 on the organisation of gambling, the president of the sara is empowered to lay down detailed rules for restricting the access of vulnerable persons to gambling in connection with the organisation of gambling activities following the principle of responsible gambling. 19 e.g. article 29 (d) of the sara act, which empowers the sara to establish detailed rules for the control of the exercise of activities subject to a concession by the authorities; article 182 (3) point 26 of act c of 2003 on electronic communications (hereinafter: ec act), which empowers the nmia to establish rules for the procedures of the construction and construction supervision authorities concerning electronic communications facilities. 115the legal status of independent regulatory organs… public governance, administration and finances law review • 1. 2023 professional content, eu and constitutional requirements of the field of specialised administration for which the fundamental law authorises the national assembly to establish these bodies . it should also be stated that it is inherent in the activity of the regulatory authorities that, in addition to the relative autonomy within the public administration, the independent regulatory organs must also be independent of the regulated, supervised market sector . the  literature on administrative law (fazekas, 2018, pp . 10–11)  –  and also the practice of the hcc20  –  typically emphasises three pillars of autonomy that the independence of independent regulatory organs must be ensured from the a) institutional; b) personal; and c) professional sides . institutional independence is ensured by how the independent regulatory organs are established, the allocation of tasks and powers and budgetary independence, and their relationship with the national assembly and the government . institutional independence is based on the fact that independent regulatory organs are created by the national assembly in a cardinal act, as the study has explained in detail . because of this, the government’s freedom of organisation does not apply to independent regulatory organs . in principle, the functions and powers of independent regulatory organs may be established by law or by legislation issued based on a statutory authorisation, except the sara, for which a municipal decree may not establish functions and powers,21 and the haea, for which a statutory authorisation is not required for lower-level legislation to establish functions and powers . budgetary independence – as the foundation of autonomy – is basically guaranteed by the fact that the budgets of the independent regulatory organs are separate titles within the chapter of the national assembly, and their expenditure and revenue budgets can only be reduced by the national assembly .22 this excludes the possibility of the government directly intervening in budgetary matters . among the independent regulatory organs, the nmia is special23 in terms of budgetary independence, given that  –  as the only state body  –  its budget is governed by a  separate act, which is submitted to the national assembly by the committee of the national assembly responsible for budgetary matters based on a proposal by the president of the nmia .24 to ensure the budgetary independence of the independent regulatory organs, it is common practice to impose a levy on market operators, under conditions specified in detail in the legislation, to ensure the financing and the financial basis of the independent regulatory organ . while ensuring independence from the government, the accountability of the independent regulator should be created, but the independent regulatory organs are only 20 see hcc decision 41/2005 (x.27.). 21 however, this exception is only apparent, given that a local government may only adopt regulations to regulate local social relations not regulated by law or based on an express authorisation granted by law. given this, a municipal ordinance cannot be a source of functions and powers for autonomous regulatory bodies. 22 see annex i, chapter i of act xc of 2020 on the central budget of hungary for 2021. 23 with this solution, the legislator has disrupted the principle of unity and completeness of the budget act, while this specificity already characterised the predecessor of the media council of the nmia, the national radio and television board (hereinafter: the board). article 32(1) of act i of 1996 on radio and television broadcasting provided that the budget of the board shall be approved by parliament in a separate act. 24 see act cxxxii of 2020 on the national media and infocommunications authority’s 2021 unified budget. 116 jános kálmán public governance, administration and finances law review • vol. 8. no. 1.  accountable to the national assembly and its committees . the rules on accountability are contained in the cardinal acts, but there are no  other rules creating accountability to parliament, nor can questions be addressed to the head of the independent regulatory organs (chronowski et al ., 2011, pp . 51–52) . the relationship with the government is ensured by rules requiring the independent regulatory organs to be consulted on regulatory proposals affecting their functions and, for some independent regulatory organs, the right to attend government meetings . the personal independence of independent regulatory organs can be achieved by several means . personal independence is ensured by the nomination and election of the head of the body independent of the public administration or with limited interference from the public administration, a term of office that spans the government’s term of office, extensive rules on conflicts of interest and, in the case of the media council of the nmia, decision-making by the body . according to article 23(2) of the fundamental law – as a limitation of independence  –  the head of an independent regulatory organ shall be appointed by the prime minister or, on a proposal by the prime minister, by the president of the republic for a term of office determined by a cardinal act . the fundamental law thus confers the power to appoint the head of an independent regulatory organ to the prime minister, or the president of the republic on the proposal of the prime minister . the president of the nmia is appointed by the president of the republic on a  proposal from the prime minister . in all cases, the term of office of the president of the independent regulatory organ is significantly longer than the term of office of the government . the term of office of the chairman is 7 years for the hepura and 9 years for the other independent regulatory organs . the term of office of the chairpersons of the independent regulatory organs can typically end before the end of their term only for objective reasons (death, reaching a certain age, final and binding criminal conviction, resignation) and can be terminated in very limited circumstances (e .g . permanent disability for reasons for which they are not responsible) . personal independence is also ensured by the extensive conflict of interest rules for the heads, deputies and civil servants of the independent regulatory organs, which guarantee independence from the sector administered, from market players and the various branches of power . the general part of the conflict of interest rules is laid down in the act on the status of employees of bodies with special status,25 while the specific – sectorspecific – rules are contained in the cardinal acts establishing independent regulatory organs . independence can be facilitated by body decision-making, because this can facilitate independence by promoting self-awareness, reducing reliance on external cues, and empowering individuals to take responsibility for their own choices, but this is not the case for independent regulatory organs . one exception is the nmia, one of its bodies being the media council . this five-member body has independent powers and responsibilities to manage and supervise the media sector . the president and members of the media council are elected by the national assembly for a  9-year term . 25 see act cvii of 2019 for the status of employees of bodies with special status. 117the legal status of independent regulatory organs… public governance, administration and finances law review • 1. 2023 professional independence is based on independence in the exercise of functions and powers . this is ensured by the fact that independent regulatory bodies are subject only to the law and exercise their functions and powers independently and by law . the decisions of independent regulatory organs are typically26 not subject to an administrative appeal, nor can their decisions be amended or annulled by supervisory review . the administrative acts of independent regulatory organs are subject to administrative court actions . administrative proceedings are an instrument of subjective enforcement, so they can only be initiated by the party affected by the decision; the scope of the review is determined by the request for review, but the review can only be based on legality, not on mere technicalities or expediency (trócsányi, 1991; rozsnyai, 2013) . the review activity of the courts is an institutional necessity, in contrast to the individual decisions of public authorities with specialised expertise,27 from which it follows that the courts can be expected to ensure the accountability of public authorities through their subjective remedial role . however, judicial review, and thus accountability for the decisions of the independent regulatory organs, is constrained by the fact that the courts do not have the sectoral expertise – typically complicated technical, economic, it and legal knowledge – that the apparatus of the independent regulatory organs possesses . specialised expertise in administrative litigation can be provided by experts . however, in addition to the independence to exercise their functions and powers, some independent regulatory organs have an explicit duty of cooperation with the government or a  member of the government, or with other public authorities . the nmia participates in the implementation of the government’s policy in the field of frequency management and communications, as defined by law,28 while the sara cooperates in the performance of its tasks with the minister responsible for the supervision of state property, the minister responsible for the regulation of the management of state property, and the minister competent for the subject of concession activity, the minister responsible for justice, the state tax and customs authority, the law enforcement agencies, the body designated as the consumer protection authority and the body designated as the metrolog y authority .29 4. summary the study aimed to place the independent regulatory organs in the system of hungarian public administration and to identify the most important elements of their legal status . in summary, it can be stated that the independent regulatory organs have constitutional 26 in the case of the nmia – because of the rules on the allocation of powers within the body (i.e. the president, the media council and the nmia office have their powers) – the possibility of appeal is provided within the body if the decision was taken by the nmia office in the first instance. depending on the subject matter of the case, the internal appeal forum is the president or the media council, against whose decision only judicial review may be brought [see msmm act article 165 (1) and ec act article 44 (1)]. 27 in constitutional and rule of law circumstances, it follows from the fundamental constitutional right to judicial remedy and access to justice that judicial review of individual decisions by public authorities is necessary. 28 see msmm act article 109 (2). 29 see sara act article 4 (1). 118 jános kálmán public governance, administration and finances law review • vol. 8. no. 1.  status, are central state administrative bodies with special powers, established by the national assembly in a  cardinal act for the performance and exercise of certain functions and powers within the scope of the executive power, and are regulatory authorities with legislative powers, exempted from the direction and supervisory powers of the government, and, in some cases, autonomous . an analysis of some of the main features of the legal status shows that, in the case of independent regulatory organs, the various pillars of autonomy or, to use the correct terminolog y, independence, ensure full independence from the sector administered, while the extent of independence within the state administration is adapted to the professional content and eu and constitutional requirements of the specialised area of administration, which the fundamental law empowers the national assembly to establish . the regulatory instruments exercised by the independent regulatory organs and their legislative powers, which are specific to the independent regulatory organs, allow for a  significant degree of intervention by public authorities in the sectors they manage, but their professional and democratic control is very limited . it is precisely in light of the above that the democratic guarantees – openness, transparency and cooperation with market players – which can counterbalance this deficit are of particular importance . references balogh, j . 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(1991) . a közigazgatási bíráskodás és az alapjogok védelmének eg yes aspektusai . acta humana, 2(4), 39–51 . public governance, administration and finances law review vol. 7. no. 2. (2022) • 91–108. © the author 2023 doi: 10.53116/pgaflr.2022.2.4 why mexicans (dis)obey the law social norms, legal punishment and pluralistic ignorance rebeca pérez león* ¤ * assistant professor, instituto tecnológico de estudios superiores de monterrey campus querétaro, mexico, department of humanities, e-mail: drrpleon@gmail.com abstract: this paper presents the results of an experimental research project on the causes of mexicans’ law-abiding and non-abiding behaviour. firstly, it explains the theories tested, namely, deterrence and normative theory of law-abidance, and defines the concepts measured. regarding deterrence theory, the causal efficacy of knowledge of legal punishment was measured and of normative theory that of social and personal norms. second, it describes how these concepts were operationalised and how the two-stage experimental survey was conducted. finally, the paper outlines the main results. the statistical analyses show that neither social norms explain unlawful behaviour nor knowledge of legal punishment influence law-abiding behaviour among mexicans in specific situations. however, the analysis did show a statistically significant disagreement between mexicans’ behaviour and normative beliefs, which reveals a case of pluralistic ignorance whereby mexicans behave illegally and believe others approve of illegal behaviour, but they personally disapprove of it. these results, however, would have to be confirmed in a study with a representative sample to be conclusive. keywords: deterrence theory, normative theory, legal sanctions, social norms, mexicans’ law-abiding behaviour 1. introduction there is vast evidence of the high disregard for the law in mexico. from 2012 to 2018 mexico plummeted 33 places in the corruption perception index (cpi) resulting from numerous widely publicised cases of corruption among civil servants and politicians at all levels of government but especially at the federal level. as is well known, mexico hosts some of the most powerful drug trafficking organisations in the world recruiting men and women of all social strata, and bribing police and military officials of all ranks. but unlawful behaviour is not exclusive to law enforcement and government officials and criminal organisations. disregard for the law is also common among citizens illustrated by an extremely successful informal economy that overlooks labour rights and tax  obligations, and by the fact that “pettier crimes such as theft on the street or https://doi.org/10.53116/pgaflr.2022.2.4 https://orcid.org/0000-0003-4912-4912 mailto:drrpleon%40gmail.com?subject= 92 rebeca pérez león public governance, administration and finances law review • vol.  7. no. 2.  pickpocketing on public transportation are some of the most reported occurrences in mexico, followed by extortion and fraud cases” (statista research department, 2022). yet disregard for the law is not a single, simple or unitary phenomenon. it has a myriad of manifestations, and each manifestation is brought about by multiple causes. historical and sociological studies find the causes of mexicans’ unlawful behaviour in mexico’s political history and in the population’s precarious socio-economic conditions (almond & verba, 1989; adler de lomnitz, 1993; gonzález casanova, 1981; fix fierro et al., 2017). legal studies highlight rather the gaps in the law (camacho & garcía, 2020). and there are countless surveys that measure, categorise and disaggregate criminal activity in mexico (encup 2001, 2003, 2005, 2008, 2012; amparo casar, 2015). there is growing attention, however, to the causal efficacy of individuals’ normative and empirical expectations of others on legal behaviour (girola, 2011; morris, 2011; sarsfield, 2012; ajzenman, 2021), and the extent to which considerations about punishment play a role in individuals’ legal compliance. the investigation, whose key outcomes i hereby present, contributes to the gathering of evidence of the causal efficacy – or lack thereof – of these latter factors using an experimental methodological approach. the investigation was conducted in 2021 with participants from mexico city, and tests deterrence and normative theories of law-abidance using survey experiments. the project was guided by two interrelated questions, namely, ‘does knowledge of the legal punishments associated with particular legal breaches incline mexicans to obey the law ?’ and ‘do social norms of unlawful behaviour influence mexicans’ unlawful behaviour?’. the former question looks at a possible cause of mexicans’ law-abiding behaviour and draws its explanatory variable from deterrence theories, and the aim of the second question is to test whether the key variables of normative theories can explain unlawful behaviour. generally speaking, deterrence theories maintain that individuals’ law-abiding and non-abiding behaviour result from considerations of the legal punishment associated with breaking the law. according to this theory, the more widely known, severe, swift and certain legal punishments are, the more effective the law will be in deterring individuals from breaking the law. normative theories, on the other hand, state that social and personal norms of respect for the law condition individuals to follow the law. these two theories do not necessarily exclude one another as their respective variables could play a role in individuals’ inclination to follow or not follow the law. the statistical analyses of the data did not provide evidence to support that considerations of legal punishment condition mexicans’ legal behaviour nor did it provide evidence to show the existence of social norms of legal disobedience. however, they do show a statistically significant disagreement between mexicans’ behaviour and normative beliefs that reveals a case of pluralistic ignorance whereby mexicans behave illegally and believe others approve of illegal behaviour, but they personally disapprove of it. it would be necessary, however, to conduct the experimental design in a larger study with a representative sample in order to draw conclusive results. the paper is divided into five sections. the first section briefly describes the main tenets of deterrence and normative theories. the second section identifies the key concepts to be measured, explains how these concepts were operationalised and how the experimental survey was designed and conducted. the third and fourth sections summarise the 93why mexicans (dis)obey the law public governance, administration and finances law review • 2. 2022 main results and offer some interpretations of the results. the fifth and last section concludes the article. 2. deterrence theory and normative theory of law-abidance deterrence theory is a crime prevention theory originally stemming from criminolog y. it presupposes a utilitarian concept of human beings and their rationality according to which “individuals make decisions based on what will garner them pleasure [or] pain” (beccaria, 1986, cited in tomlinson, 2016, p. 33). from this perspective, the rationality of human behaviour is determined by whether a particular conduct is experienced positively or negatively, or brings about consequences which are pleasurable or not. pleasure and pain are not understood only in a physical or corporeal sense. rather, these sentiments involve also symbolic and immaterial valuables such as praise or condemnation, sense of belonging or rejection, etc. deterrence theory maintains that the most effective mechanism to prevent individuals from engaging in certain behaviours is to threaten them with the possibility of experiencing painful or unpleasant experiences as a penalty for engaging in those behaviours. in other words, deterrence theory advances the view that the best way to encourage individuals to avoid engaging in certain behaviours is to criminalise said behaviours. for the threat to be effective though, individuals have to regard the penalty associated as a painful experience or as severe enough for them to want to avoid it. moreover, individuals must know what penalty will follow in each case, believe that it will follow as a consequence for engaging in those behaviours, and that it will follow without undue delay. deterrence theory is thus “grounded in individuals’ perceptions” (tomlinson, 2016, p. 33) about the “certainty, celerity […] severity” (tomlinson, 2016, p. 34) and knowledge of penalties. thus, authorities have to ensure that individuals have the relevant perceptions and knowledge, and for that they need effective communication mechanisms and socialisation agencies that reach the target population. the process of creating the relevant perceptions and knowledge is not straightforward, for numerous factors “such as age, gender, impulsivity, mental illness, antisocial personality disorder, etc.” (ellis et al., 2009, cited in tomlinson, 2016, p. 34) would have to be factored in for the authorities’ message to produce the desired results. once the message about the penalties associated with engaging in certain behaviours is relayed to the target group, it is expected that individuals will make rational choices based on the information received, which, according to the concept of rationality of deterrence theory, should mean avoiding engaging in criminalised behaviours. now, in contrast to deterrence theories that view laws as the “chief means of regulating social relations […] through the threat of punishment” (barrett & gaus, 2020, p. 204), normative theories of law-abidance discard the idea of law as something that opposes and supplants common norms and as the sole effective tool of behavioural change in a political community. instead, normative theories regard laws and law-abiding behaviour as dependent on the social norms prevalent in the society under consideration and on individuals’ personal convictions (cf. barrett & gaus, 2020, p. 208–209). thus, lawabiding behaviour is more prevalent when laws are compatible with common social norms 94 rebeca pérez león public governance, administration and finances law review • vol.  7. no. 2.  and the personal convictions of the members of a society. it is this compatibility that is likely to create social norms of legal obedience. at the opposite end of the spectrum, laws that are incompatible with common social norms are likely to be resisted thereby creating a social behavioural pattern of unlawful behaviour (cf. stuntz, 2000; kahan, 2000). according to barret and gaus, “in cases where there is no social norm of legal obe dience – either because there exists no norm relating to legal obedience or because a norm of legal disobedience is present – laws tend not to be followed, even in the presence of moral convictions that they ought to be” (barrett & gaus, 2020, p. 212). social norms either of legal obedience or legal disobedience tend to trump personal convictions. if, for instance, an individual holds the belief that laws ought to be followed but witnesses people around him/her continuously and systematically breaking or overlooking the law, this individual is likely to behave in accordance with the collective behaviour he/she witnesses rather than with his/her personal moral convictions. this points toward a crucial element about the view of normative theories of individuals’ behaviour and their rationality, namely, “the main variable affecting behaviour is not what one personally likes or thinks one should do, but rather one’s belief about what ‘society’ approves of ” (bicchieri, 2017, p. 10). normative theories, thus, see individuals’ behaviour as fundamentally social. not every pattern of collective behaviour is a social norm though, as cristina bicchieri’s typolog y of patterns of collective behaviour makes clear. most people tend to use coats in winter, but their behaviour is not a social norm because wearing coats does not “depen[d] on the expectation that others conform” (bicchieri, 2006, p. 22) or on “the belief that they expect me to conform” (bicchieri, 2006, p. 22). a social norm exists when the preference of behaviour is caused by our belief that others engage in that behaviour and our belief that others expect us to engage in that behaviour: “a social norm exists when a sufficient number of individuals have the ‘normative expectation’ that others believe one ought to follow the law, and the ‘empirical expectation’ that others do in fact follow the law” (barrett & gaus, 2020, p. 212), and when these expectations are causing the choice of behaviour. social norms, thus, are maintained because individuals believe others follow the norm and because individuals believe the majority expect others to follow the norm, and they act upon these beliefs. these beliefs, however, might be mistaken, which gives rise to a phenomenon termed ‘pluralistic ignorance’. pluralistic ignorance happens when individuals hold the aforementioned beliefs while ignoring that “it is not true that all members […] believe one ought to follow n [the norm]. in fact, the majority of individuals dislike n and do not think one ought to follow it” (bicchieri, 2017, p. 42). since they believe the majority hold this mistaken belief too, they deliberately avoid openly revealing their true normative beliefs for fear of being at the receiving end of punishments of various sorts or because they seek to obtain the social benefits of behaving as others think one should behave such as “obtain[ing ] approval or avoid[ing ] disapproval” (barrett & gaus, 2020, p. 212) or some other symbolic or non-symbolic utility. moreover, individuals might see others’ “expectations as legitimate […] as grounding an obligation to comply” (barrett & gaus, 2020, p. 213). these reasons are powerful enough for people to comply with what they believe others believe and do, but, in some cases, this compliance contributes to the maintenance of socially damaging social norms. 95why mexicans (dis)obey the law public governance, administration and finances law review • 2. 2022 3. operationalisation of concepts and experimental survey design the first research question, ‘does knowledge of legal sanctions associated with particular legal breaches incline mexicans to obey the law ?’, looks at the causal efficiency of one of the explanatory concepts of deterrence theory on legal behaviour, that is, knowledge of legal sanctions. additionally, the correlation – although not the causality – of certainty of legal punishment and choice of behaviour was tested. celerity and severity of legal sanctions were left out. celerity was left out because it is in a sense subsumed under individuals’ perception of the certainty of punishment, and because it requires more familiarity with legal processes than the average person is likely to have. severity was not included because it presupposes knowledge of legal sanctions, a presupposition not necessarily warranted. the concept of knowledge of legal sanctions does not need to be operationalised. sanctions were communicated to participants in simple and plain language in order to ensure that they were aware of them. certainty of punishment was operationalised in terms of perceptions of the probability of receiving a legal sanction for specific legal offences. it was measured by asking participants about their perception of the likelihood of being punished if caught committing specific criminalised behaviours, where they had to choose between four options: highly likely, likely, not very likely, unlikely. the second research question, ‘do social norms of unlawful behaviour influence mexicans’ unlawful behaviour?’, looks at the influence of social norms on unlawful behaviour. this concept also needs operationalisation, but cristina bicchieri’s concept of social norms has the advantage of being easy to operationalise. bicchieri defines social norms as patterns of collective behaviour where the preference for behaviour depends on empirical and normative social expectations. social expectations generally are beliefs or future predictions about others. empirical social expectations in particular are beliefs about how others will behave in the future, and normative social expectations are beliefs about what others approve of, and will continue to approve of in the future. personal norms in turn are beliefs about what individuals personally approve of regardless of whether others agree or disagree with them (cf. bicchieri, 2017, pp. 11ff, 18ff ). in the first instance, measuring social norms requires gathering information about empirical and normative social expectations among participants. for there to be social norms though, there need not only be a majority consensus of the relevant expectations about others. rather, preference for a particular behaviour must be caused by this consensus, that is, compliance must come as a result of the relevant social expectations. thus, behaviour has to be measured when the relevant expectations are and are not present and see whether there are significant differences in behaviour. following cristina bicchieri’s standard measurement of social norms (cf. bicchieri, 2017, p. 50ff; bicchieri et al., 2014) i designed a two-staged experimental survey, the first of which aimed at finding out consensus (or lack thereof ) of empirical and normative social expectations, and the second stage was intended to determine whether these expectations were causing unlawful behaviour. since the research also aims at determining whether considerations about punishment influence mexicans’ legal behaviour, the survey 96 rebeca pérez león public governance, administration and finances law review • vol.  7. no. 2.  of the first stage included a question about the perception of the likelihood of being punished if caught committing a legal offence, and the second stage also put to the test the causal efficacy of knowledge of legal sanctions on law-abiding behaviour. causality implies not only that one phenomenon occurs after another, but rather it implies that, all things remaining equal, if the first phenomenon had not occurred, the second would not have occurred either. one way of measuring causality in survey experiments, as bicchieri suggests, is to manipulate variables (bicchieri, 2017, p. 27), for example, by giving information to some participants and not to others and evaluating whether their behaviour or choices change. if it does not change, then the independent variable under consideration is not having any influence, but if it does, then this would show that the independent variable is influencing behaviour. after revising the data of the national institute of statistics and geography of mexico for mexico city, four common offences were selected: bribing police officers; putting up food stands in the street without legal permission; not registering small businesses with the tax office; and urinating in the street. for the first stage, i designed a questionnaire that presents participants with four common situations where a fictional character faces the dilemma of whether to follow the law or commit one of the aforementioned common offences. for each situation, participants are asked what they believe others in mexico city would do, what they believe others in mexico city believe should be done, and what they themselves believe should be done. the first and second questions gather information about participants’ empirical and normative social expectations, respectively. since there is a possibility that participants’ do not reflect carefully about the answers to these questions, each of these two questions was followed by a question where participants are asked to guess what the majority of participants in the study selected in the previous question, and were offered a monetary incentive for each correct guess. finally, the third question inquires about their personal norms. for all questions, participants had four options, two of which described lawful behaviours and the rest described unlawful behaviours. this first questionnaire also included a chart listing the four relevant legal offences where participants had to choose the likelihood of being punished in each case from four options: highly likely, likely, not very likely and unlikely. additionally, in this first questionnaire participants also had to answer questions about their age, gender, education level, and where they live. for the second stage i designed three questionnaires which again presented participants with the same four situations described in the questionnaire of stage one, and in each case participants were asked to choose the course of action the fictional character would take. participants had to choose from four options, two of which described lawful behaviours and the other two described unlawful behaviours. the questionnaires though were not exactly the same. one questionnaire added information about the legal sanctions corresponding to the legal breaches after describing the situation. a second questionnaire added false information about empirical and normative social expectations of the majority of participants of a previous study – a deception of which participants were informed after the study. the third questionnaire did not have additional information and was used with the control group. the responses of the questionnaires were compared in order to find out whether there were significant differences between them. 97why mexicans (dis)obey the law public governance, administration and finances law review • 2. 2022 it should be noted that in the questionnaires used in the second stage participants are asked what they think the fictional character will do instead of asking participants what they themselves would do. i decided to ask indirect rather than direct questions because of the possibility that participants might not answer truthfully, namely, because of social desirability bias. this kind of error happens when asking sensitive questions to participants, such as whether they follow the law. in these situations “participants may provide survey workers with what they feel is a socially desirable answer, rather than with the answer that reflects their true attitude” (bicchieri, 2017, p. 56). asking indirect questions can provide a sort of solution to this problem, for “most individuals are subject to what is known as a ‘false consensus effect’ in that, when not aware of dispositional or personspecific information, they infer that a decision maker would behave as […] they themselves would when in a particular situation” (bicchieri, 2014, p. 11). surely, asking indirect questions also creates an error, but the responses to these questions can still “teach us something about how the respondent would react” (bicchieri, 2014, p. 11). a random sample of thirty one adult mexicans living in mexico city at the time of the study was selected for the study. given that it was an exploratory research project, the sample was small and not representative of the mexican population although it did portray the characteristics of the population in terms of gender (51.6% identified themselves as women and 48.4% did so as men), and the ranges of age were similar to the mexican population (25.8% were from 18 to 27 years old, 19.4% were from 28 to 37, 29% were from 28 to 47, 9.7% were from 48 to 57, 6.5% from 58 to 67 and 9.7% were from 68 to 77 years old). all participants answered the questionnaire of the first stage, and for the second stage participants were randomly selected to answer one of the three questionnaires. the research and all materials were evaluated by the ethics of research board at the central european university in vienna, and approved in august 2021. all participants received and signed a consent form before starting the experimental survey, and were duly informed of the false information given in one of the three questionnaires used in the second stage and of the reasons for using false information. 4. results as said above, one of the aims of the first stage was to find out whether there was a consensus or agreement of empirical and normative social expectations. these are shown in table 1 below. with only one exception, the majority of participants believe most mexicans in mexico city would behave unlawfully and believe that most mexicans in mexico city believe others should behave unlawfully. in these cases, there is a consensus of both empirical and normative social expectations suggesting a high probability of the existence of social norms of legal disobedience. in the first situation, a fictional character is driving on a lane exclusive for public transport, a police officer sees him and waves him to pull over. the police officer informs the fictional character that he will give him a ticket and take his car to the police car deposit. the character entertains the possibility of bribing the police officer so he can walk 98 rebeca pérez león public governance, administration and finances law review • vol.  7. no. 2.  away. when asked what they believe most mexicans in mexico city would do, 90.3% of participants believe most people would bribe the police officer, and only 9.7% believe they would not bribe the police officer. this clearly shows a consensus of empirical social expectations of unlawful behaviour when it comes to situations where individuals are faced with the possibility of bribing a police officer. regarding normative expectations, 58.1% believe most mexicans in mexico city believe others should bribe the police officer, and 41.9% believe mexicans believe others should not bribe police officers. again, this shows an agreement of normative expectations of unlawful behaviour. in the second situation, a fictional character works as a clerk in a hotel but every month struggles to make ends meet, so he/she entertains the possibility of selling food outside his/her house and is wondering whether to apply for a legal permit at the local council for that purpose. in this situation, 83.9% of participants believe that the majority of mexicans in mexico city would not apply for a legal permit, and 16.1% believe they would apply for a legal permit, which shows a consensus of empirical social expectation of unlawful behaviour. as to normative expectations, 41.9% believe most mexicans in mexico city believe others should not apply for a legal permit and 58.1% believe people believe others should apply for legal permission. strictly speaking these percentages do not show an agreement of normative social expectation of unlawful behaviour, because the majority did not hold this social expectation. yet the percentage of those who believe mexicans in mexico city approve of unlawful behaviour in this situation is still rather high. in the third situation, a character just started his own business fixing computers, but he has not registered it with the tax office. a client asks him for a payment invoice, which the character cannot as of yet provide. 87.1% of participants believe the majority of mexicans in mexico city would not register their business with the tax office, and only 12.9% believe they would register it. these percentages show a consensus of empirical expectations of unlawful behaviour. regarding normative expectations, 58.1% believe the majority of mexicans in mexico city believe the character should not register his business with the tax office and 41.9% believe people believe the character should register it. again, these results show a consensus of normative expectations of unlawful behaviour. finally, in the last situation a man is walking down the street after attending a party. he badly needs to go to the toilet and there are no public toilets nearby and he is disinclined to go back to the party. he entertains the possibility of urinating in the street. when asked what the majority of people in mexico city would do, 90.3% believe they would urinate in the street, and 9.7% believe they would not urinate in the street. this shows an agreement of empirical expectation of unlawful behaviour. as to normative expectations, 61.3% believe the majority of mexicans in mexico city believe the character should urinate in the street, and 38.7% believe people in mexico city believe the character  should not urinate in the street. again, this shows a consensus of normative expectations of unlawful behaviour. 99why mexicans (dis)obey the law public governance, administration and finances law review • 2. 2022 table 1. empirical and normative social expectations b ri bi ng o r n ot po lic e offi ce rs a pp ly in g fo r l eg al pe rm it to p ut u p a fo od st an d in th e st re et r eg is te ri ng o r no t a b us in es s w it h th e ta x offi ce u ri na ti ng o r n ot in th e st re et e m pi ri ca l ex pe ct . n or m at iv e ex pe ct . e m pi ri ca l ex pe ct . n or m at iv e ex pe ct . e m pi ri ca l ex pe ct . n or m at iv e ex pe ct . e m pi ri ca l ex pe ct . n or m at iv e ex pe ct . unlawful behaviour 90.3% 58.1% 83.9% 41.9% 87.1% 58.1% 90.3% 61.3% lawful behaviour 9.7% 41.9% 16.1% 58.1% 12.9% 41.9% 9.7% 38.7% total 100% 100% 100% 100% 100% 100% 100% 100% source: compiled by the author. with one exception, participants’ responses to the questions of what they believe most mexicans in mexico city would do and believe others ought to do show a consensus of empirical and normative social expectations of unlawful behaviour. thus, in the bribing situation, the business tax registration situation, and the urinating in the street situation, there is a high probability of there being social norms of unlawful behaviour, because social norms require a consensus of both empirical and normative expectations. in the food stand situation the majority does not hold a normative expectation of unlawful behaviour despite holding the empirical expectation of unlawful behaviour. yet, the percentage of those who believe mexicans in mexico city approve of unlawful behaviour is high, so there is a possibility that there might be a social norm of unlawful behaviour in this situation, too. the second stage aimed at determining the causes of lawful and unlawful behaviour in the relevant situations. in the questionnaire of stage one, i gathered participants’ data about age, gender and level of education. i first ran statistical tests to see whether these variables influenced participants’ responses, but the results of the tests do not support a  dependence of behaviour on these variables. more concretely, i ran a point-biserial correlation to test whether age influences participants’ choice for lawful or unlawful behaviour for each of the situations. the correlation for the data revealed a significant relation between age and the choice of behaviour in the bribing situation, r = +0.479, n = 31, p < .01, two tails; no significant relation between age and the choice of behaviour in the urinating in the street situation, r = +0.193, n = 31, p > .05, two tails; no significant relation between age and applying for a permit to put up a food stand situation, r = +0.203, n = 31, p > .05, two tails; and no significant relation between age and the choice of behaviour in the business registration with the tax office situation, r = +0.267, n = 31, p >  .05, two tails. these results are shown in table 2. 100 rebeca pérez león public governance, administration and finances law review • vol.  7. no. 2.  table 2. results of the point-biserial correlation between age and choice of behaviour bribing or not police officers applying or not for a legal permit to put up a food stand in the street registering businesses or not with the tax office urinating or not in the street age 0.479** 0.203 0.267 0.193 *p < 0.01, two tails **p < 0.05, two tails source: compiled by the author. i also ran fisher’s exact test to see whether gender and level of education influence the choice of behaviour. it was not possible to run the chi-square test for independence to evaluate the influence of gender and level of education on behaviour because the sample was too small and there were expected counts with less than five in all cases, which violates one of the assumptions of this test. in such cases, fisher’s exact test is used instead, which, similarly to the chi-square test for independence, tests the association or relationship between two nominal variables, but, unlike the chi-square test for independence, does not have the aforementioned assumption and can be used with very small samples. below tables 3 and 4 show the p values of fisher’s exact test for the relation between gender and choice of behaviour and level of education and choice of behaviour, respectively. in all cases, the p value is higher than 0.05 which suggests no association between the variables. table 3. fisher’s exact test results for dependence of choice of behaviour on gender bribing or not police officers applying or not for a legal permit to put up a food stand in the street registering businesses or not with the tax office urinating or not in the street fisher’s exact test exact sig. (2-sided) 0.394 0.394 0.333 0.654 source: compiled by the author. table 4. fisher’s exact test results for dependence of choice of behaviour on level of education bribing or not police officers applying or not for a legal permit to put up a food stand in the street registering businesses or not with the tax office urinating or not in the street fisher’s exact test exact sig. (2-sided) 0.889 0.172 0.879 1.00 source: compiled by the author. 101why mexicans (dis)obey the law public governance, administration and finances law review • 2. 2022 after testing the influence of age, gender and level of education on choice of behaviour, i ran statistical analyses to test whether the main independent variables of this study, that is, knowledge of legal sanctions and empirical and normative expectations of unlawful behaviour influence lawful and unlawful behaviour, respectively. as described in the previous section, participants answered one of the three questionnaires. i gathered indirect information about what they would do in each situation and compared the results of the three questionnaires in order to see whether their choices differ significantly. in all cases i ran fisher’s exact tests, but the statistical analysis showed no statistically significant dependence of lawful behaviour on considerations about legal sanctions or dependence of unlawful behaviour on empirical and normative social expectations. the crosstab of percentages is shown in table 5 and the p values of fisher’s exact tests are shown in table 6 below. table 5. percentages of choice of behaviour by treatment group and situation b ri bi ng o r n ot p ol ic e offi ce rs a pp ly in g or n ot fo r a le ga l pe rm it to p ut u p a fo od st an d in th e st re et r eg is te ri ng b us in es se s o r n ot w it h th e ta x offi ce u ri na ti ng o r n ot in th e st re et u nl aw fu l be ha v. l aw fu l be ha v. u nl aw fu l be ha v. l aw fu l be ha v. u nl aw fu l be ha v. l aw fu l be ha v. u nl aw fu l be ha v. l aw fu l be ha v. not knowing legal sanctions and no information about social expectations (control group or group a) 70% 30% 80% 20% 90% 10% 90% 10% manipulated empirical and normative expectations (second treatment group or group b) 100% 0% 80% 20% 90% 10% 90% 10% knowing legal sanctions (first treatment group or group c) 72.7% 27.3% 72.7% 27.3% 72.7% 27.3% 63.6% 36.4% source: compiled by the author. 102 rebeca pérez león public governance, administration and finances law review • vol.  7. no. 2.  table 6. results of fishers’ exact test of survey experiment bribing or not police officers applying or not for a legal permit to put up a food stand in the street registering businesses or not with the tax office urinating or not in the street fisher-freemanhalton exact text exact sig. (2-sided) .199 1.000 .578 .306 source: compiled by the author. if we compare the percentages of participants who were informed that the majority of respondents in a previous study would take the lawful course of action and disapprove of unlawful behaviour with the percentages of participants who did not receive additional information in table 5, the majority in both groups chose unlawful behaviours in all situations. this suggests that the additional information did not have any significant influence on their choice of behaviour and, thus, that there are no social norms of legal disobedience in the relevant situations. even though most participants believe others break the law and approve of illegal behaviour in most situations, the statistical results of fisher’s exact test in table 6 do not support the hypothesis that these beliefs cause unlawful behaviour among mexicans in mexico city. admittedly, given the small sample of this study, these results can only indicate this possibility without being able to state a conclusive lack of causal relation. now, with respect to the independent variable of deterrence theory under consideration, in three out of four situations the percentages of people who chose an unlawful course of action and were informed of the legal sanctions corresponding to each offence are slightly lower than the percentages of the control group (participants who receive no additional information of any kind). this difference is not statistically significant as shown in table 6, but it is worth noting, for in research with a larger sample these differences might turn out to be significant. as they are, in all cases and regardless of whether they knew of legal sanctions or not, the majority still chose the unlawful behaviour. one possible reason as to why knowledge of legal sanctions does not nudge individuals towards behaving lawfully is that deterrence theory has been relentlessly tested and consistently found limited in its ability to significantly explain legal compliance and deter unlawful behaviour (cf. barrett & gaus, 2020, pp. 209–210; tomlinson, 2016, pp. 33–38; tyler, 2006, p. 22). yet, i still decided to test the influence of knowledge of legal sanctions on legal behaviour because there are still too few empirical studies that put the theory to the test in the mexican case even though numerous strategies to reduce criminal behaviour in mexico generally and mexico city in particular still rely on the explanations of deterrence theory. although this study is not representative, it does corroborate the findings of larger studies that not only suggest the limited effectiveness of policies based on deterrence theory but also highlight the need to design different ones. the results of the correlation between certainty of punishment and choice of behaviour provides further evidence of deterrence theory’s limited ability to explain legal 103why mexicans (dis)obey the law public governance, administration and finances law review • 2. 2022 compliance. it might be recalled that in the questionnaire used in the first stage, participants were asked about their perceptions of the likelihood of being punished if caught committing the relevant legal offences. the influence of their perception on their choice of behaviour was then tested using fisher’s exact test, but the results support no significant influence. table 7 contains the percentages of choice of behaviour by perception of degree of likelihood of being punished and table 8 shows the results of fisher’s exact test. table 7. percentages of choice of behaviour in each situation by perception of degree of likelihood of legal punishment b ri bi ng o r n ot po lic e offi ce rs a pp ly in g or no t f or a le ga l pe rm it to p ut up a fo od st an d in th e st re et r eg is te ri ng bu si ne ss es o r no t w it h th e ta x offi ce u ri na ti ng o r no t i n th e st re et u nl aw . be ha v. l aw . b eh av . to ta l u nl aw . be ha v. l aw . be ha v. to ta l u nl aw . be ha v. l aw . be ha v. to ta l u nl aw . be ha v. l aw . be ha v. to ta l highly likely 9.7% 6.5% 16.2% 22.6% 9.7% 32.3% 19.4% 9.7% 29.1% 29% 9.7% 38.7% likely 12.9% 3.2% 16.1% 12.9% 9.7% 22.6% 16.1% 3.2% 19.3% 29% 6.5% 35.5% not very likely 51.6% 9.7% 61.3% 29% 3.2% 32.2% 45.2% 3.2% 48.4% 12.9% 3.2% 16.1% unlikely 6.5% 0% 6.5% 12.9% 0% 12.9% 3.2% 0% 3.2% 9.7% 0% 9.7% total 80.6% 19.4% 100% 77.4% 22.6% 100% 83.9% 16.1% 100% 80.6% 19.4% 100% source: compiled by the author. table 8. results of fisher’s exact test for association between choice of behaviour in each situation and perception of likelihood of punishment bribing or not police officers applying or not for a legal permit to put up a food stand in the street registering businesses or not with the tax office urinating or not in the street fisher’s exact test exact sig. (2-sided) 0.710 0.280 0.322 1.00 source: compiled by the author. participants’ perception of the likelihood of being punished for bribing, not applying for legal permission to sell food in the street, and not registering a business with the tax office is significantly low, which could explain that a large number of participants in these cases chose an unlawful course of action. more specifically, of 67.8% of participants who believe it is unlikely or not very likely that they will be punished for bribing 58.1% 104 rebeca pérez león public governance, administration and finances law review • vol.  7. no. 2.  chose an unlawful course of action; of 51.6% of those who believe it is unlikely or not very likely that they will be punished for not registering a business with the tax office 48.4% chose unlawful behaviours; and of 45.1% of those who believe it is unlikely or not very that they will be punished for not having legal permission to sell food in the street 41.9% decided for unlawful behaviours. this pattern might suggest that it is more likely to commit a legal offence if you believe the risk of punishment is very low or nonexistent, which would very much accord with the tenets of deterrence theory. this interpretation, however, is challenged by the percentages of the urinating in the street situation and other tendencies in table 7. in the urinating in the street situation, out of 74.2% of participants who believe it is highly likely or likely to be punished for committing this legal offence 58% would still urinate in the street. out of 48.4% of those who believe it is highly likely or likely to be punished for not registering a business with the tax office, 35.5% would nonetheless not register a business with the tax office. and a similar tendency can be seen in the applying for legal permission to put up a food stand in the street situation, where, although 54.9% of participants believe it is highly likely or likely to be punished for not having legal permission to sell food in the street, 35.5% would sell food in the street without legal permission. together with the higher p values shown in table 8, the percentages described in the previous paragraph and in this paragraph suggest that people’s perception of the likelihood of being punished does not rate high in their considerations about whether to commit a legal offence or not, for regardless of whether they believe it is highly likely, likely, not very likely or unlikely to be punished, the majority would still decide for an unlawful course of action. this conclusion disproves the explanations of deterrence theory. something worth noting is the contrast between the factual degree of certainty of punishment in mexico and participants’ perception of the likelihood of being punished. according to the results of the 2013 national survey of victimisation and perception of public security, of 33,090,263 crimes committed, 5.08% were reported, 0.49% were investigated and only 0.33% were punished (cited in amparo casar, 2015, p. 56). this means that 99.51% of crimes in mexico are not investigated, and 99.7% are not punished. it would be safe to say that in mexico people who commit legal offences generally get away with it. in contrast, table 7 shows that only a minority of individuals are aware of this fact, for very few people believe it is unlikely that they will be punished for committing the relevant legal offences. 5. pluralistic ignorance an unexpected result was found when comparing participants’ personal normative beliefs and their normative social expectations. more concretely, when participants were asked whether they personally approve of unlawful behaviour, the majority responded negatively although they believe others do approve of unlawful behaviour. in other words, most participants believe others approve of unlawful behaviour significantly more than they personally do. this shows an inaccurate perception about others’ normative beliefs, which is likely to be caused by the belief that others do in fact break the law. 105why mexicans (dis)obey the law public governance, administration and finances law review • 2. 2022 clearly, if people witness constant legal offences in their environment either personally or vicariously, it is reasonable to believe that unlawful behaviour is approved of by others. however, in some situations this normative belief is false and generates the phenomenon of ‘pluralistic ignorance’. ‘pluralistic ignorance’ is a “socio-psychological phenomenon that involves a systematic discrepancy between people’s private beliefs and public behaviour in certain contexts” (bjerring et al., 2014, p. 2445). bicchieri defines it as a “belief trap” (bicchieri, 2017, p. 44) where perceived consensus of normative social expectations differs from objective consensus, for “each member of a group believes her personal normative beliefs and preferences are different from those of similarly situated others, even if public behaviour is identical” (miller & mcfarland, 1987, cited in bicchieri, 2017, p. 42). thus, a case of pluralistic ignorance occurs when: a) people hold the true belief that others engage in a particular behaviour, i.e. breaking the law, because they in fact engage in said behaviour, but b) also hold the false belief that others believe one ought to engage in the behaviour because, in fact, c) most people hold the belief that one ought not to engage in said behaviour. in order to detect pluralistic ignorance, information about personal normative beliefs are gathered and compared to their second-order beliefs about others’ normative beliefs (normative social expectations). in all cases, comparisons between personal normative beliefs and normative social expectations show this kind of discrepancy as detailed in table 9. table 9. percentages of normative social expectations and personal norms b ri bi ng o r n ot po lic e offi ce rs a pp ly in g fo r l eg al pe rm it o r n ot to pu t u p a fo od st an d in th e st re et r eg is te ri ng o r n ot bu si ne ss es w it h th e ta x offi ce u ri na ti ng o r n ot in th e st re et n or m at iv e so ci al e xp ec ta ti on pe rs on al n or m n or m at iv e so ci al e xp ec ta ti on pe rs on al n or m n or m at iv e so ci al e xp ec ta ti on pe rs on al n or m n or m at iv e so ci al e xp ec ta ti on pe rs on al n or m unlawful behaviour 58.1% 29.0% 41.9% 29.0% 58.1% 25.8% 61.3% 32.3% lawful behaviour 41.9% 71.0% 58.1% 71.0% 41.9% 74.2% 38.7% 67.7% total 100% 100% 100% 100% 100% 100% 100% 100% source: compiled by the author. 106 rebeca pérez león public governance, administration and finances law review • vol.  7. no. 2.  table 9 shows clearly that in all cases the percentages of normative social expectations of unlawful behaviour are larger than the percentages of personal norms of unlawful behaviour and, concomitantly, the percentages of normative social expectations of lawful behaviour are smaller than the percentages of personal norms of lawful behaviour. in other words, in most situations a majority of participants believe others approve of unlawful behaviour but actually most participants disapprove of unlawful behaviour. correspondingly, in most situations a majority of participants approve of lawful behaviour, but a smaller percentage believe others approve of lawful behaviour. for all situations, i ran related-samples mcnemar test with a p value of 0.05, two-tailed, to see whether these differences were statistically significant and, as shown in table 10, with one exception, they were significant. table 10. results of related-samples mcnemar test of differences between normative social expectations and personal norms bribing or not police officers applying for legal permit or not to put up a food stand in the street registering or not businesses with the tax office urinating or not in the street distribution of values across normative social expectations and personal norms exact sig. (2-sided test) .012 .344 .013 .022 source: compiled by the author. these results suggest that, although mexicans do engage in unlawful behaviour, they do not approve of it. in fact, most participants appear to prefer lawful courses of action, but they do not behave according to their own normative beliefs. clearly, mexicans feel that there are many situations where they have to compromise their personal normative beliefs and behave according to how they believe things are done. they might believe that going with the collective flow, as it were, is actually the most rational course of action in the sense that they use the least amount of resources while obtaining a maximum utility. 6. conclusions this article presents the results of an experimental research guided by two questions, namely, ‘does knowledge of the legal punishments associated with particular legal breaches incline mexicans to obey the law ?’ and ‘do social norms of unlawful behaviour influence mexicans’ unlawful behaviour?’. the first question draws its independent variable from deterrence theory and the second question does so from normative theory of 107why mexicans (dis)obey the law public governance, administration and finances law review • 2. 2022 law-abidance. the study conducted an experimental survey to a sample of 31 adult mexicans living in mexico city at the time of the study. the statistical tests, however, did not show that knowledge of legal sanctions inclines mexicans to obey the law, nor the existence of social norms of unlawful behaviour. the statistical tests did show a sharp and statistically significant discrepancy between participants’ legal behaviour, normative beliefs and personal beliefs, which suggests a case of pluralistic ignorance. these results would have to be confirmed in a larger study with a representative sample in order to be conclusive. references adler de lomnitz, l. 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(2016). an examination of deterrence theory: where do we stand? federal probation journal, 80(3), 33–38. online: https://bit.ly/3blaglq transparency international (2021). corruption perception index. online: www.transparency.org/en/ cpi/2021 tyler, t. r. (2006). why people obey the law. princeton university press. online: http://doi.org/10.2307/j. ctv1j66769 http://doi.org/10.2307/1073832 http://doi.org/10.2307/1073832 https://bit.ly/3blaglq https://www.transparency.org/en/cpi/2021 https://www.transparency.org/en/cpi/2021 http://doi.org/10.2307/j.ctv1j66769 http://doi.org/10.2307/j.ctv1j66769 © 2018 dialóg campus, budapest public governance, administration and finances law review vol. 3. no. 2. (2018) • 110–119. complaint in tax administration as an instrument to ensure good administration1 zuzana marethová* * zuzana marethová, postgraduate student, department of financial law, faculty of law, masaryk university, the czech republic. the author specialises in tax procedural law. (e-mail: 344107@ mail.muni.cz) abstract: this contribution deals with the legal institute of complaint as  an instrument to ensure good administration, more precisely good tax administration. the main aim of the contribution is  to  confirm or disprove the  hypothesis that a  complaint is  an  institute that effectively protects people involved in tax administration and thereby mediates good governance. in  the  contribution, the method of analysis will be used to analyse and define theory and legal regulation. keywords: good governance; good administration; good tax administration; law; tax law; tax code; complaint 1. introduction the aim of this contribution is to discuss the legal institute of complaint as an instrument to  ensure good tax administration. good administration (governance) as one of the basic pillars of  the modern rule of law must be obviously protected. this  protection is ensured through a  variety of institutes. for  example, we can refer to the means of protecting the rights of tax subjects which, in addition to this protection, also ensure respect for the principles of good administration. one of these means is a  complaint which has a  special place among the other means of protecting the rights of taxpayers. it should serve as a fast, operational and effective institute. the hypothesis of this contribution is that the complaint is an effective institution protecting good governance (and the rights of taxpayers). throughout the paper, an analytical method will be used to build the text of this contribution. nowadays, the issue of complaint is elaborated particularly in decisions of  regional courts and judgments of the supreme administrative court. in the academic environment, the topic (complaint) was in general a  subject of research especially of jeroušek,2 burda3 and partly myself.4 however, these works do not take complaint as complexly as this paper. the article will be split into chapters in which good administration will generally be discussed first and then complaint will be addressed as an institute targeting to protect this good administration. 10.53116/pgaflr.2018.2.10 mailto:344107%40mail.muni.cz?subject= mailto:344107%40mail.muni.cz?subject= https://doi.org/10.53116/pgaflr.2018.2.10 111 public governance, administration and finances law review • 2. 2018 complaint in tax administration as an instrument to ensure good administration 2. good administration good administration, respectively good administrative practice is difficult to grasp and define. on a  theoretical level, good administration is defined for example by potešil according to who the term “good governance” includes a  set of requirements that aim to ensure the quality and proper functioning of public administration in the conditions and environment of a  modern democratic rule of law based on respect for fundamental rights and the freedoms of individuals. in other words, good administration is about such a  performance of public administration that can be denoted by an adjective expressing its positive attribute – good.5 the introduction of the concept of good administration into the legal systems of many states is a merit of the council of europe, in particular of its recommendation cm/ rec(2007)7 of the committee of ministers to member states on good administration. this document recommends that the governments of member states promote good administration within the framework of the principles of the rule of law and democracy; promote good administration through the organisation and functioning of public authorities ensuring efficiency, effectiveness and value for money. these principles require that member states ensure that objectives are set and performance indicators are devised in order to monitor and measure, on a regular basis, the achievement of these objectives by the administration and its public officials; compel public authorities to regularly check, within the remit of the law, whether their services are provided at an appropriate cost and whether they shall be replaced or withdrawn; compel the administration to seek the best means to obtain the best results; conduct appropriate internal and external monitoring of the administration and the action of its public officials; promote the right to good administration in the interest of all, by adopting, as appropriate, the standards set out in the model code appended to this recommendation, assuring their effective implementation by the officials of member states and doing whatever may be permissible within the constitutional and legal structure of the state to ensure that regional and local governments adopt the same standards.6 to the described recommendation, the code of good administration is attached which contains twenty-two basic principles divided into three sections. the most important of these include: principle of equality, principle of impartiality, principle of  proportionality, principle of legal certainty, principle of  taking action within a  reasonable time limit, principle of  participation, principle of respect for privacy and principle of transparency.7 in the european union, good governance is based on article 41 of the charter of fundamental rights of the european union, entitled the right to good administration, under which everyone has the right to have his or her affairs handled impartially, fairly and  within a  reasonable time by the institutions, bodies, offices  and other bodies of the union. this right includes, in particular, the right of everyone to be heard before the adoption of an individual act which could affect him; the right of everyone to have access to the file relating to him, while respecting the legitimate interests of confidentiality and  professional and business secrecy, and the obligation of  the  administrative authorities to justify their decisions. according to that article, everybody is also entitled to the compensation of 112 zuzana marethová public governance, administration and finances law review • vol. 3. no. 2. damage caused by the institutions of the union or by its employees in the performance of their duties and  the  right to write to the institutions of the union in one of  the treaty languages and receive a reply in the same language. in response to this article of the charter of fundamental rights of the european union, the european parliament has adopted the european code of good administrative behaviour applicable to the institutions and officials of the european union. the code emphasises, for example, the principles of legality, non-discrimination, proportionality, prohibition of misuse of powers, impartiality and independence, objectivity, legitimate expectations, consistency, justice, courtesy or replies in the language of the citizen.8 2.1. czech tax law and good administration the czech national law, like the eu law, operates with the institute of  good administration, but it does not define it.9 the basic procedural law regulating administrative proceedings, the administrative code,10 in its article 8(2), rules that the  administrative authorities cooperate with each other for  the  sake of good administration; the legal principle is however not further explained or developed. the main tax procedural regulation (which a  priori concerns this  contribution), the tax code,11 does not explicitly include the term of good administration. it contains, however (similarly to the administrative code and to the above-mentioned eu documents and documents of the council of europe) a catalogue of the basic principles of tax administration, whose incorporation in the law sought to achieve, among other things, good tax administration. these are the principles of legality, legal license, restraint and proportionality, procedural equality, co-operation, instructional helpfulness and courtesy, speed and economy of management, free assessment of evidence, legitimate expectation, material truth or non-publicity. thus, the basic principles of tax administration, as a whole, ensure good governance in the area of tax law. their effectiveness is ensured by being directly binding. they are important interpretative rules that need to be taken into account when interpreting individual tax provisions. the principles express certain rules that apply at any stage of tax administration. these basic principles of tax administration govern not only the behaviour of the tax administrator and the tax subjects, but also all other persons involved in tax proceedings. the principles are legally binding unless other special provisions contain exceptions.12 2.2. means to meet the requirement of good governance as has already been mentioned, the basic principles of tax administration and the good administration provided by them are intertwined through the entire legal regulation of the tax process. the tax administrators are therefore obliged to respect them in all their  procedures. but it would be illusory to think that all tax administrators do so in all their actions. it is therefore necessary for the procedural regulation to contain the means 113 public governance, administration and finances law review • 2. 2018 complaint in tax administration as an instrument to ensure good administration to  check compliance with the principles of good tax administration, respectively of all duties of the tax administrator. it is precisely these means that ensure that the tax administrators will act in  accordance with the principles of good administration in  the exercise of their powers. the czech legal framework of tax procedural law contains a wide range of these means aimed at remedying the undesirable situation in tax administration. for example, proper and exceptional remedies can be named. among these remedies, which ensure full respect for  the  principles of good administration, the legal institute of the complaint set out in article 261 of the tax code takes up to a certain extent the specific status. this institute will be the subject of the following text of this contribution. 3. complaint under article 261 of the tax code – general principles immediately at the beginning, it is necessary to briefly define what the tax code understands by a  complaint. with a  complaint any person involved in tax administration may defend against inappropriate behaviour of tax officials or against the procedure of the tax administrator if the tax law does not provide any other means of protection. it is therefore a  universal subsidiary means of protecting the rights of taxpayers as  illustrated below in more details. it is clear from this brief definition that the complaint is quite a  versatile institute which can be used in many cases of breach of principles of good tax administration. a brief historical excursion has to be mentioned at the very beginning. since no legislation can be perceived in isolation, it  is necessary to look in the past and identify the origin of the institute under examination. the institute of complaint itself is fairly new in its pure form in tax law. its tax governance enactment did not take place until january 1, 2011, that is, from the effective date of the new procedural regulation, the tax code. the previous legal regulation of the tax process, i.e. the act on the administration of taxes and fees,13 explicitly did not include this institute. the explanatory report relating to  the complaint states that the complaint institute is newly included as a  general means of protecting taxable persons when they encounter inappropriate tax treatment or inappropriate behaviour of tax administrators. complaint is therefore a new legal institute within the czech tax law, but not within the entire czech legal order. the complaint has been taken over in the area of tax administration in accordance with the model applied in  the  “general” administrative procedure. for more than 10 years, the  administrative procedure includes the legal institute of complaint. it was this law that became a model for a “tax” complaint, which caused the legal texts of both legal institutes to be practically identical. however, it is quite clear that, while administrative and tax law are very close, they are not the same legal sector with the same basic foundations, so the simple “copying” of legal regulation from one legal sector to another does not seem ideal. 114 zuzana marethová public governance, administration and finances law review • vol. 3. no. 2. after a brief description of the historical circumstances, it is necessary to elucidate the basic points of the complaint, since without these the following text would be hardly comprehensible. as stated above, the complaint can be targeted at inappropriate behaviour of the tax authorities’ official or at procedures of the tax administrator. the tax administrator responsible for processing the complaint is under an obligation to assess the claims made in  the complaint and subsequently inform the complainant of  the  outcome of the assessment. if the complainant is not satisfied with the way his complaint was assessed, he/she is entitled to file a so-called request to investigate how the complaint was assessed to the superior tax administrator. the superior tax administrator is required, based on this submission, to investigate whether the complaint has been duly processed. both the first-rate tax administrator and the superior tax administrator could then take measures to remedy the undesirable situation. the complaint is to some extent an atypical legal institute. it is enshrined only in a  single legal provision and this relatively brief regulation to some degree pre-empts its nature. the  complaint, more precisely the procedure for its processing, is not bound by extensive procedural rules, which makes the  complaint a  less formalised means of protection of rights. it is therefore a relatively quick and effective means of remedying the possible misconduct of the tax administrator, in which the emphasis should be on the outcome, i.e. the correction of any maladministration. the words of the supreme administrative court of the czech republic are as follows: “complaint processing and investigating the way complaints are handled are less formal procedures, whereby the emphasis should be on the outcome of these procedures (removal of illegality), not on the actual procedural aspect of their implementation.”14 in the same informal spirit, the process of dealing with complaints is also carried out. the systematic classification of  a  complaint under the tax code in part five entitled common provisions, authorizing, transitional and final leads  to the conclusion that a complaint is not handled in the context of “classical proceeding”. similarly, the outcome of the complaint investigation (financial authorities call it “notification”) is not a decision. this fact is quite significant. it means, for example, that it is not possible to appeal against it. in addition, rules relating to the content of the decision are not applicable to the notifications. this, of course, does not mean that the tax administrator could handle the complaint with an informal note in which there would be no details about the processing of the complaint. the notification, although not a  decision, must contain an adequately detailed and verifiable justification. the financial administration respects the above, while constantly informing the complainant about his/her complaint with notifications in which the tax administrator deals with the individual objections contained in the complaint. 3.1. admissibility of the complaint although the law does not explicitly stipulate that the tax administrator may consider the complaint inadmissible, the  tax administrator is constantly doing so within his already established administrative practice. if all the conditions for the admissibility of a complaint 115 public governance, administration and finances law review • 2. 2018 complaint in tax administration as an instrument to ensure good administration are not met, the tax administrator will consider the complaint inadmissible; as  a  result of this fact claims stated in the complaint will not be substantively examined. consequently, the conclusion that the complaint is  inadmissible may have a  major impact on  the  complainant. it is therefore necessary to consider thoroughly whether a  complaint is admissible or not. except in practice virtually non-occurring situations, such as violations of the ne bis in idem principle or the submitting of  a complaint by a  person who is not at all concerned with the contested procedures, the most important condition of admissibility of complaint is compliance with the condition of so called subsidiarity of the complaint. the legislation clearly states that a complaint may be successfully filed only if the tax law does not provide any other means of protection. it is clear, therefore, that the complaint is a  subsidiary means, a  means of  ultima ratio, as already mentioned above. if there is another means of protection, it is not possible to file a complaint in the same case. the above conclusion was explicitly stated by the supreme administrative court: “the complaint and the request to investigate the handling of a complaint are, by their nature, subsidiary, residual remedies which serve to protect the rights of the parties, unless the law foresees the application of other remedies.”15 in this context, it must be emphasised that the very existence of another means of protection will lead to  the  inadmissibility of the complaint, it is not necessary for it to be actually used. similarly, it is not possible to successfully file a complaint against how this other means of protection has been dealt with. however, it remains a relatively problematic issue which institutions can be included in a group of other means of protection that exclude complaints. the law does not define these at any rate. generally, in my opinion, these can be defined as any statutory means of protection which are capable of  providing protection of the rights of a  person involved in the administration of taxes and which that person may initiate. in some cases, there is no dispute that there are other means  of  protection. for example, if the taxpayer is convinced that the tax administrator is inactive in his case, he should file a complaint to protect the inaction of the tax administrator,  not  a  complaint. in other situations, however, the  situation is  not  so  obvious. some guidance provides the practice of  the  tax  administrator and the related case law of the administrative courts. in its judgment of 3 november 2015, no. 2 afs 143/2015 – 71, the supreme administrative court stated that: “the tax code regulates the large amount of means of protection that will prevail before the filing of the complaint; such as appeal, remonstrance, objection in the phase of paying the taxes, renewal of proceedings, review proceedings, protection against inactivity, request for an extension of term, complaints about the procedure of the tax payer, objection to bias, etc.” based on this judgment, it can be concluded that the set of protection meaning of section 261(1) of the tax code is very wide. 3.2. actions of the tax administrator that can be challenged by a complaint as noted above, a  complaint is a  means for individuals involved in tax administration to prevent “improper conduct by tax officials” or “tax administrator procedure”. these are two relatively closed groups of phenomena against which (if other conditions are met) one can successfully be defended by complaint. 116 zuzana marethová public governance, administration and finances law review • vol. 3. no. 2. 3.3. complaint against inappropriate behaviour of tax officials the first set of actions to which the legal provisions of the complaint refer is the inappropriate conduct of tax officials. if,  therefore, there is a  situation during the tax administration in which a person involved in tax administration gives the impression that an official is acting in an inappropriate manner, he or she may oppose such conduct by a  complaint. it  is  quite obvious that the inappropriate behaviour of tax officials is highly undesirable, precisely because it violates the basic principles of good administration, which also include the duty of officials to act professionally and courteously towards the addressees of legal norms. however, it can be said that complaints aiming to the inappropriate conduct are not so frequent in practice. there are several reasons for this, in my opinion. firstly, this type of complaint is relatively problematic as regards the proof of misconduct, i.e. the inappropriate conduct of an official. for  obvious reasons, these cases will almost always be based on  the  “claim against claim” situation. furthermore, there is a  problem with regard to possible remedial measures in case of this complaint. the inappropriate behaviour of tax officials will, in the vast majority of cases, take the form of a one-off time-bound act; it will not be a  long-term and ongoing process. for this reason, only remedial measures in the form of a finding of inappropriate conduct will be considered and, if necessary, prohibiting further inappropriate behaviour in the future (if the inappropriate behaviour of the official would reach a  certain intensity, it is not excluded that the competent authorities would start disciplinary proceedings with the guilty party, but any disciplinary sanction would not be a priori remedy for the complaint). lastly, it is to be hoped that one of the reasons for the small number of complaints against the inappropriate behaviour of tax officials is the fact that such inappropriate behaviour occurs only exceptionally. 3.4. complaint against the procedure of the tax administrator the subject of the complaint may also be the “procedure” of the tax administrator. given that the law does not define what is meant by such a  procedure, this type of complaint is quite problematic. however, from the systemic and regulatory contexts, it follows that the procedure is a generic term involving both formal proceedings and other procedures. given that it is such a  large set, it is necessary to look for guides in the relevant court practice. it follows that a  tax audit can be challenged by a  complaint (judgment of 13 february 2014, no.  2 aps 8/2013  –  46). conversely, one cannot file a  complaint to challenge the tax administrator’s progress in assessing evidence (judgment of 3 november 2015, no. 2 afs 143/2015 – 71). in addition, it is implicit in the above-mentioned judgment that a decision cannot be challenged by a complaint, since the court stated that another remedy preventing the filing of  a  complaint must also be regarded as an appeal and the  initiation of a  review proceeding.16 apart from the above mentioned cases, however, there is no general definition of procedures that may be challenged by a complaint. it may be added that such a definition is practically impossible to make and that such an attempt at generalisation could prove to be counterproductive. there are many different procedures in tax administration, and even the best tax law expert is certainly not able to identify and generalise all of these. 117 public governance, administration and finances law review • 2. 2018 complaint in tax administration as an instrument to ensure good administration 3.5. investigation of the complaint the actual process of dealing with the complaint, i.e. its assessing, is not in detail defined in the law. the legal regulation only defines that the tax administrator will assess the facts set out in the complaint. first of all, it follows that the dispositional principle applies in the  processing of a  complaint, as the tax administrator is required by law to examine only the facts set out in the complaint (of course, this does not change the fact that the tax administrator should correct the unlawful procedures not given in the complaint, if he finds any during the assessing ). furthermore, it follows from the above standard that after the  filing of the complaint, the tax administrator is obliged to  deal with the claims contained therein. this procedure will not be bound by any rigid procedural rules. it is therefore up  to  the tax administrator to choose the procedure for the purpose of the assessing the complaint. in this respect, the law prescribes that the tax administrator is (in order to clarify the  facts objected to in the complaint) entitled to hear the  complainant and other persons whose explanation could help to clarify the matter. in administrative practice, however, the tax administrator does not practice such interrogations. however, it can be inferred from the general principles that if the complainant asks to carry out the interrogation of the persons identified by him (or any other evidence), the tax administrator would have to either do it so or adequately justify why it is not necessary to do so. in order to fulfil the effectiveness and the operability of the complaint, the law requires the tax administrator should settle the complaint within 60 days. the deadline can be exceeded only if it is not possible to provide the necessary documents for processing the complaint. regarding the time limit, it is noted that the legislation has recently included a  rule according to which the tax administrator is obliged to settle the complaint against the inappropriate conduct of the official in the tax audit or the procedure of the tax administrator at  the tax  audit no later than the end of the tax audit. this standard was omitted from the tax code by an amendment made by  act  no. 170/2017 coll. the explanatory statement highlights  the frequent occurrence of obstructive complaints filed not for the purpose of remedying the defective condition but for the  purpose of continuously extending the tax audit.17 if the tax administrator considers the complaint reasonable, the administrator should take corrective action. the law does not specify these measures. 3.6. request to investigate how the complaint was handled as already mentioned above, the legal framework of  the  complaint also contains a  quasiremedy against the  assessing (investigating ) of the complaint. if the complainant is not satisfied with how the tax administrator has dealt with his complaint, the superior tax administrator may be asked to investigate the way the complaint was handled. the superior tax administrator then evaluates whether the complaint has been properly processed. if this administrator concludes that this was not the case (either because the tax administrator incorrectly judged the complaint as unreasonable or did not take adequate remedies), the complaint will not be returned to the first-level tax administrator (the superior tax 118 zuzana marethová public governance, administration and finances law review • vol. 3. no. 2. administrator will not proceed on a “cassation” principle) on the contrary, the superior tax administrator will take measures to redeem himself. this  approach reflects the nature of the complaint as an institute aimed at an effective and rapid remedy which is not bound by rigid procedural rules. it should also be noted that, in the past, the financial authorities had a  kind of inappropriate way to deal with the described requests to investigate how the complaint was handled. instead of actually assessing the objections contained in the request, the tax administrator was only focused on how the complaint was handled procedurally. however, this approach has already been abandoned and, in the course of investigating how the complaint is handled, the supreme tax administrators deal not only with the tax subordinate administrator’s procedure (adherence to deadlines, the settlement of all claims, etc.) but also with the substantive aspect of the matter (whether the tax administrator considered correctly the complaint reasonable or unreasonable). 4. conclusion good governance is one of the cornerstones of every state governed by the rule of law. it is essential for public administration to be based on principles which, in its entirety, ensure its legitimate, efficient, economic and equitable functioning. such functioning (“good functioning”) will, of course, be subject to scrutiny, both internal (control carried out within the public administration) and external (carried out, for example, by the addressees of the public administration). such external control takes place in particular on the basis of the individual means of protection initiated by the addressees of public rights and obligations. a specific position among these means, within the framework of  tax law, takes a  complaint which is a  subsidiary means of  protecting the persons involved in the administration of taxes against the procedures of the tax administrator and against the inappropriate conduct of the tax authorities. from the above mentioned theoretical and legal grounds, in  my  opinion, it  is clear that the complaint is an effective institute of protecting the principles of good administration. it  is  a very generic means of making it possible for all concerned to draw attention to  the  mistakes of the tax administrator. the  complaint also works on informal grounds, and its main goal is to quickly and operationally remedy the malfunction. the fact that the legal arrangement has a  two-stage approach to  its handling is added to  its effectiveness. if the complainant is not satisfied with how his complaint has been dealt with, he has the right to file a request to the superior tax administrator to investigate the way the complaint was handled. nor can it be overlooked that the remedy that the tax administrator is obliged to accept on the basis of the complaint is not defined in any detail in the law, which leads to the clear conclusion that the tax administrator is entitled to do anything (legal), which will lead to the correction of the defective state. for these reasons, it is necessary to conclude on confirming the hypothesis of this contribution because the complaint is certainly an effective means of protecting good administration. 119 public governance, administration and finances law review • 2. 2018 complaint in tax administration as an instrument to ensure good administration references 1 this article is the outcome of the research projects: muni/a/1017/2017 (selected aspects of direct taxes and their interpretation and application in the jurisprudence ii). 2 david jeroušek, stížnost dle daňového řádu v průběhu daňové kontroly [complaint according to the tax code during tax audit], 2, in daňový expert, [tax expert] no. 4 (2013). 3 zdeněk burda, stížnost v  judikatuře správních soudů [complaint in the case law of the administrative courts], 70, in daně a právo v praxi, [taxes and law in practice] no. 7 (2014). 4 zuzana marethová, podmínky přípustnosti stížnosti podle § 261 daňového řádu [conditions of admissibility of a  complaint under section 261 of the tax code], dauc.cz  –  daně, [dauc.cz  –  taxes] no. 7 (2017), in aspi, legal system (accessed 3 may 2018). 5 lukáš potěšil, „dobrá správa” v  dokumentech rady evropy [good administration in the european council documents], veřejná správa, [public administration] no. 12 (2008), www.mvcr.cz/docdetail. aspx?docid=21308870&doctype=art (accessed 3 may 2018). 6 recommendation cm/rec(2007)7 of the committee of ministers to member states on good administration, https://rm.coe.int/16807096b9 (accessed 6 may 2018). 7 appendix to recommendation cm/rec(2007)7 of the committee of ministers to member states on good administration, https://rm.coe.int/16807096b9 (accessed 6 june 2018). 8 european code of good administrative behaviour, www.ombudsman.europa.eu/en/resources/code. faces#/page/1 (accessed 6 may 2018). 9 it is worth mentioning that the czech ombudsman has defined ten principles of good governance in his practice: compliance with law, impartiality, timeliness, predictability, persuasiveness, proportionality, efficiency, responsibility, openness and helpfulness. 10 act no. 500/2004 coll., the administrative code, as amended. 11 act no. 280/2009 coll., the tax code, as amended. 12 lenka matyášová, marie emilie grossová, daňový řád. komentář [tax code. commentary], 2nd edition, 40, (praha, nakladatelství leges, 2015). 13 act no. 337/1992 coll., act on the administration of taxes and fees, as amended. 14 supreme administrative court: 9 aps 4/2013. 15 supreme administrative court: 4 afs 213/2016. 16 marethová, supra n. 4. 17 www.psp.cz/sqw/text/tiskt.sqw ?o=7&ct=873&ct1=0 (accessed 6 may 2018). http://www.mvcr.cz/docdetail.aspx?docid=21308870&doctype=art http://www.mvcr.cz/docdetail.aspx?docid=21308870&doctype=art https://rm.coe.int/16807096b9 https://rm.coe.int/16807096b9 http://www.ombudsman.europa.eu/en/resources/code.faces#/page/1 http://www.ombudsman.europa.eu/en/resources/code.faces#/page/1 http://www.psp.cz/sqw/text/tiskt.sqw?o=7&ct=873&ct1=0 _goback _goback _goback _goback _goback articles tax administration of large taxpayers in some cee and cis countries jasna bogovac,* natalia soloveva,** michal radvan,*** jarosław marczak,**** natalia uvarova-patenko***** the participation of tax authorities in insolvency agreements piotr buława* the amendment of the religious registration law and its impact on freedom of religion in the slovak republic mária havelková* the scope of public services performed by municipal local governments in the republic of poland through budgetary establishments małgorzata ofiarska* designated income accounts in budgetary units of municipalities as a form of partially decentralised redistribution of public finance resources allocated to educational services in poland zbigniew ofiarski* the legal aspects of reducing the bureaucracy of the court administration wojciech piątek* the constitution and public administration aksana shupitskaya* case study tax inspection – unlawful interference damian czudek* european investigation order and the “brussels” bureaucracy marek kordík,* lucia kurilovská** complaint in tax administration as an instrument to ensure good administration zuzana marethová* public governance, administration and finances law review vol. 7. no. 2. (2022) • 139–155. © the authors 2023 doi: 10.53116/pgaflr.2022.2.6 populism and liberal constitutionalism a proposal to define the impact of populism on the constitutional framework boldizsár szentgáli-tóth* ¤, marco antonio simonelli** ¤ * senior research fellow, centre for social sciences, institute for legal studies, e-mail: szentgalitoth.boldizsar@tk.hu ** post-doctoral research fellow, university of barcelona, faculty of law, e-mail: simonellimarcoantonio@gmail.com abstract: our paper focuses on the impact of populism on the functioning of constitutional democracy in europe. to analyse such a complex issue, a survey has been elaborated, which tries to outline how the current populist tendencies influence the institutional framework of constitutional democracy and to what extent such parties aim and are able to undermine the long-term prevalence of rule of law. to achieve this goal, the survey monitors, amongst others, the use of referenda in european countries; the presence of instruments of participatory and direct democracy; which are the political programme of populist parties, and in particular what are their ambitions concerning institutional reforms; whether the status, the independence, the competence and the composition of the constitutional court and the judiciary are contested. the survey also examines whether the protection standard of the most important fundamental rights are relativized, or are intended to be relativized by the populist parties of the different countries. we approached young constitutional scholars from certain member states, at the initial stage of their academic career, and asked them to fill the survey. keywords: constitutional democracy, populism, populist parties, political participation, survey method 1. introduction this article aims to offer an overview of the overall impact of populism on the constitutional system. relying on both analytical and empirical research, the article aims at identifying all the spheres of the national legal systems that are affected by populists’ reform. https://doi.org/10.53116/pgaflr.2022.2.6 https://orcid.org/0000-0001-5637-8991 https://orcid.org/0000-0001-7411-7365 mailto:szentgali-toth.boldizsar%40tk.hu?subject= mailto:szentgali-toth.boldizsar%40tk.hu?subject= mailto:simonellimarcoantonio%40gmail.com?subject= 140 boldizsár szentgáli-tóth, marco antonio simonelli public governance, administration and finances law review • vol.  7. no. 2.  to further this ambition, it is first necessary to clarify the meaning of populism in the context of this article. in a  broad sense,1 populism is understood as an ideolog y that rejects the liberal interpretation of constitutionalism and rule of law (skapska, 2018) and, instead of this, focuses on the effective promotion of the public interest, which is in principle unitary, and determined by the majority of the people. as a constitutional project, populism can briefly be characterised as an attempt to (re)instate popular sovereignty at the centre of the political system.2 populist leaders are always expected to act as the executor of the majoritarian intent, and this legitimacy should prevail over any legal constraint (blokker, 2019, pp. 541–544). as a consequence, populists generally treat law as an instrument to provide an enforceable form to the supposedly unitary will of the political community; the constitution is amended frequently, and judicial control mechanisms are weakened (blokker, 2019, pp. 547–551). this study does not dwell upon the exact definition of populism; rather, it simply considers populism as an alternative to liberal constitutionalism. the study’s purpose is to identify the most crucial proposals attached to this concept, and to understand how and to what extent liberal constitutional theory should reflect on these challenges. in order to reach this stated aim, we decided to focus on what are those concrete constitutional measures that most frequently follow the rise of populist politics. for this purpose, we have employed a set of 22 questions, concerning information about recent constitutional amendments, forms of popular participation, the electoral system, the form of government, instruments of militant democracy, oppositional rights, judicial independence, the status of the constitutional court, and the relationship between national and international law, as well as the law of the european union. building upon this set of questions, we built a picture of the main directions of populist discourse and policies, which may help to provide a deeper understanding of the populist impact on constitutional law. 2. the alleged centrality of popular sovereignty 2.1. the role of referendums, and other instruments of popular participation as populists rely on popular sovereignty, they attribute, at least theoretically, greater weight to direct democracy than liberal constitutionalism (brunkhorst, 2016). consequently, populist parties frequently launch referenda, even on constitutional matters, and softer forms of popular participation are also seen as preferable. the survey illustrates these trends well. if we see these attitudes towards referenda, it seems that the hungarian and the greek governments, which are usually considered populist, used them when their political aims were assumed to have the people’s support. 1 this study does not reflect on the discussion on the exact definition of populism; for some references from the recent literature on this issue see rovira kaltwasser et al., 2017; akkerman, 2003, pp. 147–159; albertazzi & mcdonnell, 2015; anselmi, 2018; bang & marsh, 2018, pp. 352–363; brett, 2013, pp. 410–413; inglehart & norris, 2016; mudde & rovira kaltwasser, 2017; tormey, 2018. 2 paul blokker attempted a detailed description of populism as a constitutional project (see blokker, 2019, pp. 536–553). 141populism and liberal constitutionalism public governance, administration and finances law review • 2. 2022 in greece, in july 2015, a referendum was held on the proposal of the left-wing populist government party, syriza. the question was whether greece should accept the conditions imposed by the european commission, the european central bank and the european monetary fund on greece’s financial bail-out. the referendum was valid, as around 62 percent of the voters participated, and more than 60 percent of the valid votes rejected the proposed conditions, in alignment with the intent of the government (aslanidis & rovira kaltwasser, 2016). similarly, one year later, a referendum took place in hungary on the migration quotas contained in an eu council decision,3 which would have obliged each member state to give asylum status to a particular number of immigrants. the right-wing populist hungarian government called for the rejection of these quotas, and the vast majority of participants agreed with this approach. however, the threshold of validity was not met, since less than half of the adult population submitted its vote. nevertheless, in the light of the clear support expressed by most of the valid votes, the government claimed this outcome as a political success and retained its policy against migration quotas (chronowski et al., 2019, p. 1473). these examples demonstrate that populist governments tend to invite the people to the ballot only when a confirmation of the actual governmental policies is expected from referenda. similarly, in germany, there is a  right-wing populist party, alternative für deutschland, which put forward proposals to extend the scope of direct democracy in germany by holding national referenda and for the president of the republic to be elected directly by the people. however, the grundgesetz provides a form of decision-making in a very narrow circle4 due to the terrible experience of direct democracy during the nazi period. referenda are nevertheless frequently organised in the länder and in the municipalities;5 the last example being the referendum held in berlin on the expropriation of housing units from real estate corporations (berry, 2021). the direct participation of people is also furthered by other populist means. for instance, people are often involved in the constitution-making or amendment process to strengthen the legitimacy of such steps (blokker, 2016a). in latvia, certain constitutional amendments are subject to parliamentary approval,6 and some of them might be subject to referendum,7 while in greece, if the parliament passes an amendment of the constitution then, after the next parliamentary election, the newly-formed legislative body shall also confirm the proposed amendments.8 in this way, the people could select their representatives in the light of their attitude towards the amendment concerned. the introduction of referenda on adopted constitutional amendments and international treaties before their entry into force has been also rumoured in greece, but these endeavours have so far remained unsuccessful (mavrozacharakis et al., 2015). 3 council decision (eu) 2015/1601 of 22 september 2015 establishing provisional measures in the area of international protection for the benefit of italy and greece. 4 grundgesetz, art. 20 and 29 (2019) (http://bit.ly/3kf6opu). 5 art. 62 and 63 of the constitution of berlin (2016) (http://bit.ly/3zy1uov). 6 art. 77 of the constitution of latvia (2019) (http://bit.ly/3kvrceu). 7 art. 78 and 79 of the constitution of latvia (2019) (http://bit.ly/3kvrceu). 8 art. 110 (3) of the constitution of greece (2020) (www.servat.unibe.ch/icl/gr00000_.html). http://bit.ly/3kf6opu http://bit.ly/3zy1uov http://bit.ly/3kvrceu http://bit.ly/3kvrceu http://www.servat.unibe.ch/icl/gr00000_.html 142 boldizsár szentgáli-tóth, marco antonio simonelli public governance, administration and finances law review • vol.  7. no. 2.  the fundamental law of hungary, enacted in 2011 has not extended the scope of referenda in comparison with the previous constitution of hungary; the rules on initiating and holding a  referendum, as well as thresholds of validity and effectiveness are essentially the same.9 any referendum on constitutional amendments is excluded;10 the adoption of these bills is exclusively subject to the approval of a two-thirds parliamentary majority.11 softer forms of popular participation in the decision-making processes are also attractive for populists; national consultations have been in fact used in hungary and greece during recent years. in greece, this appeared as an element of the constitution-making process, while in hungary national consultations are commonly used to ask the opinion of the citizens on certain issues. these consultations are often criticised, as the questions are themselves manipulative, and they are phrased in such way as to induce the participants to agree with the view of the government (pogány, 2013). it also generates several difficulties, in that usually only a small number of people are involved in these processes, so the outcome does not demonstrate the real approach of the whole society. despite these concerns, national consultations are widely used to collect arguments for populist policies by their showing broad social support. 2.2. imperative mandate another way to emphasise the pre-eminence of popular sovereignty is by introducing the institution of imperative mandate. this means that representatives are held directly responsible by the people for fulfilling their tasks, not only in the next election but also during their mandate. people may initiate the dismissal of their representatives, and they must be replaced with new parliamentarians. the idea behind this practice is that it would promote accountability and transparency. even so,12 people are often manipulated by political parties, by the media and especially by false information and radical views, spread by the social media, and therefore, people might also use this institution when it is not objectively justifiable. due to these concerns, most democracies do not allow imperative mandates, with some constitutions explicitly prohibiting their introduction. the idea of introducing an imperative mandate was put forward by the syriza government in greece in 2013 and 2014, but it remained an isolated idea (pappas, 2014, pp. 27–32). in hungary, by contrast, the institution has never been considered. conversely, latvia provides us with an excellent example of how to balance these two countervailing interests. according to a constitutional amendment that entered into force in 2010, ten percent of the whole population may initiate a process to remove the whole legislative 9 art. 28/b and 28/c of the previous constitution of hungary (1949) (www.wipo.int/edocs/lexdocs/laws/en/hu/ hu047en.pdf); art. 8 of the fundamental law of hungary (2019) (http://bit.ly/3r2xyof). 10 art. 8 (3) 1 of the fundamental law of hungary (2019). 11 art. s) of the fundamental law of hungary (2019). 12 venice commission study no. 288/2008 on imperative mandate (2009) (https://bit.ly/3jeypbo). https://www.wipo.int/edocs/lexdocs/laws/en/hu/hu047en.pdf https://www.wipo.int/edocs/lexdocs/laws/en/hu/hu047en.pdf http://bit.ly/3r2xyof https://bit.ly/3jeypbo 143populism and liberal constitutionalism public governance, administration and finances law review • 2. 2022 assembly.13 next, a consultation must be held and, if the majority expresses no confidence in the parliament, and their number is at least equal to two-thirds of the number of votes submitted at the last parliamentary election, a new legislative election shall take place at least one, and at most two months after the revocation referendum. individual deputies, however, cannot be removed separately. all in all, imperative mandate is a doubtful constitutional instrument, which could easily destabilise the political system if it does not function properly. nevertheless, it is at least clear that imperative mandate provides a potentially effective means of handing active control over public life to the people. as such, it may be useful to reflect on alternatives to ensure that mps meet the expectations of their electors. a valuable solution is offered by the spanish system, where all the major parties sitting in the parliament have signed an agreement against floor-crossing (política territorial 2020), thus enhancing the accountability of individual mps towards their electors, without hindering their freedom and autonomy. 2.3. the restructuration of the legislation, and a reduced number of parliamentarians the third direction of populist discourse on the expression of popular sovereignty is linked to the structure of the legislative body. usually, the internal organisation of the parliament and the number of deputies are the issues that have paramount importance in this regard. first, in hungary and greece, there has been extensive, but mostly academic, discussion of establishing a second chamber, which may strengthen historical ties, and might also strengthen those actors who would be keen on populist ideas (pappas, 2014, pp. 27–32; dezső, 2011). since these proposals have not been transposed into the constitution, this issue has only a secondary significance from a populist perspective. regarding the number of deputies, it is an attractive measure in the eye of populist leaders to reduce the number of politicians, be they municipal representatives or parliamentarians. this step is always very popular, as it is depicted as anti-elitist, capable of guaranteeing a reduction in public expenses and of promoting a more effective political arena (szentgáli-tóth, 2014; bakos et al., 2019). however, in reality, such a decision only affects the effectiveness and economic operation of the public administration to a limited extent, as the salaries of politicians constitute only a minor item in the budget. even so, a reduction would bring remarkable political benefit for those parties that initiated it, and it also serves majoritarianism, which is also a key element of populism and which will be assessed more thoroughly in the next section. if there are fewer seats in the parliament, the role of smaller political groups with parliamentary representation would be significantly curtailed, as political life will be organised around two or three main centres of power (norris, 1997). 13 amendment of the constitution of latvia enacted on 14 june 2009, entered into force on 2 november 2010. 144 boldizsár szentgáli-tóth, marco antonio simonelli public governance, administration and finances law review • vol.  7. no. 2.  the best example of this tendency is hungary, where the number of parliamentarians has been reduced from 386 to 199 and, in parallel with this, the electoral system has been also reconsidered, from a mostly proportional system to a primarily majoritarian framework (mécs, 2017). simultaneously with the enactment of the fundamental law and the new act on parliamentary elections,14 the system of municipal elections was also renewed in hungary.15 the number of local councillors have been reduced by more than 50 percent, and the majoritarian character of the electoral system principle has been strengthened. a similar reform has been approved in italy, where the two chambers of the parliament will lose roughly a third of their members in the next legislature, as a result of constitutional reform pushed by the populist 5 stars movement, and subsequently confirmed in a referendum. in germany, the idea to limit the number of deputies in the bundestag has been already discussed, and similar proposals have also been published in greece, but they have not received wide support from participants in the political sphere. 2.4. majoritarianism majoritarianism is a core element of the populist concept, which is clearly linked to the argumentation based on popular sovereignty. in a nutshell, majoritarianism means that the view shared by the majority of the population shall be given pre-eminence; as a consequence, the protection of political minorities has only a  limited space in this logic (urbinati, 2017). the amendment of the electoral system is used for strengthening the majoritarian decision-making mechanisms in the legislation. there are two ways in which this goal is promoted: the electoral system shall mainly be based on the majoritarian principle and, with fewer available seats, smaller political parties’ room to manoeuvre is further limited. as regards the first instrument, the hungarian electoral system was shifted from a mostly proportional framework to an inherently majoritarian one. before 2014, around 46 percent of the deputies were selected on a majoritarian basis from individual districts, after which, their proportion increased to around 55  percent (mécs, 2017). second, simultaneously with this, the number of the distributed mandates has been reduced; therefore, weaker political groupings have remarkably less chance of obtaining parliamentary mandates. there are also several smaller details during the electoral process (stricter requirements for presenting lists of candidates, additional mandates for the winner [which is also used in greece]) which also serves the purpose of centralising the political arena in the hands of the strongest.16 in cyprus, a more majoritarian system has been considered several times instead of the current proportional one, but this has been rejected in each case.17 14 act cciii of 2011 in hungary on the elections of members of parliament (2012) (https://bit.ly/3kk9136). 15 act l of 2010 in hungary on municipal elections (2010) (http://njt.hu/cgi_bin/njt_doc.cgi?docid=131705.283319). 16 greek conservatives (2019) (http://bit.ly/3wbxwdb). 17 republic of cyprus parliamentary elections (2016) (www.osce.org/files/f/documents/2/b/230496.pdf). https://bit.ly/3kk9136 http://njt.hu/cgi_bin/njt_doc.cgi?docid=131705.283319 http://bit.ly/3wbxwdb https://www.osce.org/files/f/documents/2/b/230496.pdf 145populism and liberal constitutionalism public governance, administration and finances law review • 2. 2022 in greece, almost every government has amended the electoral system: the syriza government moved it in a proportional direction, while the new democracy government changed the framework back to a mostly majoritarian system by providing additional mandates for the election’s winner. amendments to electoral laws are also ordinary business in italy, where in the last decade the electoral law was first amended in a majoritarian sense and then in a  proportional fashion. this continuous change brings permanent uncertainty to the system, which threatens to exacerbate voters’ conscious decision-making. 3. an instrumentalist approach to the law 3.1. constitutional amendments in compliance with their emphasis on the respect of the majoritarian will, populists do not consider the law, nor legality itself, as a supreme value: in their view, the interest of the community may overcome legal constraints if the situation so requires (elkins et al., 2009). as a  consequence, although the constitution is still formally recognised as the supreme legal source, its content is subject to continuous revisions, and transformed into an instrument of everyday politics, in order to pursue the alleged collective interest of the community (müller, 2017). it is indeed a widespread tendency in several national constitutional systems that constitutional amendments are more frequent than earlier (elkins et al., 2009). the primary value is not the constitution itself, but the actual content of the constitution, which shall be flexible, and shall at any time be in harmony with the feelings of the majority (scheppele, 2018). consequently, it is a widely accepted practice under populist regimes that when the constitutional court outlaws a  particular statute, the constitution is amended, and then the same law is enacted with constitutional rank. populist governments also tend to amend the constitution relatively frequently when it serves political rather than legislative necessities (walker, 2019). the best example is the hungarian development after 2010, when the previous constitution was amended several times by a  two-thirds governmental parliamentary majority. moreover, simultaneously with this, a new fundamental law was being prepared, which functioned as a constitution (cf. the german grundgesetz) but also highlighted the historical traditions of hungary, and strengthened the protection of the national values and the christian culture (kovács & tóth, 2016). the fundamental law has been amended eight times since its enactment in 2011, which undermined its social reception as a  coherent and permanent framework (sonnevend et al., 2015). moreover, transitional measures concerning the entry into effect of the fundamental law were adopted, but some of these were subsequently repealed by the constitutional court since, despite their interim character, they substantively and permanently overruled the main text of the fundamental law itself.18 what is more, the fundamental law expresses as a  duty 18 45/2012 (xii.29.) ruling of the constitutional court of hungary, abh 2012, 346. 146 boldizsár szentgáli-tóth, marco antonio simonelli public governance, administration and finances law review • vol.  7. no. 2.  for everyone, and in particular the constitutional court, to interpret its provisions in the light of their purposes, of the national avowal, and of the achievements of the historical constitution.19 the enumeration of these points of reference as secondary legal sources would increase the uncertainty about the borders and the real content of the constitution even further (kovács & tóth, 2016). one may argue that the presence of populist ideas may enhance the possibility of frequent constitutional amendments, but the real extent depends mostly on the procedural flexibility of the constitutional framework. a  good case in point is germany, which, notwithstanding the presence of populist parties in parliament, is minoritarian: eleven constitutional amendments were approved over the last decade.20 a similar situation is observable in both hungary and cyprus where, as in germany, a two-third legislative majority is sufficient for amending the constitution. by contrast where, the constitutional revision process became being stricter, like in greece, the presence of populist parties in government has a smaller impact on the frequency of constitutional amendments. 4. reforming the constitutional court and constitutional adjudication according to populist ideolog y, the expression of the democratic will of the majority is the primary orientation for decision-makers; legal considerations could restrict this logic only exceptionally, in the event of serious violations of procedural requirements, fundamental principles or substantial limits (lacey, 2019). consequently, the role of judicial review should be marginal. hence, the autonomy and powers of constitutional courts become targets of populist endeavours. hungary and poland have provided the best examples of intense discussion about the role of the constitutional court: in this study, however, we will focus only on the hungarian constitutional court. the populist attitude towards the constitutional court mostly respects the formal framework of the body, and its status, including the safeguards of its autonomy; however, the composition and the competences of the constitutional court are often under 19 art. r (3) of the fundamental law of hungary (2011) (https://mkogy.jogtar.hu/jogszabaly?docid=a1100425. atv). 20 19 march 2009: art. 106, 106b (new), 107, 108 gg, road traffic taxation; 17 july 2009: art. 45d gg, implementing parliamentary control committee concerning the federal intelligence service; 29 july 2009: art. 87d gg, aviation administration system changed; no monopoly for national providers anymore; air traffic control also by – within the eu – authorized providers; 29 july 2009: article 91c, 91d, 104b, 109a, 143d (new), 104b, 109, 115 gg, deeper integration between states and federation; 21 july 2010: art. 91e gg, deeper integration between states and federation concerning better support for the unemployed; 11 july 2012: art. 93 para. 1 nr. 4c gg, implementing a constitutional legal proceeding for parties, which were denied to take part in the national election; 23 december 2014: art. 91b gg, deeper integration between states and federation concerning funding of science and research; 13 july 2017: art. 21 gg, political parties that are fighting against the main values of the grungiest are excluded from federal party financing; 13 july 2017: 104c, 143e, 143f, 143g (new); art. 90, 91c, 104b, 107, 108, 109a, 114, 125c, 143d gg, federal financial support for the states; 28 march 2019: 104d (new), art. 104b, 104c, 125c, 143e gg, federal financial support for the states; 15 november 2019: art. 72, 105, 125b gg, implementing a legislative competence of the federation concerning property taxes. https://mkogy.jogtar.hu/jogszabaly?docid=a1100425.atv https://mkogy.jogtar.hu/jogszabaly?docid=a1100425.atv 147populism and liberal constitutionalism public governance, administration and finances law review • 2. 2022 pressure (corrias, 2016). as regards the composition, there are two ways to influence the membership of the body. the first is to pack the constitutional court with governmentfriendly judges (fournier, 2019); in this case, the new members are elected by the governmental side, and probably these people will be most loyal to those from whom they received their mandate (fleck et al., 2011, pp. 4–7). the second way is to change the selection rules and give the populist government sole authority to appoint new judges. the usual target is to appoint judges by a simple majority instead of qualified majority and, with this method, the inherent attitude of the whole body will be changed after some years. as far as the competences are concerned, there are again two main instruments to neutralise the counterbalancing role of the constitutional court. first, the rules on standing before the constitutional court can be amended in such a way that fewer cases are heard by the constitutional court, especially with less political weight. the best example in this regard is the adoption of the hungarian fundamental law, which significantly amended the powers of the hungarian constitutional court (stumpf, 2017). the ex-post constitutional review initiated by actio popularis, i.e. by any citizen, has been substituted with a direct individual appeal, which can be submitted only by a natural or legal person claiming a violation of its fundamental rights (szente, 2015). more worryingly, constitutional court rulings based on the previous constitution of hungary have been repealed, which is not so understandable, since constitutional court decisions do not have any legal effect.21 consequently, instead of systematic discrepancies, the hungarian constitutional court focuses mostly on individual concerns, which have beyond doubt paramount importance for the persons involved, but not from the perspective of the whole constitutional system (chronowski et al., 2019, p. 1459). second, material limitations on the matters that can be subjected to the constitutional court judicial review are introduced. the fundamental law remarkably narrowed the margin of appreciation of the constitutional court on economic matters, providing that if the government debt exceeds half of the total gross domestic product, the constitutional court may review budgetary acts for conformity with the fundamental law “exclusively in connection with the rights to life and human dignity, to the protection of personal data, to freedom of thought, conscience and religion, or the rights related to hungarian citizenship, and it may annul these acts only for the violation of these rights”.22 in addition to these approaches, the general attitude of populist leaders towards constitutional courts should be taken into account: these politicians tend to overrule decisions not in their favour by amending the constitution, as we have already noted earlier. 21 fourth amendment of the fundamental law of hungary, art. 19 (2) (2013) (https://mkogy.jogtar.hu/ jogszabaly?docid=a1300325.atv). 22 the fundamental law of hungary, art. 37 (4) (2011). https://mkogy.jogtar.hu/jogszabaly?docid=a1300325.atv https://mkogy.jogtar.hu/jogszabaly?docid=a1300325.atv 148 boldizsár szentgáli-tóth, marco antonio simonelli public governance, administration and finances law review • vol.  7. no. 2.  5. attempts to undermine the independence of the judiciary populist regimes also attempt to reorganise the judicial system, and it is regularly interpreted as efforts to undermine the independence of the courts. again, two main measures can be identified through which populist politicians may extend their influence. sometimes, an establishment of separate administrative tribunals is envisaged, and this could weaken the traditionally elaborated independence of the judiciary.23however, a more meaningful direction is to extend the powers of the executive vis à vis the judiciary, as regards the appointment of judges, the internal administration and the budget of the courts. in parallel with this, the powers of judicial self-government bodies are put under pressure (waldron, 2006). such steps have been taken in many european states, especially in greece, hungary, poland and spain (kazai, 2019) and their evaluation is very mixed. the supporters of these reforms call for a  more efficient and faster judicial review, while their opponents treat these steps as serious attacks on judicial integrity. the issue is quite difficult, as even the venice commission acknowledged that the same model with the same involvement of the executive might be problematic or even acceptable, depending on the social, political and legal context.24 6. the relationship of national law with international law, and with the law of the european union finally, some words should be directed to the populist consideration of the role of international and european union law. according to populist rhetoric, national sovereignty shall have priority over these aspects (chronowski, 2012) but usually, populists do not intend to amend the legal regulations concerning the relationship between national and european union law. instead of this, constitutional courts in populist-ruled countries have become champions of the defence of the national constitutional framework and national identity against the attempts at enforced integration (rodrik, 2018). an attempt to present the national constitution, or at least some part of it, as superior to eu law has been made by several european courts, above all by the constitutional courts of germany, italy and spain. while these courts merely seek to enhance the level of protection of fundamental rights at the eu level, the hungarian and polish constitutional courts put in place a fullyfledged confrontation with the eu. these constitutional courts clearly asserted their competence to review an eu act against the national constitution, and eventually declare its unconstitutionality (blokker, 2016b). consequently, in the debate between the court of justice of the european union (‘the ecj’) and the national constitutional courts, 23 8th amendment of the constitution of cyprus (law 130(i)/2015) on the establishment of a new first instance administrative court. 24 venice commission, opinion no. 943/2018. on the administrative justice reform of hungary, par. 27–29 (2019) (https://bit.ly/3xs4eeh). https://bit.ly/3xs4eeh 149populism and liberal constitutionalism public governance, administration and finances law review • 2. 2022 populists give priority to the national constitutions, and sometimes outlaw some elements of european union law.25 those constitutional courts, which have members with some populist background, as they have been thus packed by their respective governments, share this approach. from the near past, a  case might be highlighted here. the hungarian constitutional court has elaborated a detailed concept of constitutional identity, which has been added explicitly to the constitutional framework by the seventh amendment of the fundamental law of hungary.26 this amendment also stipulated that: [b]ased on an international treaty, hungary may exercise its certain powers jointly with the other member states via the institutions of the european union to the extent necessary for the exercise of its rights deriving from the founding treaties and for the performance of its obligations in order to take part in the european union as a member state. the exercise of its powers pursuant to this section shall be consistent with the fundamental rights and freedoms laid down in the fundamental law, and shall not limit hungary’s inalienable right of disposal related to its territorial integrity, population, form of government and governmental organisation.27 this approach properly embodies the populist vision in this regard, claiming that certain core elements of the national constitutional identity shall impose substantial limitations on the margin of movement of the european union. 7. conclusions in this contribution, we envisaged a  new methodolog y to analyse the impact of populism on the constitutional framework, and selected some european countries to demonstrate how this research could be completed in a  broader sense, across the european union, or even across the whole european continent. populism is currently considered the most important challenge to liberal constitutionalism, and is the consequence of numerous social and economic factors, and the various failures of liberal democracies. the link between populism and constitutional law has been evaluated by many scholars; nevertheless, a well-elaborated system with the aim of completeness has not been provided. our aim with this research was to suggest a complementary method of research, including empirical research based on a uniform set of questions. this kind of comparative approach to populist constitutional ideas mean the main innovation of our academic piece is to seek a  deeper understanding of the populist view of 25 as an example please see the sound of economics (2020). 26 “we hold that it is a fundamental obligation of the state to protect our self-identity rooted in our historical constitution.” (the fundamental law of hungary, national avowal, 25.04.2011.) 27 seventh amendment of the fundamental law of hungary, art. 2 (2018) (https://mkogy.jogtar.hu/ jogszabaly?docid=a1800628.atv). https://mkogy.jogtar.hu/jogszabaly?docid=a1800628.atv https://mkogy.jogtar.hu/jogszabaly?docid=a1800628.atv 150 boldizsár szentgáli-tóth, marco antonio simonelli public governance, administration and finances law review • vol.  7. no. 2.  constitutionalism, which could help to reconsider which elements of liberal constitutionalism may need to be reshaped. in our view, populism is supported by wide social layers due to its successes, mostly in the economic field (burai et al., 2017, p. 9), and liberal democracy would be again the primary choice if it could articulate such mechanisms within its traditional standards, which could provide the same sense of comfort for the citizens (ginsburg et al., 2018). a well-founded analysis of populism could serve this necessary reform process of liberal democracy, as the most urgent demands might be identified more easily. in this way, comparative research would not only have academic and theoretical significance, but would also show those fields of constitutional life, where populism has put forward alternatives, and where liberal constitutionalism needs to be reconsidered if it is to retain its former positions. our contribution could, we hope, be a modest contribution to these crucial endeavours. annex. text of the questions survey evaluating the impact of populism on constitutional and representative democracy 1.  what kind of constitutional changes have taken place in the last ten years in your country? please specify the date and content of constitutional amendments. (please specify all constitution-making acts in the past ten years in your country. if there were any changes in the constitutional text, please briefly describe their topics and motives.) 2.  is there a prohibition of imperative mandate in your national constitution? 2a. if yes, is there any formalised or unformalised proposal to amend the constitution as to remove the prohibition or introduce the possibility of ‘recall’? 3.  is there in your country the possibility to hold a  referendum to propose a  bill? (please specify the source of law.) 3a. if no, is there any formalised or unformalised proposal to amend legislation to introduce this possibility? 4.  is there in your country the possibility to hold an abrogative referendum? (please specify the source of law.) 4a. if no, is there any formalised or unformalised proposal to amend legislation to introduce this possibility? 5.  is there in your country the possibility to hold a  consultative referendum? (please specify the source of law.) 5a. if no, is there any formalised or unformalised proposal to amend legislation to introduce this possibility? 6.  does your national constitution provide for mandatory participation of the people in the constitutional amending process? (if yes specify the form.) 6a. is there any formalised or unformalised proposal aimed at enhancing the role of the people in the constitutional-amending process? 6b. if yes, through which instruments (e.g. ex-ante referendum, direct involvement in the revision process, ex-post referendum). 151populism and liberal constitutionalism public governance, administration and finances law review • 2. 2022 7.  on what matters have national referendums been held? what other forms of citizen’s participation are used in your country (in practice)? 8.  is there in your country any formalised or unformalised proposal to introduce forms of participative democracy? if yes, please specify at which level (constitutional, legislative, regulatory act). 9.  is there in your country any formalised or unformalised proposal to amend the constitution to reduce the number of mps? 10.  is there in your country any formalised or unformalised proposal to switch to a mono-cameral system or vice versa? 11. have there been, in the last ten years, any changes in electoral laws? (in replying to this question, the practice of changing electoral boundaries, campaign financing rules, and the rules guiding political advertisements might be particularly important.) 11. which kind of electoral system your country has? 11a. is there any formalised or unformalised proposal to change it in a  more proportional one? 11b. is there any formalised or unformalised proposal to introduce a  majority bonus system? 12. does the voter, in your country, have the possibility to express his/her individual preference in national elections? 12a. if not, is there any formalised or unformalised proposal to introduce such a possibility? 13. which form of government does your country have? 13a. is there any formalised or unformalised proposal to change the rules for electing the heads of the government and of state? 14. is there a limit of presidential mandates in your national constitution? 14a. if yes, is there any formalised or unformalised proposal to amend the constitution as to remove the limitation? 15.  is there in your country any formalised or unformalised proposal to reduce the rights of the opposition (e.g. abolition of qualified majority voting for certain acts; enhancement of thresholds for triggering ex-ante judicial review of legislation; initiative aimed at reducing parliamentary discussions)? 16.  is there in your country any instrument of ‘militant democracy’ (e.g. possibility for constitutional courts to outlaw political parties, norms declaring illegal extremist ideas)? 16a. is there any formalised or unformalised proposal to introduce such instruments? 16b. is there any formalised or unformalised proposal to abolish such instruments? 17. how constitutional judges are appointed in your country? 17a. is there any formalised or unformalised proposal to amend the composition and powers of constitutional courts? 18. what is the composition of your national council of judiciary? 18a. is there any formalised or unformalised proposal to amend its composition and powers? 152 boldizsár szentgáli-tóth, marco antonio simonelli public governance, administration and finances law review • vol.  7. no. 2.  19. how the members of the main independent authorities (e.g. central banks, telecommunications regulatory bodies) are appointed? 19a. is there any formalised or unformalised proposal to modify the rules of appointments? 20.  is there in your country a  norm on the relationship between national and eu law ? 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(2006). the tensions between legal instrumentalism and the rule of law. uc berkeley. the sound of economics (2020, may 4): an analysis of the german constitutional court’s ruling on the ecb qe programme. the sound of economics. online: http://bit.ly/3kznrev tormey, s. (2018). populism: democracy’s pharmakon? policy studies, 39(3), 260–273. online: https:// doi.org/10.1080/01442872.2018.1475638 urbinati, n. (2017). populism and the principle of majority. in c. rovira kaltwasser, p. a. taggart, p.o. espejo & p. ostiguy (eds.), the oxford handbook of populism (pp. 571–587). oxford university press. online: https://doi.org/10.1093/oxfordhb/9780198803560.013.31 versteeg, m., horley, t., meng, a., guim, m. & guirguis, m. (2020). the law and politics of presidential term limit evasion. columbia law review, 120(1), 173–248. online: www.jstor.org/stable/26868346 waldron, j. 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(1997). the rise of illiberal democracy. foreign affars, 76(6), 22–43. online: https://doi. org/10.2307/20048274 http://bit.ly/3kznrev https://doi.org/10.1080/01442872.2018.1475638 https://doi.org/10.1080/01442872.2018.1475638 https://doi.org/10.1093/oxfordhb/9780198803560.013.31 https://www.jstor.org/stable/26868346 https://doi.org/10.2307/20455656 https://doi.org/10.1093/icon/moz027 https://doi.org/10.2307/20048274 https://doi.org/10.2307/20048274 public governance, administration and finances law review vol. 7. no. 2. (2022) • 173–189. © the author 2023 doi: 10.53116/pgaflr.2022.2.8 polish experience in the search for the optimal model of performing and financing metropolitan tasks małgorzata ofiarska* ¤ * associate professor, university of szczecin (poland), faculty of law and administration, e-mail: malgorzata.ofiarska@usz.edu.pl abstract: for nearly 25  years, the problem of managing public affairs in metropolitan areas in poland has been present in the public debate and the legislative process. the aim of the study is to analyse and evaluate the projects and adopted acts dedicated to such areas. using legal dogmatics and historical and legal methods, successive attempts have been made to adopt a legal basis for managing metropolitan areas and performing and financing metropolitan tasks, both in the form of a  single act, regulating the organisation and functioning of metropolitan selfgovernment throughout the country using a  comprehensive and framework approach and legal solutions dedicated to only one metropolitan area. in 2017, the first and so far the only metropolitan union in poland was established in the silesian voivodeship. it was determined that the search for appropriate organisational forms for the performance and sources of financing metropolitan tasks had not yet been completed. so far, an agreement has been reached on the choice of a  statutory functional solution based on the structure of a  metropolitan union and a  catalogue of metropolitan tasks, separate from the public tasks of municipalities and districts. the metropolitan union was provided with financing from the state budget. keywords: municipal cooperation, metropolitan area, metropolitan union, metropolitan district 1. introductory remarks since the restitution of the local self-government in poland in 1990, its system has been subject to specific evolutionary processes. although the most important organisational and functional problems have already been resolved, optimal methods of performing specific public tasks and their sources of financing are still being sought. the unification of functions, tasks and sources of income of local self-government units (especially municipalities) carried out at the stage of determining the political and financial basis for the functioning of local self-government, the successive transfer from the sphere of government administration of tasks to be performed subsequently by the local self-government, and even taking immediate needs into account (the need to secure the current needs of the state budget during the public finance crisis at the turn of the https://doi.org/10.53116/pgaflr.2022.2.8 https://orcid.org/0000-0001-5311-0201 mailto:malgorzata.ofiarska@usz.edu.pl 174 małgorzata ofiarska public governance, administration and finances law review • vol.  7. no. 2.  20th–21st century or the challenges faced by local self-government in the conditions of the covid-19 pandemic) were the premises for the growing interest on the part of local selfgovernment in instruments to correct the regulations adopted in this field and developing various forms of intermunicipal cooperation (imc) (ofiarska, 2022). this problem has been identified and analysed in the world literature for many years (hulst & montfort, 2007; teles, 2016; swianiewicz & teles, 2018). in the last decade, detailed research into the essence and legal nature of cooperation, its motives and barriers as well as problems regarding the organisation, functioning and results of intermunicipal cooperation has been conducted in western european countries, including france (boyer, 2012), germany (stork, 2012), switzerland (steiner & kaiser, 2018), austria (matschek, 2011) and the netherlands (allers & de greef, 2018), southwest, spain (bel et al., 2013), portugal (camões et al., 2021), south, that is, italy (marotta et al., 2018) and slovenia (rakar et al., 2015), and north (wiberg & limani, 2015) and central and eastern europe, including hungary (balázs, 2014; hoffman et al., 2016), poland (kołsut, 2015; dolnicki, 2018; ofiarska & ofiarski, 2021), the czech republic (bakoš et al., 2020) and slovakia (grešová, 2016). intermunicipal cooperation is also the subject of numerous studies in non-european countries, such as the united states (warner et al., 2021), canada (spicer, 2015) and various latin american countries (yurisch et al., 2019; da silva et al., 2020). in poland, the issue of cooperation between lgus is gaining importance, especially in connection with the legislator’s work on finding an effective legal formula for managing metropolitan areas. the last decade was therefore dominated by studies of the system of metropolitan areas and the search for appropriate forms of cooperation for the performance of public tasks in such areas. these issues are the subject of research conducted from various perspectives, mainly economics and finance, management and quality sciences, administration and legal sciences (szlachetko & gajewski, 2016; ofiarska, 2017; szydło, 2018; szlachetko, 2021), and cover various issues of a  specific nature. the reason for conducting such research is the necessity, diagnosed by practice and doctrine, to supplement the current structure of the public administration apparatus in its self-government sphere with entities capable of efficiently and effectively meeting the collective needs of residents, combined into one organism with neighbouring local self-government units through a  combination of mutual dependencies resulting from functional, social, economic and cultural (dolnicki, 2020, pp. 73–74) links. initially, the main problems in the metropolitan discourse (scientific discussions and political debates) were primarily the delimitation and legal regulation of the status of metropolitan areas and urban functional areas. later, in connection with the choice of the statutory functional solution based on the structure of the metropolitan union, these were accompanied by discussions on the legal nature and catalogue of statutory public tasks of the metropolitan union and the search for adequate sources of income to finance these tasks. the issues regarding the management of metropolitan areas have also gained special importance in connection with the adoption of appropriate instruments for implementing the european union’s regional policy (see krukowska & lackowska, 2017). the problem is universal, interdisciplinary and complex, as evidenced by, inter alia, 30  years of attempts to adopt systemic solutions for large cities and the surrounding 175polish experience in the search for the optimal model of performing and financing metropolitan tasks public governance, administration and finances law review • 2. 2022 municipalities. the need to formulate special solutions for urban areas was already expressed during the work on the draft of the first act on local self-government, adopted by parliament in 1990. however, the first act on local self-government ignored the incompletely identified specific opportunities and needs of metropolitan areas. neighbouring towns and municipalities were authorised to cooperate only on a voluntary basis (e.g. in the form of intermunicipal unions and associations), then it was recognised that legally regulated universal (analogous to urban, rural and urban–rural municipalities) forms of activity would be sufficient. the next stage of state system reform, consisting of the expansion of local self-government by districts (units of supra-municipal local self-government) and self-government voivodeships (units of regional self-government), in 1998, did not resolve the basic problems of metropolitan areas as the institutional solutions to managing metropolitan affairs in such areas were omitted. there was also a lack of legal solutions to enable the efficient and effective performance of metropolitan tasks needing to be performed by the local self-government units in such an area. the failure of voluntarily created municipal unions to develop and coordinate specific public tasks was also due to the lack of a  stable source of income and the inability to cooperate with local selfgovernment units at other levels. the abandonment of metropolitan reform in poland was largely due to, on the one hand, the different positions of political parties (including coalition ones) in parliament and the government’s indecisive actions, and, on the other hand, different visions of the objectives and process of reform among different levels of local self-government. the aim of the study is to indicate the main directions of the assumptions of draft acts and adopted acts, prepared on the basis of various initiatives, dedicated to the problems of managing public affairs at the metropolitan level. the thesis was verified that the normative concept of the metropolitan union finally adopted in poland is a compromise between various expert assumptions submitted for nearly 30 years. at the same time, the introduction of one universal model of a metropolitan union was abandoned in favour of individualised solutions that took the specificity of particular metropolitan areas into account. therefore, the subject of the analysis and evaluation were both the binding regulations constituting the legal basis for the organisation of the functioning metropoli tan union association in the silesian voivodeship, and those proposed in the draft acts on the establishment of metropolitan unions, submitted unsuccessfully to the sejm during the previous (2015–2019) and current term of office (until 30th march 2022). the analysis was carried out according to the process of regulating the basic aspects of metropolitan management: defining metropolitan tasks, indicating the essence of the metropolisation process, in the case of poland implemented by creating a metropolitan union, establishing the foundations for creating the composition of a metropolitan union and determining the material foundations of its functioning. using legal dogmatics, as well as historical legal methods, successive attempts were made to adopt the legal foundations for managing metropolitan areas and performing and financing metropolitan tasks. attempts to appoint metropolitan boards to control the development of the metropolitan area have been made in many european countries. however, metropolitan management is implemented in various organisational and legal forms and in diversified spatial frameworks. the past experience of european countries shows that the basic models 176 małgorzata ofiarska public governance, administration and finances law review • vol.  7. no. 2.  of the metropolitan system are solutions based on voluntary cooperation between local self-government units or through the establishment of general metropolitan units (metropolitan districts, metropolitan regions). the choice of the right organisational form for solving metropolitan problems is mainly determined by the systemic, political, historical, settlement and economic specificity of a given area. an evolutionary shift from forms based on voluntary cooperation to the establishment of general-metropolitan units is also visible. the presented polish assumptions and projects were mainly prepared in response to the experience gained from the operation of voluntary forms of cooperation, which indicated that solutions based on the use of municipal union institutions did not bring the expected results to large cities and metropolitan areas. metropolitan initiatives and projects in which the search for an appropriate systemic concept for the capital city of warsaw was sought will remain outside the scope of considerations (niziołek, 2007; izdebski, 2015), due to the specific features of this metropolitan area and the unique statutory changes implemented, establishing, inter alia, structures and forms of cooperation (ranging from the autonomy of urban districts designed as independent municipalities to the concept of an integrated city with urban districts devoid of autonomy in practice and performing limited functions). the analysis of assumptions and draft acts, as well as the adopted statutory solutions to the problems of managing public affairs at the metropolitan level will enable certain universal phenomena and tendencies that are also visible in studies of metropolisation processes occurring in other contemporary european countries to be identified. 2. genesis and assumptions of selected concepts and drafts of legal solutions dedicated to large cities, agglomerations and metropolises (1990–2013) problems in the system of metropolitan areas already featured in the public debate during the initial period of the political transformation in poland. at that time, it did not gain a proper place in the public debate nor in the work of the government administration. in 1993, as part of the joint commission of the government and the local self-government, a  board for the metropolitan system was established to develop systemic assumptions for the functioning of public authorities in metropolitan areas. in this period, work aimed at introducing another reform of public administration was carried out and new systemic solutions were sought in relation to large cities in order to prepare them to perform the functions of cities equal to districts in the future. in the draft act on district self-government of 1993, it was proposed to adopt solutions defining the essence of metropolitan complexes and establishing the rules for their creation, organisation and functioning as well as financing. the above proposal to define the legal status of metropolitan complexes was assessed as debatable and leading to the creation of not only a  separate, but also a  supra-district level of local self-government (kieres, 1994, p. 79). 177polish experience in the search for the optimal model of performing and financing metropolitan tasks public governance, administration and finances law review • 2. 2022 in the same period, other attempts were made to develop future systemic solutions for large cities, but they were temporary and experimental in nature, constituting de facto a prototype for the future district. these were the goals of the so-called pilot programme of public administrative reform (intended for large cities) starting in 1993, the substantive continuations of which were municipal public service zones functioning until 1 january 1999 (intended for smaller cities and the surrounding municipalities). in the following years, several concepts concerning the legal position, tasks, organisation and principles of functioning and financing of large cities, agglomerations and metropolises, of a standardised or tailored nature (to a specific agglomeration/metropolis), developed by both representatives of the doctrine and teams appointed by government administrative bodies (minister of the interior and administration, silesian voivode) or parliamentary groups, were discussed and assessed. the concept of a metropolitan district was universal in nature, proposed in 2005 in a comprehensive draft act amending the act on introducing the basic three-tier territorial division of the state and amending certain other acts concerning local self-government, prepared in 2004–2005 for the purposes of the national development plan project for 2007–2013. an important element of the project was the creation of 12 metropolitan districts, including a special capital district with regional status (izdebski, 2014, p. 276, 378), carrying out, in addition to the tasks typical of a district, also tasks characteristic of a metropolitan district. this project was not subject to parliamentary work. the concept of a metropolitan district was also referred to in a later period by identifying metropolitan tasks and searching for the appropriate form of their implementation. it was recognised that, within the framework of binding constitutional and international standards, the only possibility was to adopt a solution consisting of creating, from metropolitan areas, specific units of the basic territorial division in the form of metropolitan districts, being a special category of district. a metropolitan district would implement only metropolitan tasks and would have an organisational structure, as a rule modelled on the district (izdebski, 2010, pp. 67–68). attempts have been made to develop optimal legal solutions for the metropolitan area in the silesian voivodeship. the essence of one of the concepts of the special act for the silesian conurbation was to be the creation of a regional union (called śląsk or silesia), with the status of a regional self-government unit (knosala et al., 2007). another metropolitan draft act, presented in 2007–2008 and prepared at the request of the silesian voivode, referred, inter alia, to the german experience in the management of agglomerations and to the concept of a  municipal union regulated in the act on municipality self-government. it assumed the creation of an obligatory municipal union, which could be joined by neighbouring municipalities, after being approved by the minister responsible for administration ( jaworska-dębska, 2017, p. 230). both draft acts were not subject to parliamentary work. instead, they were to constitute the basis for the development – at the request of the government – of a universal act regulating the functioning of metropolitan unions. in the first stage of the implementation of the act, there would be only two pilot unions (in silesia and the tri-city – gdańsk, gdynia and sopot). ultimately, it was planned to establish a union for several metropolitan areas. 178 małgorzata ofiarska public governance, administration and finances law review • vol.  7. no. 2.  in january 2007, a government team was appointed to prepare a diagnosis of problems in the development of metropolitan areas and a  recommendation for their delimitation in poland. the results of the team’s work were used in the draft act of may 2008 on urban development, regional development centres and metropolitan areas. it was decided that, in order to solve problems of public management common to local selfgovernment units in large urban agglomerations, a  metropolitan complex should be established by the council of ministers on the terms specified in the act. belonging to this group of municipalities and districts located in the metropolitan area was to be obligatory. the above proposals to define the legal status of metropolitan complexes were considered to be a repetition of previously formulated proposals (dolnicki, 2010) and were assigned a classificatory meaning (edwarczyk, 2015, p. 309). another attempt to work out future system solutions for metropolitan areas was made in the draft act on urban policy and cooperation of local self-government units in september 2008. a dual method of creating a metropolitan area was proposed. the act would create two metropolitan areas, warsaw and upper silesia. further areas could be established by the council of ministers on the terms specified in the act. in order to handle the affairs of the metropolitan area, it was proposed to establish a metropolitan complex to which municipalities and districts located entirely in this area would belong by virtue of law. the scope of activities of the metropolitan complex was planned to be similar to those proposed in the draft act of may 2008. reactions to the project were mixed. on the one hand, objections were raised as to the scope of its application or even its legitimacy and compliance with the constitution, and the proposal of some solutions (primarily inefficient sources of income) was criticised. on the other hand, the creation of an institutional level for cooperation between local self-government units and the opportunity to boost their development was positively assessed (see ignasiak-szulc, 2009 and the cited literature). another government draft act on state urban policy and cooperation among local self-government units of may 2009 formulated a proposal to allow only the council of ministers to create metropolitan areas (with a total number of inhabitants of no less than 2,000,000, with a population density exceeding 200 inhabitants per km2). in order to handle the affairs of the metropolitan area, it was proposed to establish a metropolitan complex, to which municipalities and districts located entirely in this area would belong by virtue of law. similarly to the previous draft acts, the scope of the metropolitan complex was defined and similar rules for its organisation were proposed. legislative work on the draft act was suspended in 2010, due to disagreements between the local self-government and the government during the consultations. due to the suspension of work on the preparation of solutions addressed to all metropolitan areas, those aimed at preparing the draft metropolitan act for only a specific area were resumed. in 2011–2012, work was done on adopting the legal basis for obligatory cooperation between fourteen cities with district rights (forming the upper silesian metropolitan union) with the seat of the metropolitan district authorities in katowice. in 2012, a proposal was drawn up, the essence of which was to preserve the existing basic three-tier territorial division of the state and to create another category of district – the metropolitan district, which would include statutorily designated cities with district 179polish experience in the search for the optimal model of performing and financing metropolitan tasks public governance, administration and finances law review • 2. 2022 rights. a metropolitan district would take over some of the tasks of cities, the effective performance of which – due to their supra-local nature – exceeded the capabilities of individual cities and municipal unions. the, proposal addressed to one metropolitan area, was not approved by the government; instead, consultations were carried out on the most important dilemmas regarding the preferences for adopting detailed solutions for the demarcation of metropolitan areas, determining the tasks carried out there, as well as the organisational structure and the principles of managing metropolitan areas and financing them. based on the collected opinions and conclusions, the directions of further government actions aimed at preparing legal and organisational changes aimed at improving the functioning of urban agglomerations have been set (ministerstwo administracji i cyfryzacji, 2013). 3. genesis, concept and general evaluation of the first act on metropolitan unions in august 2013, a parliamentary draft act on the metropolitan district was submitted to the sejm.1 the project did not specify any criteria that had to be met in order to create a  metropolitan district. they could be created by the council of ministers, both on its own initiative and at the request of the interested municipality, district or city council with district rights. although the council of ministers could consult the inhabitants of a  given community, these consultations were not binding. the metropolitan district would carry out its own tasks and commissioned by the act in the field of government administration. the proposed metropolitan district system was essentially a duplication of the current district model. the original version of the draft act on the metropolitan district met with a  diverse assessment, expressed both in the legislative process and in the literature (antkowiak, 2016, pp. 100–108). the culmination of the two-year procedure of the draft act on metropolitan districts was the adoption on 9 october 2015 of the act on metropolitan unions.2 in the course of parliamentary work, the concept of the metropolitan area management model was changed and the idea of creating a  metropolitan district was abandoned in favour of adopting a functional solution in the form of a metropolitan union. it was to be an association of local self-government units located in a given metropolitan area, with a separate legal personality from the units that constituted it. the phrase “association of local selfgovernment units” has not yet appeared in normative acts and has caused the greatest doubts as to the nature of the metropolitan union. it could be created in a  spatially coherent zone of influence of the city that is the seat of the voivode or the regional council, characterised by the existence of strong functional connections and the advancement of urbanisation processes, inhabited by at least 500,000 inhabitants. the council of ministers could establish a union on its own initiative or at the request of the municipality council located within the metropolitan area, in order to implement statutory public tasks in the 1 paper no. 2107 of the sejm of the 7th term. 2 journal of laws of 2015, item 1890. 180 małgorzata ofiarska public governance, administration and finances law review • vol.  7. no. 2.  field of shaping the spatial order, developing the union area, public transport in the area of the union, and cooperation in determining the route of national and provincial roads in the area of the union. it would have two bodies, a  regulatory and control one (an  assembly, consisting of delegates of municipalities and districts included in the union – two from each local self-government unit) and an executive (a three-person board, elected by the assembly). the budget resolution was to be the basis for financial management. the catalogue of sources of income for metropolitan unions has been specified in the amended act on the income of local self-government units. it includes, inter alia, contribution to personal income tax from natural persons residing in the area of the metropolitan union, contributions from municipalities included in the metropolitan union and subsidies from the state budget and from local self-government budgets. the solutions proposed in the act on metropolitan unions were not applied in practice, because, during the period of its validity, the council of ministers did not issue the regulation necessary for its application, thereby specifying the rules for dividing the state’s territory into metropolitan areas, in which individual metropolitan unions were to be established as a result of specific regulations. in the autumn of 2015, the parliamentary majority changed, which questioned the legitimacy of the solutions proposed in the act, because, in its opinion, the most powerful municipal centres in poland were privileged. the act on metropolitan unions expired in connection with the entry into force of the act of 9  march 2017  on the metropolitan union in the silesian voivodeship.3 despite the fact that the adoption of statutory systemic legal solutions dedicated to metropolitan areas has been postulated for many years, the regulations introduced by the act on metropolitan unions have been assessed quite critically. the literature negatively assessed, inter alia, the universal nature of the act and it was argued that it was a compromise solution aimed at creating general legal norms for the functioning of metropolises in general, and not for solving problems specific to a given territory, taking into account the existing forms of cooperation between local governments and the way of organising the performance of public tasks (moll, 2017, pp. 150–151). 4. genesis, concept and general evaluation of the act on the metropolitan union in the silesian voivodeship the government formed as a  result of the parliamentary elections in 2015  gave up the concept of creating metropolitan unions on a  national scale, and focused on adopting legal solutions dedicated exclusively to the silesian voivodeship, where intensive activities aimed at strengthening metropolitan ties had been carried out for a  decade. in january 2017, a  government draft act on the metropolitan union in the silesian voivodeship was submitted to the sejm,4 which became the basis for the act on the metropolitan union in the silesian voivodeship adopted on 9 march 2017.5 3 journal of laws of 2017, item 730. 4 paper no. 1211 of the sejm of the 8th term. 5 journal of laws of 2017, item 730. 181polish experience in the search for the optimal model of performing and financing metropolitan tasks public governance, administration and finances law review • 2. 2022 the specificity of this metropolitan area determined the choice of the location for the first metropolitan union in poland. it consists of 14 cities with district rights and the surrounding land districts. the specificity is determined by the lack of a dominant central city and the functioning of a dozen or so urban centres of similar size and potential side by side. its distinctive features are a very high population and housing density, an extensive network of road infrastructure and public transport connections and a large daily migration between the cities of the agglomeration; as well as the degradation of the natural environment related to the development of industry and the exploitation of mineral deposits, as well as the revitalisation of post-industrial areas. it was assumed that a metropolitan union might be established in the area of the silesian voivodeship, constituting an association of local municipalities, characterised by the existence of strong functional connections and the advancement of urbanisation processes, located in a spatially coherent area inhabited by at least 2,000,000 inhabitants. this union includes the city with district rights i.e. katowice. this union is obligatory and the municipalities that are part of it are unable to withdraw from it. the council of ministers was authorised to establish the union and determine its area and borders, taking into account the existing forms of cooperation between municipalities that make up the metropolitan union, functional connections and the advancement of urbanisation processes, as well as the settlement and spatial layout, taking into account social, economic and cultural ties in this area. it issued an ordinance on this matter on 26 june 2017, creating a metropolitan union called “the metropolis of upper silesia and zagłębie”.6 when establishing the structure of the metropolitan union in the silesian voivodeship, the legislator referred to the systemic solutions adopted in the act on metropolitan unions of 2015, with some necessary modifications. the analysis of detailed legal solutions regulating the principles of operation of the authorities of the metropolitan union allows for the creation of new institutions unknown to polish local self-government law. for the first time in polish law, a solution was adopted that an entity that is not a new local self-government unit, within the meaning of the constitution of the republic of poland, receives its own tasks. the catalogue of the union’s obligatory tasks includes public tasks in the following areas: shaping the spatial order; social and economic development of the union area; planning, coordination, integration and development of collective public transport; sustainable urban mobility; and metropolitan passenger transport. the established metropolitan tasks combine elements typical of both local and regional tasks. the independence of the metropolitan union in determining the internal structure and rules of operation, as well as determining the number of delegates, has been limited. the assembly of the union consists of delegates from the municipalities that make up the union, regardless of their size, one from each municipality. the union board consists of five members and is elected by the assembly in a secret ballot. the assembly of the union adopts resolutions by a double majority of votes, unless the act provides otherwise. this condition is met if both the majority of the statutory composition of the assembly and 6 regulation of the council of ministers of june 26, 2017 on the establishment of a metropolitan union in the silesian voivodeship “the metropolis of upper silesia and zagłębie”, journal of laws of 2017, item 1290. 182 małgorzata ofiarska public governance, administration and finances law review • vol.  7. no. 2.  such a  number of delegates representing municipalities that the inhabitants of these municipalities constitute the majority of the population living in the area of the metropolitan union vote in favour of the resolution. the adopted solution is to prevent the possibility of resolutions being blocked by municipalities representing a smaller number of inhabitants but which are more numerous in the assembly. a specific method of financing the activities of the metropolitan union was adopted, ensuring the union receives a share of the income tax of natural persons residing in the area of the metropolitan union (0.2% in the year in which the metropolitan union was established, and 5% in the following years). the catalogue of the union’s sources of income includes contributions (fixed and variable) from municipalities included in the metropolitan union. the fixed part of the annual contribution was to constitute 0.1% in the year in which the metropolitan union was established, and 0.5% in subsequent years of income from the participation of the municipality in revenues from personal income tax. the metropolitan union was granted legal personality, but local communities were not empowered at the same time. it should perform new extra-municipal tasks that have not been performed so far. although the explanatory memorandum to the draft act described this structure as a kind of experiment, the metropolitan union does not have an official pilot character. this construction was assessed in the literature as innovative, which opens the way to experimentation in public administration in the future (pyka, 2018, pp.  21–22). 5. the concept and general assessment of other legislative initiatives concerning the system of metropolitan areas (taken by 31 march 2022) the statutory adoption of the principles of establishing, organising and operationalising a  metropolitan union in the silesian voivodeship meant abandoning the concept of uniform statutory solutions for all metropolitan areas in favour of adopting, if necessary, separate (subsequent) acts for individual metropolitan areas. from that moment on, a significant increase can be noticed in the submission of various legislative proposals on institutional forms of performing metropolitan tasks. in december 2016, the parliamentary draft act on the poznań metropolitan union was submitted to the sejm.7 it was modelled on the draft act on the metropolitan union in the silesian voivodeship and used some solutions adopted in the act on metropolitan unions. it assumed the creation of a metropolitan union that would be an association of municipalities and districts located in the greater poland voivodeship, inhabited by at least 600,000 inhabitants, covering a spatially coherent area of influence of the city with poznań district rights and characterised by the existence of strong functional connections. this draft act was rejected by the sejm in the first reading in march 2017. the next three draft acts regarding the establishment of the metropolitan union are dated 2018. 7 paper no. 1196 of the sejm of the 7th term. 183polish experience in the search for the optimal model of performing and financing metropolitan tasks public governance, administration and finances law review • 2. 2022 in january, a parliamentary draft act on the wrocław metropolitan union was submitted,8 which would obligatorily include wrocław (a city with district rights) and, voluntarily, other municipalities and districts located in the lower silesian voivodeship, with a total population of at least 900,000. in september, the parliamentary draft act on the krakow metropolitan union was submitted to the sejm,9 which would consist of krakow (a city with the district status of krakow) and other municipalities located in the lesser poland voivodeship, inhabited by at least 1,000,000 inhabitants. in march, however, the parliamentary draft act on the metropolitan union in the west pomeranian voivodeship was submitted,10 which would consist of szczecin (a city with district rights) and municipalities of the west pomeranian voivodeship, inhabited by at least 600,000 inhabitants. the solutions proposed in the above-mentioned three draft acts were basically analogous. they assumed entrusting the metropolitan union with carrying out tasks that overspill the administrative boundaries of municipalities, in the field of: planning, coordination, integration and development of public collective transport; shaping the spatial order as well as social and economic development of the area of the metropolitan union. all three draft acts were sent for a first reading, which did not take place until the end of the sejm’s term of office. in 2020, two more draft acts on the establishment of a metropolitan union were submitted to the sejm. in february, the senate’s draft act on the łódź metropolitan union was submitted,11 which would include łódź (a city with district rights) and other municipalities of the łódź voivodeship, inhabited by at least 1,000,000 inhabitants. in september, the senate’s draft act on the metropolitan union in the pomeranian voivodeship was submitted to the sejm,12 which is to be an association of municipalities and districts of the pomeranian voivodeship with a  population of at least 1,000,000. it  will obligatorily include three cities with district rights – gdańsk, gdynia and sopot, and those districts, where at least half of the municipalities are part of the metropolitan union. the catalogue of tasks planned to be entrusted to the union was the same as in the case of draft acts submitted to the sejm in 2018. it was extended to include environmental protection tasks. both draft acts were submitted for their first reading, which did not take place until 30 march 2022. the proposals for adopting the legal basis for the establishment of metropolitan unions, submitted in the previous and current term of office of the sejm, partly propose analogous solutions to those adopted for the union in the silesian voivodeship. in addition to common elements, one can point to elements specific to the lower silesian and pomeranian concepts, which are based on the establishment of membership of municipalities and districts, which significantly differ from those of the others. the general description of subsequent draft acts related to metropolitan unions, submitted relatively shortly after the entry into force of the act dedicated to the metropolitan union in the silesian voivodeship, which did not lead to their adoption in the 8 paper no. 2252 of the sejm of the 8th term. 9 paper no. 2934 of the sejm of the 8th term. 10 paper no. 2428 of the sejm of the 8th term. 11 paper no. 285 of the sejm of the 9th term. 12 paper no. 646 of the sejm of the 9th term. 184 małgorzata ofiarska public governance, administration and finances law review • vol.  7. no. 2.  form of an act, proves that the polish legislator is still reluctant to create new metropolitan areas requiring an individualised approach, even in the case of justified needs reported by local self-governments. 6. summary these considerations serve to confirm the adopted thesis of a  specific compromise between expert assumptions and the will of the legislator with regard to the final normative version of the metropolitan union concept. at the same time, it has been shown that the withdrawal from the introduction of one universal model of a  metropolitan union for individual metropolitan areas opens up the possibility of submitting further legislative initiatives aimed at creating new unions, with individualised features that take into account the specificity of particular metropolitan areas. the presented concepts, assumptions and draft acts, as well as adopted legal solutions, present an evolution in the way of understanding the problems of metropolitan areas. they reveal a diverse approach to the scope of the proposed regulation and the model of the legal status of such areas (ranging from solutions using voluntary forms of cooperation to creating a new category of local self-government units and making changes to the territorial division of the state). there is no  doubt that the search for an optimal model for managing metropolitan areas and the need to create an organisational form that would institutionalise the processes by which large urban centres impact on the surrounding municipalities, and after 1998 also on districts, was repeatedly raised in various environments with varying intensity, including also in the course of working on the next stages of public administration reform. also in practice, using the forms of cooperation specified by the legislator, the most appropriate way of performing metropolitan tasks was sought (in particular in the fields of spatial planning and development, road authority and public transport). with the emergence of discussions on the status of metropolitan areas and the failure of a top-down creation of metropolitan structures, local self-government structures began to emerge in poland, based on the voluntary cooperation of municipal and district units. local selfgovernment legislation in poland since 1990 has provided legal grounds for intermunicipal cooperation, since 1998 for cooperation of districts, and since 2015 also for municipal and district cooperation. there is a visible bottom-up process of building a coalition of local cities and the surrounding municipalities and districts, which can be described as the beginning of the process of integration of management and planning in functional urban areas. neither the establishment of cities with district rights nor other solutions introduced only in a fragmentary manner, enabling the implementation of metropolitan tasks, have solved the specific problems of metropolitan areas (e.g. functional areas, regulated in the act on spatial planning and development, for which a  spatial development plan is adopted or integrated territorial investments [iti] implemented in the cities that are the seat of voivodeship self-government authorities or a voivode and areas functionally related to them). despite the creation of organisational and financial instruments supporting the 185polish experience in the search for the optimal model of performing and financing metropolitan tasks public governance, administration and finances law review • 2. 2022 cooperation of local self-governments in the functional areas (iti), the adoption of statutory solutions regulating the performance and financing of metropolitan tasks is currently not a priority in poland, neither for the government nor for the parliament. contrary to the top-down reform of the state in 1990 and 1998, there is now clear social pressure to organise the management structures of large cities in a democratic rather than technocratic manner. the long-term process of creating legal regulations regulating the mode and rules of functioning of metropolises is crowned with the entry into force of the act on the metropolitan union in the silesian voivodeship. the metropolitan union is de facto compulsory. this is evidenced by the statutory procedure for establishing a union and the lack of legal solutions that establish the rules for the withdrawal of municipalities from the union (in practice, this makes it impossible for municipalities to withdraw). the metropolitan union is a  new local self-government institution, but it is not another local self-government unit. it is an organisational unit included in the local selfgovernment sector and the public finance sector, but qualitatively different from the associations of local self-government units, although its legal structure resembles the institution of a  municipal union regulated in the local self-government system act. it assumes the cooperation of certain local self-government units existing in the metropolitan area according to the functional formula of the association, with a separate legal personality from its constituent units. the representative bodies of a metropolitan union do not result from general elections, but are composed of delegates from individual local selfgovernment units that make up the union. this means that the union derives its legitimacy from individual local self-government units, and only indirectly from the inhabitants of the metropolitan area. the idea of a metropolitan union is, first of all, for the legislator to distinguish general metropolitan tasks, stemming both from the role of a metropolitan city as the centre of the union and the need to solve problems caused by the spatial and functional layout of its surroundings. satisfying the collective needs of the inhabitants of the metropolitan area creates for the metropolitan union a category of its own tasks. its creation enables such tasks to be implemented in an integrated and coordinated manner. granting the metropolitan union the category of its own tasks, which until now have been reserved for local self-government units, is an innovative solution for polish conditions. the creation of sources of income for the metropolitan union by means of an act means that the status of the metropolitan union in terms of budget, compared to the status of classic municipal unions is generally more stable. the assumptions and draft acts submitted so far, as well as the adopted acts dedicated to the problems of managing public affairs at the metropolitan level, as well as containing detailed institutional and legal solutions, in the vast majority referred to the cooperative model of metropolitan area management and constituted specific modifications to this model. on the one hand, it was proposed to entrust the management of the metropolitan area to an additional metropolitan unit of local self-government, which was to exist next to the already functioning municipalities (cities with district rights). the concept of the metropolitan district, understood as a local self-government community, belongs to this trend, although the various models, prepared at different times, differed in their specific 186 małgorzata ofiarska public governance, administration and finances law review • vol.  7. no. 2.  structural elements. the main difference was to determine whether the metropolitan district is to be the next (fourth) category of local self-government units and constitute an element of the basic territorial division of the state, or to function as another category of a district (next to the land district and the magistrate district, which was referred to in the literature as a city with district rights), without the need to change the basic territorial division of the state. on the other hand, it was planned to appoint a union metropolitan complex with a separate legal personality to manage the metropolitan area, which would include individual local self-government units located in the metropolitan area. the current legal status in poland in the field managing of metropolitan areas is characterised by a wide variety of solutions as well as fragmentedness and dispersion in many legal acts. different metropolitan areas are managed differently, which is determined by both the legislation in force and the practice of its application. currently – with the exception of warsaw, organised on the basis of a  separate act based on the model of a unified metropolitan authority – the model of cooperative management of such an area in poland is characteristic of metropolitan areas. the management of metropolitan areas is carried out by local government units (mainly by cities with district rights and neighbouring municipalities), as well as by specific forms of intermunicipal cooperation and, in the case of a  metropolitan area in the silesian voivodeship, by a  metropolitan union (operating under the name of the metropolis of upper silesia and zagłębie). granting the warsaw and silesian metropolitan area legal instruments dedicated to them by the legislator in practice privileges their position. the functional-spatial and socio-economic differentiation of metropolitan areas, as well as specific system solutions that regulate the relations between local self-government units in different countries, make it impossible to identify a  single, optimal model of metropolitan area management. compared to many european countries with welldeveloped forms of metropolitan areas management (for example, germany, france, italy and the netherlands), poland is still at the beginning of the path of making them important management and planning entities. on the one hand, this was due to historical conditions (including a relatively short period of local self-government functioning ) and, on the other hand, legal, administrative and political conditions. the discussion of the optimal shape of systemic, organisational and financial solutions, taking into account the specificity of the functioning of metropolitan areas, cannot be considered complete. an agreement has already been reached on the choice of a statutory functional solution based on the structure of the metropolitan union and the catalogue of metropolitan tasks, separate for the public tasks of municipalities and districts. however, there is still no universal acceptance of the choice of the nature of the regulation of the metropolitan area management model. the legislator himself quickly changed his position on this matter, departing from the adopted universal solutions in favour of solutions dedicated to a specific area. this may mean the legislator’s reluctance to create new metropolitan areas that require an individualised approach, even in the case of justified needs reported by local self-government communities. when adopting new legal solutions and improving the existing ones, it is necessary to take advantage of the negative experiences of the only metropolitan union so far (the metropolis of upper silesia and zagłębie), in particular related to the system and the rules of functioning and 187polish experience in the search for the optimal model of performing and financing metropolitan tasks public governance, administration and finances law review • 2. 2022 adopting resolutions by the union’s decision-making body. 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(2021). privatization and intermunicipal cooperation in us local government services: balancing fiscal stress, need and political interests. public management review, 23(9), 1359–1376. online: https://doi.org/10.1080/14719037.2020.1751255 wiberg, u. & limani, i. (2015). intermunicipal collaboration – a smart alternative for small municipalities? scandinavian journal of public administration, 19(1), 63–82. yurisch, a. k., soto, k. & fuenzalida, c. r. (2019). inter-municipal cooperation in latin america: current situation and future research challenges. revista de administração pública, 53(3), 575–591. online: http://dx.doi.org/10.1590/0034-761220180042x http://doi.org/10.19195/0137-1134.114.25 http://doi.org/10.19195/0137-1134.114.25 https://doi.org/10.1057/9781137445742 https://doi.org/10.1080/14719037.2020.1751255 http://dx.doi.org/10.1590/0034-761220180042x public governance, administration and finances law review vol. 7. no. 2. (2022) • 157–172. © the author 2023 doi: 10.53116/pgaflr.2022.2.7 the impact of the covid-19 pandemic on constitutionalism and the state of emergency blerton sinani* ¤ * associate professor, south east european university, faculty of law, e-mail: blerton.sinani@ seeu.edu.mk abstract: the emanation of the covid-19  global pandemic has managed to influence specific legal, political and socio-economic aspects. public health, public institutions, as well as concepts such as: the rule of law, restriction of certain human rights and socio-economic wellbeing became characteristics of the global pandemic and as such triggered a state of emergency. the pandemic cannot be a  justified pretext for an unlimited suspension of democracy. indeed, restrictions on civil rights and liberties ought to be interim, proportional and transparent. although the emergency measures taken by governments against the covid-19  should be provisional, timebound and in congruence with democracy as any contemporary political regime or state governed by the rule of law. this situation once again revealed to us the importance of a  constitutional state of emergency guided by public law in its forms and examples of comparative constitutional law regarding events which in 2020 demanded the emergence and function of public institutions in an effort to protect society. the state of emergency is regulated by the constitution of the republic of north macedonia of 1991 in general which gives the government expansive power, such as bypassing the parliament’s power through issuing acts by force of law. it is worth mentioning that in north macedonia there is no  lex specialis or special legislative act that regulates a state of emergency. keywords: constitution, state of emergency, covid-19, democracy, rule of law, human rights 1. some general considerations in relation to constitutionalism under extreme conditions constitutions are often made, broken, or changed under extreme conditions such as war, secession, emergency or some other extraordinary circumstance. over the past 40  years alone more than 200  constitutions have been introduced in this way. as peter russell (2004, p. 106) notes: “no liberal democratic state has accomplished comprehensive constitutional change outside the context of some cataclysmic situation such as revolution, world war, the withdrawal of empire, civil war, or the threat of imminent breakup.” constitutionalism under extreme conditions raises a bundle of fascinating and important issues. constitutionalism is nowadays commonly identified by a certain condition such as the recognition of the people as the source of all governmental authority, https://doi.org/10.53116/pgaflr.2022.2.7 https://orcid.org/0000-0001-8841-4715 mailto:blerton.sinani@seeu.edu.mk mailto:blerton.sinani@seeu.edu.mk 158 blerton sinani public governance, administration and finances law review • vol.  7. no. 2.  the normative supremacy of the constitution, the ways the constitution regulates and limits governmental power, adherence to the rule of law and respect for fundamental rights. constitutions are intended to be stable and to survive during times of crisis. they are therefore sometimes designed expressly to accommodate unforeseen circumstances and to authorise resort to emergency powers. these unforeseen circumstances  –  for instance belligerency, war, terror and alike; natural and manmade disasters; political and economic meltdowns, and the emergency regimes created to manage these situations  –  pose a  serious challenge to each of the components of constitutionalism. in a constitutional regime, there is a normative supremacy of the constitution, the source of which is “the people”. however, states of exception and emergency powers go to the very root of the constitutional order, to the question of sovereignty and its exercise. as carl schmitt famously stated in his book political theolog y the sovereign is “he who decides on the state of exception”. according to the classical institution of the roman dictatorship in times of crisis, an eminent citizen was called by the ordinary officials and temporarily granted absolute powers and in some cases to create a temporary “constitutional dictatorship” as the regime seeks to restore the status quo ante emergency. these regimes undermine limits to governmental powers as they give enhanced powers, usually to the executive, allowing it to overcome legal restrictions in order to efficiently face the crisis. emergency regimes have implications for the rule of law. the rule of law comprises two layers: formal and substantive. briefly put, the formal aspect of the rule of law requires prohibitions and delegations to be explicitly anchored in the law, which is promulgated, prospective, general, stable, clear and enforced equally. the substantive aspect of the rule of law requires prohibitions and delegations to respect various contentbased values, such as individual rights or the separation of powers. in times of crisis both values are at risk (albert & roznai, 2020, p. 2). needless to say, emergencies are not an everyday issue. otherwise, they would become normal which alludes to periods where the everyday functioning of institutions is deemed sufficient for solving pressing problems. therefore, “emergencies” is a broader term than those of “state of emergency” or “state of exception”, which invokes a situation in which the very existence of a state is at stake. nevertheless, “emergency” can be defined as an extraordinary situation requiring prompt and firm action; therefore, emergency powers are conferred to the executive, while the role of parliament as well as the protection of some key fundamental rights and freedoms are compressed; the emergency finished, the normal functioning of the form of government is restored. in addition, “the key elements of traditional emergencies are mainly two: a temporary prominent role of the executive power over the legislative and measures that temporary infringe or suspend rights and freedoms; therefore, temporariness is the core word, since the emergency character of the situation requires a deviation from the constitutional legal order; moreover, since the ultimate aim is the restoration of the constitutional legal order, the deviation cannot be temporary” (albert & roznai, 2020, p. 168, 219). as to the constitutional emergency powers undertaken by the executive under such extreme conditions the following three main models–archetypes for constitutional emergencies are identified as: 159the impact of the covid-19 pandemic on constitutionalism and the state of emergency public governance, administration and finances law review • 2. 2022 ƿ the “rule of law”, or “business as usual” archetype model, according to which responses to emergencies can be framed within the existing, ordinary legal framework. here, no  extraordinary measures in the strongest sense of the term are adopted, since they are provided for in a  predetermined framework also available during times of normalcy. in this archetype model the label “emergency” is more of a  discursive or communicative tool as it does not lead to an upheaval of existing legal structures. ƿ the “constitutional dictatorship” archetype model in which emergencies lead to exceptional and temporary regimes wherein ordinary norms no  longer apply. emergency measures also take place within a  predetermined normative space, albeit one of a  temporary nature and which is not available in periods of normalcy. moreover, there are substantive and procedural requirements in place, since they are seen as reducing the likelihood of abuse. ƿ the “extralegal archetype model” in which responses to emergencies are to be found outside of established norms, perhaps best illustrated by the adage “necessity knows no law”. accordingly, emergencies are mostly or completely unregulated in light of the impossibility by lawmakers to foresee all possible extraordinary scenarios. it should be noted that the three archetype models mentioned above are not always apt at accurately describing the constitutional regimes in specific legal systems. thus, they should not be applied in an either/or fashion to label every particular instance. in some cases emergencies may lead to a combination of elements from more than one of the archetype models (albert & roznai, 2020, p. 2). in fact, two types of emergency powers exist: constitutional and extra-constitutional. in the first case emergency powers are based upon the (written) constitution or on an organic or ordinary law enacted in accordance with the constitution; the state officially proclaims a  state of emergency (in one of the forms foreseen by national law) and, usually, enacts emergency measures. in the latter case, executive authorities act  –  and are considered to be entitled to act  –  in an emergency on the basis of unwritten (constitutional) principles in order to overcome the emergency; the state enacts emergency measures without officially proclaiming a  state of emergency. the first form of state of emergency may be considered a  de iure one, the second a de facto one. the latter form does not necessarily constitute a violation of international law. the absence of a  formal declaration may however preclude states from resorting to certain measures [e.g. under the iccpr (international covenant on civil and political rights), a derogation from human rights can only take place “in time of public emergency the existence of which is officially proclaimed”, article 4(1)]. a  system of de iure constitutional emergency powers can provide better guarantees for fundamental rights, democracy and the rule of law, and better serve the principle of legal certainty, deriving therefrom. in its 1995 report on emergency powers, the venice commission expressed a  preference for the de iure form, recommending that “de facto state of emergency should be avoided, and emergency rule should be officially declared”. the declaration of a state of emergency is subject to the rules enshrined in the domestic legal order (alivizatos et al., 2020, pp. 6–7). the rules must be clear, accessible and 160 blerton sinani public governance, administration and finances law review • vol.  7. no. 2.  prospective (available in advance). within the system of written emergency powers, the basic provisions on the state of emergency and on emergency powers should be included in the constitution, including a  clear indication of which rights can be suspended and which rights do not permit derogation and should be respected in all circumstances. the venice commission has previously indicated that: “the emergency situations capable of giving rise to the declaration of states of emergency should clearly be defined and delimited by the constitution.” this is necessary because emergency powers usually restrict basic constitutional principles, such as fundamental rights, democracy and the rule of law. it is up to each state to decide whether one or several emergency regimes will be recognised. if  several emergency regimes exist, the differences between them (causes, levels of parliamentary oversight, levels of powers to the government, available emergency measures) should be clearly set in the legal rule. the state should always opt for the least radical regime available in the given circumstances (alivizatos et al., 2020, 6–7). 2. constitutional aspects of a state of emergency in the republic of north macedonia according to its constitution of 1991, the republic of north macedonia is a  parliamentary democracy governing political system with an explicitly determined principle of division of state powers into legislative, executive and judicial (article 8  paragraph 1 line 4 of the constitution of the republic of north macedonia),1 a system of checks and balances (relation between three branches of state power based on forms of mutual cooperation and reciprocal control and balances), and a  comprehensive, modern catalogue of rights and freedoms designed on the basis of the european convention of human rights. the first case of covid-19 was reported on 31 december 2019 and the source of the outbreak has been linked to a wet market in wuhan in hubei province, china. cases of the virus have been confirmed in numerous countries and territories worldwide. on 11 march 2020 the world health organization (who) declared the global outbreak of a pandemic. since then it has spread to most corners of the globe. while the health threat it poses and the challenge it represents for human health is paramount, no less important is the strain it puts on the legal order. for most of the affected countries, this outbreak is posing unprecedented institutional challenges and has obliged public institutions and governments to adopt strict measures affecting citizens’ rights in a way unparalleled since the second world war (binder et al., 2020, 1). indeed, the world was dramatically marked in 2020 by a pandemic due to the spread of a new, hitherto unknown and deadly coronavirus that causes the infectious disease covid-19 (coronavirus disease).2 in a lightning and aggressive expansionist campaign the virus has forced the public authorities of a large number of states to declare, organise and implement a series of new, differentiated, in a row 1 constitution of the republic of north macedonia. official gazette, no. 52/1991. 2 a global pandemic of coronavirus covid-19 was declared on 11 march 2020 by the world health organization (who). 161the impact of the covid-19 pandemic on constitutionalism and the state of emergency public governance, administration and finances law review • 2. 2022 strict measures to protect society and its members. this is, of course, a situation that is still ongoing and the consequences of which have not yet been definitively summarised. these are the most serious possible issues facing society, and this clearly shows us the current state of comparative state law theory and practice around the world marked by a pandemic. furthermore, the plague of coronavirus seemed to open a pandora’s box, from which all sorts of questions arose from the immediate medical and health ones about the nature of the virus, its sources and weaknesses, vaccine production and the organisation of mass vaccination of the population, to other broad and general socio-political issues, such as whether invoking a de facto or de iure state of emergency due to a pandemic will once again test the ability of the democratic order to cope with the challenges of the crisis of important segments of state and social organisation (bačić, 2021, pp. 105–106). today, some 90 per cent of all constitutions worldwide contain unequivocal provisions for how to deal with states of emergency (elkins et al., 2009, pp. 1–65). the emergency constitution may be defined as the set of formal legal provisions encoded in the constitution that specify who can declare an emergency, under which conditions an emergency can be declared, who needs to approve the declaration, and which actors have which special powers once it has been declared that the constitution does not assign to them outside emergencies (bjornskov & voigt, 2018, p. 103). a state of emergency in the legal order of the republic of north macedonia is regulated by its constitution. it could be declared only in cases within the bounds provided for by the constitution, and only in a manner prescribed by the constitution. in fact a state of emergency is regulated by several articles of the constitution of the republic of north macedonia. the provisions are distributed in several places in the normative text of the constitution and when talking about the state of emergency, everyone should be taken into account as a systematic coherent normative whole. the constitution in articles 54, 125, 126 and 1283 stipulates when a state of emergency is introduced, who proposes to introduce it, who decides on its proclamation, how long it lasts, how it continues, who controls its legal effects, which rights of citizens cannot to be restricted and which bodies continue their work in emergency conditions (шкариќ, 2020). the normative definition of the emergency state is provided by article 125 of the north macedonia constitution: “a state of emergency exists when major natural disasters or epidemics take place. a state of emergency on the territory of the republic of north macedonia or on part thereof is determined by the assembly on a  proposal by the president of the republic, the government or by at least 30 representatives. the decision to establish the existence of a state of emergency is made by a two thirds majority vote of the total number of representatives and can remain in force for a maximum of 30 days. if the assembly cannot meet, the decision to establish the existence of a state of emergency is made by the president of the republic, who submits it to the assembly for confirmation as soon as it can meet.” subsequently, one of the stated conditions, realistically and practically, was met. that is the outbreak of the covid-19  epidemic on the territory of the 3 the mandate of the judges of the constitutional court of north macedonia, as well as members of the judicial council of the republic of north macedonia is extended for the duration of the state of war or emergency (article 128 of the constitution of the republic of north macedonia of 1991). 162 blerton sinani public governance, administration and finances law review • vol.  7. no. 2.  republic of north macedonia, which has been confirmed a  pandemic by the world health organization. in the proposal of the government of the republic of north macedonia for introducing a  state of emergency from 18  march 2020  states that the epidemic, “has affected the territory of the republic of north macedonia”. it cited the first case was on 26 february 2020 and 35 more cases to 17 march 2020. the government of the republic of north macedonia had submitted this proposal to the assembly of the republic of north macedonia and not to the president of the republic of north macedonia assuring that the mandate of the members of parliament is in force and that the assembly should make the decision on the state of emergency. however, according to the decision on self-dissolution of 16 february 2020: “the assembly has restored the sovereignty of its citizens.” thus, from that moment it had ceased to exist from a constitutional standpoint (шкариќ, 2020). it is worth mentioning that the assembly of the republic of north macedonia had been dissolved prior to the coronavirus crisis on 16 february 2020 for the purpose of convening early parliamentary elections on 12 april 2020. in the absence of a special law regulating the state of emergency and in conditions of a dissolved assembly, in harmony with the constitution, the president on 18 march 2020  proclaimed a  state of emergency that lasted a  total of three months or 95  days (хаџи-зафиров et al., 2020, p. 9). this is the first time in the contemporary constitutional history of the republic of north macedonia that a state of emergency had been confirmed. with the proclamation of the state of emergency, article 126 of the constitution and article 10 of the law of the government of the republic of north macedonia4 were activated, these stipulate that in case of any state of war (state of martial law) or a state of emergency, if the assembly cannot meet, the government, in accordance with the constitution, may adopt decrees with the force of law on issues within the jurisdiction of the assembly (хаџи-зафиров et al., 2020, p. 9). before the expiration of the 30 days, the government is obliged to submit to the president a detailed report for the effects of the measures that had been taken and a  reasoned proposal for the need of potentially extending the state of emergency for additional 30 days. in such circumstances the alternative subsidiary normative-constitutional solution had to be activated (applied), the decision for a state of emergency to be made by the president of the republic of north macedonia. meanwhile, the president of the republic of north macedonia in conformity with article 125 of the constitution of the republic of north macedonia has adopted a decision to establish the existence of а state of emergency on the entire territory of the republic of north macedonia. the state of emergency, its duration is limited ex constitutione, i.e. the constitution of the republic of north macedonia limits the duration of the state of emergency to a maximum of 30 days. as a result, the state of emergency has been instituted for a maximum of 30 days at a time with a view to preventing the spread and coping with the consequence of the covid-19 coronavirus.5 the decision which is subject to parliamentary approval shall be submitted to the assembly of the republic of north macedonia to be verified as soon as the assembly is able to meet. the state of emergency 4 закон за влада на република северна македонија, службен весник на република северна македонија, бр. 59/00, 26/01, 13/03, 55/05, 37/06, 115/07, 19/08, 82/08, 10/10, 51/11, 15/13, 139/14, 196/15, 142/16, 140/18, 98/19. 5 decision on determining the existence of a state of emergency. official gazette of the republic of north macedonia, no. 68/2020. 163the impact of the covid-19 pandemic on constitutionalism and the state of emergency public governance, administration and finances law review • 2. 2022 was determined, that is, declared by a  decision of the president of the republic on 18 march 2020 because the president of the assembly notified the head of state that the assembly is not able to hold a session and decide on the proposal of the government due to the previously adopted decision of dissolution of the assembly. besides that, the decision to proclaim a state of emergency was made by the president of the republic of north macedonia after the previously held session of the security council of the republic of north macedonia, which clarified two key issues: firstly, to be introduced a state of emergency instead of a  state of crisis and, secondly, the government to postpone the parliamentary elections scheduled for 12 april 2020 by a decree with the force of law (шкариќ, 2020; жерајиќ, 2021, pp. 10–12). in view of the above, it can be concluded that the decision of the president of the republic to establish the existence of а state of emergency has no declarative, but a constitutive legal effect: it activates the special provisions of the constitution relating to the state of emergency and, through the special authorities of the government by decrees with the force of law, to manage the overcoming of the crisis and of its consequences to assume a legislative function, to intervene with economic measures in the economy, to restrict human freedoms and rights, etc. (камбовски et al., 2020, p. 6). additionally, the state of emergency in north macedonia was declared after a broad consensus was reached among all relevant political parties because the country found itself in a parliamentary pre-election time period (bieber et al., 2020, p. 9), that is, the constitutionally envisaged 60 days as a time limit for organising parliamentary democratic elections in the assembly of the republic of north macedonia after the decision to dissolve the assembly (article 63, paragraph 3).6 this caused objectively the act of postponing the parliamentary democratic elections through a special decree with the force of law, which happened immediately after the first decision to establish the existence of a state of emergency. the state of emergency is not a health-related, but a special constitutional-legal, that is, legal category which, based on the decision to declare an epidemic as a serious danger to the health of the population, consists in putting into temporary force special constitutional-legal competencies and legal instruments for health protection, but also for regulating social relations and activities in various spheres (economy, education, etc.) (камбовски et al., 2020, p. 6). in this context, it is worth withdrawing the demarcation line, i.e. to make the distinction between a state of crisis and a state of emergency as separate and particular legal concepts in their connotation (semantic) aspects. during a state of crisis, the government acts and undertakes activities in compliance with the existing law on crisis management and other laws (above all, the law on the protection of the population from infectious diseases, the law on protection and rescue, etc.), and its activities and competencies are legally defined and limited. in a state of crisis, the existing laws do not give the government the right to issue decrees with the force of law, which in conditions of emergency, according to the constitution, it has the right to pass. thus, in accordance with article 126, paragraph 2 of the constitution of the republic of north macedonia, in a  state of emergency, the authorisations of the government to adopt decrees with the force of law last until its completion, for which the assembly decides. by authorising the government to pass decrees 6 устав на република северна македонија, службен весник на република северна македонија бр. 52/1991. 164 blerton sinani public governance, administration and finances law review • vol.  7. no. 2.  with the force of law, it practically takes over the legislative competence of the assembly, although the decrees are not, nor can they be considered, classical laws, but it is a special type of general normative legal acts that, according to the constitution, are adopted in conditions when the country is in a state of emergency or in a state of war. in fact, the decrees with the force of law as a combination of legislative and executive power are an opportunity for the executive power to participate in the exercise of the legislative function and the decrees with the force of law are in fact acts of delegated legislation, whereby the principle of necessity – namely, the legislative competencies of the government are limited to the purposes for which the state of emergency has been declared and the measures must not exceed those objectives.7 therefore, the decrees with the force of law can amend and supplement provisions of existing laws, but must be within the framework of the constitution. with the state of emergency declared by the head of state, the government was empowered to restrict human rights in accordance with the constitution and international human rights treaties, although even in times of crisis the government may impose certain human rights restrictions in compliance with the constitution, laws and international human rights instruments. the difference is that in a state of emergency the restrictions on human rights are made through the direct application of the decrees with the force of law, while in a state of crisis by the application of the existing current law (каракамишева & јовановска, 2020, pp. 28–29). the similarity between the two situations is that the government is obliged to respect the constitution, laws and international treaties for the protection of human rights and freedoms in such restrictions. it is a fact that the state of emergency temporarily suspends the constitutionally guaranteed principle of separation of powers, but at the same time leads to the concentration of political power in the hands of the government due to the transfer of legislative power from the assembly to the government. the justification of this suspension of the principle of separation of powers is most often sought in the need to accelerate all activities of state bodies, while the restriction of human and civil rights and freedoms is done in accordance with the need to eliminate the threat posed by the state of emergency. in a state of prolonged duration of the health crisis, and thus the factual basis for the existence of the state of emergency, after the expiration of 30 days the question arose how to “extend” the state of emergency in conditions when its extension was requested by the medical profession, but it was also the only way for a somewhat normal functioning of the legal order and the political system within the described circumstances. as there was no constitutional basis for a decision to extend the state of emergency, the president of the republic of north macedonia, deciding on a new proposal of the government of the republic of north macedonia, made a new decision to establish a state of emergency for a time period of 30 days. this decision was 7 the principle of necessity requires that emergency measures must be capable of achieving their purpose with minimal alteration of normal rules and procedures of democratic decision-making. moreover, the principle of necessity is not referred directly in the context of the institutional emergency measures, but may be derived from the requirement of proportionality and necessity of the emergency measures in the field of human rights. therefore, the power of the government to issue emergency decrees should not result in a carte blanche given by the legislator to the executive. given the rapid and unpredictable development of the crisis, relatively broad legislative delegations may be needed, but should be formulated as narrowly as possible in the circumstances, in order to reduce any potential for abuse. as a general rule, fundamental legal reforms should be put on hold during the state of emergency (council of europe, 2020, p. 4). 165the impact of the covid-19 pandemic on constitutionalism and the state of emergency public governance, administration and finances law review • 2. 2022 challenged by a certain political party before the constitutional court of the republic of north macedonia, claiming that: “the president has the right to declare a state of emergency with a maximum period of time of 30 days for the same legal and factual situation” (каракамишева & јовановска, 2020, p. 29, 62). on the other hand, the constitutional court of the republic of north macedonia rejected the initiative for assessment of constitutionality with the explanation that the constitution of the republic of north macedonia does not limit from a quantitative (numerical) point of view, nor is it possible, how many times a state of emergency will be declared, if the competent state bodies like the assembly of the republic of north macedonia or the president of the republic of north macedonia assess that the conditions and the need for its proclamation are met. this means that the constitution of the republic of north macedonia stipulates that after the expiration of the time period of 30 days, the state of emergency ceases. if the factual conditions for the existence of a state of emergency remain, which is a constitutional basis and condition, a new additional decision for declaring a state of emergency is made. it is a guarantee that the state of emergency cannot be automatically extended, but there is a need for a new assessment of whether there are conditions and a need for the existence of a state of emergency, and if it is deemed necessary and justified, a new decision is made establishing the existence of a state of emergency for a certain period of time, which again may not be more than 30 days. this is because the state of emergency implies limitation (restriction) of certain freedoms and rights of man and citizen recognized in international law and determined by the constitution of the republic of north macedonia, which must be an exception, due to which its time limit is necessary and subject to mandatory review. following the spirit and the stated legal logic of the constitutional court of the republic of north macedonia, in conditions of the existence of the reasons for determining the state of emergency stated in the constitution of the republic of north macedonia, the president of the republic of north macedonia made 4 (four) consecutive decisions as follows: 18 april 2020 for a duration of 30 days, 18 may 2020 for a duration of 14 days and 30 may 2020 for a duration of 14 days. after these multiple extensions the state of emergency ceased on 13 june 2020. nevertheless, two days later the president made a new decision to re-declare a state of emergency for 8 days starting on 15 june 2020. pursuant to article 1  of the new decision the state of emergency was declared throughout the country for the preparation and conduct of early elections for members of the parliament of the republic of north macedonia, with measures aimed towards public health protection during the covid-19 pandemic conditions. the state of emergency officially ended on 23 june 2020 (жерајиќ, 2021, pp. 11–13; хаџи-зафиров et al., 2020, p. 16).8 8 decision on determining the state of emergency no. 08-607 / 2 of 16 april 2020, for the period of time of 30 days published in the official gazette of the republic of north macedonia no. 104/20; decision for determining the state of emergency no. 08-682 / 2 dated 16 may 2020, for the period of time of 14 days, published in the official gazette of the republic of north macedonia no. 127/20; decision on determining the existence of a state of emergency no. 08-729 / 2 from 30 may 2020, for a period of time of 14 days, published in the official gazette of the republic of north macedonia no. 142/20; decision on determining the existence of a state of emergency no. 08-777 / 3 from 15 june 2020, for a period of time of 8 days, published in the official gazette of the republic of north macedonia no. 159/20, adopted for the preparation and conduct of early elections for members of the parliament of the republic of north macedonia, with measures for protection of public health in conditions of coronavirus pandemic covid-19. 166 blerton sinani public governance, administration and finances law review • vol.  7. no. 2.  3. the impact of covid-19 emergency measures on the field of human rights the freedoms and rights of the individual and citizen can be restricted only in cases determined by the constitution of the republic of north macedonia. the freedoms and rights of the individual and citizen can be restricted during states of war or emergency, in accordance with the provisions of the constitution (article 54). this allows the possibility to understand that the constitution of the republic of north macedonia rigorously requires the basic rights and liberties to be limited only by the constitution  and in conformity with the reasons mentioned in the related articles of the constitution without breaching upon their essence. moreover, human rights may be temporarily suspended or limited for the duration of state of emergency, but only to the extent required by such circumstances and as much as the measures adopted do not create any discrimination on the basis of race, sex, ethnic origin, language, religion, political or other conviction, social status, education and other personal circumstances. such limitations are foreseen under article 54 of the constitution of the republic of north macedonia of 1991  as the supreme legal act and simultaneously in the human rights international treaties – article 15 of the european convention on human rights of the council of europe as well as article 4  of the international covenant on civil and political rights of the united nations organization, which the republic of north macedonia has ratified by law, and as such, are an integral applicative part of the internal legal order (article 118). limitations are restrictions imposed on non-absolute human rights, such as the right to freedom of expression, the right to freedom of association or the right to private and family life. effective enjoyment of all these rights and freedoms guaranteed by articles 8, 9, 10 and 11 of the european convention on human rights is a benchmark of modern democratic societies. restrictions on them are only permissible if they are established by law and proportionate to the legitimate aim pursued, including the protection of public health. the legitimate aim of protection of health is contained in article 5 paragraph 1e, paragraph 2  of articles 8  to 11  and article 2  paragraph 3  of protocol no.  4  to the european convention on human rights. these limitations are subject to a triple test of legality (are prescribed by law), legitimacy (pursue a legitimate aim) and necessity (are needed to reach the aim and proportionate to it). certain convention rights do not allow for any derogation, i.e. considered non-derogable human rights: the right to life, except in the context of lawful acts of war (article 2), the prohibition of torture and inhuman or degrading treatment or punishment (article 3), the prohibition of slavery and servitude (article 4 paragraph 1) and the rule of “no punishment without law” (article 7). there can be no derogation from abolishment of a death penalty or the right not to be tried or punished twice (protocols no. 6 and 13 as well as article 4 of protocol no. 7) (alivizatos et al., 2020, pp. 2–6). it is recognised at the outset that governments are facing formidable challenges in seeking to protect their populations from the threat of covid-19. it is also understood that the regular functioning of society cannot be maintained, particularly in the light of the main protective measure required to combat the virus, namely confinement. it is moreover 167the impact of the covid-19 pandemic on constitutionalism and the state of emergency public governance, administration and finances law review • 2. 2022 accepted that the measures undertaken will inevitably encroach on rights and freedoms which are an integral and necessary part of a democratic society governed by the rule of law. the republic of north macedonia pursuant to article 15 of the european convention on human rights used the possibility to restrict several rights on account of protection of health (article 5e provides for an explicit ground to detain people due to infectious diseases) subsequently depositing notifications to the council of europe that the republic of north macedonia shall exercise the right to derogate from its obligations under the european convention on human rights on the entire territory of north macedonia. since the first case of covid-19 was detected on the territory of the republic of north macedonia on 24 february 2020 the government of the republic of north macedonia gradually has adopted a set of decisions, conclusions and has been taking concrete preventive measures to combat covid-19  and to protect the public health. the measures introduced by the government of the republic of north macedonia, among others include: suspension of regular classroom instruction in primary, secondary and vocational schools and universities, to be replaced with distance home learning, restriction of public assemblies, cancelling all public events, meetings and gatherings, closing of museums, theatres and cinemas for visitors, cancellation of performances and conferences, suspension of international passenger air traffic, establishing special rules of isolation and state-organised quarantine for citizens entering the territory, ban on and special regime of movement in parts and on the entire territory of the country, as well as additional movement restrictions. the application of these measures may influence the exercise of certain rights and freedoms under the convention and in some instances give reason for the necessity to derogate from certain obligations of the republic of north macedonia under article 8 and article 11 of the european convention on human rights, article 2 of the first protocol and article 2 of protocol no. 4 to the convention. the measures adopted by the government are proportionate and targeted, required by the exigencies of the situation and are not inconsistent with other obligations under international law (council of europe – directorate of legal advice and public international law, 2020; камбовски et al., 2020, pp. 20–21). 4. the decrees with force of law the authorisation of the government to adopt decrees with the force of law lasts until the end of the state of war or the state of emergency. during state of emergency conditions, the system of checks and balances, i.e. the separation of powers into legislative, executive and judiciary is temporarily replaced by a  concentration of legislative and executive power in one body  –  the government, which was put in a  position to take measures to address the challenges of protecting the population from the effects of the pandemic, such as those of health-related nature, as well as no less important economic and social consequences (хаџи-зафиров et al., 2020, p. 9). as stated in the decision of the constitutional court of the republic of north macedonia, “the decrees with the force of law, in accordance with article 126, paragraph 1  of the constitution of the republic of north macedonia, must be adopted on the basis and within the bounds of 168 blerton sinani public governance, administration and finances law review • vol.  7. no. 2.  the constitution and legislation, i.e. in the compliance with the law”.9 by decree with the force of law the government regulates issues within the competence of the assembly in case of a  state of war or a  state of emergency if there is no  possibility for convening the assembly (article 36 paragraph 1 of the law on government). this means that the decrees with the force of law of the government regulate issues that are within the competence of the assembly and which are legal matters (materia legis). it should be emphasised that neither in the constitution, nor in the law on government,10 nor in the rules of procedure of the government of the republic of north macedonia11 are there provisions that regulate a  special legal procedure for adopting decrees with the force of law in the government. hence, this represents a legal gap (lacuna legis) because a  regulation that by its legal force possesses the character of a  law in substantial (material) connotation/sense and with which derogation of specific legal issues is accomplished, as well as changing the legal situations previously regulated by laws adopted by the legislature, should not be carried out by the executive power in the same manner and procedure as bylaws are adopted outside the frameworks of a state of emergency (павловска-данева, 2020, pp. 39–40). in the period of time from 18 march 2020 to 22 june 2020 a total of 250 decrees with the force of law were adopted. according to the type, 101 of the total number of adopted decrees are decrees with the force of law for application of a specific law, 41 are original decrees with the force of law, while 107 are decrees with the force of law for amendments to existing decrees. only one decree was adopted to terminate an existing decree with the force of law (трпевски, 2020, p. 16). table 1. review of adopted decrees with force of law by month month march 2020 april 2020 may 2020 june 2020 the number of decrees with force of law 43 97 58 52 source: трпевски, 2020, p. 16. the decrees regulate a  total of 33  areas with the force of law. according to the field of regulation, most of the decrees with the force of law refer to finance (54), health protection (22), education (19), transport and communications (16), as well as labour relations (14) (павловска-данева, 2020). based on the analysis of the already adopted decrees with the force of law, it can be concluded that the principle of proportionality is not 9 одлука на уставниот суд на република северна македонија у.бр. 49/2019, службен весник на република северна македонија бр. 135/2020. 10 the law on the government of the republic of north macedonia has only one article dedicated to the decrees with the force of law. this is article 36, paragraph 1 of the law on government which is relatively brief. it prescribes only the possibility and general right to issue a decree with the force of law by the government during a state of war or state of emergency. however, it does not provide any further details! 11 деловник на владата на република северна македонија, службен весник на република северна македонија бр. 38/01, 98/02, 9/03, 47/03, 64/03, 67/03, 51/06, 5/07, 15/07, 26/07, 30/07, 58/07, 105/07, 116/07, 129/07, 157/07, 29/08, 51/08, 86/08, 114/08, 42/09, 62/09, 141/09, 162/09, 40/10, 83/10, 166/10, 172/10, 95/11, 151/11, 170/11, 67/13, 145/14, 62/15, 41/16, 153/16, 113/17, 228/19, 72/20, 215/20, 309/20, 41/21, 56/21. 169the impact of the covid-19 pandemic on constitutionalism and the state of emergency public governance, administration and finances law review • 2. 2022 always respected when adopting such decrees that derogate the existing laws for the protection of public health. in certain situations, there are provisions in which it can be foreseen that they will produce legal consequences even after the end of the state of emergency. also, the constitutionality of certain provisions of some decrees has been questioned (e.g. the reduction of judges’ salaries). certain decrees that cause particular public attention are changed too often, are passed in a  non-transparent manner and in an extremely short period of time without consultation with interested parties, experts and the civil society (камбовски et al., 2020, p. 15). 5. the activity of the constitutional court of the republic of north macedonia during the state of emergency although the decrees with the force of law, as a rule, should be adopted in order to deal with the causes and consequences of the pandemic, in the absence of any oversight by the assembly over the executive power, the need for oversight of the observance and safeguarding of the universal european fundamental values of democracy, the rule of law and human rights by other relevant state bodies is emphasised. without any doubt, it should be emphasised that the importance of the constitutional court as the sole domestic controller whose constitutional competence is to protect the constitutionality and legality of the adopted decrees with the force of law. in that regard, in addition to several initiatives, the constitutional court of the rnm for the first time acted on its own initiative (proprio motu) assessing the constitutionality and legality of 5 (five) of the decrees with force of law and decided to initiate a procedure for assessing the constitutionality and legality for 3 (three) of the disputed decrees (хаџи-зафиров et al., 2020, p. 18).12 in compliance with article 108 of the constitution of the rnm, “the constitutional court of the republic of north macedonia is a body of the republic protecting constitutionality and legality”. for this reason, the core jurisdiction to the constitutional court of the republic of north macedonia is the constitutional-judicial review of constitutionality and legality over general normative legal acts. constitutional judicial review is, in short, a procedure for examining the conformity of legislation with the constitution and its provisions, and the judicial determination that legislation that is inconsistent with the provisions of the constitution is un-constitutional and null and void. that is, constitutional-judicial review is an instrument that limits the discretion and scope of action of political decision-makers, especially with regard to the fundamental rights and freedoms protected by the constitution. constitutional judicial review extends the idea of constitutionality according to which the supremacy of the constitution limits the government beyond the realms of public law towards the realms of criminal, civil and administrative law, and in these senses constitutional judicial review is central to the idea of neo constitutionalism (roznai, 2020, p. 355). 12 for more information see the constitutional court decision of 12 may 2020, у.бр.216/2020 (http://ustavensud. mk/?p=19683). http://ustavensud.mk/?p=19683 http://ustavensud.mk/?p=19683 170 blerton sinani public governance, administration and finances law review • vol.  7. no. 2.  having in mind that during the state of emergency the legislative function of the assembly passes to the government and especially due to the fact that the state did not have a  functional assembly, the role of the constitutional court of the republic of north macedonia becomes more significant in order to control the constitutionality of the decrees. deciding on the submitted initiatives for constitutional control of the decrees with the force of law, the decisions on measures for dealing with covid-19 adopted by the government, as well as the decisions on determining the existence of a state of emergency, the constitutional court adopted a total of 148 decisions and resolutions with which control and assessment of the constitutionality and legality of a total of 172 regulations was performed (трпевски, 2020, p. 23). table 2. statistical review of decisions and resolutions by the constitutional court on submitted initiatives decisions rulings a n an nu lm en t of re gu la ti on a n ab ro ga ti on of re gu la ti on th e in it ia ti ve is re je ct ed th e pr oc ed ur e is in it ia te d th e pr oc ed ur e is n ot in it ia te d th e pr oc ed ur e is te rm in at ed the decrees with force of law 10 0 25 92 11 2 the government’s decisions on measures for covid-19 0 0 3 0 1 1 the decisions of state of emergency 0 0 6 1 0 0 the total by manner of proceedings 10 0 34 93 12 3 the total by type 10 142 source: трпевски, 2020, p. 23 6. conclusion on 18 march 2020 for the first time in its history, in the republic of north macedonia, by decision of the president of the country, a  state of emergency was declared due to a declared pandemic of the covid-19 virus. the state of emergency was declared by the president of the country in accordance with the dissolved assembly of the republic of north macedonia as a  result of the then-announced early parliamentary elections. in addition to the intensified measures for the protection of the health of the population, 171the impact of the covid-19 pandemic on constitutionalism and the state of emergency public governance, administration and finances law review • 2. 2022 the state of emergency caused the need to introduce new practices and adapt the existing work procedures in various social processes in the country. the health crisis and the state of emergency undoubtedly affected the functionality and efficiency of the entire state apparatus in acting and exercising its functions in practice; the need to declare a  state of emergency due to the covid-19  pandemic arose at a  time when the assembly was dissolved. on 17 february 2020 the members of parliament in the assembly passed a decision to dissolve in order to start the mandatory 60-day deadline for holding early parliamentary elections. therefore, at the instigation of the government a state of emergency was declared by the president of the republic of north macedonia. the assembly of the rnm has not acted concerning the formal approval of the decrees with the force of law of the government of the rnm. such acts should address issues related to an exceptional situation, and should not remain in force after the end of the state of emergency. unless of course they have been confirmed, and extended by the legislative state power via a special law. the state of emergency in the rnm has shown that it is necessary to adopt a special law on legal regime of state of emergency where all issues related to the state of emergency will be regulated in a clear, precise and detailed manner from a normative legal point of view, especially the issue of the procedure for enacting decrees with the force of law, the scope and content of the questions, i.e. the question whether the decrees with the force of law can regulate only questions related to the reason for determining the state of emergency and dealing with the consequences of the factual situation due to which the state of emergency was determined and, finally, their legal effect, i.e. validation after the end of the state of emergency. instead of the parliamentary democratic elections for members of parliament to be announced by the president of the assembly of the republic of north macedonia, as prescribed de lege lata and provided in article 67, paragraph 4 of the constitution of the republic of north macedonia, they should be announced by the president of the republic of north macedonia as head of state which is in fact the standard legal solution in the comparative constitutional law, which eliminates (avoid) the deficiency by announcing parliamentary elections in conditions and circumstances of a self-dissolved assembly. by decree with the force of law the government regulates issues within the competence of the assembly in case of a state of war or a state of emergency if there is no possibility for convening the assembly. during the state of emergency in north macedonia in the period of time from 18 march 2020 to 22 june 2020 the government of the republic of north macedonia adopted a total of 250 decrees with the force of law, including original decrees, decrees aimed at applying a certain law, as well as decrees amending and supplement previously adopted decrees. the constitutional judiciary plays a crucial role in exercising control and assess of the executive’s prerogatives during states of emergencies, taking decisions on the constitutionality of a declaration of a state of emergency as well as reviewing the constitutionality and legality of specific emergency measures – legislative decrees which have the force of law. 172 blerton sinani public governance, administration and finances law review • vol.  7. no. 2.  references albert, r. & roznai, y. (2020). introduction: modern pressures on constitutionalism. in r. albert & y. roznai (eds.), constitutionalism under extreme conditions. springer, cham. online: https:// doi.org/10.1007/978-3-030-49000-3_1 alivizatos, n., bílková, v., cameron, i., kask, o. & tuori, k. (2020). respect for democracy, human rights and the rule of law during states of emergency. reflections. european commission for democracy through law. online: https://bit.ly/3d6n1uc binder, k., del monte, m., diaz crego, m., eckert, g. & kotanidis, s. (2020). states of emergency in response to the coronavirus crisis: situation in certain member states. european parliamentary research service. online: https://bit.ly/3iuzinr bačić, p. (2021). corona ante portas i ustav izvanrednog stanja u aktualnoj politici i pravu sporta. zbornik radova pravnog fakulteta sveučilišta u splitu, 58(1), 105–120. online: https://doi. org/10.31141/zrpfs.2021.58.139.105 bieber, f., prelec, t., djolai, m., emini, d., marović, j. et al. (2020). the western balkans in times of the global pandemic. biepag policy brief, april 2020, pp. 1–37. online: https://hal-sciencespo. archives-ouvertes.fr/hal-02586059 bjornskov, c. & voigt, s. (2018). the architecture of emergency constitutions. international journal of constitutional law, 16(1), 101–127. online: https://doi.org/10.1093/icon/moy012 council of europe (2020). respecting democracy, rule of law and human rights in the framework of the covid-19 sanitary crisis. a toolkit for member states. strasbourg. council of europe – directorate of legal advice and public international law (2020): note verbale from the permanent representation of the republic of north macedonia to the council of europe, jj9021c tr./005-232. online: https://rm.coe.int/16809e1288 elkins, z., ginsburg, t. & melton, j. (2009). the endurance of national constitutions. cambridge university press. online: https://doi.org/10.1017/cbo9780511817595 каракамишева, т. & јовановска, д. 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(2020): владеењето на правото и човековите права во услови на вонредна состојба во република северна македонија 2020. скопје. хаџи-зафиров, ж. et al. (2020). анализа на донесените уредби со законска сила за време на вонредната состојба во 2020. скопје. шкариќ, с. (2020, april 17). правната битка за вонредната состојба. respublica. online: https:// respublica.edu.mk/mk/blog/2020-04-16-23-18-27 жерајиќ, с. (2021). анализа на искуствата на институциите за време на вонредната состојба и уредбите со законска сила. скопје. https://doi.org/10.1007/978-3-030-49000-3_1 https://doi.org/10.1007/978-3-030-49000-3_1 https://bit.ly/3d6n1uc https://bit.ly/3iuzinr https://doi.org/10.31141/zrpfs.2021.58.139.105 https://doi.org/10.31141/zrpfs.2021.58.139.105 https://hal-sciencespo.archives-ouvertes.fr/hal-02586059 https://hal-sciencespo.archives-ouvertes.fr/hal-02586059 https://doi.org/10.1093/icon/moy012 https://rm.coe.int/16809e1288 https://doi.org/10.1017/cbo9780511817595 https://doi.org/10.1515/icl-2020-0039 https://doi.org/10.1515/icl-2020-0039 https://respublica.edu.mk/mk/blog/2020-04-16-23-18-27 https://respublica.edu.mk/mk/blog/2020-04-16-23-18-27 public governance, administration and finances law review vol. 8. no. 1. (2023) • 55–71 . © the authors 2023 doi: 10 .53116/pgaflr .6650 constitutional and administrative law in nigeria: are they instruments of governance? adeleke adegbami* ¤, akeem adewale ganiyu** * senior lecturer, olabisi onabanjo university, ago-iwoye, ogun state, nigeria, e-mail: adeadegbami@yahoo .com ** lecturer, the polytechnic, ibadan, oyo state, nigeria, e-mail: ganiyuakeem4sure@gmail .com abstract: are constitutional and administrative laws in operation in the institutions and agencies of government in nigeria? how effective are these laws at regulating the activities of the government in the country? has the law enhanced the quality of services delivered by the government? what are the factors influencing the practice of public administration in nigeria? are these factors in consonance with administrative law ? these are germane questions to which this study attempted to provide answers . it relies on secondary data, which were subjected to content analysis . the study argues that the 1999 constitution of nigeria, prepared by the government without legitimacy (the military), and handed over to the civilian administration some twenty-three years ago, with little or minor amendment to date, made the legitimacy of the government of nigeria’s fourth republic questionable . and, apart from the faulty preparation of the constitution and some amendments made to it by the national assembly, the elite, who appear to be above the law, do not allow the constitution to work . these elite are mainly among the legislature, the judiciary and the executive; they are all guilty of stemming and whittling down the power of the constitution, and the law of administration by their flagrant disregard for the rule of law and the constitution in their various capacities . this study therefore, concludes that, until nigeria’s constitution is redrafted, and constitutional law and administrative law properly applied, quality or good governance will continue to elude the country . keywords: constitutional law, administrative law, governance, legitimacy, constitutionality, constitutional government and rule of law, human rights 1. introduction the place of law in regulating all forms of human activities and endeavours cannot be overemphasised . the importance of law can be seen in the areas of specifying what is and what is not accepted in society . a better way to understand the importance of law is by imagining the likely state society would be without it (cronus law, 2019) . suffice to say, without law within society there will be chaos, confusion and conflicts . in essence, the essentiality of law in society includes the maintenance of law and order; safeguarding the fundamental rights of citizens; controlling and regulating the political system; https://doi.org/10.53116/pgaflr.6650 https://orcid.org/0000-0002-3582-1680 mailto:adeadegbami@yahoo.com mailto:ganiyuakeem4sure@gmail.com 56 adeleke adegbami, akeem adewale ganiyu public governance, administration and finances law review • vol. 8. no. 1.  regulating economic activities; and ordering human relations, as well as international relations, among others (shrivas, 2022) . several countries across the world have a  suitable constitution that provided for government structure, as well as defining the relationships between/among various governmental units, and specified how these units will be interrelated, and how the government was formed or set up, as well as the form of the country’s constitution, will determine how the public administration of such a  country will operate, and how its operation will affect other areas of the government’s activities . since public administration is considered part of the executive arm of government, with a modicum of independence in discharging its multiple functions, there is a tendency for public agencies to overstep their boundaries (prunty, 2018) . it is, therefore, through constitutional means that public administration can be regulated vis-à-vis agencies and institutions of government, hence the need for constitutional and administrative law . constitutional and administrative law is the branch of public law established to regulate the activities of government and its institutions in a  given state . in essence, constitutional and administrative law are concerned with the distribution and exercise of power within the state . constitutional and administrative law also covers the power to make legal rules, as well as to demand accountability on the part of those charged with the responsibilities of legislating, applying and enforcing the law . constitutional and administrative law thus control and regulate the dealings and relationships between the state and the individual (nottingham law school, 2020) . although it appears somewhat difficult to distinguish between constitutional and administrative law, simply because both are components of public law, which has to do with regulating the functions and activities of the government in modern society (dhyani, 2022) . be as it may, constitutional law can be seen as the body of law defining the powers as well as structure of different entities of a state vis-à-vis the executive, the legislature and the judiciary, alongside the basic rights of citizens, and the relationship between the government at the centre with those of the state and local levels (strictly legal, 2022) . constitutional law derives from the constitution and, as such, is related to, or interpretive of a  constitution; the term is therefore synonymous with the constitution, since it “connotes the constitution as interpreted and applied by the organs of government” (encyclopedia .com, 2018, para . 1) . on the other hand, administrative law, otherwise referred to as the law of public administration, is that body of law governing the activities of administrative agencies of government . their activities include, but are not limited to, rule-making, adjudication and the enforcement of a specific regulatory agenda (robson & page, 2023) . administrative law is also concerned with the decision-making of administrative entities or units of government . the key difference between constitutional law and administrative law is, therefore, that the former governs the legislative and executive branches, while the latter governs their operations . constitutional law is derived from the constitution, while administrative law is derived from legislation, vis-à-vis administrative regulations, executive decrees, circulars, letters of instruction and conventions, among other sources (dhyani, 2022) . 57constitutional and administrative law in nigeria: are they instruments of governance? public governance, administration and finances law review • 1. 2023 since governance is how a state’s resources are being managed for effective services delivery, the welfare of its citizens and national development, among others, and agencies or institutions of government are in charge of translating government policies and program into reality, such agencies and institutions of government must therefore be well regulated in order to give utmost performance . administrative law has, for that reason, become indispensable in regulating the activities of agencies and institutions of government in order to bring regularity, orderliness and certainty to them, as well as to control any misuse of powers vested in those agencies and institutions . in essence, concerning the practice of public administration, administrative law plays a key role, especially in monitoring and remedying administrative blunders, including ineffectiveness, inaction, indiscipline and other unethical behaviour by public administrators . furthermore, administrative law enhances accountability and probity in the conduct of government business . in other words, in order to promote quality governance, administrative law confines public administrators’ powers and authorities within their legal borders to prevent them from abusing their offices . it is against this background that the study analyses the place of constitutional and administrative law in the governance process in nigeria . this is with a view to determining the factors that influence the practice of public administration in nigeria and those that hinder the proper application of administrative law into the country’s public offices . 2. the constitutionality of constitutional government in nigeria the essentiality of the constitution as a legal framework in the governance of any political entity cannot be overemphasised . this is because it remains a  reference point for ensuring quality or good governance (adegbami & uche, 2016) . it is for that reason that a  constitutional government became desirable . constitutional government, in essence, is one which operates within a set of legal and institutional constraints . under a constitutional government, the activities of government are regulated by a set of rules . these rules spell out the powers and functions of government; in other words, “the institutional autonomy” . the rules equally define the relationship between state and the individual, namely “individual autonomy” (keman, 2000) . thus, constitutional government depends on the existence of a constitution that serves as a legal instrument, or a set of fixed rules generally accepted as the fundamental law of the polity; applied to control the exercise of political power . it covers the distribution of powers among levels of government and several other governmental units, in such a way that the component units of government shall cooperate to formulate the will of the state (britannica, s . a .) . the centrality of constitutional government is to run governmental affairs and businesses in line with the constitution of the land, which is considered supreme over individuals or groups . similarly, all powers of exercising governmental functions by the supposed authorities and personalities must be derived from the constitution and, as such, the rule of law, or set of “basic laws” that connects public officeholders and the citizenry in a  given country must be respected by government operators in line with the constitution . 58 adeleke adegbami, akeem adewale ganiyu public governance, administration and finances law review • vol. 8. no. 1.  the governmental system of nigeria is based on a written constitution, although the country has intermittently had its constitution suspended through military incursion into its governance and administrative activities . the country, however, in the last 23 years, has witnessed unbroken democratic governance and operates under a written constitution that perhaps developed from the various military decrees . in other words, the so-called 1999 constitution of nigeria was handed over to the civilian administration by the military government some 23 years ago, with little or minor amendment by the current civilian administration . although it could be said that nigeria currently operates with a constitutional government with a written constitution, there have however been steady discussions, arguments and counter-arguments in various quarters as to whether the country is running or operating a constitutional government, and whether the country truly has a genuine constitution . while it is true that the military may seize power from the legitimate government for legitimate reasons, especially when the official government fails to exercise its functions as spelt out in the constitution . in nigeria, for instance, the first military coup of january 1966 was attributed to the civilian rulers’ corruption and misgovernance of the country . excerpts from the coup speech delivered by the major actor in the first coup d’état, major nzeogwu revealed this . according to him: our enemies are the political profiteers, the swindlers, the men in high and low places that seek bribes and demand 10 per cent […] those that make the country look big for nothing before international circles, those that have corrupted our society and put the nigerian political calendar back by their words and deeds (nzeogwu, cited in obasanjo, 1987, p . 99) . ever since the 1966 coup d’état, the military persistently dominated the governance and administration of the country . the military was in charge of the country’s administration between 15 january 1966, and 30 september 1979 . on 1 october 1979, the civilian administration was ushered in, and by 31 december 1983, the military had come back to power again and stayed in power until 23 august 1993, when an interim national government (ing) was put in place after the annulment of the general election of 12 june 1993 . by 17 november 1993, the military had suppressed the interim national government, came to power once again and ruled until 29 may 1999 . in essence, for a long period, nigeria’s political history was of governments without constitutions, but decrees, and it was the government without a constitution that made a constitution for constitutional government . what an aberration! as such, it is not surprising that the 1999 constitution of the federal republic of nigeria suffers from many defects, which can be attributed to the process by which the constitution emanated . as pointed out by ogboye & yekini: one fundamental defect in this constitution, which one may rightly argue as robbing it of constitutionalism, is the fact that it did not emanate from the will of the people . in other words, it failed to meet one of the fundamental values of a constitution . the 1999 constitution (as amended) is a military decree and the preamble to the constitution is nothing but false . be that as it may, we have generally regarded the document as the constitution of the country . despite the fact that at the face value, the constitution proclaims constitutionalism, 59constitutional and administrative law in nigeria: are they instruments of governance? public governance, administration and finances law review • 1. 2023 the actions and inactions of the government and its machinery more often than not are not in accordance with the constitution (ogboye & yekini, 2014, p . 125) . it is not surprising, therefore, that the so-called constitutional government in operation in nigeria is full of defiance of court orders; disregard for fundamental human rights; faulty electoral process; poor accountability; and poor welfare and delivery of services, among others . while concerned nigerians are calling for the review or further amendment of the constitution, some stakeholders call for total annulment of the constitution to give way to a new people’s oriented constitution . this set of stakeholders believes that the defectiveness inherent in the 1999 constitution of nigeria will be difficult, if not impossible to rectify through constitutional amendment by nigeria’s national assembly . for instance, babalola1 argues that: it is common knowledge that the 1999 constitution was made by the military, which, in its wisdom, claimed that it was made by the people . the constitution says among other things that “we the people of the federal republic of nigeria, having firmly and solemnly resolved […] do hereby make and give to ourselves the following” […] of course, this claim is false . the truth is that there is no way the national assembly can amend the 1999 constitution to cure the inherent defects . first, you cannot cure fraud . second, it is impossible, by way of amendment, to take away the military system of government under the 1999 constitution or the power and control of public funds by the president . or can we, by way of amendment, change the judicial powers of the president under the 1999 constitution? why then is the national assembly afraid of calling a national constitutional conference to fashion out a new true federal constitution (babalola cited in afolabi, 2021, para . 6–9) . in a similar vein, hassan in her position paper entitled “nigeria’s constitutional review: the continuing quest for a legitimate grundnorm” stated: many of nigeria’s ethnic nationalities and interest groups believe that the content and character of the 1999 constitution have been stifling their growth and development . as a result, the current constitution has been openly rejected by socio-cultural groups, especially those representing various ethnic groups, civil society, and professional groups within the nigerian polity . importantly, too, anger remains in the polity over the historic lie told in the preamble of the 1999 constitution that “we the people” of nigeria came together to deliberate upon and collectively approve the nation’s constitution when such debates and genuine public input did not occur at anything like a national level (hassan, 2021, para . 6) . it is widely believed that the outlook of a country is determined by its constitution, how the constitution is made or allowed to work, as well as the respect that the constitution arouses, from the rulers and the ruled . apart from the fact that the preparation of the 1 afe babalola is a senior advocate of nigeria (san); he holds the titles of the officer of the order of the federal republic (ofr), and commander of the order of the niger (con). he was a former pro-chancellor and chairman of the governing council of the university of lagos, nigeria; and a former chairman of the committee of pro-chancellors of nigerian universities. 60 adeleke adegbami, akeem adewale ganiyu public governance, administration and finances law review • vol. 8. no. 1.  current constitution of nigeria is faulty; the constitution is not able or allowed to work . this is because some categories of nigerian citizens, or the so-called elite, appear to be above the law . beyond this, the executive arm of the government of nigeria did not help matters, because the executive only obeys selected court orders, especially those that favours them, and disobeys others . to this extent, the so-called nigerian constitution on several occasions did not arouse any respect from nigeria’s citizens, especially from the political class/officeholders . in a  country where the constitution is not supreme, where the rule of law is not upheld, and the rulers rule with impunity, the legitimacy of such a  government is in doubt, hence the constitutionality of nigeria’s government is contestable . 3. administrative law and institutions of government in nigeria the fact remains that the government of any given country cannot carry out all its functions and responsibilities, regarding implementing or transforming the policies and programs of government into reality all by itself . there is, therefore, a need for the government to involve bureaucrats to assist in implementing these policies and programs for the benefit of the citizenry . the government can achieve this through delegating some of its functions and responsibilities to the institutions of government, namely ministries, departments and agencies and other government units across the different levels of government . for these institutions to function well and be able to carry out their given assignments, they need to be well-regulated and coordinated, hence the necessity of administrative law . administrative law also covers regulatory law, public law or the law of public administration, stemming from the executive branch of government, for the purpose of monitoring and regulating the responsibilities delegated to the institutions and agencies of government . administrative law regulates government institutions and agencies to ensure effective delivery of services, by carrying out the government’s business in a professional manner . therefore, it can be thus deduced that administrative law is concerned with the protection of the interests of the public in relation to government . in other words, administrative law oversees the core activities and operations of government agencies, by laying down the guiding principles of how the business and activities of government should be handled to bring about the desired result . as such, public servants, the administrative machinery through which governmental activities are being delivered, are expected to operate under civil service rules and regulations for the effective delivery of civil services activities . at this juncture, the pertinent questions are: is administrative law being applied to the operations of the institutions of government in nigeria? how effective is administrative law at regulating the activities of these institutions in nigeria? has the law enhanced the quality delivery of services by the institutions? what are the factors influencing the practice of public administration in nigeria? are these factors in consonance with the contents of administrative law ? 61constitutional and administrative law in nigeria: are they instruments of governance? public governance, administration and finances law review • 1. 2023 the knowledge of the ecolog y of administration has provided needed opportunity to understand some of the factors that influence the practice of public administration in a particular society . this has made it clear that there is no way public administration can be practiced in isolation without reference to the peculiarities of society . suffice to say that the norms of that society and people’s attitudes, as well as their orientation, determine its administrative system to a large extent . several civil service rules and regulations, codes of conduct and of work ethics are available for various institutions of government, yet the administrative practices are designed to favour the political officeholders and their career official counterparts (omolaja, 2009), and these unethical practices within the institutions of government are inimical to the interests of the majority of society . in nigeria, for instance, political officeholders and their career official counterparts have used their offices to accumulate the “commonwealth” of the people on several occasions . the fact that career officials in nigeria are poorly remunerated when compared with their colleagues in some other countries across the globe perhaps explains their unethical practices in their respective public offices . besides, huge salaries are being paid to their political officeholders’ counterparts . according to sunday:2 the gap between civil servants and political officeholders in terms of emoluments is too wide, because if on becoming a councilor or commissioner or minister you suddenly have multiples of what a director or permanent secretary would get, then some civil servants would feel, ‘well, this is an unfair deal’ and they would devise means to rock the system (sunday cited in aramide, 2020, para . 2) . in addition to this, the fear of the unknown about life after retirement makes some career officials use unethical practices . this is also buttressed by sunday . according to him:3 if the system guarantees that at the end of your service years you have packages to fall back on in terms of gratuity or pension or regular contributory pension scheme then the temptation to save or embezzle money to be used at the time of retirement would be reduced (sunday, cited in aramide, 2020, para . 6) . politicians, on the other hand, given the pattern and nature of their ascension to public offices, through manipulation, vote-buying and faulty electoral process among other most crooked ways, have come to see political office as a  business in which it is worth investing . to this extent, political office seekers did go the extra mile to get money and find ways of buying themselves through to offices, after which they convert public funds to theirs as a gain on their political investments . as career officials are looking for a way of amassing wealth through their offices, so are political officeholders . it has even been argued that it is the career officials in nigeria who teach and support the political 2 edgar amos sunday is the head of service (hos), adamawa state, nigeria. 3 edgar amos sunday. 62 adeleke adegbami, akeem adewale ganiyu public governance, administration and finances law review • vol. 8. no. 1.  officeholders in better ways of amassing public wealth . supporting the assertion is fayose .4 according to him: no governor, minister or top political officeholders can steal a  penny from the treasury without the cooperation of the civil servants . we don’t write papers as politicians, but we only approve whatever the civil servants came up with (fayose cited in oluwole, 2015, para . 4) . apart from the above-mentioned issues faced by career officials is the fact that political officeholders wield all the power, and in their hands are sledgehammers that can be used to knock out any career official who may want to obstruct their making money from public offices; as a  result, career officers do not have an option but to cooperate . the result of the unholy cooperation of the duo of political officeholders and career officials is the precarious economic and developmental condition in which the country finds itself . in essence, administrative law as far as nigeria is concerned has not been able to curtail unethical practices in governmental institutions properly and, as such, has not enhanced the quality delivery of services in nigeria, although the government of nigeria has also established various regulatory agencies in addition to civil service rules and regulations and code of conduct, among other measures . it is believed that a good and effective regulatory agency will go a long way to foster the economic and welfare development of the country . to some extent, some regulatory agencies proved to be effective and enhanced economic growth and development, increased investment, and provided a better quality of service delivery . the feat achieved by these agencies has since been defeated by the constant corruption, bribery and extortion, and poor orientation of services, as well as the anti-business mentality that characterised many of these regulatory agencies . according to osinbajo:5 if the environment on account of regulatory authorities is so difficult or expensive, such that people are discouraged or it doesn’t make sense for people to do business, then we are shooting ourselves in the foot in a manner we can only blame ourselves . these are human issues and we must do something very serious about these issues . i am in full support of holding our ceos to account because they, in turn, must hold their staff to account . if there is systemic corruption, bribery and extortion, and nobody is held to account, there is a problem (osinbajo cited in adegboyega, 2021, para . 8–9) . as a result of the poor operations of the regulatory agency, nigerians have continued to be exposed to a  variety of threats, including unsafe food and drugs, environmental pollution, toxic waste, a  risky civil aviation sector, and dangerous building designs, among others, while the so-called regulatory agencies appear incapable of controlling the menaces . hence, these controllable challenges testify to the fact that administrative 4 ayodele fayose is a former governor of ekiti state, from 29 may 2003, to 16 october 2006, and from 16 october 2014, to 15 october 2018. 5 oluyemi oluleke osinbajo is grand commander of the order of the niger (gcon); a lawyer, professor and the vice president of nigeria since 29 may 2015. 63constitutional and administrative law in nigeria: are they instruments of governance? public governance, administration and finances law review • 1. 2023 law or the law of public administration has had, to a large extent, insignificant effect on the governance and administrative activities of nigeria . 4. challenges of constitutional and administrative law in nigeria: implications for governance there is no doubting the fact that administrative law remains indispensable in propelling government toward providing quality governance . as such, if governance is a  function of government and the body saddled with the responsibility of carrying out the function is public administration, the instrument that can adequately enhance public administration in order to carry out the function effectively is administrative law . hence, proper application of administrative law to the administrative activities of a given country is sine qua non to good governance (oikhala, 2020) . however, there are some challenges militating against the proper application of administrative law to governmental activities in nigeria . these include: societal factors: these are one of the factors that hinder the proper application and enforcement of administrative law in many governmental institutions in nigeria . these can be viewed from different angles or perspectives . for instance, society’s indifference to, instead of condemnation of corrupt practices in the country has continued to weaken the proper application of administrative law in the country . nigerian society has been segregated, especially along ethnic and religious divides . as such, members of the society always fail to call a spade a spade, when any member of their ethnic group or religious affiliation is involved in unethical practices in public office . to defend corrupt officials with which they have an affiliation with, members of society have gone to the extent of intimidating law enforcement agents . on some occasions, members of the society have caused chaos and crisis that resulted in lawlessness in order to protect their kinsmen or enable co-religionists to evade justice . this practice has limited administrative law from taking effect in nigeria . from another angle, nigerian society encourages wasteful and excessive spending ; from the career officials to political officeholders, and individuals within the country, all are in the habit of living an ostentatious life . people prefer foreign clothes, jewellery, shoes, bags, drinks, wigs and hair attachments, as well as household goods (omolaja, 2009), and of course, in recent times, they have even started importing soups, jollof rice and toothpicks from abroad . some parts of the country set off flares for all kinds of ceremonies, especially funerals . the environment permits people to spend their life savings on ceremonies, and even go the extra mile, again and again, to borrow from banks and people around them . the consequence of these wasteful activities is the looting of public resources, as a means of augmenting funds wasted on ceremonies, and the only available and sure solution is to dip hands into the public purse, and when the law is about to take its toll, they always find ways to circumvent or pervert justice, especially through stirring ethnic and religious sentiments . social factors can also be viewed from an extreme taste for fashion; public officials in recent times have had an unquenchable taste for fashion . they love luxurious goods and 64 adeleke adegbami, akeem adewale ganiyu public governance, administration and finances law review • vol. 8. no. 1.  trendy materials . they crave different types and models of cars and big mansions . public officials who are men marry many wives and have concubines, and end up building extended families . all these social practices need a lot of money for maintenance, and when there are not enough legal sources of generating income to cover their huge and accumulated expenses, public officials turn to stealing public funds . another angle from which one can look at societal factors affecting the proper implementation of administrative law is societal attachment to wealth . in times past, society frowned on sudden and questionable wealth, no matter who was involved . society abhorred people with an unknown or dubious source of wealth like the plague . however, society today has lost the value of a good name and integrity, and, as such, people with a dubious source of wealth are highly celebrated and respected, to the extent that they are awarded or conferred with chieftaincy titles: religious sects, both christians and muslims alike, are not left out of being given religious titles (ademu, 2013) . for this reason, the pursuit of making money, by any and all means, has made public officials, career officials and political officeholders alike involved in corrupt practices while holding public office . poor conditions of service and welfare packages for the law enforcement agents: the law enforcement agencies, which are saddled with enforcing the law of administration, are not well-motivated . according to the study by ipadeola (2016), agents are subjected to poor conditions of service and poor welfare packages . this has continued to limit their performance and also accounts for the high level of corruption even within the various law enforcement agencies . as such, it will be difficult for those law enforcers who are hungry to handle the law of administration as expected . delay in judicial process: another impediment to the proper application and enforcement of administrative law in nigeria is the problem of delays in dispensing justice on unethical behaviour . justice delayed is believed to be justice denied; it is on record that the judicial process against unlawful activities being perpetrated in public offices takes a long time . to this extent, according to ipadeola (2016), the anti-corruption agencies in nigeria, particularly the economic and financial crimes commission (efcc) have continued to demand a strong commitment from the executive arm of the government of nigeria to intervene in the matter of delaying the judicial process of unethical practices in public office and encourage the judiciary and the nigeria bar association to expedite action in handling unethical cases in nigerian public institutions always . the unduly drawn-out nature of legal proceedings has continued to frustrate the performance of anti-corruption agencies . low or no punishment for corrupt public officials: another factor that constitutes a blockage to the proper application of administrative law in nigeria is the problem of meting minor or no punishments to public officials involved in unethical practices . the fact that the government has no political will to allow administrative law to take its course has contributed to this . the government has, on several occasions, provided a soft landing for corrupt officials . many political officials who were found to be involved in corruption and misappropriation of public funds were not adequately punished . some of them were allowed to settle their cases through a plea bargain . the corrupt public official in question is then asked to return the stolen money to public coffers . most of the time, a certain percentage of the stolen money is returned . the leniency accorded to corrupt public 65constitutional and administrative law in nigeria: are they instruments of governance? public governance, administration and finances law review • 1. 2023 officials in this regard has continued to whittle down the efforts of anti-corruption agencies in nigeria . similarly, because corruption is deeply rooted in nigerian society, corrupt officials always have a network of connections with different anti-corruption agencies . this also explains why the law of public administration is less impactful in the country . there is no way the battle against corruption can be won as long as corrupt officials have friends, family, kinsmen or people of the same religious faith within the agencies that are fighting corruption . as such, there must be a way to handle this issue; moreover, there is a need for stiffer punishments to be meted out to corrupt public officials to make administrative law function effectively . politicisation and political interference in the activities of administrative institutions: the improper implementation of administrative law in nigeria can also be attributed to undue political interference in the administrative policies and practices of some administrative institutions . most of the administrative policies in nigeria are driven by politics rather than objectivity . the government did play politics with the judicial process on many occasions, and when it came to the prosecution of a public official accused of unethical practices . a statement such as “i have been ordered from above”, and “the presidency is interested in the case”, among other clichés, are in use whenever politics takes precedence and is made to override objectivity in public administration . public officeholders hide under this undue advantage to involve themselves in unethical practices in their various offices . they use their advantage to accumulate public wealth, since they know that there is always a godfather to call upon at any time an issue is raised regarding their unethical practices . for that reason, institutions that are supposed to bring these public officials to justice are being castigated and compromised and have thus become toothless bulldogs that cannot bite . weak institutions for enforcing administrative law: one of the metrics for evaluating the government’s effectiveness in terms of quality governance lies in its ability to have developed institutions or agencies that can adequately deliver social services and general development in the country . however, institutions and agencies in nigeria appear weak, and unable to handle government business effectively . a weak institution can be seen in terms of a steady decline in the power of government agencies of a country, when such agencies can no longer discharge their assigned duties effectively (usman et al ., 2015) . due to the weaknesses in the powers of government agencies in nigeria, they are unable to enforce administrative law adequately in their various offices . some of the causes of the weakness in the powers of government institutions and agencies in nigeria have been mentioned under this sub-heading, which include societal factors; poor remuneration and poor conditions of service of law enforcement agents; delays in the judicial process; low or no punishment for corrupt public officials; weak institutions for enforcing administrative law; politicisation and political interference in the activities of administrative institutions, among others . what then are the implications of those challenges to administrative practices and governance of nigeria? of course, the implications of the challenges are many . the fact that administrative law or the law of public administration is put in place by the constitutional government to regulate and keep the powers of public administration within the legal framework; protect the citizens against abuse of powers; make administrative law indispensable . the 66 adeleke adegbami, akeem adewale ganiyu public governance, administration and finances law review • vol. 8. no. 1.  indispensability of the law lies in the fact that it checks excesses, abuse or misuse of powers by public officials in their various offices and, by that, enhances good governance . the importance of administrative law for good governance notwithstanding, it is not accorded a special place in nigeria’s governance and administrative activities . it is not surprising that all the arms of government, the legislature, the judiciary and the executive are culpable for stemming and whittling down the power of the law of administration by their flagrant disobedience to the rule of law and the constitution in their various capacities . concerning the legislative arm of government, they do not normally sit for a stipulated number of plenary sessions . for instance, in 2021, the senate, which is the highest law-making body in nigeria, broke its rules and also undermined the country’s constitution, which it swore to uphold, by not having the required number of plenary seasons as stipulated by the constitution . section 63 of the 1999 nigerian constitution (as amended), states unequivocally that “the senate and the house of representatives shall each sit for a period of not less than one hundred and eighty-one days in a year” (federal republic of nigeria, 1999) . contrary to this stipulation, the senate in the year 2021 sat for 66 days only, thereby, breaking the constitution (iroanusi, 2022) . besides, the legislative arm of government is also found to have abandoned or jettisoned some of its oversight functions . legislative oversight is the responsibility of overseeing or supervising the executive arm of government to ascertain whether it duly implements the projects over which the national assembly has approved funds . it also involves the national assembly conducting investigations into governance matters by monitoring the performance of ministries, departments and agencies, for the benefit of the citizenry (policy and legal advocacy centre, 2016) . these powers of the legislative arm are provided for in section 88 of the 1999 nigerian constitution (as amended) (federal republic of nigeria, 1999) . on several occasions the legislators could not perform their duties, simply because they had been bought by the executive . it was to this extent that obaro states that the oversight of the legislature has been exchanged and substituted for pecuniary gains from the executive arm of government, to the detriment of the masses (obaro, 2015 cited in tobi & adegbami, 2020) . commenting further on the defectiveness of the senate in performing its responsibilities under the buhari administration, adetayo states: the ninth national assembly, unlike its predecessor, has become the pliant arm of an evermore authoritarian executive . on january 23, 2019, buhari ordered the removal of nigeria’s chief justice on allegations of corruption in an unprecedented judicial intervention . there was no constitutional basis for this . the state security service, the country’s intelligence unit, has grown all-powerful by flaunting court orders, arresting journalists, and operating outside the law (adetayo, 2021, para . 10) . further commenting on the ineptitudes of the legislative arm of the government is sayuti . according to him: the national assembly has a yearly ritual of accusing the federal government of failure to fully implement the budget of the preceding fiscal year . however, such accusations have been observed as amounting to the national assembly indicting itself as weak and [with an] 67constitutional and administrative law in nigeria: are they instruments of governance? public governance, administration and finances law review • 1. 2023 inability to oversight and hold the executive to account . budget defense by federal ministries, parastatals and agencies has been reduced to a  yearly “parley” where various legislative committees and members of the executive negotiate sharing of the “national cake” with no interest to the nigerian people . their power of oversight has been slaughtered on the altar of corruption and weakened by their craving to amass wealth at the expense of the masses (sayuti, 2016, p . 15) . on the part of the judiciary, it has been revealed how the actions and inactions of the judiciary cause delays to the courts’ process . the timely administration of justice is a key requirement for the peace and stability of human society . administration or dispensation of justice is a  basic responsibility of the judiciary, just as it is widely believed that the judiciary is the last hope for the common man . this assertion portrays the significance of the judiciary as one of the major arms of government . the importance of the role of the judiciary notwithstanding, the body is often berated for causing delays in the judicial process . delays in the judicial process have tended to make people lose confidence in the courts, especially since justice delayed is taken to be justice denied . this has continued to bring the legal profession into disrepute . there is no doubt that the justice system in nigeria is fraught with challenges, and this has made court proceedings to be seen as time-consuming activities . on many occasions, “by the time the case brought before the court is determined, the litigants possibly would have lost interest or the case would have lost the supposed economic value” (monye et al ., 2020) . judicial and legal officials have been found to use different means of delaying the judicial process, including but not limited to raising preliminary objections to challenge the jurisdiction of the trial court, and raising the irregularity or the validity of a  charge brought against the accused based on some noticed or perceived defects . in addition, the counsel may use an appeal, either a substantive or interlocutory appeal, just to delay proceedings . while all these are parts of the judicial or court process, the judiciary normally uses them as tactics to frustrate the entire judicial process . in many instances, these antics and tactics have made the efforts of administrative law’s regulatory and enforcement agents futile, and consequently constitute a hindrance to the proper application of the law of administration to public offices in nigeria . in addition, the judiciary has also been accused of dispensing justice to favour the highest bidder . according to daudu,6 “there is a growing perception, backed up by empirical evidence that justice is purchasable and has been purchased on several occasions in nigeria” (daudu, cited in nnochiri, 2011, para . 4) . the executive arm of government in nigeria, on the other hand, is alleged to have disobeyed court judgments on several occasions . some concerned advocators of the rule of law have continued to decry recurring disobedience of court orders by the executive arm of the government of nigeria . according to falana:7 6 joseph bodurin daudu is a nigerian jurist, bencher, senior advocate of nigeria (san), and former president of the nigerian bar association. 7 femi falana is a lawyer, a senior advocate of nigeria (san), and a human rights advocate. 68 adeleke adegbami, akeem adewale ganiyu public governance, administration and finances law review • vol. 8. no. 1.  i’ve compiled about 32 court orders being flagrantly disobeyed by the government of nigeria, which are not in line with the rule of law . it doesn’t lie in the mouth of an attorney general or the president of a country to pick and choose which orders of the court to obey . when you do that, you are reducing the status of the country to a banana republic . and that is why the bar has to rise now and take its rightful place (falana, on channels television, 2019, august 27) . in a  similar vein, fasusi8 while commenting on the need to obey court judgments, and the effects of disregarding court’s decisions states: it is crystal clear that the orders of the court are valid and ought to be enforced and complied with by all persons because there is a duty on everyone and every constituted authority to do so . refusal to obey a  court judgment/decision/order could lead to severe consequences . however, in recent times, it appears the executive arm of government has been paying lip service to this sacred duty (fasusi, in onyekwere, 2021, para . 3–4) . similarly, a report by the socio-economic rights and accountability project, (serap), showed that the administration under president muhammadu buhari has flouted many court judgments since its inauguration in 2015 . in its recent public presentation, serap listed some of the court judgments that it had secured against the federal government of nigeria but which the government flagrantly disobeyed . according to the serap spokesperson, oludare:9 the first of such judgments is the judgment by justice hadiza shagari delivered on july 5, 2017, ordering the federal government to tell nigerians about the stolen assets it allegedly recovered, with details of the amounts recovered . the second judgment, by justice mohammed idris, on february 26, 2016, ordered the federal government to publish details on the spending of stolen funds recovered by successive governments since the return of democracy in 1999 . the third judgment, by justice oluremi oguntoyinbo on november 26, 2019, ordered the federal government to challenge the legality of states’ pension laws permitting former governors now serving as ministers and members of the national assembly to collect such pensions and to recover pensions already collected by them . the fourth judgment, by justice mohammed idris on may 28, 2018, ordered the federal government to prosecute senior lawmakers suspected of padding and stealing n481 billion from the 2016 budget; and to widely publish the report of investigations into the alleged padding of the 2016 budget . the fifth judgment, by justice chuka obiozor on july 4, 2019, ordered the federal government to publish the names of companies and contractors who have collected public funds since 1999 but failed to execute any electricity projects . these judgments and many others by the courts have remained unchallenged till date and the federal government has refused to obey them (emphasis added are ours) (oludare cited in ojelu & dania, 2022, para . 3–6) . 8 deji fasusi is a lawyer and litigation partner. 9 kolawole oludare is a deputy director of the socio-economic rights and accountability project, (serap). 69constitutional and administrative law in nigeria: are they instruments of governance? public governance, administration and finances law review • 1. 2023 besides this is the undue interference in the judicial process by the executive . the judges are not decisionally independent in all the cases they handled . according to west-idahosa:10 there is a fair presence of decisional independence amongst nigerian judges in respect of civil cases founded on common law and general criminal litigation . the area of concern has to do with the conduct of political matters, whether pre-election or post-election ones . while it has been generally acknowledged that election matters are sui generis (one of its kind), many believe that some of the decisions given were largely influenced by political, religious, tribal and social actors . i must point out that a number of judges are also influenced by corruption, greed and avarice in the discharge of their duties . it is this notion that has given rise to such concepts as “black market” orders, “cash and carry” judgments and a host of uncomplimentary theories surrounding the nature of some of the judgments delivered in nigeria . the danger is that a negative perception of this nature erodes the three basic elements of the independence of the judiciary (west-idahosa, 2021, para . 8) . this development has continued to cause crises in governance, thereby questioning the legitimacy of the government of nigeria . the snowball effect of this is the weak condition of governance, where the government appears unwilling and incapable of carrying out its responsibilities effectively . whenever a government fails to preserve the rule of law and uphold human rights, among others, sit is structurally out of order (oecd, 2005), and faulty political structures and weak institutions make a  country susceptible to organised crime (henkel, 2013) . therefore, the series of governance challenges in the country can be seen as the mounting effects of jettisoning the proper application of constitutional and administrative law to the governance and administrative practices of nigeria . 5. conclusion the place of the constitution in the governance of any political entity cannot be overemphasised, because, it remains a  reference point in ensuring quality or good governance and, for that reason, a  constitutional government became desirable . the activities of government are believed to be well regulated under a constitutional government, via the constitution and administrative law . this is because administrative law remains indispensable in propelling government toward providing quality governance . in nigeria however, the legislature, the judiciary and the executive are guilty of restricting the power of the law of administration by their deliberate disobedience of the rule of law and the constitution in their various capacities . other challenges militating against the proper application of administrative law to governmental activities in nigeria include societal factors, poor remuneration and poor conditions of service for law enforcement agents, delays in court proceedings, lenient or no punishment for corrupt public 10 ehiogie west-idahosa is a former member of the house of representatives of nigeria from 1999 to 2011. 70 adeleke adegbami, akeem adewale ganiyu public governance, administration and finances law review • vol. 8. no. 1.  officials, weak institutions for enforcing administrative law, and politicisation and political interference in the activities of administrative institutions, among others . the implication of these challenges is the abuse of power by public officials in their various offices . this development has continued to cause crises in governance and put a question mark on the legitimacy of the government of nigeria . the effect of this is the weak condition of governance, which has made the country susceptible to organised crime that has continued to torment the country . the study, therefore, concludes that until nigeria’s constitution is redrafted, and constitutional law and administrative law properly applied, quality or good governance will continue to elude the country . references adegbami, a . & uche, c . i . n . 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(2019) • 5–15 . articles administrative liability for causing damage to selected components of the environment branislav cepek* * branislav cepek, associate professor, phd, paneuropean university in bratislava, faculty of law, institute of public law . (e-mail: branislav .cepek@paneurouni .com) abstract: the article deals with one of the most important and recent issues of the contemporary law of the member states and the eu in the field of environment, which is criminal liability for environmental crimes which serves as a tool for promoting environmental protection . environmental law can be divided into two basic types of environmental liability for damage to the environment and liability for damage . liability for environmental damage is divided into civil liability for damage as well as liability of the public for ecological damage . a special case is liability for historical damage . the directive on torts is divided into criminal liability and administrative liability . in this paper, the author focuses on the analysis of the contemporary czech tort law in the field of biodiversity protection and considers several aspects of this a de lege ferenda issue . keywords: environmental law; administration; law; liability for damage to the environment 1. introduction in connection with the legal-theoretical research into the subject matter of environmental liability, the legal science, before the adoption of act no . 17/1992 coll . on environment, drew attention to a  number of specific features of the regime of administrative and legal liability allowing, within the de lege ferenda considerations, to “incorporate” the provisions related to compensation, or more precisely, to restoration of environmental loss . professional legal literature deals mostly with the issue of imposing individual types of sanctions . in the following article, my intention is to give an analysis of the slovak legal arrangements of liability in tort in the field of biodiversity protection, further, to compare it partly with the czech legislation and consider some aspects of this issue de lege ferenda. i choose liability in tort in the field of biodiversity protection of the ecosystems because it ranks among one of the most important environmental components, where the most scientific research has been done into, but it is also one of the most sensitive components regarding the change in environment . biodiversity is, in a  broader sense, the diversity of species of 10.53116/pgaflr.2019.2.1 mailto:branislav.cepek%40paneurouni.com?subject= https://doi.org/10.53116/pgaflr.2019.2.1 6 branislav cepek public governance, administration and finances law review • vol. 4. no. 2. the living organisms (plants, fungi, animals and one celled organisms of the living world); we do not discuss only those species that are generally known . in situ protection remains the most effective approach towards biodiversity protection . it means protection of the ecosystems and natural habitats, including maintaining and restoring viable species populations in their natural habitat . an important part of in situ protection is the management of specially protected areas of national and international importance, ensuring the ecological networks of functional habitats, including the restoration of destroyed habitats and the conservation of species within natural habitats .1 in the slovak environmental law, the general regulation of administrative and legal liability for administrative offences in environmental protection is contained in act no . 17/1992 coll . on environment, namely in the section called “liability for a breach of obligations while protecting the environment” . provision 28 sets forth the general regulation of sanctioning/punitive liability, i .e . liability in tort . a sanction, at the set amount, can be imposed only on a natural person or legal person that is authorised to engage in business who while doing their activity causes some environmental harm by breaching laws, or fails to take measures that would lead to correction, or fails to warn some competent authority that there is a threat of harm to the environment . pursuant to section 2 of this provision, a  fine may be imposed only within one year since the day on which the environmental authority ascertained the breach of obligations, but no later than three years since the date on which the breach occurred . however, environmental law does not regulate the jurisdiction of the state sanctioning authorities under the cited provision, and thus the practical application of this provision is practically excluded . however, the need for such a provision is rather arguable, especially in the view of the fact that laws in question contain specific provisions which regulate the breach of obligations in each of the environmental sectors .2 2. protection of biodiversity under special provisions for the specific actus reus of administrative offences, it is necessary to investigate in special legal regulations, namely in the area of sources of environmental law (especially act no . 543/2002 coll . on nature and landscape protection) and further (although now only in the “remnants”) in offences act . offences defined in this act, can be divided according to the level of complexity of legislation in relation to protection into: a) specific offences, which can be further subdivided into general § 45 and segmental § 35 b) generally designed, for example § 46 . in the field of biodiversity protection, it is possible to consider, under the special part of offences act, the so-called offences, namely offences in the field of agriculture, hunting and fishing . this is the category of offences against individual environmental components, which can, however, have a significant impact on the protection of biodiversity, especially on the ecosystem and species protection . finally, residual offences can be applied in order to achieve the protection of biodiversity, namely the offences in the field of environmental protection, and the so-called other offences against order in administration . 7 public governance, administration and finances law review • 2. 2019 administrative liability for causing damage to selected components of the environment the mutual proportion of offences in the field of environmental protection and its individual components regulated by special laws and offences in offences act is expressed by the speciality principle . from the viewpoint of enforcing the principle of liability of a tortfeasor within liability in tort in the area of administrative and legal liability related to the protection of biodiversity, it is necessary to tackle both, individual issues of fact of administrative torts and their definition, sanctions and protective measures and conditions of cessation of liability . only a natural person can commit an offence . article 6 of the offences act stipulates that a person who has acted or should have acted on behalf of a legal person is liable for the breach of obligation imposed on that legal person, and in case of an injunction, it is a person who awarded an order for such proceedings . when we take a closer look at the individual provisions of laws in the area of biodiversity, then we find out that there are no problems with identifying a person who committed an offence . liability in tort of natural persons in the conduct of running their business and legal persons is based on the principle of strict liability . the absence of the element of fault differs by liability in tort of natural persons in the conduct of running their business from another liability in tort of natural persons . in case of legal entities, environmental laws, unlike natural persons, do not distinguish whether they are commercial or non-commercial entities . consequently, even associations can also, theoretically, commit an administrative offence, in whose articles of associations the protection of natural environment is the main scope of their business activity .3 the subjective side of the offence is mandatorily investigated only when it comes to offences, and in case of other administrative offences committed by legal and natural persons who run a  business, the element of fault is not investigated . liability is therefore strict, and the entity cannot be relieved from liability by their reference to contractual agreements or by breach that was caused from the side of their contractual partner . in terms of environmental protection and in terms of the preventive function of liability modes, it is important to classify administrative offences according to the consequence of unlawful conduct . if the consequence lies in endangerment of protected values and interest, then we speak about the offences of criminal threat, in case the consequence lies directly in the breach of these values, then we speak about breach offences . in practice, however, we can determine another group of administrative offences of a minor importance . it is unlawful conduct, but it does not reach the level of seriousness of the offence of criminal threat . although this type of conduct does cause the breach of legal regulations, it is not a type of breach that will pose threats to the environment, but rather it is a  breach of obligations related to the organisation of protection of a  certain interest, therefore we speak about offences of administrative nature . for such offences, we could indicate a  breach of duty to notice or the duty to report (unless, of course, it is not the duty to report some serious accident or emergency incident), further, a  breach of duty to register, a  breach of duty to pay fees or other financial deductions or payments, a breach of duty to monitor, and a breach of duty in relation to control authorities . however, the failure to comply with the said duties has no direct impact on threats to the environment . 8 branislav cepek public governance, administration and finances law review • vol. 4. no. 2. issues of the fact of administrative offences appear to a  greater or lesser extent in the wording of many legal regulations in the area of biodiversity protection . their number consequently also depends on the area which is regulated by the  relevant legislation . clearly, the largest number of them is in sections where a  great emphasis is placed on monitoring activities, and therefore on keeping a  variety of records and fulfilment of the duty of monitoring . a  significant number of administrative offences can be also found in the legislation whose legal adjustments stem from the contents of international treaties . in case of breach offences within the category of administrative offences, the consequence in the form of death of the object of an attack is directly implied . a typical example is killing of birds . another consequence relates to damage, destruction, deterioration of state and so on .4 some types of conduct are not considered to be unlawful, unless they cause a prohibited consequence defined by law . interventions against pests, plant diseases and while taking hygiene measures are permitted by separate laws, but this conduct cannot endanger, over an acceptable limit, particularly protected components of nature . based on the inspiring ruling of the czech supreme administrative court, it is possible to document both, the issues of objective liability and the issues of proving the conduct and consequences of an administrative offence in the field of biodiversity protection . the said court, in its ruling no . a 3 /2003-47, dated on the 24th of february 2005, held that the inadmissible use of organic or industrial fertilisers or any other chemical substantives is sufficient to fulfil the merits of the case of unauthorised interference with natural development of specially protected plant species, under the nature and landscape protection act; without, at the same time, the necessity of requiring the effect of destroying an individual, and a  specially protected plant species . even in case of another administrative offence, this is liability for unlawful conduct irrespective of fault . scientific literature dealing with the categorisation of the issues in the fact of administrative offences recognises, in practice, four types of categories . the most common type is defining the issues of fact by verbal description . the second unlawful act by unlawful interference with the natural development of specially protected case is a partial wording in combination with a reference to the provisions governing the duty which a liable person violated . for example, “a nature conservation authority will impose a  fine of up to the amount of € 7,000 on a natural person who commits an offence by damaging or destroying a cave and its part, or who violates other duties”. the third case occurs when the issues of fact only refer to the relevant provision of the law which is sanctioned . for example, “a natural person commits an offence if they sell or offer specimens in violation of the relevant provisions of act no. 543/2002 coll. on nature and landscape protection”. the fourth option concerns other (residual) facts . for example, “a nature conservation authority will impose a fine of up to the amount of € 16,000 on a legal or natural person, if in the conduct of their business they commit an offence by […] killing birds or keeping birds, except those that may be hunted, or keeping specially protected animals without permission, or if they otherwise unlawfully interfere with their natural development”. furthermore, in my view, it is also possible to distinguish cases where an act infringes directly some statutory provision, or it refers to the infringement of a  specific 9 public governance, administration and finances law review • 2. 2019 administrative liability for causing damage to selected components of the environment administrative act issued under the law or some directly effective eu regulation . for example, an “administrative offence is committed by a  natural or legal person  –  an entrepreneur who disposes of an exemplary species directly threatened by extinction in violation of an import license or another valid permit under this act (act no. 543/2002 coll.) or under the regulation concerning trade in endangered species”. from the principle of nulla poena sine lege results the requirement for some legal form of expression of the type and amount of sanction, the conditions and manner of their imposition, as well as considerations for the assessment of the sanction in a particular case . for sanctions to serve their purpose, they must be designed, in terms of their kind and amount, in a way to match the nature and gravity of unlawful conduct, considering the property and other benefits obtained by that unlawful conduct, and so on . even in the case of sanctions, it is necessary to distinguish sanctions imposed for offences and sanctions imposed for other administrative offences, whereby the type and amount of sanctions is, in particular, in case of administrative offences different than in offences laid down by individual laws . in this respect, it is not possible to omit the general provision of article 29 of the act on environment, under which fines or other measures are imposed for a  breach of duties stipulated by these special regulations .5 in case of offences, the law in the area of biodiversity protection mostly imposes a fine as a form of sanction . however, under the offences act, other forms of sanctions may also be applied in a subsidiary way, which means, for example, giving a  caution, or imposing prohibition of an activity and a thing forfeit . in particular, the latter two may be relevant in the field, for example, while regulating the trade in threatened animal and plant species . exceptionally, in case of offences, in special laws, it is possible to come across another sanction form, different from fines . for example, under the hunting act, “a government authority will impose a  fine of up to the amount of € 1,200 on a  hunting license holder who commits an offence by violating some hunting rule; it may impose a  ban on activity for the period of up to two years; alongside the ban, the hunting license is withdrawn; at the same time it is possible to pronounce a thing forfeit”. in case of other administrative offences committed by legal persons and natural persons who act as entrepreneurs, these groups of individuals are most likely to be fined, although there are other types of sanctions that can come into consideration, such as a ban on activity or a ban on farming . exceptionally, in case of offences, as well as in case of other administrative offences, it is possible to come across a recurrence in the area of biodiversity, which is a repeated breach of the same obligations . usually, the relevant law combines repetition with a  certain time limit . for example, under the act on zoological gardens, “for an offence or other administrative offence stated in the section […] a  fine of up to the amount of € 200,000 may be imposed, if that offence has been committed repeatedly within the period of one year after the imposition of the fine on it”. in the environmental protection legislation, other institutes of sanctioning nature than fines are also entrenched . although they are often not labelled as sanctions, they undoubtedly are some form of punishment for a  recipient, by virtue of their nature . an important thing is that these are the institutes that may also be involved as a  result of a  breach of an obligation imposed by law, and in this sense, they may be included in 10 branislav cepek public governance, administration and finances law review • vol. 4. no. 2. the accountability scheme . an important element is, in most cases, also the public interest, which is also confirmed by the fact that the application of the instrument in question is not only permissible in connection with unlawful conduct, but often also in the absence of substantive conditions for the performance of certain activities or in the actual occurrence of the unlawful state . the confiscation or seizure of a thing does not preclude the simultaneous imposition of a fine . in the area of biodiversity protection, we can come across the following types/tips: 1 . instruments relating to entities  –  for example, in the form of authorisation or license withdrawal in the event of a  serious breach of duties while performing special activities 2 . instruments relating to activities of some place of business – usually in the form of bans, revocation, suspension or limitation of operation or refusal of an application 3 . instruments relating to a  thing  –  removal or seizure of a  thing or a  living animal that cannot be disposed of or kept . typically, in the area of biodiversity protection, it involves a  plant or an animal species, living or dead, or a  product made from them, in case of unlawfully kept individuals within the category of particularly protected species, and these protective measures are implemented quite often6 the majority of the environmental protection laws, including the laws in the area of biodiversity, set deadlines in relation to the application of sanction liability . these are both of the subjective and objective nature . the nature and landscape protection act provides an exception to this, it regulates only the objective periods of time . for example, “a fine, under sections 1 and 2, may be imposed not later than three years from the date on which the unlawful conduct was committed”. it can come across as a failure of a lawmaker, but by looking back at the historical development of the legal adjustment of the nature and landscape protection act, we can come to a clear conclusion that this is an obvious intention in the stated examples . the said act, even before the act on regulation of trade in endangered species came into force, contained the subjective period of time . however, after the act on regulation of trade in endangered species had been amended, the said period was left out . this was probably due to the effort to facilitate a  proceeding and to increase the possibility of imposing a timely fine . the time limits for the imposition of a fine for committing an administrative offence are subject to preclusion, the passing of which is neither interrupted nor stopped as a matter of principle . the objective time limit is set only in case of offences . provision 20 of act no . 372/1990 coll . on offences, makes it impossible to deal with an offence if two years have passed since it was committed . some offences in the field of nature and landscape protection can also be qualified as criminal offences under the criminal code no . 300/2005 coll ., as altered and amended . to be precise, it concerns, in particular article 300 on “threats and damage to environment”, and article 305 on “violation of plant and animal species protection”, which are aimed at protecting the species of wild fauna and wild plants . the conditions contained in these issues of fact are designed in a way to be consistent with the meaning of this general provision, and applicable to all objects of this crime (in 11 public governance, administration and finances law review • 2. 2019 administrative liability for causing damage to selected components of the environment other words, to the environment as a  whole and to all its components), not only to plant and animal life . articles 300 to 305 have been amended and their purpose is to clarify the provisions of the criminal code in question in order to cover all the proceedings required by the directive, and follow the established system of listed national, european and international sources of environmental law . the typical feature of crimes against environment is that, apart from some exceptions, all provisions refer to other generally binding legal regulations . crimes of threats and environmental damage (articles 300 and 301) have a  “general character” compared to other provisions, which means that in this paper, other offences are in the subsidiarity or specialty relation to them, and a  single-action concurrence between the crimes of threat and harm to the environment with these crimes is therefore excluded . in case of a  deliberate form of criminal offences of threat and damage to the environment (article 300 section 2), the offender is punishable, if he unlawfully builds a building in a  protected area . the offender can be any natural person (general entity) as well as a  legal person who is subject to criminal liability . from the point of view of the subjective element of crime, a  criminal offence under article 300 requires deliberate culpability; in other words, specific intent, in case of a criminal offence under article 301, negligence is required . punishability of a  crime of threat and a  crime of causing harm to the environment under article 300 may, upon fulfilment of relevant conditions, lapse by applying effective regret (article 85) . less serious interventions in the environment may be sanctioned pursuant to article 45 of act no . 372/1990 coll . on offences as offences, and pursuant to article 28 of act no . 17/1992 coll . on the environment as administrative offences . in the year of 2014, in the field of biodiversity protection, regulation (ec) of the european parliament and of the council of the eu no . 1143/2014 of 22 october 2014 on the prevention and regulation of the introduction or planting and the spread of invasive non-native species was adopted . the impacts of the spread and the effect of invasive nonnative species on the biodiversity of geographically indigenous species and on natural ecosystems have been evident for a long time from the side of natural sciences – they pose one of the most serious sources of threats to biodiversity. article 30 section 2 of the above-mentioned regulation imposes an obligation on the member states to lay down penalties for infringements of the provisions of this regulation, provided that the member states shall take all necessary measures to enforce these sanctions . the term “all necessary measures to enforce these sanctions” means, within the framework of the slovak national law, the adoption of substantive and procedural standards in the field of liability in tort, including the determination of the powers of administrative or judicial authorities .7 however, article 30 section 2 of the above-mentioned regulation does not explicitly determine whether administrative liability or even criminal liability arises . it only indicates that sanctions are to be imposed, it provides their demonstrative calculation in paragraph 3, and it only sets out what their functions should be like; which means that these sanctions should be effective, proportionate and have a  deterrent effect . sanctions under article 30  should be mainly introduced in cases of a  breach of obligations under articles 7, 8, 9, 10, 16, 17, paragraph 20, 31 and article 32 . 12 branislav cepek public governance, administration and finances law review • vol. 4. no. 2. from the point of view of the subjective aspect of the relevant type of unlawful act, it is possible to formulate both a deliberate and negligent act, and an omission to act, except for article 7 where gross negligence is required . after the adaptation of article 30 of the regulation on the prevention and regulation of the introduction or planting and the spread of invasive non-native species within the slovak national law, in my opinion, in the context of de lege ferenda considerations, there are two ways  –  legal liability will be regulated not only in the area of administrative law, but also in criminal law . when it comes to the imposition of proper punishment, of course, offences committed by natural persons and other administrative offences committed by legal and natural persons, entrepreneurs who are subject to strict liability  –  come into consideration . in terms of sanctions, the types of sanctions calculated demonstratively correspond to article 30 section 3, in other words fines, further we speak about the seizure of invasive non-native species as well as the immediate suspension or withdrawal of a  permit in accordance with article 8 . when it comes to entrenching administrative punishment in case of offences, two options are in place  –  it is of course, the legal adjustment of the offences act (where the common arrangement for different cases would be an advantage); the second option would be the amendment process of sanctioning provisions in each individual segmental law which regulates this subject matter, for example in the forest act, nature and landscape protection act, water act, hunting act, etc .) .8 from the perspective of other administrative offences of legal entities and natural persons who are entrepreneurs, only one option is possible, providing that there is the absence of a  code listing other administrative offences, the option is to amend the sanctioning provisions in each individual segmental law that regulates this subject matter . it is clear from the point of view of determining the relevant state administration authorities that in case of offences either general regulation of the authorities under the offences act will come into question, or the relevant control and sanctioning authorities will have to be determined in individual segmental laws . the already existing authorities, particularly the slovak inspectorate of the environment and the state veterinary authorities, are in consideration . in the territory of national parks and protected landscape areas, the respective national park administration authorities could exercise these competences . local authorities could be omitted because of the high level of expertise in the issue of control and imposition of sanctions and corrective remedies . the area of criminal law is also considered, without doubts, but there is a  question whether the requirement of the above-mentioned eu regulation is criminal liability, or whether it can be deduced . such a requirement is absent . on the other hand, pursuant to article 30 section 2, sanctions that are determined must be effective, proportionate and deterrent . the expression “deterrent” could also mean the introduction of criminal liability . similar wordings are commonly found in the case law of the court of justice of the european union, and in other sections of environmental law (citas, nature and landscape protection within the natura 2000 scheme, protection of the earth’s ozone layer, etc .), where, in the past, the european union law enabled the introduction of criminal liability concept into the slovak domestic law .9 13 public governance, administration and finances law review • 2. 2019 administrative liability for causing damage to selected components of the environment as long as the slovak republic makes a decision to do so, it will be necessary to amend the criminal code, in order to complete the actus reus of a crime that deals with the most serious violation of the regulation, but only such proceedings that will not be determined as offences or other administrative offences at the same time – because such a duplication would be inadmissible . sanctions could be then imposed, in particular, for the violation of the following obligations: ƿ failure to take preventive and regulatory measures ƿ failure to take measures to restore damaged ecosystems ƿ failure to make a notification ƿ breach of a relevant decision ƿ unlawful possession, or possession of an individual this occurs, of course, on the condition that there is no duplication with offences or other administrative offences . criminal offences must be defined in accordance with the ultra ratio principle . the offender would be a natural person . it should be also considered whether it is necessary to establish such a  crime also for legal persons . again, duplication will not be possible, if there is a correctly defined administrative offence of legal entities in the relevant segmental laws . from the point of view of giving the precise wording to the actus reus of crimes set out in the slovak criminal code, it is possible to refer to the violation of a  directly effective eu regulation on the prevention and regulation of the introduction or planting and the spread of invasive non-native species, which is acceptable from the viewpoint of criminal law, for example this is the way how citas offences in the czech penal code are dealt with . in terms of specific sanctions in the area of criminal liability, it can be stated that the sanctions set out in the demonstrative calculation in article 30 section 3 on ind, can be also employed in the criminal code, and possibly, in the act on criminal liability of legal entities . since it is not an exhaustive calculation, it is possible to consider also introducing other sanctions, for example in the form of a custodial sentence or a ban in the area of environment protection . in case of determining competent authorities, this subject matter, when it comes to adaptation, is no longer valid, since we speak about the already established criminal justice system . 3. conclusion i  hold the view that de lege ferenda should be more focused on unification of the conditions of administrative punishment in the area of administrative liability for other administrative offences of legal persons and natural persons, who are entrepreneurs in the field of  species biodiversity protection . furthermore, the precise wording of the actus reus of 14 branislav cepek public governance, administration and finances law review • vol. 4. no. 2. offences and other administrative offences in the area of administrative punishment in case of persecution of threatened species of wild animals (especially when placing poisonous baits), and stating the conditions of liability in tort for the import and transport of invasive non-native species, including their regulation . definitions should concern not only amendments made to laws in the area of administrative liability and liability for environmental protection, but also the level of criminal law (criminal code and criminal liability of legal entities) . the amendment process should be based on both the normative requirements of european legislation in the area of biodiversity protection, and at the same time, it should take into account the needs of the domestic practice . 15 public governance, administration and finances law review • 2. 2019 administrative liability for causing damage to selected components of the environment references 1 richard b . primack, pavel kindlmann, jana jersáková, úvod do biologie ochrany přírody [introduction to the biolog y of nature protection] (praha, nakladatelství portál, s .r . o ., 2011) . 2 soňa košičiarová, ekologická ujma a škoda v práve životného prostredia [ecological damage and damages in environmental law], 120 (bratislava, vydavatelské oddelenie právnickej fakulty uk, 1997) . 3 milan damohorský et al ., právo životního prostředí, 3. vydání [environmental law, 3rd edition] (prague, c . h . beck, 2010) . 4 branislav cepek et al ., environmentálne právo. všeobecná a osobitná časť [environmental law – general and special part, 1st edition] (pilsen, aleš čeněk, s .r . o ., 2015) . 5 helena prášková, východiska budoucí právní úpravy správního trestání [background of the future legal regulation of administrative punishment] (prague, právní praxe, 1999) . 6 lilla garayová, bioethics and law in the postmodern society, 37–45, in wissenschaftszeitschrift des studienzentrums hohe warte conference proceedings (sonderausgabe 2014 december) . 7 milan damohorský, leg al responsibility in environmental protection, 34, in acta universitatis carolinae – iuridica, no . 2 (2015) . 8 peter potasch et al ., zákon o priestupkoch – veľký komentár [law on offences – big commentary] (bratislava, eurokodex, 2016) . 9 lilla garayová, sources of eu law, 59–62, in selected sources of law – past and current perspectives (bratislava, paneurópska vysoká škola, 2019) . pga2019_02_b1 _hlk18895087 _hlk18895098 _hlk27344917 articles administrative liability for causing damage to selected components of the environment branislav cepek* the right to informational self-determination in the context of selected judicial decisions and practical background andrea erdősová* information security awareness in public administrations at an international level lilla garayová* blockchain technology – current status, challenges and perspectives in tax and customs law ladislav hrabčák,* monika stojáková* application possibilities of blockchain in accounting péter bálint király* budget allocation of taxes to territorial budgets ivana pařízková* the efficiency of tax collection in the czech republic eva tomášková* case study new legal regulation of the administrative justice in the slovak republic juraj vačok* pga2019_02 _hlk18895087 _hlk18895098 _hlk27344917 articles administrative liability for causing damage to selected components of the environment branislav cepek* the right to informational self-determination in the context of selected judicial decisions and practical background andrea erdősová* information security awareness in public administrations at an international level lilla garayová* blockchain technology – current status, challenges and perspectives in tax and customs law ladislav hrabčák,* monika stojáková* application possibilities of blockchain in accounting péter bálint király* budget allocation of taxes to territorial budgets ivana pařízková* the efficiency of tax collection in the czech republic eva tomášková* case study new legal regulation of the administrative justice in the slovak republic juraj vačok* pga2019_02_b4 _hlk18895087 _hlk18895098 _hlk27344917 articles administrative liability for causing damage to selected components of the environment branislav cepek* the right to informational self-determination in the context of selected judicial decisions and practical background andrea erdősová* information security awareness in public administrations at an international level lilla garayová* blockchain technology – current status, challenges and perspectives in tax and customs law ladislav hrabčák,* monika stojáková* application possibilities of blockchain in accounting péter bálint király* budget allocation of taxes to territorial budgets ivana pařízková* the efficiency of tax collection in the czech republic eva tomášková* case study new legal regulation of the administrative justice in the slovak republic juraj vačok* © 2018 dialóg campus, budapest public governance, administration and finances law review vol. 3. no. 2. (2018) • 5–27. articles tax administration of large taxpayers in some cee and cis countries jasna bogovac,* natalia soloveva,** michal radvan,*** jarosław marczak,**** natalia uvarova-patenko***** * jasna bogovac is associate professor at the department of financial law and financial science at the faculty of law, university of zagreb. she has a  phd and master’s degree in tax law and ba in economy. with 24 years of professional experience in accounting, finance and tax management at departments of multinational companies, and education both in economics and law, she specialised in an interdisciplinary approach to taxation. her primary areas of expertise are public finance, corporate taxation and tax administration. she is a  member of the institute of public administration (zagreb) and the centre of information and organization of public finances and tax law research in central and eastern europe. (e-mail: jbogovac@pravo.hr) ** natalia soloveva, phd in law, associate professor at the department of international economics and international business activity. the author specialises in taxation, tax systems and tax law. she is the author of a  monograph and co-author of 5 books. she has published more than 50 articles in leading legal journals and conference papers in russia and abroad. the author is a  member of the russian branch of the international fiscal association and the centre of information and organization of public finances and tax law research in central and eastern europe. (e-mail: nubiforme@mail.ru) *** jarosław marczak, phd, institute of finance, faculty of economics and sociolog y, university of łódź, poland. he is mainly focused on comparative public finance, finance of local government, fiscal (tax) systems and tax policy. he is a member of the centre of information and organization of public finances and tax law research in central and eastern europe. he presented his scientific research in more than 100 articles in polish, english and russian in journals and monographies, mainly concerning the spanish tax system and the regional finance in spain. (e-mail: marczak. jaroslaw@gmail.com) **** michal radvan is vice-dean for foreign and external affairs at the faculty of law, masaryk university, czech republic, and associate professor of financial law at the department of financial law and economics. he specialises in tax law. he is the author of 5 books and the co-author of almost 40 books. he presented his scientific research in approximately 70 reviewed articles in prestigious journals and conference proceedings. he is a  member of the european association of tax law professors and the centre of information and organization of public finances and tax law research in central and eastern europe. (e-mail: michal.radvan@law.muni.cz) ***** natalya uvarova-patenko, phd in law, department of accounting and audit at the caspian university, associate professor of the graduate school “adilet”, caspian university, almaty, republic of kazakhstan. the author specialises in theory of public administration, public finance and financial law. she is the co-author of 1 book (theory of public administration). she has published more than 50 articles in leading legal and economic journals, monographs and conference papers in kazakhstan and abroad. (e-mail: uvarova.natalya@yahoo.co) abstract: we compare tax administration of large taxpayers in croatia, the czech republic, russia, poland and kazakhstan. our hypothesis is that these units of tax administrations play an important role in collecting public revenue as well as preventing tax evasion in a  dynamic global economy. 10.53116/pgaflr.2018.2.1 mailto:jbogovac%40pravo.hr?subject= mailto:nubiforme%40mail.ru?subject= mailto:marczak.jaroslaw%40gmail.com?subject= mailto:marczak.jaroslaw%40gmail.com?subject= mailto:michal.radvan%40law.muni.cz?subject= mailto:uvarova.natalya%40yahoo.co?subject= https://doi.org/10.53116/pgaflr.2018.2.1 6 jasna bogovac, natalia soloveva, michal radvan, jarosław marczak, natalia uvarova-patenko public governance, administration and finances law review • vol. 3. no. 2. we  provide evidences about the most important characteristics of large taxpayer offices, their normative definitions, scope of work and positive as well as negative aspects of their practice. some data are compared between countries and some for each country separately, due to the fact that differences in the above-mentioned countries, in size, economic and political aspects, vary substantially. moreover, we were confronted with the limited scope of available information what made our comparison even more challengeable. therefore, this work is, in a way, a “pioneer” attempt to compare specific national ltos in one place. our findings support the discussion that prove the hypothesis and enable recommendations. keywords: large taxpayers’ office; tax administration; public revenue; croatia; russia; poland; the czech republic; kazakhstan 1. introduction experience of many countries in developed economies shows that the creation of specialised control mechanisms over the activities of large taxpayers has led to better tax compliance and increase in the efficiency of tax administrations, including the optimisation of their functions. existence of special tax units gives tax authorities the opportunity to focus on a relatively small group of taxpayers, which pay a large percentage of all tax revenues.1 to date, special units for large taxpayers (hereinafter: large taxpayers’ office, lto) have been created in most oecd countries. despite the fact that the tax system is a  primarily national economic and legal phenomenon, research of the practice of tax regulation in different countries gives wide opportunities for improving the tax system of a particular state. the present article offers the analysis of large taxpayers’ administration in croatia,2 the czech republic, the russian federation, poland and the republic of kazakhstan.3 our hypothesis is that ltos became strategic organizational units for developing countries and their existence is of great importance for tax administrations with the aim to cope with the fast changing global environment. the paper is structured as follows. as a basis for the determination of similarities and differences of the history and practice of the ltos in the aforementioned countries, definitions of the large taxpayers’ authorities responsible for their administration, positive and negative experiences, as well as data on their roles and responsibilities are presented in chapter 2. discussion on the proofs of the hypothesis is given in chapter 3 which briefly concludes and gives recommendations. 2. methods and data with the aim to compare, discuss and make conclusions on the benefits of the existence of the large taxpayers’ offices in our countries, their development and possible improvements, we were confronted with two main challenges. 7 public governance, administration and finances law review • 2. 2018 tax administration of large taxpayers in some cee and cis countries firstly, there are the obvious and huge differences in size, population, history and economic realities between them. the environment, social, economic and technological development throughout time and at present of the analysed countries narrowed our research to several aspects that can be rationally compared. another challenge which we faced at the very beginning and during our research is the “rather limited” amount of information on operation of tax administrations and evidence on their effectiveness. moreover, there are some documents that we could use as a  literature review on the topic,4 but information collected and analysed within these projects were limited to the basic explanations and definitions of the lto, together with explanations and developments of ltos in countries that are rarely covered with our research. since we want our paper to contribute to new knowledge in the field, following the previous projects, we decided to continue with the work in a way it would be a combination of the legislative analysis and field research. there is no accurate data on the revenues generated by large taxpayers, i.e. very little data are available (as is the case with other information in the area of taxation in our countries). most of the information and attitudes of this paper were based on personal experiences or conversations we had with people employed in tax administrations, or the offices, and with large taxpayers. for lack of exact data, we have used some available information on the historical development and roles and responsibilities of the respective offices. to be more precise, these data are probably handled by the intra-european organization of tax administration (iota), but they are only available to some authorised users from each member state, i.e. the tax administration. the very diversity of the countries we are concerned with, because each scientist presents their specific country situation, causes the absence of an accurate comparison of all the data and conclusions that you are looking for. however, given the available information, we decided that these offices are important and useful parts of tax administration and that there are some good and some bad experiences that can serve the further advance of developing countries. therefore, we proceed our research in two phases. firstly, we give general information on the definition of the large taxpayers and units of tax administrations which govern them for each country. we stress the main differences between their practice and experiences in contrast to other tax administration units that deal with other taxpayers. to support discussion on the subject matter, we also provide findings on the problems these offices face in their daily operations. secondly, we collected and arranged data on the development, roles and responsibilities of the ltos in these countries so that our exploration of the importance of these offices within each state tax administration become more transparent and rationalised (table 1). 8 jasna bogovac, natalia soloveva, michal radvan, jarosław marczak, natalia uvarova-patenko public governance, administration and finances law review • vol. 3. no. 2. 2.1. definition of large taxpayers 2.1.1. croatia in accordance with the bylaw on the conditions for the fulfilment of the criteria for the appointment of the large taxpayers under responsibilities of the large taxpayers’ office,5 one of the following conditions has to be met: 1. taxes equal or are above hrk 150 m (approximately euro 20 m). 2. business activity of: a) insurance, leasing and telecommunications with revenues above hrk 15 m (approximately euro 2 m), or b) banks, regardless of the amount of revenue. 3. large projects with the expected revenue exceeding hrk 150 m to which a significant number of taxpayers can be associated (e.g. subcontractors). in addition to the strict conditions, flexibility of the appointment is assured by the possibility of the large taxpayers’ office (e.g. simultaneous controls to be carried out on related persons) to propose to the director general to issue a decision on the responsibilities of the large taxpayers’ office for the taxpayers that do not meet prescribed conditions. once a taxpayer is recognised as a “large” one, he/she stays under the responsibility of the lto for three tax periods. the lto deals with approximately 650 taxpayers.6 2.1.2. the czech republic according to section 11(2) of the financial administration act, large taxpayers are legal entities with turnover higher than czk 2,000,000,000 (approximately euro 75 m). the specialized tax office is a  sui generis financial office and has jurisdiction over certain special entities: – large taxpayers  –  legal entities with turnover higher than czk 2,000,000,000 (approximately euro 75 m) – banks and credit unions, including branches of foreign banks – insurance companies, including branches of foreign insurance companies – investment funds and their management companies – pension companies and their funds – lottery operators – members of groups according to the value added tax act the specialized tax office currently manages taxes on about 1,500 taxpayers.7 9 public governance, administration and finances law review • 2. 2018 tax administration of large taxpayers in some cee and cis countries 2.1.3. russia the role of large taxpayers in the formation of the budget of the russian federation is constantly increasing. their share in tax revenues of the state according to different sources ranges from half to two thirds. there is no definition of large taxpayers in the tax code of the russian federation. criteria for recognition of taxpayers as large ones are specified in the order:8 1. indicators of financial and economic activities for the accounting year according to accounting and tax reporting of taxpayer. 2. interdependence and influence of the taxpayer on the economic results of activities of associated taxpayers. 3. special permission (license) for conducting specific activities by taxpayer (banking activity, insurance activity, etc.). depending on the value of indicators of financial and economic activities, large taxpayers are divided into two types: 1. large taxpayers administered at the federal level. the taxpayer should meet the following indicator: the total sum of received revenues exceeds 35 billion rubles (approximately euro 480 m). in addition, organizations that are subject to tax administration at the federal level include those that do not meet the established criteria, but the federal tax service has decided to classify them as the largest taxpayers. 2. large taxpayers administered at the regional level (the taxpayer should meet all the following indicators at the same time): – the total sum of received revenues ranges from 2 to 35 billion rubles (approximately from euro 25 m to euro 480 m) – assets rated from 100 m rubles (approximately from euro 1.25 m) or the total amount of federal taxes exceeds 75 m rubles (approximately euro 1 m) – the average number of employees exceeds 50 persons the status of large taxpayer is kept for the next three years following the reporting period in which indicators of financial and economic activities no longer meet specified limits. 2.1.4. poland the tax office and tax chamber act does not provide an explicit definition of a  large taxpayer, but its article 5, item 9c implies that taxpayers should be selected for specialised tax offices based on a value criterion and an industry criterion. the first criterion states that a  large taxpayer is an entity with end-of-the fiscal year net revenue amounting to an equivalent of at least euro 5m. there are some exceptions to this rule that will be presented below. the criterion is invalid in case of organizations that meet the industry criterion, according to which large taxpayers are: 10 jasna bogovac, natalia soloveva, michal radvan, jarosław marczak, natalia uvarova-patenko public governance, administration and finances law review • vol. 3. no. 2. 1. tax capital groups 2. banks 3. insurance companies 4. organizations conducting business regulated by the act on trade in financial instruments of 2005 and investment funds laws 5. organizations conducting business regulated by the act on the organization and operation of pension funds 6. branches or representative offices of foreign corporations 7. incorporated and unincorporated entities that: a) at the end of the previous fiscal year had a net income (as defined by accounting regulations) from the sale of goods, products and services amounting to an equivalent of at least euro 5 m, converted at an average exchange rate of the national bank of poland, or b) being resident entities as defined by the foreign exchange law directly or indirectly participate in the management or control of foreign-based enterprises, or have capital shares in them, or c) are directly or indirectly managed by a  non-resident entity as defined by the foreign exchange law or a  non-resident entity has at least 5% of votes at an assembly of shareholders or a general assembly, or d) being resident entities as defined by the foreign exchange law directly or indirectly participate in the management or control of a  domestic enterprise and a foreign enterprise at the same time, or have capital shares in such enterprises at the same time. natural persons are not considered large taxpayers even if their net revenue exceeds the aforementioned amount of euro 5 m, because article 5, item 9b explicitly limits this category of taxpayers to incorporated entities and unincorporated organizations. general partnerships are excluded for the same reason. 2.1.5. the republic of kazakhstan the list of large taxpayers, subject to further monitoring, is approved by the government of kazakhstan no later than december 25 of the year prior to the year of the enactment of the list. the list includes the first 300 large taxpayers with the highest aggregate annual income (without including the adjustment provided for in article 99 of the tax code of the republic of kazakhstan).9 a taxpayer is considered large on condition that the total book value of all assets is not less than the 325,000-fold monthly calculation index provided for in the budget code of the republic of kazakhstan, and the number of employees is 250 or more. the approved list of large taxpayers is effective for two years from the date of enactment and is not subject to revision during this period. the following methods are used to compile a  list of large taxpayers, subject to monitoring : 11 public governance, administration and finances law review • 2. 2018 tax administration of large taxpayers in some cee and cis countries a) estimating the aggregate annual income based on the corporation income tax return data for the tax period prior to the year of the approval of the list of large taxpayers; b) estimating the book value of assets based on the annual financial report data for the year prior to the year of the approval of the list of large taxpayers; c) estimating the number of employees based on the personal income tax return and social tax deduction data for the last month of the first quarter of the year prior to the year of the approval of the list of large taxpayers. the monitoring of large taxpayers involves the analysis of their financial and operating performance with the purpose of determining their actual tax base, control of compliance with the republic’s tax regulations, and the market prices employed in transfer pricing. large taxpayers should submit an account of monitoring in the form of an electronic document certified by a  digital signature. an account of monitoring includes a  balance sheet, reports on the goods manufactured and purchased, work done and services rendered; costs of goods manufactured, work done, and services rendered; a  report on the financial and operating performance; and an explanation of accounts receivable and accounts payable. 2.2. authorities responsible for the administration of large taxpayers 2.2.1. croatia the croatian tax administration organization consists of three parts: central office, regional offices (six being responsible for regions and one large taxpayers’ office at the national level) and 57 branches on the local level (in towns and municipalities, subordinated to regional offices). its headquarters are in zagreb, supported by three dislocated units in osijek, rijeka and split. the total number of officials in the lto is 112.10 historically, lto in croatia have been developed from the unit responsible for the audit and collection of taxes from the largest companies, with the continuous and logical evolution resulting in an office for the sophisticated approach to the large taxpayers on a  daily basis, as well as for its audit. chronologically, the most important phases were the following : – 2003: the unit for large taxpayers’ audit have been established within the zagreb regional office.11 – 2009: establishment of the two units for large taxpayers: office for large taxpayers’ audit and the separate zagreb branch for large taxpayers,12 both within the regional office in zagreb.13 – 2012: establishment of the large taxpayers’ office in zagreb with three branches (dislocated units) in split, rijeka and osijek.14 the lto integrates the work of the audit and the daily collection of taxes for large taxpayers.15 more than 600 large taxpayers were identified with the share of the 46% of all taxes and contributions paid to the budget in 2011. thus, in addition to 20 regional offices in croatia, 12 jasna bogovac, natalia soloveva, michal radvan, jarosław marczak, natalia uvarova-patenko public governance, administration and finances law review • vol. 3. no. 2. the  separate 21st office was established with “specific internal organization” that is necessary for such assignments. the large taxpayers’ office with headquarters in zagreb was responsible for all large taxpayers in croatia. – 2014: decrease in the number of regional offices,16 but lto remains one of the crucial organizational units within the croatian tax administration, being one of the seven “regional offices” (see supra). roles and responsibilities of the office have not change in comparison to the 2012 decree, hence the continuity in work. the lto employees are engaged as team members in the cooperation with colleagues from different departments and the central office. the internal and external cooperation of the lto employees with the public officials in other institutions (e.g. croatian national bank, croatian financial services supervisory agency), and thematic meetings with the private sector stakeholders, show their willingness to cooperate in line with the values and ethical principles stated in the strateg y of the tax administration17 and to overcome the traditional vertical and horizontal fragmentation in public administration in croatia.18 the lto staff is provided with “special training courses in order to acquire the specific knowledge and skills and apply the modern techniques required for tax audit and desk audit, including risk analysis”.19 this task is closely connected with the following aspect. they achieve international cooperation with the eu, oecd, iota, imf and the world bank, as well as bilaterally, in the fields of risk management, audit, procedures and techniques, and it. various projects, pilot-projects, funds, seminars, workshops and exchange of employees with member states strongly supported the employees’ and the management’s skill development. 2.2.2. the czech republic as mentioned in previous research papers,20 tax administration in the czech republic is divided between financial administration of the czech republic and customs administration of the czech republic. tax administration sensu lato is also carried out by municipal offices (local and administration charges), other offices (administration charges) and courts (court fees). this division of tax administration has existed de facto since 2004 when the czech republic joined the eu. then it was decided that the bodies of customs administration would be in charge of the administration of selected excise taxes and vat on imports. as for financial administration, until 2012, there were financial offices as first-instance bodies, financial directorates as second-instance bodies and the ministry of finance with an internal organizational unit  –  central tax and finance directorate. the general financial directorate, which was established in 2011, was followed by the specialized tax office, which was introduced just a year later. the new act no. 546/2011 sb., on financial administration of the czech republic (financial administration act) took over, to a  certain extent, these existing institutions so that a  logical and properly arranged three-instance system of bodies of financial administration of the czech republic could be launched as of 1 january 2013. the establishment of the system of the financial administration bodies brought mainly a  unified central control of a  system of 13 public governance, administration and finances law review • 2. 2018 tax administration of large taxpayers in some cee and cis countries bodies which, despite being formally subordinated to the ministry of finance, are de facto managed by the general financial directorate with general jurisdiction. the newly established financial administration meets the parameters of a  possible future system of bodies called jim (jedno inkasní místo, i.e. single collection place) so that the financial administration could, if given more power, continue without having to change its structure. the general financial directorate’s function is mainly directive and methodological in the field of tax administration. the directorate closely cooperates with the ministry of finance in the legislative, analytic and conception activities and in the area of international relationships (international administrative cooperation and recovering financial receivables). the appellate financial directory is an administrative body directly superior to financial offices. it also deals with administrative offences and it also acts as a  contact body for the agenda of recovering some receivables. as for the area of international cooperation in tax administration, it administers the records and registries needed for operation of the financial administration bodies. at the basic level, there are fourteen financial offices, i.e. one for each region and one office for prague. aside from them, there is a specialized tax office (not only) for large taxpayers. financial offices have local offices, usually in the place where the original financial offices had been prior to the reform of 2013. as for the subjectmatter jurisdiction, financial offices carry out almost all powers granted to the bodies of financial administration; they are especially in charge of the administration of taxes at the first instance.21 the specialized tax office represents tax administration on the national level. the seat of the specialized tax office is prague, but it has several regional offices (plzeň, hradec králové, ústí nad labem, brno, ostrava a české budějovice). the director of the specialized tax office is appointed and removed by the director general of the general financial directorate. the specialized tax office provides the following activities:22 – performs the administration of taxes, with the exemption of immovable property tax and immovable property transfer tax, and administrative, court and local charges/fees – carries out the proceedings about administrative offences – transfers collected tax incomes – performs supervision over lotteries and other gambling games – collects and enforces pecuniary compliance imposed by them – keeps records and registers, which are needed for the performance of activity of the financial administration bodies – performs financial control – performs investigations according to the accounting act and imposes fines – under the authorisation of the ministry of finance, it fulfils a role of liaison office for the recovery of financial claims and provide international assistance in the administration of taxes – under the authorisation of the ministry of finance, it reviews the economy of regions, the capital of prague and regional councils of regions cohesiveness and performs a supervision over the reviewing of economy of municipalities, voluntary associations of municipalities and the city districts of the capital of prague 14 jasna bogovac, natalia soloveva, michal radvan, jarosław marczak, natalia uvarova-patenko public governance, administration and finances law review • vol. 3. no. 2. 2.2.3. russia on the basis of levels of state administration and administrative-territorial division of the russian federation, the structure of the tax authorities in russia consists of four levels: – federal level that is the federal tax service of russia – federal-regional level – interregional inspections of the federal districts – regional level – tax administrations of the subjects of the russian federation – local level – tax inspections that is the lowest unit of tax authorities’ system the structure of the tax authorities also includes specialised interregional inspections (federal level) and specialised interdistrict inspections (regional level). the system of tax administration of large taxpayers in russia appeared in 2001. nowadays administration of large taxpayers at the federal level is implemented by interregional inspections for large taxpayers. at the moment there are nine interregional inspections for large taxpayers that are specialised by industrial principle: oil; gas; manufacturing industries, construction and trade; electric power industry; metallurgical industry; transport services; telecommunication services; military-industrial complex; banks and insurance companies.23 at the regional level large taxpayers are administrated by interdistrict inspections for large taxpayers. interdistrict inspections are created in the structure of tax administrations of the subjects of the russian federation. in case if such interdistrict inspections are not created in certain tax administrations, large taxpayers are administrated by the tax inspection at the location of originations but control over their administration are implemented by tax administrations of the subjects of the russian federation. 2.2.4. poland until the end of 2003, all taxpayers in poland regardless of their size were handled by tax offices with jurisdiction over the taxpayer’s place of residence, registered address or registered business address. however, complicated relations between domestic and foreign companies, polish and international capital groups, raised many doubts as to the reliability of their tax settlements. phenomena such as transfer prices and tax optimisation schemes emerged, which had never or rarely been observed before. the situation was aggravated by the high turnover of the tax office staff, insufficient training of the staff in dealing with taxpayers assisted by large consultancies, and, quite frequently, by confirmed suspicions that taxpayers were trying to evade the payment of taxes. as a result, the tax office act was amended and 20 specialised tax offices (stos) were appointed to exclusively handle large taxpayers from 1 january 2004. the new approach has not solved problems related to the operations of large taxpayers, though. stos have the single purpose of handling large taxpayers. as mentioned, twenty stos have been selected to provide service to large taxpayers, i.e. four more than there are voivodeships in the country. these additional stos are based in the mazowieckie voivodeship (2) and in the silesian and wielkopolskie voivodeships (1 extra in each). they were 15 public governance, administration and finances law review • 2. 2018 tax administration of large taxpayers in some cee and cis countries created because of significant numbers of large taxpayers in these voivodeships and the need to provide high-quality service. stos operate on the same rules as other tax offices do. the highest number of large taxpayers is registered in the mazowieckie voivodeship, particularly in the capital city of warsaw. research shows that of 96,903 large taxpayers that poland had in 2013 approximately 45,659 (ca. 38.5%) were based in that voivodeship.24 it must be noted, however, that some taxpayers are not active, meaning that not all of them pay corporate income tax (cit). in 2013, only 52,960 taxpayers (ca. 55.5 %) filed cit-8 returns. 14,013 taxpayers (ca. 26.4% of the active ones) reported net revenue in excess of the equivalent of euro 5m. on 1 january 2016, the tax administration act establishing the national specialised tax office (physically, the 1st mazowiecki tax office in warsaw) for taxpayers with net revenue exceeding the equivalent of euro 50 m (their number was estimated at ca. 3,830, of which around 1,000 had already been serviced by that tax office) was to enter into effect.25 however, it did not become effective until 1 july 2016, because of the plan to reform the tax, treasury and customs administration (by establishing the national treasury administration). 2.2.5. the republic of kazakhstan tax administration involves tax control by taxation bodies, implementation of methods that would ensure the fulfilment of overdue tax obligations, tax enforcement and provision of public services to taxpayers (tax agents) and other authorised public bodies according to the established procedure. a  first mention of the responsible body for the large taxpayers was prescribed in 1999.26 tax administration on the national scale, as well as tax administration of large taxpayers is performed by the state revenue committee of the ministry of finance of the republic of kazakhstan.27 the monitoring of large taxpayers is performed by analysis of financial and economic activity of large taxpayers in order to determine their actual tax base, control of compliance with tax legislation of the republic of kazakhstan and the applicable market prices in order to monitor transfer pricing. during the monitoring, the authority may demand from the large taxpayers subject to monitoring, submission of documents confirming the correctness of tax calculation and timely payment of taxes and other obligatory payments to the budget and financial statements of the taxpayer (tax agent), including financial statements of its subsidiaries. 2.3. positive aspects of the ltos practice 2.3.1. croatia the large taxpayers’ office consolidates the largest croatian taxpayers from different sectors (industry, trade, banking, insurance) and theirs related companies. the work scope requires of the lto officials a good education and knowledge about the international and croatian accounting standards, taxation, it, law and economics, the same as to be familiar 16 jasna bogovac, natalia soloveva, michal radvan, jarosław marczak, natalia uvarova-patenko public governance, administration and finances law review • vol. 3. no. 2. with the taxpayers’ business environment. covering both direct and indirect taxes, enabling a  focus to the “whole of taxpayer” within the administrative taxpayers’ affairs, the lto staff is dedicated to broaden a  close relation with the taxpayers with complex and considerable transactions. audit of the transfer prices and thin-capitalisations are at the top of the tax issues in the eu and globalised world, the same in complexity as in the amounts. therefore, it is crucial that the lto employees work in teams, exchange information and continuously learn and develop professional skills. while these issues are advisable for other public officials, for the lto officials they are indispensable. the lto in croatia is recognised as a  strategically important unit since the conducting audit “is the most important aspect of the overall control function of the tax administration”,28 at the same time being involved in cooperation with the large taxpayers that “deserve special status and services. […] tax administration will continue to develop services and a special way of communication with large taxpayers”.29 the development of special skills and knowledge of the lto staff can be recognised in the way they deal with the largest taxpayers in the country. they apply: – an individual approach to each taxpayer – team work and open communication within the headquarters in zagreb, as well as with the employees in regional offices dedicated to the large taxpayers; the head of the lto participates in the daily work and communication, giving additional support to the staff – acting in real time and up-front, increasing openness and dialogue with taxpayers in order to prevent the problems as they occur; this approach is supported by a  legal basis that gives opportunity to the tax administration and taxpayers to cooperate with the aim to decrease tax risks on both sides (horizontal monitoring )30 as well as the number of audits and disputes (voluntary adjustments of the submitted tax returns)31 due to the incremental development of the large taxpayers’ office, which modestly began in the early 2000s, croatia now has a  national office that can be recognised as a  centre of excellence within the tax administration. its employees are involved in many national and international projects, contributing to working groups by their knowledge and experiences from a complex and sophisticated field. their work is also recognised by the taxpayers who expressed their trust and reliability in this office.32 continuous development of their partnership with the largest taxpayers in the country forms a basis for further development and importantly contribute to the improvement of the whole croatian tax administration organization.33 2.3.2. the czech republic generally, there are no differences between the large taxpayers’ administration by the specialized tax office and administration of all other taxpayers by “normal” tax offices. the essential difference lies in the extent of territorial jurisdiction: the specialized tax office’s territorial scope is nationwide. for the purposes of tax administration by the 17 public governance, administration and finances law review • 2. 2018 tax administration of large taxpayers in some cee and cis countries specialized tax office so called sectoral breakdown of selected entities is accentuated. tax administration is performed by the team of specialists for specific sectors, always with respect to the operating conditions of a  particular industry in which the selected entity carries out its activities. the main benefit of a  team tax administration is to obtain a  comprehensive insight into the activities of the tax entity or to the activities of the group of entities. the working team shares any information about this group, so there is no loss, fragmentation or omission. a  prerequisite for a  team tax administration is constant communication among all staff members, information sharing and joint solution of problems.34 in february 2015, the specialized tax office initiated a controlling operation in order to verify the correctness of setting the transfer pricing between companies that are personnel or property related. the main aim of the operation was to prevent possible tax evasion. the tax entities were chosen for control due to the analysis of data gained from questionnaire voluntary filled in by tax entities last year and from data obtained by searching activities of the specialized tax office.35 the specialized tax office has its price control unit. controls are focused on the compliance of the way of price regulations set by the price act and further on assessment whether in the area of non-regulated prices did not occur an abuse of economic position. state control over betting games and lotteries is another area of the specialized tax office’s competencies. this state control is performed by employees of the state control and it is focused on compliance with the lotteries act and conditions resulting from the permissions to run lotteries and other like games.36 2.3.3. russia the practice of tax administration considers the following features that are inherent to large taxpayers: – maintenance activities on large territories belonging to different regions of the russian federation – extensive organizational and management structure – broad participation in the processes of international integration and cooperation organizational and regulatory support of administration of large taxpayers is exercised on the basis of general provisions of the tax code of the russian federation. however, the specificity of tax administration of this category of taxpayers is determined in the different regulations (orders, instructions, methodical guidelines) of the ministry of finances of russia and the federal tax service. thus, there are detailed rules of registrations of large taxpayers that provide procedures and time limits different from the general rules.37 there are also some peculiarities of tax reporting ; however, they are caused by the presence of special subjects (interregional and interdistrict inspections) of tax control. at the same time, tax control over activities of large taxpayers is provided in the form of tax audits, which are carried out according to the general rules fixed in the tax code. 18 jasna bogovac, natalia soloveva, michal radvan, jarosław marczak, natalia uvarova-patenko public governance, administration and finances law review • vol. 3. no. 2. thus, it is fair to say that generally, the tax administration of large taxpayers is only slightly different from the tax administration of other legal entities. as it was mentioned with regards to considering countries, the main advantage of the tax administration of large taxpayers namely by specialised tax units is their focus on working only with this category of taxpayers. as a  result, there are the following positive trends: – improving of efficiency of tax administration – cost optimisation of tax authorities for implementation of tax control measures – improving of tax compliance of large taxpayers 2.3.4. poland the establishment of specialised tax offices for taxpayers provided an opportunity for staffing them with very competent workers, capable of making reliable assessments of taxpayers’ real and legal situation and of being their partners in tax settlement processes. because of the complexity of large organizations’ business relations, the control bodies must have the appropriate knowledge to resolve a  considerable proportion of disputable situations without involving the court. 2.3.5. the republic of kazakhstan kazakhstan takes drastic measures to improve tax administration. the implementation of a tax administration improvement program in 2010–2011 took the republic’s tax system to a  brand new level of quality, providing convergence with international practices. over 50 amendments dealing with issues of tax administration have been made to the tax code of the republic of kazakhstan. the process of improving the legal mechanisms of tax administration in terms of combating tax evasion is ongoing. this pertains to large taxpayers, as well. 2.4. problems the administration of large taxpayers are facing 2.4.1. croatia the positive practice and experiences gathered during the 13 years of existence of the croatian tax administration team of large taxpayers need to be used and fatherly developed especially with regards to the following : 1. staffing the team with experts from the fields of accounting, finance, corporate, financial and intellectual property law, international tax law and it, is a necessity to keep the pace with the large taxpayers, both in terms of the daily cooperation and of their audit. 19 public governance, administration and finances law review • 2. 2018 tax administration of large taxpayers in some cee and cis countries 2. even though the notion of support to the work of the lto is continuously repeated in strategic documents and can be easily recognised within the organizational hierarchy (see supra), the encouragement is sometimes missed. it must be taken into consideration that croatia does not provide a  business-friendly environment38 and that the work of the lto staff is sometimes not recognised on behalf of other public officials or by the general public, which may cause obstacles in their daily work. 3. officials of the large taxpayers’ office are often being hindered in their work with a  variety of denunciations from other state entities that have no particular connection with their work and responsibilities, and it often turns out that it does not have a great material significance, either. 2.4.2. the czech republic as the above mentioned benefits of the existence of the specialized tax office prevail, not every taxpayer or selected entity is satisfied, especially those from smaller cities. mostly till the end of 2011, such a  selected entity was usually (one of ) the largest taxpayers in the territorial jurisdiction of a  tax office and it had an “eminent position”. not in the sense of lower taxes, of course, but the tax office was ready to help, give advice, cooperate, as the main purpose of the tax administration is to assess taxes right (the correct amount, on time). nowadays such a selected entity is one of many similar selected entities and it has no longer the privileges it had before. 2.4.3. russia despite the 15 years of existence of the system of large taxpayers’ administration by special tax bodies and its positive aspects, there are negative sides of such a system and challenges for its improvement. neither the concept of large taxpayers and their criteria, nor the specificity of the administration of large taxpayers is fixed in the tax code of the russian federation. regulations of the ministry of finances of russia and the federal tax service that regulate legal relations on large taxpayers’ administration are often changed. moreover, interregional and interdistrict inspections frequently interpret norms differently. it is necessary to fix in the tax code the following : the concept of large taxpayers, the criteria for recognition of organizations as large taxpayers, the rights and obligations of tax authorities and large taxpayers in the implementation of large taxpayers’ administration, other provisions that differ from the general procedure of tax administration. negative moments of large taxpayers’ administration include complication of the system of tax payments’ accounting by authorised bodies and increase of errors in this field, as well as the duplication of tax inspections’ functions. for a  significant number of large taxpayers administrated at federal level, there is a  problem of distance from the place of actual location and conducting business to the 20 jasna bogovac, natalia soloveva, michal radvan, jarosław marczak, natalia uvarova-patenko public governance, administration and finances law review • vol. 3. no. 2. interregional inspection where such taxpayers are registered as most of the interregional inspections are situated in moscow. considerable distance causes additional costs for large taxpayers. 2.4.4. poland after a decade of the sto’s activity, a conclusion was reached that its scope was too broad. “since the very onset of their activity, specialised tax offices have been handling, according to their designation laid out in article 5 item 9b of the tax offices and tax chambers act of 21 june 1996, the same catalogue of enterprises. their structure, defined following the general organizational model of tax offices, has not changed, either. it lacks systemic solutions accounting for the special needs of taxpayers for which stos were established. moreover, the general model of relations with taxpayers takes little account of the fact that the stos’ clients are entities of strategic importance for the development of the national economy, so they need to be approached on an individual basis.”39 instead of concentrating on strategic enterprises conducting complicated business operations at home and abroad, stos handled all active taxpayers indicated in the act, including those with small business volumes. as a  result, they were less effective than they could be, as well as less competent and friendly to taxpayers. the findings led to changes in the manner of operation of the stos, and to the redefinition of a large taxpayer. 2.4.5. the republic of kazakhstan general problems of tax administration in kazakhstan are substantially topical for large taxpayers. the tax administration in kazakhstan needs to be drastically improved so that it would contribute to the modernization and diversification of the economy, fight against violations of tax regulations and tax evasion, and withdrawal of operating business structures that serve as sources of income for the budget from the shadow sector. according to the accounts committee, tax control measures adopted by the public taxation bodies to react promptly to the cases of tax evasion are not effective enough. taxation bodies often fail to document violations of tax regulations during audit, which is detrimental to the budget of the republic. credit resources are often misallocated. there are no approved norms for prices on work and services rendered. agreement terms are not met, which leads to delays in public purchases and, ultimately, to the failure to achieve direct and end results from the use of intended transfers.40 low quality of the services rendered by the tax administration results in the violation of rights and legitimate interests of all taxpayers including large ones. thus, in 2014, the association of taxpayers of kazakhstan examined the complaints of taxpayers about the actions of taxation bodies during tax administration. the examination revealed the following problems: lengthy tax audits; unsatisfactory qualification of tax auditors; lack of transparency of tax audits. 21 public governance, administration and finances law review • 2. 2018 tax administration of large taxpayers in some cee and cis countries the issue of the implementation of e-audit instead of (or along with) the conventional tax control requires thorough examination. the use of e-audit would allow identifying, suppressing, and punishing tax violations. it is recommended by the oecd and is widely used in foreign practices. the same is true for the incorporation of the general antiavoidance rule into the national tax legislation. the strateg y for the development of kazakhstan until the year 2050 makes provisions for the introduction of favourable tax treatment for the objects of taxation involved in the production and advanced technologies. it also aims to continue the policy of liberalisation of tax administration and systematisation of customs administration. at the business level, the tax policy should stimulate internal growth and national export to foreign markets and be socially-oriented. meanwhile, at the level of population, it should stimulate savings and investments. all these strategic tasks provide substance to the long-term public tax policy. 2.5. some facts on the growth of the ltos with the aim to compare relevant information of the ltos, we tried to emphasise some facts that are possible to be collected, and to show them in a  way as much transparent as possible. on the other hand, we tried to find information that will show growth in importance of the lto in every country, since comparison between countries will not be rational. therefore, some data should be compared between countries and some for each country separately. table 1. growth, roles and responsibilities of the ltos (by country) croatia russia poland the czech republic kazakhstan year of establishment 200341 2001 2004 2012 1999 number of employees at the first establishment 15 n/a 2,639 137 n/a number of entities administrated at the first establishment 1,100 n/a 990 220 number of employees (2015–2016) 13642 n/a 2,300 460 n/a number of entities administrated (2015–2016) 650 n/a 53,00043 1,500 300 position of the office within the ta state level from federal to local regional state level state level responsibilities: direct taxes yes yes yes44 yes yes indirect taxes yes yes yes42 yes yes contributions (for the employees) yes no45 yes yes yes 22 jasna bogovac, natalia soloveva, michal radvan, jarosław marczak, natalia uvarova-patenko public governance, administration and finances law review • vol. 3. no. 2. croatia russia poland the czech republic kazakhstan coordination with foreign revenue bodies (e.g. simultaneous tax audits, exchange of information) yes yes yes yes yes tax compliance of the lt yes yes yes yes yes tax control of the lt yes yes yes yes yes teams dedicated for specific/ important/key sectors and industries yes yes no46 yes n/a employees dedicated for every large taxpayer; contact-persons for large taxpayers (compliance, contacts) yes yes yes yes n/a employees participate in strategic projects (working groups, pilotprojects or similar decision-making processes etc. of the ministry or central tax administration office) almost always often almost never almost always almost always source: compiled by the authors. data shows that, where available, very similar facts can be found in the scope of the responsibilities of the ltos, their teams and employees dedicated to the specific taxpayers and their industry. also, in the majority of cases, these offices are of strategic importance for the tax administrations, due to the fact that they are established at the state (federal) level and their employees participate in strategic projects of the ministry of finance or central tax administrations. some opposite conclusions can be found in case of poland, which has ltos established on regional level and their employees do not participate in strategic projects. huge and surprising fact is that polish ltos deal with 97,000 taxpayers (53,000 active legal persons) but the number of employees decreased in the 12 years of the existence of the office. it is contrary to the practice of modern tax administrations and cannot be justified by any of the basic arguments of the establishment of such a  unit. instead, poland chooses the establishment of the large taxpayers’ office who actually deals with the thousands of medium and small legal entities. on the other hand, the facts show (where available) that ltos in other countries grow in size (number of employees); this can be a  good sign of the recognition of its benefits for the tax administration in general. 3. discussion and conclusions each country has a  vastly different tax system, their own economic realities and different experiences of large taxpayers’ administration and the analysis shows that although each country uses different approaches to organizing the administration of large taxpayers, benefits obtained and problems they face are rather comparable. 23 public governance, administration and finances law review • 2. 2018 tax administration of large taxpayers in some cee and cis countries therefore, we compared the history and practice of every large taxpayer staff in each country aiming to make conclusions of its advantages and disadvantages, as well as to compare it between the countries in scope. in all analysed countries, criteria for recognition of legal entities as large taxpayers can be conditionally divided into two groups: – economic and financial criteria (turnover, amount of taxes paid, revenues received, value of assets, etc.) – organizational criteria (type of activity, license for conducting certain type of activity, number of employees, interdependence of taxpayers, etc.) the mentioned criteria may be applied for certain categories of taxpayers both separately and collectively. in all studied countries, except kazakhstan, special units of tax authorities for administration of large taxpayers have been created: – the large taxpayer office in croatia – specialized tax office (not only) for large taxpayers in the czech republic – interregional tax inspections (federal level) and interdistrict tax inspections (regional level) in russia – specialised tax offices in poland in the republic of kazakhstan, the state revenue committee of the ministry of finance of the republic of kazakhstan performs the administration of large taxpayers. the lack of significant differences in the administration of large taxpayers compared with the administration of all other legal entities is emphasised. the differences are largely due to the presence of the special subject of administration, that is a  special unit of tax authorities (for instance, special rules of registration as large taxpayer, etc.). among the positive sides of administration of large taxpayers by specialised tax units, the following are marked: – comprehensive insight into the activities of large taxpayers, as well as an individual approach to each taxpayer – higher competence of the employees of specialised tax units responsible for large taxpayers’ administration – improving of efficiency of tax administration and tax compliance of large taxpayers – cost optimisation of tax authorities for implementation of tax control measures although the above-mentioned benefits are achieved in different countries to varying degrees, these benefits are undoubtedly important objectives of large taxpayers’ administration. it should be noted that the large taxpayers’ administration in different countries has a number of disadvantages, among which are the following : – the problem of distance from the place of actual location and conducting business to the specialised tax unit where large taxpayers are administrated which, in particular, causes additional costs for taxpayers (the czech republic, russia) 24 jasna bogovac, natalia soloveva, michal radvan, jarosław marczak, natalia uvarova-patenko public governance, administration and finances law review • vol. 3. no. 2. – the lack of systemic solutions accounting for the special needs of taxpayers for which ltos were established; being less effective than ltos could be, as well as less competent and friendly to taxpayers (poland) – the lack of legal regulation of large taxpayers’ administration at the federal level (russia) – some lack of the encouragement for lto’s work, a  variety of denunciations from other state entities that have no particular connection with the lto’s work (croatia) – the absence of the separate large taxpayers’ unit(s) for their administration and control (kazakhstan) nevertheless, it appears that the work of specialised tax units for large taxpayers represents an effective mechanism of tax administration, which over time will be evolving and improving in the interests of the state, as well as taxpayers. having in mind all these benefits of the practice of the ltos, we can conclude that our hypothesis is proven to a  great degree, due to the fact that such organizational units grow in roles and responsibilities, as well as in the importance for every tax administration where they are established. the special skills, teamwork and understanding of the big business in a  globalised world, makes public servants in those specialised units capable for challenges that tax administrations and taxpayers face regarding tax collection, legal tax certainty, tax evasion and administrative cooperation. since large taxpayers usually account for the majority of the tax revenue, their existence and improvement in the operations might hugely increase efficiency and effectiveness of the tax administrations in general. if we give respect to the disadvantages of the practice of ltos in respectable countries, we can conclude that our hypothesis is not discredited, giving the fact that tax administrations in developing countries faces considerable problems in keeping on track with the practice of modern states. therefore, some of the issues that create difficulties for achieving its full success can be expected as inevitable problems that can be solved with the help of the experiences of other countries. kazakhstan, as the only country between the analysed states that failed to establish a separate lto, can learn from the practice of the developing countries that experienced the benefits of such organizational units. poland, on the other hand, might learn the most from its own misconceptions. due to the fact that tax administrations around the globe, in developed and developing countries, are not immune to the problems in organization, effectiveness or “complifications”, we think that our findings can be useful for many of them. however, we look forward to see improvements of these offices in our countries. 25 public governance, administration and finances law review • 2. 2018 tax administration of large taxpayers in some cee and cis countries references 1 the majority of the public revenues are collected by the large taxpayers, which is often interpreted in accordance with the pareto principle. in this article we recognise the significance of this group of taxpayers in the sense of its total taxes (as well as contributions where appropriate) paid in absolute amounts. our intention was not to interpret the progressivity or redistribution effect of the tax system. 2 some of the data presented in this article regarding croatia are parts of the project of the faculty of law in zagreb. 3 this chapter provides legal basis, international organizations’ and scientific observations and, where necessary, anecdotal evidences from personal interviews, experiences and surveys of the authors. each author analysed the tax administration in their own country. 4 large taxpayers are mostly addressed by the oecd and the imf, but non of their reports have exact data on the amounts surveyed by these offices, the data are not structured in a  way to enable identifying this issues; instead, we have used the data from reports made by the experts coming from these respective organizations and used the results as a basis for their further research. see, for example: oecd (2015) tax administration 2015: comparative information on oecd and other advanced and emerging economies, or oecd (2010) forum on tax administration, tax administration in oecd and selected non-oecd countries: comparative information series. 5 official gazette, 67/2015. 6 oecd (2015: 93) evidenced 680 taxpayers, tax administration 2015: comparative information on oecd and other advanced and emerging economies, www.oecd.org/ctp/administration/taxadministration-23077727.htm (accessed 15 february 2016). 7 www.financnisprava .cz/cs/financni-sprava/organy-financni-spravy/specializovany-financni-urad/ informace-o-sfu (accessed 09 may 2016). 8 order of federal tax service of russia № mm-3-06/308@ dated 16 may 2007. 9 code of the republic of kazakhstan dated december 10, 2008 no. 99-iv on taxes and other obligatory payments to the budget (tax code), http://adilet.zan.kz/rus/docs/k080000099_ (accessed 28 april 2016). 10 see oecd (2015: 93), tax administration 2015: comparative information on oecd and other advanced and emerging economies, www.oecd.org/ctp/administration/tax-administration-23077727. htm (accessed 15 february 2016). 11 pursuant to the decree on internal organization of the ministry of finance (official gazette, 71/2003). 12 usually positioned in local branches according to the territorial and functional organization. 13 decree on internal organization of the ministry of finance (official gazette, 29/2009). 14 official gazzete, 124/2012. 15 in accordance with the draft amendments to the tax administration law with final proposal of the law, the establishment of the large taxpayers’ office was one of the strategic goals of the project of the modernization of the tax administration (revenue administration modernization program  –  ramp), https://vlada.gov.hr/userdocsimages//sjednice/arhiva//03851.%20-%202.pdf (accessed 15 february 2017). 16 decree on internal organization of the ministry of finance (official gazette, 154/2014). 17 cta (2016: 4). 18 ibid. 71. 19 the cta strateg y (2011: 20). 20 michal radvan, petr mrkývka, czech republic (national report for the conference the transformation of tax systems in the central and eastern european countries [cee] and brics countries  –  25 years of experience and future challenges.) 21 ibid. 22 www.financnisprava.cz/en/financial-administration/financial-administration-bodies/specialized-taxoffice/characteristic (accessed 8 may 2017). http://www.oecd.org/ctp/administration/tax-administration-23077727.htm http://www.oecd.org/ctp/administration/tax-administration-23077727.htm http://www.financnisprava.cz/cs/financni-sprava/organy-financni-spravy/specializovany-financni-urad/informace-o-sfu http://www.financnisprava.cz/cs/financni-sprava/organy-financni-spravy/specializovany-financni-urad/informace-o-sfu http://adilet.zan.kz/rus/docs/k080000099_ http://www.oecd.org/ctp/administration/tax-administration-23077727.htm http://www.oecd.org/ctp/administration/tax-administration-23077727.htm https://vlada.gov.hr/userdocsimages//sjednice/arhiva//03851.%20-%202.pdf http://www.financnisprava.cz/en/financial-administration/financial-administration-bodies/specialized-tax-office/characteristic http://www.financnisprava.cz/en/financial-administration/financial-administration-bodies/specialized-tax-office/characteristic 26 jasna bogovac, natalia soloveva, michal radvan, jarosław marczak, natalia uvarova-patenko public governance, administration and finances law review • vol. 3. no. 2. 23 official site of the federal tax service of the russian federation. www.nalog.ru/rn77/about_fts/fts/ structure_fts/mri_fns/ (accessed 15 may 2016). 24 system obsługi i wsparcia podatnika. koncentracja wyspecjalizowanych urzędów skarbowych na kluczowych podatnikach, ministerstwo finansów [taxpayer handling and support system. the concentration of specialised tax offices on key taxpayers], 6, warsaw 2015, www.warszawa.apodatkowa. gov.pl/c/document_library/get_file?uuid=7fb5f9bd-280b-4d08-9781-53f748b35f27&groupid=764034 (accessed 15 february 2016). 25 taxpayers with revenues exceeding an equivalent of euro 3m will be handled by the other 19 stos. 26 order of the ministry of state revenues of the republic of kazakhstan dated april 22, 1999 № 269 on monitoring of large taxpayers. 27 order of the government of the republic of kazakhstan dated august 14, 2014 № 933 on the departments of the central executive bodies of the republic of kazakhstan, http://adilet.zan.kz/rus/docs/ p1400000933 (accessed 20 november 2014). 28 cta strateg y (2011:22). 29 cta (2016:1) strateg y of the tax administration for the period 2016–2020, zagreb, www.poreznauprava.hr/en/documents/strateg y%202016-2020%20final.pdf (accessed 15 february 2017). 30 regulation on approval and suspension of the special taxpayer status with the aim to advance voluntary tax compliance, official gazette, 67/2015. 31 general tax act, article 66 (official gazzete, 26/2015). 32 jaroslaw marczak, jasna bogovac, rational tax system in the light of the management’s perception  – a  theoretical review, in annales, vol. l, no. 1 (2016), http://cejsh.icm.edu.pl/cejsh/element/bwmeta1. element.ojs-doi-10_17951_h_2016_50_1_421/c/1754-1989.pdf (accessed 15 february 2016). 33 as well as to the other public administration bodies, since “(t)he public administration in croatia is more costly than that in many eu membr states, but does not perform well in terms of effectiveness”, european commission (2016: 24), country report croatia 2016, swd(2016) 80 final/2, brussels, ec.europa.eu/ europe2020/pdf/csr2016/cr2016_croatia_en.pdf (accessed 9 may 2017). 34 ibid. 35 www.financnisprava .cz/en/internation-tax-affairs/news/2015/the-specialized-tax-office-initiateda-n-5762 (accessed 9 may 2016). 36 www.financnisprava.cz/assets/en/attachments/fs-vysledky-cinnosti/vz_fs_2013.pdf (accessed 9 may 2016). 37 the order of the federal tax service of the russian federation № mm-3-09/553@ dated 27.09.2007 on approval of methodical instructions to tax authorities on registration of large taxpayers that are russian organizations, documents and commentaries, 2007, № 21. 38 croatia does not have a  long or successful history of the market economy or the substantial inward fdi. this can be supported by the results of international researches showing that “even with the improvement on the basis of the revised data, croatia’s rank in terms of ‘ease of doing business’ is still the second lowest in the eu-28 (after malta)”. (eu commission, swd(2015) 30 final, country report croatia 2015 (2015: 21, box 2.1.1). moreover, “croatia is the worst performing eu member state in the oecd product market regulation index”. ibid. 21. 39 system obsługi i wsparcia podatnika. koncentracja wyspecjalizowanych urzędów skarbowych na kluczowych podatnikach, ministerstwo finansów [taxpayer handling and support system. the concentration of specialised tax offices on key taxpayers], 5, warsaw 2015, www.warszawa.apodatkowa. gov.pl/c/document_library/get_file?uuid=7fb5f9bd-280b-4d08-9781-53f748b35f27&groupid=764034 (accessed 9 may 2016). 40 key points of the report of the accounts committee on the budget implementation in 2014, http://esep. kz/rus/showin/article/2121 (accessed 31 december 2014). 41 not exactly the real lto but the unit for the large taxpayers’ audit within the zagreb regional office. 42 oecd mentions 112 employees. see oecd (2015: 93), tax administration 2015: comparative information on oecd and other advanced and emerging economies, www.oecd.org/ctp/administration/ tax-administration-23077727.htm (accessed 15 february 2016). https://doi.org/10.17951/ h.2016.50.1.421 http://www.warszawa.apodatkowa.gov.pl/c/document_library/get_file?uuid=7fb5f9bd-280b-4d08-9781-53f748b35f27&groupid=764034 http://www.warszawa.apodatkowa.gov.pl/c/document_library/get_file?uuid=7fb5f9bd-280b-4d08-9781-53f748b35f27&groupid=764034 http://www.porezna-uprava.hr/en/documents/strategy%202016-2020%20final.pdf http://www.porezna-uprava.hr/en/documents/strategy%202016-2020%20final.pdf http://cejsh.icm.edu.pl/cejsh/element/bwmeta1.element.ojs-doi-10_17951_h_2016_50_1_421/c/1754-1989.pdf http://cejsh.icm.edu.pl/cejsh/element/bwmeta1.element.ojs-doi-10_17951_h_2016_50_1_421/c/1754-1989.pdf http://ec.europa.eu/europe2020/pdf/csr2016/cr2016_croatia_en.pdf http://ec.europa.eu/europe2020/pdf/csr2016/cr2016_croatia_en.pdf http://www.financnisprava.cz/en/internation-tax-affairs/news/2015/the-specialized-tax-office-initiated-a-n-5762 http://www.financnisprava.cz/en/internation-tax-affairs/news/2015/the-specialized-tax-office-initiated-a-n-5762 http://www.financnisprava.cz/assets/en/attachments/fs-vysledky-cinnosti/vz_fs_2013.pdf http://www.warszawa.apodatkowa.gov.pl/c/document_library/get_file?uuid=7fb5f9bd-280b-4d08-9781-53f748b35f27&groupid=764034 http://www.warszawa.apodatkowa.gov.pl/c/document_library/get_file?uuid=7fb5f9bd-280b-4d08-9781-53f748b35f27&groupid=764034 http://www.oecd.org/ctp/administration/tax-administration-23077727.htm http://www.oecd.org/ctp/administration/tax-administration-23077727.htm https://doi.org/10.17951/h.2016.50.1.421 27 public governance, administration and finances law review • 2. 2018 tax administration of large taxpayers in some cee and cis countries 43 the total number of the large taxpayers is approximately 97,000 of which approximately 53,000 are active taxpayers. 44 state taxes only. 45 until december 2016. starting from january 2017 contributions paid by the large taxpayers shall be under responsibility of the lto. 46 territorial division only. _goback _goback _goback _goback _goback articles tax administration of large taxpayers in some cee and cis countries jasna bogovac,* natalia soloveva,** michal radvan,*** jarosław marczak,**** natalia uvarova-patenko***** the participation of tax authorities in insolvency agreements piotr buława* the amendment of the religious registration law and its impact on freedom of religion in the slovak republic mária havelková* the scope of public services performed by municipal local governments in the republic of poland through budgetary establishments małgorzata ofiarska* designated income accounts in budgetary units of municipalities as a form of partially decentralised redistribution of public finance resources allocated to educational services in poland zbigniew ofiarski* the legal aspects of reducing the bureaucracy of the court administration wojciech piątek* the constitution and public administration aksana shupitskaya* case study tax inspection – unlawful interference damian czudek* european investigation order and the “brussels” bureaucracy marek kordík,* lucia kurilovská** complaint in tax administration as an instrument to ensure good administration zuzana marethová* © 2019 dialóg campus, budapest public governance, administration and finances law review vol. 4. no. 1. (2019) • 5–18 . articles measuring success of the czech financial administration before the supreme administrative court: partial results of a quantitative research of court proceedings marie karfíková,* jakub vojtěch** * prof . judr . marie karfíková, csc ., head of the department of financial law and financial science at the faculty of law, charles university, the czech republic, attorney-at-law, president of the arbitration court attached to the czech chamber of commerce and the agricultural chamber of the czech republic and a  member of the centre of information and organization of public finances and tax law research in central and eastern europe . this paper has been elaborated within the programme “progres q02 – publicization of law in the european and international context” which is realized in 2019 at the faculty of law of the charles university . orcid: 0000-0002-5655-7858 . (e-mail: karfikov@prf .cuni .cz) ** judr . jakub vojtěch, a  phd candidate at the faculty of law, charles university, czech republic . this text has been elaborated within the project of the student scientific research “finance and information technolog y as drivers of legal regulation in the european union countries and their criminal law aspects” which is realized in the years 2017–2019 at the faculty of law of the charles university, svv 260 360/2017 . orcid: 0000-0003-0636-8079 . (e-mail: vojtechj@prf .cuni .cz) abstract: the paper discusses the issues of the actions and measures of tax authorities challenged by taxpayers before the administrative justice and thus serves as a  contribution to the discussion on efficiency of tax authorities and public administration in general . the authors first address the currently discussed problems of the czech tax law and tax administration . this is followed by describing their quantitative research focused on answering the question of what is actually the success rate of the czech financial administration before the supreme administrative court in the proceedings on cassation complaints . the ratio of cassation complaints for or against the financial administration can be an interesting indicator showing the performance of public administration . afterwards, it follows an explanation of methodolog y and presentation of results of the first part of the quantitative research that is focused on analysing the supreme administrative court’s rulings on cassation complaints brought (both by taxpayers or the financial administration) against the regional courts’ rulings on legal actions against unlawful interference by the financial administration with the taxpayers’ rights that cover the period 2013–2017 . keywords: the czech republic; financial administration; court proceedings; analysis 10.53116/pgaflr.2019.1.1 mailto:karfikov%40prf.cuni.cz?subject= mailto:vojtechj%40prf.cuni.cz?subject= https://doi.org/10.53116/pgaflr.2019.1.1 6 marie karfíková, jakub vojtěch public governance, administration and finances law review • vol. 4. no. 1. 1. introduction in the czech republic, in principle any administrative decision, interference or failure to act of an administrative authority can be challenged before the administrative justice by way of a legal action brought by a natural or legal person . the actions and measures of tax authorities (in czech: spravce dane) are no exception as tax authorities are only considered specialised administrative authorities . while only a  taxpayer can sue the tax authority before an administrative court (in the czech republic before a regional court, in czech: krajsky soud), extraordinary remedy in the form of a  cassation complaint (appeal in cassation, in czech: kasacni stiznost) against a  regional court’s ruling can be brought before the supreme administrative court (hereinafter: “sac”, in czech: nejvyssi spravni soud) by both of them . based on the currently discussed problems of czech tax law and tax administration, the authors have decided to conduct a  quantitative research with the main purpose to determine the ratio of cassation complaints for or against the tax authorities in the past five years (from january 1, 2013 to december 31, 2017), i .e . since the establishment of the new structure of the financial administration of the czech republic as of january 1, 2013 . the main part of the quantitative research is yet to be realised, results of the first part are already finished . the primary focus of the paper thus consists in the presentation of the results of the first part that includes examination of rulings on cassation complaints brought either by the taxpayer or the tax authority against the regional courts’ rulings in cases of unlawful interference with the taxpayers’ rights in the period 2013–2017 . 2. economic prosperity of the czech republic and problems related to tax law and tax administration the czech republic is experiencing an economic upswing : dynamic economic growth makes the country one of the fastest growing countries in the whole european union,1 european record low unemployment rate,2 rising wages,3 strong exports,4 manageable inflation5 and strong financial sector .6 this is the big economic picture of the czech republic in 2018 and in the years before . according to private sector economic analysts,7 international consulting firms8 and public sector institutions (e .g . the european commission,9 oecd,10 the czech ministry of finance11 and the czech national bank12), the economic performance of the czech republic should also be above average in the upcoming months and years . even the entrepreneurs themselves are optimistic .13 yet, in the long term, less optimistic data and information not influenced by the current conjunction can be found . they are more of a  structural nature combined with certain economic and legal deficiencies which can be observed over a longer period of time . the area of taxation and tax law can serve as a good example . lack of stability and predictability of future tax law developments and never-ending partial amendments of (not only) tax laws are broadly considered (according to the private sector14 and even public officials15) one of the biggest problems of the czech legislation .16 another problem consists in introducing completely new tax obligations, very slow pace of 7 public governance, administration and finances law review • 1. 2019 measuring success of the czech financial administration… bureaucracy reduction and relatively slow implementation of electronic contact with the tax authorities (the financial administration of the czech republic) . last but not least, a  strong criticism has been recently directed against the approach of the tax authorities when enforcing obligations from taxpayers, especially in the field of the value added tax (hereinafter: “vat”) . for instance tax controls are becoming more detailed and with increasing demands .17 in general, the tax authorities have recently adopted increasingly restrictive measures to collect as much tax as possible . one of the new measures in the field of tax collection is the extended application of “securing orders” (in czech: zajistovaci prikazy) and their subsequent enforcement within a very short time especially in vat-related matters .18 they may be used before the actual tax liability is determined or before a  tax control is completed, largely depending on the tax authority’s discretion . securing orders increasingly often serve to collect funds on the tax authority’s account where the future collection of the estimated tax liability appears to be endangered while the deadline for depositing the funds does not exceed three workdays . tax authorities may also freeze bank accounts and attach other assets . these actions, usually undertaken very quickly, may have the effect of paralysing, or even terminating a  corporation’s business activities . it is to be pointed out that the number of cases in which the tax authorities decided to enforce taxpayers’ assets based on securing orders has increased dramatically over the last years .19 this issue was even the subject of debates in the chamber of deputies .20 in recent years, there can also be noticed a  growing number of court rulings stating that securing orders and other instruments performed by the tax authorities were issued or enforced unlawfully . especially the decision-making practice of the sac is correcting to some degree the approach of the tax authorities .21 the czech media have reported a number of cases in which the tax authorities intervened against taxpayers who later found support from the administrative courts .22 in addition, the tax authorities do not always take these court rulings into account,23 albeit officially declaring that they proceed with prudence and that their enforcement is professionally supervised .24 the financial administration of the czech republic is also often trying to point to the cases, in which it was successful25 or state that it actually respects the case law of administrative courts .26 the issue of court cases for or against the tax authorities is what our quantitative analysis is dealing with . to be more precise, it consists in answering the question of what is actually the success rate of the financial administration of the czech republic before the sac . the main focus thus lies in determining its success if its actions and measures are questioned by taxpayers before the administrative justice . 3. financial administration and administrative justice in the czech republic as of january 1, 2013, the structure of tax authorities considerably changed27 with the establishment of the financial administration of the czech republic (in czech: financi sprava ceske republiky, hereinafter: “financial administration”) as the main tax authority and the general financial directorate (in czech: generalni financni reditelstvi) as its 8 marie karfíková, jakub vojtěch public governance, administration and finances law review • vol. 4. no. 1. central body . the head of the general financial directorate is the director general, who is appointed and removed by the government of the czech republic based on proposal by the minister of finance . its subordinate body is the appellate financial directorate (in the position of the appellate body) to which sixteen financial offices are further subordinated (the responsibility of which is territorially limited to one of the sixteen regions of the czech republic) and the specialized financial office (administrating certain taxes of special taxpayers like banks and insurance companies) .28 the czech system of administrative justice consists of two components: regional courts, seated in each of the czech sixteen regions, and the sac with its seat in brno . the sac being the supreme judicial body specialised exclusively in the field of administrative justice has a  special additional task in ensuring the unity and legality of the case law of regional courts and administrative authorities . the principal instrument for achieving this objective is the cassation complaint . the sac is entitled to hear cassation complaints challenging final rulings of regional courts in matters of administrative justice, in which complainants seek the 1 . annulment of an administrative decision by way of legal action against a  decision of an administrative authority; 2 .  protection against a  failure to act (inaction by an administrative authority); 3 . protection against an unlawful interference by an administrative authority with individuals’ public right and 4 . protection in  other matters (like electoral matters and local and regional referendum, matters concerning political parties or political movements, judicial review of measures of a  general nature, competence complaints) .29 the czech system of administrative justice can be marked as a one-instance-system of judicial review, i .e . regional courts acting as courts of first and last instance with no appeal or other ordinary judicial remedy being permissible . there is, however, the possibility of filing and extraordinary remedy – the cassation complaint – before the sac . it should be noted that, albeit designed as an extraordinary remedy, i .e . a remedy against the final ruling of regional courts, the admissibility criteria for a cassation complaint before the sac are defined quite broadly . a  cassation complaint has to be filed within two weeks of the regional court’s decision becoming final and lie against any final decision of a  regional court in administrative matters, provided it is not expressly precluded by law . both errors in the assessment of substantive legal provisions, as well as errors in the procedure before the regional court might be challenged . a  complainant before the sac must be represented by an attorney . as a rule, the sac decides on a cassation complaint without an oral hearing, albeit a hearing might be ordered if further evidence is deemed necessary .30 while only a  taxpayer can sue the financial administration before the regional court, a  cassation complaint against a  regional court’s ruling can be brought by both of them . by the nature of the administrative court proceedings, the financial administration can be sued only within three cases, namely: 1 . decision of the tax authority (the financial administration, i .e . one of its bodies – financial offices); 2 . failure of the tax authority to act and 3 . unlawful interference by the tax authority with the taxpayers’ rights . 9 public governance, administration and finances law review • 1. 2019 measuring success of the czech financial administration… 4. the aim of the quantitative research of court proceedings based on the new structure of the financial administration, we have decided to pay attention to the past five years (i .e . the period from january 1, 2013 to december 31, 2017) and to examine what is the success rate of the financial administration before the administrative justice, or more precisely its success rate in the proceedings on cassation complaints before the sac . it is clear, that despite the fact that the sac has the competence to decide on cassation complaints against the rulings of regional courts in all of the three matters 1–3, in reality, not every decision of the regional court has to be (or can be) challenged by a  cassation complaint . despite that we believe that in view of the broad admissibility criteria for a cassation complaint, the results of a quantitative research will reflect most of the relevant cases . the data obtained from the quantitative research might be an interesting indicator showing the performance of the financial administration in cases heard by the administrative justice . after a  deeper analysis, the data might reflect annual developments in the success rate since the establishment of the financial administration in 2013, while possible developments could be linked to the number of employees of the financial administration (according to the numbers announced in its annual reports) or other factors . most importantly, the data could serve for a  better understanding of public administration and its development and might be an inspiration for legal scholars and practitioners in other jurisdictions considering to undertake a  similar approach towards a  better understanding of public administration . however, it is obvious that a  complete comparability of the results achieved cannot be possible, in particular due to the different judicial systems and models of public administration . it is also clear that that the data will not capture the individual nature of any case . nevertheless, we are convinced that the ratio of cassation complaints for and against the financial administration can be an interesting indicator showing the court performance of one part of the czech public administration . measuring the success rate of the financial administration in proceedings on cassation complaints before the sac in the past five years (i .e . in the period 2013–2017) consists, according to our calculations, in an analysis of several thousand rulings covering the three fields, i .e . the cases in which regional courts decided on 1 . a legal action against a  decision of the financial administration (financial office); 2 . a  legal action for the failure of the financial office to act and 3 . a  legal action against unlawful interference by the financial office with the taxpayers’ rights . given this amount of rulings, we have decided to proceed step by step and have first analysed the sac’s rulings concerning the third area, i .e . the sac’s rulings on cassation complaints brought either by the taxpayer or financial office against a  regional court’s decision in the cases of unlawful interference by the financial office issued in the period 2013–2017 . in the following chapter we first explain the methodolog y of the first part of the research which is subsequently followed by the description and explanation of the results achieved . 10 marie karfíková, jakub vojtěch public governance, administration and finances law review • vol. 4. no. 1. 5. the methodology and scope of the first part of the research as the first part of the quantitative research, we have decided to proceed with the sac’s rulings on cassation complaints brought both by the taxpayer and the financial administration (financial office) in matters of unlawful interference in the period 2013– 2017, namely those in which regional courts decided on a  legal action brought by taxpayers against unlawful interference by the financial office . as mentioned earlier, this limited number of rulings is part of a  much broader quantitative research since it is also intended to analyse the sac’s rulings in two other main fields, namely rulings on cassation complaints against decisions of regional courts on 1 . legal actions against a  decision of the financial office and 2 . legal actions for the failure of the financial office to act . as for legal actions against unlawful interference, the concept of interference with individual rights refers to a  broad scale of activities of administrative authorities, e .g . an unlawful tax control conducted by the financial office etc . protection against unlawful interference is a  complementary form of legal protection, it can only be invoked against some type of activity of an administrative authority which does not result in the issuance of a  formal decision that could be challenged (by way of legal action against a  decision of an administrative authority) . logically speaking, an unlawful interference is also distinct from the failure to act . in a certain sense then, the protection against unlawful interference creates a “left-over” category, in which a person can challenge the activities of an administrative authority which encroaches upon individual public rights, but which does not constitute a decision or failure to act .31 there is a strict time limit for filing such an action, namely within two months of the day the legal or natural person became aware of the interference (the “subjective” time limit) or, at the latest, within two years of the day the interference took place (the “objective” time limit) . should the action be successful, the court will order the administrative authority to discontinue violating the legal or natural person’s rights or will confirm the unlawfulness of the interference . it will further order the restoration of the status quo which prevailed prior to the interference .32 we have used the following methodolog y to perform the first part of the quantitative research on the sac’s rulings related to the financial administration’s unlawful interference: a) all the rulings of the sac have been taken from the website database of the sac;33 b) in the website database, only rulings concerning the matter of “taxes” (in czech: dane) have been selected; c) only rulings on cassation complaints issued between january 1, 2013 to december 31, 2017 have been taken into account; d) cassation complaints brought both by the taxpayer (natural or legal person) and the financial office against decisions of regional courts on legal actions against unlawful interference by the financial office with the taxpayers’ rights have been considered; e) only rulings containing the words “financial office” (in czech: danovy urad) have been selected in the website database of the sac, i .e . rulings in which the financial office was the party complained in the proceedings before the regional court; 11 public governance, administration and finances law review • 1. 2019 measuring success of the czech financial administration… f ) for the purpose of avoiding rulings of procedural character (i .e . not on the merits of the case), only rulings in the form of a  judgment (in czech: rozsudek) have been taken into account; g ) any subsequent intervention by the constitutional court and possible annulment of the sac’s judgment have not been considered; h) partly justified (successful) cassation complaints have been considered as overall successful unless the applicant had success only as to costs; i) in the event that a cassation complaint was brought both by the defendant (financial office) and the plaintiff (taxpayer), we consider which cassation complaint was successful according to the judgement . 6. results of the first part of the quantitative research: cassation complaints on unlawful interference in tax matters based on the above criteria, we are able to present the results of the first part of the research concerning the rate of success of the financial administration before the sac . the results concern only the cassation complaints (filed both by the taxpayer and the financial office) seeking to set aside a regional court’s ruling on protection against an unlawful interference by a  financial office with the taxpayers’ rights . as for a  more detailed analysis of the judgments on cassation complaints related to unlawful interference in tax matters in the period 2013–2017, please see below tables 1–5 which summarise the results of our research . the total number of judgments in the past five years (from january 1, 2013 to december 31, 2017) on cassation complaints filed in cases of unlawful interference in tax matters is reflected in table 1 . they result in some 109 sac judgements based on the criteria set in the previous chapter . table 1 . the total number of “unlawful interference” tax cases before the sac in 2013–2017 year 2013 2014 2015 2016 2017 2013–2017 in total total no . of cases 7 23 22 26 31 109 source: compiled by the authors . table 2 divides the total number of judgments in the past five years (from january 1, 2013 to december 31, 2017) on cassation complaints filed in cases of unlawful interference in tax matters based on the criteria of the applicant, i .e . whether filed by 1 .  the financial administration (its financial offices) or 2 . the taxpayer that himself also challenged the unlawful interference by the financial office before the regional court . based on the criteria set in the previous chapter, out of the 109 sac judgements, only 6 were issued following the cassation complaints filed by the financial offices, meanwhile 103 judgments were issued following the cassation complaints filed by the taxpayer . 12 marie karfíková, jakub vojtěch public governance, administration and finances law review • vol. 4. no. 1. table 2 . appellants in 2013–2017 year 2013 2014 2015 2016 2017 2013–2017 in total financial office 0 2 2 0 2 6 taxpayers 7 21 20 26 29 103 both 7 23 22 26 31 109 source: compiled by the authors . table 3 summarises the cases of failure and success of both 1 . the financial administration (its financial offices) and 2 . taxpayers in the period ranging from january 1, 2013 to december 31, 2017 . successful cases means that the sac decided in accordance with provisions of the act on the code of administrative justice34 to set aside a  regional court’s decision and eventually returned the case to that court on the basis of a cassation complaint filed either by the 1 . financial office or 2 . the taxpayer . on the other hand, failed cases i shall have the meaning of a  regional court’s ruling confirmed by the sac and a  rejection of the cassation complaint filed either by 1 . the financial office or 2 . the taxpayer . failed cases ii means that in accordance with provisions of the act on the code of administrative justice, the sac decided to set aside a  regional court’s ruling and to reject the taxpayer’s legal action when ruling on the basis of a cassation complaint filed by the taxpayer . the financial administration filed only 6 cassation complaints in total, 3 of them were successful (i .e . the  sac annulled a  regional court’s ruling and returned the case to it) and 3 of them were unsuccessful (i .e . the sac confirmed a  regional court’s ruling ) . on the other hand, taxpayers filed 103 cassation complaints in total, whereby 30 were successful (i .e . the sac annulled a regional court’s ruling and returned the case to it) and 73 unsuccessful (i .e . the sac confirmed a  regional court’s ruling or annulled it and rejected the legal action as inadmissible) . table 3 . success and failure of appellants in 2013–2017 year 2013 2014 2015 2016 2017 2013–2017 total success/failure financial office submitted a cassation complaint successful cases 0 1 1 0 1 3 failed cases i 0 1 1 0 1 3 taxpayer submitted a cassation complaint successful cases 3 4 8 3 12 30 failed cases i 3 17 11 20 17 68 failed cases ii 1 0 1 3 0 5 source: compiled by the authors . 13 public governance, administration and finances law review • 1. 2019 measuring success of the czech financial administration… table 4 shows the total number of successful and unsuccessful cases of both 1 . the financial administration (its financial offices) and 2 . taxpayers in the period ranging from january 1, 2013 to december 31, 2017 . the financial administration’s successful cassation complaints (successful cases) are aggregated with the failed cassation complaints brought by taxpayers (failed cases i and ii). it results the total number of 76 successful cases of the financial administration . on the other hand, if the same calculation is applied to taxpayers, all of the financial administration’s failed cassation complaints (failed cases i) have to be aggregated with the taxpayers’ successful cassation complaints (successful cases). here, some 33 taxpayers’ and 76 financial administration’s total successful cases result . table 4 . total successful cases in 2013–2017 year 2013 2014 2015 2016 2017 2013–2017 in total financial office’s successful cases 0 1 1 0 1 3 taxpayers’ failed cases i and ii 3 + 1 17 + 0 11 + 1 20 + 3 17 + 0 73 financial office’s total successful cases 4 18 13 23 18 76 year 2013 2014 2015 2016 2017 2013–2017 in total financial office’s failed cases i 0 1 1 0 1 3 taxpayer’s successful cases 3 4 8 3 12 30 taxpayer’s total successful cases 3 5 9 3 13 33 source: compiled by the authors . table 5 depicts the average success rates of the financial administration before the sac in the period 2013–2017 . the figures for the financial offices’ total successful cases are taken from table 4 and further divided by the figures of the total no. of cases extracted from table 1, which is afterwards multiplied by one hundred (converted to percentage ratio) and rounded down to the nearest unit . from this calculation result the percentage ratios (rounded average success rate) for each year and the total percentage ratio (rounded total average success rate) in the right bottom field for the whole five-year period . 14 marie karfíková, jakub vojtěch public governance, administration and finances law review • vol. 4. no. 1. table 5 . average success rates of the financial administration in 2013–2017 year 2013 2014 2015 2016 2017 2013–2017 in total total cases 7 23 22 26 31 109 total successful cases 4 18 13 23 18 76 average success rate (rounded) 57% 78% 59% 88% 58% 68% source: compiled by the authors . finally, on the basis of the above calculations, it can be concluded that in the period 2013– 2017, the financial administration had an average success rate of 68% in the sac’s rulings on cassation complaints challenging the decisions of regional courts on legal actions of taxpayers against unlawful interference by the financial offices . from this, it can be further concluded, that if 1 . decided on the merits of the case by the regional court and 2 . later subject to a cassation complaint (filed either by a financial office or taxpayer), there were on average some 32% successful legal actions of taxpayers against unlawful interference by a financial office with the taxpayers’ rights . in our view, on the basis of these data it is not yet possible to recognise a clear curve of increase or decrease in cases related to unlawful interference in tax matters decided by the sac, neither a  clear curve of success or failure of the financial administration since the figures vary significantly year by year in the five-year period: 57% (2013), 78% (2014), 59% (2015), 88% (2016) and 58% (2017) . a  further research reflecting other types of legal actions has to be conducted in order to obtain more data and draw general conclusions . 7. conclusion in the czech republic, in principle any administrative decision, interference or failure to act of an administrative authority can be challenged before the administrative justice by way of a legal action brought by natural and legal persons . the actions and measures of tax authorities are no exception as the tax authorities are only considered specialised administrative authorities . one of the currently discussed problems of czech tax law and tax administration is the recently adopted restrictive approach of the tax authorities towards taxpayers . the media have reported an increasing number of cases in which actions and measures of the tax authorities have been found unlawful by the administrative courts . while only a taxpayer can sue the tax authority before the regional court by bringing one of the three legal actions coming into consideration, i .e . 1 . a legal action against a decision of a tax authority; 2 . a legal action for the failure of a tax authority to act and 3 . a legal action against unlawful interference by a  tax authority; extraordinary remedy against a  regional court’s ruling in the form of a  cassation complaint can be brought before the sac both by the tax authority and the taxpayer . 15 public governance, administration and finances law review • 1. 2019 measuring success of the czech financial administration… the quantitative research conducted by the authors aims to analyse cassation complaints in all of the three fields, i .e . cassation complaints seeking to set aside rulings of the regional courts that decided on 1 . legal actions against a  decision of a  financial office; 2 . legal actions for the failure of a financial office to act; and 3 . legal actions against unlawful interference by a  financial office with the taxpayers’ rights . it is thus based on determining the success rate of the financial administration in the proceedings on cassation complaints before the sac . according to our calculations the quantitative research consists in an analysis of several thousand rulings of the sac . we have thus resulted to proceed step by step and first analysed the sac’s rulings on cassation complaints against the regional courts’ decisions on legal actions against unlawful interference by a  financial office as the tax authority . in the paper there have been presented results of the first part of the quantitative research . in view of the new structure of the financial administration of the czech republic as of january 1, 2013, we have decided to cover the period of the last five years (from january 1, 2013 to december 31, 2017) . it can be concluded that in the period 2013–2017, the financial administration had a  total average success rate of 68% in the sac’s rulings on cassation complaints challenging the rulings of regional courts on legal actions of taxpayers against unlawful interference by the financial administration . the  figures of average success rates differ significantly year by year: 57% (2013), 78% (2014), 59% (2015), 88% (2016) and 58% (2017) . the obtained data are part of a  much broader quantitative research to be realised in the near future . the follow-up research will include an analysis of several thousand rulings . we hope the chosen methodolog y and approach might serve as an inspiration for other legal scholars and practitioners in other jurisdictions considering to undertake a  similar approach towards a better understanding of public administration and especially administration of taxes by tax authorities . 16 marie karfíková, jakub vojtěch public governance, administration and finances law review • vol. 4. no. 1. references 1 eurostat, flash estimate for the first quarter of 2018, may 15, 2018, http://ec .europa .eu/eurostat/documents /2995521/8897618/2-15052018-bp-en .pdf/defecccc-f9d9-4636-b7f8-d401357aca46 (accessed 21 june 2018) . 2 eurostat, unemployment statistics, april 2018, http://ec .europa 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http://www.pravniprostor.cz/aktuality/aktuality/soud-se-v-danovem-sporu-zastal-firmy-v-udajnem-podvodnem-retezci http://www.pravniprostor.cz/aktuality/aktuality/fau-vyhrala-spor-s-financni-spravou-rozsudek-potvrdil-nss http://www.pravniprostor.cz/aktuality/aktuality/fau-vyhrala-spor-s-financni-spravou-rozsudek-potvrdil-nss https://echo24.cz/a/s9bxr/soudci-zastavuji-nezakonne-radeni-babisovy-ministryne?utm_source=www.seznam.cz&utm_medium=sekce-z-internetu https://echo24.cz/a/s9bxr/soudci-zastavuji-nezakonne-radeni-babisovy-ministryne?utm_source=www.seznam.cz&utm_medium=sekce-z-internetu https://echo24.cz/a/s9bxr/soudci-zastavuji-nezakonne-radeni-babisovy-ministryne?utm_source=www.seznam.cz&utm_medium=sekce-z-internetu http://www.podnikatel.cz/clanky/mely-by-financni-urady-respektovat-rozhodnuti-spravnich-soudu/ 18 marie karfíková, jakub vojtěch public governance, administration and finances law review • vol. 4. no. 1. 24 financial administration of the czech republic, martin janeček, finanční správa nikoho nelikviduje, žádné zadávání úkolů nefunguje [the financial administration eliminates no one, no task assignment is in place] september 13, 2017, www .financnisprava .cz/cs/financni-sprava/pro-media/fs-v-mediich/2017/martinjanecek-financni-sprava-nikoho-ne-8749 (accessed 21 june 2018); ministry of finance of the czech republic, zástupci ministerstva financí se zúčastnili odborného semináře k zajišťovacím příkazům [representatives of the ministry of finance participated in a seminar on securing orders] october 30, 2017, www .mfcr .cz/cs/ aktualne/tiskove-zpravy/2017/zastupci-ministerstva-financi-se-zucastn-29999 (accessed 21 june 2018) . 25 financial administration of the czech republic, nejvyšší správní soud zamítl kasační stížnost firmy km plus ve sporu o zajišťovací příkazy proti finanční správě [the supreme administrative court rejected km plus’s cassation complaint in a dispute over securing orders with the financial administration] december 18, 2017, www .financnisprava .cz/cs/financni-sprava/pro-media/tiskove-zpravy/2017/nejvyssi-spravni-soud-zamitlkasacni-sti-8934 (accessed 21 june 2018) . 26 financial administration of the czech republic, rozsudek nss nic převratného nepřinesl [the sac’s judgment has not brought anything new] february 15, 2018, www .financnisprava .cz/cs/financni-sprava/pro-media/ nepresnosti-v-mediich/2018/rozsudek-k-nss-nic-prevratneho-neprinesl-9071 (accessed 21 june 2018) . 27 based on the act no . 456/2011 coll ., on the financial administration of the czech republic, as amended . 28 financial administration of the czech republic, general financial directorate, www .financnisprava .cz/en/ financial-administration/general-financial-directorate (accessed 21 june 2018) . 29 article 4 of act no . 150/2002 coll ., the code of administrative justice, as amended . 30 supreme administrative court, remedies against decisions of administrative courts, january 6, 2014, www . nssoud .cz/remedies-against-decisions-of-administrative-courts/art/496?menu=316 (accessed 21 june 2018) . 31 supreme administrative court, protection against unlawful interference, december 18, 2014, www .nssoud . cz/-p-protection-against-unlawful-interference-p-/art/491?menu=311 (accessed 21 june 2018) . 32 supreme administrative court, protection against unlawful interference, december 18, 2014, www .nssoud . cz/-p-protection-against-unlawful-interference-p-/art/491?menu=311 (accessed 21 june 2018) . 33 supreme administrative court, rozhodovací činnost. rozhodnutí správních soudů. plný formulář [decisionmaking . decisions of administrative courts . full form .] www .nssoud .cz/main0col .aspx?cls=judikaturaextended search&pagesource=0 (accessed 21 june 2018) . 34 article 4 of act no . 150/2002 coll ., the code of administrative justice, as amended . http://www.financnisprava.cz/cs/financni-sprava/pro-media/fs-v-mediich/2017/martin-janecek-financni-spravahttp://www.financnisprava.cz/cs/financni-sprava/pro-media/fs-v-mediich/2017/martin-janecek-financni-spravahttp://www.mfcr.cz/cs/aktualne/tiskove-zpravy/2017/zastupci-ministerstva-financi-se-zucastn-29999 http://www.mfcr.cz/cs/aktualne/tiskove-zpravy/2017/zastupci-ministerstva-financi-se-zucastn-29999 http://www.financnisprava.cz/cs/financni-sprava/pro-media/tiskove-zpravy/2017/nejvyssi-spravni-soud-zamitlhttp://www.financnisprava.cz/cs/financni-sprava/pro-media/tiskove-zpravy/2017/nejvyssi-spravni-soud-zamitlhttp://www.financnisprava.cz/cs/financni-sprava/pro-media/nepresnosti-v-mediich/2018/rozsudek-k-nss-nic-pre http://www.financnisprava.cz/cs/financni-sprava/pro-media/nepresnosti-v-mediich/2018/rozsudek-k-nss-nic-pre http://www.financnisprava.cz/en/financial-administration/general-financial-directorate http://www.financnisprava.cz/en/financial-administration/general-financial-directorate http://www.nssoud.cz/remedies-against-decisions-of-administrative-courts/art/496?menu=316 http://www.nssoud.cz/remedies-against-decisions-of-administrative-courts/art/496?menu=316 http://www.nssoud.cz/-p-protection-against-unlawful-interference-p-/art/491?menu=311 http://www.nssoud.cz/-p-protection-against-unlawful-interference-p-/art/491?menu=311 http://www.nssoud.cz/-p-protection-against-unlawful-interference-p-/art/491?menu=311 http://www.nssoud.cz/-p-protection-against-unlawful-interference-p-/art/491?menu=311 http://www.nssoud.cz/main0col.aspx?cls=judikaturaextended search&pagesource=0 http://www.nssoud.cz/main0col.aspx?cls=judikaturaextended search&pagesource=0 © 2017 dialóg campus, budapest public governance, administration and finances law review vol. 2. no. 2. (2017) • 5, 67–70 book reviews challenges of good governance in the european union magdalena michalak* * judr. magdalena michalak, phd, assistant professor at the department of administrative law and procedure, faculty of law and administration, university of szczecin. (e-mail: m.michalak. amb@gmail.com) the reviewed book, challenges of good governance in the european union, was issued under the scientific edition of robert grzeszczak, professor at the university of warsaw, faculty of law and administration. it constitutes an outcome of cooperation of many authors who have prepared respective chapters of the book. it deals with a  particularly important subject which is good governance and its today’s challenges. currently, the issue of good governance at the european union level is especially worth analysing, taking into account that the eu finds itself in a period of difficult reforms which shall allow to answer questions on its future shape and a chosen level of integration of the eu member states. these reforms are also supposed to address the current economic and political crises which the eu is facing due to the lack of vision of integration and incapability to reconcile the interests of the member states, which seem diverse and heterogeneous as never before. it is worth noticing that the eu’s capacity to fulfil the needs of its citizens decreases and, at the same time, the democratic deficit within the european union seems to increase. the eu system at the time of the crisis also faces the problem of lack of stable longterm governance policy and emerging ad hoc decisions, which results inter alia from the already mentioned insufficiencies in the integration scheme. such situation requires not only defining or redefining the goals of the european union, but also a deep and balanced reflection, including the academic one, on the values the system should be based on and on a possible path of the eu development. the research on potential directions of the political and legal system’s reforms led to the development of a concept of good governance, which, according to some scholars, including the authors of the reviewed book, may contribute to healing the eu order and therefore the principles of good governance should be introduced therein. according to the european commission, good governance in the european union shall be based on 5 principles: openness and transparency of the european institutions; participation of citizens in drafting and implementation of policies; accountability of each party involved in the decision-making process; effectiveness of the eu policies and coherence between them. it must be noted that good governance may be seen as a  value itself, but its full meaning and possible implications may become more clearly visible when we examine it in a  particular context, from a  perspective of other values and interests. such operation may 10.53116/pgaflr.2017.2.5 https://doi.org/10.53116/pgaflr.2017.2.5 68 magdalena michalak public governance, administration and finances law review • vol. 2. no. 2. be done inter alia through its thorough analysis carried out in juxtaposition with democratic principles and the rule of law, human and civil rights, in particular the right to good administration, effectiveness of public administration or of judicial protection of individuals. the reviewed book is devoted to the above-mentioned concept of good governance and related challenges emerging at the european union level. good governance is analysed therein from different points of view using diverse approaches. the authors examine good governance as such and juxtapose it with other concepts and elements of the system of public administration. the book was issued in 2016 by the publishing house nomos, baden–baden. it consists of 3 parts, each of them divided into chapters (from 5 to 7). the book starts with a  scientific editor’s introduction to the subject tackled. the author presents and explains therein the origin of the concept of good governance, points out and elaborates on its persistence, but also on the ambiguities related to this notion and the development of the concept of good governance itself. the introductory part defines the objectives of the book which are to verify the hypothesis that the 21st century is a  time of transition from government to governance; to analyse issues which constitute the concept of good governance in the eu; to evaluate a hypothesis that an element of good governance is the ability to fulfil social needs of eu citizens; to determine optimal measures for wielding power and to formulate a  coherent concept of good governance and methods of its realisation in practice. in the first part of the book the authors analyse the problematics of a  change of the paradigms that is said to be taking place in the european union system, which is defined as a  transformation from government to good governance. reflections presented therein discuss issues regarding inter alia different approaches to good governance in the european union or links and relations between good governance and public administration as well as between good governance and human rights, with a special emphasis on the right to good administration. the second part is devoted to different questions concerning public participation and government effectiveness and relations between them. it includes chapters referring to the issues such as the concept of eu citizenship, rights and interests of eu citizens, their security level assured by the eu legal system, as well as access to e-justice. the third part of the book deals with problematics of the practice of good governance and it includes diverse case studies of such practice at both – eu and national level. the subject addressed and reflections presented in the reviewed book are interesting from both  –  theoretical and practical point of view. taking into account the first aspect, the book develops a survey of past debates concerning the concept of good governance and adds new thoughtfully developed insights therein. secondly, it answers to practical needs associated with two phenomena i.e. the emergence of new legal regulations on the one hand and new needs of modern society on the other, which together leads to the appearance of new challenges for administration  –  after the formulation of a  concept of good governance and methods of its realisation in practice the authors propose to introduce an approach based on a  principle of good governance into the eu system. it shall be clearly underlined, as it is explained by the book’s scientific editor himself in the introductory part, that the book focuses not on a  question as to who governs, but rather how the 69 public governance, administration and finances law review • 2. 2017 challenges of good governance in the european union governing is done. such a  view is undoubtedly valuable and deserves to be familiarised with. some of the issues undertaken in the study are of a general nature and may constitute the basis for more advanced research, while others are characterised by a  fairly profound level of detail. most considerations, though not all, are devoted to the concept of good governance in the eu context. however, many of them, even if they do not directly discuss national systems, are also depicted through examples of the impact the eu norms and practice have on them. another advantage of the book are numerous references to literature and normative acts, which allows the reader to deepen the knowledge about such a complicated issue as good governance and problems related thereto. the book challenges of good governance in the european union will be valuable and enriching to all readers interested in issues related to the functioning of the administrative apparatus, but also to the state and its structures as well as to the european union in general. given the issues raised by the authors, the book can be recommended to theoreticians and practitioners dealing with the problems of all legal and political systems  –  from national, through european to international level. it offers insights for researchers, academic teachers, practitioners, as well as opens a  path to generate new discussions. 70 magdalena michalak public governance, administration and finances law review • vol. 2. no. 2. references 1. robert grzeszczak (ed.), challenges of good governance in the european union, 369 pages. (baden–baden, nomos, 2016). https://doi.org/10.5771/9783845275451 https://doi.org/10.5771/9783845275451 public governance, administration and finances law review vol. 5. no. 1. (2020) • 62–72 . * magdalena knapp, phd, candidate at the department of public economic law, faculty of law, university of białystok, poland, e-mail: knapp .magdalena@gmail .com, orcid: https://orcid . org/0000-0003-0147-3056 abstract: the article focuses on the scope of the directive (eu) 2019/633 o f the european parliament and of the council of 17 april 2019 on unfair trading practices in business-to-business relationships in the agricultural and food supply chain . it discusses recent developments in regulatory approach to unfair trading practices . it analyses steps taken towards uniformity in this area of law within the eu and contemplates whether there is a need for further harmonisation . the article attempts to evaluate the scope of the utp directive, focusing mainly on a  material scope inherently linked to the notion of “agricultural and food products” and characteristics of unfair trading practices . it also discusses whether member states should consider widening the national regulations beyond food supply chain so that their scope would cover vertical relationships in every sector of the economy . keywords: unfair trading practices, b2b, buyer power, bargaining power, agricultural producer, agri-food sector, buyer, supplier 1. introduction the directive on unfair trading practices in business-to-business relationships in the agricultural and food supply chain, which entered into force in may 2019 (hereinafter: the utp directive) is the final solution to the problem of unfairness and inequality of bargaining power in business-to-business relationships (hereinafter: b 2b) r eached b y e u authorities supported by member states and other stakeholders . it sums up more than ten years of discussion that began first with actions taken by the european commission aimed at overcoming challenges faced by the european food supply chain (among them: wijnands et al ., 2019; com/2008/0321 final, 2008; com/2009/0591 fi nal, 2009) . thr oughout the years the issue of unfair trading practices was not limited to the agri-food sector, it was also reviewed in a wider context of the whole supply chain . having said that, it is noteworthy to consider whether the scope of the regulation should be broadened beyond food supply chain . this issue will be given further consideration in the following sections of the paper . © 2021 the author doi: 10.53116/pgaflr.2020.1.4 protection of a weaker party in public interest – material scope of the directive on unfair trading practices in business-to-business relationships in the agricultural and food supply chain magdalena knapp* mailto:knapp.magdalena@gmail.com https://orcid.org/0000-0003-0147-3056 https://orcid.org/0000-0003-0147-3056 https://doi.org/10.53116/pgaflr.2020.1.4 63 public governance, administration and finances law review • 1. 2020 protection of a weaker party in public interest the paper gives an assessment of the scope of the utp directive with the main focus on material scope inherently linked to the notion of “agricultural and food products .” although the utp directive has many points in common with competition law, they generally do not overlap (on the subject of similarities and divergence between the two regulations see daskalova, 2019) . there are many convergences between both regulations, but their prevailing aim is different . due to the nature of such practices, competition law is not the best suited tool to eliminate them . in short, the aim and capabilities of competition law prevent it from being an effective tool of counteracting utp . the comparison of both regulations is particularly compelling given that in most member states the prohibition of utp is enforced by ncas . nevertheless, these issues go beyond the aim of this paper and its short form . the remainder of the paper is organised as follows . the next section presents a  brief background information on the key factors behind introducing prohibition of utp and refers to a current state of play in member states . section nature of the prohibited practices analyses the characteristics of utps in more detail, and section a glance at the scope of the utp directive discusses mainly the material scope of the regulation and the personal scope closely related to it . it also discusses whether member states should consider widening the national regulations to the whole supply chain . finally, section conclusion presents the conclusion and suggests some tips for future research on unfair business-to-business practices in the eu . 2. overview (regulatory background) at the outset it is important to highlight the marked trend towards providing greater legal protection to weaker party, e .g . to the employee or the consumer . within the eu legal framework, particular attention is paid to consumer protection . however, there is also an increasing number of instruments aimed at protection of the weaker party in b2b relations . one of such instruments is the utp directive focusing on protecting a  supplier in relation with a larger buyer in the food supply chain . until recently, the issue was given little consideration . the concern about significant differences in bargaining power expanded gradually in both economics and law . the main focus of the legislators was on total welfare  –  and in particular consumer welfare . they have been slow to react to problems that utps can present . to some extent utps can result in positive effects to consumers, such as reducing the cost of final products (clarke et al ., 2002, p . 187); this makes the harm caused to weaker parties in b2b relations less visible and causes legislators to ignore or overlook the problem . therefore the question is: what are the reasons for change in the approach and shift to public enforcement? most of the utps can be successfully tackled by measures of private law . the essence of private law, that is, granting initiative to the party to make use of its rights, turns out to be its weakness in relationships characterised by asymmetric bargaining 64 magdalena knapp public governance, administration and finances law review • vol. 5. no. 1.  power . private enforcement was deemed insufficient due to the “fear factor”,1 hence the need for a  state intervention . in this regard, the utp directive imposes an obligation on member states to provide or strengthen a  mechanism of public enforcement2 which was a novel solution in some countries . better bargaining position, even if achieved in accordance with the law and market rules, does not justify imposing unfair conditions on a  weaker party in a  transaction – unfair in the sense that a weaker party would not have accepted them if there was no stark imbalance in the contractual position of the parties . in free market economies, trade relies mostly on economic principles and legal equality . ideally, market equilibrium is achieved automatically with no need of state intervention, though this approach implies no economic differences between market participants . however, with existing inequalities, it only deepens the advantage of the stronger party over the weaker . consequently, in extreme cases, there is a  need to apply non-economic measures, in this case legal measures, in the public interest . the european economic and social committee also shed some light on the importance of balance between the parties that enables mutual relations based on fairness . the committee stressed that the protection of a  weaker party cannot be a  sole rationale for state actions aimed at restoring the disturbed balance . in this regard, the primary objective of regulations on unfair trading practices should be the protection of the economic interest of member states (com/2013/37 final, 2013) . however, most of the member states decided to introduce detailed regulations preventing the abuse of the bargaining position by a  stronger party, before any regulatory actions at the eu level . in practice, this led to substantial differences in national legislation . some countries blacklisted specific trade practices, while others relied on general clauses referring to fairness, good commercial conduct and other principles fundamental to trade system . depending on the approach adopted by a  particular member state, provisions concerning utps are part of competition law (extending its scope beyond eu competition rules) or can be found in different branches of law  –  including, among others, civil, commercial (laws of general nature) or sector-specific laws (renda et al ., 2014, p . 35–43) . this in turn translates into how abusive behavior is defined, what measures are implemented to combat this behavior and what the potential sanctions for non-compliance are . it will also, to some extent, determine the object of protection and the model of enforcement (public, private or the combination of both) . since it was the member states that introduced the relevant laws on a  national level first, in a way it was a bottom-up harmonisation in this area . as can be expected, this course of action has achieved little in terms of uniformity . the laws of some member states were designed to meet particular needs of domestic markets of those countries . this is best illustrated by a simple example of the member state with one of the highest concentration 1 the “fear factor” is further explained in: green paper on unfair trading practices in the business-to-business food and non-food supply chain, com (2013) 37 final, p. 7–8; report from the commission to the european parliament and the council on unfair business-to-business trading practices in the food supply chain, com(2016) 32 final, https://eur-lex. europa.eu/legal-content/en/txt/html/?uri=celex:52016dc0032&from=pl. 2 recital 28 of the utp directive. https://eur-lex.europa.eu/legal-content/en/txt/html/?uri=celex:52016dc0032&from=pl https://eur-lex.europa.eu/legal-content/en/txt/html/?uri=celex:52016dc0032&from=pl 65 public governance, administration and finances law review • 1. 2020 protection of a weaker party in public interest ratio in food retailing .3 lithuania introduced specific legislation on utp in 2009  –  the law on the prohibition of unfair practices of retailers .4 the law focuses on protecting suppliers against abusive practices of buyers, which are large retail chains . at the time of its adoption, it applied only to the four largest retail chains: maxima, rimi, iki and norfa . a  characteristic feature of the lithuanian market was the lack of large international retail chains . the situation changed after 2016, when the german retailer lidl began to gain an increasing market share, mainly at the expense of maxima, which is still the largest network with approximately 40% of the market .5 another significant factor contributing to divergence among the national legislation is the influence of national interest groups and political pressure within member states . 3. nature of the prohibited practices unfair trading practices that are a result of imbalance of bargaining power in vertical b2b relations resemble those covered by consumer law . however, the scope of protection of b2b power imbalances is nowhere near to the standard set by consumer law . even if the weaker party is not an sme supplier or buyer, it may be facing similar problems of limited freedom of choice, negotiations impediments and dependency in relationship with its stronger counterparty . superior bargaining power is a relative concept and depends on the circumstances of the particular relationship between parties . the point of reference is bargaining position of the other party, not the reference to the relevant market . the advantage of a  stronger party is of economic nature . economic analyses suggest that the assessment of bargaining power between suppliers and buyers should be made on a case-by-case basis, as it depends greatly on the trade relationship . even the subject of the transaction can affect distribution of bargaining power between the supplier and the buyer . this means that a similar transaction on another product market can completely alter the balance of bargaining power (haucap et al ., 2013, p . 15–16) . the size of an undertaking does not play a key role in the assessment of bargaining power (heimeshoff & klein, 2013, p . 14) . it is more important to analyse to what extent a stronger party can limit the freedom of a weaker party (the degree of dependence of the weaker party) or expand its capabilities (carstensen, 2017, p . 76) . generally, abuse of a bargaining position consists in imposing contractual conditions on one party (b2b relations) resulting from a stronger position of the other party in a given trade relationship . abuses will occur in situations where one of the parties uses its bargaining position to achieve economic benefits at the expense of the weaker party . in some cases, a weaker party will accept adverse conditions in order to avoid serious financial losses . unfair practices may indirectly lead to a  foreclosure of competitors from relevant markets . the assessment of the unfairness of behavior is generally determined by its purpose 3 it may also apply to sweden and finland, bearing in mind that regulations of both countries have limited scope and are based on consumer protection legislation. see swd/2018/092 final – 2018/082, 2018. 4 lietuvos respublikos mažmeninės prekybos įmonių nesąžiningų veiksmų draudimo įstatymas, valstybės žinios nr. xi-626, 22.12.2009. 5 vizbarienė, 2018. 66 magdalena knapp public governance, administration and finances law review • vol. 5. no. 1.  and reference to commonly accepted practices in a  specific market . usually, there is no obligation to prove the suffered damage or impact of the infringement on the market, because the main focus is on the fairness, not the implications of the practice . a catalogue of unfair practices is open as there is no uniform legal definition of utp . the following list is based on provisions of national laws, international reports and other “soft law” documents which provide an overview of examples of utps,6 such as: ƿ unjustified extension of payment deadlines, exclusion of contractual penalties in the event of late payment; ƿ introducing unclear or imprecise contractual conditions; ƿ claims for additional benefits that have no relation to the subject of the contract; ƿ introducing additional marketing fees, e .g . slotting fees, loyalty fees, charging fees for fictitious services, fixed fees for remaining on the list of suppliers (“pay-to-stay”), participation in the costs of promotion and marketing ; ƿ using excessively detailed product specifications to refuse delivery or reduce the price of goods ordered; ƿ providing products of lower quality or different parameters than agreed; ƿ cancelling orders and lowering forecasted last-minute orders (especially in relation to perishable agricultural and food products), setting excessively high minimum order thresholds; ƿ reducing or delaying deliveries in comparison to previous arrangements; ƿ unjustified return of unused or unsold products, threatening to withdraw products from the offer; ƿ claims for payment for the deterioration or loss of agricultural and food products that occurred after the transfer of ownership to the buyer; ƿ unjustified lowering of prices, unfair price fixing, e .g . encouraging the sale of goods below production costs; ƿ inadequately high contractual penalties; ƿ unfair transfer of commercial risk to the other party; ƿ unilateral changes to the provisions of the contract, including retroactive change of the general terms of delivery and prices; ƿ unilateral contract termination and exclusivity clauses, e .g . an obligation to make purchases from a selected buyer/supplier; ƿ territorial limitation of supply . as it is apparent from the above list, the utps can take any form: they are not limited to the provision of the agreement stating the obligations and rights of the parties . utps may occur at any stage of the product selling (which is confirmed in recital 15 of the utp directive) . the utp directive specifically lists the unfair practices in article 3(1)–(2) . the first list contains practices that are regarded unfair regardless of the circumstances . the second list consists of practices that are deemed fair as long as they are subject of contractual 6 icn, 2008, p. 7–9, 20–21, 27–28; com(2013) 37 final, p. 5–6; renda et al., 2014, p. 99–100; article 3 of the utp directive; swd/2018/092 final – 2018/082, 2018, p. 206–225. 67 public governance, administration and finances law review • 1. 2020 protection of a weaker party in public interest agreement . while it is understandable that certain practices can be justified and bring benefits to the parties, it cannot be ruled out that those practices could also be agreed involuntarily . in result, it gives room for potential abuse by the party exercising significant bargaining power which contrasts quite sharply with the idea behind the utp directive . a short list of prohibited practices obviously has its merits and limitations . on the one hand, an exhaustive list is always flawed in so far as it fails to capture every possible utp and allows an opportunity to circumvent it . on the other, it provides minimal standard and certainty for economic operators as to what to expect, the biggest advantage possibly being lifting the administrative burden from enforcement authorities, leading to shorter and simplified investigation . the decision-making practice of the member states is not extensive, despite the fact that some of the regulations were introduced more than ten years ago . for example, since the relevant law was enacted, only a  dozen or so decisions were issued in the czech republic (bejček et al ., 2019, p . 17; úřad pro ochranu hospodářské soutěže, 2018, pp . 32–33; úřad pro ochranu hospodářské soutěže, 2019, p . 17) . the situation is similar in lithuania (moisejevas et al ., 2019, pp . 191–193; lietuvos respublikos konkurencijos taryba, 2019, pp . 29–31) and bulgaria (dinev, 2019, pp . 51–54) . in slovakia (blažo et al ., 2019, pp . 267) and hungary (papp, 2019, pp . 154–156) enforcement authorities are more active, they issued several dozen decisions .7 still, the enforcement authorities were expected to be more active in this field . in many member states legislation prohibiting utp refers to general clauses supplemented by examples of prohibited practices rather than specific lists (swd/2018/092 final – 2018/082, 2018, pp . 227–236) . member states rely on more or less stringent tests to capture as many prohibited practices as possible, which may imply that it is inefficient to rely solely on an exhaustive list of practices . moreover, some member states moved from detailed lists of utps to more general categories, e .g . in france8 and the czech republic (frischmann & šmejkal, 2016, p . 231, 239–240), because the former model was deemed unsuccessful . in order to fulfil requirements of the utp directive, those countries are obliged to reestablish the previous model of detailed catalogue of prohibited practices . 4. a glance at the scope of the utp directive the personal scope of the utp directive indicates that it is focused primarily on the problem of buyer power,9 giving very limited attention to seller power . the provisions of the utp directive apply in situations of imbalance of bargaining power depending on thresholds set in article 1(2) . the introduced categories do not reflect the structure of national agri-food markets, therefore they provide more of a  guidance than a  ready-made solution . the personal scope of the utp directive is improved, though, compared to proposal for 7 by comparison, in poland the enforcement authority issued six decisions since 2017, when the rules on utp were introduced. 8 as a result of the amendment, in 2019 a list of 13 prohibited practices included in article l.442-6 of the french code de commerce was removed and generally formulated categories of prohibited practices were introduced. 9 more on the buyer power with regard to utp see gjendemsjø & anchustegui, 2019; carstensen, 2017, p. 38–78. 68 magdalena knapp public governance, administration and finances law review • vol. 5. no. 1.  a  directive10 containing a  vague definition referring to the sme category (for a  critical analysis of the issue see piszcz, 2018, pp . 153–154) . however, it still has its flaws, such as the lack of “two-sided” protection (piszcz, 2020, pp . 114–117) . the material scope of the directive is limited by definition to “agricultural and food products”, which covers products listed in annex i to the tfeu as well as products not listed in that annex, but processed for use as food using products listed in that annex [article 2(1) of the utp directive] . hence, the directive applies not only to the entire agri-food sector; it goes beyond that . the definition includes mostly food products, but also raw agricultural products, semi-products, food supplements, food for special medical purposes, total diet replacement for weight control, fortified food, novel food, products not intended for human consumption etc . many of the above mentioned products can be bought in pharmacies and from medical wholesalers . thus, the directive applies (to a limited extent) to the entities from the pharmaceutical and the biotech sector (manufacturers, wholesalers, pharmacies) . if we also consider residues and waste from the food industries (listed in annex i) and their intended end-use, say, biofuel industry, then the scope is further extended beyond the narrow and typical understanding of agri-food sector . a broad definition of agricultural and food product relates to supply chains other than food supply chain . it is somewhat inconsistent with the emphasised need to protect the agri-food sector, and above all, the need to protect agricultural producers (recital 7 and 10 of the utp directive) . in the light of above, commentators point even to the questionable legal basis for the directive (schebesta et al ., 2018) . another issue is the introduction of a more precise definition of “perishable product” than in the proposal for a directive, which should be viewed as an improvement . currently, perishable agricultural and food products are agricultural and food products that by their nature or at their stage of processing are liable to become unfit for sale within 30 days after harvest, production or processing . it is further clarified that perishable products are products that are normally used or sold quickly (recital 17 of the utp directive); e .g . fruit and vegetable crops are perceived as highly perishable . perishable products also stand out from other products for their features such as limited shelf time, changes in demand and approach to safety issues of these products . prohibiting some practices referring to perishable products can prevent or minimalise the risk of food loss and food waste, which is a serious and pervasive problem . it is also economically viable and may enhance the performance of the food chain . with the above comments in mind, i turn the attention to the issue of the limited scope of the utp directive and whether it is sufficiently justified . in the beginning, the discussion on utp referred to the whole supply chain .11 further along the road it was 10 proposal for a directive of the european parliament and of the council on unfair trading practices in business-tobusiness relationships in the food supply chain [2018] com/2018/0173 final (hereinafter, proposal for a directive) 11 com/2013/036 final, 2013, p. 6–7; com/2013/37 final. the resolution of 12.06.2013 of the european parliament stated that similar regulations could be introduced in other sectors of the economy, to the benefit of consumers; www.europarl.europa.eu/sides/getdoc.do?pubref=-//ep//text+ta+p7-ta-2013-0268+0+doc+xml+v0// en&language=en. in another resolution of 11.12.2013, the european parliament clearly stressed that unfair trading practices occur throughout the entire supply chain; www.europarl.europa.eu/sides/getdoc.do?pubref=-//ep// text+ta+p7-ta-2013-0580+0+doc+xml+v0//en&language=en. http://www.europarl.europa.eu/sides/getdoc.do?pubref=-//ep//text+ta+p7-ta-2013-0268+0+doc+xml+v0//en&langua http://www.europarl.europa.eu/sides/getdoc.do?pubref=-//ep//text+ta+p7-ta-2013-0268+0+doc+xml+v0//en&langua http://www.europarl.europa.eu/sides/getdoc.do?pubref=-//ep//text+ta+p7-ta-2013-0580+0+doc+xml+v0//en&langua http://www.europarl.europa.eu/sides/getdoc.do?pubref=-//ep//text+ta+p7-ta-2013-0580+0+doc+xml+v0//en&langua 69 public governance, administration and finances law review • 1. 2020 protection of a weaker party in public interest slowly constrained to food supply chain . there is no doubt that the agri-food sector has peculiar characteristics . it is also stressed in the utp directive (recital 6) . the sector is subjected to many state interventions . states often grant subsidies for specific crops, land subsidies, thus significantly influencing the market dynamics . such actions affect the structure of the market, the level of concentration and other factors crucial to the functioning of the market . sometimes this may lead to creation of artificial supply and demand in a  given market . agricultural producers depend on various circumstances, such as: unpredictable weather conditions, geographical conditions, compliance with provisions regarding crop and animal welfare, order-based production which is not uncommon and somewhat reduces the possibility of changing or finding a new buyer . the food supply chain combines three key sectors for the food industry: agricultural, processing, wholesale and retail distribution . the activities of the agricultural sector include, inter alia, crop production and livestock farming, providing both products for direct consumption as well as raw materials for the processing industry and alternative markets, such as biofuels . the processing industry is at the bottom of the chain . it is diversified because it consists of the production of agricultural goods and animal products as well as basic processing, e .g . refining sugar . the final link in the chain supplying final products to consumers are retailers, such as large retail chains, small local stores, horeca etc . (high-level group on the competitiveness of the agro-food industry, 2009) . other features of the food supply chain that lead to its complexity in comparison to other supply chains are the products’ perishable feature, price, and demand variation, increasing consumer awareness of food security . however, despite the distinctive attributes of the food supply chain, utps are present in the whole supply chain, and they are detrimental, regardless of the sector in which they occur . it is worth considering to broaden the scope of regulation so that it would capture other sectors, taking into consideration that certain events indicate the need for such actions in some member states . recent proceedings initiated by the polish competition authority can serve as an example . the authority is investigating unfair conduct of wholesalers supplying personal protective equipment to hospitals (uokik, 2020) . the conduct of wholesalers could include utp, but due to the limited scope of the polish act counteracting the unfair use of contractual advantage in the trade in agricultural and food products,12 there is no basis for that . hence, the authority attempts to tackle it as a  competition law infringement . it demonstrates that this issue requires greater public awareness and more attention from policy makers than it has received so far . as to the member states, national laws can go beyond definition of food and agricultural product . therefore, the member states are not obliged to limit the scope of their existing provisions as long as they are proportionate and compatible with eu law (recital 12 act of 15 december 2016 on counteracting the unfair use of contractual advantage in the trade in agricultural and food products [ustawa o przeciwdziałaniu nieuczciwemu wykorzystywaniu przewagi kontraktowej w obrocie produktami rolnymi i spożywczymi] (consolidated text in journal of laws of the republic of poland 2019, item 517). 70 magdalena knapp public governance, administration and finances law review • vol. 5. no. 1.  39 of the utp directive) . some member states complement laws on utp by sector specific regulations imposing additional obligations on trade of food and agricultural products .13 5. conclusion the utp directive in its form allows for a less uniform regulatory approach to the issue of unfair trading practices . the way some of the provisions were drafted suggests the option to adjust them to specific needs of the country rather than to implement them word by word . on the other hand, the broad discretion given to member states may pose a potential risk for “gold-plating” . careful scrutiny of national legislation will be required in order to comply with the eu framework . the standard of minimum harmonisation is laid down in article 1 of the utp directive, allowing for regulatory pluralism . the member states that had already had national laws in place usually adopted more developed rules on utp . hence, the utp directive will not bring landmark change for those countries . member states should consider broadening the scope of utp laws beyond the food supply chain as there are no legal obstacles or arguments against extending the regulation to all sectors of the economy . it must be noted that when the european commission started the consultation process years ago, the debate focused on the occurrence of unfair trading practices in the whole supply chain . even now, the definition of “agricultural and food product” allows for a  broader application of the utp directive . furthermore, the member states should think of framing useful rules of general application in addition to practices listed in the utp directive . currently, the map of utp legislation resembles more a  mosaic of various national laws . regulations of the member states often contain divergent rules in this respect . it opens up the possibility for opportunistic behavior of international retail chains to apply different practices depending on the country and its regulations . for now, the introduction of the utp directive will not significantly change this situation because of its minimum requirements . it is an area of law where eu harmonisation will possibly increase proportionally . further action is required to truly approximate the utp legislation across the eu . a good step towards that goal will be closer cooperation between enforcement authorities and maybe the establishment of a new eu network for utps . as in most member states the designated enforcement authority is nca, they already have experience in cooperation within the european competition network, and now, in the light of the ecn+ directive,14 their cooperation will be strengthened . 13 see examples of central and eastern european countries in piszcz & jasser (eds.), 2019. 14 directive (eu) 2019/1 of the european parliament and of the council of 11 december 2018 to empower the competition authorities of the member states to be more effective enforcers and to ensure the proper functioning of the internal market, oj l 11, 14.1.2019, p. 3–33. 71 public governance, administration and finances law review • 1. 2020 protection of a weaker party in public interest since the member states are still facing the challenge of transposing the provision of the utp directive into national laws, there is a  dearth of comprehensive evaluation . it remains to be seen whether adopted measures (particularly a list of practices prohibited per se, which is absent in most member states legislation) are proportionate and appropriate to achieve policy objectives . references bejček, j ., petr, m ., & pipková, p . (2019) . czech republic . in piszcz, a . & jasser, a . (eds .), legislation covering business-to-business unfair trading practices in the food supply chain in central and eastern european countries . university of warsaw, faculty of management press, pp . 85–124 . blažo, o ., kováčiková, h ., & patakyová, m . t . (2019) . slovakia . in piszcz, a . & jasser, a . (eds .), legislation covering business-to-business unfair trading practices in the food supply chain in central and eastern european countries . university of warsaw, faculty of management press, pp . 243–270 . carstensen, p . (2017) . competition policy and the control of buyer power: a global issue . edward elgar publishing . clarke, r ., davies, r ., dobson, p ., & waterson, m . (2002) . buyer power and competition in european food retailing . edward elgar publishing . daskalova, v . (2019) . the new directive on unfair trading practices in food and eu competition law : complementary or divergent normative frameworks? journal of european competition law & practice, 10(5), pp . 281–296 . https://doi .org/10 .1093/jeclap/lpz032 dinev, a . (2019) . bulgaria . in piszcz, a . & jasser, a . (eds .), legislation covering business-to-business unfair trading practices in the food supply chain in central and eastern european countries . university of warsaw, faculty of management press, pp . 41–62 . frischmann, p ., & šmejkal, v .  (2016) . 2016 amendment of the czech significant market power act of 2009 . yearbook of antitrust and regulatory studies 9(14), pp . 227–246 . gjendemsjø, r ., & anchustegui, i . h . (2019) . the scope for national regulation of unfair trading practices . ssrn electronic journal . https://doi .org/10 .2139/ssrn .3378461 haucap, j ., heimeshoff, u ., klein, g . j ., rickert, d . & wey, c . (2013) . bargaining power in manufacturer-retailer relationships, discussion paper no . 107, düsseldorf institute for competition economics . https://citeseerx . ist .psu .edu/viewdoc/download?doi=10 .1 .1 .1038 .1754&rep=rep1&type=pdf heimeshoff, u ., & klein, g . j . 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(eds .), legislation covering business-to-business unfair trading practices in the food supply chain in central and eastern european countries . university of warsaw, faculty of management press, pp .147–170 . https://doi.org/10.4337/9781782540588 https://doi.org/10.7172/1689-9024.yars.2016.9.14.11 https://doi.org/10.1093/jeclap/lpz032 https://doi.org/10.2139/ssrn.3378461 https://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.1038.1754&rep=rep1&type=pdf https://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.1038.1754&rep=rep1&type=pdf https://editorialexpress.com/cgi-bin/conference/download.cgi?db_name=iioc2017&paper_id=316 https://editorialexpress.com/cgi-bin/conference/download.cgi?db_name=iioc2017&paper_id=316 https://bit.ly/2zyvqev https://bit.ly/3gzssaa https://bit.ly/3gcgdin https://doi.org/10.4337/9781782540588 https://doi.org/10.7172/1689-9024.yars.2016.9.14.11 72 magdalena knapp public governance, administration and finances law review • vol. 5. no. 1.  piszcz, a . (2018) . the eu 2018 draft directive on utps in b2b food supply chains and the polish 2016 act on combating the unfair use of superior bargaining power in the trade in agricultural and food products . yearbook of antitrust and regulatory studies, 11(17), pp . 143–167 . piszcz, a . (2020) . eu directive on unfair trading practices in business-to-business relationships in the agricultural and food supply chain: dipping a toe in the regulatory waters? balkan yearbook of european and international law, pp . 109–127 . https://doi .org/10 .1007/16247_2019_7 renda, a ., cafaggi, f ., pelkmans, j ., iamicelli, p ., correia de brito, a ., mustilli, f ., & bebber, l . (2014) . study on the legal framework covering business-to-business unfair trading practices in the retail supply chain . final report . european commission . https://bit .ly/2xefp4j schebesta, h ., purnhagen, k . p ., keirsbilck, b ., & verdonk, t . 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(2017) • 6, 56–58 book reviews means of protection of individual rights in public administration – system and efficiency1 eva sigmundová* * mgr. eva sigmundová, phd student, department of administrative studies and administrative law, faculty of law, masaryk university. (e-mail: 392849@mail.muni.cz) the monograph means of protection of individual rights in public administration – system and efficiency is the  result of a  scientific project lasting for multiple years (2013–2016), managed by members of the department of administrative studies and administrative law of the faculty of law, masaryk university, brno. a much larger group of authors, comprising of almost thirty experts participated on this project. apart from co-authors from the czech republic, also a large number of experts from the slovak republic, republic of poland, representatives of austria and slovenia contributed to the  realization of the  book. authors came from academic communities and application practice, including constitutional and administrative judiciary. despite the  large number of authors, the book is connected by linking articles which discuss the issue of the protection of individual rights in the area of administrative law and public administration. it is a comprehensive work which will be certainly utilized by students of law as well as students from other fields of public administration studies. however, this is not a  typical textbook, as the legal theory, as well as legal practice itself is very appropriately incorporated into individual chapters in which the  authors express their own attitudes and views on the  issue. it offers a  clear and simple overview of all the  basic institutes that in the  czech republic could be used to protect individual rights within public administration, in an understandable way to nonprofessionals; the book is divided into three major parts. the first part briefly, but in principle, deals with the  role and activities of public administration, the  issues of (subjective) rights, their protection but also the  possibility of abusing these rights. the  question whether the  primary purpose of public administration is the protection of personal rights is being asked in this section. the authors answer the question negatively; nevertheless, they acknowledge that public administration provides protection of rights even so, all the more. the very content of the book is evidence that even in the field of public administration which is primarily not dedicated to protect rights, but to the administrate public affairs in the public interest, a relatively wide variety of resources can be found which could be considered as an instrument for the protection of rights. based on this, the  authors investigate answers for another question, i.e. whether the  individual means of protection of rights form a  coherent system and subsequently what is the  actual effectiveness of these means of protection of rights. as a  result, the  book represents an imaginary mirror and feedback as it attempts to confront factual reality with legal status. 10.53116/pgaflr.2017.1.6 https://doi.org/10.53116/pgaflr.2017.1.6 57 public governance, administration and finances law review • 1. 2017 means of protection of individual rights in public administration – system and efficiency the second part of the  book represents its main part (pp. 41–366). the  individual chapters focus on the  general means of protecting individual rights that can be found in the  exercise of administrative activity. the  authors perceive the  issue in the  necessary european context, such as the  actions of the  council of europe and the  european union, including a  model proposal for the  european union’s administrative code. following general institutes which can be considered as a means of the protection of individual rights in public administration, where the  authors include the  principles of good governance, the  principles governing the  performance of the  administrative activity, or the  work of the  ombudsman, the  following particular means for the  protection of individual rights. in this regard the  book is written mostly with respect to the  factual figure and regulation of the czech republic. among the specific means of protection of individual rights, which are subject to closer analysis, the  authors present the  procedural rights of the  participants in administrative procedures, requirements for proper reasons for the decision, issues of ordinary and extraordinary remedies. attention is paid to whether and how the  protection of individual rights in other procedural processes is ensured, such as the  conclusion of public contracts, the  implementation of factual acts, the  issuing of legislation by the  public administration, the  issuing of binding documents for the  decision of the  administrative authority, or the  issue of measures of a  general nature, which is a  rather specific form of administrative activity, notably inspired by the  german institute allgemeineverfügung. in addition, the  authors are also focusing on the  selected areas of public administration where they are interested in whether and how individual rights are protected. for example, the area of self-government, immigration and asylum agendas, administrative penalties, or public services in state administration and security services. the last part of the book is focused on the protection of individual (subjective) rights, in spite of the views of the authorities, ombudsmen, administrative and constitutional judiciary, including the relatively provocative issues of the so-called adr means that is also represented in this section. thus, the book goes from the general bases to individual institutes. due to the systematic construction of the individual chapters it is not necessary to read the book chronologically, so the reader can focus only on the part that interests him/her. it is worth pointing out another advantage of this work, namely its practicality and connection with the  reality of the  legal world: an appropriate combination of theory, philosophy of law, practice, the  opinion of experts from the  field, as well as an outline of the  issues and shortcomings brought by the  currently established procedures. therefore, we can look at issues from different angles which will give us a coherent picture of individual themes and allow readers to think and read their own attitude towards the subject. the book is an interesting reflection of whether and how attention is paid in the czech republic to the protection of individual rights when the law provides a fairly wide range of instruments that can be used for this purpose. it focuses not only on the  description of the  legislation and legal status but attempts to take into account the  actual functioning which is supplemented in some parts with specific statistical data and their evaluation. the  essential contribution of this monograph lies in its practical functioning, in which it provides interesting and informative issues by presenting a  variety of authors and opinions to the reader. 58 public governance, administration and finances law review • vol. 2. no. 1. eva sigmundová references 1. soňa skulová & lukáš potěšil (eds.), means of protection of individual rights in public administration – system and efficiency, 464 pages. (praha, c. h. beck, 2017). public governance, administration and finances law review vol. 5. no. 2. (2020) • 32–44 . * justyna kulikowska-kulesza, phd, department of administrative law and procedure, faculty of law, university in białystok, poland, email: j .kulikowska@uwb .edu .pl, orcid: https://orcid . org/0000-0001-6934-9014 ** dominik kościuk, phd, department of administrative law and procedure, faculty of law, university in białystok, poland, email: d .kosciuk@uwb .edu .pl, orcid: https://orcid .org/00000002-2695-8212 abstract: in the history of mankind there are known cases of conducting experiments with a  goal against people . after all, there has been eugenic research, or research leading to the creation of biological weapons . such experiments are usually hidden from the public and governed by the internal and classified regulations of particular states . th at is wh y it is im portant for th e domestic legal orders world-wide to establish not only research methods and ways of conducting experiments (from the point of view of medical art and effectiveness of research) but also  –  and perhaps even more importantly  –  legal principles and rules limiting the conduct of medical experiments, and to establish rules of conduct with the effect of saving and prolonging the life and health of the patient . this article will analyse the polish legal regulations and polish doctrine in the fi eld as a  case st udy, describing an example of the national measures implemented to provide control of the research and medical experiment procedures . keywords: medical experiments, administrative procedure, decision, opinion, administrative court 1. introduction it is evident that in practice, a medical experiment is associated with a potential benefit for a specific patient (because it consists in the application of a new method of treatment when the existing ones are unreliable or do not exist at all), while a  research experiment is not necessarily the same, because its aim is to gain knowledge about the processes and phenomena taking place in the human body, and a person subjected to such an experiment is often healthy and – through the experiment – exposed to the danger of losing this health . the benefit of a  re search experiment is on ly in direct, be cause it al lows to im prove th e healing process in the future . in the history of mankind, however, there are known cases of conducting experiments with a goal against people . after all, there has been eugenic research, or research leading to the creation of biological weapons . such experiments are usually hidden from the public and governed by the internal and classified regulations of particular states . © 2021 the authors doi: 10.53116/pgaflr.2020.2.3 the rules of medical experimentation on people in the light of the polish law and administrative solutions justyna kulikowska-kulesza* – dominik kościuk** mailto:j.kulikowska@uwb.edu.pl https://orcid.org/0000-0001-6934-9014 https://orcid.org/0000-0001-6934-9014 mailto:d.kosciuk@uwb.edu.pl https://orcid.org/0000-0002-2695-8212 https://orcid.org/0000-0002-2695-8212 https://doi.org/10.53116/pgaflr.2020.2.3 33 public governance, administration and finances law review • 2. 2020 the rules of medical experimentation on people in the light of the polish law and administrative solutions that is why it is important for the domestic legal orders worldwide to establish not only research methods and ways of conducting experiments (from the point of view of medical art and effectiveness of research) but also  –  and perhaps even more importantly  –  legal principles and rules limiting the conduct of medical experiments and to establish rules of conduct with the effect of saving and prolonging the life and health of the patient . this article will analyse the polish legal regulations and the polish doctrine in the field as a  case study, describing an example of the national measures implemented to provide control of the research and medical experiment procedures . 2. literature overview polish law does not contain a legal definition of a medical experiment, but only introduces a  division into therapeutic and research experiments, setting out general premises for the admissibility of experiments and specifying the procedure for obtaining permission to conduct them . therefore, it is worth answering the question whether the current provisions of the polish law concerning the conduct of medical experiments are consistent and unambiguous enough to ensure that it is the patient’s life and health that is the overriding value, and the observance of his/her health is guaranteed by law . in order to answer this question, it will be necessary, firstly, to define the notion of “medical experiment”, secondly, to assess the premises of admissibility of conducting the experiment (including subjective limitations), and thirdly, to identify “procedural” principles and guarantees (understood as standards of conduct) leading to consent to the experiment . 3. the term “medical experiment” as indicated in the introduction, the provisions of polish law, namely article 21(1) of the law of 5 december 1996 on the professions of doctors and dentists (official journal of laws 2018, item 617 with amendments, hereinafter referred to as pdd), do not contain a  direct definition of a  medical experiment, but only indicate that a  medical experiment carried out on people may be a therapeutic or research experiment . therefore, in order to propose such a  definition, attention should be paid to the notions of therapeutic and research experiment functioning in administrative law, as well as to the notion of medical experiment in criminal law . a therapeutic experiment, in accordance with article 21(2) of the pdd, is the introduction by a  doctor of new or only partially tried-and-tested diagnostic, therapeutic or prophylactic methods with the aim of directly benefiting the health of the person treated . it may be carried out if the medical methods used so far are not effective or if their effectiveness is insufficient . on the other hand, the research experiment, in accordance with article 21 (2 and 3) of the pdd, is primarily aimed at broadening medical knowledge, but can be carried out 34 justyna kulikowska-kulesza – dominik kościuk public governance, administration and finances law review • vol. 5. no. 2.  on both sick and healthy individuals if participation is not associated with risk or if the risk is small and not disproportionate to the possible positive results of such an experiment . in the criminal law there is a  concept of the so-called innovative risk, which is stipulated in article 27 of the penal code, which specifies that a  person does not commit a crime, if he or she acts, among other things, in order to conduct a medical experiment, if the expected benefit is of significant cognitive and medical importance and the expectation of its achievement, the advisability and manner of conducting the experiment are justified in the light of the current state of knowledge . requirements of a  medical experiment, in accordance with the regulations of criminal law, are the consent of the participant on whom it is conducted and proper information about the expected benefits, the impeding negative effects and the likelihood of their occurrence, as well as the possibility to withdraw from participation in the experiment at any stage . at the same time, it is claimed in the  literature that the therapeutic experiment is mainly aimed at achieving a  goal, which  –  as p . daniluk writes  –  must be not any, but a direct benefit of the treated person, related to the improvement of his health . (daniluk, 2005, p . 37) b . iwańska specifies that the connection with the so-called “direct benefit for health” is that the therapeutic experiment can be carried out only in circumstances when the medical methods used so far are not effective, or if the effectiveness of these methods is not sufficient . (iwańska, 2000, p . 73) in a  lexicon article, filar et alii also write about the healing purpose of this kind of experiment . in their opinion, the key is therapeutics, which involves the use of new or previously unused methods, techniques and procedures that have not been tested or have been examined “poorly”, and as such, are not routinely applied . above all, however, according to filar et alii, the essential feature of a therapeutic experiment is that the experimenter intends “to treat, not to investigate” . (filar et al ., 2004) the therapeutic experiment also involves the introduction of new prophylactic methods . this is pointed out by o . nawrot and a . wnukiewicz-kozłowska, who write that the legislator predicted that this experiment is not only the introduction of new or only partially tested prophylactic methods by a doctor . (nawrot & wnukiewicz-kozłowska, 2015) these authors present an opinion that since prophylaxis is often carried out on people who are not currently ill (because the prophylaxis is supposed to serve prevention, not treatment), the experiment can also be carried out on healthy people . the authors claim that the potential health benefit could then consist in examining such a  person (before administering e .g . a  new vaccine) and possibly detecting the disease, which could then be treated . slightly different features characterise the research experiment . first of all, it is aimed at “improving”, “gaining” medical knowledge . there is no key “direct benefit to health” as in the case of a  medical experiment . the doctrine indicates that although the research experiment can be conducted with the participation not only of healthy people, but also of patients, in relation to whom the cognitive goal is to be achieved; the activities undertaken during this experiment are not, by definition, directly aimed at improving the health of the participant, but at the same time do not exclude such a therapeutic benefit . (iwańska, 2000, p . 71) 35 public governance, administration and finances law review • 2. 2020 the rules of medical experimentation on people in the light of the polish law and administrative solutions the literature also expresses ethical doubts related to this type of medical experiment . k . sakowski points out that the basic aim of “cognition” is to expand empirical knowledge, to gain knowledge about certain processes and phenomena taking place in the human body . it is difficult to talk here about benefits for a particular patient . if any, it “consists in a  possible progress in medicine, enriching the skills of doctors, and thus improving the healing process . the person subjected to the experience has no personal benefit for his or her health; on the contrary, his or her most precious goods are put at risk” . the same author argues that the cognitive goal involves exposing the research subject to risk, and even sacrificing the interest of the participant in the research process for the benefit of higher goods, such as science, humanity, civilisation . (sakowski, 2014) to sum up the above, the main elements of therapeutic and research experiments appear to be the following : introduction by the doctor of new or only partially tested diagnostic, therapeutic or prophylactic methods; medical methods used so far are not effective or their effectiveness is not sufficient; broadening of medical knowledge; conducting on both sick and healthy persons; consent of the participant on whom the experiment is conducted and proper information about expected benefits and possible negative effects; direct health benefit; introduction of new prophylactic methods; broadening of empirical knowledge; gaining knowledge about certain processes and phenomena occurring in the human body; development of medicine without reference to the benefit of a specific patient . it therefore seems justified to assume that a medical experiment is an empirical action carried out on a person who is duly informed of the expected benefits and risks of adverse effects, and consisting in expanding knowledge of the processes and phenomena taking place in the human body, followed by the possible implementation of new diagnostic, therapeutic or prophylactic methods, aimed at the direct or indirect benefit of the health of the researched subject or other people . 4. conditions for the admissibility of a medical experiment the doctrine concretises the prerequisites for the admissibility of a  medical experiment, pointing to a  number of limitations in their conduct . for example, m .  kopeć argues that the conduct of a research experiment is allowed only when participation in it is not associated with any risk or when the risk is small and not disproportionate to the possible positive results of such an experiment . (kopeć, 2016) assessing the admissibility of an experiment, the premise of a  significant therapeutic or cognitive benefit is highlighted by k . buchała and a . zoll who point out that the assessment of the significance of this benefit should be based on the current state of knowledge, and thus on data objectively available to specialists in a given field, concerning recognised theoretical rights, research conducted so far and their results, including information concerning similar experiments and their results . (buchała & zoll, 1998, p . 259) m .  nesterowicz writes that the admissibility of a  therapeutic experiment depends on the existence of two conditions . firstly, the so-called incurable state, which is connected with the fact that commonly used therapeutic means are not sufficient to cure the patient . 36 justyna kulikowska-kulesza – dominik kościuk public governance, administration and finances law review • vol. 5. no. 2.  on the other hand, it is necessary to establish that the risk of the experiment is proportionate to the expected benefits . this means that the experiment should not be carried out when the intended benefits are disproportionate to the risk of deterioration of the patient’s health, in particular when the development of the disease is not life-threatening . (nesterowicz, 2013, pp . 240–241) e . zielińska allows conducting a  medical experiment in connection with the “risk of novelty”, adding that the expected result of the experiment is to have a significant cognitive value from the point of view of the current state of knowledge, and the way it is conducted is to be justified and cannot be carried out without the patient’s consent . (zielińska, 2014) in addition, the provisions of the generally applicable law in poland contain a number of restrictions on the free conduct of medical experiments . first of all, in accordance with the regulation of article 22 of the pdd, an experiment may be conducted if the expected therapeutic or cognitive benefit is significant and the expected achievement of this benefit as well as the purposefulness and manner of conducting the experiment are justified in the light of the current state of knowledge and consistent with the principles of medical ethics . this means that the performance of the therapeutic experiment is closely related to the patient’s ill health and the research experiment is associated with significant scientific and cognitive importance . the penal code also applies to medical experimentation . from the wording of article 27 of this act, we derive that a person does not commit a crime when he/she acts in order to conduct a  medical experiment, if the expected benefit is of significant cognitive and medical significance, and the expectation of its achievement, the purposefulness and manner of conducting the experiment are justified in the light of the current state of knowledge; furthermore, that the experiment is inadmissible without the consent of the participant on whom it is conducted, who is duly informed about the expected benefits and the possible negative effects and the probability of their occurrence, as well as about the possibility to withdraw from participation in the experiment at each stage . “expected benefit” means that this provision does not justify crimes which have inadvertently (without the intention to achieve the expected results of the experiment) led to benefits for the patient’s health or medical development . this is confirmed by the case law of the polish supreme court from the 1960s . the court wrote: “for a  risk to be considered as a basis for the exculpation of an accused person, it must be the result of a conscious decision on the undertakings which may be taken in various alternative forms” (the supreme court judgment of october 31, 1968, i kr 130/68, publ . osnkw 1969, no 6, item 69) . the literature notes that article 22 of the pdd does not explicitly mention the condition of “proportionality” between expected and adverse effects, but accepts that “the likelihood of the expected benefits exceeds (not necessarily seriously) the likelihood of injury resulting from the failure of the experiment” . (kędziora, 2016, p . 298) undoubtedly, one of the most important conditions for the admissibility of conducting an experiment on a human being must be his/her explicit consent . this premise is contained in article 25 of the pdd, which, in paragraph 1, requires the written consent of the person examined to participate in the experiment, whereas in the case of impossibility of giving written consent, the oral consent given in the presence of two witnesses is 37 public governance, administration and finances law review • 2. 2020 the rules of medical experimentation on people in the light of the polish law and administrative solutions considered equivalent . of course, even if a minor (a person between the ages of 13 and 18) is to take part in the experiment, the written consent of his legal representative is required . if the minor is able to give an informed opinion on his/her participation in the experiment, his/her written consent is also required . an additional condition for the admissibility of the experiment on a  minor is that the expected benefits are of direct relevance to the minor’s health and that the risk is low and not disproportionate to possible positive results . at the same time, a  research experiment involving a  person under 16 years of age is not admissible if it is possible to conduct such an experiment of comparable effectiveness with the participation of a person with full legal capacity [article 25 (2) and (3) of the pdd] . similar restrictions are contained in the pdd for a  person who is incapacitated or does not have the ability to properly discern his or her participation in the experience . paragraphs 4 and 5 of the above mentioned provision contain that in the case of a person fully incapacitated, the consent to participate in the therapeutic experiment is given by the person’s legal representative, and if such person is able to express an opinion on his/her participation in the experiment, it is also necessary to obtain his/her written consent . on the other hand, in the case of a person who has full legal capacity but is not able to give an opinion on his/her participation in the experiment, his/her participation shall be authorised by the guardianship court having jurisdiction competent for the seat of the subject participating in the experiment . the condition for consent shall be restricted in cases of urgency and imminent danger to life, as set out in article 35(8) of the pdd . in such circumstances it is not necessary to obtain consent . at the same time, one should agree with the statement of d . karkowska, who writes that “the patient has obviously the right not to be willing to be kept alive in a condition which he does not accept . on the other hand, the doctor has the right to save the patient’s life, even if he does so against patient’s will . at the same time, the doctor has the right and duty to use common sense to respect the patient’s previously expressed will, primarily because of the asymmetry of information and the patient’s incompetence in medical matters, which is generally an undeniable fact that strengthens the doctor’s decision-making power . […] however, when a patient is in a critical condition with no chance of avoiding death, the cessation of treatment is a duty, whether or not the patient has previously expressed a wish or not . it is required to respect the patient’s right to a dignified and peaceful death” . (karkowska, 2009) subjective restrictions  –  resulting from the provisions of the law (article 27 of the pdd)  –  have also been introduced for other persons who, by definition, are disabled or unable to defend their rights on their own . the polish legislator has assumed that the participation of pregnant women in therapeutic experiment requires a  particularly thorough assessment of the associated risks for the mother and the conceived child, and their participation in research experiments is only possible when the experience is not risky or the risk is low . on the other hand, it is excluded that conceived children, incapacitated persons, soldiers of the primary service and prisoners (deprived of liberty) take part in the research experiment . an experiment shall be allowed only if the obligation to provide information referred to in article 24 of the pdd is fulfilled . in accordance with that provision, the person to be subjected to the experiment shall be informed in advance of the aims, modalities and 38 justyna kulikowska-kulesza – dominik kościuk public governance, administration and finances law review • vol. 5. no. 2.  conditions of the experiment, the expected therapeutic or cognitive benefits, the risks and  the possibility of withdrawing from the experiment at any stage . the obligation to provide information also applies to the experimenter during the execution of the experiment . if the immediate interruption of the experiment could cause a threat to life or health of the participant, the doctor is obliged to inform him/her about it . it is worth emphasising, as r . kubiak does, that such information should be simple and understandable even for a  person with no life experience . he writes that “the experimenter should take into account the level of intelligence of the person being examined, the level of education, […] his physical and mental state, and perceptual capabilities” . (kubiak, 2000, p . 50) at the same time, one should agree with the opinion of this author that the experimenter himself is not fully aware of the possible effects of the undertaken actions, and most often can only guess the effects of the conducted experiments . therefore, it is not “possible for him to present to the participant of the experiment any information concerning the expected course of the experiment” . (kubiak, 2000, p . 433) at the same time, it is impossible not to notice that the legislator introduced a  specific condition for the admissibility of a medical experiment of an administrative and legal nature . the possibility of implementing such an undertaking is subject to the consent of the relevant bioethics committee . 5. consent to the experiment as a result of the polish administrative proceedings the content of article 29 of the pdd indicates that a medical experiment may be carried out only after a positive opinion has been expressed on the project by an independent bioethics committee, adjudicating in a  panel of persons of high moral authority and highly specialised qualifications . the committee’s consent takes the form of a  resolution, taking into account ethical criteria as well as the advisability and feasibility of the project . therefore, it should first of all be determined whether the committee’s resolution (called an opinion) enabling the implementation of the experiment may be qualified as an administrative act, determining an individual case as referred to in the polish code of administrative procedure (hereinafter referred to as cap), or whether it is only a consultative act, not of an administrative nature . in order to do so, it is worth noting first of all that an “administrative matter” involves proceedings before public administrative authorities in individual cases falling within their jurisdiction, adjudicated by administrative decisions [article 1(1)(1) of the cap] . thus, in a  nutshell, if we are dealing with an “authority” (i .e . an entity whose competence lies in deciding on the rights or obligations of others), an “individual case” (concerning a specific natural or legal person, or even an organisational unit without legal personality), and an “administrative decision” (understood as a  sovereign, unilateral decision on rights or obligations), these are the elements determining the existence of an administrative case . it should be noted here that the jurisprudence of the polish supreme administrative court concludes that any case in which a public administration body is deciding on obligation of an entity concrete, is resolved by an administrative decision . this is “a situation in 39 public governance, administration and finances law review • 2. 2020 the rules of medical experimentation on people in the light of the polish law and administrative solutions which three conditions are met . first, the public administration body applies a  norm of substantive law based on generally applicable law . secondly, that norm does not directly shape the substantive legal relationship in a way that does not require authoritative concretisation . thirdly, finally, the standard does not indicate a form of administration other than a legal decision as being appropriate to be applied in this case” . (see nsa, ii gsk 1702/18, similarly adamiak, 2005, pp . 17–18) however, referring to the above mentioned medical experiment, it should be noted that it can be conducted only when an appointed entity (bioethics committee) gives a  positive opinion on the application submitted by the doctor (researcher), based on sources of universally applicable law (e .g . dpp) . therefore, there should be no doubt that we are dealing with the above mentioned elements of an administrative case . such reasoning is confirmed by the supreme administrative court’s ruling (ii osk 1112/06), often quoted in the  literature, according to which the opinion issued by the bioethics commissions is an act constituting an independent resolution of an administrative case, containing consent or stating lack of consent to conduct a  medical experiment . according to this court, the committee’s position is an expression of knowledge and experience aimed at resolving the case, and thus the opinion is subject to appeal to the administrative court . at the same time, it is impossible to disagree with the argument (from the same judgment) that “the statutory regulation of the issue of appointing bioethical committees, both at first and second instance, and entrusting bioethical committees with the task of deciding whether a  medical experiment (an experiment project) proposed by a  physician can be positively assessed, whether or not it meets the conditions for obtaining a positive opinion, and as a result, the decision on the admissibility of a medical experiment (since a positive opinion of the bioethics committee is a  necessary condition for carrying out the experiment), which belongs to the forms of medical practice [art . 2(3) od the pdd], places the said committee within the sphere of public administration, and its opinion is an act which is an independent resolution of an administrative matter initiated at the request of a doctor, considered according to the procedure defined by the legislator” . the scholarly supporters of this doctrine also intend to demonstrate that the commission’s opinion is an expression of administrative authority, characteristic of public administration bodies . for example, p . brzezicki claims that the commission “through its resolutions, opinions, decisions enter the scope of the constitutionally guaranteed freedom of scientific research, being able to limit or even exclude this freedom”, and thus “it is undisputable that these entities [i .e . commissions  –  explanation added by the authors], within the scope of their authority, should be treated as part of the executive power as a  structure performing functions in the field of public administration” . (brzezicki, 2012, pp . 9–10) o . nawrot and a . wnukiewicz-kozłowska also consider bioethics committees entities characterised by administrative power . they come to the conclusion that the committee is a  control body of biotechnological development, understood as an institutionalised instrument of verification of medical experiments . in their opinion, these entities are equipped with the competence to legitimise experimental biomedical research involving humans . (nawrot & wnukiewicz-kozłowska, 2015) 40 justyna kulikowska-kulesza – dominik kościuk public governance, administration and finances law review • vol. 5. no. 2.  it is worth noting, in orderly fashion, that we have a completely exceptional situation in the case of the committee’s judgments on clinical trials of a  medicinal product (often also classified as medical experiments) . in such experiments, the president of the office for registration of medicinal products, medical devices and biocidal products (formerly the minister of health) is the decision maker regarding the permission to start studies, and the opinion of the bioethics committee is only a  part of the documentation attached to the application to start studies . the regional administrative court in warsaw spoke in the case concerning this type of experiment, pointing out that “resolutions adopted by both the bioethics committees and the bioethics appeals committee are opinions on the conduct of clinical trials” because “only the content of the opinion of the bioethics appeals committee contained in the resolution after considering the appeal against the resolution of the bioethics committee is the basis for issuing an administrative decision of the minister of health [the minister issued decisions in the previous legal status – explanation added by the authors], which constitutes a  ruling on the merits of the case initiated by the motion of a  person who has a  legal interest in issuing this decision . in the case under consideration, such a decision was made by the minister of health” ( judgment of the regional administrative court in warsaw, vii sab/wa 15/14, publ . onsa) . since clinical trials of a  medicinal product are connected with a special procedure (conducted by the organ issuing the decision as indicated by the law), which has not been established in relation to other types of medical experiments, it is logical that the above statement of the court cannot be attributed to other resolutions of the committee, only for clinical trials of a medicinal product . in our opinion, the opinion of the bioethics committee on the project of a  medical experiment (not regulated by other provisions, such as those concerning research on medicinal products), expressed in the form of a resolution, constitutes the ruling administrative act (decision) referred to in cap . therefore, it is worthwhile to briefly draw attention to the basic procedural rules aimed at protecting procedural rights of a  party to administrative proceedings, which should be applied in cases of issuing an opinion on a medical experiment . these principles are intended not only to ensure the formal correctness of the process leading to the issuance of an opinion, but also to protect the rights of the applicant and participants in the experiment . first of all, the committee should have regard to the principle of legality, which states that administrative authorities only act on the basis of and within the scope of generally applicable law . it should therefore not, when preparing an opinion, justify a refusal (i .e . an unfavourable opinion) on the basis of reasons arising from sources of law of an internal nature (regulations, statutes, guidelines, etc .) . the principle of information as defined in article 9 of the cap should also be applied in the proceedings before the committee . that provision stipulates that public administration bodies are obliged to duly and exhaustively inform the parties of factual and legal circumstances that may affect the determination of their rights and obligations which are the subject of administrative proceedings, and that those bodies ensure that the parties and other persons participating in the proceedings are not harmed by ignorance of the law and, to that end, provide them with the necessary explanations and guidance . therefore, it is worth noting that the committee should inform extensively  –  even before issuing an 41 public governance, administration and finances law review • 2. 2020 the rules of medical experimentation on people in the light of the polish law and administrative solutions opinion – the entity submitting the experiment, not only about the applicable law, but also about other circumstances influencing the content of the decision . the bioethics committee should also pay attention to whether the experimenter will provide adequate information and whether he/she intends to inform the participants of the experiment about all aspects of the experiment that may affect their life or health . undoubtedly, the process before the bioethics committee should take into account the application of the principle set out in article 11 of the cap, i .e . active participation of the parties . the said provision stipulates that public administration bodies are obliged to ensure active participation of the parties at every stage of the proceedings and, before a  decision is issued, to give them an opportunity to comment on the evidence, materials collected and demands made . this means that before the committee adopts a resolution, it should consider whether it bases it only on the documentation submitted by the applicant, or whether it has collected other evidence (documents, opinions, etc .) and, in such a case, it should give the entity intending to conduct an experiment the opportunity to inspect the entire documentation and then to comment on the evidence collected . this principle will not only protect the applicant, but will potentially lead to a  fair explanation of the case, and thus may reveal possible irregularities and attempts to act contrary to medical ethics . the correct procedure before the committee should also be characterised by compliance with the provisions on formal correctness of the application . it follows from article 63 § 2 of the cap that an application should include at least an indication of the person from whom it comes, his/her address and request, and should satisfy other requirements set out in special provisions . such a  “special” provision is § 4(2) of the regulation of the minister of health and social welfare of 11 may 1999 on detailed rules for appointing and financing as well as the procedures for the operation of bioethics committees (official journal of laws 1999 nr 47, item 480 as amended), from which we derive that the application should contain: designation of the person or other entity intending to conduct the medical experiment, and in the case of a multi-centre experiment, also the names of all the centres in the country where the experiment is to be conducted; the title of the project, its detailed description and justification as to the advisability and feasibility of the project; name, surname, address and professional and scientific qualifications of the person in charge of the medical experiment; information about the insurance conditions of persons intending to participate in the medical experiment; data about the expected medical and cognitive benefits and, possibly, other anticipated benefits for persons subjected to the medical experiment . in addition to the above elements, the following should be attached to the application [as indicated in § 4 (3) of the regulation on detailed rules for appointing and financing as well as the procedures for the operation of bioethics committees]: a  draft of the medical experiment; information intended for persons subjected to the medical experiment containing detailed data on the aims and principles of conducting the medical experiment; expected therapeutic and other benefits for these persons, and the risk associated with participation in the experiment; a form of consent of the patient subjected to the medical experiment; a  declaration of acceptance of insurance conditions; a  declaration submitted by the person subjected to the medical experiment, in which he/she agrees to the processing 42 justyna kulikowska-kulesza – dominik kościuk public governance, administration and finances law review • vol. 5. no. 2.  of data related to his/her participation in the experiment by the person or another entity conducting the medical experiment . such a  detailed scope of the application undoubtedly affects the protection of the interest of the participants in the experiment, and this protection is strengthened by the disposition of article 64 § 2 of the cap, according to which, if the application does not meet other requirements set out in the provisions of law [including the pdd and the regulation  –  underlining added by the authors], the applicant should be summoned to remove the deficiencies within a  specified period, not shorter than seven days, with the information that failure to remove these deficiencies will leave the application without consideration . it would therefore be illegal to consider an application for an experiment, despite its incompleteness (e .g . omitting any of the above mentioned elements) . the protection of the interests of the participants in the experiment is strengthened by the application of the cap provisions and exceptions from the regulation concerning the formal correctness of taking and preparing a  decision (i .e . a  committee’s resolution) . according to article 107 of the cap, the decision should contain: designation of the public administration body; date of issue; designation of the party or parties; indication of the legal basis; ruling ; factual and legal justification; instruction on how to appeal against it, on the right to renounce the appeal, and on the consequences of renouncing the appeal; signature with the name, surname and official position of the employee of the body authorised to issue the decision, and  –  if the decision was issued in the form of an electronic document – a qualified electronic signature . in order for the opinion to be legally adopted, the committee “decides” by secret ballot, with the participation of more than half of the committee’s members, including the chairman or deputy chairman and at least two members of the committee who are not doctors . only votes for or against the opinion may be cast in a vote . it should also be noted that the resolution is signed by the members participating in its adoption . at the same time, it is clear that some of the general principles of administrative procedure are restricted in cases before committees . this is because the principle of speed of proceedings adopted in administrative proceedings (which implies that matters should be dealt with immediately, and sometimes within a  month or two months) is limited . however, it follows from § 6 (8) of the regulation of the minister of health and social welfare of 11 may 1999 on detailed rules for appointing and financing as well as the procedures for the operation of bioethics committees (official journal of laws 1999 nr 47, item 480 as amended), that the committee expresses its opinion no later than within three months of receiving complete documentation of the experiment . this limitation appears to be justified . the extended period of investigation may lead to a reliable clarification of the case and a  thorough examination of all aspects of the planned experiment . similarly, it should be argued that it is appropriate to extend (beyond the standard month specified in the cap) the time limit for the board of appeal to two months [§8 (3) of the regulation] . similarly, the principle of resolving the doubts in favour of a party (applicant, experimenter) should be subject to such restriction . the specific nature of an experiment requires the protection of essential goods (health and life) as a  priority superior to the “development of medicine” and the “achievements of civilization” . it is therefore justified  –  in proceedings concerning the issue of an opinion – to apply the exception specified in article 43 public governance, administration and finances law review • 2. 2020 the rules of medical experimentation on people in the light of the polish law and administrative solutions 7a (2) (1) of the cap, that this principle does not apply if an important public interest requires it . after all, it is primarily public (and also individual) interest to protect the life and health of people . 6. conclusions the analysis of the pdd regulations, in conjunction with the cap, penal code and the interpretation of these regulations in the existing  literature on the subject, allow to conclude that a  medical experiment can be defined as such an empirical action  –  carried out on a  person duly informed about the expected benefits and threatening adverse effects  –  which consists in expanding the knowledge of processes and phenomena occurring in the human body, and then the possible implementation of new diagnostic, therapeutic or prophylactic methods, aimed at the direct or indirect benefit for the health of the research subject or other people . what is more, it is reasonable to conclude that the current legal regulations in poland regulate the process of permitting medical experiments in such detail that no consent is likely to be given for unethical experiments which contradict to the idea of protecting life and health of every human being . not only the existence of a  whole range of subjective and objective restrictions on conducting experiments on people is clear, but it is also possible to demonstrate the existence of procedural restrictions resulting from the law and administrative proceedings . references adamiak, barbara (2005) . zagadnienie domniemania decyzji administracyjnej [the issue of presumption of an administrative decision] . in jan boć & piotr lisowski (eds .), podmioty administracji i prawne formy ich działania . studia i materiały z konferencji jubileuszowej profesora eugeniusza ochendowskiego [administrative entities and legal forms of operation . studies and materials from professor eugeniusz ochendowski’s jubilee conference] . tnoik, toruń . brzezicki, paweł (2012) . zasady wnoszenia opłat na rzecz komisji bioetycznych w wieloośrodkowych badaniach klinicznych produktów leczniczych [rules on the payment of fees to bioethics committees in multi-centre clinical trials of medicinal products] . kwartalnik prawa publicznego xii, 3/2012 . uksw – tnoik, warszawa – toruń . 9–17 . buchała, kazimierz & zoll, andrzej (1998) . kodeks karny, cz . ogólna, komentarz [penal code, general part, commentary] . wydawnictwo pravnicze, kraków . daniluk, paweł (2005) . cel leczniczy w świetle poglądów doktryny prawa [therapeutic purpose in light of the legal doctrine] . prawo i medycyna, 6(2), 46–58 . filar, marian, krześ, sławomir, marszałkowska-krześ, elwira & zaborowski, piotr (2004) . odpowiedzialność lekarzy i zakładów opieki zdrowotnej [the responsibility of doctors and health care institutions] . lex online . https://bit .ly/3dipizg iwańska, barbara (2000) . warunki prawne dopuszczalności przeprowadzania eksperymentów medycznych [legal conditions for the admissibility of medical experiments] . państwo i prawo, 70(2), 56–70 . http://czytelniaonline . pl/magazine/16777547/2000/2/toc karkowska, dorota (2009) . prawa pacjenta [patient rights] . oficyna, lex on-line . https://bit .ly/2xvq8vp https://bit.ly/3dipizg http://czytelniaonline.pl/magazine/16777547/2000/2/toc http://czytelniaonline.pl/magazine/16777547/2000/2/toc https://bit.ly/2xvq8vp 44 justyna kulikowska-kulesza – dominik kościuk public governance, administration and finances law review • vol. 5. no. 2.  kędziora, renata (2016) . odpowiedzialność karna lekarza w związku z wykonywaniem czynności medycznych [criminal liability of the doctor in connection with the performance of medical acts] . wolters kluwer, warszawa . kopeć, marcin (ed .) (2016) . ustawa o zawodach lekarza i lekarza dentysty . komentarz [act on the professions of physician and dentist . commentary] . wolters kluwer, warszawa . kubiak, rafał (2000) . zgoda uczestnika eksperymentu, cz . 1 [the consent of the participant in the experiment, part 1] . prawo i medycyna, 2(8) . nawrot, oktawian & wnukiewicz-kozłowska, agata (eds .) (2015) . temida w dobie rewolucji biotechnologicznej – wybrane problem [temida in times of biotechnological revolution – selected problems] . wydawnictwo uniwersytetu gdańskiego, gdańsk . nesterowicz, mirosław (2013) . prawo medyczne [medical law] . tnoik, toruń . zielińska, eleonora (eds .) (2014) . ustawa o zawodach lekarza i lekarza dentysty . komentarz [act on the professions of physician and dentist . commentary] . lex on-line . https://bit .ly/2bgaiyp legal references judgment of the polish supreme court of october 31, 1968, i kr 130/68, publ . osnkw 1969, nr 6, item . 69 . judgement of the vac in warsaw, june 25, 2014, vii sab/wa 15/14 (orzeczenia .nsa .gov .pl) . order of the sac, april 18, 2007, ref . no . ii osk 1112/06 (orzeczenia .nsa .gov .pl) . https://bit.ly/2bgaiyp © 2019 ludovika university press, budapest public governance, administration and finances law review vol. 4. no. 2. (2019) • 95–100 . case study new legal regulation of the administrative justice in the slovak republic1 juraj vačok* * associate professor, judr . juraj vačok, phd, comenius university in bratislava, faculty of law, department of administrative law . (e-mail: vacok1@uniba .sk) abstract: administrative justice is a  very strong element of control of public administration . its decisions not only control but also guide the future directions in an application of particular legal norms . the author evaluates the new changes of administrative justice in the slovak republic . he points out the main changes in comparison with the previous legal regulation and tries to evaluate them . he points out that it is too early to evaluate the whole new legal regulation . despite this fact, he states that it is possible to make a  partial evaluation on the basis of a  result and experiences acquired to this time . keywords: administrative justice; civil judicial proceedings; branch of law; general courts; new legal regulation 1. the current legal regulation administrative justice in the slovak republic is now connected to many changes . one of the most important is adopting the new legal act . it is law no . 162/2015 coll . on administrative judicial order, as amended2 (hereinafter: administrative judicial order) . it entered into force on 1 july 2016 . this law can be specified as a general law for administrative justice and administrative judicial proceedings . it means that special laws can regulate particular matters in a different way .3 the relation between special laws and the administrative judicial order is based on the principle of subsidiarity .4 nevertheless, it can be stated that most of the legal regulation is included in the administrative judicial order . however, it is difficult to predict its future development . the current situation is influenced by the fact that the administrative judicial order is valid only for a relatively short period . due to this fact, there was not enough time for the legislation to change special laws and create its own system of judicial review in particular areas of law . despite this fact, i suppose that special laws will not depart significantly from the general legal regulation in the administrative judicial order . i think that special laws will 10.53116/pgaflr.2019.2.8 mailto:vacok1@uniba.sk https://doi.org/10.53116/pgaflr.2019.2.8 96 juraj vačok public governance, administration and finances law review • vol. 4. no. 2. complete the gaps in the legal regulation in most situations or regulate specifics in particular proceedings which are typical for these kinds of proceedings . 2. legal regulation before the administrative judicial order administrative judicial order replaced law no . 99/1963 coll . on civil judicial order, as amended (hereinafter: civil judicial order) . this law regulated the procedure in matters of administrative justice in its fifth part with subsidiary use of the first part and second part of the civil procedural order . this was a  very big change in the area of administrative justice . civil judicial order was established to regulate the procedures within the civil procedures .5 i think that it was not appropriate to regulate the area of administrative justice in the same law .6 of course, there could be more opinions for this . among the colleagues of my university, there were also many discussions about the position of administrative justice in the system of law . these disputes were mainly between scholars with specialisation in civil judicial proceedings and scholars with specialisation in administrative proceedings .7 despite the different opinions about this question, administrative justice was considered a part of civil proceedings . it was because of section 1 § (1) of the civil judicial order which defined the subject-matter of this act . this provision connected the whole legal regulation with civil judicial procedure . it means that if proceedings in administrative justice were regulated in the civil judicial order, this law had to be considered a  part of civil judicial proceedings . 3. the new position of the administrative justice after adopting the administrative judicial order the adoption of the administrative judicial order strengthened the position of the administrative justice . this new legal regulation demonstrates that proceedings in ad ministrative justice cannot be regarded as a part of civil judicial proceedings . proceedings before administrative courts have their own separate legal regulation which reacts to their own needs and specifics . opposite to this fact, it can be mentioned that section 25 of the administrative judicial order refers to a  subsidiary use of law no . 160/2015 coll . on civil dispute order, as amended (hereinafter: civil dispute order) . this law regulates proceedings before courts in the private law dispute matters .8 truly, i am not satisfied with section 25 of the administrative judicial order . in my opinion, the proceedings before administrative courts should be separated from the proceedings in civil matters . i have more reasons for this opinion, which are connected mainly with the aim of administrative justice . this is not to solve disputes between two parties which are in horizontal relations to each other . the aim of administrative justice is the control of public 97 public governance, administration and finances law review • 2. 2019 new legal regulation of the administrative justice in the slovak republic administration . because of that, administrative justice controls the legality of acts and activities of public administration . even if we take into account the slovak legal history and tradition, administrative judicial proceedings are closely connected to the civil judicial proceedings . nevertheless, this fact does not mean that administrative judicial proceedings and civil judicial proceedings are identical . these proceedings can be similar and they have some common features, too . but this does not mean that it is correct to build only one kind of judicial proceedings . moreover, if this legal regulation is influenced mainly by amendments which are connected with the requests to the better civil judicial proceedings .9 because of these facts i consider one of the most important advantages that the amendments of the administrative judicial proceedings will react only to the needs of administrative justice . they will not be independent and they will be affected by a need to change and influence other areas of law . the separate legal regulation is also very important for the position of administrative justice . i am convinced that the separate law strengthens the position of every particular area of law . the separate legal regulation stresses the specifics and independence of this area . division of the previous legal regulation into separate laws should demonstrate that there are independent proceedings with their own aims and ways to reach them . 4. the main changes of the new legal regulation of administrative justice the new legal regulation follows up the previous legal regulation which was in the civil judicial order . it can be stated that the concept of reviewing is the same as some new kinds of actions . despite these facts i assume that the main part of the cases will still be connected with the reviewing of the legality of decisions, measures, inactivity and interferences of public administration .10 if we take into account conceptual changes, i draw attention to one of them, which is connected with the transformation of appeals to extraordinary remedies . the transformation of appeals to extraordinary remedies means that an appeal was replaced by a cassation complaint which can be filed against the final decision of administrative courts . pursuant to the civil judicial order, judicial proceedings were built on the principle of proceedings in two instances . the first instance judicial decision could be reviewed by a  higher instance administrative court which was usually the supreme court of the slovak republic . the new legal regulation changed this principle . according to that, administrative courts decide in one instance . the final decisions of administrative judicial courts can be reviewed by the supreme court of the slovak republic which has the status of a cassation court . this court decides on the basis of the filed cassation complaints, as an extraordinary remedy . it means that decisions of the administrative courts issued in one instance proceedings produce legal effects .11 this is different from the previous legal regulation which connects filing of the appeal with the suspensory effect . 98 juraj vačok public governance, administration and finances law review • vol. 4. no. 2. moreover, reviewing of decisions of the administrative courts by the supreme court of the slovak republic is built on the cassation principle . it is connected with the fact that a court of cassation cannot repair legal defects . it can only cancel acts which were issued in previous proceedings and return cases back with its legal opinion . this situation has an impact on legal certainty . it is connected mainly with the factor of time . if we take into account the length of the proceedings before a cassation court,12 it is possible to presume that decisions of the cassation court are issued at the time when decisions of administrative courts may be enforced . if decisions of administrative courts are enforced before issuing of decisions of cassation courts, decisions of the cassation courts may constitute only a formal outcome . in this context, it is important to notice that a  cassation complaint is not the final remedy within the system of reviewing of administrative decisions . decisions of the supreme court of the slovak republic can be reviewed by the constitutional court of the slovak republic . according to article 127 § (1) of law no . 460/1992 coll . on the constitution of the slovak republic, as amended (hereinafter: constitution of the slovak republic) there is a possibility to bring the constitutional complaint to the constitutional court of the slovak republic if the particular private persons invoke the violation of the own fundamental rights and freedoms .13 the new legal regulation changed the situation within the system of legal remedies in the area of reviewing of final administrative decisions . that means that internal legal regulation offers three legal remedies which are built on the cassation principle and can intervene in the final legal situation . of course, there are also possibilities to protect particular rights and duties at the international level . of particular importance in this context is the protection according to article 34 of the convention for the protection of human rights and fundamental freedoms before the european court of human rights . through this remedy, it is also possible to open the final legal situation . 5. conclusion it is hard to evaluate the current legal regulation of administrative justice . the main reason is that this regulation is very young and every society needs time to adapt to the changes . after a certain time of application of the new law, we can identify the main advantages and disadvantages and make a systematic evaluation . now we have only partial results which we reach from the direct assessment of the impact of the current legal regulation on the legal application practice . despite these facts we can conclude that the new legal regulation strengthens the position of the administrative justice because of the own separate legal regulation in the particular fields of law . it is also possible to state that the new legal regulation is more complex and more detailed . it will be interesting to monitor the changes within the system of remedies . the system amendment of replacing an appeal by a  cassation complaint can help the participants to solve the matter in the administrative judicial proceedings in a  shorter time by the final 99 public governance, administration and finances law review • 2. 2019 new legal regulation of the administrative justice in the slovak republic judicial decision of administrative courts, but on the other hand, there are more possibilities to interfere in the existing legal situation which was guaranteed as final . that is a further possible intervention in the principle of legal certainty which can have an impact on the costs and time in which the case will be finally solved . 100 juraj vačok public governance, administration and finances law review • vol. 4. no. 2. references 1 this contribution is a part of the research project “legal consequences of final individual administrative acts” supported by the scientific grant agency of the ministry of education, science, research and sport of the slovak republic and the slovak academy of sciences . the registration number of this project is 1/0686/18 . 2 this law was amended two times until the present day . 3 for instance section § 228d § (8) of law no . 233/1995 coll . on enforcement agents and enforcement activities (enforcement order) and amending of other acts as amended establishes a different jurisdiction of administrative courts in matters of disciplinary delicts of enforcement agents . 4 for the principle of subsidiarity see soňa košičiarová, správne právo procesné. všeobecná časť, 115 (šamorín, heuréka, 2015) . 5 it was established in section 1 of the civil procedural order . for the term civil procedure see svetlana ficová, marek števček et al ., občianske súdne konanie. 2 . vydanie, 19–30 (praha, c . h . beck, 2013) . 6 this confirms also the general part of the explanatory memorandum of the administrative judicial order . see www .nrsr .sk/web/dynamic/documentpreview .aspx?docid=408731 (accessed 1 february 2019) . 7 this is a personal experience of the author . 8 see section 1 and section 3 of the civil dispute order . 9 this can be demonstrated by the number of amendments to the civil judicial order . this law was amended more than eighty times . only around thirty from these amendments were adopted with the purpose to regulate also the administrative justice . these information were taken from the system aspi and www .slovlex .sk/pravne-predpisy/sk/zz/1963/99/20160614#predpis .cast-piata (accessed 26 february 2019) . 10 these terms are defined in section 3 of the administrative judicial order . 11 see ida hanzelová, ivan rumana, ina šingliarová, správny súdny poriadok. komentár, 71 (bratislava, wolters kluwer, 2016) . 12 we can take into account the length of the proceedings before a cassation court for the period up to one year . of course the length of the proceedings can be longer . see zuzana hamuľáková, preskúmavacia činnosť správneho kolégia najvyššieho súdu slovenskej republiky z hľadiska dĺžky konania, 60–65, in právoplatnosť správnych rozhodnutí – právna istota vs. legalita (bratislava, univerzita komenského v bratislave, právnická fakulta, 2018) . 13 article 127 § (1) of the constitution of the slovak republic stated: “the constitutional court decides on complaints by natural persons or legal persons objecting to violation of their basic rights and freedoms, or the basic rights and freedoms ensuing from an international treaty ratified by the slovak republic and promulgated in a manner laid down by law, unless other court makes decision on the protection of such rights and freedoms.” the english version is published on www .ucps .sk/ustava_sr_anglicky (accessed 7 march 2019) . http://www.nrsr.sk/web/dynamic/documentpreview.aspx?docid=408731 http://www.slov-lex.sk/pravne-predpisy/sk/zz/1963/99/20160614#predpis.cast-piata http://www.slov-lex.sk/pravne-predpisy/sk/zz/1963/99/20160614#predpis.cast-piata http://www.ucps.sk/ustava_sr_anglicky pga2019_02_b1 _hlk18895087 _hlk18895098 _hlk27344917 articles administrative liability for causing damage to selected components of the environment branislav cepek* the right to informational self-determination in the context of selected judicial decisions and practical background andrea erdősová* information security awareness in public administrations at an international level lilla garayová* blockchain technology – current status, challenges and perspectives in tax and customs law ladislav hrabčák,* monika stojáková* application possibilities of blockchain in accounting péter bálint király* budget allocation of taxes to territorial budgets ivana pařízková* the efficiency of tax collection in the czech republic eva tomášková* case study new legal regulation of the administrative justice in the slovak republic juraj vačok* pga2019_02 _hlk18895087 _hlk18895098 _hlk27344917 articles administrative liability for causing damage to selected components of the environment branislav cepek* the right to informational self-determination in the context of selected judicial decisions and practical background andrea erdősová* information security awareness in public administrations at an international level lilla garayová* blockchain technology – current status, challenges and perspectives in tax and customs law ladislav hrabčák,* monika stojáková* application possibilities of blockchain in accounting péter bálint király* budget allocation of taxes to territorial budgets ivana pařízková* the efficiency of tax collection in the czech republic eva tomášková* case study new legal regulation of the administrative justice in the slovak republic juraj vačok* pga2019_02_b4 _hlk18895087 _hlk18895098 _hlk27344917 articles administrative liability for causing damage to selected components of the environment branislav cepek* the right to informational self-determination in the context of selected judicial decisions and practical background andrea erdősová* information security awareness in public administrations at an international level lilla garayová* blockchain technology – current status, challenges and perspectives in tax and customs law ladislav hrabčák,* monika stojáková* application possibilities of blockchain in accounting péter bálint király* budget allocation of taxes to territorial budgets ivana pařízková* the efficiency of tax collection in the czech republic eva tomášková* case study new legal regulation of the administrative justice in the slovak republic juraj vačok* public governance, administration and finances law review vol. 7. no. 2. (2022) • 59–89. © the authors 2023 doi: 10.53116/pgaflr.2022.2.3 public perception of the hungarian local government reform results of an empirical study attila badó* ¤, gábor feleky** ¤ * full professor, head of the institute for comparative law and legal theory, university of szeged, e-mail: bado@juris.u-szeged.hu ** associate professor, head of the department of sociolog y, university of szeged, e-mail: feleky45@gmail.com abstract: following a change of government in 2010, the hungarian local government system underwent a period of significant transformation. the question of how it is viewed and the effects it may have are currently being debated. the centralising effort of the government had already become clear beyond a shadow of a doubt before the adoption of the cardinal act or the fundamental law (2011) itself. this was followed by the steps of the local government reform, which transferred many local government powers to the state. municipalities lost influence over local public education institutions, municipal hospitals and many other areas. in this situation, where there was a significant loss of influence by local elites, it became an interesting question to what extent this changed society’s relationship with local government. our comprehensive research has conducted a number of quantitative and qualitative studies to answer this question. between 2016 and 2018, our research group had the opportunity to conduct four empirical studies to assess knowledge, attitudes and opinions related to local government. this paper presents and interprets the results of this research, and an important area of public attitudes towards local government, in particular with regard to the division of responsibilities between the state and municipalities. keywords: local government, empirical studies, reform, centralising efforts in 2017, we set out to map the decision-making mechanisms of hungarian local governments. our aim was, among other things, to conduct a legal sociological study of the decision-making mechanisms of local governments and the effects of decisions on citizens that are made on the basis of these mechanisms, in order to provide an empirically verified picture of the mechanisms of the recent past. it was hoped that the results of this empirical study, based on the methods of legal historical experience and modern legal studies, would provide us with a unique body of knowledge on the social perceptions of decisions in relation to the decision-making mechanisms of local governments, which could enrich the literature on local government and help any https://doi.org/10.53116/pgaflr.2022.2.3 https://orcid.org/0000-0001-8262-3401 https://orcid.org/0000-0002-1367-3875 mailto:bado@juris.u-szeged.hu mailto:feleky45@gmail.com 60 attila badó, gábor feleky public governance, administration and finances law review • vol.  7. no. 2.  legislative reform. following a change of government in 2010, the hungarian local government system underwent a period of significant transformation. the question of how it is viewed and the effects it may have are currently being debated. however, the fact that 2011 saw a reform of a more than a 20-year-old unyielding system seems difficult to argue with. laced with the democratic ideal of self-government, the hungarian regime change of 1989 resulted in a fragmented local government system with a considerable degree of management authority. the local government model opted for by hungary, which can indeed be dubbed as the champion of decentralisation, could function uninterruptedly until 2010 with minor adjustments. the centralising effort of the government had already become clear beyond a shadow of a doubt before the adoption of the cardinal act or the fundamental law (2011) itself. this was followed by the steps of the local government reform, which transferred many local government powers to the state. municipalities lost influence over local public education institutions, municipal hospitals and many other areas. in this situation, where there was a significant loss of influence by local elites, it became an interesting question to what extent this changed society’s relationship with local government. our comprehensive research has conducted a number of quantitative and qualitative studies to answer this question. between 2016 and 2018, our research group1 had the opportunity to conduct four empirical studies to assess knowledge, attitudes and opinions related to local government. 1. national research. a questionnaire was developed to analyse the hungarian local government system, in which specific questions were assigned to examine the research objectives. due to limited financial resources and in order to ensure representativeness, we opted for the omnibus method, which was carried out by the public opinion research company szonda ipsos. the technical content of the survey was defined so that the population was the adult population of the country and the minimum sample size was set at 1,000 persons. the sample is representative of the adult population of the country in terms of the main sociological parameters (gender, age, education). in addition to providing an estimated margin of error for the sample, it was also requested that the survey be conducted in the form of a personal interview (papi or capi). 2. in addition to the national survey conducted by szonda ipsos, we also had the opportunity to get an idea of the opinion of the people of szeged on local government by linking it to an annual survey of the population of szeged. the population of szeged was surveyed in the framework of the szeged studies research, which has been ongoing for decades, on a representative sample of 1,000 citizens aged 18 and over those permanently residing in szeged, by gender, age, education and constituency. in the 2018 survey, the questionnaire was supplemented with questions on the relationship between local governments and the population. the extent to which the population considers public safety, 1 the szte sociology of law research group was formed in the mid-2010s to carry out effective empirical research in various fields of study in cooperation with the szte institute of comparative law and the szte department of sociology (badó et al., 2016; badó et al., 2017a; badó et al., 2017b; badó et al., 2018; badó et al., 2019). 61public perception of the hungarian local government reform public governance, administration and finances law review • 2. 2022 public transport, environmental care, roads and sewers, street lighting, health care, nursery and kindergarten care, primary and secondary education, job creation, waste collection, utilities, local public employment and social assistance in cash to be municipal tasks and priorities was examined. 3. in 2018, we also had the opportunity to conduct a nationwidesurvey – covering all law schools – in which we asked first and fourth year law students about some of the questions that were also included in the questions of the local government and the adult population of szeged. based on the law students’ opinions, some “triple” comparisons were possible in our analysis of municipal employees. 4. in the spring of 2018, we conducted a survey among the employees of the csongrád county municipalities, supplemented by personal interviews. in addition to their satisfaction with their job, we asked them about the operational characteristics of the office, the way in which decisions are taken, how they see the situation and development of their municipality, and their opinion on the changing municipal–state relationship in recent years. thanks to quantitative and qualitative surveys, the research team has acquired a vast amount of data (more than 1,000 respondents in the national survey of the population, 111 respondents in the survey of municipal employees in szeged, 1,034 respondents in the survey of the adult population in szeged, and 1,150 respondents in the national survey of law students).2 1. introduction the focus of our research was on the social reflectivity of the operation of municipal governments, and in this context we examined the attitudes of the population towards the operation of municipal governments at all levels of the municipal hierarchy. this system of attitudes of the population forms an attitudinal structure which, in our understanding, includes the dimensions of orientation/awareness, satisfaction, trust and perception. in the present study, we unpack the latter dimension. we will show 1. how the population perceives the importance of local government in the development of local democracy; 2. how they perceive the quality of local public services; 3. how they perceive the division of responsibilities between the state and local government in this area looking specifically at the division of responsibilities in the operation of public education and training institutions; and 4. whether the political embeddedness of the 2 during the research the following literature was used: dollery et al., 2006; aaberge & langorgen, 2006; agranoff, 2014; bjørnå & jenssen, 2006; bordogna & neri, 2014; brackertz, 2013; bulmer, 2015; callanan, 2011; chan, 2019; chen et al., 2010; cuadrado-ballesteros et al., 2013; dawkins, 2021; devereux & weisbrod, 2006; falleth & hovik, 2009; gawłowski & paweł, 2019; giannoccaro et al., 2008; hardell et al., 2020; james, 2011; kadirbeyoğlu & sümer, 2012; kákai, 2019; keivani et al., 2001; kudo, 2015; milán-garcía et al., 2021; mina & surugiu, 2013; murphy et al., 2011; narbón-perpiná & de witte, 2018; nurse, 2015; powell et al., 2019; reddick et al., 2022; reid, 2012; sellers & lidström, 2007; suditu et al., 2014; tamás, 2014; tarditi, 2020; vincent-jones, 2002; watt, 2006; wilson, 2003. 62 attila badó, gábor feleky public governance, administration and finances law review • vol.  7. no. 2.  leader influences the access of the municipality to resources. in our data analysis, we have systematically examined whether there are marked regional or municipal differences in public attitudes towards local government. 2. public services and attitudes in the underlying research, attitudes towards housing were conceptualised as a multidimensional concept, with a) dimensions of orientation/awareness; b) dimensions of satisfaction; c) dimensions of participation; and d) dimensions of evaluation. here we present the measurement results related to the latter component. the public’s evaluative attitude towards local governance and local public services is not only a specific research interest, but also a reference point for the organisation, either as a legitimacy factor (critical vs. supportive, dissatisfaction vs. satisfaction, lack of trust vs. trust). the legitimacy issue is more important in theoretical or political terms, while the pragmatic aspect is primarily – as the term itself implies – a factor influencing practice. as members of the ‘public’ (residents), people come into contact with the central or local government system in four main roles: client, customer, consumer and citizen. in our research, the residents interviewed expressed their opinions in the latter two capacities. relevant international research has highlighted the importance of citizens’ evaluation of public services. this is the starting point for the search for a balance between the needs of the population and the resources available (financial, organisational, human). among the alternative solutions (“pathways”), research is mainly focused on the restructuring of the division of tasks between state and local governments, the development of intermunicipal and regional cooperation, the outsourcing (privatisation) of public services, the promotion of civic responsibility and civil society participation, and the inclusion of citizens’ initiatives. thus, the alternative to a two-tier model (central and local government) for the provision of local public services is to become a multi-tier model, or to become a multi-level model. the motives behind these changes are generally twofold: on the one hand, of course, to meet the needs of the population (which is the primary legitimacy factor), and on the other, clearly to reduce the burden on traditional actors. in the last few decades, we have witnessed the ‘take-back’ of the welfare state and welfare systems, which has been exacerbated by cyclical austerity. this then has a direct impact on the different concepts, policies and practices of public services, which in many cases also vary according to political election cycles. the development of public services takes place in a social field of power between the axes of economic vs. social rationality and is the result of a social struggle between the actors involved. however, trends are of course not independent of nation state contexts, whether historical – such as the centralisation of societies or civil society traditions – or political structures that are currently at work. in case of hungary, this is reflected in strong centralisation efforts and the weakness of civil society. the tendency of governmental efforts to weaken the autonomy of local governments was also noticeable in the period of our empirical research. 63public perception of the hungarian local government reform public governance, administration and finances law review • 2. 2022 it was therefore of interest to us to find out how the population values local public services and how they perceive the role of the state and local government in providing them.3 3. local government and democracy self-governance is a fundamental democratic ideal, either as a requirement to be created/ implemented or as a real social historical phenomenon. the hungarian term (“self-government”) is not accurate, and may even be misleading. the english term local government is much more accurate. “self-government” exists at the level of the individual or family at most, but not at the institutional or municipal level. perhaps some of the ancient greek polis (athens),4 or the early american (new england) society described by tocqueville (2000) as a “township” were such, where power was built from the bottom up, and which tocqueville described as “coming to life by the hand of god”. europe, with its hierarchical, centralising models and practices, did not exhibit this pattern either before or after the 19th century.5 in europe, it is not by god, nor by the people, but by the state that it comes into being. it is the state that regulates the scope of municipal government, not the municipal “people” decide which tasks they are willing to entrust to the municipal administration, the county or the state. there is no direct democracy (nor is it possible), there is necessarily a system of representation, i.e. there is no ‘self-government’. as robert michels wrote at the beginning of the 20th century, the people do not rule, they do not govern, at most only in-abstracto.6 the possibility of local government in europe is an achievement, a “gift” forced upon us by central power, and in this sense a truly democratic phenomenon. it is important to reiterate that we are talking here about the morphogenesis of selfgovernment, that it is created within the framework of an existing state (unlike in early america), and of course it is another question whether this is primarily the result of pressure from citizens’ movements or of some aspect of the state leadership. the point is that it happens under the ‘stewardship’ of the state. there are, of course, examples (such as the 3 this was one of the issues raised in a 2005 survey in england, where only three out of eleven public services (police, public education and health) were considered by a majority of residents to be more of a public function (police: 56%, public education: 63%, health: 84%). 4 aristotle’s observations on city-state democracy are correct but distant. on the one hand, he states that the concept of citizen includes ab ovo the possibility of participation in common affairs (politics, 1269a–b), but on the other hand, he is sometimes sceptical about the participation and rights of citizens (the people) (politics, 1282a–b). 5 of course, there is no question of europe being united in terms of state involvement. this (the “london–moscow relation”) is illustrated by alexander gerschenkron in his work, who shows that as one moves from london towards moscow, there is a tendency for autonomy to decline and, at the same time, for state involvement to increase (gerschenkron, 1984). 6 “as organisation progresses, democracy begins to decline.” “the emergence of professionalism in democracy marks the end of democracy.” “any system of leadership is incompatible with the most important postulates of democracy” (michels, 2001, 240, 241). at page 244, michels (2001) quotes the utopian socialist victor considerant, that socialism does not mean the rule of those at the bottom of the hierarchy, but the organisation of society by a group of citizens. the anarchists knew this in advance, and then, for example, trotsky in soviet social practice, or milovamion gyilas đilas in yugoslav social practice saw that there was no question of ‘self-management’ or ‘selfgovernment’ by the people (haque, 2012, 6). 64 attila badó, gábor feleky public governance, administration and finances law review • vol.  7. no. 2.  yugoslav experiment in self-management) where it can be seen as an overarching principle of social organisation, but ‘stewardship’ is still present. at the same time, we argue that there is a very close link between self-governance and direct democracy, since self-governance functions as the primary framework (terrain) for direct democracy. but of course there is no automatic coincidence. and it is not only the constraining effect of state ‘tutelage’ that is at stake here, but also, for example, the formalisation of democracy by enabling charismatic ‘people’s leaders’ to bring local communities under their control, all the while retaining the institutional trappings of direct democracy.7 it is important to clarify whether this is also the perception of the population, especially in a socio-historical context in which there is neither a strong civil society nor a strong public will to create one. it is assumed that some kind of summative (integral) attitude will be established as a result of the public’s assessment of the areas in which local authorities operate. however, in order to ‘presuppose’ this, we first of all asked about the relationship between local government and democracy. it seems reassuring that the hungarian population still tends to see municipal self-government as an opportunity to strengthen local democracy. the responses received do not show a normal distribution, but a “rightward-sloping” one. although there are many (44.2 %) who are ambivalent on this issue, the proportion of “optimists” is more than double that of “sceptics” (16.7%) (39.1%). table 1. “local authorities have an important role to play in the development of local democracy.” how far do you agree with this statement? valid percentage not at all (1) 5.7 rather not (2) 11.0 disagree (1–2) 16.7 both (3) 44.2 more like yes (4) 25.4 absolutely (5) 13.7 agree (4–5) 39.1 mean (1–5) 3.3 source: ola 2018 7 these are not new things in social or political history. both aristotle in the fourth book of his politics and plato in the eight book of his republic provide numerous examples of this phenomenon. however, even in a formal sense, there is no democracy, for example in cases of ‘self-government’, where a temporary power, granting autonomy, entrusts the administration of territorial units to political appointees (haque, 2012). 65public perception of the hungarian local government reform public governance, administration and finances law review • 2. 2022 there are two ways to look for background factors that influence public attitudes on this issue. we can look at the evolution of the mean (3.3 on a five-point scale at national level) across different groups of the population, but we can also look for significant differences in the percentage of the three opinion groups (“sceptical”, “ambivalent” and “optimistic”). as regards the differences in the average values, we should first of all draw attention to the significant regional differences. such significant differences are particularly marked in the counties, where the values outside the (3.30) ± 10% zone of the average are worthy of attention. four counties are in the high agreement (“optimistic”) zone and seven in the low agreement (“sceptical”) zone. in the case of the former, we can speak of an almost coherent ‘northern zone’, while the picture is very mixed for scepticism, with a high degree of spatial dispersion. table 2. “local authorities have an important role to play in the development of local democracy.” how much do you agree with this statement – by county county mean (1–5) n fejér 3.95 35 nógrád 3.93 28 heves 3.93 34 komárom-esztergom 3.69 35 bács-kiskun 3.56 50 somog y 3.53 23 pest 3.51 110 budapest 3.50 169 csongrád 3.42 39 szabolcs-szatmár-bereg 3.40 47 all 3.30 937 veszprém 3.12 35 hajdú-bihar 3.07 55 baranya 3.02 43 borsod-abaúj-zemplén 2.96 50 békés 2.89 38 tolna 2.81 20 jász-nag ykun-szolnok 2.75 37 zala 2.68 46 vas 2.57 25 győr-moson-sopron 2.31 17 range: 1.64 source: ola 2018; sla 2018 66 attila badó, gábor feleky public governance, administration and finances law review • vol.  7. no. 2.  the most surprising is that instead of the expected homogeneity, there is a characteristic differentiation also at a regional level. table 3. “local authorities have an important role to play in the development of local democracy.” how much do you agree with this statement – by region* region mean (1–5) n central transdanubia 3.59 104 central hungary 3.51 280 north hungary 3.50 112 southern great plain 3.32 127 all 3.30 937 southern transdanubia 3.11 86 northern great plain 3.10 139 western transdanubia 2.57 88 range: 1.02 note: significance level: 0.00; eta = 0.286 source: ola 2018 with regard to the categories of municipalities, a “u” distribution emerges, which again (the “inverse u” distribution) means that those living in the largest municipalities are closest on the attitude scale to those living in the commune, and are uniformly separated from the urban zone between them. table 4. “local authorities play an important role in the development of local democracy.” how well do you understand/agree with this statement (%) – by type of settlement* settlement type mean (1–5) n budapest/capital 3.50 169 municipality 3.42 262 country 3.30 937 city/town 3.25 332 county seat 3.05 174 szeged city 3.49 1012 range: 0.45 note: significance level: 0.00; eta = 0.152 source: ola 2018; sla 2018 the regional effects can also be illustrated by the very large differences in the percentage distribution (structure) of opinion groups. for reasons of case numbers, we have now excluded counties, looking only for significant differences in the percentage of opinion groups between regions and municipal levels. 67public perception of the hungarian local government reform public governance, administration and finances law review • 2. 2022 significant differences between regions are also apparent in this comparison. more than striking is the ‘eccentric’ opinion structure of the west transdanubian region (győrmoson-sopron, vas and zala counties), with a radically high level of scepticism (16.7%), almost 30% (46.1%) above the average, and a correspondingly radically low level of optimism (11.2%), almost 30% below the average (39.1%). table 5. percentage of agreement (attitude) groups – by region region agree ambivalence disagree north hungary 13.4 33.0 53.6 central hungary 10.0 43.9 46.1 central transdanubia 5.7 50.5 43.8 southern great plain 18.1 41.7 40.2 all 16.7 44.1 39.1 northern great plain 23.0 41.7 35.3 southern transdanubia 14.0 60.5 25.6 western transdanubia 46.1 42.7 11.2 note: the lowest values are in grey and the highest values in blue. source: ola 2018 the “u” distribution in terms of settlement categories is reflected not only in the mean values (strength of attitudes), but also in the opinion structure (percentage distribution of grouped attitudes), which (like the “inverted u” distribution) means that the opinion structure of those living in the largest settlements is closest to that of those living in the commune, and they are uniformly separated from the urban zone between them. table 6. percentage of agreement (attitude) groups – by type of settlement municipal level disagree ambivalence agree country 16.6 44.3 39.1 budapest 11.8 41.2 47.1 county seat cities 25.9 41.4 32.8 other cities 17.8 47.1 35.0 communities 12.2 44.7 43.1 szeged 11.8 39.1 49.1 source: ola 2018; sla 2018 we were unable to detect the role of personal background factors in this issue in our national database. only with regard to educational attainment was there an interesting finding : graduates are more optimistic (3.50) about the other three levels of education (at least 8 years of primary school, vocational school, vocational training, vocational 68 attila badó, gábor feleky public governance, administration and finances law review • vol.  7. no. 2.  secondary school, high school), while they show a very similar score (between 3.25 and 3.27). otherwise gender, age, social status and participatory activity were not associated with attitudes towards “local governance and local democracy”. it would be tempting to conclude that individualistic factors – not co-determinants – are the main determinants of the position on this issue, but this seems to be contradicted by the regional differences that reflect the significant differentiation. 3.1. how has the quality of local public services developed in recent years? here again, we wanted to know how residents perceive the nationalisation process of recent years. this was not done by asking directly, but indirectly. we asked how they perceived the quality of local public services (schools, medical care, transport, energ y supply) in recent years. overall, a slightly critical assessment emerged from the responses. most respondents (nearly 60%) perceive no change, but the normal curve on this question is rather “left leaning”, i.e. those who perceive a deterioration are slightly more numerous than those who think there has been an improvement in the quality of local public services (schools, medical care, transport, energ y supply). table 7. how has the quality of local public services developed in recent years (%)? noticeable deterioration 23.6 has not changed 58.5 noticeable improvement 17.8 source: ola 2018 since we measured opinions using a symmetric scale, it was possible to examine two levels of measurement. we can follow the percentage of perceptions that deteriorate or improve, but we can also use a higher (numerical) level of measurement. looking at the latter level, significant differences between counties were observed. while the counties of tolna, bács-kiskun and győr-moson-sopron are significantly above the average in the “perception of improvement”, the counties of komárom-esztergom, borsod-abaúj-zemplén and csongrád are significantly above the average in the “perception of deterioration”. table 8. how the quality of local public services has developed in recent years? county mean n tolna 0.48 22 bács-kiskun 0.38 51 győr-moson-sopron 0.31 17 69public perception of the hungarian local government reform public governance, administration and finances law review • 2. 2022 county mean n fejér 0.22 35 vas 0.11 25 somog y 0.07 22 baranya 0.05 40 jász-nag ykun-szolnok 0.03 37 zala 0.03 37 nógrád 0.02 28 békés 0.02 35 budapest –0.04 165 all –0.06 924 pest –0.15 110 heves –0.19 34 szabolcs-szatmár-bereg –0.20 47 veszprém –0.26 34 hajdú-bihar –0.28 56 komárom-esztergom –0.30 36 borsod-abaúj-zemplén –0.34 52 csongrád –0.37 40 range: 0.85 source: ola 2018 in regional terms, only the deterioration rate in northern hungary differs significantly from the average. in terms of the percentage distribution, this means that the proportion of those who perceive an improvement is the lowest (only 6.1%), two-thirds (67.0%) of those who perceive no change, and the deterioration rate is only slightly above average (27.0%). table 9. how the quality of local public services has developed in recent years? region mean n southern transdanubia 0.17 84 western transdanubia 0.11 80 southern great plain 0.04 126 all –0.06 924 central hungary –0.08 275 central transdanubia –0.12 104 northern great plain –0.17 140 north hungary –0.21 115 source: ola 2018 70 attila badó, gábor feleky public governance, administration and finances law review • vol.  7. no. 2.  there is little variation at the level of the municipality (only that the municipal residents are the most critical, but this only means that their “decay rate” is slightly higher than the average). the same can be said for the social background variables (the decay rate of graduates and those who show some kind of participatory activity is slightly above the average). table 10. how the quality of local public services has developed in recent years? type of settlement mean n county seat 0.02 176 budapest –0.04 165 all –0.06 924 city –0.06 326 municipality –0.12 256 szeged –0.18 1006 source: ola 2018; sla 2018 filtering the deterioration and improvement rates (percentages) by the background variables, we find hardly any outliers. the average deterioration rate of 23.9% is significantly higher for graduates (27.8%), those who only vote (29.2%) and those who are active (30.5%), as well as in the north great plain (29.3%), north hungary (27.0%) and central transdanubia (27.9%) regions. those aged 50–59 (25.0%), living in the south transdanubian (30.6%) and south great plain (29.9%) regions recorded a significantly higher average improvement rate than the 17.8% recorded. in case of szeged, the proportion of those perceiving deterioration is significantly higher than the national one (36%), but in some population groups the lowest (maximum primary school) and the highest (college, university) educational attainment (41.1 and 39.0% respectively) and participation activity (41.2%) are around 40%. 4. perception of the role of the state in local public services after the indirect question, we asked a direct question. we asked people to assess the growing role of the state: do they think it is good that the state is increasingly taking over more of the responsibility for providing local public services (schools, medical care, transport, energ y) from local authorities. on the whole, the structure of opinion is very balanced, differing from the normal distribution only in that it is slightly to the left, with slightly ‒ but not significantly ‒ more people in favour than against. it can be said that there is neither strong majority support nor strong majority opposition to the state taking over an increasing share of the provision of local public services from local authorities. of course, we could also say that people are strongly divided in their assessment of this process. 71public perception of the hungarian local government reform public governance, administration and finances law review • 2. 2022 table 11. how good is the growing role of the state in public services (%)? not good at all 16.4 rather not good 17.4 both 39.1 rather good 22.4 very good 4.6 mean (1–5) = 2.81 source: ola 2018 table 12. how good is the growing role of the state in public services (%) – aggregated response categories rather not good 33.8 both 39.1 rather good 29.0 not good at all (1) 16.4 rather not good (2) 17.4 not good (1–2) 33.8 both (3) 39.1 rather good (4) 22.4 very good (5) 4.6 good (4–5) 27.0 mean (1–5) = 2.81 source: ola 2018 since this is not a “regulatory” issue but a more abstract one, we assumed that certain social background variables would influence the breakpoints. measuring at the interval level allows us to examine the relationships in both numerical (averaging over a fivepoint scale) and categorical (percentages) terms. the national average, measured on a five-point scale, is 2.81, somewhat below the critical range. more critical (lower) values are mainly found at the regional level, especially in the counties. groups in the zone more than 10% below the average value are considered to have a significant deviation, such as győr-moson-sopron (2.40), vas (2.08), heves (1.96) and nógrád (1.55) counties. the highest proportions of those who approve of the process are in the capital (3.14), zala (3.22) and tolna (3.34). the value of the range on a five-point scale (1.79) is significant, but a meaningful explanation would require the expertise of a regional expert. 72 attila badó, gábor feleky public governance, administration and finances law review • vol.  7. no. 2.  table 13. how good (1–5) is the growing role of the state in public services – by county county mean n tolna 3.34 21 zala 3.22 48 budapest 3.14 167 somog y 3.08 22 fejér 3.04 36 baranya 2.95 43 békés 2.91 34 pest 2.89 111 csongrád 2.85 41 all 2.81 937 borsod-abaúj-zemplén 2.78 51 bács-kiskun 2.78 52 szabolcs-szatmár-bereg 2.78 47 hajdú-bihar 2.70 56 jász-nag ykun-szolnok 2.66 37 komárom-esztergom 2.63 36 veszprém 2.59 33 győr-moson-sopron 2.40 17 iron 2.08 24 heves 1.96 33 nógrád 1.55 28 range: 1.79 source: ola 2018 at the regional level, the averages are naturally not so dispersed (the range is only 0.84), but it is more than striking how the north hungary region differs significantly from the other six regions at this aggregate level: it is here that the increase in the role of the state in local public services is viewed most critically. 73public perception of the hungarian local government reform public governance, administration and finances law review • 2. 2022 table 14. how good (1–5) is the growing role of the state in public services – by region region mean n southern transdanubia 3.07 86 central hungary 3.04 278 southern great plain 2.84 127 all 2.81 937 western transdanubia 2.76 89 central transdanubia 2.76 104 northern great plain 2.72 140 north hungary 2.23 112 range: 0.84 source: ola 2018 there is even less variation in the averages by municipality, but it is interesting to note that only the inhabitants of the capital (probably mainly because of the issue of public transport) have a positive (3.14) view of the state’s involvement, while in all other categories of municipalities the overall view is rather negative. in this respect, szeged has proved to be the most critical, and this is where we see the fact that the population has favoured a socialist municipal government for several cycles. table 15. how good (1–5) is the growing role of the state in public services – by type of settlement municipal level mean n budapest 3.14 167 city 2.82 325 all 2.81 937 municipality 2.69 267 county seat 2.68 178 range: 0.46 szeged 2.59 1018 source: ola 2018; sla 2018 since we assumed that answers to this question would be based on values and politicalideological affiliations, we expected that some social background factor (such as education or social status) would have an effect. to put it mildly, this was not the case. there was hardly any difference (the range was not at the 0.3 level for any background factor) and since we found that only the effect of territorial factors was detectable 74 attila badó, gábor feleky public governance, administration and finances law review • vol.  7. no. 2.  among the aspects included in the questionnaire, we think it likely that the explanatory power of this question is greater for the value system and political-ideological characteristics of the respondents, but such questions were not included in our questionnaire. 5. the expected division of responsibilities between the state and the municipality in matters of municipal management8 first of all, we have to note that people (also) consider all public services related to their municipal life to be, to a greater or lesser extent, but without exception, a municipal responsibility. fourteen such services we asked for their views on this matter. we wanted to know to what extent they consider the provision of these services to be a municipal responsibility (no, partly, fully). national figures show that of the fourteen service areas, there is not one that the majority of people do not consider to be even partly a municipal responsibility. thus, people believe that shaping the living conditions in their municipalities is primarily a selfgoverning task. from this point of view, of course, they do not expect paternalism from local authorities to the same extent for all services: most of all in the field of public employment and least of all in the field of utilities, but even the latter is still considered by the majority to be (partly or wholly) a local government responsibility. table 16. is it the responsibility of the local government to provide services to the public (%)? 1 this is not a municipal task 2 this is partly a municipal responsibility 3 this is a self-governing task 2 + 3 this is partly or entirely a municipal responsibility utility services 25.1 32.8 42.1 74.9 creation of jobs 16.1 42.7 41.2 83.9 public transport 15.2 34.3 50.5 84.8 health care 14.9 37.8 47.3 85.1 road network 11.8 42.6 45.6 88.2 sewer network 11.2 34.9 53.9 88.8 refuse collection, waste farming 11.0 27.8 61.2 89.0 providing street lighting 11.0 29.5 59.5 89.0 primary and secondary schools, education 10.6 40.9 48.5 89.4 public safety 9.8 40.8 49.4 90.2 8 the so-called esomar “a” category. 75public perception of the hungarian local government reform public governance, administration and finances law review • 2. 2022 1 this is not a municipal task 2 this is partly a municipal responsibility 3 this is a self-governing task 2 + 3 this is partly or entirely a municipal responsibility day nursery, kindergarten 7.4 34.1 58.4 92.6 social assistance in cash 6.6 30.6 62.8 93.4 environmental care, public services 5.7 26.8 67.5 94.3 local public employment 4.3 24.9 70.8 95.7 note: grey numbers indicate the highest proportion of respondents who chose the given response category. source: ola 2018 based on the responses, a scale of 0 to 1 was created,9 where a higher value indicates that it is considered more of a municipal responsibility and a lower value indicates that it is considered less of a municipal responsibility. no service scored less than 0.5 on average, with all services scoring between 0.59 and 0.83. table 17. is it the responsibility of the municipality to provide services to the public? all (index values) local public employment 0.83 environmental care, public cleanliness 0.81 social assistance in cash 0.78 day nursery, kindergarten 0.76 garbage collection, waste management 0.75 providing street lighting 0.74 sewer network 0.71 public safety 0.70 primary and secondary schools, education 0.69 public transport 0.68 road network 0.67 health care 0.66 creation of jobs 0.63 utility services 0.59 source: ola 2018 9 0 = “this is not a local government task”; 0.5 = “this is partly a local government task”; 1 = “this is a local government task”. 76 attila badó, gábor feleky public governance, administration and finances law review • vol.  7. no. 2.  we then used analysis of variance to examine the factors affecting the scale value. at the numerical level of measurement, rather interesting spatial patterns emerged, both at the level of municipalities, regions and counties. the most important feature of the pattern at the municipal level is the striking separation of the inhabitants of budapest (green) from the other three categories (county, city, municipality), who show the lowest values for all services, i.e. those who think most in terms of a state/self-government division of tasks. another important feature of the pattern is that the highest values (red) are given “alternately” (alternating between services) by the inhabitants of two categories (county seats, municipalities), i.e. they are the ones who most often identify local government as the “task holder”. in all cases, the values of those in the city category are “below” these two categories. szeged does not systematically deviate (in any direction) from the triad of county–capital– city–village. in five cases it is at a level higher than the maximum value and in four cases it is below the minimum value of the triad (and in four cases it is somewhere in between). table 18. whether the local government is responsible for providing services to the public – index values by type of settlement budapest county seat city municipality min.–max. difference szeged local public employment 0.70 0.84 0.84 0.90 0.20 0.87 caring for the environment, public services 0.68 0.83 0.83 0.85 0.17 0.89 social security cash benefits vision 0.69 0.77 0.79 0.83 0.14 0.72 nursery, kindergarten and pre-school vision 0.64 0.74 0.78 0.81 0.17 0.78 garbage collection, corpse-forestry 0.60 0.79 0.78 0.79 0.19 0.83 the provision of street lighting visit 0.56 0.82 0.78 0.77 0.26 0.85 sewer network 0.57 0.78 0.75 0.72 0.21 0.78 public safety 0.60 0.74 0.73 0.70 0.14 0.72 primary and secondary schools education and training 0.56 0.67 0.73 0.73 0.17 0.65 public transport 0.44 0.85 0.76 0.61 0.41 0.88 road network 0.54 0.74 0.68 0.69 0.20 0.71 health care 0.53 0.64 0.67 0.75 0,11 0.57 creation of jobs 0.50 0.64 0.64 0.67 0.17 0.6 utility services 0.43 0.72 0.59 0.59 0.29 0.63 note: green number = minimum value; red number = maximum value. source: ola 2018; sla 2018 77public perception of the hungarian local government reform public governance, administration and finances law review • 2. 2022 in the regional cross-section, we can highlight two regions with tendencies: northern hungary shows the highest values (in red), i.e. it is “municipality-centric” in all services, while at the other pole, the region of central hungary shows the lowest values (in green) in 9 out of 14 cases and minimum values in 5 cases (as the capital is located in this region, this is not surprising ). table 19. whether the local government is responsible for providing services to the public – index values by region c en tr al h un ga ry c en tr al t ra ns da nu bi a w es te rn t ra ns da nu bi a so ut he rn t ra ns da nu bi a n or th er n h un ga ry n or th er n g re at p la in so ut he rn g re at p la in m in .– m ax . local public employment 0.74 0.85 0.81 0.88 0.97 0.84 0.86 0.23 environmental care, public services 0.73 0.80 0.84 0.75 0.95 0.79 0.89 0.22 social cash care 0.72 0.77 0.70 0.87 0.91 0.76 0.82 0.22 nursery, kindergarten care 0.69 0.81 0.70 0.73 0.83 0.76 0.85 0.16 garbage collection, corpse-forestry 0.68 0.68 0.75 0.75 0.90 0.77 0.81 0.22 street lighting 0.66 0.76 0.80 0.64 0.86 0.75 0.81 0.20 sewer network 0.65 0.71 0.75 0.60 0.82 0.75 0.77 0.17 public safety 0.66 0.71 0.78 0.69 0.82 0.65 0.68 0.17 primary and secondary schools education and training 0.61 0.76 0.66 0.65 0.79 0.69 0.76 0.18 public transport 0.56 0.72 0.72 0.72 0.84 0.68 0.67 0.28 road network 0.61 0.70 0.69 0.57 0.80 0.66 0.70 0.23 health care 0.59 0.66 0.62 0.70 0.78 0.65 0.74 0.15 creation of jobs 0.55 0.66 0.65 0.60 0.73 0.63 0.67 0.18 public utility services comments 0.49 0.64 0.68 0.50 0.76 0.61 0.54 0.27 source: ola 2018 78 attila badó, gábor feleky public governance, administration and finances law review • vol.  7. no. 2.  ta bl e 20 . w he th er th e l oc al g ov er nm en t i s r es po ns ib le fo r p ro vi di ng se rv ice s t o th e p ub lic – in de x va lu es b y co un ty baranya bács békés borsod csongrád fejér győr hajdú heves komárom nógrád pest somog y szabolcs szolnok tolna vas veszprém zala all min.–max. pu bl ic sa fe ty 0. 64 0. 65 0. 70 0. 69 0. 68 0. 77 0. 73 0. 69 0. 87 0. 61 1. 00 0. 75 0. 73 0. 65 0. 58 0. 74 0. 70 0. 73 0. 83 0. 70 0. 42 pu bl ic tr an sp or t 0. 63 0. 60 0. 59 0. 68 0. 83 0. 70 0. 66 0. 72 0. 99 0. 63 0. 99 0. 77 0. 81 0. 63 0. 69 0. 80 0. 81 0. 83 0. 69 0. 68 0. 55 en vi ro nm en ta l ca re , p ub lic cl ea nl in es s 0. 73 0. 82 0. 98 0. 93 0. 89 0. 96 0. 72 0. 79 0. 96 0. 77 1. 00 0. 82 0. 80 0. 87 0. 68 0. 74 0. 83 0. 67 0. 88 0. 81 0. 33 r oa d ne tw or k 0. 56 0. 73 0. 67 0. 68 0. 68 0. 75 0. 63 0. 70 0. 90 0. 64 0. 94 0. 72 0. 64 0. 70 0. 56 0. 53 0. 90 0. 70 0. 62 0. 67 0. 41 se w er n et w or k 0. 58 0. 76 0. 78 0. 69 0. 77 0. 78 0. 51 0. 85 0. 87 0. 68 0. 99 0. 79 0. 70 0. 73 0. 64 0. 55 0. 87 0. 68 0. 76 0. 71 0. 44 st re et li gh tin g 0. 63 0. 76 0. 83 0. 82 0. 86 0. 89 0. 67 0. 87 0. 83 0. 76 1. 00 0. 84 0. 85 0. 67 0. 67 0. 44 0. 85 0. 61 0. 82 0. 74 0. 56 h ea lth c ar e 0. 72 0. 68 0. 91 0. 61 0. 67 0. 80 0. 72 0. 80 0. 91 0. 55 0. 94 0. 68 0. 78 0. 60 0. 48 0. 57 0. 50 0. 62 0. 64 0. 66 0. 46 n ur se ry , k in de rga rt en c ar e 0. 75 0. 78 0. 95 0. 72 0. 84 0. 85 0. 70 0. 83 0. 88 0. 71 0. 99 0. 77 0. 74 0. 80 0. 59 0. 70 0. 57 0. 87 0. 76 0. 76 0. 42 r un ni ng p ri m ar y an d se co nd ar y sc ho ol s, ed uc at io n 0. 63 0. 75 0. 83 0. 63 0. 72 0. 77 0. 66 0. 73 0. 87 0. 63 0. 99 0. 70 0. 68 0. 71 0. 61 0. 65 0. 58 0. 86 0. 69 0. 69 0. 43 ex is te nc e of jo bs 0. 73 0. 69 0. 63 0. 54 0. 67 0. 69 0. 67 0. 64 0. 86 0. 54 0. 96 0. 62 0. 56 0. 68 0. 54 0. 37 0. 57 0. 74 0. 68 0. 63 0. 59 w as te tr an sp or t, w as te m an ag em en t 0. 72 0. 81 0. 77 0. 88 0. 85 0. 72 0. 71 0. 83 0. 86 0. 60 1. 00 0. 80 0. 79 0. 81 0. 62 0. 76 0. 86 0. 71 0. 72 0. 75 0. 40 u til it y se rv ic es 0. 58 0. 54 0. 50 0. 55 0. 59 0. 63 0. 67 0. 70 0. 92 0. 56 0. 96 0. 60 0. 45 0. 58 0. 51 0. 39 0. 77 0. 73 0. 65 0. 59 0. 57 l oc al p ub lic em pl oy m en t 0. 86 0. 75 0. 97 0. 97 0. 91 0. 91 0. 71 0. 87 0. 95 0. 79 0. 99 0. 81 0. 78 0. 92 0. 68 1. 00 0. 84 0. 84 0. 82 0. 83 0. 32 so ci al a ss is ta nc e in c as h 0. 86 0. 74 0. 84 0. 89 0. 89 0. 86 0. 62 0. 74 0. 87 0. 64 0. 99 0. 77 0. 76 0. 86 0. 66 0. 99 0. 64 0. 81 0. 76 0. 78 0. 37 so ur ce : o l a 2 01 8 79public perception of the hungarian local government reform public governance, administration and finances law review • 2. 2022 in the table below, the county (counties) with the maximum value are marked in red and the counties with values close to the maximum are marked in pink. dark green indicates those representing the minimum value and light green those close to it. the counties between the two pole fields remain in white. the most striking phenomenon of inter-county disparities is represented by the county of nógrád, which stands out (“outgrows”) its extreme local government centrality. there are some counties (heves, békés) which, in addition to their intermediate values, produce only a few values close to the maximum. alongside them, there are several “green” counties (above all jász-nag ykun-szolnok and komárom-esztergom, then győr-mosonsopron, baranya), whose inhabitants prefer a more state/self-government division of tasks. pest without budapest is the only region in the intermediate zone for all services (without minimum and maximum intermediate values). otherwise, the largest differences between counties were in the areas of job creation (0.59), utilities (0.57), street lighting (0.56) and public transport (0.55). the division of responsibilities between local government and the state in the field of municipal management is an area of concern where the responses of the population are not only explained by spatial variables (municipal level, region, county), but also by social background variables (education, social status). as far as education is concerned, two specific features of this relationship should be highlighted. the first is that the four education categories tend to move together (giving close values) for the 14 services. the other is that, on virtually all issues, the lowest educational attainment levels are the most likely to take a self-government-centred position (the exception is street lighting, where the lowest value is shown). table 21. whether the local government is responsible for providing services to the public – index values by educational level max. 8 general apprenticeshiptraining secondary school, vocational school college, university public safety 0.78 0.65 0.67 0.69 public transport 0.76 0.64 0.65 0.64 environmental care, public cleanliness 0.85 0.81 0.78 0.79 road network 0.75 0.65 0.65 0.60 sewer network 0.77 0.68 0.71 0.68 street lighting 0.72 0.74 0.76 0.75 health care 0.70 0.67 0.63 0.63 day nursery, kindergarten 0.79 0.80 0.72 0.70 running primary and secondary schools, education 0.76 0.74 0.62 0.63 creation of jobs 0.74 0.58 0.57 0.60 80 attila badó, gábor feleky public governance, administration and finances law review • vol.  7. no. 2.  max. 8 general apprenticeshiptraining secondary school, vocational school college, university garbage collection, waste management 0.79 0.75 0.73 0.73 utility services 0.70 0.53 0.55 0.55 local public employment 0.87 0.85 0.79 0.82 social assistance in cash 0.82 0.77 0.75 0.78 source: ola 2018 in case of social status, the pattern is similar to that of educational attainment: basically, the co-movement of different statuses in the evaluation is also observed here, but it is also clear that the lowest status (esomar category “e”) is the most likely to express municipal centrality (again, the exception is street lighting, but not the highest “a” status, but those in the middle “b” and “c” categories are most likely to hold this view), with higher status people thinking more in terms of task sharing. table 22. whether the local government is responsible for providing services to the public – index values by social status “a” “b” “c” “d” “e” public safety 0.65 0.66 0.68 0.66 0.74 public transport 0.59 0.66 0.67 0.61 0.71 environmental care, public cleanliness 0.70 0.78 0.80 0.81 0.84 road network 0.59 0.61 0.65 0.64 0.71 sewer network 0.61 0.70 0.74 0.63 0.74 street lighting 0.70 0.76 0.76 0.69 0.74 health care 0.63 0.59 0.64 0.62 0.71 day nursery, kindergarten 0.68 0.66 0.74 0.72 0.81 running primary and secondary schools, education 0.66 0.57 0.65 0.67 0.76 creation of jobs 0.57 0.58 0.59 0.61 0.67 garbage collection, waste management 0.75 0.70 0.75 0.75 0.77 utility services 0.53 0.51 0.57 0.57 0.63 local public employment 0.79 0.77 0.81 0.85 0.87 social assistance in cash 0.68 0.78 0.77 0.78 0.80 source: ola 2018 5.1. state versus local government, who should own public education institutions? this question is intended to ask about the relationship between the competences of the state and the local government, and which solution seems to be more favourable to the 81public perception of the hungarian local government reform public governance, administration and finances law review • 2. 2022 inhabitants of the municipalities. of course, it is not just a question of asking people to formulate their views in general terms, but also of asking them to give their opinions on specific issues (tasks). first of all, on issues where there has been a recent ‘restructuring’ and the state has taken over (taken away) powers previously vested in local authorities. one such area was the running of public education establishments (szüdi, s. a.; forray & kozma, 2013, p. 33). we asked people whether they think that the maintenance and operation of public education institutions (kindergartens, primary schools, secondary schools) should be the responsibility of the state, local authorities or churches and foundations. this question is not, in the opinion of the inhabitants of the municipalities, a point of reference for either those in favour or those against the changes imposed. a very similar proportion of respondents think that the maintenance and operation of public education establishments should be the responsibility of the state or local authorities, and only a few (one or two per cent) think that churches and foundations should have a maintenance and operation role in this area. the equilibrium ratios observed at the national level do not vary significantly from one municipality to another. residents of budapest and municipalities are in full agreement, with a slightly higher proportion (48.4%) than average (58.4%) of residents of county capitals preferring the state, while a slightly higher proportion (49.8%) than average (55.3%) of residents of other cities preferring the municipalities as “owners”. we found that here too, there are mainly regional differences, and less dependent on the personal parameters of the respondents. when looking at the question at a regional cross-sectional level, two regions stand out with a significantly higher proportion of respondents than the 81% average perceiving the role of politics as influential. one of the two regions is south transdanubia (93.3%) and the other is northern hungary (95.7%). the social researcher is immediately struck by the fact that, on the one hand, a large proportion of the population in these regions live in small rural settlements and, on the other, the roma population is over-represented in comparison with the overall proportion of the population in these settlements. table 23. does the fact that the mayor of a municipality belongs to the governing party affect the development of the municipality – by region region valid percentage north hungary 95.7 southern transdanubia 93.3 western transdanubia 81.1 all 81.0 northern great plain 78.4 central hungary 77.8 southern great plain 75.4 central transdanubia 73.1 82 attila badó, gábor feleky public governance, administration and finances law review • vol.  7. no. 2.  table 24. who should own the public education institutions (%)? state local government churches, foundations country 48.4 49.8 1.8 budapest 48.1 48.1 3.7 county seat 58.4 41.6 0.0 city 41.9 55.3 2.7 municipality 49.8 49.4 0.8 szeged 48.6 49.3 2.1 source: ola 2018; sla 2018 by conducting a regional comparison, we found that the region of western transdanubia is again the furthest away from the relative similarity of the six regions: here, compared to the average (48%), a much higher proportion (71.1%) favours the state as the maintainer and operator of public education institutions. in contrario, this also means the lowest level of support for the role of local government (only 28.9% instead of 49.8%). do background variables create significant differences, i.e. do they disrupt the average equilibrium state? neither gender, nor age, nor education, nor social status, nor participation activity have a differentiating effect. on the whole, it seems that people at national level also see this issue as a pragmatic rather than a value-based, political-ideological issue. 5.2. the role of the mayor’s government party in the development of the municipality (tamás, 2014) let us treat as a sociological fact that the differential relation to redistributive power naturally affects the differential access to resources, regardless of the normative order of resource allocation and access to resources.10 since this relationship is not only a matter of knowledge leaking out of informal channels and forming a more or less coherent picture in the public’s interest (see almond, 1950), but is also present in the mediatised public sphere, it is a particularly fascinating task to understand the public images that are associated with it. 10 recent national election campaigns have made it clear that local residents should take this into account when casting their votes. partisanship in government is of particular importance in systems where the executive is highly personalised. a pro-government politician in a large rural town recently told the local media that the town had ‘received’ its new resources from the prime minister personally, and that the town council owed him a debt of gratitude. 83public perception of the hungarian local government reform public governance, administration and finances law review • 2. 2022 our question was: in your opinion, does the fact that the mayor of a municipality belongs to the governing party affect the development of the municipality? the picture is quite clear: four out of every five respondents think that the political affiliation of the mayor has an influence. in other words, municipal leadership is not just about coordinating local affairs, not just about dealing with policy issues, but also about managing the political context. the “mayor’s office” can thus be seen as a local political institution whose functioning is also a function of the ‘big political’ power structure. table 25. does the fact that the mayor of a municipality belongs to the governing party influence its development? valid percentage yes, it affects 80.9 not affected 19.1 source: ola 2018 the really fascinating question is whether there are substantive differences in the public’s perception of political influence. we found that here too there are mainly regional differences, less dependent on the personal parameters of the respondents. table 26. does the fact that the mayor of a municipality belongs to the governing party affect the development of the municipality? region valid percentage north hungary 95.7 southern transdanubia 93.3 western transdanubia 81.1 all 81.0 northern great plain 78.4 central hungary 77.8 southern great plain 75.4 central transdanubia 73.1 source: ola 2018 we also have county-level data, so we can see how the responses of people living in the counties of these two regions have evolved. but here again we run into the methodological limitations of using percentages because of the small number of cases per county. this should be borne in mind when considering the following county data, which exceed 90%. 84 attila badó, gábor feleky public governance, administration and finances law review • vol.  7. no. 2.  table 27. does the fact that a municipality’s mayor belongs to the governing party influence the development of a municipality – according to some high percentage counties region percentage number of cases in relation to the number of elements in the subsample north hungary heves 100.0 34–34 borsod-abaúj-zemplén 94.4 51–54 nógrád 92.6 25–27 southern transdanubia somog y 100.0 23–23 tolna 91.3 21–23 baranya 90.9 40–44 other counties with high value szabolcs-szatmár-bereg 95.7 44–46 csongrád 90.2 37–41 source: ola 2018 however, it cannot be said that this high value – indicative of political influence – is a  characteristic of small municipalities, since in the distribution of municipalities, although they have the highest value, they hardly differ from the value of county seats. table 28. does the fact that the mayor of a municipality belongs to the governing party affect the development of the municipality – by type of settlement municipal level valid percentage country 80.9 budapest 74.6 county seat 83.7 city 79.2 municipality 85.2 szeged 88.1 source: ola 2018 when examining the perception of political influence by individual background characteristics, we found that only two groups of the population are close to 90%: those with the highest social status (88.1%) and those with “only voting” participation activity (88.4%). there is no function effect anywhere and, interestingly, even educational attainment shows no correlation with these perceptions. 85public perception of the hungarian local government reform public governance, administration and finances law review • 2. 2022 6. summary in order to map the attitude of the population towards the municipalities, we have tried to take a “deliberative” approach. this means that before asking the respondents for an evaluation, we wanted to clarify their “competence background”. on the one hand, we wanted to know where they obtained their information (media, network, personal experience) and, on the other hand, what kind of participatory activity they were engaged in, i.e. whether they had already used any of the institutional forms that allow them to learn about local government (above all elections, the parliamentary reception, public hearings, citizens’ forums, council meetings). we felt that these two important background variables could help to explain the public’s awareness of local government (knowledge of the law, the scope of its tasks, the way it operates, the actors involved), their satisfaction and confidence and their perceptions of recent changes. the two schematic diagrams below illustrate how the survey was structured in this way. the question is whether we have produced data that can only be interpreted in themselves – and then we have in fact only fulfilled the requirements of the genre that social research scepticism calls “factolog y”, “national book-keeping”, etc. – or whether our data point in a certain direction, raising the level of abstraction of the research results. we feel that, in many respects, we have succeeded in gaining insights that can be interpreted in a theoretical framework, that show definite social contexts and that require further explanation. interpretation of the measurement results includes the characteristics of the respondent population relevant to our topic. our research has found that a) the hungarian population has a relatively high level of awareness of the functioning of local government; in contrast, b) their level of participation is markedly low; and c) they have a moderately positive level of satisfaction and trust in local government. there is also a contextual factor, namely d) a shift in the relationship between the state and local government towards a weakening of local autonomy. these are therefore the underlying characteristics of the attitudes of the population we are examining in this study. a specific pattern emerged as a result of these evaluative attitudes. overall, it can be concluded that attitudes towards the functioning of local government are mainly influenced by territorial-local (region, county, type of municipality) factors, with only a very modest influence from the personal (socio-demographic, socio-cultural) characteristics of the respondents. this contradicts our expectations that age or education, for example, may play a more significant role in the perception of the functioning of local power. instead of social fault lines, territorial fault lines differentiate population attitudes. to illustrate this, the role of local government in the development of local democracy was rated highest by graduates and lowest by the less educated, but the gap between them was only a quarter of that between regions and only a sixth of that between counties. since we are measuring attitudes, it is an exciting “discovery” that the role of personal characteristics in the formation of attitudes is subordinated to the “structural” (contextual) factor, i.e. the object of the attitude. local realities dominate the perception of reality, not the perceptual positions of the perceivers. this would seem to call into question the explanatory power of the “social subjective reality” viewpoint. 86 attila badó, gábor feleky public governance, administration and finances law review • vol.  7. no. 2.  first of all, we must note that the hungarian population’s level of awareness of local government is relatively high. their primary sources of knowledge are the media (local newspapers, radio, tv and the internet) and their personal network of contacts (their circle of acquaintances). a significant proportion (80–90%) are aware of the way in which the most important local government actors (mayor, councillor, notary) take office; they know who the legislator is in the case of the law (almost 80%) or the municipal decree (almost two-thirds); they know the mayor (over 80%) and even the political side supporting him (two-thirds). however, there is a difference in awareness; the “low point” is that very few people (just under 50%) know their local councillor. the level of public participation is particularly low. not even half of the population took part in the last municipal elections, and only a fraction (a few percent) took advantage of one of the institutional opportunities to learn about the tasks and functioning of the municipality (reception hours for representatives, public hearings, citizens’ forums, council meetings). there is no legitimacy deficit: even on the eve of the next elections, local governments have the support of the majority of the population, expressed in a moderately positive level of satisfaction with their work and confidence in them. references aaberge, r. & langorgen, a. 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(2019) • 78–85 . budget allocation of taxes to territorial budgets ivana pařízková* * judr . ivana pařízková, phd, department of financial law and economics, faculty of law, masaryk university, the czech republic . the author specialises in financial law, budget law and tax law . (e-mail: ivana .parizkova@law .muni .cz) abstract: the contribution deals with the financing of territorial self-governing units in the czech republic . the economic basis of local governance is still the most important and the most complicated issue of local governance . local governances need economic independence for filling their tasks . the aim of this paper is to describe the importance of budget allocation of taxes (bat) for municipal and regional budgets in the czech republic and, on the basis of description and critical analysis or comparison and synthesis of acquired knowledge, to confirm or disprove the hypothesis that partial amendments to the act on budget allocation of revenue of certain taxes to territorial budgets damage municipalities and regions or, on the contrary, strengthen their permanent financial basis . description, analysis and synthesis are used as a method for writing this article . keywords: budget allocation; public sector; territorial self-governing unit; the budget; the czech republic 1. introduction the issue of territorial budgets is a  topic that is not satisfactorily addressed by law and, as a  result, it is often very thorny and debatable, although there are amendments to the law every year or new laws are created . as an example, we can mention act no . 23/2017 coll . on the rules of budgetary responsibility, as amended . however, problems still arise as to how much entitlement can be granted to these self-government institutions and how many levels the self-government should have . in order for these self-government units to carry out their tasks and to avoid the disproportionate interference of the state in their activities, these self-government units must necessarily have economic independence, i .e . they must have their own assets and their own funds (resources) . this is the so-called economic basis of a  municipality and a  region, within which the municipality and the region operate independently, under the conditions stipulated by special regulations .1 the act on municipalities and the act on regions define the conditions of the economy only in a  framework . they generally refer to the property of municipalities and regions, establish the right of municipalities and regions to manage, based on a  contractual principle, also with the property of other entities, and impose on municipalities and regions the obligation to manage according to the budget .2 10.53116/pgaflr.2019.2.6 mailto:parizkova@law.muni.cz https://doi.org/10.53116/pgaflr.2019.2.6 79 public governance, administration and finances law review • 2. 2019 budget allocation of taxes to territorial budgets budget allocation of taxes in the czech republic or tax allocation as stated in specialised literature determines to which budget the relevant tax or part thereof flows . tax revenue and, therefore, budget allocation of taxes play a decisive role in terms of revenue of municipal and regional budgets and have a  significant impact on their financial stability and autonomy . it is also true that this revenue is not in any way assigned . specialised literature often discusses whether budget allocation of taxes is a subsidy or transfer, and what can be considered transfers and subsidies . in order to be able to answer what is the budget allocation of taxes, first of all, we need to make a brief description of the concept of transfer and subsidy .3 generally speaking, a transfer means transferring capital and, in terms of economics, is considered to be a  government payment to other entities for which the government does not receive consideration in the form of production factor services owned by the entities . transfer payments include, for example, payments of old age and disability pensions, child allowances, maternity allowance or unemployment benefits . transfer payments in this model are independent of the size of the total pension . a  subsidy in economics means a  financial donation or a  financial reimbursement similar to the donation by the state or territorial self-government unit to the relevant entity, in order to reduce the price of a particular property the provision of which is in the “public interest” . for our needs, it is important that the concept of subsidy is defined by budget rules providing that a  subsidy means funds of the state budget, state financial assets or the national fund provided to legal or natural persons for the intended purpose and, at the same time, the law stipulates that the subsidy or refundable financial assistance is not a legal claim unless a specific regulation stipulates otherwise . budget allocation of taxes is not a  typical subsidy since funds from the collection of taxes are reallocated by determining a  specific share for a  territorial self-government unit based on a mathematical formula according to established criteria . the state has decided to leave some means of tax revenue to entities other than the state, even though they are derived from it to a  certain extent . it is a  manifestation of fiscal decentralisation, when decentralisation ensuring the degree of financial self-sufficiency of territorial self-government units takes place in addition to decentralisation of the performance of public ad ministration (powers and activities) . budget allocation of taxes, often abbreviated to bat, does not constitute direct financial flows between the state budget and territorial budgets, since the collection of the statutory and allocated taxes is immediately divided into precise shares . reallocation takes place immediately after a selection phase, i .e . before the volume of selected funds becomes part of a specific public budget . budget allocation is certainly a  crucial element in defining the links between the state and territorial selfgovernments in general . the discussion is conducted in the sense of what is considered separate tax revenue and when it is a transfer .4 most confusion is caused by taxes or the share of their revenue . two situations can be distinguished . if the competent territorial self-government unit can affect the level of taxation by means of certain structural elements of tax such as tax rates or adjusting the tax base of the tax imposed, such revenue is considered to be a  separate tax revenue of that territorial self-government unit . however, if a territorial self-government unit has no influence on the structural elements of a  tax and this influence is realised only by the central 80 ivana pařízková public governance, administration and finances law review • vol. 4. no. 2. government, then the reallocation or allocation of selected revenues is made according to the established criteria .5 in this case, such allocation, i .e . the distribution of tax revenue, can be designated as a transfer .6 if we accept the tax revenue differentiation thus set, the tax revenue from real estate intended for municipalities will remain the only tax revenue in the true sense of the word for a territorial self-government unit in the czech republic . other so-called tax revenues are already based on the setting of the budget allocation of taxes where the recipient, region and municipality will receive only the determined proportion of tax revenue according to the rules laid down by the law .7 the most important law determining the autonomous revenues of territorial self-government units is act no . 243/2000 coll . on budget allocation of revenue of certain taxes to territorial self-government units and to certain state funds (the act on budget allocation of taxes), as amended, which is to ensure their fiscal sufficiency . the existing act allocates tax revenue in such a way that the state budget and territorial self-government budgets are balanced and their fiscal volume develops relatively in agreement . this requirement is achieved by an extended portfolio of shared taxes, which in practice means that the share of municipalities and regions is secured both on progressive taxes and regressive taxes .8 given that tax revenues represent about half of the total revenues in municipalities and regions, it is appropriate to perceive changes in their development since 1993, i .e . since the establishment of the independent czech republic and the adoption of a  new tax system, and also to see the causes of the necessary changes in budget allocation of taxes to municipalities and regions in particular periods .9 2. the concept of budget allocation, shared and assigned taxes budget allocation generally means either legally defined types of taxes that flow directly to the  budgets of municipalities and regions or the statutory share of municipal and regional budgets in the national tax revenue . the issue of budget allocation of taxes is closely related to fiscal decentralisation, which accompanies the general organisational principle in public administration, namely the decentralisation of powers and activities . it is a necessary condition for mutually autonomous decision-making of individual levels of management . depending on the degree of fiscal decentralisation, we can also assess the applied model of fiscal federalism in the given budget system . the most common, combined model sets own revenues for each level of management and government level, and budget allocation of taxes plays an irreplaceable role in this matter . it is used to determine the extent of financial autonomy of these individual government levels, especially regional and local selfgovernments .10 from a theoretical point of view, the combined model can be divided into: ƿ a combined model of fiscal federalism with predominant centralising elements in which most of the revenue is concentrated in the central budget from which sub sidies are provided to other segments of the public budget system ƿ a combined model of fiscal federalism with predominant decentralising elements, where the importance of territorial self-governments is strengthened particularly through the determination of a larger part of separate revenue and thus greater self-sufficiency11 81 public governance, administration and finances law review • 2. 2019 budget allocation of taxes to territorial budgets these divisions are already somewhat redundant in terms of public finances because finding a  boundary between the two combined models will be rather complicated . it is sufficient for our needs to realise that in the combined model of fiscal federalism, there is a  partial decentralisation of public revenues at lower levels of government, the intensity of which varies greatly in individual cases . there is no uniform view of theoreticians and economists as well as political representation in this matter, where the degree of self-sufficiency is often an ideological argument of supporters of one or the other prevailing tendency .12 some authors describe situations where lower government levels have the direct authority to collect and impose taxes and bear responsibility for expenditures as fiscal decentralisation . by contrast, a  mere reallocation by allocating centrally collected taxes to lower levels is called administrative decentralisation .13 for example, michal radvan holds a  similar view, pointing to occasional changes in the economic autonomy of municipalities, so that municipalities can decide not only on local self-government expenditure but also on revenue by influencing the amount of tax revenue . in his opinion, municipalities are not able to correct the amount of tax revenue, except for local taxes and real estate taxes . according to him, everything has been set by the legislator in a fixed manner .14 on the other hand, it is not appropriate to narrow the issue of fiscal decentralisation to only the fiscal competence of territorial self-government units, i .e . the issue of local taxes . a manifestation of fiscal decentralisation is also the budget allocation of taxes, even though it is a  decentralisation stipulated by law according to well-defined criteria . the specified shares of the allocated tax revenue were not determined by the legislator arbitrarily . it is a continuous development of the level of financial autonomy after the restoration of territorial self-government in our territory after 1990 . own revenues gradually began to form the dominant part of the total revenues, especially for municipalities . already in the 1990s, authors summarised the tendencies of the territorial budget regime as compared to the previous state to the following points: ƿ strengthening the financial self-sufficiency of territorial budgets and reducing their dependence on subsidies from the state budget ƿ attenuating the claim-related requirements of municipalities ƿ achieving greater autonomy and responsibility of local governments in the budget regime however, we can speak of these as partial changes that are the result of processes taking place within the public administration and, on the basis of these arguments, we can divide the fiscal decentralisation into: ƿ fiscal decentralisation carried out by tax sharing, when the legislator sets out shares in tax revenues to be allocated to specific segments of the budget system and their components ƿ fiscal decentralisation carried out by assigning taxes, when the entire tax revenue is transferred, i .e . assigned, to specific segments of the budget system and their components 82 ivana pařízková public governance, administration and finances law review • vol. 4. no. 2. from the above, we can conclude that fiscal decentralisation can take place through tax assignment or tax sharing, depending on the budget allocation, to which public fund the tax revenue flows to and in what amount . budget allocation is one of the tax structural elements because it determines where the tax revenue flows and which budget reports it in its revenue .15 depending on whether only a single public budget is a recipient of tax revenue or the revenue is split between more segments in the budget system, we distinguish between shared and assigned taxes. assigned taxes are the revenue of the relevant tax which flows exclusively into the budget of municipalities and regions . these taxes currently include: ƿ real estate tax (the entire revenue goes to the municipality budget) ƿ corporation tax (where the taxpayer is a municipality or region, with the exception of a withholding tax at a special rate) shared taxes are taxes the revenue of which is divided into several segments of the public budget system by percentage, i .e . precise shares are set either according to a  mathematical formula that takes account of certain reallocation criteria or depending on the place of tax origin, i .e . where the tax is collected . this means that only the share of the national tax revenue goes to the municipal and regional budgets . these taxes currently include: ƿ value added tax ƿ personal income tax (advances on this tax) ƿ corporation tax (except if the taxpayer is a municipality or a region)16 3. legal framework and bat relevance the fact that the income of territorial self-government unit budgets includes, among other things, tax revenues and their shares according to a  special law is regulated at the most general level by act no . 250/2000 coll . on budgetary rules for territorial budgets, as amended . consequently, the tax allocation of taxes is regulated by act no . 243/2000 coll . on budget allocation of revenue of certain taxes to territorial self-government units and to certain state funds (the act on budget allocation of taxes), as amended . this act, comprising only eight articles, identifies two major issues: ƿ which tax revenues are transferred by the state to the territorial self-government units completely, or a  share of tax revenues to territorial self-governments is determined ƿ establishing criteria and a  method for calculating the share of each individual municipality and individual region it is hard to imagine its practical application by simply reading the text of the act . in fact, formulations verbally express a mathematical conversion, the expression of which is rather complicated for obvious reasons . in order to understand the act on budget allocation of taxes, a  detailed analysis of individual provisions is required, using many materials containing, among other things, data on the performance of individual territorial self83 public governance, administration and finances law review • 2. 2019 budget allocation of taxes to territorial budgets government units in the time series . it should be noted that budget allocation is always a matter with disputes over the way taxes are reallocated within the budget system and that there is a  very frequent debate on the fairness of the system set up . at the same time, we can state that tax allocation, including reallocation of taxes, can be described as a legal and economic and political issue the opinion on which is not uniform .17 the most important facts about budget allocation of taxes are as follows: ƿ tax revenues constitute a major part of municipal budget revenues (roughly 55–60%) . ƿ tax revenues of municipalities are not assigned . ƿ municipal authorities decide on the use of tax revenues . ƿ tax revenues of municipalities are the basis of both economic and financial independence of municipalities from the state . 4. possibilities for changes to the budget allocation of taxes acceptable de lege ferenda one of the objectives is to summarise the findings based on long-term monitoring of the issue and to reflect on some of the related aspects . allocation of taxes is undoubtedly a matter of political nature . specialists in the field generally enter the discussion only based on set model analyses . even the specialists do not have a uniform opinion on the reallocation of shared taxes .18 the debate on the topic of budget allocation of taxes is definitely not over by adopting the latest amendment . it is assumed that this will be a solution for a year or two, followed by the incorporation of a budget allocation institute as a structural element into individual tax laws . as far as the current system is concerned, it could be adjusted in the following way to  better match the real needs of municipalities with the real costs of municipalities related to the delegated and autonomous authority of public administration: ƿ establishing a criterion of the built-up area of a municipality ƿ reducing the weight of the municipality’s assessment criterion (or completely abolishing it) and the need to adjust the weight of other criteria (creating a  balanced system of criterion weight that would correspond to the amount of costs associated with the given criteria) ƿ reducing the weight of population criterion at the expense of other criteria ƿ including the share of consumption and environmental tax revenue in bat ƿ setting a single percentage for determining the share of municipal budgets in shared taxes to reflect the inclusion of other taxes19 from the point of view of the budget allocation of taxes for regions, the funding of education still seems to be the most current adjustment . at this point, there are two solutions that can be considered: ƿ the first option would be to increase the total share of regions in shared taxes, with the region continuing to reallocate that part of the funds that would represent the direct costs of education according to the stipulated schedule and, at the same time, 84 ivana pařízková public governance, administration and finances law review • vol. 4. no. 2. to increase the total share of municipalities in shared taxes to the extent of the current subsidy provided from the state budget in the aggregate subsidy relationship for the partial reimbursement of operating expenses ƿ the second option would involve increasing the total share of municipalities and regions in shared taxes for the new percentage to include the direct costs of education by the founder, as well as subsidies for partial reimbursement of operating expenses in the case of municipalities20 the first option appears to be a compromise where the advantages prevail . it would strengthen the economic impact of territorial self-governments on the educational organisations they establish . on the other hand, the concern about the municipal self-government having too much influence on rewarding teachers, especially in preschool and elementary schools, would be eliminated .21 5. conclusion tax revenues are among the most important and largest sources of funds for municipalities and regions . without tax revenues, municipalities and regions could hardly finance their operations and other public administration activities . therefore, it is important to set up a  bat system to meet real needs, to be stable and not to favour a  particular group of municipalities or regions over others . in spite of the great criticism of the current bat system introduced in 2008, we must recognise that this system has brought much needed stability into the funding of municipal systems and that it has removed unfair differences in revenues of cities and municipalities of relatively the same size . financing of municipalities was linked to decisive tax revenues, which ensured their continuous growth . yet the municipal budgets, especially of small municipalities, are not enough to cover all the costs associated with public administration . therefore, it is necessary to keep developing the current system and to introduce criteria that would be able to reflect the real costs that municipalities have in the public administration .22 it is clear from the above text that the development of the budget allocation of taxes and their significance for municipal and regional budgets in the czech republic is positive, given that the budgeted revenues can be quite easily estimated for each municipality and region . this property of the current bat is crucial because municipalities and regions have the possibility to estimate revenues and to adjust costs to avoid large indebtedness . the partial amendments to the act on budget allocation of taxes introducing various criteria for the reallocation of taxes strengthen municipalities and regions as they ensure their permanent financial basis, and it can be concluded from the above that the hypothesis stated in the introduction has been confirmed . 85 public governance, administration and finances law review • 2. 2019 budget allocation of taxes to territorial budgets references 1 milan bakeš, marie karfíková, petr kotáb, hana marková et al . finanční právo . 5 . upravené vydání [financial law, 5th revised edition], 548 (praha, c . h . beck, 2009) . 2 ivana pařízková, finance územní samosprávy [finances of territorial self-government], 238 (brno, masarykova univerzita, 2008) . 3 martin netolický, vztahy mezi články rozpočtové soustavy [relationships between budget system segments], 104 (brno, tribun eu, 2010) . 4 netolický, supra n. 3, at 102 . 5 ibid . 105 . 6 romana provazníková, financování měst, obcí a regionů [financing of cities, municipalities and regions], 86 (praha, grada publishing, 2007) . 7 act no . 243/2000 coll . on budget allocation of revenue of certain taxes to territorial self-government units and to certain state funds (the act on budget allocation of taxes), as amended . 8 petr mrkývka et al . finanční právo a finanční správa, 1 . díl [financial law and tax administration, part 1], 397 (brno, masarykova univerzita, 2004) . 9 romana provazníková, financování měst, obcí a regionů. 3 . aktualizované a rozšířené vydání [financing of cities, municipalities and regions, 3rd updated and extended edition], 109 (praha, grada publishing, 2015) . 10 netolický, supra n. 3, at 107 . 11 jitka peková, jaroslav pilný, marek jetmar, veřejná správa a finance veřejného sektoru. 2 . přepracované vydání [public administration and public sector finances, 2nd revised edition], 172–173 (praha, aspi, 2005) . 12 netolický, supra n. 3, at 107 . 13 provazníková, supra n. 6, at 40 . 14 martin netolický, vztahy mezi články rozpočtové soustavy [relations between the cells of the budget system], 107 (brno, tribun eu, 2010); michal radvan, ekonomická autonomie obcí v české republice [economic autonomy of municipalities in the czech republic], 137–147, in interakce ekonomie, managementu a práva při rozvoji regionů [interactions of economy, management and law in development of regions] (brno, vydavatelství mu, 2006) . 15 michal radvan, finanční právo a finanční správa. berní právo [financial law and tax administration . tax law], 33–36 (brno, doplněk a masarykova univerzita, 2008) . 16 mrkývka, supra n. 8, at 397 . 17 netolický, supra n. 3, 109 . 18 ibid . 178 . 19 cf . ibid . 178 . 20 ibid . 180 . 21 ibid . 22 provazníková, supra n. 9, at 131 . pga2019_02_b1 _hlk18895087 _hlk18895098 _hlk27344917 articles administrative liability for causing damage to selected components of the environment branislav cepek* the right to informational self-determination in the context of selected judicial decisions and practical background andrea erdősová* information security awareness in public administrations at an international level lilla garayová* blockchain technology – current status, challenges and perspectives in tax and customs law ladislav hrabčák,* monika stojáková* application possibilities of blockchain in accounting péter bálint király* budget allocation of taxes to territorial budgets ivana pařízková* the efficiency of tax collection in the czech republic eva tomášková* case study new legal regulation of the administrative justice in the slovak republic juraj vačok* pga2019_02 _hlk18895087 _hlk18895098 _hlk27344917 articles administrative liability for causing damage to selected components of the environment branislav cepek* the right to informational self-determination in the context of selected judicial decisions and practical background andrea erdősová* information security awareness in public administrations at an international level lilla garayová* blockchain technology – current status, challenges and perspectives in tax and customs law ladislav hrabčák,* monika stojáková* application possibilities of blockchain in accounting péter bálint király* budget allocation of taxes to territorial budgets ivana pařízková* the efficiency of tax collection in the czech republic eva tomášková* case study new legal regulation of the administrative justice in the slovak republic juraj vačok* pga2019_02_b4 _hlk18895087 _hlk18895098 _hlk27344917 articles administrative liability for causing damage to selected components of the environment branislav cepek* the right to informational self-determination in the context of selected judicial decisions and practical background andrea erdősová* information security awareness in public administrations at an international level lilla garayová* blockchain technology – current status, challenges and perspectives in tax and customs law ladislav hrabčák,* monika stojáková* application possibilities of blockchain in accounting péter bálint király* budget allocation of taxes to territorial budgets ivana pařízková* the efficiency of tax collection in the czech republic eva tomášková* case study new legal regulation of the administrative justice in the slovak republic juraj vačok* © 2017 dialóg campus, budapest public governance, administration and finances law review vol. 2. no. 2. (2017) • 60–66 case studies the invalidity of foreign currency loans in the hungarian judicial practice péter bálint király* * judr. péter bálint király, phd student, department of administrative and financial law, faculty of law, széchenyi istván university. (e-mail: kiralypeterbalint@gmail.com) abstract: after the economic crisis, a  large part of the hungarian population could not repay the suddenly increased instalments of their foreign currency loans. in lawsuits concerning the invalidity of these foreign currency loans, the different courts interpreted the provisions of the law differently, so the curia (the highest judicial authority of hungary) – fulfilling its constitutional duty – considered it necessary to unify the judicial practice. for this purpose, several uniformity decision were adopted. in this study i will briefly summarize the content of three uniformity decisions, namely, decision no. 6/2013 pje, no. 2/2014 pje and no. 1/2016 pje. keywords: foreign currency loan; invalidity of contracts; exchange rate spreads 1. introduction the subject of my paper is the evaluation of the foreign currency loan in the hungarian judicial practice, which have been one of the major challenges for both the legislature and the courts after the economic crisis, as a large part of the hungarian population had such loans and could not repay the suddenly increased instalments. in lawsuits concerning the invalidity of these foreign currency loans, the different courts interpreted the provisions of the law differently, so the curia (the highest judicial authority of hungary)  –  fulfilling its constitutional duty  –  considered it necessary to unify the judicial practice. for this purpose, several uniformity decision were adopted. “the curia renders uniformity decisions in cases raising issues of theoretical importance in order to ensure the uniform application of law within the hungarian judiciary. such decisions are binding on all hungarian courts.”1 in this study i will briefly summarize the content of three uniformity decisions, namely, decision no. 6/2013 pje, no. 2/2014 pje and no. 1/2016 pje. 2. uniformity decision no. 6/2013 pje of the curia in this uniformity decision the curia stated that foreign currency loan contracts are those in which the debtor is in debt in a foreign currency, but the loan is paid and repaid in the domestic currency (in this case huf). at the time of the conclusion of the contracts, there 10.53116/pgaflr.2017.2.4 mailto:kiralypeterbalint%40gmail.com?subject= https://doi.org/10.53116/pgaflr.2017.2.4 61 public governance, administration and finances law review • 2. 2017 the invalidity of foreign currency loans in the hungarian judicial practice was no law that would have established a  ceiling on the risk of the debtor or would generally have prohibited the risk of a change in the exchange rate. in the view of the curia, the assumption that the amount of repayment of foreign currency loans in the future could not be accurately determined at the time of the conclusion of the contract is considered false. “the debtor’s debt […] is clearly stated at the time of the conclusion of the contract: it is the amount determined in the calculation currencies. the fact that, at the time of the conclusion of the contract, it is not possible to tell how much payment currency is to be paid by the debtor to fulfil their contractual obligation, necessarily arises from the difference between calculation currency (foreign currency) and the payment currency (huf). however, this does not affect the clear definition of the obligation.” it is also considered a  concrete definition of the amount of debt, if the amount paid out loan and the instalments are not quantified, but the contract clearly contains the calculation method. act ccxxxvii of 2013 on credit institutions and financial enterprises (hereinafter referred to as hpt.) requires the financial institution to inform the debtor about the possibility that the exchange rate might change in the future, and what effects it can have on the debtor’s obligations. however, the obligation to provide information did not, of course, cover the degree and direction of exchange rate change. creditors did not have to declare the expected exchange rate of the forint during the contract period as this is unforeseeable at the conclusion of the contract. therefore, such a  commitment could not be fulfilled. the unforeseen, unilateral shift in contractual burdens after the conclusion of the contract cannot be considered a cause of invalidity, because the reason for the invalidity must exist at the conclusion of the contract. the curia also found that foreign currency loan does not conflict with the law because of its aforementioned properties. this does not mean, of course, that a particular contract or contractual terms cannot be invalid for any other reason (e.g. unfairness). it only means that the foreign currency loan as a type of contract does not conflict with the law. deciding whether or not each contract is invalid or not is only possible in specific cases. a foreign currency-based loan agreement cannot be regarded as an immoral contract. according to the hungarian judicial practice, a  contract is considered immoral if the society has a  negative value judgment on it. foreign currency based loan agreements were not condemned by society at the time of their conclusion. consumers took the risk of exchange rate fluctuations because they could have received a more favourable interest rate on a foreign currency based loan than for huf-based loans. the unfavourable development of the circumstances after the conclusion of the contract, cannot justify the invalidity of the contract. a foreign currency loan agreement cannot be regarded as a usury contract. according to the hungarian civil code a contract is deemed to be a usury if the contractor has made a  remarkably disproportionate advantage when exploiting the position of the other party at the conclusion of the contract. it follows from the nature of the blanket contracts used by financial institutions that the financial institution cannot take the financial situation of the consumer into consideration. the same terms of contract were used with consumers in a  bad financial situation as with those who were in good financial standing. we cannot therefore say that the banks have taken advantage of the economic situation of the 62 péter bálint király public governance, administration and finances law review • vol. 2. no. 2. consumers. the curia also explained that the financial institutions did not receive wrongful benefit with this practice, because only the forint equivalent of the foreign currency was repaid by the debtors at the time of repayment. the amount of debt remained the same in the foreign currency, even though its equivalent in forint has changed.2 3. uniformity decision no. 2/2014 pje of the curia according to this uniformity decision, a  contractual provision allowing unilateral contract modification is unfair if it does not comply with the following principles: clear and comprehensible wording, item-by-item definition, objectivity, factuality and proportionality, transparency, termination, and symmetry principles (hereinafter referred to as seven principles). in addition, the curia has stated that, in foreign currency loans, a  clause stipulating that the consumer will bear unlimited liability for exchange rate risk is considered to be the primary object of the contract. therefore, its invalidity can only be examined and ascertained, “if the contents of the contract at the time of its conclusion – taking account of the text of the contract and the information provided by the financial institution – were not clear to a  generally well-informed, reasonably attentive and circumspect average consumer”, and therefore, they could reasonably believe that the exchange rate risk was not real. the principle of clear and comprehensible wording has only been incorporated into the civil code by an amendment in 2009. the question therefore arises whether the principle should be applied before the entry into force of the amendment. by joining the european union, hungary is also obliged to interpret the provisions of the national law in accordance with eu law if it does not lead to contra legem interpretation. the provision of directive no. 93/13 eec  –  which states that the unfairness of a  condition determining the main service is met, the principle of clear and comprehensible wording cannot be investigated – is not in conflict with the hungarian law. therefore, this principle must be taken into account when judging contracts concluded prior to the modification of the civil code. according to article 203 of the hpt. “the financial institution shall disclose to the customer the risk of the contractual transaction, the acknowledgment of which is certified by the signature of the client”. in determining the unfairness of a  contract term, the court must take into account all the circumstances leading to the conclusion of the contract, including information provided by the financial institution to the consumer. if, on the basis of all these relevant circumstances, “a generally well-informed, reasonably attentive and circumspect average consumer” was able to recognize that the risk of exchange rate fluctuations would be borne without restriction, the unfairness of that condition could not be stated. in connection with this, the curia establishes the presumption that if the customer has received the information required by law and has signed the declaration, it must be regarded as the wording of the contract was clear and comprehensible. the bank must demonstrate that the customer has been informed in this accordingly. the contract is considered to be unfair if the fact that it was not clear and comprehensible for the consumer 63 public governance, administration and finances law review • 2. 2017 the invalidity of foreign currency loans in the hungarian judicial practice that he or she bears the risk exchange rate fluctuation is attributable to the financial institution. this must be proved by the consumer. the debtors must therefore be placed in a  situation to be able to measure their contractual obligations. this means that the contract must indicate the possible evolution of the contractual burdens. it must contain a list of reasons which must clearly disclose the mechanism and possible extent of the change in the obligation arising from the change of circumstances, that is to say, if the condition clearly and comprehensibly stipulates how and to what extent the debtor’s existing debt is changed by the changes in the circumstances determined in the contract. the solution is not appropriate in this context if the contract merely lists the circumstances giving rise to a  contract modification. without adequate explanation, these do not comply with the principle of transparency. the terms for unilateral amendment of the contract is not unfair if it ensures the possibility of inspecting the compliance with the seven principles and the contractual provisions, and that the consumer may take remedy against the financial institution. the curia considered the practice of financial institutions to be unfair as the amount paid was calculated on the basis of their own purchase and repayment details based on their own selling price, because it constitutes an unjustified and unilateral disadvantage to the consumer with the breach of the requirement of good faith and fairness. the selling rate is always bigger than buying, which means that on the side of the financial institutions this practice generates profit while on the debtor’s side it creates expense. this is an unreasonable cost against which there is no direct financial service by the financial institution. in case of foreign currency loans, when determining the repayment instalment, no real exchange of money is made, but only the amount of the debt is calculated at the exchange rate at the time of completion. “thus, the exchange rates in foreign currency loans don’t represent a  real, and direct currency exchange service for the customer.” this mechanism of pricing is also unfair because it does not meet the requirement of clear and comprehensible wording, because even in case of a  grammatically clear wording, the consumer cannot anticipate the amount of debt they have to pay to fulfil their obligations, as the economic reasons behind the different exchange rates are not clear and transparent to the average consumer. according to the decision of the court of justice of the european union, the unfair terms of contract shall be replaced with the dispositive provision of the civil code,3 according to which “the amount specified in other currencies shall be converted at the exchange rate prevailing at the time and place of payment”.4 the curia therefore requires that the purchase and sale rates in the contracts be replaced by the hungarian central bank’s official exchange rate.5 4. uniformity decision no. 1/2016 pje of the curia according to act cxii of 1996 a  consumer loan agreement is invalid if (among other reasons) it does not include the subject of the contract, the number of instalments, the amount of the repayment instalments, and the repayment dates. the curia has found that according to the hpt., the foreign currency loan contract does not qualify as null and void, if it contains the amount of the loan to be disbursed in huf, and the contract also states 64 péter bálint király public governance, administration and finances law review • vol. 2. no. 2. that the financial institution keeps a record about the amount of loan in a foreign currency, furthermore it specifies in a predictable manner the numbers, amounts and payment dates of the instalments to be paid. thus, the contract is valid if it is clearly established that the parties have concluded a  foreign exchange contract, and their intention was therefore to register and determine the loan, its interest and its contributions in foreign currency, but it was intended to pay in huf. the curia also states that “if the amount of the loan is given in both currencies on the date of the conclusion of the contract, one of the two amounts is only informative, depending on whether the given contract considers the foreign currency or huf as the starting point”. an important condition in each case is that the contract includes the method by which the loan amount in the payment currency (i.e. in huf) can be derived from the calculation currency (i.e. in foreign currency). however, it does not impact the validity of the contract whether it precisely states the date of conversion, because unless otherwise provided by the parties, the conversion date is by ipso iure the day of disbursement. if the contract or the general terms and conditions of the contract together meet these criteria, then the financial institution’s unilateral legal declaration (e.g. reimbursement notification, loan repayment plan, loan repayment schedule) is to be considered as information provided to the consumer by the financial institution. “this information is not considered as unilateral declaration of intent that intends to produce legal effects, therefore it cannot be evaluated as a  shaping right resulting either in the creation of a  contract or for modifying or terminating it. therefore, the non-delivery of the notice or its content contrary to the contract does not affect the creation or validity of the contract.” the ineffectiveness of the contract cannot be established either because of the absence of a  reference currency conversion rate, because the legislator stated that the relevant exchange rate is the official exchange rate of the hungarian central bank.6 5. summary and comments on the uniformity decisions of the curia first, i would like to point out the reasons of an individual case, the so-called kásler-case, according to which the financial institutions gain additional revenue by using the spread between buying and selling rates in their contract. however, with this the financial institution does not provide real money exchange service, but only the amount of the debt is calculated at the exchange rate at the time of completion. so the financial institution does not provide any service for the customer, and yet they gain additional profit because of this method. therefore, these contract terms are unfair and void. this is in line with 2/2014 pje, according to which the selling price is always higher than the purchase price. on the side of financial institutions this practice generates revenue while on the debtor’s side it creates expenses.7 however, this reasoning contrasts with the decision of the uniformity decision no. 6/2013 of the curia, which stated that the risk of exchange rate change is borne by the consumer while the position of the creditor is not affected by this. even though the debtors have to repay more in huf compared to the amount that was disbursed to them, but as the amount of loan is registered in a foreign currency according 65 public governance, administration and finances law review • 2. 2017 the invalidity of foreign currency loans in the hungarian judicial practice to these contracts, the foreign currency equivalent of that amount of huf the debtors repaid remains the same. so the amount of money the financial institution lends and the amount the debtors repay is the same in the foreign currency. that is why the financial institution does not gain any additional revenue because of this method.8 the other contradiction i would like to draw attention to is also in connection with the exchange rate spread. in relation to the exchange rate spread, the curia states in the uniformity decision no 2/2014 pje that: “this mechanism of pricing does not meet the requirement of clear and comprehensible wording, because even in the case of a  grammatically clear wording, the consumer cannot anticipate the amount of debt they have to pay to fulfil their obligations.”9 this is contrary to uniformity decision no. 6/2013 pje, which stated that in any foreign currency loan the amount of the debt can be clearly determined at the time of the conclusion of the contract: it is the amount determined in the calculation currencies. “the fact that, at the time of the conclusion of the contract, it is not possible to tell how much payment currency is to be paid by the debtor to fulfil their contractual obligation, necessarily arises from the difference between calculation currency (foreign currency) and the payment currency (huf). however, this does not affect the clear definition of the obligation.” in addition, the unforeseeable unilateral shift in contractual burdens after the conclusion of the contract cannot be considered invalidity reasons, because in order to establish invalidity, the reason for invalidity must exist at the time of the conclusion of the contract.10 the problem of the exchange spreads applied by financial institutions was finally settled by the legislator by establishing an irrefutable presumption, that the application of different purchase and sale rates provided by an individually non-discussed, or general contract term is unfair, therefore void and null. due to their invalidity, the buying and selling rates are dropped out of the contract and are replaced by the hungarian central bank’s official exchange rate.11 the financial institutions are subject to clearing obligations, with regard to overpayments caused by the application of the exchange rate spreads.12 with these statutory provisions referenced in the uniformity decision no. 1/2016 pje the curia stated that the invalidity of the contract cannot be established because of the absence of an exchange rate. all in all, it can be concluded that the uniformity decisions of the curia were not completely consistent. finally, however, the legislator has arranged  –  for the past and the future alike – the applicable exchange rate, and the amount of interest rates, costs and fees. “because these calculations are based on a legal act, these conditions necessarily constitute a  fair individually non-discussed general contract term, and contractual content. in addition, they cannot be considered to be in conflict with the legislation.”13 these contracts should also be measured in the light of these legal acts, when the courts decide whether the content of contracts meet the obligations required by the hpt. as the validity requirements of foreign currency loan. 66 péter bálint király public governance, administration and finances law review • vol. 2. no. 2. references 1 www.lb.hu/en/uniformity-decisions (accessed 01 march 2017). 2 uniformity decision no. 6/2013 pje, www.lb.hu/en/uniformity-decisions (accessed 01 march 2017). 3 uniformity decision no. 2/2014 pje, www.lb.hu/en/uniformity-decisions (accessed 01 march 2017). 4 civil code of hungary (act v of 2013). 5 uniformity decision no. 2/2014 pje, www.lb.hu/en/uniformity-decisions (accessed 01 march 2017). 6 uniformity decision no. 1/2016 pje, www.lb.hu/en/uniformity-decisions (accessed 01 march 2017). 7 uniformity decision no. 2/2014 pje, www.lb.hu/en/uniformity-decisions (accessed 01 march 2017). 8 uniformity decision no. 6/2013 pje, www.lb.hu/en/uniformity-decisions (accessed 01 march 2017). 9 uniformity decision no. 2/2014 pje, www.lb.hu/en/uniformity-decisions (accessed 01 march 2017). 10 uniformity decision no. 6/2013 pje, www.lb.hu/en/uniformity-decisions (accessed 01 march 2017). 11 act xxxviii of 2014, section 3. 12 act xl of 2014, section 3. 13 uniformity decision no. 1/2016 pje, www.lb.hu/en/uniformity-decisions (accessed 01 march 2017). mailto:/en/uniformity-decisions?subject= mailto:/en/uniformity-decisions?subject= mailto:/en/uniformity-decisions?subject= mailto:/en/uniformity-decisions?subject= mailto:/en/uniformity-decisions?subject= mailto:/en/uniformity-decisions?subject= mailto:/en/uniformity-decisions?subject= mailto:/en/uniformity-decisions?subject= mailto:/en/uniformity-decisions?subject= mailto:/en/uniformity-decisions?subject= © 2021 the authors public governance, administration and finances law review vol. 5. no. 1. (2020) • 73–85 . disinformation as a tool aimed at weakening consolidated democracies artur kozłowski* – klaudia skelnik** * artur kozłowski, phd habil ., professor of social sciences, wsb university in gdansk, dean of the department of economy and management, poland, email: akozlowski@wsb .gda .pl, orcid: https://orcid .org/0000-0002-5359-192x ** klaudia skelnik, m .a . in political sciences, wsb university in gdansk, poland, email: kskelnik@ wsb .gda .pl, orcid: https://orcid .org/0000-0003-2771-3900 abstract: this scholarly article indicates threats to the stability of political systems of consolidated democracies resulting from disinformation . the article presents threats resulting from the effects of disinformation in four areas: state, society, politics and law . the authors demonstrate the exposure of society to manipulative effects of fake news, which affects human emotions, reasoning and behaviour due to the use of created images of reality . it has been pointed out that fake news as a  targeted manipulation tool, while aiming to achieve its goals, exploits the imperfections of the human mind . for this reason, the individual and thus the society need support to protect themselves from the manipulative threat coming from this phenomenon . protection from fake news must be provided with the respect of freedom of expression, the values of society, the individuals’ liberties as well as legal rights . disinformation is not a new phenomenon in itself, but the development of the internet and social media allows for an unprecedented scale of social manipulation . the article also indicates that disinformation is often directed at civil liberties and destabilises the principles of social life and citizens’ trust in public institutions, authorities or the media, regardless of whether its source is third countries or it is “produced” internally . in a democratic state a citizen should be able to make informed decisions and independently assess whether the information encountered in the social media is true or false . keywords: destabilisation, fake news, consolidated democracy, information, disinformation 1. access to information as a determinant of modern democracies while defining the concept of information, it should be noted at the outset that the concept is only seemingly simple, in fact it is complex . there is a  multitude of different approaches to information in the literature, representing various fields and disciplines of science . in addition to scientific theories, the term is also commonly used (ziółkowski, 2007, p . 51), which has considerable significance in political sciences . it can be assumed that the particular concept of information refers to several intuitive understandings . firstly, each piece of information is a  message about something, and secondly, information is acquired by the individual through observation or other mental activities (greniewski, 1967, p . 51) . in scientific terms, information is generally defined either in an objective context or is closer to a subjective context when it is defined in social sciences . it should be noted that information, depending on the content or the adopted reference system, can doi: 10.53116/pgaflr.2020.1.5 mailto:akozlowski@wsb.gda.pl https://orcid.org/0000-0002-5359-192x mailto:kskelnik@wsb.gda.pl mailto:kskelnik@wsb.gda.pl https://orcid.org/0000-0003-2771-3900 https://doi.org/10.53116/pgaflr.2020.1.5 74 artur kozłowski – klaudia skelnik public governance, administration and finances law review • vol. 5. no. 1.  also be interpreted in a broader or narrower sense . broadly speaking, information is understood as a content taken from the outside world in the process of our adaptation to it and the adaptation of our senses (fischer & świerczyńska-głownia, 2006, p . 9) . in a  narrow sense, information refers to the message obtained by humans through observation or mental action, subject to transmission in the sender (human)  –  recipient (human) system (groniewska, 1990, p . 45) . babik (2008), in turn, emphasises the importance of the concept of qualitative and quantitative recognition of the characterised concept . in the first of these ranges, the author points to the existence of qualitative definitions focused not so much on measuring but on describing information . he refers to several most important concepts: according to gregory bateson from the paloalto, information conveyed to students during their education at school is one of the factors that shape people’s perception of the surrounding reality . by contrast, carla f . von weizsäcker perceives information as the signal content that makes sense to the recipient . the quality of information is therefore understood by reference to its content in certain conceptual categories such as: truth, timelines, relevance or usability . qualitative concepts, by emphasising the semantic-pragmatic tendency, are widely used in social sciences with a  particular emphasis on communication science . the precursors of mathematical information theory also fall within this trend . they are norbert wiener, claude shannon and warren, to name but a few . thanks to wiener’s work on cybernetic theories and the complementary theories of c . shannon who cooperated with weaver in 1949, a  mathematical model of signal transmission was created (garcia de torres, 2001, p . 103) – to date being the core concept of the science of communication . russian philosopher arkadij d . ursul (1971) defines information as a  reflection (mapping ) of the diversity that characterises the surrounding reality (object, event, process, phenomenon) . such a variety in biolog y can be a set of signals reaching a living organism, whereas in psycholog y, stimuli received from the external human environment . other specialists express similar opinions: r . hartley – a mathematician, a slightly older colleague of another well-known mathematician c . shannon, stated that information is a very capacious term and proposed to treat information “physically” and not through psychological interpretation . according to r . ashby (1957), an expert in cybernetics, the concept of information is associated with the diversity of the surrounding world . n . wiener (1954), an american mathematician and pioneer of cybernetics, treats information as an appellation deriving from a content taken from the outside world in the process of the adaptation of our senses to a piece of information . a closer analysis of the quoted statements does not give any grounds either for rejecting any of them or for accepting any other concepts as the only correct ones . it can be admitted, however, that these are complementary opinions describing information from different points of view and in different contexts . therefore, none of them can be treated as a  comprehensive interpretation of this concept . it can be compared to a  road seen by drivers in the fog : everyone sees only a  small part of it . it is also worth mentioning l . ciborowski’s monograph the information fight, where he states that “the stimuli affecting the human reception system invoke a mental object in his or her imagination, reflecting the image of a material or abstract entity (subject, process, phenomenon, concept, etc .), which in his or her opinion (consciousness) is, to a  certain extent, associated with these stimuli . 75 public governance, administration and finances law review • 1. 2020 disinformation as a tool aimed at weakening consolidated democracies this means that information is only those experiences that inspire the human mind to a  certain imagination . its existence is relatively related to the existence of man and his mind” (ciborowski, 1999, p . 185) . it is to be admitted that the explanation of the holistic approach to the essential features of the subject of the study, referred to by the term information, is rather difficult . neither claude shannon, the creator of the quantitative information theory, nor stafford beer, the author of one of the first scholarly articles on the use of cybernetics and the general theory of control in management in economic systems, had never defined the term, although they often used it in their arguments . currently many authors are trying to fill this semantic gap, but there is no agreement about this as yet in the formulated views . this can be perceived in the functioning lexical norms as well as in the literature on the subject . in the context of the subject discussed, it is a fundamental statement that information is a  knowledge generating tool but  –  and this should be emphasised – not knowledge per se . information is time related, it may be up-to-date or not . so it has product features and can be sold and bought . knowledge, however, belongs only to a  particular person . in the knowledge society, everyone should be able to navigate freely through waves of information and make its own interpretations . freedom of movement is connected to freedom of expression and is about developing critical thinking skills to distinguish between useful and worthless information . we humans are social beings voluntarily seeking contacts with other people and forced by reality to interact with other people . in these contacts it is information which becomes an indispensable binder of individual entities with their surroundings . this is expressed in the integrative function of information . family relationships are an eloquent example of this role of information: conversations (and thus information exchange) is an indispensable factor integrating family members . it is to be recognised that information should also be sought in the areas where it is used . emphasis can be placed on the role of information in decision-making processes, as it is the case in business operations . however, a human being is a personality that needs to be considered in various dimensions – professional, social, psychological, cultural or historical . in each dimension, one always needs information to play a variety of roles . information, as a  kind of “soft power”, is a  tool for shaping human personality . the reception of information forces each of us to analyse it and stimulates an appropriate response: it forces us to choose the purpose of the action and how to achieve it, especially when it is presented in an attractive and suggestive form . each of us applies various criteria for such assessment: the criterion of usefulness, utility, profitability, moral criteria and others can be applied . then follows an act of evaluating information . a frequent repetition of this sort of act creates the habit of taking action in accordance to specific evaluation criteria . our consciousness formulated appropriately to specific principles and norms of behaviour that shape our personality comes into fray . this is especially relevant with regard to young people . respectively, it is information itself which becomes an instrument of human education despite the fact that there could be diverse categories of recipients of information . as stated by targowski, the governing power is not the one who rules but the one who has the right bits of information in the right memory available at the right time (stefanowicz, 2009, p . 279) . 76 artur kozłowski – klaudia skelnik public governance, administration and finances law review • vol. 5. no. 1.  individuals’ rights to exercise freedom of choice is one of the main principles of liberal democracies . these rights are truly valuable when they are excercised by individuals through rational means . in turn, they can be amplified by the rights to reliable information and freedom of expression . this is why information per se should be considered a determinant shaping modern democracies . information shaping the social context plays an important role in shaping society . information is not just a  force affecting the external environment but also a  subject of influence . the definitions belonging to this trend refer to a very wide range of phenomena and also to processes whose essence is relying on information that is important in creating social reality (braman, 1989, p . 233) . the condition for the development of the democratic community is free access to reliable information enabling the citizen to control the course of events and express his/her opinions (provide information) . it is taken for granted that every citizen’s opinion counts (at least theoretically) in the countries of liberal democracy . it is society that decides who will belong to the political elite . all citizens, through participation in elections, influence the shaping of forces in the parliament . so as to implement these assumptions, genuine information, not fake information, is necessary to help citizens to make conscious election decisions . it is believed the reliable information gives people a chance to express their real opinion on a given political issue . 2. the influence of information on shaping social attitudes the development of computer technolog y has caused an insatiable need for information, whose resource in cyberspace seems infinite . at the same time this situation causes an abstract temptation to control information, a temptation which, in fact, cannot be satisfied (bauman, 2018, p . 55) . information as a  force shaping society plays an important role in creating a social context . information is not only a force affecting the external environment but also a subject of influence . the definitions pertaining to this trend refer to a wide range of phenomena and processes, including those which predominantly depend on conveying information, an important tool for creating social reality . . in the course of the discussion presented in the article, various dimensions of information were revealed . firstly, the communication dimension – information can be transferred (communication is probably the most common activity performed with information) . secondly, the cognitive dimension – information can enrich one’s knowledge (although it is not the only purpose) . third, the physical dimension  –  every piece of information is conveyed through some physical medium . the structural dimension is yet another one  –  each piece of information has a  unique structure; perhaps every structure is information . the role of information as a “spotlight” illuminating a particular situation is expressed in the theorem emphasised by specialists . it is claimed that each of our actions is preceded by making a specific decision . this applies to human participation in public and economic activities as well as in private life . the essence of decision making is or rather should actually be based on informed choices . it is a  process that resembles moving in an unknown terrain . to reach the goal (to solve the problem), one must examine the paths that lead to 77 public governance, administration and finances law review • 1. 2020 disinformation as a tool aimed at weakening consolidated democracies it . without knowing appropriate paths, moving forward will generally be at risk of failure . to avoid it, one must “see” the problem space, which requires an analysis and decision making  –  you need to have the right information to “illuminate” your surroundings . the more accurately this information describes reality, the more it will reduce the uncertainty concerning the effects of actions taken, and will protect a person against possible errors . the decision function means that information is an indispensable element of the decision-making process (both in terms of the decision problem and the procedures used) . therefore, some people argue that the decision itself is one form of information, because it often affects its content . the opinion forming function appears when information helps people in shaping an individuals’ worldview as well as the views of other people who follow the advice of their peers or associates . thereby, they build and hierarchise their own personal system of values (stefanowicz, 2009) . the controlling function is related to the fact that the sender of information, as a result of its transmission, wants to get a specific response from the recipient and influence his or her behaviour, opinions or position . this function is also associated with the decision-making process, because an entity acquiring information from the external environment faces a decision dilemma at a later stage prior to undertaking specific actions . the motivational function, which is performed in connection with providing feedback to a person about the direction of its action, can additionally serve as an incentive to intensify efforts . the human being constantly feels the need to receive new messages . the opinionforming function of information is clearly revealed when a person readily uses information made available by easily available sources: the internet, social media, press, radio and television . this means that the recipient naturally limits his or her knowledge of the world to information published by these sources . in this way one is involuntarily submitting oneself to information manipulation: one pays attention to facts that can be learned from a given source and often remains unaware of the facts that this particular source omits . the mere fact that certain facts are selectively disclosed to the general public as “key information” (an expression heard often on television and radio) draws the recipient’s attention to specific aspects of public life and diverts his or her attention from other manifestations, no less and perhaps more important, but intentionally silenced . properly profiled information affects the attitude of a  person, the actions and decisions taken . it is owing to information captured in the form of a  word, image or film (or any other form) that one can penetrate and influence another person’s mind . as a  consequence, the image of the recipient’s world is shaped to a  certain degree and his views are suggested . no surgery can penetrate the mind of another person to such an extent as information can . such surgical treatments can only change the structure of the brain, which is not equal to changing the thought processes of the individual, his or her criteria for the assessments of reality and preferred values or attitudes . information as a  “soft power” is used to control the environment – to guide other people in the direction desired by a  decision-maker . this is the foundation strateg y for educating or rather shaping the minds of the young generation . commercials which are based on the “soft power” of information provide a  good instance of this strateg y . its purpose is not to provide pure 78 artur kozłowski – klaudia skelnik public governance, administration and finances law review • vol. 5. no. 1.  information about specific products or objects, but it is aimed at convincing potential customers to buy them . this is sometimes done without any hesitation to use social engineering tricks, dishonest though they may be . the effects of such actions are both positive and negative . an example of the latter is the advertisement of tobacco products or alcoholic beverages often perversely presented as a desire to inform potential customers about specific articles available on the market . they also constitute information carrying a negative (aggressive, chauvinistic, homophobic, vulgar) content . the impact of information as a “soft power” is conspicuous in shaping the information society and so are tasks which arise from the development of information technologies and constitute a challenge for information services in new conditions . but it is not the development of new technologies themselves that has such a revolutionary impact on society . the effect achieved is the effect of the synerg y of two interconnected components: information and modern technologies to collect, process and spread it . 3. the fake news phenomenon the so called post-truth era in the world of social media domination seems to have difficulties in verifying information . even though it cannot always be verified, it does not mean it is away from the truth as such . it seems to be more difficult to reach it than it used to be but it is not impossible . actually, it is the truth in spe in which the quality criterion of the received content is beginning to be appreciated . this is why it is important to understand the post-truth phenomenon – its basic tool, its specificity, the most important features and the way it can be influenced . this tool is fake news . the term has its place in the discussion of both phenomena of post-truth and the value of information or the condition of modern media at all . in the new media era we got used to being surrounded by the flow of information . thousands of pieces of information that reach us through various channels of everyday life are nothing extraordinary . the appropriate classification of information becomes the real challenge, and widespread ignorance of how to separate false information from true information further aggravates this phenomenon . the classification and attitude towards information is governed by mathematical algorithms which, instead of us, have begun to select the messages we receive . at the same time a  large proportion of society is unaware of this fact . the flow of information also includes those pieces of information that we call fake news . it is intentionally created for disinformation, entertainment or any other purpose . its frequently shocking content reaches thousands of recipients on a  daily basis . the increase in the popularity of news (including fake news) in the social media dimension is a phenomenon of the last few years . the dissemination of sensational fake news content is still a considerable problem in the mass media and internet users are outdoing each other in creating more and more absurd information . fake news is neither the truth nor a lie, because, although it is based on misinformation, it often contains partly true information . fake news is created and used in situations where the purpose of a  medial publication is not its correspondence with the facts but getting as much interest in the topic as possible (gillin, 2017) . fake news is sometimes constructed to deliberately mislead the recipient so as to achieve, for instance, financial, 79 public governance, administration and finances law review • 1. 2020 disinformation as a tool aimed at weakening consolidated democracies political or even propaganda benefits . the creation of fake news is indeed intentional . intentionality is the key to creating fake news, because the distribution of false contents is deliberately carried out for a  specific purpose defined by the sender using channels that spread and speed up this distribution and expand the number of recipients of the specific contents . the reason why the internet is such a  readily used medium for spreading fake news is that it is often impossible to reach the real source of primary information (gans, 2004 p . 39) . analysing the phenomenon of fake news, which is a tool of the post-truth era, seems important primarily due to the fact that its presence in the media and public discourse has significantly increased . in 2017, the word went to the merriam-webster dictionary published since 1828 (lekach, 2017, p . 41), and in 2018, the phenomenon of fake news aroused extremely high interest among internet users . it is apparent that fake news is overwhelming in the mass media and on the internet (ziółkowska, 2020) . donald a . barclay defines fake news as a  propaganda tool, while brian mcnair goes much farther and notices the reason for the emergence of contemporary social and political trends in this phenomenon . moreover, monther aldwairi and ali alwahedi claim that fake news was created as part of the psychological war (mcnair, 2018) . several classifications of fake news can be identified, among which the most popular but also the most extensive one is based on the content criterion as presented in claire wardle’s classification . he has enumerated the characteristics of seven types of false information: satire or parody, false connection, misleading content, false context, imposter content, manipulated content and fabricated content . some scholars argue that fake news is a response to the needs of recipients . we have to admit that due to the dynamic of fake news’ spread we can clearly distinguish its presence in the media ecosystem . in accordance to the post-truth definition, fake news rely on objective facts which exert less influence on shaping the public, at the same time appealing strongly to human emotions and personal beliefs . so there will be messages that use the emotion or anecdotal arguments as the main persuasive device, and these messages will certainly be perceived as true ones . this information will effectively influence the public opinion by spreading doubts, mockery, hatred, or by the attempted creation of certain needs . the objective facts, the knowledge of reality and its description play a  secondary role in the interpretation of fake news, which do not need to have much to do with the truth itself (kucharski, 2018, p . 47) . considering harold laswell’s model of communication, it is conspicuous that the post-truth, which applies in particular to the content that the recipient receives, goes together with a  complete marginalisation of his or her own person and his or her ability to critically analyse the information received . the expected effect of fake news can be compared to the effects of the persuasion act . the ability to receive specific information, in turn, affects the scale of information-related impact on the recipient of the content (palczewski, 2020, p . 154) . at the same time, referring to objective facts does not necessarily change the mode of thinking about the world . other people’s arguments or opinions will always lose with a  well-grounded belief arising from the core system of values and the accepted perception of the surrounding reality . the fake news phenomenon is the result of many factors, e .g .: civilizational, cultural, economic and social . sometimes the fake news phenomenon is identified with the crisis of 80 artur kozłowski – klaudia skelnik public governance, administration and finances law review • vol. 5. no. 1.  journalism and the relativisation of the concept of truth . tabloidisation or so called softening of news of the mass media comes to the fore when discussing the reasons for the creation and development of the phenomenon of fake news . false information is intentionally created to be attractive, sensational, appealing to recipients, satisfying their curiosity and at the same time diverting their attention from understanding the falsehood of the content they decode . economic reasons are also of great importance . fake news are produced by cheaper and faster means than news based on reliable sources of information . it also brings more profit to the people or media that create or distribute it (palczewski, 2018, p . 157) . for those who are aiming at destabilisation of a  particular country, the use of fake news as a weapon is far more cheaper than any military action . (chlebowski, 2019, p . 169) regrets that it is now possible to publish unconfirmed information as well as forward unofficial contents (without informing the recipient) or just duplicate messages from social platforms . taking into account the disappearance of critical thinking and considering the fact that there is no one, objective truth, it should not surprise us that fake messages are gaining in status and popularity . the technological factor has made fake news even more widespread while creating new areas that have enabled faster distribution of fake information . for some people this situation provides new opportunities to become a  “media personality”, which has urged them to take immediate steps at the medial level (palczewski, 2018, p . 159) . fake news should be perceived as misinformation which is neither the truth nor a  lie but manipulation . when explaining fake news, it is worth noting the statement of the eu commissioner for security sir julian king who stated that “false information and misinformation have become a  weapon, which is a  serious threat to countries’ stability and security . the use of trusted channels to disseminate harmful and divisive content requires a  clear response which should be based on greater transparency, traceability and responsibility” (ec, 2018a) . it is worth emphasising the eurobarometer survey, according to which 83% of the respondents said that false information is a threat to democracy . they express concern that misinformation aims at influencing elections and immigration policy . the study also highlights the importance of high-quality media . respondents perceive traditional media as the most reliable source of information (radio 70%, television 66%, printed press 63%) . internet information sources and online video services were found to be the least reliable with a trust level of 26% and 27% respectively (ec, 2018b) . in addition, the european commission’s joint research centre has published a study (ec, 2018c) on false information and misinformation in which it is pointed out that twothirds of online news readers prefer to access them via algorithm-based platforms such as search engines, news applications, and social networking sites . it has been found that market power and income sources had shifted from news publishers to platform operators, who have an immeasurable amount of data from which they have to appropriately match readers with the articles and advertisements addressed to them . so, as it has already been mentioned, the more dangerous this phenomenon is, the more vulnerable the recipient is to the influence of fake news . to sum up, fake news is the main tool of the post-truth era and is defined as misinformation deliberately misleading the recipient to achieve the goals set by the sender . intentionality is the key to describing this phenomenon . 81 public governance, administration and finances law review • 1. 2020 disinformation as a tool aimed at weakening consolidated democracies 4. the influence of misinformation on consolidated democracies until now the phenomenon of post-truth has been referred to politics . it is gradually covering other domains of social life . we have witnessed the rise of the circumstances in which real facts are not the most important value in shaping public opinion . it affects feelings or influences beliefs, thus plays a key role in moulding public opinion . truthfulness has ceased to be crucial . words and discourse in the public space live more and more their own lives and the sense of the phenomena they describe is distorted or the context of their origin disappears . the system of consolidated democracies is liberal democracy with its democratic rule of law (kozłowski, 2019/2020) . depending on the degree of freedom and the level of its restrictions, the different political systems can be divided into the following categories: consolidated democracy, semi-consolidated democracy, hybrid regime, semi-consolidated authoritarian regime, and, in the most extreme cases, consolidated authoritarian regime .1 according to the authors, formulating an assumption about the impact of fake news as tools of misinformation on consolidated democracies requires describing the impact of information on shaping society . it should be recognised that information with its impact through the content of human sensory and mental experiences represents an enormous strength and value in shaping the functioning of democracy . the human inclination to cheat other people has now been strengthened with new opportunities of expression ensuing from civilisational and technological advancement, with general tolerance for such a  behaviour being increased . even though ethics and morality are still dominant in public discourse, at least on the level of declarations, they do not always realise in practice . allowing half-truths or manipulations to increase the importance of feelings in perceiving the world contributes to far-reaching changes in social structures . people-to-people contacts, attitudes towards authorities and trust in the media are being re-evaluated in a way leading towards an alternative reality in which there are no clear laws systematising the perception of reality . the authors of the article indicate that it is extremely important to create a  secure public space in the sense of freedom from harmful manipulations to ensure the development of democracy . the basic condition for a rational action in all spheres of human existence is always the need to make accurate decisions, which is inextricably linked to the need for relevant, objective and truthful information . this condition indicates that each piece of 1 this article adopts a typology of political systems based on their attitude to the concepts of democracy and authoritarianism, as proposed by andrzej antoszewski and ryszard herbut, who in turn draw on the conceptions put forward by scholars such as larry diamond, joseph schumpeter and robert dahl. antoszewski and herbut emphasise the need to distinguish two sub-categories of democratic systems: consolidated (stable–full) and semiconsolidated (unstable–flawed/limited). consolidated democracies are those that respect the separation of powers, sustain competitive party systems and adequately competitive elections, do not include decision-making centres uncontrolled by voters, impose limits on executive authority, and guarantee civil rights, as reflected in the unfettered development of civil society. semi-consolidated democracies are often “new”, or, as dahl calls them, “newer” or “immature”; diamond describes them as “electoral democracies”. although they meet the basic criteria characteristic of consolidated democracies, there are nevertheless flaws in their practical application. consequently, such democracies must be considered incomplete (antoszewski & herbut, 2001, pp. 18–49). 82 artur kozłowski – klaudia skelnik public governance, administration and finances law review • vol. 5. no. 1.  information has its price proportional to the value of decisions manifested efficiently through the prism of the accuracy of the cost selection . to act efficiently and effectively in all spheres of human existence, one must first get to know the areas and materials of the operational fields . this entails obtaining information about what, where, and when should be done to achieve the desired states and effects . reliable and comprehensive information about this is a  prerequisite for the selection of appropriate instruments, operators and variants of action (ciborowski, 2010), which represents an enormous strength and value in shaping both positive and negative consequences in all spheres of human existence . living and acting in the modern world means the appropriate use of information . this statement consolidates the sense of social, economic, political and educational transformations . a  person involved in various social processes and playing specific social roles from the earliest moments of his or her life is subject to a  stream of diverse information (goban-klas & sienkiewicz, 1999, p . 179) . in human society, everyone should be able to move freely through waves of information . freedom of movement is about developing critical thinking skills to distinguish between useful and worthless information . we receive more and more information and experience it more and more intensively; we, as citizens, are increasingly becoming the object of manipulation understood as actions aimed at convincing us to adopt a  specific behaviour . the fundamental factors constituting the current reality are the flow of information, the intensified pace of life and the growing number of changes (ball, 2000) . however, the excess of information forces the recipient to intensify the effort put into the reception and selection of information . therefore, the information management skills have become crucial . the increasing amount of information should serve the development of the economy, contribute to strengthening democracy or improving the quality of social life . however, the currently observed excess of information can overwhelm the recipient and cause problems with filtering the information . this is, in turn, conducive to the formation of information noise, which is becoming increasingly widespread nowadays . separating facts from opinions and truth from falsehood becomes a challenge that the contemporary consumer of media contents faces on a  daily basis . in such an environment it is extremely easy for fake news to function . the aforementioned phenomena do not contribute to the general development . nevertheless, one can venture a  claim that reliable and comprehensive information, which are a  prerequisite for choosing the right instruments as well as options, should be available to the citizen . 5. conclusions contemporary societies cannot be diagnosed as having a  passive attitude to the changing social reality . the authors believe that ongoing discussions around the post-truth issues and the problems of the increasing amount of fake news force actions that aim at limiting their pervasiveness . such activities are undertaken by several institutions like the european union, the media or ngos . admittedly, online platforms play an important role in 83 public governance, administration and finances law review • 1. 2020 disinformation as a tool aimed at weakening consolidated democracies combating the misuse of their infrastructure by hostile entities and strive to ensure the safety of their users and the public . appropriate control and preventive activities are undertaken by buzzfeed websites dealing with the investigation and verification of false news from a  journalistic perspective or an initiative of the international federation of library associations and institutions (ifla), which has prepared and published a  short guide on how to verify information to guard against fake news . there is a  special polish portal, the konkret24408, whose editors deal with analysing information and detecting fake messages . in thematically segregated sections one can find popular news about politics, health or science which has been verified and properly marked as true or false . another similar portal, acting under the name of antyfake, is a non-governmental organisation that carries out its mission on the facebook platform . preventive actions in this area will bring greater social benefits than just post factum initiatives . such actions are also concerned with decreasing the amount of fake news the general public is fed with . preventing here cannot mean political censorship, but is related rather to checking and verifying information and educational practice . the call for rational thinking comes to the fore and precludes the non-reflective reception of media content . the increasing awareness in this area may result in the general public (the recipients of media content) being more reflective and analytical as regards the nature of the information received . such awareness, in the context of publishing activities explaining this phenomenon, may influence the citizens’ ability to think critically and the will to check the sources or authors of various publications and programmes . in addition, reading the texts and viewing the entire content, instead of a  brief glance at the headline, will allow news recipients to familiarise themselves with the topics properly . beyond doubt, this ability cannot be acquired when one ignores the complexity of society . in reality, it requires support of social education and an active warning about the harm brought about by fake news . this must be conducted at a similar level as we fight addiction to nicotine, alcohol, drugs or road rage . activities that increase awareness of fake news can effectively prevent the spread of misinformation . if the recipient, who, as an active participant in the information society, also becomes a  sender, will think twice before sharing fake news with others, there is a chance that false information will not become popular and will not gain followers and resenders . that is why it is so important to educate the general public about the destructive impact of fake news . this should not be just a small csr project . this should be a highly supported and promoted action financed by supranational organisations free of governments and political control to protect them from intentional and possibly destructive political influence . the recipient of media contents should know that his actions each day affect larger social groups . by clicking on the sensational publication, one satisfies his or her curiosity, but also brings profits to media owners and their associates and employees . the actions of these media owners are often far from ethical activities and are focused on bringing political or financial benefits to certain political and medial circles or are intended to cause disorder by impairing social integration . the one who passes a  particular harmful or dishonest publication on without further checking it will only strengthen the impact of its derogative, offensive or manipulative content . it is as simple as that . thus, education and public discussion are a  basis for effective prevention of disinformation in this context . such 84 artur kozłowski – klaudia skelnik public governance, administration and finances law review • vol. 5. no. 1.  a conscious and active approach of the recipient may result not only in raising the level of the published content but also in increasing the citizens’ knowledge of information in the future . references antoszewski, a ., & herbut, r . 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(2019/2020) . populism as a factor of destabilisation in consolidated democracies . the nispacee journal of public administration and policy, 12(2), winter 2019/2020, pp . 81–108 . https:// doi .org/10 .2478/nispa-2019-0015 https://doi.org/10.1108/01435120010305582 https://doi.org/10.1016/0308-5961(89)90006-2 https://ec.europa.eu/commission/presscorner/detail/pl/ip_18_3370 https://ec.europa.eu/jrc/en/news/digital-transformation-news-media-and-rise-fake-news. http://www.politifact.com/punditfact/article/2017/jan/27/fact-checking-fake-news-reveals-how-hard-it https://doi.org/10.2478/nispa-2019-0015 https://doi.org/10.2478/nispa-2019-0015 85 public governance, administration and finances law review • 1. 2020 disinformation as a tool aimed at weakening consolidated democracies kucharski, j . (2018) . postprawda – próba dookreślenia znaczenia [post-truth – an attempt at making the meaning more precise] . in grabowski, t ., lakomy, m ., oświecimski, k ., & pohl, a . (eds .), postprawda . spojrzenie krytyczne [post-truth – a critical view] . wydawnictwo naukowe akademii ignatianum w krakowie . lekach, s . (2017) . ‘fake news’ and ‘false flag’ are being added to dictionary .com, because 2017 . mashable . https:// mashable .com/2017/09/28/fake-news-politics-dictionary/?europe=true mcnair, b . (2018) . fake news, falsehood, fabrication and fantasy in journalism . new york, routledge . palczewski, m . (2018) . świat fake newsa . siły sprawcze i konsekwencje [the world of fake news . the determining forces and consequences] . tomasz, w . g ., lakomy, m ., & konrad, o . (eds .), bezpieczeństwo informacyjne w dobie postprawdy [information security in the post-truth era] (pp . 155–168) . wydawnictwo naukowe akademii ignatianium w krakowie . palczewski, m . (2020) . postprawda –co to jest? [post-truth – what is it?] www .sdp .pl/felietony/14297,postprawdaco-to-jest-,1497430864, stefanowicz, b . (2009) . społeczne funkcje informacji [the social functions of information] . zeszyty naukowe uniwersytetu szczecińskiego [scientific periodicals of szczecin university] . ursul, a . d . (1971) . informacija . nauka [information . science] . moscow . wiener, n . (1954) . cybernetics or control and communication in the animal and the machine . the m .i .t . press and john wiley & sons, inc . https://doi .org/10 .7551/mitpress/11810 .001 .0001 ziółkowska, m . (2020) . internet opanowany przez fake newsy [the internet in control of fake news] . http:// dziennikarstwo .wroclaw .pl/internet-opanowanyfake-newsy ziółkowski, r . (2007) . zarządzanie informacją w regionie turystycznym [the management of information in the tourist region] . wyd . politechnika białostocka . https://mashable.com/2017/09/28/fake-news-politics-dictionary/?europe=true https://mashable.com/2017/09/28/fake-news-politics-dictionary/?europe=true http://www.sdp.pl/felietony/14297,postprawda-co-to-jest-,1497430864, http://www.sdp.pl/felietony/14297,postprawda-co-to-jest-,1497430864, https://doi.org/10.7551/mitpress/11810.001.0001 pga2017_1_02_article_karfikova_bohac.indd © 2017 dialóg campus, budapest public governance, administration and finances law review vol. 2. no. 1. (2017) • 2, 17–24 tax procedure code in the czech republic marie karfíková*, radim boháč** * prof. judr. maria karfíková, csc, full professor, head of department, department of financial law and finances, faculty of law, charles university, prague. (e-mail: karfikov@prf.cuni.cz) ** doc. judr. radim boháč, phd, associate professor, department of financial law and finances, faculty of law, charles university, prague. (e-mail: bohac@prf.cuni.cz) abstract: the paper deals with tax procedure code in the czech republic. the aim of this paper is to describe the czech tax procedure code and to present and evaluate its significant possible change. the basic principles of the czech tax procedure code are set out and the basic structure of the  tax procedure code is introduced. the  study concludes that the  tax procedure has been successfully codified in the  czech republic. the  adoption of tax procedure code is a  great achievement and the result of many years of work undertaken to preserve the autonomy of the tax procedure. then the  article is focused on the  considered change of tax procedure code related to the  principle of tax self-assessment and tax additional self-assessment. it is further concluded that every tax in the broad sense should have a clearly stated model which is applicable for its assessment. establishing the  tax self-assessment and tax additional tax-assessment regime could make the examination stage of tax administration much clearer. keywords: tax; tax procedure law; tax codification; tax self-assessment 1. introduction the aim of this paper1 is to describe the czech tax procedure code which came into effect in 2011 and to present and evaluate its significant possible change. the  substance of this possible change is to introduce the principles of tax self-assessment and tax self-additionalassessment. the first part is about the  recent legal regulation of tax procedure in the  czech republic. the  basic principles on which this legislation rests are set out and the  basic structure of the tax procedure code is introduced. the second chapter is focused on the considered change of tax procedure code. this change deals with the assessment of tax and additional assessment of tax. the tax assessment legislation is not uniform today. the  general regulation in the  tax procedure code is supplemented by a  number of special modifications in individual tax laws. the  main principle of tax self-assessment and additional tax self-assessment are described and analysed. 10.53116/pgaflr.2017.1.2 https://doi.org/10.53116/pgaflr.2017.1.2 18 marie karfíková, radim boháč public governance, administration and finances law review • vol. 2. no. 1. 2. recent tax procedure code developments in the  codification of financial law, i.e. tax procedure law2 culminated through the  adoption of a  new act3 in 2009. the  new legislation contained 266 sections and came into effect on january 1, 2011, thus the requirement of vacatio legis was fulfilled. regarding the relationship to the administrative procedure code, the former legislation’s principle based on the separation of the two codes has been followed. section 262 therefore states that “the administrative procedure code shall not apply in tax administration”. as regards the application of the provisions of the tax procedure code, the provision 4 states that “the provisions of the  tax procedure code shall apply unless another law on tax provides otherwise”. this implies that even after the  effective date of this act, procedural provisions contained in other tax laws shall prevail before the  procedural provisions of the tax procedure code. the tax procedure code embodies a  new comprehensive regulation of the  tax procedure and compared to former legislation, contains higher amount of provisions (more than 260) with short paragraphs and sentences and is essentially organized in a  systematically new way. the  explanatory memorandum to this draft law stated that the  aim of the  new legislation was to establish a  transparent and clear regulation of tax administration with emphasis on reducing the  administrative burden and encouraging the  use of electronic means for tax administration and communication with taxpayers. many institutes are adopted from the  act on administration of taxes and charges and the  legal text also comprises some ideas from the  current case law. the  tax procedure code has also introduced a unified terminolog y for other tax laws. the tax procedure code provides for procedural rules in tax administration involving regulation of the actions of tax administrators and the rights and obligations of taxpayers and third parties arising in connection with the administration of taxes. it also contains provisions concerning the  rights and obligations common for special tax laws where it is assumed a  minimum number of reasonable derogations from the  common provisions due to differences in various types of taxes. addressed are in particular the consequences of breach of payment. tax administration is a  term that is used in the  broadest sense for administration of financial considerations. the  tax procedure code specifies tax administration in all of its provisions, it is therefore a procedure (activity) regulated by tax laws which involves the  interaction between the  tax authorities and other persons and entities involved in tax administration. this process should be directed to meet the  basic objective of tax administration, i.e. correct identification and assessment of a  tax duty (in the original proceedings) and also ensuring its payment (payment stage of the proceedings). in this regard, the objective of tax administration continues to develop the very meaning of taxes that is to ensure the financing of public needs, although this is not explicitly stated in the act. it is therefore essential to ensure the  participation of individuals (tax subjects) on the  costs necessary for the  effective functioning of public bodies and on the  provision of public services. therefore, the  main purpose is to carry out the  determined payment into the  public budget in a  manner specified by law. however, achieving this goal shall always be realized in accordance with the  law and must be based on the  proper application of 19 public governance, administration and finances law review • 1. 2017 tax procedure code in the czech republic the principles of tax administration and of the procedure law. only when respecting these conditions can the  public interest be achieved. the  purpose of tax administration is conceived more generally and more balanced, as the initial criterion is not the elimination of possible tax evasion, but the  correct identification and assessment of a  tax duty and ensuring its payment. the  main activity of tax administrators lies in the  initiation and conduct of proceedings (especially tax procedure), through which a tax is transformed into the income of a public budget, and further in the application of procedural steps provided by the  tax procedure code (as for example local inquiry, tax audit etc.). however, in tax administration other persons and entities also participate, especially third persons that significantly affect the final result and success of the realization of the state’s entitlement to collect taxes. tax administration is based on the principle that the tax subjects carry the burden of persuasion regarding their tax duties. the  taxpayers shall cooperate in determining their tax duty, in particular by stating properly the  amount of tax that must be paid. the  tax authority then revises this statement resulting in the  acceptance of the  alleged amount of tax determination and issuing a  declaratory tax assessment or in a  decision consisting in a change of the amount stated so that it corresponds to the tax duty specified by law. the tax procedure code is divided into titles, chapters, divisions and comprises six parts. part one (sections 1 to 9) entitled introductory provisions is divided into two titles and contains the  purpose of the  act and a  list of elementary principles applied in tax administration. part two (sections 10 to 124a) entitled general part on tax administration contains general provisions applicable to various proceedings within tax administration, in particular tax procedure. part three (sections 125 to 245) entitled special part on tax administration contains mainly special provisions on various types of proceedings, payment of taxes, tax administration and legal succession and relation to insolvency proceedings. part four (sections 246 to 254) entitled consequences of breach in tax administration contains a comprehensive set of sanctions, both for the breach of duties of financial character, and for the  breach of duties of non-financial character. part five (sections 254a to 265) contains common, enabling, transitional and final provisions and part six (section 266) entitled effect contains a provision on the entry into force of the tax procedure code which shall be january 1, 2011. the tax procedure code is structured in a  way that each phase of the  tax procedure (from registration through assessment of the  tax to its payment, collection and its enforcement) appears in part three. to these multiple stages of tax procedure, it is necessary to add explanatory definitions and general provisions in part one and two of the tax procedure code. in case of breach of obligations arising from tax administration, it is necessary to focus on part four. the process of creation of tax laws reflects, among other things, also the fact that tax law is a  branch of law, which, by its nature, is subject to economic development and considerable political influences. the  consequence of this influence results in remarkably numerous changes in tax laws. however, it should not be this way regarding the  tax procedure law, more specifically the  procedural legislation, which sets rules for the administration of taxes. 20 marie karfíková, radim boháč public governance, administration and finances law review • vol. 2. no. 1. the tax procedure code as a  codified tax procedure legislation that provides for transparent procedural rules in the  framework of tax administration with emphasis on reducing the  administrative burden and enhancing the  use of electronic means in tax administration and communication with taxpayers. the  adoption of the  tax procedure code has ensured a  higher legal certainty for taxpayers and tax administrators, as it responds to the  experience gained from the  problems of interpretation relating to the former act on administration of taxes and charges. this legislation constitutes a  comprehensible text based on unified terminolog y and systemic links, which can be considered a  primary requirement for any legislative text in general. the  desired characteristics of a  new legislation can be summarized as a  long-term stability and resistance to changes in the  related legislation, its universality, i.e. it is applicable to all cases of the  same nature with no formal barriers to overcome unwanted fragmented legislation. this requires the  wording to be general enough (instead of being casuistic), to be ready to resolve specific situations and to accommodate the application of specific terms within its structure. only the  legislation that is based on a  combination of general principles (whether expressed or not) and specific rules has the  potential to deal with situations that were not anticipated in advance. these general requirements meet in the tax procedure code in the framework of the tax procedure because it provides a stable legal environment even in a situation where there are significant changes in substantive tax laws and in the organizational structure. this code has proven its qualities even in an ever closer involvement of the economy and public administration into international structures which occurs in the area of taxation. it is possible to state that in the  czech republic the  tax procedure has been successfully codified. the  adoption of tax procedure code is a  great achievement and result of many years of work undertaken to preserve the autonomy of the tax procedure.4 3. considered change of tax procedure code there is an emerging tendency in relation to the  suggested amendment to the  tax procedure code to speak about a tax self-assessment and an additional tax self-assessment (together also sometimes called “tax self-determination”), which should replace or enhance the  current general regime of a  tax assessment under the  tax procedure code. a project called “tax self-assessment” is currently being conducted by the ministry of finance, which focuses on both topics mentioned above. this project’s realization is one of the ministry of finance’s5 priorities, and this priority exceeds the  current election period because it is a long-term project.6 the general regime of the tax assessment is stated in title iv of part three of the tax procedure code which is called “examination procedure”. the substance of an examination procedure is a correct tax assessment, i.e. its assessment and additional assessment. the tax shall be assessed on the  basis of a  tax return, tax report or ex officio according to section 139, par. 1 of the tax procedure code. nevertheless, this general provision is not applicable to all payments that are recognised as taxes under the  tax procedure code, but it applies only to payments that also bring the duty to submit a tax return. 21 public governance, administration and finances law review • 1. 2017 tax procedure code in the czech republic it is in the nature of things that this general provision cannot be applied to payments that are administered in a form of divided administration, because there is no examination stage. these payments are regulated only by provisions concerning the  payment stage, because there is no examination stage for this type of payments, e.g. fines imposed during an administrative procedure. furthermore, a  number of different payments (or considerations) exist that are not subjects to submitting the tax return, and a tax administrator does not determine the value of a  tax duty. these payments (e.g. some administrative fees) are only paid and no formal act is conducted (e.g. issuing a decision) by a tax administrator. the value of such payments (in most cases) is stipulated by a  statute or a  calculation of its value, and is not complex. some of these considerations are assessed by a  tax administrator if the  payment is not completed during a  set period of time (e.g. municipal fees). finally, it is necessary to add that it has already been possible to find a  solution in the  legal order taxes, which are administered using the tax self-assessment and additional self-assessment. specifically, they are value added taxes in a one-stop shop regime and gambling tax.7 it can be concluded that the legal regulation of tax assessment is not uniformed. even though there is one general legal regime for tax assessment, this regime is not applicable for all taxes (and fees) and there are different tax assessment regimes (or provisions under which no tax assessment is conducted at all). taxes in the  broad sense may be divided into: taxes assessed by a  tax administrator based on a  submitted tax return or ex officio; taxes self-assessed and additionally selfassessed based on a  submitted tax return or an additional tax return; taxes that are only paid and a tax administrator assesses them in case they are not paid in time; taxes that are only paid and a tax administrator never assesses them and payments, administered through divided administration that are imposed during an administrative procedure or other procedure and/or are assessed without further action based on provisions of the law. it is obvious that different regimes of tax assessment exist but the  general regime is only the regime stipulated in the tax procedure code, which is the tax assessment by a tax administrator based on a submitted tax return or assessed ex officio. it is a question whether there should exist more different general regimes. we think it should be so because the  general legal regulation should explicitly cover every basic form of the  tax assessment. this should be one of the goals of the self-assessment project. essentially, the  tax self-assessment and the additional tax self-assessment regime is a  tax assessment without further action (ex lege) based on a  submitted (eventually not submitted) tax return or based on a  carried out (eventually not carried out) identified payment. while in the  general tax assessment regime under the  tax procedure code based on the  submitted tax return there is the  tax assessment by a  decision issued by a  tax administrator (i.e. payment assessment, additional payment assessment, eventually collective prescriptive list), there is no payment assessment or additional payment assessment issued by a  tax administrator in the  tax self-assessment and self-additional assessment regime and a  tax is assessed independently based on legal rules (therefore the name self-assessment and self-additional assessment). 22 marie karfíková, radim boháč public governance, administration and finances law review • vol. 2. no. 1. the tax self-assessment and tax self-additional assessment regime based on tax return (regardless whether in a form of acts of commission or omission) means that the tax is: ƿ self-assessed based on a submitted or not submitted regular tax return, ƿ additionally self-assessed based on a submitted additional tax return, ƿ additionally assessed ex officio by a  tax administrator based on a  tax investigation (esp. tax control). a declared goal of the tax self-assessment and additional self-assessment is to lower the tax administrator’s administrative burden, because a  tax administrator will not be forced to issue payment assessments or additional payment assessments that are only filed and tax payers are not notified.8 for tax subjects the  regime of tax self-assessment and tax additional self-assessment may in relation to taxes with returnable tax deductions (e.g. excessive deduction under value added tax) bring an advantage. when a tax subject submits regular or additional tax return in which he/she will state a  tax deduction, the  tax deduction in the  stated amount will be self-assessed or additionally self-assessed after a period stated by a statute. in relation to this, a  legal regulation is considered that would allow a  tax administrator to withhold only a  disputed part of such tax deduction. nowadays, a  tax administrator withholds a whole tax deduction even though only a part of the tax deduction is disputed. this leads to a situation where the tax subject cannot deal with money that rightfully belongs to him/ her. this situation is unsustainable and it is necessary to change it. a further undisputable advantage of tax self-assessment and additional self-assessment regime is that a  tax subject will know what his/her last tax duty was. in a  general regime under the tax procedure code the tax subject in most cases does not know whether a tax administrator has assessed his/her tax duty based on a submitted tax return. a tax subject therefore does not know what his/her last tax duty was and it is unclear for him/her whether an additional tax return will lead to an additional tax assessment or whether it will serve only as a basis for tax assessment. as stated above, taxes in the broad sense can be, based on the form of their examination stage, divided into: a) taxes that are assessed by a tax administrator based on a submitted tax return or ex officio, b) taxes that are self-assessed or additionally self-assessed based on a  submitted tax return, eventually on an additionally submitted tax return, c) taxes that are only paid and a tax administrator assesses them in a case that they are not paid in time, d) taxes that are only paid and a tax administrator never assesses them, e) financial considerations that are administered through a  divided administration regime which are imposed during an administrative procedure or in a  different procedure and/or they are imposed without any formal act (ex lege). taxes referred to in point a) would be assessed as nowadays. it is a recent general regime of the tax assessment under the tax procedure code. in such a case tax would be assessed on 23 public governance, administration and finances law review • 1. 2017 tax procedure code in the czech republic the basis of a submitted tax return or ex officio. moreover, additional tax assessment would be done on the basis of a submitted additional tax return or ex officio. we believe that a  model referred to in point a) could be supplemented by a  model described under point b) if there was not the tax subject’s duty to submit a tax return but tax would be assessed, eventually additionally assessed ex officio by a  tax administrator. this model could be used in cases when the  tax administrator has enough information necessary for tax assessment so that it is not necessary to have a  tax subject submit a  tax return but with a  complicated calculation the  tax administrator has to calculate the  value of a tax duty and to assess such a tax. models described under points c) and d) are models that use self-assessment and additional self-assessment of tax. either based on a  tax return or based on a  payment. the  self-assessment and self-additional assessment of tax based on a  tax return [letter c)] are currently used in the legal order for value added tax and for gambling tax. the tax selfassessment and additional self-assessment based on a  payment [letter d)] would be explicitly stated and it would be used for various taxes in the broad sense which already use this model. examples of this are especially administrative and municipal fees but also other fees sui generis (e.g. fees in atomic act). for pecuniary considerations administered through a  divided administration, a  current legal regulation would still exist. these considerations are imposed during an administrative procedure or other procedure, eventually they stem directly from the  law. therefore, the  tax assessment regime under the  tax procedure code is not applicable for these considerations. every tax in the broad sense should have a clearly stated model which is applicable for its assessment. establishing the tax self-assessment and tax additional tax-assessment regime could make the examination stage of tax administration much clearer. 4. conclusion the aim of this paper was to describe the czech tax procedure code and to present and evaluate its possible significant change. first and foremost, according to recent legal regulation of tax procedure in the czech republic, the basic principles of the czech tax procedure code were set out and the basic structure of the  tax procedure code was introduced. it was concluded that the  tax procedure has been successfully codified in the  czech republic. the  adoption of the  tax procedure code is a  great achievement and the  result of many years of work undertaken to preserve the autonomy of the tax procedure. the second chapter was focused on the considered change of the  tax procedure code. the  substance of this possible change is to introduce and analyse the principle of tax self-assessment and tax additional self-assessment. benefits resulting from these new principles were presented. as a  conclusion, it can be stated, that every tax in the  broad sense should have had a  clearly stated model which is applicable for its assessment. establishing the  tax selfassessment and tax additional tax-assessment regime could make the  examination stage of the tax administration much clearer. 24 marie karfíková, radim boháč public governance, administration and finances law review • vol. 2. no. 1. references 1. this paper has been elaborated within the  programme “progres q02 – publicization of law in the  european and international context” which is realized in 2017 at the  faculty of law of charles university. 2. milan bakeš, marie karfíková, petr kotáb & hana marková (eds.), finanční právo. 6. upravené vydání. [financial law. 6th edited issue], 255 (praha, c. h. beck, 2012). 3. act no. 280/2009 coll., tax procedure code. 4. alena kohoutková, co zůstal daňový řád dlužen? [what the tax code still owes] (systém aspi – aspi_ id lit34542cz, wolters kluwer, 2017) (accessed 19 august 2017). 5. ministerstvo financí představilo své úspěchy a  plány. [the ministry introduced its successes and plans], http://mfcr.cz/cs/aktualne/v-mediich/2016/mf-predstavilo-sve-uspechy-a-plany-24535 (accessed 19 august 2017). 6. alena schillerová o prioritách a plánech v oblasti daně. [alena schollerová about the priorities and plans on the  field of taxes], http://mfcr.cz/cs/aktualne/v-mediich/2016/alena-schillerova-o-prioritach-aplanech-23809 (accessed 19 august 2017). 7. see act no. 187/2016 coll., on gambling tax, as amended by act no. 298/2016 coll. 8. vládní návrh zákona o dani z hazardních her [government draft regulation on gambling tax 53, http:// psp.cz/doc/00/11/55/00115509.pdf (accessed 19 august 2017). pga2017_1_03_article_popovic.indd © 2017 dialóg campus, budapest public governance, administration and finances law review vol. 2. no. 1. (2017) • 3, 25–32 the fundamentals of monetary fulfilment in tax administration adrián popovič* * judr. adrián popovič is an internal phd student at the department of financial law, tax law and economy at the faculty of law, pavol jozef šafarik university in košice. (e-mail: adrian.popovic@ student.upjs.sk) abstract: in this article, the author discusses a brief definition of principles and fundamentals from a theoretical and legal point of view. based on this division, the author characterizes and mentions principles and fundamentals that are applicable in a  tax administration. the  paper differentiates between the  basic fundamentals of tax administration and the  further fundamentals of tax administration. in this respect the author draws attention to the unnamed further fundamentals of tax administration which, until now, were not named by the theory of law. in the article the author mentions these fundamentals, analyses them and finds their application in tax administration. in particular, the  author refers to the  fundamentals of monetary fulfilment in tax administration, the  definition of which can serve the  better understanding of the  nature of tax evasions and the improvement of the combat against them. keywords: fundamentals; principles of tax administration; monetary purpose of taxes 1. introduction one of the  basic tasks of the  state is undoubtedly the  collectivization of funds and their concentration in the  state budget and other public budgets. generally, taxes are the  most important forms of these funds and belong to the most important revenues of the state and other public bodies. their strict observance and application is also a guarantee of a smooth implementation of tax administration and limitation of tax evasions. for this reason, it is necessary to pay attention to the  examination of tax administration and to its individual principles and fundamentals, whose application in the  implementation of tax administration ultimately determines its character. it cannot be overlooked that the  consistent differentiation of principles and fundamentals of tax administration has its own justification and they form a comprehensive complex together that can legitimately achieve the  filling of public budgets while the  basic rights of obligated persons are respected. this system of principles and fundamentals of tax administration forms a set of general rules in which the rights and obligations of the subjects of tax legislative relations in the implementation of tax administration are specified. within the realization of tax administration it is necessary to intervene in the ownership of obliged person,2 in order to achieve the  monetary income. therefore, it is important to preserve the  applicability of the  principles and fundamentals of tax administration as more general rules of conduct. on the other hand, the fiscal interest of the state and other bodies governed by public law is prioritized when implementing tax administration. 10.53116/pgaflr.2017.1.3 https://doi.org/10.53116/pgaflr.2017.1.3 26 adrián popovič public governance, administration and finances law review • vol. 2. no. 1. the fulfilment of tax administration in the  slovak republic is characterized and limited by principles and fundamentals which are established in the tax procedure code.3 these principles and fundamentals interact with principles and fundamentals of the  so called good governance and with principles and fundamentals which result only indirectly from the tax procedure code and from special legislations applicable within the realization of tax administration. 2. principles and fundamentals from the theory of law at the  beginning of this subchapter, it should be noted that the  distinction between principle and fundamentals is mainly a  local, i.e. slovak and czech phenomena.4 there is no such distinction in foreign terminolog y and in most foreign legal systems only one of these two terms is used to express their content.5 the concept of a  principle comes from a  latin word “principium”, which literally expresses a  basis, a  beginning, origin, source or base.6 although the  modern literature of the theory of law deemed to correspond to the term fundamentals, it should be noted that in this sense a principle is understood as an original rule which constitutes a basis for other rules.7 the  principle can, therefore, be characterized generally as the  fundamental and leading idea, which is valid without residue, which does not allow any exception and, for this reason, has an absolute determination. in short, the  principle can be defined as a certain absolute value that appears in the human society as normal, automatic, natural or still present.8 the fundamentals develop, elaborate and specify the  principle in a  certain way. by the realization of the fundamentals in real situations, the content of an individual principle is fulfilled. the fundamentals are defined by a normative, more specific and more concrete content; however, it still has a  considerably high level of abstraction. in the  case of legal fundamentals it should be noted that they are a relatively general rule of law which is aimed in a specific branch of law. on the other hand, the legal principle, in the broadest sense of the word, constitutes an absolutely general rule which is applied without exception and is irrevocable.9 since the  fundamentals elaborate and specify the  principle in some way, it is possible to agree with opinions of members of the scientific community, who characterize the  fundamentals in their procedural sense in particular.10 it is important not to neglect the  fact that the  fundamentals, in contrast to the  principle, allow the  exception of their application, which means that their implementation in certain legal situations is omitted and for a particular case is not taken into account.11 the fundamentals are therefore the rule by which it is possible to set the boundaries, within which the rights are realised and the duties are enforced resulting for the subjects of the  legal relations from a  precept of law in individual branches of law. they constitute a guiding rule for these entities and by observing this rule the intended purpose of the legal process is fulfilled in accordance with the applicable legal principles of the legally consistent state of the  democratic establishment as the  bearer of the  highest possible values of contemporary society. 27 public governance, administration and finances law review • 1. 2017 the fundamentals of monetary fulfilment in tax administration 3. principles and fundamentals of tax administration12 in the  current legislation we do not find any mention about the  principles of tax administration. § 3 of the  tax procedure code sets out only the  “basic principles of tax administration”. however, on the  basis of the  initial theoretical and legal definition of the problem of principles and fundamentals and on the basis of the nature of the principles defined in the  tax procedure code, it is not possible to agree with the  inclusion of these principles among the fundamentals. in this context, it is possible to identify the following principles of tax administration that have been reflected in tax legislation: ƿ the principle of legality and the principle of legal protection,13 ƿ the principle of uniformity of process decision making of a competent authority in tax administration.14 the fundamentals of tax administration15 can be characterized as the rules under which tax administrators and persons participating in the tax administration are required to proceed and these rules have significant impact on the  correct tax enquiry and securing of tax settlement. in § 3 of the tax procedure code the basic fundamentals of tax administration are directly embedded and expressis verbis stated but besides these fundamentals it is possible to infer the existence of further fundamentals of tax administration by interpretation from the  text of the  tax procedure code and special tax legislations. consequently, it is possible to divide the fundamentals of tax administration into: 1. the basic fundamentals of tax administration, namely: a. the fundamentals of close cooperation between the tax administrator, taxable entities and other persons and the instructional fundamentals; b. the fundamentals of speed, the  fundamentals of economy (of process economics) and the fundamentals of proportionality; c. the fundamentals of the free evaluation of evidence; d. the non-public fundamentals, the  fundamentals of tax secrecy and the fundamentals of the protection of personal data; e. the fundamentals of officiality and the fundamentals of disposition; f. the fundamentals of informality and the  fundamentals of the  prohibition of purposeful abuse of rights;16 g. the fundamentals of the same procedural status of tax entities; h. the fundamentals of unified procedure of the  tax administrator in deciding factually identical cases (the fundamentals of legitimate expectation). 2. the further fundamentals of tax administration to which belong : a. the fundamentals of time-barred effect of passage of time;17 b. the fundamentals of monetary fulfilment; c. the fundamentals of non-retroactivity; d. the fundamentals of material (objective) truth; e. the fundamentals of two-stage procedure; f. the fundamentals of process in a written form and the fundamentals of the use of a state language. 28 adrián popovič public governance, administration and finances law review • vol. 2. no. 1. 4. the fundamentals of monetary fulfilment in tax administration in the  context of the  in-depth examination of the  issue of the  form of fulfilment of a  tax and a  fee we can point at the  fundamentals applied within the  realization of tax administration which has been nameless up to now. in particular, it is the fundamentals of monetary fulfilment in tax administration. for the  purpose of their content definition, it can be concluded that these fundamentals are characterized by the  fade-over of the procedural legislation of tax administration with its substantive legislation. in order to characterise the fundamentals of monetary fulfilment in tax administration it is necessary to point out the  theoretical legal definition of the  tax and the  fee. the  tax can be generally characterized as a  monetary fulfilment which has a  non-refundable and non-equivalent character, is established by law or in pursuance of the  law in order to reimburse national or other public needs, and is generally paid in a pre-determined amount and maturity period.18 on the  contrary, it is possible to theoretically define the  fee as the  monetary fulfilment which is constituted by law or in pursuance of the  law that is collected for a  particular activity by the  state or other public entities performed from the initiative or in the interest of the payer in a predetermined maturity period and in most cases in a  predetermined amount. therefore, it is a  monetary payment which is of (partially) equivalent character.19 it may be summarized that despite the  differences of these two types of fulfilments, it is always the fulfilment with the monetary character. to confirm this we can present the ruling of the supreme court of the slovak republic,20 in which it is pointed out that we consider the  tax as a  payment for the  benefit of the  state under the law without the guaranty that the state grants any equivalent to the taxable entities for this payment. on the  basis of the  analysis of the  word “payment” used in the  ruling in question, it can be concluded that it is only one way in understanding it in modern economy, so it is the monetary payment, respectively the payment realized through money. in the historical context, it can be noted that the tax liability could also be fulfilled by natural fulfilment, respectively in the  form of special services. however, this is no longer the case because the fulfilment of the tax liability, if any, is required in the form of money. in the light of the above mentioned, it is possible to reflect on how these fundamentals will be followed, for example, if the taxable entity will not have enough money to pay the tax. for this case, § 98 (1) of the  tax procedure code allows the  tax administrator to obtain unpaid taxes within the  realization of the  tax enforcement procedure, in which he can perform tax enforcement by wage deductions and deductions from other incomes, attachment of the  claim, the  sale of movable objects, withdrawing cash and other things which are not sold, the sale of securities, the sale of a real estate, the sale of an enterprise or parts of it, attachment of the ownership rights related to the business share of a partner in a business company. by these methods of tax enforcement fulfilment the tax administrator is entitled to achieve the monetary fulfilment of an own tax liability of taxable entity. the status of money within the  realization of tax administration is also emphasized when the  height of the  own tax liability of taxable entity is determined. in this context, the attention can be drawn, for example, to determining the income of taxable entity, which has a  non-monetary nature and subject to taxation. in order to determine the  own tax 29 public governance, administration and finances law review • 1. 2017 the fundamentals of monetary fulfilment in tax administration liability of taxable entity, the non-monetary income which is not legally tax-exempted must be valued at the usual price at the place and time of the fulfilment, according to its type and quality or its condition and rate of wear, and then it is necessary to add the  monetary income. from the point of view of determining the tax base, income is not just the monetary income, but also the non-monetary income, which has to be valued in money.21 these fundamentals could be applied also to the implementation of the fiscal function of tax law as one of the  most important functions of this legal sector. the  meaning of the  fiscal function of tax law is to ensure sufficient satisfaction of the  fiscal interests of the state, respectively of the territorial self-government. this could be achieved by obtaining enough money, which as such is the  revenue of public budgets, be it the  state budget or the municipality budget. after obtaining sufficient funds, the fiscal function of tax law can be fully realized, regarding the  implementation of the  public expenditure budget in particular. the  above mentioned statement means, that in order for the  fiscal function of tax law to be able to manifest at all, the  fundamentals of monetary fulfilment must also influence the concrete tax-law relations. this co-operation of the fundamentals will ensure that money inflows into the public budgets are secured and guaranteed. if the monetary fulfilment plays such an important role in fulfilling the obligations of a taxable entity, why is this rule not a principle of monetary fulfilment? this question can be answered simply. both the  own tax liability and the  monetary fulfilment entitlement, which fulfilment is conditional by the payment in the form of money, constitute only one part of the  system of authorizations and obligations, the  fulfilment of which is not obligatory in the  form of monetary fulfilment. in this context, it may be noted that the following authorizations and obligations are the object of tax law: 1. own tax liability – it is the  obligation of a  taxable entity, which is expressed by the monetary payment. this obligation is fulfilled at the moment of the transfer of funds from the  private-law sphere to the  public-law sphere without providing an adequate consideration, respectively services. even in this case, however, the  fundamentals of monetary fulfilment do not always apply, because the  tax liability could be equal to zero, respectively the taxable entity may report a tax loss and fulfil his obligation even if he does not pay any money to the tax administrator; 2. other obligations – in this case, different non-monetary obligations exist, both on the  part of the  taxable entity and on the  part of the  tax administrator or other persons involved in the tax administration. these include, for example, the duty of the  taxable entity to cooperate closely with the  tax administrator in tax administration, the  obligation to file a  tax return and so on. on the  other hand, the tax administrator has the obligation to initiate tax proceedings also on his own initiative if there are fulfilled legal conditions for the creation or existence of a tax claim, etc.; 3. authorization for monetary fulfilment – for instance, the taxable entity is entitled to a tax refund or return of tax overpayment and, for example, the tax administrator is entitled to charge the tax by using tools or a right to recover tax arrears; 4. authorization of non-monetary nature – for instance, on the  side of the  taxable entity it is the  right to represent and be represented in the  tax administration, the right to appeal and so on. in the case of the tax administrator, there is the right 30 adrián popovič public governance, administration and finances law review • vol. 2. no. 1. to carry out a tax audit and a local enquiry, the right to extend the time limit and to forgive a delay, etc.22 on the  basis of the  above mentioned, it can be stated that the  fundamentals of monetary fulfilment should be included among the  further fundamentals of tax administration. although the  form of natural fulfilment, respectively the  form of performance of specific services is not possible as the  method of payment of the  tax or the  fee under the  current legislation, the  fulfilment of the  obligation of a  monetary nature has to be seen in the  broader context of the  system of authorizations and obligations existing in the  tax administration, which create the  content of the  object of tax law itself. in this sense, the fundamentals of monetary fulfilment acts within the realisation of tax administration. 5. conclusion in the  slovak legislation, the  slovak legislator omitted to establish certain fundamentals, the existence and applicability of which have a significant impact on the lawfulness of tax administration in its broadest sense. their importance is notable even though they stem from the  tax procedure code only indirectly. it can be assumed that the  pronouncement of the provisions of individual fundamentals would have a positive effect, in particular, on simplifying the interpretation of tax legislation, which would have an undoubtedly positive influence on the  tax discipline of the  taxable entity. therefore, the  legislature should, in the  future, strive for a  possible legal enshrinement of the  fundamentals of tax administration, the  existence of which is not explicitly laid down in the  tax procedure code, but are applied within the realization and implementation of the tax administration. this article pointed at the  existence of the  unnamed fundamentals of tax administration until now, namely the  fundamentals of monetary fulfilment in tax administration. in this context, it should be noted that not even scientists of tax law can ignore this issue and treat it as closed. as the tax administration changes, the applicability of its individual fundamentals changes too. these aspects have to be continuously examined, it is needed to specify their content and update the  scope and conditions of the application of each of the fundamentals. for this reason, the role and work of individual authors of tax-law science is getting more important. the principles and fundamentals of tax administration should be the guiding line not only for authorized entities in tax relations but also for compulsory subjects. it may be presumed that if the  existence of these principles and fundamentals were avoided, on the  one hand, the tax administrator would slip into undesirable need to act against the taxable entity, and on the other hand, the taxable entity would not know how to defend himself against such a  conduct, which breaches the  law. respecting the  principles and fundamentals of tax administration creates a  guarantee for the  protection of a  liable person and the  entitled person which can be invoked in the  absence of legal proceedings of any of the  subjects of tax relations. at the  same time, it cannot be forgotten that they serve all the  entities of these relationships as a  material correction by which they assess their further actions in the application and fulfilment of their rights and duties under the tax law. 31 public governance, administration and finances law review • 1. 2017 the fundamentals of monetary fulfilment in tax administration references 1. this article represents a  partial output of the  grant project vega no. 1/0846/17 “implementation of the  initiatives of the  eu institutions in the  field of direct taxes and indirect taxes and their budgetary law implications” and vvgs no. 2016-284 “eu initiatives to prevent tax evasions and their implementation into national law”. 2. see also františek bonk, fiskálny záujem štátu verzus dĺžka trvania daňovej kontroly [fiscal interest of the state versus duration of tax control], 40–52, in dny práva 2015 – days of law 2015: v. část: dohled, dozor, kontrola ve veřejné finanční činnosti [v. part: supervision, verification, control of public financial activities], (brno, masarykova univerzita, 2016), and also ivana štieberová, selected aspects of local enquiry in the  slovak republic, 451–463, in tax codes concepts in the  countries of central and eastern europe (bialystok, temida 2, 2016). 3. the basic legislation which regulates tax administration in the  slovak republic is the  act no. 563/2009 coll. on tax administration (tax procedure code) and on amendments and supplements to certain laws in the wording of later regulations. hereinafter as “tax procedure code”. 4. vladimír babčák, as the principal representative of the school of tax law in košice introduces the idea of division of the  principles and fundamentals in tax administration in his research works. for more details see vladimír babčák, daňové právo na slovensku [tax law in slovakia], 422–447, (bratislava, epos, 2015). 5. tomáš mészáros, kukučie vajcia...alebo zásady, ktoré nie sú princípmi [cuckoo’s eggs...or principles that are not principles], 533, in základné zásady v  rozhodovacej činnosti súdnej moci: zborník vedeckých prác doktorandov [basic principles in the  judicial activity: proceedings of doctoral students] (košice, univerzita pavla jozefa šafárika v košiciach, 2014). 6. petr čechák, principy jako řídící ideje právní regulace [principles as leading ideas of legal regulation], 13, in principy a zásady v právu – teorie a praxe. sborník z konference olomoucké debaty mladých právníků [principles and fundamentals in law – theory and prax. conference proceedings olomouc debates of young lawyers], (praha, leges, 2010). 7. jan pinz, právní principy, zásady a  legis ratio [legal principles, fundamentals and ratio legis], 110, in právní principy kolokvium [legal principles – colloquium] (pelhřimov, vydavatelství 999, 1999). 8. jana dostálová, jaromír harvánek, právní principy a  procesní zásady. [legal principles and procedural fundamentals], 106, in právní principy – kolokvium [legal principles – colloquium] (pelhřimov, vydavatelství 999, 1999). 9. jan pinz, supra n. 7, at 114–115. 10. for more details see vladimír babčák supra n. 4, at 423 or martin vernarský, procesné zásady daňového konania. 2. aktualizované a  doplnené vydanie [procedural principles of tax proceedings. 2nd actualized and amended issue], 20–24, (košice, univerzita pavla jozefa šafárika v košiciach, 2013). 11. adrián popovič, the rule of time-barred effect of passage of time in tax administration in the slovak republic, 385, in tax codes concepts in the countries of central and eastern europe (bialystok, temida 2, 2016). 12. mária bujňáková, zásady a princípy daňového konania [fundamentals and principles of tax proceedings], 11–23, in zeszyty naukowe universytetu rzeszowskiego: seria prawnicza [scientific writings of the university of rzeszow: law series], vol. 91, no. 18 (2016). 13. see mária bujňáková, právne princípy v tvorbe a výklade daňového práva [legal principles in legislation and application of tax law], 282–286, in právny obzor: teoretický časopis pre otázky štátu a práva, vol. 86, no. 3 (2003); adrián popovič, princíp zákonnosti a princíp právnej ochrany v správe daní [the principle of legality and the principle of legal protection in tax administration], 129–137, in teória a prax verejnej správy: recenzovaný zborník príspevkov z vedeckej konferencie doktorandov: 17.2.2016, košice [theory and praxis of public administration: reviewed book of proceedings from scientific doctoral conference: košice, 17 february 2016], (košice, univerzita pavla jozefa šafárika v košiciach, 2016); jozef sábo, princípy daňového práva a  daňová politika štátu alebo existuje hranica, ktorá sa nesmie prekročiť? [principles of tax law and https://doi.org/10.15584/znurprawo.2016.18.1 https://doi.org/10.15584/znurprawo.2016.18.1 32 public governance, administration and finances law review • vol. 2. no. 1. adrián popovič state tax policies – or does a  border exist which must not be crossed?], 376–384, poňatie a  charakter práva: zborník príspevkov z medzinárodnej vedeckej konferencie: 27. február 2014, bratislava [idea and character of law: book of proceedings from international scientific doctoral conference: bratislava, 27 february 2014] (bratislava, sap – slovak academic press, 2014); miroslav štrkolec, zákonnosť ako princíp (zásada) daňového konania [legality as a tax procedure principle], 277–287, in humanum, vol. 4, no. 1 (2010). 14. vladimír babčák, k problematike princípov a  zásad daňového konania [on the  issue of principles and fundamentals in tax procedure], 13–25, in acta oeconomica cassoviensia no 5. (košice, podnikovohospodárska fakulta v košiciach, 2001). 15. see also anna románová, vybrané zásady daňového konania tak, ako ich nepoznali klasické rozprávky [selected principles of tax procedures, as they are not known in classical fairy tales], 25–32, in acta iuridica olomoucensia (vol. 7, no. 1, 2012); anna románová, karolína červená, nová úprava zásady skutočného obsahu právneho úkonu v daňovom poriadku [the new regulation of the  principle of material content of legal act in the  tax ordinance], 198–203, in marketing, manažment, obchod a  sociálne aspekty podnikania: zborník recenzovaných príspevkov z 2. ročníka medzinárodnej vedeckej konferencie: 23. – 24. október 2014, košice [marketing, management, business and social aspects of enterprises: reviewed book of proceedings from the  2. season of international scientific conference: košice, 23–24 october 2014] (košice, ekonomická univerzita v  bratislave – podnikovohospodárska fakulta so sídlom v košiciach, 2014). 16. see karin prievozníková, implementácia zákazu zneužitia práva do daňového poriadku [implementation of the prohibition of abuse of rights in the tax ordinance], 161–168, in daňové právo vs. daňové podvody a  daňové úniky: nekonferenčný zborník vedeckých prác. ii. diel [tax law vs. tax fraud and tax evasion: non-conference book of scientific work. ii. part.] (košice, univerzita pavla jozefa šafárika v  košiciach, 2015). 17. see adrián popovič, the  rule of time-barred effect of passage of time in the  tax administration of the  slovak republic, 383–397, in tax codes concepts in the  countries of central and eastern europe (bialystok, temida 2, 2016). 18. vladimír babčák, slovenské daňové právo [slovak tax law], 25 (bratislava, epos, 2012). 19. babčák, supra n. 4, at 24. 20. judgment of the supreme court of the slovak republic of 28 february 2005, sp. zn. 2 sž-o-ks 56/04. 21. sergej kohout, vecné plnenie v  daňovom konaní [material fulfillment in tax procedure], 42–43, in justičná revue, vol. 48, no. 2 (1996). 22. see babčák, supra n. 4, 66–68. © 2019 ludovika university press, budapest public governance, administration and finances law review vol. 4. no. 2. (2019) • 86–94 . the efficiency of tax collection in the czech republic eva tomášková* * ing . eva tomášková phd, assistant professor of national economics and  public finance, department of financial law, faculty of law, masaryk university, the czech republic . (e-mail: eva .tomaskova@law .muni .cz) abstract: this paper deals with the efficiency of tax collection in the czech republic . the first part of this paper describes theoretical approaches to efficiency of taxes . considering the aim of the article, there are no mathematical models of efficiency presented . the second part introduces efficiency from the point of view of law . the next part involves the application of efficiency of tax collection, especially how to measure efficiency and the main barriers for its establishment in the czech republic . the last part of the paper offers the summing up of gained knowledge . the aim of this paper is to detect if the current approach to tax collection contributes to higher efficiency . keywords: qualitative efficiency; quantitative efficiency; tax collection; tax evasions; tax rate 1. introduction total tax income and the increasing of total tax income is one of the most important issues in tax law . politicians, lawyers and economists try to find the best way for solving this issue . this process can be characterised as a never ending story, it is still underway . all interested persons offer new solutions and then they come back to the older ways; they get inspired from the situation in other countries and they establish new taxes, then, after a time, they repeal these new taxes . these ways are changing according to the political orientation of the presenter or changing economic conditions . for this reason, the tax system is still changing and it is possible to see different tax systems in every country . therefore, it is possible to characterise tax systems as constantly changing . there are some requirements for tax systems . these requirements can be divided into some groups . first are general rules, which are democracy, legality, legitimacy and priority of eu law and international law . second are rules connected with the fiscal part of financial law . there are many specific rules concerning purpose, schedules, effectiveness, efficiency, etc .1 effectiveness and efficiency of taxes are still popular topics . there are many views on the implementation of effectiveness and efficiency, however, it is very difficult to apply these approaches in practice . economists deal with the question how to use resources in  the  most efficient way to satisfy the needs of consumers . lawyers are trying to find the most efficient way of tax processes . politicians are comparing the efficiency of  individual public goods . 10.53116/pgaflr.2019.2.7 mailto:eva.tomaskova@law.muni.cz https://doi.org/10.53116/pgaflr.2019.2.7 87 public governance, administration and finances law review • 2. 2019 the efficiency of tax collection in the czech republic this paper describes the efficiency of tax collection in the czech republic . the aim of this paper is to detect whether the current approach to tax collection contributes to higher efficiency . the following hypothesis is stated: “the current approach to tax collection applied in the czech republic contributes to higher efficiency.” compilation, comparison, analysis and synthesis are the methods used in this contribution . 2. the history of attitude towards efficiency of taxes the term “efficiency” is based on the notion of  pareto optimality . it is a  situation when there is no possibility to improve the welfare of an individual without making the welfare of at least another individual worse . the question is how to obtain optimal allocation and efficiency .2 however, the first written remark about efficiency of taxes is older and it is connected to adam smith . smith wrote down the economic principles for taxation in his book .3 in his book, he named four maxims on taxation: ƿ taxes have to be as equal as possible  –  every subject ought to contribute to the public budgets in the closest proportion to his or her abilities; that means in proportion to the revenue which he or she respectively earns under the protection of the state . ƿ taxes have to be most certain – the amount of tax which each individual is to pay, has to be certain, clear and understandable to  the contributor and for all other persons . ƿ taxes have to be levied in the most convenient way and in the most convenient time for the contributor . ƿ taxes have to be, as  much as possible, the least burdensome to the citizens . according to leijon: “every tax ought to  be  constructed in a  way that it both takes out and to keep out  as  little as possible of the pocket of the people, apart from what it brings into the public treasury of the state.”4 several later authors agree with the approach of smith and add more characteristics to this approach . one of the other views on efficiency relates to transaction costs . the efficiency is influenced by transaction costs . according to coase, economic efficiency is shown in externalities, which are connected to economic allocation or outcome . externalities create transaction costs (these costs are connected to any economic trade when participating in the market) .5 coase’s theorem is based on pareto optimality . according to coase, a  completely competitive market is without transaction costs and for this reason, it is the most efficient and brings a mutually beneficial outcome . musgrave and musgrave define efficiency at production, efficiency at  consumers and interaction between production and consumption . production efficiency can be described by an example of two consumers and two products: if one production permits 10 units of x and 7 units of y and another production permits 10 units of x and 5 units of y the first method of production is preferred . efficiency of  a business is based on preferences of 88 eva tomášková public governance, administration and finances law review • vol. 4. no. 2. consumers and shows us the basic principles of good exchange . the marginal rate between the  two goods (x and y) must be the same for consumer a  and b . “the  lowest rate at which a and b are willing to trade the last unit of x for an additional unit of y should be the same for both actors .”6 if a  is willing to trade 1 unit of x for 4 units of y and b is willing to give 5 units of y in order to get 1 unit of x, “they will exchange and a negotiation will occur as both parties gain by exchanging” .7 the third condition is realised at the most efficient tax system . “the marginal rate for substitution of x for y in consumption should be the same as the marginal rate of transformation in production that is how many extra units of x can be produced if one unit of y is produced . if  the  marginal rate for consumption is 3 x for 2 y but the  marginal rate for production is 3 x for 2 y it will be desirable to increase the output x and reduce y until the ratio is equalised .”8 niskanen deals with efficiency in the public sector and stresses that a better competitive enviroment and an increasing controlling and sanctioning system improve total efficiency . the last two instruments can be applied in the tax system as well .9 according to taghavinezhadian, tax efficiency is most often marked as the tax effort . the success of tax efficiency includes three points . the first is the ratio of the collected taxes and allocated taxes . if the ratio equals one, the current tax system is efficient; the tax system is able to collect the taxes in the estimated level mentioned in the national budget . if the ratio is less than one or more than one, the tax system is not efficient because it gains higher income of  taxes than it needs and the welfare of consumers is lower (consumers could not use the money for their own purposes) or the budget estimation has been based on unrealistic facts . the second index includes percentage changes at  the  collected tax in the current year and percentage changes at  the  collected tax in the previous year . if this index is lower than one, efficiency of the tax system decreased . if the index is one, the tax system is on the same level with the situation in the previous year . if the index is more than one, efficiency of the tax system has been increased in comparison with the situation in the previous year . third is the relative tax rate and tax effort .10 the current changing environment brings other requirements for taxes, e .g .  salanié adds two further characteristics of taxes . the first is that taxes have to change with the economic environment; they have to be automatic stabilisers . the second one sets that taxes should be clear .11 efficiency should be applied at allocation and distribution . public finance tries to gain financial means to public budgets with the lowest costs and spend  these financial means effectively on solving the public sector tasks . according to schäfer and ott, efficiency does not involve the consideration of moral rights; it might be unjust and it does not fulfil the principles of justice and fairness . efficiency is influenced by administrative and bureaucratic processes, the political decisionmaking process and bargaining situations . raskolnikov notices that inefficiency can only lead to distortive taxes .12 the analysis of the above-mentioned knowledge shows that the most important characteristic for efficiency is consumer welfare . consumer welfare is based on low tax rates and low costs related to redistribution of tax income . some economic models were established for measuring tax efficiency . considering the aim of the article, these models are not presented in this paper . 89 public governance, administration and finances law review • 2. 2019 the efficiency of tax collection in the czech republic 3. efficiency of public administration efficiency is defined in § 2 of act no . 320/2001 coll . on financial control in public administration and on the amendment to some acts (act on  financial control) . according to this, “effective management shall mean such a use of public means for ensuring the given tasks with as  little as possible provision of those means while maintaining the corresponding quality of the tasks fulfilled” . according to mrkývka, pařízková, radvan et al ., efficiency is  evaluated through internal control system . this control system shall be independent . internal control system involves procedures fundamental for the timely providing of information to all relevant levels of  management and the elimination of shortcomings, and shall create conditions for all exercise of public administration (see § 25 of the act on financial control) . control systems are necessary for the realisation of  internal audit . according to § 28 of act . no . 320/2004 coll . on act on financial control, internal audit is characterised as the evaluation of opera tions and internal control system of the public administration unit . it involves: “a) the legal regulations, the measures adopted and the procedures defined are adhered to the activities of the public administration body b) the risks relating to the activity of a public administration body are recognized on time and corresponding measures for their elimination or mitigation are adopted c) the managing controls provided to the chief executive of a public administration body are reliable and timely organizational, together with the financial and other information d) operational and financial criteria e) the introduced internal control system is sufficiently efficient, reacts to the changes in economic, legal, operational and other conditions f ) the results achieved during the fulfilment of decisive tasks of  the  public administration body sufficiently ensure that the  approved intentions and targets of the body shall be met” (§ 28) internal audit involves financial audits, audit of systems and audit of execution . the aim of a  financial audit is the analysis of data from accounting, financial data or data from other statements . the aim of an audit of systems is to evaluate the systems of income provision of  the public administration body . execution audits are based on the examination of effectiveness and  usefulness of operations, reasonability and efficiency of the internal control system, etc . the term “efficiency” is often mentioned in this act . efficiency is  mentioned in 21 cases and inefficiency is mentioned in 3 cases . efficiency is often connected to management or financial control . 4. qualitative efficiency efficiency can be divided into two groups  –  qualitative and quantitative . the qualitative one is based on time analysis . thus, the number of operations that are performed at 90 eva tomášková public governance, administration and finances law review • vol. 4. no. 2. a  specified time is analysed .13 this time limit is often used for larger investment projects . qualitative efficiency determines how the subject handles time . if we apply this qualitative efficiency to taxes, then it is necessary to first define the time required for all processes . efficiency gains are related to internal tax collection processes . while it is possible to specify activities according to the necessary time, it is difficult to unify them for all activities as taxpayers and economic conditions differ . increasing of qualitative efficiency is based on the internal processes of tax collection . it is possible to specify time for some activities; however, it is difficult to uniform time for all activities, since the taxpayers and conditions differ . qualitative efficiency is suitable as one part of internal audit of tax offices . however, information about the number of operations realised in defined time is not published . for this reason, it is very difficult to realise an analysis of qualitative efficiency . one possibility is to set the number of financial controls per year for every tax office and analyse if the tax offices realise the assigned numbers of financial controls . however, it is difficult to define time for all activities and internal processes . nevertheless, it is possible to compare tax offices using their performance of finance control . the time necessary for finance control is based on many variables, e .g . the size of the taxable person, complexity of productions, the number of tax office workers etc . the public often evaluates the efficiency of tax offices according to the number or periodicity of financial controls . the last decade shows that the  financial controls differ in different territories of the czech republic . different tax offices performed the financial controls in intervals from 11 to 206 years between the years 2005–2013 . table 1 shows the periodicity of financial controls in the selected territories of the czech republic . table 1 . periodicity of financial controls in the selected territories of the czech republic tax office periodicity of financial control in 2014 (in year) tax office average periodicity of financial control in 2005–2013 (in year) náchod 298 praha 2 206 praha 2 284 praha 6 161 praha 6 277 praha 4 150 praha 4 272 praha 3 146 praha 1 269 praha 1 132 praha 5 225 praha-modřany 128 praha 9 182 praha 10 124 chrudim 175 praha 5 121 praha-modřany 171 praha 9 110 louny 165 praha 7 107 source: daňové ráje a pekla v česku. nový žebříček finančních úřadů [tax paradise and hell in the czech republic . new ranking of tax administrators]14 the situation was caused by a differing number of companies in different localities . many companies chose one of the tax offices in some districts of the capital city for the low level 91 public governance, administration and finances law review • 2. 2019 the efficiency of tax collection in the czech republic of likelihood of financial control . the general financial directorate has not published the average periodicity of financial control for the last years . since january 1, 2015, all tax offices can perform financial control in all territories in the czech republic . it is possible to suppose that companies, which want to avoid paying taxes, will leave the market or start to pay the taxes . for this reason, it is possible to state that qualitative efficiency (improving internal processes of tax collection) is increasing . likewise, the second factor for measuring qualitative efficiency can be the time necessary for preparation, filing and paying the taxes . according to doing business (doing business evaluates business regulations and their enforcement in 190 countries and in selected cities), time to prepare, file and pay the corporate income tax, value added or sales tax, and labour tax (including social contributions) is one of the key elements for analysing business regulation environments . it is obvious that the time spent to this preparation, filing and paying of taxes could be utilised in business more effectively . estonia is leader in this factor . businesspersons in estonia need for these activities only 50 hours per year . businesspersons in the czech republic need 5 times more time for filing their tax obligations (248 hours per year in 2018) . businesspersons in  poland need more time than businesspersons in the czech republic (260 hours per year) . the situation in the countries neighbouring the czech  republic is better . businesspersons spend 218 hours per year performing all their tax obligations in germany, 131 hours per year in austria and 192 hour per year in the slovak republic . these data were valid in 2018 .15 in sum, it is difficult to establish qualitative efficiency because we need to know the time needed for any related activity and internal process . there are some activities where it is possible to establish a time bound, but there are many other activities where it is impossible and generalisation is absurd . 5. quantitative efficiency quantitative efficiency is based on comparing real inputs and the maximum of outputs, e .g . if it is possible to gain one hundred of outputs and we gained only seventy, efficiency is 70% . it is difficult to know the maximum outputs (tax revenue) . the laffer curve shows one of its reasons; it shows the dependency of the total tax revenue on tax rate . table 2 shows the total tax revenue including social contributions in % gdp during the last years . table 2 . total tax rate and contribution rate as % of gdp in the czech republic year 2003 2004 2005 2006 2007 2008 2009 total tax rate 34 35 34 34 35 33 32 year 2010 2011 2012 2013 2014 2015 2016 total tax rate 33 34 34 35 34 34 35 source: total tax revenue by country, 1995–2016 (% of gdp)16 92 eva tomášková public governance, administration and finances law review • vol. 4. no. 2. receipts from taxes and social contributions in % gdp create more than one third of the total economic production in the czech republic . poland has very similar total tax share (it is about 33–34% in the last years), the slovak republic shows about 31–32% of total share and both german-speaking countries has a  higher total share (germany about 40% and austria about 43% of total share) . however, it is difficult to find optimal tax shares because the environment is still changing and the optimal position is changing as well . the development of the total tax rate shows that the highest tax share in the czech republic was in the1990s . the level of the total share rate was 47% in 1993 . the total tax share has not significantly changed in the last fifteen years . tax incomes are increasing although we reduce the total tax income by inflation and gdp growth . correia, economides et al . notice that the increasing of tax income can be realised by increasing the progressivity of the tax system .17 it is impossible to gain more tax revenue by  increasing the tax rate because people rather choose tax avoidance or tax evasion and a very high tax rate does not motivate people to activities, which are subject to tax . ramsey offers one solution . he suggested an optimal tax rate – to have higher tax rates while taxing less elastic goods and to have lower tax rates while taxing goods that are more elastic . this rule is difficult to apply in practice; however, the total tax income would increase . likewise, maximum outputs at the current level of tax rate can be measured as real incomes of taxes plus incomes of tax evasion . it is impossible to add tax avoidance because it is not conveniently measurable . at first, it is necessary to detect tax evasion . probably, there are some tax evasions that cannot be detected . the government stresses that it wants to eliminate tax evasions and increase total tax incomes . the government has three possibilities for the elimination of  tax evasions . first, to decrease the tax rate (low tax rate does not motivate people for tax evasions; the level of profit from tax evasion is not so high) . second, to impose more sanctions for tax evasions (high sanctions can be a  reason why people change their minds and do not commit tax evasions) . third, to increase the periodicity of financial control . that is the most preferable method of the government of the czech republic . tax evasions are still very high . tax evasions18 can reach thousands of millions czk per year . for this reason, from 2016, the government established a system of electronic records of sales . this system of electronic records is aimed at cash sales of goods and services and has to provide prompt communication between the company and the financial administration of the czech republic . it was supposed that electronic records of sales would increase the total tax income with about 18  billions of  czk in 2018 . however, the total expenditures connected with the implementation of electronic records of sales are not published . table 3 . total tax income in the last years year 2010 2011 2012 2013 total tax income in bill . czk 548,432 .3 561,388 .1 583,746 .5 610,756 .9 year 2014 2015 2016 2017 total tax income in bill . czk 639,199 .5 670,395 .8 732,197 .2 786,636 .4 source: finanční správa [tax administration]19 93 public governance, administration and finances law review • 2. 2019 the efficiency of tax collection in the czech republic table 3 shows that the total tax income in the last years is increasing . however, it is obvious that the main reason is economic development and not electronic records of sales (total tax income was 606,896 bill . czk in 2008  –  before the economic crisis) . eurostat has the same attitude – total tax incomes of value added tax is based on economic development and the impact of electronic records of sales is very small . moreover, some experts notice that electronic records of sales have a  negative impact on  the business of micro companies (because electronic records of sales bring extra costs) and do not impede tax evasions . to summarise, the application of quantitative efficiency is difficult, as well because we need to know the maximum output for the calculation . there are some possibilities how to estimate the maximum output . unfortunately, these numbers are only estimates with a  certain probability . that is the main obstacle for the calculation of quantitative efficiency . 6. conclusion this paper deals with the efficiency of tax collection . the theoretical part includes the main notions from the perspective of economy and law . it is obvious that many politicians, economists and lawyers try to solve this issue . they made some recommendations for a  better tax system and  tax collection . however, there is no comprehensive solution that can be used in all tax systems . this is due to specific tax systems in each country, specific history, specific attitude of taxpayers to paying taxes, specific economic conditions, etc . the efficiency of public administration is defined in act no . 320/2001 coll . on financial control . according to the act on financial control, efficiency is mentioned in relation to management and financial control . this sense of efficiency is close to economic attitudes . economic theory divides efficiency into qualitative and quantitative efficiency . both these methods are very difficult to apply in practice . qualitative efficiency needs to establish the time needed for any activity and  quantitative efficiency needs to establish the maximum outputs . for this reason, efficiency is only estimated through alternative factors such as: 1 . the number of financial controls per year; 2 . periodicity of financial controls; 3 . the time necessary for measuring qualitative efficiency (that means the time necessary for preparation, filing and paying the  taxes); 4 . total tax rate; 5 . tax evasions; and 6 . total tax incomes . it is possible to state that the current approach to tax collection applied in the czech republic does not contribute to higher efficiency . the hypothesis is disproved . it is obvious that the efficiency of tax collection has to improve; it would be especially useful to reduce the time necessary for preparation, filing and paying taxes . the question is when it happens because politicians still prefer only short-term objectives and short-term outcomes and the current political situation does not indicate any positive change . therefore, the improvement of the efficiency of tax collection in the czech republic will be slow . 94 eva tomášková public governance, administration and finances law review • vol. 4. no. 2. references 1 petr mrkývka, ivana pařízková, michal radvan et al . finanční právo a finanční správa, 2 . díl [financial law and tax administration, part 2] (brno, masarykova univerzita, 2004) . 2 hans-bernd schäfer, claus ott, the economic analysis of civil law (cheltenham, edward elgar, 2004) . 3 adam smith, an inquiry into the nature and causes of the wealth of nations, 676–677 (the pennsylvania state university: the electronic classics series, 2005) . 4 lena hiort af ornäs leijon, tax policy, economic efficiency and the principle of neutrality from a legal and economic perspective, 12, in uppsala faculty of law, working paper, vol . 2 (2015), www .jur .uu .se/ digitalassets/585/c_585476-l_3-k_wps2015-2 .pdf (accessed 21 august 2019) . 5 ronald h . coase, the problem of social cost, in the journal of law and economics, vol . 3 (1960) . doi: https://doi .org/10 .1086/466560 6 richard a . musgrave, peggy b . musgrave, public finance in theory and practice, 61 (new york, mcgraw-hill book company, 1989) . 7 ibid . 8 ibid . 9 william a . niskanen, bureaucracy and representative government (chicago, new york, aldine-atherton, 1971) . doi: https://doi .org/10 .4324/9781315081878 10 s . h . taghavinezhadian, investigation of effects of the organizational structure on the efficiency of the direct taxes organization, m .a . thesis, tehran university, 1990 . 11 bernard salanié, the economics of taxation (london, the mit press, 2002) . 12 alex raskolnikov, accepting the limits of tax law and economics, in cornell law review, (march 2013) . doi: https://doi .org/10 .2139/ssrn .1990430 13 ulrike mandl, adriaan dierx, fabienne ilzkovitz, the effectiveness and efficiency of public spending , in european economy, economic papers of the european commission, no . 301 (2008) . 14 daňové ráje a pekla v česku. nový žebříček finančních úřadů [tax paradise and hell in the czech republic . new ranking of tax administrators], 2018, https://zpravy .aktualne .cz (accessed 21 august 2019) . 15 doing business, 2018, www .doingbusiness .org (accessed 21 august 2019) . 16 total tax revenue by country, 1995–2016 (% of gdp), eurostat, 2018, http://ec .europa .eu/eurostat/statisticsexplained/index .php?title=file:total_tax_revenue_by_country,_1995-2016_(%25_of_gdp) .png ; finanční správa [tax administration], 2018, www .financnisprava .cz/cs/dane/analyzy-a-statistiky/udaje-z-vyberu-dani (accessed 21 august 2019) . 17 isabel correia, consumption taxes and redistribution, in american economic review, vol . 100, no . 4 (2010) . doi: https://doi .org/10 .1257/aer .100 .4 .1673; george economides, saqib jafarey, natasha miaouli, apostolis philippopoulos, consumption taxes and the efficiency-equity tradeoff, in working paper series, vol . 24 (2013), athens university of economics and business, https://ideas .repec .org/p/aeb/wpaper/2013024y2013 . html (accessed 21 august 2019) . 18 according to police reports, tax evasion with fuel reached 1 .4 billion czk . the company sold 276 billion litres of fuel between june 2010 and may 2011 . ukončení vyšetřování miliardového krácení daní [termination of investigations of billion tax evasion], police reports, 2018, www .policie .cz/clanek/ukonceni-vysetrovanimiliardoveho-kraceni-dani .aspx (accessed 21 august 2019) . 19 finanční správa, supra n. 17 . https://doi.org/10.2765/22776 http://www.jur.uu.se/digitalassets/585/c_585476-l_3-k_wps2015-2.pdf http://www.jur.uu.se/digitalassets/585/c_585476-l_3-k_wps2015-2.pdf https://doi.org/10.1086/466560 https://doi.org/10.4324/9781315081878 https://doi.org/10.2139/ssrn.1990430 https://zpravy.aktualne.cz http://www.doingbusiness.org http://ec.europa.eu/eurostat/statistics-explained/index.php?title=file:total_tax_revenue_by_country,_1995-2016_(%25_of_gdp).png http://ec.europa.eu/eurostat/statistics-explained/index.php?title=file:total_tax_revenue_by_country,_1995-2016_(%25_of_gdp).png http://www.financnisprava.cz/cs/dane/analyzy-a-statistiky/udaje-z-vyberu-dani https://doi.org/10.1257/aer.100.4.1673 https://ideas.repec.org/p/aeb/wpaper/2013024y2013.html https://ideas.repec.org/p/aeb/wpaper/2013024y2013.html http://www.policie.cz/clanek/ukonceni-vysetrovani-miliardoveho-kraceni-dani.aspx http://www.policie.cz/clanek/ukonceni-vysetrovani-miliardoveho-kraceni-dani.aspx https://doi.org/10.2765/22776 pga2019_02_b1 _hlk18895087 _hlk18895098 _hlk27344917 articles administrative liability for causing damage to selected components of the environment branislav cepek* the right to informational self-determination in the context of selected judicial decisions and practical background andrea erdősová* information security awareness in public administrations at an international level lilla garayová* blockchain technology – current status, challenges and perspectives in tax and customs law ladislav hrabčák,* monika stojáková* application possibilities of blockchain in accounting péter bálint király* budget allocation of taxes to territorial budgets ivana pařízková* the efficiency of tax collection in the czech republic eva tomášková* case study new legal regulation of the administrative justice in the slovak republic juraj vačok* pga2019_02 _hlk18895087 _hlk18895098 _hlk27344917 articles administrative liability for causing damage to selected components of the environment branislav cepek* the right to informational self-determination in the context of selected judicial decisions and practical background andrea erdősová* information security awareness in public administrations at an international level lilla garayová* blockchain technology – current status, challenges and perspectives in tax and customs law ladislav hrabčák,* monika stojáková* application possibilities of blockchain in accounting péter bálint király* budget allocation of taxes to territorial budgets ivana pařízková* the efficiency of tax collection in the czech republic eva tomášková* case study new legal regulation of the administrative justice in the slovak republic juraj vačok* pga2019_02_b4 _hlk18895087 _hlk18895098 _hlk27344917 articles administrative liability for causing damage to selected components of the environment branislav cepek* the right to informational self-determination in the context of selected judicial decisions and practical background andrea erdősová* information security awareness in public administrations at an international level lilla garayová* blockchain technology – current status, challenges and perspectives in tax and customs law ladislav hrabčák,* monika stojáková* application possibilities of blockchain in accounting péter bálint király* budget allocation of taxes to territorial budgets ivana pařízková* the efficiency of tax collection in the czech republic eva tomášková* case study new legal regulation of the administrative justice in the slovak republic juraj vačok* public governance, administration and finances law review vol. 7. no. 2. (2022) • 109–137. © the author 2023 doi: 10.53116/pgaflr.2022.2.5 how can governmental incentives inspire youth to be more engaged in environmental protection? an analysis of factors affecting djiboutian young people’s engagement toward the environment kadir aden* ¤ * university of djibouti, faculty of law, economics, and management, department of law and politics, e-mail: kadir.dirir4@gmail.com abstract: during the past years, environmental protection and adopting countermeasures against climate change have been on the agenda of many east african countries, as well as western nations, although a  common challenge confronted by policymakers is directing young people’s interest toward the environment. therefore, the purpose of this paper is to explore the impact of certain factors that can be adopted by government bodies as a  strateg y to make youth more engaged in environmental activities. an electronic questionnaire was completed by djiboutian young people from february 2022 to late june 2022. we retrieved 440 out of 500 questionnaires; a  structural equation model was subsequently employed to assess the effects of government rewards, interactions, capacity building and favourable policies on youth engagement. according to the results, all the factors demonstrated a positive impact on youth engagement; consequently, we conclude that young people have tendencies to engage in activities that revolve around environmental issues when there is a reward system in place. likewise, establishing an interactive platform that accommodates young people’s opinions while the government provides reasonable feedback will stimulate engagement. reasonably, embracing policies in favour of the environment will depict the government as an effective, responsible leader, retroactively influencing young people’s perceptions. on the other hand, allowing youths to participate in the process of policies formulation will guarantee a long-term societal engagement, since, pragmatically speaking, these adopted policies will eventually influence their future; at the same time, we conclude that providing proper training and building young people’s capacity will provide them with fundamental personal skills, while simultaneously enhancing their sustainable attitude to respond adequately to environmental challenges consequently assisting the national government with their environmental endeavours. finally, the following paper contributes to the relevant existing body of  literature, by providing empirical evidence on different types of government initiatives that could make young people more engaged and inclined in environmental issues. keywords: youth engagement, environmental protection, djibouti, public governance, sustainability, sem approach https://doi.org/10.53116/pgaflr.2022.2.5 https://orcid.org/0000-0002-1350-7252 mailto:kadir.dirir4@gmail.com 110 kadir aden public governance, administration and finances law review • vol.  7. no. 2.  1. introduction djibouti’s national environment law (law n°51/an/09/6èm)1 clearly says: “the environment of djibouti is a  national heritage, an integral part of the world heritage. its preservation is therefore of primary interest at the local, national, regional, and international levels in order to guarantee the needs of current and future generations.” supported by article 3 of the same law, “the preservation of the environment constitutes a major interest of the nation, and it is the responsibility of each citizen residing in the republic of djibouti to engage and participate in the development of environmental policy”. looking closely at these two articles, it gives the perception that the national environment is protected to its utmost. yet, in 2016, the global metrics of the environmental index classified the republic of djibouti as 164th out of 178  countries, scoring 45.29 respectively, just above burkina faso and below ethiopia (epi, 2016). although, in the following years until now, the country’s performance has been improving ; for instance, it ranked 135th in ecosystem vitality and 148th in environmental health, and it was among the top 10 among middle and low-income countries for adopting policies in favour of the environment. however, despite reaching an acceptable index on environmental policies, djibouti’s performance was limited to habitat protection, marine protected areas, and policy formulation without fully significantly implementing them. this implies the government is still struggling to keep the effectiveness of the domestic environment in areas such as water treatment, waste management, recycling and tree cutting. as a  result, there is a  need to employ a  mechanism that will help the government manage and protect the national environment more effectively. it is well documented in the literature that threats to the environment primarily come from the harmful behaviour of certain people (kormos & gifford, 2014; kazdin, 2009), hence there is an ongoing need for strategies to alter individual actions for people to be more positively engaged in environmental activities (recycling, energ y conservation, efficient travel behaviour) and simultaneously assist the government in its endeavours (bamberg, 2006). here comes the concept of youth engagement in environmental protection. indeed, young people have more potential to create an impact at global and local levels nowadays, and their meaningful engagement in climate decisions and actions can increase the possibilities of a sustainable future achievement (talwar et al., 2011). and certainly, the government recognises the fact that young people’s ideas, energ y and vision are essential for societal development, as they can also influence their peers and communities to engage in sustainable projects (shaharir, 2012), nevertheless, directing young people toward environmental issues has been a challenge for the djiboutian government. despite the country’s youth being estimated to comprise 60% of the population, their apathy for political and environmental activities is transparent by their lack of active involvement. scholars of public administration and civic engagement characterised young people as an asset and resource (varney, 2007; watts & flanagan, 2007; wheeler & edlebeck, 2006); therefore, providing adequate capacity building and opportunities will foster their participation (carlson 2006). additionally, other researchers consider inviting young 1 loi n°51/an/09/6ème l portant code de l’environnement. 111how can governmental incentives inspire youth to be more engaged in environmental protection? public governance, administration and finances law review • 2. 2022 people to public work that has real consequences will change their perception (perri, 2007; meadowcroft, 2007; zilans, 2013); likewise, chawla and cushing (2007) mentioned that participation in environmental organisations and witnessing pollution and environmental destruction can be an additional motivating factor to stay engaged. in the same vein, watts & flanagan (2007) suggested the use of multiple paths to engage young people, such as: while they are a member of a religious organisation, community college, or military school. similarly, arnold et al. (2009) proposed a framework based on educational programmes that promote caring for the environment. furthermore, onuoha et al. (2018) and he et al. (2018), have investigated the effectiveness of establishing a reward system on citizen engagement; interestingly, their positive evidence was in contradiction with timlett & williams (2008), who found almost non-existent evidence of engagement from a reward system. however, these articles were focused mostly on developed countries with more concentration on the community than the young people themselves, whereas they explore the impact of these factors (reward and capacity building ) separately. hence, there is an active call for further investigating youth engagement in environmental issues. although recent papers have examined the role of financial reward on environmental protection (kaiser et al., 2020; dardanoni & guerriero, 2021), perceived environmental risk in stimulating youth engagement (shafiei & maleksaeidi, 2020) and the influence of personal moral norms (ru et al., 2019; wallis & loy, 2021), however, no paper, to the author’s knowledge examined motivator factors infusing youth engagement in environmental preservation while juxtaposing government incentives to materialise such sustainable behaviour. therefore, the current paper adopts several neglected factors such as governmental reward, favourable policies, interaction and capacity building on youth environmental involvement, hoping it will assist the djiboutian government in better responding, managing and directing young people toward environmental activities more effectively. a structural equation model was employed to catch the effect level of each of these factors on youth engagement, considering the fact that this study is one of the first to apply an sem approach to capture the effectiveness of youth programmes in further stimulating collective sustainable participation in a low-middle income african country, while overcoming the sample gap in the literature (wallis & loy, 2021). 2. a brief collection of previous studies 2.1. youth engagement studies of public engagement define youth engagement as an authentic process where youths engage actively in an event or a programme about which they are motivated and excited (bråten et al., 2009; kotzé, 2006). this is supported by browne et al. (2011), who considers youth engagement a  positive mechanism that leads youths to develop their personal skills, particularly when the activity in which they have been engaged makes them feel effective and provides opportunities for skill building. although, some authors utilise the term youth engagement and youth participation in an interchangeable 112 kadir aden public governance, administration and finances law review • vol.  7. no. 2.  manner (hart, 2013), while others associate youth engagement with youth development (maynard, 2008). albeit variations in definition, the core of these terms has the same significance in the context of acknowledging the value of young people in society as civic actors (bryson et al., 2010). for instance, stewart (2010) states that young people influence democratic society by cooperating with the government and other stake h olders by becoming active participants; as a  consequence, they evolve their civic ability and habits. in a similar vein, arnold et al. (2009) argue that engagement is not about gathering a  mass collective and directing them to a  particular issue (political issues, social action, fundraising ); in contrast, it has to include several programmes that enhance people’s knowledge and understanding of the issues at hand and subsequently empowering them. similarly, engagement is not about the quantity, such as the number of youths who are involved, but instead about the quality of engagement and participation, and to what extent their endeavours influence the policy-making process and contribute to national environment betterment (nyoni, 2009). interestingly, lorenzoni et al. (2007) accentuated an approach that is based on emphasising the cognitive, affective and active components. according to their approach, engaging in environmental protection and preservation has to rely on a personal state of connection, establishing a link between climate issues and cognitive engagement, instead of an engagement driven by mere public participation in policy-making : in other words, it is not totally sufficient to know about climate change in order to be involved; rather, people need to find a connection with climate issues, to care about and be motivated thereafter so they can take the necessary measures. barber (2009) also suggested that listening to the voices of youth and creating a bidirectional consultation based on reciprocity is fundamentally required, whereas, recognising youth as a salient stakeholder in the decision-making process will stimulate their engagement, as these policies will have a direct effect on their future lives. some authors proposed several instruments (religious, moral values and perceived benefits of the engagement) to motivate youth in order to become more engaged. for instance, pancer & pratt’s (1999) motivation model was how the volunteering experience will help with landing jobs, enrich university applications, project socially acceptable behaviour, etc. on the other hand, rose‐krasnor (2009) noted that establishing sustaining factors that incorporate individuals in ecological footprint mitigation will eventually lessen authorities’ unilateral burden; nonetheless, authorities should first take into consideration how to facilitate collective participation and ease barriers for such engagement in order to infuse a sustainable, healthy society based on all-of-society approach. in a similar study, o’neill (2007) investigated canadian youths’ engagement in politics and, according to their conclusions, education and income explained much of the youth backdrop and apathy towards political and other local participatory activities. whereas, other potential studies found that youth engagement is influenced by their milieu and surroundings, especially when they observe someone who is close (a family member) volunteering and projecting positive socially acceptable behaviour (bouman et al., 2020). keeping in line with the terms of behaviour, youths who were previously part of, and engaged in environmental activities are more prone to maintain a sustainable attitude (pancer & pratt, 1999; chawla & cushing, 2007). despite previous literature noting that youths have little to 113how can governmental incentives inspire youth to be more engaged in environmental protection? public governance, administration and finances law review • 2. 2022 contribute to policy drafting by manifesting noticeable apathy towards government activities, recent studies revealed how to motivate youths to engage in certain activities. harris et al. (2010) and o’brien et al. (2018) suggested the adverse argument, by confirming that young people have more considerable interest in social movements and social activities. yet, essential efforts are required in order to generate collective engagement, although they noted that these efforts may vary depending on the mainstream strategies employed such as via leadership skills, public speaking and meeting with the participants (erbstein, 2013). therefore, in the current study, we will examine and illustrate factors that considerably influence djiboutian youth engagement in the process of environmental preservation. 2.2. governmental reward the reward system has been used and underlined by many authors. for instance, chiang & birtch (2008) presented the reward as a value that a government, employer or entity is willing to offer to a  citizen, employee or civil worker in exchange for their contributions. cook & hunsaker (2001) view reward systems as programmes established by organisations to reward employees and encourage them in order to generate productive results. therefore, the absence of reward will create an unpleasant environment by decreasing the person’s efforts and engagement. kaiser & wilson (2004) also mentioned that the presence of reward may be a  pleasant or good motivator for some people whereas, the lack of it might be perceived as a  strong de-motivator. it is worth noting that the reward might be in form of cash incentives (with strict monetary value) or noncash incentives (gifts, coupons) and both depend on the provider and how the recipient appreciates them (shaffer & arkes, 2009). clearly, as in any other sector, environmental protection necessitates joint action between the government and young people. however, the provision of public goods is required to achieve the above-mentioned collective action (chamberlin, 1978). empirical studies have demonstrated that citizen engagement can contribute to government effectiveness, but tangible or intangible rewards given by the competent authority can be regarded as a motivator and, in the best case, maintain the mainstream of this engagement, and indeed, this particular reciprocity shows how government incentives generate commitment from citizens (kim & darnall, 2016; cropanzano & mitchell, 2005). according to garcés et al. (2002), collective engagement in environmental protection does not always generate personal benefits. in contrast, environmental protection, such as recycling or reducing waste, is more of a universal activity and does not lead to an immediate benefit on an individual level (carlson, 2001, p. 1242). however, elster (1989) and olson (1971) argued that if members (young people, citizens) are rational egotists, neither collective issues nor universal morals will warrant collective action. nevertheless, if schemes that entail penalties, such as charging fees on the amount of waste disposed of, people will increase recycling. alternatively, other services, such as rewards by exchanging recycling for goods with a value, will reduce waste disposal. other scholars also covered government rewards and their effect; cohen et al. (2017) and he (2018), both illustrated how government financial incentive mechanisms can contribute to more green buildings, 114 kadir aden public governance, administration and finances law review • vol.  7. no. 2.  supported by (onuoha et al., 2018), who stated that monetary green building incentives have a significant effect on green building adoption and development. in a similar study, chen et al. (2021) looked into the role of government policy in embracing green buildings. surprisingly, they found that government subsidy is a  major factor that leads to opting for and accepting green building technolog y. likewise, li et al. (2020) proved that increasing the income of developers can effectively promote the development of prefabricated buildings. researching exactly the same theme of reward effect, (chung & poon, 1996) found in their survey that respondents showed a willingness to return batteries if there was a refundable deposit. whereas, schultz et al. (1995), williams & taylor (2004) and bennett et al. (2008), suggested that economic rewards, such as valuable instruments are strongly effective in boosting community engagement and participation in environmental protection. on the other hand, allen et al. (1993), investigated the reliability of coupons in stimulating aluminium recycling in the united states and could not find any association. similarly, scott (1999) discovered the effect of reward incentives on the recycling intensity in some communities in the toronto area is relatively non-existent. another study by timlett & williams (2008), demonstrated that only 12% of the households expressed that the reward scheme was the main factor that motivated them to waste recycling. in accordance with scholars’ findings, we propose the following hypothesis: h1: government rewards have a positive effect in stimulating young people’s engagement toward environmental protection. 2.3. interaction public authorities and political parties pour hundreds of millions into public communication. however, despite spending a massive amount, dissatisfaction and disengagement are still present (smelser & baltes, 2001; cavaye, 2004; craig, 2006; scharlemann et al., 2020). research reveals that public authorities focus more on distributing their messages than establishing a  bidirectional relationship that consists of speaking and listening. although the government listens, it is often overshadowed by a poor or intermittent interaction led by one party, showing that 95% of communication resources are surrounded by information dissemination and promotion without fully taking public opinion into consideration (macnamara, 2016). the brexit referendum vote is an example; according to macnamara (2017) the lack of listening of the uk government to their citizens, as the authority vehemently put a  lot of emphasis on campaigning without guidance from citizens’ opinions, demonstrated a severe absence of understanding public concerns; similarly, the u.s. donald trump election revealed how the political parties in washington, d.c. were not active and in touch with public opinion, subsequently losing public support. interestingly, among the articles reviewed by hügel & davies (2020), on factors hindering climate engagement, three elements can only be considered substantial: incorporating psycho-social and behavioural adaptation to climate change into policy processes, the paradox of involving considerable stakeholders, and the difficulty of governance transition toward a framework that absorbs citizens’ demand. and this can ultimately be traced back to a lack of shared understanding of public involvement for climate adaptation across 115how can governmental incentives inspire youth to be more engaged in environmental protection? public governance, administration and finances law review • 2. 2022 disciplines; insufficient articulation of processes involving citizen engagement. alternatively, thew et al. (2020) investigated how through the years young people’s justice claims in the context of climate had been evolved. according to the longitudinal data the author noted several variety claims; 1. youth manifested their future vulnerability; indeed, this reasoning of discomfort from young people can be related to the current unprecedented climate change adaptation backdrop; 2. the second claim captured by the panel data was the poor interaction between civil servants and young people. however, from another threshold of public interaction, christensen et al. (2020) hypothesised the significance of cognitive abilities, for better executive functioning. to demonstrate how these little aspects affect interactions with the state, christensen et al. (2020) used examples of three universal life circumstances: scarcity, health issues and age-related cognitive decline. the findings show that these variables both raise the possibility that people may require state help and impair executive performance, which may amplify the negative impact of burdensome interactions with the state, limiting access to benefits and raising inequality. it is worth noting that the author does not overvalue the cardinal role of state–citizen interaction but warns that a greater dependency would lead to the state’s underperformance. by now it is clear that interaction stimulates community engagement in order to achieve certain considerable sustainable development. but when the case involves young people, it might be quite different, since the mere idea of establishing a smooth interaction and sound communication will be complicated if not challenging. delli carpini (2000) studied the cause and root of youth disengagement and concluded that young people are less trusting of their fellow citizens, projecting lower concern and enthusiasm for politics and public affairs, supporting this statement with their empirical finding that only 19% of 18–29-year-olds follow politics. accordingly, these youths will be unlikely to engage in community organisations due to their inability to feel a sense of identity, pride or obligation. for instance, stoneman (2002) founder of “youth builds” in somerville, usa, advocates a new leadership development approach, stressing that the skill of listening is how young people respond, believing that citizens need to be considered important, and pinpointed that effective engagement of young people in civic and other sectors requires an interaction based on a solid, good foundation and continuity. it is well-known that, in order to build a sustainable society, the participation and engagement of every citizen is crucial. they can act as decision-makers, such as expressing their opinion by interacting with the legitimate competent authority. in fact (yang & callahan, 2005; sommerfeldt, 2013; willis, 2012; taylor & kent, 2014; johnston &  lane, 2019; piqueiras et al., 2020), mentioned that effective engagement requires constant interactions between the public and community and this can not only contribute to collective engagement but also to mutual trust and reciprocity. besides, in the field of public administration, researchers discovered that when citizens participate in a discussion forum or join a  political group, whether it is a  physical or virtual interaction, there is a  higher level of engagement in civic action. therefore, the following hypothesis is proposed: h2: interaction positively stimulates youth’s engagement in environmental betterment. 116 kadir aden public governance, administration and finances law review • vol.  7. no. 2.  2.4. favourable policies knoepfel et al. (2007) defined policy as a  package of decisions or actions taken and implemented by a  competent public authority to address and resolve a  public problem (e.g. unemployment, inflation, gender inequality, pollution). the policy is regarded as favourable if it reaches a specific goal or identifies socially acceptable and desirable issues (moynihan, 2012; jager et al., 2020). mettler and soss (2004) explored how desirable policies influence citizens and recapped in their article that appropriate policies shape citizens’ patterns of behaviour and mobilise interest groups by making them more politically engaged and bolstering their level of commitment to that issue; for them, policies are a  way of conveying messages to the public about civic engagement. additionally, edelman (1964) remarked that policies can intimidate or comfort, foster beliefs or evoke mass collective participation. in a similar spectrum, feldman & conover (1983), kinder & sears 1985 and krosnick (1990) investigated the effect of favourable policies on citizens in stimulating votes; according to their summary, government targets the population with policies that it deems relevant to them, and subsequently, citizens acquire a sense that these policies attribute great importance to their cause, thus proceed to vote to the candidate with the most suitable policy. scholars in public management have argued that the process of adopting favourable policies appears successful in making citizens (young people) more socially engaged; however, they emphasised the importance of including actors (civil society and citizens) in the process of policy formulation: as a result, this will produce an effective level of public service which is based on a co-produced and co-created framework that is tackling the most serious issues (alford, 2009). moreover, collaborative activities between the two parties will motivate each person (young people and government) to achieve sustainable governance and fasten societal transformation; in other words, youths will behave in the given social context with action that contributes to the country’s most challenging issues (phang et al., 2014). nevertheless, this certainly depends on how promising, appealing and beneficial these policies are in order to infuse an impact on young people. the next hypothesis is proposed: h3: favourable policies positively influence young people’s engagement in the context of protecting the national environment. 2.5. capacity building capacity building is regarded as a vital method of promoting growth, performance and effectiveness. the concept of utilising capacity building includes a  variety of activities, such as improving skills and providing training that aspires to enhance and develop the internal and external capacity of a non-profit organisation or people (doherty & mayer, 2003). castelloe et al. (2002) employed capacity building on a  grassroots organisation with funds below $150,000. they noted that this organisation would need an injection of skills, training and support in terms of financing ; they added how these steps would assist the grassroots organisation in upgrading their operational skills to provide 117how can governmental incentives inspire youth to be more engaged in environmental protection? public governance, administration and finances law review • 2. 2022 compelling services, and subsequently, after they had acquired the necessary support, they could meet the expectations of the community. indeed, government and community can benefit from young people’s involvement in all aspects of the country’s development process (granger, 2010; narksompong & limjirakan, 2015); however, to materialise such an engagement, the government needs an approach that consists of providing support and empowering young people, which, in turn, will lead to long-term sustainability. some prominent researchers suggested activity setting theory as a mechanism to engage young people (hawe et al., 2009; case & hunter, 2012; o’donnell & tharp, 2012); their framework embraces establishing development programmes. alicea et al. (2012) and yohalem & martin (2007) also suggested that competent authorities need to promote a variety of competencies instead of only relying on attracting young people to a special issue. such authors recommend focusing on developing youths’ individual and social systems by providing them with sufficient empowerment to become productive in society. ultimately, these authors emphasise capacity building, which comprises physical, emotional, personal and intellectual development rather than a pathological focus. hence, investing in youth resources and their potential skills will generate the desired outcome (geldhof et al., 2013; pereira & freire, 2021). equally, schusler & krasny (2010) and johnson et al. (2009), studied the engagement of indigenous youths2 in environmental sustainability, and they concluded that engagement in environmental activities depends on teaching them, so that later, when they accumulate sufficient education incorporating environmental awareness, climate change and ecological footprint impacts, they can ultimately serve as pillars who promote and engage in environmental sustainability, consequently contributing to community development. in a similar context, latulippe & klenk (2020) emphasised the distinction between knowledge and governance and conveys the impression that knowledge co-production aids in the governance of global environmental change. however, using indigenous knowledge to guide environmental decisions implies that indigenous peoples are participants in opposition to self-governing countries with rights and obligations, therefore, respecting their knowledge systems and territory is rather a perquisite. yet in most cases, indigenous sovereignty is typically not persevered when knowledge is only used as information for group decisionmaking. the author also underlined the significance of integrating co-production with indigenous knowledge in environmental governance, while also urging public administration scholars to work to better “integrate” indigenous knowledge into western science and pave the way for indigenous research leadership. in another situation, in 1986, the nigerian government introduced a programme to encourage and attract youths to the agriculture sector so that the country could secure and ensure a stable food supply. the programme was based on providing vocational training for young people; surprisingly it later created job opportunities (latopa & abd rashid 2015). miklosi (2007) also investigated three factors (respecting, listening, and empowering ) that increase american teenagers’ civic engagement, the paper concluded 2 in general, compared to other groups, indigenous peoples in most parts of africa, south america and central asia tend to have less access and relatively limited quality of education. therefore, it is important to make efforts to guarantee that indigenous peoples have access to culturally and linguistically appropriate education that does not promote or lead to unintentional assimilation. 118 kadir aden public governance, administration and finances law review • vol.  7. no. 2.  that when young people participate in extracurricular activities, such as student government, political clubs, vocational and community organisations, they tend to project strong engagement and are more active in political activities. equally, barnett & brennan (2006) and brennan (2007), demonstrated that when youth engage in social issues, they accumulate knowledge, master social skills, and get a sense of purpose; as a result, they become long-term participants in the development process. consequently, the current study proposes the following hypothesis: h4: capacity building infuses positive sustainable engagement among young people. 3. methodology 3.1. participants 3.1.1. defining the participants according to the african charter, youth are considered people between 15–35  years, yet the concept of young peoples’ delineation provided by the un might differ (15–24). however, considering that the current paper exclusively focuses on an african country, and is an active member of the african union it will be preferable to employ the african charter. the application of such a chart will provide us with a cardinal extension of the dataset by reaching a  decent number of people while simultaneously overcoming the sample gap in the literature. 3.1.2. data collection and demographic analysis the survey included a total of 440 respondents; the questionnaire was posted on social media platforms by making it available for the djiboutian public setting from february 2022  to late june 2022  and targeting youths before entering the summer break. other feasible communication tools were utilised to acquire enough respondents; for instance, university students use whatsapp groups in order to communicate and share information regarding university news announcements, for instance, the official whatsapp group of law student major surpasses 200 students, only in their first year, whereas, secondand third-year students are estimated to be 50–60: other faculty students participated in the survey, as well. overall, our sample size exceeds the absolute minimum recommended data for sem which is 250  cases (westland, 2010). it can be seen in table 1  that female respondents represented 53.4% while male participants were 46.6%. in terms of age, the largest segment of respondents was between 21 and 25 with 48.9%, followed by those who were 26–30  (34.1%). regarding educational level, most of our participants were bachelor holders/students (55.0%) while phd holders/students comprised only 3.0%. as for their income, only 132  seem to be getting an income, 119how can governmental incentives inspire youth to be more engaged in environmental protection? public governance, administration and finances law review • 2. 2022 which can be relatively explained by the high unemployment that exists in the job market of the country, and with covid-19  it became worse; in 2021  the republic of djibouti had the second highest unemployment rate in africa, according to statista. table 1. respondent’s profile demographic characteristics n = 440 frequency % gender female 235 53.4% male 205 46.6% age 15–20 59 13.4% 21–25 215 48.9% 26–30 150 34.1% 31–35 16 3.6% educational level high school 78 17.7% bachelor 242 55.0% master 107 24.3% phd 13 3.0% income yes 132 30.0% no 308 70.0% source: compiled by the author. 3.2. questionnaire a self-administered questionnaire was created for this study, see table 2. for the sake of convenience of distribution and completion, an online survey was conducted. the first part of the questionnaire focused on the demographics of the respondents, followed by the factor of youth engagement; composed of five items inspired by (szagun & pavlov, 1995), then, in order to assess the effect of governmental reward on young people’s engagement, six items were established. two were newly created while four were inspired by (chen, 2015; lin & lo, 2015), while the three other sections were structured as follows; three items for capacity building were taken from (bennett et al., 2014), and six items on favourable policies were taken from (webler & tuler, 2000); however, only four items were maintained because of their low loading, and the last section was about interaction, with six items based on (heikkila & roussin isett, 2007) but due to the low loading, only four items were retained respectively. the respondents rated the items via a  5-point likert scale (1 = strongly disagree to 5 = strongly agree). 120 kadir aden public governance, administration and finances law review • vol.  7. no. 2.  table 2. the questionnaire constructs constructs items measures youth engagement ye1 i advocate for the environment and inform others about climate issues. ye2 overall, i am engaged in environmental activities at the national level (such as cleaning the beach, using bikes and purchasing sustainable products). ye3 i value the environment to the point where i will sacrifice certain luxuries. ye4 i am always involved in climate change activities and volunteer whenever i get the chance. ye5 i believe i have an important responsibility toward the environment. governmental reward gr1 the government should give rewards to people who are engaged in environmental protection. gr2 governmental reward such as monetary incentives plays an important role in how i perform. gr3 personally, i will be engaged frequently in climate change activities if there was a rewarding system. gr4 acknowledging my engagement efforts from the government contributes positively to my climate advocacy. gr5 giving away simple awards such as electronics, prizes and books are enough to encourage me. gr6 i feel valued and appreciated when i am rewarded. capacity building cb1 i feel the government is not providing us with enough training that will help us respond to environmental challenges. cb2 i believe i need more resources to prepare myself for environmental challenges. cb3 generally, we are lacking encouragement and empowerment from the authority. cb4 more coaching and education about climate issues would increase my engagement. cb5 my environmental engagement will be irrelevant and feeble without proper training. cb6 even if i engage in environmental protection activities, i will need external support. 121how can governmental incentives inspire youth to be more engaged in environmental protection? public governance, administration and finances law review • 2. 2022 favourable policies fp1 the government is inclusive and considers our voice when adopting legislation. fp2 the policies in force are strong enough and protect the national environment. fp3 tougher laws against waste disposal and pollution should be put in place. fp4 personally, i want to influence climate policies proposed by the government. interaction in1 the government established several interaction initiatives and platforms for the youth about climate issues in the past 3 years. in2 i can function and protect the environment without governmental interaction initiatives. in3 i am satisfied with the lack of interaction with the authority. in4 as a youth, i believe the government listens to our environmental concerns. source: compiled by the author. 3.3. statistical analysis structural equation modelling was utilised in order to measure the significant effect of the independent (governmental reward, capacity building, favourable policies, interaction) variables on the main variable (youth engagement). we used spss version 28  to prepare the descriptive statistics, as well as the reliability analysis of the collected data (cronbach alpha), while amos 24  was used to conduct the structural equation modelling. according to tommasetti et al. (2017), structural equation modelling is considered a powerful tool for causal effect, so sem was the most appropriate tool for this research. however, before demonstrating the results, it is important to assess the model fit of the whole model. the model of fitness consists of the following indexes; incremental fix index “ifi”, tucker lewis index “tli”, comparative index “cfi”, goodness of fit index “gfi”, adjusted goodness-of-fit index “agfi”, and root mean square error of approximation “rmsea” (kamboj et al., 2018). 4. finding and results first, the model fit of this study can be seen in table 3; all the values were within their respective common acceptance levels, and the five-factor model demonstrated a  good fit. according to the table, the chis-square/df (cmin) ratio shows 1.955, and it is in line with (schumacker & lomax’s 2004) statement: “if the chi-square/df ratio is less than 5  then the model and the data are an excellent match.” the fact that our result is closer to 1  is considered an excellent match for the model. similarly, the “ifi” has a  parameter estimate of 0.952, and the “tli” index shows 0.945, while the “cfi” has  0.952; continuing with the model fit, our “gfi” has 0.916  and “agfi” displays 122 kadir aden public governance, administration and finances law review • vol.  7. no. 2.  0.897.  all the indices were greater than 0.800, as they were all closer to 1  (garson, 2012), hence, the aforementioned values are considered excellent. furthermore, our rmsea displayed an estimate of 0.047 which is adequate since it is lower than the suggested value by hair jr et al. (2010) which is 0.07. table 3. goodness-of-fit measurements of the model goodness-of-fit measures of the model parameter estimates minimum cutoff suggested by chis-square/df 1.955 < or = 5.00 (schumacker & lomax, 2004) incremental fix index (ifi) 0.952 > 0.80 (garson, 2012) tucker lewis index (tli) 0.945 > 0.80 (hu & bentler, 1999) comparative index (cfi) 0.952 > 0.80 (hair jr et al. 2010) goodness of fit index (gfi) 0.916 > 0.80 (hu & bentler, 1999) adjusted goodness-of-fit index (agfi) 0.897 > 0.80 (gefen et al. 2000) rmsea 0.047 > 0.07 (gefen et al. 2000) source: compiled by the author. the next step was to analyse the convergent validity of the factors by assessing via average variance extracted (ave), and composite reliability (cr). figure 1  shows all the factor loading and they are all higher than 0.5  which is the recommended value by (chin, 2008), followed by composite reliability (cr), which are excellent and surpass the recommended threshold, which is 0.6; additionally, the ave which reflects the overall amount of variance in the indicators accounted for by the latent constructs exceeds the recommended value of 0.5  (hair jr et al., 2014), observe table 4.  furthermore, before conducting the sem, all the items were subjected to factor analysis in spss, in order to avoid discrepancy and mixing in variables, since some of the items were newly created; however, the items were placed and divided into 6 categories, contradicting our framework, which was composed of 5  constructs. the two independent items that were put into the same category were interaction constructs; after deleting them and repeating the principal component analysis, all the items were perfectly placed in their expected categories (five categories) as a  result validating our framework, (keeping in mind that the two same items were lower than 0.5 in the loading process after employing amos), the same with favourable policies, despite loading in the same category in factor analysis; 2  of the 6  items were below the desired value and therefore, were discarded. similarly, the kmo test ensured the overall measure of sampling adequacy, which was 0.826  higher than the value recommended by (chan & idris, 2017) which is of > 0.50; additionally, bartlett’s test provided support for the appropriateness of the factor analysis, which was significant at p < 0.01. 123how can governmental incentives inspire youth to be more engaged in environmental protection? public governance, administration and finances law review • 2. 2022 table 4. descriptive statistics and reliability of the constructs constructs items min. max. mean std loading cronbach’s alpha cr ave youth engagement ye1 1 5 3.91 1.132 .721 .833 .834 .501 ye2 1 5 4.02 1.078 .712 ye3 1 5 4.02 1.048 .713 ye4 1 5 4.03 1.012 .746 ye5 1 5 4.22 .997 .631 governmental reward gr1 1 5 4.00 1.025 .851 .912 .912 .635 gr2 1 5 4.10 .984 .782 gr3 1 5 3.87 1.011 .698 gr4 1 5 4.04 1.006 .817 gr5 1 5 4.04 .921 .787 gr6 1 5 4.03 .955 .838 capacity building cb1 1 5 4.04 1.006 .650 .865 .867 5.18 cb2 1 5 4.12 .948 .701 cb3 1 5 4.07 .941 .583 cb4 1 5 4.13 1.076 .816 cb5 1 5 4.03 1.005 .646 cb6 1 5 4.16 1.016 .863 favourable policies fp1 1 5 3.89 1.165 .861 .816 .824 .548 fp2 1 5 3.97 1.121 .815 fp3 1 5 4.08 .928 .593 fp4 1 5 4.09 1.092 .533 interaction in1 1 5 2.49 1.161 .781 .869 .865 .617 in2 1 5 2.88 1.285 .686 in3 1 5 2.74 1.180 .835 in4 1 5 2.64 1.035 .830 source: compiled by the author. 124 kadir aden public governance, administration and finances law review • vol.  7. no. 2.  figure 1. sem with its indicator source: compiled by the author. table 5  presents the results of the hypothesis, the values displayed in the table are the standardised beta; we notice that the variable interaction possesses the highest impact on youth’s engagement with a strong significant p-value (β: 0.190; p = <.0.00), therefore supporting our hypothesis 4. it is worth noting, that the mechanism of young people to engage deeply in the environment had been impeded by a relative lack of active interaction with public authority. on average our responders are concerned about the government’s limited interaction with potential stakeholders, and indeed this dichotomy has contributed to a  server backdrop of youth participation. capacity building also demonstrated a  strong significant p-value, as it appears in the table, while the direct effect of capacity building on youth engagement toward activities that involve environmental protection is estimated to be (β: 0.189; p <.0.00); hence, in accordance with this result, our second hypothesis is also supported. accordingly providing training and enhancing young people’s skills to accommodate environmental challenges will reduce the government’s unilateral responsibility, see table 5. this is followed by the favourable policies factor, and interestingly it has a positive significant effect on youth engagement; (β:.169; p <.0.002); observe figure 1, consequently justifying and providing further validation to our third hypothesis. this implies the current strateg y of non-inclusiveness in the djiboutian context should be abandoned and adversely turned toward a  more inclusive societal approach involving other stakeholders aside from the government in environmental policy formulation, and in the best scenario, this will further provide validation to “article 3” of the djiboutian national environment law in the sense of strictly abiding by the collective engagement promoted by the article. finally, the impact 125how can governmental incentives inspire youth to be more engaged in environmental protection? public governance, administration and finances law review • 2. 2022 of government rewards on youth engagement displayed a positive impact, with a significant p-value (β: 0.139; p <.0.008) which validates our hypothesis that young people will be more deeply engaged in environmental and climate activities when there is a reward system in place. table 5. structural estimates (hypotheses testing ) hypothesis standardised estimates t-value p-value decision h1 governmental reward → ye .139 2.638 .008 accepted h2 capacity building → ye .189 3.412 *** accepted h3 favourable policies → ye .169 3.035 .002 accepted h4 interaction → ye .190 3.445 *** accepted *ye = youth engagement source: compiled by the athour. 5. discussion this study’s findings contribute to the existing body of knowledge, by providing empirical support for the factors that influence young people’s engagement. despite the fact that scholars have highlighted the need to explore incentives and initiatives proposed by government and public authority and their effect on youth’s engagement, little research has been done on this topic, as previous studies focused deeply on community engagement while assessing it from different facades without fully taking into account young people’s potential; therefore, this article is among the first to explore and identify the significant effect of governmental reward, interaction, favourable policies and capacity building on youth engagement. in addition, sem was utilised to assess the causal relationship between the constructs and to examine their level of significance. considering our results, all the proposed hypotheses were supported, for instance, the interaction factor had the highest direct effect on youth engagement (β: 0.190; p  =  <.0.00), our results are in line with ( johnston & lane 2018; canel et al., 2022). the  following results reveal that djiboutian young people are more inclined toward environmental activities if the government establishes several platforms that consist of interaction and consulting. yet, this has been hindered by constrained governmental agenda that lacks collective inclusivity. in a more formal way, the national government is focused heavily on campaigns that address specifically and solely what they want to say; as a result, this excessive emphasis on message transmission on climate issues might be perceived by the government as a catalytic factor of youth engagement, nonetheless, this provokes only a one-way direction run by the authority. indeed, the government has a tendency to limit its interaction with young people; a particular reason could be attributed to the lack of providing a mechanism that absorbs young people’s opinions or recommendations on certain societal issues, consequently reducing their engagement and further reinforcing their apathy toward societal 126 kadir aden public governance, administration and finances law review • vol.  7. no. 2.  transformation and environmental activities (o’neill, 2007). on the other hand, young people have this belief that environmental and community improvement merely falls under governmental umbrella. however, interaction is a dialogue not only involving one single party (government or youth) but to explore how they can add value to each other and create mutual input for a better national outcome. the government needs to acknowledge that young people are the main vehicle for overcoming environmental issues; as suggested by piqueiras et al. (2020), young people are considered the backbone of any nation. hence, the government is required and advised to recognise the concept of being an audience, listening and adopting a mechanism that is based on consecutive interaction with young people rather than a periodic, unidirectional interaction led on government terms. moreover, youth engagement is fully directed by their perception and the extent of influence the government has on them. in other words, an uninterrupted commitment to environmental issues is rare, but when young people realise, they have been acknowledged; their passion for engagement is driven by a sense of inclusiveness and confidence, simply because they value this interaction and, as a  result, their engagement level increases. likewise, the government needs to note that listening to and consulting with youths does not only enhance the level of engagement, it helps administrators define the situations more carefully, whereas an interaction platform will offer the djiboutian government a real reinvention agency and easier policy management process. the results also showed that capacity building had a positive significant effect on engagement (β: 0.189; p <.0.00). this provides insight into how building young people’s skills in the context of environmental awareness and sustainability development boosts their level of participation in the national environment. from the constructs, our participants believe that the national government does not provide enough training that will assist them in overcoming environmental challenges. several authors mentioned the critical role that capacity building plays when it is implemented in a specific population (alicea et al., 2012; schusler & krasny, 2010; iwasaki, 2016), as their recommendations included that providing training will promote growth, effectiveness and performance. interestingly, our empirical findings that providing training and capacity building will help the government to make young people more engaged in environmental issues is in line with their results. similarly, capacity building is not limited to physical training and providing resources, as much as this might be salient; on the contrary, it is insufficient. therefore, including education and environmental awareness will produce higher support in the level of engagement, for instance, it is unlikely that someone who does not have sufficient information on climate impact will be engaged in environmental activities. as  a  solution, public authorities need to establish several impactful capacity building programmes, which can be achieved by building partnerships with private and educational institutions so that in retrospect could introduce some voluntary courses that promote environmental awareness in order for young people to accumulate sufficient knowledge of the climate issues that threaten their country and the wider region. keeping in line with the results, favourable policies also demonstrated a  positive impact on youth engagement (β:.169; p <.0.002); our findings support the statement made by (mettler & soss, 2004), who considered that desirable policies influence citizens’ patterns and mobilise them to undertake impactful action, thus, adversely becoming 127how can governmental incentives inspire youth to be more engaged in environmental protection? public governance, administration and finances law review • 2. 2022 politically engaged. although our scope was investigating youth engagement from two points (one checking if the policies adopted by the government are inclusive in nature by considering young people’s voices, whereas the second was if these policies in question are strict enough in terms of protecting the environment and encouraging the already existing environmentalist to maintain their engagement). many potential respondents voiced that little did the government consider their proposed policies or recommendation in the national environmental agenda, yet one of the elements on which the national environment law is based is on (principe de participation) is a tenet and element of participation, which means that every citizen residing in the national territory is allowed to express and propose their ideas in order to respond better to climate change since the preservation of environment falls under the responsibility of every citizen. furthermore, the goal of incorporating young people’s decisions in environmental policies will further project the existence of strong participatory governance, while at the same time, it predicts a  better policy outcome by presenting the government as more equitable and transparent (bishop & davis, 2002; kauneckis & andersson, 2009). the fact that these strategies will affect their future is another reason to allow young people to influence these adopted policies by the government. however, effective engagement can only be reached when two conditions are met, first, finding civil society actors, and second, making sure that these actors are willing to contribute to the government’s task at hand. evidently, our results answered this, as we demonstrated how certain particular variables related to government strategies influence engagement. continuing with the favourable policies factor, respondents were not satisfied with the current laws in place. this explains the low level of youth engagement in protecting the national environment, for instance – if the already existing laws are not sufficiently strict in protecting the environment (poor waste management, water pollution, overfishing, unnecessary tree cutting ) the likelihood of participating in environmental activities is adversely, negatively affected by poor legislation. accordingly, if the authority responsible demonstrated a sense of responsibility, and showed effectiveness in improving government service, commitment to public service, transparency and leadership, this will prevail and foster the level of engagement (zamir & sulitzeanu‐kenan, 2018; hassan et al., 2021). finally, governmental rewards also had a significant effect on youth engagement, observe the estimate from table 5 (β: 0.139; p <.0.008). the government should take into account that youth are inclined towards environmental activities if there is a reward system in place. we conclude that young people’s actions are motivated when some incentives are offered in exchange for their engagement, therefore further confirming previous scholars’ finding (abila & kantola, 2019; maki et al., 2016; onuoha et al., 2018). from the constructs, it should be noted that rewarding can take different forms, while the level of appreciation depends on the participants. for instance, the majority of the respondents were fine with no monetary incentives, such as giving away gifts, prizes and recognition ceremonies. the djiboutian authorities could establish systems that provide bonuses, and coupons to young people whenever they engage in environmental protection activities. bennett (2008) identified how rewarding citizens for their positive activities such as waste disposal can increase the level of commitment to environmental protection, by injecting friendlier environmental behaviour. while others did not find any link between the 128 kadir aden public governance, administration and finances law review • vol.  7. no. 2.  reward system and environmental protection (timlett & williams, 2008), overall, our result adds support to previous findings on the positive effect of reward on engagement. 6. recommendation considering the climate issues that menace the republic of djibouti and the horn of africa, the current government must develop certain strategies to combat drought while focusing on keeping the national environment safe. according to a report published by the guardian on 20 august 2022, the drought in the horn of africa has displaced more than 21  million people (agence-france presse, 2022). however, this article is focusing more on national environmental issues; this includes how to protect natural habitats, waste management, and hastening the transition to renewable energies by deploying youths and directing them to these issues. clearly, it is a challenge to deploy young people’s potential skills toward a  specific problem unless there is some motivating factor influencing their actions, and indeed demonstrating this was one of the main objectives of this study. applying the results and the findings of this research at the national environmental level will assist the djiboutian government in dealing better with the environmental issue while at the same benefiting from young people’s potential. in the context of government rewards, the country’s status is a  low-middle income country according to the world bank development classification; therefore, rewarding could take other forms rather than a  monetary incentive, such as simple recognition, prizes and giving items away. in other cases, when young people demonstrate uninterrupted environmental engagement, the government should consider providing reasonable rewards. mostly because a  small incentive will compensate their time and further reinforce their level of engagement. for instance, o’neill (2007) investigated canadian youth engagement in politics, and concluded that insufficient education and lack of income explained much of young people’s apathetic attitude toward political activities and other participatory activities. reasonably, education is considered an important factor, as it helps in building youths’ confidence by providing adequate cognitive capacity while low income represents a barrier to engagement because, considering the reality that young people have insufficient access to public resources, including financial income, compared to their adult counterparts, thus rewarding will be a reasonable strateg y. it is also recommended that the government should develop a  waste management system that is based on rewards, such as creating a  coupon strateg y that allows young people to purchase certain limited items in exchange for their environmental activities and sustainable waste disposal. public authorities should also consider increasing waste collection vehicles in certain communities instead of deploying exclusively to urban areas, simultaneously encouraging street sweepers and sanitation workers by providing them a total tax break, and continuing their salary even after retirement not in the sense of pension package, but a systematic flow of income for their long services. moreover, it is required of the current government to show resiliency and responsibility, such as educating young people about the benefit of preserving the national environment by establishing several programmes in institutes of public education, as the 129how can governmental incentives inspire youth to be more engaged in environmental protection? public governance, administration and finances law review • 2. 2022 current national curriculum lacks environmental subjects; it is therefore advised that the national government considers adopting certain educational strategies that will help young people to grow with an environmentally friendly mind-set from when they are still young ; furthermore, depicting themselves as leaders will help young people to change their perspective of the government. most djiboutians are not interested in environmental issues, and a  hindering factor is the lack of leadership. for instance, the mayor could prepare certain initiatives that involve community cleaning at weekends, informing citizens not only how this will help the national environment but demonstrating to young people how engaging in social issues can be fun by how it provides something different, and the opportunity to meet new people, build their experience and enriching their academic cv. similarly, investing in renewable energies will increase young people’s appreciation of the efforts made by the government. despite having policies that promote the transition to renewable energies, the country is far behind in its goal. djibouti is notorious for it has abundant solar energ y; the sun is present during almost the whole year, thus, installing more solar panels will help the government on mitigating the excessive dependence for energ y transmission and exportation from neighbourhood countries, likewise, this will provide djiboutian citizens to benefit from low electricity prices, since current electricity bills average is estimated to be more than usd350 per household. moreover, the government needs to invest more in platforms that facilitate interaction between the government and young people, the idea of considering young people’s outlooks and viewpoints as undeserving is becoming obsolete. young people need to feel they have been listened to and heard while, in turn, the government is required to provide reasonable feedback and, adversely, this will make them feel more appreciated and acknowledged, in retrospect, their sense of trust in the government will increase, which in turn boosts their engagement level. 7. conclusion the djiboutian government has been struggling over the last years to make young people interested in environmental protection while reluctantly trying to discourage the harmful behaviour of some citizens, such as dumping their waste in public spaces and roads whilst the current regulations scarcely contribute to environmental protection. consequently, the aim of this study was to provide a  contribution to the already existing  literature in the field of public administration, civic engagement, environmental behaviour and sdg goals. four factors were selected (governmental reward, interaction, capacity building and favourable policies) to investigate their effect on youth engagement. a  structural equation model was employed to explore the causal effects. all the factors had a positive effect on youth engagement. for instance, young people are more inclined to get involved in sustainable activities when there is a communication platform that is run through bi-directionality. in other words, the government needs to adopt the concept of being an audience while providing reasonable feedback to young people. it is important to note that the scope of environmental engagement can be challenging, 130 kadir aden public governance, administration and finances law review • vol.  7. no. 2.  since environmental issues can be more complex and to some extent incorporate complicating factors. as a  result, establishing a  reward system will be the most appropriate way to increase young people’s engagement, and in some cases a  penalty system could accompany it; however, the djiboutian penalty system, which prohibits harming the natural habitat, and imposes fines for improper disposal, has proved unfit for the task of safeguarding the environment from degradation; therefore, implementing an alternative solution, which makes young people more engaged in environmental activities and, at the same time, alters positively their actions and behaviour, by caring about the national environment is further required, and as it has been shown from these results, rewarding them will stimulate their engagement and encourage them to become involved in more sustainable activities. the issues of young people’s long exclusion from the public sphere can be disregarded when we take as a reference the djiboutian environmental law that requires the participation of every citizen in national environmental politics; however, a  mere law cannot generate this engagement unless young people’s opinions, suggestions and worries have been taken into consideration and are included in the environmental agenda, since these adopted policies will influence their future. on the other hand, providing proper training and building young people’s capacity will assist the government in addressing the environmental issue more effectively while ensuring for the long-term, a more sustainable society that prioritises the environment. finally, the study has several limitations, the paper has focused more on young people’s sustainable and environmental attitude while juxtaposing the government’s role in stimulating such behaviour, therefore, future studies could address the role of young people in ecological footprint mitigation. a threshold of an environmental sector that has a limited literature paper. moreover, scholars could consider incorporating mediating or moderating factors such as income, and education level while simultaneously applying a  comparative study between people in accordance with their generation category belonging such as baby boomers, generation x, millennials, etc. noticeably, these comparative studies will prevent responder biases for instance, since the current study focused on young people it is likely our responders were willing to portray socially acceptable responses, therefore, future studies should consider applying a comparative study. furthermore, instead of utilising the role of government, upcoming studies could conduct on the private sector, considering how in recent years private entities are becoming more competitive in the sense of opting for a more sustainable approach. references abila, b. & kantola, j. 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(2019) • 16–29 . the right to informational self-determination in the context of selected judicial decisions and practical background1 andrea erdősová* * andrea erdősová, judr ., phd, paneuropean university in bratislava, faculty of law, institute of international law . (e-mail: andrea .erdosova@paneurouni .com) abstract: it is essential to address in particular the comprehensive prevention of breaches of the right to informational self-determination and whether the persons concerned are aware that they “voluntarily agree” to pass on their identity information to third parties . it is alarming nowadays what amount of private data are available at their disposal for companies or private persons regarding other persons and how easy it seems to obtain this data . in today’s information age and the era of more advanced use of artificial intelligence, it will be more necessary than in the past to define what the individual intended, what he agreed with, and what he eventually approved as data privacy . in order to ensure the protection of the individual and his/her privacy, it is therefore necessary to respond to and refine the existing sources of law, especially to establish codes of ethics taking into account the modern technological and social development . keywords: ethics; informational self-determination; the right to privacy; personality rights; european court of human rights; findings of the constitutional court; case law 1. introduction primarily, the right of the informational self-determination originates in guaranteeing the freedom and dignity of individuals in relation to public authorities . today, state power is not the only threat to law . nowadays it seems easy for different subjects to gather without a  problem huge amounts of information about individuals, especially for those such as google, facebook, instagram, or twitter . it might not be satisfactory to just consider how to protect someone effectively from the power handled by public authorities . in order to ensure the protection of the individual and his/her privacy, it was therefore necessary to respond to and refine the existing legislation in this area, in particular at the european union law level .2 regulation (eu) 2016/679 of the european parliament and of the council of 27 april 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing directive 95/46/ec (general data protection regulation) is one of the “new” means of protecting the privacy of individuals .3 in the context of the protection of informational self-determination, the whole regulation is an important instrument for the protection of the right to 10.53116/pgaflr.2019.2.2 mailto:andrea.erdosova%40paneurouni.com?subject= https://doi.org/10.53116/pgaflr.2019.2.2 17 public governance, administration and finances law review • 2. 2019 the right to informational self-determination in the context of selected judicial decisions… privacy, in particular through the so-called right to erasure (‘right to be forgotten’) in article 17 of the regulation, which consists in the rights of the data subject4 to obtain the deletion of personal data relating to him from the controller5 without undue delay . the controller is then obliged to delete such personal data without undue delay if one of the enumerated reasons is fulfilled, allowing the data subject to request the deletion of his personal data published on the internet (with or without his knowledge) . to what extent it is an effective means in the current technological development and possibilities of data and information backup on other media, it seems more than questionable . therefore, we perceive these means rather than the mechanisms of derangement of one’s own information identity, where, particularly in disputes concerning the protection of personality, the court will thus be able to see by consenting, verifying and examining what the individual has agreed to interfere to his/her right to privacy . last but not least, today, more than in the past, it is also necessary to set general ethical boundaries of permissible interference from the perspective of exploitation of the artificial intelligence .6 2. the meaning of informational self-determination the term “right to informational self-determination” (informationelles selbstbestimmungsrecht) originated in the federal republic of germany and its author is the federal constitutional court (bundesverfassungsgericht), which derived this right from article 2(1) 12 in conjunction with article 1(2) of the constitution of germany .7 the term “selfdetermination” generally means the right to autonomy and independence . the essence of the right to informational self-determination is therefore the right of every individual to control information from his/her privacy so that he/she decides what facts about his/her surroundings will get known, who has them and how they will be used . the constitutional court of the slovak republic knows this term, although it is used only very sporadically, i .a . judgment of the constitutional court of the slovak republic of 29 april 2015, no . pl . ús 10/2014-78, where its paragraph 89 defines as follows: “the case law of foreign constitutional courts also takes a similar approach to privacy. for example, the federal constitutional court of germany, through the right to informational self-determination guarantees protection not only of the content of the information to be moved, but also protects the external circumstances in which it is carried out; location, time, subscribers, type and mode of communication, because knowing the circumstances of the communication made, in conjunction with other data, may itself indicate the content of the  communication itself, and by examining and analysing this data, individual subscriber profiles can be constructed out of the communication. [e.g. decision of 27.7.2005, bverfge 113, 348 (vorbeugende telekommunikation süberwachung ) or 27.2.2008, bverfge 120, 274 (grundrecht auf computerschutz)].” the ruling in question was a  proposal by a  group of members of the national council stating that the contested provisions of the electronic communications act impose an obligation on electronic communications providers to keep traffic data, location data and 18 andrea erdősová public governance, administration and finances law review • vol. 4. no. 2. data of communicating parties from the date of communication for 6 months in the case of internet connection, e-mail and internet telephony, and for 12 months for other types of communication . in the view of the group of deputies, “the introduction of the obligation to retain data pursuant to the above provisions constitutes a noticeable interference with private life, as it is a blanket surveillance of all slovak citizens, regardless of their integrity and honesty . every day, every person in slovakia is obliged to record who he was calling, who he sent text messages and emails, when he did, where he was, what phone or service he used, how long the communication in question took, and many others . by combining this information, we can describe the movement of every citizen in slovakia who uses a  mobile phone or the internet, predicting their behavior, circle of acquaintances, hobbies, health, sexuality, or other personal data and secrets […] it is possible to compile the perfect personality, communication and movement profile of an individual, revealing a number of essential characteristics of his identity and behavior, in other words, reveal a substantial part of his privacy .” in its proposal, the group of deputies also points out that “according to the case-law of the echr”, interference with private life “e-mail and telephone calls (ecthr judgment in klaas v . germany), as well as finding telephone numbers of telephone persons or storing information that the person was calling with a person, all of them have to be considered as keeping the control or check over the mail and its content . it is irrelevant whether the data retained has been used or disclosed in any way (in particular the ecthr judgment in copland v . the united kingdom) . infringement of fundamental rights, and hence private life, means not only immediate intervention (e .g . familiarisation with stored data), but also measures taken by public authorities from which it is foreseeable that they will result in a restriction of fundamental rights and freedoms” . according to the proposers, the contested provisions of the electronic communications act “are in direct contradiction with the principle that fundamental rights and freedoms must be respected in substance and meaning , and restrictions can only be applied to a  stated objective (article 13(4) of the constitution)” . they further state that “the merits of any interference with fundamental rights and freedoms in a democratic and legal state are assessed on the basis of the cumulative fulfilment of three basic criteria, namely the legality, legitimacy and proportionality of such interference (constitutional court findings, file no . i . ús 117/07, pl . ús 23/06, pl . ús 3/09, pl . ús 3/00, pl . ús 67/07)” . in a part of this petition, the constitutional court of the slovak republic granted the proposal about the breach of law . also i .a . in the decision of the constitutional court of the czech republic under no . pl . ús 24/10, in which the court assessed the constitutionality of § 97 par . 3 and 4 of act no . 127/2005 coll . on electronic communications regulating the obligation of legal or natural persons providing a  public communications network or publicly available electronic communications service to store traffic or location data, this court adopted and used the term “informational self-determination” as a  doctrine contained in the above-mentioned federal constitutional court decision and informational self-determination as follows: 19 public governance, administration and finances law review • 2. 2019 the right to informational self-determination in the context of selected judicial decisions… “the primary function of the right to respect for private life is to provide space for the development and self-realisation of an individual personality. in addition to the traditional definition of privacy in its spatial dimension (protection of the dwelling in the broader sense of the word) and in the context of autonomous existence and public power undisturbed in social relations (marriage, family, society), the right to respect for private life fundamental decision – decided freely by the individual. in other words, the right to privacy also guarantees the right of the individual to decide at his/her own discretion to what extent, in what manner and under what circumstances should the facts and information about his/her personal privacy be made available to other entities. this is an aspect of the right to privacy in the form of the right to informational self-determination; guaranteed by article 10 paragraph 3 of the charter.” pars pro toto two findings of the two constitutional courts serve as an example of the use of a  term which, despite its extraordinary timeliness and, so to speak, material significance in disputes concerning the protection of personality and privacy, has still not been frequently used as a terminus technicus . this is peculiar, pointing out that in today’s information age and the era of more advanced use of artificial intelligence, it will be more necessary than in the past to define what the individual intended, what he agreed with, and what he eventually approved as data privacy . in our view, this is also a key aspect of shifting the burden of proof to the operators, or creators or sponsors of the algorithms involved in setting up and using a wealth of information and data from our privacy . however, even the national doctrine of the general courts does not leave the right to informational self-determination unnoticed . according to the order of the supreme court of the slovak republic (order of the supreme court of the slovak republic of 18 february 2010, ref . no . 3 cdo 137/2008), the right to privacy lies in the right of a natural person to decide independently whether and to what extend should the facts from his private life be made available to others or made public . the violation of the right to privacy is not only the unauthorised acquisition of knowledge about the privacy of a natural person, but also the unauthorised dissemination of this knowledge . the unauthorised interference with the right to privacy may significantly reduce dignity or seriousness in society, but this is not the only right required to demonstrate the seriousness of the harm to a  natural person . consequently, there is no procedural obligation to prove to the injured party that the unlawful interference had the effect of reducing his seriousness and dignity in society . 3. strasbourg doctrine although the european court of human rights also does not directly and expressis verbis address the issue of self-determination, the basis of its earlier case law can still be used to answer the question of which data, information an individual has authorised or where was his legitimate expectations about the use and spread of these information, to what extent, location, time and for which range of recipients . paradigmatic in this context is the case of max rufus mosley, mosley v . united kingdom,8 who is known to the public as ex-president of the international automobile federation (fia) . 20 andrea erdősová public governance, administration and finances law review • vol. 4. no. 2. briefly, on march 30, 2008, sunday’s newspaper news of the world published an article on the front page entitled “f1 chief had perverted nazi orgies with five prostitutes” . ex-president of the international automobile federation was exposed as a secret sadomasochistic sexual pervert . the published text continued by describing the event and adding a  few photos taken from a  video recorded by one of the sex org y participants, and the recording was pre-ordered and paid for . in addition, the extract from the record as well as the relevant photographs were accessible on the newspaper’s website, where potential candidates could further disseminate them . in the proceedings against the publisher of the tabloid, the complainant did not in fact object that the sexual sadomasochistic act had not occurred as was clear from the recordings and the text, but openly admitted that he had been professing this kind of sexual practice for years, but denied background act simulation with nazi content . he alleged that the media had unlawfully interfered with his privacy, on the grounds that his private life was his personal affair and that the newspaper publisher had no relevant evidence, except for the presence of uniforms, a strange german accent in his speech and connotations to his father’s fascist past and the direct relation of sexual orgies to nazi ideolog y . he requested that the footage of the video be immediately downloaded from the newspaper website . the applicant was successful in the national proceedings for the protection of his personal rights and was awarded damages of gbp 60,000 and gbp 420,000 with respect to costs . mosley argued that the state failed to fulfil its positive responsibilities and had ensured a general obligation for publishers or journalists to seek prior consent from the person concerned . in so doing, the complainant demanded that the ecthr determine that newspaper publishers be required to notify the person concerned of the planned media coverage three days before publishing information that infringes the privacy of persons . thus, the ecthr also assessed the practical impact of the complainant’s claim and found that there was no general obligation to pre-notify as such in any of the member states’ legal systems . on the other hand, some member states require the data subject’s consent to the publication of material relating to family life,9 although in many cases they provide for exceptions to the publication of information relating to “public interest” issues (paragraph 62) . in paragraph 128 of the ecthr, referring to the national decision, it recalled that any prior consent would not have any effect other than a penalty for not respecting it . a regulatory or civil sanction in the form of a  fine would probably be a  small incentive to avoid publication without the prior consent of the person concerned . this is all the more necessary to prevent the prohibition of publishing the article in question in the press because the person concerned has not given his consent to its publication . moreover, as the ecthr pointed out, these obstacles can also lead to censorship . the threat of criminal sanctions or punitive penalties may have a freezing effect in the field of political reporting and investigative journalism concerning the highly protected values of the convention . information and video footage of max mosley were seen by hundreds of recipients and they had the opportunity to spread them further . therefore, the response to the request to download video footage and prevent access to information was as follows: “the court must always be cautious when considering the real facts and the limits of what can be achieved […] . however, in order to limit access to information by court order, it must be 21 public governance, administration and finances law review • 2. 2019 the right to informational self-determination in the context of selected judicial decisions… remembered that information is so widely and generally accessible on public domains that such a  court command would have practically no meaning . in traditional terminolog y, such a  measure would be labelled “brutum fulmen” . it is not appropriate for the court to make only blank gestures (paragraphs 34–35) .” for these reasons, the chamber decided that article 8 of the convention had not been infringed in that case . in addition, what can be seen as the scope of the legitimate requirement can be summarised from one of the three decisions in the case of caroline von hannover, in concreto hannover v . germany, no . 59320/00 .10 it can be inferred from the judgment in question that, although there is a  public demand – in the case of a commercial interest in magazines – for the publication of photographs and articles, in the present case, everyone, even if known to the public, must have a “legitimate expectation” of protecting and respecting their private lives . the judgment of the ecthr on the basis of a complaint from the princess of monaco, caroline von hannover, is not only pointedly defining the so-called personality protection of “relative” (quasi) public persons, but it is also a sort of navigation system in the endless sea of the details of the private life searched from the prominent people . it will serve the press in a  number of cases to distinguish between legitimate and well-known processing and further dissemination of information and details from the privacy of “celebrities” . as  j .  herczeg pointed out: “[…] the readers of the boulevard will not lose their stories, as the media behavior of these persons will also be important for assessing whether or not the intervention is justified . but in other words, one’s own behavior will set the limits of legal privacy .”11 this also applies, mutatis mutandis, to cases of confidentiality of data from the private sphere of a  natural person subject to professional secrecy . legal theory has clarified that “[…] when a  patient himself publishes in the press or other mass media his own health condition stating the facts subject to confidentiality by the doctor, or when the patient himself discloses certain facts subject to confidentiality, and so they will exclude them from their personal privacy” .12 on the other hand, reid’s legal opinion commenting on the ecthr’s judicial practice in this context cannot be overlooked . in its view, the mere fact that an individual is in a  public place or that his personal data is publicly accessible to others on public domains does not necessarily preclude the application of article 8 of the convention . like the person’s legitimate expectations regarding their protected sphere of privacy, although significant, they are not necessarily the only determining factor in assessing the legitimacy of an intervention .13 this also applies, mutatis mutandis, to the voluntary disclosure of information or guarantees of its later use .14 4. informational self-determination of minors in the context of one case the situation where there is currently an internet connection in virtually every home, even in the streets of cities, is making it even more difficult by the lack of general legal knowledge of what data are collected in the internet environment, how they are used and to 22 andrea erdősová public governance, administration and finances law review • vol. 4. no. 2. what extent they are kept . the issue is also addressed by relevant psychological concerns, according to which a group of minors approaching adulthood are not even partially aware of the importance of protecting their privacy and informational self-determination and the consequences of its ill-considered sharing with third parties in cyberspace . in addition, it is very common to find that the parents of minors also violate their right to informational self-determination by sharing their photographs or by publishing them in public places . this question was also addressed by the supreme court of the czech republic in its order of 12 december 2012, file no . 30 cdo 3770/2011, which unequivocally ruled that unauthorised interference with the right to informational selfdetermination of a  child could also be carried out by a  legal representative, stating : “protection under section 11 of the civil code also includes images of a minor of “celebrities” who capture his daily and private activities for which there is no public interest, even if his or her legal representative is motivated by an incentive to attract public attention to himself or herself . […] the appellant’s argument that the consent of the legal guardian to the public dissemination of photographs and articles on minors that capture and map the child’s privacy precludes the unlawful interference must be rejected . article 16 of the convention on the rights of the child15 affords the child protection against arbitrary interference with his or her privacy, without distinction from where they are carried out . in other words, a  child has the right to protection from arbitrary interference with his/her privacy, even if carried out by legal representatives (holders of parental responsibility) .” the right to informational self-determination is also related to monitoring the behaviour of individuals, which is no longer a dystopia, but an increasingly current reality, where there are certain algorithms of systems, of which the most familiar is the so-called “cookies” . modern software, however, cannot only read the behaviour and decision-making processes of an individual, but also over time his or her consumer preferences, thoughts, and motivations, giving rise to very interesting and relevant information for data collection . worse, however, is the risk of interference with the right to privacy, in particular the right to informational self-determination, where the individual does not even know not only what data are collected about him/her, but also where and for what purposes he or she continues to use it . installations of industrial cameras may also be another way of disrupting the individual’s self-determination . 5. industrial cameras in a legislative and practical framework the emergence and existence of the first industrial cameras is associated with monitoring missile test launches in nazi germany in 1942 . by technical improvement, we now have not only a  larger number of camera systems but also an increase in the number of objects monitored by them . these are, for example, security cameras, which follow us when shopping, in underground garages, cameras at the entrance to the pub together with appropriate software, which can identify among the visitors known so-called “troublemakers”, furthermore, those that recognise vehicle licence plates, but also camera surveillance through other devices that we accept on a  voluntary basis, but eventually become an 23 public governance, administration and finances law review • 2. 2019 the right to informational self-determination in the context of selected judicial decisions… undesirable burden . these include laptops, phones, tablets, game consoles, the internet, video servers and viral videos . in the united states, there has recently been a debate on the introduction of cameras with face recognition software,16 which is mainly used by police forces in several countries . cops are allowed i .a . to take a  picture of a  person with a  mobile phone and immediately identify their identity and eventual criminal record or other personal information from various accessible databases . a  very turbulent case of the right to privacy is the so called “street view”, which under this technolog y was designed in 2007 to monitor populated parts of the world . it was tracking in about 12 countries collecting emails, passwords, photos and other personal information .17 related to this was a  system creating a  mapping of an increasing number of states through the so-called google maps, which also retrieves images captured by people in public places which allows them to find themselves online . this way, it is also possible to take a look at dwellings and private spaces . this may potentially undermine the right to privacy and, in these circumstances, the unauthorised use of personal data . the  biggest commotion was caused by the maps in italy, where they captured a  highranking politician coming out of a public house .18 in many of the disputes that google has encountered in connection with this technolog y, it has been argued that wifi communication channels have allowed this data to be retrieved, making it publicly available to society . finally, even in disputes where google lost, monetary sanctions were negligibly small compared to the company’s regularly high profits . in the context of privacy invasions through surveillance, or rather espionage,19 there has to be mentioned the media-narrated case of snowden’s testimony, according to which there is a  secret prism anti-terrorism program that allegedly allows the u .s . national security agency and the federal bureau of investigation to retrieve texts, photographs or video-mails, chats, social networking, and phone calls around the world .20 we have a  number of cases of violations of the right to privacy through camera systems, both at home and close to the border . not long ago, the media resonated the case of a journalist from the czech republic, who protected his property against vandals with his own cctv system, but cctv did not allow the perpetrators to be detained and accused as evidence in court and acquitted the perpetrators . the damaged journalist was eventually sanctioned by the office for personal data protection of the czech republic for unannounced installation of the camera and unauthorised collection of personal data . on the basis of an analogous case, the supreme administrative court of the czech republic even referred a question to the court of justice of the european union .21 6. public versus private finally, the right to informational self-determination is also a question of what information should be and for what purpose part of the monitoring, even if a  person has not directly elected it, but the interest in monitoring has exceeded private interests and is rather perceived in the public good . 24 andrea erdősová public governance, administration and finances law review • vol. 4. no. 2. in one such case, the regional court in brno upheld the lawsuit against the decision to place the camera on the ground floor of an apartment building at the entrance so as to capture the persons entering and leaving the house, thereby identifying the property better and in the aim to prevent stealing mailboxes . the court has rightfully held that by placing the camera at the entrance to the house against the plaintiff ’s will, the defendants rightfully infringed his right to privacy as a personality right within the meaning of section 11 of act no . 40/1964 coll . civil code, as amended, hereinafter referred to as ozčr, as well as unlawful interference with the applicant’s right to protection against unauthorised acquisition and collection of pictorial records pursuant to § 12 para . 1 ozčr .22 since no legal licence has been given for this intervention and the installation of a cctv system requires the consent of all residents of the apartment building, the court pursuant to § 13 para . 1 ozčr prohibited the acquisition and collection of video recordings and ordered the defendants to dismantle it . however, in this and similar cases, the problem is mainly focused on obtaining monitoring consent, as other cases assess cases in which the subject feels affected by the monitoring and therefore disagrees with the capture of premises owned or exercised by other related rights . pursuant to the aforementioned legislation, it would be necessary not only to obtain the consent of all potentially affected persons before installing a cctv system, but also to place a visible space monitoring sign . if all residents of the dwelling house were to agree in unison, then it would seem difficult to assert that the monitoring affected the rights of visitors or other persons who found themselves in the dwelling without having a legal relationship with it . assuming, of course, that the monitoring of this space could have anticipated what was clearly indicated . this obligation also creates space for labelling without being linked to an active system, i .e . it is only an assembly of non-functioning dummy devices . however, they logically do not establish any real violations of law and their importance lies in the territory of purely preventive security measures . if we rely on the case law of the european court of human rights, we find a  number of explanations for what is considered a  home, even though the concept of home is generally autonomous and according to the text of the european convention on human rights23 it can only be defined with great difficulty . in principle, it is a space that is a physically defined area where private and family life develops . however impersonal we would consider prima facie, for example, a hotel room, in the case of a homeless person who was paid for accommodation by the local authorities, it became home during his stay .24 however, the court is not concerned with extending the right to home through the right to acquire or own property, but to place protection in respect of home without being able to undermine the right to use it . in particular, the intervention of competent authorities by confiscation, control or secret surveillance is prevented .25 in friedl v . austria case decision, the commission considered essential that the taking of photographs and the subsequent recording in the investigation file infringed the right to privacy, irrespective of the interests of a private or public nature behind the pictures taken .26 the court has stated on several occasions that the mere fact that an individual is in the public domain or that data about him is widely available on public domains does not 25 public governance, administration and finances law review • 2. 2019 the right to informational self-determination in the context of selected judicial decisions… automatically exempt from the application of article 8 of the convention . the court accepts that there are a  number of factors which may be considered in assessing whether there has been an infringement of the right to privacy . the individual’s reasonable expectations of possible interference with his or her privacy are certainly essential facts, but not exclusive . the same applies to the information provided by the parties concerned (right to informational self-determination) .27 to the same extent, it applies to e-mails and the internet used at the workplace which are part of private autonomy, provided that the employee has not been notified by the employer on the possible monitoring of its manifestations .28 finally, persons who are being prosecuted must not be excluded from the protection of privacy .29 it can therefore be settled in the ecthr case law that insofar as the purpose of obtaining information is to protect the public interest, whether it is the right to public information or the protection of collective security . interference with the right to respect for private life are going to be considered less strictly than searching for information and details from private life . for this reason, the control of the exercise of a public function, the task of which is, for example, to maintain security and order in public places, also implies an obligation to suffer the capture of video recordings from the intervention .30 at the same time, it is clear from that judgment that the powers of public officials, in particular exercised in public and in contact with the public, may, and should be, directly subject to a  control regime, which is an exercise of the right to information . naturally, questions falling within the scope of the fundamental right to privacy of a  natural person are not subject to such a legal regime . it is also necessary to carefully differentiate whether the attacks carried out in the sphere of personality rights were really directed against individuals or against the state authority of which they are representative . “given the above-mentioned differences between the state authority and the natural persons of which it is composed, it can be concluded that if an intervention is directed against a particular authority of the state, it cannot be inferred from this that such interference affects the personality rights of the natural persons of which a  government body is  composed, which does not mean that the authority concerned is also hit by this inter ference .”31 the need for obtaining and storing information is generally not disputed as long as it is carried out under the auspices of a police investigation or security guarantee and is clearly based on legitimate objectives and is indispensable in a  democratic society .32 in addition, the necessity and procedural guarantees enjoy a  wide margin of appreciation in national security measures .33 the question of the violation of the right to privacy in such cases has been answered in the earlier case-decision of the commission, which in hilton v . united kingdom34 has confirmed that security control per se does not affect private life, except for information pertaining to private life, which is subject to control . it was a  strictly individualised demonstration of the interference that caused direct interference with the right to privacy . however, the case law has evolved to more general assumptions, and thus, through a  permanent court in particular, has established that the principle of “reasonable probability” will always be decisive in establishing whether 26 andrea erdősová public governance, administration and finances law review • vol. 4. no. 2. an  individual is a  subject of observation (reasonable likelihood) . indeed, it indicates that such measures are applicable to the person concerned or those that belong to the category of persons likely to be monitored . if he/she finds himself/herself in this category, then there is no longer any need to prove whether or not surveillance has or could affect privatesector attributes .35 in addition, the court has established that public information falls within the scope of private life when it is systematically collected and stored in the files of the competent authorities, particularly where it relates to the distant past or is false or capable of significantly undermining a person’s good repute .36 the perception of the existence of a specific subject is also significantly influenced by the nature of the activity per se, as was the case, for example, with vanessa redgrave,37 who found a wiretapping device which, in her view, was placed by the government . the suspicion was supported by the fact that the applicant was known both from controversial political cases and by belonging to the revolutionary party, and there existed an interest in tracking her in the past . another important criterion taken into account by the court is the legality of the intervention . in this sense, judicial criteria are based on legality which refer to the presence and content of national legislation available and guarantee that the measures in question are reasonably foreseeable and protected against arbitration .38 according to doctrine, the question of predictability is meant in terms of general guarantees of predictability of law, but this does not automatically represents that an individual will know in advance i .a . control procedures of special forces, as this could be the threat to the controls relating to national security interests . however, it must be pre-defined, what categories of people will be monitored, within what time limit, by what procedural mechanisms, how data will be further used, how they will be protected when communicating them to third parties, and the conditions under which records can or must be destroyed .39 the ecthr case law focuses in particular on examining the adequacy and effectiveness of safeguards against misuse of information . on the other hand, it is not excluded that the alert in some form will persist later, sometimes despite or without the adoption of rules on the obligation to destroy it . this raises the association to the aforementioned max mosley case where the court was i .a . forced to state that even downloading video footage and preventing official later distribution after the recording appeared on public domains does not prevent its misuse . despite all this, forcing publishers, journalists to ask for prior approval of the publication leads to nothing and it solely can present nothing or means only an empty gesture .40 7. conclusion a few of these cases map out circumstances of the use of the institute of the right to informational self-determination, and although we see that it appears sporadically in both national and european court of human rights rulings, we consider this could be one of the criteria for assessing both the rate of participation of a  person affected by the rights of  personality and the subsequent determination of the amount of non-material harm . 27 public governance, administration and finances law review • 2. 2019 the right to informational self-determination in the context of selected judicial decisions… as  can be seen from the text followed, informational self-determination is not always a  question of delimiting the private sphere, and the autonomy of the individual in this context may be outweighed by the public interest, fulfilling the purpose of the public good, i .a . trying to maintain security, or preventing unrest, or a certain preventive-deterrent effect while maintaining public order . 28 andrea erdősová public governance, administration and finances law review • vol. 4. no. 2. references 1 this contribution is the result of the project implementation grant by the apvv no . 16-0588 . 2 see more i .a . elena júdová, ochrana slabšej strany – porovnanie európskeho a slovenského medzinárodného práva súkromného [protection of the weaker party – comparison between european and slovak private international law], 17–31, in acta iuridica olomucensia, vol . 9, no . 1 (2014) . 3 lilla garayová, regulácia voľného pohybu osôb v kontexte protiteroristických opatrení v eú [the regulation of the free movement of persons in the context of counter-terrorism measures], 80–86, paneurópske právnické listy, no . 1 (2018) . 4 the expression “data subject” according to article 4(1) of the regulation states that “personal data” means any information relating to an identified or identifiable natural person (“data subject”), an identifiable natural person is one who can be identified, directly or indirectly, in particular by reference to an identifier such as a name, an identification number, location data, an online identifier or to one or more factors specific to the physical, physiological, genetic, mental, economic, cultural or social identity of that natural person . 5 “controller” means the natural or legal person, public authority, agency or other body which, alone or jointly with others, determines the purposes and means of the processing of personal data; where the purposes and means of such processing are determined by union or member state law, the controller or the specific criteria for its nomination may be provided for by union or member state law . 6 see the document drafted by a panel of experts at the request of the european commission (dg research and innovation) which aims at raising awareness in the scientific community, and in particular with beneficiaries of eu research and innovation projects . it does not constitute official eu guidance; the document was adopted on november 14, 2018, https://ec .europa .eu/research/participants/data/ref/h2020/grants_manual/ hi/ethics/h2020_hi_ethics-data-protection_en .pdf (accessed 8 august 2019) . 7 ruling of the german constitutional court defining informational self-determination, http://sorminiserv . unibe .ch:8080/tools/ainfo .exe?command=showprinttext&name=bv065001 (accessed 8 august 2019) . 8 mosley v . united kingdom, judgment of 10 may 2011, no . 48009/08, complaints valid september 15, 2011 . 9 lilla garayová, odhad vplyvu brexitu na voľný pohyb osôb [the estimated impact of brexit on the free movement of persons and data], 51–62, in voľný pohyb osôb a vnútorný trh európskej únie: vedecký zborník (bratislava, paneurópska vysoká škola, 2018) . 10 hannover v . germany, judgment of 24 june, 2004, no . 59320/00 . 11 jiří herczeg, případ caroline von hannover – zveřejnění fotografií ze soukromí prominentů, 877–880, in právní rozhledy, no . 23 (2004) . 12 karel knap et al ., ochrana osobnosti podle občanského práva, 4th substantially revised and supplemented edition, 24 (linde praha, 2004) . 13 to this we associate, mutatis mutandis, the case of friedl v . austria, judgment of 31 january 1995, no . 15225/89, in which the court did not find a violation of article 8 of the convention, even though the police photographed the complainant, but during a public demonstration and they remained anonymous without mentioning the name of the photographers . 14 karen reid, a practitioner’s guide to the european convention on human rights, 3rd edition, 483 (london, sweet & maxwell ltd ., 2008) . 15 convention on the rights of the child, adopted and opened for signature, ratification and accession by general assembly resolution 44/25 of 20 november 1989, entry into force 2 september 1990, in accordance with article 49, www .ohchr .org/en/professionalinterest/pages/crc .aspx (accessed 8 august 2019) . 16 technológia rozpoznania tváre a gdpr, 9 march 2011, https://blog .canex .sk/2019/12/19/technologiarozpoznavania-tvare-a-gdpr/ (accessed 8 august 2019) . 17 judgment of the federal supreme court on google street view: decisions on the processing of personal data, published august 2013, www .edoeb .admin .ch/datenschutz/00683/00690/00694/01109/index . html?lang=en; compare with david streitfeld, court says privacy case can proceed vs . google, 11 september 2013, www .nytimes .com/2013/09/11/technolog y/court-says-privacy-case-can-proceed-vs-google .html (accessed 8 august 2019) . https://ec.europa.eu/research/participants/data/ref/h2020/grants_manual/hi/ethics/h2020_hi_ethics-data-protection_en.pdf https://ec.europa.eu/research/participants/data/ref/h2020/grants_manual/hi/ethics/h2020_hi_ethics-data-protection_en.pdf http://sorminiserv.unibe.ch:8080/tools/ainfo.exe?command=showprinttext&name=bv065001 http://sorminiserv.unibe.ch:8080/tools/ainfo.exe?command=showprinttext&name=bv065001 http://www.ohchr.org/en/professionalinterest/pages/crc.aspx mailto:/2019/12/19/technologia-rozpoznavania-tvare-a-gdpr/?subject= mailto:/2019/12/19/technologia-rozpoznavania-tvare-a-gdpr/?subject= http://www.edoeb.admin.ch/datenschutz/00683/00690/00694/01109/index.html?lang=en http://www.edoeb.admin.ch/datenschutz/00683/00690/00694/01109/index.html?lang=en http://www.nytimes.com/2013/09/11/technology/court-says-privacy-case-can-proceed-vs-google.html 29 public governance, administration and finances law review • 2. 2019 the right to informational self-determination in the context of selected judicial decisions… 18 pohľad do zákulisia google streetview, 1 november 2012, www .wesolyaniolek .com/pohlad-do-zakulisiagoogle-streetview/ (accessed 8 august 2019) . 19 lilla garayová, spoločnosť proti terorizmu? [torture as a just means of preventing terrorism?] 360–364 (plzeň, aleš čeněk, 2016) . 20 super veľký brat? fakty a mýty o tajnom programe prism, 11 june 2013, https://zpravy .aktualne .cz/zahranici/ supervelky-bratr-fakta-a-myty-o-tajnem-programu-prism/r~i:article:782171/ (accessed 8 august 2019) . 21 nejvyšší správní soud: nejvyší správní soud položil předběžnou otázku soudnímu dvoru evropské unie [the supreme administrative court referred the question to the court of justice of the european union for a preliminary ruling ], 22 april 2013, www .nssoud .cz/nejvyssi-spravni-soud-polozil-predbeznou-otazkusoudnimu-dvoru-evropskeunie/art/956 (accessed 8 august 2019) . 22 see also ako gdpr nahliada na používanie kamerových systémov [how gdpr views the use of camera systems], www .isecure .sk/sk/aktuality/monitorovanie-kamerovym-systemom-z-pohladu-gdpr .html (accessed 22 august 2019) . 23 convention for the protection of human rights and fundamental freedoms, podpísaný 4 . novembra 1950 v ríme, hereinafter referred to as “convention”, o’rourke v . united kingdom, decision about admissibility 2001, no . 39022/97; see also david john harris, michael o’boyle, edward bates, carla buckley, law of the european convention on human rights, 2nd edition, 380 (oxford, oxford university press, 2009); friedl v . austria, 1995, no . 15225/89, compare with x . v . u .k ., 9702/82 or murray v . u .k ., par . 84, 85, concerning data collection, fingerprints and photos by the police, also chave née jullien v . france, no . 14461/88, for obtaining and storing medical records or dnas and marper v . u .k ., 2008, no . 30562/04 and 30566/04; lupker v . netherlands, 1992, no . 18385/91; copland v . u .k ., 2007, no . 62617/00, par . 42; sciacca v . italy, 2005, no . 50774/99, par . 29 . 24 o’rourke v . u .k ., decision on admissibility by 2001, no . 39022/97 . 25 david john harris, michael o’boyle, edward bates, carla buckley, law of the european convention on human rights, 2nd edition, 380 (oxford, oxford university press, 2009) . 26 compare with case x . v . u .k ., 9702/82 or murray v . u .k ., par . 84, 85 . 27 lupker v . netherland, by 7 december 1992, no . 18385/91 . 28 copland v . u .k ., by 3 april 2007, no . 62617/00, par . 42 . 29 sciacca v . italy, by 11 november 2005, no . 50774/99, par . 29 . 30 see also the judgment of the constitutional court of the slovak republic of 5 january 2001, rec . ii ús 44 / 00-133: “according to the legal opinion of the constitutional court, the exercise of his/her statutory duty of service by a public official – an employee of the municipal police – cannot be considered a part of the fundamental right to privacy or a manifestation of personal nature (pursuant to § 11 of the civil code) […] these are diametrically opposed issues of the public and not the private sphere, which cannot in any way be considered a part of their fundamental right to privacy .” 31 judgment of the supreme court of the slovak republic of 27 march 2001, rec . no . m cdo 46/2000 . 32 leander v . sweden, of 26 march 1987, no . 9248/81, par . 49 . 33 ibid . par . 59 . 34 hilton v . u .k ., of 6 july 1988, no . 12015/86 . 35 compare with halford v . u .k . of 25 june 1997, no . 20605/92 . 36 rotaru v . romania, 4 .5 .2000, č . sť . 28341/95 ods . 43–44 . 37 redgrave v . u .k ., of 1 september 1993, no . 20271/92 . 38 lilla garayová, sources of eu law, 59–62, in andrea erdősová, lilla garayová, peter potásch (eds .), selected sources of law – past and current perspectives (bratislava, paneurópska vysoká škola, 2019) . 39 karen reid, a practitioner’s guide to the european convention on human rights, 3rd edition, 563 (london, sweet & maxwell ltd ., 2008) . 40 mosley v . u .k ., of 10 may 2011, no . 48009/08, par . 34–35 . http://www.wesolyaniolek.com/pohlad-do-zakulisia-google-streetview/ http://www.wesolyaniolek.com/pohlad-do-zakulisia-google-streetview/ https://zpravy.aktualne.cz/zahranici/supervelky-bratr-fakta-a-myty-o-tajnem-programu-prism/r~i:article:782171/ https://zpravy.aktualne.cz/zahranici/supervelky-bratr-fakta-a-myty-o-tajnem-programu-prism/r~i:article:782171/ http://www.nssoud.cz/nejvyssi-spravni-soud-polozil-predbeznou-otazku-soudnimu-dvoru-evropskeunie/art/956 http://www.nssoud.cz/nejvyssi-spravni-soud-polozil-predbeznou-otazku-soudnimu-dvoru-evropskeunie/art/956 http://www.isecure.sk/sk/aktuality/monitorovanie-kamerovym-systemom-z-pohladu-gdpr.html pga2019_02_b1 _hlk18895087 _hlk18895098 _hlk27344917 articles administrative liability for causing damage to selected components of the environment branislav cepek* the right to informational self-determination in the context of selected judicial decisions and practical background andrea erdősová* information security awareness in public administrations at an international level lilla garayová* blockchain technology – current status, challenges and perspectives in tax and customs law ladislav hrabčák,* monika stojáková* application possibilities of blockchain in accounting péter bálint király* budget allocation of taxes to territorial budgets ivana pařízková* the efficiency of tax collection in the czech republic eva tomášková* case study new legal regulation of the administrative justice in the slovak republic juraj vačok* pga2019_02 _hlk18895087 _hlk18895098 _hlk27344917 articles administrative liability for causing damage to selected components of the environment branislav cepek* the right to informational self-determination in the context of selected judicial decisions and practical background andrea erdősová* information security awareness in public administrations at an international level lilla garayová* blockchain technology – current status, challenges and perspectives in tax and customs law ladislav hrabčák,* monika stojáková* application possibilities of blockchain in accounting péter bálint király* budget allocation of taxes to territorial budgets ivana pařízková* the efficiency of tax collection in the czech republic eva tomášková* case study new legal regulation of the administrative justice in the slovak republic juraj vačok* pga2019_02_b4 _hlk18895087 _hlk18895098 _hlk27344917 articles administrative liability for causing damage to selected components of the environment branislav cepek* the right to informational self-determination in the context of selected judicial decisions and practical background andrea erdősová* information security awareness in public administrations at an international level lilla garayová* blockchain technology – current status, challenges and perspectives in tax and customs law ladislav hrabčák,* monika stojáková* application possibilities of blockchain in accounting péter bálint király* budget allocation of taxes to territorial budgets ivana pařízková* the efficiency of tax collection in the czech republic eva tomášková* case study new legal regulation of the administrative justice in the slovak republic juraj vačok* pga2017_1_04_case_study_pardavi.indd © 2017 dialóg campus, budapest public governance, administration and finances law review vol. 2. no. 1. (2017) • 4, 33–42 case studies new elements in the tax control in hungary lászló pardavi* * dr. lászló pardavi phd, associate professor for financial law, department of administrative and financial law, faculty of law, széchenyi istván university. (e-mail: pardavi-laszlo@t-online.hu) abstract: the system-wide regulation of taxes in hungary clearly represents the lawmakers’ constant strive for making the  law up-to-date. currently, hungary has approximately 60 types of taxes or fees, and it is a huge challenge to fulfill tax policy aims in order to make the regulation suitable for all of them. in recent years, tax authorities – given by the  possibilities of the  regulation – have introduced numerous, specific tax control methods, while some of these provide interesting legal solutions, but more importantly several of them have significant impact on taxpayers. the  study introduces applicational experiences with some of these. keywords: administrative control; tax control; on-line cash register; road-trade control system; value added tax; tax rate 1. online cash registers pursuant to paragraphs 159 and 166 of act cxxvii of 2007 on value added tax (hereinafter vat act), taxpayers are obliged to give invoice or bill in case of selling of goods or provision of services. the  latter one can only be applied if, based on law, the  taxpayer is not obliged to give invoice. based on the  tax authority’s controlling experiences, several defaults and misuses have happened in connection with the obligation of providing invoice and bill, hence, the investigation of connected regulation has become actual. in government decision no. 1457/2012 (x. 19.) on tasks connected to measures increasing the  balance of the  budget, the  government decided to investigate and prepare the connection of cash registers with the national tax authority. as its result, the parliament modified the  vat act with act ccviii of 2012 on certain acts’ connection to the preparation of the central financial act as well as its modification with other purposes, supplementing the  vat act with a  new paragraph – 178. (1a) – making it possible to create such a law which could prescribe that the operation of cash registers serving to issue invoice should be controlled by the  state tax authority through its communication device and system. government resolution no. 1059/2013 (ii. 13.) on the  introduction of cash registers that feature an online data connection with the  national tax and customs administration office regulated the  introduction of new cash registers. the  obligatory starting day of their application was may 1, 2013, while the sanction free use of traditional cash registers’ was allowed until june 30, 2013. 10.53116/pgaflr.2017.1.4 https://doi.org/10.53116/pgaflr.2017.1.4 34 lászló pardavi public governance, administration and finances law review • vol. 2. no. 1. however, due to the emerging technical difficulties, the deadline was extended1 until september 1, 2013. requirements connected to new cash registers were laid down in the  decree of the  minister of national economy 48/2013 (xi. 15.). the  peculiarity of cash registers and the  system lies in the  fact that certain taxpayers (such as retailers, pharmacies, caterers, travel agencies, repairmen, etc.) can only fulfill their invoicing obligation using online cash registers. online cash registers basically consist of two main parts. one of them looks like and functions as a  traditional cash register, the  other one is a  so called fiscal control unit (furthermore referred to as fcu). simultaneously with the  printing of invoices, fcu records the  data on them in an electronic diary and those data can be directly controlled and accessed by the  tax authority anytime with the  assistance of online connection – without the  permission and knowledge of the  taxpayers. at least one time a  day, fcu shuts the  electronic diary, provides it with electronic signature and through online connection, sends it to a  server being under the  commission of the  national tax and customs administration office. based on act xcii of 2003 on the  order of taxation, this information can be used by the tax authority for the controlling of tax payers’ taxation obligations. through a communication device and system (online system), the tax authority also has the  technical and legal possibility to regularly, or even occasionally control the  operation of cash registers serving the  compliance with issuing invoice. for instance,  the  tax authority is obliged to supervise the  fulfilling of invoicing obligation via an inspector doing mystery shopping in an exact time announced beforehand, without the inspector revealing him/herself after the transaction. of course, the database created during the operation of the system is or will be able to analyze and compare the tax payers’ activity in certain periods. such as the reasons someone has had significantly less income in the  same period of the  previous year compared to the period after the introduction of the cash registers. whether the  results of the  introduction can already be seen is a  further question to ask. it seems that the  answer is yes. according to the  minister for national economy’s statement2 given on the 7th of march 2015, more than 180, 000 retailers used cash registers in 2014, and companies operating in the  trade industry declared 250 billion huf more vat than the  year before. due to the  success of online cash registers, this year the  government would make their usage obligatory in the  service sector as well. for instance, from 1 january 2017 taxi drivers, car repair shops and parts traders, plastic surgeons, dance clubs, discos, laundries, g yms are also obliged to supply the  sales data to the nav via the automated surveillance unit (asu). besides the on-line cash registers, currently three linked systems help to discover vat fraud in hungary. by detecting money’s route through bank transfer investigation, the goods’ movement with the help of eprtcs system and with itemized vat declaration invoices these can be investigated. 35 public governance, administration and finances law review • 1. 2017 new elements in the tax control in hungary 2. the electronic public road trade control system (eprtcs)3 in harmony with the vat directive, hungary does not levy sales tax in case of goods’ sale within the community and outside the community.4 however, it ensures the deduction and reclaim of vat5 in these cases, too. the  schengen agreement (14 june 1985) abolished inner boarders between member states, which, in case of community sale and purchase, made it almost uncontrollable for the  hungarian tax authority to control whether goods really enter the territory of the country or they leave it, or even whether it is a real business or not. in case of community purchase of goods and goods import it is a  further question whether they announce goods’ entrance at the  tax authority (customs authority) and coincidentally they fulfill their vat declaration and payment obligation or not; or they sell or circulate goods without taxation, causing damages to the  budget. the  lower domestic sales price without the higher vat creates a significant competitive disadvantage for fair tax payers. the phenomenon’s legal background can be found in the  norms of the  european union. article 168(a) of the vat directive 2006/112 makes it possible that if goods and services are used for the purposes of the taxed transactions of a taxable person, the taxable person shall be entitled, in the member state he carries out these transactions, to deduct the  following from the  vat which he is liable to pay: the  vat due or paid in that member state in respect of the  supplies of goods or services to him, carried out or to be carried out by another taxable person. this regulation not requiring other certificate but an invoice provided a  huge opportunity for tax dodgers, making it possible to deduct or even reclaim the extremely high 27% of vat after fictive businesses. at first, the  hungarian state saw the  solution to this problem in the  increase of investigations and the  coherent regulation of investigation practice with directives. in 2012, however, this controlling practice of the  tax authority and court rulings accepting this method mostly proved to be contrary to the law of the european union according to the  court of justice of the  european union. rulings made in the  combined cases of c-80/11 and c-142/11 on june 21, 2012 (ruling of combined cases of mahageben and david) and case no. c-324/11 (tóth case) on 6 september 2012 pointed out that the  practice of case law and the  tax authority need to be investigated as it is not the  tax payer but the  tax office who on the  basis of objective evidence, has to prove that the taxable concerned knew, or ought to have known, that the transaction taken as a legal basis for the deduction was connected with fraud committed by the issuer of the invoice or by another trader acting earlier in the chain of supply. custom borders between member states, the  lack of investigation that used to be applied there and the  two conclusions described above greatly obstruct the  customs authority’s successful and effective procedure; hence, the  hungarian state tried to move forward with the formation of a new control system called eprtcs in order to formalize the  informal economy and control vat deductions and reclaims. the  system was launched on 1 january 2015. the system aims at enabling the  tax authority to follow products and goods’ route, hence ensuring that common charges connected to them are properly paid and/or that 36 lászló pardavi public governance, administration and finances law review • vol. 2. no. 1. vat is legally deducted. furthermore, the  system is also an adequate tool for observing food-safety rules. in hungary, public road carriers shall pay fee for the  usage of motorways, dual carriageways and main roads. cameras of the  control system (hu-go) formed by act lxvii of 2013 on the  mileage-dependent toll payable for the  use of motorways, dual carriageways and main roads are adequate for the  controlling of goods’ transportation as well, hence, only the  already given technical background had to be connected with the adequate legal tool. according to the  regulation: product sale, product purchase and other product movement carried out by vehicles subject to road toll payment and done by public road transportation can exclusively be completed by tax payers having eprtcs number. furthermore, eprtcs number also needs to be claimed if so called risky goods are transported by vehicles not subject to road toll payment. in order to get eprtcs number, the  tax payer has to make an announcement on the  electronic site of eprtcs. in doing so, the  consignor’s data (name, tax id), the  consignee’s data (name, tax id), as well as other data determined in the  ministerial regulation issued for the  implementation of the  act has to be announced at the  national tax and customs authority (hereinafter “ntca” or “tax authority”). these contain information referring to that sales quantity of goods being in the  possession of the  tax payer that can only be transported with a  document authentically proving the  goods’ origin. moreover, ntca can oblige the consignee, the recipient, the consignor and the transporter of goods for a declaration. furthermore, if risk factors justify – except livestock and fast decaying goods – ntca may also apply authority lock on the  means of transport in order to ensure the identification of the goods. detailed rules regarding the  operation of eprtcs included in regulation no. 5/2015 (ii. 27.) ngm of the  minister of national economy (hereinafter “r .”) on the operation of the electronic public road trade control system. the scope of r . covers product purchase or other imports from other member states of the  european union for domestic purposes within the  community transported by vehicles subject to road toll payment and done by public transportation; product sale from inland to other member states of the european union or export with other purposes; furthermore, the  sale of vat taxable product as first taxable domestic sale if it is not for and end-user inland. public road transportation – be that either transportation of own goods or goods’ transit for another party – with a few exceptions can only be carried out with having eprtcs number6 (in order to determine the  eprtcs number, tax payers shall make and electronic announcement at the tax authority). in the  announcement a  lot of information needs to be brought to the  attention of the tax authority, with which legislators aim at the smooth identification of products and subjects participating in the  transportation, however, excessive administration is not incentive for tax payers. the  most significant data to be announced are data of the  consignor and the  recipient, place and time of loading and unloading , registration number of the transporting vehicle, determination of products connected to the eprtcs number, reason for public road transportation (product sale, purchase, etc.). in case of 37 public governance, administration and finances law review • 1. 2017 new elements in the tax control in hungary purchase and selling of the  so called dangerous products (which i am going to mention later on) net price of goods also needs to be provided. for tax payers included in the  database and for tax payers free from public debt, r . makes it possible to make a simplified data content announcement compared to the above mentioned,7 if their annual income exceeded 50 billion huf and their tax number has not been previously suspended by the  tax authority, and if the  goods in question is not dangerous. in case of goods’ purchase or import with other aims within the  community from a consignor’s address found in another member state of the european union to an inland recipient’s address, the  recipient is obliged to announce the  data. from an inland consignor’s address to a  recipient in another member state of the  european union, involving freight road transport with the aim of selling or other aims, the consignor has to announce the  data. in case of product selling with freight transportation service from an inland consignor’s address to an inland recipient’s address, announcement obligation is the  obligation of the  consignor. if non-dangerous products are transported or get transported by the consignee, the announcement obligation is the task of the consignee. of course, tax payers obliged to declare should also announce changes and modification at the  tax authority. based on their announcement, the  tax authority sends the  eprtcs number valid only for 15 days to the  announcer via the  electronic page of eprtcs. as i have already mentioned it above, certain goods are exempt from the obligation of data submission. r. lists general and individual exemptions. regarding general exemptions, we can mention subjective and objective ones. hence, military, law enforcement, disaster control services, foreign armed forces, vehicles transporting humanitarian relief supplies and transportation connected to international treaties and reciprocity do not fall under the effect of the system. as to objective exemptions, it has to be mentioned transportation of such goods that are ensured anyway, i.e. goods requiring permission or declaration or goods which are under customs control. hence, we can include excise goods, waste, goods requiring metal trade permission, pills for human usage or postal deliveries here. in order to unburden everyday goods transportation, smaller amount, non-dangerous goods are also free from the  effect of eprtcs. non-dangerous goods if their common gross weight does not exceed 2500 kilograms and their common non-taxed value does not exceed 5 million huf do not need to be declared when they are carried from the  same consignor to the  same recipient in the  same vehicle subject to road toll payment in one transportation. those dangerous goods are also exempted from the  announcement obligation that are transported from the same consignor to the same recipient in the same vehicle subject to road toll payment in one transport if their total gross weight does not exceed 500 kilograms and their common non-taxed value does not exceed 1 million huf. however, the obligation of daily declaration may be an exaggerated burden on certain tax payers. therefore, there is a  possibility for an individual exemption as well, if the  tax payer’s production organization peculiarities justify this and the inland loading address as well as the inland offloading address’ distance (recipient) is maximum 20 kilometers. 38 lászló pardavi public governance, administration and finances law review • vol. 2. no. 1. regarding the  transportation and announcement of risky goods, r. determines different rules than the  ones referring to general goods. the  circle of dangerous goods is determined in the regulation of the ministry for national economy (ngm) no 51/2014. (xii. 1.) on determining risky products related to the  operation of the  electronic public road trade control system. basically, we can determine risky goods as goods that are hard or impossible to individually identify as they are generally transported in bulks. this goes hand in hand with the possibility that tax payers may use the same cargo continuously, for instance for the certification of selling within the community. risky products can be risky food such as various types of meat, vegetables, greases, oils, sugars or other products such as building materials, lubricants, clothes, shoes. as a basic rule, for the eprtcs number of risky food, tax payers shall have a so called “felir” identification number registered at the information system of the national food chain safety office, and in case of product purchase from the  community, the  first hungarian place of storage has to be announced as well. moreover, tax payers shall also provide risk guarantee in case of every dangerous product. the  amount of security has to reach 15 % of the net value of risky products registered in eprtcs. the guarantee can be accomplished via a  transaction to a  separated deposit account, or can be undertaken by a  financial institution, cash flow institution, investment corporation, through guarantee registered at the national tax and customs authority. if tax payers can be found in the tax authority’s qualified database or are included in the database for taxpayers free of public debt and the  tax number of whom has not been suspended, they do not have to give guarantee. the new system could not be effective enough without sanctions adjusted to it. as  a  sanction regarding the  omission of the  obligatory announcement or having it done with fictional content, it is determined that in this case goods shall be deemed of unconfirmed origin, upon which a  default penalty amounting up to 40% of the  value of the unreported goods may be imposed and the national tax and customs administration may seize the  goods to the  extent of the  amount of the  default penalty or affix an official seal on each piece. however, the  system was introduced in january 2015, the  relevant ministry declared that they would not levy penalty until the  28th of february for those breaking the  rules, hence, we can say that the  system has only been operating since the  1st of march 2015. at  the  time of the  publication only two months passed since the  1st of march but some achievements of eprtcs can already be seen. these are primarily connected to the  exposure of food supply of unconfirmed origin which are mostly products arriving from abroad. in these cases, foreign transporters ignorance can also be the  reason for the discovered disorders. 40,  000 clients have required 1,5 million eprtcs number until the  20th of march and this number was more than 113,  500 at the  beginning of april. within the  frame of the  effective guarantee provision, clients paid 1,026 billion huf, which amount reached 2,134 billion huf until the  7th of april, furthermore, bank guarantee in the  amount of 827,978 huf was also paid by tax payers in the  framework of their guarantee provision obligation.8 39 public governance, administration and finances law review • 1. 2017 new elements in the tax control in hungary controlling also led to great achievements as within one month the  budget grew by 1,5 billion huf only because of the  tax authority’s public road controlling has been activated in the  framework of the  eprtcs system. the  tax authority controlled 7502 cargos of which 283 ended up in the  confiscation of chattel because of irregularities. the  estimated value of chattels was almost 1 billion huf. besides, more than 0,5 billion huf tax debit was paid by tax payers in cash in 1303 cases9. however, not everyone was satisfied with the  introduction of this system. most of them disapprove administrative obligations, guarantee obligations and the  competitive disadvantage caused by these. they believed that as a result of these, hungarian tax payers have a  serious disadvantage on the  market compared to enterprises not coming within the scope of the system.10 3. expansion of reverse vat taxation reverse taxation is significant in the fight against tax fraud as with its assistance, the state can achieve that pre-levied tax is paid before its deduction, reclaim. in branches where subcontractors did not get the  counter-value of selling or service done by them, reverse taxation can especially be important, as these subcontractors were obliged to pay the  tax in these cases as well. however, reverse taxation levies this burden on the  tax payer customer, sub-contractors do not need to finance the  amount of tax. at the  same time, reverse taxation is also advantageous for the treasury as the possibility that the client main contractor deducts vat without the issuer of the invoice has paid it, was abolished. member states may not only broaden the  scope of reverse taxation based on cases listed in the  current vat directive or based on derogation lasting for years but they may do so in frames of more flexible qrm that is, quick reaction mechanism procedure against vat fraud. at the  same time, this taxation method is not practical to be introduced widely as during this it is only the  end user (as the  last subject of production and purchase procedure) who pays tax into the central budget; the latter means significant risk for the state, with special regards to certain probable end user misuses. hungary has applied the  partial reverse taxation of vat since the  1st of january 2006. at first, it was applied to constructing-assembling services, property businesses, waste trade and selling of pledges, then the scope was constantly widened from the 1st of july 2012 until the summer of 2014 by certain grain and protein plants. later, the council of the  european union with regards to council directive 2013/43/eu amending directive 2006/112/ec on the common system of value added tax, as regards an optional and temporary application of the  reverse charge mechanism in relation to supplies of certain goods and services susceptible to fraud made it possible for member states to apply reverse taxation in case of grains and oily seeds until the 31st of december 2018. in 2013, the hungarian state had planned on introducing reverse taxation on pork as well but it was not allowed according to the  european committee’s report of 19 march 2013. furthermore, on the  17th of december 2013 and repeatedly in april 2014, the  committee refused the  hungarian petition on introducing reverse taxation in sugar 40 public governance, administration and finances law review • vol. 2. no. 1. lászló pardavi trade having various fictive businesses. among others, this lack of success created basis ground for the introduction of the eprtcs system. utilizing its possibility provided by the european union, with act xxxiii of 2014 on the  modification of certain financial acts, the  hungarian state expanded reverse taxation on temporary employment, employment through school cooperatives, various metals, wastes, debris, recovered paper or cardboard, glass jars, glass waste, plastic waste, chips, used or new rags, ropes, used batteries, batteries, etc. the sale of property collateral, the sale of 100,000 huf assets, the sale of greenhouse gas emission allowances, as well as on certain steel industry products from the 1st of january 2015 until the 31st of december 2018. 4. application of lower tax rate a further tool against tax fraud could be if states terminated the  trade interest of people committing tax fraud. one of its methods is the  application of significantly lower vat than the  average. as i have previously mentioned, the  average degree of vat is 27% in hungary, which is considered significantly high worldwide. on one hand, it provides high income for the state, on the other hand, it urges tax payers for misuses and frauds. one type of misuse can be found in the avoidance of community and import goods’ vat, thus goods imported to hungary can be sold 27% cheaper than goods sold regularly, decreasing competitiveness by that. the  other form of fraud is connected to fictive vat deductions and reclaims. it can be attractive for tax payers that this way they can get sources from the  state via vat reclaim after invoices with unrealistic content and especially with reclaims. realizing all these, there is a  significant need from the  hungarian traders’ part that legislators shall expand the  circle of goods and services having the  lowest, 5% vat. therefore, medicines and other health products, services were supplemented by the circle of pork and half-pork, cattle, goat, sheep and their meat. they are going to further extend the  scope of goods and services with 5% vat rate by pork meat, immobile possessions like flats to 150 m2, and family houses to 300 m2 from 2016, chicken meat, egg and milk from 2017, hence assisting hungarian traders and because of the  expected lower price, consumers, as well. 5. tax traffipax one of the  most recent and most interesting tax control methods applied by the hungarian tax administration since the spring of 2017 is the so called “tax traffipax” (the term traffipax is used in hungary to describe traffic enforcement equipment, or in other words speedcams used by the  police during roadside checks), during which the  ntca publicizes it’s inspection sites on its website beforehand. in this manner, the  taxpayers are able to follow the  way of controls; they are able to prepare themselves for the inspection(s) as well. 41 public governance, administration and finances law review • 1. 2017 new elements in the tax control in hungary the first thought seems to suggest, that this prior publication undermines the  effectiveness of control, but the  results so far are showing quite the  opposite. firstly: despite the  fact of prior knowledge about the  inspection, in 20–40% of the  cases there were deficiencies found. secondly (and more importantly): during the  “tax traffipax”, taxpayers almost always show up revenue growth during the  announced period. for instance, during an inspection day on the 10th of march in the budapest grand bazaar (a large marketplace), the  average turnover growth for a  taxpayer was above 40% (!) compared to the previous year. in this way the amount of revenue hidden revenues can be deducted – which in connection with the  on-line cash registers can provide useful statistical data about the proportion of avowed and hidden revenues. 6. conclusion the basic aim of the  hungarian fiscal and tax policy is to ensure that the  public revenues are met accordingly and in this way the  hungarian regulation and the  activities of the  ntca are also subordinate to this purpose. based on the  fact that the  hungarian system of taxes is quite complex, flexible (and therefore rather volatile from a  taxpayer’s point of view) it is quite probable, that new types of controls, or normative solutions will emerge in the  upcoming years. in my short study, i tried to point out the  practice of tax controls and inspections: how and with what means are taxpayers “engaged” more efficiently. 42 public governance, administration and finances law review • vol. 2. no. 1. lászló pardavi references 1. government resolution no. 1315/2013. (vi. 12.) amending government resolution no. 1059/2013. (ii. 13) specifying the installation schedule of the online enabled cash registers to be connected to the system of the national tax and customs administration office. 2. www.kormany.hu/hu/nemzetgazdasagi-miniszterium/hirek (accessed 6 april 2017). 3. see further lászló pardavi, new tools against vat fraud in hungary, 113–124, in vladimír babčák, anna románová & ivana vojníková (eds.), tax law vs. tax frauds and tax evasion ii. (košice, pavol jozef safarik university, 2015). 4. vat act 89 §, 98 §. 5. vat act chapter vii. 6. eprtcs number identifies that product unit which is transported by the same vehicle from one consignor to one consignee on a given route. r. 15 §. 7. only the data of the consignor and the consignee, and the registration number of the transporting vehicle shall be announced. 8. http://logisztika.com/a-nav-tajekoztaton-mutatta-be-az-ekaer-eredmenyeit/ (accessed 6 april 2017). 9. http://portfolio.hu/gazdasag/adozas/itt_a_kormany_csodafeg yverenek_elso_eredmenye.212769.html (accessed 6 april 2017). 10. the german–hungarian chamber of commerce and industry was concerned that the system significantly risks the competitiveness of every affected hungarian enterprise. “the system can lead to serious defaults in the  already existing transportation and production procedures, it imposes huge administrative burden on enterprises and has significant data protection risk that may endanger trade competitiveness.” http://nol. hu/gazdasag/a-kmara-szerint-kart-okoz-az-ekaer-1511393 (accessed 6 april 2017). © 2017 dialóg campus, budapest public governance, administration and finances law review vol. 2. no. 2. (2017) • 2, 30–41 public administration on the financial market in the czech republic michal janovec* * judr. michal janovec, phd, assistant professor at the department of financial law and economics at the faculty of law, masaryk university brno. (e-mail: michal.janovec@law.muni.cz) abstract: this article is dealing with licencing of the financial institutions on the financial market. licence procedure is a  special administrative procedure dealing with systemic important institutions – banks. good public administration in this area is a basic prerequisite for stabile financial market, because only those institutions proven to be good and stable enough might pass through the difficult administrative procedure, which is licencing procedure. this article aims to confirm or refute the hypothesis that a  proper and consistent procedure of taking away licences supports the general objective of regulation and supervision, namely the maintenance of financial market stability. keywords: public procedure; administrative procedure; licence; bank; liquidation; bankruptcy 1. introduction – granting and taking away licences and permits on the financial market it is clearly believed that one of the most important parts of financial market regulation and supervision is the stipulation of conditions on which one may gain access to the financial market as a financial market entity with subsequent monitoring ensuring that the conditions are met and business is conducted in the proper way. these are macro-prudential rules stipulated for the entire financial market – if one wants to become a financial market entity, a licence (banks) or a permit (all the other financial market entities) must be gained. it is far beyond the scope of the present paper to analyse the licencing procedure for all financial institutions so only two are discussed here: banks and securities traders, arguably the second most important financial market entity after banks. this article aims to confirm or refute the hypothesis that a  proper and consistent procedure of taking away licences supports the general objective of regulation and supervision, namely the maintenance of financial market stability. the hypothesis only applies to the termination of financial market entities because when licences are being granted, it is crystal clear that a proper procedure observing all the conditions necessary for the licence to be granted helps to maintain financial market stability. there are two reasons why only two entities (banks and securities traders) are discussed here in connection with licences and permits. firstly, the two are undoubtedly the most important institutions conducting business in the financial market (especially banks and their conduct is essential for the stability of the entire system). secondly, legal norms linked with these entities are rather specific (this is especially true of banks) and they thus illustrate the issue very well. 10.53116/pgaflr.2017.2.2 mailto:michal.janovec%40law.muni.cz%29?subject= https://doi.org/10.53116/pgaflr.2017.2.2 31 public governance, administration and finances law review • 2. 2017 public administration on the financial market in the czech republic taking away licences and permits is further analysed here on a more general level, i.e. in connection with all financial institutions, and not just banks and securities traders. this is justified by the fact that the end of licences and permits is more or less the same (barring a few irregularities), regardless of which financial institution’s licence or permit is cancelled. 2. licencing procedure for banks if anybody wants to offer banking services (i.e. conduct business as a  bank in the czech republic), there are two options according to act no. 21/1992 coll., on banks (hereinafter the banks act). 1. the first option is to gain a  banking licence from the czech national bank (hereinafter cnb) or a  permit to offer banking services, i.e. accept deposits from the public and offer credit. 2. the second option is to offer banking services in the czech republic by banks whose headquarters is in another eu member country by means of a  branch as a  result of the so-called single licence in the banking market; two conditions are necessary: the foreign bank must own a  valid licence from the country of its headquarters and it must follow the procedure stipulated by eu law. in accordance with the international contract, the cnb can issue a  directive raising the number of countries whose banks have the same advantages while doing business in the czech republic as banks that are from eu countries. whoever conducts business under the single licence in another country, is supervised by the domestic supervisory body, with the exception of a few clearly-defined legal norms of the home country. if a bank wants to offer services via its branch, it must go through the so-called notification procedure, in which it presents information regarding its business plan, its list of services, its headquarters, its organisational structure, and its head. these branches only need to comply with the registering obligation of taxable entities stipulated in a special legal norm.1 banks with the headquarters in eu member countries are entitled to conduct business even without setting up a branch if their business is not permanent. however, this paper only goes on to discuss the granting of a  banking licence (hereinafter licence) in a licensing procedure – when a new banking institution under the supervision of the cnb is established. the licence application (the required form) is submitted to the cnb along with a  proposal of the association articles. the minimum capital for would-be banks is czk 500,000,000, and this is also the required minimum amount of money gathered by deposits on a  pre-arranged account. the licence requirements are stipulated by the cnb directive no. 233/2009 coll. the application must be submitted in writing and it must include basic information about the applicant, the reason(s) for the application, the objective of the bank, a business plan and a market analysis, plus a number of other documents. all of these are considered in the licensing procedure. 32 michal janovec public governance, administration and finances law review • vol. 2. no. 2. the licensing procedure formally begins when the cnb informs the applicant that the procedure has commenced. this is, of course, only possible once the application form has been submitted. along with the commencement of the licensing procedure, the cnb asks the applicant to comment on/make a  complaint about the documents submitted in the application form or the method of their assessment. typically, the licensing procedure lasts 6 months unless it is interrupted because the cnb requires supplementary information. in such a  case, the licensing procedure can last up to 12 months. the cnb assesses especially the capacity of the main shareholders regarding their financial stability and power, but it also looks into the level of expertise and the moral standards of persons proposed to form the statutory and executive boards of the bank. moreover, technical and organisational equipment necessary for the services to be offered is examined, as well as the feasibility of the economic plans for the future liquidity and profitability of the bank. the applicant must pay an administrative fee of czk 200,000.2 provided that all the necessary conditions are met, the cnb grants the licence. typically, the category of administrative discretion is applied here because while some aspects and conditions affecting the decision to grant the licence may be objective, others appear rather subjective and their assessment is thus left to the discretion of the assessor. for instance, in some cases it might be disputable whether a  given person reaches the required level of expertise or moral behaviour, or whether the technical background is appropriate enough for the type and range of services that the banking institution plans to offer. in order to prevent such unclear situations that may result from some rather vague categories, the cnb issues official notices that provide more information about the categories and they specify the requirements that applicants should meet. the assessment of such categories as expertise or credibility is thus hopefully clearer and more predictable.3 if the application is successful, the licence is given for an indefinite period. the licence stipulates the activities that the bank is allowed to perform; alternatively, it provides a  list of conditions that must be met before another type of activity is initiated or that must be observed during the performance of this activity. some activities present in the licence may be conditioned by the granting of a  special permit (e.g. a  permit for services in the investment industry which is granted under act no. 256/2004 coll., capital market undertakings act). in a  nutshell, before a  bank comes into existence, there must first be a  joint-stock company which, sooner or later, manages to meet the requirements of the banks act; only after the company has been granted a banking licence, can the company call itself a bank.4 the purpose of business activities listed in the list of company registers is banking services or all the services that the applicant is entitled to perform according to the licence. if the cnb’s decision is negative, the applicant may file a  remonstrance, which is  a regular remedial measure present in the administrative order; the decision (which is irrevocable) is then made by the bank board of the cnb. the remonstrance, however, has no suspensory effect and the provision about the possible conclusion of the remonstrance proceeding cannot be applied.5 33 public governance, administration and finances law review • 2. 2017 public administration on the financial market in the czech republic 3. granting permits according to the banks act in a number of cases the banks act demands that banks, prior to making a certain step, ask for permission or inform the cnb of what they are going to do. a  prior permission is required in the following cases: 1. a person intends to obtain direct or indirect share of the bank worth at least 20%, 30%, or 50% of the voting rights of the bank, including a  person who wants to reach the above-mentioned limits of the basic capital of the bank, including a  person who will become an executive member due to a  contract to control the bank – this obligation also applies to persons acting in compliance,6 2. prior to a contract about the sale of the bank ort its part,7 3. prior to a bank merger, a division of a bank, or a transfer of funds to another bank as a shareholder,8 4. when a decision to terminate a bank is reached at the level of the general meeting or when the decision affects the activities which can only be performed by a  licence holder,9 5. when the basic capital is reduced, unless it is a case of loss compensation,10 6. when an auditor is about to be chosen.11 within two days after receiving the application, the cnb must confirm in writing its acceptance, and it must inform the applicant of the deadline by which the cnb must reach a  decision. the cnb must do so no later than 60 working days after sending the confirmation notice. if this deadline is missed, the applicant can act as if the licence has been granted. it should be stressed, though, that if there is an increase in the qualified interest in the bank or if there is a  takeover without the consent of the cnb, this does not mean that such a legal act is automatically nullified. yet, the voting rights linked with this act cannot be exercised until the permission from the cnb is granted. legal acts and resolutions of the general meeting made without a prior consent are invalid. the participant in the prior consent proceeding is only the requesting bank; in the following cases it is also the second contractual party: when the bank or its part is transferred according to letter b), or when there is a bank merger or a bank division, or the funds are received according to letter c).12 the notification duty is applicable in the following cases: 1. the reduction of the direct or indirect share of the bank under 20%, 30%, or 50% of the voting rights – this duty also applies to persons acting in compliance; after the banks act amendment, the duty also applies when the share in the basic capital is reduced below the above-mentioned limits or when there is a  loss of control over the bank; further, if there is a proposal to transfer such an amount of share or other rights that constitutes qualified interest in the bank,13 2. a change in the association articles,14 3. a change of personnel in the statutory body of the bank or in the executive board,15 34 michal janovec public governance, administration and finances law review • vol. 2. no. 2. 4. an intent to open a  branch abroad16  –  having received the notification about the branch abroad, the cnb decides in an administrative proceeding whether the conditions stipulated by eu law are met (according to article 5c – 5m of the banks act)17 and if the decision is negative (the conditions are not met), it is reviewable in court, 5. the acquisition of qualified interest of another legal person.18 4. licensing procedure for securities traders the establishment and conduct of business of securities traders is governed by act no. 256/2004 coll., the capital market undertakings act (hereinafter cmua). before the application is submitted, it is necessary for the applicant to clarify its business intent since it is a  key aspect in determining the line of business, particularly as regards the scope of investment services. this also determines the minimum capital requirements, the capital adequacy requirements and other material, personnel and organisational requirements. the only participant in a  permit procedure is a  joint-stock shareholder or a  limited liability company with its headquarters in the czech republic; the application must be submitted in the form prescribed by the cnb including all the compulsory supplements. the application can be submitted by a  company even before the company is listed in the list of company registers, but it must meet all the criteria required for the permit before its entry in the list  –  the company must be able to prove them in a  trustworthy manner. during the permit procedure it is possible to order a  hearing in which the cnb officers specify what additional information is needed to complete an imperfect application. the cnb decides whether the permit is granted or not within 6 months from the day it received the application, unless there have been delays caused by an incomplete or imperfect form. this deadline became stipulated by law in accordance with the mifid directive. in case an existing securities trader plans to make a change in their scope of business, there needs to be a  new permit procedure, which is, to a  certain extent, similar to the original procedure. the cnb must assess all the lawful requirements as when a new permit is about to be granted; though in this procedure the applicant only provides that information which is relevant for the change in question. of course, the applicant may refer to the documents that have been submitted in the past three years, providing the relevant data have not changed. the application seeking to gain a  permit or a  permit expansion (including all the relevant documents) is purely the responsibility of the applicant and the cnb is in no way obliged to look for documents that are necessary for the applicant to meet the legal requirements. the administrative fee, payable before or along with the application, is czk 100,00019 for a permit, or czk 10,000 for a permit extension. if the fee is not paid, the cnb informs the applicant and sets an extended deadline; if even this deadline is missed, the cnb terminates the administrative procedure. it is interesting to note that along with a permit application (or even later), the applicant may apply for the registration of another business activity (i.e. other than investment services). 35 public governance, administration and finances law review • 2. 2017 public administration on the financial market in the czech republic such a  registration is for free and it is not decided in an administrative procedure.20 if the conditions linked with this business activity are met (i.e. they do not prevent the offer of investment services and they do not prevent efficient supervision of the securities trader), the cnb registers the activity and issues a  registration notification.21 this registration certifies that the conditions stipulated by law have been met. yet, such a registration can modify itself into an administrative procedure, if the applicant fails to give evidence that the lawful conditions have been met  –  the cnb then initiates an administrative procedure with the applicant and cancels the registration application providing the applicant does not meet the criteria even during the administrative procedure. 5. taking away licences and permits of financial market entities miroslav singer, the former cnb governor, asserted22 that by close of observation of liquidation rules the cnb helps to increase the transparency of the financial market for its participants, which is why i deem it apposite to include the matter of taking away licences and permits in this article. i attempt to analyse what happens when a financial institution is being liquidated or when it is declared insolvent; in other words, when preventive measures and lawful requirements aiming to prevent the bankruptcy of financial institutions fail. the licence to conduct business in the financial market is revoked in the following ways: 1. revocation of a licence or a permit as a sanction, 2. revocation of a licence or a permit at the request of a financial market entity, 3. revocation of a licence or a permit resulting from the decision of a financial market entity to close down, 4. revocation of a licence or a permit resulting from the decision of a financial market entity to terminate the activities for which the licence or the permit is needed, 5. revocation of a licence or a permit after it has expired. once the licence or the permit has been revoked, the institution enters liquidation unless it enters a  different type of market where the licence (permit) is not required; alternatively, an insolvency proceeding may also be initiated. 6. a company in liquidation generally, liquidation of a legal person is treated in act no. 89/2012 coll., the civil code (hereinafter the cc), which states that the primary objective of liquidation is to settle and distribute the property of the legal person, to settle its debts to creditors and lawfully dispose of the property that remains after liquidation.23 the ultimate objective of liquidation is the expungement of the institution from the commercial register. a  legal person enters liquidation the day it is cancelled or declared invalid. once the legal person has entered liquidation, the liquidator, without unnecessary delay, makes an entry about it in the public register.24 36 michal janovec public governance, administration and finances law review • vol. 2. no. 2. as far as the liquidation of a financial institution is concerned, the crucial thing is the appointment of a liquidator. there are only a few particularities in comparison with general legal norms. natural or legal persons can become potential liquidators for all financial institutions apart from banks, where the liquidator must only be a  natural person.25 such a  provision is motivated by the unquestionable importance of banks and the extremely high level of responsibility that their liquidation entails  –  a  natural person is liable for unprofessional conduct with all their property as collateral. what is important is the fact that the liquidator is appointed or removed by the court, which follows the proposal of the cnb – the court has 24 hours to announce its decision.26 the cnb plays a prominent role in the process of liquidation since it is not only a  supervisory authority  –  it actually also determines who will be appointed or removed as the liquidator (the court is the institution ultimately responsible for the decision but it always follows the proposal from the cnb). furthermore, the cnb also determines the liquidator’s remuneration, which is paid from the property of the liquidated institution. if the property does not cover the total remuneration, it is covered by the state. the liquidator is obliged to act with due managerial care,27 hence their liability for any damage; an exception is the liquidator of an investment company or an investment fund –they must act with professional care.28 the liquidator’s obligation to act with due managerial care can be inferred from article 159, par. 1 of the civil code, which maintains that whoever “accepts the office of a  member of an elected body undertakes to discharge the office with the necessary loyalty as well as the necessary knowledge and care. a  person who is unable to act with due managerial care although he must have become aware thereof upon accepting or in the discharge of the office and fails to draw conclusions for himself is presumed to act with negligence”.29 what is the difference between the two notions? professional care is generally perceived to entail a higher level of expertise, higher requirements and, inevitably, a higher amount of liability for a breach of the professional care rule. if the rule is violated, it is a case of an administrative offence with all the administrative and legal consequences (administrative punishment) with the cnb acting as the administrative body. if the due managerial care rule is violated, the consequences are only in the area of civil procedure – the given institution can only demand a loss compensation via a lawsuit. with the exception of the liquidator of investment companies and investment funds, the cnb does not currently have the power to sanction liquidators who fail to adhere to the rules. as for the liquidators of financial institutions, the cnb chooses them from persons who are on a  special list of trustees in bankruptcy; these persons have passed a  specific exam for trustees and they are expected to possess a  high level of expertise in this area. the same requirements that apply to the choice of trustees in bankruptcy also apply to the choice of liquidators, which seems wholly logical. once it is known who the liquidator is going to be, the cnb submits a  proposal of their appointment to the relevant commercial court in charge of the commercial register. the court then officially appoints the liquidator and the appointment comes into effect the moment it is disclosed either on the official noticeboard of the court or on its electronic noticeboard. when this happens, the liquidator acquires the competence of a  statutory body and one of their main duties is to announce in the official business journal that the institution has entered liquidation. the announcement also contains an 37 public governance, administration and finances law review • 2. 2017 public administration on the financial market in the czech republic appeal to potential creditors of the institution to submit their claims. the deadline for the creditors cannot be shorter than three months.30 a  problem may arise if there are more creditors than previously expected and the financial situation of the institution reveals that there is, in fact, no other option but to initiate an insolvency proceeding of the financial institution. in my opinion, it is reasonable not to conclude the process of finding out creditors too soon, and the insolvency proceeding submission should also be considered carefully. the reason is that liquidation is closely supervised by the cnb (the cnb can even remove the liquidator, i.e. it submits such a  proposal and nominates another liquidator). in contrast, an insolvency proceeding is not supervised to the same extent because the cnb can only demand information from the trustee in bankruptcy; this, however, is not even enforceable. i am convinced that liquidation is fairer, more carefully controlled and more transparent because of the cnb’s intervention and because of the requirements placed on liquidators. 7. insolvency proceeding of financial institutions there are several substantial differences that apply to financial institutions in insolvency proceedings compared to other entities. financial institutions are not even subject to the same legislation; or rather, the type of insolvency proceeding is determined by the fact whether it concerns a  credit institution or not. it is worth highlighting that unlike in a  typical list of financial institutions, act no. 182/2006 coll., the insolvency act, as amended, states that a financial institution is a bank, a savings or credit bank, an insurance company or a reinsurance company.31 the bankruptcy of financial institutions is dealt with in the insolvency act (article 2, section iv), which explicates the differences in comparison with a  regular bankruptcy. while there are, admittedly, certain differences between banks and (re)insurance companies, these seem to be rather minute and i thus treat the insolvency of all financial institutions as one group here. a big difference from the usual insolvency proceeding under the insolvency act, is the fact that for financial institutions the trustee in bankruptcy may only be a  trustee with a special permit.32 what has been mentioned so far clearly suggests that there are, as a matter of fact, two schemes of bankruptcy. on the one hand, there are financial (credit) institutions, on the other hand, there are other institutions such as securities traders, investment companies, investment funds, pension companies and pension funds. if these non-credit institutions go bankrupt, they are dealt with in the regular bankruptcy scheme. it is not even necessary that their licence or permit be revoked; unlike with financial institutions where licence revocation is a prerequisite for the application of the insolvency act. what is then the main difference between the two schemes? apart from the abovementioned necessity to revoke the licence before an insolvency proceeding may begin, it is also people who can submit the insolvency proposal  –  for financial institutions, the proposal may be submitted by, except for creditors and debtors, the cnb, as well. another unique option is a  solution via liquidation. yet another important option is the announcement of the crucial parts of the insolvency decision in the official journal of 38 michal janovec public governance, administration and finances law review • vol. 2. no. 2. the  european union, as well as the fact that the claims of creditors resulting from the accounting of the debtor are registered automatically, of which the creditor is informed by the trustee in bankruptcy within 60 days of the company going into liquidation. these exceptions are quite logical and straightforward. as the cnb supervises these institutions and it has a  large amount of highly relevant information about them, it is desirable that it should have the right to lodge an insolvency proposal. it is also wholly logical to include automatically all the creditors present in the accounting because the insolvency of a  financial institution is always of such a  scope and magnitude that one cannot expect all the creditors to be informed of the insolvency and to submit their claims; this is especially true of foreign creditors. this would also undoubtedly result in an immense administrative overload for the trustee in bankruptcy and the insolvency court  –  it would be neigh impossible to process such a  vast number of documents. naturally, problems may arise if the accounting is badly kept or even missing – this means a  considerable load for the trustee in bankruptcy that must do their best to obtain the relevant information. if the information is still unavailable, there is no other option but to include those creditors that have been found out – either from the accounting or by means of applications submitted after the announcement in the official journal of the european union. i have suggested above that liquidation is more favourable for creditors than bankruptcy. what happens, though, if, theoretically speaking, these two clash? the cnb may revoke a licence or a permit and suggest a liquidation entry while submitting a proposal to the relevant commercial court with a proposal as to who the liquidator should be. the court has 24 hours to decide and in this interval a  debtor or a  creditor may submit an insolvency proceeding proposal. the insolvency proceeding commences the day the proposal physically appears at the court.33 the insolvency proceeding is thus opened and, a few hours later, the court opens liquidation and appoints a liquidator. thus, the two clash and the institution is both insolvent and in liquidation. insolvency is, of course, stronger and the court must deal with the insolvency proposal and possibly declare a bankruptcy. if the court dismisses bankruptcy, the insolvency proceeding is cancelled and liquidation may go on. however, if the insolvency proposal is justified, then the institution is declared insolvent and liquidation is put on the back burner  –  the role of the liquidator is purely formal. i believe that liquidation is beneficial for all the parties involved. one of the reasons why i think so is the fact that if the decision is based on a  proposal made by such an institution as the cnb, then there should be no problem with loss compensation. one may assume that if the cnb proposes liquidation, it knows very well why, and it is then up to the liquidator and his integrity to submit an insolvency proposal if need be. of course, there is still the court that assesses whether all the requirements for declaring bankruptcy have been met; if the court decides so and the requirements have actually not been fulfilled (i.e. it would have been possible to deal with the situation by means of liquidation), then the state must compensate the loss. 39 public governance, administration and finances law review • 2. 2017 public administration on the financial market in the czech republic 8. conclusions the cnb performs the role of an administrative body as far as investment and banking services are concerned; a bank that also wants to offer investment services according to the capital market undertakings act, can thus submit only one application and the cnb only makes one decision  –  if it is a  positive one, it enables the bank to offer the services. banks present in the czech banking market take part in other financial services by means of creating financial groups that might include, for example, an insurance company, a  pension fund, an investment company, an investment fund, a  financial leasing company, a  factoring company, etc.; the cnb carries out supervision over the whole group. the dangers that a bank faces may be caused by its presence in the financial group. that is why some rules of prudential business (especially the capital adequacy, the commitment, and the inner control system) are applied to the group as a whole. it may be concluded that it is a  correct decision to entrust a  single body with administrative procedures permitting an activity or granting a licence, as well as subsequent supervision of financial institutions owing to the fact that financial services are globalised to such an extent that many financial institutions are active in a number of financial areas. if supervision were carried out separately (including the granting of licences and permits), it would take more time and there would be a greater danger of imperfections because the administrative bodies would have to share information and the decision-making process would be more complicated and time-consuming. this is hardly acceptable these days. as regards the termination of business activities, it is clear that the current legislation (based on eu law) considers liquidation and insolvency of financial institutions a  serious issue; it is, after all, to everyone’s benefit to make sure that these proceedings affect the stability of the economic system as little as possible. except for the specific issues of liquidation and insolvency, there are also buffers such as the deposit insurance fund and the financial market guarantee system, which provide a  certain form of guarantee that deposits or other entrusted finance will be paid out should financial institutions be declared insolvent. in case there is a  potential clash between liquidation and insolvency, i am convinced that liquidation should be given preference (the reasons are outlined above); all the more so because, occasionally, insolvency proposals are submitted without a proper reason. i also believe that the liquidator, carefully chosen by the cnb, provides a sufficient guarantee of an objective assessment of the debtor’s financial situation – the insolvency proposal will be filed if the conditions stipulated by law are met. i can certainly confirm the hypothesis set at the beginning of this article, namely that the right and consistent method of terminating the activities of financial institutions supports the general objective of regulation and supervision: the maintenance of financial market stability. public administration in this area is without any doubt one of the tools which supports the financial market stability when good administration is applied. it is evident that without clear rules and their consistent application the financial market can barely be kept transparent. if there were any doubt surrounding the end of a  financial institution (whether it be an enforced or a voluntary decision) by means of liquidation or insolvency, financial institutions would be left in relative uncertainty as to how to conduct 40 michal janovec public governance, administration and finances law review • vol. 2. no. 2. business in the financial market. without realising and accepting the negative consequences of improper conduct of business activities (e.g. taking excessive risk without sufficient safety measures), financial institutions might find it difficult to avoid such conduct that could result in terminating their business. 41 public governance, administration and finances law review • 2. 2017 public administration on the financial market in the czech republic references 1 cf. § 33, act no. 337/1992 coll., on tax and fees administration, as amended. 2 item. 65/1, letter a) of act no. 634/2004 coll., on administrative fees, as amended. 3 based on the cnb official notice, issued on the 3rd of december 2013, explaining the notions of credibility and expertise. 4 cf. article 3, par. 1 of the banks act. 5 cf. article 152 par. 5 act no. 500/2004 coll., the administrative order. 6 cf. article 20 par. 3 of the banks act. 7 cf. article 16 par. 1 letter a) of the banks act. 8 cf. article 16 par. 1 letter c) of the banks act. 9 cf. article 16 par. 1 letter b) of the banks act. 10 cf. article 16 par. 1 letter d) of the banks act. 11 cf. article 22 par. 4 of the banks act. 12 cf. article 16 par. 1 of the banks act. 13 cf. article 20 par. 14 of the banks act. 14 cf. article 16 par. 2 letter a) of the banks act. 15 cf. article 16 par. 2 letter b) of the banks act. 16 cf. article 16a par. 1 of the banks act. 17 it is a  provision connected with the principle of a  single licence, i.e. the possibility to provide banking services in the member countries of the eu, without the need to acquire the licence in every single one of them. 18 cf. article 16 par. 2 letter c) of the banks act. 19 item 65/2 letter b) of the tariff of administrative fees, amendment to act no. 634/2004 coll., on administrative fees, as amended. 20 registration in the administrative procedure does not follow part two of the administrative code, but it follows part four (articles 154 to 158); more specifically it is a different act according to article 158 of the administrative code. 21 if the trader’s activity which should be registered involves a  direct link to their own property (article 8a, par. 1 to 3 of the cmua), the cnb dismisses the application unless there are extraordinary circumstances (article 6a, par. 6 of the cmua). 22 miroslav singer, dohled nad finančním trhem [supervision over the financial market], 40. paper delivered at den otevřených dveří of the cnb, prague 12 june 2010. 23 cf. article 187 and the following of act no. 89/2012 coll., the civil code. 24 rené kurka, anežka paříková, subjekty finančního trhu, vybrané aspekty likvidace a insolvence [subjects of the financial market. selected aspects of liquidation and insolvency], 60 (praha, c. h. beck, 2014). 25 cf. article 8 par. 9, of the banks act. 26 cf. e.g. article 36 par. 1, of the banks act. 27 it can be inferred from article 159 par. 1, of the cc. 28 cf. article 348 act no. 240/2013 coll., on investment companies and investment funds, as amended. 29 kurka, paříková, supra n. 24, at 62. 30 cf. article 198 of the civil code. 31 kurka, paříková, supra n. 24, at 150. see also article 2 letter k) of the ia. 32 cf. article 3 par. 2 of act no. 312/2006 coll., on trustees in bankruptcy, as amended. 33 cf. article 97 par. 1 of the ia. © 2019 ludovika university press, budapest public governance, administration and finances law review vol. 4. no. 2. (2019) • 65–77 . application possibilities of blockchain in accounting péter bálint király* * dr . péter bálint király, internal phd student of the széchenyi istván university in győr, faculty of law, department of administrative and financial law . (e-mail: kiralypeterbalint@gmail .com) abstract: in recent decades technolog y has advanced rapidly, and inventions that have made our lives easier have emerged . among the many life changing inventions, blockchain facilitates our financial activities, for example banking, commerce and accounting, because it eliminates the need for a  third party, thus saving us time and money . with its help, we can manage and record asset movements, contracts and their fulfilment, as well as other data by cryptographic methods . in the following article, firstly i will describe the concept and operation of blockchain and the advantages of using it in the field of accounting . after that i will introduce the accounting principles, based on the hungarian accounting act . finally, i will address the legal questions raised by applying the accounting principles to blockchain when they are used in the process of accounting . keywords: blockchain; tax law; accounting 1. introduction in recent decades, technolog y has advanced rapidly, and inventions that have made our lives easier have emerged . in the following, i address the issue of blockchain regulation, examining the legal challenges generated by technological innovation, including its impact on the current accounting regulation . blockchain is already considered by many to be the most important invention of the 21st century and is compared to the internet in terms of importance . blockchain is essentially a  decentralised or distributed ledger that, due to cryptographic procedures, is capable of authenticating transactions, without the need for an intermediary . blockchain allows us to trust third parties we do not know and therefore do not have enough information about them . in the past, in order for this trust to exist, we needed an intermediary trusted by both parties to ensure that the other was not deceived . for example, we needed financial institutions in order to prove that we have the amount of money or collateral needed for a  particular transaction . blockchain systems eliminate the need for a  third party, thus saving us time and money, while allowing everyone to access and supervise transactions carried out through blockchain .1 blockchain allows transactions to be made anonymously . applying it can bring many benefits in different areas of life . the purpose of its creation was to eliminate the failures of the traditional financial intermediary system, and to provide a  faster, cheaper and more secure way of conducting financial transactions . with its help, we can manage and record asset movements, contracts and their fulfilment, as well as other data by cryptographic 10.53116/pgaflr.2019.2.5 mailto:kiralypeterbalint%40gmail.com?subject= https://doi.org/10.53116/pgaflr.2019.2.5 66 péter bálint király public governance, administration and finances law review • vol. 4. no. 2. methods . in addition, it can ensure the transparency of transactions, verify the origin of goods, provide authorities with real-time, reliable and credible data, enable continuous collection of taxes immediately after a  transaction without human intervention, etc . its potential for use is endless and the recent emergence of blockchain-based innovations has significantly accelerated, necessitating an examination of how blockchain and other related technologies can be integrated into the current regulatory environment . 2. the operation of blockchain in order to present the legal challenges, the concept and operation of blockchain must first be described . blockchain is a distributed ledger or decentralised database that is publicly accessible and, through cryptographic procedures, authentically and unalterably captures recorded data (e .g . transactions) without any intermediary, in a merely peer-to-peer way .2 blockchain is an implementation of distributed ledger technologies (dlts) . the distributed ledger technolog y is a database based on a technolog y that enables the content to be simultaneously accessed, modified and authenticated by authorised personnel and, upon agreement, to be copied, shared and synchronised between participants, regardless of geographic boundaries . the essence of a  centralised software system is that there is a  central node (central computer) and all other nodes (computers) are connected to the central node, but these other nodes are not directly connected to each other . in contrast, in a  distributed/decentralised system, like a  blockchain, nodes (computers) are connected to each other without any central node among them . that is, the nodes communicate directly with each other, and not through a central node . blockchain is essentially a  so-called peer-to-peer protocol, which means that it is a computer network whose users (or rather their computers functioning as nodes) communicate directly with one another without a  central node (computer) . p2p systems are distributed software systems that consist of nodes (computers) and thus make their computing resources (e .g . processing speed, storage, information distribution) directly accessible to others . when connected to a  p2p network, users’ computers become equal nodes in the system in terms of their roles and privileges . although users are different in terms of available resources, all nodes in the system have the same functional capabilities and the same responsibility . as a result, all users’ computers are both service providers and consumers .3 the above properties mean that anyone can join blockchain, and once connected, initiate transactions directly to each other, anonymously . transactions are also authenticated by users through their computer capacity made available to blockchain . during this process blockchain wraps the information about the transactions in so-called blocks, and then these blocks are added to the blockchain that serves as the ledger . an essential element of this process is the so-called consensus mechanism, which is needed to get computers to agree on blockchain updates so that all computers will then have the same blockchain data content .4 67 public governance, administration and finances law review • 2. 2019 application possibilities of blockchain in accounting how does it work? i would like to illustrate the operation of blockchain through the example of the bitcoin–blockchain proof of work consensus mechanism . the data about transactions are gathered into blocks every 10 minutes . then the transactions included in the new block are authenticated by the nodes (e .g . they confirm that the buyer actually had  the needed amount of cryptocurrency available for the transaction) .5 thereafter, the transaction data set of the new block is supplemented by the so-called “header” of the previous block . this header actually works like a personal number . each block has a unique header through which it can be identified . this means that each block refers to the preceding block and consequently the chain of transactions can be traced back to the original block containing its first transactions . once the header of the previous block is added to the new block, the data contained therein begins to be encrypted by solving a  cryptographic puzzle .6 (cryptography was originally equivalent to encryption, but today it has become a  stand-alone mathematical-informatics science, which is about protecting information by transforming and transmitting information, text and messages in a way that only those can understand, to whom the message was intended .) all the blockchain-running computers (the so-called miners) compete on which one can solve this cryptographic puzzle the fastest, because the first one to solve receives bitcoin (or other cryptocurrency in case of other blockchain systems) for their work . the new block is then added to the blockchain and shared on all computers in the system .7 when a sufficient amount of computer power is provided, blockchain is able to record transactions reliably, as the entire blockchain is constantly updated and shared among network members . that means that every single moment any participating computer can verify every transaction that has been recorded .8 recorded transactions are virtually immutable once added to the blockchain . this is because the complete blockchain is present on all computers and each block refers to the preceding block . this means that if a  hacker wants to change a  transaction, they need to change not only the block that contains that transaction, but also the next one, and then the next one, and so on, since all blocks contain the header of the previous block . in addition, these changes would have to be made on more than half of the nodes of the blockchain, since more than half of the computers are needed to reach consensus about transactions .9 3. advantages of the blockchain technology in accounting the essence of accounting and auditing is to create mutual trust and to provide protection for investors . that is why the requirement of double-entry accounting has been introduced, which ensures the accuracy of the recorded data . as business companies grew and evolved, they increasingly needed external financial resources . however, investors only provided capital to a business company if they saw that their investment was paying off . the easiest way to check this was if the company in which they were investing disclosed information about their activities . due to the information asymmetry between the company and the investor, the company can easily manipulate the data . this is why there is a need for external auditing of accounts, which can reduce information asymmetry and increase trust 68 péter bálint király public governance, administration and finances law review • vol. 4. no. 2. and  thus the value of the company . of course, conducting an external audit to detect accounting errors and fraud is also in the interest of the business, since the decision of potential investors is greatly influenced by whether they can rely on the information disclosed by the business . because external auditing is done by people, it is not perfect either: it reduces the risk of errors and fraud, but it cannot detect all .10 the digitisation of accounting activities may provide a solution to this . however, this is made more difficult by the complex set of legal requirements which require, among other things, the authenticity of the recorded data . the purpose of the accounting rules is to prevent the possibility of forgery and the recording of false or misleading information . this is ensured by, among other things, various regular checks, extensive documentation of data, double-entry bookkeeping, etc ., all of which are labour-intensive and costly activities and difficult to automate . at least that was the case until blockchain appeared .11 as is clear from its concept, blockchain is a  technolog y that functions as a  general ledger for transferring ownership and recording accurate financial information . the focus of the accounting profession’s activities is to record, measure and communicate financial information, property rights and obligations, and to analyse that information . based on this data, accounting professionals plan the best allocation of financial resources . for accountants, using blockchain can greatly improve efficiency by reducing the cost of maintaining and reconciling ledgers, and reliably recording transaction chains and ownership of assets . applying blockchain can help accountants’ work by making the resources, rights and obligations of companies more transparent . in addition, it saves time for accountants, as transactions need not be recorded by accountants, as blockchain will do it .12 blockchain technolog y can also facilitate compliance with legal requirements, for example by assisting in double-entry bookkeeping, and the authenticity of recorded data no longer has to be verified by an external actor (auditor), as the blockchain itself provides this .13 in addition, with the help of blockchain, all of these activities are performed by the program itself without the need for an intermediary, in a  transparent, secure, reliable and tamper-proof manner .14 the focus of the accountants’ activities is thus expected to shift from data accounting to planning and the evaluation of blockchain data . blockchain is not able to answer all the questions that arise during the activities of a company . for example, you can credibly prove who owns an asset, but its value, condition, method of accounting, and placement in each category of financial statement still need to be determined by experts .15 4. accounting principles below i present the accounting principles required by act c of 2000 on accounting (hereinafter: sztv .) . the basic principle of the sztv . is the principle of going concern, which means that drawing up the financial report and the accounting records shall be based on the assumption of the economic entity’s capacity to sustain operations in the foreseeable future and on its ability to continue its activity, and the termination of or a  considerable reduction, for any reason, in the operation is not expected .16 it assumes that the business is created to operate profitably in the long run . the other principles must also be interpreted in this light . 69 public governance, administration and finances law review • 2. 2019 application possibilities of blockchain in accounting according to the true and fair view principle, assets shown in the books and contained in the financial report shall be such that they can be found and verified as in fact being in existence, tenable and verifiable . the measurement of such assets shall be carried out in accordance with the valuation principles prescribed in the sztv ., as well as with the relevant valuation procedures .17 based on the principle of completeness, economic entities shall keep accounts of all economic events, the effect of which on the assets and liabilities, as well as on profits, are to be shown in the financial report, including the economic events which pertain to the financial year in question that became known after the balance sheet date but before the date of closing, as well as the ones generated by the economic events of the financial year ending on the balance sheet date, that had not yet taken place prior to the balance sheet date but became known prior to the closing date of the balance sheet .18 according to the principle of prudence, no profit shall be recognised where the financial realisation of the revenues and certain items of income are uncertain . when determining the profit or loss for the year, foreseeable liabilities and potential losses shall be taken into account and shall be covered by provisions, even if such liabilities or losses become apparent only between the date of the balance sheet and the date on which it is drawn up . depreciation impairment losses shall be accounted for, regardless of whether the income statement for the year shows a profit or a loss .19 the principle of matching means that when determining the profit or loss for a certain period of time, the revenues recognised for a given period of activities and the costs (expenditures) directly associated to such revenues shall be taken into account, regardless of the financial settlement . the revenues and costs shall relate to the period in which they were incurred for economic purposes .20 based on the principle of accruals, the consequences of economic events concerning two or more financial years shall be recognised under the revenues and costs of the period in question in the proportion in which they are incurred between the underlying period and the accounting period .21 for example, if a  business leases an office for 3 years and receives a 3-year lease in advance, it may not account for the full 3-year rent for the year it was issued, but only show 1/3 of that year . according to the principle of grossing up with the exceptions laid down in the sztv ., revenues and costs (expenditures), and receivables and liabilities may not be set off against one another .22 this means that liabilities, receivables and revenues should be recorded separately, because if these could be offset, the data would no longer give a credible picture of the company . the principle of substance over form means that in the financial report and in the relevant accounting records, economic events and transactions shall be shown and accounted reflecting their economic substance and in accordance with the basic principles and relevant provisions of the sztv .23 this means that in accounting, not the legal content is primary, but the economic . however, when recording economic events and transactions, the principles of the sztv . and the relevant regulations must be followed . (for example, in the case of a  finance lease, the leased asset must be shown to the lessee, even though the legal ownership of the asset is with the lessor . because the lessee possesses the asset in the economic sense of the asset as if it were the owner, it will order the lessee to account for it .) 70 péter bálint király public governance, administration and finances law review • vol. 4. no. 2. according to the principle of valuation on an item by item basis, assets and liabilities shall be entered and evaluated item by item in the course of bookkeeping and preparing the report . that is, each item must be separately identified and recorded as specified in the accounting policy of the company .24 the principle of materiality means that for the purposes of the financial report, information is material if its omission or misstatement could influence  –  within reason  –  the economic decisions of users taken on the basis of the financial report . the materiality of individual items shall be assessed in the context of other similar items . it is the entity’s responsibility to determine in its accounting policies exactly which information is material to that particular entity .25 based on the principle of cost–benefit, the usefulness (utility) of any information published in the financial report (balance sheet, profit and loss account, notes on the accounts) shall be commensurate with the costs of producing that information .26 according to the principle of consistency, in respect of content and formal requirements, and of the financial report and the underlying accounting records, constancy and comparability shall be provided for .27 compliance with this requirement is facilitated by the models annexed to the sztv . and the eu directives . the principle of clarity means that the accounting records and the financial report shall be prepared in a concise, comprehensible form in accordance with the sztv .28 based on the principle of continuity, the opening data of a financial year shall be identical to the corresponding closing data of the previous financial year . in consecutive years the valuation of assets and liabilities, and the assessment of profit of loss may be altered only in accordance with the relevant provisions of the sztv .29 if the valuation principles applied in the process of drawing up the balance sheet for the previous year have been changed, the factors causing the change, and the quantified effect thereof shall be detailed in the notes on the accounts .30 5. the application of the accounting principles on blockchain in the previous chapters, the operation of the blockchain technolog y, its conceptual basis, the advantages of its application in the field of accounting, and the accounting principles have been described . blockchain, while it automates bookkeeping, creates the necessary trust between the parties without resorting to intermediaries and saves us time and money, but does not solve all the problems . indeed, from a legal point of view, many issues need to be addressed . in the following, i will address the application challenges of accounting principles on blockchain . in my opinion, among the accounting principles described above, there are those that are not influenced by whether a  particular company uses blockchain or traditional tools for accounting . the principle of going concern is also relevant in case of blockchain, since accounting must continue to be based on the fact that the enterprise is engaged in business indefinitely and thus can continue to operate in the foreseeable future . 71 public governance, administration and finances law review • 2. 2019 application possibilities of blockchain in accounting the principle of substance over form is also an inescapable principle . it requires that in the financial report and in the relevant accounting records, economic events and transactions shall be shown and accounted reflecting their economic substance and that the principles and relevant requirements of the sztv . should be followed . in my view, adhering to this principle is only a matter of programming . the same is true of the principle of completeness, since the accounting technolog y does not change the fact that an enterprise is required to account for all economic events that have an impact on its assets and liabilities and on the profit or loss for the current year . because economic events are recorded in real time, the economic events which pertain to the financial year in question that became known after the balance sheet date but before the date of closing are definitely recorded . however, it should be noted that, with proper programming, the technolog y can be used not only to look at periodic balance sheets and profit and loss statements, but also to take a  look at the current financial position of the enterprise at any time . however, there are also some principles that are easier to comply with by the use of blockchain . the principle of clarity requires that the accounting records and the financial report be clear and understandable . blockchain makes it easier to produce various statements and statistics that help you understand the financial position and activity of a  particular enterprise . according to the principle of prudence, it is forbidden to recognise a  profit if the revenue, the financial realisation of the income is uncertain . the essence of blockchain is to verify that a financial transaction has actually taken place, so applying it excludes the recognition of a profit for which the financial realisation of revenue is uncertain . the obligations set out in the principles of matching and continuity  –  that last year’s closing data should be consistent with next year’s opening data, and that revenues and expenses should relate to the period in which they are economically incurred – can also be easily met, as blockchain records the chain of economic events that have already taken place . it must be noted that, if the blockchain data capture methods change as a  result of changes in the legal environment or accounting policies, then, in accordance with the principle of continuity, its quantified effects must be disclosed separately . compliance with the principle of grossing up is not a problem either, as the individual transactions in the blockchain are recorded separately . in this respect, states must ensure that the participants in the transactions do not make an agreement outside the blockchain, and not just transfer the amount determined as a result of the set-off . the same applies to the principle of valuation on an item by item basis, as blockchain is able to record individual items separately in a way specified in the accounting policy . in accordance with the principle of materiality, only material financial events need to be recorded in the financial reports . with the help of blockchain, not only the material but all economic events can be recorded . however, it is debatable whether we really want all the data to be included in the report, as it is important to maintain transparency . nonetheless, the technolog y allows us to authentically record and store a  large amount of data and to produce reports and statistics on different subjects that meet the needs of the user . 72 péter bálint király public governance, administration and finances law review • vol. 4. no. 2. according to the principle of cost–benefit, the usefulness of the information disclosed should be proportionate to the cost of producing the information . in my view, blockchain can widen the scope of information to be provided, as it can produce more information at a  lower cost about companies . all of this can be beneficial to investors, as companies become more transparent . however, compliance with the principle of accruals may be problematic because transaction data are immediately recorded in the blockchain and there is no possibility to recognise economic events concerning two or more financial years under the revenues and costs of the period in question in the proportion in which they are incurred between the underlying period and the accounting period . of course, this is really only a  matter of programming, but it should be reconsidered whether this principle should be applied to companies using blockchain . similarly, consideration should be given to whether the principles associated with a  specific time period are relevant to a  system that provides data at any time, for any time period, and whether changes in the financial state of the company in question can be tracked in real time . based on the principle of consistency, enterprises shall provide the consistency and comparability of their accounting records and financial reports . in connection to this, the issue of interoperability arises . currently, individual states have begun to develop their blockchain on their own, which are governed by their own laws . this can cause problems for companies involved in international trade or with subsidiaries . these must apply the blockchain of each state in which they operate in order to comply with the regulations of each state . it would therefore be advisable to set up an international blockchain that complies with international accounting standards . this, of course, first and foremost requires the creation of a fully unified international system of requirements . alternatively, we may create a  method that can easily convert data from one national blockchain to another . the biggest challenge, in my opinion, is to comply with the true and fair view principle. it can be problematic that the integrity of the recorded data can be assured only if more than half of the computer capacity connected to the system is owned by the state (or at least by a  person or body whose good faith is beyond doubt) . blockchain, as explained above, is a  distributed ledger that we can trust because all the computers in the network have the registered data, and it is theoretically impossible to change the data set because in order to do so one needs to hack all computers (or at least more than half them) . in case of blockchain, we do not have to rely on a specific person or institution (as it is not a specific person or institution doing the registration tasks), but on the system itself, on the code of the program . blockchain is thus potentially suitable for replacing intermediaries in different fields . the disadvantage of blockchain systems is that blockchain can only guarantee the integrity of the input data, but not the authenticity of the input data . so, even if we can make sure that no one has tampered with the input, we still cannot use blockchain to ensure that the input is accurate .31 the blockchain network authenticates the different facts and data with the agreement of the individual nodes, but it can just as easily happen that there is an agreement between the members of the network regarding a fact or data that is not true . from this point of view, blockchain can also be “hacked” not in the traditional 73 public governance, administration and finances law review • 2. 2019 application possibilities of blockchain in accounting sense, not by altering the data stored in the blockchain, but by including false information in the block .32 it should also be noted, however, that this problem also arises with the accounting methods currently used, since accountants may enter incorrect or even false data in the ledger . as explained above, that is the reason why the institution of audit was introduced . at this point, the problem arises that, if the data recorded on the blockchain is also audited by an outsider institute (i .e . auditor), then we have essentially brought back a  centralised element into the blockchain system, which is otherwise based on the principle of decentralisation . although legally it is completely acceptable, because it is one of the most important goals of accounting principles to ensure the accuracy of the data . however, blockchain is created precisely for the purpose of directly capturing the necessary data in a system without the involvement of an intermediary (in this case, an auditor, and, moreover, the state), whereby the program itself creates trust between the parties . subsequent state control over the data registered thus goes against the very essence of blockchain, the  introduction of which would certainly face considerable opposition amongst the blockchain enthusiasts .33 6. further challenges: immutability of the recorded data the essence of the right to forget is that everyone should have the right to request the deletion of their data if its use does not comply with data protection rules .34 furthermore, there may be cases where the law states that after a certain period of time stored data must be deleted from the register . in addition, data is uploaded to the system by people and people make mistakes, so we cannot rule out incorrect data entry, which may also need correction . what happens if i enter data incorrectly? how can the data be erased or corrected in a system that relies on the fact that the input data cannot be deleted or modified later? the data once added to the blockchain cannot be changed or deleted, or at least a so-called hard fork is required to do so .35 hard fork is used when the blockchain protocol is modified in such a way, that a previously created block becomes invalid . this can virtually delete previously recorded data in the event of an error . of course, this also requires the consent of the majority of the nodes .36 this raises another problem: what happens when, despite a legal provision or a judicial or regulatory decision, developers cannot delete data stored in the blockchain due to a lack of consensus? what happens, for example, if a  central bank’s decision in the interest of inflation cannot be enforced on the blockchain because users are voting against it? and what happens if users will not collect the tax that the state intends to collect on the blockchain? in this case, the members are risking of acting illegally . the consequences of invalidity and nullity could be applied as civil law consequences . that is, they create a chain of virtually void contracts on the blockchain by not modifying the blockchain protocol in line with changes in legislation . in practice, this will motivate the community to vote in favour of the amendment, as a  chain reaction would also jeopardise the validity of their contract . but who can say that a transaction or blockchain as a whole is illegal? in case of a dao, it is practically the community, not a court of justice . (the development of smart 74 péter bálint király public governance, administration and finances law review • vol. 4. no. 2. contracts itself has the effect that instead of the court, the program itself says that a  party has behaved in an unlawful manner .) but what happens when users abuse their power to vote for a  hard fork, though no illegal activity occurred, but they do have an interest in overwriting previous transactions? a related problem is whether the blockchain and the code as the law principle are almighty . in principle, all contracts can be rewritten into smart contracts that are selfexecuting, meaning you do not have to go to court in case of a  legal debate . in case of an interest on late payments, this works easily: if the buyer does not pay until the 31st of july, the purchase price paid by the buyer will be automatically increased by the amount of the interest on late payments . but what happens, for example, in case of an accident? a smart contract cannot tell who is responsible for the damage . that is, if, for example, we turn an insurance contract into a smart contract, then who tells the smart contract that the insured person actually caused the damage, and so the insurance amount is due . how can a cooperation obligation be coded? it cannot be written in bits because certain legal concepts are so complex that they cannot be simplified into logical (yes or no; if… then… because if not…) relationships . how could a code be a law if the legislators themselves or the lawyers drafting the contract are not able to incorporate all life situations and their legal solution into law or contracts? why do we think programmers can do this? (of course, this is only true as long as we do not have artificial intelligence capable of analog y and thus able to interpret complex concepts from the previous case law, such as equity .)37 this leads us to the conclusion that there is still a need for an external body (courts or authorities) with appropriate authority, control, oversight and rights to decide that a transaction, a combination of transactions and the operation of the blockchain itself is unlawful or not . this decision must also be enforceable in such a  way that the unlawful act cannot be lawfully continued, that is, it cannot legitimise the block that needs to be modified in the system (e .g . by continuing the blockchain based on an illegal transaction, like in the case of ethereum) . from this point of view, it would be advisable for both courts and authorities to operate in a blockchain, and when a decision is made, it would be included in the system . so, in the end, we reintroduced the state as the third party . of course, the problem here (which is not primarily legal, but more technological in nature) is how the state, a centralised power, can enter into a decentralised system in which the basic principle is the lack of intermediary institutions and independence from any central power? how can the benefits of a  decentralised organisation be secured in a  way that, if necessary, the state intervenes in the blockchain? after all, allowing the state at any time to interfere with the operating principles of the blockchain or the data recorded therein immediately raises the risk of abuse and corruption . 7. conclusion blockchain can bring about changes that make life much easier for us . for this reason, we can safely consider it the most important invention since the advent of the internet . in my paper i introduced the operation and conceptual foundations of blockchain . i thought it 75 public governance, administration and finances law review • 2. 2019 application possibilities of blockchain in accounting necessary to explain it because, in my opinion, only by understanding its operating mechanism can we identify the points of legal concern and ask the relevant questions . as stated above, blockchain is essentially a decentralised or shared ledger that, due to cryptographic procedures, is capable of authenticating transactions, without the need for an intermediary or body . all in all, blockchain allows us to rely on third parties that we do not know and about whom we do not have information affecting our risk-taking, even without recourse to intermediaries . due to all these features, blockchain can fundamentally change the field of accounting as they save businesses time and money while providing the state and investors with reliable data about businesses and their operations, all this in real time . as explained above, blockchain is fundamentally consistent with accounting principles, but we must also see that it does not solve all the problems and, in fact, raises a  number of issues from a legal point of view . among these are the challenges related to the authenticity and immutability of the recorded data, interoperability, business secrets and jurisdiction . the issues raised cannot be left unanswered, and their solution is even more needed, as the technologies described above are used more and more widely . just think about the fact that even the largest audit firms have already begun to develop their own blockchain because they do not want to lag behind in innovation competition .38 the process initiated by blockchain is irreversible . the question therefore is, first and foremost, how lawmakers respond to the phenomenon . in this respect, i believe that the most important thing is to find an internationally coherent solution, since blockchain is a  cross-border innovation providing a service across the world via the internet . uniform regulation could ensure that the economic potential of blockchain can be exploited more smoothly . however, legislators should also make sure that the regulations they introduce do not hinder innovation, but support, where possible, the development of blockchain and related technologies . 76 péter bálint király public governance, administration and finances law review • vol. 4. no. 2. references 1 joseph j . bambara, paul r . allen, blockchain: a practical guide to developing business, law, and technolog y solutions, 15 (new york, mcgraw-hill education, 2018) . 2 primavera de filippi, aaron wright, blockchain and the law: the rule of code, 13–14 (london, harvard university press, 2018) . doi: https://doi .org/10 .2307/j .ctv2867sp 3 daniel drescher, blockchain basics – a non-technical introduction in 25 steps, 23 (new york, apress, 2017) . doi: https://doi .org/10 .1007/978-1-4842-2604-9 4 david schwartz, noah youngs, arthur britto, the ripple protocol consensus algorithm (2014) . 5 mayukh mukhopadhyay, ethereum smart contract development – build blockchain-based decentralized applications using solidity, 15–18 (birmingham, packt publishing, 2018) . 6 drescher, supra n. 3, at 23 . 7 don tapscott, alex tapscott, blockchain revolution: how the technology behind bitcoin is changing money, business and the world, 28–32 (london, portfolio penguin, 2016) . 8 hossein kakavand, nicolette kost de sevres, bart chilton, the blockchain revolution: an analysis of regulation and technolog y related to distributed ledger technologies, 4–5 (2016) . 9 sarah wurfel, blockchain is unhackable but these are 5 possible vulnerabilities of “the new internet”, in blockchain crypto journal, december 1 (2018) . 10 ting yu, stanley lin, qingliang tang , blockchain: the introduction and its application in financial accounting , in the journal of corporate accounting & finance, vol . 29, no . 4 (2018) . doi: https://doi . org/10 .1002/jcaf .22365 11 deloitte, blockchain technology. a game-changer in accounting? www2 .deloitte .com/content/dam/deloitte/ de/documents/innovation/blockchain_a%20game-changer%20in%20accounting .pdf (accessed 18 august 2019) . 12 icaew, blockchain and the future of accountancy, www .icaew .com/technical/technolog y/blockchain/ blockchain-articles/blockchain-and-the-accounting-perspective (accessed 18 august 2019) . 13 deloitte, supra n. 11 . 14 yu, lin, tang, supra n. 10 . 15 icaew, supra n. 12 . 16 sztv . 15 § (1) . 17 sztv . 15 § (3) . 18 sztv . 15 § (2) . 19 sztv . 15 § (8) . 20 sztv . 15 § (7) . 21 sztv . 16 § (2) . 22 sztv . 15 § (9) . 23 sztv . 16 § (3) . 24 sztv . 16 § (1) . 25 sztv . 16 § (4) . 26 sztv . 16 § (5) . 27 sztv . 15 § (5) . 28 sztv . 15 § (4) . 29 sztv . 15 § (6) . 30 sztv . 46 § (2) . 31 péter bálint király, a blokklánc-technológia nemzetközi kereskedelmi jogi összefüggései, 27, in külgazdaság, vol . 63, no . 3–4 (2019) . 32 mike bullock, blockchain in plain english (2017) . 33 király, supra n. 31, at 27 . 34 robert kirk walker, the right to be forgotten, 272, in hastings law journal, vol . 64, no . 1 (2012) . 35 bambara, allen, supra n. 1, at 79–80 . https://doi.org/10.1007/978-1-4842-2604-9 https://doi.org/10.2139/ssrn.2849251 https://doi.org/10.1002/jcaf.22365 http:// dx.doi.org/10.2139/ ssrn.2017967 https://doi.org/10.2307/j.ctv2867sp https://doi.org/10.1007/978-1-4842-2604-9 https://doi.org/10.1002/jcaf.22365 https://doi.org/10.1002/jcaf.22365 https://www2.deloitte.com/content/dam/deloitte/de/documents/innovation/blockchain_a game-changer in accounting.pdf https://www2.deloitte.com/content/dam/deloitte/de/documents/innovation/blockchain_a game-changer in accounting.pdf http://www.icaew.com/technical/technology/blockchain/blockchain-articles/blockchain-and-the-accounting-perspective http://www.icaew.com/technical/technology/blockchain/blockchain-articles/blockchain-and-the-accounting-perspective https://doi.org/10.1007/978-1-4842-2604-9 https://doi.org/10.2139/ssrn.2849251 https://doi.org/10.1002/jcaf.22365 http://dx.doi.org/10.2139/ssrn.2017967 77 public governance, administration and finances law review • 2. 2019 application possibilities of blockchain in accounting 36 philipp hacker, corporate governance for complex cryptocurrencies? a framework for stability and decision making in blockchain-based organizations (november 22, 2017), 140–166, in philipp hacker, ioannis lianos, georgios dimitropoulos, stefan eich (eds .), regulating blockchain. techno-social and legal challenges (oxford, oxford university press, 2019) . doi: https://doi .org/10 .2139/ssrn .2998830 37 josias n . dewey, shawn s . amuial, jeffrey r . seul, the blockchain: a guide for legal and business professionals, 49–50 (danvers, ma ., thomson reuters, 2016) . 38 stephen o’neal, big four and blockchain: are auditing giants adopting yet? (2019) . https://doi.org/10.2139/ssrn.2998830 pga2019_02_b1 _hlk18895087 _hlk18895098 _hlk27344917 articles administrative liability for causing damage to selected components of the environment branislav cepek* the right to informational self-determination in the context of selected judicial decisions and practical background andrea erdősová* information security awareness in public administrations at an international level lilla garayová* blockchain technology – current status, challenges and perspectives in tax and customs law ladislav hrabčák,* monika stojáková* application possibilities of blockchain in accounting péter bálint király* budget allocation of taxes to territorial budgets ivana pařízková* the efficiency of tax collection in the czech republic eva tomášková* case study new legal regulation of the administrative justice in the slovak republic juraj vačok* pga2019_02 _hlk18895087 _hlk18895098 _hlk27344917 articles administrative liability for causing damage to selected components of the environment branislav cepek* the right to informational self-determination in the context of selected judicial decisions and practical background andrea erdősová* information security awareness in public administrations at an international level lilla garayová* blockchain technology – current status, challenges and perspectives in tax and customs law ladislav hrabčák,* monika stojáková* application possibilities of blockchain in accounting péter bálint király* budget allocation of taxes to territorial budgets ivana pařízková* the efficiency of tax collection in the czech republic eva tomášková* case study new legal regulation of the administrative justice in the slovak republic juraj vačok* pga2019_02_b4 _hlk18895087 _hlk18895098 _hlk27344917 articles administrative liability for causing damage to selected components of the environment branislav cepek* the right to informational self-determination in the context of selected judicial decisions and practical background andrea erdősová* information security awareness in public administrations at an international level lilla garayová* blockchain technology – current status, challenges and perspectives in tax and customs law ladislav hrabčák,* monika stojáková* application possibilities of blockchain in accounting péter bálint király* budget allocation of taxes to territorial budgets ivana pařízková* the efficiency of tax collection in the czech republic eva tomášková* case study new legal regulation of the administrative justice in the slovak republic juraj vačok* © 2021 the authors public governance, administration and finances law review vol. 5. no. 2. (2020) • 45–57 . * michal radvan, judr ., ing ., phd, associate professor, vice-dean for foreign and external affairs, department of financial law and economics, faculty of law, masaryk university in brno, czech republic, e-mail: michal .radvan@law .muni .cz, orcid: https://orcid .org/0000-0002-9858-4555 ** sandra papavasilevská, mgr ., department of financial law and economics, faculty of law, masaryk university in brno, czech republic, e-mail: sandra .papavasilevska@law .muni .cz, orcid: https://orcid .org/0000-0002-9577-8063 abstract: the tax on acquisition of immovable property was abolished on september 26, 2020 in the czech republic . one of the reasons mentioned in the explanatory report to the act was the statement that the abolition deals with the effects of this virus on society . the main aim of the article is to answer the question of whether the abolition of the tax on acquisition of immovable property is a  tool to suppress the negative consequences of covid-19 or a  politicum. to get the answer, it is necessary to shortly describe the tax on acquisition of immovable property and its structural components and make a  basic comparison with the other eu member states . we also summarise the pros and cons of the tax and related findings of the constitutional court . as the property transfer tax is connected with the income tax and there were several amendments in the proposal, it is needed to analyse these changes . based on the research, it is possible to conclude that the abolition of the tax on acquisition of immovable property is definitely not a tool to suppress the negative consequences of covid-19; it is just a  politicum: political parties believe that the abolition of the transfer tax brings them more voices in the elections . keywords: tax on acquisition of immovable property, transfer tax, tax, covid-19, personal income tax 1. introduction, literature overview and research property transfer tax is a traditional direct tax . it is a part of many tax systems worldwide; however, the national legislators use different titles: transfer tax, acquisition tax, registration tax, transaction tax, tax on sale, etc . in several countries, the stamp duty is being collected . (radvan, 2017) according to bahl (2004, p . 1), the stamp duty is a  charge for certifying documents but also has taken on the role of a  sales tax on certain transactions . the property transfer tax is levied on the disposal of properties, i .e . on the passing of ownership or title to property from one person to another, no matter if these persons are natural persons or legal entities . the disposal usually means the sale of the property; however, free of charge transfers (donations, inheritance) might be the object of taxation, too . these taxes are usually called inheritance tax and gift tax . the property is mostly immovable property (real estate); however, shares or bonds are to be taxed, too . doi: 10.53116/pgaflr.2020.2.4 abolition of tax on acquisition of immovable property: a tool to suppress the negative consequences of covid-19 or a politicum? michal radvan* – sandra papavasilevska** mailto:michal.radvan%40law.muni.cz?subject= https://orcid.org/0000-0002-9858-4555 mailto:sandra.papavasilevska%40law.muni.cz?subject= https://orcid.org/0000-0002-9577-8063 https://doi.org/10.53116/pgaflr.2020.2.4 46 michal radvan – sandra papavasilevska public governance, administration and finances law review • vol. 5. no. 2.  in central and eastern european countries, there is a visible trend to abolish property transfer taxes, especially inheritance tax (estate tax, death tax, succession tax) and gift tax (donations tax) (e .g . slovakia in 2004, the czech republic in 2014) . property transfer taxes were also cancelled, e .g . in estonia, lithuania, romania and slovakia . (radvan, 2017) in the czech republic, the tax on acquisition of immovable property was abolished on september 26, 2020 .  one of the reasons mentioned in the explanatory report to the act was the statement that the abolition deals with the effects of the virus sars-cov-2 on society . (chamber of deputies, 2020, p . 9) as more tax law bills are dealing (according to the government) with the harmful effects of the virus (e .g . the abolition of the super gross wage), the primary research question is whether the proposed amendments are tools to suppress the negative consequences of covid-19 or a politicum. the main aim of the contribution is to answer this question concerning abolishing the tax on acquisition of immovable property . historically, before the virus sars-cov-2, many political parties in the czech republic aimed to abolish both super gross wage and the tax on acquisition of immovable property . that is why the main hypothesis of this article is that the abolition of tax on acquisition of immovable property is not a  tool to suppress the negative consequences of covid-19 but a politicum . in the following text, we bring arguments to confirm or disprove this hypothesis . to achieve the aim of the article and confirm or disprove the hypothesis, we briefly introduce the tax on acquisition of immovable property in the czech republic . in this part, we present the list of transfer taxes collected in the eu member states and we compare the structural components of these taxes, namely subject of the tax, object of taxation, tax base and tax rate, correction components, etc . later, we critically analyse the legal regulation and bring the pros and cons of the property transfer tax generally and the tax on acquisition of immovable property in the czech republic concretely . we also analyse the related findings of the constitutional court . as the original bill of the act abolishing the tax on acquisition of immovable property in the czech republic was different from the final version of the act, we critically analyse the history of parliamentary proceedings and we compare the final act abolishing the tax on acquisition of immovable property and related amendments of the personal income taxation with the original bill . at the end of the article, using the synthesis method, we summarise our findings, answer the research question and deal with the hypothesis . 2. property transfer tax in many eu member states, property transfer taxes are currently the subject of economic and political discussions . especially inheritance tax and gift tax were abolished in several countries in the last two decades . 47 public governance, administration and finances law review • 2. 2020 abolition of tax on acquisition of immovable property table 1 . typical transfer taxes in the eu member states country inheritance tax gift tax property transfer tax belgium yes yes yes bulgaria yes yes yes the czech republic no no no denmark yes yes yes estonia no no no finland yes yes yes france yes yes yes croatia yes yes yes ireland yes yes yes italy yes yes yes cyprus no no yes lithuania no no no latvia no no yes luxembourg yes yes yes hungary yes yes yes malta no no yes germany yes yes yes the netherlands yes yes yes poland yes yes yes portugal no no yes austria no no yes romania yes no no greece yes yes yes slovakia no no no slovenia yes yes yes sweden no no yes spain yes yes yes source: compiled by the author based on european commission (2020) . both inheritance tax and gift tax in the czech republic have been abolished in connection with the recodification of private law since 2014 .  as inheritance and gifts are incomes at the same time, it was necessary to amend the income taxation rules . as a result, inheritance is exempt from both personal and corporate income taxes . in case of gifts, only natural persons are exempted if they are relatives or living in the same household with the donor . other gifts up to 15,000 czk per year are also exempted . in countries where inheritance tax and gift taxes still exist, the rates may be extremely high . for example, in slovenia, the inheritance of property applicable to the first class of recipients is exempted from taxation, while in case of the other categories, the applicable legislation stipulates an inheritance tax varying from 5% to 39% . (lowtax, 2020) the inheritance and gift tax in hungary used to 48 michal radvan – sandra papavasilevska public governance, administration and finances law review • vol. 5. no. 2.  have a maximum rate of 40% . they are now levied at a flat rate of 18%, with a reduced rate of 9% applying to acquisitions of residential property . (bencze, 2020) as stated in the introduction, there are many titles used for property transfer taxes: transfer tax, acquisition tax, registration tax, transaction tax, tax on sale, stamp duty, etc . property transfer taxes are closely connected with other taxes, such as primarily inheritance tax and gift tax, secondarily recurrent property tax, value added tax, or income taxes . there might be additional taxes sensu lato on property transfers, e .g . property value increasement tax and registration taxes . table 2 . property transfer taxes in the eu member states title of the tax country transfer tax aus, cro, ger, fin, gre, hun, neth, pol, port, slo registration tax bel, fra, ita, lux acquisition tax bul capital tax cyp (capital gains), spa (capital transfers) stamp duty gb (land tax), irl, swe tax on sale den duty lat (for consolidation of ownership), mal (property transfers) no transfer taxation czk, est, lit, rom, svk source: compiled by the author based on european commission (2020), radvan (2017) . like any legal relationship, tax (tax relationship) is made up of structural components: taxpayer, object of taxation, tax base, tax rate, correction components, payment conditions, tax administration and budget destination . (radvan, 2020, pp . 25–26) there are two kinds of entities in tax relations, one in the position of the entitled entity, that is, the state or municipality which are represented by the relevant tax authority, and the other in the position of the obligated entity to which the tax liability is attached  –  the taxpayer . the property transfer tax is mostly paid by the acquirer (usually the buyer) . the same is true for all eu member states, except for states mentioned below . the seller pays the tax in denmark, cyprus, or slovenia . in austria, germany and italy, the tax is paid by both seller and buyer at the same time . however, in germany as well as in bulgaria, the contract parties are free to set the taxpayer in the contract . bulgarian regulation ensures payment of the tax by the buyer being the surety . in the czech republic, the tax on acquisition of immovable property is a  kind of transformation of an earlier tax on transfer of immovable property . this tax was paid by the seller, while the buyer was the surety . adopting the tax on acquisition of immovable property effective since january 1, 2014, the taxpayer was (surprisingly and contrary to the government’s bill) still the seller, even if the title of the tax was including the word “acquisition” and the object was defined as the acquisition of immovable property . it was confusing for the contract parties and on 1 november 2016, the buyer became the taxpayer . the object of taxation generally copies the official title of the property transfer tax . therefore, generally, it is the transfer or the acquisition of the property . in the czech 49 public governance, administration and finances law review • 2. 2020 abolition of tax on acquisition of immovable property republic, the tax on acquisition of immovable property was a one-off tax paid after the real estate had been acquired, i .e . after the real estate title had been acquired . the object of taxation was an acquisition of property right on immovable property (land, structure/ building, unit – flat, non-residential premise, the right of construction burdening the land, and shares on the immovable property) located in the territory of the czech republic for consideration . unfortunately, the transfers of company shares (including the immovable property) did not fall within this definition and very often, this rule was used for tax avoidance . for the property transfer tax, an ad valorem tax base is being used . it might be set by the contract parties, by the state, by an independent expert, or as a  comparison of several approaches . mostly, it is possible to deduct expenses connected with the acquisition of the property . table 3 . property transfer tax base in the eu member states tax base country contract price aus, bel, den, gb, ger, irl, lat, mal, slo, spa, swe price vs . taxable value port assessed value bul market value cro, ita, lux, pol source: compiled by the author based on european commission (2020), radvan (2017) . in the czech republic, there were several possibilities of setting the tax base, depending on the type of transfer . generally, the tax base was the acquisition value reduced by the eligible expenses (costs of the expert’s report) . to get the acquisition value, it was necessary to compare the contract price and 75% of the comparative tax value . the comparative tax value might have been the indicative value self-assessed by the taxpayer using the bylaw or the price determined by an expert . the property transfer tax rates might be linear or progressive . there might be one rate for all types of transfers, or different rates depending on the type of property, relations between the contract parties, or legal status of the taxpayer . in the czech republic, the tax rate was linear of 4% . table 4 . property transfer tax rates in the eu member states country tax rate note austria 3 .5% 2% for relatives belgium 5–12 .5% depends on region bulgaria 0 .1–3% croatia 5% cyprus 20% income tax the czech republic n/a 50 michal radvan – sandra papavasilevska public governance, administration and finances law review • vol. 5. no. 2.  country tax rate note denmark taxed by income taxes estonia n/a n/a finland 4% france 3 .8–4 .5% depends on departments + 1 .2% additional local tax germany 3 .5% greece 3% hungary 2–4% degressive ireland 1–2% italy 3% latvia 2–6% depends on type of property, discounts for relatives lithuania n/a luxembourg 6% malta 3–5% degressive the netherlands 6% 2% for dwellings poland 2% portugal 0–8% depends on type of property and location romania n/a slovakia n/a slovenia 2% spain 6–7% depends on location sweden 1 .5% 4 .25% for natural persons for legal persons source: compiled by the author based on european commission (2020), radvan (2017) . the property transfer tax rate is mostly set by the central authority; in belgium, spain and portugal it is set by the central and regional authorities, in germany by the regional authority, in bulgaria by the local authority, and in france by the central, regional and local authorities . the correction components are set mainly for relatives . very often, they respect public interest (exemptions for public institutions, charities, public benefits associations, churches, red cross, etc .) and protection of the environment . in several countries, there are tax minimums for the low-value properties, primarily used as permanent residences . the correction components are mostly set in the act . some are also defined by the regional authorities (belgium, spain) or local and regional authorities (france, portugal) . in the czech republic, there was a  special exemption for newly constructed family houses and units in the apartment buildings (in case of the first acquisition of title for consideration if it occurred within five years of the date of their completion or commencement of use) . the state tax offices generally administrate property transfer taxes . however, in france and germany, the tax is administered at the regional level, in bulgaria and spain by the local authorities . belgian property transfer tax is administered by professional intermediaries like notaries . in latvia, it is the land register responsible for the tax administration . 51 public governance, administration and finances law review • 2. 2020 abolition of tax on acquisition of immovable property the property transfer tax revenue usually goes to the central budget . however, there are several exceptions: table 5 . property transfer tax budget destination in the eu member states country tax rate austria state and municipality belgium state and region bulgaria municipality croatia state and municipality cyprus state the czech republic n/a denmark state estonia n/a finland state france municipality germany region greece state and municipality hungary state ireland state italy state and region latvia state lithuania n/a luxembourg state malta state the netherlands state poland municipality portugal municipality romania n/a slovakia n/a slovenia municipality spain region sweden state source: compiled by the author based on european commission (2020), radvan (2017) . 3. pros and cons of property transfer taxation transfers of immovable property might be expensive . the oecd has constructed indicators of transaction costs based on property transfer taxes, registration fees (registration of property title and details of the owner of the property in the land registry), notary or other legal fees (in some countries, a  notary must verify the signatories), and real estate agent 52 michal radvan – sandra papavasilevska public governance, administration and finances law review • vol. 5. no. 2.  fees . gayer and mourre (2012, p . 33) state that transaction costs are comparatively high in belgium, france and greece (14% or more) and significantly lower in some nordic countries and the united kingdom . high transaction costs also reduce labour market mobility . there are several other disadvantages of property transfer tax . (bahl, 2004, p . 39–40; radvan, 2017; franzsen & mccluskey, 2017, p . 45; bahl, 2009, p . 22) taxpayers argue that there are multiple taxations of property transfers . from any income, including the bank interests and incomes from the sale of the property (if the time tests are not fulfilled), the (personal or corporate) income tax should be paid . there is a value added tax increasing the price of the property . the property transfer has to be paid when buying the property . even if this tax is paid by the seller, it is taken into account and the selling price is higher as it includes the transfer tax . finally, every year the recurrent property tax is collected . as the tax base is usually the market value or at least the market value is usually considered when setting the tax base, some taxpayers are trying to minimise the transfer tax undervaluing the property in the contracts . undervaluation of property might be dangerous for the seller if the buyer is willing to pay the price in the contract and not the actual, verbally agreed price . undervalued price also deforms the property market . another way to avoid taxation is the usage of other legal acts which are not the object of taxation . typically, inheritance or gifts are to be mentioned here . in the czech republic, very often higher value assets are invested in the special-purpose business corporations (becoming commercial assets) and the company or the share on that is being sold . such a procedure is legal and there is no property transfer tax on such a sale . moreover, transfers of the shares of housing cooperatives are not liable to tax, even the share is connected with the flat . one might argue why the transfers of immovable property are taxed, while transactions with a  movable property are tax free . in our opinion, the answer is in the tax administration effectiveness: it would be difficult to find transfers of many movable assets and it would be difficult to set the value (i .e . the tax base) . in the case of movables, it would be easy to avoid taxation and the administrative costs would be too high . as evident from the text mentioned above, the property transfer tax is not a  perfect tax and many taxpayers find this tax unfair . some may find it even unconstitutional, e .g . the supreme administrative court (2009) . this court submitted a petition to declare the unconstitutionality of the property transfer tax to the constitutional court . in the opinion of the supreme administrative court, the tax does not pass the minimum rational basis test, as the chosen solution does not lead to the objective pursued . the court sees the reasons for illegitimacy and irrationality in several ways . above all, this is a discriminatory tax, as only one of the cases of property transfers is subject to this property type tax . the court completely lacks knowledge why the legislator chose to tax the transfer of this single type of property . in the spirit of the rule of law, the legislator cannot act arbitrarily but must have a strong and rational reason for its activity . the court states that the regulatory function is precluded by the fact that the property transfer tax causes the price of this real estate to increase by the amount of this tax . nor can the property transfer tax have a redistributive function, the essence of which lies in the establishment of social peace, as this tax does not only burden luxury property . nor can a  rational and legitimate reason for the existence of this tax be inferred from the fiscal policy of the state . the relevant reason is not 53 public governance, administration and finances law review • 2. 2020 abolition of tax on acquisition of immovable property even the easy way of controlling property transfers and payment enforcing . there is no reason why the state should impose public payments on the immovable property transfers twice: using the property transfer tax and the fee for deposit in the real estate cadastre . the court brings several other arguments, including multiple taxations of property transfers . the supreme administrative court concludes that the property transfer tax is “an antisocial, demotivating tax, unequal in terms of ownership of various types of property, limiting flexibility in the immovable property market and, as a result, hampering the flexibility of the labor market, and in its consequences negatively affecting family life” . (constitutional court, 2009, article 4–12) the constitutional court generally stated that the power of the state to tax under certain, precisely defined conditions is institutionalised precisely to raise funds for the security of public goods and services . the legitimacy of taxation follows, among other things, from the fact that the results of taxation are also used to protect and create conditions for the development of the property . such protection and creation of conditions must, of course, be paid for something . but this purpose of taxation is not the only one; tax interference in the property and legal sphere of an individual acquires justification precisely by the even distribution of these burdens . dealing with the principle of equality, the constitutional court took into account the accessory principle prohibiting discrimination against persons in the exercise of their fundamental rights and the non-accessory principle consisting of excluding the legislature’s discretion in distinguishing between specific groups (i .e . the principle of equality before the law) . assessing the unconstitutionality of taxes in terms of the three basic functions of taxes (allocation, distribution and stabilisation functions) falls within the competence of the democratically elected legislator . the constitutional court cannot assess the unconstitutionality of taxes in terms of basic functions of taxes, as it would enter the field of individual policies . the rationality of individual policies cannot be assessed well enough from the point of view of constitutionality . the constitutional court also generally does not review the effectiveness of taxes (except for cases where the inefficiency of a certain tax would establish an obvious inequality in the tax burden of taxpayers) . the constitutional court may only examine whether the given tax measures do not interfere with the constitutionally guaranteed ownership, respectively, whether the given tax measures cannot be considered unreasonable contrary to the principle of equality, i .e . arbitrary . in its judgment on the appropriateness of public policies, the constitutional court will not replace the judgment of a  democratically elected legislator, who has broad discretion in the field of public policies, and also bears political responsibility for the possible failure of the chosen solution . in other words, the legislator can also take irrational steps in the field of taxation, which, however, is not yet a  reason for the intervention of the constitutional court . the constitutional court will only intervene if the right of ownership is limited in the intensity of the so-called suffocating effect, or if the principle of equality is violated, both in its accessory or non-accessory form . (constitutional court, 2009) to summarise the explanation of the constitutional court, it is up to the state to define the tax policies and adopt tax law regulation, i .e . it is a  politicum . the role of the constitutional court in tax issues is only to protect the right of ownership and intervene if 54 michal radvan – sandra papavasilevska public governance, administration and finances law review • vol. 5. no. 2.  the principle of equality is violated . there is no place at the constitutional level to answer whether the property transfer tax is a good or bad, fair or unfair tax . as the cons were discussed earlier, what might be the pros of the property transfer tax? primarily it is an easy tax in the perspectives of tax administration and administration costs . the immovable property is fixed in location and it is not possible to move it from one country to another to avoid the tax or optimise the tax duty . as in many countries, there are real estate cadastres . then the property is registered and it is impossible to hide the immovable property; transfers of property are public and registered; it is easy to identify the taxpayer . the registration protects the owner and the owner’s property rights . in several, especially the developing countries, the property is transferred only if the property transfer tax is paid (emphasis on taxation), while in developed countries, the tax is to be paid only after the transfer is registered in the cadastre (emphasis on registration) . contrary to movable property, immovable property has definitely certain positive value: it is relatively easy to set the tax base and applying the tax rate to collect the tax . the value is mostly registered (or at least the contracts are registered) what might be a  tool for an effective administration of other taxes: if the recurrent property tax is assessed according to the value, the value might be used to set the recurrent property tax base . the value might be useful for income taxes administration, too, mainly when taxing the income from sold property or the profit from real estate trading . (radvan, 2017; almy, 2001, p . 1; franzsen & mccluskey, 2017, p . 44) 4. parliamentary proceedings to abolish property transfer tax in the czech republic it was not only in the context of the coronavirus (sars-cov-2) crisis and its impact on society that, the government proposed the bill abolishing the tax on acquisition of immovable property as the only surviving transfer tax . the other reasons for cancelling the property transfer tax were the simplification and clarification of the tax system, lowering the motivation to establish special-purpose business corporations owning real estate and transfer shares in them, which is not the object of taxation . still another objective was to grow investment in immovable property (lower initial costs) and ease the administrative burden of the cessation of the obligation to file a tax return on the acquisition of immovable property . (chamber of deputies, 2020, pp . 9–10) the government bill abolishes the tax on acquisition of immovable property with a retroactive effect: the decisive date is march 31, 2020 .  it means that the tax will no longer be paid by anyone to whom a  cadastre deposit has been made in december 2019 and later, as the deadline for filing a  tax return has expired on march 31, 2020 and later . in the area of personal income tax, the proposal further governs the extension of the time test for income from the sale of immovable property not intended for own housing from 5 to 10 years . the extension of the time test will be effective for the immovable property acquired after january 1, 2021 . in connection with the proposal to abolish the tax on acquisition of immovable property, the government proposed to cancel the tax allowance on mortgage interests . this 55 public governance, administration and finances law review • 2. 2020 abolition of tax on acquisition of immovable property personal income tax correction component allows deducting from the tax base the amount equal to the interest paid on a loan provided from a housing saving scheme or the amount equal to the interest on a  mortgage loan or the amount equal to the interest on a  loan provided by a housing savings bank (300,000 czk at maximum per household per year) . the proposed changes intend that taxpayers keep the amount originally earmarked for property transfer tax immediately, and not as a  result of partial tax allowances for several decades . this amendment should only be applied to taxpayers who acquire housing needs on credit from january 1, 2022 . the chamber of deputies accepted the government’s proposals to abolish the tax on acquisition of immovable property and to extend the time test . however, it did not accept the proposal to cancel the tax allowance on mortgage interests; it only lowered the yearly limit to 150,000 czk . the proposal, as prepared by the chamber of deputies, had a lot of legislative-technical mistakes . the senate made technical corrections and set a  new date when the maximum tax allowance on mortgage interests is to be changed; the maximum of 150,000 czk shall be applied to taxpayers who acquire housing needs on credit from january 1, 2021 .  this version of the bill was adopted by the chamber of deputies and signed by the president . the tax on acquisition of immovable property in the czech republic was officially abolished on september 26, 2020 . as the abolition of the tax on acquisition of immovable property is retroactive (if the cadastre deposit has been made in december 2019 and later), the taxpayers who have already filed their tax returns and paid the tax have to ask the tax office to send the paid tax back . if the taxpayer did not file the tax return and did not pay the tax, there is no penalty or other sanctions . (financial administration, 2020a) 5. conclusions in the many eu member states, property transfer taxes are currently the subject of economic and political discussions . especially inheritance tax and gift tax were abolished in several countries in the last two decades . the abolition of the property transfer tax is currently a discussed topic in several other countries . in the czech republic, the tax on acquisition of immovable property was abolished, i .a . in the context of the virus sars-cov-2 crisis . one may argue that the real estate market has slowed dramatically due to the pandemic and the abolition of the tax on acquisition of immovable property can undoubtedly have a  positive effect on its relaunch . however, there is no research confirming these expectations, answering how immediate and significant the overall effect might be . several other tax law measures were adopted in the czech republic to eliminate the negative consequences of the virus sars-cov-2 crisis . the most important in the substantive tax law are: ƿ a reduction in the vat rate from 15% to 10% for accommodation services, admission to cultural and sports events, sports grounds, saunas and other similar facilities ƿ measures allowing resident personal and corporate income taxpayers to use estimated 2020 losses to offset income declared in 2018 and 2019 56 michal radvan – sandra papavasilevska public governance, administration and finances law review • vol. 5. no. 2.  ƿ an expansion of the scope of the recurrent property tax exemption for municipalities that might be applied retrospectively ƿ a 25% reduction in the road tax for vehicles weighing more than 3 .5 tones; ƿ exemption from customs duties and vat on imports of goods necessary to combat the consequences of the virus sars-cov-2 (cch global content assets team, 2020; financial administration, 2020b) in the procedural tax law, some measures were adopted by the parliament, some by the ministry of finance . the most important are: ƿ extension of the deadlines for filing a  tax return and tax payments (personal and corporate income tax, vat, social and health contributions, etc .) ƿ waiver of advance payments ƿ waiver of tax accessories and certain administrative fees ƿ waiver of fines for late submission of inspection report ƿ deferment or instalment payment of taxes and tax advance payments (financial administration, 2020b) historically, before the virus sars-cov-2, many political parties in the czech republic aimed to abolish the tax on acquisition of immovable property . finally, it was abolished on september 26, 2020 by all political parties in the parliament, who mostly argued with the negatives of the property transfer taxation . based on all the arguments mentioned above, we believe that the statement that the abolition deals with the effects of this virus sarscov-2 on society was only a  pretext . the main hypothesis, that the abolition of tax on acquisition of immovable property is not a  tool to suppress the negative consequences of covid-19 but a politicum, is confirmed . the politicians are just trying to exploit this crisis for their own benefits, to please voters, to be re-elected . the negative consequences of this virus sars-cov-2 force the governments to adopt measures to eliminate these consequences; however, at the same time, they offer to approve legislative changes to make the tax system more manageable, more transparent and more effective . the property transfer tax is definitely not an ideal tax . nevertheless, cancelling this tax and losing 14 billion czk for public budgets (žurovec, 2020) was an excellent chance to accept other proposals and ideas closely connected with property taxation . e .g . the cancelation of the tax allowance on mortgage interests would keep the budget revenues from the long-term perspective on the same level . the taxpayers would get the cashflow necessary at the time of crisis . the abolition of the tax on acquisition of immovable property might have meant the increase of the recurrent property tax rates (as the czech tax on immovable property is one of the lowest in oecd countries) so that the municipal budgets would get missing sources of their revenues caused by the crisis . even if there is a crisis, we should be aware of public finance and extremely deficit public budgets . 57 public governance, administration and finances law review • 2. 2020 abolition of tax on acquisition of immovable property references almy, r . 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(2019) • 52–64 . blockchain technolog y – current status, challenges and perspectives in tax and customs law1 ladislav hrabčák,* monika stojáková** * ladislav hrabčák, mgr ., internal phd student of pavol jozef šafárik university in košice, faculty of law, department of financial law, tax law and economy . (e-mail: ladislav .hrabcak@student .upjs .sk) ** monika stojáková, judr ., internal phd student of pavol jozef šafárik university in košice, faculty of law, department of financial law, tax law and economy . (e-mail: monika .stojakova@student . upjs .sk) abstract: one of the hallmarks of the 21st century society is rapid technological progress . it must be addressed by national legal systems, which is another theme discussed in this article . blockchain technolog y is one of the most current issues, not only in information technolog y, but also in law . this paper aims to assess the current legal situation and to reflect on the challenges and perspectives that are undoubtedly related to blockchain, as it focuses on tax and customs law . whether blockchain is capable of contributing to more efficient tax and customs collection is a fundamental hypothesis that we will attempt to confirm or refute . keywords: blockchain; tax law; customs law; taxes; customs 1. introduction the blockchain technology was birthed in 2008, when a  person under the pseudonym satoshi nakamoto2 introduced an alternative payment system in the document called bitcoin: a peer-to-peer electronic cash system. the idea of the bitcoin’s author and developer was initially not embraced by society . the change occurred only at the turn of 2017 and 2018 with a rapid increase in the value of cryptocurrencies, although it could be perceived more as the motivation of most entities to engage in speculative buying and selling virtual currencies3 to appreciate their money rather than to show interest in the technology itself . it is an issue which has been unexplored, and unregulated by legislation . national parliaments have adopted certain legislations with substantial delay, and only due to the increasing value of cryptocurrencies, since it became a prospect of taxation . the concept of “virtual currency” has been applied in slovak law since january 1, 2018, when the legislature began taxing income linked to cryptocurrency operations . we can see that the legal systems of the individual states limit their scope mostly to regulating one specific way of using blockchain, namely cryptocurrencies (in particular their taxation), which relate to their cautious approach to modern technologies, and their lack of readiness to use it potentially in the public sector . it is the positive way of using blockchain we have set out to highlight in the following text of this paper, which aims to assess the 10.53116/pgaflr.2019.2.4 mailto:ladislav.hrabcak@student.upjs.sk mailto:monika.stojakova@student.upjs.sk mailto:monika.stojakova@student.upjs.sk https://doi.org/10.53116/pgaflr.2019.2.4 53 public governance, administration and finances law review • 2. 2019 blockchain technolog y – current status, challenges and perspectives in tax and customs law current legal status of the technolog y and to reflect on the challenges and perspectives that are undoubtedly related to blockchain, as it focuses on tax and customs law . 2. technological and legal aspects of distributed ledger, blockchain and smart contracts 2.1. distributed ledger technology (dlt) before we elucidate the blockchain technolog y, we must first briefly attend to the “distributed ledger technolog y” (hereinafter: dlt), since blockchain represents the most renowned dlt . it is a concept that is broader than the concept of blockchain . this term is so specific that there is no equivalent denotation for it in the slovak language without raising certain reservations . with some measure of generalisation and imprecision, dlt can be defined as a technolog y, which allows computers in various locations to propose and verify transactions, as well as update the records in the network in a synchronised fashion .4 on the whole, dlt represents a  way, which enables chronologically arranged information to propagate throughout the entire network . its defining attribute revolves around information that is cryptographically locked and retroactive changes that are not possible . another significant aspect is storing information in a decentralised way . the above is of course also valid for the blockchain technolog y with features which make it unique in relation to the dlts . the most significant difference between the two lies in storing information about potential transactions in blockchain into blocks that gradually interconnect . it is a  quality which every dlt need not have . the following section of the article is dedicated to blockchain . 2.2. blockchain technology some authors consider blockchain to be both a technolog y as well as a strateg y, which the states can use to provide services in a transparent, effective and decentralised fashion .5 we can agree with this opinion and immediately list examples of multiple states which have already adopted the use of the blockchain technolog y in the public sector .6 we are going to attempt to elucidate the concept of blockchain in several remarks . the previously presented information makes it apparent that blockchain is a  specific type of a  distributed network, in which the exchange transactions are gradually classified into blocks that are mutually interconnected and invariably recorded within the network .7 technically speaking, there are 3 types of computers involved in  blockchain as follows: 1 . nodes  –  which preserve the entire blockchain and perceive all transactions, including their histories 54 ladislav hrabčák, monika stojáková public governance, administration and finances law review • vol. 4. no. 2. 2 . miners – who verify the authenticity of the executed transactions via the dedicated technolog y, and 3 . clients to get a  better grasp of how the technolog y works, figure 1 models a  transaction in blockchain . figure 1. source: www .zignuts .com/blogs/how-blockchain-architecture-works-basic understanding-of-blockchain-and-its-architecture/8 blockchain is a legally unregulated technolog y, which can be attested by the example of the slovak republic . in theory, blockchain is usually compared to a general ledger, database, or a computer program . it is however questionable, whether this technolog y meets the attributes of at least some of the listed concepts, which have found its place in the legal order of the slovak republic . most often, blockchain tends to be likened to a general ledger, namely to an accounting journal.9 although in act no . 431/2002 coll . on accounting as amended,10 there is no legal definition of these concepts, it is possible to perceive the likeness in the way accounting is done in the accounting journal . the individual accounting entries are arranged chronologically, which proves accounting of all accounting cases in the accounting period (act no . 431/2002, s . 12 (1) coll . on accounting, as amended) .11 to some extent this comparison can be accepted with one exception . our reservation is rooted in the fact that blockchain allows for virtually endless chaining of new and new blocks and is not confined to a limited period such as the accounting period for an accounting journal .12 in contrast to an accounting journal, information recorded in blockchain is virtually immutable, which is an advantage to states . another concept which blockchain is compared to is a  database. pursuant to s . 130 (1) of act no . 185/2015 coll . on copyright as amended13 (hereinafter: copyright act), a  database is: “…a collection of mutually independent works, data, or other mutually independent materials which are systematically or methodically arranged and individually http://www.zignuts.com/blogs/how-blockchain-architecture-works-basic-understanding-of-blockchain-and-its-architecture/ http://www.zignuts.com/blogs/how-blockchain-architecture-works-basic-understanding-of-blockchain-and-its-architecture/ 55 public governance, administration and finances law review • 2. 2019 blockchain technolog y – current status, challenges and perspectives in tax and customs law accessible by electronic or other means regardless of the form of its expression.” it is clear from this definition that it serves a  specific piece of legislation, but by generalising it, it is also possible to arrive at certain characteristics that can subsequently be confronted with the properties of blockchain technolog y . the content of the database, as it follows from the respective definition, does not necessarily have to include only copyrighted works, but also other elements that are not copyrighted works or are even excluded from copyright protection .14 blockchain also shares this property since different types of data can be stored within this “database” .15 since the element of creativity is absent in the arrangement of the data in question, it can be ruled out that blockchain carries the attributes of an author database . however, we might wonder whether blockchain is a  so-called unauthorised database where a  substantial contribution of an entity to the acquisition, verification or presentation of the database content is important .16 this question can also be answered in the negative . blockchain technolog y is an open source,17 which means it is available to virtually anyone . based on the above, blockchain cannot be a  database in the sense of the copyright act . blockchain technolog y does not carry the features of a computer program either . here, too, the provisions of the copyright act are useful . a  computer program “…is a  set of commands and instructions expressed in any form, which is used directly or indirectly in a computer or similar technical device…” also significant here is the conclusion of the referenced provision: “…if it is a  result of the author’s intellectual activity (act no. 185/2015, s. 87 (1).  coll. on copyright as amended”).18 this condition is absent in this case . there are also information technolog y reservations in relation  to this comparison but we will not discuss these in detail . we can see that blockchain technolog y is somewhat in a  vacuum in the legal conditions of the slovak republic, much like in most countries . due to its peculiarities, it cannot be compared to any of the presented concepts, even if it is closest to an accounting journal . this technolog y is in principle considered safe because thousands of independent miners19 participate in the network to verify individual transactions (see above), and therefore its use in the public sector can be considered . it connects to the following characteristic features of blockchain: 1 . availability  –  it is a  non-patented technolog y, allowing for a  wider range of application 2 . decentralisation and security – data control is transferred from centralised institutions to individuals 3 . transparency  –  information is easily traceable and retrospective change is not possible 4 . distribution  –  p2p20 systems hinge on the fact that all information is sent to all active nodes in the network which ensures fast and automatic availability of information to users states will first have to deal with the issue whether the state’s local blockchain can be as secure as the one used for cryptocurrencies and whether it is global in nature . in principle, it is essentially far easier to compromise blockchain that exists within a  single state than the worldwide blockchain . another question raised revolves around ways to strengthen 56 ladislav hrabčák, monika stojáková public governance, administration and finances law review • vol. 4. no. 2. the position of the state, as the use of this technolog y weakens it,21 while the possibility of avoiding foreign influence remains an equally important issue if a  person or a  group of persons gained control over the absolute majority of the miners’ network, in which they could then arbitrarily falsify transactions without being revealed . these are only some of the pitfalls associated with this modern achievement . 2.3. smart contracts smart contracts serve as an example of blockchain’s use that is not limited to cryptocurrency . generally, smart contracts are agreements in the form of computer programs . the basic objective of smart contracts is to eliminate the need for an intermediary and at the same time to contribute to simplifying the execution of online transactions between anony mous participants . as far as the definition of smart contracts is concerned, they can be defined as agreements between parties, which are stored as computer codes recorded in blockchain that ensures independent and automatic execution when pre-agreed conditions are fulfilled .22 this definition yields certain defining features, which are: 1 . terms of contract  in source code  –  use of programming language  in contrast to standard contracts using a common language23 2 . storing source code on the blockchain platform – this platform ensures durability and non-reversibility of a smart contract24 3 . independence  –  the will of the parties is required initially, but it is no longer needed after the conclusion of the smart contract 4 . self-execution, after fulfilment of predetermined conditions, is related to the previous quality and therefore smart contracts are described by some authors as executors of themselves25 we could undoubtedly include its unregulated nature as another defining feature, since this is an issue that the legal norms in the legal systems of states do not consider . it is also important to deal with the question of whether smart contracts can be regarded as contracts in the true sense of the word . there is no consensus among law theorists on this issue . many have reservations in relation to the designation of smart contracts as “smart”, as they are merely executors of what is contained in the source code .26 we are going to point out to the example of the slovak law to elucidate whether smart contracts are contracts in the proper sense of the word . “the contractual relationship is a legal relationship that gives the creditor the right to performance (receivable) from the debtor and the debtor becomes obliged to fulfil the obligation (act no. 40/1964, s. 488 coll. of the civil code as amended)”.27 it is a  very broad definition of a  contractual relationship, but more important to us is that the smart contract is certainly a  legal fact that gives rise to a  legal relationship between the contracting parties . in accordance with that provision, therefore, the obligation is subject to certain performance . the will of the contracting parties is required initially, but it is subsequently no longer necessary, and  therefore the debtor is essentially unable to avoid the fulfilment of his obligation . the essential fact here, 57 public governance, administration and finances law review • 2. 2019 blockchain technolog y – current status, challenges and perspectives in tax and customs law however, is that the contracting parties show their willingness to be bound by it which makes the views in theory, whether legal obligations in the true sense of the word arise here, unfounded .28 it is questionable whether a  smart contract can be regarded as a  comprehensive contract or an agreement on the way of its performance which will form a part of a comprehensive contract .29 regardless, we agree that in the event of damage, it is possible to file a claim in court, and also, that if one of the parties is a consumer, the consumer protection regulation applies .30 their use in practice could follow this course: 1 . the contracting parties set the terms and conditions 2 . the terms and conditions must then be written in computer code 3 . the code is stored in blockchain and cannot be changed from now on 4 . the conditions are fulfilled, the contract will execute itself in comparison with traditional contracts, smart contracts are characterised by the following aspects: 1 . they are completely digital 2 . they are “self-executing” in nature, and 3 . the code itself defines the obligations of the contracting parties smart contracts are a  very interesting idea, but they have not yet had much success in practice . however, it is more than likely that future is bright for smart contracts, which is why the legislators will have to deal with this issue . the use of blockchain and smart contracts is possible also in tax and customs law, which we are going to point out further on . 3. a new tool for more efficient tax and customs collection? several authors have already pointed out in their publications that blockchain can also be used in the public sector .31 this can be explored in several directions, but we will, because of the limited scope of the paper, consider its use in the following situations . 3.1. use of blockchain to eliminate tax and customs fraud value added tax (hereinafter: vat), as a  general indirect consumer tax,32 is a  traditional part of the tax systems of the eu member states . while it is true that this tax involves certain issues, it is the most profitable tax ever .33 on the other hand, vat evasion climbed across the eu in 2016 to € 147 .1 billion,34 which is in fact an alarming figure . this situation can also be attributed to cross-border intra-eu trade as it is exempt from vat in the current legal situation . although this exemption is planned to be abolished in the context of the upcoming reform of the eu vat system, blockchain technolog y is also a promising tool (especially in the future) in eliminating vat evasion . 58 ladislav hrabčák, monika stojáková public governance, administration and finances law review • vol. 4. no. 2. here, we will try to briefly explain what the mtic fraud entails (from missing trader intra-community fraud), and how it could be countered by using this modern tool . in general, mtic fraud is an abuse of the vat system in cross-border trade . figure 2 models how such fraud could work . 0 % 21 % 0 % 21 % +21%-21% a b c d in carousel vat frauds, a merchant fails to remit vat to the taxing authority, despite charging his buyers the price of the sold goods plus vat. missing trader fraud no vat is refunded …do vat remittance the carousel can start all over again… business a delivers goods to b in the netherlands. because this is a cross-border sale within the eu, a does not charge b any vat. b sells the goods to c and charges him 21% vat. he has to remit this to the taxing authority, but fails to do so. he commits fraud. c has payed 21% worth of vat to b, which he can deduct on his vat return. c delivers the goods to d and charges vat. d can sell the goods back to a. because this is a cross-border sale between two eu member states, d charges 0% vat . figure 2. source: https://en .wikipedia .org/wiki/missing_trader_fraud#/media/file:carrouselfraude .svg35 person a  from one member state delivered goods to person b in another member state . this trade will not be subject to vat as it qualifies for a  vat exemption . subsequently, person b sold the goods with applied vat to person c from another member state . person b, however, did remit the vat to the tax authority, thereby committing fraud, but person c deducted it on their vat return . then, person c delivered the goods to person d, who sold it back to person a . such a  chain can be repeated practically indefinitely . in theory, this situation is commonly referred to as carousel fraud, or carousel chain .36 according to some estimates, applying the potential of blockchain technolog y could reduce vat evasion by eur 50–60 billion per year .37 it could be possible by using a multilateral smart contract to which the seller, the buyer, the competent tax authority, and the banks of the seller and the buyer would be parties . it is the buyer’s bank that will have a  significant role in this multilateral relationship, since it will “redistribute” the buyer’s payment by transferring vat to the tax authority’s account and the purchase price, less https://en.wikipedia.org/wiki/missing_trader_fraud#/media/file:carrouselfraude.svg 59 public governance, administration and finances law review • 2. 2019 blockchain technolog y – current status, challenges and perspectives in tax and customs law vat, to the seller’s account . in this way, it would be possible to eliminate the risk of error by taxpayers, and, also to reduce the extent of fraudulent action . such an automated process would also be advantageous because the information about the entire transaction would be recorded in blockchain, in an immutable and continuous manner . from a legal point of view, the nature of the legal relationship arising from a multilateral smart contract is also an interesting issue . here we get to a specific situation where the state is also represented by a  particular tax authority . it becomes permeated by public law elements and the legal relationship becomes hybrid . in contrast to the current situation, final vat clearance would no longer lie with the taxpayers .38 based on this principle, each company’s vat input and output balance would be kept by the tax authorities, and its new information updates would be continuously recorded in blockchain . technically, entrepreneurs will need to be linked to a “transaction register” . as it is a modern technolog y, there are some unanswered questions, or pitfalls . one is the amount of data that would be recorded . it is questionable whether blockchain is able to function smoothly even under an extreme load and overload of business transactions . it is also questionable how to protect this confidential data from various hacker attacks, as practice has shown us that even these are not out of the question . if the eu member states are interested in putting this technolog y into practice, it will also be very difficult to deal with the user interface, taking into account the number of member states and the number of entities operating in their territory . this system must also take into account the modification of existing registers in the individual countries, or whether eidas must be compatible39 to be applicable under the current legal situation . in addition to tax law, the concept of blockchain has not gone unnoticed also in customs administration . meanwhile, it is clear, that information technolog y is taking on an increasingly important role in modern customs administration, but the priorities, expectations, experience, capacities and resources of individual customs administrations vary widely . customs administrations fight fraud by demanding a  high degree of accounting and reporting accuracy to support indirect taxation and customs declarations . the so-called “blocking technolog y” is also a  step forward for customs in the 21st century, as it offers several opportunities for it, from collecting accurate data to automatically detecting customs evasion and fraud, as well as collecting customs . where block chains allow sensitive or valuable data to be transmitted with accuracy and trust, it is no wonder that they are becoming increasingly common in everyday business processes . the customs procedure takes place in certain phases  –  from the start of a  customs procedure, through the identification of the documents for the decision, to the issuance of the substantive decision .40 it is very important in the customs procedure to prove the veracity, credibility and completeness of all the documents required for the goods . the time and cost of clearing goods for import or export entails a  significant financial burden on trade because of the number of permits necessary to import or export goods . these are various permits, licenses, phytosanitary certificates, and others that are required for health, human, animal or plant safety . the so-called “arbitrator” in border trade is the customs administration whose task is to ensure that all such authorisations are duly obtained, valid and the goods legally declared and that all regulatory requirements are met . in customs 60 ladislav hrabčák, monika stojáková public governance, administration and finances law review • vol. 4. no. 2. administration, the documents, which describe or should describe the nature of the goods, and whether the goods comply with the required standards, play an important part . what if all steps in the supply chain from origin to destination were contained in blockchain?! customs block chains would allow for comprehensive management of product life cycle data by providing a  common platform where manufacturers, laboratories, logistics operators, regulators and consumers can fully access all related information such as demonstration, testing, certification and licensing . blockchain technolog y would ensure that the electronic certificate is appropriately and properly issued and subsequently digitally signed by a  valid regulatory/issuing agency . at the same time, the certificate would be protected from any risk of modification, misuse or tampering with its content . consequently, it would only have to be verified whether there is any discrepancy between the data submitted by traders and the data that has been updated repeatedly in the public ledger . depending on the unchangeable and trustworthy data that the customs authorities might have in the private sector network, they could distinguish between illegitimate and legitimate trade as much as possible without relying on their traditional risk management technique . blockchain technolog y is based on cryptographic evidence instead of trust, allowing parties to trade directly with each other without the need for a  trusted third party . the truthfulness and reliability of the information contained in the documents is essential, but it is difficult to achieve certainty, as the necessary information is often provided by third parties and can be obtained from different systems . errors can lead to penalties, loss of opportunities and costly delays in cross-border goods transport . one of the advantages of  blockchain technolog y is that there is no intermediary which means that decentralised ledgers reduce the need for trust based on third-party transaction verification, i .e . intermediaries, from transactions . the speed, accuracy and transparency of blockchain could help alleviate this burden for taxpayers by reducing the risk of fraud . traders are often obliged to provide additional information, documents (e .g . on the origin of goods), or documents which enable them to benefit from concessions or reductions in customs duties (e .g . through a  free trade agreement) . however, if these items were kept automatically in the block chain and the customs authorities had access to the chain, they could verify with complete accuracy the origin and nature of the goods at each stage of the chain . in short, the documentation and communication required for the transport of goods between continents would be largely automated and, at that, done with accuracy, security and reduced time and costs associated with these tasks . the launch of blockchain would also significantly reduce the costs associated with documenting each step of customs authorities, the logistics process, transparency in terms of shipment delivery and the transfer of funds .41 blockchain is a  step forward in customs and trade that want more efficiency in their business . more specifically, the technolog y will help to ensure the customs security of legitimate trade, while also calling on customs and commercial authorities to simplify their tasks (often called “bureaucracy”) that have been required to comply . undoubtedly, blockchain technolog y is a huge leap for customs in the 21st century . 61 public governance, administration and finances law review • 2. 2019 blockchain technolog y – current status, challenges and perspectives in tax and customs law 3.2. blockchain technology and real estate registration for tax purposes local taxes, including real estate tax, can be considered a  relatively new but stable instrument in our tax system, even though their existence was already foreseen by the slovak national assembly act no . 369/1990 coll . on municipal establishment, as amended,42 but most of all, article 59(1) of the constitution of the slovak republic43 no . 460/1992 coll ., as amended .44 local taxes are taxes that citizens pay to their municipality to finance a wide range of public goods . however, with regard to local taxes, all citizens’ taxes must be manually registered through private entities, logged in a database where the information is collected by the tax officials of the municipality . the citizens paying these taxes then “pass” through the banks to make the payment . all these methods are centralised and they are not automated . blockchain enables a  decentralised and distributed system that allows you to track paid taxes, streamlines, and automates the process itself, and brings confidence to the system . the real estate cadastre is a  formal system that provides identification and location of real estate and records of the past, as well as current data relating to the respective piece of real estate . many public services rely on data stored in the real estate cadastre (hereinafter: rec) . the main issues which the rec systems still face in many countries relate to the accuracy of the data stored in the rec and the effectiveness of the rec systems . although all data stored in this information system should be credible and correct, this is not the case – inaccuracies or errors are usually the result of errors that occurred in the digitisation process . the land register provides answers to questions about who owns certain property and what legal document establishes the title . cadastre is an official record of real estate data in a particular area, which is also significant for tax purposes . blockchain used for property records could be potentially applicable via smart contracts . in fact, smart contracts are written and stored in blockchain (see above) . because they are stored in blockchain, they are also immutable, so it should not be possible for anyone to have access to smart contract data stored in blockchain technolog y . the simplest example could be that as soon as there is a  change of ownership registered in the land register, the other involved institutions should be automatically informed of the change . for example, the tax administrator in whose district the property is located, could be automatically informed, but also, for example, utility companies that are entitled to be informed of a change in billing information from a certain date to another natural or legal person .45 at present, it is not unusual for computer programs to evaluate images . we also see the potential of blockchain technolog y in synerg y with other databases, by linking them together to automatically compare the real estate data recorded in blockchain with the data obtained from satellite imagery . this could prevent (even by the verification of facts by local investigation) both illegal construction and the related tax evasion on real estate tax . 62 ladislav hrabčák, monika stojáková public governance, administration and finances law review • vol. 4. no. 2. 4. conclusion this paper aimed to confirm or refute the basic hypothesis  –  whether blockchain technolog y is capable of contributing to more efficient tax and customs collection . based on what we have presented here, we must conclude that the hypothesis has been confirmed . undoubtedly, blockchain is an instrument (among others, also in the fight against tax and customs evasion) that the governments of individual member states can count on in the future . however, as things stand, there are a  number of issues (both legal and technical), such as: ƿ protection of confidential data from hacking attacks ƿ respect for modifications in the existing registers and lists for tax purposes in the individual member states ƿ eiadas compatibility, and others these must first be answered to make use of blockchain in the public sector and to assist the states . while lack of legal regulation makes this technolog y attractive to many, it is necessary for both national parliaments and the european parliament to address this issue and establish minimum standards to create a legal framework for the use of blockchain technolog y in the public sector . it will also be difficult to find a  suitable model, or blockchain “public” architecture, which could be put into practice, not only at the european or national level, but also at the level of municipalities and cities . this need has already been identified by the european parliament and, to this end, it has asked the european commission, as well as the relevant working groups, in its resolution of 24 november 2016 on towards a  definitive vat system and combating vat fraud [2016/2033 (ini)],46 to address the issue of “digital technologies”, which should contribute to “filling” the vat gap . only the future will show how the regulatory challenges of the eu and the member states will be dealt with and whether we can use modern technologies to our advantage or they will engulf us . 63 public governance, administration and finances law review • 2. 2019 blockchain technolog y – current status, challenges and perspectives in tax and customs law references 1 this paper was created as a partial output of the project solution vvgs-2019-1068 “blockchain technolog y as a factor affecting the current form of law” and vega 1/0846/17: “implementation of the initiatives of the eu institutions in direct and indirect taxation and their legal budgetary implications” . 2 satoshi nakamoto, bitcoin: a peer-to-peer electronic cash system, 2008, https://bitcoin .org/bitcoin .pdf (accessed 25 august 2019) . 3 the concepts of “virtual currency” and “cryptocurrency” are not identical, but are used interchangeably for the purposes of this paper . 4 david allessie, maciej sobolewski, lorenzino vaccari, blockchain for digital government, publications office of the european union (luxemburg, 2019) . 5 zdenka poláková, peter rakovský, blockchain technológie – regulačné výzvy a príležitosti [blockchain technologies – regulatory challenges and opportunities], 82 et seq ., in zborník z medzinárodnej vedeckej konferencie bratislavské právnické fórum 2018 [collection of papers from the international academic conference bratislava legal forum 2018] (bratislava, univerzita komenského v bratislave, 2018) . 6 the scandinavian countries are pioneers here, while estonia is definitely an interesting example of modern technolog y application within parameters similar to the slovak republic . 7 david allessie, maciej sobolewski, lorenzino vaccari, blockchain for digital government, publications office of the european union (luxemburg, 2019) . 8 how blockchain architecture works? basic understanding of blockchain and its architecture, www .zignuts .com/ blogs/how-blockchain-architecture-works-basic-understanding-of-blockchain-and-its-architecture/ (accessed 25 august 2019) . 9 zdenka poláková, peter rakovský, blockchain technológie – regulačné výzvy a príležitosti [blockchain technologies – regulatory challenges and opportunities], 82 et seq ., in zborník z medzinárodnej vedeckej konferencie bratislavské právnické fórum 2018 [collection of papers from the international academic conference bratislava legal forum 2018] (bratislava, univerzita komenského v bratislave, 2018) . 10 act no . 431/2002 coll . on accounting, as amended . 11 ibid . 12 of course, by this we do not mean an inability to check the individual transactions in another accounting period, as taxpayers are required to keep their accounting records for the period prescribed by law, but we wanted to point to the content of blockchain and the accounting journal . 13 act no . 185/2015 coll . on copyright, as amended . 14 peter vojčík et al ., právo duševného vlastníctva [intellectual property law] (plzeň, aleš čeněk, 2014) . 15 ladislav hrabčák, výzvy pre daňové právo v podobe blockchain technológie [challenges for tax law in the form of blockchain technolog y] in zborník príspevkov zo 6. ročníka jarnej internacionalizovanej školy doktorandov upjš 2019 [proceedings of the 6th spring internationalized school of phd students upjš 2019] (košice, šafárikpress, 2019) . 16 peter vojčík et al ., právo duševného vlastníctva [intellectual property law] (plzeň, aleš čeněk, 2014) . 17 the “open source” designation generally means that it is a computer software with so-called open source code . 18 act no . 185/2015 coll . on copyright, as amended . 19 of course, it also depends how consensus is achieved in the relevant network . this is typical of the proof of work method . see ladislav hrabčák, výzvy pre daňové právo v podobe blockchain technológie [challenges for tax law in the form of blockchain technolog y], 60, in zborník príspevkov zo  6. ročníka jarnej internacionalizovanej školy doktorandov upjš 2019 [proceedings of the 6th spring internationalized school of phd students upjš 2019] (košice, šafárikpress, 2019) . 20 peer-to-peer phrase, which originates in english, refers to a decentralised communication model . 21 the weakened position of the state lies in the fact that blockchain is decentralised in nature and as such is somewhat elusive to the state’s full control . https://doi.org/10.2760/942739 https://doi.org/10.2760/942739 https://bitcoin.org/bitcoin.pdf http://www.zignuts.com/blogs/how-blockchain-architecture-works-basic-understanding-of-blockchain-and-its-architecture/ http://www.zignuts.com/blogs/how-blockchain-architecture-works-basic-understanding-of-blockchain-and-its-architecture/ https://doi.org/10.2760/942739 https://doi.org/10.2760/942739 64 ladislav hrabčák, monika stojáková public governance, administration and finances law review • vol. 4. no. 2. 22 alexander savelyev, contract law 2.0: «smart» contracts as the beginning of the end of classic contract law (moscow, national research university higher school of economics, 2016) . 23 in judicial practice, this could cause considerable complications due to the lack of knowledge of the programming language by judges . 24 theoretically, changes could be made by concluding a new smart contract (but without affecting the original contract) or if this option was directly incorporated in the source code . 25 adam zábranský, úvod do práva smart kontraktů – část 1 [introduction to the law of smart contracts – part 1], www .epravo .cz/top/clanky/uvod-do-prava-smart-kontraktu-cast-1-109049 .html (accessed 10 august 2019) . 26 stephen mcjohn, ian mcjohn, the commercial law of bitcoin and blockchain transactions (2016) . 27 act no . 40/1964 coll . the civil code, as amended . 28 alexander savelyev, contract law 2.0: «smart» contracts as the beginning of the end of classic contract law (moscow, national research university higher school of economics, 2016) . 29 some academics regard smart contracts as a form of self-help . see max raskin, the law of smart contracts (georgetown technolog y review, 2017) . 30 adam zábranský, základní právní aspekty smart kontraktů  –  část 2 [basic legal aspects of smart contracts – part 2], www .epravo .cz/top/clanky/zakladni-pravni-aspekty-smart-kontraktu-cast-2-109050 . html (accessed 10 august 2019) . 31 zdenka poláková, peter rakovský, blockchain technológie – regulačné výzvy a príležitosti [blockchain technologies – regulatory challenges and opportunities], 82 et seq ., in zborník z medzinárodnej vedeckej konferencie bratislavské právnické fórum 2018 [collection of papers from the international academic conference bratislava legal forum 2018] (bratislava, univerzita komenského v bratislave, 2018) . 32 vladimír babčák, daňové právo na slovensku [tax law in slovakia] (bratislava, epos, 2015) . 33 miroslav štrkolec, zabezpečovacie inštitúty pri správe daní [tax administration security institutions] (košice, equilibria, 2017) . 34 grzegorz poniatowski et al ., study and reports on the vat gap in the eu-28 member states: 2018 final report taxud/2015/cc/131, https://ec .europa .eu/taxation_customs/sites/taxation/files/vat-gap-fullreport-2019_en .pdf (accessed 13 august 2019) . 35 missing trader fraud, https://en .wikipedia .org/wiki/missing_trader_fraud#/media/file:carrouselfraude . svg (accessed 13 august 2019) . 36 peter šamko, daňové podvodné konania a ich dokazovanie [tax fraud and evidence] (bratislava, wolters kluwer, 2015) . 37 david allessie, maciej sobolewski, lorenzino vaccari, blockchain for digital government, publications office of the european union (luxemburg, 2019) . 38 ibid . 39 petra krupičková, smart contract – revoluce v smluvním právu 21 . století? [smart contract – revolution in 21st century contract law ?], 26, in revue pro právo a technologie [revue for law and technology] (brno, masarykova univerzita v brne, 2017) . 40 karin prievozníková, colné právo [customs law] (žilina, knižné centrum, 2008) . 41 monika stojáková, eliminácia daňových a colných únikov vplyvom moderných technológií [elimination of tax and customs evasion due to available modern technologies], 272–285, in vplyv moderných technológií na právo [effect of modern technologies on law] (košice, upjš, 2019) . 42 slovak national assembly act no . 369/1990 coll . on municipal establishment, as amended . 43 constitution of the slovak republic no . 460/1990 coll ., as amended . 44 vladimír babčák, daňové právo na slovensku [tax law in slovakia] (bratislava, epos, 2015) . 45 miroslav stefanović et al ., blockchain and land administration: possible applications and limitations, in proceedings of the 5th international scientific conference on contemporary issues in economics, business and management ebm 2018 (kragujevac, faculty of economics, university of kragujevac, 2018) . 46 european parliament resolution of 24 november 2016 on towards a definitive vat system and combating vat fraud [2016/2033 (ini)] . https://doi.org/10.2139/ssrn.2885241 https://doi.org/10.2139/ssrn.2885241 https://doi.org/10.2139/ssrn.3272816 https://doi.org/10.5817/rpt2017-1-2 http://www.epravo.cz/top/clanky/uvod-do-prava-smart-kontraktu-cast-1-109049.html http://www.epravo.cz/top/clanky/zakladni-pravni-aspekty-smart-kontraktu-cast-2-109050.html http://www.epravo.cz/top/clanky/zakladni-pravni-aspekty-smart-kontraktu-cast-2-109050.html https://ec.europa.eu/taxation_customs/sites/taxation/files/vat-gap-full-report-2019_en.pdf https://ec.europa.eu/taxation_customs/sites/taxation/files/vat-gap-full-report-2019_en.pdf https://en.wikipedia.org/wiki/missing_trader_fraud#/media/file:carrouselfraude.svg https://en.wikipedia.org/wiki/missing_trader_fraud#/media/file:carrouselfraude.svg https://doi.org/10.2139/ssrn.2885241 https://doi.org/10.2139/ssrn.2885241 https://doi.org/10.2139/ssrn.3272816 https://doi.org/10.5817/rpt2017-1-2 pga2019_02_b1 _hlk18895087 _hlk18895098 _hlk27344917 articles administrative liability for causing damage to selected components of the environment branislav cepek* the right to informational self-determination in the context of selected judicial decisions and practical background andrea erdősová* information security awareness in public administrations at an international level lilla garayová* blockchain technology – current status, challenges and perspectives in tax and customs law ladislav hrabčák,* monika stojáková* application possibilities of blockchain in accounting péter bálint király* budget allocation of taxes to territorial budgets ivana pařízková* the efficiency of tax collection in the czech republic eva tomášková* case study new legal regulation of the administrative justice in the slovak republic juraj vačok* pga2019_02 _hlk18895087 _hlk18895098 _hlk27344917 articles administrative liability for causing damage to selected components of the environment branislav cepek* the right to informational self-determination in the context of selected judicial decisions and practical background andrea erdősová* information security awareness in public administrations at an international level lilla garayová* blockchain technology – current status, challenges and perspectives in tax and customs law ladislav hrabčák,* monika stojáková* application possibilities of blockchain in accounting péter bálint király* budget allocation of taxes to territorial budgets ivana pařízková* the efficiency of tax collection in the czech republic eva tomášková* case study new legal regulation of the administrative justice in the slovak republic juraj vačok* pga2019_02_b4 _hlk18895087 _hlk18895098 _hlk27344917 articles administrative liability for causing damage to selected components of the environment branislav cepek* the right to informational self-determination in the context of selected judicial decisions and practical background andrea erdősová* information security awareness in public administrations at an international level lilla garayová* blockchain technology – current status, challenges and perspectives in tax and customs law ladislav hrabčák,* monika stojáková* application possibilities of blockchain in accounting péter bálint király* budget allocation of taxes to territorial budgets ivana pařízková* the efficiency of tax collection in the czech republic eva tomášková* case study new legal regulation of the administrative justice in the slovak republic juraj vačok* © 2018 dialóg campus, budapest public governance, administration and finances law review vol. 3. no. 1. (2018) • 26–33. simplified tax procedures in the new tax ordinance act in poland leonard etel,* mariusz popławski** * leonard etel, professor of tax law, department of tax law, faculty of law, university of bialystok, poland . the author specializes in tax law . he is the author of over 300 books and articles . he is the  chairman of the general taxation law codification committee in poland and vicechairman of the information and organization centre for the research on the public finances and tax law in the countries of central and eastern europe . (e-mail: leonard .etel@wp .pl) ** mariusz popławski, professor of the university of bialystok, department of tax law, faculty of law, university of bialystok . the author specializes in tax law . he is vice-rector for development and international cooperation, member of the general taxation law codification committee, member of the scientific council of the periodical public governance, administration and finances law review in the european union and central and eastern europe . (e-mail: mpoplawski@poczta . onet .pl) abstract: the purpose of this article is to indicate the need to simplify typical tax procedures but also to explain how it could be done . the discussed issues are based on proposed provisions provided in the draft of the new tax ordinance act prepared by the general tax code codification committee . efforts should be made to increase the efficiency of tax proceedings, which means, among others, the elimination of the overly extensive and formalized procedure for assessment of low tax amounts . at present, for example, proceedings regarding million zlotys tax amounts are carried out on identical terms as in the case of taxes amounting to several dozen pln . the proposed new law will speed up the handling of many matters, but will also reduce the costs incurred in meeting all the existing procedural requirements . in addition, there should be no proceedings undertaken regarding tax amounts that are lower than the costs of obtaining them . the procedures for serving documents to taxpayers should be also simplified . currently, they are very expensive . additionally, they are often ineffective, which leads to the loss of significant tax revenues by the state . in addition, the process of granting individual tax reliefs should be simplified, especially in the context of local taxes . it should be enabled municipalities to independently decide on these entitlements and streamline the procedure for their granting . keywords: simplification in tax law; simplified tax proceeding ; tax procedures; tax proceeding ; general tax law; tax ordinance act 1. introduction the problem which should be solved in the nearest future is excessive and too formalized procedures of the realization of taxes . tax authorities have to assess and then collect taxes with all formal procedural requirements determined in the act of 29 august 1997, tax ordinance act, hereinafter referred to as to (act no . 749/2012, on books) . paradoxically, 10.53116/pgaflr.2018.1.3 mailto:leonard.etel%40wp.pl?subject= mailto:mpoplawski%40poczta.onet.pl?subject= mailto:mpoplawski%40poczta.onet.pl?subject= https://doi.org/10.53116/pgaflr.2018.1.3 27 public governance, administration and finances law review • 1. 2018 simplified tax procedures in the new tax ordinance act in poland this just rule in reference to all tax evokes, however, a great number of negative consequences (popławski: 77) . one of them is the fact that proceedings referring to tax amounts going into millions are realized on the same basis as in the case of taxes of a  few dozen zlotys . this results in the tax authorities being overwhelmed with petty cases, and thereby they have less time to conduct proceedings referring to considerable amounts . also the costs borne in connection with fulfilling all procedural requirements resulting from the ordinance are not to be disregarded . a  typical tax procedure concluded with issuing a  decision consists of at least three letters addressed to the taxpayer (the decision of initiating the procedure, notice on a possibility to comment on the gathered evidence and the decision) . the cost of their delivery alone is more than a  dozen zlotys . they are not considerable expenses in the proceedings concerning high amounts, but when the tax oscillates within pln 40, it is doubtful if the costs of the proceedings do not exceed the obtained revenues . the problem has already been noticed by the legislator but the amends to the ordinance are not sufficient . the provided possibility in the to as for the delivery of the establishing decision only, at the so-called annual assessments in the situation where the actual state has not changed or where the decision is to be issued only on the basis of the data resulting from the information submitted by the taxpayer, fails to solve the problem under examination . this enhances the realization the property tax, the agricultural tax and the forest tax, but they are still classic simplified procedures where the procedural requirements, unwanted by the taxpayer, and unnecessarily lengthening the tax case proceedings, are reduced to a  minimum . the proceedings concerning the tax amounts which are lower than the costs of their obtaining should also be abandoned . the currently valid regulations in this matter are too rarely applied due to the low amount which allows for not initiating and discontinuing petty cases . it is also important to modify the mode of the changes in final decisions due to the circumstances occurring after their issuing which affect the tax amount . in practice this mode is applied out of the provision wording – it is impossible otherwise – which is not a positive phenomenon . the process of communication of the tax authority and the taxpayer should be spread . the present day procedures of delivering the taxpayers’ letters, beside the fact that they are expensive, are often ineffective, which leads to the municipalities’ losses of considerable revenues . the opportunity of paying the tax for the taxpayer by other persons should also be extended . it is easy to indicate the effects of their elimination in all the procedures and methods . this would be a beneficial action for tax authorities (lower expenses and workload) as well as taxpayers (swifter handling of the case) . the objective of this article is to indicate the need for simplifying typical tax procedures and the ways it should be done . proposing amendments in the currently valid regulations, the proposed provisions of the new tax ordinance are taken into consideration, as presented in the new tax ordinance bill of 6 october 2017 and its justification prepared by the codification commission of the general tax law (hereinafter referred to as the commission) . 28 leonard etel, mariusz popławski public governance, administration and finances law review • vol. 3. no. 1. 2. simplified procedures a problem which negatively affects the effectiveness of tax authorities’ work is the necessity of carrying out tax proceedings concerning small tax amounts in obvious cases, which do not require any evidence procedure . there is no sense in a  formalized and expensive procedure in the situation where the tax amount is not disputable, the actual state raises no doubts and the taxpayer wants to have the case settled as soon as possible . under the current ordinance routine cases referring to less than a  few dozen zlotys must be carried out on the same basis as the cases of a  few million zlotys, which by nature requires a  long evidence procedure . this illustrates the need for introducing simplified procedures (kmieciak) . such procedures are deformalized and by definition must be short . they are concluded with issuing a  decision which is not justified . in effect, the taxpayer has a  fast decision, and the tax authority has less work and lower procedure costs . the simplified procedure cannot be implemented without the taxpayer’s consent (or request) and in problematic cases, where are discrepancies referring to the circumstances affecting the tax amount . the proposal of simplified procedures is included in the bill of the new tax ordinance . in accordance with the bill, if there is no need for an evidence procedure (the actual state raises no doubts) or the tax amount does not exceed pln 5,000, the tax authority may, at the party’s consent, issue a decision immediately without its justification . cases in this procedure will be handled quickly, no longer than within 14 days . in accordance with the bill, the simplification of the procedure is reduced to the decision that there is no need for issuing and delivering the decision on its initiation, the taxpayer is not notified on an opportunity to comment on the collected evidence, and the issued decision is not justified, unless the party demands it after the conclusion is delivered . the taxpayer has the right, on the terms of general rules, to appeal against the decision issued by the authority of the first instance to the authority of the second instance and to complain to the court the decision issued by the second instance authority . the introduction of the simplified procedure proposed in the bill of the new tax ordinance will enhance handling petty cases, reduce the workload of tax authorities and the expenses connected therewith . (the bill of the tax ordinance) . 3. proceedings on trivial tax amounts we should decidedly extend the already implemented procedure for tax amounts not exceeding the lowest expenses of the delivery of a  registered mail with confirmation of receipt (currently, the rounded amount is pln 7 .00) . the amount is too low . the tax of a few zlotys covers the costs of delivery only, assuming that in the case only one tax decision is issued . and what about other expenses connected with the collection of this tax? a tax the amount of which is lower than the costs of its enforcement has no economic grounds . such a tax is not wanted by the state or a local government unit, and, which is obvious, by the taxpayer . it is collected only because it is required by the tax law . it is the beneficiary of tax incomes who should decide on when it is profitable to collect the tax . otherwise, the taxes generating costs are a  financial burden for the entities which should benefit from 29 public governance, administration and finances law review • 1. 2018 simplified tax procedures in the new tax ordinance act in poland them . the already mentioned bill of the new tax ordinance extends the rule of not initiating or discontinuing proceedings on trivial amounts . in the case where the tax amount does not exceed pln 50 .00 the procedure is not initiated and those initiated are discontinued, and the taxpayer is notified about the fact . the procedure refers to the proceedings initiated (discontinued) ex officio . it cannot be applied by, for example, a taxpayer who assessed in the declaration the tax amount lower than pln 50 .00 . the amount resulting from the declaration must be paid . if the taxpayer fails to pay, the authority may, on the basis of the declaration, initiate enforcement proceedings . in the case of taxes being the income of the state, in accordance with the bill of the new tax ordinance, there will be no possibility to conduct tax proceedings if the amount possible to collect is less than pln 50 .00 . the bill provides for, including the interest of tax beneficiaries who have significant incomes from trivial obligations, competences for the municipality council of establishing the amount lower than the limit amount of pln 50 .00 . in this way municipality councils obtain an opportunity to adjust the limit of triviality to the specificity of a particular area . here it is important to note an erroneous practice of certain tax authorities, which is reduced to issuing and delivering so-called zero decisions . the tax authority assesses in such a  decision that the taxpayer has nothing to pay (for example, is exempted) and this “assessment decision” is delivered to the taxpayer1 . as a  result of realizing this tax, the tax authority loses (delivery costs) and does not profit, which contradicts the essence of the tax . this case, even though the statutory obligation of not initiating or discontinuing proceedings on trivial amounts has been introduced, is still controversial . taxpayers demand issuing such decisions, especially in the agricultural tax, due to the needs for acquiring by them or their family members social benefits (e .g . scholarship, dole) . the “zero” decision is treated here groundlessly as an equivalent of the certificate which should be issued in a different mode . 4. the modification of the rules of changing establishing and determining decisions issuing thousands of decisions establishing the amount of the tax obligation within the framework of an annual assessment (in the property tax, agricultural tax and forest tax) at the beginning of the year entails the obligation of their change, if, after their delivery, changes occur affecting the tax amount . these are very often situations connected with, for instance, a sale of the property or a change of its intended use during the year, which raises the need for modification of the decision issued at the beginning of the year and assessing the tax for the whole year . the burdensomeness of the procedure of decision change is connected with the flaws of the currently valid regulations (act no . 749/2012 on books: art . 254), being the only legal basis for these changes . in accordance therewith, the final decision, establishing or determining the amount of a tax obligation for a particular period, may be changed by the tax authority that issued it, if, after its delivery, a change occurred of actual circumstances affecting the cessation or determination of the obligation amount, 30 leonard etel, mariusz popławski public governance, administration and finances law review • vol. 3. no. 1. and the results of these circumstances were regulated in the provisions of tax law binding on the day of the decision issuing . thus, a decision change requires the occurrence of actual circumstances, the results of which are regulated by the provisions of law . literature aptly notes that the reduction of the possibility of a decision change to the occurrence of actual circumstances only in practice unnecessarily limits this competence of tax authorities (dowgier: 274) . the reason for a  decision change may be also other circumstances, for example legal, which results in the necessity of adjusting to them the assessment decisions issued before (e .g . the introduction of an exemption or lowering the rate) . in such circumstances, the only basis for a decision change is the regulation under scrutiny (act no . 749/2012 on books: art . 254), which discusses actual circumstances only . interpretative problems emerge also because of the reservation that the effects of the occurrence of the circumstances affecting the tax amount must be provided for in the provisions of tax law . these provisions, regulating particular local taxes (property, agricultural and forest taxes) regulate the effects of the occurrence of these circumstances, but only in reference to natural persons . nothing is mentioned on legal persons and organizational entities without legal personality, in relation to whom decisions determining the tax amount were issued . thus, in the current legal state, taking into account only the wording of the provision under analysis, it is possible to change a decision establishing the amount of the obligation for a  natural person, and it is formally impossible to change a  decision determining the obligation for a legal person . this is absolutely groundless and therefore, in practice, on the basis of to, all decisions which established or determined obligations are being changed (act no . 749/2012 on books: art . 254) . this practice, however, misses the literary wording of this regulation . in the works on the new tax ordinance an improvement of the mode under scrutiny was proposed, so that it could be applied as extensively as possible . (the bill of the tax ordinance: art . 259) . in accordance with the planned wording, the final decision establishing or determining the amount of the tax obligation may be changed, ex officio or on the party’s request, if after its delivery a change of the circumstances occurred affecting its content . the designed adjustment of this mode of the decision change to the needs of local tax authorities will eliminate the aforementioned interpretative doubts . the facultative nature of this decision is not a drawback of the designed regulation . the decision may be changed, or the authority may not have to change it . if a  tax authority decides, regardless if ex officio or on request that there were circumstances affecting the tax amount established or determined in the decision, it has to change it (the principle of legalism) . it will not be allowed to do it after the obligation expiry date only . 5. procedures of communication with the taxpayer a considerable and costly problem connected with conducting tax proceedings by tax authorities is the mode of communication with the taxpayer (his representative) . due to the fact that the currently valid regulations do not include an obligation of the taxpayer to report the change of his address to the tax authority (in the period out of the tax proceedings), the delivery of the decision very often makes a  great number of difficulties and lengthens the proceedings . taxpayers make use of gaps in legal regulations regarding 31 public governance, administration and finances law review • 1. 2018 simplified tax procedures in the new tax ordinance act in poland deliveries in order to evade paying taxes . it is relatively easy, for example in local taxes paid by natural persons, because the failure in the delivery of the establishing decision results in no obligation and the interest for delay is not accrued . legal persons, on the other hand, as practice shows, use the imperfect procedure of establishing decision deliveries for lengthening the proceedings till the expiry date . these problems were noted in the bill of the new tax ordinance . in the opinion of the codification commission of general tax law, it is important to introduce a cheap and effective method of communicating with the taxpayer and his representative . the bill proposes extending the possibility of delivery through electronic devices . in this form the letters could be delivered to not only professional representatives and public entities, but also entrepreneurs (except those taxed in the form of tax card and lump sum for registered incomes, unless they provide their electronic address) as well as the users of ict systems (e-puap and the tax portal) . additionally, it is proposed that the data in the registering report stored in the central register of taxpayers of the national registry of taxpayers (crt) were the basis for establishing the address of residence and the address of the headquarters for the purpose of delivering letters . the possibility of successful delivering to the address indicated in the register will enhance the effectiveness of deliveries and reduce the costs connected therewith . taxpayers, who do not have an address registered in the crt, letters will be delivered on general basis . 6. tax payment for the taxpayer the possibility of paying a tax for the taxpayer by the members of his closest family and by certain other categories of persons was first introduced to the ordinance in 2016 . taxes are very often paid not by the taxpayer but other persons, foremost his family . this is not bad in itself and does not result in abuses . why, for example, a  father cannot pay an agricultural tax for his daughter and reversely? the introduction of such a  possibility should be assessed positively . in relation to taxpayers this is legalizing the common practice resulting in paying taxes on time . beside the family members who can pay a  tax without reducing the amount, also the current owner of the subject of compulsory mortgage or tax pledge may pay the secured amount of tax . all other persons may pay the tax for the taxpayer but up to pln 1,000 only . the introduction of this limitation leads to interpretative problems .2 does this entitlement embrace the possibility of paying tax arrears along with the interest for delay? we believe so, because the tax arrears is nothing else but the tax unpaid before the deadline . it is impossible to pay the arrears alone without paying the interest amount for delay connected therewith . thus, other persons may pay the arrears together with the interest for delay for the taxpayer . the statutory limit of pln 1,000 should be referred to the arrears amount only, and not the interest for delay . for example, if the amount of the arrears is pln 300 and the interest pln 1,000, then, even though the amount of the payment exceeds the statutory limit, there is no basis for questioning the payment by the person other than the taxpayer . the amount of arrears has not exceeded pln 1,000 (the interest amount should not be counted as the statutory limit) . there is also no problem if another entity pays for the taxpayer a  pln 200 32 leonard etel, mariusz popławski public governance, administration and finances law review • vol. 3. no. 1. installment of the tax . this regulation is applicable without doubts to the moment when there are five installments . the tax is also an installment and an advanced payment, which is an argument for recognizing such a payment (act no . 749/2012 on books: art . 3 point 3) . as we can see, the article under analysis may be differently interpreted, which justifies the need for enhancing its wording . the bill of the new tax ordinance raises the tax amount which may be paid by another person up to pln 5,000 . this possibility also includes tax arrears and the entailed interest for delay . in this way we increase the possibility of paying relatively petty tax amounts by persons other than the taxpayer, which will facilitate their enforcement . 7. conclusions in conclusion, it is important to state that certain tax procedures for tax realization should be modified due to the need for increasing their effectiveness and reducing the costs of tax collection . the aforementioned proposals are largely included in the planned provisions of the new tax ordinance . however, changes are necessary also in the laws regulating particular taxes, including foremost the taxes supplying municipal budgets . first of all, we have to reform the procedure of the so-called annual tax assessment, based on delivering sometimes dozens of thousands decisions establishing the amount of the tax obligation for natural persons in a  short period of time ( january–february) . also declarations and information submitted by the taxpayer should be uniformed, which will lead to the popularization of their submission through the means of electronic communication . the tax records must finally begin to operate, not only on paper, which will perfectly facilitate the access to date necessary for proper and punctual concluding tax proceedings . 33 public governance, administration and finances law review • 1. 2018 simplified tax procedures in the new tax ordinance act in poland reference 1 this does not refer to decisions on investment reliefs issued on the basis of article 13 of the act on agricultural tax . this decision establishes the agricultural tax amount and then the so-called investment expenses borne by the taxpayer are deducted, which results in the situation that there is no tax amount to pay . this decision has to be delivered, because the fact of its delivery results in the tax obligation from which the investment expenses are deducted . 2 leonard etel (ed.), ordynacja podatkowa, komentarz, 544, (warsaw 2017). pga2017_1_01_article_bonk_cakoci.indd © 2017 dialóg campus, budapest public governance, administration and finances law review vol. 2. no. 1. (2017) • 1, 5–16 articles statutory general anti-abuse rule in the slovak tax code: some expectations and the reality of its implementation?1 františek bonk*, karin cakoci** * judr. františek bonk, phd, research associate at the department of financial law, tax law and economy at the faculty of law, pavol jozef šafarik university in košice. (e-mail: frantisek.bonk@ upjs.sk) ** doc. judr. karin cakoci, phd, associate professor at the  department of financial law, tax law and economy at the  faculty of law, pavol jozef šafarik university in košice. (e-mail: karin. cakoci@upjs.sk) abstract: this article aims towards an analysis of the  slovak statutory general anti-abuse rule (henceforth gaar) which entered into force under the  initiatives of the  eu and oecd on 1  january 2014. the  article provides an analysis of the  particular construction elements of the implemented gaar with respect to the european court of justice (henceforth ecj) case law and gaar legislative practice at eu level, which is seemingly, with regard to the  anti-tax avoidance directive gaar, unstoppable. keywords: statutory general anti-abuse rule; tax code in slovakia; counteracting tax avoidance; implementation of eu initiatives 1. introduction in recent years, the  abuse of tax law has become a  topical issue in the  european union. this  is clearly demonstrated by the  case law of the  ecj, the  significance of which has contributed to the creation of the principle of prohibition of the abuse of tax law, and it is convincingly justified by the papers in tax law science.2 ecj established the prohibition of the  abuse of tax law in both indirect and direct taxation areas by halifax and cadbury schweppes rulings.3 some years later, a  strong legislative initiative in incorporating statutory gaars began at eu level.4 tax jurisdictions of the  central and eastern european countries (henceforth cee countries) were understandably a  rather obvious target: most of them had not contained statutory gaar provisions in their domestic tax systems before. neither their judicial gaars – the  prohibition of abuse of tax law doctrines had been developed. or, at the  same time, under the  judicial development, the domestic doctrine had to face ecj’s developing prohibition of abuse doctrine in the tax law area. eu statutory gaars have the  refore played “a model role” by their application in domestic tax systems. however, the  way of implementation with regard to the  slovak tax 10.53116/pgaflr.2017.1.1 https://doi.org/10.53116/pgaflr.2017.1.1 6 františek bonk, karin cakoci public governance, administration and finances law review • vol. 2. no. 1. law is not that obvious, as it will be shown later on. implementing statutory gaar without previous experience is rather a  serious issue and authors will try to analyse if the  slovak gaar had been implemented correctly (if not, what would be the  way of its implementation). due to the  limited scope of the  article, the  emphasis will not be fully given to national judicial doctrine of prohibition of tax law abuse. under the  ecj’s case law development, particular construction elements of statutory gaar will be analysed in detail. 2. “eu gaar” as an implementation model gaar as a rule devoted to prevention of tax evasions and tax avoidance has been in force in the  slovak tax code since 1 january 2014, following international initiatives in tax evasions and tax frauds prevention. under the  explanatory report to act no. 435/2013 coll., the reasons for amendment are represented by: ƿ measures proposed by the  analysis of the  payments for goods, services and other forms of payments made by taxpayers for the benefit of persons established in noncooperative and off-shore jurisdictions, as well as ƿ commission recommendation of 6 december 2012 on aggressive tax planning (c(2012) 8806 final).5 especially the  wording of the  “eu gaar” that is included in the  commission’s recommendation proved to have a  strong influence on the  implementation of statutory gaars within the  cee region. by the  wording of legally non-binding recommendation the  slovak law maker had rather promptly transposed the  new clause into the  slovak tax code. this article is not a  comprehensive analysis of the  whole abuse of tax law doctrine; attention is devoted only to the  analysis of the  criteria which had been established by the ecj taking into account requirements of the statutory gaar provisions at eu level. it seems to be clear that “eu gaar” incorporated in the  text of recommendation codifies the  formerly developed ecj doctrine on the  prohibition of abuse of tax law.6 this has already been established in emsland-stärke – the case dealing with the refund of agricultural levies – where ecj for the  first time identified abuse of law under a  twofold test of objective and subjective element of abuse.7 the case became enormously influential for the next development, waiting however until 2006 when abuse of tax law in both areas of indirect taxes (halifax)8 and direct taxes (cadbury schweppes)9 were confirmed. landmark cases on the prohibition of the abuse of the tax law both followed a twofold test of objective and subjective element of the  abuse of tax law settled by emsland-stärke.10 however, the  concept of the  prohibition of tax law abuse in the  area of direct taxation established by cadbury schweppes developed a  much narrower line, limiting the  concept of abuse only to wholly artificial arrangements.11 the concept of “artificiality” at eu level, developed by the  ecj found its place in the  wording of “eu gaar” incorporated in the recommendation on aggressive tax planning. eu gaar was introduced and proposed to be incorporated into national tax systems by means of the following clause: “an artificial 7 public governance, administration and finances law review • 1. 2017 statutory general anti-abuse rule in the slovak tax code… arrangement or an artificial series of arrangements which has been put into place for the essential purpose of avoiding taxation and leads to a tax benefit shall be ignored. national authorities shall treat these arrangements for tax purposes by reference to their economic substance”.12 apart from that, the  recommendation provides few paragraphs that explain concepts used in the  wording of the  clause – which constitutes particular elements of tax law abuse. most importantly, after the  implementation of the  eu gaar, objective and subjective elements of the  slovak gaar in tax code will be analysed in the  following text. 3. slovak gaar in tax code and its application elements as mentioned above, apart from the  objective and subjective elements which represent the  core testing of tax law abuse, other supplementary elements and application problems arise when analysing the  wording of the  national gaar. at the  very beginning, it is important to stress that gaar is a  new provision without previous experience in the application practice of the slovak tax law, which is rather supplementing (not replacing ) the  formerly applied substance over the  form rule that has been present and developed within the national case law.13 statutory gaar has recently became a  part of our tax legislation by the  following wording : “a legal action or other facts essential for identification, assessment or collection of a  tax without an economic substance and resulting into a  purpose-built tax avoidance or  acquisition of such tax benefit to which the  taxpayer would not be otherwise entitled or resulting into a  purpose-built reduction in tax liability shall be disregarded within administration of taxes.“ with the  next text, particular construction elements will be analysed with respect to the implemented clause. when analysing slovak gaar in tax code, which had been implemented under the  commission’s recommendation on aggressive tax planning, some differences are already present with regard to the  application scope of the  implemented provision. contrary to the  eu gaar that had been adopted in order to counteract aggressive tax planning in the  area of direct taxation,14 the  scope of the  implemented slovak gaar is broader and covers all taxes within our tax system – indirect taxes, direct taxes and local taxes.15 the issue of the application of gaar with the other levies/fees that are present in our legal system16 has not been confirmed yet and is rather the oretical, but in our view it could not be fully excluded. gaar had been implemented as a  rule which is aimed at directing not only taxes, but also tax avoidance cases arising from the whole tax system. when it comes to the scope of situations in which gaar should find its application, slovak gaar refers to legal action or other facts, and it seems that the  scope of situations which are mentioned by the  eu gaar overlaps it. however, a  legal action or other facts seem to be, in the  narrower sense, compared to the  concept of arrangement which for the  purposes of the  recommendation means any transaction, scheme, action, operation, agreement, grant, understanding, promise, undertaking or event. an arrangement may comprise more than one step or any part of it. even the  fact that by the  wording of recommendation the arrangement may comprise more than one step or might partly bring 8 františek bonk, karin cakoci public governance, administration and finances law review • vol. 2. no. 1. some chaos by interpreting national gaar. what could be an important moment for  the  application of gaar? the  verbatim interpretation of the  wording of the  slovak gaar, the  provision in itself shall be applied as soon as there is a  legal action or some other fact that fulfils the  statutory requirements of the  applicable provision. this might rather be an expression of the  need to introduce gaar as an instrument which is applicable to all taxes, not only to tax avoidance schemes in the area of direct taxation that typically consists of more transactions, steps and operations in order to reach the final “tax arrangement”. the terminolog y seems to be somehow confusing, nevertheless legal actions create arrangement(s). the  issue is becoming interesting when it comes to the  analysis of the objective and subjective testing of the slovak statutory gaar. 3.1. the objective test of the slovak gaar the objective element of the  abuse of tax law testing has been present already from emsland-stärke where ecj held that despite formal observance of the  conditions laid down by the  community rules, the  purpose of those rules has not been achieved.17 subsequently, the  objective element has been confirmed under actions that resulted in obtaining tax benefit contrary to the purpose of those provisions in halifax.18 similarly, in order to find an abusive arrangement under cadbury schweppes ruling the objective pursued by the freedom of the establishment has not been achieved.19 the objective element is specified in the  eu gaar as well. under paragraph 4.5 of the text of recommendation, “the purpose of an arrangement or series of arrangements consists in avoiding taxation where, (regardless of any subjective intentions of the taxpayer), it defeats the object, spirit and purpose of the tax provisions that would otherwise apply”. it is the refore clear that the  objective element is particularly emphasized by the  wording of the  above mentioned provision. but the  requirement is given rather cumulatively and the  objective element, interpreting the  provision literally may be present only when the  action of the  taxpayer is of such kind that it defeats the  object, spirit and purpose of the  tax provisions that would otherwise apply.20 interpretation problems are connected with the fact whether the object, spirit and purpose of the tax provision are of the same meaning or whether this should be examined separately. lastly, eu gaar is only a  non-binding soft law and member states are free to implement the  provision under their domestic interpretation standards, the  refore a  closer look at the  wording of the  implemented provision at the issue is needed. reading the  wording of the  slovak gaar in tax code the  very first impression evokes that the  objective element has to be deduced since it is not really clear from the  wording of the  clause. where is the  objective element in the  slovak gaar? if we interpret the  objective element in accordance with the  ecj case law and the  eu gaar, the  objective element is actually not explicitly present within the  wording of the  clause. there is no explicit reference regarding the objective testing neither under the explanatory report with the amending law.21 the economic substance as an emphasized concept could not represent the  objective test, it is rather a  subjective criterion that is connected with the  issue of artificiality. if we regard the  objective test under eu law as a  tool of testing 9 public governance, administration and finances law review • 1. 2017 statutory general anti-abuse rule in the slovak tax code… the taxpayer’s action against the object, purpose or the spirit of the particular tax provision (law), then such a  test is simply not present within the  wording of the  slovak gaar. the  provision in itself rather accounts for three statutory alternatives (besides the  lack of the economic substance of the legal action or the other fact) if the abuse of tax law shall be confirmed. in order to apply gaar, a  legal action or other facts without an economic substance that fulfil one of the  three alternatives have to be present. either the  y have to result in: ƿ a purpose-built tax avoidance or ƿ an acquisition of such tax benefit to which the taxpayer would not be otherwise entitled or ƿ a purpose-built reduction in tax liability.22 an interesting point of these statutory alternatives in order to meet the  legislative criteria of abuse is represented by the fact that only one of them mentions directly the obtainment of tax benefit as a substantial element when gaar should be applied. seemingly, it looks as if the words’ purpose and result have been mixed in implementing the statutory gaar. however, incorporating the test of “result” is not quite obvious. if there are more results of the particular transaction, which one should be decisive for the application of gaar? are non-tax results of importance interpreting the  clause? the  necessity of “result” in testing abuse brings only more chaos to the interpretation of the provision. after all, at the end of the day, in determining whether an arrangement or series of arrangements has led to a tax benefit, national authorities are invited to compare the  amount of tax due by a  taxpayer, having regard to those arrangement(s), with the amount that the same taxpayer would owe under the  same circumstances in the  absence of the  arrangement(s).23 this is in our view the  way the  result should be understood. however, the  wording of gaar evokes that apart from the  unclear objective test, the  subjective test plays an important role on the whole in identifying abuse. 3.2. the subjective test in the slovak gaar being of equal importance, the  subjective test (starting already in emsland-stärke) represents besides the objective test the second criterion in identifying abuse. reliability of the  subjective testing had been partially disturbed by opinions of the  general advocate in halifax.24 nevertheless, the  ecj had never resigned of finding both elements in order to identify abuse. under the  ecj doctrine of prohibition of abuse, the  subjective test is represented by the intention of the taxpayer to obtain tax benefit.25 again, a closer look on how the subjective test is reflected by the wording of the slovak gaar is needed. subjective testing is at eu level terminologically bounded by the  concept of artificiality which has been brought to the  wording of eu gaar from  the  ecj rulings. it was the ecj in the first place, who mentioned the concept of (wholly) artificial arrangements, the combat which authorizes the restriction of the freedom of the establishment.26 the concept of artificiality lies apparently at the heart of the commission’s recommendation on aggressive tax planning. under par. 4.4 of the  recommendation, for 10 františek bonk, karin cakoci public governance, administration and finances law review • vol. 2. no. 1. the purposes of eu gaar an arrangement or a series of arrangements are artificial when it lacks commercial substance.27 such an explanation only replaces one ambiguous concept by another one and does not make it clear at all.28 an ambition to provide some examples of artificiality is rather positive; however, the shortlist might be only seen as a codification of few situations of abusive practices coming from the  more developed national judicial doctrines of tax abuse, such as the german or british. a non-binding recommendation left the  door open for transposing the  subjective testing under the  national standards and imaginations of the member states. if we examine the  wording of the  slovak gaar in detail, there is nothing like an artificiality concept within the gaar at all. however, apart from fulfilling one of the three statutory alternatives in order to identify abuse, the legal act or some other fact has to lack economic substance. already from the  wording of the  clause it is evident that finding “economic substance” is prioritized in order to identify abuse, apart from the  cumulative fulfilment of the  one of the  three above mentioned statutory alternatives. “searching for” the  economic substance of a  transaction has a  rather long history in our judicial doctrine with respect to the  substance over form principle that has been applied in our tax system for a  long time. the  role of the  principle within its meaning was to counteract simulation actions and sham transaction within the  tax administration before the  adoption of the statutory gaar. the adoption of the statutory gaar and a developed ecj case law on prohibition of abuse rather involved application problems. there is a clear confusion in the contemporary judiciary when it comes to testing the abuse of tax law. developing case law started to operate not only with finding the objective and subjective element of abuse as it was brought by the ecj rulings, but also to hold on the finding of economic substance of the  transaction.29 this might create confusion but on the  other hand the  substance over form principle is still present in the  tax code. after all, the  economic substance may be easily found and proved on the value added tax cases, but it has not been tested on corporate tax avoidance cases from the area of direct taxation by courts yet. the finding of the “real” economic substance in such cases might be in our view much more difficult and the  economic substance test might become less reliable. subsequently, the  purpose test as a  part of subjective testing (or as a  separate additional element of finding abuse) is of significant importance by identifying abusive practices as well. 3.3. purpose test purpose test represents one of the  most controversial issues when discussing gaars. the  terminological chaos has already been caused by different “intensity” expressions of testing the  purpose of arrangements what has been brought by the  ecj. first of all, the  essential purpose had been presented by halifax as a  criterion in identifying abuse.30 after that, things became more complicated under part service ruling in which more “levels” of purpose were illustrated.31 following the  development of ecj ruling, the  expression of the  intensity of tested purpose is far from being clear and the  ecj and domestic courts collide amongst many alterations – from the  sole purpose, through 11 public governance, administration and finances law review • 1. 2017 statutory general anti-abuse rule in the slovak tax code… principal purpose, one of the principal purposes up to the essential purpose of the arrangement (transaction). purpose test is a part of the eu gaar brought by the commission’s recommendation on aggressive tax planning. under the meaning of the eu gaar, the essential purpose of the  arrangement (transaction) is relevant. an attempt to clarify “the essential purpose” is subsequently provided by par. 4.6 of the recommendation, under which “for the purposes of point 4.2, a given purpose is to be considered essential where any other purpose that is or could be attributed to the  arrangement or series of arrangements appears most negligible, in view of all the  circumstances of the  case”. in our view, this merely contributes to understanding of what actually the  essential purpose is. it only makes the  situation more difficult by identifying more purposes, the negligibility and circumstances of which have to be compared. apart from that, the  wording of the  clause of eu gaar is contrary to the ecj’s case law since par. 4.2, mentions an artificial arrangement or an artificial series of arrangements which has been put into place for the  essential purpose of avoiding taxation. consistently with the  ecj’s rulings, an essential purpose of arrangement should be manifested by obtaining tax benefit in the first place. implementing eu gaar, the  intensity of “purpose testing” had (luckily) not been specified within the  wording of the  slovak gaar.32 on the  other hand, the  explanatory report brings more chaos providing the  aim of the  new clause which is “to enable tax authorities to disregard within administration, e.g. artificial transactions and structures created for the  purpose of an undesired tax optimization, even in a  case when such an optimizing is not the sole purpose of the transactions and structures“ (what is actually contrary to the  wording of the  clause).33 the  wording of the  slovak gaar rather leaves the  door open for tax authorities and courts to interpret and potentially sets limits to the  required purpose for abusive arrangements. purpose test as such is in our view a  rather unreliable and questionable criterion that might easily tempt tax authorities and courts to focus on the purpose of the arrangement instead other criteria by identifying abusive practices.34 3.4. tax advantage and legal consequences tax advantage presents a part of gaar testing and the eu gaar provides in this respect under par. 4.7 with a  few situations when tax benefit may occur.35 a demonstrative list of a few situations under which tax benefit occurs is rather promising, suggesting that the idea of the tax benefit is of a broader scope. however, assessment of the situation if arrangement or series of arrangements lead to a tax benefit under par. 4.2 of the recommendation relies on a  fiction.36 in our view, tax advantage represents the  result of the  arrangement (transaction) and it is up to the  tax authority to prove its obtainment. nevertheless, the finding and confirming of the objective element and subjective element of abuse should be performed in the first place. otherwise, the fictitious reconstruction of the arrangement without having any specified discretionary limits might unjustifiably strengthen decisive powers of tax authorities. once the  obtainment of tax benefit is confirmed by the  tax authority, the taxpayer fails to prove the opposite. 12 františek bonk, karin cakoci public governance, administration and finances law review • vol. 2. no. 1. when it comes to legal consequences of the  application of gaar, slovak gaar corresponds with the eu gaar which provides that an abusive arrangement (or series of arrangements) shall be ignored. as it is provided by par. 4.2 of the  recommendation, national authorities shall treat these arrangements for tax purposes by reference to their economic substance, what brings us back to the substance over form principle applied in our national tax law for decades. 4. implementation of anti-tax avoidance directive gaar? legislative ambitions of eu law makers of recent years with respect to statutory gaars have been intensified and manifested by the  prompt adoption of anti-tax avoidance directive (henceforth atad).37 atad gaar represents in itself the  ultimate force to adopt statutory gaar for those member states who have not entered statutory gaar in their domestic laws by now.38 gaar incorporated in the  art. 6 of anti-tax avoidance directive39 is the measure of “minimum standard” and shall not preclude the application of domestic or agreement-based provisions aimed at safeguarding a higher level of protection for domestic corporate tax bases.40 as the preamble of the directive says, it is important to ensure that the gaars should be applicable in domestic situations, within the union and vis-à-vis third countries in a uniform manner, so that their scope and results of application in domestic and cross-border situations do not differ.41 it is outside the scope of the article to bring a  closer analysis of the  issue, however, atad gaar seems like a  follower of previous statutory eu gaars and ecj’s case law and becomes a “codification mixture” of all.42 however, the question of application scope makes it different as it was constructed to apply only to corporate taxation. despite the  fact that slovakia already has gaar incorporated in its tax code, several implementation possibilities could be mentioned. the  situation becomes more interesting regarding our tax system compared with member states that lack statutory gaar in their tax systems (and are obliged to incorporate atad gaar into their domestic tax legislation). as we already have statutory gaar, the following possibilities could be mentioned: ƿ incorporation of the atad gaar into the domestic law for all tax purposes with the corresponding repeal of the existing statutory gaar; or ƿ implementation of the  atad gaar according to the  original scope of the  directive and preservation of traditional statutory gaars for all other taxpayers and tax liabilities; or ƿ no explicit implementation of the  atad gaar in the  domestic legislation holding the view that existing gaars suffice.43 it seems likely that none of these three options could be rejected from the  very first impression while applying the gaar concept for the slovak tax system. however, due to the limited extent of the article the issue of the implementation possibilities of the atad gaar is fully left for another time. 13 public governance, administration and finances law review • 1. 2017 statutory general anti-abuse rule in the slovak tax code… 5. conclusion the concept of statutory gaars is currently gaining a remarkable attention in tax systems all around the world. statutory gaars at eu level became such phenomena that member states had to deal with in the  last years. cee countries are especially targeted by the implementation of gaars since the statutory (and often judicial) concept of gaars had been lacking in their tax systems and (or) is just under development. the  case of statutory slovak gaar that has been implemented under the  commission’s recommendation on aggressive tax planning (eu gaar) shows that the implementation went rather on its own way and the  final wording of the  gaar in the  tax code is rather different from what was requested by the  eu gaar and ecj’s case law at the  end of the  day. in our view, the  main issue of the  slovak gaar is that it totally gives up on objective testing and attracts its attention to “economic substance” testing what is still not really “clearly” developed by courts and only expresses the  nature of the  substance over form rule applied by tax authorities and courts for decades before.44 the  new clause has however not been tested properly by courts, so the interpretation could only be presumed. the  abuse of tax law was judicially confirmed in slovakia only a  few years ago under the  decision of the  highest court45 issued after answering preliminary ruling by ecj (tanoarch).46 after that, the  way of the  identification of abuse of tax law by courts is not consistent relying on objective and subjective testing on the  one hand, and finding of the  economic substance on the  another one. nevertheless, it is, in our view, just the  beginning of the  journey in which statutory gaars will play a  more important role. however, for next time the way of the implementation should not be underestimated. 14 public governance, administration and finances law review • vol. 2. no. 1. františek bonk, karin cakoci references 1. this paper was written as a  partial output of the  research project apvv-16-0160: “tax evasions and tax avoidance (motivation factors, formation and elimination)”, as well as the  output of the  project vega 1/0846/17: “implementation of the  initiatives of the  eu institutions in the  field of direct taxes and indirect taxes and their budgetary law implications”. 2. rita de la feria, prohibition of abuse of (community) law – the creation of a new general principle of ec law through tax?, 395 et seq., in common market law review, vol. 45 (2008). 3. wolfgang schön, abuse of rights and european tax law, 78 et seq., in comparative perspectives on revenue law (cambridge, university press, 2008). 4. starting with the  first common consolidated corporate tax base (henceforth ccctb) proposal gaar, followed by a  gaar in financial transaction tax proposal, by the  “eu gaar“ represented by the  commission’s recommendation on aggressive tax planning, as well as gaars in direct tax directives, leading subsequently to the last resort – anti-tax avoidance directive gaar. 5. for more information see: anna románová, the new anti abuse rule in slovak tax law: strengthening of the legal certainty?, 214, in system of financial law (system of tax law) (brno, masaryk university, 2015). similarly: anna románová, karolína červená, nová úprava zásady skutočného obsahu právneho úkonu v  daňovom poriadku [the new regulation of the  principle of material content of legal act in the  tax ordinance], 198 et seq., in marketing, manažment, obchod a  sociálne aspekty podnikania: zborník recenzovaných príspevkov z 2. ročníka medzinárodnej vedeckej konferencie: 23–24 október 2014, košice [marketing, management, business and social aspects of enterprises: reviewed book of proceedings from the  2. season of international scientific conference: košice, 2017 october 23–24] (košice, ekonomická univerzita v bratislave – podnikovohospodárska fakulta so sídlom v košiciach, 2014). similarly: miroslav štrkolec, fighting tax evasion and its reflection in the  procedural tax law, 468 et seq., in tax codes concepts in the  countries of central and eastern europe. similarly: vladimír babčák, daňové právo na slovensku [tax law in slovakia], 439 et seq., (bratislava: epos, 2015). as well as: mária bujňáková, [fundamentals and principles of tax proceedings], 11, in zeszyty naukowe universytetu rzeszowskiego: seria prawnicza [scientific writings of the university of rzeszow: law series] vol. 91, no. 18 (2016). 6. see more: markus seiler, gaars and judicial anti-avoidance in germany, the uk and the eu, 145 et seq., (vienna, linde, 2016). 7. c – 110/99. 8. c – 255/02. 9. c – 196/04. 10. according to paragraphs 52 and 53 of emsland-stärke ruling, “a finding of an abuse requires, first, a  combination of objective circumstances in which, despite formal observance of the  conditions laid down by the community rules, the purpose of those rules has not been achieved.  it requires, second, a subjective element consisting in the  intention to obtain an advantage from the  community rules by creating artificially the conditions laid down for obtaining it”. 11. under cadbury schweppes ruling (55 et seq.), restriction of freedom of establishment might be justified only when it is aimed at the preventing of the creation of wholly artificial arrangements intended to escape the national tax normally payable. 12. par. 4.2 of recommendation, available under http://eur-lex.europa.eu/legal-content/en/txt/html/? uri=celex:32012h0772&from=en (accessed 20 june 2017). 13. a principle explicitly incorporated in the provision of § 3 p. 1 of the tax code that directly stresses that an actual content of the  legal action (transaction) over the  form should be preferred. see more: karin prievozníková, implementácia zákazu zneužitia práva do daňového poriadku [implementation of the prohibition of abuse of rights in the tax ordinance], 161 et seq., in daňové právo vs. daňové podvody a  daňové úniky: nekonferenčný zborník vedeckých prác. ii. diel [tax law vs. tax fraud and tax evasion: non-conference book of scientific work. ii. part.], (košice, univerzita pavla jozefa šafárika v  košiciach, 2015). also see: anna románová, karolína červená, nová úprava zásady skutočného obsahu právneho https://doi.org/10.2139/ssrn.3475123 https://doi.org/10.1017/cbo9780511585951.006 https://doi.org/10.2139/ssrn.3475123 https://doi.org/10.1017/cbo9780511585951.006 15 public governance, administration and finances law review • 1. 2017 statutory general anti-abuse rule in the slovak tax code… úkonu v daňovom poriadku [the new regulation of the  principle of material content of legal act in the  tax ordinance], 189 et seq., in marketing, manažment, obchod a  sociálne aspekty podnikania: zborník recenzovaných príspevkov z 2. ročníka medzinárodnej vedeckej konferencie: 23–24 október 2014, košice [marketing, management, business and social aspects of enterprises: reviewed book of proceedings from the  2. season of international scientific conference: košice, 2014 october 23–24] (košice, ekonomická univerzita v bratislave – podnikovohospodárska fakulta so sídlom v košiciach, 2014). 14. par. 1 defining subject matter and the scope of the recommendation. 15. similarly: lubica adame, gaar in slovakia, 585, in gaars – a key element of tax systems in the post beps world (amsterdam, ibfd, 2016). 16. such as local fee for municipal waste and minor construction waste and local fee for development under the law no. 582/2004 coll. concerning the issue of the local fee see more: ivana štieberová, local fee for municipal waste and minor construction waste in the light of legislative changes, 405 et seq., in local government financing and european charter of local self-government (warszawa, cedewu, 2016). concerning the  issue of the  other fee see as well: adrián popovič, reflection on the  local fee for development, 57 et seq., in local government financing and european charter of local self-government (warszawa, cedewu, 2016) and adrián popovič: zamyslenie sa nad miestnym poplatkom za rozvoj [thoughts on local fee on development], 1263 et seq., in justičná revue, vol. 68, n.11 (2016). 17. c – 110/99, p. 52. 18. c – 255/02, p. 74. 19. c – 196/04, p. 64. 20. markus seiler, gaars and judicial anti-avoidance in germany, the uk and the eu, 183 et seq. (vienna, linde, 2016). 21. explanatory report to the  law proposal no. 435/2013 coll. amending the  law no. 563/2009 z. z. on administration of taxes. available online https://www.nrsr.sk/web/default.aspx?sid=zakony / zakon&masterid=4553 (accessed 20 june 2017). 22. similarly: anna románová, the  new anti abuse rule in slovak tax law: strengthening of the  legal certainty?, 214 et seq., in system of financial law (system of tax law) (brno, masaryk university, 2015). 23. par. 4.7 of the recommendation. 24. as it was provided in opinions of general advocate maduro in par. 71 of halifax judgement: “it is the  consideration of the  objective purpose of the  community rules and of the  activities carried out, and not the subjective intentions of individuals, which, in my view, lies at the heart of the community law doctrine of abuse”. 25. par. 53 of c – 110/99, par. 75 of c – 255/02, par. 64 of c – 196/04. 26. par. 55 of c – 196/04. 27. after that, in determining whether the  arrangement or series of arrangements is artificial, national authorities are invited to consider whether the  y involve one or more of the  situations as provided by the par. 4.4 of the recommendation. 28. seiler, supra n. 20, 204. similarly: t. lyons, the financial crisis, tax avoidance and an eu gaar, 114, in british tax review, no. 2 (2013). 29. the identification of the  absence of the  economic substance had been present in the  judgment of the highest court of slovak republic no. 3 sžf/45/2010 from 2 june 2011.the case dealt with the simple fictitious vat transactions, where the  actual content of transaction has not been found contrary to the formal declarations in order to obtain vat returns. 30. par. 75 of c – 255/02. purpose test has not been specified in emsland-stärke ruling at all. 31. under par. 40 of c – 425/06 a  following reference had been made to the  court: “…whether the  sixth directive should be interpreted as meaning that there can be a  finding of an abusive practice when the accrual of a tax advantage is the principal aim of the transaction or the transactions in question, or if such a  finding can only be made if the  accrual of that tax advantage constitutes the  sole aim pursued, to the exclusion of other economic objectives. 16 public governance, administration and finances law review • vol. 2. no. 1. františek bonk, karin cakoci 32. the clause provides with its wording only purpose-built tax avoidance and purpose-built reduction of tax liability (by obtaining tax benefit it is rather evident that the purpose has to be present). 33. see more: románová, supra n. 22, at 218. 34. similarly: seiler, supra n. 20, 212. 35. under par. 4.7 of the recommendation following situations are mentioned: a) an amount is not included in the tax base, b) the taxpayer benefits from the deduction, c) a loss for tax purposes is incurred, d) no withholding tax is due, e) foreign tax is offset. 36. national authorities are invited to compare the  amount of tax due by a  taxpayer, having regard to those arrangement(s), with the  amount that the  same taxpayer would owe under the  same circumstances in the absence of the arrangement(s). 37. council directive (eu) 2016/1164 of 12 july 2016 laying down rules against tax avoidance practices that directly affect the  functioning of the  internal market. adoption of the  directive represents one of the  measures that have been introduced by the  european commission on 28 january 2016 as a  part of “anti-tax avoidance package”. 38. for example in the case of the czech republic or croatia. 39. the wording of the  atad gaar is the  following : “for the  purposes of calculating the  corporate tax liability, a member state shall ignore an arrangement or a series of arrangements which, having been put into place for the  main purpose or one of the  main purposes of obtaining a  tax advantage that defeats the  object or purpose of the  applicable tax law, are not genuine having regard to all relevant facts and circumstances. an arrangement may comprise more than one step or part.” 40. art. 3 of directive. see more: luc de broe & dorien beckers, the general anti abuse rule of the antitax avoidance directive: an analysis against the  wider perspective of the  european court of justice’s case law on abuse of eu law, 141, in ec tax review, no. 3 (2017). 41. p. 11 of the preamble to the directive. 42. similarly: broe & beckers supra n. 40, at 139. 43. andrés báez moreno, a pan-european gaar? some (un)expected consequences of the  proposed eu tax avoidance directive combined with the dzodzi line of cases, 143 et seq., in british tax review, no. 2 (2016). 44. karin prievozníková, implementácia zákazu zneužitia práva do daňového poriadku [implementation of the  prohibition of abuse of rights in the  tax ordinance], 168, in daňové právo vs. daňové podvody a  daňové úniky: nekonferenčný zborník vedeckých prác. ii. diel [tax law vs. tax fraud and tax evasion: non-conference book of scientific work. ii. part.] (košice, univerzita pavla jozefa šafárika v  košiciach, 2015). similarly: ivana forraiová, právne dôsledky zneužívania daňovo-právnych noriem [legal consequences of abusing tax-law norms], 86 et seq., in zneužitie a iné formy obchádzania práva [abuse and other forms of law avoidance] (košice, upjš, 2016). similarly: ivana štieberová, zneužívanie práva pri uplatňovaní nadmerných odpočtov dane z pridanej hodnoty [abuse of law in the  application of excess vat deductions] 305 et seq., in zneužitie a iné formy obchádzania práva [abuse and other forms of law avoidance] (košice, upjš, 2016). 45. judgment no. 5 sžf/66/2011. see more: peter huba, jozef sábo & miroslav štrkolec, medzinárodné daňové úniky a metódy ich predchádzania [international tax avoidance and methods of the ir prevention], 146, (košice, upjš, 2016). 46. c – 504/10 tanoarch. public governance, administration and finances law review book reviews tax codes concepts in the countries of central and eastern europe1 dana šramková* * judr. dana šramková, ph.d., mba, assistant professor, masaryk university, faculty of law, specialized in financial law, tax and customs law and administration. (e-mail: dana.sramkova@law.muni.cz) a thematic monograph entitled tax codes concepts in the countries of central and eastern europe has been resulted from an international cooperation of members of the information and organization centre for the research on the public finances and tax law in the countries of central and eastern europe, białystok, poland (hereafter referred to as centre). editors of the volume, leonard etel and mariusz popławski, oversaw a group of authors that are mostly closely related to the organization. the authors made a selection of topics – their first interest was aimed at providing an overview of tax codes (history, structure, evaluation and development), secondly, they focused on substantive and procedural tax law aspects from the tax codification perspective). it is not merely a coincidence that the editors and hence the team leadership for this publication have been polish, as there were several reasons substantiating the choice. polish tax laws are in a process of crucial recodification as the polish general taxation law codification committee is elaborating a new tax ordinance. there has been a number of professional workshops and specialists conferences organised by and in the faculty of law in bialystok. the volume under review, however, is not exclusively concerned with polish legal codifications. its aim, as mentioned above, was to create a broad and detailed collection of studies on professional approaches to tax law codifications in eight different central and eastern european countries, those of belarus, czech republic, hungary, lithuania, poland, russia, slovenia and ukraine. the choice of working language itself – english – is also reflecting an ambition to provide information on a regional as well as an international level. its reviewer was a czech specialist, associate professor petr mrkývka. the volume indeed provides a substantial contribution to a special area of law – best seen in its first part – introduced by a review chapter entitled tax code models by mariusz popławski. roles and impacts of tax law and tax codes are analysed not only in the context of the eu law codification but also in context of wider international legal systems and entities – the international monetary fund code model in particular, that offers a draft of a model of a hypothetical tax law in 2000 (imf tax code) and the ciat tax code model compiled by the inter-american center of tax administrations with subsequent versions dated to 1997, 2006 and 2015. at this point i would like to emphasize that the first part of the monograph offers a concise summary of information on fundamental questions of law codification in the states concerned, including their different historical perspectives. since the volume does not offer a succinct comparative perspective, its informative and well-organised contents enable the reader to formulate conclusions. the second part of the volume consists of individually very interesting, but rather selective elements concerning current aspects of substantive and procedural tax law. these aspects are indeed related to a sum of shared underlying issues in a tax codification perspective. the states participating in activities of the centre are usually represented by several authors, and additionally another essay reflecting on the french system has also been added. the character of this part of the monograph is undoubtedly related to the 15th international scientific conference, which bears the title of concepts of tax codes. 15 years of the centre’s operation. presentations revealing the results of the research teams from the individual member states particularly on the current state and the direction of changes of their tax law codification procedures are composing it. however, we are not dealing with a typical structure of conference proceedings here – a selection was made on-demand for this volume and with a clear objective of publishing studies pertinent to the volume’s overall topic, whilst unrelated studies have been or will be published elsewhere. conclusively, it may be said that the publication tax codes concepts in the countries of central and eastern europe resulted in a specialized and thematized monograph, offering a complex and comprehensive knowledge concerning a large european region and an important area of law systematisations. especially thanks to its first part, it becomes a recommended reading on legal theory and practice in the field of tax laws and their existing and proposed codifications. references 10.53116/pgaflr.2016.2.7 mailto:dana.sramkova@law.muni.cz https://doi.org/10.53116/pgaflr.2016.2.7 1 leonard etel, mariusz popławski (eds.), tax codes concepts in the countries of central and eastern europe (temida 2, białystok, 2016) isbn 978-83-62813-88-9. public governance, administration and finances law review articles the next generation of capital and county government offices developments in hungarian middle-level state administration since 2011* attila barta** * dr. attila barta, phd., senior lecturer at the department of administrative law, faculty of law, university of debrecen. his main fields of research are: middle-level public administration, territorial state administration, organization of public administrative institutions and regulation of local self governments. (e-mail: barta.attila@law.unideb.hu) ** this study has been realized within the framework of the research on the ‘new challenges in the middle level state administration. trends in the development of county and capital government offices and district offices’. the work has been granted by the hungarian ministry of justice. abstract: the last financial crisis and the rhapsodic developments of hungarian public administration resulted in a political aspiration that aimed (and still aims) to revitalize the state of hungary and increase its administrative competitiveness. the territorial representation of the government has been strengthened by the reorganization of the middle level of public administration and the establishment of the new institution of capital and county government offices. the goal of this study is to summarize and evaluate the major steps of the aforesaid process, and to consider the expected further developments in this field. keywords: hungarian public administration; middle-level state administration; territorial representation of hungarian government 1. introduction public administration systems are complex phenomena,1 that cannot operate independently of the social, economic, and cultural atmosphere in which they exist. at the same time, no public administration system is absolutely isolated: the european national administrative systems were affected by numerous megatrends in the last 25 years. a continuous need of development was generated by, among others, the globalization,2 the new public management, and the idea of the european administrative space. however, while these trends are undoubtedly convergent, they did not result in uniform administrative systems. public administration systems are still predominantly nation-specific, since they are formed primarily within the framework of national politics.3 from the onset of the 21st century, but especially since the financial crisis of 2007–09, an increased interest has been observed regarding the classic weberian bureaucratic traditions in europe.4 understandably, this can change the judgement of most elements of public administration systems, including middle-level state administration. like the energy crisis of the 1970s, the recent crisis induced notable reforms in the public sector, and resulted in the major readjustment of the relationship between the state, the market, the citizens, and the society they live in.5 at the same time, considering that individual countries faced specific challenges, it cannot be stated that the recent international crises (such as threats of terrorism, environmental disasters, illegal immigration) evoked common crisis management. on the contrary, each country practically reacted to the above challenges in their own specific ways. what is certain, however, is that the re-imagination of the state and administrative roles became of utmost importance.6 in hungary, the above process proved to be especially cumbersome, due to the administrative evolution (on-going since the democratic transformation) being far from following a clear-cut path: instead, the improvement of hungarian state administration in the last 25 years is rather a story of burdening reversals and concept changes. let me point out though, that this tendency generally applies to all countries of the centraland eastern european (cee) region – almost none of them possessed a straightforward concept regarding the roles and responsibilities of the state after transformation.7 in my opinion, the above tendencies altogether resulted in a political aspiration, which aimed (and aims) to revitalize the state and increase its competitiveness. since the executive branch of the state is its administrative apparatus, and the above aspirations required executive actions, the reformation of hungarian state administration was inevitable. the goal of this study is to provide detailed data and information on the recent changes of hungarian middle-level state administration for researchers, and for anyone interested in the topic. the overview first considers the changes 10.53116/pgaflr.2016.2.1 mailto:barta.attila@law.unideb.hu https://doi.org/10.53116/pgaflr.2016.2.1 performed between 2011 and 2014. then, the executed integration actions of 2015 will be summarized. finally, the study describes the most recent and upcoming developments in public administration, spearheaded (and to be spearheaded) in 2016 and beyond. 2. first steps toward an integrated territorial public administration (2011–2014) as an organic part of the evolution described above, the legislative branch established the capital and county-based government offices. in administrative sciences, these offices are also known as the territorial, sub-national, or middle-level elements of hungarian public administration. thus, i will use these terms interchangeably in this study.8 the inception and evolution of these ‘government offices’ (hereafter gos in short) were performed in line of the following milestones. albeit the period of 1990–2010 already had a deconcentrated state administrative organization in hungary that ensured the territorial representation of the government, middle-level public administration saw the onset of a new era from 1 january 2011.9 15 deconcentrated organizations have been merged into the so-called capital and county government offices. the rationale behind this transformation was the decrease of territorial division experienced within the administrative system.10 one of the specialties of the newly-found gos was the so-called ‘distributed structure’. this meant that the offices were divided internally into a main office, and to several specialized administrative organs. the main office was responsible for the management of joint functions, like it, procurement, and hr-matters; at the same time, the specialized administrative organs handled specialized administrative duties (as a relic of the roles of the former specialized territorial agencies). the reorganization affected almost 250 institutions in hungary, which was about half of the entire state administrative organizational circle at that time. one year after the fundamental law of hungary was enacted, it named the gos as the general-duty territorial organizations of the government.11 since then these offices have practised the administrative supervision of the local selfgovernments.12 to improve their effectiveness of influence over the mid-level processes, the leaders of the gos (the ‘governmental commissioners’) also received a key role in coordinating the key investments of the national economy. the middle-level government offices were vertically expanded in 2013: the 20 gos received 198 additional deconcentrated offices (the so-called ‘district offices’, or dos in short).13 with their introduction, legislation aimed to standardize the rather eclectic image of sub-national state administration functioning between counties and towns.14 in 2014 the structure of dos evolved further. the ever-growing network of integrated customer service offices (also known as ‘government windows’), operating as part of the dos, were complemented by several sub-offices and almost a thousand specialized civil servants. considering the fact that most of the pre-2015 steps of this reinforcement have already been studied extensively,15 the rest of my study focuses on the major transformations of 2015, 2016, and beyond. 3. 2015 – government offices reloaded? since 1 april 2015, the model of gos has been facing yet another transformation. the changes are due to the legislative decision of homogenizing the administrative structure, and merging additional specialized duties into the offices. the course of this transformation is detailed below. 3.1 mid-level government offices: version 2.016 the political forces intended to continue the path of changes that would increase state (pro)activity, and in which the gos appear as the integrative connective points of mid-level public administration. however, the ideological framework of these changes has been designated as the strategy for the improvement of public administration and public services, the mid-term improvement documentation of hungarian public administration, which obviously builds on the existing countyand district-level apparatus, and considers the structure of integrated administrative offices an element worthy of further improvements.17 the strategy aims for a completely reformed user-friendly public administration, to be achieved by 2020. considering that large-scale complicated systems (like the public administration apparatus, and its subsystems) can rarely be reformed within a single political cycle, i find it justified that a long-term strategy has been prepared.18 at the same time, let me point out that while it would be reasonable to align the planning and execution phases to the known eu-level development cycles, the proposed modifications will most probably be scheduled to align the hungarian election year. hence, most of the painful changes will be carried out by the government during 2016, or in 2017 the latest. the reformation of the government offices were executed by an internal and external thread, which are summarized below in more detail. 3.1.1 ‘the 3-is’: increasing internal integration the laws enacted in 2015 (and the underlying strategy on which they are based) clearly indicate that the main aspiration of the decision makers was to enhance cooperation among the elements of gos that were rapidly forged into a single organization back in 2011. from that moment on, no internal distributed structures were required. their tasks and authorities were re-assigned and concentrated to the county-level governmental commissioners and district office directors; at the same time, offices started to consist only of divisions and departments (see table 1 below). due to the re-definition of organizational and professional control, the management, supervisory and monitoring licences were also clearly determined.19 compared to the original structure, the current administrative offices of the government boast a seasoned internal structure, a more centralized control scheme, and more dynamic leadership. 3.1.2 the second round of external integration to simplify territorial state administration, two solutions were implemented. in some cases, integration meant only the assimilation of certain specialized tasks and their related personnel, as happened with the hungarian state treasury, national health insurance fund and office of immigration and nationality. in two cases, however, integration was realized by merging complete organizations into the gos. these were the inspectorates for environment, nature and water and the mining inspectorates. the ‘government office corpus’ established in 2011 was successful in accepting new organizations and responsibilities during 2015, and this tendency (horizontal expansion of government offices) is likely to continue in the future. to facilitate the understanding of the core concept behind the internal organizational changes and the external integration, table 1 has been prepared below. the table showcases the events that occurred ‘under the hood’ between 2010 and 2015, that is the development of the specialized agencies working as units of the mid-level public administration apparatus. table 1: organizational changes in mid-level state administration with the progress of the integration process (2011–2015)20 source: table 1 was edited by attila barta. it is therefore not an overstatement that in the past years, the government interventions have been focusing on the territorial level;21 more precisely, on the mid-level government offices and the district government windows. the gos became the nucleus of the re-defined middle level of public administration: the government aspires to use them in the unification of deconcentrated state administration (shattered back then during the democratic transformation). this endeavour – unparalleled even on an international level22 – is truly a large-scale aspiration: just consider that while the 20 gos employed roughly 20.000 civil servants in 2011, their number was increased to about 33.500 by april 2015 (it is almost 1/4 of the whole civil servants in hungary). it should therefore come as no surprise, that the scale of identified monetary support (provided from the central budget) was also increased: while in 2011 it accounted for 88.4 billion huf, it was around 114.7 billion huf in 2015. as it is apparent from the above train of thought, the reformation of the county and capital government offices was far from being only a mere organizational change. i suppose it is obvious that the system is facing a new generation of government offices. this of course does not mean that there are no pending issues: for example, even by considering only the daily operation of the organization, we can pinpoint several areas of improvement. for an organization of this scale, even the system of countersigning official documents can be a daunting task to set up, not to mention the geographical challenges: in the current structure, employees working for the same department (or for the same division in case of district offices) may work on different premises, a factor resulting in numerous challenges in communication and work efficiency. for example, the capital government office of budapest operated more than 130 offices in 2015, which conveyed the suggestion of rationalizing its premises. 3.2 a quick look at the rest of the deconcentrated actors as it is apparent from the summary, the transformation of 2015 was as important as the establishment of the gos back in 1 january 2011. however besides the notable administrative integration, the recent years have also seen a tendency of latent disintegration. because of this latter trend, the types of deconcentrated administrative bodies in 2015 were basically equal to the amount that the system had back in 2011 (see figure 1 below). figure 1: changes in the annual number of specialized territorial administrative organizations (2010–2015) source: figure 1 was edited by attila barta as we can see in the figure above, in 2010 there were 25 types of deconcentrated organs with specialized tasks. although this category received a new organization; national land trust with operational deconcentrated units, the same year also saw the inception of the national media and infocommunications authority. with its establishment, the regional bodies of the former national communications authority have been removed from this category. one year later, there were a notable decrease, then increase. the causes: the beginning of 2011 saw the merging of 14 specialized deconcentrated administrative authorities, and the unification of the former public administration offices. therefore, the number of related organizations decreased. at the same time, the regional offices of the hungarian investment and trade agency were established. on 1 may 2011, the regional directorates of the national institute for quality and organizational development in healthcare and medicines and the regional offices of national health insurance fund were also created as ‘hidden’ deconcentrated organizations. in 2012 the number of territorial state administrative organizations increased, because the regional bodies of the national institute for environment were created. in 2013 seventeen types of deconcentrated bodies functioned outside the gos. the causes behind this number were as follows: the government absorbed several operational tasks that had formerly been delegated to local self-governments, resulting in the creation of a new system of deconcentrated institutions. new organizations included the educational districts of the klebelsberg institution maintenance centre and the county directorates of social affairs and child protection. the number of deconcentrated organs decreased in 2014, because the hungarian investment and trade agency ceased to be a body of state administration; hence its deconcentrated bodies were no longer considered parts of the public administration system.23 in 2015 this trend was continued when the mining inspectorates and the inspectorates for environment, nature and water were merged into the county/capital gos. most of the mid-level deconcentrated bodies (5 types) belong to the agricultural and (3 types to the) human capacity portfolios (the latter mostly preoccupied with unemployment-, education-, and public health-related tasks), just as they did earlier.24 the latter can be explained with the shift of responsibilities: starting from 2010, mid-level human capacity matters formerly handled by county-level self-governments were transformed into a state administration responsibility. at the same time, the maintenance of social, medical, and educational institutions reached such a level and specialties that neither them, nor the deconcentrated bodies of tax and treasury administration (described below) were affected by the integration with territorial government offices. 4. the way forward? the overview of the administrative structure resulting from the process described above is shown in the following link. the figure is about the system of state administration and local self-governments in hungary in mid-2016. triangles indicate offices, while circles indicate public bodies (the figure was translated and updated by attila barta, on the basis of istván balázs’ original illustration): http://jog.unideb.hu/documents/tanszekek/kozigazgatasi/201617_szi_flv/the_system_of_state_administration_and_local_selfgovernments_in_hungary_in_mid-2016.jpg the following section of my essay considers some plans and tendencies that may pave the way for future improvements in the middle level of hungarian public administration. 4.1 who is in charge? following 2010, the number of ministries was radically decreased. still, in early 2017, a new central organizational reform is planned that would affect around 50 institutions. the goal of this transformation is to achieve a simpler administrational structure by drastically decreasing the number of background institutions supporting the ministries. this will be mostly achieved by merging these institutions into the ministries themselves. the effects of this reorganization are, however, far more expansive: many of the daily tasks will be delegated to the middle level of public administration (that is, to the gos25). this readily fits the plan which calls for a hungarian state administration which is operated solely by ministries, gos, and dos. in case the above plans will be fully realized, the number of specialized deconcentrated bodies of state administration is expected to be decreased by three besides the gos, starting from 2017 and beyond. in correlation with the above changes, the procedural law of the authorities will also be simplified.26 considering that the government and dos allow the handling of increasingly more administrative cases (for example, the capital government office and its districts handled almost two million cases alone), legislation aims to concentrate the first instance licenses of authority to the middle level of public administration. in line with the above changes, second instance tasks and authorities would be assigned to ministries or (if the case was started at district offices) to capital and county gos. to summarize, official licenses would remain in the sphere of state administration by simplifying their administrative background. at the same time, the jurisdictional system of hungarian public administration would also transform.27 4.2 fine-tuning district administration the recent years confirmed that the government considers gos to be the ‘pillars’ of hungarian public administration, and keeps expanding their competences. during the establishment of districts, the underlying goal was to keep those cases with state administrative character (originally assigned to self-governments) at the notary, which fall under local regulations and jurisdiction. at the same time, cases requiring country-level management should be transferred to district level.28 however, when jurisdiction transferred the responsibilities from the notaries to the districts, they inevitably distanced them from clients. to avoid the drastic decrease of administration locations, the government established several local dos. where the foundation of local branch offices was unfeasible, specialized clerks were trained and employed. due to the above developments, the currently existing 19729 districts will be supported by 270 government windows by the end of 2016. at the same time, the system of approximately 900 municipal specialized clerks (serving approximately 2400 municipalities) will also be kept. by mid-2016, the types of cases handled by government windows reached around 1.500, and legislation still aims to expand this list. at the same time, additional government windows are planned to be opened in department stores and train stations to ease their accessibility. thanks to the expansion elaborated above, district-level administration is increasingly becoming the preferred entry point for clients in handling official matters. in other words, the districts and the government windows become the most direct administrative manifestation (or ‘face’) of the central administration. in my opinion, the fine-tuning of the district system is inevitable; however, in light of the upcoming elections of 2018, i expect no further drastic transformation. that said, i think there is nothing to prevent the assignment of rare tasks requiring specialized knowledge to specific districts. this aspiration already has some examples: starting from 1 january 2017, the central hub of environmental protection will be the government office for pest county, while the family events of hungarian citizens residing abroad have been registered nation-wide by the government office of the capital city budapest since 2015. http://jog.unideb.hu/documents/tanszekek/kozigazgatasi/201617_szi_flv/the_system_of_state_administration_and_local_self-governments_in_hungary_in_mid-2016.jpg 4.3 ‘the young siblings’ as mentioned in section 3.2, the middle-level of state administration contained several specialized duties that were ‘protected’ from reorganization from the start. these included the bodies of tax and treasury management, which ‘walked their own path’ and evolved in parallel with the system of gos. the independence of the tax authority is clearly marked by the fact that its institutional structure has already been reorganized before the establishment of capital and county gos.30 the organization (employing approximately 20.000 officials and handling one of the largest amounts of cases and clients in the public administration sector) is separated from mid-level gos even today. that said, this organization also saw fundamental reforms in 2016. this resulted in the simplified operation of the tax authority: the number of organizational units and senior managers were halved. at the same time, plans were made to enable the management of taxation matters in gos as well. another important and independent organization within the public administration structure is the state treasury, whose profile began its transformation already in 2015 (see the related changes in section 3.1.2). in the future, all state payments are expected to be handled by this organization; at the same time, the introduction of the so-called selfgovernment asp (advanced service provider) is also related to its further developments. the goal of this it-system (connected to the state treasury) is to grant users access to applications running on remote servers, allowing selfgovernments to perform document management, accounting, or taxation matters through a uniform system.31 while several self-governments welcomed this development with lukewarm enthusiasm at best, it is still expected to be realized by 1 january 2018. 4.4 it solutions and gos it is a commonly accepted observation nowadays that computerization can make public administration more effective: hence, it-infrastructure developments quickly gained importance. enabling the possibility to manage official matters from home is advantageous for citizens and public administration bodies alike: it can reduce the number of clients in the offices, and enables the automatization of management, along with faster communication. when it comes to in-office solutions, i think that a key aspect in increasing the integration of the mid-level government office system should be the support of its leaders. the gos and dos increased both in numbers and in their scope of authorities; hence, every effort must be taken to help their leaders having a clear and up-to-date picture on the processes of the organization. computerizing the work by setting up and maintaining management information systems (mis) is a considerable facilitator to that: by using such advanced information technology (it) solutions, institutional decision-making can become more grounded and swift. similar improvements can be achieved by introducing e-administration, that is using it solutions for services aimed outside the offices. while the use of it solutions is undoubtedly the way to go, and related developments were certainly more aimed and coordinated in this area, i still consider these improvements sporadic at best in the system. therefore, i think that e-administration should be implemented in multiple stages, along the line of the most frequently handled case types, all the while considering both the matters requiring personal appearance, and also the (generally senior) segment of the hungarian population who prefer to handle their administrative matters by visiting the office in person.32 4.5 public servants or state servants? however, despite the large-scale ideas and plans, it would be a mistake to forget about the skilled and dedicated civil servants: without them, these offices (and the entire system of public administration) would be worth nothing. legislation also realized this, and responded by creating the legal status of ‘state servants’ on 1 july 2016.33 as a pilot of this change, only officials working for the dos received this legal status at first.34 the logic behind this development is outward expansion: the government aims to change the legal status of professionals working in state administration gradually, in multiple stages.35 by 1 january 2017, all public servants working for the gos would receive the new legal status; then, from 2018, the new status would be expanded to officials employed by the ministries and other central bodies of public administration. this approach would allow not just the raise of salaries, but could also be a motivational factor in the recruitment of new colleagues as well as keeping the experienced workforce. besides the potential advantages, the sustainability of the above process should also be considered. can the above transformation be finished completely? and if so, then what will be the legal status of the officials employed in non-state administration areas, like self-governments? 5. conclusions in my opinion, the large-scale transformation of the hungarian public administration system was driven not just by the fiscal and economic crisis, but (similarly to some other european countries)36 the need to clearly define the role of the state as well. i firmly believe that the re-centralisation efforts and the reinforcement of deconcentrated state administration within mid-level public administration were the most obvious manifestations of the effort in reinforcing state roles, and improving its integrity in public administration. the tight-scheduled series of changes elaborated above aligns with the intensive duty-based reorganization which characterizes hungarian public administration since 2011. the latest and forthcoming changes in the gos and their districts are a direct continuation of the reform which aims to increase the administrative capacity of the hungarian state and government. while mid-level public administration is still organized on a divided structure [territorial state administration and territorial type self governments (like counties, cities with the rights of counties, and the capital city) see the link above], its state administration segment definitely became more integrated (albeit with exceptions, as noted above). this is because the government aims to handle the same (or increasing) amount of responsibilities with a reduced number of state administration organizations. the direct result of this was the establishment of such mega-organizations as the gos,37 the national tax and customs administration, or the institution maintenance bodies. with the plan of merging central administrative bodies to ministries, the number of such organizations is expected to increase. the status of the government offices fulfilling the territorial representation of the government has strengthened, and it clearly became the leading actor of the reorganized mid-level, thanks to the constant expansion of its sphere of authorities (by mid-2016, 5 million clients visited the gos and dos). in light of these developments, it is no surprise that no further reforms are planned for the system of local self-governments. with its horizontal expansion, the gos can facilitate a more efficient maintenance, and can reduce the costs of keeping deconcentrated state administration operational. this can be achieved, among others, by unifying procurement, maintaining a joint car fleet, or centralizing the arrangement of energy efficiency developments. considering that public administration is a monopoly, it is hard to decide whether an administrative reform or intervention is successful, efficient, and supportable. however, it is certainly an achievement if it increases client and societal satisfaction, and the transformation in the years behind us aimed to improve this very type of satisfaction. however, it must be taken into account that a permanent state of reforms works against consolidation, and opposes the stabilization of the administrative environment and predictable management – after all, constant changes block and upset the regular operation of public administration, even if they do so temporarily. personally, i think that the internal consolidation of the offices, and the concentration of the organizational and professional control on the territorial level of administration was a necessary step in 2015. however, i am also convinced that further optimal solutions inevitably require performing model experiments before imposing any further reforms. the ‘grassroots’ introduction of the ‘state servant’ legal status could be a sign of this; in any way, it is a certainty that the changes related to administrative personnel, procedures, and organizations can only be a success if they are planned in consideration with each other. i am sure that the best course of action can only be the balanced and pragmatic development of the administrative system. each country must choose the direction that keeps the realisation of their specific needs in view, and is defined within the limits of their own possibilities. i hold that the solutions elaborated above can really contribute to the creation of the customer-friendly public administration. after all, let us not forget that ‘administratio’ also meant assistance and service in latin. references 1 b. guy peters, jon pierre, the sage handbook of public administration, 513 (sage publications ltd., 2012). caroline e. covell, sustainable development for public administration: effective administrative system of the 21st century public administration, 9. available at ssrn: http://ssrn.com/abstract=2789785 or http://dx.doi.org/10.2139/ssrn.2789785 (accessed 3 june 2016). 2 meetika srivastava, globalisation and public administration: a study of the term ‚globalisation’, its nature, meaning, characteristics and impacton public administration, available at ssrn: http://ssrn.com/abstract=1508013 or http://dx.doi.org/10.2139/ssrn.1508013 (accessed 1 august 2016). 3 peters, pierre, supra n.1, at 508. https://doi.org/10.2139/ssrn.2789785 http://ssrn.com/abstract=2789785 http://dx.doi.org/10.2139/ssrn.2789785 http://ssrn.com/abstract=1508013 http://dx.doi.org/10.2139/ssrn.1508013 https://doi.org/10.2139/ssrn.2789785 4 cf. g. fodor gábor, stumpf istván, neoweberi állam és jókormányzás, 3 nemzeti érdek 5–26 (2008). also wolfgang drechsler, the reemergence of ‘weberian’ public administration after the fall of new public management, the central and eastern european perspective, 6 halduskultuur 94–108 (2005). or from earlier, see christopher pollit, geert buckaert, public management reform. a comparative analysis, (oxford university press, oxford, 2004). 5 tiina randma-liiv, riin savi, introduction to the special issue: the impact of the fiscal crisis on public administration, 1 administrative culture 4 (2014). 6 see e.g. tiina randma-liiv, new public management versus neo-weberian state in central and eastern europe, http://iss.fsv.cuni.cz/iss-50-version1-080227_ted1_randmaliiv_npmvsnws.pdf (accessed 22 july 2014). 7 peters, pierre, supra n.1, at 597. 8 see patyi andrás, rixer ádám, hungarian public administration and administrative law, 304–320 (schenk verlag, passau, 2014). and oecd (2015), hungary: reforming the state territorial administration, oecd public governance reviews, oecd publishing, paris. http://dx.doi.org/10.1787/9789264232921-en (accessed 17 april 2016). 9 while the government had regional representative bodies between 1990 and 2010 as well, their duties and licences were different. between 1990 and 1994, this task was fulfilled by the ‘köztársasági megbízott’ (government commissioner). between 1994 and 2006, the assigned offices were called ‘fővárosi közigazgatási hivatal’ and ‘megyei közigazgatási hivatalok’ (capital public administration office and county public administration offices, respectively). between 2006 and 2008, the body was called ‘regionális közigazgatási hivatal’ (regional public administration office). finally, from 2009 until september 2010, it was known as ‘regionális államigazgatási hivatal’ (regional state administration office). barta attila, new trends in the territorial representation of governments, 1 curentul juridic 75–84 (2012). 10 see the the cxxvith act of 2010 on the capital and county government offices, and on the amendments related to the establishment of government offices and the integration of territorial state administration. 11 the fundamental law of hungary, article 17., paragraph (3) 12 as defined by the fundamental law of hungary and the clxxxixth act of 2011 on the hungarian local selfgovernments. 13 175 so-called ‘járás’ in the countryside, and 23 so-called ‘kerület’ in budapest. 14 kéki zoltán: a kistérségi és a körzeti igazgatás, 233 in csefkó ferenc (ed.), ünnepi kötet ivancsics imre egyetemi docens, decan emeritus 70. születésnapjára (pécs, kódex, 2008). 15 see the thematic issues of új magyar közigazgatás 2012, and 2014. also see zöld-nagy viktória, virág rudolf, a területi államigazgatás integrációja (budapest, nemzeti közszolgálati és tankönyvkiadó, 2013). finally, see barta attila, területi államigazgatás magyarországon (budapest, gondolat, 2013). 16 related to this see barta attila, területi kormányhivatalok 2.0. a középszintű államigazgatás továbbfejlesztése 2015ben, 1 kodifikáció és közigazgatás 39–47 (2015). http://kodifikator.hu/letoltes/category/16-2015-evi-i-szam (accessed 23 june 2015). 17 http://www.kormany.hu/download/8/42/40000/k%c3%b6zigazgat%c3%a1s_feljeszt%c3%a9si_strat%c3%a9gia_.pdf 41–52, (accessed 30 june 2015). 18 for example, the reconstruction of the citizenship’s trust towards public administration is a sociological question that takes at least 8–10 years to research and restore (if not more). 19 for other interesting details on the new regulations, see the work of papp dorottya, http://www.arsboni.hu/hatekony_kozigazgatas_de_milyen_aron.html (accessed 26 march 2015). 20 the internal structure of some offices (such as that of the government office for pest county or the government office of the capital city budapest) may differ from the ones included in the table. the reasons of this can be numerous: on the one hand, responsibilities may vary in the different counties; and on the other hand, it can occur that certain departments and divisions are numbered due to limitations in the number of personnel. the table is aimed to serve as an illustration only, and thus indicates just general solutions. 21 balázs istván, a közigazgatás változásairól magyarországon és európában a rendszerváltástól napjainkig, 190–193 https://doi.org/10.2139/ssrn.2789785 http://iss.fsv.cuni.cz/iss-50-version1-080227_ted1_randmaliiv_npmvsnws.pdf http://dx.doi.org/10.1787/9789264232921-en http://kodifikator.hu/letoltes/category/16-2015-evi-i-szam http://www.kormany.hu/download/8/42/40000/k%c3%b6zigazgat%c3%a1s_feljeszt%c3%a9si_strat%c3%a9gia_.pdf http://www.arsboni.hu/hatekony_kozigazgatas_de_milyen_aron.html https://doi.org/10.2139/ssrn.2789785 21 balázs istván, a közigazgatás változásairól magyarországon és európában a rendszerváltástól napjainkig, 190–193 (debreceni egyetemi kiadó, debrecen, 2011). 22 szamel katalin, balázs istván, gajduschek györgy & koi gyula, az európai unió tagállamainak közigazgatása (budapest, complex, 2011). the government visibly aims to share the ‘hungarian way’ on an international level. see the early 2015 symposium on the recent results and the future direction of the reforms on territorial public administration below: http://radioorient.hu/adasok/2015-01-15_nemzetkoziszimpozium (accessed 10 june 2015). 23 since the regional directorates of the national institute for quality and organizational development in healthcare and medicines and the regional offices of national health insurance fund rarely based the topics of a thorough analysis, the number of these organizations may be indicated differently in the related professional materials. 24 see ferrel heady, public administration, a comparative perspective, 182 (taylor & francis group, 2001). 25 the specific steps and the schedule of the reorganization are detailed in government decree 1312/2016. (vi. 13.) on the measures related to the revision of central offices and ministry background institutions operating as publicly financed institutions. 26 see the cxlth act of 2004 on the general regulations of public administrative procedure on authorities and the government decree 1352/2015. (vi. 2) on the various tasks related to the preparations for the act on public administration civil procedure and the act on general administrative procedure. 27 http://www.kormany.hu/download/c/c8/50000/20150514%20jelent%c3%a9s%20az%20%c3%a1ltal%c3%a1nos%20k%c3%b6zigazgat%c3%a1si%20rendtart%c3%a1s%20koncepci%c3%b3j%c3%a1r%c3%b3l.pdf (accessed 5 september 2016). 28 patyi, rixer, supra n.1, at 318. 29 in the meantime, a district has been merged into another. 30 see cxxiith act of 2010 on the national tax and customs administration. 31 for details, see government decree 257/2016. (viii. 31.) on the asp system of self-governments. 32 see veszprémi bernadett, az információs társadalom kihívásai és a közigazgatás reakciói (debreceni egyetemi kiadó, debrecen, 2015). 33 the polarization of public administration personnel already started when the e ‘mployees of the tax authority received their own career benefits. 34 see liith act of 2016 on state servants. 35 currently, clerks employed in the public administration sector are uniformly called ‘public servants’, while officials working in state administration are known as ‘government officials’. since 1 july 2016, the ‘state servant’ legal status basically exists within the latter group. 36 http://www.eastr-asso.org/content/eastr-0 (accessed 5 september 2016). 37 in mid-2016, 33.702 public servants work at the 20 gos. http://radioorient.hu/adasok/2015-01-15_nemzetkoziszimpozium http://www.kormany.hu/download/c/c8/50000/20150514%20jelent%c3%a9s%20az%20%c3%a1ltal%c3%a1nos%20k%c3%b6zigazgat%c3%a1si%20rendtart%c3%a1s%20koncepci%c3%b3j%c3%a1r%c3%b3l.pdf http://www.eastr-asso.org/content/eastr-0 © 2018 dialóg campus, budapest public governance, administration and finances law review vol. 3. no. 1. (2018) • 16–25. the civil service law system in poland – selected issues wojciech drobny* * wojciech drobny, phd, vice-director general of the institute of law studies, polish academy of sciences, specializes in polish administrative law – civil service law . (e-mail: w .drobny@inp .pan .pl) abstract: the article refers to the topic of civil service law in poland . it describes the organization of civil service system in comparison to other international solutions and it gives the historical background of how it has been evolving so far . particularly it refers to the elements of its regime, the position and duties of the polish head of the civil service and rights and duties of the civil service corpus’ members . the author claims that the changes taking place in the area of this part of law are due to the domination of private law (labor law) over public law (administrative law) . this tendency currently prevails in the western legislation . keywords: civil service; administrative law; public governance; public administration 1. introduction the topic of the polish civil service is still very much a current issue . a  discussion on this topic is being held in poland now by both administration, labor and constitutional law representatives . therefore, the statements published in recent articles refer to the constitutional basis of the polish civil service, to the labor rights and duties of the civil service members and not really to the public-private character of this law institution . therefore, it makes sense to assess the changes in the law of office which regulates the legal status of government administration employees from the point of view of administration law rules . researching such an area of studies and looking at it from historical perspective will let assess the state of the polish civil service and formulate conclusions as to its changes . the current act on the civil service of 21 november 20081 in the last several years was the fourth act which has regulated in a  totally new way the legal situation of the polish government administration staff . therefore, my first conclusion is that the legislator in the post-transformation period (after the system changes in 1989) was making the changes in an unplanned and inconsistent way . the big number of these changes violated the rules of good legislation, the quality of law, its continuity and security and what it leads to  –  the operational calm of public administration work . the changes made in the following acts of 1996,2 1998,3 20064 and 2008 and at the same time parallel and alternative laws that were kept in force – act of 16 september 1982 on state posts officials5 – did not aim at building one coherent official corps, which, in my opinion, is a condition of a proper implementation of public duties . 10.53116/pgaflr.2018.1.2 mailto:w.drobny%40inp.pan.pl?subject= https://doi.org/10.53116/pgaflr.2018.1.2 17 public governance, administration and finances law review • 1. 2018 the civil service law system in poland – selected issues however, the law currently in force has been a long awaited legal act, necessary in the first place to eliminate the legal solutions of its predecessor i .e . the act on civil service from 2006 (and strictly connected with its act of 24 august 2006 on the state human resources and senior state positions) .6 some of the above-mentioned acts have been generally assessed not only as unacceptable but also incompatible with the polish constitution . to illustrate this well, let me mention the concept of liquidation of the government administration central organ, responsible for the civil service: chief of the civil service, which, despite being criticized already on the stage of the legislative work, was introduced to the state law order in 2006 . an experiment (described in article 8 of this act) according to which the prime minister was in charge of the civil service (while the pm chancellery chief was to carry out tasks on behalf of the pm), has not defended itself against the accusation of the degradation of the current output in the area of the civil service (in the context of other proposed changes in the civil service organization, particularly creating the state human resources) . the current act on the civil service has liquidated the state human resources, high positions have been placed again within the civil service as well as the civil service chief as the central organ of the government administration (his own post has not been restored but assigned to the pm chancellery) . despite some concerns that will be discussed further on, this act is therefore a  big improvement which can be called a partial restitution of the correct status of the polish civil service .7 2. general assumptions of the civil service law of 21 november 2008 the current civil service law came in force on 24 march 2009 and complemented the law context of the polish civil service corps through specifying the constitutional8 and systemic assumptions as well as describing the elements of the service regarding the civil service corps members in several decrees published by the pm and civil service chief . the law has been amended several times and the amendments referred to the rules of the senior positions placement as well as the board of public service, its duties and tasks .9 none of its articles has been so far controlled by the polish constitutional tribunal10 but it has been a subject of supreme court cases a few times . 3. detailed assumptions of the civil service act of 21 november 2008 describing the chosen and, in my opinion, the most important elements of the legal status of the civil service corps members in view of the law from 2008, i need to state that the further assessment will be made based on the fact that the law of office is the natural part of administration law and the civil service is of a public-private character . in other words, the civil service is not only a  tool or an instrument to carry out the political will nor is it a group of people employed to perform specific work but it is an important element of the 18 wojciech drobny public governance, administration and finances law review • vol. 3. no. 1. philosophical concept of a  “democratic country of law” whose constant attribute is a  professional, objective and politically neutral staff corps which is protected by a  catalog of guarantees . 3.1. the jurisdiction of labor courts with regard to the status of civil service corps members i agree with the opinion that the acceptance of the public-private concept of the employment relations at the same time meant that the employment relations belonged to the administrative law with all its process consequences as to its changes and solutions . this assumption in a classic form was respected by the polish legislator in the interwar period,11 when matters resulting from business relations were settled during the administrative procedure, ending in a decision appealing to the administrative court . the exclusion of the principle of presumption of administrative court jurisdiction for common courts occurred at the moment of codification of labor law .12 from that moment, the possible submission of selected cassation cases to administrative courts required a separate legal basis or an appropriate, explicit reservation in the act . despite the common classification of the legal status of members of the civil service corps as “public officials” (e .g . the verdict of the provincial administrative court in poznań of 13 march 201313) in the currently binding pragmatics, even a few examples of guaranteeing administrative lawchanging modes of action  –  despite the classic models of administrative and courtadministrative proceedings – were granted to the labor courts . an excellent example of this is the civil service’s right to appeal to the prime minister against the decision of the central government administration body competent in civil matters – the head of the civil service in the matter of transferring him to another office (article 67) . the appeal procedure in this respect is governed by the provisions of the code of administrative procedure14 but the decision of the prime minister may be appealed not to the administrative court, but to the labor court – in accordance with the general rule set out in art . 9 pragmatics, according to which ‘disputes over a  claim regarding an employment relationship in the civil service are considered by labor courts’ . this was confirmed by the voivodship administrative court in warsaw in the judgment of 8 may 2012,15 by unambiguously stating that in case of filling the vacant position by transfer, the legislator did not foresee control measures in the administrative course of the instance . therefore, in such a situation, the complaint is inadmissible and subject to rejection . a similar example of the questionable transfer of cases to the examination of labor courts is the system of protection of the civil service corps member in the assessment procedure . in the light of art . 83 pragmatics from the periodic assessment of the corps member is used to oppose the director general of the office . if the objection is not met within the statutory deadline, or if the objection is not taken into account – which follows the law in the form of a “decision” – the corps member has the right to appeal again not to the administrative court, but to the labor court . this is indicated by the verdict of the appeal court in rzeszów of 24 june 2014,16 in which “the right of the labor court to perform periodic review control in all its aspects was clearly confirmed . at the same time, 19 public governance, administration and finances law review • 1. 2018 the civil service law system in poland – selected issues it must determine whether the mode of the periodic assessment as well as its formal nature resulting from the act were taken into account strictly” . this view was also shared by the supreme court in its judgment of 30 october 2013,17 stating that “the civil servant’s objection from the periodic assessment is examined by the district court – the labor court” . it is worth noting that in the above context  –  in systemic terms  –  there is a  glaring inconsistency of the polish legislator in the elimination of public law elements in the employment relations of public officials . to prove this, it is enough to refer to the legal status of appointed controllers of the supreme audit office18 or prison officers19 whose certain employee matters were explicitly excluded from the general jurisdiction court for administrative judiciary . primarily i am referring to the possibility of challenging the decision to transfer to another organizational unit, terminating the employment relationship with notice and without notice and to appeal against the decision on the negative qualification . 3.2. the issue of recruitment to the civil service corps recommendation of the committee of ministers of the council of europe20 on the status of public employees in europe clearly indicates that the constructive element of proper recruitment to the public service is effective administrative supervision over this procedure and its judicial and administrative control . the importance of this issue was emphasized by the polish constitutional tribunal, pointing out that the essence of a properly constructed recruitment process for the public service is the feature of competitiveness that characterizes it . it is why the proceedings need to be protected in court-administrative proceedings against arbitrary decisions, while at the same time constituting a  procedural measure of constitutional review of the criteria of equal access to the same principle21 it follows – which is extremely important – that the omission of the competition fundamentally changes the legal position of people interested in public service, because it deprives them of proper protection against arbitrary decisions . the exclusion of the competition system means eliminating the path of judicial review of the correctness of applying the recruitment criteria to the civil service . from the point of view of the assumptions made, the pragmatics in force did not create a  fully correct concept of recruitment, did not guarantee the transparency of the proceedings, as well as clarity and understanding of the actions and decisions taken . analyzing this law, it is not possible to read the substantive criteria, the fulfilment of which is a  condition of access to public service . the candidate also has no knowledge as to the rules, methods, mode of operation and decision-making by the recruiters, as well as the general directors of offices responsible for conducting the proper conduct, who do not have any statutory guidelines as to the legislator’s expectations in this respect . it will only fill in the gap when declaring open and competitive recruitment . what is more, the amendments introduced in 2015, changes in the scope of casting senior positions in the civil service, in particular the introduction of “appointment” as a legal basis for establishing employment relationships at the same time, enabling the appointment of people from 20 wojciech drobny public governance, administration and finances law review • vol. 3. no. 1. outside the civil service corps, the required competition deepens the negative assessment of the solutions in this area . on the other hand, the solutions of the act on the civil service of 1996 may serve as an example of optimal consideration of the pragmatics of the above-mentioned conditions . it guaranteed the candidate who took part in the qualification procedure the right to request a written decision by the civil service body at that time . although the 1996 act did not specify expressis verbis that this decision was subject to appeal to the administrative court, nevertheless the doctrine rightly, consistently assumed that it had the character of an administrative decision . such legal classification determined the possibility of being challenged by the supreme administrative court with a  request that the qualifying committee remove the violation of law . 3.3. the subjective scope of the civil service act in the light of the systemic assumptions of the polish civil service, using the jurisprudence of the constitutional tribunal, one may put forward the thesis that in the constitution’s view the civil service corps should cover all government administration offices . according to the wording of art . 153 of the constitution of the republic of poland, the sphere of action of the civil service corps are offices of the government administration, and the prime minister is the supervisor of this corps . the meaning of the term “government administration” can be determined on the basis of the definition of the term, the taxonomy of the constitution and the interpretation presented by the constitutional tribunal . therefore, with his interpretation, it can be recalled that to recognize an office as a government administration office it is necessary to meet two conditions simultaneously, i .e . to perform tasks of public administration character and to place the state apparatus in this segment, headed by the council of ministers . in the justification to the judgment of 13 november 2003,22 the tribunal indicated that the wording of art . 153 of the constitution allows the adoption of a position that the entire clerical apparatus, performing tasks for public administration, in its part subject to the council of ministers, should be covered by the act on civil service . meanwhile, the legislator in the content of the binding pragmatics is inconsistent in this respect . in addition to the statutory directory of offices covered by the civil service corps, there are unjustifiable entities that have their status in the structure of public administration in this part, headed by the council of ministers . a perfect example of this is the legal status of the government legislative center, which was not legally covered by the civil service corps . 3.4. system of civil service organs i believe that granting  –  in the light of obligatory pragmatics  –  the head of the civil service, the status of a  central government administration body is optimal, but current regulations granting it insufficient catalog of competences may adversely affect the manner 21 public governance, administration and finances law review • 1. 2018 the civil service law system in poland – selected issues and effectiveness of his tasks . incomplete scope of competences of the head of the civil service, including the lack of significant supervisory or imperious powers, obviously limits the effectiveness of his actions and makes it impossible to enforce decisions . therefore, i  am of the opinion that the potential resulting from the status of a  “central government administration body”23 has not been fully used . the more so because the problem of its organizational separation still remains a  problematic issue, because currently this body is supported by the chancellery of the prime minister . the current legal situation in this respect is somewhat in contradiction with the theoretical assumptions of the “administrative body” model . the assumed lack of independence of this body in managing the auxiliary apparatus assigned to it to serve, contradicts the general concept of the status of such a body . on the other hand, the analysis of the nature of the current powers of the public service council reveals a certain inconsistency between its statutory declared status (i .e . an advisory and consultative body) and the rights it possesses . the direction of change adopted by the legislator perceived as positive in the provisions of the act of 2008, in the light of which some strengthening of the position of this body by granting subsequent rights, should be considered positive . this testifies to the growing importance of the council in the civil service system . therefore, due to the actual tools in which it has been equipped in the current legal status, it may be necessary to consider a  statutory change of the concept of the status of this body from consultative and advisory to approval and control . the current provisions, in my opinion, do not guarantee the person holding the office of the general director of the office the appropriate status and sufficient tools to effectively implement the tasks assigned to the law . from the analysis of transformations of the legal status of this entity, in the light of successive office law pragmatists, there emerges a disturbing tendency to limit the role and importance of the director general of the office . his position in relation to the head of the office is weak, which may directly threaten the apolitical nature of the civil service corps . some doubtful legal solutions can be found in the part of the civil service act in which it enables the director general to perform his duties – during his vacancy and in the situation of not finding a replacement – by a member of the civil service corps employed in that office . this may result in the practice of longterm failure of directors-general and long-term actual performance of these functions by people who do not meet the statutory conditions necessary to take up this position . 3.5. eligibility procedure in the civil service another key element having a fundamental impact on the correct status of the civil service is the qualification procedure in the civil service . handover of the national school of public administration  –  in accordance with the act of 1991 on the national school of  public administration,24 the status of “legal person”  –  tasks in the organization of the recruitment procedure implied serious consequences for the legal position of the participant in this proceeding . as a result of this transfer (in accordance with the decision of the supreme administrative court25) in the current legal state, “the qualification 22 wojciech drobny public governance, administration and finances law review • vol. 3. no. 1. procedure” is in fact the so-called “act of knowledge” . in this dimension, in historical terms, the legal situation of a person applying for the status of civil servant has deteriorated . the legislator resigned from the solutions of earlier acts, in the light of which the central organ of public administration, that is the head of the civil service, was responsible for conducting the qualification procedure, and then he transferred this responsibility to the “state legal person” . this has far-reaching effects, mainly expressed in maintaining the legal status in which the participant in the recruitment procedure was deprived of adequate legal protection . the lack of instances in this proceeding and, consequently, also of judicial and administrative control from the point of view of administrative law principles  –  may be considered as controversial . these are not only theoretical considerations, which is confirmed by the judicature, and which is illustrated by the judgment of the provincial administrative court in warsaw of 22 august 201226 that ruled on the complaint of the person taking part in the qualification proceedings for inactivity of the national school of public administration, which according to the plaintiff ‘consisted in the lack of appointment as a  civil servant .’ the court dismissed the complaint by rightly noting that administrative courts within their jurisdiction exercised control over the legality of actions or omissions of public administration bodies . thus the national school of public administration was not the subject of the control  –  in other words, the head of the civil service would be able to remain inactive if he was responsible for carrying out the qualifying procedure . the above legal classification of the recruitment procedure in another judgment was confirmed by the supreme administrative court (referred to the aforementioned judgment of 6 february 2013), which stated that in the light of the current provisions, the recruitment procedure is not an administrative proceeding and cannot be subject to administrative court control, and consequently, the inadmissibility of the authority on this subject cannot be subject to control . what is extremely important, at the same time in the light of the judgments of administrative courts, the recruitment procedure is not a  claim under the employment relationship – thus, art . 9 of the act on civil service in which there is a mention of court cognition in such matters .27 4. final remarks i believe that the development in 2008 of pragmatics of the concept of organizing the civil service system, which restores the central government administration body competent in civil service matters and maintains a consultative and advisory body at the prime minister in civil service matters and finally introducing a  statutory requirement to disseminate information about the recruitment to work in the civil service corps  –  although in discussions and subject to further improvement – are positive examples of achievements in the construction of this part of the public service . this conclusion is important in the discussion on the possibility or legitimacy of adopting solutions applied in government administration in pragmatists regulating the legal status of employees of other “segments” of public administration – be it state or local government offices . personally, i am in favor of uniformly defining the legal status of all 23 public governance, administration and finances law review • 1. 2018 the civil service law system in poland – selected issues public administration employees, as there is no rational justification that members of the civil service, local government employees and employees of state offices cannot be covered by similar ethical or professional standards, or that they are not subject to similar selection, recruitment evaluation or disciplinary responsibility . however, it is too early to say that the process of building the polish civil service is completed, and thus too early to transfer these solutions from the area of government administration to local government or state . therefore, based on the above presented considerations on selected elements of the legal status of the civil service, but also bearing in mind the aforementioned discussion between representatives of the doctrine of labor and administrative law, as well as the current state of the act on local government employees and the act on employees of state offices that the polish law of office still faces an identity crisis . nevertheless, a recent – extremely important – supreme court ruling of 10 april 201428 in which it was stated that the head of the civil service as a central government administration body does not act in the field of labor law as an employer but performs its statutory powers of a public law, act of appointment is an act of applying the law by a public administration body (i .e . a unilateral, authoritative, declaration of will, thus shaping the individual legal situation of the person applying for appointment), and in the matter of determining the obligation of the head of the civil service to issue this act an administrative route  –  allows the polish administrative law attorneys to look with some hopes on the further course of the discussion on this identity of the polish official law . 24 wojciech drobny public governance, administration and finances law review • vol. 3. no. 1. references 1 ustawa z dnia 21 listopada 2008 r . o służbie cywilnej; dz . u . nr 227, poz .1505 [act of 21 november 2008 on civil service; dz . u . no . 227, item 1505], www .prawo .sejm .gov .pl (accessed 20 may 2018) . 2 ustawa z dnia 5 lipca 1996 r . o służbie cywilnej; dz . u . nr 89, poz . 402 [act of 5 july 1996 on civil service; dz . u . no . 89, item 402], www .prawo .sejm .gov .pl (accessed 20 may 2018) . 3 ustawa z dnia 18 grudnia 1998 r . o służbie cywilnej; dz . u . nr 49, poz . 483 [act of december 18, 1998 on civil service; dz . u . no . 49, item 483], www .prawo .sejm .gov .pl (accessed 20 may 2018) . 4 ustawa z dnia 24 sierpnia 2006 r . o służbie cywilnej [act of 24 august 2006 on civil service;  dz .  u . no . 170, item 1218], www .prawo .sejm .gov .pl (accessed 20 may 2018) . 5 dz . u . z 2001 r ., nr 86, poz . 953 [dz . u . of 2001, no . 86, item 953], www .prawo .sejm .gov .pl (accessed 20 may 2018) . this act covered the same category of officials in its subjective scope . 6 dz . u . nr 170, poz . 1217 [dz . u . no . 170, item 1217], www .prawo .sejm .gov .pl (accessed 20 may 2018) . 7 teresa górzyńska et al ., system prawa administracyjnego, tom 2 konstytucyjne podstawy funkcjonowania administracji publicznej [system of administrative law, volume 2 constitutional grounds for the functioning of public administration], 452 (warsaw, 2012) . 8 constitution of the republic of poland of april 2, 1997; dz . u . of 1997 no . 78, item 483 (hereinafter referred to as the “constitution of the republic of poland”), www .prawo .sejm .gov .pl . the text referring to art . 153 is added as follows: ‘1 . in order to provide a professional, reliable, impartial and politically neutral performance of state tasks, the civil service corps functions in government administration offices . 2 . the prime minister is the head of the civil service corps .’ 9 the most serious changes were introduced by the act of 30 december 2015 amending the act on civil service and some other acts; dz . u . 2016, item 34 (ustawa z dnia 30 grudnia 2015 r . o zmianie ustawy o służbie cywilnej oraz niektórych innych ustaw; dz . u . 2016, poz . 34), www .prawo .sejm .gov .pl (accessed 28 february 2019) . 10 the joint constitutional complaint of the ombudsman and a group of deputies awaiting consideration by the constitutional tribunal regarding the constitutionality of the aforementioned amendment of 2015, case no . k 6/16, www .trybunal .gov .pl/s/k-616/ (accessed 20 may 2018) . 11 the first polish law regulating the legal status of officials is the act of 17 february 1922 on state civil service; dz . u . of 1949 no . 11, item 72 (ustawa z 17 lutego 1922 r . o państwowej służbie cywilnej; dz . u . z 1949 r . nr 11, poz . 72) . 12 ustawa z dnia 26 czerwca 1974 r .  –  kodeks pracy; dz . u . z 1998 r . nr 21, poz . 94 [act of june 26, 1974 – labor code; dz . u . of 1998 no . 21, item 94], www .prawo .sejm .gov .pl (accessed 20 may 2018) . 13 sygn . akt iv sa/po 786/13 (ref. act iv sa / po 786/13), www .orzeczenia-nsa .pl (accessed 20 may 2018) . 14 ustawa z dnia 14 czerwca 1960 r . kodeks postępowania administracyjnego; dz . u . z 2000 r . nr 98, poz . 1071 [the act of june 14, 1960 . the code of administrative procedure; dz . u . of 2000 no . 98, item 1071], www .prawo .sejm .gov .pl (accessed 20 may 2018) . 15 w . drobny, glosa do postanowienia wsa z dnia 8 maja 2012 r. [gloss to the decision of the provincial administrative court of 8 may 2012], vii sa / wa 639/12, lex / el 2012 . 16 sygn . akt iii apa 4/14 [ref . act iii apa 4/14], www .orzeczenia .rzeszow .sa .gov .pl (accessed 20 may 2018) . 17 sygn . akt ii pk 32/13 [ref . act ii pk 32/13], www .sn .pl (accessed 20 may 2018) . 18 ustawa z dnia 23 grudnia 1994 r . o najwyższej izbie kontroli; dz . u . 2012, poz . 82 [the act of december 23, 1994 on the supreme audit office; dz . u . 2012, item 82], www .prawo .sejm .gov .pl (accessed 20 may 2018) . 19 ustawa z dnia 9 kwietnia 2010 r . o służbie więziennej, dz .u . 2010, nr 79, poz . 523 [the act of 9 april 2010 on the prison service, dz .u . 2010, no . 79, item 523]; www .prawo .sejm .gov .pl (accessed 20 may 2018) . 20 zalecenie km rm z 24 lutego 2000 r ., r/2000/6 [rm rm recommendation of 24 february 2000, r / 2000/6] . http://www.prawo.sejm.gov.pl http://www.prawo.sejm.gov.pl http://www.prawo.sejm.gov.pl http://www.prawo.sejm.gov.pl http://www.prawo.sejm.gov.pl http://www.prawo.sejm.gov.pl http://www.prawo.sejm.gov.pl. http://www.prawo.sejm.gov.pl http://www.trybunal.gov.pl/s/k-616/ http:// http://www.orzeczenia-nsa.pl http://www.prawo.sejm.gov.pl http://www.orzeczenia.rzeszow.sa.gov.pl http://www.sn.pl http://www.prawo.sejm.gov.pl http://www.prawo.sejm.gov.pl 25 public governance, administration and finances law review • 1. 2018 the civil service law system in poland – selected issues 21 wyrok tk z dnia 12 grudnia 2002 r ., sygn . akt k 9/02 [ judgment of the constitutional tribunal of december 12, 2002, ref . act k 9/02], www .trybunal .gov .pl (accessed 20 may 2018) . 22 sygn . akt k 51/02 [ref . act k 51/02], www .trybunal .gov .pl (accessed 20 may 2018) . 23 jan zimmermann, prawo administracyjne [administrative law], 128 (cracow, 2005) . 24 ustawa z dnia 14 czerwca 1991 r . o krajowej szkole administracji publicznej, dz . u . nr 63, poz . 266 [the act of june 14, 1991 on the national school of public administration, dz .u . u . no . 63, item 266], www . prawo .sejm .gov .pl (accessed 20 may 2018) . 25 postanowienie nsa z dnia 6 lutego 2013 r ., sygn . akt i osk 65/13 [order of the supreme administrative court of 6 february 2013, ref . i i osk 65/13 file]; www .orzeczenia .nsa .gov .pl (accessed 20 may 2018) . 26 sygn . akt vii sab/wa 45/12 [ref . act vii sab / wa 45/12], www .orzeczenia .nsa .gov .pl (accessed 20 may 2018) . 27 for example, the aforementioned judgment of the provincial administrative court of 22 august 2012 . 28 sygn . akt ii pk 259/13 [ref . act ii pk 259/13], www .sn .pl (accessed 20 may 2018) . http://www.trybunal.gov.pl http://www.trybunal.gov.pl http://www.prawo.sejm.gov.pl http://www.prawo.sejm.gov.pl http://www.orzeczenia.nsa.gov.pl http://www.orzeczenia.nsa.gov.pl http://www.sn.pl public governance, administration and finances law review case studies subject of waste management fee in poland andrzej huchla* * dr. andrzej huchla, department of financial law, faculty of law, administration and economics, university of wrocław. his main fields of research are: financial law, taxes and tax law, general tax law, income taxes. (e-mail: anhuchla@prawo.uni.wroc.pl) abstract: the study is dealing with selected matters of waste management regulation, especially with the applicational issues and praxis of municipalities in poland and makes an effort to present the most neuralgic points of the normative regulation and practical experiences as well. keywords: local self governments; waste management; waste management fee a new regulation on the collection of municipal solid waste in poland came into force on 1st july 2013. the purpose of its implementation was directive 2008/98/ec of the european parliament and of the council of 19th november 2008 on waste and repealing certain directives1. according to the new wording of the law on preserving cleanliness and order in municipalities (from 3rd september 19962) municipalities are obliged to collect waste instead of the previous practice of commercial relations between real estate owners and recycling companies. a very important element of the new system is the waste management fee (literally: a fee for the management of municipal waste) which is a public burden collected by the municipal tax administration. fee revenues should cover the costs of collection and recycling of waste by the municipality, its special units or outsourced subjects. the legal construction of waste management fee includes, of course, many elements and details. among them, the subject of the fee seems to be the most controversial thus many disputes and legal proceedings have arisen with regard to this subject. the law from 3rd september 1996 (art. 6h) states that the owners of properties should carry the burden of the fee. ‘owners’ also means organizational units and persons possessing such immovable property in management or usufruct (art. 2 sec. 1 p. 4 of the same act). moreover, when single apartments in the building are notarially certified as separate real estate, such a role comes to persons (units) managing the common property (art. 2 sec. 3 of the law). this last case is mostly doubtful because of the different meanings of ‘management’ in polish regulations concerning immovable properties. another act, the law on the ownership of apartments (from 24th september 19943) in art. 20 orders the managing board to be called when the number of apartments in the building exceeds 7 (it is optional in smaller houses). the next possibility, one of the most frequent and important in poland, is the functioning of traditional, special structures called housing cooperatives. they are owners or managers of thousands of houses with dwelling and commercial spaces accessible in different legal ways. according to art. 27, sec. 2 of the law on housing cooperatives (from 15th december 20004), management of common properties is held by the cooperative ‘like’ entrusted management ordered in the law from 24th september 1994. the question is whether it is the managers or the owners who are the subjects obliged to pay the waste fee in these cases. it is obvious that the economic charge of the fee must be the burden of the owners, however, this can be realized directly by owners or by managers paying or transferring collected quotes. it causes legal responsibility (for delayed or ignored payment) held by one of these subjects. the situation in bigger houses (exceeding 7 apartments) is most characteristic. the owners of flats may manage the common property in two ways: they can elect a manager or management board among themselves (which may be called a ‘non-professional manager’) or employ an external person or company as a professional manager and representative. another possibility, very common for the management board of the owners, is to negotiate the role of management (as maintenance of the common space, in a technical sense only) with such external subjects. professional management companies were the first to explain their legal position in reference to the fee. it was made by suing acts of the municipality law which obliged managers to submit tax (fee) returns with a calculation of the fee. this effectively means that managers are responsible subjects of the fee. another way was initiating procedures of advance rulings with the suggestion that managers cannot be treated as such subjects. applicants argued that they have no possibility either calculating preciselyor levying the exact amount of fee duties. their activity concerns common space such as staircases and courtyards and they have neither access to apartments nor information about them. when the quote of the fee depends on the apartment’s size, the number of persons living in the flat and the capacity of garbage from commercial activity, they cannot verify all these data and have no legal instruments to force the owners to give such 10.53116/pgaflr.2016.2.5 mailto:anhuchla@prawo.uni.wroc.pl https://doi.org/10.53116/pgaflr.2016.2.5 information. when paying, due to legal responsibility, the manager may encounter financial problems if it is not feasible to collect payment from the owners. similar reasons were submitted by housing cooperatives in their cases. the final solutions were disadvantageous for all of them. administrative courts of voivodships5, as well as the supreme administrative court6 confirmed direct wording of laws and stressed that all managing subjects have ample opportunities to get back quotes of fee from the owners. only once did the court decide to link the manager’s obligations and responsibility only with common property and not apartments7, however, this view wasn’t approved by the supreme court. as an aside, in wrocław, where controversies and cases between managers and the city administration were extremely frequent, another authority suggested practical compromise. according to the verdict of the self-governing appeal judging board in wrocław (the second instance for judgment of self-governing decisions8), the subject of the fee should only be managers elected by owners to represent their community (instead of the management board of the owners). this excludes managers hired only for maintaining common spaces – which happens in the distinct majority of managing relationships – from the circle of responsibility. in the intervening period, the law of 24th september 1994 was changed in january 2015. nowadays, the regulation referring to multi-apartment buildings (art. 2, sec. 3) indicates, as the payers of the fee, only the owners’ communities and housing cooperatives. they may all request necessary information from owners of apartments (art. 6m, sec. 1c); this competence is fairly new in the law. this way all kinds of managers are exempt from the charge. the amendment of the law evidently seems to be a consequence of previous disputes. the present situation is relatively clear. the only doubt can be the possible responsibility of some owners – members of the owners’ community – for the fee not paid by others. of course, proceedings concerning the period between july 2013 and january 2015 still persist and there are some questions to be answered ultimately. also there are no examples of claiming a refund for the fee paid by managers. though the waste management fee is certainly a public burden, treated in polish law like taxes, clearing of the accounts between the fee subjects and owners will be settled through civil proceedings. additional troubles may arise from inconsequent practice. for example, in wrocław tax returns with a declared waste management fee were always accepted from the owners of apartments in all houses (also managed by professional companies) therefore their payments were undoubtedly accepted as well. the position of owners of flats in city buildings managed by the organizational units of the municipality is unclear. however, it is only a short and incomplete report of the most evident controversies, some remarks and conclusions can be drawn (still mostly referring to the legal status before january 2015). the main paradox is that almost all arguments presented by all sides of the dispute (first of all managers and municipal tax authorities) are generally right. there are serious reasons to accept the opinions of both the fee subjects (about calculation and collection problems) and of the tax authorities and courts (about the direct interpretation and meaning of the text of the law). the final ground of all these problems is the low quality of legislation. regulations concerning the waste management fee were introduced hurriedly, without sufficient care with regard to their context and consequences. in the sphere of the subject of the fee, the main mistake is defining it through various legal expressions between different provisions of the same, or even alternative acts. this must not happen in tax law, especially in the regulation of such a universal burden. references 1 official journal l from 22. 11. 2008, no 312, p. 3. 2 ustawa z dnia 3 września 1996 r. o utrzymaniu czystości i porządku w gminach (dz. u. z 2013 r., poz. 199). 3 ustawa z 24 września 1994 r. o własności lokali (dz. u. z 2015 r., poz. 1892). 44 ustawa z dnia 15 grudnia 2000 r. o spółdzielniach mieszkaniowych (dz. u. z 2013 r., poz. 1222). 5 see for example judgments: from 2nd february, 2013 (i sa/bd 72/13, from 21st november 2013 (i sa/ol 586/13), from 7th february 2014 (i sa/bk 526/13), from 15th may 2014 (i sa/ol 285/14), from 5th december 2014 (iv sa/po 868/13); all verdicts of administrative courts are available at http://orzeczenia.nsa.gov.pl/cbo/query. 6 see for example judgment from 26th april 2016 (ii fsk 1621/15). 7 judgment from 31st march 2014 (i sa/wr 67/14). http://orzeczenia.nsa.gov.pl/cbo/query 8 from 17th december 2015 (sko 4138/43/15). © 2018 dialóg campus, budapest public governance, administration and finances law review vol. 3. no. 1. (2018) • 5–15. articles tax ruling regulations in poland – evolution of the institution and evaluation of the regulations elżbieta agnieszka ambrożej* * elżbieta agnieszka ambrożej, doctor of law, department of finance and accounting, college of finance and management in bialystok, poland, specializes in tax law and tax advisory . author of numerous articles related to tax law and tax consulting, published in prestigious magazines . member of the information and organization centre for the research on the public finances and tax law in the countries of central and eastern europe . (e-mail: elzbieta .ambrozej@gmail .com) abstract: this contribution deals with tax ruling in poland, its evolution, evaluation of legal solutions concerning it, as well as the practice of issuing those rulings by competent tax authorities . the main objective of the contribution is to confirm the hypothesis that legal regulations concerning tax ruling provisions and the practice of issuing them did not sufficiently ensure the main purpose of the ruling, i .e . uniformity of application of tax law by the fiscal apparatus, as well as legal security of taxpayers . the research used a dogmatic and legal research method, which was supplemented by an analysis of the case law of administrative courts and the constitutional tribunal, as well as the existing statistical analysis . keywords: uniformity in the application of tax law; general tax ruling ; individual tax ruling ; amendment, annulment or expiration of the tax ruling 1. introduction the institution of tax ruling in poland has been functioning since 1998 . it is regulated by the act of 29 august 1997, the tax ordinance1 (hereinafter referred to as to) . the main reason for the introduction of this institution was the increasing complexity of the polish tax law, which in turn translated into the growing complexity of economic relations and phenomena, as well as fears of taxpayers’ efforts to circumvent tax law and avoid taxation .2 additionally, the taxpayer’s self-calculation method being adopted in the polish tax law transferred the burden of performing complicated and risky activities in the application of tax law, such as how to determine the provisions of both material and procedural tax law, their interpretation and application in relation to the actual state of affairs to the taxpayer . it created a  threat to the legal security of the individual, who bears the risk and consequences of possible mistakes or errors made while calculating the tax .3 these circumstances required the introduction of regulations that would prevent the tax authorities from issuing different decisions in the same factual and legal circumstances, and on the other hand would allow the taxpayer to obtain professional support provided by tax authorities . 10.53116/pgaflr.2018.1.1 mailto:elzbieta.ambrozej%40gmail.com?subject= https://doi.org/10.53116/pgaflr.2018.1.1 6 elżbieta agnieszka ambrożej public governance, administration and finances law review • vol. 3. no. 1. the tax ordinance, in its original wording,4 provided for two types of tax rulings: official tax ruling and written information on the scope of application of tax law provisions . written information was issued by the competent tax authority of the first instance at the written request of the taxpayer, payer, and collector in their individual cases . the reason for introducing them was the resignation of the legislator from the concept of broad information to taxpayers on the provisions of tax law .5 according to the adopted principle of information (article 121 § 2 of the to) the tax authorities are obliged, at the party’s request, to provide only the necessary information on the tax law and only those that are related to the subject of the proceedings, hence the taxpayer’s (payer’s, collector’s) right to obtain written information was to supplement the above principle . official tax rulings of the minister of finance (mf) constitute a  specific legal aid in the interpretation of complicated tax law provisions6 both for citizens and tax authorities . they are the resolution of an abstract problem that occurred in the field of application of tax law .7 the purpose of introducing them was for the mf to ensure uniformity in the application of tax law by all tax authorities, in case of discrepancies in the practice of their application . uniformity in the application of provisions in tax law is of particular importance – it is a condition for the implementation of the principle of equality and justice of taxation .8 it ensures that all taxpayers who are in the same legal and actual status will be treated equally by the tax authorities, which means they will bear the same tax burden . it also supports the implementation of the principle of taxpayers’ certainty of taxation and their legal security, as it enables them to decide on their actions on the basis of full knowledge of the premises of the tax authorities and the legal consequences that their actions may entail .9 the mf’s tax rulings also serve to deepen citizens’ trust in tax authorities and strengthen the proper implementation of taxpayer’s rights in tax proceedings . the obligation to publish those means that citizens and tax authorities may obtain information on the manner of tax rulings of specific tax law provisions, and that compliance with them must not cause any negative consequences . the article will present the evolution and attempt to evaluate mf’s tax ruling . individual tax rulings will be discussed only to the extent to which they complement the main objective of general tax rulings – ensuring uniformity in the application of tax law by tax authorities . due to the complexity of the issue of individual tax ruling, the article refers only to tax rulings issued by the state tax administration agencies, it does not deal with tax rulings issued in terms of the attribute of the tax authorities of local government units . 2. official tax rulings in the period from 1 january 1998 to 30 june 2007 initially (from 1998 till 2002), art . 14 of the to on the official mf was far too general and imperfect . it stated that official tax rulings were made to ensure uniform application of tax law by tax authorities and fiscal control authorities . the article did not regulate the legal character of official taxes, the manner of issuing them and the scope of their content, only that those tax rulings were to be made taking into account the case law of courts and 7 public governance, administration and finances law review • 1. 2018 tax ruling regulations in poland – evolution of the institution and evaluation of the regulations the constitutional tribunal decisions; and if discrepancies in the case law were found, the mf was to notify the competent court or authority that could apply measures to eliminate the discrepancies . the mf’s tax rulings were published in the ministry of finance’s tax bulletin . the to did not specify to whom the tax rulings of the mf are directed, but it stated that the taxpayer’s compliance with the official tax ruling (only) could not harm them . at the same time, the provisions of the to did not indicate any situations that could be considered harmful to the taxpayer, nor did they regulate the manner in which the tax authority should act in case of negative consequences of the taxpayer’s compliance with the mf’s tax ruling . as a  result of the amendment of the to on 1 january 2003,10 the provision of art . 14  § 2 of the to determined that the mf’s tax rulings are the ones addressed to tax authorities and fiscal control authorities regarding tax law problems and they bind tax authorities and fiscal control authorities . giving the mf’s tax rulings binding force for tax authorities and fiscal control authorities had far-reaching consequences . that tax ruling, as incontestable, obliged the authorities (both the first and the second instance) to apply it, i .e . to proceed and rule in accordance with its content . overturning the vitiated tax ruling could take place only if the taxpayer (the payer, collector) appealed against the final decision to the supreme administrative court (sac), which violated the principle of two instances of tax proceedings .11 in the literature on the subject, it is stated that noncompliance with the binding tax rulings of tax authorities created a  gross violation of the principle that tax proceedings should be led in the way that was raising citizens’ confidence in the state authorities, in connection with art . 121 § 1 of the to .12 on the other hand, the official tax rulings are not universally binding sources of law (article 87 of the polish constitution provides for their closed catalogue) so they cannot constitute a legal basis for a tax decision . they should be treated only as guidelines of the mf, how to understand the law .13 as a result, this provision, in part stating that the mf’s tax rulings bind tax authorities and fiscal control authorities, was considered by the constitutional tribunal (judgment of 11 may 200414) to be inconsistent with the constitution of the republic of poland and on 31 may 2004 lost its binding force . the amended art . 14 of the to exempted the mf from the obligation to notify the courts or the body that could apply measures to remove discrepancies in case law . in addition, it was specified that the mf does not tax rule in individual cases of taxpayers, payers or collectors, which unequivocally defined the abstract nature of these tax rulings . protection due to compliance with the mf’s official tax ruling was granted to the payer and collector (except the taxpayer) . however, it has been added that compliance with the tax ruling does not exempt the taxpayer, payer or tax collector from the obligation to pay tax . this regulation clearly indicated that the mf’s tax ruling, although not binding for the taxpayer (payer, collector), protected him only if he behaved according to its content, even if it was incorrect . the taxpayer’s (payer’s, collector’s) compliance with erroneous tax ruling was to have the effect that no proceedings in cases of fiscal offences or fiscal misdemeanours will be instituted against them, and the proceedings instituted in these cases will be dismissed, and that no other consequences, such as no default interest will be charged, or they will not pay the so-called additional liability, will they bear . 8 elżbieta agnieszka ambrożej public governance, administration and finances law review • vol. 3. no. 1. in addition, the compliance of a taxpayer, payer or tax collector to the tax ruling could also constitute a premise for the cancellation of tax arrears . another significant change in the regulations governing the institution of tax ruling took place at the beginning of the year 2005 .15 the mf was to make official tax rulings, taking into account not only judgments of the courts and the constitutional tribunal, but also of the european court of justice16 (art . § 1 p .2 of the to) . in addition, art . 14 § 2 of the to defined that the official mf’s tax rulings are all the explanations of the content of applicable tax law, addressed to tax authorities and fiscal control authorities, regarding tax law problems (excluding tax rulings in individual taxpayer cases) . this provision also provided that mf tax rulings and their amendments thereto would be published in the official journal of the minister of finance . the principle stating that the compliance of a  taxpayer, payer or a  collector with the tax ruling must not be harmful to them, has also been extended to the taxpayer’s legal successor and third parties responsible for tax arrears . 3. general tax rulings in the period from july 1, 2007 to the current legal status a change in the structure of institutions of official tax ruling took place on 1 july 2007 .17 the previous official mf tax rulings took the form of general tax rulings, and written tax rulings – of individual tax rulings . the provision of art . 14a § 1 of the to, specifying the competences of the mf in the field of issuing general tax rulings, was amended several times, but in fact retained its shape and meaning in substance . as a result of the tax administration reform (tar), since 1 march 201718 general tax rulings have been issued by the mf in order to ensure a uniform application of the tax law by tax authorities . they should include a  description of the issue in relation to which the tax law is ruled, as well as an explanation of the scope and manner of applying the interpreted tax law provisions to the described issue together with legal justification (article 14a § 1a of the to19) . since january 2012,20 general tax rulings have been issued by the mf not only ex officio but also upon request (article 14a § 1 of the to) . in principle, the to has not provided for any restrictions as regards entities entitled to submit a  claim with one exception, public administration bodies are not entitled to submit applications (article 14a § 1b of the to) . applications for a general tax ruling shall be submitted on an official form, and a  template thereof, in accordance with the instruction of art . 14a § 11 of the to, shall be specified by mf .21 a  fee of pln 40 (article 14d in connection with article 14a § 9 of the to) shall be paid within seven days from the date of submitting the application (article 14f in relation to article 14a § 9 of the to) . the fee shall be returned only in the case of issuing a  general tax ruling, within seven days from the date of its publication (article 14a § 8 of the to) . according to art . 14a § 2 of the to an application for issuing a general tax ruling, in addition to the data identifying the applicant, should contain justification of the need to issue a general tax ruling, in particular: 9 public governance, administration and finances law review • 1. 2018 tax ruling regulations in poland – evolution of the institution and evaluation of the regulations ƿ presentation of the issue and indication of tax law provisions requiring the general tax ruling, and ƿ indication of non-uniform application of tax law provisions in specific decisions, decisions and individual tax rulings issued by tax authorities and fiscal control authorities (in connection with tar currently only by tax authorities) in the same factual circumstances or future events and in the same legal statuses . it seems that meeting the conditions for submitting an application for a general tax ruling is even “prohibitive” . while the presentation of the issue and indication of tax law provisions requiring a  general tax ruling does not raise any objections, the applicant’s indication of non-uniform application of tax law provisions in specific decisions, decisions issued by tax authorities in the same factual circumstances or future events and in the same legal statuses throughout the country may be extremely difficult to comply with .22 this requires the applicant to find appropriate decisions or rulings, for which it is necessary to be aware not only of their existence (in accordance with article 129 of the to, the access to the case file, including decisions and rulings, is reserved exclusively for parties to proceedings, which significantly limits the knowledge about them and their availability), but also their content and whether they were issued in the same factual circumstances or future events (i .e . according to the linguistic interpretation, ‘identical’, ‘unchangeable’, ‘uniform’, ‘equivalent’) . it means that in practice, the indication of non-uniform application of tax law provisions may be limited only to individual tax rulings which, pursuant to the act (article 14i § 3 of the to) together with the application for a tax ruling, are published in an anonymous version in the public information bulletin . as the administrative courts emphasize, the existence of inconsistent individual tax rulings determines the necessity of issuing a  general tax ruling at the taxpayer’s request,23 however, issuing two different individual tax rulings, one of which, within the time limit of issuing a  general tax ruling, becomes incorrect pursuant to art . 14e § 1 of the to changed – to the extent consistent with the other  –  does not constitute a  non-uniform application of law in individual tax rulings referred to in art . 14a § 2 point 2 of the aforementioned act . 24 art . 14a § 3 of the to made issuing the general tax ruling dependent on the fulfilment of an additional condition . on the day of submitting the application for it issuance, in the cases indicated in the application, no tax proceedings or control proceedings by the fiscal control authority may be conducted, or no appeal or complaint was filed against the decision or provision (currently, if no tax proceedings, tax control, customs and tax control are conducted, or no appeal or complaint was filed against the decision or provision) . in order to verify the fulfilment of this condition, tax authorities, upon the written request of the mf, are obliged to submit files regarding the decisions, provisions and individual tax rulings immediately (article 14a § 7 of the to) at the beginning of 2012, the ministry of finance, acting on the basis of the delegation of art . 14a § 10 of the to, in order to improve the service of applicants, authorized five directors of tax chambers (depending on the scope of cases) to issue, as the first instance authority, decisions on leaving without consideration requests for general tax rulings, and to submit written requests to tax authorities and fiscal control authorities to provide the files regarding decisions, provisions and individual tax rulings indicated in the application 10 elżbieta agnieszka ambrożej public governance, administration and finances law review • vol. 3. no. 1. for issuing general tax ruling . 25 currently, as a result of the tar, such authorization is held by the director of the national tax information (nti) .26 the nti director is responsible for the preliminary assessment of the submitted application (including checking whether the application has been addressed to the competent authority and whether the application fee has been paid) and verifying compliance with the statutory prerequisites for consideration of the application . failure to comply with these conditions shall result in the application not being considered (article 14a § 4 to) . this applies: ƿ if the application does not present the issue and the tax law provisions which require a  general tax ruling and does not indicate non-uniform application of tax law provisions in specific decisions, provisions and individual tax rulings issued by tax authorities in the same factual circumstances or future events and in the same legal statuses, or ƿ if the application does not meet other requirements specified by law (in this case, to the requirements that should be met pursuant to art . 168 of the to regarding the manner of submitting the application, the designation of the entity from which it comes, its address, signature), or ƿ when the issue presented in the application is the subject to a general tax ruling and the legal status has not changed in this respect . the decision to leave the application without consideration is made by the nti director by way of a  decision which may be appealed against to the mf . if the application is considered justified and meets the formal requirements, the director of nti submits the application of the mf together with the attached acts, i .e . the decisions, provisions and individual tax rulings indicated in the application for a general tax ruling . general tax ruling should be issued without undue delay, however not later than within 3 months from the date of the receipt of the application . according to art . 14d of the to, the dates and periods referred to in art . 139 § 4 of the to (including periods of suspension of proceedings or delays caused by the fault of the party or for reasons beyond the control of the authority, as well as the period necessary for the transfer of files related to the decisions, provisions and tax rulings indicated in the application) shall not be included in the time limit, which means that the actual deadline for issuing the tax ruling may be longer than 3 months (article 14d in conjunction with article 14a § 9 of the to) . submitting an application for a  general tax ruling will, in principle, result in nonjurisdictional proceedings, however, in accordance with art . 14a 9 of the to, certain provisions on jurisdictional proceedings shall apply to it; including the ones on accordance with the rule of law (article 120 of the to), conducting the proceedings in a manner that inspires confidence in the tax authorities (article 121 § 1 of the to), in compliance with the principle of speed and thoroughness of proceedings (article 125 of the to) and transparency of proceedings for its parties (article 130 of the to) . irrespective of whether tax ruling was issued upon the request or ex officio by the mf, it is not binding either for the taxpayer or the tax authorities . ‘however, taking into consideration the official subordination and organisational subjection of tax authorities to the minister, one may doubt if they do not become quasi-sources of tax law’ .27 from the taxpayer’s point of view the legal consequences of complying with the tax ruling are of 11 public governance, administration and finances law review • 1. 2018 tax ruling regulations in poland – evolution of the institution and evaluation of the regulations fundamental importance . the lack of a binding force of the mf’s tax ruling means that the taxpayer may but does not have to use it, as it is not a decision .28 however, complying with the tax ruling protects the taxpayer even if it is incorrect . since 1 july 2007, compliance with the general tax ruling prior to its amendment may not harm the party who has complied with it, as well as in the event of it not being taken into account in the decision on a tax case (art . 14k § 2 of the to) . ‘no harm’ means that in the case of compliance with a  general tax ruling which later has been amended or was not included in the decision of the tax case, no proceedings are instituted in cases concerning fiscal offences or fiscal misdemeanours, and the proceedings initiated in such cases are discontinued and interest on arrears is not charged (article 14k § 3 of the to) . compliance with the above tax ruling also results in an exemption from the obligation to pay the tax, to the extent resulting from the event being the subject of the ruling . this is the case if the liability has not been properly performed as a  result of complying with the ruling which has changed or the ruling not included in the judgment of the tax case, as well as when the tax consequences related to the event which corresponds to the factual circumstances took place after the publication of the general tax ruling (article 14m § 1 of the to) . the scope of this exemption, depends on the tax settlement period  –  annual, quarterly or monthly (art . 14m § 2 of the to) . additionally, in a  situation described in art . 14m § 3 of the to, the taxpayer may additionally demand from the tax authority a  calculation of the tax, in a  decision determining or fixing the tax covered by this exemption, or – in case of paying the tax, calculation of the amount of overpayment . however, the compliance with tax ruling does not release from the obligation of payment, if the tax consequences related to the event, which corresponds to the factual circumstances being the subject of the ruling, took place before the issuing of the general tax ruling (article 14l of the to) . according to the to, the mf’s tax ruling cannot be appealed against by anyone, even if it has been issued upon request . it results from provisions of the to that a taxpayer may submit an application for a general tax ruling, but not for its amendment . the only entity being entitled to amend the issued tax ruling is the mf,29 who may do that ex officio if its inaccuracy has been stated, taking into account, in particular, judicial decisions of courts, the constitutional tribunal or the court of justice of the european union . since 1 january 2017, the competence of the ministry of finance in the field of harmonizing the application of tax law has been extended by the possibility to issue exofficio tax explanations, i .e . general explanations of tax law provisions regarding the application of these provisions (article 14a § 1 point 2 of the to) . tax explanations, similarly to general tax rulings, are issued taking into account the judgments of the courts, the constitutional tribunal or the court of justice of the european union . however, their content differs from general tax rulings . general tax rulings contain an official interpretation of the provisions, whereas the essence of tax explanations is linking the content of the provision with its practical application in relation to exemplary situations .30 the purpose of introducing tax explanations was to provide taxpayers with the possibility of obtaining a faster protection due to their compliance with the tax explanations, without the need to apply for an individual tax ruling . identical scope of protection granted by tax explanations and tax rulings is to lead to a reduction in the number of individual tax rulings 12 elżbieta agnieszka ambrożej public governance, administration and finances law review • vol. 3. no. 1. issued in those areas in which sufficient explanations are included in tax explanations .31 tax explanations are included in the public information bulletin, and their change may take place in the mode provided for general tax rulings . 4. conclusions the basis for introducing the institution of tax ruling was the mf’s attempt to ensure uniformity in the application of tax law by the tax authorities, if the practice of its application raises any doubts . consequently, it was supposed to prevent the tax authorities from issuing diverging individual tax rulings and to reduce the number of such rulings . the tool of unification of tax legislation application has so far been used by the mf to a limited extent . from 1 july 2007 till the end of 2011, when general tax rulings could only be issued ex officio, the mf issued only thirty . this situation has not been improved by the introduction of the possibility of issuing rulings upon request . in the period from 2008 till may 2018, the number of general tax rulings amounted to 78 (in the years: 2008  –  8; 2009  –  7; 2010  –  6; 2011  –  9; 2012  –  14; 2013  –  19; 2014  –  11; 2015  –  12; 2016  –  9; 2017  –  6; 2018  –  7), out of which 72 were issued ex officio . since 2012, mf has issued only 6 tax rulings upon request (in the years: 2012  –  3; 2013  –  1; 2015  –  1; 2016  –  1) . according to the data of the tax information office for the years 2013–2016, it appears that a  great part of the submitted applications for a  general tax ruling was left without consideration (in the years: 2012 – 77 applications out of 57; 2013 – 41 applications out of 34; 2014  –  46 applications out of 32; 2015  –  20 applications out of 19; 2016  – 22 applications out of 17) . the presented data confirm that the conditions to be met by the application for issuing a  general tax ruling are not so difficult to meet as they are ‘prohibitive’, hence the moderate activity of the mf in issuing rulings ex officio may be surprising . especially that in the analyzed period the number of tax rulings issued in individual taxpayer cases increased successively (24,229 in 2008, 28,153 in 2009, 30,920 in 2010, 35,929 in 2011, 36,816 in 2012 36,143 in 2013, 37,891 in 2014, 37,710 in 2015), which were often contradictory32 and also erroneous, thus repealed by administrative courts .33 the decrease in the number of these tax rulings took place in 2016–2017 (up to 34,151 in 2016 and 25,718 in 2017) . the reason for the decrease in the number of issued tax rulings should be seen not so much in improving the quality of the polish tax law, guaranteeing the legal security of taxpayers, as in the introduction into the to in 2016–2017 new legal regulations allowing to, among others file a  so-called joint application (article 14s of the to), which may be requested by at least two interested parties who are in the same factual circumstances or are to participate in the same future event . the competent authority may also refuse to issue an individual tax ruling, if the anti-avoidance clause applies in the case described in the application, or if an attempt to avoid taxation is detected (article 14b § 5b of the to) . on this basis, in 2017, the director of the nti issued 650 decisions refusing to issue a tax ruling . it seems that the fear of the effects of this regulation itself may lead to a  decrease in the number of applications . in addition, the provisions of the to provide that no ruling shall be issued if the factual circumstances or future events presented in the 13 public governance, administration and finances law review • 1. 2018 tax ruling regulations in poland – evolution of the institution and evaluation of the regulations application correspond to an issue being subject to a general tax ruling issued in the same legal state . in such a case, the director of the nti issues a decision stating that general tax ruling is applicable to such a situation or event (article 14b § 5a of the to) . in 2017, the director of nti issued 491 decisions on the application of general tax ruling, whereas nti offices received a  total of 29,59934 applications for an individual tax ruling . it seems that the purpose of this regulation is not only to reduce the impact of requests for individual tax rulings, but also to ensure greater activity on the part of the mf in issuing general tax rulings, which unfortunately cannot be observed . therefore, it should be stated that, although the regulations regarding the tax rulings of the mf have been significantly improved and clarified since the day of their introduction, the provisions of the to do not contain regulations which would indicate what criteria should be followed by the mf while assessing the need for a  general tax ruling . even if there are discrepancies in the assessment of identical factual circumstances between the views presented in the case law of administrative courts and the views presented by tax authorities, the minister is not required to issue a  general tax ruling consistent with the case law of these courts or to amend an existing one35 which should be considered as a weakness of this regulation . for this reason, it should be recognized that the regulations concerning the interpretation of tax law provisions and the practice of issuing them do not sufficiently ensure the main purpose of a tax ruling, i .e . ensure uniformity of application of tax regulations by the tax office . 14 elżbieta agnieszka ambrożej public governance, administration and finances law review • vol. 3. no. 1. references 1 uniform text: journal of laws 2018, item 800, as amended . 2 bogumił brzeziński, advance tax rulings jako instytucja prawa podatkowego [advance tax ruling as an institution of tax law], 13–21, in roczniki nauk prawnych [annals of juridical science], no . vii (1998) . 3 zbigniew kmieciak: procesowe gwarancje ochrony interesu podatnika [procedural guarantees protecting taxpayer’s interest], 9–28, in kwartalnik prawa podatkowego [tax law quarterly], no . i (2000) . 4 journal of laws, no . 137, item 926 . 5 henryk dzwonkowski, indywidualna interpretacja prawa podatkowego [individual tax ruling ], 18–23, in monitor podatkowy [tax monitor], no . 4 (2003) . 6 jacek brolik, kontrowersyjne kompetencje ministra finansów w  dziedzinie stosowania prawa podatkowego [controversial competences of the minister of finance in the field of application of tax law], 6, in przegląd podatkowy [tax review], no . 7 (1999) . 7 leonard etel (eds .), prawo podatkowe [tax law], 216–217 (warsaw, difin 2008) . 8 constitutional court, k 10/93 . all verdicts of the constitutional court are available at trybunal .gov .pl/ wyszukiwarka/ (accessed 4 june 2018) . 9 constitutional court, k 47/05 . 10 the act of 12 september 2001 on the amendment of the act – tax ordinance act and on amendments of certain other acts ( journal of laws, no . 169, item 1387) . 11 cezary kosikowski et al ., ustawa ordynacja podatkowa. komentarz [tax ordinance act. commentary], 78 (2nd edition, warsaw, dom wydawniczy abc 2004) . 12 roman szumlakowski, zasady prawne postępowania podatkowego organów administracji podatkowej w  relacjach z  podatnikiem [the legal principles of tax proceedings of tax administration authorities in relations with the taxpayer], 203–213, in paweł borszowski (eds .), podatnik versus organ podatkowy [tax payer versus tax authority] (wrocław, prawnicza i ekonomiczna biblioteka cyfrowa 2011) . 13 justyna bauta, ryszard sowiński,  ochrona podatnika przed skutkami błędnej interpretacji prawa podatkowego [protection of a  taxpayer against the consequences of misinterpretation of tax law], 53, in przegląd podatkowy [tax review], no . 10 (2001) . 14 constitutional court, k 4/03 . 15 the act of 2 july 2004, provisions introducing the act on the freedom of economic activity, journal of laws of 2004, no . 173, item 1808 . 16 now: court of justice of the european union . 17 the act of 16 november 2006 on the amendment of the act – tax ordinance act and on amendments of certain other acts, journal of laws, no . 217, item 1590 . 18 the act of 16 november, 2016 . regulations introducing the act on the national tax administration, journal of laws of 2016, item 1948 . 19 art . 14a § 1 amended on 1 january 2016 by the act of 10 september 2015 on the amendment of the act – tax ordinance act and certain other acts, journal of laws of 2015, item 1649 . 20 act on 16 september 2011 on the reduction of certain obligations of citizens and entrepreneurs, journal of laws of 2011, no . 232, item 1378 . 21 at present the template is regulated by the regulation of the minister of finance of 17 february 2017 on the template for the application for a general tax ruling and how to pay the application fee, journal of laws of 2017, item 352 . 22 hanna filipczyk: interpretacja ogólna na wniosek – nowe rozwiązanie w ordynacji podatkowej [general tax ruling upon request], 11–15, in monitor podatkowy [tax monitor], no . 3 (2012) . 23 the voivodship administrative court in warsaw: iii sa/wa 3379/12 . all verdicts of administrative courts are available at orzeczenia .nsa .gov .pl/cbo/query (accessed 4 june 2018) . 24 supreme administrative court, ii fsk 2253/13 . http://trybunal.gov.pl/wyszukiwarka/ http://trybunal.gov.pl/wyszukiwarka/ http://orzeczenia.nsa.gov.pl/cbo/query 15 public governance, administration and finances law review • 1. 2018 tax ruling regulations in poland – evolution of the institution and evaluation of the regulations 25 directors of tax chambers: in bydgoszcz – in the field of personal income tax; in katowice – in the field of corporate income tax and excise duty; in poznan  –  in the field of tax on goods and services; in warsaw  –  in the area of tax on civil law transactions, inheritance and donation tax, and the provisions of the tax ordinance act; in lodz – in the scope of other applications, irrespective of the place of residence or registered office of the applicant . regulation of the minister of finance of 27 december 2011 on authorizing the issuance of decisions on leaving without consideration the applications for general tax rulings and for performing certain activities related to submitted applications ( journal of laws, no . 296, item 1757) . 26 regulation of the minister of economic development and finance of 21 february 2017 on authorizing the issuance of decisions on leaving without consideration the applications for issuing general tax rulings and performing certain activities related to submitted applications, journal of laws of 2017, item 341 . 27 przemysław krzykowski, urzędowe interpretacje prawa podatkowego a  system źródeł prawa [official interpretations of tax law and the system of sources of law], 28–29, in kwartalnik prawa podatkowego [tax law quarterly], no . 3–4 (2005) . 28 the voivodship administrative court in rzeszow, i sa/rz 1153/13 . 29 art . 14e § 1 p . 1 of the to amended on 1 january 2016 by the act of 10 september 2015 on amendment of the act – tax ordinance act and certain other acts . 30 leonard etel et al ., ordynacja podatkowa. komentarz [tax ordinance act, commentary], 183, (warsaw, wolters kluwer, 2017) . 31 polish parliament of the vii term: justification of the draft law amending certain acts to improve the legal environment of entrepreneurs, paper no . 994 . 32 compare: individual tax rulings of the tax chamber director in warsaw no . ippb5/423-200/09-2/dg, no . ip-pb3-423-59/08-2/gj, no . ippb5/423-788/10-5/dg as well as: individual tax rulings of the tax chamber director in katowice, no . ibpbi/2/423-709/09/sd and individual tax rulings of the tax chamber director in bydgoszcz annulled by the voivodship administrative court in gdańsk, i sa/gd 1311/10 . 33 compare: supreme administrative court, ii fsk 1242/16; i fsk 2140/15; i fsk 726/16; i fsk 382/16; i fsk 350/16; i fsk 307/16 . 34 all the data come from the information on the tax information office activities for the years: 2013, 2014, 2015, 2016, and the information on the revenue information office activities for the year 2017, www .kis . gov .pl/dzialalnosc/raporty-z-dzialalnosci (accessed 28 may 2018), and official journals of the ministry of finance and official journals of the ministry of economic development and finance for the years 2007– 2018, www .mf .gov .pl/ministerstwo-finansow/minister-finansow/dziennik-urzedowy (accessed 28 may 2018), www .mf .gov .pl/ministerstwo-finansow/minister/dziennik-urzedowy-ministra-rozwoju-i-finansow (accessed 27–28 may 2018) . 35 the ombudsman, rpo-630990-vi/09/ab, www .rpo .gov .pl/sites/default/files/informacja_kwartalna_o_ pracy_rpo_pazdziernik_%e2%80%93_ grudzien_2009_r .pdf (accessed 22 may 2018) . http://www.kis.gov.pl/dzialalnosc/raporty-z-dzialalnosci http://www.kis.gov.pl/dzialalnosc/raporty-z-dzialalnosci http://www.mf.gov.pl/ministerstwo-finansow/minister-finansow/dziennik-urzedowy http://www.mf.gov.pl/ministerstwo-finansow/minister/dziennik-urzedowy-ministra-rozwoju-i-finansow http://www.rpo.gov.pl/sites/default/files/informacja_kwartalna_o_pracy_rpo_pazdziernik_%e2%80% 93_ grudzien http://www.rpo.gov.pl/sites/default/files/informacja_kwartalna_o_pracy_rpo_pazdziernik_%e2%80% 93_ grudzien pga2017_1_05_case_study_stiebrova.indd © 2017 dialóg campus, budapest public governance, administration and finances law review vol. 2. no. 1. (2017) • 5, 39–51 the limit of tax audit and its impact on the status of taxable entities1 ivana štieberová* * judr. ivana štieberová, internal phd student, department of financial law, tax law and economy at the  faculty of law, pavol jozef šafarik university in košice. (e-mail: ivana.strakova1@student.upjs.sk) abstract: tax audit is a  significant control mechanism nowadays, particularly in the  context of increasing tax evasion and tax fraud. taxable entities are obliged to tolerate the  performing of tax audit for a certain statutory period. but what if the tax audit exceeds this statutory time limit? what impact does it have on the status of the taxable entity? regarding the length of the tax audit, we will deal with the  impact of the  interest on value added tax refund on the  status of the  taxable entity. will this interest contribute to its improvement? keywords: tax law; tax audit; length of tax audit; interest on value added tax refund 1. a few notes on tax audit for introduction nowadays, especially with regard to increasing tax evasion and tax fraud2 it is of outmost importance to apply different control mechanisms provided by law. such a  significant control mechanism3 in our legal system is tax audit. it is one of the  most important activities of the  tax authority in tax administration. the  tax audit is namely an important procedural tool that allows the  tax administrator to provide a  realistic picture of how people abide tax law provisions, how they are implemented and applied in tax practice. in general, tax audit serves to find out or verify facts decisive for the correct tax determination or compliance with provisions of special regulations. the importance of tax audit for the  tax administration derives in particular from the fact that in the slovak republic (hereinafter ‘sr’) taxable entities apply self-application in the  area of tax law. in relation to the  collection of tax this means that it is the  taxable entity himself who should assess his tax obligation. the taxable entity is the person who is obliged to calculate, voluntarily declare the amount and pay the tax himself. if law transfers responsibility for determining the taxable entity’s own tax obligation to himself, it is logical that it also seeks to ensure effective control mechanisms for such a tax calculation in order to impose on the  taxable entity the  highest possible care, honesty and integrity in the calculations of his own tax obligation.4 the tax audit is characterised by the  fact that it has such immediate and long-term contact between a  tax administrator and an inspected taxable entity as in any other procedural act. each side protects and asserts its interests. a tax administrator enforces the fiscal interests of the state or municipality and the taxable entity tries to minimize his own tax burden and thus pay the lowest tax possible, of course in accordance with the law. in addition, the  tax administrator has a  superior position in relation to the  taxable entity. 10.53116/pgaflr.2017.1.5 https://doi.org/10.53116/pgaflr.2017.1.5 44 ivana štieberová public governance, administration and finances law review • vol. 2. no. 1. all these lead to the need of regulating mutual rights and obligations in terms of/as regards these subjects, in particular to regulate the tax audit procedure of the tax administrator.5 the tax audit, as an important tool for effective tax collection is in particular a support institute that has several functions. like any kind of control, the  tax audit also has a  cognitive function, whose purpose is to identify the  actual facts and a  comparative function, which serves to compare and evaluate the factual situation of the tax subject with the conditions that assumes the applicable tax law. one of the  basic and important functions is the  preventive function. effective tax collection is relatively closely related to the  issue of tax morality, thus to the  access of the  taxable entity in compliance with tax laws and paying taxes itself, because taxable entities are basically not controlled in the fulfilment of obligations, such as bookkeeping , filing tax returns, reports, control statements and so on, and the  control of filed documents by the  tax administrator is usually only formal. and here, the  potential possibility to carry out the  tax audit by a  tax administrator with consequent possibility of the additional assessing of tax or a tax difference against the assessed tax in assessment proceedings is a  tool that could indirectly force taxable entities to comply with the  tax laws. thus, the existence of a tax audit institute serves to discourage taxable entities from socially undesirable behaviour in the  form of concealing taxable income, distorting or overstating the  amount of tax expenses and other illegal practices.6 some authors also describe other functions of tax audit, such as elimination, inspection or protective function and others.7 in connection with the afore mentioned issue of tax morality, a serious problem of tax audit is in looking at taxable entities for its effectiveness. complaints about tax inspectors who sometimes try to find even the  slightest mistake in the  tax records of taxable entities became relatively significant and also the  fact that they do not try to fight large taxable entities.8 it is quite well described by e. burák in his article where he writes that there is a certain parallelism in the world and so in the slovak case, where “tax officials are charging small money, but big money (billions) of the  state escapes – oftentimes – unfortunately, through visible channels that have long been known as public secrets.”9 the  tax audit creates respect, fear, even stress amongst taxable entities. it is perceived as a big risk because all taxable entities may be mistaken. if irregularities are detected during the tax audit, there is not only an additional assessing of tax, but also it means imposing appropriate sanctions (fines, penalties) on the taxable entity.10 at present, the  tax audit procedure is regulated in the  slovak legal order in act no. 563/2009 coll. on tax administration (tax procedure code) and on amendments and supplements to certain laws in the wording of later regulations (hereinafter ‘tax procedure code’), namely in article 44 and the following articles. the main objective of tax audit is expressed in art. 44, par. 1 of the  tax procedure code and is to find out or verify various facts that are important for correct tax determination or compliance with provisions of special regulations, such as income tax act, value added tax act and individual acts about excise duties. tax audit shall be performed in the extent which is necessarily important for achieving its purpose,11 either directly with the  taxable entity or at another place required by the  purpose of the  tax audit. 45 public governance, administration and finances law review • 1. 2017 the limit of tax audit and its impact on the status of taxable entities based on the above, especially with regard to the self-application of tax law, it is clear that the  regulation of control mechanisms, which is also the  tax audit, is necessary in our legal order. taxable entities are obliged to tolerate tax audit for a certain statutory period. but what if tax audit exceeds this statutory time limit? what impact does it have on the  status of a  taxable entity? the  problem arises, in particular, when the  payment of the taxable entity’s funds, such as excess deduction of value added tax (hereinafter ‘vat’), depends on the  termination of the  tax audit, which is legally carried out but takes longer than usual and it is concluded that the  taxable entity has requested the  payment of the funds legally. precisely in the context of tax audit being performed to verify rightfulness of the claim to refund an excessive vat deduction or its part, a problem arises. therefore, following the  decision of the  court of justice of the  european union (hereinafter ‘the eu’) of october 21, 2015 in case c-120/15 kovozber, “default interest relating to the  refund of excess vat has been incorporated into our legal system since january 1”. in this article we will also deal with the  fact when the  taxable entity is entitled to claim interest on vat refund and how it is regulated in our legal system. 2. the length of the tax audit – is there a limit? after carrying out all the  necessary acts and evidence during the  tax audit, the  tax administrator’s employee shall make a protocol of the tax audit containing the findings of the  tax audit, including the  assessment of evidence. so a  tax audit is terminated by the delivery of the tax audit protocol, the delivery of the notification on tax determination by using tools, or the  day of the  expiry of the  claim for refund of excess vat deduction under the vat act. in connection with the  termination of the  tax audit, the  tax procedure code also regulates in its provisions the  deadline for completing the  tax audit, which is one year at most from the  date of its initiation. this time period is available to the  tax administrator regardless of whether he is carrying out the  tax audit of a  small enterprise or a  large enterprise, whether it is an undertaking which exclusively carries out domestic supplies of goods and services or it is a  taxable entity who predominantly supplies the  goods and services to other states. in case of the tax audit of foreign related persons which determinate their tax base pursuant to the income tax act, the second instance authority can prolong the  mentioned time period before its expiry by no longer than twelve calendar months upon a reasonable written request. the tax procedure code also allows the interruption of tax audit; in case of its interruption, the  provisions relating to the  interruption of tax proceedings shall be applied accordingly. the negative impact of the  tax audits on the  territory of the  slovak republic is their occasionally long duration. although the  tax procedure code sets out a  time limit for a  tax audit,12 its termination is sometimes deferred by its interruption. this is due to the  fact that during the  interruption of a  tax audit the  time periods pursuant to tax procedure code shall not lapse, and thus the time period prescribed for completing the tax audit do not lapse either. this is especially true for extensive (simultaneous or so-called network)13 tax audits because of the  extensive collection of evidences and obtaining all 46 ivana štieberová public governance, administration and finances law review • vol. 2. no. 1. the  necessary documents. the  interruption of the  tax audit results in its extension and therefore the question arises as to whether there are in fact time limits for the completion and termination of the tax audit which should be respected by the tax administrator. here, it will be necessary to deal with the  case law of the  courts of the  slovak republic, which have many times dealt with the  issue of compliance with the  time limits for tax audit in their decision-making praxis. it is clear from the jurisprudence of the courts of the sr that the  time period set out to carry out the  tax audit must be observed. here, for example, the supreme court of the sr emphasizes in its judgment14 that “the time periods specified in art. 30a, par. 715 of act no. 511/1992 coll.16 are the  legal procedural time periods provided by the  law for a  tax audit. since they are stipulated directly by the  law, it is not possible for the tax administrator to disrespect them, or to prolong it beyond the statutory limit. these are the periods during which the taxable entity is obliged to tolerate a tax audit and to fulfil the  obligations stipulated by the  tax administrator for the  taxable entity pursuant to art. 15, par. 6 of act no. 511/1992 coll.17 the  tax audit represents the intervention of the public authority in the private sector of the entity, therefore it can only be carried out in the  scope and process laid down by the  law (article 2, par. 2 of the  constitution of the  slovak republic). the  tax audit of a  taxable entity cannot be carried out for an unlimited time period. any intervention by a  public authority in the private sphere of a legal entity is governed by the universal principle of proportionality and the  provision of time periods for carrying out the  tax audit is an expression of the  principle of proportionality. the  supreme court points out that a  tax audit can be continued after the  expiry of the statutory period only with the  consent of the  concerned taxable entity. otherwise, the activity of the tax administrator creates an unlawful state in the form of unlawful interference by a public authority.” the above mentioned was finally confirmed by the  decision of the  constitutional court of the  slovak republic,18 in which it confirmed the  quoted conclusions of the supreme court of the slovak republic: “the time period laid down in art., 30a par. 7 of the  tax and fees administration act is a  statutory time limit and for the  tax administrator performing the  tax audit is obligatory, because it determines the  legality of the  tax audit. this time period cannot be compared with the  time periods for decisionmaking pursuant to art. 30a, par. 1 to 4 of the tax and fees administration act. the tax audit as a  process of obtaining evidence (the protocol), which is not a  decision-making process on the tax liability of the taxable entity, represents a serious and intense interference by the tax administration in the individual, lawfully protected sphere of the taxable entity, which is quite apparent on the  basis of the  nature of obligations of the  inspected taxable entity during the tax audit (art. 15 par. 6 of the tax and fees administration act). the aim of the tax audit cannot be fulfilled without respecting the rights and legitimate interests of taxable entities. the  requirement of proportionality shall be applied during the  tax administrator’s interferences in the  taxable entity’s tax affairs even during tax proceedings (art. 2 par. 3 of the  tax and fees administration act19). in some cases, this requirement was formulated by the legislator in a very precise way by specifying the limits of a specific type of interference.” in this decision the constitutional court of the slovak republic, in accordance with the  established case law of the  supreme court of the  slovak republic, does not neglect that “the prohibition to exceed the  statutory timeframe of a  tax audit 47 public governance, administration and finances law review • 1. 2017 the limit of tax audit and its impact on the status of taxable entities applies unconditionally only if the inspected taxable entity provides the tax administrator carrying out the tax audit with the necessary co-operation”. similar legal conclusions were also pronounced by the supreme court of the sr in its other decisions.20 it is therefore clear from those decisions that if the  tax administrator fails to respect the  maximum duration of the  tax audit, it violates not only the  relevant provision of the tax procedure code art. 46 par. 10, which establishes the time limit for the tax audit, currently art. 46 par. 10, but also the principle of proportionality and legality21 applicable throughout the tax administration; therefore such a tax audit and all decisions made during it will be unlawful. regarding the extension of the tax audit by its interruption, we consider necessary to point out that the  interruption of the  tax audit can occur only in the  cases regulated by the  tax procedure code, thus not arbitrarily. the  tax administrator has to consider carefully, assess and then justify whether the interruption of tax audit is grounded pursuant to the  relevant regulation. if the  reasons for the  discontinuation exist and the  tax audit is interrupted and the  term for the  tax audit does not expire, i.e. the  time period of the  tax audit may be longer than one year. on the  other hand, however, during the  interruption, the  tax administrator will not be entitled to require the  inspected taxable entity to cooperate as during the  tax audit, nor will he be able to carry out control tasks with the taxable entity. it is important that the interruption of the tax audit shall not be used for its actual extension by requiring cooperation from the  inspected taxable entity in process forms that can be obtained during the tax audit (for example testimony, local enquiry), at a  time when the  tax audit is interrupted. taxable entities should consistently require that no collection of evidence should be carried out during the interruption of the tax audit.22 in the  light of the  above, it can be stated that the  period prescribed for the  tax audit should serve the  taxable entities’ interest as a  means of legal certainty in order to prevent the  taxable entity from abusive and unjustified prolongation of the  tax audit by the  tax administrator. 3. tax audit of the excess deduction of vat most tax audits are carried out on vat, namely the  tax audit of excess deduction or its part, as there is a  huge tax evasion and tax fraud in connection with the  unjustified application of excess deductions.23 however, if the  taxable entity claims a  refund of excess vat deduction rightly,24 as demonstrated at the completion of the tax audit, there is a large intervention in the sphere of property of the taxable entity. during the tax audit, to verify rightfulness of the claim to refund an excessive vat deduction or its part, the  taxable entity cannot dispose of funds corresponding to the applied excessive deduction. this follows from the fact that if the tax office (the tax administrator) initiates the  tax audit within the  time period for refunding the  excess deduction,25 the  tax office shall refund the  excess deduction within ten days of the  completion of the  tax audit in the  amount determined by the  tax office, except the return portion of the excess deduction based on the interim protocol.26 thus, it can be 48 ivana štieberová public governance, administration and finances law review • vol. 2. no. 1. observed that if the  taxable entity claims the  refund of the  excess vat deduction in the relevant taxation period and the tax audit is initiated (with the tendency among the tax administrators that if the taxable entity claims the refund of the excess vat deduction, so they initiate the  tax audit to verify rightfulness of the  claim to its refund – as is already clear from the  above mentioned fact, that the  most tax evasion arises precisely in connection with unjustified application of excessive vat deductions), a  significant extension of the  deadline for refund of the  excess deduction can occur in some cases, namely twelve (or twenty-four) months, moreover, if the  tax audit is interrupted, it can even be a longer period of time. it can be stated that the  taxable entity has a  primarily fiscal interest in the  rapid termination of tax audit in order to be able to dispose of the  funds corresponding to the  claimed excess vat deduction. in many cases, this is not a  negligible amount, and the  non-payment of excess vat deduction may be liquidated for the  taxable entity. he counts with a certain income to be able to continue to pay his obligations. in case of doubt, it is of course the right of the tax administrator to verify whether the taxable entity applies excess vat deduction rightfully. however, it is not conceivable for the  state to do so whenever the  taxable entity asks for the  refund of the  excess vat deduction. this affects mainly honest entrepreneurs because the tax administrator mostly tries to reject the excess vat deduction or reduce it as much as possible by referring to the  general principle of the prohibition of abuse of law,27 which also applies at the area of tax law. the retention of excess deduction by the tax administrator in case the subsequent tax audit proves that the  claim to refund an excessive deduction or its part was rightful, is a significant interference in the taxable entity’s financial freedom (in some cases it may also be liquidation for the taxable entity) and in the violation of vat neutrality. 3.1. to introduce an interest on vat refund here it is worth mentioning the  order of the  court of justice of the  eu of october 21, 2015 in case c-120/15 kovozber s.r.o. versus daňový úrad košice (hereinafter ‘the kovozber order’ or ‘case c-120/15’). in that case, there was a  conflict between kovozber and the  tax office of košice, where kovozber brought a  legal action before a  competent national court after the tax authority rejected its request for the payment of default interest relating to the refund of excess vat. since, in our national legislation, there was no default interest relating to the refund of excess vat, and no legislation defining the circumstances in which the  redemption of excessive deduction was considered to be delayed, therefore the national court decided to suspend the proceedings and referred questions to the court of justice of the  eu for a  preliminary ruling. in its preliminary questions, the  national court essentially asks whether national legislation which stipulates the  calculation of default interest relating to the refund of excess vat only after ten days of the completion of the  tax audit to verify rightfulness of the  claim to refund an excessive deduction or its part, is contrary to the eu law. the court of justice of the  eu pointed out that although article 183 of council directive 2006/112/ec of november 28, 2006 on the common system of value added tax 49 public governance, administration and finances law review • 1. 2017 the limit of tax audit and its impact on the status of taxable entities (hereinafter ‘the vat directive’)28 does not entail any obligation to pay interest on refund of excess vat deduction, nor does it appoint the day from which the interest accrues, that fact does not, in itself, permit the  conclusion that the  provision must be interpreted as meaning that the conditions laid down by the member states for the refund of the excess vat deduction are not subject to any control under union law. the eu member states are obliged to comply with certain specific rules under article 183 of the  vat directive, which are to be interpreted in the light of its context and the general principles governing vat. then the  court of justice of the  eu notes: “the member states have a  certain freedom in determining the  conditions for the  refund of excess vat, those conditions cannot undermine the  principle of fiscal neutrality by making the  taxable person bear the  burden of the  vat in whole or in part. in particular, such conditions must enable the  taxable person, in appropriate circumstances, to recover the  entirety of the  credit arising from that excess vat. this implies that the  refund is made within a  reasonable period of time by a  payment in liquid funds or equivalent means, and that, in any event, the method of refund adopted must not entail any financial risk for the taxable person”. it is clear from the case law of the court of justice of the european union29 in relation to national legislation which makes the  tax authorities liable to pay default interest after terminating the tax audit procedure that the calculation of those interests being obligated to pay by a  tax authority which, at the  time of passing the  deadline, did not take the  date on which the  excessive deduction of vat would normally have been refunded under the  vat directive is in principle contrary to the  requirements of article 183 of that directive. in that respect, the court of justice of the eu recognized in its kovozber order that the  period for refunding excess vat may, as a  general rule, be extended in order to carry out the  tax audit without there being any need for such an extended period to be regarded as unreasonable, provided that the extension does not go beyond what is necessary for the successful completion of the tax audit. further on, the court of justice of the european union states that it is clear from its case law that “if the excess vat deduction is refunded to the taxable person after the expiry of a  reasonable period, the  principle of fiscal neutrality requires that the  financial losses thus incurred by the  taxable person, which results from the  impossibility of dealing with that amount, are to be compensated by payment of default interest”. subsequently, the court of justice of the eu referred to the national legislation such as the  slovak vat act, based on which the  excess vat is refunded within ten days of the  completion of the  tax audit (resulting in the  withholding of funds corresponding to the  excess vat deduction applied during a  substantial period which, according to the current situation, may be twelve to twenty-four times longer than the taxation period of one month) as not being compliant with the  principle of fiscal neutrality, based on which the refund must be made within a reasonable period of time. the court of justice of the eu in its order further states that the  “legislation, which allows the  tax authorities to initiate the tax audit any time, even immediately before the deadline for refunding the excess vat deduction, thereby enables a significant extension of the time period for refunding the excess deduction, not only exposes the  taxable person to a  financial disadvantage but it is also unable to predict the date from which funds corresponding to the excess vat will be made available to him, thus entailing an additional burden for that person”. 50 public governance, administration and finances law review • vol. 2. no. 1. ivana štieberová on the  basis of the  above mentioned and also on the  basis of previous precedents, the  court of justice of the  eu declared that kovozber was entitled to default interest in national proceedings as it had been refunded the excess vat deduction after the completion of the tax audit which exceeded the reasonable time period. at the same time, it stated that “when calculating interest, the date on which the excess vat would have had to be repaid in the normal course of events in accordance with the vat directive should be considered the  starting point”. concerning the  question of the  conditions of the  payment of default interest, the court of justice of the european union pointed out that the establishment of these conditions fall within the competence of the national legislation of each eu member state. the court of justice of the european union is not competent to interpret a domestic law or to apply the  eu rule in a  particular case. it is for the  national court, under its jurisdiction, to apply the  eu law in its entirety and is under a  duty to give full effect to the eu law. at the same time, the court of justice of the eu mentions that the conditions under which default interest is payable must not be less favourable than the conditions for similar claims in domestic law and also they may not be stipulated in such a  way that the  exercise of rights conferred by the  law of the  union is impracticable or the  exercise is excessively burdensome, that is to say, those conditions must respect the  principles of equivalence and effectiveness. 4. interest on vat refund de lege lata therefore, in view of the above, since january 1, 2017, an amendment of the vat act has been introduced which established a  new article 79a (‘compensation for vat refund retained during tax audit’), which contains a  regulation of interest on vat refund. it follows from that provision that the  taxpayer is entitled to compensation for the  retained vat refund (the law uses abbreviation interest on vat refund) if the  tax office initiates the  tax audit within the  time period of the  refund of the  excess vat deduction and the vat refund is not paid within six months from the last day of the same time period. entitlement to the interest on vat refund does not concern the first six months from the  expiry of the  time period of the  refund of excess vat deduction. this entitlement arises only on the first day after the expiration of the six-month period and it is calculated until the day of the retained vat refund. it is apparent from the explanatory memorandum that the legislature modified the entitlement to interest on vat refund in such a way that it allows the state sufficient time to exercise power to examine the rightfulness of the excess deduction without the  entitlement to the  interest on vat refund for that period. interestingly, the  taxable entity does not have such a  long time when he is late with the payment of the tax and is liable to pay interest on late payment30. moreover, the court of justice of the  eu states that a  taxable entity is entitled to interest on vat refund if the excess vat deduction is refunded to the taxable entity after the completion of the tax audit which exceeded the reasonable time period and as the onset date should be the date on which the excess vat would have had to be repaid in the normal course of events. it is therefore questionable whether the legislation adopted in the slovak republic and having been in force since january 1, 2017 is consistent with the expression of the court of justice 51 public governance, administration and finances law review • 1. 2017 the limit of tax audit and its impact on the status of taxable entities of the  eu. we are of the  opinion that this is not that case, and that the  regulation of interest on vat refund should be defined in the law simpler and in a more comprehensible way and interest on vat refund should be granted earlier, from the  moment when it should normally be returned under the vat act.31 the interest rate on vat refund shall be equal to twice the  current base rate of the  european central bank being valid on the  first day of the  calendar year for which the  interest is charged. also, if the  interest rate of the  european central bank is below 1.5%, a  minimum interest rate shall be set at 1.5%. at this point, we would like to note that if the  taxable entity is late with the  payment of the  tax (or other amounts within the  meaning of article 156, par. 1 of the  vat act), he is obliged to pay interest on late payment, which is set at being four times the  base interest rate of the  european central bank valid on the date when the tax arrears arose, while if the fourfold base interest rate of the  european central bank does not reach 15%, the  annual interest rate of 15% shall be applied. the  state is required to pay interest at the  rate of 1.5%, while the  taxable entity who is late with the payment of the tax interest is to pay it at the rate of 15%.32 5. conclusion in conclusion, as the taxable entity has the right to the refund of excess vat deduction (if the  statutory conditions are fulfilled), the  tax administrator also has the  right in doubted cases to verify whether the  taxable entity claims the  reimbursement of excess vat deduction correctly, as this may have a  negative impact on the  state budget and the  detection of tax evasion means net savings for the  state before the  amount of the required excess vat deduction is paid. these facts are verified by the tax administrator in the  tax audit, which is currently effective, and can be regarded as one of the  most effective tools we have in our legal system regulated to detect and eliminate tax evasion. the  tax audit is an integral part of tax administration, because without it one cannot expect that taxable entities will voluntarily fulfil all their statutory obligations and comply fully with the tax laws (this is a preventive but also a repressive function of the tax audit). despite the  above said, however, it is not conceivable for the  state to initiate the  tax audit every time the  taxable entity asks for a  refund of the  excess vat deduction. it can have a  significant impact on small and medium-sized entrepreneurs when the  tax audit takes a  longer period of time. in the  case of the  initiation of a  tax audit to verify the  rightfulness of the  claim to refund excess vat deduction, they cannot use the  funds corresponding to this excess deduction and the  late payment of the  requested excessive deduction may be liquidated for them. this is why they should be compensated by the  payment of default interest on the  refund of excess vat. the  introduction of such a  default interest, which the  tax administrator will be obliged to pay to the  taxable entity from the  amount of the  rightfully claimed excess vat deduction, may in our opinion, either reduce the number of tax audits aimed at examining the rightfulness of the claim to refund excess vat deductions or lead to a more precise selection of the inspected taxable entities, or speed up tax audits, as the  tax administrator has a  certain period of time until the interest on vat refund is reimbursed and it will be interested in avoiding the payment 52 public governance, administration and finances law review • vol. 2. no. 1. ivana štieberová of that interest. from the afore mentioned we conclude that the introduction of the interest on vat refund will probably lead to a better enforceability concerning the taxable entity’s entitlement to the repayment of excess vat deduction, or at least to shorten the length of tax audits of excess vat deductions. 53 public governance, administration and finances law review • 1. 2017 the limit of tax audit and its impact on the status of taxable entities references 1. this paper represents a  partial output of the  grant projects vega no. 1/0846/17 “implementation of the  initiatives of the  eu institutions in the  field of direct taxes and indirect taxes and their budgetary law implications” and vvgs no. 2016-284 “eu initiatives to prevent tax evasions and their implementation into national law”. 2. tax evasion and tax fraud have a  negative impact on overall state economy and public finances because they cause losses of the tax revenue in the state budget. these revenue losses amount to several billion euros a year. 3. the nature of tax audit as a  control process has also been highlighted by the  constitutional court of the  slovak republic in its decisions. see for example: the  decision of the  constitutional court of the slovak republic of december 16, 2008, case. no. i. ús 238/06, also the decision of the constitutional court of the  slovak republic of june 29, 2010, case. no. iii. ús 24/2010. similarly, the  supreme administrative court of the  czech republic also expresses its ruling : see for example the  judgment of the supreme administrative court of the czech republic of april 11, 2006, case no. 2 afs 85/2005; also the  judgment of the  supreme administrative court of the  czech republic of september 30, 2005, case. no. 5 afs 89/2004. 4. compare: tomáš zatloukal, daňová kontrola v širších souvislostech [tax control in a boarder context], 1, (praha, c.h. beck 2011). 5. compare: vladimír babčák, daňové právo na slovensku [tax law in slovakia], 422-447, (bratislava, epos, 2015). 6. compare: miroslav štrkolec, prerušenie daňovej kontroly – prípustnosť, dôsledky a  možnosti procesnej obrany [interruption of tax control – admissibility, implications and possibilities of procedural defense], 1354–1355, in justičná revue, vol. 66, n. 11 (2014). 7. see more zatloukal, supra n. 4, at 1–2. 8. compare: karolína červená, michal karabinoš, daňová kontrola ako nástroj odhaľovania daňových únikov [tax control as a  tool of detecting tax evasion], 148, in zborník vedeckých štúdií z  vedeckej konferencie „odhaľovanie daňových únikov a daňovej trestnej činnosti“ [proceedings of scientific studies from the scientific conference “detecting tax evasion and tax crime”], (bratislava, akadémia policajného zboru slovenskej republiky, 2012). 9. see more emil burák, vysoké daňové zaťaženie podnecuje k daňovým únikom [a high tax burden encourages tax evasion], 20, in dane a právo v praxi, vol. 4, no. 15–16 (1999). 10. compare: emil burák, daňová kontrola – očami praxe [tax control – parctical view], 80, (bratislava, tesfo, 2016). 11. the extent of the  tax audit is to assess the  actual tax administrator performing a  tax audit, who decides what facts will be checked, to what extent and how does the  tax administrator (employee of the  tax administration) inspect them. when performing the  tax audit, the  tax administrator must respect the fundamental principles of tax administration, taking care to respect the rights and legitimate interests of taxable entities and of other persons in tax administration. the  tax audit carried out cannot therefore disproportionately and unjustifiably interfere with the  rights of taxable entities, what must also be in line with the  extent of the  performing tax audit, which has to be proportionate to the  circumstances of the particular case. 12. for example, the  previous legislation did not regulate a  specific time period for performing the  tax audit. see more františek bonk, fiskálny záujem štátu verzus dĺžka trvania daňovej kontroly [fiscal interest of the state versus duration of tax control], 41–44, in dny práva 2015 – days of law 2015: v. část: dohled, dozor, kontrola ve veřejné finanční činnosti [v. part: supervision, verification, control of public financial activities], (brno, masarykova univerzita, 2016). 13. simultaneous tax audit is regulated by the  act no. 442/2012 coll. on international assistance and cooperation in tax administration. in order to conduct simultaneous tax audits of one or more taxable entities, the  competent authority of the  slovak republic can agree with the  competent authority of 54 public governance, administration and finances law review • vol. 2. no. 1. ivana štieberová the  member state or with competent authorities of member states. these competent authorities shall conduct the tax audits simultaneously, in their own territory. such a way the simultaneous or network tax audit will be verified by a  network of taxable entities that cooperate in a  certain form, based on the  cooperation of several tax authorities with each other. other bodies, such as the  customs offices, the  police force of the  sr, and so on, often participate in such cooperation. the  cooperation of several authorities both at home and abroad ensures higher efficiency of tax audits and thus, greater detection of tax evasion. simultaneous or network tax audit will inspect not only the  individual components of the  chain but also the  whole network of taxable entities. although it is a  relatively demanding activity, particularly in terms of time, coordination and possible disclosure, it has the greatest effect and results are estimated to amount to tens and sometimes hundreds of millions of euros in taxes. 14. judgment of the supreme court of the slovak republic of january 29, 2009, case no. 3 sžf 1/2009. 15. currently, article 65 of tax procedure code. 16. note: act of the  slovak national council no. 511/1992 coll. on tax and fees administration and on changes in the system of territorial financial authorities (hereinafter ‘tax and fees administration act’) was repealed by the tax procedure code on january 1, 2012. 17. currently, article 45 par. 2 of tax procedure code. 18. the decision of the  constitutional court of the  slovak republic of june 29, 2010, case no. iii. ús 24/2010. 19. currently, article 3 par. 1 of tax procedure code. 20. see for example the  judgment of the  supreme court of the  sr of april 19, 2007, case no. 3 sžf 9/2007; similarly, the judgment of the supreme court of the sr of october 08, 2009, case no. 3 sžf 107/2009; also the  judgment of the  supreme court of the  sr of september 21, 2011, case no. 2 sžf 35/2010; also the judgment of the supreme court of the sr of march 03, 2015, case no. 3 sžf 6/2014. 21. see more mária bujňáková, maxims and principles of tax proceeding, 213 et seq., in tax codes concepts in the countries of central and eastern europe (bialystok, temida 2, 2016). 22. compare: martin vernarský, limity daňovej kontroly [limits of tax control], 58, in justičná revue, vol. 64, no. 1 (2012). 23. the financial policy institute of the ministry of finance of the slovak republic has produced a number of analyses where it states that according to current estimates, the  vat tax gap in the  year 2015 reached 29.2% of the  potential vat in the  slovak republic. in nominal terms, this difference corresponds to 2.2 billion euros, representing 2.8% of gdp. the  tax gap is the  difference between the  potential vat, which had been paid to the  state budget, if economic entities would have accepted all made transactions in accordance with the applicable legislation, as it assumes, and the vat actually paid. 24. the taxable entities often try to get the  claim of excess vat deduction by means of various camouflage legal acts. for camouflage legal acts, their difference against an abuse of law and a circumvention of law, see more for example: adrián popovič, zastierané právne úkony pri správe daní [false legal acts in tax administration], 255 et seq., in zneužitie a  iné formy obchádzania práva [abuse and other forms of law avoidance], (košice, upjš, 2016). 25. the conditions for the excessive deduction of the taxable person, the process of deducting it or its return, and the time period for the refund of excess vat are stipulated by the vat act in art. 79. 26. the interim protocol is stipulated by tax procedure code in art. 47a, and this provision follows the act on value added tax. the tax administrator can return a portion of the excess deduction before the end of the  tax audit in the  amount defined in the  interim protocol. in particular, this concerns the  situations where during the  tax audit the  tax administrator finds out that a  portion of the  excess deduction is rightfully applied, but for the  remaining portion further investigation is needed. such as getting information through an international exchange of information from another member state of the  european union, which sometimes takes a  long time and therefore it is not possible to terminate the tax audit. 27. to introduce this principle into our law, see for example: karin prievozníková, implementácia zákazu zneužitia práva do daňového poriadku [implementation of the prohibition of abuse of rights in the tax 55 public governance, administration and finances law review • 1. 2017 the limit of tax audit and its impact on the status of taxable entities ordinance], 161 et seq., in daňové právo vs. daňové podvody a  daňové úniky: nekonferenčný zborník vedeckých prác. ii. diel [tax law vs. tax fraud and tax evasion: non-conference book of scientific work. ii. part.], (košice, univerzita pavla jozefa šafárika v košiciach, 2015). also jozef sábo, gaar (všeobecné pravidlo predchádzania daňovým únikom) v právnom poriadku sr [gaar (general anti-abuse rule) in the  regulation of the  slovak republic], 199 et seq., in daňové právo vs. daňové podvody a  daňové úniky: nekonferenčný zborník vedeckých prác. ii. diel [tax law vs. tax fraud and tax evasion: non-conference book of scientific work. ii. part.], (košice, univerzita pavla jozefa šafárika v košiciach, 2015); also anna románová, the new anti abuse rule in the slovak tax law: strengthening of the legal certainty? 212 et seq., in system of financial law: system of tax law, (brno, masaryk university, 2015). 28. the article 183 of the vat directive regulates: “where, for a given tax period, the amount of deductions exceeds the amount of vat due, the member states may, in accordance with conditions which they shall determine, either make a  refund or carry the  excess forward to the  following period. however, member states may refuse to refund or carry forward if the amount of the excess is insignificant.” 29. see for example the  judgment of the  court of justice of the  eu of may 12, 2011 in case c107/10 enel marica iztok 3 ad; also the order of the court of justice of the eu of october 21, 2015 in case c-120/15 kovozber. 30. interest on late payment and its conditions are regulated in article 156 tax procedure code. 31. excess vat deduction should be refunded no later than thirty days after filing the  tax return for the taxation period following the taxation period, in which the excessive deduction was created, or within thirty days after the  expiration of the  period for filing the  tax return if the  taxpayer is not obliged to file the tax return for the taxation period following the taxation period, in which the excessive deduction was created; and this applies provided that the  taxpayer cannot deduct excessive deduction from its own tax obligation in that following taxation period. 32. act on vat in article 79a also stipulates the decision on the grant of interest on vat refund, the reduction and increase of such interest, and the  conditions under which interest on vat refund is not granted to the taxpayer. public governance, administration and finances law review legislative changes in the environmental impact assessment act in the slovak republic michal maslen* * judr. michal maslen, phd., senior lecturer, department of administrative law, environmental law and financial law, faculty of law, university of trnava. his main fields of research are: administrative offences and responsibility, principles of administration, good administration and administrative procedure. (e-mail: michal.maslen@truni.sk) abstract: the study is dealing with the implementation of the eia directive in the slovak republic, primarily focused on the participation of public in environmental proceedings. the case law presented a special approach on this field – partially which – leaded to new ways of interpretation of normative rules. keywords: environmental law; right to a favorable environment; right to a judicial protection; public interest; public participation the government of the slovak republic with its resolution no. 330/2014 of july 2nd 2014 approved a draft law amending and supplementing the act no. 24/2006 coll. on the environmental impact assessment. the prime minister of the slovak republic submitted the draft law to the national council of the slovak republic on july 16th 2014. this proposition was adopted on october 14th 2014. the mentioned governmental proposition brought changes and amendments made within the applicable act no. 24/2006 coll. this amendment represents the reaction of the slovak republic responding to the allegations of the european commission in the framework of the so-called ‘infringement proceeding’ according to the article 258 of the treaty on the functioning of the european union. the breach of the obligation to apply the european law was formally notified to the slovak republic by the european commission on march 21st 2013 through the letter no. ‘c (2013)1558’. according to the opinion of the european commission, the main shortcoming of the previously valid act no. 24/2006 coll. was the insufficient connection of the process of the environmental impact assessment of the proposed activities with the subsequent proceedings of permission. the european commission criticized the slovak republic for the lack of implementation of articles 6, 7 and 9 of the environmental impact assessment directive. the abovementioned directive provides in article 6 the obligation of the member states to take the necessary measures to ensure that the institutions to which powers in the environmental field the project can relate, shall express their statement on the information supplied by the developer and the application for permission. this article of eia directive also established the obligation to inform the public early in the environmental decision-making and at the latest as soon as it can reasonably provide information either by public notices or other appropriate means such as electronic media where available, on the decision-making matters defined by this provision of the eia directive. at the same time, this provision requires from the member states to ensure the access of the public concerned to the mentioned group of information in due time. article 7 of the eia directive governs the cases in which the assessed project could most likely have significant impact on the environment of another member state. article 9 of the eia directive lays down the conditions and extent of providing the information to public about the granting or refusal of permission. the eia directive is an important tool that enables to enforce the requirements of environmental protection into the design of construction projects. the meaning of the process of environmental impacts assessment lies in the fact that this procedure ensures that the consequences on the environment of the construction projects shall be assessed and taken into account before a competent authority of a member state shall issue a decision permitting the project. the purpose of the eia directive includes the effort to ensure that projects likely to have significant impact on the environment shall be properly assessed prior to the permission. the slovak case law has presented a special approach to the right to a favorable environment and to the right to a judicial protection in the field of environmental impact assessment before. the civic association ‘g. s.’ has filed an action against the unlawful intervention to the right to a favorable environment under the article 44 of the constitution of the slovak republic and under the article 27 of the act no. 24/2006 coll. to the supreme court of the slovak republic.1 in the opinion of the mentioned civic association the essence of this intervention should lie in the fact that the ministry of environment of the slovak republic nominated people with biased professional qualification to prepare the expertise of the proposed activities in accordance with the article 36 of the act no. 24/2006 coll.2 the ministry of environment of the slovak republic argued that the article 27 of the act no. 24/2006 coll. does not 10.53116/pgaflr.2016.2.6 mailto:michal.maslen@truni.sk https://doi.org/10.53116/pgaflr.2016.2.6 the ministry of environment of the slovak republic argued that the article 27 of the act no. 24/2006 coll. does not create an independent right to a favorable environment of the non-governmental organization promoting the environmental protection. this article establishes the state that allows real exercise of the procedural rights of the party of the administrative proceeding, respectively the public concerned in the process according to the act no. 24/2006 coll. the supreme court of the slovak republic considered the relation between the designated qualified person and the intervention to the right to a favorable environment. the purpose of the proceeding on the protection against the unlawful intervention caused by the public authority is to provide the judicial protection to the natural or legal person who claims to be disadvantaged in their rights and legitimate interests through the unlawful intervention of the public administration, which is not a decision, and at the same time this action was aimed against this natural or legal person or it was enforced as a result against this person. the supreme court of the slovak republic focused on the fact, whether the civic association was entitled to bring an action against the unlawful intervention to the supreme court of the slovak republic. it concluded, that the civic association has demanded protection of individual rights against unlawful intervention by the public administration in proceedings according to act no. 24/2006 coll. the dispute of the case was the assessment of the operation of a nuclear power plan. that is why the supreme court of the slovak republic did not automatically exclude the fact that its operation may have had an impact on the individual rights of the public concerned. such fundamental rights of natural persons as their right to life or the right to property may have been affected. these rights may have a connection to the right to a favorable environment under article 44 of the constitution of the slovak republic as well. the object of the activities of the mentioned civic association was the environmental protection. the civic association brought together the individuals whose premise was the protection of public subjective right – the right to a favorable environment and the protection of other fundamental rights guaranteed by the constitution – the right to life and the right to property. in this case the civic association met the conditions of the article 27 of the act no. 24/2006 coll.3 the case law in this case stated that the civic association helped the individuals to perform their right to a favorable environment. therefore it has concluded that the civic association was entitled to bring an action for the protection against the unlawful intervention by the public authority. however, the key issue was to assess whether the designation of the objected qualified person filled up the characteristics of the unlawful intervention. the case law considers the intervention to be unlawful, if it directly intervenes in the subjective public rights – e. g. violation of the right to life, violation of the personal liberty, violation of the right to property, violation of the right to inviolability of the home and such. either the civic association did not show a causal link between the claimed partiality of the expertise and the environmental impact assessment process. since january 1st 2015 the participation of the public concerned in the proceedings regulate the articles 24 and 25 of the act no. 24/2006 coll. section 1 of the article 24 of this act defines the obligation of the competent authority to inform the public about the facts established by law. subsequently, section 2 of the article 24 of act no. 24/2006 coll. regulates the position of the participant of the public concerned in the proceedings established in the third part of act no. 24/2006 coll. according to this provision, ‘the public concerned has the status of a party in the proceedings referred to in the third part and subsequently the status of the participant in the proceeding on the permission of the proposed activity or its change if it applies the procedure under sections 3 or 4 if its participation in the proceedings does not already arise from the special regulations. right of the public to a favorable environment, which has shown the interest in the proposed activity or its change through the procedure under sections 3 or 4, may be directly affected by the permission of the proposed activity or its change or by the subsequent performance of the proposed activity or its change.’ the public may show the interest in the proposed activity through the procedure under the article 24 (3) of the act no. 24/2006 coll. if it does so, it automatically gains the position of the participant to the proceeding. according to the article 24 (3) of the act no. 24/2006 coll. ‘the public shows the interest in the proposed activity or its amendment and in the proceeding of permission, when filing a) a reasoned written opinion on the plan in accordance with the article 23 (4) b) a reasoned comment on the scope of the assessment of the proposed activity or its amendment according to the article 30 (6) c) a reasoned written opinion on the assessment report according to the article 35 (2) d) a reasoned written opinion on the notification of the amendment according to the article 29 (9).’ the legal position of the participant to the proceedings guarantees several special procedural rights to the public under the article 24 (4) of the act no. 24/2006 coll. effective from january 1st 2015. according to this provision ‘the public has a right to appeal against the decision on whether the proposed activity or its amendment shall be assessed under this act (hereinafter referred to as ‘the decision issued in the screening proceeding’), or appeal against the final statement even if it was not a participant to screening proceeding or to the proceedings on the issuance of the final statement or amendments to it. the date of receipt of the decision when making such an appeal shall be the fifteenth day of the publication of the decision issued in the screening proceeding according to the article 29 (15) or the fifteenth day of the publication of a final statement by the competent authority according to the article 37 (7). the public by filing the appeal shall also show the interest on the proposed activity and on proceeding permitting it.’ since january 1st 2015 the legislator has included the legal position of the participant to the public concerned in the proceedings referred to in the third part of the act no. 24/2006 coll. to the article 24 (2) of the act no. 24/2006 coll. according to this provision, right of the public to a favorable environment, which has shown the interest in the proposed activity or its change through the procedure under sections 3 or 4, may be directly affected by the permission of the proposed activity or its change or by the subsequent performance of the proposed activity or its change.’ in my opinion, this expression brings positive changes in the sense that it allows the public to step up against decisions issued under the provisions of the act no. 24/2006 coll. effective of january 1st 2015. thus the slovak legislator has ensured the transposition of the conditions of the article 46 (2) 2 of the constitution of the slovak republic, according to which ‘who claims to have been deprived of his rights by the decisions of the public authority, may apply to the court to examine the legality of such a decision, unless the law stipulates otherwise. from the jurisdiction of the court the examination of decisions concerning fundamental rights and freedoms may not be excluded.’ it can be said that in such case, the right to a favorable environment under the article 44 of the constitution of the slovak republic has in some way ‘greened’ the right to judicial protection under the article 46 (2) of the constitution of the slovak republic. the public concerned is in this way put in position, in which it is actively entitled to protect the right to a favorable environment. if the legislator presumes the direct connection between the intentions and proposed activities on one hand and the right to a favorable environment on the another hand, then it has also established the entitlement of the public concerned to file a constitutional complaint to the constitutional court of the slovak republic. references 1 see: the judgment of the supreme court of the slovak republic of january 1st 2011, no. 8 sžz 1/2010. 2 according to article 36 (1) of act no. 24/2006 coll. effective in the year 2010, “expertise on the proposed activity may be prepared only by a natural or a legal person who is professionally qualified according to article 61 and designated competent authorities. a person who has participated in the preparation of the plan or in the assessment report on the activity cannot take part in the process of the preparation of the expertise. other professionally qualified persons registered under special regulations may also participate in the process of the preparation of the expertise, if it arises from the nature of the impact of the proposed activity on the environment.” 3 according to the article 27 of the act no. 24/2006 coll. effective in 2010, “the non-governmental organization promoting the environmental protection, which submits a written statement to the intention of the proposed activity listed in annex no. 8 according to article 23 (4) has the status of a party within the integrated licensing, proceedings under the road act, building act, aviation act, water act, railway act, the forests act, the nature and landscape protection act and the authorization of mining activity act. such non-governmental organization is considered to be a subject whose right to a favorable environment may be affected by the decision. non-governmental organization promoting environmental protection shall submit proof of registration to the competent authority and to the permitting authority together with submission of written observations on the proposed action plan.” © 2019 ludovika university press, budapest public governance, administration and finances law review vol. 4. no. 2. (2019) • 30–51 . information security awareness in public administrations at an international level1 lilla garayová* * lilla garayová, judr ., phd ., paneuropean university in bratislava, faculty of law, institute of international and european law . (e-mail: garay .lilla@gmail .com) abstract: privacy and data protection laws have changed significantly over the last two decades . the highly networked and interconnected world we live in today was only a  flash on the horizon in the  1990s . the internet itself was still a  whole new innovation for many people . many businesses have not had a  public website yet . concepts, such as online social media platforms, did not exist  –  and certainly no one thought about how they should be regulated . smartphones, wearable technolog y and artificial intelligence have made huge leaps over the past 20 years – powered by new ways of data acquisition and processing . as a  result, courts and regulators have increasingly had to adapt the aging data protection laws to suit a constantly changing world for which they were simply not designed . government digital agendas worldwide go hand in hand with this fast-paced digital evolution . information security and awareness should be a  crucial part of public administration agendas with the primary goal to protect information of all types and origins . keywords: public administration; privacy; data protection; private information 1. introduction in the global information economy, personal data has become the driving force of most of today’s online activity . every day, a great deal of information is transmitted, stored and collected worldwide, allowing a tremendous improvement in computing and communication power . in developing countries, online social, economic and financial activities have been facilitated through the use of mobile phones and improved internet connectivity . as more economic and social activities move online, the importance of data protection and privacy is increasingly recognised, not only in the context of international trade . at the same time, the current data protection system is very fragmented and has different global, regional and national regulatory approaches . in this study we will provide a comprehensive overview of the current situation and an analysis of the development trends of compatibility of data protection policies at international level . we also aim to provide a new and balanced view of privileged data protection issues by considering the views of different stakeholders . the conclusions of this study should contribute to reflection on how to increase international compatibility in data protection and privacy, in particular in relation to public law as well as international trade 10.53116/pgaflr.2019.2.3 mailto:garay.lilla%40gmail.com?subject= https://doi.org/10.53116/pgaflr.2019.2.3 31 public governance, administration and finances law review • 2. 2019 information security awareness in public administrations at an international level and provide de lege ferenda proposals that could serve as inspiration for countries planning to introduce new laws or amendments to existing laws . the protection of personal data belongs to the area of fundamental human rights and freedoms . personal data is sensitive information that serves to identify a  person and can only be processed with his or her consent . everyone has the right to protection from unauthorised interference in private and family life, as well as protection against unauthorised collection, disclosure or other misuse of personal data . the processing of personal data should be designed to serve humanity . the right to the protection of personal data is not an absolute right; it must be assessed in relation to its function in society and must be balanced with other fundamental rights, in accordance with the principle of proportionality .2 rapid technological development and globalisation have brought new challenges in the area of personal data protection . the extent of collection and sharing of personal data has increased considerably . technolog y enables private companies and public authorities to use personal data to an unprecedented extent in carrying out their activities . natural persons are increasingly disclosing their personal data, including on a  global scale . technolog y has transformed both economic and social life and should further facilitate the free flow of personal data on a global scale and transfer to third countries and international organisations, while guaranteeing a  high level of protection of personal data . the economic and social integration resulting from the functioning of the internal market has led to a significant increase in cross-border flows of personal data . data protection is directly related to trade in goods and services in the digital economy . insufficient protection can create negative effects on the market by diminishing consumer confidence, and too strict protection can unduly restrict businesses, resulting in adverse economic effects . ensuring that laws take into account the global nature and scope of their application and promote compatibility with other frameworks is essential for global trade flows that increasingly rely on the internet . many social and cultural standards around the world include respect for privacy . while the basic privacy policies contain many common features across countries, interpretations and applications vary considerably in specific jurisdictions . some protect privacy as a  fundamental right, while others base individual privacy on other constitutional doctrines or delicts . others still have to accept privacy . such differences will increasingly affect individuals, businesses and international trade . internationally compatible data protection regimes are desirable as a way of creating an environment that is more predictable for all stakeholders involved in the information economy and building trust online . new technological developments increase this need . data protection legislation must carefully address the changing needs and opportunities associated with these changes in order to facilitate potential benefits . in order to ensure a consistent level of protection of personal data and to avoid differences between the jurisdictions of different states that could hinder the free movement of personal data, it is necessary to adopt rules providing legal certainty and transparency for economic operators, including micro, small and medium-sized enterprises, and providing individuals in all countries of the world with the same level of legal enforceable rights, ensuring consistent monitoring of the processing of personal data and providing for equivalent sanctions, as well as effective cooperation between the supervisory authorities of 32 lilla garayová public governance, administration and finances law review • vol. 4. no. 2. the countries of the world . the proper functioning of the international market requires that the free movement of personal data is not restricted or prohibited for reasons connected with the protection of individuals in the processing of personal data . in order to avoid a  serious risk of circumvention, the protection of individuals should be technologically neutral and not dependent on the technological solutions used . the protection of individuals should apply to the processing of personal data by automated means, as well as to manual processing if personal data are stored in or to be stored in the information system . efforts to achieve balanced, flexible and compatible data protection regulation have become an urgent global objective . some countries have strong regulatory mechanisms, while others have outdated legislation or none at all . in order to achieve adequate protection that enables innovation and facilitates trade, it is essential to continue the national, regional and global dialogue of all stakeholders . 2. key privacy concerns in an international context data and privacy concerns are manifested in many different dimensions . govern ments  – especially those in developing countries that are trying to adopt data protection legislation  –  have difficulties in modelling their data protection regimes, although most have opted for an approach in line with eu legislation . common challenges include: 1 . the time needed to adopt legislation 2 . the financial costs of implementing and enforcing the data protection regime, and 3 . lack of public and private sector knowledge and cooperation between governmental entities regulating in parallel in some countries, lack of understanding and fear in society can aggravate one or more of the above concerns . concerned consumers, concerns about the integrity of payment systems, hidden costs, fear of fraud and product quality are often more pronounced in the context of international e-commerce . building trust in the online environment is crucial, and confidence is reflected in transactions with government and private actors . studies show that citizens are concerned about how their personal data are collected and used and they also point out that these concerns are growing .3 the lack of clarity in terms of protection and remedies tends to aggravate these concerns . the most commonly highlighted concerns are: 1 . too strict protection regimes will disproportionately restrict activities, increase the administrative burden and hamper innovation . 2 . uncertainty and compatibility between schemes increase uncertainty with negative effects on investment . 3 . given the link between cross-border e-commerce and data protection, different regimes will prevent the uptake and dissemination of emerging technological developments, thereby reducing potentially accompanying societal benefits . 33 public governance, administration and finances law review • 2. 2019 information security awareness in public administrations at an international level although there are significant differences in data protection laws in different countries around the world, there is a  more universal consensus on the fundamental principles of personal data protection, which are considered to be at the core of most national legislation and international regimes . this set of basic principles can serve as a useful starting point for efforts to achieve greater compatibility and harmonisation on a  global scale . there is currently no uniform agreed model of data protection legislation . however, compatibility is an established objective of many global and regional initiatives in the area of personal data protection . there are a number of challenges in the development and implementation of data protection legislation . we believe that areas where action is particularly needed are: ƿ addressing gaps in the legal protection of personal data ƿ addressing new technologies ƿ management of cross-border data transfers ƿ strengthening the enforcement of justice ƿ determination of authority in the field of personal data protection the number of national data protection laws has risen sharply in the last decade, but large gaps remain in the legislation of the different countries . some countries have no legislation in this area, others have partial laws and some laws that are outdated and require amendments . in this study, we would like to provide considerations de lege ferenda that can help countries that are developing, revising or amending and supplementing their data protection laws . for countries that still do not have the relevant legislation, governments should develop laws that should apply to data processed by government and the private sector and remove the exemptions to achieve greater coverage of personal data protection . the core set of principles is found in the vast majority of national data protection legislation as well as in global and regional initiatives . adopting this core set of policies enhances international compatibility while allowing some flexibility for domestic implementation . the creation of a  single central regulatory authority shall be encouraged, where possible, with a combination of supervisory and complaint functions and powers . in addition, the trend is to extend enforcement powers as well as to increase the extent and scope of fiscal constraints and data protection sanctions . it is critical to address cross-border data transmission issues with specific text and to support one or more mechanisms that businesses can use to facilitate international data flows . in an increasingly globalised economy, where more and more economic activities are carried out online, it is impossible to remain silent on this issue . a  modern approach to addressing this seems to be allowing companies to consider a  range of options . national data protection legislation should avoid (or remove) clear barriers to trade and innovation . this may include avoiding or removing data localisation requirements that go beyond the basic options for managing cross-border data transfers . a  useful test that has emerged in this area is the requirement that such provisions should not be “disguised restrictions on trade” . it is also increasingly difficult to ignore the need to balance personal data protection and state surveillance requirements . in general, countries should implement measures that set appropriate monitoring limits and conditions . 34 lilla garayová public governance, administration and finances law review • vol. 4. no. 2. in order to promote the international compatibility of different legislations, it is important to avoid duplication and fragmentation of regional and international approaches to the protection of personal data . it would be preferable for global and regional organisations to focus on a single consolidating initiative or a smaller number of initiatives that are internationally compatible rather than carrying out multiple initiatives . where possible, similarities to the basic principles should be used to establish mechanisms for recognition and compatibility between different legal frameworks . future work to achieve greater compatibility will require the effective involvement of all stakeholders, including the government, the private sector and civil society representatives . their involvement must go beyond general discussions in order to be formally involved in the process of developing the legal framework . this active involvement will also help to develop measures that promote a higher level of legal certainty and trust among stakeholders, which will increase the overall effectiveness of the legal frameworks . most regional and global initiatives do not mention the issue of monitoring initiated by governments . however, we believe that it is essential that national legislation and global and regional initiatives recognise the existence of surveillance issues and try to address them directly . while monitoring issues often have an international or cross-border dimension, the extraterritorial nature of data flows must be addressed separately, as they relate to state sovereignty . the un declaration on digital rights can serve as a platform to consider the link between data protection and surveillance .4 the development and promotion of international and regional data protection initiatives should also take into account the compliance burden and the potential for adverse effects on trade, innovation and com petition . finally, favouring provisions that build consumer confidence in regulatory models will help to expand e-commerce . the most important is the development of effective policies around the world, especially with the advent of the latest technological advances . countries should endeavour to counterbalance the various legitimate concerns of data protection stakeholders, while cautiously avoiding solutions that unduly restrict trade . rebalancing can have serious consequences for the protection of fundamental rights as well as for international trade and development . efforts for a balanced, flexible and compatible legal regulation of personal data protection have become an urgent goal worldwide . some countries have strong regulatory mechanisms, while others have outdated legislation or none at all . in order to achieve adequate protection that enables innovation and facilitates trade, it is essential to pursue a  multistakeholder national, regional and global dialogue . 3. increasing importance of personal data protection data protection laws date back to the 1970s, reflecting concerns about the development of computer and communication technologies and their ability to remotely process large volumes of data . in the global information economy, personal data has become the driving force of most of today’s online activity . 35 public governance, administration and finances law review • 2. 2019 information security awareness in public administrations at an international level every day, a huge amount of information is transmitted, stored and collected around the world as a result of the huge improvement in computing and communication power . in developing countries, online social, economic and financial activities have been facilitated through mobile phones and better internet access . the cross-border nature of the internet, as well as the speed and volume of communications itself, cause cyber security problems, such as those related to the identification, investigation, jurisdiction, criminalisation and prosecution of those who commit security and privacy violations . in this environment, information security is a  problem for governments, businesses and consumers . protecting data and privacy rights online is a  major and increasingly pressing challenge for policy makers . the scrutiny of and access to information obtained through online activities concerns legislators whose task is to protect their citizens from unauthorised interference and harm . from a  commercial point of view, the transmission of data to and from developing countries may be hampered by the lack of domestic legal protection, which may result in missed business opportunities . adequate legal instruments to ensure data protection and privacy are still lacking in most developing countries . the scope of the definition of personal data varies (wide or narrow) depending on the jurisdiction, and privacy laws vary considerably between countries and regions . while many national, regional and international initiatives have pursued distinctly different regulatory approaches, there is a  considerable degree of harmonisation of the underlying principles that underpin them . the common principles include the need to have a legitimate reason for any processing activity obtained either by consent or by some other justification . obligations regarding the quality of the processed personal data are another fundamental principle that requires data to be accurate, complete and updated . compliance with this principle should be mutually beneficial to both the processing entity and the processor . the role of data security is essential . whether physical, logical or organisational, security measures should protect against intentional misuse as well as accidental loss or destruction of data . as with data quality issues, the needs of the individual data subjects and the data processing entity  –  and in principle society as a  whole  –  should be combined in implementing adequate data security . although there is a broad agreement on fundamental principles, there is no consensus on how best to apply them . some data protection regimes apply equally to everyone who processes personal data . other regimes apply different rules to specific sectors (e .g . health, education), types of processing entities (e .g . public authorities) or data categories (e .g . children’s data) . in such jurisdictions, some sectors are not subject to regulatory controls at all . a  distinction may also be made between regimes which operate primarily through enforcement actions brought by individuals or their representative groups and regimes that confer enforcement powers on a specialised supervisory authority, which continuously monitors the behaviour of those processing personal data . some modes work by combining both approaches . data protection is seen as an important area of law, policy development and regulation . it combines elements of human rights and consumer protection, and in many international agreements and individual jurisdictions, the protection of personal data is even considered a  fundamental right . at the same time, many stakeholders see data protection regulation 36 lilla garayová public governance, administration and finances law review • vol. 4. no. 2. as a legal framework that facilitates the development of new technologies and innovations and promotes international trade and development . data protection regulation is currently a very topical issue, as evidenced by a number of recent events: ƿ in 2015, the united nations appointed a  special rapporteur on the right to privacy . ƿ the european union has adopted a  new general data protection regulation, regulation (eu) 2016/679 on the protection of individuals with regard to the processing of personal data and on the free movement of such data . this regulation is an essential step towards strengthening the fundamental rights of citizens of the digital age and facilitating entrepreneurship by simplifying the rules for companies in the digital single market . at the same time, the unified legislation will put an end to the current fragmentation and costly administrative burden . ƿ data protection has been included in several international trade agreements . ƿ data protection regulation has been considered in several lawsuits with a  high degree of professionalism on national surveillance issues . ƿ many countries are drafting new data protection laws or reviewing existing legislation . ƿ the european union and the united states have renegotiated a  long-term crossborder data protection agreement (the former eu–u .s . safe harbor framework, now called privacy shield), one of the few alternatives for transmission of data outside the eu and therefore its existence is very important . ƿ several global and regional organisations have issued (or are preparing ) multilateral agreements and/or guidelines on the protection of personal data . 4. key challenges in drafting data protection laws while many of the global and regional initiatives discussed in this publication are aimed at increasing interoperability between personal data protection regimes, the key problem is that huge gaps remain in the scope of data protection legislation . these gaps fall into three main categories: 1 . countries without personal data protection legislation the number of countries with data protection legislation has risen sharply in recent years, currently reaching a  total of 107 countries that have comprehensive data protection laws, or at least partial data protection legislation . however, this still leaves almost 30% of countries in the world without applicable privacy laws .5 personal data in these countries receive a  low level of protection, thus reducing legal certainty and confidence in a  wide range of business activities . these countries may also be cut off from international business opportunities, as many business transactions require cross-border data transmission, subject to minimum legal requirements . these requirements are difficult (but not always impossible) to meet in the absence of basic data protection legislation . at least 35 countries are currently drafting data protection laws to address this gap . however, the development and 37 public governance, administration and finances law review • 2. 2019 information security awareness in public administrations at an international level implementation of data protection laws is a time-consuming and complicated process . the united nations surveys of government officials in 48 african, asian and latin american and caribbean countries highlight the need for awareness-raising and knowledge among lawmakers and courts in order to formulate and effectively enforce informed data protection policies and laws . 2 . countries with legislation containing large gaps and exemptions many national data protection laws contain significant gaps and exemptions . for example, some laws exclude small businesses (such as australia and canada) or small data sets (such as japan excludes data sets with less than 5,000 records) from the privacy laws . other exceptions in some laws apply to: ƿ types of data subjects (e .g . only children’s data and no employee data) ƿ data sensitivity (e .g . only to sensitive data such as health or financial records) ƿ data sources (e .g . limited to online or offline data collection) ƿ sectoral data (e .g . private and public sector exceptions or laws that are limited to specific sectors such as health and credit) the exceptions are so numerous and so complex that the entire textbook could only be written with a  list of exceptions and loopholes in the privacy laws . these exceptions are generally common in north america, asia and the pacific, but less typical in europe, south america and africa, where data protection legislation tends to provide comprehensive coverage . exceptions create several legal problems . they require a  wide range of stakeholders (business partners, consumers and regulators) to comprehensively identify and categorise data . they severely limit countries’ ability to meet the “adequacy test” for cross-border credit transfers and can also lead to complex complaints and disputes . 3 . countries where companies are allowed to exclude certain services or practices from the scope the third type of gap is less common but has been steadily growing in recent years . some national laws and regional initiatives allow individual companies to determine the “scope” of the data protection they offer to consumers . there are two ways to do this: first, a  company can join a  data protection regime (for example, the eu–u .s . safe harbor framework/eu–u .s . privacy shield or cross-border privacy rules), but their membership is limited to specific activities . the scope is usually published in the online register . typical limitations restrict coverage to online or offline data collection, consumer or employee data, or other general categories . however, some scope constraints exclude whole countries from the protection offered by large multinationals . second, a company may exclude certain activities from protection by including exceptions in its privacy policy . organisations are increasingly excluding specific services such as mobile apps, cloud services and software . these exclusions often apply to dispute resolution 38 lilla garayová public governance, administration and finances law review • vol. 4. no. 2. when a  company uses a  third-party dispute resolution provider, so these exclusions can be  quite significant for consumers . in practice, the second type of exclusion may not be entirely legitimate if a  complaint is lodged with the regulator concerned . regulators have a  wide range of powers in this area . in the united states of america, the federal trade commission (ftc) may take steps for “unfair” behaviour, which may limit the use of such exceptions . such specific exclusions are a relatively new phenomenon in international data protection regulation and their state (and future) is uncertain . overall, however, it is difficult to promote global interoperability, while these three types of “gaps” in coverage remain . 5. cross-border data transfers overall, it is generally recognised that there should be legislation on cross-border data transfers, but there is a wide range of approaches to this issue and there is no single global model to manage it yet . at a  national level, some countries have no restrictions on the transfer of personal data to foreign jurisdictions (such as the united states of america) . most countries have some restrictions in place, usually accompanied by a long list of exceptions . typical exceptions fall into two broad categories . 1 . one-off exceptions – on a global scale, there seems to be a broad consensus on one-off “exceptional circumstances” that allow cross-border data transmission . a  recent report by the international center for policy management states that the following exceptions have already become common:6 a) the transfer is necessary for the performance of the contract between the data subject and the operator or between the operator and the third party and is concluded at the request of the data subject; or is in the interest of the data subject b) transmission for the purposes of legal proceedings or for the purpose of obtaining legal advice or for the establishment, exercise or protection of legal rights c) the transfer is necessary to protect the vital interests of the data subject 2 . ongoing exceptions – the use of ongoing exceptions is less consistent . the following list demonstrates the wide range of approaches available, but there is no consistency or global consensus in their use . a) the “reasonableness” approach (sometimes known as the white list) assesses whether the entire jurisdiction of destination provides a  sufficient level of protection for the transfer of personal data . this approach is used by different countries, including members of the european union, israel, japan and switzerland . b) the “binding rules” approach assesses whether a  particular company has put in place processes and independent control mechanisms that provide a  sufficient degree of protection for the transfer of personal data (usually across a  group of companies) . this approach is used in a system of binding eu business rules . some individual jurisdictions also have the potential to recognise these types of binding rules, notably australia and japan . 39 public governance, administration and finances law review • 2. 2019 information security awareness in public administrations at an international level c) the “model contracts” approach assesses whether the specific wording in the contracts provides a  sufficient degree of protection for the transfer of personal data . so far, this approach has only been used in the eu . d) the “consent” approach examines whether individual consumers can agree to transfer their data abroad . this approach is used in the eu and some other jurisdictions but is subject to additional conditions regarding the nature of consent . consent may be difficult to prove and does not constitute an effective guarantee of protection . not surprisingly, many countries have decided to adopt a  combination of several approaches to managing cross-border data transfers, as there is no single mechanism that stands out as completely positive . as a  result, the law on cross-border data transfers is fragmented and inconsistent . the problems associated with cross-border data transfer are to some extent addressed through international trade agreements . one recent example of the agreement is the trans pacific partnership agreement (tpp), which covers 12 countries . tpp addresses the issue of balancing data protection with special regard to trade . in particular, it imposes restrictions on the scope of the data protection regulation which signatories may lay down in their national legislation and is partly based on article xiv of the wto general agreement on trade in services . article xiv allows for restrictions on cross-border transfers if they meet four requirements: 1 . the law must “achieve a legitimate public policy objective” – this seems to be a very direct requirement 2 . the law must not be “applied in a manner which would constitute a means of arbitrary or unjustified discrimination” 3 . the law must not be a “disguised restriction on trade” 4 . the law must not “impose restrictions on the transmission of information beyond what is necessary to achieve the objective”7 it seems that this four-part test could provide a  potential basis for a  global standard to determine whether a  restriction went “too far” . these criteria have a  good chance of removing “hidden trade restrictions” and have the potential to increase interoperability and harmonisation beyond the signatories to the agreement . overall, the possibilities for managing cross-border data transfers are diverse and varied . most countries adopt a  combination of the above measures and give businesses considerable leeway in managing their own cross-border transfers . this is largely due to the recognition of the reality of modern data-processing systems as well as the current volumes of cross-border transfers that occur at any given moment . 6. strengthening powers and determining jurisdiction currently, we can see a  trend towards strengthening enforcement and sanctioning powers in the area of personal data protection . this is a response to a number of high-profile cases 40 lilla garayová public governance, administration and finances law review • vol. 4. no. 2. where existing regulatory powers have proven to be disproportionate in view of the widespread impact and scale of privacy breaches . strengthening enforcement has been a  major issue in amending and updating laws (especially in australia, the eu, china and japan) . the united states is considered a  leader in this area . although there are many loopholes and inconsistencies in the u .s . legislation, the country has had good experience of using extensive sanctions to prevent neglect of privacy . the imposition of large sanctions is considered important for: ƿ the target company (as a  clear signal to senior management and employees to reform their practices) ƿ the consumers concerned (as a  form of compensation for the damage they have suffered), and ƿ also as a wider deterrent to the whole industry jurisdiction is an extremely important issue in all areas of law, in particular in the areas of cybercrime, tax law and intellectual property law . data protection regulation has become a  very important issue, partly because of the extensive flow of data across borders, partly because of the lack of a  single global data protection agreement (and the consequent fragmentation of regulation) . in the absence of an international agreement, determining jurisdiction is very difficult . the issue of determining jurisdiction has long been a  source of debate and legal reform . the u .s . child online privacy protection act (coppa) extends to foreign service providers who direct their activities to u .s . children or consciously collect information from u .s . children . a  recent law reform in japan resulted in a  new request (which came into force in 2017) stating that if a data controller outside japan collects personal information concerning japanese citizens, then that foreign controller will be required to meet the requirements listed in the japanese law . regulation (eu) 2016/679 on the protection of individuals with regard to the processing of personal data and on the free movement of such data contains an extraterritoriality clause (article 3) stating : 1 . this regulation shall apply to the processing of personal data in the context of the activity of the controller or processor in the union, whether or not processing is carried out in the union . 2 . this regulation shall apply to the processing of personal data of data subjects who are situated in the union by an operator or intermediary not established in the union, the processing activities being related to: a) the offering of goods or services to those data subjects in the union, whether or not payment is made to the data subject, or b) monitoring their behaviour within the union8 these reforms are part of a trend towards national data protection regulations that seek to capture any activity that targets local people, regardless of the actual location of the company . 41 public governance, administration and finances law review • 2. 2019 information security awareness in public administrations at an international level privacy requirements may limit the possibilities for innovation or create an unrealistic burden on compliance businesses (especially for smaller businesses) . some examples of data protection requirements that have the potential to burden businesses are as follows: 1 . registration requirements in a small number of jurisdictions (mostly in europe), data controllers are required to register their operations and sometimes their individual datasets with the local data protection authority . this requirement relates to the historical introduction of data protection regimes at a time when data processing was considered a key risk to privacy . over time, some data protection authorities considered the registration procedure to be a useful form of general regulation and supervision . in many developing countries, the registration process has also become an important source of revenue . in jurisdictions where data protection relies on membership of a  specific system (such as the eu–u .s . privacy shield), membership in these systems requires a combination of payments to a central system operator (such as the u .s . department of commerce) plus payments to service providers dispute resolution (such as the american arbitration association) and payments for third-party certification services (such as truste) . most fees in these systems must be paid annually . for businesses, registration requirements can be a  significant financial burden . some processes are time-consuming and bureaucratic, and many require fees, whether one-time or annual . registration requirements may also hamper the ability of businesses to create a  single, comprehensive system of data protection processes that could be used in all jurisdictions . 2 . requirements for the appointment of data protection officers a common requirement in national legislation is that each undertaking appoints a specific data protection officer (the specific name varies slightly in each national law) . this does not represent a  significant burden in most large organisations if such appointments are common, but it may be a burden for smaller businesses . 3 . requirements for the establishment of data centres in a  few rare cases, data protection laws require businesses to set up either data centres or offices at a  specific location . these requirements are a  significant obstacle for all businesses but are particularly challenging for smaller businesses and new entrants . overall, they can effectively reduce opportunities for smaller, newer businesses and negatively affect interoperability . smaller businesses play an important role in managing innovation and competition, yet they face difficulties in jurisdictions with high compliance burdens . however, the interests of businesses (including small ones) are not completely neglected in global, regional and national personal data protection initiatives . most global and regional initiatives include a warning of linguistic complexity, excessive burdens on privacy requirements . 42 lilla garayová public governance, administration and finances law review • vol. 4. no. 2. 7. global developments and trends in the field of personal data protection privacy is not the subject of a  single comprehensive global agreement or contract . rather, it  is included in a  number of international and regional instruments, each covering a  particular group of countries . these global and regional initiatives differ in scope and application  –  many are simply voluntary guidelines . this chapter discusses major global initiatives, plus the strengths and constraints of each system . in short, we would like to focus on major initiatives with an almost global reach: the un, the council of europe, the oecd and idpc . each of these initiatives has its strengths and weaknesses . 1. un the united nations has long promoted the right to privacy through human rights treaties, in particular through article 12 of the universal declaration of human rights and article 17 of the international covenant on civil and political rights . in the period of 2013– 2015, the un strengthened its role in the field of privacy by means of two highly profiled measures . the first was the publication of the digital rights declaration . the second was the appointment of a un special rapporteur on the right to privacy . declaration on the right to privacy in the digital age  –  in december 2013, the un general assembly adopted resolution 68/167,9 expressing its deep concern about the negative impact that monitoring and interception of communications may have on human rights . the general assembly confirmed that the rights held by citizens offline must also be protected online and urged all states to respect and protect the right to privacy in digital communications . the general assembly also called on all states to review their procedures and legislation regarding communications monitoring, interception and collection of personal data and underlined the need for states to ensure the full and effective implementation of their obligations under international human rights law .10 the resolution notes that international human rights law provides a  universal framework under which any interference in individual rights, including the right to privacy, must be assessed . the international covenant on civil and political rights, which has so far been ratified by 167 states, states that no one shall be subjected to arbitrary interference in private life, family, home or correspondence, nor to attacks on their honour and reputation .11 it further states that everyone has the right to the protection of the law against such interference or attacks . other international human rights instruments also contain similar provisions . although the right to privacy under international human rights law is not absolute, any case of interference must be subject to a  thorough and critical assessment of its necessity, legitimacy and proportionality . the resolution was followed by a  detailed report published in 2014: study by the high commissioner for human rights on the right to privacy in the digital age (a/hrc/27/37) .12 the report concludes that practices in many countries have revealed a  lack of adequate national legislation, weak procedural guarantees and ineffective supervision, which together contributed to a  lack of responsibility for arbitrary or unlawful interference with the right to privacy . 43 public governance, administration and finances law review • 2. 2019 information security awareness in public administrations at an international level un special rapporteur on the right to privacy – the special rapporteur is an independent expert appointed by the un human rights council to examine and report on specific issues . in july 2015, the human rights council appointed professor joseph cannataci of malta as the first ever un special rapporteur on the right to privacy . pursuant to resolution 28/16 of the human rights council, the special rapporteur shall: a) collect relevant information, including information on international and national frameworks, national practices and experiences; study trends, developments and challenges regarding the right to privacy and make recommendations to ensure its support and protection, including in the context of challenges arising from new technologies b) seek, receive and respond to information from states, the united nations and its agencies, programs and funds, regional human rights mechanisms, national human rights institutions, civil society organisations, the private sector, including business entities c) remove possible obstacles to the enforcement and protection of the right to privacy, identify, exchange and enforce principles and best practices at national, regional and international level and, in this context, submit proposals and recommendations to the human rights council, including in the light of these facts and in particular to the particular challenges of the digital age d) participate in and contribute to relevant international conferences and events in order to promote a systematic and coherent approach to mandate issues e) raise awareness of the importance of promoting and protecting the right to privacy, addressing the specific challenges of the digital age as well as providing information to individuals whose privacy has been violated, ensuring access to effective remedies, in accordance with international human rights obligations f ) report on alleged violations of the right to privacy wherever they occur, as set out in article 12 of the universal declaration of human rights and article 17 of the international covenant on civil and political rights, including the challenges arising from new technologies, and alert the council and the un high commissioner for human rights on situations of particular concern g ) submit an annual report to the human rights council and the general assembly in march 2016, the un special rapporteur prepared his first report on the right to privacy, which was presented to the human rights council (a/hrc/31/64) . the report describes his vision of the mandate and provides an overview of the state of privacy in early 2016 and a  work plan for the first three years of the mandate . in order to facilitate the process of further elaborating the dimensions of the right to privacy and its relation to other human rights, the special rapporteur has developed a framework action plan . the strengths of un initiatives include universal respect and global coverage, a  long history of promoting and protecting human rights; and recognition of privacy as a fundamental right . one of the limitations of un initiatives is, in particular, that the current provisions are too theoretical for day-to-day operations  –  the right to privacy must be translated into a detailed set of principles . another problem is that the un is facing some significant constraints in terms of resources, whether material or personnel . 44 lilla garayová public governance, administration and finances law review • vol. 4. no. 2. 2. the council of europe the right to the protection of the private sphere of the individual from interference by other entities, in particular the state, was for the first time enshrined in article 12 of the un universal declaration of human rights in 1948 and referred to respect for private and family life . the universal declaration of human rights has influenced the development of other human rights instruments in europe . the council of europe was established after world war ii with the intention of bringing together european states in the promotion of the rule of law, democracy, human rights and social development . to this end, the council of europe approved the european convention on human rights in 1950, which entered into force in 1953 . member states have an international obligation to comply with the echr provisions . all member states of the council of europe have incorporated the echr into or have entered into force in their national legislation and must therefore comply with the provisions of this convention . the right to the protection of personal data forms part of the rights protected under article 8 of the echr, which guarantees the right to respect for private and family life, dwelling and correspondence and lays down the conditions for the admissibility of restrictions on that right . in its case law, the echr has considered many data protection cases, including, inter alia, interception of communications,13 various forms of surveillance14 and protection against the retention of personal data by public authorities .15 article 8 of the echr not only requires states to refrain from taking any action that might undermine this right enshrined in the convention, but in certain circumstances imposes a  positive obligation to actively ensure effective respect for private and family life . council of europe convention no . 108 – the emergence of information technolog y in the 1960s has made it increasingly urgent to adopt detailed rules on the protection of individuals by protecting their personal data . in the mid-1970s, the committee of  ministers of the council of europe adopted several resolutions on the protection of personal data referring to article 8 of the echr . in 1981, the convention for the protection of individuals with regard to automatic processing of personal data (convention 108) was prepared for signature . convention 108 was the only legally binding international data protection document . at present, convention 108 is the most important binding international agreement on the protection of personal data . although this convention was established in the council of europe, its membership is open to each country, and several non-european countries have already signed the convention . all member states of the council of europe have ratified the convention and implemented data protection laws that comply with the convention (the last one was turkey, where ratification took place in 2016) . uruguay was the first non-european country to become a party to the convention in 2013 . currently, the convention has been ratified by 9 non-european countries (argentina, burkina faso, cape verde, mauritius, morocco, mexico, senegal, uruguay and tunisia) . the convention differs from many other global initiatives in that it is binding on signatories . data in the private and public sectors, such as the processing of personal data in the judiciary or law enforcement authorities, protects the individual from abuse that could accompany the collection and processing of personal data, while regulating the cross-border flow of personal data . 45 public governance, administration and finances law review • 2. 2019 information security awareness in public administrations at an international level with regard to the collection and processing of personal data, the principles laid down in the convention related in particular to fair and lawful collection and automated processing of data which are stored for specified legitimate purposes and are not used for purposes incompatible with those purposes or absolutely necessary . these principles also regulate the quality of the data, in particular its adequacy and relevance, as well as the fact that the data must not be redundant (proportionality) and must be accurate . in addition to providing safeguards for the collection and processing of personal data, the convention regulates (where there are no adequate legal safeguards) the processing of so-called “personal data”, i .e . sensitive data such as race, political attitudes, health, religious beliefs, sexual life, or criminal record data . the convention also enshrines the right of an individual to know about the retention of data concerning him and to be able to correct such data as necessary . restricting the rights set out in the convention is only possible in cases of overriding interests, such as national security or defence . among the strengths of the council of europe convention 108 include comprehensive coverage, the existence of broad acceptance of the principles contained in the convention, the possibility of any country to join, cooperation under the open procedure . the great advantage is the binding nature of the agreement, which leads to effective harmonisation; and that the convention has strong support of other initiatives (e .g . endorsed by the international data protection commissioner as the best available global model) . the limitations of the council of europe convention include, in particular, its eurocentric nature (although currently extending rapidly to non-european countries) . overall, convention 108 is the most promising international development in an area where each initiative faces enormous challenges . 3. oecd member states of the organization for economic co-operation and development (oecd) have developed the oecd guidelines on the protection of privacy and crossborder flows of personal data in consultation with a  broad stakeholder group . with the introduction of information technolog y in various areas of economic and social life, and with the increasing importance and potential of automated data processing, the organization for economic co-operation and development decided in 1980 to issue guidance on international privacy policy and the cross-border flow of personal data . the rapid and ubiquitous development of information and communication technologies and infrastructures, characterised by a phenomenon such as the internet, has accelerated developments towards a global information society . the oecd has therefore focused on how this guidance could best be applied in the 21st century to help ensure respect for privacy and the protection of electronically accessible personal data . the guideline on privacy and the cross-border flow of personal data was adopted as a  recommendation of the oecd council in support of the three principles that are binding on oecd member states: open democracy, respect for human rights and the free market economy . it entered into force on 23 september 1980 . the privacy guidelines 46 lilla garayová public governance, administration and finances law review • vol. 4. no. 2. constitute an international consensus on the general approach to collecting and managing personal information . the principles set out in the privacy guidelines are comprehensible, flexible to apply and formulated sufficiently broadly to be adapted to technological changes . the principles include all media for automated processing of individual data (from local computers to networks with complex national and international branches), all types of personal data processing (from human resources to compiling customer profiles) and all data categories (from transient data to fixed data, from the most mundane to the most sensitive) . the principles are applicable both nationally and internationally . they have gradually been incorporated into a large number of national regulatory or self-regulatory instruments and are still frequently used in both the public and private sectors . the guidelines can be governed by any country, not just oecd members . the oecd itself has 34 members, of which 32 have already implemented comprehensive data protection laws prior to the adoption of the guidelines . at the end of march 2016, the turkish parliament approved a  draft data protection law aimed at aligning the turkish regime with the eu regime, leaving the u .s . as the only exception (the u .s . is more likely to use the sectoral approach to data protection) . however, the real impact of the oecd guidelines is its impact on the content of privacy laws around the world  –  far beyond the oecd membership . the guideline contains eight privacy principles, which are those contained in most national privacy laws . the strengths of the oecd guidelines on privacy include a  long and respected history, generally accepted basic principles, a focus on striking a balance between data flows and data protection; wide support for diverse groups . the limitations of the oecd guidelines on privacy include the absence of the principle of proportionality (or minimisation of data), the non-binding nature of the guidelines and focus on developed countries (although in practice the basic principles are largely applicable) . 4. initiatives of the international data protection commissioners the latest data protection initiative, which has an almost global impact, is the work of international data protection authorities . their main role is to regulate national data protection legislation, but since their work involves more international disputes, they have begun to engage in a global privacy debate . there are three main initiatives: 1 . annual meeting and conference 2 . a system of cooperation on international and cross-border complaints, and 3 . a statement of global privacy principles for our purposes, the third initiative is of the utmost importance . at their meeting in 2005, the international data protection commissioners issued a statement entitled: the protection of personal data and privacy in a globalised world: a universal right respecting diversities (also known as the montreux declaration) .16 the declaration called for the development of an international data protection convention and is one of the most important efforts to harmonise data protection laws worldwide . in particular, the declaration states: data 47 public governance, administration and finances law review • 2. 2019 information security awareness in public administrations at an international level protection and privacy commissioners express their desire to strengthen the international recognition of the universal nature of these principles . they agree to cooperate, in particular, with governments by international and transnational organisations in drawing up a universal convention on the protection of individuals with regard to the processing of personal data . to this end, the commissioners called for: a) the un to develop a  legally binding instrument that clearly lays down detailed data protection and privacy rights b) any government in the world to promote the adoption of legal instruments for data protection and privacy in accordance with the fundamental principles of data protection and to extend them to its mutual relations, and c) the council of europe, in accordance with article 23 of the convention for the protection of individuals with regard to automatic processing of personal data (convention 108), invites non-member states of the council of europe which already have data protection enshrined in domestic law to accede to the strengths of the international data protection commissioners’ initiatives include significant global impact, real world experience, insight into current issues and emphasis on the convention on the protection of individuals with regard to automatic processing of personal data (convention 108) as a  global platform (instead of proposing something brand new) . restrictions on the initiatives of the commissioners for international data protection include the lack of formal structure or follow-up and the non-binding nature of the declaration . 8. conclusion on the previous pages, we aimed to emphasise the importance of data protection management in the context of international trade and in the context of different global, regional and national approaches to data protection regulation . we recognise that there are various legitimate concerns regarding data protection and privacy – from consumers (civil society), businesses and governments . the challenge for data protection and privacy laws is therefore to balance these various concerns and interests, ideally in a way that does not unnecessarily restrict trade and innovation . it is also essential to find solutions that are internationally compatible to facilitate cross-border online trade . as we have mentioned in this study, the current system is not satisfactory and, given the growing economic and social activity on the internet and the introduction of new technologies, there is an urgent need to address the situation . against this background, we evaluated the current situation and tried to find possible paths towards a system that provides an appropriate balance between data protection and data streams . key conclusions are: there is a  recognised set of basic data protection principles . with a  remarkable degree of harmonisation and coherence around the core principles of data protection in key international and regional agreements and guidelines, different implementation procedures exist . although there are significant differences in the details 48 lilla garayová public governance, administration and finances law review • vol. 4. no. 2. of data protection laws around the world, we can find greater agreement at the core of most national laws and international regimes . these common basic principles are: openness, limitation of data collection, purpose specification, limitation of use, security data quality, transparency and accountability . this set of basic principles is a useful starting point for efforts for interoperability and legislative harmonisation . countries that have not yet introduced laws, or countries that are updating or reforming their laws, should seek to incorporate these basic principles into their new (or  amended) legislation . while the coherence of the principles may not guarantee full mutual recognition, it can significantly contribute to the compatibility of different policies . in some other legal areas, international and regional organisations have come together to support a  single initiative to achieve compatibility and harmonisation . for example, in the case of cybercrime, there is broad support for the development and extension of the 2001 council of europe convention on cybercrime, which now has 54 signatories, including many european countries, australia, canada, japan and the usa . the convention has led to the harmonisation of cybercrime legislation in many other countries, beyond the signatory members, as the basic provisions are often reflected in the national legislation of several states . on the contrary, there is no single global agreement on data protection . there are many regional and international initiatives in this area, some of which are in competition with each other . although there are different approaches, there are quite a number of common views on the basic principles and broad agreement on the issues to be addressed . the convention for the protection of individuals with regard to automatic processing of personal data (council of europe convention no 108) is the agreement with the widest support and greatest potential for compatibility . the convention may be signed by any country; already has a large number of supporters; it is based on generally agreed principles; has the support of key stakeholders (in particular civil society and regulators); and its binding nature would increase compatibility and interoperability . however, the convention must attract key support in north america and asia and the pacific . regardless of which instrument will form the basis of cohesion, convergence of regimes may already occur . one example is the european union . the european union intends to make progress not only towards internal but also external cooperation: the eu is actively engaged in international data protection cooperation through various international fora, including the oecd and the council of europe (and intends to become a  party to the revised council of europe convention on data protection 108) . the eu participates in a  dialogue on privacy and data protection with regional organisations, in particular apec . achieving the wrong balance between data protection and data flows can have serious consequences for the protection of fundamental rights as well as for international trade and development . in most cases, data protection initiatives have been developed in an open and transparent way, with opportunities for entry from different stakeholders’ perspectives . for example, the council of europe convention 108 contains a forum where all member state governments, regulators, private sector stakeholders and civil society representatives can gather information and share information on the promotion and improvement of the 49 public governance, administration and finances law review • 2. 2019 information security awareness in public administrations at an international level convention . however, there are examples of initiatives that were developed without the opinion of external stakeholders . for example, international trade agreements are often considered to be developed through clandestine negotiations, which clearly limit the opportunities to hear the voice of the consumer – civil society . another key point for countries without a  legal framework in the field of personal data protection is the establishment of an effective regulatory structure . the benefits of a  single central regulator, in particular for international trade opportunities and for consumers in general, are considerable . while there are differences in the regulatory structure of the legislation, the creation of a  single central regulatory authority seems to be strongly encouraged, where possible . several countries have moved from a complex regulatory structure of several agencies to a simpler structure of national agencies (e .g . japan has moved from 30 regulators to one central regulator) . this is not always possible due to the federal nature of jurisdiction (e .g . canada, germany and india) . however, the benefits of a single regulator, especially as regards international trade opportunities, are huge . foreign companies then have to deal with only one focal point and a  single regulator can achieve consistency by issuing a single set of guidelines or standards . consumers will also be made much easier to deal with complaints and questions if there is a single regulatory body and at the same time, a  single consistent set of decisions of the national regulatory authority will have a greater impact than a diverse set of decisions from several regulatory authorities . it is important that the regulator also has the role of complaint manager . most regulators combine a  general supervisory function with this specific task, with some exceptions . for example, the ftc in the united states of america is a  strategic regulator (it may not respond to individual complaints), while dispute resolution in the united states is partly governed by private litigation and third-party providers . the republic of korea has formally divided the regulatory and complaints agenda between the two agencies . developing and implementing data protection laws is a  complex and costly process that often requires a  careful balance between data protection and data flows . redressing the balance can have serious consequences for the protection of fundamental rights or for international trade and development . future efforts to achieve greater compatibility will require the effective involvement of all stakeholders, including representatives of the private sector and civil society . this involvement must go beyond general discussions (conferences, seminars, etc .) to engage in the formal policy development process . developing global and regional data protection initiatives also requires the involvement of developing countries in the debate . too often, the debate is dominated by the interests of developed countries . developed countries have the most advanced data protection laws and have the most experience in enforcing them but improving cooperation with developing countries is increasingly encouraged . the world is at the forefront of a  transformational technological revolution, fuelled by the economic and social benefits of access to data . emerging markets are competing with time to capture these benefits but are left out of the innovation dialogue that largely takes place among developed markets . global privacy laws are at a  crossroads . so far, these laws have mostly focused on the rights of individuals . in general, the aim was to ensure the protection of individuals’ private lives and to prevent their governments and businesses from being unfairly violated . however, interesting new pages are emerging in discussions on the future direction of 50 lilla garayová public governance, administration and finances law review • vol. 4. no. 2. policy in this area . on the one hand, there is strong business pressure to allow a  free flow of  data, which is an essential part of a  world in which economic growth is increasingly digital . on the other hand, individuals generally do not like the feeling that they are being spied on or that their data is beyond their control . the overall approach to this issue in the eu and some other jurisdictions is currently being resolved for the foreseeable future, but legislators in jurisdictions in which privacy is emerging are facing challenges . the main question is where there should be the right balance between the right to privacy and the ability of companies to monetise individual data . on the one hand, there is an indication that the right to privacy is absolute and inviolable (in fact, it is referred to as a fundamental right in the eu) . the supporters of this view consider that the right to the privacy of the individual is paramount – and it is not difficult to understand why this argument is attractive . major privacy breaches and security failures are getting headlines with alarming regularity and show that many businesses are not investing as much in digital security as they should . in fact, even if proper and responsible investments have been made, it is often impossible for any company to ensure that no third-party attacker gets well into its systems . efforts to achieve balanced, flexible and compatible data protection regulation have become an urgent global objective . some countries have strong regulatory mechanisms, while others have outdated legislation or none at all . in order to achieve adequate protection that enables innovation and facilitates trade, it is essential to continue the national, regional and global dialogue of all stakeholders . the need for new legislation is fast approaching due to the unstoppable technological revolution . new technologies, including machine learning, artificial intelligence and fintech, offer countless benefits in terms of data analysis and quick and accurate decisionmaking in tasks that can take a lot longer . however, the testing and development of these technologies often relies on access to large data sets to achieve meaningful results . developers are faced with difficult decisions to move their operations to jurisdictions that place less restrictions on data handling for testing purposes . once the products are functional, many companies find that if they choose to offer their services in jurisdictions with very strict privacy laws, they have to face a high regulatory barrier . some companies have taken the view that the costs of meeting these strict privacy obligations are too high to be justified until the product is well established . as a  result, users in jurisdictions with strict privacy laws are increasingly finding that the latest technologies are not available in those jurisdictions . it is therefore important that all jurisdictions ensure the implementation of data protection laws in a  way that does not hinder creativity and technological development . if they fail to do so, they risk their citizens becoming second-class passengers on the digital journey . 51 public governance, administration and finances law review • 2. 2019 information security awareness in public administrations at an international level references 1 this work was supported by the slovak research and development agency under the contract no . apvv16-0521 . 2 regulation (eu) 2016/679 of the european parliament and of the council of 27 april 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing directive 95/46/ec (general data protection regulation) . 3 data protection regulations and international data flows; united nations publication; unctad/web/ dtl/stict/2016/1/ipub united nations, 2016 switzerland . 4 the age of digital interdependence, report of the un secretary-general’s high-level panel on digital cooperation, www .un .org/en/pdfs/digitalcooperation-report-for%20web .pdf (accessed 11 august 2019) . 5 summary of adoption of e-commerce legislation worldwide, global cyberlaw tracker, http://unctad .org/ en/pages/dtl/sti_and_icts/ict4d-legislation/ecom-global-legislation .aspx (accessed 11 august 2019) . 6 centre for information policy leadership (cipl), cross-border transfer mechanisms, www .informa tionpolicycentre .com/uploads/5/7/1/0/57104281/cipl_comments_indonesia_ministry_of_comm_and_ it_draft_regulation_august_20_2015 .pdf (accessed 08 november 2019) . 7 wto general agreement on trade in services, www .wto .org/english/tratop_e/serv_e/gatsintr_e .htm (accessed 08 november 2019) . 8 regulation (eu) 2016/679 of the european parliament and of the council of 27 april 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing directive 95/46/ec (general data protection regulation) . 9 the right to privacy in the digital age: resolution / adopted by the general assembly, a/res/68/167, https://digitallibrary .un .org/record/764407/?ln=en (accessed 08 november 2019) . 10 united nations, resolution adopted by the general assembly on 18 december 2013, 68/167 . the right to privacy in the digital age, www .un .org/ga/search/view_doc .asp?symbol=a/res/68/167 (accessed 08 november 2019) . 11 the international covenant on civil and political rights, https://treaties .un .org/doc/publication/unts/ volume%20999/volume-999-i-14668-english .pdf (accessed 08 november 2019) . 12 united nations high commissioner for human rights, the right to privacy in the digital age (an overview), www .ohchr .org/en/issues/digitalage/pages/digitalageindex .aspx (accessed 08 november 2019) . 13 copland v . the united kingdom european court of human rights [2007] c/62617/00, european court of human rights . 14 klass and others v . federal republic of germany, judgment, merits, app . no . 5029/71 (a/28), (1979-80) 2 ehrr 214, ihrl 19 (echr 1978) . 15 s and marper v . united kingdom, echr [2007] ehcr 110, 30562/04 . 16 the international data protection and privacy commissioners, montreux declaration – the protection of personal data and privacy in a globalised world: a universal right respecting diversities, 2005, https:// edps .europa .eu/sites/edp/files/publication/05-09-16_montreux_declaration_en .pdf (accessed 08 november 2019) . http://www.un.org/en/pdfs/digitalcooperation-report-for web.pdf http://unctad.org/en/pages/dtl/sti_and_icts/ict4d-legislation/ecom-global-legislation.aspx http://unctad.org/en/pages/dtl/sti_and_icts/ict4d-legislation/ecom-global-legislation.aspx http://www.informationpolicycentre.com/uploads/5/7/1/0/57104281/cipl_comments_indonesia_ministry_of_comm_an http://www.informationpolicycentre.com/uploads/5/7/1/0/57104281/cipl_comments_indonesia_ministry_of_comm_an http://www.informationpolicycentre.com/uploads/5/7/1/0/57104281/cipl_comments_indonesia_ministry_of_comm_an http://www.wto.org/english/tratop_e/serv_e/gatsintr_e.htm https://digitallibrary.un.org/record/764407/?ln=en http://www.un.org/ga/search/view_doc.asp?symbol=a/res/68/167 https://treaties.un.org/doc/publication/unts/volume 999/volume-999-i-14668-english.pdf https://treaties.un.org/doc/publication/unts/volume 999/volume-999-i-14668-english.pdf http://www.ohchr.org/en/issues/digitalage/pages/digitalageindex.aspx https://edps.europa.eu/sites/edp/files/publication/05-09-16_montreux_declaration_en.pdf https://edps.europa.eu/sites/edp/files/publication/05-09-16_montreux_declaration_en.pdf pga2019_02_b1 _hlk18895087 _hlk18895098 _hlk27344917 articles administrative liability for causing damage to selected components of the environment branislav cepek* the right to informational self-determination in the context of selected judicial decisions and practical background andrea erdősová* information security awareness in public administrations at an international level lilla garayová* blockchain technology – current status, challenges and perspectives in tax and customs law ladislav hrabčák,* monika stojáková* application possibilities of blockchain in accounting péter bálint király* budget allocation of taxes to territorial budgets ivana pařízková* the efficiency of tax collection in the czech republic eva tomášková* case study new legal regulation of the administrative justice in the slovak republic juraj vačok* pga2019_02 _hlk18895087 _hlk18895098 _hlk27344917 articles administrative liability for causing damage to selected components of the environment branislav cepek* the right to informational self-determination in the context of selected judicial decisions and practical background andrea erdősová* information security awareness in public administrations at an international level lilla garayová* blockchain technology – current status, challenges and perspectives in tax and customs law ladislav hrabčák,* monika stojáková* application possibilities of blockchain in accounting péter bálint király* budget allocation of taxes to territorial budgets ivana pařízková* the efficiency of tax collection in the czech republic eva tomášková* case study new legal regulation of the administrative justice in the slovak republic juraj vačok* pga2019_02_b4 _hlk18895087 _hlk18895098 _hlk27344917 articles administrative liability for causing damage to selected components of the environment branislav cepek* the right to informational self-determination in the context of selected judicial decisions and practical background andrea erdősová* information security awareness in public administrations at an international level lilla garayová* blockchain technology – current status, challenges and perspectives in tax and customs law ladislav hrabčák,* monika stojáková* application possibilities of blockchain in accounting péter bálint király* budget allocation of taxes to territorial budgets ivana pařízková* the efficiency of tax collection in the czech republic eva tomášková* case study new legal regulation of the administrative justice in the slovak republic juraj vačok* © 2017 dialóg campus, budapest public governance, administration and finances law review vol. 2. no. 2. (2017) • 3, 42–59 the status of e-administration in hungary  – are we on the right track?1 bernadett veszprémi* * judr. bernadett veszprémi, phd, assistant professor at the department of administrative law at the faculty of law, university of debrecen. (e-mail: veszpremi.bernadett@law.unideb.hu) abstract: the goal of this study is to define (or find out) where hungary currently stands in the development of e-administration solutions. the issue is more topical than ever, as infocommunications became an integral part of our daily lives, affecting both the private and public sectors, and changing our ways of working  –  thus, it requires our understanding. when it comes to the public sector, however, striking changes can only be achieved if the entire process of public administration is (or would be) changed. the goals are clear: work should be faster, as it would result in satisfied clients, cut costs and more efficient procedures. the question to ask now is where hungary stands in this endeavour. are we on the right track? keywords: e-administration; e-management; e-communication; interoperability 1. introduction the european union already realized back in the 1990s that it can only compete with japan and the united states of america if it strives to create a knowledge society. reaching this goal, however, requires being a leading force in electronic developments, as well. this, of course, does not just mean the development of new technologies, but also the training of people who can and want to use such innovations. private sector enterprises have long come to understand the necessity of this transformation, hence their attempts to gradually change their marketing and ways of working. when it comes to the public sector, a different approach is necessary, where the regulation itself has to be studied in the first place, to understand the system and current state of e-administration. concerning the regulation, it basically fulfils its role and meets the actual expectation. on the one hand, centralization (which already appears in numerous aspects of e-administration) is required; on the other hand, making various functions and services available on the market to ensure the more efficient and complete service of clients is certainly a good direction. e-administration requires standardization and central decisionmaking, due to the complexity of its technical background, to ensure the interoperability of its systems, and eventually to achieve its general availability. the developments are already underway, and the organizational integration of regional-level state administration leads to the need of establishing permeability among the various specialized systems. at the same time, on the level of self-governments, the  deployment of the asp also serves the same goal of standardization and unification. the procedure thus started – we are now looking forward to its continuation. 10.53116/pgaflr.2017.2.3 https://doi.org/10.53116/pgaflr.2017.2.3 43 public governance, administration and finances law review • 2. 2017 the status of e-administration in hungary – are we on the right track? we must admit that hungary is lagging a  decade behind the eu when it comes to e-administration: after all, while the eu took concrete steps to develop the strateg y of e-administration in the 1990s, the first initiatives in hungary were only made at the beginning of the 2000s. we also could not meet the related deadlines of the eu, such as the eeurope 2005 or the clpbs recommendations. the idea of using integrated, interoperable systems and services is good, but we should not forget that there are several countries which use such services for years now. i can only hope that the next five years will bring substantial changes in this field; however, launching the new developments, along with their reconciliation and alignment to practical needs will not occur without problems  –  just like the elimination of the resistance against the new and unknown. to be able to outline the current stance and the arc of development of hungarian e-administration, first we must define the concept itself. i find this very important to clarify, as international literature tends to specify it in a  variety of ways. for example, e-government stands for a different concept in english-speaking countries than in germany or other territories. in a  wider sense, government and governance comprise all agents and activities of the executive power; however, the hungarian scientific literature defines these terms as the agents of public administration, legislation, and the president of hungary. as such, e-administration in hungary comprises the it technologies and procedures of state administration (that is, the central and regional executive bodies of the government), and the administrative actors of the local self-governments. my goal is to describe this narrowlydefined type of e-administration as it has been realized in hungary so far. 2. e-government and e-administration: clarifying the fundamental concepts legislative literature offers several definitions for e-administration. the website of the mag yary programme for example defines the concept as follows: “e-administration is an extensive task, an aspiration in public administration development which aims to improve its work efficiency by utilizing the most suitable it solutions.”2 ancsin, however, defines the goal of e-administration as “the transformation of the internal and external contacts of the public sector via the modern technical means of infocommunications, and the transactions that can be realized by those”.3 i myself consider the second definition as the definite one. e-administration, in a  wider sense, means the computerization of public administration, the digitalization of traditional office work to electronic solutions, the online availability of public administration services and electronic records, and the use of computerized administrative systems. due to their specialized nature, the systems and records used in the specific administrative branches are subject to those specific parts of the administrative system. in this sense, e-administration also comprises all specialized areas of administration where some (or all) activities are digitalized (such as hospital records, employee registration, electronic communication between the court and authorities, or the public procurement of administrative agencies). in a  narrow sense, 44 bernadett veszprémi public governance, administration and finances law review • vol. 2. no. 2. e-administration means the computerization of public proceedings, along with their front office and back office connections. we are living in the age of information society. electronic procedures are becoming widespread, and take the lead against traditional, paper-based proceedings. as szittner states, “the question is not whether computerization is needed; it is rather how it should be or should not be done”.4 at the same time, tózsa concludes that “the electronic and communication networks, which channel the new resource of information, inevitably enter the administration of public duties.”5 electronic communication is present in almost all aspects and levels of life. it systems are widely used not just by large companies, but by small and medium-size enterprises, as well. it is important to stress though, that there are still lots of problems to sort out in this area, so we are far from a full-fledged, actual e-administration system at this time. still, the topic is justified, and is worthy of research. but what does e-administration actually mean? no specific definitions are available, though its levels were tried to be classified multiple times.6 in my opinion, “electronic administration is neither equal to the automation of certain work processes, nor to the replacement of the human workforce with machines. […] the term can be approached from a  front office (client-side) and back office (authority-side) aspect as well: in this respect, it means providing new types of public services both for offices and clients, or at least facilitating to reach existing services via new methods. from the back office (or office) side, the state is able to coerce its subordinated organizations to switch over to these new methods, and can support this transformation and the development of the technical infrastructure via financial stimulations”.7 in the eu, the digital and e-administration services are measured by the following four indicators: 1. the e-government user indicator. this means the amount of administrative applications submitted electronically. 2. the presence of submitted intelligent e-forms. this means the automatic loading of data available to authorities. 3. the complexity of public e-services. this measures which and how many steps of public proceedings happen electronically. 4. the open data indicator. based on the above, hungary achieved a  score of 39%, which earned her the 4th place from the bottom on the list of eu countries, against the eu average of 55%.8 3. the domestic evolution of e-administration the effort to digitalize various life situations, legal relations and services goes back almost two decades. while certain initiatives have been planned earlier than that,9 the first legal form of digitalization manifested only in 2003.10 the közigazgatási hatósági eljárás és  szolgáltatás általános szabályairól szóló 2004. évi cxl. törvény [act cxl of 2004 on the general procedural and service regulations of public administration authorities] (hereinafter ket.) contained regulations for the general 45 public governance, administration and finances law review • 2. 2017 the status of e-administration in hungary – are we on the right track? procedures of public administration authorities (covering all branches of the administrative system). originally, it covered the rules of main proceedings, legal remedies and execution  –  it was this framework, to which legislation added the regulations of e-administration in 2004, concentrating mainly on the means of communication and the electronic availability of documents. in 2015, the elektronikus üg yintézés és  a  bizalmi szolgáltatások általános szabályairól szóló 2015. évi ccxxii. törvény [act ccxxii of 2015 on the general rules for electronic administration and trust services] (hereinafter e-administration act) came into force, bringing fundamental changes in the area of e-administration. as we will see, the process of e-administration was unmatured at this time, both technically and also considering its legal status. the e-administration act defines e-administration as the electronic performance of administrative activities, or making declarations electronically.11 it does not specifically concentrate on the process of administration (generally mapping a  procedure), as its regulations go beyond the public administration organizations (and this was not a  goal with ket. either). the past and current regulations both aim to establish the framework that would help realizing e-administration: mosaic services available to clients and the authorities alike that would offer secure means of electronic communication for both sides. there is, however, another service related to e-administration which provides its lifeline: the it backbone (with its equipment pool and software) and its services related to the information society (such as websites, or the front and back offices of the administrative user interface). in this approach, e-administration basically means two things: besides having the clients initiating electronic cases and possibly submitting (uploading ) declarations, it could also stand for the proceedings and decision-making mechanism of the related authorities. therefore, their work must also be supported by it resources which – by means of a framework – also require legal regulations. putting e-administration into a legal framework raised many issues in the past years, the best proof of which is the fact that its rules were constantly shifting within the legal system and regulations. when ket. took effect, the possibilities of electronic administration significantly increased, as the act made it possible to practice certain administrative actions electronically, as well as let authorities inform clients on their decisions by electronic means. however, most of the local self-governments were unprepared for this channel of administration; therefore, in line with the regulations of ket.,12 most of them enacted local decrees that ruled out the possibility of handling any official matters via electronic means. legislation has established a central electronic service provider system, and as part of it, an üg yfélkapu [client access portal] as well, to which self-governments and other organizations could also connect. however, at the beginning, only about 1% of the selfgovernments connected to the client access portal voluntarily. to speed up their electronic integration and connection to the client access portal, legislation forced self-governments via a  government decree13 to publish announcements electronically (via e-forms) on the client access portal. with this method, the state facilitated the creation of the technical background by legal means for the self-governments.14 in 2005, ket. defined two means to initiate electronic administrative matters. the first method (the direct one) was the usage of high-security digital signatures, while the second 46 bernadett veszprémi public governance, administration and finances law review • vol. 2. no. 2. one was letting clients send their applications through the client access portal of the central electronic service provider system. when ket. took effect, e-administration received a  separate article within the act with the details expanded in implementing regulations by the legislator. however, it soon became apparent that the regulations within ket. were only enough for the computerisation of public proceedings; the framework would not be enough to regulate the numerous services of the central system developed by the government. therefore, the concept (and its regulations) have been expanded, and eventually received separate legal regulations15 under the denomination of electronic public services, with its own implementing regulations. this central system became the sole channel of electronic client-authority and authorityauthority communications. the goal of this regulation was to eliminate specialized developments and custom solutions or services, and to centralize electronic administration.16 the ekszt. unified the concepts related to electronic communication that occurred in the various sectoral legislation branches, and made electronic administration available as an electronic public utility to almost all actors of the economy and to civil organisations, as well. the ket. received further modifications17 in 2012, with the goal to replace the monopolistic solution (affecting both the delivery and development sides) with systems created from simpler, compatible and cooperative modules,18 that would consider the pangovernmental interests with much more emphasis. this concept shift was also justified by the ever-changing needs of the population along with the constant technological improvements. the core elements of this shift were the following : 1. instead of using one government system, create several modules called szabályozott elektronikus üg yintézési szolgáltatások [regulated electronic administration services]; (hereinafter szeüsz19), which can be developed and offered by market participants, as well.20 2. develop a  reporting and authorization system  –  the elektronikus üg yintézési felüg yelet [electronic administration supervision] (hereinafter eüf) 3. create technolog y-neutral regulations. the modification of ket. in 2011 ceased the former centralized model, and started focusing on the regulation of the proceedings instead of the regulation of the technolog y used. it established a  regulatory framework which allowed public administration the flexibility of using proven solutions developed by market participants.21 this same modification in 2011 also repealed the regulations of ekszt. and the 2009. évi lii. törvény a  hivatalos iratok elektronikus kézbesítéséről és  az elektronikus tértivevényről [act lii of 2009 on the electronic delivery of official documents and the electronic acknowledgment of receipt] (hereinafter hiektv.), placing the regulations of e-administration in the ket. again, within its separate section. rather than focusing on a  central system, the new wording defined regulated electronic services and service providers, though it also emphasized that electronic communication with clients and other organizations shall only be available via government communication services.22 regarding 47 public governance, administration and finances law review • 2. 2017 the status of e-administration in hungary – are we on the right track? the means of communication, the act also defined electronic channels as a  valid, though non-written form of legal communication.23 the government appointed the minister responsible for e-administration with nation-wide competence as the supervisory authority of electronic administration.24 the ket. effective until 2017 did not consider electronic administration procedures as separate proceedings (regulated under a  separate title); it rather fit them within the framework of traditional procedures, by introducing a couple of specialties in its section of e-administration (section 10). the equality of electronic and paper-based administration methods was guaranteed by section ii/a (defining the rules of communication), and the declaration25 of equal probative values for electronic and paper-based documents. by defining e-administration as a means of communication, and establishing it as an accessible means of administration for clients, ket. made electronic administration not just equal to traditional paper-based administration, but almost made it the primary means of proceedings. this was also supported by the main principles of speed, efficiency and cost effectiveness defined in the act. exclusion of electronic means was only possible in unique cases, such as special legal regulations, the lack of technical conditions,26 or when e-administration was incomprehensible for the specific scenario. the modifications of ket., however, kept narrowing down these cases: eventually, only acts, government decrees issued in original legislative authority, and self-government decrees issued in self-governing authority matters could declare such scenarios. 2015 was another milestone in the history of hungarian e-administration. a new act took effect27 that repealed the special regulations concerning e-administration and its public proceedings, and also returned to the 2009 model, establishing a unified framework for all electronic proceedings. this framework was the eg ységes digitális üg yintézési tér [unified electronic administration environment]. the major difference between the current regulation and the 2009 one is that while the legislation realized the necessity of a  centralized model and extended the rules of e-administration to every sphere, it still retained the independence of the szeüsz modules (available to clients and authorities) for market participants. while the regulations defined in the act cover electronic administration matters beyond that of public administration, this study focuses solely on the rules of electronic public administration; hence it does not cover the new regulations of other areas (such as trial procedures). the act essentially strived to regulate two major areas. the first of these was the extension of e-administration to all administrative sectors. this endeavour encapsulated two important statements that i would like to cover here. on the one hand, the new regulations restrict the possibility of excluding e-administration methods even more: it can be ruled now only via acts or government decrees. this basically means that selfgovernments can no longer exclude electronic methods in their administrative affairs: they must provide the necessary services somehow. on the other hand, the legislation attempts to “realize the necessary developments in a way that, on the one hand, the already existing systems could be used by all claimants without the necessity of substantially modifying said systems; and on the other hand, where such systems do not exist, they shall be deployed easily and with low costs”.28 unfortunately, the recently declared decree which defines the necessity of connecting to the self-government application service provider (asp) does 48 bernadett veszprémi public governance, administration and finances law review • vol. 2. no. 2. not really follow the above principles, as it makes connection mandatory for two systems (taxes and economy), and also enforces data transmission towards data banks regardless of the type of connection used. besides this, the application to connect to the asp (csatlakozási konstrukció az  önkormányzati asp rendszer országos kiterjesztéséhez [constructing connection to the nation-wide extension of the self-government asp system]  –  pacsdop-2.1.2-cchop-1629) provides pecuniary assistance only for those self-governments that choose complete connection (system connection) to the asp. this effectively puts those self-governments at a  disadvantage who stick to the old, proven systems, generating additional costs and extra development required for the connection. another aspiration of the act that deserves appreciation is that by targeting the realization of levels 4–5 of the clbps recommendation, it tries directing all possible communications (client/consumer [hereinafter client]  –  authority/service provider [hereinafter authority] or authority/authority) to electronic channels. besides this, it also observes the parameters (identification method, representation) provided by clients, the form of maintaining contact, and the means of administration, as well (such as administrative stipulations or personalized administrative interfaces). it only regulates the means of communication and the technical requirements of data transmission; it does not create any new legal titles for data handling. in order to expand e-administration and ensure a  unified regulation, the act merges several other former acts (such as the eat.30 and the ioptv.31). with the further development of the system created for ioptv., it becomes possible to regulate the flow of all electronically available data between organizations bound to electronic administration. the eventual goal is to let all information and data necessary for the information-technological cooperation be available for all cooperating organizations. this can be ensured by enforcing their obligation to supply information. the second major area covered by the act is the field of e-identification and trust services, on the grounds of the related eu directive.32 this directive defines cooperative obligations for all member states regarding their e-identification systems. its main principles are voluntary reporting and mutual acknowledgment: in other words, reporting the systems is optional, but in case a  member reports its system, the rest of the member states must acknowledge it wherever it is used.33 needless to say, the mutual knowledge, inspection and acceptance of the specific tools and identification solutions would be of great help for clients utilizing cross-country e-services. the eidas-regulation also covers e-government solutions and all security solutions used by market participants, essentially breaking the absolutism of e-signatures. in hungary, supervision is performed by the nemzeti média és hírközlési hatóság [national media and infocommunications authority]. by defining and naming the concept of trust services, the eidas-regulation substantially restricts the scope for action of the hungarian regulations. the goal with this was to increase trust in the e-communication methods, and to create a safe communication platform among member states. per the definition of eidas, trust services are electronic services usually provided for a compensation, and include the following : 49 public governance, administration and finances law review • 2. 2017 the status of e-administration in hungary – are we on the right track? 1. electronic signatures, electronic stamps or electronic timestamps, electronic delivery solutions for registered mail, and creating, verifying and authenticating certificates for the said services, or 2. creating, verifying and authenticating website-authenticator certificates, or 3. keeping electronic signatures, electronic stamps, or certificates related to the said services. with eidas taking effect, the eat. has been repealed. since then, the e-administration act ensures that the obligations toward the eu are met. the act also names several identification services provided by the government: these are the client access portal, the e-card, and partial code-based phone identification. all these services are built from a unified client registration register. the new regulation also allows the identification of economic organizations via natural persons acting as their representatives, provided that these persons are identified, and their power of agency is verified. moreover, if the power of agency results from certified public records or the administrative stipulations of the economic organization, further verification of the power of agency is neither required, nor demandable. in case it is required for electronic administration matters bound to identification, foreign clients (such as persons unregistered due to lack of hungarian residence) can voluntarily register to the database of foreigners applying for e-administration. however, they are, of course, entitled to utilize such services even if they decline registration, as long as they use the solutions defined in eidas.34 the freedom of service providing and the simplification of procedures in e-administration were first defined as expectations in the service directive35 of the eu; the hungarian government implemented these expectations with a  szolgáltatási tevékenység megkezdésének és  folytatásának általános szabályairól szóló 2009. évi lxxxv. törvény [act lxxvi of 2009 on the general rules of commencement and pursuit of service activities]. the guarantee of the possibility of single-windowed administration (or in other words, the points of single contact, or pscs) was also defined here the first time, which was eventually realized in hungary with the so-called kormányablakok [government windows]. the eugo.gov.hu website was launched in effect to the directive, and aims to  provide information for foreigners, mostly for business activities; however, it unfortunately provides no e-administration services. access to the client access portal was supposed to be provided by mag yarorszag.hu for foreigners; however, the above-mentioned website provides no means to login to it, while mag yarorszag.hu lacks any kind of foreignlanguage information. 4. the means of electronic communication in public administration proceedings the legal regulation differentiates between the type and means of communication. as mentioned earlier, e-communication can be basically performed in every form (both oral and written), because due to the convergence, it is now possible to contact authorities or 50 bernadett veszprémi public governance, administration and finances law review • vol. 2. no. 2. service providers through almost any kind of it device. ket. and the e-administration act made this possible with various legal consequences. until 2017, the means of e-communication were listed by az  elektronikus üg yintézés részletes szabályairól szóló 85/2012. (iv. 21.) korm. rendelet [government decree 85/2012 (iv. 21.) on the detailed provisions regarding electronic administration].36 one of the key properties of its regulations is that it provides relatively large freedom in the means of communication, and it does not enforce the usage of any specific system. that said, it should be noted that three out of the five means listed in the decree are szeüszs provided by the state on an obligatory basis. legislation defined no detailed rules regarding mailing and document uploads, though the explicit identification of senders is unavailable in these cases; hence they can be used only with limitations.37 the secure e-delivery service has been developed by the mag yar posta zrt. [hungarian postal service inc.]. the legal consequences of this service are the same as the traditional notice of receipt, thus it is suitable for the delivery of official statements of decisions, as well. the administrative stipulations are basically the representations of personalization.38 they are used to authorize proxies, define the type of identification to use (client access portal, elevated-security access site, phone identification), list contact information, enable periodic notifications on the selected electronic activities, and also to enable or block the selected means of communication. regarding identification, hungary chose the knowledge-based identification of providing a  password-based login routine built in the client access portal for its citizens.39 recent developments aimed to expand the group of legal entities (economic organizations, non-administrative organizations, foreign individuals) who can use the client access portal (on client-side) or the official access portal for organizations, and also to offer means for multi-factor authentication (mfa) as well (via phone code). for the sole role of identification, a  new szeüsz, the központi azonosítási üg ynök [central identification agent] (hereinafter kaü) was created. these developments of course can use some improvements: for example, after logging in to the government portal, users need to re-log in on kau.gov.hu. according to the currently existing legislation,40 clients may utilize electronic identification services provided by id cards containing storage elements (hereinafter e-id card), the client access portal, and partial code-based phone identification as electronic identification services provided by the government on an obligatory basis. the records of the applicants using any of these services are kept in the központi üg yfél-regisztrációs nyilvántartás [central client registration register] (hereinafter küny). depending on the chosen method, clients may identify themselves as follows: 1. in case of using electronic identification services provided by e-id card, by scanning the identification data stored on the card’s storage element, and using the pin code of the permanent id card. 2. in case of partial code-based phone identification, by providing the user identification and password. 51 public governance, administration and finances law review • 2. 2017 the status of e-administration in hungary – are we on the right track? 3. in case of using the client access portal, by logging in with the username and password, and using a secondary authentication method. in case of using an id card issued since january 1, 2016, clients may request access to the client access portal electronically, as well.41 regarding the küny, the government elected the following organizations, persons, and tools as its registration authorities: the capital and county government offices, the district-level offices of said government offices, the minister responsible for e-government services, the nemzeti adóés vámhivatal [national tax and customs administration], the mag yar posta zrt., the embassies and consulates of hungary,42 and the e-id cards issued since january 1, 2016. electronic forms formerly authenticated by e-signatures are gradually falling into the background. electronic id cards now contain built-in e-signature and fingerprint information as well, though their use potential is currently unknown. also, in the age of smartphones, clients should be able to contact the authorities not just in person or online, but by phone, as well. this could be realized by the utilization of the e-identification functions of e-id cards. 5. interoperability in practice the need for cooperation, communication and data exchange among the it systems have appeared in eu-level expectations already back in the 2000s,43 due to the fact that administration usually involves the usage of multiple specialized systems even when handling a  single case. to achieve actual and complete e-administration, these systems must be able to forward data to each other, and they should possess no parallel databases, as that would often result in storing conflicting data for the same client. interoperability can be defined on multiple levels.44 the optimal case is when it is realized on all administrative levels. in a  political sense, interoperability means the willingness of decision makers to establish cooperation among the various organizations and systems. by 2016, this political interoperability certainly existed. on the organizational level, interoperability is ensured45 by the establishment of county-level government offices, the creation of districts, the transfer of state administration duties from self-governments, the integration of special-duty organizations and tasks into county-level government offices and ministries, and the creation of the single-windowed pscs.46 from the technical side, the european committee created the european interoperability framework (eif) of the european (cross-border) public services, and the european interoperability strateg y (eis). the framework is based on the agreement of the organizations aiming to cooperate with each other, and defines the public administration and private sector expectations toward public services, thereby creating the conceptional model of public services, and the levels of interoperability required for its realization.47 this guarantees the common definition of interoperability on eu-level. the strateg y also provides guidance and sets priorities among the european public administration systems regarding the cross-country and cross-specialization interactions, and the activities related 52 bernadett veszprémi public governance, administration and finances law review • vol. 2. no. 2. to the improvement of information exchange and cooperation during the establishment of european public services.48 in hungary, the first regulation aiming to establish interoperability was in effect from january 2015, and was the az  állami és  önkormányzati nyilvántartások eg yüttműködésének általános szabályairól szóló 2013. évi ccxx. törvény [act ccxx of 2013 on the general rules of collaboration between state and self-government records49] that enforced the cooperation between the records of the various authorities. this regulation enforced only data connection: it did not define the means of how to record data, and what format to use. it primarily aimed to establish a  data connection service, so that there would be constant communication between the various registers and records, thereby the latest information would always be available during queries, regardless of the authority where the query is made. this data connection service is a service whereby registers allow other registers to transfer data via manual or automatic data transfer, as defined in the act. the registry containing the primary data is obliged to provide information, while the registry handling the derived data is obliged to receive it. the job of the government then was to clearly define what primary and derived data means in such cases. to establish the proper proceedings, the act ordered the affected registers to create data connection service rules, and to sign data connection service agreements between each other. it also charged a  separate organization with the supervision of the area, and assigned a central address register to ensure unified address handling. most of the regulations of the act took effect in july 1, 2015, though the service providers received substantial days of grace as well: they are obliged to meet the regulations of the act by the first day of the 30th month following the act’s entry into force (which means january 1, 2018). another expectation of the act was to make the already developed e-administration systems and related specialized systems connectable, and to make them able to communicate and permeate each other. after all, e-administration only makes sense if these conditions are met: only in this case can procedures be sped up, avoiding the concurrency and time-spending of paper-based traditional and electronic procedures. since january 1, 2017, the rules of interoperability are also part of the e-administration act. the cooperation is essentially defined on organizational, technical and semantical levels as well, as electronic data transfer among the various authorities have profound effects: their systems communicate with each other and interpret the received data, which results in better cooperation and more efficient work among the affected authorities. the act also restricts the means of contact: it can only occur either via delivery to an address in use for secure electronic communication, or by utilizing the file transfer service available between filing systems. in light of the above changes it can be ascertained that the legal part of interoperability (along with its semantic part, due to the basic concepts laid down in the regulations) is properly regulated. now, the regulations must be put into practice. after all, interoperability only exists if a government window offers a single solution to everyday situations. once we are not directed to five different locations for five different certificates (despite attending business with a  single authority), are not forced to visit the office a  second time with 53 public governance, administration and finances law review • 2. 2017 the status of e-administration in hungary – are we on the right track? a  proof of receipt, and are not instructed to wait for days to receive an official acknowledgment for a piece of data which can otherwise be queried from a database, only then we can state that interoperability has been put in practice. 6. e-administration – is it still the future? years ago, regarding the future of e-administration, i wrote the following : “although there are sporadic attempts to expand e-administration, for example eu subsidies like the széchenyi 2020 köfop, it is clear that to achieve this, measures must be taken on a central level. it is simply not enough to introduce sparse adjustments in the administrative subsystem of self-governments (handling most of the state-level and local cases affecting common citizens); instead, due to the lack of funds and the appearing resistance, a standard, unified, and accepted government software is needed, that would be available to all selfgovernments  –  similarly to the specialized systems, like onka or asza. the emphasis should be, on the one hand, on its state-level development and free availability, and on the other hand, on its mandatory usage.” this aspiration now seems to come to fruition with the asp-project of self-governments, which is already enforced legally by the mötv.50 hopefully, the provided modules, special systems, and the legislative-political intentions are indeed aimed to standardize administrative work, and to increase the efficiency and quality of public administration on the self-government level, instead of trying to achieve a greater level of control. another note of mine was made regarding document identification: “its legislative background is substantially detailed, but it is missing the development and standardization of a unified system on the back office (authority) side, just like its nation-wide introduction (both on firstand second degrees for all administrative cases). this would require not just the technical development of an it framework, but also the harmonization of it, legal and organizational requirements; in other words, the creation of a knowledge-based workflow system, which would break down processes to individual steps, would also provide legal help and form templates for each step of the specific procedure, and would be flexible enough to immediately react to additional steps added any time to the procedure.” besides, it could handle the administrative and internal procedural deadlines, it would indicate omissions to the superior authorities or employers, and would always indicate the changes and availability of the documents related to the procedure. the system is also expected to connect specialized subsystems, ensure permeability, and eliminate the parallelism of paper-based traditional and electronic procedures. it would be a  huge improvement if the work of administrators could be proven not just by written documents, but the whole procedure would be mapped and stored electronically, and therefore could be checked up anytime, producing evidence when needed. the government itself also admits that “many times, the emphasis on the client-driven approach remained a  mere buzzword, because in spite of the developments in legal regulations (for example having ket. stipulating that clients cannot be asked to provide 54 bernadett veszprémi public governance, administration and finances law review • vol. 2. no. 2. data which is otherwise available in the records of other authorities), no good progress was made in general in the area”.51 based on the nemzeti infokommunikációs stratégia [national infocommunications strateg y], we would be able to administrate everything electronically by 2020 with a  guaranteed bandwidth of 30 mbps, and with a  connection of 100 mbps being available to at least 50% of the households. the strateg y also aims to realize complete interoperability between databases by 2020, and to have central public administration institutions handle 80% of their processes via paperless, electronic means.52 based on an eu survey, hungary is the 4th worst performer when it comes to electronic public services, positioned far from the eu average.53 we own the penultimate position in the egov-indicator of client-drivenness, and are 3rd from the bottom of the list on the egov-indicator of transparency.54 the basics of the current regulation are fine. on the one hand, the centralization (which already appears in numerous aspects55 of e-administration) is required; on the other hand, making the various functions and services available on the market to ensure the more efficient and complete service of clients is certainly a  good direction. e-administration requires standardization and central decision-making, due to the complexity of its technical background, to ensure the interoperability of its systems, and eventually to achieve its general availability. what is required is a  standard, general and unified software/system accepted (and made mandatory) on a state level, which would be then made available to all administrative organizations, or at least to all organizations within the various administrative sub-systems. so far, regulation only covered the entry points used by the clients and authorities (the client access portal and office access portal, respectively – and which should be clarified further). however, to ensure the vitality of the area, the two entry points should be connected, and besides guaranteeing a secure backbone network, an it, administrative and legal application is also required that would provide a  complete workflow56 for the entire administrative procedure, handling both front and back office processes from submitting a  form through conveying decisions to providing electronic payment methods, as well. the above statement is not completely true nowadays though, as the developments are already underway, and the organizational integration of regional-level state administration leads to the need of establishing permeability among the various specialized systems. at the same time, on the level of self-governments, the deployment of the asp also serves the same goal of standardization and unification. the procedure thus started  –  we are now looking forward to its continuation. my study focused primarily on the legal and administrative aspects of the need for e-administration and electronic proceedings. that said, the topic could also be investigated from an it perspective, focusing on topics such as the need for network developments, increasing bandwidth, establishing knowledge centres, and increasing interoperability in cross-authority communication. the unstoppable expansion of electronic administration in the public and private sectors also justifies the effort to create a  unified framework for e-administration, regardless of the actors of e-communication (such as administrative organizations, courts, or public service providers). challenges of the upcoming years in this respect include the 55 public governance, administration and finances law review • 2. 2017 the status of e-administration in hungary – are we on the right track? creation and maintenance of a  cross-border digital infrastructure, the expansion of electronic public procurement, and the support of using contractual records. the eu aims to let enterprises run on public procurement tenders electronically anywhere in the eu by 2018, and to make e-billing an accepted form of billing by every public administration system by 2019. the committee also plans further actions regarding e-identification to speed up its cross-border and cross-specialization usage. we must admit that hungary is lagging a  decade behind the eu when it comes to e-administration: after all, while the eu took concrete steps to develop the strateg y of e-administration in the 1990s, the first initiatives in hungary were only made at the beginning of the 2000s. we also could not meet the related deadlines of the eu, such as the eeurope 2005 or the clpbs recommendations. the idea of using integrated, interoperable systems and services is good, but we should not forget that there are several countries which use such services for years now. i can only hope that the next five years will bring substantial changes in this field; however, launching the new developments, along with their reconciliation and alignment to practical needs will not occur without problems  –  just like the elimination of the resistance against the new and unknown. 56 bernadett veszprémi public governance, administration and finances law review • vol. 2. no. 2. references 1 the work was created under the priority project pacsdop-2.1.2-cchop-15-2016-00001 entitled “public service development establishing good governance” in cooperation with the national university of public service and the “de-ájk governance resource management research group” of the university of debrecen. for the description of the underlying concepts, see: tamás m. horváth, ildikó bartha, az ágazati közszolgáltatások rendszertanáról [the theoretical system of public service sectors], 25–37, in tamás m. horváth, ildikó bartha (eds.), közszolgáltatások megszervezése és  politikái [the organization and sectors of public services] (budapest, dialóg campus, 2016). 2 http://mag yaryprogram.kormany.hu/admin/download/d/2c/40000/mag yary%20kozig%20fejlesztesi% 20program%202012%20a4.pdf (accessed 02 january 2015). 3 lászló ancsin, az  e-közigazgatás [the e-administration], 37, in új mag yar közigazgatás, vol. 5, no. 5 (2012). 4 károly szittner, út az  elektronikus közigazgatáshoz [the way to electronic administration], 5, in új mag yar közigazgatás, vol. 2, no. 4 (2009). 5 istván tózsa, az elektronikus közigazgatás helyzete [the situation of electronic administration], 2, in új mag yar közigazgatás, vol. 5, no. 5 (2012). 6 lasse berntzen, morten goodwin olsen, benchmarking e-government  –  a  comparative review of three international benchmarking studies, 77–82, (cancun, third international conference on digital society, 2009); balázs benjámin budai, a közigazgatás és az elektronikus közigazgatási fejlesztések hatékonyságának mérése napjainkban [the measuring of effectivity of administration and electronic administration nowadays], 13–29, in új mag yar közigazgatás, vol. 5, no. 5 (2012). 7 bernadett veszprémi, a  közigazgatás döntései, a  közigazgatási aktustan [administrative decisions, study of administrative acts], 175–176, in zsuzsanna árva, istván balázs, attila barta, bernadett veszprémi, közigazgatás-elmélet [theory of administration] (debrecen, debreceni eg yetemi kiadó, 2012). 8 european commission digital agenda scoreboard, https://ec.europa.eu/digital-agenda/news_redirect/ 16475 (accessed 31 december 2016). 9 nemzeti informatikai stratégia [national it strateg y] (1995), mag yar válasz az  információs társadalom kihívásaira [hungarian answer to the challenges of the information society] (1999), tézisek az  információs társadalomról [theses on the information society] (2000), mag yar informatikai charta [hungarian it charta] (2000), nemzeti információs társadalom stratégia [national information society strateg y] (2001). 10 1126/2003. (xii. 12.) korm. határozat a  mag yar információs társadalom stratégiáról és  annak végrehajtásáról [government resolution no. 1126/2003 (xii. 12) on the hungarian information society strateg y (mits) and its execution]. 11 e-administration act, § 8, article (1). 12 based on the wording of ket. back in 2005, acts, government decrees and self-government decrees may rule out the administration of specific cases electronically. 13 225/2008. (ix. 9.) korm. rendelet a termőföldre vonatkozó elővásárlási és előhaszonbérleti jog g yakorlásának részletes szabályairól szóló 16/2002. (ii. 18.) korm. rendelet módosításáról [government decree no. 225/2008 (ix. 9) on the modifications of government decree no. 16/2002 (ii. 18) on the detailed regulations of practicing pre-emption and pre-leasing of agricultural land] § 2, www.kozlonyok.hu/ nkonline/mkpdf/hiteles/mk08130.pdf (accessed 21 august 2014). 14 repealed on 30 march 2009. 15 az elektronikus közszolgáltatásról szóló 2009. évi lx. törvény [act lx of 2009 on electronic public service] (hereinafter ekszt). 16 http://mag yaryprogram.kormany.hu/download/b/cd/70000/a_jogszabalyi_keretek_osszefoglalasa_ekozig_projektek.pdf (accessed 02 december 2014). https://doi.org/10.1109/icds.2009.55 http://magyaryprogram.kormany.hu/admin/download/d/2c/40000/magyary kozig fejlesztesi program 2012 a4.pdf http://magyaryprogram.kormany.hu/admin/download/d/2c/40000/magyary kozig fejlesztesi program 2012 a4.pdf https://ec.europa.eu/digital-agenda/news_redirect/16475 https://ec.europa.eu/digital-agenda/news_redirect/16475 http://www.kozlonyok.hu/nkonline/mkpdf/hiteles/mk08130.pdf http://www.kozlonyok.hu/nkonline/mkpdf/hiteles/mk08130.pdf http://magyaryprogram.kormany.hu/download/b/cd/70000/a_jogszabalyi_keretek_osszefoglalasa_e-kozig_projektek.pdf http://magyaryprogram.kormany.hu/download/b/cd/70000/a_jogszabalyi_keretek_osszefoglalasa_e-kozig_projektek.pdf https://doi.org/10.1109/icds.2009.55 57 public governance, administration and finances law review • 2. 2017 the status of e-administration in hungary – are we on the right track? 17 a  közigazgatási hatósági eljárás és  szolgáltatás általános szabályairól szóló 2004. évi cxl. törvény és  eg yes kapcsolódó törvények, valamint a  miniszteri hatósági hatáskörök felülvizsgálatával összefüggő eg yes törvények módosításáról szóló 2011. évi clxxiv. törvény [act clxxiv of 2011 on the modification of act cxl of 2004 on the procedural and service regulations of public administration authorities, related acts, and acts related to the revision of the official authorities of ministers], http://njt.hu/cgi_bin/njt_doc. cgi?docid=139785.210265 (accessed 20 august 2014). 18 http://mag yaryprogram.kormany.hu/download/b/cd/70000/a_jogszabalyi_keretek_osszefoglalasa_ekozig_projektek.pdf (accessed 01 december 2014). 19 electronic services whose contents and terms of services (that is, being bound to notice or permission) are defined by acts or government decrees. some of these services are bound to be provided by the government (that is, the organizations listed in the related government decrees). 20 there are several agents who can be considered szeüsz providers. firstly, authorities who provide regulated electronic administration services for their clients or for their own inner administration. secondly, authorities who provide such services for other authorities, as well. and finally, legal entities without authority status who provide regulated electronic administration services for clients and authorities, either for a fee, or free of charge. 21 http://mag yaryprogram.kormany.hu/download/b/cd/70000/a_jogszabalyi_keretek_osszefoglalasa_ekozig_projektek.pdf (accessed 02 december 2014). 22 ket. § 160, article (3). based on wording effective until 31 december 2016. 23 ket. § 28/b, article (5). based on wording effective until 31 december 2016. 24 § 2 of eg yes, az elektronikus üg yintézéshez kapcsolódó szervezetek kijelöléséről szóló 84/2012. (iv.21.) korm. rendelet [gov. decree no. 84/2012 (iv.21) on the appointment of certain organisations related to electronic administration]. 25 ket. § 160, article (4). based on wording effective until 31 december 2016. 26 see articles (1) and (5) of ket. § 28/b. based on wording effective until 31 december 2016. 27 the e-administration act. 28 www.parlament.hu/irom40/07392/07392.pdf (accessed 12 july 2016). 29 https://www.palyazat.gov.hu/kfop-121-vekop-16-csatlakoztatsi-konstrukci-az-nkormnyzati-asp-rendszerorszgos-kiterjesztshez (accessed 01 march 2017). 30 az  elektronikus aláírásról szóló 2011. évi xxxv. törvény [act xxxv of 2011 on electronic signatures] (hereinafter eat.) 31 az  állami és  önkormányzati nyilvántartások eg yüttműködésének általános szabályairól szóló 2013. évi ccxx. törvény [act ccxx of 2013 on the general rules of cooperation between state and selfgovernment records] (hereinafter ioptv.) 32 regulation (eu) no.  910/2014 of the european parliament and of the council of 23  july 2014 on electronic identification and trust services for electronic transactions in the internal market and repealing directive no. 1999/93/ec (hereinafter eidas-regulation). 33 obligatory from 2018. 34 www.parlament.hu/irom40/07392/07392.pdf (accessed 12 july 2016). 35 directive 2006/123/ec of the european parliament and of the council of 12 december 2006 on services in the internal market, http://eur-lex.europa.eu/legal-content/hu/txt/?uri=celex:32006l0123 (accessed 01 march 2017). 36 § 7, article (1): “where the possibility of electronic communication is provided, the usage of the means of communication is provided by the authority, clients without administrative stipulations may submit applications within the scope of the electronic communication means as follows: a) by utilizing secure electronic delivery services, b) within the scope of the law, by the support service of submitting an ányk (általános nyomtatványkitöltő [general form filler app]) form in accordance with the specific provisions, c) via electronic mail with the conditions observed in article (2), d) by uploading documents through the internet-based interface provided by the authority, or, http://njt.hu/cgi_bin/njt_doc.cgi?docid=139785.210265 http://njt.hu/cgi_bin/njt_doc.cgi?docid=139785.210265 http://magyaryprogram.kormany.hu/download/b/cd/70000/a_jogszabalyi_keretek_osszefoglalasa_e-kozig_projektek.pdf http://magyaryprogram.kormany.hu/download/b/cd/70000/a_jogszabalyi_keretek_osszefoglalasa_e-kozig_projektek.pdf http://magyaryprogram.kormany.hu/download/b/cd/70000/a_jogszabalyi_keretek_osszefoglalasa_e-kozig_projektek.pdf http://magyaryprogram.kormany.hu/download/b/cd/70000/a_jogszabalyi_keretek_osszefoglalasa_e-kozig_projektek.pdf http://www.parlament.hu/irom40/07392/07392.pdf https://www.palyazat.gov.hu/kfop-121-vekop-16-csatlakoztatsi-konstrukci-az-nkormnyzati-asp-rendszer-orszgos-kiterjesztshez https://www.palyazat.gov.hu/kfop-121-vekop-16-csatlakoztatsi-konstrukci-az-nkormnyzati-asp-rendszer-orszgos-kiterjesztshez http://www.parlament.hu/irom40/07392/07392.pdf http://eur-lex.europa.eu/legal-content/hu/txt/?uri=celex:32006l0123 58 bernadett veszprémi public governance, administration and finances law review • vol. 2. no. 2. e) by utilizing further means of contact enabled by the administrative stipulations of the clients.”, http:// njt.hu/cgi_bin/njt_doc.cgi?docid=148205.322472 (accessed 12 july 2016). 37 in these cases, identification and authentication can be performed by e-signature. 38 https://rendelkezes.kekkh.gov.hu/rny-public/ (accessed 01 march 2017). 39 www.mag yarorszag.hu (accessed 01 march 2017). it should also be mentioned that e-signatures can also be used for authentication and identification purposes. still, the government aimed to realize e-administration primarily within the framework of a central system. 40 az  elektronikus üg yintézés részletszabályairól szóló 451/2016. (xii.19.) korm. rendelet [government decree no. 451/2016 (xii. 19) on the detailed rules of electronic administration] (hereinafter e-administration decree) 41 § 35, articles (1)–(2) of the e-administration act. also, see § 71, article (1) and § 72, article (2) of the e-administration decree. 42 in case of applying for the new e-id card, the registration application can be submitted only where applications can be submitted for permanent id cards, as per the 414/2015. (xii. 23.) korm. rendelet a  személyazonosító igazolvány kiadása és  az eg ységes arcképmásés  aláírás-felvételezés szabályairól [government decree no. 414/2015 on issuing identity cards and on regulations of unified registering of facial images and signatures]. 43 com (2006) 173  –  i2010 egovernment action plan on accelerating egovernment in europe for the benefit of all. decision 2004/387/ec of the european parliament and of the council of 21 april 2004 on the interoperable delivery of pan-european egovernment services to public administrations, businesses and citizens (idabc), (hl l 181, 18 may 2004, p. 25). 1639/2006/ec  –  decision of the european parliament and of the council of 24 october 2006 establishing a  competitiveness and innovation framework programme (hl l 310, 09 november 2006, p. 15). decision no. 922/2009/ec of the european parliament and of the council of 16 september 2009 on interoperability solutions for european public administrations (isa) (hl l 206, 10 march 2009, p. 11). 44 módszertani útmutató az  interoperabilitás tervezésének támogatására [methodological guide for the support of planning interoperability], 10 (budapest, miniszterelnöki hivatal [office of the prime minister], 2008); com (2010) 744: communication from the commission to the european parliament, the council, the european economic and social committee and the committee of the regions towards interoperability for european public services, 3–4 (brusells, 2010), www.europarl.europa.eu/regdata/ docs_autres_institutions/commission_europeenne/com/2010/0744/com_com(2010) 0744_hu.pdf (accessed 26 july 2016). 45 in line with the regulations of a  fővárosi és  meg yei kormányhivatalokról, valamint a  fővárosi és  meg yei kormányhivatalok kialakításával és  a  területi integrációval összefüggő törvénymódosításokról szóló 2010. évi cxxvi. törvény [act cxxvi of 2010 on metropolitan and county government offices, and on the amendments in connection with the formation and regional integration of the metropolitan and county government offices], starting from january 1, 2011, county and capital government offices became the regional general-authority administrative organizations of the government. starting from 2011, regional special-duty authorities were gradually merged into county-level government offices, first generating a shared (organizational and specialized) management, and then numerous major departments and departments within the offices, as they lost their independence. district management has been introduced in 2013 by a járások kialakításáról, valamint eg yes ezzel összefüggő törvények módosításáról szóló 2012. évi xciii. törvény [act xciii of 2012 on the formation of districts and the amendment of certain associated statutes], as an administrative unit below the counties, belonging to the organization of countylevel government offices. following the inception of the districts, administrative duties formerly belonging to the self-governments (including those of the registrars, administrators and mayors) were gradually transferred/returned to the district offices. 46 based on directive 2006/123/ec of the european parliament and of the council of 12 december 2006 on services in the internal market. in hungary, it was realized under the name of kormányablak [government window]. http://njt.hu/cgi_bin/njt_doc.cgi?docid=148205.322472 http://njt.hu/cgi_bin/njt_doc.cgi?docid=148205.322472 https://rendelkezes.kekkh.gov.hu/rny-public/ http://www.magyarorszag.hu http://www.europarl.europa.eu/regdata/docs_autres_institutions/commission_europeenne/com/2010/0744/com_com%282010%290744_hu.pdf http://www.europarl.europa.eu/regdata/docs_autres_institutions/commission_europeenne/com/2010/0744/com_com%282010%290744_hu.pdf 59 public governance, administration and finances law review • 2. 2017 the status of e-administration in hungary – are we on the right track? 47 even this framework already builds the european public services as modules, which enables connecting the various services. 48 com (2010) 744: communication from the commission to the european parliament, the council, the european economic and social committee and the committee of the regions towards interoperability for european public services. final text, 8. 49 http://njt.hu/cgi_bin/njt_doc.cgi?docid=165627.254004 (accessed 01 january 2015). 50 2011. évi clxxxix. törvény mag yarország helyi önkormányzatairól [act clxxxix of 2011 on the local governments of hungary]. 51 e-közigazgatási keretrendszer koncepció [e-administration framework concept], belügyminisztérium [ministry of the interior], 29 april 2015, www.kormany.hu/download/0/05/ 50000/e -k % c3% b6zigazgat% c3% a1si_keretrendszer_koncepci%c3%b3.pdf (accessed 26 july 2016). 52 http://2010-2014.kormany.hu/download/b/fd/21000/nemzeti%20infokommunik%c3%a1ci%c3%b3s%20 strat%c3%a9gia%202014-2020.pdf, 81 (accessed 21 march 2017). 53 https://ec.europa.eu/digital-single-market/en/scoreboard/hungary#5-digital-public-services (accessed 26 july 2016). for example, in 2016, the amount of personalization in hungary (that is, automatically filling forms with data available to the system or the administrative organization) was 19%, compared to the eu average of 49%. 54 http://digital-agenda-data.eu/charts/analyse-one-indicator-and-compare-countries/ (accessed 09 december 2014). 55 such as in the ntg and specified szeüsz providers. examples of technical interoperability include the self-government asps and the ioptv. regarding organizational interoperability, examples include the integrated development of government offices and government windows (kormányablakok), along with the concentration of tasks. 56 “breaking down administration to knowledge-based, process-driven steps. e-administration does not merely mean the development of a  framework: it rather means the harmonization of it, legal, and organizational conditions, resulting in a  knowledge-based workflow system offering both front office and back office services. public administration proceedings can be divided to steps and sub-steps that can be modelled. there are elements which can be inserted into this flowchart, and there are also elements which may appear anytime during the procedure, and thus need to be handled as independent elements when developing an electronic system.” zsuzsanna árva, istván balázs, attila barta, bernadett veszprémi, közigazgatás-elmélet [theory of administration], 180–181 (debrecen, debreceni eg yetemi kiadó, 2012). http://njt.hu/cgi_bin/njt_doc.cgi?docid=165627.254004 http://www.kormany.hu/download/0/05/50000/e-k%c3%b6zigazgat%c3%a1si_keretrendszer_koncepci%c3%b3.pdf http://www.kormany.hu/download/0/05/50000/e-k%c3%b6zigazgat%c3%a1si_keretrendszer_koncepci%c3%b3.pdf http://2010-2014.kormany.hu/download/b/fd/21000/nemzeti infokommunik%c3%a1ci%c3%b3s strat%c3%a9gia 2014-2020.pdf http://2010-2014.kormany.hu/download/b/fd/21000/nemzeti infokommunik%c3%a1ci%c3%b3s strat%c3%a9gia 2014-2020.pdf https://ec.europa.eu/digital-single-market/en/scoreboard/hungary#5-digital-public-services http://digital-agenda-data.eu/charts/analyse-one-indicator-and-compare-countries/ © 2018 dialóg campus, budapest public governance, administration and finances law review vol. 3. no. 1. (2018) • 46–56. impact of the principle of proportionality in tax law on the jurisprudence of the court of justice of the european union and the supreme administrative court in poland artur mudrecki* * artur mudrecki, professor at the department of financial and tax law, kozminski university and a  judge of the supreme administrative court in poland, head of the tax law department in the judicial decisions bureau of the supreme administrative court . he is also a member of the fiscal association polish branch and the international association centre for information and organization of research on public finances and tax law of the countries of central and eastern europe  –  association at the białystok university, european association of tax law professors, faculty of law and the financial law association aures in opole . he specialises in tax law and is the author of over 100 publications, mainly on tax law . particularly noteworthy is his monograph due process in tax proceedings. (e-mail: amudrecki@kozminski .edu .pl) abstract: the principle of proportionality in tax law as an eu and constitutional standard may play an important role in the interpretation of tax law . the principle of proportionality is associated with moderation of the activities of public authorities and minimization of their interference in the sphere of rights and freedoms . the principle of proportionality is also called the principle of commensurability, moderation, and adequacy . the article analyses the impact of the proportionality principle in tax law on the case law of the court of justice of the european union . the case law of the polish supreme administrative court uses the principle of proportionality when interpreting tax law, and the judgments of the court of justice of the european union and the polish constitutional tribunal have a significant impact on the jurisprudence of administrative courts in poland . keywords: principles of law; the principle of proportionality; court of justice of the european union; jurisprudence; the case law of the constitutional tribunal; the case law of the supreme administrative court; poland 1. introduction the objective of the article is to attempt at answering the question of what role is played by the principle of proportionality in tax law, with particular focus on the case law of the court of justice of the european union (cjeu) and municipal courts in poland . this paper will offer answers to two fundamental questions: 1 . does the court of justice of the european union, in tax cases, employ the analysed european standard, and are polish solutions compliant with this european standard? 2 . does the case law of the polish supreme administrative court, in its interpretation of tax law provisions, employ the principle of proportionality, and 10.53116/pgaflr.2018.1.5 mailto:amudrecki%40kozminski.edu.pl?subject= https://doi.org/10.53116/pgaflr.2018.1.5 47 public governance, administration and finances law review • 1. 2018 impact of the principle of proportionality in tax law on the jurisprudence… do judgements of the court of justice of the european union and polish constitutional tribunal exert significant impact on the case law of administrative courts in poland? the principle of proportionality is an important standard in taxpayer rights protection and is associated with moderation of the activities of public authorities and minimization of their interference in the sphere of rights and freedoms . the principle of proportionality is also called the principle of commensurability, moderation, and adequacy (l . etel, p . pietrasz, niekompletność świadczeń o przeznaczeniu oleju opałowego a  zastosowanie sankcji podatkowej, o której mowa w art. 89 ust. 16 ustawy o podatku akcyzowym [incompleteness of declarations on the use of fuel oil and the imposition of the tax sanction provided for in art. 89 (16) of the value added tax act], znsa, no . 2(41)/2012, p . 27) . furthermore, the principle of proportionality is linked with observation of the criteria of usefulness, necessity, and the weighing up of particular values . the addressees of the principle of proportionality are: 1) the legislative authority 2) the executive authority 3) the judiciary with consideration to the scope of the research set out in the article, the object of assessment will be observance of the principle of proportionality by the judiciary, id est by courts and tribunals . 2. the principle of proportionality in the normative sense the principle of proportionality can be understood as a  normative, doctrinal principle . it exerts significant influence on interpretation of legal provisions performed by tribunals and courts . the principle of proportionality in tax law is one of the most important general principles of european law . it should also be stated that the indicated standard is anchored in the constitution of poland . it impacts the interpretation applied by the polish supreme administrative court (sac) in tax cases; that court applies an eu-friendly and constitutionally consistent interpretation . in the normative sense, the legal basis of the principle of proportionality jest art . 3b (3 and 4), incorporated into the treaty on european union and treaty establishing the european community by the lisbon treaty, replacing art . 5 (4 and 5) of the treaty on european union . under the principle of proportionality, the content and form of union action shall not exceed what is necessary to achieve the objectives of the treaties . the principle serves as criterion for evaluating the activities of eu institutions and is the basis for assessing actions taken by the member states (m . bącal, in m . militz, d . dominik-ogińska, m . bącal, t . siennicki, zasady prawa unijnego [principles of eu law], warsaw 2013, pp . 145– 146) . 48 artur mudrecki public governance, administration and finances law review • vol. 3. no. 1. under the adopted solutions and under the principle of subsidiarity, in areas which do not fall within its exclusive competence, the union shall act only if and in so far as the objectives of the proposed action cannot be sufficiently achieved by the member states, either at central level or at regional and local level, but can rather, by reason of the scale or effects of the proposed action, be better achieved at union level . the institutions of the union shall apply the principle of subsidiarity as laid down in the protocol on the application of the principles of subsidiarity and proportionality . as we can see, in this case the principle of proportionality is associated with the principle of subsidiarity . in order for these principles to be more than words on paper, the aforementioned protocol also sets out mechanisms designed to ensure observance of the principle of proportionality . in particular, national parliaments ensure compliance with the principle of subsidiarity in accordance with the procedure set out in that protocol (art . 3b[3]) . under the principle of proportionality, the content and form of union action shall not exceed what is necessary to achieve the objectives of the treaties . the institutions of the union shall apply the principle of proportionality as laid down in the protocol on the application of the principles of subsidiarity and proportionality (art . 3b[4]) . the protocol holds that each institution shall ensure constant respect for the principles of subsidiarity and proportionality set out in article 3b of the treaty on european union (art . 1 protocol) . the commission shall forward its draft legislative acts and its amended drafts to national parliaments at the same time as to the union legislator . the european parliament shall forward its draft legislative acts and its amended drafts to national parliaments (art . 4 protocol) . the court of justice of the european union plays an important role in respect of adherence to the principles of proportionality and subsidiarity . it is competent to rule on cases concerning violations by a  legislative act of the principle of subsidiarity brought by member states in accordance with the provisions of article 230 treaty on the functioning of the european union (tf eu) or presented by them pursuant to their legal regimes in the name of a national parliament or chamber thereof . under the rules set out in that same article, applications may be brought by the committee of the regions (cor) in respect of legislative acts whose adoption requires consultation under the tf eu (art . 8 protocol) . in addition, the commission presents each year to the european council, the european parliament, the council, and national parliaments a  report on application of article 3b teu . this annual report is also presented to the economic and social committee and the committee of the regions (art . 9 protocol) . in addition, the principle of proportionality is present in the highest legal act in effect in poland, the constitution . under art . 31 (3) of the 1997 constitution (oj l no . 78, item 483 as amended), any limitation upon the exercise of constitutional freedoms and rights may be imposed only by statute, and only when necessary in a  democratic state for the protection of its security or public order, or to protect the natural environment, health or public morals, or the freedoms and rights of other persons . such limitations shall not violate the essence of freedoms and rights . this regulation also applies in tax law . 49 public governance, administration and finances law review • 1. 2018 impact of the principle of proportionality in tax law on the jurisprudence… 3. impact of the principle of proportionality on the case law of the court of justice of the european union member states of the european union are obliged to carry out timely and correct implementation (transposition) of eu regulations . the subject literature emphasizes that  imple mentation as a  whole is composed of: 1 . normative implementation, 2 . administrative implementation, and 3 . judicial implementation . judicial implementation refers to the role of municipal courts as eu courts applying principles of eu law and imposing sanctions for violations or non-application of eu law by individual entities (a . kunkiel-kryńska, metody harmonizacji prawa konsumenckiego w unii europejskiej i ich wpływ na procesy implementacyjne w państwach członkowskich [methods of harmonization of consumer law in the european union and their impact on implementation processes in member states], warsaw 2013, p . 89) . recognition by the cjeu that judicial application of the law is an element of national implementation of a  directive makes it possible to: 1 . grant courts the competence to assess whether a  state has properly implemented european law, 2 . achieve in the judicial application of law the objectives of eu law, including of directives (principle of effectiveness of eu law), 3 . interpretation of municipal law consistent with eu law, 4 . uniform application of eu law in all member states (see judgment of cjeu of 10 april 1984 in case c 14/83, sabine von colson and elisabeth kamann versus land nordrhein-westfalen, and of 9 december 2003 in c-129/00, commission versus the republic of italy) . in the judgment of the sac of 12 june 2013 (i fsk 146/13) it is indicated that european law provides a  clear division of competences concerning interpretation and application of european law . the cjeu is the court competent to rule on binding interpretation and validity of acts of european union law, while municipal courts as european courts are charged with the duty of applying those provisions and their interpretation in individual cases . application of provisions of eu law by municipal courts encompasses inter alia the duty to apply those provisions and their interpretation in individual cases, as well as the duty to ensure the full effectiveness of provisions of eu law and non-application of provisions of municipal law that are in conflict with it (principle of primacy) . an unambiguous and precise response by the cjeu concerning interpretation of eu law ‘in practice determines the content of the judgement by a  municipal court in a given case, and even in the absence of express regulation of the issue, in fact has binding force’ (sac judgment of 19 september 2008, i gsk 1038/07, central repository of administrative court judgments – cracj) . pursuant to art . 260 tf eu, if the court of justice of the european union finds that a  member state has failed to fulfil an obligation under the treaties, the state shall be required to take the necessary measures to comply with the judgment of the court . if the commission considers that the member state concerned has not taken the necessary measures to comply with the judgment of the court, it may bring the case before the court after giving that state the opportunity to submit its observations . it shall specify the amount of the lump sum or penalty payment to be paid by the member state concerned which it considers appropriate in the circumstances (see cjeu judgment of 22 june 2016 50 artur mudrecki public governance, administration and finances law review • vol. 3. no. 1. in c-557/14, european commission vs portuguese republic [non-compliance with cjeu judgment of 7 may 2009 in case c-530/07, european commission vs portuguese republic] and of 4 june 2009 in case c-568/07, commission of the european communities vs hellenic republic (non-compliance with cjeu verdict of 21 april 2005 in case c-140/03, commission of the european communities vs hellenic republic) . here we should cite one such ruling by the cjeu . in its judgment c-241/11 of 25 june 2013, the cjeu imposed a  lump sum payment on the czech republic of eur 250,000 for failure to implement measures in a timely manner ensuring implementation of cjeu verdict c-343/08 of 14 january 2010 . in assessing the seriousness of the infringement, the cjeu indicated that the absence in that country of a second pillar in its pension system, as well as the fact that institutions for occupational retirement provision are prohibited from establishing themselves in its territory, late compliance, by that member state, with the judgment in commission v. czech republic had a limited effect on the internal market for occupational retirement provision, which directive 2003/41, according to recitals 1, 6 and 8 in the preamble thereto, seeks to establish, and, therefore, on private and public interests (para 53) . in particular, the complete transposition of directive 2003/41 is intended principally to inform interested persons in the event that, as the court observed in paragraph 51 of the judgment in commission v. czech republic, the national retirement pension system develops in that regard (para 54) . the cjeu, in deciding whether interpretation of the provision of the act performed by the supreme court of the czech republic constitutes legislation, emphasized that assessment of the scope of municipal legislative, executive, and administrative provisions must be performed with heed to the interpretation given by municipal courts (verdict c-382/92 of 8 june 1994, commission vs united kingdom) . in consequence, the notion of “legislation of a  member state” is understood by the cjeu as also encompassing interpretation of a  provision of municipal legislation performed by a  national supreme court (cjeu judgment of 15  march 2018 in case c-431/16, instituto nacional de la seguridad social (inss), tesorería general de la seguridad social (tgss) vs josé blanc markus) . from the above said we may conclude that the court of justice of the european union plays a  primary role in the interpretation of eu law . because of the principle of primacy in the application of eu law and effectiveness of that law, municipal courts must respect verdicts of the cjeu . if they fail to adhere to the interpretation indicated by the cjeu, they may be at risk of a fine, as in the case of the czech republic, whose supreme court ignored a judgment of the cjeu . the union principle of proportionality has been invoked quite frequently in tax law cases decided by the cjeu . the court has reviewed compliance of national solutions with the principle of proportionality . this test has frequently led to decisions of benefit to taxpayers, for example, that a  given legislative solution adopted in an eu member state violated that principle . however, there is also a collection of rulings by the cjeu holding that this principle was not infringed . for reasons of space, the article only gives some examples of cjeu judgments concerning the research problem undertaken, with particular attention to rulings that have been handed down in polish cases . 51 public governance, administration and finances law review • 1. 2018 impact of the principle of proportionality in tax law on the jurisprudence… in its judgment c-418/14 of 2 june 2016 in roz-świt zakład produkcyjnohandlowo-usługowy henryk ciurko, adam pawłowski spółka jawna vs dyrektor izby celnej we wrocławiu, the cjeu held that directive 2003/96/ec of 27  october 2003 restructuring the community framework for the taxation of energ y products and electricity and the principle of proportionality must be interpreted as: ƿ not precluding national legislation under which sellers of heating fuel are required to submit, within a  prescribed time limit, a  monthly list of statements from purchasers that the products purchased are for heating purposes, and ƿ precluding national legislation under which, if a list of statements from purchasers is not submitted within a  prescribed time limit, the excise duty applicable for motor fuels is applied to the heating fuel sold, even though it has been found that the intended use of that product for heating purposes is not in doubt . having regard to the discretion which member states have as to the measures and mechanisms to adopt in order to prevent tax avoidance and evasion connected with the sale of heating fuels and since a  requirement to submit to the competent authorities a  list of statements from purchasers is not manifestly disproportionate, it must be held that such a  requirement is an appropriate measure to achieve such an objective and does not go beyond what is necessary to attain it . secondly, a  provision of national law under which, in the event of failure to submit a  list of statements from purchasers within the time limit, the excise duty applicable for motor fuels is automatically applied to heating fuels even if those fuels are used as such, runs counter to the general scheme and purpose of directive 2003/96, based on the principle that energ y products are taxed in accordance with their actual use . furthermore, such an automatic application of the excise duty applicable to motor fuels in the case of non-compliance with the requirement to submit such a  list infringes the principle of proportionality . the application of the rate of excise duty provided for motor fuels to the heating fuels because of the infringement of the requirement imposed by national law to submit a  list of statements from purchasers within the time limits set, where it has been held that there was no doubt as to the intended use of those products, goes further than is necessary to prevent tax avoidance and evasion (see paras 25, 26, 33–35, 39, 42) . in its opinion, the cjeu emphasized that general principles of law, which include the principle of proportionality, form part of the eu legal order . they must accordingly be observed not only by the eu institutions but also by member states in the exercise of the powers conferred on them by eu directives (see, to that effect, inter alia, judgments of 21 february 2008 in netto supermarkt, c-271/06, eu:c:2008:105, paragraph 18, and of 10 september 2009 in plantanol, c-201/08, eu:c:2009:539, paragraph 43) . it follows that national rules, such as those at issue in the main proceedings, which are intended, inter alia, to transpose the provisions of directive 2003/96 into the domestic legal order of the member state concerned must be consistent with the principle of proportionality (paras 20 and 21) . in another verdict, c-588/10, of 26 january 2012 (minister finansów vs kraft foods polska sa), the cjeu defined the limits of the freedom of eu member states to determine the rights and duties of taxpayers on the example of the requirement to possess confirmation 52 artur mudrecki public governance, administration and finances law review • vol. 3. no. 1. of receipt of a  correcting invoice . in that ruling it indicated that the requirement that, in order to be entitled to reduce the taxable amount as set out in the initial invoice, the taxable person must be in possession of acknowledgment of receipt of a correcting invoice by the purchaser of the goods or services constitutes a condition for the purpose of article 90(1) of the vat directive (para 42) . however, the principles of the neutrality of value added tax and proportionality do not, in principle, preclude such a  requirement . however, where it is impossible or excessively difficult for the taxable person who is a  supplier of goods or services to obtain such acknowledgment of receipt within a  reasonable period of time, he cannot be denied the opportunity of establishing, by other means, before the national tax authorities of the member state concerned, first, that he has taken all the steps necessary in the circumstances of the case to satisfy himself that the purchaser of the goods or services is in possession of the correcting invoice and is aware of it and, second, that the transaction in question was in fact carried out in accordance with the conditions set out in the correcting invoice . copies of the correcting invoice and the reminder addressed to the purchaser of the goods or services to send acknowledgment of receipt and, as kfp submitted at the hearing without being contradicted on that point, proof of payment or the production of entries from the accounts which make it possible to identify the amount actually paid to the taxable person in connection with the transaction in question by the purchaser of the goods or services may serve that purpose (cf . paras 41, 42) . analysis of this verdict demonstrates that the cjeu, in interpreting provisions concerning value added tax, frequently applies the principle of neutrality alongside the principle of proportionality, the former of which is supposed to prevent vat from burdening an entrepreneur . furthermore, the principle of proportionality prevents the national legislator from applying any “automatic” mechanisms to tighten up tax regulations . in its verdict of 29 july 2010 in case c-188/09, dyrektor izby skarbowej w białymstoku vs profaktor kulesza, frankowski, jóźwiak, orłowski sp .j ., formerly profaktor kulesza, frankowski, trzaska sp .j ., the cjeu took up the imposition of sanctions for failure to maintain a record of sales using a cash register . in this judgment it was indicated that the common system of value added tax, as defined in article 2(1) and (2) of first council directive 67/227/eec of 11 april 1967 on the harmonisation of legislation of member states concerning turnover taxes and in articles 2, 10(1) and (2) and 17(1) and (2) of sixth council directive 77/388/eec of 17 may 1977 on the harmonisation of the laws of the member states relating to turnover taxes – common system of value added tax: uniform basis of assessment, as amended by council directive 2004/7/ec of 20 january 2004, does not preclude a  member state from imposing a  temporary restriction on the extent of the right of taxable persons who have not complied with a formal requirement to keep accounting records of their sales to deduct input tax paid, on condition that the sanction thus provided for complies with the principle of proportionality . in essence, because it aims at ensuring the proper collection of tax and prevention of tax, such an obligation is consistent with the measures that can be applied by member states under art . 22 (8) of the sixth vat directive . in that context, by providing that, in cases where that accounting obligation is not complied with, the proportion of the vat which the taxable person may deduct is reduced by 30%, that measure must be regarded as constituting an 53 public governance, administration and finances law review • 1. 2018 impact of the principle of proportionality in tax law on the jurisprudence… administrative sanction, the deterrent effect of which is intended to ensure compliance with that obligation . however, it is a  matter for the national court to determine whether the procedure for determining the amount of the sanction and the conditions under which the facts relied on by the tax authorities in order to apply that sanction are recorded, investigated and, as the case may be, adjudicated upon effectively render meaningless the right to deduct vat, and thus do not undermine the principle that the tax burden must be neutral in relation to all economic activities . it must be observed in this connection that the rate of the amount withheld in the main proceedings, which is limited to 30% and thus preserves the greater part of the input tax paid, appears neither excessive nor inadequate for the purpose of ensuring that the sanction in question is deterrent and, therefore, effective . moreover, such a reduction on the basis of the amount of tax paid by the taxable person is not manifestly without any link to the level of the economic activity of the person concerned . furthermore, in so far as the purpose of that sanction is not to correct accounting errors but to prevent them, its flat-rate nature, resulting from the application of the fixed rate of 30%, and, consequently, the lack of any correspondence between the amount of that sanction and the extent of any errors which may have been made by the taxable person cannot be taken into account in the assessment of whether that sanction is proportionate (cf . paras 27, 28, 34–37, 39) . the court also held that national provisions imposing administrative sanctions that can be imposed on vat taxpayers in the event of their failure to apply a  cash register to record transactions and tax sums due are not “special measures for derogation” intended to prevent certain types of tax evasion or avoidance within the meaning of article 27(1) of the sixth vat directive . such a  measure thus cannot constitute a  „special measure for derogation” under art . 27(1) because it displays characteristics of measures encompassed by art . 22(8) of the sixth directive, on grounds of which member states may impose other obligations they see fit for the proper accounting and collection of tax and prevention of tax fraud (cf . paras 41–43) . it was also held that article 33 of the sixth vat directive does not preclude the maintenance of provisions such as those of article 111(1) and (2) of the polish 2004 law on vat, which provide for administrative sanction in the event it is held a taxpayer has not adhered to the obligation of using a  cash register to record turnover and tax sums due (cf . para 49) . in its verdict of 26 march 2015 in c-499/13, marian manikowski przeciwko dyrektor izby skarbowej w gdańsku, the court took up the issue of a  court bailiff being considered a  vat payer arising from the sale of movables in the course of enforcement proceedings . in that ruling, the cjeu held that articles 9, 193 and 199(1)(g ) of the vat directive must be interpreted as not precluding a provision of national law, such as that at issue in the main proceedings, which, within the context of a  sale of immovable property effected through enforcement, imposes on a person – namely the court enforcement officer who made the sale  – obligations to calculate, collect and pay the vat on the proceeds of that transaction within the prescribed time-limits . in essence, the national regulation is designed to avoid situations in which the taxpayer, owing to poor financial condition, violates the obligation to pay vat; such regulations can ensure the proper collection of the tax and be subject to art . 273 of directive 2006/112 . furthermore, although it is true that 54 artur mudrecki public governance, administration and finances law review • vol. 3. no. 1. those provisions provide, in essence, that the tax may be payable only by a  taxable person carrying out a taxable supply of goods or, in certain circumstances, by the purchaser of the immovable property, the function of the court enforcement officer as the intermediary responsible for the collection of that tax does not fall within those provisions . in essence, because the obligation merely ensuring the collection of the amount of the tax and its payment to the tax authority on behalf of the taxable person by whom it is payable, within the prescribed time-limit . in that situation, the court enforcement officer’s obligation is not a  fiscal obligation, because that obligation still lies with the taxable person (cf . paras 38, 39, 41, 42, 45) . furthermore, the court ruled that the principle of proportionality must be interpreted as precluding a  provision of national law, such as that at issue in the main proceedings, under which a  court enforcement officer must be liable with his entire assets for the amount of vat due on the proceeds of the sale of immovable property effected through enforcement where he does not discharge his obligation to collect and pay that tax, provided that the court enforcement officer concerned actually has all legal means to discharge that obligation, which is for the referring court to determine (cf . para 53) . the presented case law demonstrates that the court of justice of the european union, in interpreting the provisions of tax law, takes into consideration the principle of proportionality, which is intended to protect the taxpayer in certain situations . this principle serves as a  sort of safety valve to protect against overly restrictive legislation . however, in the absence of sanctions for failure to record turnover in a  cash register and the recognition of a court enforcement officer, the test of infringement of the principle of proportionality was failed . 4. the principle of proportionality in the case law of the supreme administrative court the principle of proportionality, derived from normative acts, impacts the interpretation of legislation applied by administrative courts in poland . with a  view to the effectiveness of eu law, which is defended by the court of justice of the european union, the polish supreme administrative court frequently invokes the case law of the cjeu in tax matters . in its verdict of 18 may 2017 (i fsk 1916), the sac ruled that art . 88 (3a)(4)(b) of the value added tax act of 11 march 2004 (vat act) (oj l 2011, no . 177, item 1054 as amended), under which issued invoices, correcting invoices, or customs documents containing sums inconsistent with the real value of goods and/or services (false values) are not grounds for tax deductions – in respect of those items for which false values have been provided, the proper interpretation is, in the event the evidence gathered gives the tax authority the possibility of assessing the true value of the transaction for which an excessive figure has been given in the invoice  –  with a  view to the principles of neutrality and proportionality  –  the right remains to deduct tax in the portion consistent with the true value of the transaction . in its verdict of 24 may 2016 (i fsk 1625/14), the sac took the position that the time limit on exercising the right to deduct vat provided for by art . 86 (13) of the vat 55 public governance, administration and finances law review • 1. 2018 impact of the principle of proportionality in tax law on the jurisprudence… act, apart from specified cases from 1 january 2014 in art . 86 (13a) of the act regarding reverse charge to the purchaser, does not violate the principles of neutrality, balance, effectiveness, and proportionality, and is not in and of itself capable of making it practically impossible or severely hindering the exercise of the right of the duly diligent taxpayer to take the deduction; instead, it constitutes a  sort of sanction for an insufficiently diligent taxpayer in the form of the loss of the right to deduct that tax upon expiry of the time limit . the time limit can be waived only in the event a  duly diligent taxpayer could not observe it owing to causes beyond his control . in turn, in its verdict of 22 october 2015 (i fsk 1131/14), the sac ruled that an invoice containing a  formal defect that could be remedied by the issuance of a  correcting note (e .g . address of the purchaser) allows the taxpayer under art . 86 (1) of the vat act to exercise the right to deduct the tax listed in the invoice within the time limits provided for by the act (art . 86 [10] [1]; from 1 january 2014 art . 86 [10] and [10b] [1]), regardless of whether the formal defects in the invoice are corrected – if there is no risk of fraud or abuse (the activities documented by the invoice were performed on behalf of the taxpayer and benefited his taxable activity) . however, an invoice that has not been corrected and whose formal defect is so serious as to render it impossible to determine the true scope (subjective and/or objective) of the transactions listed in the invoice, and by the same token to determine whether they have in fact taken place, thereby giving rise to the possibility of fraud or abuse as well as preventing the effective collection of tax – does not give the taxpayer the right under art . 86 (1) vat act to deduct the tax assessed from such an invoice . this does not constitute an infringement of the principles of neutrality and proportionality . invoking the principle of proportionality in its verdict of 21 october 2014 (i fsk 1536/13), the sac held that in the case of a taxpayer who – meeting all the conditions set out in art . 89a (2) of the vat act as worded through 31 december 2012 – revised the tax due in an inappropriate accounting period, a  correcting filing submitted pursuant to art . 81 § 1 of the tax code of 29 august 1997 (oj l 2012, item 749 as amended) with the intent of correcting that defect and settling the adjusted tax due on the basis of art . 89a (1) vat act in the proper accounting period indicated in art . 89a (3) is not subject to the time limit imposed by art . 89a (2) (5) vat act, as there has been no fraud or detriment to the state budget . in another verdict of 9 may 2015 (i fsk 709/12), the sac, invoking eu and constitutional standards, indicated that interpretation of art . 116 (6)(2) of the vat act cannot lead to violations of the principles of vat neutrality, proportionality (as defined by art . 31 [3] and art . 2 of the constitution of poland and art . 5 of the treaty on european union), and protection of property rights (as defined by art . 21 [1] and art . 64 [1] of the constitution of poland) . this means that the provision in question should be interpreted as not depriving the taxpayer submitting past-due payment for agricultural products and/ or services to a farmer assessed lump-sum tax, encompassing lump-sum tax rebate, the right to recover the value of the tax . in its verdict of 12 june 2012 (i fsk 841/11), the sac held that depriving a taxpayerseller the right provided for in art . 129 (1) of the vat act to apply the tax rate of 0% to the supply of goods transported outside the european union, and on which that taxpayer 56 artur mudrecki public governance, administration and finances law review • vol. 3. no. 1. refunded the tax to a  traveller, for the sole reason that the taxpayer did not adhere to the informational conditions provided for by art . 127 (4)(1 and 4) vat act, violates the principle of proportionality expressed in art . 31 (3) and art . 2 of the constitution of poland . 5. summary initial research undertaken in the preparation of this work has demonstrated that the principle of proportionality plays an important role in the application of tax law in effect in the countries of the european union . an important role in shaping the proper implementation of tax law is performed by the court of justice of the european union . on the one hand, with the test of adherence to the principle of proportionality the cjeu examines whether a  member state has violated that principle . on the other hand, the court, in settling disputes between a  taxpayer and tax authorities, examines whether the applied measures are adequate to the circumstances . the court’s case law in this respect is diverse, as it ascertains infringement of the principle of proportionality through the introduction of specified solutions, but in the case of the imposition of sanctions and recognition of a court enforcement officer as a taxpayer it holds that the indicated principle has not been violated, by the same token providing certainty as to the law . the supreme administrative court, particularly in turnover taxes subject to harmonization  –  value added tax and excise tax  –  applies eu-friendly interpretation (consistent with eu law) . in practically every judgment of the sac, we may find references to the case law of the cjeu . particular attention is paid by administrative courts in poland to the application of the principle of proportionality when interpreting tax law . in this respect the sac invokes not only eu standards, but also points to constitutional solutions in effect in poland . the rulings of the sac within the subject matter being examined here are diversified and dependent on the circumstances of a particular case . the research issue taken up concerning the principle of proportionality in tax law should be explored further . © 2018 dialóg campus, budapest public governance, administration and finances law review vol. 3. no. 1. (2018) • 34–45. concept of good governance in jurisprudence: the russian experience and practice elena kireeva* * elena kireeva, doctor of legal sciences, dean of the faculty of personnel management and civil service of the institute of public administration and civil service of the russian presidential academy of national economy and public administration, russian federation . she is a  member of the advisory board of the higher attestation commission under the ministry of education and science of the russian federation . she is the author of three books and more than 45 reviewed articles in prestigious journals . (e-mail: elena_kireeva02@mail .ru) abstract: in the given contribution the author analyses the russian experience in the implementation of the concept of good governance . the research highlights the issues in the sphere of public management, which have been only partially resolved in the course of the administrative reform in the russian federation . using the method of comparative legal analysis and monitoring the author reviews the existing approaches to the concept of good governance in the scientific literature and explores the implementation of the principles of good governance enshrined in the eu documents in the russian law . keywords: good governance; good administration; modern bureaucracy 1. introduction in this article the author presents the results of an analysis of the implementation of the principles of good governance declared in the governing documents of the council of europe in the national legislation of the russian federation . on the basis of the methods of systematic comparative legal analysis and monitoring, the study of normative regulation of activities of executive bodies of the russian federation the author reveals the effect of such principles as transparency and the rule of law . 2. analysis of the situation in the russian federation according to a  number of experts, formalization of relations is one of the sides of bureaucracy . being a complicated social phenomenon, bureaucracy is explored by political scientists and government officials and is practically not included in the legal categories .1 there is also an opposite position claiming that it’s been a long time since the historical process of bureaucracy development demonstrated a  number of features of this phenomenon, including its trend towards self-expansion and a  tight connection with the regulatory self-description, i .e . association with the principle of legality .2 in the research of issues related to bureaucracy as part of public administration and administrative law the emphasis is firstly on the sphere of executive power . 10.53116/pgaflr.2018.1.4 mailto:elena_kireeva02%40mail.ru?subject= https://doi.org/10.53116/pgaflr.2018.1.4 35 public governance, administration and finances law review • 1. 2018 concept of good governance in jurisprudence: the russian experience and practice how did the executive power in russia transform in the recent years, what are the top priorities of the administrative reforms? as it’s been noted by the experts from the institute of comparative legislation under the government of russia, an important direction of administrative reforms is connected with the administrative legal regulation of the mechanism used by the executive bodies exercising their powers . executive bodies must follow the uniform rules established by law . this order will in many ways contribute to the efficiency and democratic character of the judgements made in public and private cases in this country, as well as to the development of a modern system of executive power .3 in addition to the settlement of administrative procedures there was a task to develop administrative procedures that would regulate the fulfilment of all state functions and certain processes that ensure their fulfilment, including those connected with the provision of state services to the public; with a guarantee of protection of citizens and organizations’ rights and duties; with the provision of public services to particular persons in the state bodies .4 evaluating the practical results of the administrative reforms in facts and figures one should note the following : ƿ federal bodies of executive power have developed over 400 administrative policies of public services provision; ƿ 232 policies have been approved and registered in the ministry of justice of the russian federation; ƿ over 40 subjects of the russian federation have adopted their legal framework of policies and continue their development; ƿ the total number of administrative policies adopted at the level executive bodies of the subjects of the russian federation is over 2,000 .5 in addition to regulatory policies, active work has been done on the development of information support of public administration . based on the russian government decree of 25 december 2009 no . 1088 (as amended on 27 november 2015) state automated information system “administration” (rus . “upravleniye”) was created .6 sas “administration” is a  unified distributed state information system that provides collection and procession of the data contained in state and municipal information resources, official statistics, and the data for making management decisions in the sphere of public administration, including the information support of strategic planning, as well as the provision and analysis of the data in accordance with the relevant decree . the state automated information system “administration” was created in order to increase the efficiency of public administration and to deal with the following tasks: a) provision of informational and analytical support to the decision-making bodies of the state and local self-governments, as well as planning the activities of these bodies; b) monitoring, analysis and control of the execution of the decisions made by the bodies of state and local power of the russian federation, including the strategic planning decisions and top priority national projects; 36 elena kireeva public governance, administration and finances law review • vol. 3. no. 1. c) monitoring and analysis of the processes occurring in the real sector of economy, finance, banking and social spheres, as well as social and economic development of the constituent territories of the russian federation; d) assessment of the efficiency of the activity of the executive bodies of the russian federation and local self-governments; e) monitoring, analysis and control over the achievement of target indicators stipulated in the decrees of the president of russia of 7 may 2012 no . 596–606 for the constituent territories of the russian federation, as well as the implementation of measures aimed at their achievement; strategic planning support in: ƿ state registration of the documents of strategic planning ; ƿ maintaining the state federal registry of documents of strategic planning ; ƿ monitoring and control of implementation of documents of strategic planning in accordance with the established procedure; ƿ monitoring and controlling indicators of social and economic development and protection of russian federation national security; ƿ monitoring the efficiency of work of strategic planning participants; ƿ providing participants of strategic planning participants, entities and individual with an access to the documents of strategic planning ; ƿ development of public hearings and approval of the drafts of strategic planning documents in accordance with the established procedure; ƿ information and analytical support of strategic planning participants in fulfilment of strategic tasks . sas “administration” contains the data on 8 .5 thousand indicators . the list of indicators is formed by means of coordination of operation flow charts of interdepartmental interaction with the help of the portal of methodological support of sas “administration” project development . for the citizens of the russian federation the practical result of the administrative reform is the creation of a portal of public services and a chain of multi-functional centres providing state and municipal services (mfc), which simplified considerably the interactions with the state bodies aimed at the receipt of a number of documents and other public services . as it has been noted by the colleagues from the institute of comparative legislation, more and more measures facilitating the access to public services are introduced in the legislation . the terms of entering market relations are simplified . for example, there is a  transition to the notification order of business registration based on a  single-window principle within the timeframe established by law . the number of licensable activities has decreased dramatically . the functions of the licensing bodies are regulated by means of removing control and oversight powers over subordinate subjects from their authorities .7 the single-window principle implies that the state or municipal service is provided after a single application with a relevant request . 37 public governance, administration and finances law review • 1. 2018 concept of good governance in jurisprudence: the russian experience and practice as of 1 january 2016, 2,684 centres and 10,130 offices providing state and municipal services were created in russia . the coverage of the population with the single-window service amounted to over 94% . the government of the russian federation summarized the results of multifunctional centres creation project . the key results are presented in the report on the progress of the realization of the decree of the president of russia of 7 may 2012 no . 601 “on the main direction in improving the public administration system” . according to the data of monitoring the development of mfc network, as of 1 march 2017, 2,777 multi-functional centres, 10,214 autonomous units and 312 offices on the basis of contractors had been created in russia . over 33,000 of multifunctional specialists are employed by them all over the country . about 350,000 citizens of russia apply to multifunctional centres for advice or services per day . over 60 million services were provided in multi-functional centres in 2016 .8 as of 1 march 2017, the indicator of population coverage by the single-window system, calculated on the basis of the methodolog y approved at the government committee hearing concerning the implementation of the administrative reform of 30 october 2012 no . 135, amounted to 96 .6% of the total population of the russian federation . regular social studies have shown that the average waiting time for the citizens applying for state and municipal services is decreasing steadily: in 2012 this indicator was 55 minutes; in 2013  –  52 minutes; in 2014  –  42 minutes; in 2015  –  35 .7 minutes; in 2016 – 21 .9 minutes . about 49 .1% of the respondents noted that they had spent less than 15 minutes in the queue waiting for their turn to submit the documents in order to receive state and municipal services . the results of the research show that the waiting time in mfc is less than in the bodies of public authority and self-government bodies and is evaluated by the respondents at 18 .9 minutes . analysing the results of the transformations many russian colleagues speak of low efficiency of the reform . thus, for example, a .m . gogolev emphasizes that the course of the administrative reform is contradictory and that it is dragged out .9 he points out that the key “consumer” of the reform at present is the entrepreneurial environment . and one of the key components of the reform is the orientation at the efficient service for this environment . the functional differentiation of federal executive bodies shows that the reform is aimed at the so-called new models of public administration that have already been implemented in other countries by liberal reformers . the transition to the new form of public administration is taking place under the conditions that are either absent or in their infancy in russia . director of the institute of legislation and comparative legal studies under the government of the russian federation t .y . khabrieva underlines that the absence of a  systemic approach to the regulation of administrative procedures leads to a  situation where many of them will start either working inefficiently or translate into administrative barriers that impede the exercise of rights and freedoms and the solution of economic and political tasks faced by the state and society .10 the source, or the “breeding ground” for the administrative barriers could be the loopholes in the legislation, as well as excessive regulation, which is proved by the practice 38 elena kireeva public governance, administration and finances law review • vol. 3. no. 1. of enforcement of numerous regulations related to the execution of public functions and provision of public services .11 early in the ’80s of the last century eu countries kickstarted the work on the assessment and removal of excessive administrative control . the given activity that was called “de-regulation” was determined by the need to reinforce the role of small business as the most active sector of economy . in the middle of the ’90s the cis countries joined this activity, too . in russia the stable trend towards the reduction of administrative burden emerged early in this century .12 a . m . gogolev highlighted two strategies of reforms implementation . the first strateg y makes entrepreneurship the top priority and sees it as the only unifying force in the face of radical social changes . the second one relies on the liberal concept of the priority of the civil society over the state and views public administration as a  purely auxiliary tool, while the key goal of the reform is to turn public administration into a transparent and efficient institute providing service to the person and to the citizen . the reform implementation must involve the institutes of social control and the necessity for wide public debates . today the basis of the reform efforts should be the change in the relationships between the state and the citizen, where the state should be given the role of a kind of service centre, safeguarding the interests of a  person and a  citizen, while the administrative law should fulfil the function of legal support of this activity . the given position seems quite relevant and viable for modern russia . 3. the concept of good governance and its russian interpretation the term “good governance” has become quite popular in the legal doctrine recently, which is confirmed by numerous publications and the enshrinement of the given principle in international acts and national legislation . as it has been noted by professor igor bartsits, the very term “good governance” (spanish “buen gobierno”, french “bonne gouvernance”) is quite widespread . there is a  canadian political maxim “peace, order and good governance”, which places good governance in one row with such unconditional values as peace and order .13 professor i . v . ponkin considers good governance in terms of three key aspects: 1 . as a measure of ideal in public administration; 2 . as a  concept of design, development, realization and assessment of public administration; 3 . as a tool system . the first case refers to the ideal quality of the system of public administration that is in public demand . the second one refers to the value-laden regulatory concept describing “good governance”, including the systemic totality of formal rules (laws and by-laws) and nonformal propositions (corporate and social norms), regulating the conduct of individuals 39 public governance, administration and finances law review • 1. 2018 concept of good governance in jurisprudence: the russian experience and practice and organizations and guiding the managerial activity . the concept also includes the ideas, the tools for their implementation and the system of essential attributes (and at the same time criteria) of quality of public administration and expected (designed) quality indicators of public administration . as a  tool system “good governance” is a  structural and functional totality of institutional, legal, organizational and administrative mechanisms of design, programming, realization, provision and control of public administration with the aim of providing, protecting and safeguarding public interests, realizing social, economic and other functions of public power, including the provision of sustainable wealth of all the citizens, security of an individual, of the society and the state, stability of the positive and efficient economic development of the state .14 to our opinion one can simplify all of the constructions mentioned above by leaving cicero’s formula that is as old as time, “salus populi suprema lex esto” and determine the wealth of the people to be the main appraisal criterion of public authority’s activity . it should be noted that in the russian legal doctrine, as well as in the legislation, the term “good governance” is not a  widely spread one yet, while its separate elements or principles are used in the regulatory framework, e .g . executive and local self-government bodies’ performance indicators have been established, guaranteed access to the information about the activity of public authorities has been enshrined, as well as the defence of economic entities’ rights in the course of state and municipal control, the principles of electronic government activity and the use of electronic document flow in the activity of public authorities . 4. good governance in international documents as it has been noted by professor i . v . ponkin, at present the term “good governance” has become a  permanent part of the vocabulary of a  wide range of participants of the international community . today almost all major institutes declare that “good governance” is their priority and a part of their development strateg y .15 article 41 “right to good administration” of the charter of fundamental rights of the european union (2007/c 303/01) (strasbourg, 14 .12 .2007)16 declares: 1 . every person has the right to have his or her affairs handled impartially, fairly and within a  reasonable time by the institutions, bodies, offices and agencies of the union . 2 . this right includes: (a) the right of every person to be heard, before any individual measure which would affect him or her adversely is taken; (b) the right of every person to have access to his or her file, while respecting the legitimate interests of confidentiality and of professional and business secrecy; (c) the obligation of the administration to give reasons for its decisions . 40 elena kireeva public governance, administration and finances law review • vol. 3. no. 1. 3 . every person has the right to have the union make good any damage caused by its institutions or by its servants in the performance of their duties, in accordance with the general principles common to the laws of the member states . 4 . every person may write to the institutions of the union in one of the languages of the treaties and must have an answer in the same language . the principle of good governance is mentioned in the stockholm programme  –  an open and secure europe serving and protecting citizens (2010/c 115/01) (4 .5 .2010), “the european council recalls that transparency of decision-making, access to documents and good administration contribute to citizens’ participation in the democratic life of the union . furthermore, the union citizens’ initiative introduced by article 11 teu will create a  new mechanism for civic participation . that mechanism should be realised rapidly” (2 .6 . participation in the democratic life of the union) .17 p .4 art . 71 regulation (ec) no . 883/2004 of the european parliament and of the council on the coordination of social security systems (strasbourg, 29 .4 .2004)18 enshrines that “the institutions, in accordance with the principle of good administration, shall respond to all queries within a  reasonable period of time and shall in this connection provide the persons concerned with any information required for exercising the rights conferred on them by this regulation” . the given principle is also reflected in branch administration . as an example, one can think of recommendation rec(2005)8 “on the principles of good governance in sport” (adopted by the committee of ministers on 20 april 2005 at the 924th meeting of the ministers’ deputies), where it was stipulated that “good governance in sport is a  complex network of policy measures and private regulations used to promote integrity in the management of the core values of sport such as democratic, ethical, efficient and accountable sports activities; and that these measures apply equally to the public administration sector of sport and to the non-governmental sector of sports” . good governance  –  the responsible conduct of public affairs and management of public resources  –  is encapsulated in the council of europe 12 principles of good governance . the 12 principles are enshrined in the strateg y on innovation and good governance at local level, endorsed by a  decision of  the committee of ministers  of the council of europe in 2008 . they cover issues such as ethical conduct, rule of law, efficiency and effectiveness, transparency, sound financial management and accountability:19  1 . fair conduct of elections, representation and participation 2 . responsiveness 3 . efficiency and effectiveness 4 . openness and transparency 5 . rule of law 6 . ethical conduct 7 . competence and capacity 8 . innovation and openness to change 9 . sustainability and long-term orientation 10 . sound financial management 11 . human rights, cultural diversity and social cohesion 41 public governance, administration and finances law review • 1. 2018 concept of good governance in jurisprudence: the russian experience and practice 12 . accountability 5. incorporation of the principles of good governance in the russian legal system let us consider how the above-mentioned principles can be incorporated into the russian legal system . it is obvious that the analysis of the implementation of all 12 principles is not the objective of the given work, so we will dwell only on such an important component as good governance as openness and transparency (4) . the given principle implies that: ƿ decisions are taken and enforced in accordance with rules and regulations . ƿ there is public access to all information, which is not classified for well-specified reasons as provided for by law (such as the protection of privacy or ensuring the fairness of procurement procedures) . ƿ information on decisions, implementation of policies and results is made available to the public in such a way as to enable it to effectively follow and contribute to the work of the local authority . federal law of 09 .02 .2009 no 8-fz (as amended on 28 december 2017) “about ensuring access to information on activities of state bodies and local government bodies”,20 article 4 “the main principles of ensuring access to information on activities of state bodies and local government bodies” enshrines the following : 1 . openness of information on the activity of state bodies and local self-government bodies and a  free access to that information, except for the cases specified under federal laws; 2 . the accuracy of information and the timeliness of its provision; 3 . freedom of search, receipt, transfer, production and dissemination of information on the activity of state bodies and local self-government bodies by any legal means; 4 . observation of citizens’ rights to the inviolability of private life, personal and family privacy, their honour and business reputation of citizens as well as the business reputation of organisations in the course of provision of information on the activity of state bodies and local self-government bodies . the given law establishes some restrictions on the effect of the principles mentioned above in case it constitutes state or other official secret under the legislation of the russian federation (article 5) . article 8 also declares that the information users shall have the following rights: 1 . to receive reliable information on the activities of government bodies and local government bodies; 2 . to refuse to receive information on the activities of government bodies and local government bodies; 42 elena kireeva public governance, administration and finances law review • vol. 3. no. 1. 3 . not to substantiate the need to obtain the requested information on the activities of government bodies and local government bodies, the access to which is not restricted; 4 . to appeal in accordance with the established procedure the acts and (or) actions (omissions) of state bodies and local government bodies, their officials, which violate the right to access information on the activities of government bodies and local government bodies and the established procedure for enjoyment thereof; 5 . to demand, in accordance with the procedure established by the law, compensation for harm caused by violation of his/her right to access to the information on the activities of government bodies and local government bodies . in the legal system of the russian federation there is a  separate act on the provision of access to information on the activities of the courts . federal law of 22 .12 .2008 no 262-fz (as amended on 28 december 2017) “on provision of access to information on the activities of courts in the russian federation”21 envisages the following ways of access to the information on the activities of courts: 1 . presence of citizens (individuals), including representatives of organizations (legal entities), public associations, public authorities and local self-government bodies, in an open court session; 2 . disclosing (publishing ) information on the court activities in the mass media; 3 . posting information on the court activities in the internet; 4 . placement of information on the court activities in the premises occupied by the courts, the judicial department, the bodies of the judicial department, and the bodies of the judiciary; 5 . familiarization of information users with the information retained in archives; 6 . providing information users upon their request with information on the activities of the courts; 7 . webcasting open court sessions on the internet in accordance with this federal law, other federal laws (article 6) . the resolution of the plenum of the supreme court of the russian federation of 13 .12 .2012 no . 35 “on the openness and publicity of legal proceedings and about information access about activity of the courts”22 enshrines that the openness and publicity of legal proceedings, timely, qualified, objective informing society on the activity of the courts of the general jurisdiction contribute to an increase in the level of legal awareness of judicial system and legal proceedings, are a  guarantee of fair legal proceedings, and also provide public control over functioning of judicial authority . open legal proceedings are a means of maintaining the society’s trust in court . the openness and publicity of legal proceedings, access to the information about the activity of courts shall promote the realization of tasks of civil, administrative and criminal trial (article 2 ccp of the russian federation, article 24 .1 of the code of the russian federation on administrative offences, article 6 of the code of criminal procedure of the russian federation) and shall not lead to any intervention in judicial activities, as courts implementing justice are independent and submit only to the constitution of the 43 public governance, administration and finances law review • 1. 2018 concept of good governance in jurisprudence: the russian experience and practice russian federation and the law (article 120 of the constitution of the russian federation, article 5 of the federal constitutional law “about judicial system of the russian federation”, item 5 article 4 of the law on ensuring access to information) . 6. conclusion the concept of good governance in the russian federation has formed mainly in the managerial and administrative legal doctrine . some of its elements or principles are used in the regulatory framework, e .g . executive and local self-government bodies’ performance indicators have been established; guaranteed access to the information about the activity of public authorities has been enshrined, as well as the defence of economic entities’ rights in the course of state and municipal control,23 and a number of others . a considerable amount of work aimed at the provision of legal regulation of executive bodies’ activity in terms of public functions fulfilment (including the provision of public services to individuals and legal entities) has been done in the russian federation . a lot of attention is given to the regulation of administrative procedures, the development of administrative policies and forms of interaction, including the online one, between the public authorities . a legal framework and electronic resources ensuring the interaction of the system of state power with the external environment have been developed, among which there are such state automated systems as “administration”, “justice”, “elections”, public services, federal tax services portals, etc . the percentage of the population using electronic services has increased; the time of their provision has decreased . however, a  lot of administrative barriers have not been removed yet; the paper-flow and reporting forms have grown massively (online reports have been added to the paper ones); there is excessive regulation of a  number of administrative processes (e .g . lengthy interdepartmental approval of documents) . 44 elena kireeva public governance, administration and finances law review • vol. 3. no. 1. references 1 л . е . калинина, программно-целевая бюрократия: публично-правовой аспект [l . e . kalinina, special-purpose bureaucracy: legal and public aspect], 11–14, in государственная власть и местное самоуправление [state power and local self-government], no . 10 (2014) . 2 и . а . исаев, легальность и бюрократия [i . a . isaev, legality and beraucracy], 3–8, in история государства и права [history of state and law], no . 20 (2014) . 3 е . к . волчинская, и др ., с . е . нарышкин, c . е ., хабриева, т . я ., административная реформа в россии . научно-практическое пособие [e . k . volchinskaya et al ., s . e . naryshkin, t . y . khabrieva (eds .), administrative reform in russia. research and practice textbook] (мoscow, kontrakt, infra-m 2006) . 4 ibidem . 5 monitoring administrative policies implementation (national research university “higher school of economics”), monitoring .hse .ru/about (accessed 10 may 2018) . 6 собрание законодательства рф [collection of legislative acts of the russian federation], 4 january 2010, no . 1, art . 101 . 7 т . я . хабриева, ж . марку, административные процедуры и контроль в свете европейского опыта [t . y . khabrieva, zh . marku (eds .), administrative procedures and control in the light of european experience] (moscow, statut 2011) . 8 совершенствование государственного управления: портал административной реформы [enhancing public administration: portal of the administrative reform], http://ar .gov .ru/ru/news/42956/1/0/2/10/ index .html (accessed 10 may 2018) . 9 а . м . гоголев, некоторые тенденции и закономерности становления и развития государственного администрирования [a . m . gogolev, some trends and patterns in the development of public administration], 19–25, in административное право и процесс [administrative law and procedure], no . 2 (2018) . 10 т . я . хабриева, ж . марку, административные процедуры и контроль в свете европейского опыта [t . y . khabrieva, zh . marku (eds .), administrative procedures and control in the light of european experience] (moscow, statut, 2011) . 11 see more in: доклад департамента развития малого и среднего предпринимательства министерства экономического развития российской федерации „об исполнении полномочий по государственному контролю (надзору), муниципальному контролю государственными (муниципальными) предприятиями и учреждениями” [report of the department of small and medium business development of the ministry of economic development of the russian federation “on the execution of authorities of state control (oversight), municipal control by state (municipal) enterprises and institutions”] (moscow 2010) . 12 л . а . истомина и др ., малое предпринимательство: как снизить административные барьеры? зарубежный опыт . [l . a . istomina et al ., small business: how to reduce administrative barriers?] (moscow, tesey, 2003) . 13 и . н . барциц, конституционное право на хорошее (эффективное) управление: критерии, показатели, оценки [i . n . bartsits, constitutional right to good (efficient) governance: criteria, indicators, evaluation], 64–71, in конституционное и муниципальное право [constitutional and municipal law], no . 11 (2013) . 14 и . в . понкин, теория публичного управления: учебник для магистратуры [i . v . ponkin, theory of public administration: texbook for master’s programme], 336 (moscow 2017) 15 и . в . понкин, теория публичного управления: курс лекций [i . v . ponkin, theory of public administration: course of lectures], 86 (мoscow 2013) . 16  хартия европейского союза об основных правах [the eu charter of fundamental rights], www .coe . int/t/ngo/source/reading_guide_charter_fr .pdf (accessed 10 may 2018) . http://monitoring.hse.ru/about http:// http:// http:// http:// 45 public governance, administration and finances law review • 1. 2018 concept of good governance in jurisprudence: the russian experience and practice 17 стокгольмская программа „открытая и безопасная европа, которая служит своим гражданам и защищает их“ [the stockholm programme – an open and secure europe serving and protecting the citizens], ec .europa .eu/anti-trafficking/eu-policy/stockholm-programme-open-and-secure-europe-ser ving-andprotecting-citizens-0_en (accessed 10 may 2018) . 18 регламент n 883/2004 европейского парламента и совета европейского союза „о координации систем социальной защиты” [regulation (ec) no 883/2004 of the european parliament and the council of 29 april 2004 on the coordination of social security systems], eur-lex .europa .eu/ (accessed on 10 .05 .2018) 19 principles of good governance and european label of governance excellence (eloge), www .coe .int/en/ web/good-governance/12-principles-and-eloge (accessed on 10 .05 .2018) 20 собрание законодательства рф . 2009 . № 7 . ст . 776 [collection of legislative acts of the russian federation of 4 january 2009, no . 7, art . 776] 21 собрание законодательства рф, 29 .12 .2008, n 52 (ч . 1), ст . 6217 [collection of legislative acts of the russian federation of 29 december 2008, no . 52, part 1, art . 6217] 22 бюллетень верховного суда рф . 2013 . n 3, март [bulletin of the supreme court of the russian federation of 2013, no . 3, march] 23 федеральный закон от 26 .12 .2008 n 294-фз (ред . от 18 .04 .2018) „о защите прав юридических лиц и индивидуальных предпринимателей при осуществлении государственного контроля (надзора) и муниципального контроля” [federal law of 26 .12 .2008 no 294-fz as amended on 18 april 2018 “on protection of rights of legal entities and individual entrepreneurs in exercise of state control (supervision) and municipal control”), собрание законодательства рф . 2008 . n 52 (ч . 1), ст . 6249 (collection of legislative acts of the russian federation . 2008, no . 52, part 1, art . 6249] http://ec.europa.eu/anti-trafficking/eu-policy/stockholm-programme-open-and-secure-europe-serving-and-prote http://ec.europa.eu/anti-trafficking/eu-policy/stockholm-programme-open-and-secure-europe-serving-and-prote http://eur-lex.europa.eu/ http://www.coe.int/en/web/good-governance/12-principles-and-eloge http://www.coe.int/en/web/good-governance/12-principles-and-eloge © 2018 dialóg campus, budapest public governance, administration and finances law review vol. 3. no. 1. (2018) • 72–81. structure of revenues and impact thereof on the rate of indebtedness of municipalities kristýna řezníčková* * kristýna řezníčková, judr, phd, assistant professor at the department of administrative law and financial law, faculty of law, palacky university in olomouc, czech republic, since 2014 . specializes in fields of financial law, public finances and tax law . she is the author and co-autor of four books and more than twenty articles in journals and conference proceedings . (e-mail: kristyna . reznickova@upol .cz) abstract: in this article, the author examines in detail the structure of revenues of municipalities and the level of indebtedness thereof in particular periods . the author´s assumption is that the high rate of revenues obtained by the municipalities from the state, have a negative impact on indebtedness of the municipalities . the aim of the article is to prove that there is a relation between the indebtedness of municipalities and the kinds of revenues thereof . therefore, the hypothesis the author will try to prove or disprove in her work, reads as follows: “the sources of municipal revenues are a very important aspect that may have a substantial effect on the economic results of every municipality .” the author in particular uses the method of analysis, synthesis and mostly in the second part of her work she also uses the comparative method . keywords: budget; revenue; subsidy; tax; indebtedness 1. introduction recently a  great emphasis has been put on the struggle against indebtedness . total indebtedness has been rising, both at the level of states, territorial units, and its citizens . the logical consequence of this condition is the effort to prevent the debtors from getting into excessive debt . due to the last economic crisis, conditions for all subjects were tightened . evidence for this may be, for example the proposed amendment to the czech national bank act, by which the bank will try to set stricter conditions for the provision of mortgages .1 even though the european union put a special emphasis on the overall indebtedness of individual states in the beginning, now, by means of directives, the union has been trying to implement into national laws limits of indebtedness at lower territorial levels . therefore, in 2017 it was implemented into the czech legal order eu directive 2011/85 on requirements for budgetary frameworks of the member states that has brought in many changes and the strengthening of requirements for the composition of the budget . however, all these measures mean that the problem has been solved from the outside . this kind of solution in general will not bring the desired results and often receives a  large portion of criticism from the addressees, even though it is them whom it is intended to serve in the end . 10.53116/pgaflr.2018.1.7 mailto:kristyna.reznickova%40upol.cz?subject= mailto:kristyna.reznickova%40upol.cz?subject= https://doi.org/10.53116/pgaflr.2018.1.7 73 public governance, administration and finances law review • 1. 2018 structure of revenues and impact thereof on the rate of indebtedness of municipalities i consider what prevention could be offered to the municipalities to help them reduce their indebtedness from the inside . a  key to this change could be, at the municipal level, the larger independence of the municipalities and the larger extent of their own revenues within their budgets . the aim of this article is therefore to find out and emphasize what percentage of their own revenues the municipalities are capable of influencing, and to highlight the risks that municipalities will have to face . considering the above stated, i have set down the following hypothesis: “sources of municipal revenues are a  very important aspect that may have a  substantial effect on the economic results of every municipality .” with regard to the scope of the issue, i will concentrate only on municipalities in the territory of the czech republic . the established facts could be valid, considering similar historic and political development, also in neighbouring countries, in particular in the states of the so-called visegrád four group . in my work, i will at first use the descriptive method, in order to depict the conditions of the concerned issue, while the analytical method will be used later . upon analysing the information from available sources, i will apply the method of synthesis on the analysed facts . by means of synthesis the analysed information is linked to logical units, out of which are deduced partial conclusions . in addition, the comparative method will be used in order to compare the found facts, so that relevant conclusions and de lege ferenda recommendations can be made . the author has been dealing with similar issues for a long time . it is worth mentioning her publication exclusive tax revenues of municipalities,2 in which the author tries to determine the level of fiscal autonomy of municipalities, or, for example articles the issue of tax revenues of local councils3 and the municipal autonomy in the czech republic.4 2. the structure of revenues in municipal budgets in the czech republic as to the structure of revenues, it is true since the early 1990s, that most revenues of municipalities in the czech republic (cr) are those that municipalities do not have any control of in respect of the level thereof . the largest percentage share of the budgets is subsidies from the state, subsidies from european funds, and shares of the stateadministered taxes (personal income tax, corporate tax, and value added tax,5 hereinafter jointly referred to as shared taxes) . revenues that can be influenced by the municipalities are in particular local fees, immovable property tax, and revenues from their own assets and the management thereof . the rates of revenues that can or cannot be influenced are shown in the table6 below . revenues can be divided into “state” (revenues the level of which the municipaliy cannot influence) and “own” (revenues the level of which the municipality can influence) .7 the following table displays data since 2000; i have not succeeded in finding older ones . in the 1990s when district authorities still existed, revenues of both municipalities and districts were registered within the state budget under the same designation . after so many years, it is therefore very difficult to find sufficient sources of information, and to distinguish the revenues of municipalities from the revenues of districts . 74 kristýna řezníčková public governance, administration and finances law review • vol. 3. no. 1. table 1. year 1993 1994 1995 1996 1997 1998 1999 2000 state ? ? ? ? ? ? ? 70 % own ? ? ? ? ? ? ? 30 % year 2001 2002 2003 2004 2005 2006 2007 2008 state 76 .9 % 77 .6 % 80 .7 % 80 .8 % 77 .9 % 78 .3 % 79 .5 % 79 .1 % own 23 .1 % 22 .4 % 19 .3 % 19 .2 % 22 .1 % 21 .7 % 20 .5 % 20 .9 % year 2009 2010 2011 2012 2013 2014 2015 2016 state 78 .2 % 79 .7 % 78 .6 % 74 .5 % 76 .1 % 78 .2 % 81 .8 % 80 .5 % own 21 .8 % 20 .3 % 21 .4 % 25 .5 % 23 .9 % 21 .8 % 18 .2 % 19 .5 % source: compiled by the author. the table clearly shows that municipalities in the cr can in fact influence only about 20% of their respective revenues . this fact negatively affects the necessity to plan municipal expenditures . municipalities must be aware of the fact that they are reliant on the state for most of their revenues . how then can the local government draw up a  balanced budget, as required by law,8 when they are not able to estimate or have control over 80% of the revenue part of their budget? the amount of finance provided to the municipalities by the state completely differs year by year . the biggest differences can be found in shared taxes, which make around 50%9 of the overall volume of the revenues of municipalities . with regard to the fact that the state is bound by law to provide municipalities with a tax share, while those shares are expressed in percentage of the overall tax revenues, it is only logical that the volume of means provided to the municipalities must vary every year . many variables count in this case . one of them is the growth of the economy, which always affects tax collection . a  number or factors affect the economy, such as gdp, the value of the czech crown (exchange rate), inflation or the unemployment rate . the first big drop in the czech economy was seen in the early 1990s, when due to the changeover to a  market economy the czech republic had to face many problems . roughly, by the mid-1990s the republic managed to improve the situation, but then came other downswings caused by changes in the exchange rate . economic growth was renewed only after 1999 . a little slowdown in the economy came in 2001–2003, and the consequences of the world financial crisis started to affect the cr in 2007 . the situation still worsened, so in 2009–2011 the economy recorded a  significant drop, which was followed by a  gdp decrease in 2012 and 2013 . since then, an important slowdown has not yet been recorded .10 although table 1 does not show much correlation between that information, it can be calculated from the state final accounts . the most remarkable drop in tax revenues was recorded in 2009 . tax revenues of czk 544 billion in 2008 dropped down to czk 480 billion11 in 2009 and it took the next three years to recover to the value of revenues of 2008 . the municipalities definitely felt the decrease in revenue volume, without having any chance of solving the situation . another important factor that influences the level of tax collection is the value of tax rates . from the beginning, municipal budget revenues included personal income tax 75 public governance, administration and finances law review • 1. 2018 structure of revenues and impact thereof on the rate of indebtedness of municipalities (dpfo) and corporate income tax (dppo) . from 1 january 2001, vat was added . the development of the respective rates is shown in the following table . table 2. year 1993 1994 1995 1996 1997 1998 1999 2000 dpfo12 15, 20, 25, 32, 40 .44% 15, 20, 25, 32, 40 .43% 15, 20, 25, 32, 40 .43% 15, 20, 25, 32, 40 % 15, 20, 25, 32, 40 % 15, 20, 25, 32, 40 % 15, 20, 25, 32, 40 % 15, 20, 25 . 32% dppo13 45% 42% 41% 39% 39% 35% 35% 31% year 2001 2002 2003 2004 2005 2006 2007 2008 dpfo14 15, 20, 25 .32% 15, 20, 25 .32% 15, 20, 25 .32% 15, 20, 25 .32% 15, 20, 25 .32% 12, 19, 25 .32% 12, 19, 25 .32% 15% dppo15 31% 31% 28% 24% 26% 24% 24% 21% vat 22 and 5% 22 and 5% 22 and 5% 19 and 5% 19 and 5% 19 and 5% 19 and 5% 19 and 9% year 2009 2010 2011 2012 2013 2014 2015 2016 dpfo16 15% 15% 15% 15% 15% 15% 15% 15% dppo17 20% 19% 19% 19% 19% 19% 19% 19% vat 19 and 9% 20 and 10 % 20 and 10 % 20 and 14 % 21 and 15 % 21 and 15 % 21, 15 and 10 % 21, 15 and 10 % source: compiled by the author. the last important issue that is closely connected to tax rates are acts determining percentual rates of shares from tax revenues, which belong to municipal budgets . allocation of revenues to the state and to the municipalities is determined from the early 90s by the act on budgetary rules of the czech republic .18 the revenues of municipalities were regulated by section § 23 . at that time, state-allocated taxes were only personal income tax and corporate income tax . on 1 january 2001, the act on budgetary allocation of taxes came into effect,19 which significantly changed the rules .20 the development of tax shares that belonged to the budgets of municipalities is shown in the table below . table 3. year 1993 1994 1995 1996 1997 1998 1999 2000 dpfo 21 100%22 100%23 100%24 100%25 100 %26 100 %27 100 %28 100 %29 dppo 30 0 0 0 20 % 20 % 20 % 20 % 20 % year 2001 2002 2003 2004 2005 2006 2007 2008 dpfo31 20 .59% 20 .59% 20 .59% 20 .59% 20 .59 % 20 .59 % 20 .59 % 21 .4%32 dppo 20 .59% 20 .59% 20 .59% 20 .59% 20 .59 % 20 .59 % 20 .59 % 21 .4 % vat 20 .59% 20 .59% 20 .59% 20 .59% 20 .59 % 20 .59 % 20 .59 % 21 .4 % 76 kristýna řezníčková public governance, administration and finances law review • vol. 3. no. 1. year 2009 2010 2011 2012 2013 2014 2015 2016 dpfo33 21 .4 % 21 .4 % 21 .4 % 21 .4 % 23 .58%34 23 .58%35 23 .58%36 23 .58% dppo37 21 .4 % 21 .4 % 21 .4 % 21 .4 % 23 .58% 23 .58% 23 .58% 23 .58% vat 21 .4 % 21 .4 % 21 .4 % 19 .93% 20 .83 % 20 .83 % 20 .83 % 20 .83% source: compiled by the author. data from tables 2 and 3 can be compared to data from table 1 . the growth of the share of state revenues up to 1% a year may be rather a consequence of the growth in the economy enabling the increased collection of particular taxes . the first substantial increase of the state revenues share is seen between 2000 and 2001 . it was caused by the inclusion of vat into the shared taxes, when starting from 2001 the municipalities received a  share of the vat in amounting to 20 .59% . the reason for the next, though not so high increase of state revenues as compared to their own revenues in 2003 cannot be seen from the tables . it was caused by the dissolution of the districts, when powers thereof were devolved to the municipalities, and the state started to provide new subsidies to the municipalities as remuneration for the execution of those devolved powers . further, the table shows an obvious decrease in state revenues in 2005 . the reason was a  change in the funding of school education; previously the subsidies for funding school education were sent to the municipalities, but since 2005 they have been directly sent to the schools .38 between 2007 and 2008 there was a  decrease of revenues obtained by the municipalities from the state, though the tax share of the municipalities increased in all shared taxes . this phenomenon was caused by the financial crisis, and by a reduction in the income tax rates . a small increase in 2010 was probably caused by the growth of vat rates . even though tax rates did not decrease until 2012, the amount of revenues obtained by the municipalities from the state decreased compared to their own revenues . the reason for this was the impact of the economic crisis . the receding economic crisis and a  decreased share from the vat received by the municipalities then caused a relatively large downswing in the revenues received by the municipalities from the state in 2012 . the vat share received by the municipalities was cut mainly because the vat rates were increased, but the legislator evidently failed to properly estimate and take into account the consequences of the crisis . the state thus caused considerable trouble in the municipal budgets .39 it was probably also for this reason that the state again increased the share of vat for the municipalities in the year after . along with the growth in tax rates, that step brought in a  visible increase in the proportion of revenues received by the municipalities from the state and its own revenues . thanks to the growth in the economy, the share of the state revenues received by the municipalities from the state in comparison with the share of own revenues in the following years kept increasing . the reason for a  decrease in 2016 of the proportion of revenues received by the municipalities from the state and their own revenues was a reduction in the volume of subsidies provided from european funds .40 77 public governance, administration and finances law review • 1. 2018 structure of revenues and impact thereof on the rate of indebtedness of municipalities 3. development of debts of municipalities since 1990 to the present with the establishment of the czechoslovak federative republic,41 self-government slowly started to be renewed at the territorial level . that tendency continued also in the newly established czech republic .42 among the most important provisions was article 101 of the constitution of the czech republic that enshrined the right of municipalities to their own property, and management and administration of their own budget .43 however, rather high demands were placed on the municipalities from the very beginning . even though they were not indebted in the early 1990s, the conditions slowly changed . provazníková states that a major part of expenditures was due to capital expenditures . furthermore, they were expenditures that would not bring any real profit to the municipality in the future . therefore, projects already carried out would not contribute in the future to pay off the debts caused by those projects . that is why the indebtedness of municipalities rapidly grew in the 1990s .44 the course of the growth of indebtedness is shown in the table below . it presents the level of overall debt of all municipalities in the czech republic in billion czech crowns from 1993 to 2016 .45 concerning 2017, the ministry of finance has not published any data yet . table 4. year 1993 1994 1995 1996 1997 1998 1999 2000 debt 3 .4 14 .3 20 .3 28 .3 34 .4 39 40 41 year 2001 2002 2003 2004 2005 2006 2007 2008 debt 48 .3 55 .8 70 .4 74 .8 79 80 .9 79 .2 80 .1 year 2009 2010 2011 2012 2013 2014 2015 2016 debt 80 .6 83 .3 82 .4 90 92 .2 88 .9 86 .9 71 .9 source: compiled by the author. from the stated data, about 50% of the indebtedness falls on the biggest czech cities  –  prague, brno, pilsen, and ostrava . it is noteworthy that indebtedness applies to only about 50% of the czech municipalities which is around 3,100 municipalities . the other municipalities manage to run without debts . the ministry of finance also states that the indebtedness of a municipality increases with the growth in its population . the table shows that czech municipalities over recent years have succeeded in redeeming their debts and decreasing their indebtedness . this is in accordance with the current trend over the past years, where individual states actively endeavour to reduce their respective debts after the world financial crisis, and the european union also forces the states to do so . another tremendous risk concerning indebtedness is in the hidden use of eu funds . these subsidies are often several times higher than the total amount of the revenues of the municipality . in the case where the municipality breaches budgetary discipline46 in connection with the funds, it will have to return the subsidy, which may throw the 78 kristýna řezníčková public governance, administration and finances law review • vol. 3. no. 1. municipality into financial turmoil and lead it to becoming debt ridden . this, however, would be a topic for a separate article . czech municipalities continue to succeed at redeeming their debts mainly thanks to the positive balance of their respective budgets that they have reached in recent years . shared taxes, revenues of which have recently grown, contributed significantly to the current situation and today they constitute, as i have already noted, about 50% of the overall revenues of the municipalities . however, the question is what the next financial crisis would do to the indebtedness of the municipalities . considering the above stated facts, i am convinced that when the next downswing of economy comes, the municipalities will start getting into debt again . it is only a matter of time . at the moment when 50% of revenues of a particular unit have a variable level and furthermore that unit cannot flexibly respond to that outage by replenishment from other sources, the unit is forced to get into debt . in my opinion, the municipalities have no other way out . this is not the best of prospects when economists forecast the coming of another financial crisis . 4. conclusion the increase of the share of the municipalities in tax revenues is a  trend in the czech republic over the last years . this is the way how the state increases the revenues of the municipalities in accordance with their own requirements, in order to improve the financial situation . in my opinion, it is not a good step forward . the hazard potential of this kind of revenues has become evident several times, when lower tax income occurred due to a  decline in the economy or a  decrease in tax rates . logically, this caused a lower volume of means that the state paid out to the municipalities as their share of tax income . lastly the economic crisis significantly affected the czech republic in 2009–2011 . the aftermath thereof was no way catastrophic, however it does not mean that something worse may not happen over the next few years . currently another problem is on the agenda at the municipal level, connected with the share in tax income . it concerns the amendment prepared by the ministry of finance that should decrease overall taxation of a certain kind of taxable entities,47 i .e . employees, and from 1 january 2019 to repeal so-called super-gross wages .48 since income tax, which will be affected by the amendment, is a significant source of revenue for municipal budgets, the union of towns and municipalities of the czech republic immediately objected to the amendment . if the amendment to the act is approved, it will deprive municipal budgets of about czk 5 .3 billion . as i have already noted, municipalities are not able to flexibly respond to such an outage . they can influence about 20% of their respective revenues, and the possibilities to increase their share within this 20% are rather limited . in addition, the municipalities are under pressure due to the rules set by the implemented directive 2011/85/eu on requirements for budgetary frameworks of the member states . it has been implemented into the czech legal order as the act on the rules of budgetary responsibility49 and as an associated act that amended50 over dozens of the legal regulations . these new duties, where the state defines for the municipalities the level of the highest possible indebtedness, also impose new sanctions as well . pursuant to 79 public governance, administration and finances law review • 1. 2018 structure of revenues and impact thereof on the rate of indebtedness of municipalities section 17, the municipality is obligated, on the balance sheet date, to keep its debt below 60% of its average revenues received over the last four budgetary years . if the municipality exceeds the limit, it is obligated to cut the budget down in the following calendar year by at least 5% . if it fails to do so, the state may suspend a transfer to the municipality of its share in shared tax income .51 as expected, the union of towns and municipalities objected to the provision . it raised the objection that there has been a  breach of the constitutional right to administer their own property and their own budget, which is the expression of the right to selfgovernment of every municipality . however, the objections remain unheard and the provision in law is valid . thus, the municipality may easily get into serious problems that it will not be able to solve, as the state does not provide the municipality with sufficient options to gain its revenues independently of the state . thus, it is more than obvious that the legislator should consider in the future an extension of the municipal competences as it concerns different kinds of revenues . it has been suggested that municipalities be given an option to introduce new municipal fees, such as advertising fees, or to enable municipalities to determine a surcharge on taxes, as it is practiced in several nordic countries .52 regarding the above stated, i dare say that the objective of the work has been reached and the hypothesis “sources of municipal revenues are a  very important aspect that may have a substantial effect on the economic results of every municipality” has been proven . 80 kristýna řezníčková public governance, administration and finances law review • vol. 3. no. 1. references 1 vladan gallistl, zárodky krizí vznikají v nejlepší době [the emergence of crises emerges in the best times], čnb, www .cnb .cz/cs/verejnost/pro_media/clanky_rozhovory/media_2018/cl_18_180424_mora_e15 . html (accessed 24 april 2018) . 2 kristýna řezníčková, výlučné daňové příjmy obcí [exclusive tax revenues of municipalities], 230 (olomouc, iuridicum olomoucense, 2016) . 3 kristýna řezníčková, the issue of tax revenues of local councils, 333–342, in pavel smolen (ed .), selected issues in taxation and tax authorities in central europe (lublin, wydawnictwo kul, 2016) . 4 kristýna müllerová, the municipal autonomy in the czech republic, 325–337, in petr mrkývka (ed .) system of financial law: general part: conference proceedings (brno, masaryk university, faculty of law, 2015) . 5 since 2017, tax from gambling has been added to shared taxes . 6 information source: own calculations are based on data from the ministry of finance of cr, and kristýna řezníčková, výlučné daňové příjmy obcí [exclusive tax revenues of municipalities], 82 (olomouc, iuridicum olomoucense, 2016) . 7 more on the issue of distinction of state and own revenues see kristýna řezníčková, výlučné daňové příjmy obcí [exclusive tax revenues of municipalities] (olomouc, iuridicum olomoucense, 2016) . 8 section 4 para 4 of act no . 250/2000 sb ., on budgeting rules of territorial budgets, as amended . 9 kristýna řezníčková, výlučné daňové příjmy obcí [exclusive tax revenues of municipalities], 81 (olomouc, iuridicum olomoucense, 2016) . 10 česká národní banka [czech national bank], www .historie .cnb .cz/cs/menova_politika/prurezova_temata_ menova_politika/1_ekonomicky_vyvoj_na_uzemi_ceske_republiky .html (accessed 24 april 2018) . 11 source: ministry of finance of cr . 12 personal income tax . 13 corporate income tax . 14 personal income tax . 15 corporate income tax . 16 personal income tax . 17 corporate income tax . 18 act no . 576/1990 sb ., on rules of management of budgetary means of the czech republic and of the municipalities in the czech republic (budgetary rules of the czech republic), as amended . 19 act no . 243/2000 sb ., on budgetary allocation of revenues from taxes to territorial self-governing units and to some state funds (act of budgetary allocation of taxes) . 20 explanatory memorandum to act no . 243/2000 sb ., on budgetary allocation of taxes . 21 personal income tax . 22 total revenues from income tax of natural persons having residency in the territory of the municipality, +40% of revenues from income tax on dependent activities and from fringe benefits, paid by the payer in the territory of the municipality . 23 see also note no . 22 . 24 see also note no . 22 . 25 total revenues from advance income tax of natural persons having residency in the territory of the municipality, + 10% of revenues from income tax on dependent activities and from fringe benefits, paid by the payer in the territory of the municipality . 26 see also note no . 25 . 27 see also note no . 25 . 28 see also note no . 25 . 29 see also note no . 25 . 30 corporate income tax . http://www.cnb.cz/cs/verejnost/pro_media/clanky_rozhovory/media_2018/cl_18_180424_mora_e15.html http://www.cnb.cz/cs/verejnost/pro_media/clanky_rozhovory/media_2018/cl_18_180424_mora_e15.html http://www.historie.cnb.cz/cs/menova_politika/prurezova_temata_menova_politika/1_ekonomicky_vyvoj_na_uzemi_ http://www.historie.cnb.cz/cs/menova_politika/prurezova_temata_menova_politika/1_ekonomicky_vyvoj_na_uzemi_ 81 public governance, administration and finances law review • 1. 2018 structure of revenues and impact thereof on the rate of indebtedness of municipalities 31 in addition, it applies for the whole line that the municipalities are entitled to 30% from revenues from advance income tax of natural persons, having residency in the territory of the municipality . 32 in that year so-called super-gross wages were introduced, which increased the real taxation of employees . 33 personal income tax . in addition, it applies for the whole line that the municipalities are entitled to 30% from revenues from advance income tax of natural persons, having residency in the territory of the municipality . 34 excluding fringe benefits, paid by the employer, where the value 22 .87% applies . 35 see also note no . 34 . 36 see also note no . 34 . 37 corporate income tax . 38 state final balance statement for 2005, ministry of finance, www .mfcr .cz/assets/cs/media/statni-zaverecnyucet_2005_f-hospodareni-rozpoctu-uzemnich-samospravnych-celku-za-rok-2005 .pdf (accessed 24 april 2018) . 39 final economic statement of territorial self-government for 2012, deník veřejné správy, www .dvs .cz/ clanek .asp?id=6608210l (accessed 24 april 2018) . 40 ministry of finance cr, www .mfcr .cz/cs/verejny-sektor/statni-rozpocet/plneni-statniho-rozpoctu/2016/ statni-zaverecny-ucet-za-rok-2016-31478 (accessed 5 may 2018) . 41 on 29 march 1990, by constitutional act no . 81/1990 sb ., on the change of the name of czechoslovak socialist republic . 42 the czech republic was established on 1 january 1993 . 43 article 101 para . 3 of constitutional act no . 1/1993 sb ., constitution of the czech republic . 44 romana provazníková, olga sedláčková, financování měst, obcí a regionů: teorie a praxe [financing cities, municipalities and regions: theory and practice], 196 (2nd amended edition, prague, grada, 2009) . 45 source of data contained in the tables: deník veřejné správy [ journal of public administration], www .dvs . cz/clanek .asp?id=6432000 (accessed 25 april 2018) and ministry of finance cr, www .mfcr .cz/cs/ verejny-sektor/uzemni-rozpocty/zadluzenost-uzemnich-rozpoctu/2016/zadluzenost-uzemnich-rozpoctuv-roce-201-30092 (accessed 24 april 2018) . 46 see in michal koziel, breach of budgetary discipline as a direct consequence of the breach of conditions in the management of the eu funds, in eva kovářová, lukáš melecký, michaela staníčková (eds .), proceedings of the 3rd international conference on european integration 2016 (ostrava, všb-technical university of ostrava, 2016) . 47 for further reading on the topic see zdenka papoušková, vybrané aspekty pojmu daňový subject [selected aspects of the term tax entity], 197–209, in zdenka papoušková, michael kohajda et al ., aktuální otázky finančního práva ve středoevropském prostoru (olomouc, iuridicum olomucense, o . p . p ., 2013) or zdenka papoušková, daňové subjekty ve světle nové právní úpravy [tax entities in the light of new legislation], 7–15, in zdenka papoušková et al ., vybrané instituty správy daní po změně právní úpravy v čr a na slovensku (olomouc, univerzita palackého v olomouci, 2012) . 48 municipalities will lose 5 .3 billion due to tax allowances of the state . union of towns and municipalities of the czech republic, www .smocr .cz/cz/tiskovy-servis/tiskove-zpravy/obce-prijdou-o-5-3-miliardvlivem-danovych-ulev-statu .aspx?referrerid=94 (accessed 25 april 2018) . 49 act no . 23/2017 sb ., on the rules of budgetary responsibility . 50 act no . 24/2017 sb ., amending certain laws in connection with the adoption of budgetary responsibility regulations . 51 more on the new rules of budgetary responsibility: michal koziel, new rules of budgetary responsibility and their impact on public finances, 223, in ivana pařízková, eva tomášková (eds .), interaction of law and economics 2017: conference proceedings. publications of masaryk university, theoretical series, edition scientia, file no . 604 . (brno, masaryk university, 2017) . 52 paweł swianiewicz, finanse lokalne, teoria i praktyka [local finance, theory and practice], 47 (warsaw, municipium, 2004) . http://www.mfcr.cz/assets/cs/media/statni-zaverecny-ucet_2005_f-hospodareni-rozpoctu-uzemnich-samospravnych http://www.mfcr.cz/assets/cs/media/statni-zaverecny-ucet_2005_f-hospodareni-rozpoctu-uzemnich-samospravnych http://www.dvs.cz/clanek.asp?id=6608210l http://www.dvs.cz/clanek.asp?id=6608210l http://www.mfcr.cz/cs/verejny-sektor/statni-rozpocet/plneni-statniho-rozpoctu/2016/statni-zaverecny-ucet-za http://www.mfcr.cz/cs/verejny-sektor/statni-rozpocet/plneni-statniho-rozpoctu/2016/statni-zaverecny-ucet-za http://www.dvs.cz/clanek.asp?id=6432000 http://www.dvs.cz/clanek.asp?id=6432000 http://www.mfcr.cz/cs/verejny-sektor/uzemni-rozpocty/zadluzenost-uzemnich-rozpoctu/2016/zadluzenost-uzemnic http://www.mfcr.cz/cs/verejny-sektor/uzemni-rozpocty/zadluzenost-uzemnich-rozpoctu/2016/zadluzenost-uzemnic http://www.mfcr.cz/cs/verejny-sektor/uzemni-rozpocty/zadluzenost-uzemnich-rozpoctu/2016/zadluzenost-uzemnic http://www.smocr.cz/cz/tiskovy-servis/tiskove-zpravy/obce-prijdou-o-5-3-miliard-vlivem-danovych-ulev-statu. http://www.smocr.cz/cz/tiskovy-servis/tiskove-zpravy/obce-prijdou-o-5-3-miliard-vlivem-danovych-ulev-statu. public governance, administration and finances law review implications of the new framework for market abuse in the eu* ľubomír čunderlík** * the article is the output of vega project no. 1/0907/16 “legal protection of parties of economic and legal relations with emphasis on criminal-law protection of creditors”. ** judr. ľubomír čunderlík, phd., associate professor at the department of financial law of the faculty of law, comenius university in bratislava; member of supervisory board of bratislava stock exchange, member of the board of centre for legal aid, former director of banking department of ministry of finance (e-mail: lubomir.cunderlik@flaw.uniba.sk) abstract: the market abuse regulation (mar) was adopted in april 2014, and it has been uniformly regulating the issues of insider dealing and market manipulation throughout the eu since 3 july 2016. unlike the previous legislation, deviation from the regulation’s wording will not be possible. this should exclude different applications, which have occurred in the individual eu member states so far, when investigating unlawful behaviours marked as market abuse. the regulation introduced several substantial changes. keywords: market abuse; insider dealing; market manipulation; administrative and criminal offences 1. introduction market abuse is considered to be one of the most dangerous unlawful behaviours on the financial market although it is usually referred to as victimless crime. the root of this is favouring certain group of investors with access to non-public information (insiders) or dissemination of false and misleading information within the investing public. accordingly, we distinguish two basic forms of market abuse: insider dealing and market manipulation. the european commission assessed the existing regulatory framework for market abuse under the market abuse directive1 and related implementing directives as insufficiently effective.2 after ten years of existence and application of the given directive, a new legislation was adopted in the form of regulation on market abuse.3 its wording also takes account of the related new legislation on provision of investment services and technological developments on the financial market.4 parallel to this legislation a new directive (mad ii) was adopted, harmonizing criminal penalties in the area of market abuse. criminal law measures can be considered an element to ensure the effective enforcement of eu policies, as recognized by the treaty on the functioning of the eu.5 the purpose of the regulation (mar) is to minimize the national differences in investigation of insider dealing and respective sanction regimes. the regulation entered into force on 3 july 2016, and from this date it repealed mad and related implementing directives (including the regulation establishing exemptions for buy-back programmes and stabilization of financial instruments). the adoption of the regulation will ensure unification of this issue as well as direct effect of its provisions, and adoption of a national legislation, which may vary across countries, will not be required. the purpose of the article is to analyze the fundamental changes introduced by mar compared to the previous european legislation. several institutes were adopted from the market abuse directive and related implementing directives in the respective regulation, whereas its wording includes also experience from practice or case law of the european court of justice. 2. substantive changes included in mar the regulation contains several changes,6 some of them are of only legislative and technical nature, and others assume significant impact on more efficient investigation of unlawful conduct such as insider dealing and manipulative practices on the capital market (market manipulation). in the following paragraphs we will try to analyze and summarize the most important changes through some comments. we believe that identification of the most important changes is beneficial not only for the theoreticians of the financial market, but also for the legal practice of the supervisory authority of the capital market. 1. the regulation formally distinguishes, unlike mad, three types of unlawful conduct as an administrative offence in the field of market abuse: a) insider dealing, b) unlawful disclosure of inside information, c) market manipulation.7 unlawful disclosure of inside information was subordinated to actions under letter a) in mad. 2. the material scope as well as the personal scope of prohibition related to market abuse was extended, namely by alternative trading platforms and their participants. the mad was applied only to financial instruments admitted to 10.53116/pgaflr.2016.2.2 mailto:lubomir.cunderlik@flaw.uniba.sk https://doi.org/10.53116/pgaflr.2016.2.2 trading on a regulated market, or for which a request for admission on such market and its derivatives has been made. on the contrary, the regulation includes also financial instruments traded on multilateral trading facilities (mtfs) which were admitted to trading on mtfs or for which a request for admission to trading on mtfs has been made, and financial instruments which are traded on organised trading facilities (otfs8) and their derivatives9. the reason is the increase in trading volume also on the given alternative trading platforms. in this connection, the personal scope was extended by issuers of such financial instruments with regard to the obligations arising from the market abuse regulation. 3. the personal scope covers also those persons who act in collaboration to commit market abuse.10 in practice it most commonly refers to brokers who devise a trading strategy designed to result in market abuse or persons who encourage a person with inside information to disclose that information unlawfully, or persons who develop software in collaboration with an investment firm for the purpose of facilitating certain forms of market abuse. 4. according to the regulation, the concept of financial instrument will include also emission allowances or auction products based thereon traded on an auction platform with status as a regulated market. the emission allowances were included into the financial instruments already by the adoption of previous markets in financial instruments directive (mifid).11 from practical experience, a behaviour which has effect on benchmarks, subject to fulfillment of conditions set out, is also understood as market manipulation according to the regulation.12 5. in addition to the existing administrative offences defined in the market abuse directive (e. g. transaction, order or other conduct related to the financial instrument; a commissive conduct)13, the regulation covers also omissions and measures to prevent specific transactions (omissive conduct).14 6. a rebuttable presumption – so called interpretive rule to assess unlawful conduct 15 – has been formally established which was already formulated by the decision-making practice of the european court of justice in the context of the previous directive.16 it refers to objectivization of the conduct, which means that it is assumed that the conduct of a legal or natural person who is in possession of inside information is forbidden from using inside information, thus an unlawful conduct. however, a rebuttable presumption fully respects the preservation of the rights of defense. the respective recital17 extends the interpretive rule also to all subsequent changes to orders that were placed before possession of inside information, including the cancellation or amendment of an order, or an attempt to cancel or amend an order. in practice it will mean that within the sanction proceedings the commitment of the offence of insider dealing will be always presumed until proven otherwise by the person against whom the sanction proceedings are conducted (reversed burden of proof). 7. when committing market manipulation, an attempt to engage in market manipulation18, which was originally covered under the mad only in relation to the second form of market abuse (insider dealing) shall be also deemed unlawful. changes pursuant to item 5, 6 and 7 present a significant and a stricter legislation, extensively defining market abuse. based on this, it will be possible to sanction an unlawful conduct, the assessment of which was disputed or could not be at all considered as one of the forms of market abuse in the past. 8. insider dealing in the form of tipping (recommendation, abetting to trading based on a ‘good tip’ for investment) will be examined in the context of subjective elements – the knowledge that it is an inside information and the conduct is based thereon. recommendation and abetting will be considered separately as an unlawful conduct, under the definition of unlawful disclosure of inside information. 9. general exceptions to conducts that are otherwise deemed market abuse were directly reflected in the regulation (buy-back programmes and price stabilization, etc.).19 moreover, the regulation extended the activities and entities which will not fall under the regulation due to public interest: – transactions carried out by the european commission or any other officially designated body acting on its behalf in pursuit of public debt management policy; – transactions carried out by the european commission, special purpose vehicle of one or several member states, european investment bank, european financial stability facility, european stability mechanism, an international financial institution established by two or more member states which has the purpose to mobilize funding and provide financial assistance to the benefit of its members (especially the single resolution board managing the supranational single resolution fund)20; – activity of the member states, european commission or any other officially designated body acting on their behalf, which concerns emission allowances and which is undertaken in pursuit of the climate policy or in pursuit of the common agricultural or fisheries policy21. the general exceptions do not apply to employees or external collaborators of the aforementioned entities (e. g. employee of the agency for debt and liquidity management) under the conditions that the given natural persons carry out prohibited transactions, directly or indirectly, on their own account, or they engage in prohibited behaviour in form of aiding and abetting. however, national legislations should, in our opinion, implement such organizational measures that would restrict market abuse by the said natural persons. in addition to the original special exceptions to unlawful conducts (e. g. legitimate conduct of market makers, persons authorised to act as counterparties, persons authorised to execute orders on behalf of third parties, takeover bids, etc.), the regulation distinguishes some new special exceptions (behaviour on the basis of own trading plans and strategies, market soundings22 if the relevant market lacks confidence). some of the existing special exceptions are directly adopted in the text of the regulation23, not only in the recitals as in mad. 10. the market abuse directive did not set forth the obligation of a legal entity to implement organisational measures to restrict dissemination of inside information. the implementation thereof deprives the legal entity that is in possession of inside information of the mentioned rebuttable presumption that it used the inside information. the regulation, directly in its text, requires the implementation of the aforementioned measures. 11. for market manipulation the merits of dissemination of false information is complemented by dissemination of misleading information or provision of false inputs in relation to a benchmark, or any other behaviour which manipulates the calculation of a benchmark.24 the regulation’s non-exhaustive list of examples of manipulative behaviour includes placing orders, cancellation or modification thereof by any and all available means of trading. specifically this is an algorithmic and high-frequency trading if it is executed with certain negative effect on the market.25 the algorithmic and high-frequency trading is considered as one of the potential risk carriers, including manipulative practices. the requirement of its regulation refers to the requirement of mifid ii for risk control at investment firms which use this method of trading.26 however, the regulation also underlines the importance of various internet applications and their impact on the investor’s behaviour (blogs, social networks like facebook) and points out the necessity of putting them on an equal footing with traditional dissemination of information. the non-exhaustive list of market manipulation indicators was transferred from directive 2003/124/ec implementing mad to annex i of the regulation. mar, however, emphasises that it is only a nonexhaustive list of indicators relating to false or misleading signals and to price positioning (part a, annex i) and a nonexhaustive list of indicators relating to the employment of a fictitious device or any other form of deception or contrivance (part b, annex i). 12. in addition to the national supervisory authorities, also a supranational supervisory authority, namely the european securities and markets authority (esma), is involved in the process of accepted market practices (amps). the national supervisory authority, which is the národná banka slovenska (national bank of slovakia) in the slovak republic, will have to before establishing an accepted market practice notify esma of the intention to establish an accepted market practice at least three months before the amp is intended to take effect. following this notification, esma shall issue an opinion assessing the compatibility of the amp with the criteria under the regulation, and whether the establishment of the respective amp would not threaten the market confidence. where a national supervisory authority establishes an accepted market practice contrary to the opinion of esma, it shall publish on its website a notice setting out its reasons for doing so. such procedure should facilitate market transparency and functioning of small capital markets to which the relevant market practice should not necessarily present a threat as in the case of more developed capital markets. at the same time, it will help avoid arbitrariness of procedures of national authorities according to the principle ‘comply and explain’. 13. the regulation assumes establishment of effective precautionary measures, systems and procedures aimed at preventing and detecting insider dealing, market manipulation and attempts thereof under the threat of administrative sanctions for operators of regulated or non-regulated markets (mtf, otf). these are requirements for the operators of these markets not for market participants.27 in practice, it will more probably refer to technical software requirements and requirements to carry out orders related to transactions. the details should be laid down in the implementing technical standards of esma. 14. a number of changes were made within the obligation of disclosure of inside information (ad hoc publicity). one of them is ad hoc publicity of inside information related to financial instruments that are admitted to trading on an sme growth market (‘small and medium enterprises’). the respective inside information may be posted on the website of the respective market instead of on the issuer’s website where such facility, based on the decision of the market operator, is provided to sme issuers.28 by the effect of embedding this simplified way of information reporting, the administrative burden for the issuers on the markets of small and medium enterprises should be reduced. in order to preserve the stability of the financial system29, the regulation introduced a special reason for delaying the performance of the ad hoc publicity obligation for selected issuers. specifically, it refers to financial institutions and credit institutions where inside information is related to their temporary liquidity problems (for example, the need to receive temporary financial assistance from a central bank as lender of last resort). the delay may be executed with a time limit provided that the following conditions are met cumulatively:30 – the disclosure of the inside information entails a risk of undermining the financial stability of the issuer and of the financial system; – it is in the public interest to delay the disclosure; – the confidentiality of that information can be ensured; – the competent authority has consented to the delay. provided that consent to delay the disclosure is not granted by the competent authority, the issuer must disclose the information without delay. the introduction of the special reason is closely related to the second pillar of the eu’s banking union (crisis management and resolution).31 15. the regulation introduces exemption from the obligation to draw up an insider list for issuers of financial instruments admitted on the sme market. this is an unburdening approach in order to reduce the administrative costs arising from this obligation for smes.32 we see this initiative as a psychological effect not to discourage starting smalland medium-sized issuers with various administrative obligations which are connected with issuance and subsequent trading in financial instruments. however, the supervisory authority may request for provision of an insider list. therefore, smalland medium-sized issuers will have to be able to develop an insider list upon request and provide it. moreover, the obligation to instruct persons with access to inside information remained for all the issuers. with respect to the archiving obligation of the issuers, the period to retain all inside information on their websites has been prolonged (from one year to at least five years). 16. the notification of managers’ transactions (transactions of persons discharging managerial responsibilities at the issuer and transactions of persons closely associated with them) has been significantly extended. the obligation of notification refers not only to transactions relating to shares admitted to a regulated market or their derivatives, but also to transactions relating to debt instruments and/or all financial instruments to which the regulation subject will apply (it means also emission allowances, financial instruments on otf and mtf). at the same time, the regulation shortened the notification period for the managers’ transactions, i. e. from five days to three days. the obligation of notification of managers’ transactions was complemented by pledging and lending of financial instruments as the given legal operations can result in a material and potentially destabilizing impact on the issuer.33 the regulation rationalized the aforementioned addition of pledging and lending as follows, ‘without disclosure, the market would not know that there was the increased possibility of, for example, a significant future change in share ownership, an increase in the supply of shares to the marketplace or a loss of voting rights in that company’.34 17. the previous european legislation under mad did not set forth any specific rules for cooperation between the relevant national supervisory authorities and esma. therefore, the regulation explicitly constituted the mutual relations between the aforementioned authorities in the form of cooperation (in exchange of information, investigation of market abuse forms, on-site inspection, and recovery of imposed pecuniary sanctions).35 in terms of the regulation, esma is in the position of a coordinator of investigation in cases with cross-border effects if it is requested by one of the involved national supervisory authorities. the cooperation in the form of investigation and on-site inspection may be executed in several ways: – the requested national authority may carry-out the on-site inspection or investigation itself; – it may allow the requesting party to participate in an on-site inspection or investigation; – allow the requesting party to carry out the on-site inspection or investigation itself; – appoint auditors or experts to carry out the on-site inspection or investigation; – share specific tasks related to supervisory activities with the other competent authorities.36 supervisory authorities of third countries (non-eu countries) may also take part in cooperation provided that cooperation arrangements concerning the exchange of information and the enforcement of obligations arising under mar are concluded with them. 18. specifically it is necessary to draw attention to the specific legislation of whistleblowing for reporting of market abuse behaviours.37 in this respect, the regulation puts greater emphasis on the protection of persons reporting infringements of the provisions concerning prohibitions and obligations. reporting should be carried out within a reporting mechanism to a national supervisory authority.38 at the same time, according to the regulation, member states should be allowed to provide for financial incentives for whistleblowers. 3. conclusion most of the mar provisions came into force on 3 july 2016 (some provisions have been applied since 2 july 2014; provisions related to otf, sme markets, emission allowances will apply only from 4 january 2017). in compliance with the principle of direct applicability of the european regulation, the national supervisory authorities throughout the entire european economic area must, therefore, adopt the relevant provisions of the regulation starting from the mentioned date. the relevant national provisions governing the whole issue of market abuse (insider dealing and market manipulation) were repealed in the slovak republic by amending the act on securities and investment services effective from 1 july 2016.39 in compliance with article 144, paragraph 3 of the act on securities and investment services, the sanctions for market abuse shall be imposed directly in terms of the regulation.40 with respect to the scope and significance of changes introduced by mar, it appears to be optimal that the national legislation was omitted and not replaced. adoption of own national legal provisions into the act on securities and investment services would bring a risk that its wording could be in contradiction with the wording of the regulation. despite the effort of the legislator, it can be stated that not all areas of the mar legislation were fully implemented. the regulation related to whistleblowing in relation to market abuse has not been amended in details on national level despite the fact that the implementing directive to the regulation41 that should harmonize the legal regulations in this area determined 3 july 2016 as the date of its transposition. although the slovak republic has a general legislation on reporting of anti-social behaviour (under the whistleblowing act) since 1 january 2015, it has chosen an approach of special legislation for whistleblowing in relation to all unlawful behaviours on the entire financial market, not only in relation to market abuse. this approach was reflected in a bill amending the financial market supervision act – a basic procedural regulation for the entire financial market. the reason is the effort to exclude differences in the application practice in relation to various financial market entities. although, we consider that the aforementioned approach is appropriate, but its legislative process has been significantly falling behind as the transposition of the implementing directive should have taken place already on 3 july 2016 (only in relation to reporting of market abuse). the duration of the legislative process is in this case to the detriment of effective reporting of suspicious transactions of insider dealing or market manipulation. with respect to the fact that these are hardly detectable and provable unlawful conducts, the absence of a detailed whistleblowing process can be deemed negative which makes it impossible to effectively enforce the provisions of the regulation despite the fact that the slovak republic had repealed the national legislation in time due to conflict. at the same time, most of the changes introduced by mar and listed in the text above will not be applicable in the slovak republic given the small volume of the slovak capital market. references 1 directive 2003/6/ec of the european parliament and of the council of 28 january 2003 on insider dealing and market manipulation (market abuse); market abuse directive (hereinafter mad). 2 communication from the commission to the european parliament, the council, the european economic and social committee and the committee of the regions, dated 8 december 2010, on reinforcing sanctioning regime in the financial services sector. http://ec.europa.eu/smart-regulation/impact/ia_carried_out/docs/ia_2010/com_2010_0716_en.pdf (accessed 7 feb. 2015) 3 regulation no. 596/2014, dated 16 april 2014, on market abuse (market abuse regulation) and repealing directive 2003/6/ec of the european parliament and of the council and commission directives 2003/124/ec, 2003/125/ec and 2004/72/ec; market abuse regulation (hereinafter mar). 4 directive 2014/65/eu of the european parliament and of the council of 15 may 2014 on markets in financial instruments; markets in financial instruments directive ii (hereinafter mifid ii). its transposition was postponed from the original date of 3 july 2016 to 3 july 2017 due to the complexity of the legislation. updated rules for markets in financial instruments: mifid 2, http://ec.europa.eu/finance/securities/isd/mifid2/index_en.htm (accessed on 14 aug. 2016). 5 libor klimek, effective enforcement of sanctions for market abuse in the eu: introduction of criminal sanctions, 114, in alexander bělohlávek, filip černý & naděžda rozehnalová (eds.), regulatory measures and foreign trade, czech yearbook of international law (juris publishing, inc., huntington, new york, 2013). 6 for instance, husták was engaged in the issue of innovations introduced by mar. zdeněk husták, the new market https://doi.org/10.2139/ssrn.2624110 http://ec.europa.eu/smart-regulation/impact/ia_carried_out/docs/ia_2010/com_2010_0716_en.pdf http://ec.europa.eu/finance/securities/isd/mifid2/index_en.htm https://doi.org/10.2139/ssrn.2624110 6 for instance, husták was engaged in the issue of innovations introduced by mar. zdeněk husták, the new market abuse regulation – torrent of duties in midsummer, http://www.epravo.cz/top/clanky/nove-narizeni-o-zneuzivani-trhuzaplava-povinnosti-v-parnem-lete-101826.html (accessed on 14 aug. 2016). 7 see titles of articles 8, 10, 12, 14 and 15 of mar or recital 7 of mar. 8 otf is considered as another alternative trading platform to the regulated market, which will be deemed a new investment service and it will fall under the legal regulation of mifid ii. refer to definition under art. 4, para. 1, item 23 of mifid ii. 9 refer to art. 2, para. 1 and recital 8 and 9 of mar. 10 refer to recital 39 of mar. 11 directive 2004/39/ec of the european parliament and of the council of 21 april 2004 on markets in financial instruments. 12 a serious case of a multiannual manipulation of benchmarks was the scandal related to the manipulation of libor interbank rate which influenced the us market too. 13 regardless the fact whether it was conducted on a trading venue or as a non-public trading. 14 refered to recital 23 of mar ‘prohibition against insider dealing should apply where a person who is in possession of inside information takes unfair advantage of the benefit gained from that information by entering into market transactions in accordance with that information, or by cancelling or amending, or by attempting to cancel or amend an order to acquire or dispose of … ’. cf also art. 8, para. 1 of mar. 15 to be found under recital 23 and 24 of mar. 16 preliminary ruling proceedings before the european court of justice in case no. c-45/08 spector photo group nv, chris van raemdonck v. commissie voor het bank-, financieen assurantiewezen (cbfa). refer to the ruling of the european court of justcie in this case dated 23 december 2009, http://eur-lex.europa.eu/legalcontent/en/txt/html/?uri=celex:62008cj0045&qid=1472221177998&from=sk (accessed on 14 aug. 2016). 17 recital 25 of mar. 18 the reasoning of this objective is indicated under recital 41 of mar and it assumes that market manipulation was not completed as a result of failed technology, but the seriousness of this conduct is equally important. 19 refer to art. 5 and 6 of mar. for buy-back programmes and price stabilization refer to ľubomír čunderlík, market transparency and capital market abuse, 126–140 (wolters kluwer, bratislava, 2015). 20 for these entities refer to ľubomír čunderlík, financial implications of mandatory contributions of bank entities in times of financial crisis in the context of banking union anticipation, 31–50 in damian czudek, michal kozieł (eds.), legal and economic aspects of the business in v4 countries, conference proceedings (tribun eu, centrum prawa polskiego, brno, 2014). 21 recital 13, 21 and 22 of mar. 22 art. 11 of mar. in practice, it can be a situation known as ‘road show’, when the issuing manager contacts key investors and provide them the trade conditions. the execution of market sounding will be considered as a lawfully authorised disclosure of inside information in the course of exercise of that person’s employment or function, if the person disclosing the information in this way fulfills the requirements under art. 11, paras 3 and 5 of mar. 23 for instance, art. 9 of mar. 24 art. 12, para. 1 d) of mar. 25 art. 12, para. 2 c), items i to iii of mar. 26 art. 17 of mifid ii. 27 the requirement is based on the parallel requirements determined under articles 31 and 54 of mifid ii. 28 art 17, para. 9 of mar. 29 stated under recital 52 of mar: ‘… the wider public and economic interest in delaying disclosure outweighs the http://www.epravo.cz/top/clanky/nove-narizeni-o-zneuzivani-trhu-zaplava-povinnosti-v-parnem-lete-101826.html http://eur-lex.europa.eu/legal-content/en/txt/html/?uri=celex:62008cj0045&qid=1472221177998&from=sk 29 stated under recital 52 of mar: ‘… the wider public and economic interest in delaying disclosure outweighs the interest of the market in receiving the information which is subject to delay.’ 30 pursuant to art. 17, para. 5 of mar. 31 refer to recital 64 and art. 39, para. 2 of directive 2014/59/eu of the european parliament and of the council of 15 may 2014 establishing a framework for recovery and resolution of credit institutions and investment companies; bank recovery and resolution directive (brrd). 32 refer to the reasoning under recital 56 of mar. 33 the interpretation of the previous legislation of mad was not uniform. despite that, already before the adoption of mar, there were opinions criticising this imperfection of mad. refer to, for example josef kotásek, managers’ transactions, 128 in josef bejček (ed.), veřejný zájem v obchodním právu, conference proceedings (masarykova univerzita, brno, 2008). 34 recital 58 of mar. 35 a national supervisory authority may refuse a request to cooperate only under the exhaustively listed conditions. see art. 25, para. 2 of mar. 36 these forms of cooperation are broader than those that are indicated under art. 16, para. 4 of mad. 37 by the effect of adopting whistleblowing act no. 307/2014 coll. in the slovak republic with effect from 1 january 2015, the protection of whistleblowers in relation to defined criminal offences and administrative offences was introduced already before the regulation entered into force. the regulation, however, presents a special legislation for reporting illicit conduct on the capital market. 38 implementing directive (eu) 2015/2392 of 17 december 2015 as regards reporting to competent authorities of actual or potential infringements of mar lays down details on whistleblowing procedures before national supervisory authorities set out in art. 32 para. 1 of mar. its provisions shall apply from 3 july 2016. in the slovak republic, the details of this mechanism will be adjusted both by an act amending the act on financial market supervision (with proposed effect from 1 october 2016) and by internal work regulation of the národná banka slovenska (national bank of slovakia). the bill amending the act on financial market supervision is currently under late interdepartmental review, and its original date of effect was determined for 3 july 2016 (identical to both regulation¢s and implementing directive’s date of effect). 39 act no. 361/2015 coll. dated 10 november 2015 amending act on securities and investment services. its entry into force repealed art. 131a up to art. 132n and art. 144, para. 12. 40 art. 30, para. 2 and art. 31 of mar. 41 implementing directive (eu) 2015/2392 of 17 december 2015 on mar as regards reporting to competent authorities of actual or potential infringements of that regulation. © 2018 dialóg campus, budapest public governance, administration and finances law review vol. 3. no. 1. (2018) • 82–93. rationalization of legally determined expenditure as a condition for strengthening financial accountability eugeniusz ruśkowski,* urszula zawadzka-pąk** * eugeniusz ruśkowski, professor of legal sciences . head of the department of public finance and financial law, faculty of law, university of bialystok, poland . the author specializes in the theory of public finances and financial law, the public finance discipline, the public finances in the  comparative perspective, the local government finances, the financial control, the budgetary law, the foreign exchange law . author or co-author of forty-seven books and over 350 articles or chapters in books . president of the association of the centre for information and organization of public finance research and tax law of the countries of central and eastern europe . (e-mail: eugen@list .pl) ** urszula zawadzka-pąk, doctor in legal sciences . assistant professor at the department of public finances and financial law, faculty of law, university of bialystok, poland . the author specialises in the financial law and the public financial management, including the participatory budgeting, the public values, the fiscal rules and the performance management . author or co-author of seven books and more than 75 papers or book chapters . member of the centre for information and organization of public finance research and tax law of the countries of central and eastern europe, the international political science association and the european economic association . more information can be found on her website: uzawadzka .org . (e-mail: u .zawadzka@uwb .edu .pl) abstract: the main purpose of this article is to analyse the relationship between financial accountability and legally determined expenditure . according to the adopted research hypothesis, increasing the financial accountability requires taking specific actions in the field of the legally determined expenditure . as the article is theoretical, it does not present the results of the empirical research; the formal-dogmatic method was used to interpret the content of legal acts and jurisprudence of the constitutional tribunal, as well as the non-obstructive method to analyse the foreign and polish literature presenting the results of both theoretical and empirical research . in the article, having presented in the introduction the methodological issues, first, the principle of common good, the financial accountability, and the legally determined expenditure will be first explained . next, the solutions for the rationalization of the legally determined expenditure will be proposed . we conclude that their implementation should increase the financial accountability to strengthen the constitutional principle of the common good . keywords: financial accountability; common good; legally determined expenditure; flexible expenditure; spending rules; multi-annual planning 1. introduction according to art . 1 of the constitution of the republic of poland of 2 april 1997, the republic of poland is the common good of all citizens . on the grounds of the polish legislation, the common good is the constitutional value as well as the constitutional 10.53116/pgaflr.2018.1.8 mailto:eugen%40list.pl?subject= http://uzawadzka.org. mailto:u.zawadzka%40uwb.edu.pl?subject= https://doi.org/10.53116/pgaflr.2018.1.8 83 public governance, administration and finances law review • 1. 2018 rationalization of legally determined expenditure as a condition for strengthening financial accountability principle . on the grounds of the financial law, the public financial funds and an appropriate way of spending them should be the basis, though obviously not the only one, the instrument of the realization of the common good value (principle) . this was confirmed by the constitutional tribunal recognizing a properly constructed (and balanced) budget as a  necessary condition for the state to realize the goal of caring for the common good .1 however, the legally determined expenditure introduced without a  sufficient analysis of social needs and the financial consequences of their implementation can be an important barrier to the implementation of the common good principle, as the resignation from the legally determined expenditure requires the positive intervention of the legislator .2 therefore, the main purpose of this article is to analyse the relationship between financial accountability and legally determined expenditure . according to the adopted research hypothesis, increasing the financial accountability requires taking specific actions in the field of the legally determined expenditure . as the article is theoretical, it does not present the results of the empirical research; the formal-dogmatic method was used to interpret the content of legal acts and jurisprudence of the constitutional tribunal, as well as the nonobstructive method to analyse the foreign and polish literature presenting the results of both theoretical and empirical research . in the article, having presented in the introduction the methodological issues, first, the principle of common good (section 1), the financial accountability (section 2) and the legally determined expenditure (section 3) will be first explained . next, the solutions for the rationalization of the legally determined expenditure will be proposed (section 4) . we conclude that their implementation should increase the financial accountability to strengthen the constitutional principle of a common good . 2. implementation of the common good principle in a representative democracy an essential feature of the contemporary democratic systems is the choice of citizens’ representatives to take the public decisions, including the financial ones, in their interest, and therefore in accordance with the common good . the implementation of the state’s expenditure policy in the public interest, however, faces difficulties, as in today’s democracies the activity of citizens generally is limited to the participation in the elections .3 using the words of a . de tocqueville, “each individual endures being bound because he sees that it is not a man or a class, but the citizens emerge for a moment from dependency in order to indicate their master, and return to it” .4 the election of the citizens’ representatives in the elections process is accompanied by the principal-agent problem, which is the basis for explaining many phenomena in the sciences of public administration . this problem consists in that the rulers should not seek to pursue their own interests but they should take actions that serve only the public interest; however, in practice the citizens are unable to enforce their representatives and public administrators acting on their behalf not to pursue their own goals but the goals of society .5 thus, the implementation of a  policy that provides special privileges to groups that have narrow self-goals that run counter to the interests of particular voters and society as a whole does not serve the public interest .6 84 eugeniusz ruśkowski, urszula zawadzka-pąk public governance, administration and finances law review • vol. 3. no. 1. the basic cause of the problem of the principal-agent problem is the information asymmetry, as the information about the actions of public decision-makers is considered the common good .7 lack of the reliable and transparent information on the implementation of the common good principle is a  manifestation of the information asymmetry in the budgetary issues, analysed in this study . an important role in strengthening transparency, and in consequence of the effectiveness and efficiency of public policy implementation, and thus the implementation of the common good principle can play the performance budgeting . however, in poland, after several years of work on this instrument, launched in 2007, it has not become a subject of discussion in the parliament, nor even of more interest to citizens, hence its development boils down to a  large extent to the formal implementation of labour-intensive obligations stemming from the act of public finances8 and executive acts . however, even if the problems pointed out were solved, the performance budgeting alone would not solve the problem of the excessive legally determined expenditure, if not accompanied by additional instruments enabling rationalization of the non-elastic expenditure . 3. financial accountability as an instrument supporting the implementation of the common good principle n . dias notes that nowadays all over the world we observe the disappointment with the representative democracy system .9 similarly, a . toffler sees the problem of modern democracy, where the mass of voters are so far removed from their elected representatives that the politicians are becoming less and less accountable to the citizens .10 therefore, striving to propose the effective mechanisms for the implementation of the constitutional value of the common good, it was considered legitimate to consider the concept of accountability as the basis for further considerations, as the traditionally understood legal responsibility does not allow the effective enforcement of the common good principle . while there are no definitional doubts regarding the legal responsibility, which means the incurrence or potentiality of certain entities to incur normatively determined negative consequences (sanctions) of certain events or state of affairs,11 there is a  lack of the commonly accepted definition of the term “accountability” . as a . sroka notes, this term is most often used as a  kind of “conceptual umbrella” under which various definitions are located .12 accountability is based on various values and criteria, the most commonly used ones being procedural correctness, transparency, effectiveness, efficiency, usefulness, and sustainable development .13 although the concepts of contemporary accountability researchers are not fully consistent, t . schillemans,14 having made a  synthetic analysis of 230 publications, determined that the minimum conceptual consensus in the area of accountability includes the following issues: ƿ accountability is about providing answers towards others with a legitimate claim in some agents’ work . ƿ accountability is a  relational concept: it focuses our attention on agents who perform tasks for others and thus may be held accountable by others . 85 public governance, administration and finances law review • 1. 2018 rationalization of legally determined expenditure as a condition for strengthening financial accountability ƿ accountability is retrospective  –  ex-post  –  and focuses on the behaviour of some agent in general, ranging from performance and results to financial management, regularity or normative and professional standards . ƿ accountability is not a singular moment or situation, but rather refers to a layered process .15 in the definitions presented in the literature, the accountability is defined either as a social, administrative or political mechanism, institutional relation or arrangement in which a given person can be held accountable by another person or institution, or, less often as an advantage, the desired quality (value) of the state, governments or officials .16 accountability is not a  single moment or situation, but is a  multi-stage process consisting of three analytically distinct phases: ƿ the information phase, when the agent renders an account on his conduct and performance to a significant other . ƿ the debating phase, when the principal assesses the information (transmitted orally or in writing ) and both parties often engage in a  debate on this account . the principal may ask for additional information and pass judgment on the behaviour of the agent . the agent will then answer questions and if necessary justify and defend his course of action . ƿ the sanctions or judgment phase, when the principal comes to a  concluding judgment and decides whether and how to make use of available sanctions .17 definitional difficulties, at least partially, result from the existence of the varieties of the accountability, of which only a part has been precisely explained . b . wampler18 noted that the configuration of the three types of accountability, separated on the basis of the subjective criterion (the accounter) plays a  particularly important role in strengthening financial accountability, i .e .: ƿ the vertical accountability is realized by the citizens (society) towards to public officials, the elected ones and expansively to administration subordinated to them,19 using its basic instrument (the election), during which voters can, at least in theory hold accountable for decisions realized in public interest . the main disadvantage of this approach limits the role of citizens to the only role of a voter, while the rulers make countless decisions affecting the well-being of each of them . ƿ the horizontal accountability, being the extension of the vertical accountability, is based on the distribution of authority among different departments or branches of government and the system of checks and balances .20 ƿ the social accountability is realized by widely understood institutions of civil society . this kind of accountability, even if it is not legally institutionalized, can be particularly effective in strengthening the basic mechanisms of vertical and horizontal accountability . for example, vertical accountability may strengthen the disclosure of illegal practices of politicians, jeopardizing election results . in turn, horizontal accountability may lead to the destruction of the reputation of a corrupt public official, a lawsuit against public transport unit or a school that segregates in a racial manner .21 86 eugeniusz ruśkowski, urszula zawadzka-pąk public governance, administration and finances law review • vol. 3. no. 1. in turn, by applying the criterion of the subject (matter), to which accountability refers, among others, the educational accountability, the accountability in health care, or the ecological accountability can be distinguished . however, given the fact that almost every public policy requires public finances, the accountability for making decisions in the area of public expenditure and revenues (i .e . the financial accountability) seems crucial for the strengthening the common good principle . in the literature as well as in government documents (in english) the terms “financial (fiscal) accountability”22 as well as “budgetary accountability”23 do exist, however, there are no definition or distinctive features . analysing the context of the use of these terms, it can be stated that sometimes these terms are used interchangeably,24 however, more often the budgetary accountability means the accountability for the implementation of expenditure and revenues already planned in the budget, whereas the financial accountability is used in a broader context, as it is not limited to planned expenditure and revenue but covers public finances as a whole without budgeting them . financial accountability refers to the potential use of public funds, it is not limited by the content of financial (budgetary) documents of an authorizing and planning nature, with a  view to making the best use of available resources in the public interest . the analysis of the literature can also give the impression that in practice attempts are made to implement fiscal accountability, while financial accountability in the public sector still remains in the sphere of postulates and scientific considerations . thus it can be stated that on the ground of the financial law, the accountability, as opposed to legal responsibility, may not necessarily result from the legal norm . moreover, accountability, unlike in the case of legal responsibility, does not have to be accompanied by the possibility of applying a legal sanction . 4. essence of legally determined expenditure the legally determined expenditure is the part of public expenditure that the state is obliged to realise under the national or international law, contracts or court judgments . the etiolog y of this concept is therefore legal in nature,25 but it is distinguished primarily due to the systemic and organizational effects and economic consequences . the legally determined expenditure limit the freedom of decisions of state authorities regarding the optimal use of public funds, as they bind these authorities when determining the state budget expenditure . this can have negative effects on the improvement of expenditure efficiency, the size of developmental expenditure and the possibility of state intervention in emergency situations (e .g . the natural disasters, the economic crises) .26 there are doubts related to the content of the legally determined expenditure of the state budget, and thus the question of what types of expenditure should be included in this category . traditionally among the legally determined expenditure are classified: the subsidies for local government units, subsidies to the social insurance fund and the pension fund, the expenditure on road infrastructure, the debt service of the treasury, the national defence, the offices of the supreme state authorities, the control and protection of the law, the judiciary, the social pension, the family benefits (including financing the “500+ 87 public governance, administration and finances law review • 1. 2018 rationalization of legally determined expenditure as a condition for strengthening financial accountability program” providing monthly payment of pln 500 for the second and subsequent child) and benefits from the maintenance fund, the benefits from child support fund, payments from social insurance institution and agricultural social insurance fund, the social and health insurance contributions covered from the state budget, co-financing of projects with the participation of european funds, the pension benefits paid from the state budget, the subsidies for the state fund for the rehabilitation of disabled people, own resources of the european union .27 however, due to the fact that the concept and scope of the legally determined expenditure are not directly regulated by law, such selection will always be subjective . in the literature, other categories of public expenditure are sometimes considered as the legally determined expenditure, close to the legally determined expenditure or the quasilegally determined expenditure .28 this applies in particular to the expenditure of the state budget for multi-annual programs, for grants to local government units (especially commissioned tasks), etc . it seems necessary, at least for planning purposes, to develop an official methodolog y for determining (and possibly listing ) the legally determined expenditure . most of the doctrinal studies regarding the expenditure of the legally determined expenditure concentrate on the establishment and the global criticism of the size of this expenditure . it is estimated that in poland they cover about 75%, whereas the flexible expenditure is about 25% of state budget expenditure . very often, this global criticism, postulating a  reduction in the level of the legally determined expenditure, ignores their diverse character regarding both the possibility of affecting their amount of state authorities, as well as the developmental character of some of them . we are against the method of the globalization of the legally determined expenditure, which in extreme cases may lead to the administrative determination of their border, advocating the need for individualized analysis of them and  –  as a  result  –  the individual rationalization of the legally determined expenditure of the state budget . the doctrine also postulates numerous and detailed changes in the scope of the legally determined expenditure . it is worth paying attention to two proposals, which may be of significant importance for further discussions of the rationalization of the legally determined expenditure . first, it is postulated to progressively withdraw from the so-called indexed expenditures in which changes relate to certain amounts or changes in other expenditure groups .29 this is not about the mere parametric construction of the regulations, which was treated as a  specific achievement in legislation, but about the fact that often indicated parameters are not up-to-date because they come from many years ago, and deprive state authorities of the possibilities of flexible, current action . second, in the opinion of some authors, the legally determined expenditure, the exceeding of a  certain level (e .g . 75% of total budget expenditure): it should give the parliament the obligation to review sui generis “laws” giving rise to payment of benefits to third parties for the purpose of repealing them or the for future changes .30 it would also be an opportunity to renew the content of the social contract without revolutionary or fundamental system changes .31 despite the critical attitude of the legal doctrine to the legally determined expenditure and their basic categories, it can be stated that in practice they grow from year to year in absolute numbers as well as in relation to total state budget expenditure . so there is a classic 88 eugeniusz ruśkowski, urszula zawadzka-pąk public governance, administration and finances law review • vol. 3. no. 1. example of the contradiction between science and practice, which is quite common in the area of public finances and financial law (e .g . regarding target funds, de-budgeting, the simplicity of tax law, etc .) . in 1998, the legally determined expenditure amounted to around 47% of state budget expenditure32 and were hence subject to constant, absolute and relative growth, with the exception of some decline in 2004–2006 . in 2007 they reached the level of 73% of state budget expenditure33 . in the report of the council of ministers on the implementation of the state budget for 2012, it is stated that the legally determined expenditure constitutes about 75% of the total state budget expenditure .34 the management of public finances in poland in the last decade is subject to extremely opposite scientific assessments . regardless of their reasons, two weaknesses in the fiscal policy of this period can be pointed out, also regarding the formation of the legally determined expenditure . the first one results from too little analysis of the risk of internal and external decisions regarding the public expenditure, the second is the failure to take or undertake with a  long delay the necessary public finance reforms . the political struggle exerting a  particular influence on the formation of the legally determined expenditure is intensified as part of election campaigns . even if we assume that only a part of the election announcements will be implemented, their impact often increases the legally determined expenditure, making it difficult to achieve the balance of public finances . fiscal policy directed at the rationalization of the legally determined expenditure should, therefore, concentrate on the first two reasons for shaping them, striving to eliminate (or limit) the other factors mentioned above .35 5. conditions of rationalization of legally determined expenditure planning the critical attitude of the public finance science and financial law towards the amount and the structure of the fixed state budget expenditures has, to a small extent, affected the fiscal policy pursued in this area . apart from some exceptions (e .g . j . hausner’s policy in the years 2004–2006), the public authorities limited their actions to single, uncoordinated activities, which cannot be called a  detailed policy . in the recent period, even the notion the legally determined expenditure has been omitted in both the budget documents and the multiannual state financial plan . the problem of the rationalization of the legally determined expenditure will not be solved spontaneously and automatically by the expenditure rules, multi-annual planning or performance budgeting  –  these are the instruments for an appropriate use in conducting detailed fiscal policy regarding the legally determined expenditure . therefore, starting with the realization of spending review by the polish ministry of finance should be positively assessed, unfortunately, they cover relatively narrow areas and to make it worse, not in a comprehensive way . in this context, it will be particularly important: ƿ to develop a methodolog y to classify certain expenditure as the legally determined expenditure (broad or narrow approach), ƿ to present the problem and the amount of the legally determined expenditure structure for discussion to the government and parliament, using the detailed 89 public governance, administration and finances law review • 1. 2018 rationalization of legally determined expenditure as a condition for strengthening financial accountability information about this expenditure in the justification of the budget bills and the descriptions of the council of ministers’ reports on the implementation of the budget, ƿ to determine the treatment of the legally determined expenditure of the nonuniform nature, from the point of view of their flexibility and the impact on economic development (e .g . subsidies for local government units, the legally determined expenditure in the form of 2% of gdp on defence, which implies that at least 20% will be intended for property purposes), ƿ to develop the effective ways of encouraging the legislative bodies (parliament, the senate) to participate in the process of the rationalization of the legally determined expenditure, at the level of development of the assumptions and methodolog y of this process . the legally determined expenditure is an expression of the action of these bodies, not always acting on the request of the government . so imposing the principles and methodolog y of the rationalization of the legally determined expenditure by the executive bodies and the public managers may result in the indifference or the obstruction of the legislative bodies and repeat the negative experiences in this area with the introduction of performance budgeting in poland,36 ƿ to optimally use the existing achievements of bodies dealing with the introduction of performance budgeting in poland, and partially also the rationalization of public expenditure, not to commit the error that new people are starting from the beginning to solve problems, already partly or completely resolved,37 ƿ understanding that methods of limiting public spending should not be treated as the best (or even the only one) method of the rationalization of the public expenditure . often, it may be in the interest of poland to increase public expenditure or to reduce in a  very slow peace . the point here is to launch mechanisms that on the one hand will replace one public expenditure with others, and on the other hand to cover new public expenditures with discretionary budget revenues . this conclusion fully applies to the rationalization of the legally determined expenditure .38 6. conclusions the conditions of rationalization of the legally determined expenditure presented above constitute an important, though obviously not the only one condition to increase the financial accountability in the field of public expenditure, both in terms of horizontal, vertical and social accountability . in the vertical and social dimension, the introduction of the transparent, reliable methodologically and the efficient methods for classifying the legally determined expenditure will allow meeting the needs of citizens (i .e . the principal in the electoral process) to a  greater extent than before, limiting the electoral goals of politicians (i .e . agents) . on the other hand, in the horizontal dimension of the accountability, determining the existing and desired scope of the legally determined expenditure will strengthen the rationality of planning, execution, and control of state 90 eugeniusz ruśkowski, urszula zawadzka-pąk public governance, administration and finances law review • vol. 3. no. 1. budget expenditure . the above considerations allow confirming the research hypothesis adopted in the introduction, according to which the increase of financial accountability requires taking certain actions in the scope of the legally determined expenditure . however, it is conditioned by the existence of the reliable information and analysis of budget expenditure, and within them of the legally determined expenditure, carried out on the regular basis . it seems valuable to use british experience in this area .39 in conclusion, without denying the pertinence of the existence of certain categories of the legally determined expenditure, it should be borne in mind that they should serve the implementation of the common good principle, not accidentally expressed in the first article of the constitution of the republic of poland . 91 public governance, administration and finances law review • 1. 2018 rationalization of legally determined expenditure as a condition for strengthening financial accountability references 1 pl: constitutional tribunal, sk 36/07, iii .4 . 2 urszula kinga zawadzka-pąk, shaping financial accountability via participatory budgeting  –  theoretical framework for axiological and legal analysis . paper submitted for the xvii center conference entitled “currency, taxes and other institutes of financial law in the year of the 100th anniversary of the founding of czechoslovakia”, prague 2018 . 3 in this regard the activity of civil societies acting in frame of the participatory (deliberative) democracy should be positively assessed – from the perspective of the political science, and in the frame of governance assessing from the perspective of the science of public management . cf . urszula kinga zawadzka-pąk, op. cit. 4 alexis de tocqueville, democracy in america, (indianapolis, liberty fund, 2010) . 5 joseph stiglitz, ekonomia sektora publicznego [economy of the public sector], 238–239 (warsaw, pwn, 2013) . 6 arye leo hillman, public finance and public policy. responsibilities and limitations of government, 73–74 (cambridge, cambridge university press, 2004) . 7 ibidem . 76 . 8 public finance act of 27 august, as amended; compare: eugeniusz ruśkowski, urszula kinga zawadzkapąk, activity-based budget in the light of theoretical principles and practical experiences of selected countries, 622–633, in radim boháč (ed .), current issues of finance and financial law from the viewpoint of fiscal and monetary promotion of economic growth in the countries of central and eastern europe after 2010 (prague, leges, 2010); eugeniusz ruśkowski, urszula kinga zawadzka-pąk, o możliwości wykorzystania w polsce doświadczeń zagranicznych w zakresie budżetu zadaniowego [on the possibility of using foreign experience in poland in the field of performance budgeting ], 139–150, in barbara woźniak, marta postuła (eds .), budżet zadaniowy metodą racjonalizacji wydatków [performance budgeting as the method of the expenditure rationalization] (warsaw, cedewu, 2012) . 9 nelson dias, twenty-five years of participatory budgets in the world: a  new social and political movement? 21–27, in hope for democracy  –  25 years of participatory budgeting (são brás de alportel, nelson dias, 2014) . 10 alvin toffler, szok przyszłości [future shock], 472 (poznań: zysk i s-ka, 1998) . 11 wiesław lang, jerzy wróblewski, sylwester zawadzki, teoria państwa i prawa, 385 . (warsaw, pwn, 1986) . 12 anna sroka, rozliczalność w badaniach jakości demokracji (na przykładzie polski i hiszpanii) [accountability in research on the quality of democracy (on the example of poland and spain)], 17 (warsaw, elipsa, 2011) . 13 krzysztof olejniczak, organizacje uczące się. model dla administracji publicznej [learning organizations. model for public administration], 54 . (warsaw, scholar, 2011) . 14 thomas schillemans, the public accountability review: a  meta-analysis of public accountability research in six academic disciplines . working paper . 13–14 . (utrecht university school of governance, 2013) . 15 ibidem . 16 robert goodin, thomas schillemans (eds .), the oxford handbook of public accountability, 7–10 . (oxford, oxford university press, 2014) . 17 thomas schillemans, the public accountability review, op . cit ., 13–14 . 18 brian wampler, participatory budgeting in brazil contestation, cooperation, and accountability, 17 (pennsylvania, penn state university press, 2007) . 19 guillermo o’donnell, horizontal accountability in new democracies, 3, journal of democracy (1998) . 20 adam przeworski, susan stokes, bernard manin, democracy, accountability, and representation, 50, (new york, cambridge university press, 1999) . 21 catalina smulovitz, enrique peruzzotti, societal and horizontal controls: two cases of a  fruitful relationship, 311, in scott mainwaring, christoper welna (eds .), democratic accountability in latin america . (new york, oxford university press, 2003) . 22 anwar shah (ed .), participatory budgeting, 2 (washington, the world bank, 2007) . https://doi.org/10.15290/acr.2018.11.11 https://doi.org/10.7366/9788373836327 https://doi.org/10.1093/oxfordhb/9780199641253.001.0001 https://doi.org/10.1017/cbo9781139175104 https://doi.org/10.1093/0199256373.003.0010 https://doi.org/10.1596/978-0-8213-6923-4 https://doi.org/10.15290/acr.2018.11.11 https://doi.org/10.7366/9788373836327 https://doi.org/10.1093/oxfordhb/9780199641253.001.0001 https://doi.org/10.1017/cbo9781139175104 https://doi.org/10.1093/0199256373.003.0010 https://doi.org/10.1596/978-0-8213-6923-4 92 eugeniusz ruśkowski, urszula zawadzka-pąk public governance, administration and finances law review • vol. 3. no. 1. 23 becky carter, evidence on budget accountability and participation (birmingham, gsdrc, 2013) . 24 public financial accountability . budget documents, quebec gouvernement du québec, 2017 . yves herzberg sintomer, giovanni carsten allegretti, participatory budgeting worldwide . 25 (dialog global, 2013) . http://portugalparticipa .pt/upload_folder/table_data/c3164679-c343-4715-b198-576aee3d4ad1 /files/dialog-global .pdf (accessed 20 april 2018) 25 teresa dębowska-romanowska, charakter, charakter prawny i  klasyfikacja tzw . wydatków sztywnych a  granice swobody politycznej władz państwa [character, legal character and classification of the legally determined expenditure and the limits of political freedom of state authorities], in jan głuchowski, alicja pomorska, jolanta szołno-koguc (eds .), uwarunkowania i bariery w procesie naprawy finansów publicznych [conditions and barriers in process of public finances repair], 279 (lublin, kul, 2007) . 26 see: e .g . piotr russel, wydatki budżetowe w  polsce [public expenditure in poland], studia biura analiz sejmowych [studies of parliamentary (sejm’s) analysis office] 3, 6 (2010); agata bury, wydatki prawnie zdeterminowane w  budżecie państwa, zeszyty naukowe uniwersytetu szczecińskiego [legally determined expenditure in the state budget, scientific notes of university of szczecin] 38, 33 (2011) . 27 this list of the legally determined expenditure is presented by budzyński, tomasz, opinia o  ustawie budżetowej na rok 2013 [opinion on the budget act for 2013], opinie i ekspertyzy [opinions and expertises], 198, 10 (2012) . 28 cf . agata bury, op . cit ., 32; alicja kasperowicz-stępień, kształtowanie się wydatków publicznych w polsce w latach 2005–2009 [public spending in poland in 2005-2009], zeszyty naukowe polskiego towarzystwa ekonomicznego [scientific papers of polish economic society] 10, 88 (2011) . 29 cf . alicja kasperowicz-stępień, op . cit . 91 . 30 therefore, the findings and recommendations included in two parts of the report of the ministry of finance on spending reviews related to the issue of the legally determined expenditure should be positively assessed . cf . przegląd wydatków publicznych: mechanizmy waloryzacyjno-indeksacyjne oraz uwarunkowania prawne determinujące poziom wydatków sztywnych, w szczególności w obszarze wydatków socjalnych. część i i ii [valuation-indexation mechanisms and legal conditions determining the level of legally determined expenditure, in particular in the area of social spending. part i and ii] (warsaw, ministerstwo finansów [ministry of finance], 2017) . 31 teresa dębowska-romanowska, op . cit ., 292 . 32 alicja kasperowicz-stępień, op . cit . 87 . 33 cf .: jerzy żyżyński, budżet i polityka podatkowa. wybrane zagadnienia [budget and tax policy. selected issues], 97–98 (warszawa, pwn, 2009) . 34 sprawozdanie z  wykonania budżetu państwa za okres od 1  stycznia do 31  grudnia 2012  r . omówienie [report on the implementation of the state budget for the period from 1 january to 31 december 2012 . description], 54 (warsaw, rada ministrów [council of ministers], 2013) . 35 for more details on the essence of the legally determined expenditure cf .: eugeniusz ruśkowski, wydatki sztywne budżetu państwa [legally determined expenditure of state budget], zeszyty prawnicze biura analiz sejmowych [legal notes of parliamentary (sejm’s) analysis office], 10–17 (2015) . 36 eugeniusz ruśkowski, urszula kinga zawadzka-pąk (ed .), prawne problem konstrukcji i  funkcjonowania budżetu zadaniowego we francji. wnioski dla polski [legal problem of the construction and functioning of the performance budgeting in france. applications for poland], 103 and the following (białystok: temida 2, 2010) . 37 marta postuła, instrumenty zarządzania finansami publicznymi [public finance management instruments], 150 and the following (warszawa: wydawnictwo naukowe wydziału zarządzania uniwersytetu warszawskiego [scientific publisher of the faculty of management at the university of warsaw], 2015) . 38 eugeniusz ruśkowski, wydatki sztywne [legally determined expenditure], op . cit ., 20–21 . http://portugalparticipa.pt/upload_folder/table_data/c3164679-c343-4715-b198-576aee3d4ad1/files/dial http://portugalparticipa.pt/upload_folder/table_data/c3164679-c343-4715-b198-576aee3d4ad1/files/dial 93 public governance, administration and finances law review • 1. 2018 rationalization of legally determined expenditure as a condition for strengthening financial accountability 39 urszula kinga zawadzka-pąk, instrumenty nowego zarządzania finansami publicznymi w wielkiej brytanii [instruments of the new public financial management in the united kingom], 151–174, in eugeniusz ruśkowski (ed .), instrumenty nowego zarządzania finansami publicznymi w wybranych krajach unii europejskiej [instruments of new public finance management in selected european union countries], (białystok: temida 2) . © 2018 dialóg campus, budapest public governance, administration and finances law review vol. 3. no. 1. (2018) • 94–108. macroeconomic legal trends in the eu11 countries lászló vértesy* * lászló vértesy, phd jur . phd œc . associate professor for administrative law and finance at the national university of public service, faculty of public administration in hungary . since 2005 he has been constantly teaching in higher education, presenting lectures, participating in conferences in hungary and in other countries . his work encompasses a  number of fields: in jurisprudence: administrative law (public administration, administrative procedure, efficiency and management, public tasks, good governance), financial law, banking and commercial law; and in economics: macroeconomics, financial sector, monetary and fiscal policy, business cycle, furthermore law and economics . (e-mail: vertesy .laszlo@uni-nke .hu) abstract: this contribution deals with the macroeconomic legal trends in the eastern member states of the european union, so called eu11: bulgaria, croatia, the czech republic, estonia, latvia, lithuania, hungary, poland, romania, slovakia and slovenia . the paper discusses the development from the 1990s to nowadays, emphasizing the initial changes and the consolidation after the financial crisis . therefore, the fiscal policy bears a  major attention: fiscal and budgetary stability, government debts, fiscal controls (auditing and independent fiscal councils), for a more comprehensive overview, some ports of the monetary policy will be examined: national banks and price stability . the main aim of the contribution is to confirm or disprove the hypothesis that there is any identifiable or verifiable correlation between the legislation and the macroeconomic trends: sustainable balanced budget and government debt, economic growth, inflation . the research is based on law and economics, especially law and finance methodolog y with quantitative analysis, because of the cross-discipline nature of the topic . the paper contains some comparative statistics to evaluate the certain results upon figures, because it is even important to match the legal provisions with the economic performance . keywords: llaw and finance; law-making ; eu countries; macroeconomics; government debt; inflation; economic growth 1. introduction the main aims of the article are to summarise the economic and legal development of the eastern member states of the european union . the terminolog y eu11 countries refer the central, eastern and baltic european member states which accessed in 2004 and after: in 2004 the czech republic, estonia, latvia, lithuania, hungary, poland, slovenia, and the slovak republic; in 2007 bulgaria, romania; and in 2013 croatia . in the recent years, numerous reforms related to public law and finance can be found . therefore, it is interesting to demonstrate the close or loose relationships between the legislative and the macroeconomic trends, in order to find out how public finances are developing with or without legal background . because of the fact that the eu11 countries are rule of law states, and particularly even the prescriptions of the maastricht criteria and the stability 10.53116/pgaflr.2018.1.9 mailto:vertesy.laszlo%40uni-nke.hu?subject= https://doi.org/10.53116/pgaflr.2018.1.9 97 public governance, administration and finances law review • 1. 2018 macroeconomic legal trends in the eu11 countries ƿ a national budget deficit at or below 3 percent of the gross domestic product (gdp); ƿ national public debt not exceeding 60 percent of the gross domestic product, a country with a higher level of debt can still adopt the euro provided its debt level is falling steadily; ƿ long-term interest rates should be no more than two percentage points above the rate of the three eu countries with the lowest inflation over the previous year; ƿ the national currency is required to enter the erm 2 exchange rate mechanism two years prior to entry . at the national level, after the financial crisis, a  relatively new trend can be identified: finances increasingly become enfolded even into the level of constitutionalism . in addition to some general and common fiscal provisions (economic system, budgeting, taxation, state audit, central bank, national currency, national wealth or assets) in some of the eu11 countries, a  separate chapter deals with macroeconomics and public finances: hungary (chapter: public finances, articles 36–44), lithuania (chapter xi finances and the state budget), poland (chapter x . public finances), slovenia (part vi .  public finance) . these sections contain more and more detailed regulations on a  balanced budget and interim, temporary rules, budgetary settlements and accounting, state audit and controls, the decisions or the management of the general government debt, central bank or the state treasury . 3. fiscal stability two criterions of the maastricht criteria focus on fiscal issues: an annual deficit below 3% and a  general government debt below 60% of the gdp . the stability and growth pact (sgp), which was introduced as a  framework to ensure price stability and fiscal responsibility, adopted identical limits for governments budget deficit and debt as the convergence criteria . due to the fact that several countries did not exercise a sufficient level of fiscal responsibility during the first ten years of the euro’s lifetime, two major sgp reforms were introduced . the first reform was the sixpack which entered into force in december 2011, and relates to the following regulations and guidelines for fiscal and monetary policy:7 ƿ regulation 1173/2011: on the effective enforcement of budgetary surveillance in the euro area; ƿ regulation 1174/2011: on enforcement action to correct excessive macroeconomic imbalances in the euro area; ƿ regulation 1175/2011 amending regulation 1466/97: on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies; ƿ regulation 1176/2011: on the prevention and correction of macroeconomic imbalances; 98 lászló vértesy public governance, administration and finances law review • vol. 3. no. 1. ƿ regulation 1177/2011 amending regulation 1467/97: on speeding up and clarifying the implementation of the excessive deficit procedure; ƿ directive 2011/85/eu: on requirements for budgetary frameworks of the member states . later, in january 2013, it was followed by the even more ambitious fiscal compact, which was signed by the eu member states . this twopack contains two regulations to reform a part of the stability and growth pact for eurozone member states: regulation 473/2013: on common provisions for monitoring and assessing draft budgetary plans and ensuring the correction of excessive deficit of the member states in the euro area, regulation 472/2013: on the strengthening of economic and budgetary surveillance of member states in the euro area experiencing or threatened by serious difficulties with respect to their financial stability . 3.1. budgetary stability and government debt the budgeting follows a  historically and internationally accepted concept . the legislature assesses  –  by an act  –  the central budget and with a  separate action adopts its implementation, final account for each year . the executive is responsible for submitting the proposal, and authorised (by the legislative adoption of the act on the central budget) to implement it, by collecting the revenues and disbursing the expenditures . the state audit of the government budget and the expenditures is an essential control element in public finances . the constitutions establish a  separate public organ, which is independent, and/or subordinated to the legislature (parliament or the national assembly), strengthens the system of checks and balances, and its president or the chief accountant elected for a longer term than the parliamentary election: 6–12 years . the naming is different, the most common expressions are the following : supreme, state audit institution, chamber, committee office or court, furthermore instead of audit control can be found, it reflects the auditors or accounts . the list of eu11 countries supreme audit institutions: сметна палата (bulgaria), državni ured za reviziju (croatia), nejvyšší kontrolní úřad (the czech republic), riigikontroll (estonia), valsts kontrole (latvia), valstybës kontrolë (lithuania), állami számvevőszék (hungary), najwyższa izba kontroli (poland), curtea de conturi (romania), računsko sodišče (slovenia), najvyšší kontrolný úrad (slovakia) . after the mortgage-debt financial crisis and the european debt crisis, it can be observed that the principle of balanced, transparent and sustainable budget management became more and more important .8 therefore, the general government debt and the deficit are the crucial areas . 99 public governance, administration and finances law review • 1. 2018 macroeconomic legal trends in the eu11 countries table 2. general government deficit/surplus (% gdp) 2005 2008 2009 2010 2013 2015 2017 bgr 1 .8 1 .6 –4 .1 –3 .1 –0 .4 –1 .6 0 .9 hrv –3 .4 –2 .8 –6 –6 .5 –5 .3 –3 .4 0 .8 cze –2 .2 –2 –5 .5 –4 .2 –1 .2 –0 .6 1 .6 est 2 .9 –2 .7 –2 .2 0 .2 –0 .2 0 .1 –0 .3 hun –9 .3 –3 .7 –4 .5 –4 .5 –2 .6 –1 .9 –2 lva –0 .5 –4 .2 –9 .1 –8 .7 –1 .2 –1 .4 –0 .5 ltu –0 .3 –3 .1 –9 .1 –6 .9 –2 .6 –0 .2 0 .5 pol –3 .6 –3 .6 –7 .3 –7 .3 –4 .1 –2 .6 –1 .7 rom –2 .1 –5 .4 –9 .2 –6 .9 –2 .1 –0 .8 –2 .9 svk –3 .6 –2 .4 –7 .8 –7 .5 –2 .7 –2 .7 –1 svn –1 .2 –1 .4 –5 .8 –5 .6 –14 .7 –2 .9 0 avr. –2.0 –2.7 –6.4 –5.5 –3.4 –1.6 –0.4 source: own compilation based on eurostat: general government deficit/surplus, 2018 the balance of the budget is the surplus (sufficit) or the deficit, which essentially compromises the change of the government debt. table 3. general government gross debt (% gdp) 2000 2005 2008 2009 2010 2013 2015 2017 bgr 71 .2 26 .8 13 13 .7 15 .3 17 26 25 .4 hrv 35 .5 41 .1 39 48 .3 57 .3 80 .5 83 .8 78 cze 17 27 .9 28 .3 33 .6 37 .4 44 .9 40 34 .6 est 5 .1 4 .5 4 .5 7 6 .6 10 .2 10 9 hun 55 .3 60 .5 71 .6 77 .8 80 .2 77 .1 76 .7 73 .6 lva 12 .1 11 .4 18 .2 35 .8 46 .8 39 36 .8 40 .1 ltu 23 .5 17 .6 14 .6 28 36 .2 38 .8 42 .6 39 .7 pol 36 .5 46 .4 46 .3 49 .4 53 .1 55 .7 51 .1 50 .6 rom 22 .4 15 .7 12 .4 22 .1 29 .7 37 .5 37 .7 35 svk 49 .6 34 .1 28 .5 36 .3 41 .2 54 .7 52 .3 50 .9 svn 25 .9 26 .3 21 .8 34 .6 38 .4 70 .4 82 .6 73 .6 avr. 32.2 28.4 27.1 35.1 40.2 47.8 49.1 46.4 source: own compilation based on eurostat: general government gross debt, 2018 nonetheless, the average of the government debt in the eu11 countries is nearly 46%, but the deviation is great, because the lowest figure is 9% (estonia), but the highest is 78% (croatia) . only three countries are affected by high government debt: croatia, hungary and slovenia (over 70% of the gdp), while slovakia and poland fulfil the maastricht 100 lászló vértesy public governance, administration and finances law review • vol. 3. no. 1. requirement, but only with 10% below the threshold . nevertheless, there is no excessive deficit procedure against one of the member states . the trend shows that the sovereign debt ratio to the gdp in most of the countries has been rising, and after the financial crisis, and the introduction of the national provisions and the implementation of the stability and growth pact,9 a  general slight decrease can be observed in the countries with higher debt ratio to the gdp than it is stated in the maastricht criteria (croatia, hungary, slovenia) . on the one hand, the excessive deficit procedure,10 and the possibility of fining proved to be effective, but even the national legislation can coerce the state for relevant efforts . in lithuania, the decisions concerning the state loan and other basic property liabilities of the state shall be adopted by the seimas on the proposal of the government .11 in poland it is neither permissible to contract loans, nor provide guarantees and financial sureties which would engender a national public debt exceeding three-fifths of the value of the annual gross domestic product .12 hungary has the strictest constitutional rule on budgeting and government debt, since that the national assembly may not adopt an act on the central budget as a result of which state debt would exceed half of the gdp, and as long as this condition is not satisfied, the national assembly may only adopt a  central budget which provides for state debt reduction in proportion to the gdp, and no such borrowing may be contracted and no such financial commitment may be undertaken .13 the public financial consolidation is proven to be more important than fundamental rights and constitutional guarantees, because as a  further restriction, as long as the state debt exceeds half of the gdp, the constitutional court may review the acts on the central budget and central taxes for conformity with the fundamental law exclusively in connection with life and human dignity, protection of personal data, to freedom of thought, conscience and religion, and it may annul these acts only for the violation of these rights . the results are obvious: slight decrease (7%) of the government debt ratio, and the excessive deficit procedure was abrogated, shortly after the adoption of the fundamental law (2011) .14 it can be said that without this restriction and limitation, the previous governments originated an excessive state debt by borrowing huge credits and loans . but it has to be noted that the same and higher decrease can be observed without such a provision (e .g . the czech republic, latvia, slovenia), and others can maintain on a  low level (estonia) . the macroeconomic stabilisation involved lower levels in hierarchy of sources of law: acts, cardinal or organic acts, strategic government decisions etc ., for example in hungary act cxciv of 2011 on the economic stability was adopted . in some other countries (poland, slovenia, estonia) the acts on public finances define the restrictions . 101 public governance, administration and finances law review • 1. 2018 macroeconomic legal trends in the eu11 countries table 4. structural primary balance and fiscal efforts   structural primary balance (% of gdp) consolidation effort   2012 2013 2014 2015 2016 2013 2014 2015 2016 bgr 0 .70 0 .40 0 .00 0 .10 0 .00 –0 .30 –0 .40 0 .10 –0 .10 cze 0 .10 0 .00 –0 .30 –0 .50 –1 .00 –0 .10 –0 .30 –0 .20 –0 .50 est 0 .30 –0 .20 0 .50 0 .50 1 .00 –0 .50 0 .70 0 .00 0 .50 hun 3 .50 3 .10 2 .10 1 .70 1 .60 –0 .40 –1 .00 –0 .40 –0 .10 lva 0 .90 0 .00 –0 .10 –0 .60 –0 .90 –0 .90 –0 .10 –0 .50 –0 .30 ltu –1 .90 –0 .80 –0 .10 0 .60 1 .30 1 .10 0 .70 0 .70 0 .70 pol –0 .80 0 .00 0 .20 0 .30 0 .90 0 .80 0 .20 0 .10 0 .60 rom –1 .00 0 .20 0 .60 0 .70 0 .70 1 .20 0 .40 0 .10 0 .00 svk –2 .20 –1 .00 –0 .50 0 .20 0 .60 1 .20 0 .50 0 .70 0 .40 svn –0 .70 0 .10 1 .50 1 .30 1 .50 0 .80 1 .40 –0 .20 0 .20 avr. –0.11 0.18 0.39 0.43 0.57 0.29 0.21 0.04 0.14 source: own compilation based on berti–castro–salto: effects of fiscal consolidation envisaged in the 2013 stability and convergence programmes on public debt dynamics in eu member states. 13. in the interest of fiscal discipline, many countries have reduced the budget deficit, or maintain on a  low level, in order to meet the maastricht deficit criterion, furthermore to reduce the general government deficit ratio . according to the figures, the highest pressure was on the hungarian government . even the slovenian public debt ratio is high, but it has a balanced budget . after the consolidation, a significant proportion of the eu11 countries realized a sufficit in the budget for one or more years . 4.60% 4.83% 36.70% 1.76% 13.86% 3.47%0.46% 7.34% 5.35% 2.44% 4.20% r² = 0.296 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% lg d eb t % p ub lic d eb t lg debt % gdp figure 1. local government debts (% gdp and % public debt) source: own compilation based on eurostat government finance statistics [gov_10dd_logd], [gov_10dd_cgd] 102 lászló vértesy public governance, administration and finances law review • vol. 3. no. 1. in some countries, since the local government debt needs to be calculated into the general government debt, some state introduced different types of limitations for them .15 in estonia, limits for local debt were introduced from 2009 to 2012 . according to the financial management of local authorities act of 2011,16 the debt ceiling for local governments ranges from 60% to 100% of the current year operational revenues (depending on the municipality self-financing capacity) .17 in latvia local governments can only carry out long-term borrowing to finance investment projects (golden rule) . loans must be contracted with the state treasury or within specific funding programmes, or borrowing from another institution must be justified and authorised by the ministry of finance . the borrowing in a  given year cannot exceed 20% of current revenues .18 in poland the public finance act stipulates the sum of local loan instalments and interest payments must not exceed 15% of total debt,19 and later in 2014 it was declared, that the debt of local governments should not exceed 60% of gdp .20 in hungary, the fundamental law states, that in order to preserve a balanced budget, for any borrowing or for other undertaking of commitments by local governments to the extent determined in the stability act, certain conditions and/or the consent of the government are required .21 between 2011 and 2014 a comprehensive consolidation was carried out in four phases22 by the central government, while the local debts were overtaken by the government in amount of €4 .56 billion (huf 1,369 billion),23 which was 2 .78 % of gdp and 5 .54 % of the public debt . in slovenia local government borrowing rights are regulated by the public finance act (1999) and the financing of municipalities act (2006),24 which stipulate, that the municipalities have the right to borrow to finance certain types of investment projects (golden rule), but they need prior consent of the ministry of finance . in the czech republic, within the new fiscal framework, the law requires that the level of local government gross debt remains below 60% of a  four-year average of revenues . the bond issuance must be approved by the ministry of finance .25 3.2. independent fiscal council in some cases, in the order of the sustainable fiscality an advisory board involved in the budgetary procedure, by examining the feasibility of the central budget and taking part in the preparation, or the right of veto granted . the fiscal council of croatia has, for example, a  high degree of leverage . according to the so-called two-pack,26 euro area countries should have an independent body in place, such as a  fiscal council, which is in charge of monitoring compliance with numerical fiscal rules and, where appropriate, assessing the need to activate the correction mechanism foreseen under the fiscal compact .27 the deadline for setting up a fiscal council was october 2013 .28 the independent fiscal councils were established by the legislator  –  under different expressions  –  in bulgaria (фискален съвет на българия, fiscal council, 2015), croatia (odborza fiskalnu politiku, fiscal policy committee, 2013), estonia (eelarvenõukogu, fiscal council, 2014), latvia (fiskālās disciplīnas padome, fiscal discipline council, 2013), lithuania (lietuvos respublikos valstybės kontrolė, national audit office – budget policy monitoring department, 2014), hungary (költségvetési tanács, budget council, 103 public governance, administration and finances law review • 1. 2018 macroeconomic legal trends in the eu11 countries 2008), romania (consiliul fiscal, fiscal council, 2010), slovenia (urad rs slovenije za makroekonomske analize in razvoj, fiscal council, 2015 and institute of macroeconomic analysis and development, 1995), slovakia (rada pre rozpočtovú zodpovednosť, council for budget responsibility, 2012) .29 in poland no fiscal council was founded . most of them are members of the network of the eu independent fiscal institutions (eu ifis) .30 the roles and members are different, but generally the effectiveness of fiscal councils will largely depend on whether they are independent from political interference and whether they have functional autonomy . this is even based by a  more important law source, for example in slovenia the fiscal council was established by the implementation of the amendment of the constitution .31 in romania, the economic and social council is an advisory body of the parliament and government, in the specialised fields stated by the organic law for its establishment, organisation, and functioning,32 in hungary the budget council can be found in the fundamental law .33 only in latvia and slovenia are respective macroeconomic forecasts produced by fiscal councils .34 budgetary projections, which are produced in all countries by the government, are only scrutinised by an independent body for endorsement in romania and slovakia .35 in most countries the fiscal council members are academics or experts outside of the government, and their staff is mostly recruited on the basis of competence and experience .36 although the members of the hungarian budget council are the president of the budget council, the president of the national bank of hungary and the president of the state audit office, which may call into question the independence of the monetary policy and the audit . it can be stated, that after the introduction  –  besides the relevant legal provisions on fiscal stability  –  the macroeconomic figures slightly moved to a  better direction . the correlation is uncountable, because of the various and numerous indicators, but the observation raises the attention on the importance and the raison d’être of the independent fiscal councils . 4. price stability the other main part of public finances is monetary policy. the central banks are public institutions which possess the monopoly on managing and implementing the monetary policy of a  state or federation . generally, the constitutions contain the central bank and often the national currency . the functions of the central banks are the same, but the naming can be different, e .g . national bank: българска народна банка, (bulgaria) hrvatska narodna banka (croatia), česká národní banka (czech republic), mag yar nemzeti bank (hungary), narodowy bank polski (poland), banca națională a româniei (romania), národná banka slovenska (slovakia); or bank of a  country: eesti pank (estonia), latvijas banka (latvia), lietuvos bankas (lithuania), banka slovenije (slovenia) . the content of the constitutional provisions is brief and quite different, the details can be found in separate (cardinal or organic) acts, statutes . besides the monetary policy some central bank even performs the supervision of the financial intermediary system (the czech republic, hungary, lithuania, slovakia) . the legal, goal, operational and management independences are granted by 104 lászló vértesy public governance, administration and finances law review • vol. 3. no. 1. different ways . the governor or the president of the central bank is appointed by the president (e .g . hungary) or elected by the parliament (e .g . poland) for a longer term than the parliamentary cycle (five or six years) . the monetary decisions lay with a  monetary committee or governing council . in accordance with the independence and the sustainable government debt management, the principle of prohibition of monetary financing declares that overdraft facilities or any other type of credit facility with the european central bank or with the central banks of the member states in favour of union institutions, bodies, offices or agencies, central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of member states shall be prohibited, as shall the purchase directly from them by the european central bank or national central banks of debt instruments .37 in case of some eu11 countries, the national currency is not relevant yet, because they have already joined to the eurozone, therefore they use the common currency: estonia (2011), latvia (2014), lithuania (2015), slovakia (2009), slovenia (2007) . as it was read in the newspapers,38 the debt crisis in the eurozone caused that poland and the czech republic rethought their view of deeper monetary integration in 2010 . (in march 2018, the governors of the polish central declared its commitment to joining the eurozone .) the non-euro members are not in erm ii, but obliged to join the eurozone on meeting convergence criteria . the constitutions determine the national currency: the czech koruna, the hungarian forint, the polish złoty, the romanian leu, but two countries do not declare the legal tender: bulgaria (lev) and croatia (kuna) . 4.1. inflation there are no legal prescriptions on inflation in the examined countries legal system, but it is also important for the eu11 to comply with the maastricht criterion: inflation of no more than 1 .5 percentage points above the average rate of the three eu member states with the lowest inflation over the previous year . the inflation is the rate at which a  sustained increase in the general price level of goods and services in an economy over a  period of time, and consequently, the purchasing power of the currency is falling .39 the inflation rate is widely calculated by calculating the movement or change in a  price index, usually the consumer price index (cpi) .40 table 5. annual inflation ratio (%) 1990 1995 2000 2005 2008 2009 2010 2015 2016 bgr 23 .8 62 .05 10 .32 5 .04 12 .35 2 .75 2 .44 –0 .10 –0 .8 hrv 500 3 .95 4 .61 3 .32 6 .08 2 .38 1 .03 –0 .46 –1 .1 cze . . 9 .17 3 .90 1 .85 6 .35 1 .04 1 .41 0 .34 0 .6 est . . 28 .78 4 .02 4 .09 10 .37 –0 .08 2 .98 –0 .46 0 .1 hun 28 .97 28 .30 9 .78 3 .55 6 .07 4 .21 4 .88 –0 .07 0 .4 105 public governance, administration and finances law review • 1. 2018 macroeconomic legal trends in the eu11 countries 1990 1995 2000 2005 2008 2009 2010 2015 2016 lva . . 24 .98 2 .65 6 .72 15 .43 3 .47 –1 .07 0 .20 0 .1 ltu . . 39 .66 1 .01 2 .64 10 .93 4 .45 1 .32 –0 .88 0 .9 pol 555 28 .07 10 .06 2 .11 4 .35 3 .83 2 .71 –0 .99 –0 .6 rou . . 32 .24 45 .67 8 .99 7 .85 5 .59 6 .09 –0 .59 –1 .5 svk . . 9 .89 12 .04 2 .71 4 .60 1 .62 0 .96 –0 .33 –0 .5 svn . . 13 .46 8 .88 2 .48 5 .65 0 .86 1 .84 –0 .52 –0 .1 avr. .. 25.51 10.27 3.95 8.18 2.74 2.23 –0.35 –0.23 source: own compilation based on world bank: databank – world development indicators, 2018 in the early 1990s, due to the political changes above-mentioned almost in all the presented countries, there was a  double-digit, in some cases a  three-digit inflation . the artificial prices – kept by the government in the planned economy – suddenly went out of control, and the constituent governments for the first time did not know how to handle this . the inflation rate, in the examined area, relatively quickly dropped to below 5% by 2000, except romania . the economies of this decade  –  similar to the previous one  –  show a  moderate inflation . as a  new phenomenon, a  slight negative inflation (deflation) appeared in this decade in several countries (croatia, estonia, hungary, poland, romania, slovakia and slovenia) . the main reasons for this is that the world market prices of raw materials greatly fell (particularly in the case of crude oil), the euro exchange rate changed, or because of sluggish corporate investments . 5. conclusion the common attribute of the eu11 countries is that all of them have experiences about socialism, but nevertheless, the beginning of the 1990s was just roughly the same . for some of them becoming independent was the major challenge, while others needed to face with poverty and deep dictatorship also . economically, parallel with the political changes, and the democratic transition,  –  as a  rule of law states  –  the previous command economies were transformed via the legislation into market economies, and set up or renewed the major macroeconomic factors: budgetary rules, national audit, national currency, central bank . generally, they shortly encountered the following problems: high inflation, high unemployment, low economic growth and high government debt . by 2000 these economies were stabilised, and sooner or later between 2004 and 2013 all of them joined the european union . new macroeconomic requirements have arisen for them; the maastricht criteria became obligatory . later the stability and growth pact set stricter rules through national legislation by implementing e .g . the regulations and directives of the sixpack, because the financial crisis was a shocking milestone not just for the eu11, but for the other member states . 106 lászló vértesy public governance, administration and finances law review • vol. 3. no. 1. unfortunately, clear and verifiable correlation between the macroeconomic development and the legislation cannot be calculated, since the multitude of the factor and indicators . not only the legislators, but even the law applicators, the executive branch contributed to the positive results . only three countries are affected by high government debt: croatia, hungary and slovenia (over 70% of the gdp), while slovakia and poland fulfil the maastricht requirement but only with 10% below the threshold . nevertheless, there is no excessive deficit procedure against one of the member states . the balances of the central budget are lower than 3% of the gdp, sometimes change to surplus (sufficit) . for the budgetary stability some countries introduced different restrictions, particularly on government borrowings, and adopted limits on the financial autonomy of the local governments . all the eu11 countries founded  –  under different naming  –  independent fiscal council, except poland . in monetary policy the differences based on the eurozone, estonia, latvia, lithuania, slovakia, slovenia use the common currency . the economies of this decade  –  similar to the previous one  –  show a  moderate inflation . as a  new phenomenon, a  slight negative inflation (deflation) appeared in this decade in several countries (croatia, estonia, hungary, poland, romania, slovakia and slovenia), which demonstrates sensitivity regarding international developments . 107 public governance, administration and finances law review • 1. 2018 macroeconomic legal trends in the eu11 countries references 1 for summary, see gerhard schnyder, the law and finance school: what concept of law? (king’s college london, 2016) . 2 in hungary, the former constitution (act xx of 1949, amended in 1989) contained the social market economy in the preamble, but in the text, article 9 mentioned only the market economy . according to the interpretation of the constitutional court, the preamble is not obligatory for the state organs, therefore the economy is just market economy without any attribute, and the social market economy is just a  state goal . 33/1993 . (i . 28 .) ab resolution, abh 1993, 247, 249 . 3 constitution of slovakia, article 55 (1) the economy of the slovak republic is based on the principles of a socially and ecologically oriented market economy . 4 fundamental law of hungary, article m (1) the economy of hungary shall be based on work which creates value, and on freedom of enterprise . 5 tim callen, gross domestic product: an economy’s all (international monetary fund, 2012) . 6 the provisions are based on article 140 (ex-article 121 .1) of the treaty on the functioning of the european union and in the relevant protocols 7 “package of six legislative proposals .” hungarian presidency of the council of the european union . april 2011 . retrieved 11 may 2013. 8 katia berti, matteo salto, matthieu lequien, an early-detection index of fiscal stress for eu countries . european economy economic paper no . 475 . 2012 . and francesco caprioli, sandro momigliano, the macroeconomic effects of fiscal policy shocks during good and bad times, (mimeo . 2012) . 9 jocelyn boussard, francisco de castro, matteo salto, fiscal multipliers and public debt dynamics, consolidations. european economy economic paper no . 460 . (2012) and gianluca cafiso, roberto cellini, fiscal consolidations for debt-to-gdp ratio containment? maybe … but with much care, voxeu .org/ article/fiscal-consolidations-debt-gdp-containment (accessed 20 march 2012) . 10 treaty on the functioning of the european union, article 126 11 constitution of lithuania, article 128 . 12 constitution of poland, article 216 . 13 fundamental law of hungary, articles 36 and 37 . 14 alejandro guerson, the composition of fiscal consolidation matters: policy simulations for hungary . imf working paper (fiscal affairs department, 2013) . 15 kenneth davey (ed .), local government in critical times: policies for crisis, recovery and a  sustainable future . (council of europe, 2011) . 16 local government financial management act, www .riigiteataja .ee/en/eli/523052014001/consolide (accessed 8 june 2018) 17 oecd: estonia – subnational government country profile . 2017, 2 . 18 oecd: latvia – subnational government country profile . 2017, 2 . 19 gergő medve-bálint, dorothee bohle, local government debt and eu funds in the eastern member states: the cases of hungary and poland . maxcap working paper series, 18 (2016) . 20 oecd: poland – subnational government country profile . 2017, 2 . 21 the fundamental law of hungary article 34 (5), act cxciv of 2011 on the economic stability of hungary article 10-10/d and 353/2011 . (xii .30 .) government decree on the detailed rules for the consent to debt-generating transactions . 22 (1st phase) 2011: 20 county local governments, (2nd phase) 2012: 1,740 local governments under 5,000 inhabitants and multi-purpose co-operations, (3rd phase) 2013: 279 local governments above 5,000 inhabitants, (4th phase) 2014: 516 local governments and co-operations 23 erika steiner, introduction to the hungarian local government system. hungarian association of local governments – norway grants, 2016, 14 . 24 oecd: slovenia – subnational government country profile . 2017, 2 . 25 oecd: czech republic – subnational government country profile . 2017, 2 . http://dx.doi.org/10.2139/ssrn.2859950 https://doi.org/10.2765/28160 https:// doi.org/10.1007/978-88-470-5331-1_12 https://doi.org/10.5089/9781484305225.001 http://voxeu.org/article/fiscal-consolidations-debt-gdp-containment http://voxeu.org/article/fiscal-consolidations-debt-gdp-containment http://www.riigiteataja.ee/en/eli/523052014001/consolide http://dx.doi.org/10.2139/ssrn.2859950 https://doi.org/10.2765/28160 https://doi.org/10.1007/978-88-470-5331-1_12 https://doi.org/10.5089/9781484305225.001 public governance, administration and finances law review vol. 7. no. 2. (2022) • 5–39. © the author 2023 doi: 10.53116/pgaflr.2022.2.1 social legal consciousness or legal culture? istván h. szilágyi* ¤ * full professor, pázmány péter catholic university, faculty of law and political sciences, department of legal philosophy, e-mail: h.szilag yi.istvan@jak.ppke.hu abstract: in contemporary legal sociolog y research, legal culture and legal consciousness are often used as synonymous or closely related, overlapping concepts. the aim of this paper is to elucidate the possibility of separating the two concepts through a  more in-depth analysis. the first part of the paper explores the ideological-historical connections between the two concepts and argues that the conceptual confusion between legal culture and legal consciousness that characterises contemporary legal sociolog y occurred in the 1970s in american legal scholarship. the concept of social legal consciousness is first discussed in the context of conceptual analysis. after a general definition of legal consciousness, the components of individual legal consciousness, the factors and mediating structures linking individual and social legal consciousness, and finally the theoretical issues of conceptualisation are discussed. the second part of the conceptual analysis focuses on the concept of legal culture. the difficulties of defining the concept are taken into account, starting from a  review of the academic debate surrounding the work of lawrence friedman. the concept of legal culture is constructed on the basis of the criteria for conceptualisation derived from this. the core concept is culture, and the distinguishing feature is a  sociological concept of law. next, it introduces the distinction between lay and professional culture and examines the extent to which the concept of legal culture thus outlined meets the criteria set out above. the paper concludes by summarising the rationale and yields of the conceptual analysis, highlighting the dynamic relationship between legal culture and social legal consciousness. keywords: legal consciousness, individual legal consciousness, social legal consciousness, legal pluralism, culture, sociological concept of law, lay legal culture, professional legal culture 1. introduction some of the concepts that appear in the following analysis  –  for example, the idea of social control, legal culture or legal pluralism – were formed during my legal anthropological research in the 1990s (fekete, 2021, pp. 11–14). more closely related to my arguments are the insights that have emerged in the course of theoretical and empirical studies of the hungarian population’s legal consciousness over the past decade (h. szilág yi, 2018). i am especially indebted to balázs fekete and györg y gajduschek – members of the research group for legal sociolog y at the faculty of law and political https://doi.org/10.53116/pgaflr.2022.2.1 https://orcid.org/0000-0003-0347-0764 mailto:h.szilagyi.istvan%40jak.ppke.hu?subject= 6 istván h. szilág yi public governance, administration and finances law review • vol.  7. no. 2.  sciences of pázmány péter catholic university  –  for their professional and collegial cooperation in subsequent interdependent research projects, and for the research fellowship of the eötvös józsef research centre.1 however, the earlier version, which is the immediate predecessor of this thought train, was the result of a  project organised and led by lászló kelemen (h. szilág yi et al., 2022, pp. 6–36). partly because this was presented at the international conference hungarian experiences,2 and partly because hungarian legal sociolog y has an unbroken tradition of legal research going back to the mid-1960s (fekete & h. szilág yi, 2017), i will make regular reference to the results of hungarian research throughout the paper. the starting point of the study is to establish the state of affairs that in contemporary empirical sociological research on law, legal culture and legal consciousness are often presented as synonymous or closely related, overlapping concepts. in my view, however, the phenomenon captured by the two concepts can be clearly separated through a more in-depth analysis. the root of this conceptual ambiguity can be brought to light by exploring the ideological-historical connections, and therefore in the first part of this paper i will briefly outline the history of the two concepts and argue that the conflation of the two concepts occurred in american legal scholarship in the 1970s. the concept of social legal consciousness is then discussed first. in this context, i will first try to define the concept of legal consciousness, then i will discuss the components of individual legal consciousness, the fields of influence and mediating structures linking individual and social legal consciousness, and finally i will consider the conceptual issues of conceptualisation. in the second part of the conceptual analysis, i will look at the concept of legal culture. the starting point for taking stock of the difficulties of defining the concept is a review of the academic debate that has developed in the wake of lawrence friedman’s work, published almost half a century ago. bearing in mind the conceptual criteria drawn from this, i will attempt to construct a concept of legal culture by outlining a concept of culture as a stem and a sociological concept of law as a distinguishing feature. i will then introduce the distinction between lay and professional culture and examine the extent to which the concept i have sketched meets the criteria i have previously set out. the conclusion of the paper summarises the meaning and implications of the conceptual analysis, highlighting the dynamic relationship between legal culture and social legal consciousness. 1 theoretical and methodological issues of legal consciousness research in hungary. senior research fellowship, eötvös józsef research centre, 2020. 2 hungarian experiences. theoretical and methodological issues of sociological and empirical comparative research of legal consciousness (12–13 may 2022). research group for legal sociology, pázmány péter catholic university, budapest. 7social legal consciousness or legal culture? public governance, administration and finances law review • 2. 2022 2. the concept of legal culture and legal consciousness from a historical perspective the conception of law as a cultural phenomenon dates back to the beginning of the 19th century, in the two strands of the historical school of law that emerged in the english and german traditions  –  as a  reaction to the rationalism of the french enlightenment  –  which emphasised the concept of culture over civilisation. the two were linked by an insistence on the historicity of law and the idea of the spontaneous, organic development of law, as well as an interest in the early stages of legal development. while friedrich carl von savigny (savigny, 2002) was the founding master of the german school, henry sumner maine (maine, 1861) can be considered the founder of the english school. both branches of the historical legal school had a significant influence on the cultural anthropolog y that developed in the second half of the 19th century, and within it, on legal anthropolog y. however, the english school of social anthropolog y  –  which, from bronislaw malinowski (malinowski, 1926) through isaac schapera (schapera, 1938) max gluckman (gluckman, 1965), philip hugh gulliver (gulliver, 1963) and simon roberts (roberts, 1979) had an unbroken line of legal anthropolog y until the 1980s – was early influenced by french sociolog y, especially the work of émile durkheim (leach, 1982), and thus the concept of culture was relegated to the background. in the united states, however, the cultural anthropolog y school established by franz boas (boas, 1911; 1940) continued to preserve the original german approach to the concept of culture. the study of legal phenomena also quickly attracted the interest of american cultural anthropolog y, as shown by the distinguished masters of legal anthropolog y in the period from the 1930s to the 1980s: edgar adamson hoebel (lewellyn & hoebel, 1941; hoebel, 1951), paul bohannan (bohannan, 1957), leopold pospíšil (pospíšil, 1958), sally falk moore (moore 1973; 1978) and laura nader (nader, 1969; 1990), to name but a few. the influence of the german historical legal school was decisive for the legal ethnolog y founded at the end of the 19th century by albert hermann post (post, 1886) and josef kohler (kohler, 1885). however, ethnological jurisprudence should be mentioned primarily because of its significant influence on the legal ethnography that was developing in central europe, including hungary (fekete, 2021, pp. 2–10; bognár, 2016), at the beginning of the 20th century. in the period between the two world wars, the movement lost momentum in the stifling atmosphere of nationalism and then nazism, and the new generation of researchers emigrated to the united states and integrated into the scientific community there (schott, 1986). the dutch adat law school, the third major school of legal anthropolog y (griffiths, 1986a), pioneered by cornelius van vollenhoven and barend ter haar (haar, 1949), was more successful during this period. after world war ii, research, which had been interrupted in the 1940s, was resumed with the work of major authors such as geert van den steenhoven (steenhoven, 1962), fons strijbosch (strijbosch, 1985), kebet and franz von benda-beckman (benda-beckman & benda-beckman, 2007), john griffiths (griffiths,1986b) and agnes t. m. schreiner (schreiner, 2003; 2019). 8 istván h. szilág yi public governance, administration and finances law review • vol.  7. no. 2.  from the late 1940s onwards, academic interaction between the three main schools of legal anthropolog y – english, american and dutch – was intensified. over the next three decades, a series of new theoretical concepts – e.g. legal pluralism, social control, semi-autonomous social field theory – and methodological considerations emerged in legal anthropolog y. the 1970s were a critical period in the history of anthropolog y: the disintegration of former colonial empires accelerated, and former colonies gained independence, which led anthropologists to “return home”. as a result, in the 1980s, a succession of departments and research centres for “socio-legal studies” were set up, in which anthropologists worked together with sociologists, and the theoretical import of legal anthropolog y contributed greatly to the renewal of the sociolog y of law. part of this was that anthropologists brought with them the concept of culture, as opposed to the structural-functional or systemstheoretical approach that dominated legal sociological thinking of the time. this effect was further enhanced by the fact that the “linguistic turn” in philosophy was also beginning to make itself felt in social research. it is this intellectual context that explains the interest in lawrence m. freedman’s the legal system, published in 1975, to which we generally associate the renaissance of the concept of legal culture up to the present day. in european jurisprudence, the concept of legal consciousness also appeared at the turn of the 19th and 20th centuries. kohler, arguing for the universality of law – its existence in all societies without historical or geographical limits – stressed that the universal psychological basis of law is the sense of law (recthsgefühl) that operates in every human being. this psychological aspect was the basis of leon petražycki’s sociological theory of law, who believed that law is the result of “legal experiences” built up from emotions and psychological impulses (podgórecki, 1981). adam podgórecki, a disciple of petražycki, operationalised this idea in the mid-1960s for the kol research he initiated and organised, in which he separated the elements of legal knowledge and of opinions and attitudes towards law within the range of individual psychological factors determining legal compliance. in addition to german, dutch and american researchers, this research project also involved polish and hungarian sociologists of law (podgórecki et al., 1973). although podgórecki was later forced to leave poland because of his “anti-communist academic activities” (clark, 2007), the concept of legal consciousness nevertheless became accepted in european marxist legal theory and sociolog y of law. at the same time, it quickly found its way to legal sociologists who joined the “critical legal studies” (cls) movement, which was taking shape in american jurisprudence in the second half of the 1960s and was partly marxist and neo-marxist in inspiration. the coexistence and conceptual confusion of legal culture and legal consciousness thus occurred in american jurisprudence, as functionalism and systems theory eclipsed the cultural approach to law in western european sociolog y of law, and socialist jurisprudence, based on orthodox marxism, rejected the concept of legal culture until the 1980s. 9social legal consciousness or legal culture? public governance, administration and finances law review • 2. 2022 3. the concept of legal consciousness legal consciousness is an empirically analysable set of individual and group psychological factors directed towards legal culture. it is a  specific configuration of psychological and social psychological phenomena  –  knowledge, opinions, attitudes, prejudices, impulses, skills and abilities – that form a mentality about law at the group level. in the definition of a legal consciousness, we have combined individual and group psychological phenomena, which are discussed separately below. 3.1. individual and social legal consciousness the distinction between the individual and the social level of legal consciousness – with regard to the conceptual framework of the prevailing marxist social science, and more specifically of marxist legal theory  –  was developed in the 1970s by hungarian legal sociolog y (sajó, 1976),3 which partly explains why the “social” as opposed to the individual remained to a certain extent undefined. the reason for this was that, although it was clear to researchers that social stratification was of great significance in the conditions of socialist society, the image of a “classless society” desired at the level of political ideolog y, as well as the actual political practice of destroying traditional communities and preventing the spontaneous formation of groups, both tended to equate the concept of the “social” level with the “overall social”, i.e. state level. the separation of the individual and the social level thus implicitly implied that the individual was directly linked to the state, which represented society, without any further intermediary group. in fact, researchers were already aware at the time of the oversimplification of this conception of the individual’s relationship to society as the most comprehensive group. with regard to the social level of legal consciousness, we must see that legal consciousness at the social level is related to the institutional layer representing the (political) community as a whole – which we usually identify with the state or the government – in a different way than individual legal consciousness is related to the individual as a social and psycho-physical reality. in contrast to the individual’s relation to his own legal consciousness, the state is by no  means the exclusive bearer and shaper of social legal consciousness. while the individual’s legal consciousness can in principle be reconstructed from the behaviour of the individual, the “activity” of state bodies cannot be used to infer the legal consciousness of society in all its aspects, since the latter encompasses a much broader phenomenon and is much more complex in relation to the institutional layer identified as the state. 3 in fact, “socialist legal sociology” existed only in hungary and poland, because in the other socialist countries legal sociology could not become institutionalised at that time (see fekete & h. szilágyi, 2017). 10 istván h. szilág yi public governance, administration and finances law review • vol.  7. no. 2.  3.2. the structure of individual legal consciousness historically, the separation of the categories of legal consciousness and legal knowledge in the study of individual legal consciousness was first developed in legal consciousness research in the 1960s and 1970s (kulcsár, 1967; podgóreczli et al., 1973). in further analysis, this distinction will be linked to traditional psychological concepts describing the structure of the individual psyche. in the conceptual relation between legal consciousness and legal knowledge, the former is the more comprehensive category, and legal knowledge is thus a component of legal consciousness, which can be related to the cognitive (conscious, rational, intellectual) sphere of the individual psyche. it is also to a certain extent a residual category, because it includes all the other psychological aspects not covered by legal knowledge: in particular the emotional and volitional elements, which belong to the affective (subconscious, emotional) or reactive part of the psyche. in what follows, we will therefore review the intellectual (a), emotional (b) and volitional (c) aspects of legal knowledge, and finally we will examine the problems of the structure of legal consciousness (d). ad (a). the notion of knowledge of the law must certainly be interpreted more broadly here than knowledge of the rules of positive law, since “understanding the law” and “the ability to use the law as a tool” also presuppose some knowledge of the dogmatic layer. from the very beginning of the kol research, the starting point was that knowledge of the law is neither a necessary nor a sufficient condition for compliance with the law, although knowledge of the law is clearly an indispensable element of legal competence. empirical studies have revealed that lay people’s knowledge of the law is generally low (aubert, 1963; black, 1973; valverde, 2003) – certainly much lower than the principle of ignorantia iuris non excusat proclaimed by lawyers is not to be regarded as a mere fiction justifying legal responsibility – and varies from one area of law to another. the rules of criminal law are generally the best known, while those of administrative and civil law are much less so. similarly, lay people are more familiar with substantive rules than with procedural rules. the social factors that most influence legal knowledge are  literacy (education) and the amount of legal experience – while differences such as age, gender, income or “media consumption” do not or only to a small extent.4 however, legal knowledge does not cover all the elements of the cognitive sphere that can be associated with law, since it also includes, obviously, the patterns of prejudices and attitudes that are not rationally controlled on a case-by-case basis, but which can become the guiding principles of legal or legally relevant actions. of course, their examination is also an integral part of the kol research. finally, there is the very general question of the extent to which reason, conscious and rational deliberation can be regarded as a determinant of individual action. as we know, the modern legal doctrine’s conception of man is based on this very premise, and sees the citizen as being able to know the legal rules, to adapt his actions to them and, in general, to rationally calculate the consequences of his actions. perhaps the closest approach to this 4 these findings have also been confirmed by hungarian legal knowledge research (see kulcsár, 1967; gajduschek & fekete, 2015; hollán & venczel, 2019). 11social legal consciousness or legal culture? public governance, administration and finances law review • 2. 2022 conception is that of rational choice theory, while the social-psychological approach emphasises that people follow the law much more often than rational deliberation would indicate that it is “worth” for them to do so (tyler, 1990). ad (b). in the problem of the emotional attitude towards law, the first question that arises is whether there exists in the human soul a sense of justice or a specific sense of right. the traditional conception of law answers the question in the affirmative, and for example, at the end of the 19th century it seemed to joseph kohler to be evident that the “sense of right” (rechtsgefühl) was an absolutely essential element of the human mind (kohler, 1885; schott, 1982). this idea was, however, eclipsed in the second half of the last century by the concept of instinct reduction in psycholog y, which saw the human psychological character as being unspecialised and denied the existence of an instinctive impulse that could be identified with a sense of justice (gehlen, 1987; berger & kellner, 1965). in the light of konrad lorenz’s research in the 1970s, however, this problem can be reconsidered (lorenz, 1974). it is then worth examining how feelings such as “respect”, “loyalty”, “trust” or even “fear” and “anxiety” are expressed and interpreted in relation to law. in the last decade, theoretical and sociological research on this problem has increasingly drawn on recent findings in neuroscience. indeed, a separate interdisciplinary field of research (law and emotions) is slowly taking shape in international research. the research of andrás sajó, who has studied how legal (constitutional) “public sentiments” emerge from individual moral emotions in interaction with legal and political institutions, is very instructive in this respect (sajó, 2010). ad (c). the traditional legal doctrine has tended to explain non-compliance or unlawful conduct by a “defect of the will”. one important issue that arises when examining the psychological element of will is the problem of “force”. the ability to use the law as a means to achieve individual goals – legal competence – includes, in addition to the element of knowledge of the law, the willingness to engage in conflict. this link seems to be supported by some of the results of hungarian legal consciousness studies conducted in the 1970s. researchers have used pft (personal frustration tolerance) tests to investigate how individual frustration tolerance is related to the degree of tolerance of deviant behaviour. the results showed that individuals with higher frustration tolerance were generally more intolerant (more likely to act against deviant behaviours) (sajó et al., 1977). the everyday experience also highlights the problem that conflict tolerance and willpower also change with age: older people tend to avoid conflict and their willpower gradually softens. an interesting contribution to the study of the problem of “weakness of will” is a development in rational choice theory, which analyses how rational foresight can be used to overcome this psychological difficulty (the so-called “odysseus problem”) (elster, 2015, pp. 99–113). it should also be mentioned that in the course of empirical research on legal consciousness, researchers have developed a number of concepts based on some combination of the traditional concepts of individual psycholog y  –  distinguishing between cognitive, reactive and emotional aspects of personality  –  in an attempt to refine the exploration of the components of individual legal consciousness. when studying the process of legal education, the concept of “legal understanding” was used in connection 12 istván h. szilág yi public governance, administration and finances law review • vol.  7. no. 2.  with the notion of legal knowledge, which mixes the conscious elements of explicit knowledge of the law with the emotional, instinctive impulses of a sense of justice. the ability to evaluate is highlighted as a psychological factor in its own right in the study of the role of values in the relationship to law. this evaluative moment refers to a specific combination of cognitive and emotional elements of consciousness. very frequently used concepts are also “attitude” and “prejudice” (vidmar, 1997; fox, 1999; riesman, 1999; sapiro, 2001; amand & zamble, 2001), which are also defined in social psycholog y as a combination of cognitive, emotional and reactive elements (allport, 1935). the “ability to use the law”, which is highlighted as a separate component of legal consciousness, alongside legal knowledge and attitudes towards the law, implies evaluative and volitional components in addition to legal knowledge. in analysing the sense of entitlement, three components have been identified: “legal alertness”, “ability to identify the law” and “legal mobilisation” (fekete, 2019; fekete et al. 2022). the first of these concepts is similar to “legal awareness”, the second to “legal knowledge” and the third to the “ability to use the law”. ad (d). already after the first wave of kol research, researchers concluded that a single, more or less coherent set of beliefs and motives about law does not emerge in individual consciousness (berkics, 2015a; berkics, 2015b; gajduschek, 2018). individual legal consciousness is thus fragmented, knowledge, evaluations and emotional attitudes towards law are full of internal contradictions and therefore do not form a single dimension of consciousness, so that attitudes towards law are strongly linked to the social context. we should also be aware that the fragmentation of the structure of individual legal consciousness, aggregated at group or societal level, produces sociologically describable and measurable patterns. the study of these patterns opens up the horizon of analysis of individual legal consciousness to social legal consciousness, legal culture, and social history and legal history research. 3.3. the relationship between individual and social legal consciousness in the system of relations linking the individual to society, we can distinguish three fields of influence from society to the individual: socialisation (a), communication (b) and the application of law (c). among the effects from the individual to society, we should again distinguish the fields of communication (d) and the fields of legally relevant social actions (e) and explicitly legal actions (f ). at the societal level, we must distinguish between the institutional layer (g ) and the social legal consciousness (h). ad (a). the concept of socialisation as used in social psycholog y is applied here in a somewhat narrower sense. on the one hand, we disregard the essentially interactive nature of the learning process, i.e. the feedback of the behaviour of the educated on the educator during the process of education. on the other hand, although, as the concept of lifelong learning is being adopted in social psycholog y, researchers are paying increasing attention to the adult stage of social learning, and to the problems of re-socialisation and “re-education”, the first stage of socialisation, which ends with the development of a solid individual identity at young adulthood, is relevant to legal socialisation. this latter 13social legal consciousness or legal culture? public governance, administration and finances law review • 2. 2022 consideration is based on the fact that the adult stage of legal socialisation is essentially characterised by the accumulation and processing of knowledge and experience of the law in the cognitive sphere of the personality, which, however, is highlighted in our proposed model by the specific reference to the impact of social communication and the application of the law. the process of legal socialisation in the phase of social education up to the acquisition of identity is not clearly distinct from other aspects of education. especially in the early period from birth to puberty, during which the emotional and volitional elements of the personality are formed in relation to the various social manifestations of authority and rules. in the period following puberty, the cognitive sphere gradually becomes dominant in the course of personality development, and in parallel, knowledge of legal authorities and laws becomes increasingly differentiated and enriched, while emotional and moral attitudes towards them become more reflective and critical. whilst the family is the most important agent in the early stages of socialisation, later on it is school, peer groups and, nowadays increasingly, the media that have a decisive influence. in social psycholog y research, attempts have been made to interpret and empirically explore the phenomena of socialisation on the basis of two basic theoretical approaches. in the 1970s, the “cognitive development” movement, based on the work of jean piaget (piaget, 1932; piaget, 1936), was founded on the research of lawrence kohlberg and june l. tapp (tapp & kohlberg, 1971). it was also around this time that the theory of “social learning”, coined by ronald l. akers and albert bandura (bandura, 1977; akers, 1998) was formed. while the former emphasised the internal dynamics of cognitive development, the latter stressed the importance of external, social influences in the theoretical model of socialisation. the “integrated approach”, developed in the 1980s in the mediation between the two approaches and the combination of their elements, was first elaborated in the works of ellen s. cohn and susan o. white (cohn & white, 1990). over the past half century, legal socialisation researchers have explored a number of concepts and theoretical frameworks aimed at theorising the phenomenon of legal socialisation, and have conducted a wide range of empirical research that has produced important results for legal policy and practice. among the former, we can refer to the conceptual separation of the cognitive aspects of legal knowledge and “legal reasoning” from emotional motivations and evaluative attitudes and the ability to use the law (legal competence). we can also mention theoretical constructs that explore the phases and the internal complexity of the development of legal knowledge and the nature of the interactions between agents and subjects of education (kourilsky-augeven, 1997; kourilsky, 2000; vari-szilag yi, 2004; fagan & tyler, 2005; trinker & tyler, 2016). empirical research topics of practical relevance include, for example, the results of studies on the development of legal understanding and legal competence, which can provide ammunition for legal policy debates on setting the age of criminal responsibility and the inclusion of minors in legal proceedings (e.g. as witnesses) (peterson-badali & abramovitch, 1992). the results of a study on the role of schools and the media in the development of legal knowledge and attitudes towards the law are also instructive and could be used to improve curricula and broadcasting policies to promote legal education. 14 istván h. szilág yi public governance, administration and finances law review • vol.  7. no. 2.  ad (b). as regards the dimension of communication from the social level towards the individual, we note that the other direction of interaction – from the governmental level: feedback – has been separated in the analysis (d). in the context we are now considering, we are thus thinking primarily of the flow of information on the law sent by state institutions to citizens through the various channels of mass media. in terms of content, this covers a very wide range of knowledge about the law, from the promulgation and publication of specific legal rules, to the accessibility of court decisions, to information on the organisation and functioning of the legislative and judicial bodies. from the point of view of the communication process, the well-known problems of indirect and one-way communication arise in ensuring access to legal information – as a condition of the rule of law and legal certainty, as a means of legal education and possible “legal propaganda” – in the selection of information and even in the examination of the possibility of disinformation and manipulation. moreover, these issues take on an even more complex form in the context of the information structures and mechanisms of action of the various media: print, radio, cinema (machura & robson, 2001), television, social media, etc. particular attention should be paid to the impact of the internet social media (facebook, twitter, etc.) on legal communication, which have been developing at a  rapid pace in recent decades. on the one hand, because of their interactive nature, unlike traditional media, and on the other, because they also function as an “alternative” public sphere to the “official” one (burkell & kerr, 2000; black, 2002; o’day, 2004). however, the element of communication is present in some form in all the aspects we have highlighted. for example, in legal education, the media appears as an essential agent. communication between parties is also an important element in the application of the law, as is the expression of individual opinions and individual legal actions or legally relevant other social actions. in view of this consideration, it becomes clear that the empirical research we are now highlighting is only a narrow field within the broad field of theoretical and empirical research exploring the role of communication in law. in the 1960s and 1980s, the work of jürgen habermas (habermas, 1984; habermas, 1987), niklas luhmann (luhmann, 1989; luhmann, 1992), günther teubner (teubner, 1993), jacques derrida (derrida, 1978) and jean baudrillard (baudrillard, 1970; 1994; 2000), among others, brought the phenomenon of communication to the forefront of european social theory. in the 1990s, david nelken sought to synthesise this european social theoretical tradition with the new trends in anglo-saxon jurisprudence that had been emerging since the 1980s, in particular “law and language” (goodrich, 1990; gibbons, 1994; tiersma & solan, 2012), “law and semiotics” ( jackson, 1985; kevelson, 1988; jackson, 1994; wagner & bhatia, 2009) and “law and literature” (white, 1973; aristodemou, 1993; duxbury, 1995; ward, 1995), in order to define the field of research on “law as communication” (nelken, 1996). however, the impact of these social and legal theoretical developments on empirical sociological research on law was only felt after decades of delay, and often more through detours of methodological considerations. thus, the empirical study of the social communication of law within the sociolog y of law was part of the theme of the kol research, the theoretical background of which was the mid-level theories of contemporary political sociolog y, social psycholog y and communication theory. 15social legal consciousness or legal culture? public governance, administration and finances law review • 2. 2022 ad (c). the “counterpart” of the application of law is the field of individual legal actions (f ), and the two together cover the field of law fulfilment in the traditional sense  –  the application and compliance of law. the scope of enforcement thus covers primarily ex officio actions initiated by public authorities, while individual, citizen-led enforcement is included in the scope of individual legal actions. in a very simplified way, the former includes administrative, law and order, law enforcement and criminal justice activities, while the latter includes private law actions and the operation of civil justice. on a closer look, it is clear that in modern legal systems there are a number of institutions and procedures in which ex officio official action is closely linked to individual acts of enforcement. this is evident, for example, in the case of administrative licensing procedures or the operation of various mediation and conciliation forums. thus, the separation between the application of law and individual legal actions can only be relative. in the last decades of the last century, kol research has confirmed the assumptions of traditional doctrine by empirically demonstrating that legal experience in the application of the law has a significant impact on both the level of individual legal knowledge and the perceptions of the law (sarat, 1990; reifman, 1992; savelsberg, 1994; cooper, 1995; sampson & bartush, 1998). two theoretical approaches to understanding the impact of the application of law on individual legal knowledge have emerged and continue to be influential today. one is the economic analysis of law, of which richard posner (posner, 1983) is perhaps the best known representative. the more comprehensive theoretical background of this tendency is provided by the theory of rational decisions. the description and evaluation of the functioning of the application of law is based on the simple thesis that the application of law with sufficient predictability and efficiency makes it “cheaper” to follow the law and “more expensive” to break the law or to avoid it. the best known authority of the other approach, based on social psycholog y, is tom r. tyler (tyler, 2006; tyler, 2010). from this perspective, the role of the application of law in influencing the individual’s sense of justice can be seen in the strengthening or weakening of the respect and trust in the law – legitimacy – that has been developed in earlier stages of socialisation. while the economic analysis of law focuses on the system of sanctions in the context of the application of law, which makes illegal or evasive behaviour costly and therefore undesirable from the point of view of rational consideration, the social psychological approach emphasises the justice of the application of law, but also the importance of procedural justice and fair play. in addition to the research inspired by these two essentially macro-level theories, we must also remember the efforts that draw mainly on developments in legal anthropolog y, which developed in the united states in the 1960s and 1980s in the wake of the work of sally falk moore and laura nader (moore, 1973; nader, 1990). the focus of this research is on understanding how legal experiences are created in the course of the application of law, and concentrates on a micro-sociological analysis of the functioning of legal forums as “semi-autonomous social fields”. ad (d). in order to take into account the effects from the individual to the social level, we must first consider the phenomenon of individual communication. this requires distinguishing between what people think and say and how they act. individual expressions about the law do not necessarily reflect what a person really thinks about the law, 16 istván h. szilág yi public governance, administration and finances law review • vol.  7. no. 2.  and even less can be inferred from how he or she will act in a given situation. this insight leads to two important conclusions about individual expressions of rights. one is that by communicating an opinion on law, which necessarily involves some proportion of the elements of substantive knowledge of law and of evaluation of law, the individual enters the sphere of social existence, i.e. individual legal communication has political implications. by formulating and expressing an opinion on law, the individual enters into the process of public opinion flowing, in the terms of gabriel almond and sydney verba, “upwards” from the citizen to the government, and becomes part of the shaping of political culture (almond & verba, 1963). the close link between legal consciousness and political culture is thus already clear at the level of individual communication. on the other hand, the above considerations should also lead researchers to a kind of methodological caution: it is not necessarily reliable to ask the opinion of the person under study alone, without trying to observe his or her actual behaviour, in order to study individual legal consciousness.5 hence the particular importance of micro-sociological studies in this area. this conclusion is also supported by taking into account the interactive nature of communication at the individual level, since when examining discourse at the “ground floor” of social life, we cannot ignore the structural elements that provide the context  –  social stratification and group formation, organisational forms, social fields (o’barr & conley, 1988; sarat & kearns, 1993; reisman, 1999; ewick & silbey, 2003). ad (e). among the legally relevant social actions, it is worthwhile to distinguish at the outset between illegal conduct and actions aimed at avoiding the law. the forms of violations and, more importantly for the study of legal consciousness, the motivations behind them can be very diverse. at one extreme, there is the case of civic disobedience, a conscious, politically or morally motivated, open (but non-violent), demonstrative defiance of the law. at the other extreme, there may be cases where the cause of the infringement is simply a lack of knowledge of the law (ignorantia iuris). these include the complex mass of infringements resulting from “alienation from the law”, from rational deliberation, from emotional influence, from the “error of intention” or “error of will”, or some combination of these, which the liability systems of the various branches of law seek to systematise at the dogmatic level. marc hertogh attempted to create a mid-level theory to account for the cognitive factors behind violations (hertogh, 2018, pp. 49–64), but apart from this, the kol studies have been based on some derivatives of the previously presented theoretical directions of obedience to law – social psychological and rational choice theory – and adapted to the responsibility system of each branch of law. criminolog y naturally plays the leading role in this research (fickenauer, 1995; anderson, 2000; akers & jensen, 2006; vigh & tauber, 1988; kerezsi, 2006), given its moral and political weight, and the empirical exploration and analysis of the motives for offences receives much less attention in the fields of civil and administrative law. 5 this problem is particularly acute in survey-type questionnaires: the respondent does not answer what he or she thinks about a particular question, but what he or she thinks is generally “expected”, “politically correct”, etc. 17social legal consciousness or legal culture? public governance, administration and finances law review • 2. 2022 as far as law avoidance behaviour is concerned, it is essentially the individual’s attempt to seek other means of conflict resolution rather than the law. some of these are mediation and conciliation forums operating in the “shadow of the law” (mnookin & kornhauser, 1979), others are community or group-level institutions (loss, 2001), largely or entirely independent of state law, with little formalisation, traditional procedures or specific patterns of social practice. the study of conflict management mechanisms and procedures that are functionally equivalent to state law, and the motives of those who use them, has traditionally been of interest to legal anthropolog y. it was transferred to the sociolog y of law in the 1980s as the subject of “informal justice” (faber & white, 1994; morrill, 2017), which was then supplemented in the following decade by research on the development of conciliation or mediation procedures and institutions operating “in the shadow of the law” (restorative justice) (edgar & newell, 2006; miller, 2008; barabás, 2011). ad (f ). the scope of legal actions can again be divided into two parts. on the one hand, there are cases of “passive” compliance with the law, and on the other hand, when the individual consciously uses the possibilities offered by the law as a means to assert his interests or other claims. the former is of more interest from the sociological point of view in the study of the enforcement and effectiveness of law in general, while the latter is of greater importance from the perspective of the study of legal consciousness. in the case of “passive” compliance, the person’s action objectively complies with the law, regardless of his or her motives. the focus here is therefore on the fulfilment of the individual’s legal obligations, which may be obligations established by the law enforcement authority in the course of a legal procedure or civil obligations between individuals. since the beginning of the last century, legal sociolog y has been aware, following the work of eugen ehrlich (ehrlich, 1936), of the importance of legal transactions and legal actions without dispute – “trouble-less cases”, to use john griffiths’s term (griffiths, 2003) – for the legal life as a whole. this mass of legal actions constitutes “living law”, even though we know that “passive”, “indifferent” legal action is often in fact due to the influence of other social norms supporting the law – morality, custom, manners, etc. in contrast, the other type of legal action, where the individual is able to use the law as a tool, presupposes not only a relatively high level of knowledge of the law, the “understanding of the law”, but also a specific attitude towards the law, the “rights consciousness” (sajó, 1988; ewick & silbey, 1988). the latter implies that the individual relies on a disposition of “claiming” rather than “bagging” vis-à-vis the authorities that administer the law. however, the use of law as an instrument is not only subject to the conditions inherent in the individual subject, but also requires certain external conditions which are factually given to the individual: specific social resources must be available for litigation – time, money, education, etc. – the lack of which may constitute an obstacle to the invoking of law. these social resources are, of course, unevenly distributed along social stratification, which is reflected in the critical approach that sociolog y of law has taken since the 1980s to the issue of “access to law” (styles, 2001; munger, 2006; hernández, 2010). the study of the former type of legal action  –  the “living law”  –  requires mainly micro-sociological, legal anthropological or qualitative (documentary) research (nader, 1990; griffiths, 2003), while the latter type requires the analysis of the “rights 18 istván h. szilág yi public governance, administration and finances law review • vol.  7. no. 2.  consciousness”, the litigation rate and the “litigation disposition” (kulcsár, 1982, pp.  565–589; blankenburg, 1994; blankenburg, 1997; murayama, 2013, róbert & fekete, 2018). ad (g ). after reviewing the fields of influence from the individual to the level of society, “upwards”, we have again reached the “social level”, whose layer closer to the ground, directly related to the action of the members of society, can be identified as the level of the state or governmental organisation. however, two aspects of the traditional use of the term need to be nuanced here. on the one hand, the adjectives “state” or “government” evoke the dominance of the political element, while our analysis implies a  predominance of legal connotations. therefore, in the functioning of parliament or government, for example, it is not so much the function of political decision-making as that of legislation that will be of interest to us. it is from this particular legal perspective that lawrence friedman, for example, tries to define this institutional layer when he mentions the legal institutional system as an element of the legal system, alongside legal norms and legal culture (friedman, 1975, pp. 1–24). or blankenburg when he speaks of the “legal infrastructure”, which may also include non-state organisations operating in the shadow of the law and institutionally ensuring the avoidance of the law (blankenburg, 1994). on the other hand, the usual terminolog y leaves the fact of organisational complexity unreflected. and here it is not enough to think of the functional separation of the legislator, the law enforcer (concentrating on dispute resolution and the application of sanctions) and the “regulatory authorities”, as accepted in the sociolog y of law, reflecting the political doctrine of the separation of powers. in fact, legal institutions show a very complex internal structure in terms of their organisational interests, their access to social resources, their power and communication relations. the harmonised, transparent structure of legal institutions; their predictable, reliable and efficient functioning ; their easy accessibility to the citizen; their organisational ethos (who serves whom? the state serves the citizen, or vice versa?); their subjection to publicity and other forms of democratic control (krygier, 2009): these are all factors that influence both the ideological image of law formed by socialisation and social communication, the degree of trust in law and the range of individual legal experiences that reinforce or destroy it. ad (h). the concept of social legal consciousness raises a number of theoretical and methodological problems. some of the theoretical problems stem from the fact that the concept, as we have seen above, is deeply embedded in the marxist social science tradition. first of all, therefore, it must be stressed that social legal consciousness cannot be associa ted with a “collective personality” conceived as the bearer of marx’s “class consciousness”, since in a  psychologically precise sense it is only the individual who has it. individual legal consciousness therefore contains both the individual characteristics of a given person and the conscious elements of the individual arising from his or her social embeddedness. hence the methodological difficulties. it is often hard to distinguish between the components of individual legal consciousness that fall within the scope of psycholog y and those that belong to social psycholog y. the changes described by developmental psycholog y, which show a  different dominance of cognitive, emotional and reactive 19social legal consciousness or legal culture? public governance, administration and finances law review • 2. 2022 aspects in the various stages of personality development, tend to belong to the former. on the other hand, the phenomena of identity, self-esteem and prejudice, which are linked to the psychological effects of social relationships, relate to the latter. the difficulty also stems from the marxist tradition, as mentioned above too, of an over-simplistic conception of the relationship between the individual and society, which ignores the structural elements that are inherent in the relationship between the individual and society as the most comprehensive (political) community. following john griffiths’s admonitions in his critique of the instrumental approach to law-making, we must therefore take into account that the individual is never directly linked to the state, but always through a  system of smaller or larger, partially overlapping groups and communities. secondly, the legal message from the legislator to the addressee of the norm never passes through a  normative vacuum. thirdly, the state does not have an exclusive normative monopoly (griffiths, 2003, pp. 13–17). in the light of these considerations, we can begin to take stock of the structural mediating elements between the individual and society, which can be grouped into three intersecting dimensions: social stratification (i), social groups (ii) and professional groups (iii). ad (i). the “hard facts” that determine an individual’s social status include gender, age, wealth, income, education and place of residence. the impact of social stratification on legal knowledge and legal consciousness has already been investigated by researchers in the first wave of kol studies (podgórecki et al., 1973). the results showed that all the factors determining stratification had a varying degree of impact on the legal consciousness of the samples studied, but no general correlation could be found. the impact of these factors seemed to be organised into different patterns, but these showed a variable pattern across countries and legal cultures. subsequent research has suggested two likely trends: first, that the most significant influence on the development of legal knowledge is the level of education. the second is that gender differences have decreased over time, both in terms of the level of legal knowledge and in terms of opinions about the law (kulcsár, 1967; gajduschek & fekete, 2015). ad (ii). the more significant forms of social groups are those organised along family, kinship, ethnic, local, age, religious or ideological lines. societal groups have a significant impact on the formation and development of an individual’s identity, due to the strong affective effects of direct, face-to-face communication and interpersonal contact, and their specific internal psychological dynamics. although from the outset researchers have assumed the influence of social groups on individual sense of entitlement, it was only from the mid-1970s onwards, following the adaptation of the “participant observation” method from anthropolog y, that research in this area gained momentum. in the following decades, researchers from kibbutzim in israel (schwartz, 1954) to chiapas indian communities in central america (collier, 1979) to suburban residential communities in the united states (greenhouse et al., 1994) have investigated the impact of group internal structure, cohesion and culture on dispute resolution and the formation of individual conceptions of law in a wide variety of groups. ad (iii). professional groups constitute actually the structure of society based on the division of labour, which includes all kinds of institutions and more or less formalised organisations in the economic, political, cultural and of course legal spheres. belonging to 20 istván h. szilág yi public governance, administration and finances law review • vol.  7. no. 2.  a professional group – one’s “occupation” – is itself a status factor, but this has lost much of its importance in recent decades. nevertheless, participation in certain professional groups – “professional orders”, trade unions, political parties, companies in various sectors of the economy, etc. – has a differential impact on the legal knowledge and legal consciousness of the individuals involved, as they need particular legal skills and gain specific legal experience in their occupation. in the early period of the kol studies, we can already find research that examined the effect of occupational group membership on the attitude towards law (podgórecki et al., 1973), and such attempts were also made in the hungarian legal consciousness studies in the 1970s (sajó, 1981a; sajó, 1981b). however, from the 1980s onwards, both international (morison et al., 1991; katzman, 1995; abel, 1997; pue & sugarman, 2003) and hungarian research (utasi, 1999; utasi, 2016; h. szilág yi & jankó-badó, 2018) has increasingly focused on the legal consciousness of a single professional group: the legal profession. from the studies, it is clear that the legal profession is a highly prestigious intellectual career, with the majority of its members recruited from middle-class families. entry to the profession is based on a theoretical qualification (law degree) obtained through specific education, usually followed by a longer or shorter period of practical training. the legal professions are divided into professional groups (judges, lawyers, prosecutors, administrators) with a structure that varies from country to country and from one legal culture to another. this internal division of the profession, the size and prestige of the groups in relation to each other, the typical trajectories of internal mobility between the groups, are all factors which influence the degree of cohesion between the members of the profession, the development of the self-image of the legal profession and its external, social perception (the image of the legal profession in society). lawyers are characterised by a level of legal knowledge and understanding and legal competence that is higher than that of lay people, but not necessarily accompanied by a higher level of respect for the law. the social function  –  and in fact the monopoly  –  of the legal profession is the elaboration and “maintenance” of the normative layer of legal culture, and the care of the doctrinaldogmatic layer connected to it. this function is linked to the distinction between lay and professional legal culture, which will be discussed below in connection with the concept of legal culture. two comments should be made on the above outline of the structures that mediate between the individual and society. one is that in our review we have focused only on corporative groups and structural elements with relatively clear boundaries to the social milieu, and have ignored the so-called “semi-autonomous social fields” (moore, 1973). these are fields of social power in which not only individuals but also corporative groups may be present, and which are capable of generating and enforcing autonomous normative systems against participants independently of state law. these subtle elements of social structure can only be studied using micro-sociological methods. the rapid expansion of forms of communication on the internet and the rapid transformation of communication opportunities in recent decades have raised further problems. these phenomena obviously need to be taken into account when discussing the two strands of communication mentioned above (social and individual communication), 21social legal consciousness or legal culture? public governance, administration and finances law review • 2. 2022 but the processes of group formation in “virtual reality” are obviously also linked to the study of mediating structures. for instance, the question is whether the model of the “semi-autonomous social field” can be applied to the functioning of virtual communities on internet social networking sites, or to what extent and in what way the communication taking place there influences the participants’ legal consciousness. our second comment is that this diverse array of mediating structures is a kaleidoscope that dissects and multiplies the previously enumerated beams of legal socialisation, communication and action. it also means that the effects and contexts that can be researched are multiplied. no wonder, therefore, that citizens who are not familiar with law or the legal sciences sometimes find it insurmountably difficult to form a consistent picture of the law. however, this leads back to the problems of the structure of individual legal consciousness. 3.4. conceptual issues in the study of social legal consciousness taking into account the marxist and neo-marxist ideological implications of the concept of social consciousness of rights, it is not sufficient to define the concept as a  residual category linked to individual consciousness of rights, including all the sociopsychological aspects  –  attitudes, opinions, beliefs, mass feelings  –  which cannot be included in the former. in order to free the concept from the “obligatory” critical character of the marxist tradition, we draw on two reflections by marc hertogh. hertogh distinguishes between two strategies for constructing the concept of a legal consciousness: the american and the european conception (hertogh, 2004). the former, which goes back to the work of roscoe pound, is based on the distinction between law in books and law in action (pound, 1910). the aim of sociological studies of law is to explore the difference between the two, i.e. how, why and to what extent the (official) law in practice differs from the official law. the central question for legal studies in this tradition is how people perceive formal law. in this view, law becomes an independent variable and legal consciousness an explanatory factor for deviation from the law. in contrast, the european concept of legal consciousness is inspired primarily by the work of eugen ehrlich (ehrlich, 1920), which focuses on the concept of “living law”. sociological research should focus not on formal law but on “living law”, which is the centre of gravity of the life of law, since formal law is only applied by public authorities in the resolution of disputes, whereas living law is applied in transactions that are carried out without dispute and which constitute the predominant part of legal life. from this perspective, the main question for legal studies is therefore not how people perceive formal law, but what they perceive as law in the first place. thus, law becomes a contingent variable when viewed from this perspective. in another line of thought, hertogh distinguishes between two approaches to legal consciousness studies, the “critical” and the “secular” (hertogh, 2018, pp. 1–15). the former is closely linked to the tradition of critical legal studies, which is largely neo-marxist in inspiration, and to the american conception of legal consciousness described above. in the three decades between the 1970s and the turn of the millennium, 22 istván h. szilág yi public governance, administration and finances law review • vol.  7. no. 2.  a number of major studies were carried out in this approach.6 what they have in common is that they sought to answer the question of why people turn to the law, despite the fact that it actually works against their interests and that they are often disappointed by it. they tried to show the pervasive presence and hegemony of law in social life and, above all, to identify the motives for its acceptance and support. the “secular” approach,7 which hertogh himself advocates, on the other hand, drawing on the european concept of legal consciousness, refuses to take the hegemony of law as given and focuses primarily on why people do not follow formal law and seek alternative solutions instead. instead of accepting law, it thus focuses on forms of alienation from law, avoidance of law, defiance of law and alternative forms of social control in place of formal law. what conclusions can we draw from the above considerations with regard to the conceptualisation of social legal consciousness? first, that we must conceive of social legal consciousness as a phenomenon that interacts with legal culture. from the point of view of social consciousness, law (legal culture) appears sometimes as an independent variable and sometimes as a dependent variable. legal culture shapes legal consciousness, but it is also shaped by social legal consciousness. the american and european conceptions of legal consciousness as outlined by hertogh are in fact “two sides of the same coin” illuminating two relations of interaction. on the other hand, social legal consciousness should be understood as being internally structured according to the structural elements that link the individual to society – social stratification, societal and professional groups – as is the case with legal culture. it is also far from certain that formal law is able to fully dominate interactions in all segments of society, and therefore the study of negative attitudes and feelings towards law is as important as the study of acceptance and support for law. 4. the concept of legal culture in defining the concept of legal culture, i will first take account of its difficulties, starting with a  review of the academic debate that has developed in the wake of lawrence friedman’s work, published almost half a century ago. in the light of the conceptual criteria drawn from this debate, i will attempt to build up the concept of culture as a core concept, with a sociological concept of law as a distinguishing feature. i will then introduce the distinction between lay and professional culture and examine the extent to which the concept i have sketched meets the criteria i have previously set out. 6 see e.g. galanter (1974); galanter (1981); merry (1990); ewick & silbey (1998); engel (1998); nielsen (2000). 7 the irony of the term “secular” is hard to miss, given the marxist commitment of the proponents of the “critical” approach. 23social legal consciousness or legal culture? public governance, administration and finances law review • 2. 2022 4.1. difficulties in conceptualisation the difficulties in defining the concept of legal culture are reflected in the academic debate8 that has emerged in the wake of lawrence friedman’s work (friedman, 1975). in his work on the legal system, friedman gave several definitions of legal culture (a), highlighting different conceptual elements. for example, in the first chapter of the volume, which serves as a theoretical introduction, he considers legal culture to be part of culture in general: “those parts of the general culture  –  habits, beliefs, ways of acting and thinking  –  that incline social forces towards or away from the law” (friedman, 1975, p. 15). in the chapter on legal culture, the term legal culture refers to “knowledge of and attitudes and patterns of behavior towards the law” (friedman, 1975, p. 19). in a later work, we find a similar, slightly expanded version of the conceptual elements: “ideas, attitudes, expectations and opinions that people in a  particular society hold about the law” (friedman, 1990, p. 213). in other cases, it describes legal culture as a kind of “aggregate” of these elements (friedman, 1990, pp. 212–213). on the other hand, friedman emphasises that the concept of legal culture can be interpreted at different levels (b). we can talk about the legal culture of a nation, but we can also interpret it in the case of a region, a social group (friedman, 1975, p. 19). on the other end of the scale, it can be used to describe larger historical periods, such as “the legal culture of modernity” (friedman, 1994), or larger geographical units, such as “western legal culture” (friedman, 1990, pp. 198–199). third, within the phenomenon of legal culture, friedman distinguishes between “external” and “internal” legal culture (c) (friedman, 1975, p. 223; friedman, 1977, p. 76; friedman, 1990, p. 4), the former denoting the legal culture of lay citizens and the latter the legal culture of “members of a  society who perform some special legal function” (friedman, 1975, p. 223), which he attributes a distinct importance to the functioning of the legal system (friedman, 1975, p. 194). the most thorough critic of friedman’s concept, roger cotterrell, points out that the conceptual vagueness of friedman’s definition of legal culture (ad a) allows it to be used as a broad, residual category – for example, in the field of legal comparison, in the grouping of legal systems – but that it has much less explanatory power in empirical research. in particular, the conceptual elements listed are rather heterogeneous in nature and do not facilitate the linking of legal culture with actual social processes (cotterrell, 2006, pp. 81–88). david nelken, on the other hand, argues that european comparative legal research has already developed a multi-layered conception of legal culture,9 which includes the study of legal norms, the distinctive forms and “infrastructure” of legal institutions, the attitudes that create, use or do not use the law, and the legal consciousness of lawyers and lay people. with this in mind, he believes that the concept of legal culture is a concept that can be retained and refined in the light of current research. at the same time, nelken rejects cotterrell’s suggestion that the concept of legal culture, which is not conceptually 8 for a summary of some aspects of the debate see nelken (1995); silbey (2001); kurkchiyan (2009). 9 here nelken refers primarily to the research of erhardt blankenburg (see blankenburg, 1994; blankenburg, 1997). 24 istván h. szilág yi public governance, administration and finances law review • vol.  7. no. 2.  clear, should be replaced by the concept of “legal ideolog y”, which better expresses the link between law and political discourse. nelken stresses that such a  conceptual exchange would hardly be fruitful, since the concept of ideolog y is as contested and ambiguous as that of culture, and is deeply embedded in (marxist) critical theories whose outlook and objectives are not necessarily identical with those of sociological research (nelken, 1995, pp. 438–439, 446). returning to cotterrell’s critical reflection, the author argues that friedman overstretches the notion of legal culture in two directions (ad b). on the one hand, he sees it as a  way of characterising entities of vast temporal and spatial extent  –  “modernity”, “western legal culture”. on the other hand, however, friedman seems to subscribe to a radical conception of legal pluralism, especially in his later works, when he stresses that the concept of legal culture can be interpreted to include all social units “under the state” – local, religious, ethnic, etc. groups – and thus legal culture appears as a “dizzying parade of cultures” (friedman, 1990, p. 213). however, it provides little guidance as to how these diverse cultural “aggregates” can integrate into larger entities (cotterrell, 2006, p. 84). in fact, at this point cotterrell points to the difficulty of radical legal pluralism, which andrew arno called “legal exclusivism” (arno, 1985, p. 41). he describes legal exclusivism as the tendency to attribute to legal phenomena a prominent, central importance in relation to other social phenomena. in the case of radical legal pluralism, this takes the form of considering all forms of social control as law. this extension of the concept of law, however, leads to a doubling of the concept: an analytical concept of law on the one hand and a historical concept on the other. this not only threatens to lose the historical perspective of law, but also makes it difficult to explain the relationship between law and other forms of social control. as for friedman’s separation of “external” and “internal” legal culture (ad c), cotterrell explains that the above-mentioned vagueness of the concept makes this distinction lose most of its sociological explanatory potential. there is no clear answer to the question why we should consider the “internal” legal culture more important than the “external” one for the functioning of law, and what the relationship between the two aspects is. furthermore, since friedman emphasises the diversity and plurality of legal culture while ultimately treating it as a unity, the “internal” aspect appears as an aggregate representing the unity of legal culture, as opposed to the “external” aspect representing its diversity (cotterrell, 2006, pp. 85–86). from the analysis of the discussion points, it emerges that the following criteria should be borne in mind when defining the concept of legal culture: first (ad a), the concept of legal culture cannot be established without a prior clarification of either the culture or the sociological concept of law. second (ad b), that the concept of legal culture must be constructed in such a  way as to accommodate the diversity of legal culture resulting from its fragmentation according to the social structure, while avoiding the pitfalls of a radical pluralist approach. thirdly (ad c), it must provide an answer to the relationship between the “external” and “internal” aspects of legal culture. 25social legal consciousness or legal culture? public governance, administration and finances law review • 2. 2022 4.2. definition of legal culture in the light of the above criteria, legal culture can be defined as a fabric of values, norms, symbols, narratives and specific patterns of social practices related to law. legal culture is directly linked to political culture through the concept of legitimacy (krygier, 2009), and it is an integral part of the texture of culture as a whole, without sharp boundaries. within legal culture we must also distinguish between the terrain of “lay” and “professional” legal culture. the latter is the social function – and the monopoly – of the legal profession, that is to say, the “maintenance” of the normative layer of legal culture and the development of the doctrinal-dogmatic layer related to it. the “professional” aspect is of crucial importance for the formation of legal culture as a whole. at the same time, the image of the law as it is perceived by the lay public may differ significantly from the image that lawyers wish to project “inwards” (towards the legal profession) and “outwards” (towards society as a whole). 4.3. the concept of culture as indicated above, the conceptual formulation of legal culture requires an elaboration of the concept of “culture” as a  core concept and of “law” as a  concept applicable to empirical research. the concept of man behind the concept of culture we propose10 is based on the idea that man is a being with culture, living in culture, and that he fully exists – with his whole being – embedded in culture. his relationship to his natural and social environment is therefore not determined by his needs and biological endowments alone, but his behaviour is influenced just as importantly by his ideas about the world. before embarking on a further conceptual analysis of culture, we need to record the general attributes that we have included in the concept. first of all, the concept of culture always refers to a community. culture is a communal creation into which one is born, ready for the individual. no one can create culture on his own. it follows from this – and we can add to the above concept of man – that man is by nature a social being. secondly, that culture is not given to the individual in the same way as his biological dispositions. the individual maintains and shapes culture through his actions throughout his life. the individual is a participant in the shaping of culture, and not merely a passive subject or carrier of it. finally, culture – like the people who bear and shape it – exists in time, and as long as it exists, it exists continuously. no matter how much a new generation may hope, it can never be a “clean sheet”. culture is therefore a historical phenomenon, a tradition that comes from the past, and which carries its weight throughout one’s life, adding its own and passing it on to future generations. 10 the following outline is based mainly on my research in cultural anthropology and the main literature used to develop it: benedict (1961); bibó (2015); bohannan & glazer (1973); geertz (1973); leach (1982); lévi-strauss (1963); turner (1969); wolf (2010). 26 istván h. szilág yi public governance, administration and finances law review • vol.  7. no. 2.  the next step in our analysis is to reduce the concept of culture to the concept of “pattern”. although the notion of pattern is also used in a wide range of different senses, there are some common elements. one of these is the element of regularity: a pattern creates the idea of repetition, which can occur in a wide variety of dimensions in space and time. if the pattern is somehow related to time, it is associated with a sense of regularity, of permanence. at the same time, the notion of pattern also refers to “form”, which can be separated from the thing patterned, the bearer of the pattern. the concept of pattern can be further broken down into a wide variety of aspects – e.g. content, structure, nature of the thing patterned – and thus we can talk about a great variety of patterns. this is important for the concept of culture only in so far as we can also relate the notion of pattern to human behaviour, in so far as we assume that certain enduring regularities can be observed in it. this brings us to the concept of “cultural patterns”, which refers to forms and regularities of human behaviour in a given community that are not derived from biological endowments (inherited traits). it should be noted here that biological and cultural patterns of human behaviour are not independent of each other. in some circumstances, acquired (learned) patterns may become heritable, and it is debatable to what extent certain regularly occurring behaviours are due to biological endowments and to what extent to cultural patterns. the general concept of pattern includes the distinction between descriptive and prescriptive patterns. a descriptive pattern refers to a pattern that can be discovered in something that already exists – a pattern of “something” (e.g. a fossil imprint left in limestone). a prescriptive pattern, on the other hand, is a pattern of something to be formed or shaped – a pattern made “for something” (e.g. a design for a house). this distinction can also be applied to cultural patterns, and is of no small relevance to sociological inquiry: it is one thing how people actually act in social practice – that is, what sociolog y describes (sociological patterns)  –  and another thing what people think they should do  –  the patterns of expected, prescribed action. these two kinds of cultural patterns are, of course, not independent of each other either, and it is not so easy to tell whether a pattern is descriptive or prescriptive. for example, if you prepare a technical drawing of an existing house, it becomes a descriptive pattern, but if you build a new house on the basis of it, it becomes a prescriptive pattern. the descriptive or prescriptive nature of cultural patterns therefore depends on their application and use in social practice. the concept of culture can therefore be defined in general terms as the set of cultural patterns specific to a given community that shape the interactions between members of society, groups of society, or even between different societies, or indeed between the natural environment and society. culture, however, is not some amorphous mass of cultural patterns, but has an internal order, a structure. one aspect of this internal structure is the way in which the patterns relate to phenomena of social life. on this basis, we can talk about sexual culture, housing culture or just political or legal culture. on the other hand, culture is also adapted to social structure. in complex, modern societies, culture is thus adapted to social stratification and the structure of social groups (family, kinship, residential community, circle of friends) and professional groups (occupation, profession) following the functional division of labour. 27social legal consciousness or legal culture? public governance, administration and finances law review • 2. 2022 this relative separation and interconnection of the layers of cultural patterns is not a mechanical aggregation, but the result of the internal dynamics of culture. the main driving force behind this internal self-movement of culture, which is partly independent of social reality but interacts with it, is the creativity inherent in language and symbols. according to the traditional view, language is the “connective tissue” of culture, as it is the main vehicle of cultural patterns and the basic form of communication between members of society. however, language – as has become increasingly evident in philosophy following the linguistic turn and in sociolinguistics, which became institutionalised in the second half of the last century – not only carries and connects layers of cultural patterns, but also plays a role in their creation. language is thus not only a passive, neutral means of communication, but also a constitutive element of culture.11 linguistic signs themselves have multiple meanings, and language can be seen as a specific system of symbols. symbols are signs with multiple meanings, which can also be grouped according to the nature of their bearer (linguistic, visual, material, etc.). social actions – to borrow max weber’s definition (weber, 1978, pp. 22–24): human actions which, according to the intended meaning of the actor, refer to or are in the process of being adapted to the behaviour of others – are also generally symbolic and their meaning can be understood in the context of culture. in case of certain symbolic actions, such as rites, it is the very meaninglessness of the formalised action itself that allows the participants to be linked together, despite the fact that they are motivated by different values or conflicting interests and ideas. symbols perform specific functions in communication. on the one hand, they substitute for certain things, as all symbols do, and on the other hand, they integrate the community, because only members of that community will know the rich meanings attached to the symbol. another very important feature of symbols is that they do not only function in the cognitive sphere, but are also capable of evoking specific emotions, thus increasing community cohesion. so cultural patterns do not just float indifferently side by side, but are bound together by intricate and multifaceted relationships that are extremely complex. the adjective “complex” is no exaggeration: every culture is a whole world. in cultural anthropolog y, the recognition that culture must be understood as an entity in its own right, with its own internal structure and image, has been of great importance. the relative independence of culture from social, physical reality is precisely based on this internal order and self-movement. 4.4. a sociological concept of law the conceptualisation of legal culture requires, in addition to the core concept of “culture”, a  sociological definition of “law” that can be used in empirical cultural research. of the three distinctive conceptualisation strategies in the sociolog y of law  –  “legal monism”, “legal pluralism” and “mediating theories” – distinguished by roger cotterrell 11 on the question of linguistic creativity see austin (1975); hymes (2005); lucy (1993); searl (1969); wardhaugh (2006). 28 istván h. szilág yi public governance, administration and finances law review • vol.  7. no. 2.  (cotterrell, 1983), it is the “mediating theories” that have seemed to us to be the most fruitful. what these conceptions have in common is that they define law more broadly than “lawyers’ law” or state law, and that they also consider lawyers’ practical definitions of law to be sociologically inadequate, yet they limit the concept of law by giving a prominent role and clear primacy to state law in modern societies today. the solution we propose is to posit as the core concept of law the notion of “social control” derived from a  functional analysis of social workings, while adding as its distinguishing feature a conceptual element based on the above conceptual analysis of culture: law is a specific form of social control, a set of cultural patterns whose assertion is ensured by the state. the first half of the definition tells us two things. the first is that the concept of social control is broader than law, since law is only one – a historically given – form of social control (black, 1976, p. 15). the second thing that the first part of the definition warns us about is that we cannot limit the scope of our research to law. we can only analyse the problems of the enforcement and effectiveness of law in relation to other forms of social control. given that we have already discussed the nature of “cultural patterns”, two things need further clarification in the second round of our definition: the concept of “the state” and what it means that “the state ensures” that certain cultural patterns prevail. we limit the concept of “state” here to the historical type of the “modern nation state”, adding that from a sociological point of view it is very important to keep in mind that the state is an extremely complex and differentiated institutional structure. as regards the relationship between state action and cultural patterns considered law, we must also assume a  multifaceted system of relations. this ranges from very direct effects – where the state makes and directly enforces rules (e.g. collects taxes) – to cases where the relationship is, so to speak, “loose”. for example, when the parties to a civil dispute reach a settlement in anticipation of a court decision, or when the state sets the compulsory curriculum for education or the requirements for graduation. in the latter cases, it is clear that the state neither creates nor imposes cultural patterns, but it does influence the course of events. the assumption of an indirect link between state action and the prevalence of certain cultural patterns, and the identification of social control as the core concept of law, allows us to take into account considerations arising from the view of legal pluralism. in examining legal phenomena, it is therefore impossible to ignore the effects of the power fields and semi-autonomous social fields that are created in the various segments of the social structure. 4.5. professional and lay legal culture in order to shed more light on the separation of professional and lay legal culture and on the conceptual elements of legal culture, we present as an example a conceptual analysis of a  specific facet of professional legal culture, the professional self-image of the hungarian attorneys, drawn from a  recent empirical study (h. szilág yi & jankó-badó, 2018). 29social legal consciousness or legal culture? public governance, administration and finances law review • 2. 2022 our point of departure, therefore, is that the discussion on the self-image of the legal profession must be placed in the discourse on culture, and within it, on legal culture. in this context, the self-image of the attorneys is understood as an element of “professional legal culture”, separated from or contrasted with the “lay” legal culture. the self-image of the profession, however, can itself be understood as a  set of intellectual contents and elements: values, norms, descriptive cultural patterns, narratives, symbols and patterns of behaviour of the members of the profession. the values that are characteristic of the attorneys’ self-image – high level of legal knowledge, sense of justice, impartiality, unconditional respect for the client’s interests, etc. – are also part of the more general values of the legal profession and are embedded in the even more universal values of political culture, such as freedom, equality or social solidarity. the layer of self-image that is one notch closer to the level of social actions is the layer of rules of the profession, some of which are “written”, legal or juridical rules, such as in our case the law on lawyers xi of 1998  or the ethical codes of the bar associations. in addition, of course, there are unwritten rules – such as collegial rules or rules of “courtesy” in dealing with lay people – which are also part of the profession’s self-image. descriptive cultural patterns do not primarily tell us what the actors in a given situation should do, but rather they indicate the position and competence of the actors. they give us information about the place and scope of action of a given social group in society or, more specifically, in the world of law. in our case, for example, the rules of the code of civil procedure on the conduct of proceedings, which are addressed primarily to judges, also define the position and possibilities of lawyers to influence the course of proceedings. the values, the layers of prescriptive and descriptive cultural patterns, analytically separated above, are woven together by narratives – in our case, the stories known and told by lawyers – at the same time creating, in robert cover’s terms, the “normative universe” in which they take on meaning (cover, 1983, p. 4). every profession has its “great stories”, such as the history of the hungarian legal profession, which is otherwise the subject of the history of law, and which is supposed to be elaborated and “told” to future lawyers during their university education. these grand narratives are woven around the major turning points and prominent figures in the history of the profession as a corporate group, which form the basis of the identity of the whole profession. upon these grand narratives hang the web of local, “urban legends” and personal stories, which are linked by a thousand strands to other areas of culture (h. szilág yi, 2015). the symbols expressing self-image are not understood here in their physical reality – luxury car, expensive watch, rice-pod wig, robe, “very smart” phone, high-end laptop, etc. – but as symbols with multiple meanings. symbols can both signal the fact of belonging to a profession and at the same time mobilise complex emotions and contents of consciousness in outsiders. in case of lawyers, for example, status symbols are of particular importance. not only because they indicate middle-class status but also because they create a sense of success in the client (such as a luxury car or a branded watch), while other symbols (such as the yester-year attorneys’ briefcase) explicitly indicate belonging to the profession. there are also certain rites and rituals associated with entering and 30 istván h. szilág yi public governance, administration and finances law review • vol.  7. no. 2.  belonging to the profession, such as the doctoral oath or polite forms of interaction between colleagues. we should also talk about the layers of patterns that can be read from the behaviour of practitioners of the profession, which belong to the tacit knowledge that those entering the profession learn by observing the activities of colleagues. these are the tricks of the trade, which can only be learned in practice and which often significantly differ from the idealised values and rules of the profession’s manifest self-image. the basic tendency of the formation of professional self-image is to strive for intellectual unity and internal coherence, since there are always contradictions and internal tensions between the above-mentioned elements and layers of self-image. presumably, the more coherent and clearer the self-image, the better it can ensure cohesion between practitioners and contribute significantly to the capacity of the profession to advocate its interests. conversely, the more contradictory, fragmented and unclear the self-image of the profession, the less able it is to integrate its members and the less vulnerable it is to external influences. however, the role of a solid and clear self-image of the profession for the development of its social position is always an empirical question: too strong a corporative spirit can also become an obstacle to an adequate response to social change. important conclusions from the above analysis for the separation of professional and lay legal culture are: first, that the structure of lay legal culture is similar to that of professional culture, only its normative-dogmatic layer is much thinner and more fragmented, fraught with logical contradictions (berkics, 2015a). secondly, that these differences, even if very substantial, are still gradational and do not affect the fundamental identity of these two aspects of legal culture in terms of the components, the structure and the fine web that connects the elements. thirdly, that stories about law are also very important for describing and understanding lay legal culture. these narratives, which not only link and organise the elements of legal culture – the values, norms, symbols and patterns of action and thought that crystallise in social practice – but also weave legal culture into the culture as a whole (h. szilág yi, 2021). 4.6. compliance with the definition criteria before analysing the concept of legal culture, three criteria of conceptualisation were identified: firstly (a) that the concept of legal culture cannot be conceived without a  prior clarification of either the culture or the sociological concept of law. second (b) that the concept of legal culture must be constructed in such a  way as to manage the diversity of legal culture resulting from its fragmentation according to the social structure, while avoiding the pitfalls of a  radical pluralist approach. thirdly (c), it must provide an answer to the relationship between the “external” and “internal” aspects of legal culture. the results of the analysis in this respect are summarised below. ad (a). the decision to limit the concept of culture to purely objectified intellectual contents – values, norms, symbols, narratives – has pushed the conceptualisation in the direction of using the concept thus given as a tool for the semiotic analysis of “meaningful 31social legal consciousness or legal culture? public governance, administration and finances law review • 2. 2022 social actions” in the first place. what is more, our argument has precisely highlighted the autonomy of culture (legal culture), its relative independence from actual social conditions. however, the question of how to relate the concept thus created to current social processes remains open. is it sufficient to refer to the effect of values on moral emotions or to the integrative function of symbols? can these conceptual elements of culture be placed without concern in the context of patterns of social practices, of individual opinions and attitudes towards law, which develop spontaneously at the social level? these questions can be answered by analysing the relationship between legal culture and legal consciousness. ad (b). our sociological concept of law allows us to take into account the diversity of legal culture due to its fragmentation according to the social structure, yet it avoids the pitfall of a radical pluralist approach by linking the sociological concept of law to the historical phenomenon of the modern nation state. ad (c). the outlined concept of legal culture allows for an analysis of the dynamic interaction between “lay” and “professional” legal culture, by emphasising the relativity of their separation and the organic relationship between the two aspects. 5. conclusions the concepts of legal awareness and legal culture are closely related and, due to a lack of theoretical clarification, are often used as synonymous concepts. according to susan s. silbey, recent research trends are moving in the direction of using the concept of legal culture (as a  semiotic analytical tool) in macro-level theoretical and comparative research. whereas in micro-level research, especially when the object of study is how individuals interpret and mobilise legal meanings and signs, the concept of legal culture is used rather than legal consciousness (silbey, 2001, p. 8624). however, this distinction is not so much based on conceptual analysis as on a supposed difference in the object of research and the different traditions of the various academic disciplines (legal anthropolog y, legal ethnography, comparative law, sociolog y of law). other theorising strategies resolve the relationship between the two concepts by subordinating one to the other. marina kurkchiyan, for example, uses the solution of subordinating the concept of legal consciousness to the concept of legal culture, defining it as one of its elements (kurkchiyan, 2009, pp. 337–338). kahei rokumoto, on the other hand, in a  2004 study, considers legal culture a part of legal consciousness at the societal level, alongside legal knowledge and legal attitudes and legal sentiments. the core concept of legal culture is legal conception, which has a remarkable durability over time, in contrast to legal knowledge and attitudes and legal sentiments, which can change significantly over a short period of time. rokumoto stresses the qualitative difference between the elements of legal consciousness, insofar as legal knowledge, attitudes towards law and legal emotions can be studied empirically, using sociological and social psychological methods, whereas legal culture is a phenomenon accessible to the tools of cultural studies (murayama, 2014, p. 191). 32 istván h. szilág yi public governance, administration and finances law review • vol.  7. no. 2.  in our view, as presented above, the concepts of individual legal consciousness, social legal consciousness and legal culture should be separated. the purpose of this separation is not only to make clear the different nature of the phenomena thus separated, to which the methods of analysis should be adapted. hence, in the case of legal culture, the methods of linguistic analysis, textual analysis, logical and normative analysis and legal semiotics are all relevant to the method of documentary analysis. the conceptually defined phenomena of individual legal consciousness fall essentially within the domain of psycholog y, whereas social legal consciousness lies within the scope of social psycholog y. their separation highlights not only the methodological differences in their study, but also the fact that these phenomena are subject to different laws: the relative autonomy of culture is precisely based on the fact that it is not simply determined by social realities, but to a large extent by the laws of ethics, aesthetics and logic. similarly, individual behaviour has components determined in the individual psyche, and components that are organised and operate according to laws that derive from social existence and are distinct from the laws that govern the individual psyche. at the same time, a clear separation of these three concepts allows a more in-depth analysis of the relationships linking the phenomena they cover, taking into account the different laws that determine them. the conceptual analysis of legal consciousness and legal culture outlined above brings us first of all to the illumination of the fact that the formation of legal consciousness takes place in a multi-level, multi-layered structure, which are in constant interaction with each other. the individual’s legal consciousness, which is a web of knowledge, volitional and emotional elements relating to the law, is organised according to the psychological laws of the individual. it is only relatively separable from the social legal consciousness, which is the sum of the manifestations of individual legal consciousness, but which operates according to the specific internal dynamics of social interaction. social legal consciousness, on the other hand, is inextricably linked to legal culture, which enshrines intellectual content and forms that are more durable and objective than mass sentiment, public opinion and public mood, but which is itself subject to change. it is precisely 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(1997). generic prejudice and the presumption of guilt in sex abuse trials. law and human behavior, 21(1), 5–25. online: https://doi.org/10.1023/a:1024861925699 wagner, a. & bhatia, v. k. (eds.) (2009). diversity and tolerance in socio-legal context. explorations in the semiotics of law. ashgate. online: https://doi.org/10.4324/9781315577708 ward, i. (1995). law and literature. possibilities and perspective. cambridge university press. online: https://doi.org/10.1017/cbo9780511519260 wardhaugh, r. (2006). an introduction to sociolinguistics (5th ed.). blackwell publishing. weber, m. (1978). economy and society. an outline of interpretive sociolog y. university of california press. white, j. b. (1973). the legal imagination. university of chicago press. wolf, e. r. (2010). europe and the people without history (2nd ed.). university of california press. http://www.1001publishers.com/index uk.html http://www.1001publishers.com/index uk.html https://doi.org/10.2307/793723 https://doi.org/10.1017/cbo9781139173438 https://doi.org/10.1016/b0-08-043076-7/02913-2 https://doi.org/10.1016/b0-08-043076-7/02913-2 https://doi.org/10.1080/07329113.1985.10756291 https://doi.org/10.1080/07329113.1985.10756291 https://doi.org/10.1111/j.1540-4560.1971.tb00654.x https://doi.org/10.1146/annurev-lawsoscsi-110615-085141 https://doi.org/10.1146/annurev-lawsoscsi-110615-085141 https://doi.org/10.1515/9781400836666 https://doi.org/10.14232/belvbook.2016.58526 https://doi.org/10.14232/belvbook.2016.58526 https://doi.org/10.1023/a:1024861925699 https://doi.org/10.4324/9781315577708 https://doi.org/10.1017/cbo9780511519260 public governance, administration and finances law review the theoretical framework of macroprudential policy and its place in the scheme of economic policy jános kálmán* * dr. jános kálmán, assistant lecturer, department of administrative and financial law, faculty of law, széchenyi istván university in győr. his main field of research is macroprudential policy in the context of administrative law. (e-mail: janos.kalman88@gmail.com) abstract: microprudential regulation and supervision – focused on institutional risks – cannot guarantee the stability of the financial system. therefore special attention should be paid to macroprudential regulation and supervision to address systemic risks. the purpose of this study is to provide the historical context and a theoretical framework for macroprudential regulation and supervision – a new area of economic policy. to this end, we shall examine the causes for the spread of macroprudential policy, its basic concepts, and thirdly, its place within the scheme of economic policies. keywords: economic policy; glass–steagall act; macroprudential policy; regulation and supervision 1. introduction the liberalization and deregulation pervading the regulation of financial markets in recent decades would go hand in hand with a significant decrease in states’ ability to intervene. due to regulatory deficiencies, supervisory authorities were incapable of sensing the impending crisis and were also unable to handle aspects of the crisis that had been identified. providing a new basis for the regulation of financial markets and simultaneously strengthening supervisory competencies have constantly been on the agenda since 2008: on the global level at the financial stability board formed by the g20, on a regional level with the european union, as well as at the state level. an agreement has been reached between those creating regulatory and supervisory policy, and academic representatives in that microprudential regulation and supervision that focus on institutional risks are insufficient for ensuring the stability of the financial system; therefore significant attention must be paid to macroprudential regulation and supervision that aim to handle systemic risks. this policy area practically did not even exist prior to 2008 and its conceptual definition, the development of its tools as well as its relationship to other areas of economic policy is still evolving. this study aims to present the historical and theoretical basis for macroprudential regulation and supervision as a new field of economic policy. to this end, we shall examine the causes for the spread of macroprudential policy, its basic concepts, and thirdly, its place within the scheme of economic policy.1 2. reasons for the spread of the macroprudential approach the global economic crisis that emerged in 2008 – specifically an asset price-bubble2 at the outset – was not the first serious setback in human history. one of the basic characteristics of the economy is that it is in constant change; sometimes it grows, other times it begins to decline3 and this cyclicality is especially true for the workings of the financial markets. based on broad empirical research, leaven and valencia demonstrated that of the 42 banking crises occurring between 1970 and 2007, 55% were also followed by a currency crisis; in contrast, the number of sovereign debt crises was far lower; over half of bank crises were accompanied by another crisis (currency and banking crises). furthermore, in almost 11% of cases, a triple crisis occurred (i.e. currency, banking, and sovereign debt crises simultaneously).4 distinct risks in particular economic sectors are thus able to have an effect on the stability of the whole sector, which – due to the interconnectedness of actors in the economy – may contaminate other sectors and thus the whole of the economy. therefore it is worth briefly reviewing the reasons that led to the spread of macroprudential regulation and supervision in the financial markets. 2.1 the glass–steagall act the supervisory and regulatory side of the ‘great depression’ of 1929–1932 yielded numerous morals and consequences, the causes of which are to be found in the erosion of faith in the financial markets’ flexibility and ability to self-regulate – i.e. in the ‘invisible hand’ of the market according to adam smith. the glass–steagall act5 enacted in 1933 made an 10.53116/pgaflr.2016.2.3 mailto:janos.kalman88@gmail.com https://doi.org/10.53116/pgaflr.2016.2.3 attempt – in order to restore faith in the banking system6 – to restrict the propensity to speculate, which can be regarded as a basic aspect of financial markets. to this end – effectively erecting a firewall between the activities of financial institutions –, the glass–steagall act separated commercial and investment banking activities. this fundamentally meant that if a bank accepted deposits, it could only use them for providing credit but was prohibited from trading on the stock exchange. the act also introduced restrictions regarding the speculative use of capital, eliminated interest on deposits repayable on demand, introduced a deposit insurance scheme and the minimum capital requirement.7 the fundamental aim of the act was to prevent from hastily risking or at least seriously limit banks concerning the funds of depositors. consequently, the act also tried to refrain states – i.e. taxpayers – from having to bail out troubled financial institutions when they are near bankruptcy. the glass–steagall act placed emphasis on security, soundness, stability and avoidance of abuse amid steady growth rather than quick but risky growth; i.e. it targeted the creation of a system of safeguards providing protection against renewed financial crises. however, the regulations of the glass–steagall act – through taking advantage of its deficiencies – were often worked around by market participants, and constantly eroded during their time in effect.8 firstly, the avoidance of the separation of functions appeared in the formation of foreign subsidiaries by financial institutions, since financial markets were significantly more deregulated in numerous jurisdictions – such as in great britain – than in the usa. secondly, commercial banks developed new instruments for investment that behaved almost like securities, while investment banks developed products with the characteristics of loans and deposits,9 as a result of which they essentially became each other’s competitors. a fundamental new technique serving the ‘avoidance’ of the glass–steagall act became available from the 70s when banks began to sell ‘repacked’, in other words ‘securitized’ loans – initially of high quality – to investors in the capital markets.10 we call this the originate-to-distribute model. the essence of this practice lies in that banks are able to transform illiquid instruments into liquid ones having a large market, while the institution originally providing loans spreads its risk among investors.11 it must be stressed that – besides market actors – the central bank of the united states of america, the federal reserve system (hereinafter referred to as the fed) itself played a crucial role in the decline of the glass–steagall act’s provisions incentivizing stability. article 20 of the act contained a general prohibition on banks’ forming affiliations with companies whose principal activity is securities underwriting. however, the fed reinterpreted this prohibition in such a way that initially 5%, then 10%, and after 1997, 25% of the total revenues of commercial banks could originate from investment banking;12 furthermore, in 1990 it expressly permitted j. p. morgan & co. to underwrite securities.13 hence the fed, in the words of wolfgang reinicke, de facto overruled the glass–steagall act.14 this process resulted in the u.s. congress having no other choice but – after several unsuccessful bills15 – to formally remove the barriers between commercial and investment banking activity with the gramm–leach–bliley act of 1999. 2.2 the consequences of the gramm–leach–bliley act uncovering the causes of the global economic crisis of 2008 is not an aim of this study,16 however, it is necessary to point out that restrictions removed by the gramm–leach–bliley act in the spirit of – ‘cyclical euphoria’17 – created the basis for the materialization of the macroeconomic risks, the mitigation of which continues to be the primary task of economic policy to this day. firstly, the dissolution of the boundary between commercial and investment banking made it possible for financial conglomerates to form enormous corporations that combine the previously separate financial activities (such as the collection of deposits with insurance and listing securities). the risk effect of the merging of activities is connected with financial stability, which is significant for the entirety of the economy.18 on the one hand, as a consequence of the gramm–leach–bliley act, such institutions were formed in great numbers that had to be saved by state capital injection in cases of crisis due to their size and role in financial intermediation and their contribution to the national economy. this is the so called ‘too big to fail’ problem.19 achieving the classification of ‘too big to fail’ comes with significant competitive advantage compared to other financial institutions as it allows for carrying out their activity, building market positions and undertaking exaggerated risks in order to increase their profitability in the secure knowledge that the potential costs of risky businesses and losses will always be paid by tax payers. this is the so-called moral hazard problem that produces significant macroeconomic risks. on the other hand, activities with different aims within one institution necessarily lead to conflicts of interest. as marján expressed if stock analysts were in the same boat as investment bankers, the temptation would be too big to – as it has indeed happened – endorse to investors without a second thought corporations with known problems. bankers would easily become accomplices of ceos running away from problems.20 therefore, instead of solving problems at the micro level, they added up to the macro level due to not having dealt with them. secondly – strongly connected to the removal of the barrier from between commercial and investment banking – the originate-to-distribute model formed due to securitization was seriously damaged by the originator’s failure to be sufficiently circumspect, and spread more than just good quality mortgages among investors. due to a relaxation of mortgage lending conditions, increasing numbers of so-called subprime borrowers received mortgages that were then also securitized, resulting in complex derivative securities – the risks of which could not even be assessed by the issuers themselves in some cases. they were sold to investors, hence placing the risks off the balance sheet. as a result of this practice, at first everyone was a winner: debtors received loans, banks issued an increasing number of loans that raised their income, those repackaging securities got their premiums and savers realized significant returns without perceiving risk.21 at the same time, the success of such lending formed a bubble, together with which securitization – after reaching a ‘critical mass’ – no longer meant the spreading of risk but rather the infection of the whole financial system. macroeconomic risks produced as a result of the abovementioned practices highlighted the fact that the micro-level approach to the regulation and supervision of the modern financial system, i.e. individual institutional prudence is insufficient. the micro-level stability of the financial system before the economic crisis concealed the accumulated systemic risks, the forecasting and management of which must be made part of the regulatory and supervisory system. therefore states, economic integration organizations and various international institutions are making significant efforts globally in order to create suitable institutional frameworks and tools for the prevention, discovery and management of systemic risks.22 3. basic definitions of macroprudential policy after having presented the reasons for the spread of macroprudential regulation and supervision (hereinafter referred altogether to as macroprudential policy), we will attempt to define the basic concepts and aims of macroprudential policy. firstly, the origin of the term ‘macro-prudence’ must be mentioned briefly, as in spite of the need for macroprudential approach having been brought to the fore by the present economic crisis, its appearance dates back to much earlier. 3.1 the origin of the term ‘macro-prudence’ uncovering the exact origin of the term macro-prudence is not an easy task, but academic literature relates its inception to the expert work done at the bank of international settlements (hereinafter/henceforth referred to as bis). piet clement demonstrated that – according to bis archives – the first appearance of the term macro-prudence in an international context was in 1979 at a meeting of the cooke committee (the forerunner of the present-day basel committee on banking supervision, the bcbs), where experts discussed the hidden risks of maturity transformation in international interbank lending.23 because this document was an internal publication, the term was not publicized. the first public document that specifically dealt with macroprudential policy was a report by one of bis’s committees (committee on the global financial system).24 it was not by accident that the question of the necessity of macroprudential policy emerged in connection with risks hidden in the derivative markets and the process of securitization. however, ‘cyclical euphoria’ overshadowed expert proposals – in parallel with the liberalization and deregulation of the financial markets25 – and up until the beginning of 2000, the notion of macro-prudence was only rarely used.26 the notion’s ‘rebirth’ is traced back to a speech from september 2000 by andrew crockett, head of the financial stability forum.27 crockett summarized the differences between the macroand microprudential approaches of regulation and supervision, and expressed his concern that in order to reach financial stability, the macroprudential approach would be needed to be reinforced. in spite of the abovementioned, – apart from a few exceptions28 – academic journals remained almost indifferent to macroprudential policy, as figure 1 shows. figure 1: appearances of the term ‘macro-prudence’ in academic journals based on the ebsco econlit database (edited by the author) 3.2 the concept and aims of macroprudential policy macroprudential policy can be defined as the primary use of prudential tools to limit systemic risks and assure the stability of the financial system. the central element of the notion of macroprudential policy is the concept of systemic risk itself, which encompasses the decline in the provision of financial services due to the weakening of the whole or part of the financial system in a way that this decline has a potentially profound negative effect on real economy.29 in other words, by way of financial institutions’ risk-taking and risk-management practices, systemic risks affect the whole of the financial system and thereby the economy as well, since through shifts in economic conditions they become internal risks for particular market actors.30 according to academic literature, the rationale for macroprudential intervention can essentially be found in the occurrence of externalities of the financial system stemming from systemic risks. firstly, externalities can arise between particular institutions of the financial system. as credit grows, there can be excessive reliance on short-term wholesale funding provided by banks and non-bank financial institutions that exposes the system to liquidity risk. a build-up of exposure to funding and derivative markets also goes hand in hand with the risk of intermediaries becoming ‘too interconnected to fail’. these institutions take larger risks – relying on a state lifeline in case of trouble – through which they gain a competitive advantage, yet they also ‘poison’ other market actors, weaken market discipline and the incentive to appropriately control risk.31 besides, they do not take into consideration the effect of their own exposure on the whole system of financial services.32 secondly, externality can lead to an overexposure of the system to aggregate shocks. a proven correlation exists between credit and asset prices, resulting in widespread leverage and increases the vulnerability of the system against declines in asset prices. credit booms caused by competitive pressure and capital flow leading to an erosion of lending standards that also increases the financial system’s exposure to macro shocks. at the same time, overreliance on short-term wholesale funding exposes the system to crises of confidence.33 thirdly, externalities can arise when the financial system amplifies adverse shocks to the economy.34 this characteristic is referred to as pro-cyclic behavior. the most well-known form of pro-cyclic behavior is the so-called credit crunch phenomenon, when decreasing profitability, increasing costs of external financing and exchange rate devaluation leads to problems of capital adequacy and liquidity, to which banks react by either cutting or in extreme cases, stopping lending. reduction of lending leads to cuts in investments and employment that also causes serious problems in the real economy.35 besides the credit crunch phenomenon, we must also mention the so-called fire sale effect, when multiple institutions start selling illiquid securities, thereby depressing prices, further weakening balance sheets and increasing the cost of credit, applying a negative effect on the real economy.36 these externalities give rise to three objectives or ‘tasks’ for macroprudential policy. macroprudential policy – as an example of financial stability policy – (1) must handle structural or cross-sectoral risks, (2) must increase the resistance and flexibility of the financial system in the face of aggregate systemic shocks, and (3) must decrease the financial system’s pro-cyclicality, i.e. the time dimension of risks. therefore, firstly, the task of macroprudential policy is the handling of structural or cross-sectoral risks through the regulation of the vulnerability stemming from the interconnections of financial intermediaries in the financial system. secondly, its task is to increase the resilience of the financial system to aggregate systemic shocks by building buffers that absorb their impact and help maintain the ability of the financial system to provide credit to the economy. thirdly, its task is to decrease the inherent pro-cyclicality of the financial system by introducing various capital requirements, provisioning and liquidity regulations, and leverage indicators, i.e. through administrative limits. the objectives of macroprudential policy can primarily be realized through macroprudential regulation and supervision. macroprudential regulation means financial regulation that aims to control the social costs associated with excessive balance-sheet shrinkage on the part of multiple financial institutions hit with a common shock.37 the notion of macroprudential supervision refers to the entire process of (1) monitoring and analysis of the financial system as a whole in order to chart vulnerabilities; (2) assessing potential threats to financial stability and deciding to take mitigating action, (3) implementing measures to actually mitigate vulnerabilities, and (4) evaluating these actions in order to ascertain to what extent vulnerabilities have indeed been diminished.38 ensuring the stability of the financial system can also be achieved with approaches other than macroprudential policy, which therefore must closely cooperate with other areas of economic policy, since the stability of the economic system can only be maintained through harmonized coordination. 4. the place of macroprudential policy within the system of economic policies hence, macroprudential policy must cooperate with several other economic policy areas in order to reach its goals. figure 2 presents the relationship between macroprudential and other policies. figure 2: the relationships between macroprudential and other policies (edited by the author) 4.1 the relationship of macroprudential policy and monetary policy the most recent financial crisis completely undermined the preceding consensus and showed that price stability does not guarantee financial or macroeconomic stability.39 several countries had to deal with dangerous financial instability besides extremely low inflation levels. in order to ensure macroeconomic stability, monetary policy – among others – has to take financial stability objectives into consideration, and because of the strong connections of the two policy areas, central banks also have to play a leading role in the realization of macroprudential policy. macroprudential policy and monetary policy supplement each other in a flexible way, which is especially significant when monetary policy itself hits its limitations – as could be seen in the economic crisis of 2008. on the one hand, – ex ante – well-calibrated and clearly communicated macroprudential policies can limit risks, thereby easing the burden on monetary policy. macroprudential policy may assist in the controlling of lending and thereby affects asset prices – thus decreasing risks stemming from the formation of asset price bubbles – and can ease asset price fluctuations originating from pro-cyclical behavior. moreover, when macroprudential policies – ex ante – constrain risk-taking, they reduce the risk of financial disturbances.40 on the other hand, macroprudential policy also provides buffers against unexpected shocks, lessening the risk of the monetary policy’s running into its own limitation, the 0% interest rate. at times of recession, macroprudential policy can – ex post – dampen the effect of shocks on lending and the financing of the economy by releasing these buffers, hence supplementing the devices of monetary policy.41 4.2 the relationship between macroprudential and fiscal policies adequate fiscal policy plays a significant role in the avoidance of macroeconomic shocks as well as in the handling of existing ones. firstly, certain types of tax may contribute to the build-up of systemic risks. corporate taxes – as several analyses point out42 – generally increase willingness to development using loans, as opposed to financing from capital. many countries do not provide tax breaks for those renting property, while providing generous relief for mortgage interest. this can be a source of significant distortion and revenue loss, as households are encouraged to borrow against housing assets, either to invest in non-housing assets or to finance immediate consumption. such fiscal policy decisions can cause distortions in the financial system that could be avoided through the creation of coordination mechanisms. secondly, fiscal policy can have a direct effect on risks in the financial system via taxes, levies and fees. so-called pigovian taxes43 (such as the bank tax) and so-called financial stability contributions44 (such as contributions paid into resolution funds) states can influence the behavior of actors in the financial markets and at the same time can create funds – using revenues of market actors – in order to ensure financial stability. thirdly, taxes affect asset prices in that a newly introduced tax decreases an asset’s price by decreasing the profitability of the asset. therefore, in periods of prosperity, fiscal policy can be used to prevent the development of asset price bubbles. 4.3 the relationship of macroprudential and microprudential policies one main lesson of the economic crisis has been that although microprudential regulation is necessary, it is not sufficient for a stable operation of the financial system since the latter is much more than the sum of its financial institutions. in order to defend against losses stemming from systemic risks, the institutional approach in itself is not enough; therefore, the policy areas representing two different perspectives must cooperate closely. the comparison of macroand microprudential policy can be seen in table 1. table 1: comparison of macro and microprudential perspectives45 macro and microprudential perspectives macroprudential policy microprudential policy immediate objective limit financial system-wide distress and systemic risk limit individual risks, decreasing threats affecting individual institutions ultimate objective avoid output costs consumer protection type of risk (partly) endogenous: result of the common behavior of individual institutions exogenous: they can be regarded as a given in relation to individual institutions correlations and common exposures across institutions important irrelevant calibration of prudential controls in terms of system-wide risks: top-down in terms of risks for individual institutions: bottomup it can be seen from the comparison that while microprudential policy contributes to the stability of the financial market it can be seen from the comparison that while microprudential policy contributes to the stability of the financial market through the prevention and discovery of institutional risks, macroprudential policy does so via the prevention and discovery of systemic risks. therefore sharing information and the joint analysis of risks, as well as tight communication are necessary to realize the supplementary benefits. besides close cooperation, there must also be mechanisms in place that are able to resolve conflicts arising from differing perspectives and objectives – mainly occurring at times of economic shock. regardless of their distinct approaches, macroprudential and microprudential policies both deliver their effects through the same transmission mechanism. during periods of ‘good times’, the microprudential authority probably agrees with the formation of buffers being a prudent behavior, even if the ratio of credit default is low and profitability is high. however, in ‘bad times’, tension may increase between the two policy areas, as the macroprudential authority – in order to break pro-cyclicality – would like to ease regulatory conditions in order to avoid a credit crunch and a fire sale, while the micro-prudential authority would tighten requirements to protect depositors and investors.46 in order to resolve conflicts, it needs to be clarified which perspective should have priority at which times. 4.4 the relationship of macroprudential policy, crisis management and resolution policy crisis management and resolution policy also supplement macroprudential policy. macroprudential policy averts risks threatening financial stability as a ‘first line of defense’ by identifying and managing them. however, in practice all threats cannot be averted, therefore, the macroprudential authority increases resilience of the financial system as a ‘second line of defense’. at the inception of a crisis, when the system is not able to neutralize shocks, crisis management and resolution are the final, ‘third line of defense’ for maintaining financial stability.47 the establishment of crisis management and resolution systems, recognizing the unsustainability of national bailout actions,48 aims at the regulated removal of a failing financial institution from the market in order to maintain financial stability. an effective and credible crisis management and resolution system may support the realization of the objectives of macroprudential policy by reinforcing market discipline.49 4.5 the relationship between macroprudential and competitive policies the freedom of economic competition originates from the theoretical consensus that competition ensures cost efficiency, the ongoing improvement of the quality and standards of goods and services: all in all, greater efficiency. when carrying out financial activity, intensive competition often incentivizes financial institutions to take excessive risks and grow too fast, and mergers can result in institutions too large in size, carrying in them systemic risks.50 because of this, tension may arise between the objectives of competition policy and financial stability: the assurance of fair competition may conflict with ensuring financial stability. in order to avoid tension, it is necessary to establish that in relation to the financial sector, the scrutiny of economic competition must be supplemented with a macroprudential perspective. in order to achieve this, certain elements of traditional competition law enforcement (such as authorization, investigation of effective control, merger approval) have been assigned to the macroprudential supervisory authorities in several countries. other countries implemented strict coordination and consultation mechanisms between the two policy areas and have incorporated financial stability and as a secondary aim into the mission statement of competition authorities. 5. summary the global economic crisis has brought into sharp focus the fact that as a result of financial globalization – which primarily manifests itself in the form of the liberalization and deregulation of the financial system – financial institutions are intricately intertwined, leading to the appearance at the global level of instability in the financial system – the so called poisoning effect. even before the symbolic start of the crisis (the bankruptcy of lehman brothers), rajan had already pointed out that the international financial system, the capital and money markets had built up new risks that were not seen by anybody, could not be assessed but still they existed.51 macroprudential policy specifically aims to forecast, identify and manage these systemic risks pent up in the financial system. macroprudential policy has to handle structural risks, increase the resilience and flexibility of the financial system against shocks, and decrease the financial system’s pro-cyclicality, i.e. the time dimension of risks. ensuring financial stability – and thereby economic stability – cannot be achieved by macroprudential policy alone; therefore, it is essential that it may operate in close cooperation with other economic policy areas. references 1 the scope of this study does not include the presentation of the organizational framework of macroprudential regulation and supervision, or the analysis and evaluation of its toolset. 2 it is interesting to note that the first bubble crisis broke out in the netherlands in 1637 (the so-called tulpenwoerde, meaning tulip mania). because of speculation, the price of tulip bulbs increased unbelievably over a few years, until the bubble burst and a bulb worth up to the price of a ship one day, regained its original value the next day. essentially the same happened at the inception of the 2001 dotcom and the 2007 asset price bubbles. see also: christian c. day, paper conspiracies and the end of all good order: perceptions and speculation in early capital markets, 1 entrepreneurial business law journal 283, 322 (2006). 3 rising and declining periods are referred to as cycles. the four most significant types are the kitchin, juglar, kondratyev, and braudel cycles. the kitchin cycle, which is also called the inventory cycle, is the shortest one, describing around the fluctuation of the economy over about 3 to 5 years. the juglar cycle, also known as the fixed-investment cycle, lasts for 7–11 years. the kondratyev cycle encompasses 50–60 years, consisting of one rising and one declining period. the longest period, 100–200 years, is described by the braudel cycle. over this time frame, even practically immobile structures change. we must note that due to the acceleration of the world, the peaks and troughs have moved closer to one another: that is, cycles of 200 years have become shorter, even as much as half the previous length. on the causes of cycles see: andrás bródy, a ciklus oka és hatása, 52 közgazdasági szemle 903, 914 (2007). 4 luc laeven, fabian valencia, systemic banking crises: a new database, imf working paper, no. 224 (2008). 5 banking act of 1933, https://ia802702.us.archive.org/7/items/fulltexttheglasssteagallacta.k.a.thebankingactof1933/1933_01248.pdf (accessed 11 december 2015). 6 see vincent p. carosso, investment banking in america: a history (harvard university press, 1970). 7 see further howard h. preston, the banking act of 1933, 23 am. econ. rev. 585, 607 (1993). 8 sándor ligeti, márta sulyok-pap (eds.), banküzemtan (tanszék pénzügyi tanácsadó és szolgáltató kft. 1998), 9 see william d. jackson, glass–steagall act: commercial vs. investment banking, 26 (congressional research service,1987). 10 ‘securitization’ can be defined as a process of separation, restructuring and transportation of a loan portfolio having adequate credit enhancement to investors. ‘securitization’ was first used by salomon brothers in the public stock issuance for bank of america in 1977. see leon t. kendall, michael j. fishman (eds.), a primer on securitization (mit press, 1996), 31. 11 júlia király, márton nagy & e. viktor szabó, egy különleges eseménysorozat elemzése – a másodrendű jelzáloghitelpiaci válság és (hazai) következményei, 55 közgazdasági szemle 573, 621 (2008), 584. 12 james r. barth, r. dan brumbaugh & james a. wilcox, source policy watch: the repeal of glass–steagall and the advent of broad banking, 14 j. econ. perspect., 191, 204 (2000), 196. 13 see also: zsuzsánna biedermann, the history of the american financial regulation, 57 public financ. quart. 313, 331 (2012). 14 wolfgang h. reinicke, banking, politics, and global finance: american commercial banks and regulatory change, 1980–1990, 114. (edward elgar, 1995). 15 see also: jill m. hendrickson, the long and bumpy road to glass–steagall reform: a historical and evolutionary analysis of banking legislation, 60 a. j. econ. sociol. 849, 879 (2001). 16 see also the hungarian literature regarding this subject: györgy lászló asztalos, the correlation between the financial crisis and the crisis of the financial institutions, 54 public financ. quart. 369, 406 (2009); józsef móczár, anatomy and lessons of the global financial crisis, 55 public financ. quart. 753, 775 (2010); miklós losoncz, the global financial crisis and the european union, 55 public financ. quart. 792, 808 (2010). see also in foreign specialized literature: joseph e. stiglitz, the current economic crisis and lessons for economic theory, 35 eastern economic journal 281, 296 (2009); mark jickling, (2010): causes of the financial crisis (congressional research service, 2010); jeffrey m. lipchaw, 10.5089/9781451870824.001 10.1257/jep.14.2.191 10.1111/1536-7150.00126 https://ia802702.us.archive.org/7/items/fulltexttheglass-steagallacta.k.a.thebankingactof1933/1933_01248.pdf https://doi.org/10.5089/9781451870824.001 https://doi.org/10.1257/jep.14.2.191 https://doi.org/10.1111/1536-7150.00126 the financial crisis of 2008–2009: capitalism didn’t fail, but the metaphors got a ‘c’, 95 minn. law rev. 1532, 1567 (2011). 17 the expression comes from raghuram g. rajan, who uses it to describe how faith in draconian regulation is strongest at the bottom of the cycle – when there is little need for participants to be regulated. by contrast, the misconception that markets will take care of themselves is most widespread at the top of the cycle – the point of maximum danger for the system. in case of growth, at the highest point of expansion, when the chance of market actors taking exaggerated risks is highest, everyone trusts the self-regulatory mechanism of the market. see raghuram g. rajan, the credit crisis and cycle-proof regulation, 91 fed reserve bank st. 397, 402 (2009), 400. 18 borbála szüle, a pénzügyi konglomerátumok létrejöttének kockázati hatásai, 53 közgazdasági szemle 661, 680 (2006), 662. 19 according to most sources, the source of the expression can be traced to senator mckinney, who used it at a congress hearing in 1984. see hearings before the subcommittee on financial institutions supervision, regulation and insurance of the committee on banking, finance and urban affairs house of representatives, ninety-eight congress, second session, 1984, 89. https://fraser.stlouisfed.org/docs/historical/house/house_cinb1984.pdf (accessed 11 december 2015).the first appearance of this terminology in literature is in the works of walter adams and james w. brock. see walter adams, james w. brock, corporate size and the bailout factor, 21 j. econ. issues 61, 85 (1987). 20 attila marján, az európai pénzügyi szolgáltatási szektor és a gazdasági és monetáris unió, http://phd.lib.unicorvinus.hu/126/1/marjan_attila.pdf (accessed 11 december 2015), 55. 21 biedermann, supra n. 13, at 343. 22 see: a financial stability forum: report of the financial stability forum on addressing procyclicality in the financial system (2009), http://www.financialstabilityboard.org/wp-content/uploads/r_0904a.pdf (accessed 11 december 2015). european union: the high level group on financial supervision is the eu: de larosiere report (2009), http://ec.europa.eu/internal_market/finances/docs/de_larosiere_report_en.pdf (accessed 11 december 2015). a g20: g20 working group 1 enhancing sound regulation and strengthening transparency (2009), http://rbidocs.rbi.org.in/rdocs/publicationreport/pdfs/20_010409.pdf (accessed 11 december 2015). 23 piet clement, the term ‘macroprudential’: origins and evolution, bis quarterly review, 59, 67 (2010), 59–60. 24 recent innovations in international banking (cross report), cgfs publications no 1. (1986), http://www.bis.org/publ/ecsc01c.pdf (accessed 11 december 2015), 233–244. 25 liberalization essentially means restoring the conditions of the market economy in areas where state intervention has reached significant levels. deregulation means the removal of regulations on various financial sectors, financial services, interoperability of sectors with one another; generally, it means the reduction of limiting legislation. 26 we must emphasize from this period that the concept itself escaped the circle of ‘central bankers’ and the imf also started to use it, initially in connection with the crisis in south east asia. see: key aspects of a framework for a sound financial system (1998), http://www.imf.org/external/pubs/ft/wefs/toward/pdf/file03.pdf (accessed 11 december 2015), 13. 27 andrew d. crockett, marrying the microand macroprudential dimensions of financial stability, http://www.bis.org/speeches/sp000921.htm (accessed 11 december 2015). 28 see: ágnes lublóy, rendszerkockázat a bankszektorban, 2 hitelintézeti szemle 70, 90 (2003); jean-charles rochet, a framework for macroprudential banking regulation, 12 revista de economia 6, 16 (2005), 6–16.; claudio borio, monetary and financial stability: so close and yet so far? 192 national institute economic review 84, 101 (2005). 29 on the academic literature approach to the notion of systemic risk see also: lubóy, supra n. 13, at 77–81. 30 katalin mérő, a bankszabályozás kihívásai és változásai a pénzügyi-gazdasági válság hatására, 133 in pál valetiny, ferenc lászló kiss & csongor istván nagy (eds.), verseny és szabályozás 2011 (mta krtk közgazdaság-tudományi intézet, 2012). 31 see: viral acharya, matthew richardson (eds.), restoring financial stability: how to repair a failed system (new york university stern school of business, 2009). 32 anikó szombati, a makroprudenciális felügyeleti hatáskör magyarországon, 132 in lentner csaba (ed.), bank 10.1057/eej.2009.24 10.1177/002795010519 200109 10.1002/9781118258163 https://fraser.stlouisfed.org/docs/historical/house/house_cinb1984.pdf http://phd.lib.uni-corvinus.hu/126/1/marjan_attila.pdf http://www.financialstabilityboard.org/wp-content/uploads/r_0904a.pdf http://ec.europa.eu/internal_market/finances/docs/de_larosiere_report_en.pdf http://rbidocs.rbi.org.in/rdocs/publicationreport/pdfs/20_010409.pdf http://www.bis.org/publ/ecsc01c.pdf http://www.imf.org/external/pubs/ft/wefs/toward/pdf/file03.pdf http://www.bis.org/speeches/sp000921.htm https://doi.org/10.1057/eej.2009.24 https://doi.org/10.1177/002795010519200109 https://doi.org/10.1002/9781118258163 32 anikó szombati, a makroprudenciális felügyeleti hatáskör magyarországon, 132 in lentner csaba (ed.), bank menedzsment. bankszabályozás – pénzügyi fogyasztóvédelem (nemzeti közszolgálati és tankönyvkiadó, 2013). 33 see gianni de nicolò, giovanni favara & lev ratnovski, externalities and macroprudential policy, in imf staff discussion note, no. 5. (2012). 34 samuel g. hanson, anil k. kashyap & jeremy c. stein, a macroprudential approach to financial regulation, 25 j. econ. perspect. 3, 28 (2011). 35 ádám balog, györgy matolcsy, márton nagy & balázs vonnák, credit crunch magyarországon 2009–2013 között: egy hiteltelen korszak vége? 13 hitelintézeti szemle, 11, 34 (2014), 11. 36 douglas w. diamond, raghuram g. rajan, fear of fire sales and the credit freeze, nber working paper, no. 14925. (2009). 37 hanson, kashyap & stein, supra n. 34, at 5. 38 towards a more stable financial system: macroprudential supervision at dnb, 2010, de nederlandsche bank, http://www.dnb.nl/en/binaries/towards%20a%20more%20stable%20financial%20system_tcm47-236522.pdf (accessed 11 december 2015), 12. 39 pamfili antipa, julien matheron, interactions between monetary and macroprudential policies, 18 financial stability review 225, 239 (2014), 226. 40 stijn claessens (et al.), the interaction of monetary and macroprudential policies (imf 2013), 10–11. 41 ibid. 11. 42 ruud a. de mooij, tax biases to debt finance: assessing the problem, finding solutions, imf staff discussion note, no. 11. (2011). 43 taxes with which the state attempts to balance the negative social effects of an activity by taxing those entities who engage in those activities. 44 see: a fair and substantial contribution by the financial sector, final report to the g20, 2010, imf. https://www.imf.org/external/np/g20/pdf/062710b.pdf (accessed 11 december 2015). 45 source: claudio borio, towards a macroprudential framework for financial supervision and regulation? bis working paper, no. 128. (2003), 2. 46 jacek osiński, katharine seal & lex hoogduin, macroprudential and microprudential policies: toward cohabitation, imf staff discussion note. no. 5. (2013), 9–10. 47 see also: towards a more stable financial system: macroprudential supervision at dnb, 12–14. 48 financial rescue operations incentivize risk taking, weaken national budgets and distort competition. see: thomas f. huertas, a szanálás reformja, 12 hitelintézeti szemle 86, 101 (2014), 88–89. 49 claessens, supra n. 40, at 14–15. 50 see xavier vives, competition policy in banking, 27 oxford rev. econ. pol. 479, 497 (2011) and lev ratnovski, competition policy for modern banks, imf working paper no. 126. (2013), 8. 51 see raghuram g. rajan, has financial globalization made the world riskier? nber working paper, no. 11728 (2005). 10.2139/ssrn.2083302 10.1257/jep.25.1.3 10.3386/w14925 10.1257/jep.25.1.3 10.5089/9781463935139.006 10.5089/9781484369999.006 10.1093/oxrep/grr021, 10.2139/ssrn.2270288 http://www.dnb.nl/en/binaries/towards%20a%20more%20stable%20financial%20system_tcm47-236522.pdf https://www.imf.org/external/np/g20/pdf/062710b.pdf https://doi.org/10.2139/ssrn.2083302 https://doi.org/10.1257/jep.25.1.3 https://doi.org/10.3386/w14925 https://doi.org/10.1257/jep.25.1.3 https://doi.org/10.5089/9781463935139.006 https://doi.org/10.5089/9781484369999.006 https://doi.org/10.1093/oxrep/grr021 https://doi.org/10.2139/ssrn.2270288 public governance, administration and finances law review �e absence of the �nancial investigation in the slovak republic and its consequences lucia kurilovská*, marek kordík** * judr. lucia kurilovská phd., associate professor at the department of the criminal law, criminology and criminalistics of the faculty of law, comenius university in bratislava; rector of the police academy in bratislava, counsel to the minister of justice of the slovak republic; senior researcher of the institute of the state and law, slovak academy of sciences. (e-mail: lucia.kurilovska@minv.sk) ** capt. judr. marek kordík phd., ll.m., assistant professor at the department of the criminal law, criminology and criminalistics of the faculty of law, comenius university in bratislava; vice-rector of the police academy in bratislava. (e-mail: marek.kordik@�aw.uniba.sk) abstract: according to current status �nancial investigation is not established by the criminal procedural code or other legal source in a formal way in slovakia. �e study analyses this situation de lege lata and de lege ferenda. keywords: �nancial crimes; �nancial investigation; forfeiture of property 1. introduction pursuant to criminal procedural code,1 assets from criminal activities are subject to evidence to the extent of their income, range, content, and height. from the perspective of the investigative process performed by the judicial and police authorities, the gathering of illegal assets as evidence deriving from criminal activities is required, and treated as any other subject of evidence as it relates to mens rea or actus reus. �e primary reason why it is necessary to investigate illegal assets from criminal activities is to create a su�cient procedural base for judicial impositions of the sanctions related to the con�scation of income from criminal activities. section 58(2) of the criminal code2 stipulates the �rst category of crimes punishable by the con�scation of property, while taking into account the circumstances under which the criminal o�ence was committed, and the personal situation of the o�ender. �e court may order the forfeiture of property of the o�ender whom it sentences to life imprisonment or to unconditional imprisonment for a particularly serious felony, through which the o�ender gained or tried to gain large-scale property bene�ts or caused large-scale damage. �e large scale bene�t or damage is de�ned pursuant the section 125(1) of the criminal code as a sum at least equal to 133,000€. 10.53116/pgaflr.2016.1.3 https://doi.org/10.53116/pgaflr.2016.1.3 �e second category when the court orders the forfeiture of property, even in the absence of the conditions referred above when sentencing perpetrators of criminal o�ences for so-called predicative o�ences,3 is if the o�ender has acquired a substantial extent of property, or part thereof from the proceeds of crime. substantial extent or damage is de�ned pursuant to section 125(1) of the criminal code as a sum at least equal to 26,600€. �e third category when the court mandates the forfeiture of property, even in the absence of the conditions referred above, when sentencing perpetrators for the criminal o�ence of the legalization of proceeds of crime pursuant to section 233 of the criminal code when his or her property or part thereof was acquired from the proceeds of crime, at least in the substantial extent pursuant to section 233(2), or acquired his or her property or part thereof from the proceeds of crime to at least a large scale extent.4 2. current status despite the legal obligation of the police and judicial authorities to gather evidence regarding illegal income from criminal activities and the mandatory obligation to impose the punishment of the forfeiture of property, statistics show con�icting data. since 2011 there have been raised indictments in 111 cases, but no punishments have been imposed for the forfeiture of property, although individuals have been found guilty for the legalization of proceeds of crime pursuant to section 233 of the criminal code. while analyzing these cases, it is evident that the judicial ruling on the legal criteria for imposing the punishment of the forfeiture of property has not been met in these particular cases. �e ruling may have been interpreted in a way that the judicial �le has not included any or su�cient evidence to rule the forfeiture of the property. �ere should be a direct nexus proven between proceeds or assets and the particular criminal activity. intent of the perpetrator to gather the proceeds or assets is insu�cient for imposing the forfeiture of property.5 �e process of gathering the evidence of the proceeds of crimes is subjected to �nancial investigation. financial investigation is a proceeding of the police and judicial authorities that is independent from the investigation and the prosecution for the predicative crime. financial investigation is a secondary and supplementary evidence gathering process focused on the trace and undercover of the proceeds from the criminal activities in order to establish reasonable ground to impose the punishment of the forfeiture of property by the judicial authority, or to decide to freeze assets in the pretrial or trial phase to ensure the proper execution of further judicial decision if the legitimate criteria are met. currently, the �nancial investigation has not been established by the criminal procedural code, nor by any other relevant legal source, at least in a formal way. additionally, �nancial investigations have not been incorporated into the organizational structures of police forces nor the prosecutor’s o�ces. it is important to note that the police or judicial authority performing an investigation are currently completely allocated for the investigation of the predicative crimes, and they time time and/or personal capacity to perform a �nancial investigation. table n. 1. seizure of assets in slovakia done by the financial intelligence unit of the national criminal agency6 y2011 seizure of money acc. s. 95 of the criminal procedural code 40 seizure of security papers acc. s. 96 of the slovak criminal code 1 surrender of items acc. s. 550 of the criminal procedural code (evidence in the judicial cooperation in the criminal matters) 7 seizure of property acc s. 551 of the criminal procedural code (the execution of the foreign asset related judicial decision in the judicial cooperation in the criminal matters) 2 table n. 2. criminal o�ence of money laundering acc. section 233 of the criminal code in the area of the district prosecutor’s o�ces7 y2011 prosecution 19 indictment/plea bargaining 17/0 sentenced imprisonment-7 con�scation of property-0 table n. 3. seizure of assets in slovakia done by the financial intelligence unit of the national criminal agency 8 y2012 criminal o�ence of money laundering acc. s. 233 and s. 234 of the criminal code other criminal o�ences seizure of money acc. s. 95 of the criminal procedural code 40 45 seizure of security papers acc. s. 96 of the slovak criminal code 1 5 surrender of items acc. s. 550 of the criminal procedural code (evidence in the judicial cooperation in the criminal matters) 7 0 seizure of property acc. s. 551 of the criminal procedural code (the execution of the foreign asset related judicial decision in the judicial cooperation in the criminal matters) 2 0 table n. 4. criminal o�ence of money laundering acc. section 233 of the criminal code in the area of the district prosecutors’ o�ces9 y2012 prosecution 47 indictment/plea bargaining 34/6 sentenced imprisonment-8 con�scation of property-0 table n. 5. seizure of assets in slovakia done by the financial intelligence unit of the national criminal agency10 y2013 criminal o�ence of money laundering acc. s. 233 and s. 234 of the criminal code other criminal o�ences seizure of money acc. s. 95 of the criminal procedural code 12 0 seizure of security papers acc. s. 96 of the slovak criminal 0 1 code surrender of items acc. s. 550 of the criminal procedural code (evidence in the judicial cooperation in the criminal matters) 0 42 seizure of property acc. s. 551 of the criminal procedural code (the execution of the foreign asset related judicial decision in the judicial cooperation in the criminal matters) 0 48 table n. 6. criminal o�ence of money laundering acc. section 233 of the criminal code in the area of the district prosecutors’ o�ces11 y2013 prosecution 46 indictment/plea bargaining 24/8 sentencing imprisonment-21 con�scation of property-0 table n. 7. criminal o�ence of money laundering acc. section 233 of the criminal code in the jurisdiction of the special prosecutor’s o�ce12 y2013 prosecution 11 indictment/plea bargaining 10 sentencing imprisonment-0 con�scation of property-0 table n. 8. seizure of assets in slovakia done by the financial intelligence unit of the national criminal agency13 y2014 criminal o�ence of money laundering acc. s. 233 and s. 234 of the criminal code other criminal o�ences seizure of money acc. s. 95 of the criminal procedural code 22 198 seizure of security papers acc. s. 96 of the slovak criminal code 0 1 surrender of items acc. s. 550 of the criminal procedural code (evidence in the judicial cooperation in the criminal matters) 2 37 seizure of property acc. s. 551 of the criminal procedural code (the execution of the foreign asset related judicial decision in the judicial cooperation in the criminal matters) 7 24 table n. 9. criminal o�ence of money laundering acc. section 233 of the criminal code in the area of the district prosecutors’ o�ces14 y2014 prosecution 48 indictment/plea bargaining 31/4 sentencing imprisonment-12 con�scation of the property-0 table n. 10. criminal o�ence of money laundering acc. section 233 of the criminal code in the jurisdiction of the special prosecutor’s o�ce15 y2014 prosecution 12 indictment/plea bargaining 7/3 sentencing imprisonment-3 con�scation of property-0 we have provided the statistics regarding the legalization of proceeds of crime pursuant to section 233 of the criminal code. �e statement given above is in regards to the e�ectiveness of prosecution and the sanctioning of economic crimes as such. a comprehensive �nancial investigation is considered one of the most e�ective tools to �ght against organized crime. seizing and sourcing out the income of organized crime works preventively, as it is able to stop generating additional income by these groups. in this way it narrows the possibilities for serious criminal activities.16 3. the necessity of effective financial investigation veri�cation and tracing of �nancial transactions, digital data in account or crm17 systems, or other databases may identify any illegal income, payments, secret accounts, non-justi�able items and entries in ledgers, and/or illegitimate depreciations. financial investigations have led to the discovery of hidden spvs,18 acting in accordance with business relations or transaction schemes including information on real bene�ciary owners. �e urgent need to identify any person who exercises ownership or control over a legal entity in order to ensure e�ective transparency has been articulated in the basic anti-money laundering legal source within the eu: the recently adopted iv. directive. ‘identi�cation and veri�cation of bene�cial owners should, where relevant, extend to legal entities that own other legal entities, and obliged entities should look for the natural person(s) who ultimately exercises control through ownership or through other means of the legal entity that is the customer. control through other means may, inter alia, include the criteria of control used for the purpose of preparing consolidated �nancial statements, such as through a shareholders’ agreement, the exercise of dominant in�uence or the power to appoint senior management. �ere may be cases where no natural person is identi�able who ultimately owns or exerts control over a legal entity. in such exceptional cases, obliged entities, having exhausted all other means of identi�cation, and provided there are no grounds for suspicion, may consider the senior managing o�cial(s) to be the bene�cial owner(s).’19 ‘�e need for accurate and up-to-date information on the bene�cial owner is a key factor in tracing criminals who might otherwise hide their identity behind a corporate structure. member states should therefore ensure that entities incorporated within their territory in accordance with national law obtain and hold adequate, accurate and current information on their bene�cial ownership, in addition to basic information such as the company name and address and proof of incorporation and legal ownership.’20 member states should ensure that the widest possible range of legal entities incorporated or created by any other mechanism in their territory is covered. while �nding a speci�ed percentage shareholding or ownership interest does not automatically result in �nding the bene�cial owner, it should be one evidential factor among others to be taken into account. member states should be able, however, to decide that a lower percentage may be an indication of ownership or control.21 linking true bene�ciary owners and their assets with the committed crimes are key factors of a successful �nancial investigation. tracing these links is usually known as a creation of an economic pro�le or asset pro�le of the accused. economic pro�ling is a part of a �nancial investigation, and is usually based upon open source checks. �e gathered evidence should not be used only for investigation and prosecution of money laundering, but as important evidence in the prosecution for the predicative crime (e.g. to provide a more complete picture of the structure of an organized group). another reason to support e�ective �nancial investigations in the slovak republic are detailed in the following recommendations of money val experts, which stipulate that: – the slovak authorities could give more speci�c training on money laundering and terrorist �nancing o�ences, and the seizure, freezing, and con�scation of property that is the proceeds of crime, or is to be used to �nance terrorism, to police, prosecutors, and judges;22 and – an increase in dedicated resources and sta� to the fiu for its activities in the supervision �eld, and for its performance of a more e�ective national coordination role.23 �e experts also emphasized that: – more training on terrorist �nancing-related issues, including those regarding the implementation of sr iii requirements, should be provided to the national bank of slovakia’s supervisory sta� involved in anti-money laundering / combating the financing of terrorism (aml/cft) initiative;24 – authorities should provide the fiu with additional resources to allow more detailed coordination on the national level;25 – there are some de�cits on the e�ectiveness of money laundering and terrorist �nancing investigations;26 – there is currently a lack of su�cient coordination between major players of the aml/cft regime;27 – more e�ective mechanisms are needed to coordinate at the operational level;28 and – there is no evidence of concrete arrangements for coordination of seizure and con�scation actions with other countries, or for sharing con�scated assets with them, other than those provided under the framework decision applicable for eu member states.29 4. conclusion legal development in the slovak republic has grown signi�cantly in recent years while continuously evolving and adopting new tools to make the �ght against economic crime more e�ective. a new whistleblowing act,30 allows parliament to address the act of criminal responsibility of legal persons. it is possible that all these legislative activities may become obsolete, and the slovak republic will ful�ll the expected criteria only in a formal way. �e current system of investigation and prosecution does not rely on the �nancial investigation, and the sta� will not be able to put these (both recently adopted and still developing) legal tools into practice. �e justi�cation for the failure to do so will likely be that the ‘practitioners have not got used to’ the process, as evidenced in the statistics. another such tool is the called in-direct criminal responsibility of legal persons, established through the sanction-protective measure of the forfeiture of money sum or forfeiture of property. it was been established in 2011, and since then, no claim against a legal person has been raised, and no legal person has been brought before the court. references 1. act no.141/1961 (code of criminal procedure). 2. act no. 300/2005 (criminal code). 3. illicit manufacturing and possession of narcotics or psychotropic substances, poisons or precursors, and tra�cking in them pursuant to section 172 paragraphs 2, 3 or 4, or section 173, criminal o�ence of tra�cking in human beings pursuant to section 179, criminal o�ence of tra�cking in children pursuant to section 180 paragraphs 2 or 3 or section 181, criminal o�ence of extortion pursuant to section 189 paragraph 2 (c), criminal o�ence of gross coercion pursuant to section 190 paragraphs 1, 3, 4 or 5, or section 191 paragraphs 3 or 4, criminal o�ence of coercion pursuant to section 192 paragraphs 3 or 4, criminal o�ence of sharing pursuant to section 231 paragraphs 2, 3 or 4, or section 232 paragraphs 3 or 4, criminal o�ence of legalization of proceeds of crime pursuant to section 233 or 234, criminal o�ence of forgery, fraudulent alteration and illicit manufacturing of money and securities pursuant to section 270, criminal o�ence of uttering counterfeit, fraudulently altered and illicitly manufactured money and securities pursuant to section 271 paragraph 1, criminal o�ence of manufacturing and possession of instruments for counterfeiting and forgery pursuant to section 272 paragraph 2, criminal o�ence of failure to pay tax and insurance pursuant to section 277, criminal o�ence of failure to pay tax pursuant to section 278 paragraphs 2 or 3, criminal o�ence of breach of regulations governing state technical measures for labelling goods pursuant to section 279 paragraphs 2 or 3, criminal o�ence of establishing, masterminding and supporting a criminal group pursuant to section 296, establishing, masterminding and supporting a terrorist group pursuant to section 297, criminal o�ence of terror pursuant to section 313 or section 314, criminal o�ence of accepting a bribe pursuant to section 328 paragraph 2 or 3, or section 329 paragraphs 2 or 3, criminal o�ence of bribery pursuant to section 334 paragraph 2 or section 335 paragraph 2, criminal o�ence of counterfeiting and altering a public instrument, o�cial seal, o�cial seal-o�, o�cial emblem and o�cial mark pursuant to section 352 paragraph 6, criminal o�ence of smuggling of migrants pursuant to section 355 or section 356, criminal o�ence of procuring and soliciting prostitution pursuant to section 367 paragraph 3, criminal o�ence of manufacturing of child pornography pursuant to section 368, criminal o�ence of dissemination of child pornography pursuant to section 369, criminal o�ence of corrupting morals pursuant to section 372 paragraphs 2 or 3, or criminal o�ence of terrorism and some forms of participation on terrorism pursuant to section 419 4. for the purposes of this article we have decided to illustrate the current status of the �nancial investigation in the slovak republic at the statistics of the criminal o�ense of the legalization of proceeds of crime pursuant to section 233 with the data analyses back to 2011, when the last money val evaluation took place. evaluation report of the slovak republic by the money val, http://www.coe.int/t/dghl/monitoring/moneyval/evaluations/round4/svk4 _mer_moneyval%282011%2921_en.pdf (accessed 21 september 2015) 5. wouter h. muller, christian h. kälin, john g. goldsworth (eds.), anti-money laundering-international law and practice, 12 (chichester, john wiley & sons ltd, 2007). http://www.coe.int/t/dghl/monitoring/moneyval/evaluations/round4/svk4_mer_moneyval%282011%2921_en.pdf 6. fiu annual report 2011, translated by the authors, http://www.minv.sk/swift_data/source/policia/naka_opr/fsj/vyrocna_sprava %20sjfp%202011.pdf (accessed 15 september 2015) 7. annual statistics of the criminal and non-criminal agenda in 2011, o�ce of the prosecutor general, translated by the authors, http://www.genpro.gov.sk/statistiky12c1.html (accessed 15 september 2015) 8. fiu annual report 2012, supra n. 6 9. annual statistics of the criminal and non-criminal agenda in 2012, o�ce of the prosecutor general, translated by the authors, http://www.genpro.gov.sk/statistiky-12c1.html (accessed 15 september 2015) 10. fiu annual report 2012, supra n. 6 11. annual statistics of the criminal and non-criminal agenda in 2013, o�ce of the prosecutor general, translated by the authors, http://www.genpro.gov.sk/statistiky-12c1.html (accessed 15 september 2015) 12. annual statistics of the criminal and non-criminal agenda in 2013, o�ce of the prosecutor general, ibid. 13. fiu annual report 2014, http://www.minv.sk/swift_data/source/policia/naka_opr/fsj/vyrocna_sprava %20sjfp%202011.pdf (accessed 15 september 2015) 14. annual statistics of the criminal and non-criminal agenda in 2014, o�ce of the prosecutor general, translated by the authors, http://www.genpro.gov.sk/statistiky12c1.html (accessed 15 september 2015) 15. annual statistics of the criminal and non-criminal agenda in 2014, o�ce of the prosecutor general, ibid. 16. wouter h. muller, christian h. kälin, john g. goldsworth (eds.), antimoney laundering-international law and practice, 22 (chichester, john wiley & sons ltd, 2007). 17. customer management systems a.g. oracle, sap, sas. 18. special purpose vehiclein this context a legal entity established for a single purpose mainly for the ‘tax optimization’, corruptive practices or money laundering. 19. point 13 of the preamble to the directive (eu) 2015/849 of the european parliament and of the council of 20 may 2015 on the prevention http://www.minv.sk/swift_data/source/policia/naka_opr/fsj/vyrocna_sprava%20sjfp%202011.pdf http://www.genpro.gov.sk/statistiky-12c1.html http://www.genpro.gov.sk/statistiky-12c1.html http://www.genpro.gov.sk/statistiky-12c1.html http://www.minv.sk/swift_data/source/policia/naka_opr/fsj/vyrocna_sprava%20sjfp%202011.pdf http://www.genpro.gov.sk/statistiky-12c1.html of the use of the �nancial system for the purposes of money laundering or terrorist �nancing, amending regulation (eu) no 648/2012 of the european parliament and of the council, and repealing directive 2005/60/ec of the european parliament and of the council and commission directive 2006/70/ec, http://eur-lex.europa.eu/legalcontent/en/txt/html/?uri= celex:32015l0849&from=en (accessed 15 september 2015) 20. point 14 of the preamble to the directive (eu) 2015/849, ibid. 21. point 12 of the preamble to the directive (eu) 2015/849, ibid. 22. section 914, compliance with the recommendation n. 30 fatf, 4 evaluation report of the slovak republic by the money val, http://www.coe.int/t/dghl/monitoring/moneyval/evaluations/round4/svk4 _mer_moneyval%282011%2921_en.pdf (accessed 21 september 2015) 23. section 915, compliance with the recommendation n. 30 fatf, ibid. �e evaluators commented that the slovak authorities should satisfy themselves that there are adequate resources allocated to set up and maintain the anti-money laundering/combating the �nancing the terrorism system on the policy level and that policy makers are appropriately skilled and provided with relevant training. 24. section 918, compliance with the recommendation n. 30 fatf, ibid. section 919, compliance with the recommendation n. 30 fatf, ibid. 25. point 27, table 1, section 915, compliance with the recommendation n. 30 fatf, ibid. 26. point 27, section 915, compliance with the recommendation n. 30 fatf, ibid. 27. point 31, section 915, compliance with the recommendation n. 30 fatf, ibid. 28. point 31, section 915, compliance with the recommendation n. 30 fatf, ibid. �e same has been pointed in point 14 of the preamble to the directive (eu) 2015/849 of the european parliament and of the council of 20 may 2015 saying that more detailed and comprehensive statistics should be maintained with regard to the investigation and prosecution of ml and tf, as well as on the provisional measures applied and con�scation of http://eur-lex.europa.eu/legal-content/en/txt/html/?uri=celex:32015l0849&from=en http://www.coe.int/t/dghl/monitoring/moneyval/evaluations/round4/svk4_mer_moneyval%282011%2921_en.pdf proceeds of all predicate o�ences. all these statistics should be analyzed on a regular basis to determine areas where more resources are required and to assess the e�ectiveness of the system. 29. act no. 307/2014 (whistleblowing act) © 2018 dialóg campus, budapest public governance, administration and finances law review vol. 3. no. 1. (2018) • 57–71. abusus iuris and the protection of public interest by administrative authorities and (administrative) courts in slovakia peter potasch* * peter potasch, associate professor, dr . et dr ., phd, paneuropean university in bratislava, faculty of law, institute of public law . (e-mail: peter .potasch@paneurouni .com) abstract: the presented paper deals with public interest in the decision-making practice of public authorities . the author also deals with the so-called abusus iuris (with focus on public law) which does not enjoy legal protection on the grounds that it is contrary to public interest . in this context, the author also points out that there is no uniform and universal definition of the concept/term of “public interest”, but that public interest as such consists of partial public interests which may sometimes even be in conflict with one another thus comparing public interest and private interest in a certain case does not always have to suffice . he also points out certain procedural burdens relating to administrative proceedings – in particular the burden of sufficient reasoning and fact-finding especially in reference to the protection of public interest by administrative authorities . the paper primarily focuses on the decision-making practice of the courts of the slovak republic and of the czech republic  –  both at the level of protection of public interest in administrative proceedings and of its protection in court proceedings . keywords: good governance; administration; law 1. chapter 1 the protection of public interest1 is undoubtedly an essential component of the functioning of the state, which as such also constitutes an element necessary for the existence of the state itself . however, the key questions we need and we strive to explore in this paper is what the protection of public interest is, where the boundaries of this institute are, under what circumstances is its application admissible and how its implementation is ensured so that it cannot be misused in such a  way that referring to the protection of public interest would eventually become a  “legitimate reason” for the issuance of an unlawful act by the public authorities . first of all, it is necessary to consider whether “public interest” is something that is expressed in the constitution of the slovak republic or in other generally binding legislation explicitly by (always) using the phrase “public interest” . the answer is a  very clear “no” and this makes the matter even more complicated and sensitive at the same time . the constitution of the slovak republic and the laws of the slovak republic use a number of indications, which sometimes explicitly, sometimes descriptively indicate the protection of public interest .2 to illustrate, it is possible to point to some partial legal regulations, i .e . art . 20 par . 2 of the constitution of the slovak republic states “the law shall establish 10.53116/pgaflr.2018.1.6 mailto:peter.potasch%40paneurouni.com?subject= https://doi.org/10.53116/pgaflr.2018.1.6 58 peter potasch public governance, administration and finances law review • vol. 3. no. 1. certain property, which is necessary for the purposes of safeguarding the needs of the society, the development of the national economy and the public interest, except the property defined in art . 4 of this constitution as the exclusive property of the state, the municipality or specific legal persons . a  law may also lay down which property only individual citizens or legal persons residing in the slovak republic may own .”3 (explicit use of the term “public interest”) art . 20 par . 3 of the constitution of the slovak republic states: “the ownership is binding . it shall not be misused causing harm to others or in contradiction with the general interests protected by the law . the exercise of right in property must not be detrimental to the health of other people, nature, cultural sites or the environment beyond the margin laid down by a law .” (use of the term “general interest” as a concept indicating the protection of public interest) . art . 20 par . 4 of the constitution of the slovak republic further  –  “expropriation or restrictions of right in property may be imposed only to the necessary extent and in public interest, based on the law and for a valuable consideration .”4 if we go to the level of inspecting the regulations defined by general acts (rather than by the constitution), it is evident that there are various acts that protect public interest  –  (e .g . act . no . 538/2005 coll .) states  –  for example  –  that “the state spa commission will reject an application for a  permit to use a  resource if it is in the public interest not to use a  natural healing resource or a  natural mineral resource…”5 . the provisions above (examples of sources of law) represent the legal basis of the protection of public interest in specific matters, while the protection of public interest can be (and most often is) realized in the decision-making processes of public authorities in particular cases . in this context, it is necessary to refer to administrative bodies, which decide about the rights, duties and rightful interests of natural persons and legal entities within the administrative procedure and who are obliged according to § 3 par . 1 of act no . 71/1967 coll . (code of administrative procedure)6 to protect the public interest in the decisionmaking process  –  “administrative authorities shall act in accordance with laws and other legislation . they are required to protect the interests of the state and society, the rights and interests of natural persons and legal persons, and to consistently require the fulfilment of their duties .” where the protection of public interest is expressed by the phrase are required to protect the interests of the state and of society (the term corresponds to the time at which the aforementioned legal provision was formulated, the terminolog y equates to today’s “public interest”) .7 on the other hand, within the administrative judiciary we may encounter the protection of public interest expressed explicitly when § 5 par . 3 of act no . 162/2015 coll .  –  the code on administrative judiciary  –  states that “in its decisionmaking the administrative court is committed to the protection of law and public interest .” (svk: “pri rozhodovaní správny súd dbá na ochranu zákonnosti a verejného záujmu .“) the protection of public interest is specifically addressed in the code on administrative judiciary e .g . with regard to the suspensory effect of the administrative action in relation to the decision to be subjected to judicial inquiry, which results from the provision of § 185 (a) of the administrative proceedings code, according to which “the administrative court may, following a  motion by the claimant and the defendant’s statement, grant a suspensive effect to a claim: (a) if the immediate execution or other legal consequences of the contested decision of the public authority or of the measure of the 59 public governance, administration and finances law review • 1. 2018 abusus iuris and the protection of public interest by administrative authorities… public authority would threaten to cause serious damage, whether substantial financial damage or economic damage, damage to the environment or any other serious irreparable consequences and the granting of a suspensive effect is not contrary to the public interest.” finally, it must be concluded (within this general introduction) that there are more procedural provisions explicitly regulating the protection of public interest in public law decision-making procedure (i .e . by reference to the phrase “public interest” or other designation with similar content  –  e .g . act no . 50/1976 coll . building act states in its § 81 that “in the building approval [occupancy] proceeding, the building authority shall in particular examine whether the construction was carried out according to the documentation certified by the building authority in the construction procedure and whether the conditions of constructions specified by the zoning plan of the zone or the conditions specified in the territorial decision and in the building permit were observed . it shall further examine whether the actual construction or use of the structure will endanger the public interest, especially in terms of the protection of life and health of people and the environment, occupational safety and the safety of the technical equipment .”) . for the purposes of this paper we consider it sufficient to point out provisions of the law highlighted above, which we consider to be sufficient to illustrate the existing legal regime in which the protection of “public interest” is expressed in a direct way (directly) . 2. on the protection of public interest (the indirect way/method) however, the protection of public interest is not always provided for by a direct reference public interest in the source of law . with regard to the protection of public interest, it cannot be omitted that the legislation of the slovak republic recognizes a  number of partial institutes  –  sometimes inspired by the legislation of foreign countries and incorporated into the legal order of the slovak republic, and some based on the decisionmaking activity of the european and/or international courts (with effects similar to those of the protection of public interest arising from the text of the act explicitly [see above]) . in the cases we will deal with in this section of the paper, there is no explicit definition of/ reference to the protection of public interest,8 i .e . the legislature does not use the phrase “public interest” or “general interest” (in the very source of the law) but through other legal expressions and legal regulations, it provides for the protection of public interest as a whole or a part thereof (e .g . in order to ensure quick and cost-effective judicial or administrative proceedings, to ensure the protection of public finances, etc .) . examples of such regulations include, for example, § 5 of act no . 160/2015 coll . civil proceedings code for adversarial proceedings: “obvious abuse of rights shall not involve legal protection . the court may, in so far as provided for in this act, refuse and sanction procedural acts that are manifestly abusive, arbitrary or unlawful, or lead to unjustified delays in the proceedings .” the provisions of § 3 par . 6 of act no . 563/2009 coll . on the administration of taxes and on amendments to certain acts (hereinafter referred to as tax code), which is identical with the provisions of § 2 par . 6 of the previous act no . 511/1992 coll . on the administration of taxes and charges and on changes in the system of territorial financial authorities, with 60 peter potasch public governance, administration and finances law review • vol. 3. no. 1. effect from 1 january 1993, regulated  –  without any substantive change  –  the principle of informality of the tax procedure according to which in the application of the various tax laws in tax administration, the actual/true content of the act or of other event crucial to finding, the levying or collection of taxes had to be taken into account . as of 1 january 2014, the provision has been supplemented so that a legal relation or other fact crucial to finding, the levying or collection of taxes which have no economic justification and are resulting in targeted tax avoidance or obtaining such a  tax advantage which the taxable entity would not otherwise be entitled to or resulting in a  targeted reduction of tax liability shall be disregarded in tax administration. the purpose of the change in question was to allow the tax authorities to prevent tax administrators (tax authorities) from taking into account, for example, artificial transactions and structures created for unwanted tax optimization, even if such tax optimization is not the sole purpose of those transactions, and while avoiding an unjustified tax advantage under which it understands the unjustified application of claims resulting from tax legislation, such as a  non-taxable portion of the tax base, the application of undue tax charges, the use of fictitious expenses, and the like . thus, the question is related to the prohibition of abusus iuris in tax proceedings, which has already been recognized by the judicial practice even before, despite the absence of a  specific statutory provision . for example, the supreme court of the slovak republic in its decision  –  file no . 2sžf 44/2013  –  stated that “the conduct of a  taxpayer whose sole purpose is to obtain [tax] overcompensation and which conduct is devoid of any economic meaning, cannot be classified otherwise as an abuse of the objective law [abusus iuris] thus such conduct cannot be taken into account for tax purposes .” understanding the prohibition of abuse of law/rights in court practice, based on the assessment of the economic meaning of the transaction by the taxpayer and the subsequent confrontation with the result in obtaining an unjustified tax advantage, the tax reduction for the entity is close to the formula used by the legislator in the amended provision of § 3 par . 6 of the tax code . even in this case, these are facts which have no economic justification and which result in deliberate circumvention of a  tax duty or acquisition of a tax advantage to which the taxpayer would otherwise not be entitled to or which results in a  specific tax reduction . under the aforementioned circumstances, therefore, it appears that the amendment does not impose any new rules of conduct, but only the settled judicial practice has been given the form of a  statutory provision . from the use of the words purposeful circumvention, purposeful reduction, and advantage to which the entity would not be entitled to, it is beyond doubt, that the law here refers to acts that violate the law or obstruct it, and not what the law predicts directly – and combines the consequences in the form of benefits for the tax entity . therefore, in order to apply this provision, an abusive application of the law/right must be exercised by the tax entity . in this context, it is necessary to define the concepts of the circumvention of the law and abuse of law/rights (abusus iuris) which are both present in civil and tax law, but with some differences, particularly in terms of legal consequences . bypassing (circumventing ) the law is defined in the legal theory of civil law9 in such a way that the legal act does not contradict the explicit wording of the statutory provision, however its consequences aim not to observe the objective of the law . here the law refers 61 public governance, administration and finances law review • 1. 2018 abusus iuris and the protection of public interest by administrative authorities… not only to the civil code (act no . 40/1964 coll ., the civil code), but also to other laws that have the force of an act . bypassing (circumventing ) a  law by legal action, in fraudem legis, is a behaviour that is based on the fact that someone does not act contrary to the law (contra legem), but in such a way as to deliberately achieve a result not foreseen by the law and/or a  result that is undesirable .10 the constitutional court of the slovak republic stated that circumvention of the law consists of the exclusion of a  legally binding rule of conduct with the deliberate use of means which are not forbidden by the law per se, as a result of which the established state of affairs appears to be incontestable in terms of law . procedure in fraudem legis is a  procedure whereby someone is formally acting under the law, but deliberately delivers a  result that is prohibited, unforeseen or undesirable under legal rule .11 a legal act obstructing the law is invalid under § 39 of the civil code (§ 39 of the civil code reads: “a legal act whose content or purpose are at variance with an act, circumvent the act or are at variance with good manners shall be invalid .” the fact that such conduct does not enjoy protection, can be derived from § 3 (1) of the civil code: “exercise of rights and duties following from civil legal relationships must not groundlessly infringe rights and lawful interests of others and must not be at variance with good manners.” a broader understanding of circumvention in tax law vs . civil law is that it does not only deal with legal acts (the mere legality of the acts/of the conduct) but also with other matters that are critical for the discovery, collection or levying of taxes . for example, based on the case law of the supreme administrative court of the czech republic, such a  fact may be setting up and doing business through multiple companies in order to avoid the legal status of a  value added tax payer .12 another difference is in the legal consequences  –  while civil law relates circumvention of law with a  legal consequence in the form of the invalidity of the legal act to which the circumvention relates (see above), tax law does not examine the question of the validity of the legal act at all, the circumstance circumventing the law, even if it was a legal act, is just simply not taken into account in tax proceedings/for taxation (tax) purpose (while not impacting in any way the very legal effect of the act itself ) .13 it is, therefore, a  system of protection against abusus iuris (and thus also an instrument of protection of public interest) in the proceedings of the administrative body (the tax authority), who is under a  duty to investigate whether a  tax activity  –  showing otherwise  –  signs of a  perfectly legal action, does not show signs of abusus iuris. if this is the case, the tax authority will evaluate this act as abusus iuris (e .g . an act damaging the public interest, such as reducing the tax liability of the person) with the relevant legal consequences not “accepting” that act for taxation (tax) purposes without directly affecting the legality (lawfulness/validity/binding effects) of the act itself . in addition to the tax code (in the procedural regime), the code on administrative judiciary (act no . 162/2015 coll .) also regulates the abuse of rights . under § 28 of the code on administrative judiciary, “the administrative court may exceptionally refuse actions brought by natural and legal persons, which are of a  clearly vexatious nature or which pursue an abuse of law or its application to no avail . the administrative court may also sanction the parties’ procedural acts that serve to abuse the laws, in particular to achieve delays in the proceedings .” this provision of § 28 of the code on administrative judiciary may be perceived as another ground for dismissing an action in connection with 62 peter potasch public governance, administration and finances law review • vol. 3. no. 1. § 98 (1) h) of the code on administrative judiciary (“if so shall be established by this act”) . the basic parameters that need to be addressed (§ 28 of the code on administrative judiciary) are as follows: 1 . the application of such rejection is discretionary on the side of the court 2 . exceptionality 3 . dismissal of the action is carried out by a court decision 4 . the grounds for refusal are a) clearly vexatious nature of the action b) abuse of law/rights (by the applicant) c) unsuccessful application of the law (by the applicant) the refusal of an action under § 28 is therefore a qualitatively different refusal than a refusal under the grounds set out in § 98 of the code on administrative judiciary . rejection of an action for the reasons set out in the aforementioned provision of the code on administrative judiciary is based on substantive facts relating to the action brought, while the concept of § 28 is completely different . § 28 covers the dismissal of an action, which is, in essence, an indirect penalization of the applicant for bringing an action, with a  certain content or negative purpose (see above) . it should also be pointed out that there are several qualitative differences between the rejection of the application with reference to § 98 and with reference to § 28 of the code on administrative judiciary – for example: ƿ the grounds for refusal under § 98 of the code on administrative judiciary are in fact factually positive, objectively verifiable and without the discretion of the court, on the other hand  –  the grounds for refusal under § 28 of the code on administrative judiciary are based exclusively on the court’s own discretion (the vexatious nature of the action, or, as the case may be, on the court’s reasoning on the abusus iuris by the applicant), which should then be detailed, particularly regarding the abusus iuris as an instrument for the protection of public interest ƿ while § 98 of the code on administrative judiciary regulates the so-called “mandatory” refusal of the action, the provision of § 28 regulates the option/ possibility of an administrative court to reject the action (not its duty/obligation) . the purpose of the provisions of § 28 of the code on administrative judiciary is to prevent lawsuits from being brought into the system of administrative justice without real substantive justification, which would cause a  slowdown in the overall performance of justice, both in the individual case before the court and in general too . the fact that the provision § 28 of the code on administrative judiciary is a tool for the protection against obvious abuse of the law/rights, also stems from the explanatory memorandum to the provision in question: this provision lays down the principle of the prohibition of obvious abuse of law/rights . the filing of an action by a natural person or a legal person abusing the law or following a harsh or expressly unsuccessful exercise of rights justifies its refusal under § 98 par . (1) h . 63 public governance, administration and finances law review • 1. 2018 abusus iuris and the protection of public interest by administrative authorities… the existence of a  prohibition of abuse of law/rights is derived primarily from the theory of law as a general legal principle, which is further developed by the case law of civil courts, administrative courts and of the constitutional court . the scholarly doctrine which one can refer to (see above), defines abusus iuris as a  situation in which someone performs his or her subjective right thus causing unjustified harm to someone else or society  –  if so, such behaviour results in the illicit and is only apparently/formally permissible .14 this is the case of only apparently/formally permissible behaviour, because the law does not perceive a behaviour that could be both permissible and non-permissible at the same time . in the legal theory, the abuse of law/rights means the use of a  legal rule inconsistent with its purpose .15 it is therefore an action apparently/formally permissible, that  –  however  –  eventually results in the circumvention of the law (circumventing its spirit and meaning ) in order to deliberately achieve the result of a  legal norm that is unforeseeable and undesirable .16 the supreme court of the slovak republic was also dealing with actions having vexatious, or “abusive” character in its judgement  –  file no . 5sži/6/2012 in which the following opinion was expressed: “concluding, the supreme court shall disclose that the freedom of information act should not serve as a pretext for criticizing public authorities but as a  tool of social control . the supreme court does not deny the applicant’s right to information, but it is essential that this right be enforced effectively, i .e . only those requests that are genuinely required by those persons are to be addressed, i .e . requests for information within the scope of their decision-making activities . this is the only way to talk about effective social control of public administration . otherwise, claimants could use this right as a pretext for formalistic and pointless disputes . one cannot overlook the fact that the control itself was carried out by the defendant in 2009 and the claimant as a civic association that ‘watches politicians and points out where they steal, cheat and where they should behave more honestly, and proposes solutions to bring more decency and honesty to the political and public life’ unnecessarily continued the administrative and legal proceedings for another three, or four years, although no more requested information could be provided by the directly concerned obligated person .” i .e . in the explanatory statement (the reasoning ) of the decision, the court indirectly identified the circumstances which could be subsumed under § 28 of the code on administrative judiciary and at the same time under the heading of academic disputes (which  –  under standard circumstances  –  shall not be protected by the law and/or by courts) . the collection of opinions and decisions of the supreme court of the slovak republic  –  no . 5/2014 case no . 82  –  also contains the following legal sentence (ratio decidendi): “the request for disclosure of information pursuant to act no . 211/2000 coll . on the free access to information (the freedom of information act), as amended, is to serve only as a tool of social control and not as a means of misuse of law.” ( judgment of the supreme court of the slovak republic of 28 february 2013, file no . 5sži/6/2012) thus confirming the fact that in the conditions of the slovak republic, judicial protection should not be sought or exercised in such a way as to exercise a right that is harassing or abusive (by the party to the proceedings) . the constitutional court of the slovak republic in a  resolution dismissing the complaint in the above-mentioned case (as manifestly ill-founded) accepted the procedure and the outcome of the supreme court of the slovak republic (see above), but at the same 64 peter potasch public governance, administration and finances law review • vol. 3. no. 1. time pointed out the specificity of the case and the fact that such an approach cannot have a  so-called template nature (“for the sake of completeness, in order to prevent misinterpretation, it must be added that the way in which the matter in question was legally understood can in principle be relied on in clear cases where it is clear that it is information from one office which is part of the loaned documentation that must be returned and does not become an information acquisition of the office to which the file was borrowed .” [svk: pre úplnosť veci, v záujme zamedzenia dezinterpretácie, je nutné dodať, že spôsob, akým bola právne uchopená predmetná vec, môže byť v zásade uplatnený pri jednoznačných prípadoch, kde je zrejmé, že ide o informáciu z jedného úradu, ktorá je súčasťou zapožičanej spisovej dokumentácie, ktorá musí byť vrátená a nestáva sa takpovediac informačnou akvizíciou úradu, ktorému bola zapožičaná .]) – decision of the constitutional court of the slovak republic, file no . ii . ús 482/2013, dated 3 october 2013 . the constitutional court of the slovak republic thus “approved” the procedure (and the outcome) of the supreme court of the slovak republic in the matter, but at the same time, by means of some restrictive interpretation, it attempts to limit the application of the principle defined by the supreme court (in the above case) – by stating that this approach must not be considered to be a  general rule and that all cases must be assessed on an individual basis . it follows from the abovementioned short “legal trip” (to the code on administrative judiciary) that, with effect as of 1 july 2016, the law of the slovak republic includes a  positive, expressly stated right of the administrative court to refuse the administrative action (brought before it by an applicant) on the grounds that it has a vexatious character or presents an abuse of law/rights . however, with reference to the decision-making activity of the constitutional court of the sr, it must always be a  sensible decision of the court (taking into account all the relevant circumstances of the particular case) . notwithstanding the above, it must be concluded that the abuse of law cannot be subject of evidence as a  legal institute . the factual situation that is the result of the evidence obtained can be – once such factual situation is settled – legally assessed to be an abuse of law . conclusion on the fulfilment of the facts of the abuse of law/rights is the result of a legal assessment of the settled state of affairs (facts) . (resolution of the constitutional court of the slovak republic of 7 june 2016, file no . iii 355/2016-16) 3. public interest and its protection in specific cases (slovak republic/czech republic) public interest is (in most cases) a vague term, but this does not mean that the content of this term is to be formulated (or made up) by the administrative authorities themselves .17 the supreme administrative court of the czech republic has unequivocally pronounced the legal opinion according to which “the principle of protection of the public interest does not mean that the public authorities should formulate public interest, more precisely public interests, themselves, which is, in principle, the task of legislative authority . it is the task of the administrative authorities, when applying the laws that define individual public interests, to specify – in particular cases – the generally expressed public interests .” file no . 65 public governance, administration and finances law review • 1. 2018 abusus iuris and the protection of public interest by administrative authorities… 6 as 65/2012, decision dated 10 may 2013, whereas the constitutional court of the czech republic several years before this decision of the supreme administrative court of the czech republic had established that “public interest in a  particular case should be investigated during the administrative procedure on the basis of the measurement of a wide range of particular interests, after consideration of all contradictions and comments . the explanatory statement (the reasoning ) for the administrative decision must then clearly indicate why the public interest outweighed a  number of other specific interests . public interest should be found in the decision-making process…” (28 june 2005, file no . pl . ús 24/04) . although the wording of the czech administrative proceedings code (in reference to public interest) is not identical to the verbal expression of the protection of public interest in the slovak republic (§ 3 [1] of the administrative proceedings code), when it comes to the protection of public interest, the decision of the czech supreme administrative court can be useful . the said court in file no . 6 as 65/2012 stated that “the principle of protection of public interest by seeking and adopting solutions that are in accordance with the public interest is also one of the basic principles of administrative proceedings enshrined in § 2 (4) of the administrative proceedings code . the formulation ‘the accordance of the solution adopted with the public interest’ then means the application of the provisions of laws expressing generally individual public interests in specific cases . in the administrative proceedings, several public interests are often against each other (or at least not completely in line) and it is not possible for the decision ultimately to be in line with all the public interests involved in the case . furthermore, it is important to point out that administrative authorities should not formulate public interest themselves; this is, in principle, the task of the legislature; on the other hand, ‘the task of the administrative authorities, when applying the laws that define individual public interests, to specify in particular cases the generally expressed public interests .’” (for more see: j . vedral, administrative procedure: commentary, 2nd edition, prague, ivana hexnerová  –  bova polyglon, 2012, p . 100) . it follows from this that public interest as a concept is not only vague without specific (general and universal) content, but rather – when deciding individual cases – it would be desirable to deal with various (and all relevant) specific public interests . undoubtedly, there are many of such interests and they will not always be consistent (e .g . there may be a discrepancy between protection of the environment (as one specific public interest) and the public interest in the construction of motorways) . it is unlikely that it would be possible to fully comply with all the particular interests in all cases . the decision-making of the czech (administrative) courts  –  and in particular of the supreme administrative court of the czech republic  –  (file no . 6 as 8/2010 dated 23 june 2011) confirms the concept of balancing when it explicitly requested that it was the duty of the administrative body “to weigh the collision of the public interest in the construction of this motorway and of the public interest in the protection of specially protected plant and animal species and to ‘assess whether the proposed highway route is the optimal solution for the protection of specially protected plant and animal species’” . similarly, the municipal court in prague (file no . 11 ca 41/2006  –  decision dated 31 august 2006) concluded: “the distinct predominance of another public interest over the interest of nature conservation in 66 peter potasch public governance, administration and finances law review • vol. 3. no. 1. accordance with § 56 of the nature and landscape protection act may be given only where the other public interest cannot be satisfied otherwise, without adversely affecting the natural development of specially protected species… it is the duty of the administrative authority to assess the consequences of the harmfulness of the construction intervention in relation to particular endangered species and to assess the particular facts to a  greater extent, in connection with the existence of a distinctly overriding other public interest over the interest of nature conservation .” the assessment of public interest (sometimes occurring as a  conflict of several subordinate/partial public interests) is therefore a  matter of individualizing the decisionmaking process in a particular regime, in a particular legal context and taking into account the specific facts of the matter under consideration . again, this is very well expressed in the decision of the supreme administrative court of the czech republic (case no . 6as/65/2012), which states: “the supreme administrative court, however, points out that even if the respondent had convincingly stated that the construction ad 1) was actually carried out in the public interest, it would have to be assumed that the public interest is a category with a specific content, in each case, which is dependent to the circumstances of the case” . it is therefore necessary that “the public interest be explicitly formulated by the administrative authority in relation to the matter specifically addressed . it has to be deduced from the legal regulation and its components, from legal policy and assessment of various aspects according to the tasks of administration in the relevant fields (social, cultural, environmental protection etc .)” (hendrych, d ., cited above, p . 358) . in the case which was the subject of the decision of the administrative authorities and of the subsequent judicial review (see above), the administrative authorities have concluded that the construction for which the permit was sought was in public interest (i .e . it was in public interest to issue the permit) . however, the administrative authorities failed to explain and assess how that element of public interest identified by them (interest in construction), related to and/or outweighed other public interests in the case . the supreme administrative court of the czech republic stated (file no . 6/65/2012): “the supreme administrative court therefore summarizes that it has come to the conclusion that the municipal court did not make a  mistake when finding that the respondent has failed to provide adequate reasons for the public interest in the construction in the relevant locality where such construction affects the protection of specially protected species . had there perhaps been an urgent public interest in the construction, it would not have been proven that it couldn’t be satisfied with another solution that would achieve the desired intention while minimizing possible intervention in the protection of specially protected species of animals . in the case of the weighing of two public interests at conflict, as in the case of a  collision of fundamental rights, the administrative authority must first identify and individualise the two public interests and then compare the gravity of both, while the intervention in either of the two protected public interests must not outweigh its positive effects . in addressing conflicts of public interest, it is necessary to maintain the maximum of the two conflicting interests, identifying the core and periphery of public interest, and at least the core of both public interests in play should be maintained .” the perception of public interest for the purpose of illustration in slovakia could be carried out via the decision of the regional court in košice in file no . 8s/26/2018 by 67 public governance, administration and finances law review • 1. 2018 abusus iuris and the protection of public interest by administrative authorities… which the administrative court ruled that the administrative action will not be granted a suspensive effect, (based also on the ground that the applicant had failed to establish that the suspensive effect – which he had requested – was not contrary to the public interest it follows from § 185 lit . [a] the code on administrative judiciary) . the application for the suspensory effect of the administrative action was based on the specifics of the application as follows: on the basis of a  legally enforceable first instance decision in conjunction with the decision of the second instance administrative body: a registration at the land registry would allow to the relevant parties to the proceedings to acquire ownership of the properties included in the administrative decision/the project, including those parties who did not pay compensation for the land or co-ownership interest in the account of the public body (the fund), and did not show the will to become the landowners (etc .) . on the question of the public interest, the application stated: ‘the public interest in granting the suspensory effect of an administrative action in this case is not affected .’ as stated above, pursuant to § 185(a) of the code on administrative judiciary, the administrative court may grant a suspensive effect (to the claim) if the immediate execution or other legal consequences of the contested administrative decision of the public authority or the measure of the public authority would threaten to cause serious damage, whether substantial financial damage or economic damage, damage to the environment or any other serious irreparable consequences and the granting of a suspensive effect is not contrary to the public interest. with the introduction of a suspensory effect by law or admission under a decision of the administrative court under § 185 of the code on administrative judiciary, the effects of the contested decision are suspended . the suspensory effect shall cease to be valid by the decision of the administrative court in the main proceedings (§ 186 [1], 2 code on administrative judiciary) . if the administrative court does not accept the application, it will reject it (§ 188 code on administrative judiciary) . as is clear from the wording of §  185 (a) of the code on administrative judiciary, the potential granting of suspensory effect to an action (i .e . to set aside the effects of the challenged administrative decision) is assessed by the court at the request of the applicant and after the defendant’s statement has been provided . the granting of a  suspensory effect is conditional, and the court must be satisfied that ordering a suspension would not be against public interest . the administrative court in the case under consideration has reached the following conclusion: (regional court in košice, file no . 8s/26/2018) “… the wording of § 185 let . (a) of the code on administrative judiciary provides for the applicant’s duty in connection with his request for a  suspensive effect to be granted by the court, not only to claim, but also to prove by means of evidence that the immediate execution or other legal consequences of the contested decision of the public authority threaten the consequences defined in § 185 (a) code on administrative judiciary . [… .] the applicant did not prove the facts in question before the administrative court and therefore the court did not even have to deal with the assessment of the potential contradiction between the granting of the suspensory effect and public interest when deciding on whether suspension shall be granted.” apart from the fact that the administrative court in this case did not perceive the applicant (the slovak republic on whose behalf the slovak land fund was acting ) as an entity whose subjective rights may be affected by the decision, the application for the 68 peter potasch public governance, administration and finances law review • vol. 3. no. 1. suspensive effect of the action was dismissed by the court on the grounds that in the court’s view “the risk factors that the legislator refers to in relation to the possibility of a procedure were not proven by the applicant . the threat of serious harm, material, economic damage, financial damage, serious damage to the environment, or other serious irreparable damage, have not been substantiated and legally supported by the applicant in the case under review .” the other element the court has to assess when deciding on the suspensory effect of a  claim as per the code on administrative judiciary, is the matter of potential contradiction with public interest (shall the suspension be granted) . in this connection the court stated (in this very case) that “the court further considers that, with regards to the public interest protected by the same dictum of §185 let . (a) code on administrative judiciary, any admission of the suspensory effect of an administrative action would not be in accordance with the case . the concept of “public interest” is an indeterminate legal concept which cannot be sufficiently defined, and its application depends on the assessment in each individual case . however, the settled case law regards the public interest as a  generally beneficial interest, the bearer of which is the society and whose purpose is to ensure its optimal development . in the case in question, in the opinion of the administrative court, it is not disputed that the legal effects of long-term processes of arrangement of ownership relationships in gardening facilities are a priority public interest of the society.” it follows from the abovementioned explanatory statement of the court that the issue of public interest has been dealt with (by the court) in the case despite the fact the applicant did not specify any specific material arguments (details) relating to the public interest in his application (see above) . we approve of such assessment of public interest by the court (despite of the applicant not providing any supporting arguments in his request for a suspension) . at the conclusion of this paper on the practical protection of public interest (within the framework of the activities of public bodies i .e . courts and administrative bodies), we would like to point to the decision of the regional court in banská bystrica (file no . 23s/118/2014), in which the court deals with the potential abuse of law/right (by the claimant)  –  and the lawfulness of the action brought to court by the applicant in the context of the freedom of information act . in accordance with the act on free access to information (no . 211/2000 coll . – “the foia”), the applicant requested a very extensive set of information from the district court of zvolen (the applicant requested disclosure of all court proceedings which meet the following characteristics: a) the proceedings started at the district court of zvolen; b) the proceedings were registered in one of the “c”, “cb”, “ro” or “rob” registrars in accordance with the decree of the ministry of justice of the slovak republic no . 543/2005 coll ., annex no . 1, chapter ii, part b, point 1, or part (1) or part ( j); c) in the proceedings, the court has the obligation under article 49 (1) of the relevant act to deliver documents (addressed to the claimant) only to ulianko & holčík, s .r .o or ulianko & partners, s .r .o, with snp 27, 960 01 zvolen, or if there are more claimants, the above duty of the court exists only to one of them; d) in the proceedings, the respondent, if he is a  natural person, is not resident in the zvolen district, or if he is a legal entity, he is not domiciled in the zvolen district (district according to § 2 par . 33 of act no . 371/2004 coll .) . from the procedures thus selected, the applicant requested information in the extent of: 69 public governance, administration and finances law review • 1. 2018 abusus iuris and the protection of public interest by administrative authorities… ƿ file number assigned to the case at the district court of zvolen, ƿ the name of the judge managing the case, ƿ whether the matter was terminated at the district court of zvolen by transferral of the case to another court as per § 105 par . 2 of the relevant act . the district court of zvolen (acting as the first instance administrative authority within the foia proceedings) rejected the request for information and did not provide the information requested by the applicant . the appellate authority (the regional court in banská bystrica – acting as an appellate administrative authority) upheld the administrative decision of the first instance administrative decision . the regional court in banská bystrica (acting as the relevant administrative court) subsequently examined the decision of the district court of zvolen as well as of the regional court in banská bystrica  –  on the basis of an administrative action brought by the applicant  –  and dismissed the action. the court also partially resorted to the abuse of law in its decision, claiming that “the new code on administrative judiciary in § 5 par . 12 (basic principles of the proceedings) establishes a  novelty when the administrative court exceptionally may reject providing judicial protection to the rights of the natural person and the legal entity, and the application is subject to obvious abuse of rights . the provision in question refers to the protection of rights or to the legitimate interests of natural persons and legal persons and to avoid the execution of practices that are vexatious or are abusing the right to judicial protection to the detriment of other parties to legal relationships or public authorities .” the regional court in banská bystrica, expressed the legal opinion that the information requested by the applicant from the district court of zvolen (when looking at the quantity and the extent of the requested information) “is considered by the court to be an abuse of law/rights, as the ulianko & holčík law firm in zvolen, has been providing legal services for more than twelve years” . the court stated that: “from this point of view, the abuse of law/of the right to information may also be considered as a specific ground for refusing the claim brought to the court . in the present case, the applicant requested to provide a  large amount of information from one entity  –  inter alia  –  whether ‘the court has a duty under article 49 of the relevant act – to deliver the claimant’s documents only to the ulianko & holčík law firm, or ulianko & partners, with registered seat at nám . snp 27, zvolen, or – if there are more claimants – if such duty exists to at least one of the claimants’  –  taking into consideration  –  that the law firm has been active for more than twelve years . requiring such information does not provide for a reasonable arrangement of social relations, such conduct by the applicant may be an abuse of a  subjective right and even have a vexatious nature . providing such information is in violation of § 5 par . 12 of the code on administrative judiciary and the administrative court in such cases where the action is vexatious or would contain an abuse of rights, does not provide the applicant with legal protection .” 70 peter potasch public governance, administration and finances law review • vol. 3. no. 1. 4. conclusion the protection of public interest is implemented in the slovak republic by both substantive and procedural law provisions . while in some cases it is clearly identifiable that the protection of public interest is the primary purpose of the rule introduces by a  source of law (in particular through the mandatorily expressed obligation of the administrative authority to take into account concepts such as “public interest”, “general interest”, “interest of society” etc .), in other cases, protection of public interest is carried out by other means (rather than expressly stating for the protection of public interest) . it appears that both the czech republic and the slovak republic have accepted that public interest is a vague term in most cases without a  clear definition of its content . nevertheless, public interest must always have a  legal basis and administrative authorities are not the ones tasked with “making up” the contents of public interest, rather, they are obliged to identify the specific interests involved in a  particular case  –  either based on the very legal definition of public interest in a particular case (shall there be such definition expressly stated in the source of law) or specifying public interest(s) by looking into the very core of the laws they are applying in the decision-making . at the same time, it is without any doubts that “public interest” does not have a specific “universal” content, but public interests of different kinds should be  –  as a  rule  –  perceived as complementary . on the other hand, sometimes inconsistency between particular public interests cannot be ruled out . in such cases, it is the duty of the administrative authorities not only to point to the factual and legal relevance of public interest versus private interest, but also to the links and relationships between the various partial public interests that may exist in the case . balancing in categories of partial public interests should be clearly specified in the decision of the public authority . in the event of the existence of several partial public interests, the administrative authority should also deal within the reasoning of its decision, how it dealt with a specific public interest and why it was granted a  specific/priority status over other interests involved . this does not relieve the administrative authority of the duty to act in such a way that the interference with all the particular interests concerned is as minimal as possible . 71 public governance, administration and finances law review • 1. 2018 abusus iuris and the protection of public interest by administrative authorities… references 1 as a preliminary point, we hereby note that the essence of this article is not the examination of the institute of public interest in the context of act no . 357/2004 coll . on the protection of public interest in the performance of functions of public officials, according to which “public interest for the purposes of this act is such an interest which brings property benefits or other benefits to all citizens or to many citizens.” 2 in some sources of law, the lawmaker expressly uses the term “public interest” and defines what that public interest is . however, often this is not the case and the source of law frequently lacks a clear definition of the term public interest . 3 constitution of the slovak republic, www .prezident .sk/upload-files/46422 .pdf (accessed 5 february 2018) 4 constitution of the slovak republic, www .prezident .sk/upload-files/46422 .pdf (accessed 5 february 2018) 5 with § 39 para 1 defining what “public interest” would be for the purposes of the relevant act . 6 for reasons of clarity, in the text the symbol § is used to refer to an article in a source of law, i .e . in an act passed by the national council of the slovak republic (the parliament) . 7 see also soňa kosiciarova, správny poriadok. komentár. [administrative procedures act – commentary] 24 (šamorín, heuréka, 2013) . – “the second sentence of § 3 enshrines the tasks of administrative authorities in the exercise of their powers . they – by law – have the duty to protect the interests of the state and of the society . currently a more modern term is used to describe this – namely public interest . it [public interest] refers to a  legitimate public interest that enjoys legal protection . it is a  general or a  generally beneficial interest .” 8 lilla garayová, regulácia voľného pohybu osôb v kontexte protiteroristických opatrení v eú . [the regulation of the free movement of persons in the context of counter-terrorism measures] 1, paneurópske právnické listy, 80–86 (2018) . 9 for example, jaromír svoboda . et al . občiansky zákonník, i. diel, komentár . [civil code, commentary] 75 (eurounion 1996) . 10 dušan hendrych et al . právnický slovník, [legal dictionary] (3rd . edition, prague, c .h . beck, 2009) . 11 finding of the constitutional court of the slovak republic – file no . iii . ús 314/07 dated 16 december 2008 . 12 judgment of the supreme administrative court of the czech republic 5 afs 75/2011 . 13 see in karin prievozníková, implementácia zákazu zneužitia práva do daňového poriadku . [implementation of the prohibition of abuse of rights in the tax code] 161 et seq . in vladimír babčák, anna románová, ivana vojníková (eds .) daňové právo vs. daňové podvody a  daňové úniky [tax law vs. tax frauds and tax evasion] (košice, univerzita pavla jozefa šafárika, 2015) . 14 lilla garayová, spoločnosť proti terorizmu? [torture as a  just means of preventing terrorism?], 360–364 (plzeň, aleš čeněk, 2016) . 15 viktor knapp, teorie práva [legal theory] 184–185 (prague, c . h . beck, 1995) . 16 aleš gerloch, teorie práva [legal theory], 184 (plzeň, aleš čeněk, 2013) . 17 the content of the public interest is either expressly stated in the act (e .g .  § 39 of the act on mineral waters  –  act no . 538/2005 coll .) or can be derived from the relevant act by looking into the aims and purpose of the regulation . https://www.prezident.sk/upload-files/46422.pdf https://www.prezident.sk/upload-files/46422.pdf public governance, administration and finances law review vol. 5. no. 2. (2020) • 58–69 . prolonging payment deadlines of real estate tax instalments to entrepreneurs in connection with covid-19 in poland: basic rules, consequences of the application of the mechanism and selected disadvantages of tax resolutions mariusz popławski* – mariusz charkiewicz** * mariusz popławski, full professor, dean of the faculty of law of the university of białystok, poland, orcid: https://orcid .org/0000-0003-1403-3033 ** mariusz charkiewicz, doctor of legal sciences, assistant at the faculty of law and administration, university of warmia and mazury in olsztyn, solicitor, poland, orcid: https://orcid .org/00000001-9363-988x abstract: the primary aim of this article is to present fundamental principles resulting from article 15q of the covid act – which contains the legal basis for passing tax resolutions – according to which the municipality councils may prolong to entrepreneurs payment deadlines of certain instalments in real estate tax . this paper discusses the consequences of introducing these preferences, as well as certain flaws of the tax resolutions adopted on the basis of the aforementioned regulation of the act on covid . the flaws were detected on the basis of the analysis of the resolutions adopted by regional accounting chambers finding shortcomings in the resolutions of municipality councils adopted on the basis of the aforementioned provision of the act on covid . keywords: tax law, real estate tax, tax resolutions, prolonging payment deadlines, regional accounting chambers, covid 1. introduction as a  result of the coronavirus epidemics the authorities introduced, among other things, a possibility of tax resolutions aimed at introducing tax exemptions and prolonging deadlines for instalments in the real estate tax for entrepreneurs whose financial liquidity worsened in connection with negative economic consequences caused by the covid . the preferences result from articles 15p and 15q of the act of march 31, 2020 on amending the act on covid . the primary aim of this article is to present fundamental principles resulting from article 15q of the covid act, which contains the legal basis for prolonging payment deadlines in real estate tax, which was mentioned above . article 15q of the act on covid includes the legal basis for passing tax resolutions according to which the municipality councils may prolong to entrepreneurs payment deadlines of certain instalments in real estate tax . this paper will also discuss consequences of introducing these preferences, as well as certain flaws of the tax resolutions adopted on the basis of the aforementioned © 2021 the authors doi: 10.53116/pgaflr.2020.2.5 https://orcid.org/0000-0003-1403-3033 https://orcid.org/0000-0001-9363-988x https://orcid.org/0000-0001-9363-988x https://doi.org/10.53116/pgaflr.2020.2.5 59 public governance, administration and finances law review • 2. 2020 prolonging payment deadlines of real estate tax instalments to entrepreneurs… regulation of the act on covid . the flaws were detected on the basis of the analysis of the resolutions adopted by regional accounting chambers finding shortcomings in the resolutions of municipality councils adopted on the basis of the aforementioned provision of the act on covid . the work on those faults was written on the basis of another article by popławski & charkiewicz (2020b) . 2. literature overview the discussed preference is analysed in several papers . in some of them, we deal with the presentation of this preference in relation to other allowances introduced in connection with the covid pandemic . (dowgier, 2020a; etel, 2020a) in others, the subject of analysis is the problems that this preference may cause in practice . (dowgier, 2020b; popławski & charkiewicz, 2020a; popławski & charkiewicz, 2020b; kamiński, 2020) in other studies, the problem of prolonging payment deadlines of real estate tax instalments is presented in a broader perspective as tax reliefs (etel, 2020b) and in the perspective of other tax resolutions in which specific tax preferences are introduced . (popławski, 2011) 3. research the study uses primarily the dogmatic-analytical method . it is related to the verification and analysis of the regulations concerning the described institution as well as the literature concerning the issue of prolonging payment deadlines of real estate tax instalments . as part of this study, the following research hypotheses will be verified: commune councils have the right and not the obligation to introduce prolonging payment deadlines of real estate tax instalments; commune councils are obliged to comply with certain limitations resulting from the act; the introduction of the tax relief will trigger consequences, especially regarding public aid; and the introduced tax resolutions probably contain certain shortcomings identified by the supervisory authority, i .e . the regional accounting chambers . 4. discussion 4.1. the essence and character of prolonging the deadline of paying instalments in real estate tax for entrepreneurs introduced on the basis of the provisions of the act on covid in compliance with article 15q paragraph 1 of the act on covid, a municipal council may prolong, through a  resolution, payment deadlines of real estate tax instalments, due in april, may and january 2020 for no longer than by september 30, 2020 (act on covid, article 1 item 14) for selected groups of entrepreneurs, whose financial liquidity deteriorated in connection with the negative economic consequences caused by 60 mariusz popławski – mariusz charkiewicz public governance, administration and finances law review • vol. 5. no. 2.  covid-19 .  moreover, paragraph 2 of the regulation points out that in the resolution discussed in paragraph 1, a municipal council may prolong the deadline for instalments mentioned in paragraph 1, also for other entities whose financial liquidity worsened because of the negative economic consequences caused by covid-19, namely non-government organisations mentioned in article 3 paragraph 2 of the act of april 24, 2003 on the activity of public good and volunteering, as well as the entities named in article 3 paragraph 3 of the aforementioned act .1 the regulation refers to an institution which has not so far operated in the regulations referring to real estate tax . (etel, 2020a, p . 10) preferences which could be introduced on the basis of the act on local taxes by municipal councils through tax resolutions were differentiation of tax rates (article 5 paragraph 2–4), as well as tax exemptions (article 7 paragraph 3) . an institution similar to that in article 15q of the act on covid finds its place in article 37 paragraph 4a of the act on tax ordinance . in accordance with this regulation, the payment deadline for collectors is the day following the last day, when, according to the provisions of tax law, the payment should be done, unless the deciding authority of a  competent unit of local government scheduled a  later deadline . thus the provision regulates the institution of prolonging the payment deadline for collectors, which also may be used by the municipal council, and which was also realised in the form of a  tax resolution . however,  literature also contains a  statement that this provision regulates “prolonging the deadline” since it points out that the deadline for collectors may be extended in a resolution of the municipal council . (etel, 2020b) the institution of prolonging payment deadlines lies also in the competence of the minister of finance and is applied through a  regulation issued on the basis of the provisions of the act on tax ordinance . in accordance with article 50 of the act on tax ordinance, the minister competent in public finance may, by regulation, extend the deadlines provided for in the provision of tax law except the deadlines determined in articles 68–71, article 77 paragraph 1, article 79 paragraph 2, article 80 paragraph 1, article 87 paragraph 3 and 4, article 88 paragraph 1 and article 118, defining groups of taxpayers for whom the deadlines were prolonged, types of activities the deadline of implementation of which was extended, as well as the day of expiry of the prolonged deadline . in terms of the results of the institution of prolonging payment deadline, the mechanism of deferment of deadline is similar . in compliance with article 48 paragraph 1 of the act on tax ordinance, in cases justified by an important interest of the taxpayer or a public interest, on the taxpayer’s request a  tax authority may defer the deadlines provided for in the provisions of the tax law, except for the deadlines determined in article 68–71, article 77 paragraph 1–3, article 79 paragraph 2, article 80 paragraph 1, article 87 paragraph 3 and 4, article 88 paragraph 1 and article 118 .  however, in this case the action may be individual and applied, in the context of real estate tax, by a  wójt or mayor (city president) . 1 whereas the scope of this paper concerns entrepreneurs being payers of the real estate tax, the subject of the further analysis will be only the regulation resulting from article 15q para 1 of the act on covid. 61 public governance, administration and finances law review • 2. 2020 prolonging payment deadlines of real estate tax instalments to entrepreneurs… it is important to underscore that the mechanism regulated in article 15q of the act on covid, like that included in article 15p of the aforesaid act, is a  special regulation, which authorises but does not oblige municipality councils to introduce a  particular preference . (dowgier, 2020a, p . 7) prolonging the deadline, which is based on article 15q of the act on covid, may be applied in particular legal and time frames, which constitute limits for municipal councils . one of the limits concerns the possibility of applying the institution in reference to real estate tax only . for comparison, the institutions in article 47 paragraph 4a, article 48 and article 50 of the act on tax ordinance have a much wider application, for they may be applied for all taxes, but also for other due payments to which the act on tax ordinance is not applicable . moreover, the instrument may be applied exclusively in reference to particular payment deadlines of real estate tax instalments for 2020, i .e . those due to be paid in april, may and june 2020 . in case of taxpayers who are legal persons, the regulation is applicable in reference to three instalments of real estate tax, which were due by april 15, may 15 and june 15, 2020 . in accordance with article 6 paragraph 9 point 3 of the act on local taxes and fees, legal persons, organisational units, as well as companies without legal personality, organisational units of the agricultural property agency, as well as organisational units of the national forest holding “the state forests”, are obliged to pay the real estate tax calculated in the declaration, without a  request, to the account of an appropriate municipality, in instalments proportional to the duration of the tax obligation, within the period before the 15th of each month, but for january before january 31 . in case of taxpayers being natural persons, the regulation only refers to the instalment of the real estate tax which was due by may 15, 2020 . for in accordance with article 6 paragraph 7 of the act on local taxes and fees, the real estate tax is payable in instalments proportional to the duration of the tax obligation, by march 15, may 15, september 15 and november 15 of the tax year . moreover, the instrument may be applied only in reference to particular payment deadlines of real estate tax instalments for 2020, i . e . payable in april, may and june 2020 . thus, in article 15q of the act on covid, the legislator did not provide a basis to prolong estate tax payment deadlines due in, for example, the remaining months july– december 2020 and in subsequent years . there is no basis either for prolonging deadlines of the instalments which had been already payable in the period january–march 2020 . there are also no grounds to prolong the deadline of real estate tax instalment due in the period april–june 2020, which at the moment of the publication of the resolution had expired . in this case we would deal with the prolonging of the deadline of tax arrears, which should be distinguished from the payment deadline of the instalments which have not expired . obviously, the legislator could introduce in article 15q of the act on covid a basis for prolonging payment deadlines of tax arrears, which, however, they did not . for if the legislator’s will was also enabling a  municipality council to apply this application in reference to tax arrears, they should record it explicitly . on the grounds of article 67a paragraph 1 points 1 and 2 of the act on tax ordinance, the legislator applied a  similar mechanism, i .e . deferment of the tax payment deadline as well as tax arrears, explicitly and separately commenting on each of these due sums, for which the deferment of payment 62 mariusz popławski – mariusz charkiewicz public governance, administration and finances law review • vol. 5. no. 2.  deadline is applicable .2 literature also suggests that what can be prolonged on the basis of article 15q of the act on covid is only the deadline which has not expired yet, since reaching for the institutions regulated in the tax ordinance, it is worth noting that along with the date of the payment deadline expiry, tax arrears emerge which cannot have any payment deadline . (dowgier, 2020a, p . 13) another restriction introduced in article 15q of the act on covid determines the final deadline where the real estate tax instalments which have been prolonged should be paid . the deadline cannot be later than september 30, 2020 .  thus, the resolutions which prolong the deadline of payment of the instalments of the tax due in the months april– june, for example, until october 31, 2020, will be against the law . the wording of the adopted resolution including extending the payment deadline of the tax instalments on the basis of article 15q of the act on covid must be of an object– subject nature and should be automatic, like in the case of tax resolutions introducing tax exemptions adopted on the basis of article 15p of the act on covid . 4.2. consequences of prolonging payment deadlines of real estate tax instalments in connection with the provisions of the act on covid introducing a resolution adopted on the basis of article 15q of the act on covid triggers certain consequences, in particular on the part of the municipality, although on the part of the taxpayer there will also be certain obligations . in the context under scrutiny it is important to pose a question if a municipality introducing the prolongation of payment deadline will bear negative effects thereof, in connection with the fact that this reduces the resources acquired from the state as a general subvention . it seems that this issue should be referred to negatively, even though it is not an obvious question . in accordance with the modified provisions of article 32 paragraph 3 of the act of november 13, 2003 on the incomes of local government units, in order to determine the compensatory part of the general subsidy and payments, as well as the sum mentioned in article 21a paragraph 1 point 3, we should assume the incomes which a local government unit may gain from the agricultural tax, using the average purchase price of rye to calculate it, and from the forest tax the average sale price of wood, announced by the president of the statistics poland, and in case of other taxes calculating them with the upper limits of tax rates in force in a particular year . the income which a local government unit may obtain also includes the financial consequences resulting from the application of tax reliefs and relieves in paying off tax obligations in the form of cancelling the whole or 2 in accordance with article 67a paragraph 1, a tax authority, on request of the taxpayer, subject to article 67b, in cases justified by an important interest of the taxpayer or public interest may: 1. defer the tax payment deadline or spread the tax payment in instalments 2. defer or spread in instalments tax arrears together with interest for delay or interest for tax prepayment not paid in due time 63 public governance, administration and finances law review • 2. 2020 prolonging payment deadlines of real estate tax instalments to entrepreneurs… part of tax arrears, which are provided for in the provisions of the tax law . thus, the regulation shows directly that the consequences do not include reliefs in tax obligation payments in the form of deferment of payment deadlines and spreading the payment out in instalments . the justification for the amendment proposal of the aforementioned provision of the act on income of local government units shows that the change consists in not including at calculating subsidies and payments financial consequences resulting from applying the reliefs, provided for in the provisions of the tax law, in paying off the tax obligations in the form of deferment of tax payment and spreading the payment out in instalments . it is important from the point of view of tax reliefs granted by the authorities of local government units . this solution is connected with counteracting the effects of the covid-19 epidemics, because within their tax competences, municipalities grant taxpayers reliefs in paying off their tax obligations . it is important to underscore that prolonging the payment deadline resulting from tax resolutions adopted on the basis of article 15q of the act on covid results in a consequence practically identical to that resulting from the deferment of payment deadline constituting a relief in paying off tax obligations . thus, if in the light of article 32 paragraph 3 of the act on incomes of local government units there are no reliefs in payment involving deferring payment deadlines, there should not be situa tions either where the prolongation of payment deadlines of real estate tax instalments mentioned above occurs . the introduction of the aforementioned prolongation of payment deadlines, which will be used by entrepreneurs, will result in the necessity of the municipality to show the aid it was granted . for there is no doubt that the prolongation will be public aid . in accordance with article 15 zzzh paragraph 1 point 1 of the act on covid, the aid mentioned in article 15m, article 15p, article 15q, article 15za paragraph 2, article 15zzb–15zze, article 15zze, article 31zo and article 31zy, according to the conditions included in the communication of the commission, the temporary framework of public aid resources in order to support economy in the context of the ongoing covid-19 epidemic (2020/ c91i/01) (dz . urz . ue c 91i of 20 .03 .2020, p . 1) constitutes public aid aiming at remedying serious disturbances in economy as well as the applied resolutions (regulation of 2008 on reports) . in this matter we should apply the regulation of 2008 on reports as well as the regulation of 2020 on reports . the discussed support, however, is not aid de minimis, the granting of which obligates the authority to document it with a  certificate . (kamiński, 2020) thus, the authority has no obligation to issue certificates of granting the aid, either in case of natural persons or in case of legal persons and organisational units without legal personality, in case of applying the analysed preference . (kamiński, 2020) proving the granted aid will also occur through placing it in report rb-27s column 13 “consequences of municipality-granted reliefs”, cancellations and exemptions in taxes and fees making the municipality’s budget income (without statutory reliefs and exemptions), being appendix 8 to the regulation on budget reporting . the entrepreneur benefitting from the prolongation under scrutiny should submit an appropriate form referring to public aid . the preference resulting from a resolution adopted on the basis of article 15q of the act on covid is a form of granting public aid other than de minimis aid . (dowgier, 2020b, p . 8) 64 mariusz popławski – mariusz charkiewicz public governance, administration and finances law review • vol. 5. no. 2.  the taxpayer who meets the conditions for benefitting from prolonging tax payment instalments defined in the resolution under scrutiny has no obligation to submit a correcting declaration or tax information referring to the real estate tax . the obligation is in force if there are circumstances affecting the tax amount (article 6 paragraph 6 act on local taxes3) . in this case the tax authority is not obliged either to issue any tax decisions, where it would confirm the right to prolong the deadline of instalment payments . for there are no legal grounds in the act on tax ordinance for issuing such a  decision . the grounds cannot be introduced in the resolution adopted on the basis of article 15q of the act on covid either . this would be against the automatic character of the payment deadline prolongation, which should refer to resolutions adopted on the basis of the aforementioned provision . this statement does not mean that the tax authority will have no instruments enabling it to verify if the taxpayer had the right to pay in the instalment within the deadline prolonged in a  relevant resolution . the authority will be entitled to this possibility within the framework of proceedings carried out in order to issue a  decision of proportional counting of the payment (article 55 item 2 and article 62 paragraph 4 of the act on tax ordinance) or a decision of counting the payment or overpayment as a sum towards the arrears and interests on late payment (article 62 paragraph 4 and article 76a of the act on tax ordinance) . in these cases the tax authority is obliged to issue a decision, which can be subject to complaint . in the event where the tax authority decides that the taxpayer will make the payment after the primary payment deadline and simultaneously decides that no conditions of the taxpayer benefitting from the prolongation of the payment deadline resulting from a  resolution adopted on the basis of article 15q of the act on covid are met, the questioning of the legitimacy of benefitting from the prolonged deadline will involve issuing a relevant decision, which was mentioned above . on the other hand, in the case of undertaking a  tax execution, the tax payer may put forward an argument that they meet the conditions for prolonging the payment deadline through raising an objection against the execution, i .e . the lack of obligation in article 33 paragraph 1 point 1 of the act on executive procedures in administration . 4.3. disadvantages resulting from tax resolutions adopted on prolonging payment deadlines of real estate tax instalments introduced on the grounds of the provisions of the act on covid analysing the resolutions adopted by regional accounting chambers referring to tax resolutions adopted by municipality councils, several irregularities in the resolutions of municipality councils were detected . 3 according to this article natural persons are obliged to submit to a competent tax authority information about immovables and construction objects prepared on a specific form within 14 days of the occurrence of the circumstances justifying the emergence or expiration of a tax obligation referring to the real estate tax or from the day of the event mentioned in paragraph 3. furthermore, in accordance with article 6 paragraph 9 point 2 of the act on local taxes, legal persons, organisational units and companies without legal personality are obliged to relevantly correct declarations in the event mentioned in paragraph 3, within 14 days of the day of its occurrence. 65 public governance, administration and finances law review • 2. 2020 prolonging payment deadlines of real estate tax instalments to entrepreneurs… first, it was found that the competence norm was infringed by an inappropriate prolonging of the payment deadline and determining the deadline for the day after september 30, 2020 .  regional accounting chambers pointed out that the only competence norm allowing for prolonging payment deadlines in the real estate tax on the basis of a  tax resolution is included in article 15q of the act on covid, wherein this provision introduces its temporal limitation, i .e . no longer than september 30, 2020 .  regional accounting chambers noted that the only competence norm enabling to prolong payment deadlines of the real estate tax on the basis of tax resolution is in article 15q of the act on covid, but the provision introduces its temporal limitation, i .e . not later than september 30, 2020 . the act also underscores that in its resolution, the legislative body of the municipality deferred the deadlines of instalment payments for the months of april, may and june until october 31, 2021 .  it was pointed out that in the current legal order and taking into consideration the obligation of legislative bodies of local governments to act exclusively “on the basis and within the limits of statutory authorisations”  –  it is not possible to defer the payment deadline of real estate tax instalments by the legislative body of the municipality until the day later than september 30, 2020, because this limitation on local government legislative bodies’ actions were imposed by the legislator in article 15q paragraph 1 of the act on covid . it was also noted that local law acts cannot be automatically issued without an explicit statutory authorisation, which is reflected in judicial decisions . it was also pointed out that the basis for making acts of local law is authorisation included in the law, which determines the dependent position in the hierarchy of law sources, as well as the fact that an act of a statutory status must always include authorisation (delegation) for a council to make an act of local law . assessing it, one should bear in mind that the act cannot infringe either the regulation of the law including delegation for its establishing or the provisions of the constitution of the republic of poland, as well as other laws remaining in an indirect or direct connection with the regulated matter (judgement of the sac of july 11, 2018, judgement of the sac of may 18, 2020, judgement of the pac of february 6, 2019) . secondly, there occurred situations where municipality councils introduced deadline prolongations of arrears instalments, or tax due sums the deadlines of which have expired at the moment of adopting the resolution . certain municipality councils introduced records according to which the payment deadlines of real estate tax due in april, may and june 2020 were prolonged until september 30 to the entrepreneurs whose financial fluidity had deteriorated . regional accounting chambers decided that the municipality councils had no grounds for adopting the resolution on april 29, 2020, on the basis of which it prolonged the payment deadline of real estate tax to the entrepreneurs, which was on april 15, 2020, so before the resolution . thirdly, regional accounting chambers decided that certain municipality councils adopted faulty penal regulations in their resolutions . in general, as faulty were assumed cases when in the appendixes to the resolution, where the application forms were listed, these forms contained official statements of the applicant which were contra legem . for example, at the end of the application municipality councils introduced the following text: “those who, making a statement intended to be evidence in judicial proceedings or other proceedings conducted on the basis of the act, testify untruthfully or conceal the truth, 66 mariusz popławski – mariusz charkiewicz public governance, administration and finances law review • vol. 5. no. 2.  shall be liable to imprisonment from 6 months to 8 years” (article 233 of the act on penal code) . regional accounting chambers observed that an entrepreneur’s request (in fact being his statement) submitted on the basis of the resolution under scrutiny is not submitted in judicial proceedings or other proceedings conducted on the basis of the act, and also, that no provision of law, especially the act on covid, gives the authority to impose upon the entrepreneur the obligation of submitting a  statement including an instruction of penal liability defined in article 233 of the act on penal code . in another resolution, regional accounting chambers decided that, among other things, article 15q of the act on covid was infringed in terms of appendix 1 to the aforementioned act, called “application for extension of the deadline for the payment of real estate tax instalments of land, buildings and structures related to running a business”, where the instruction contains the following clause: “i confirm this data with my own signature, warned of penal liability .” regional accounting chambers demonstrated that the aforementioned provision of the act on covid does not give any grounds for including the clause where the signatory of the application must declare that he/she was warned of penal liability in the application for using a  certain tax preference submitted by a  taxpayer . moreover, it was underscored that the condition of liability for testifying untruthfully indicates a  statutory regulation which provides for a  possibility of receiving a  declaration under the pain of penal liability . fourthly, certain municipality councils included in tax resolutions records that the prolongation of a payment deadline only occurs on the taxpayer’s request, which should be submitted on the form determined by the mayor . also, such resolutions were found in which municipality councils introduced conditions of the deferment of payment deadlines of a  discriminatory character, furthermore, situations occurred where municipality councils did not have the resolutions they adopted published in the official journal of the province . also, those records in the resolutions were recognised as faulty where only those entrepreneurs are entitled to the prolongation of the aforementioned payment deadline who run their businesses on the territory of the town and the municipality of środa śląska, as well as those employing/self-employing natural persons who work in the town and the municipality of środa śląska . it was observed that the introduction of the aforementioned condition is an infringement of the rule of free movement of workers referred to in article 45 paragraph 2 of the treaty on the functioning of the european union . in accordance with the position of the european commission, placing in aid programmes decisions reducing aid in connection with employing persons registered only in a particular area is an infringement of the rule of free movement of workers, referred to in the treaty on the functioning of the european union . it was underscored that this one of the fundamental principles of the european union means, most generally, the unfettered right of the european union citizens to freely move within the whole territory of the european union in order to start work as well as in search thereof . it was also noted that in the light of article 45 paragraph 2 of the treaty on the functioning of the european union, the freedom of workers’ movement means removal from the member states’ legislature any forms of discrimination in terms of employment, remuneration and other working 67 public governance, administration and finances law review • 2. 2020 prolonging payment deadlines of real estate tax instalments to entrepreneurs… conditions of workers coming from other member states, regardless of their citizenship . (popławski, 2011, p . 954) regional accounting chambers also found unacceptable a  situation where a  record was introduced according to which a resolution enters into effect on the day of its passing without a simultaneous publication of this act . 5. conclusions the findings in this paper result in the following observations . first, the instrument included in article 15q of the act on covid authorises, but does not oblige, municipality councils to introduce a  resolution on the basis of which the prolongation of the payment deadline of particular real estate tax instalments in 2020 occurs . second, the aforementioned competence rule could be applied in the following legal and temporal frames: ƿ the right referred exclusively to the real estate tax ƿ the mechanism could be applied exclusively in reference to payment deadlines of the instalments of the tax in 2020 for april, may and june 2020; thus, there were no grounds for prolonging payment deadlines of real estate tax due in other periods of 2020, as well as in subsequent years ƿ it was not allowed to prolong the payment deadline of the aforementioned instalments for a period later than september 30, 2020 third, adopting a resolution on the basis of article 15q of the act on covid on the part of the municipality resulted in consequences connected with the municipality declaring the granted public aid, as well as the obligation of reporting thereof within the framework of budget reporting in rb-27s report . it is simultaneously important to note that the municipality introducing the prolongation of a  payment deadline shall not bear any negative consequences therefor in the context of general subsidy . there are no grounds to assume that in this situation a  real reduction of public resources occurs as a  result of the application of the resolution under scrutiny . fourth, on the part of the taxpayer benefitting from the prolongation of the payment deadline of the real estate tax decided on the basis of article 15q of the act on covid, there are also obligations to declare the public aid granted . the entity should submit a relevant form concerning public aid, which is a form of public aid other than de minimis aid . on the other hand, the taxpayer who meets the conditions of using the prolongation of tax instalment payment defined in the resolution under analysis has no obligation to submit a correction of the tax declaration or information referring to the real estate tax . 4 the author points out the defectiveness of certain discriminatory exemptions introduced by municipality councils in connection with, for instance, exempting entrepreneurs with businesses based on the territory of the municipality granting the exemption, or building owners registered as permanent residents in a particular municipality. 68 mariusz popławski – mariusz charkiewicz public governance, administration and finances law review • vol. 5. no. 2.  fifth, the analysis of resolutions adopted by regional accounting chambers, which referred to the verification of tax resolutions adopted by municipality councils on the basis of article 15q of the act on covid, shows the following flaws, which resulted in the necessity of recognising the municipality councils’ resolutions applied in part or in full as invalid: ƿ extending the payment deadline of real estate tax instalments on the day after september 30, 2020 ƿ prolonging payment deadlines of the instalments of due sums being tax arrears at the moment of adopting the tax resolution ƿ prolonging faulty penal regulations involving, for instance, obliging the taxpayer to submit declarations on, among other things, his financial situation under pain of penal liability for false testimony ƿ prolonging a payment deadline on request of the taxpayer ƿ authorising a wójt (head of a municipality), a mayor (or a president of the city) to determine a model application form to be submitted by the taxpayer ƿ introducing conditions of discriminatory exemptions, for example exemption of taxpayers employing workers residing in a particular municipality ƿ failure to publish tax resolutions in the official journal of the province references dowgier, r . (2020a) . nowe uprawnienia podatkowe rad gmin związane z pandemią covid-19 [new tax powers of municipal councils related to the covid-19 pandemic] . przegląd podatków lokalnych i finansów samorządowych, 5 . dowgier, r . (2020b) . weryfikacja prawa do zwolnienia oraz przedłużenia terminu płatności na podstawie uchwały rady gminy podjętej w związku z epidemią covid-19 [verification of the right to dismissal and extend the payment deadline based on a resolution of the commune council adopted in connection with the covid-19 epidemic] . przegląd podatków lokalnych i finansów samorządowych, 7 . etel, l . (2020a) . pomoc podatkowa udzielana przez władzę lokalną przedsiębiorcom w czasach zarazy – co dały nowe regulacje? [tax assistance provided by local authorities to entrepreneurs in times of plague – thanks to new regulations?] przegląd podatków lokalnych i finansów samorządowych, 8 . etel, l . (ed .) (2020b) . ordynacja podatkowa . komentarz aktualizowany [tax ordinance . comment updated] . lex/el . kamiński, k . (2020) . czy udzielając ulgi podatkowej w związku z covid-19 organ podatkowy powinien wydać podatnikowi decyzję oraz zaświadczenie o udzieleniu pomocy? [should the tax authority provide the taxpayer with a decision and a certificate of assistance when providing a tax relief in connection with covid-19?] qa 1461821, question answered on 31 may 2020 r ., lex . https://sip .lex .pl/#/question-and-answer/622218813/ czy-udzielajac-ulgi-podatkowej-w-zwiazku-z-covid-19-organ-podatkowy-powinien-wydac-podatnikowi… ?cm=urelations popławski, m . (2011) . uchwały podatkowe w nadzorze regionalnych izb obrachunkowych [tax resolutions under the supervision of regional accounting chambers] . wolters kluwer, warszawa . popławski, m . & charkiewicz, m . (2020a) . uprawnienia przedsiębiorcy będącego podatnikiem podatku od nieruchomości wynikające z przepisów tzw . tarczy antykryzysowej – wybrane kwestie [the rights of an entrepreneur who is a taxpayer of real estate tax resulting from the provisions of the so-called anti-crisis shield – selected issues] . in j . salachna (ed .), konsument na rynku usług finansowych w okresie kryzysu [consumer in the financial services market during the crisis] . under publication . https://sip.lex.pl/#/question-and-answer/622218813/czy-udzielajac-ulgi-podatkowej-w-zwiazku-z-covid-19-organ-podatkowy-powinien-wydac-podatnikowi...?cm=urelations https://sip.lex.pl/#/question-and-answer/622218813/czy-udzielajac-ulgi-podatkowej-w-zwiazku-z-covid-19-organ-podatkowy-powinien-wydac-podatnikowi...?cm=urelations https://sip.lex.pl/#/question-and-answer/622218813/czy-udzielajac-ulgi-podatkowej-w-zwiazku-z-covid-19-organ-podatkowy-powinien-wydac-podatnikowi...?cm=urelations 69 public governance, administration and finances law review • 2. 2020 prolonging payment deadlines of real estate tax instalments to entrepreneurs… popławski, m . & charkiewicz, m . (2020b) . wady uchwał podatkowych dotyczących przedłużania terminów płatności rat podatku od nieruchomości wprowadzanych w związku z covid [disadvantages of tax resolutions regarding the extension of terms of payment of real estate tax instalments introduced in connection with covid] . przegląd podatków lokalnych i finansów samorządowych, 10 . legal references eu: treaty on the functioning of the european union – consolidated versions of the treaty on european union and the treaty on the functioning of the european union – consolidated version of the treaty on the functioning of the european union – protocols – annexes – declarations annexed to the final act of the intergovernmental conference which adopted the treaty of lisbon, signed on 13 december 2007 – tables of equivalences (official journal c 326, 26/10/2012 p. 0001 –  0390). pl : 2020 .  ustawy z dnia 31 marca 2020 r . o szczególnych rozwiązaniach związanych z zapobieganiem, przeciwdziałaniem i zwalczaniem covid-19, innych chorób zakaźnych, a także wynikających z nich sytuacji kryzysowych oraz niektórych innych przepisów (dz .u . of 2020, poz . 568 z poźn . zm .) [act of march 31, 2020 on special solutions connected with preventing, counteracting and combatting covid-19, other infectious diseases, as well as the crisis situation resulting therefrom, and certain other laws] . ( journal of laws 2020, item 568 as amended) – referred to in this text as the act on covid . pl: 1997 . ustawa z 29 sierpnia 1997 r . ordynacja podatkowa (dz .u . z 2017 r ., poz . 201 as amended) [act of august 29, 1997 on tax ordinance] . ( journal of laws 2017, item 201 as amended] – referred to in this text as the act on tax ordinance . pl: ustawa z 6 czerwca 1997 r . kodeks karny (dz .u . of 2020 item 1444 as amended) [act of june 6, 1997 on the penal code] . ( journal of laws 2020, item 1444 as amended) – referred to in this text as the act on penal code . pl: 1991 . ustawa z dnia 12 stycznia 1991 r . o podatkach i opłatach lokalnych (dz . u . z 2019 poz . 1170) [act of january 12, 1991 on local taxes and fees] . ( journal of laws 2019, item 170 as amended) – referred to in this text as the act on local taxes . pl: 1966 . ustawa z dnia 17 czerwca 1966 r . o procedurach administracji w egzekucji administracyjnej (dz .u . of 2019 item 1438 as amended) [act of june 17, 1966 on executive procedures in administration] . ( journal of laws 2019, item 1438) – referred to in this text as the act on executive procedures in administration . pl: 2020 . rozporządzenie rady ministrów z dnia 4 czerwca 2020 r . zmieniające rozporządzenie w sprawie sprawozdań o udzielonej pomocy publicznej, informacji o nieudzieleniu takich dokumentów oraz o zaległościach przedsiębiorców w regulowaniu należności sektora finansów publicznych (dz . u . z 2020, poz 1023) [the regulation of the council of ministers of june 4, 2020 amending the regulation on reports on provided public aid, information about failure to provide such aid as well as reports on entrepreneurs’ arrears in paying sums due to the public finance sector] . ( journal of laws 2016, item 1023) – referred to in this text as the regulation of 2020 on reports . pl: 2008 . rozporządzenie rady ministrów z dnia 7 sierpnia 2008 r . w sprawie sprawozdań z udzielonej pomocy publicznej, informacji o ich nieudzieleniu oraz raportów o zaległościach przedsiębiorców w regulowaniu należności sektora finansów publicznych (dz . u . of 2016 poz . 1871) [the regulation of the council of ministers of august 7, 2008 on reports on provided public aid, information about failure to provide such aid as well as reports on entrepreneurs’ arrears in paying sums due to the public finance sector] . ( journal of laws 2016, item 1871) – referred to in this text as the regulation of 2008 on reports . pl: rozporządzenie ministra rozwoju z dnia 9 stycznia 2018 r . w sprawie sprawozdań budżetowych (dz . u . item 1393) [regulation of the minister of development of january 9, 2018, on budget reporting ] . ( journal of laws 2016, item 1393) – referred to in this text as the regulation on budget reporting 2020 . pl: naczelny sąd administracyjny [supreme administrative court] judgement of july 11, 2018, ii osk 675/18; judgement of the sac of may 18, 2020, i osk 430/19 (not published) . pl: wojewódzki sąd administraycjny [provincial administrative court in gdańsk] judgement of february 6, 2019, ii sa/gd 704/18 (not published) . public governance, administration and finances law review system of regular remedial measures in the administrative procedure in the czech republic and other countries of the so-called v4* lukáš potešil** * this paper was created as a result of the project ‘postdoc i’ (reg. no. cz.1.07/2.3.00/30.0009). the project is co-financed by the european social fund and the state budget of the czech republic. ** judr. lukáš potešil, phd., senior lecturer, department of administrative sciences and administrative law, faculty of law, masaryk university in brno. his main fields of research are: administrative offences, administrative responsibility, regulation of administrative procedures, remedies in administrative procedures. (e-mail: lukas.potesil@law.muni.cz) abstract: this article focuses on the system of standard (ordinary) remedial measures used in the administrative procedure that can be found in the administrative procedure acts of so called visegrad four (central european) countries. mentioned is not only the national legislation but also european impact in this sphere and connecting roots. it can be found some problems that are typical for visegrad four countries like ‘remonstrance’. this paper tries to show possible ways to solve such problems and to emphasize that there is still number of national specifics which can be found. these can be understood as ‘inspirational designs’, whether positive or negative. keywords: administrative procedure; administrative procedure act; appeal; remonstrance; judicial review 1. introduction generally speaking, regular remedial measures are sought by parties to the administrative procedure to protect their (substantive or procedural) rights. these measures are sought to contest (meritorious or procedural) decisions of the firstinstance administrative body, which have not yet come into legal force. so the authority over the respective matter is transferred to the superior/higher administrative body. this contribution stems from the individual description and the subsequent overall comparison of the examined issue in the countries of the so-called visegrad four (hereinafter ‘v4’) and focuses solely on comparing the general legislations contained in the rules of administrative procedure of these states. it deals neither with the specific regular remedial measures that may apply in particular cases, such as the execution, or within the so-called special administrative procedure pursuant to the special law1 nor with the detailed description of specific legislations and institutes. this contribution tries to answer a question as to whether the institutes and systems of regular remedial measures in v4 countries, which have similar backgrounds and closely cooperate with one another, are similar or whether they differ in some respects. in relation to this, the contribution also refers to the so-called europeanisation tendencies given by ‘european’ requirements that should be reflected on the national legislations concerned. 2. the so-called v4 group at first, i consider as appropriate to succinctly delineate what the term ‘v4 group/states’ means and why this article deals with the system of regular remedial measures contained in the rules of administrative procedure of these countries. the so-called v4 is a political (rather than legal) group of four central european states, including the today’s czech republic, slovak republic, republic of poland, and hungary. rather than a (classical) international organization, it is a regional group the beginning of which can be dated back to 15 february 1991 when the presidents of the stated countries (at the time of the then czechoslovak republic) signed a declaration of cooperation towards european integration and building of democratic legal states. their mutual cooperation stemming from this platform2 did not let up despite the common accession to the european union on 1 may 2004. it can even be said that the significance and importance of this group have been strengthened upon the accession to the european union and the v4-based cooperation still continues in various spheres. the reason why my contribution is devoted to selected institutes and legislative systems of these countries is their social, historical, geographical, language, cultural and political closeness confirmed, at the institutional level, by the existence of v4 group. the stated countries declared that they had been and were part of one civilization sharing the same values and that v4 group’s objective was to preserve, and, concurrently, contribute to strengthening, their mutual cooperation. 10.53116/pgaflr.2016.2.4 mailto:lukas.potesil@law.muni.cz https://doi.org/10.53116/pgaflr.2016.2.4 the stated introduction and v4’s proclamations may tend to infer relationship amongst the individual legislations. after all, they are members of not only the european union but also the council of europe and are governed by similar principles or requirements (see below). however, it is not that easy. they do show certain similarities, but there are also differences. the mentioned relationship amongst the legislations is given or even strengthened by their common history (and the same legal order), for slovakia and hungary until 1918 and for slovakia and the czech republic from 1918 to 1992. moreover, in case of the czech and slovak republics, including poland, a role is also played by the similarity of languages. hungary is singled out when it comes to the language, but not when it comes to the transition to democracy and its values. all v4 states belong to a group of post-socialist countries, facing similar challenges, tasks and problems. these include, among other things, the establishment of an efficient and generally understandable system of (regular) remedial measures through which individuals could contest administrative bodies’ decisions handed down within the administrative procedure. 3. v4 countries’ administrative orders the contribution focuses on the so-called regular remedial measures sought within the administrative procedure and on the systems of administrative procedure rules of v4 states. for the purposes of this contribution it is crucial, in particular, that all v4 states’ administrative procedure rules are reduced to, and have the force of, laws and their contents and focus are similar. this fact facilitates the comparative approach and underlines its sense and purpose. regarding the system of regular remedial measures contained in the administrative procedure rules, it is necessary to first briefly state several notes relating to the term ‘administrative procedure rules’ and, subsequently, to deal with the concept of administrative procedure and regular remedial measures. laws usually identified as ‘administrative procedure rules’ exist not only in central europe but also in other parts of the european continent.3 nevertheless, especially central europe is typical of the existence of administrative procedure rules.4 in terms of history, the administrative procedure rules have had a relatively long tradition in central europe.5 the term ‘administrative procedure rules’ means, (not only) in the v4 countries, the general legal regulation (lex generalis) of various procedures applied by public administration through bodies6 called, in theory, as ‘administrative bodies’.7 the subject of the legislation contained in the administrative procedure code is then the public administration activity of these bodies.8 administrative bodies and administrative procedures are regulated, similar to (civil, criminal or administrative) courts, by codes and rules.9 for this reason, administrative procedure rules are usually referred to as codes of public administration (activity).10 the oldest administrative procedure codes could be found in poland (1960), followed by the slovak republic (1967). however, in both cases, the existing administrative procedure rules differ from the then legislation. after the substantial changes in 1989 and in relation to their incorporation in the european structures (council of europe and european union), these states have preserved their administrative procedure rules, with more or less significant interventions. on the other imaginary side are the ‘new’ administrative procedure rules of the czech republic and hungary, both adopted in 2004. in these cases, the legislature decided to adopt a completely new legislation to meet the europeanization requirements. poland and slovakia preserved the original form of legislation, save for certain changes. moreover, the polish and slovak legislations seem to be more stable. the legislation of polish and slovak administrative procedure rules is more succinct when it comes to the quantity and, in particular, the length of provisions. the fact that the last section of the polish administrative procedure code is 269, while that of the slovak administrative procedure code is 85 (the actual number of provisions is lower because in both cases, it also includes the cancelled provisions) changes nothing. conversely, the czech and hungarian administrative procedure codes seem to be much more detailed at first sight and are more extensive. the czech administrative procedure code has 184 sections that are further broken down into very detailed paragraphs and subparagraphs. this makes the administrative procedure code more extensive although, in fact, it contains fewer provisions than the polish administrative procedure code. the hungarian administrative procedure code has 189 sections that are very detailed and broken down. it may be disputable as to for whom the brevity or, conversely, the extensiveness of legislation constitutes an advantage. in any case, the comparison of the individual administrative procedure codes tends to indicate adoption of the so-called case-by-case approach. the legislation, however general it should be, tries to cover solutions to all possible situations and remember various types of cases. thus, all v4 countries have their rules of administrative procedure and understand them within the intentions stated thus, all v4 countries have their rules of administrative procedure and understand them within the intentions stated above. for this reason, we can state that the administrative procedure rules of v4 countries are comparable as to their focus. however, the individual administrative procedure rules may differ and, in fact, they do differ, in particular, when it comes to the processes regulated by them. this is given by the different scope of their applicability. the thing is that public administration is performed by means of various legal measures (forms). in fact, this variety is caused by a wide range and by the specificity of the sphere of administered social relationships. the objectives and tasks of public administration of the 21st century do not allow being fulfilled in a single form, similar to the legislative (where the form of activity is a normative legal act – ‘law’) or judicial (where the form of activity is the act of applying the law – ‘decision’) power. the complexity of the domains administered by public administration and the high number of addressees of such activity requires a high number of the applied forms. furthermore, public administration is typical of combining normative and application activities predetermining the diversity of possible forms. comparing the administrative procedure rules and the scopes of their applicability, we can arrive at the following general findings further demonstrated by the table below.11 country year of adoption number of provisions (including cancelled) contents/scope of applicability poland 1960 269 1. administrative procedure 2. other acts (certificates) slovak republic 1967 85 1. administrative procedure12 czech republic 2004 184 1. administrative procedure 2. other acts (certificates) 3. public contracts 4. measure of a general nature hungary 2004 189 1. administrative procedure 2. other acts (certificates) 3. administrative contracts concurrently, it is crucial that these rules predominantly regulate the so-called administrative procedure. it is a traditional process within which the administrative bodies decide on the rights and legally protected interests and obligations of the parties to such procedure and the result of which is a decision on these rights and obligations, as can be deduced directly from the texts of the legislations (administrative procedure codes) of v4 countries.13 since the administrative procedure rules of v4 countries are similar in essence, even the issue of regular remedial measures is understood similarly. therefore, a regular remedial measure is, generally speaking, a means available to the party to administrative procedure (the party to administrative procedure is entitled to it) and contesting, within the given time-limit, a fist-instance administrative decision that has not yet come into legal force. thus, the authority to pass a decision on the remedial measure and review the whole matter is transferred to the superior administrative body (the socalled effect of devolution).14 the above-stated further shows that the legislations contained in the polish and slovak administrative procedure codes are, unlike those of the czech and hungarian administrative procedure codes, rather succinct. however, before describing the individual administrative procedure rules and the system of regular remedial measures contained in them, i consider it useful to deal with the common european roots and requirements leading to the legislations concerned being similar in essence. 4. administrative procedure and regular remedial measures from european perspective it would be a mistake to believe that the examined legislations are free of european influences and fall solely within the competence of the national legislature. however, a role is also played by the legal tradition and, to certain extent, by the insistence on the system and legal regulation of regular remedial measures, which may evoke problems and criticism (in particular, in relation to the existence of the remonstrance as stated below). we can understand the mentioned european requirements, in particular, as value-based solutions that should be contained in the legislation. concurrently, they constitute the minimal procedural standards (de minimis) which the national legislation should fulfil and reflect on. the issue of the right to (regular) remedial measures is dealt with by numerous documents of the so-called european the issue of the right to (regular) remedial measures is dealt with by numerous documents of the so-called european administrative law, the creator of which is, in particular, the international organization council of europe. the individual documents15 issued by the bodies of the council of europe state that there should be a system of the regular remedial measures of which the addressees of decisions handed down within the administrative procedure should be duly notified. the anchorage of this procedural law is then reflected on other soft-law documents of the council of europe.16 these documents require that the regular remedial measures available within the administrative procedure are first exhausted in vain before the court is involved and court protection is awarded. the stated facts lead to a partial conclusion that the requirement for existence of regular remedial measures is part of the so-called european administrative area, that is, an area of common values and principles that influence soft law of the council of europe. the existence or the previous exhaustion of regular remedial measures is considered as the basis for asserting the right to protection from procedures carried out by administrative bodies. regular remedial measures are understood as the (necessary) pre-level for granting court protection, as required by article 6(1) of the european convention for the protection of human rights and fundamental freedoms. even thanks to this, the issue of regular remedial measures gains new perspective. at the level of the european union as such (within the so-called direct union administration), numerous procedures that could be subordinated to administrative procedures can be found. their specificity lies in such procedure not being carried out by national administrative bodies, but directly by the union bodies or institutions17, which is obvious, particularly, in relation to the direct decision-making activity of the so-called independent agencies.18 while a unification mechanism for conducting administrative procedure, represented by the administrative procedure rules, exists at the national level of implementing the union law, it is absent at the union level. no matter how article 41 of the charter of fundamental rights of the eu, including the right to good governance, applies to the direct union level, it contains no right to seek regular remedial measures although it should contain such right. after all, the right to good governance, as also ensues from the stated documents of the council of europe, undoubtedly includes the right to seek regular remedial measures. the european union tries to compensate for this deficit by adopting eu administrative procedure rules.19 the stated documents and requirements under the so-called european administrative law are typical of having the so-called europeanization effect (top-down approach) and influence national legislations of the individual european states. for this reason, it can be stated that the existence of a system of regular remedial measures and the requirement for their previous application before court protection is granted as results of the europeanization. concurrently, the europeanization affects the european union itself since the contemplations about adopting eu administrative procedure rules are reflected on the individual member states (bottom-up approach). 5. poland and administrative procedure code the polish administrative procedure code is the oldest of the v4 countries. it was adopted in 1960 and has been amended more than 20 times since then.20 its abbreviation established in the polish environment is ‘kpa’. in the central european area (including v4 area), it represents other significant source of inspiration for other administrative procedure codes after the german ‘vwvfg’. its contents and system, even within the scope of remedial measures, are close to the czech and slovak administrative procedure codes. the scope of its applicability has already been briefly delineated above. the legislation and the system of regular remedial measures in poland stem from the constitutional principle of a twoinstance procedure, within which rights and obligations are determined. section 78 of the polish constitution introduces a constitutional right to seek remedial measures. the principle of a two-instance procedure at the statutory level and in the sphere of public administration is specified in section 15 of kpa, pursuant to which ‘the administrative procedure shall have two tiers’. exceptions to this rule as stipulated by the laws are admissible.21 the stated general provisions are specifically related to sections 127 and 141 of kpa that define the regular remedial measures available to the parties.22 these remedial measures are an appeal (section 127(1) of kpa – odwolanie) and a complaint (section 141(1) of kpa – zazalenia). the appeal is further associated with the so-called auto-remedy. the appeal differs from the complaint by being aimed against a decision on the merits, while the complaint is filed against a decision of a procedural nature and only in cases when so specifically stipulated by the code. other difference lies in the presence of the effect of suspension, which applies in case of the appeal, but is missing when it comes to the complaint. the filing time-limits differ too. the time-limit for filing an appeal is 14 days and that for filing a complaint is 7 days. otherwise, section 144 of kpa refers to appeal-related laws being applicable to the complaint. furthermore, the polish legislation contains a specific remedial measure that is similar to the remonstrance recognized by the czech and slovak laws (see below). pursuant to section 127(3) of kpa, it concerns an application for renewed procedure (wniosek o ponowe rozpatrzenie sprawy) in cases when a minister or a self-governing collegial body has passed a first-instance decision. in these cases, it is not possible to apply the standard regular remedial measure, including its devolution effect, since the stated bodies have no superior authority over themselves that would conduct such procedure. despite this, the stated institute is subject to the rules pertaining to the appeal and the appellate procedure. this legislation raises numerous questions in polish theory23 and is sometimes referred to as internal remedy. its essence lies in the review of an administrative decision by the same authority.24 6. slovak republic and act no. 71/1967 coll., on the administrative procedure code regarding the slovak administrative procedure code, it needs to be mentioned that it concerns the original czechoslovak (federal) administrative procedure code that was common to the czech republic and slovakia until 31 december 1992. nevertheless, this administrative procedure code applied, though in its amended form, in both countries even after they had separated. while a completely new legislation was adopted by the czech republic in 2004, the slovak republic amended the original administrative procedure code of 1967 five times.25 thus, the latter is the predecessor of the existing czech administrative procedure code. in respect of the system of regular remedial measures within the administrative procedure, the slovak administrative procedure code recognizes two or, as the case may be, three remedial measures.26 the first remedial measure is the appeal (section 53 – odvolanie) and the second is the remonstrance (section 61 – rozklad). both of these remedial measures are fully vested in the parties to the procedure. both cases represent regular remedial measures for which procedure needs to be conducted by the higher-instance administrative body, although this may be considered as disputable when it comes to the remonstrance since remonstrance contains no devolution effect. the time-limit for their filing is 15 days. unlike the polish legislation, the slovak legislation does not differentiate amongst remedial measures based on whether they are aimed against decisions on the merits or decisions of a procedural nature. decisions of a procedural nature may be contested by the stated remedial measures unless a special law excludes it. under specific conditions [section 57(1)], even auto-remedy is admissible in both cases. while the appeal is ‘the most general regular remedial measure against a decision passed within the administrative procedure’27, the remonstrance, conversely, is aimed against decisions passed by an administrative body with no higherinstance (appellate) administrative body, so no appeal is possible. concurrently, to ensure the administrative review of a decision passed by such administrative body, the legislation has created the specific institute of remonstrance. remonstrance is determined by the entity governing such administrative body (usually ministries or other central state administration bodies, with the minister or the head of such body passing a decision) on the proposal of an independent remonstrance commission.28 however, such proposal is not binding. as stated by the slovak theory, ‘compared to the appeal, it is a special regular remedial measure sought only against decisions passed by these types of administrative bodies’.29 the procedure for remonstrance is subject to the provisions pertaining to an appeal [section 61(3)]. however, no appeal against such decision may be filed [section 61(2)] and the matter is determined finally and conclusively at the level of public administration. the third remedial measure is a measure that is not determined by the administrative bodies but directly by the courts (section 70). unfortunately there is no special term for this legal measure; it is described as an ordinary remedy to (administrative) court. but this conception forgets the main distinction between (administrative) justice and public administration as part of executive power. administrative justice is no continuing of administrative procedure! the competence over this remedial measure is vested in the courts within administrative justice, but only in the cases expressly stipulated by the laws30. it concerns the procedure for a regular remedial measure in the cases when the superior administrative body is missing, rather than the ‘traditional’ procedure for an action, through which the final administrative decision is contested. they most frequently concern matters relating to (disability or old age) pension insurance.31 the time-limit for seeking a remedial measure with the court is 30 days. in this respect, a question arises as to whether the stated solution may be accepted as possible compensation for the highly disputable institute of remonstrance, by which the solution would be similar to the approach applied in the hungarian administrative procedure code (see below). but as is noted, such approach also produces a lot of problems and questions. 7. czech republic and act no. 500/2004 coll., on the administrative procedure code the czech administrative procedure code has already been briefly introduced above. from the perspective of the legislation concerned, it regulates regular remedial measures, but does not expressly confirm the principle of a twoinstance procedure as the polish legislation in section 15 of kpa. with regard to the explicit legislative absence of the principle of a two-instance administrative procedure, the conclusions of the judicature of the constitutional court and the supreme administrative court are not surprising. this judicature recognizes the existence of such principle32 and directly refers to it, in particular, in cases when it has been violated, but does not ascribe it the nature of a fundamental principle. as expressly stated by the constitutional court33, ‘neither the charter of fundamental rights and freedoms nor the convention for the protection of human rights and fundamental freedoms guarantee the fundamental right to seek twoor multipleinstance administrative procedure’. in compliance therewith, the supreme administrative court34 concluded that ‘the fundamental principles of determining rights and obligations of natural persons or legal entities by administrative bodies shall not include two-instance decision-making’. therefore, it can be concluded that the administrative procedure and the administrative bodies’ decision-making, where the principle of a two-instance procedure does not apply at all or, possibly, does apply but only in certain modified form, are admissible. hence, the right to seek regular remedial measures is a matter of common laws and is not constitutionally guaranteed. the system of regular remedial measures consists of the appeal (section 81 – odvolání) and the remonstrance (section 152 – rozklad).35 as already stated, the existing slovak administrative procedure code was the predecessor of the czech administrative procedure code. the solutions to such regular remedial measures are identical, and even the legislations are similar. the institute of remonstrance was also preserved by the czech administrative procedure code and, thus, its essence is identical with that applicable in the slovak republic (see above). the time-limit for seeking both remedial measures is 15 days. the auto-remedy is admissible too. quite a significant shift compared slovak predecessors concept is so called incomplete appellation in appeal proceedings and related concentrations proceedings at first instance [section 82(4)]. in appeal and remonstrance procedure can´t be used evidence and facts that could be used in the first instance level. the legislation pertaining to both regular remedial measures is fragmented since remonstrance is regulated, due to its specific nature, by other (the third) part of the administrative procedure code, dealing with the institutes applied within the administrative procedure less frequently. however, based on the statistical data, the institute of remonstrance is not as exceptional as it seems.36 8. hungary and administrative procedure code similar to the czech administrative procedure code, the hungarian administrative procedure code was adopted in 2004 (for the sake of completeness it has to be pointed out, that in december 2016 a new regulation was passed under the no. cl: 2016 on the general administrative ordinance, which will come into life on 1st january 2018)37. for this reason – at current state – the hungarian regulation belongs, along with the czech administrative procedure code, to the group of new administrative procedure codes of v4 countries.38 this legislation is referred to, in compliance with the hungarian method of identifying laws, as ‘cxl: 2004’. pursuant to the provisions (section 71(1) of cxl: 2004), it is necessary to differentiate between decisions on the merits and decisions of a procedural nature. the type of a decision predetermines the system of remedial measures. a decision of a procedural nature may only be contested separately in the cases stipulated by the cxl: 2004.39 the system of regular remedial measures contained in the hungarian administrative procedure code is related to the right to seek regular remedial measures, guaranteed by the constitution (article xxviii paragraph 7).40 the hungarian administrative procedure code does not explicitly differentiate between regular and extraordinary remedial measures within their systematics, but divides them based on whether they are vested in the addressee of an administrative act (redress procedure) or not (ex officio, review procedure). generally, the substance of regular remedial measures is the fact that they are vested in the addressee of an administrative decision. hence, a classical regular remedial measure is the appeal (section 97(2) and sections 98 through 108). the time-limit for filing an appeal is 15 days. alongside this, the administrative procedure code cxl: 2004 counts judicial review (sections 109 through 111, including the reference to the legislation given by the hungarian civil procedure code – act iii: 1952) and renewed procedure on the basis of a decision of the constitutional court (section 113 and act cli: 2011 on the constitutional court) amongst other remedial measures available to the addressee of an administrative act within the renewed procedure (section 112). however, these do not concern regular remedial measures since they are, in part, the extraordinary remedial measures (renewed procedure) and, in part, the elements of the follow-up judicial review and the provided court protection. the legislation pertaining to the appeal does not differ from the appeal-related legislations of the other v4 states. the possibility of filing an appeal is excluded in specific cases as stipulated by section 100(1) of 1 cxl: 2004. one of the cases of decisions against which no appeal is admissible is the decision of a minister or an independent administrative body. unlike hungary, the polish, slovak and czech legislations have chosen the possibility of remonstrance. the possible central european ‘problem’ about the remonstrance is dealt with by the hungarian administrative procedure code in section 100(1) d) in favour of the direct judicial review. no matter how the problems associated with the remonstrance are so resolved, the review is delegated directly to the courts, which does not have to be an efficient solution and may lead to the courts being overburdened with these cases. the construction of section 97 of cxl: 2004, which regulates all remedial measures, including the possibility of judicial review, is advantageous for the parties to the procedure who so obtain a simple overview of the measures allowing them to exercise their rights. thus, these parties are notified of what measures may be sought for their rights to be exercised and protected. 9. comparative notes and summary the individual v4 countries have their own administrative procedure rules. although these rules can be divided into ‘old’ and ‘new’, the common or different elements do not lie in the age of their legislations. the administrative procedure is always, either fully, such as in case of the slovak administrative procedure code, or predominantly, such as in case of the other administrative procedure codes, the core of the v4 states’ administrative procedure rules. a certain deficiency of the slovak legislation lies in the fact that it does not pay attention to other forms of administrative bodies’ activity and to the procedural regulation of other processes by which the administrative bodies may exercise their competence and participate in the performance of public administration. the slovak legislation lacks a legal framework for the other forms of public administration activity. the stated narrower scope of applicability of the slovak administrative procedure code is definitely influenced by the conditions prevalent at the time of its adoption when many public administration procedures (intentionally) remained unregulated by the laws. although it is possible to find both decisions on the merits and procedural decisions, the administrative procedure codes of v4 states allow contesting both forms of the decisions through either the same type of a remedial measure (czech republic and slovakia) or a specific category of remedial measures, such as the polish kpa. in terms of the understanding and the system of regular remedial measures applied in the administrative procedure, the administrative procedure codes of v4 countries are considerably similar. except for the hungarian administrative procedure code, all of them stem, although it often does not expressly ensues from their texts, from the classical division of remedial measures into regular and extraordinary. the division criterion is based on whether the respective remedial measure is aimed against a decision that has already come into legal force or not. conversely, the hungarian administrative procedure code divides remedial measures based on whether they are available to the addressee or not. the advantage of this approach is that the party to the procedure is aware of all remedial measures guaranteed by the administrative procedure code and may choose which of them to use. concurrently, such party must respect their possible sequence or conditionality, which applies, in particular, to the judicial review. the basic regular remedial measure in v4 states’ administrative procedure codes is an ‘appeal’. an appeal may be aimed against a decision that has not yet come into legal force and the competence to determine the matter is delegated to the superior body (devolution effect of an appeal). the time-limits for filing it as stipulated by the administrative procedure code are identical in essence (14 or 15 days). the appeal in the czech and slovak environments is also represented by a specific regular remedial measure, being the ‘remonstrance’. at present, the remonstrance raises numerous questions. in my opinion, it is an anachronism of the past since it is not desirable and sustainable that the administrative review is carried out solely by the central public administration body.41 moreover, the remonstrance-related laws contained in the czech and slovak administrative procedure codes are considerably minimalistic since they stem from similar application of appeal-related provisions. is the remonstrance a special type of the appellate procedure of an internal nature or a regular remedial measure as such? similar questions and problems can be found even in case of the polish kpa. conversely, the hungarian administrative procedure code copes with the whole issue quite clearly since it does not recognize and regulate any institute of remonstrance and, instead, vests the resolution of such matters in the judicial review. however, a question arises as to whether the stated resolution could be considered as possible compensation for the institute of remonstrance. regarding the institute of remonstrance, its specificity raises numerous theoretical and practical problems in both the czech republic and slovakia.42 as stated above, even the polish professional literature shows ambiguities. in my opinion, remonstrance clings to the historical concept, which, however, does not suit the conditions and the environment of a legal state of the 21st century. the czech administrative procedure code is deviating when it comes to the system and lucidity of its legislation. the first remedial measure (‘appeal’) is regulated by section 81, while the second, relatively specific remedial measure (‘remonstrance’) is regulated in section 152, that is, far behind the provisions pertaining to extraordinary remedial measures or administrative execution. for this reason, the orientation in the czech administrative procedure code requires its perfect knowledge. conversely, the other administrative procedure codes are exemplary as to their systems. the regular remedial measures are specified in a single place in logical sequence. regarding natural persons and legal entities, the most instructional administrative procedure code is the hungarian administrative procedure code that provides a list of possible remedial measures, including the follow-up judicial review, in a single place. it should be noted, that remedial measures are designed to participants of administrative procedures to protect their rights and freedoms. this is from the external scope of view. but there is also strong scope of internal consequences. the ‘appeal’ is therefore regarded as an instrument of internal or hierarchical control of public administration. thanks appeal starts the function of superior administrative body. there is a large choice of different results that can be used by superior administrative body. the most typical is the cancellation according to the cassation principle. to this we should add that the use of remedial measure represents also one condition for damages caused by ‘wrong and unlawful’ administrative decision. it can be concluded that regular remedial measures have several functions. the legislations on regular remedial measures in v4 states’ administrative procedure codes are very similar, also due to the influence of the europeanization requirements. the admissibility of regular remedial measures is recognized generally and only a special law or a special nature of the decision-making administrative body can stipulate otherwise. in all cases, the access to court protection is conditioned by the previous exhaustion of regular remedial measures. therefore, the possible differences are given, in particular, by the historical development and tradition. it should be emphasized that even if in different laws could not be found in all v4 countries the existence of the principle of two instances, all v4 countries have similar roots and all of them admits an ‘appeal’. therefore an appeal represents similar and connecting legal remedy of central european legal culture. it is ‘standard’ of the legal regulation that can be found. all exceptions should be interpreted restrictive. finally, it is worth mentioning that the higher number of remedial measures on its own does not guarantee a higher standard of protection of the rights. it is important to find the suitable balance between identifying remedial measures for addressees of public administration activity and, concurrently, these remedial measures not paralyzing the public administration activity. in principle, one regular remedial measure fully suffices the administrative procedure purposes if it is conceived broadly and can be sought in a wide range of cases. this basic method of protecting rights is represented in all v4 states’ administrative procedure codes by the institute of appeal. references 1 compare the institute of objections made in case of selected decisions of the czech social security administration pursuant to act no. 88 of act no. 582/1991 coll., on the organization and implementation of social security, as amended. 2 as stated on the group‘s website, the v4 group did not arise as an alternative to the efforts towards pan-european integration and does not try to compete with functional central european structures. in no way shall its activities be aimed against isolating or weakening the relationships with other countries. instead, the group tries to boost optimal cooperation with all countries, in particular, the neighbouring countries, and is interested in all parts of europe developing democratically. compare http://www.visegradgroup.eu/about . 3 alongside the v4 countries, the administrative procedure rules can be found, for example, in spain, croatia, switzerland, slovenia, the netherlands or iceland. it is definitely not uninteresting that the adoption of such administrative procedure rules is also discussed at the level of the european union as such (see below). administrative procedure rules can also be found, for example, in the united states – the federal administrative procedure act (apa) of 1946. http://www.visegradgroup.eu/about 4 compare in more detail the german administrative procedure code of 1976, known under the abbreviation vwvfg and being a major inspiration base for other (central) european administrative procedure rules. 5 the first administrative procedure rules in the czech republic (and slovak republic) were adopted in 1928 (p. průcha, správní řád s poznámkami a judikaturou 13 [administrative procedure code with notes and judicature] leges, praha, 2012), in poland in 1928 (adamiak, b., borkowski, j., postepowanie administracyjne i sadowoadministracyjne, 7. wydanie, 54 [administrative procedure law and administrative justice procedure law, 7th] editionlexisnexis polska, warszawa, 2009) and in hungary in 1929 (horáková, m. et al., správní řízení v zemích eu [administrative procedures of eu countries], praha: linde 2012, p. 237). 6 compare also adamiak, b., borkowski, j., postepowanie administracyjne i sadowoadministracyjne, 7. wydanie 82–83 [administrative procedure law and administrative justice procedure law, 7th edition] (lexisnexis polska, warszawa, 2009), l. klat-wertelecka, (ed), kodeks postepowania administracyjnego 11 [code of administrative procedure] (oddk, gdańsk, 2012), m. vrabko et al., správne právo procesné. všeobecná časť 54 [administrative procedure law. general part] (c. h. beck, bratislava, 2013), s. košičiarová, správny proriadok. komentár, 7 [administrative procedure code, commentary] (heuréka, šamorín, 2013), or p. váczi, procedural principles of public administration in hungary, in p. smuk, the transformation of the hungarian legal system 2010–2013, 185 (wolters kluwer, budapest, 2013). 7 they are sometimes referred to as administrative bodies directly by the laws since they constitute a legal concept. section 1(1) of the czech administrative procedure code contains the general list of bodies considered as ‘administrative’. the slovak administrative procedure code defines ‘administrative bodies’ in section 1(2). the hungarian administrative procedure code contains a more specific definition of administrative bodies in section 12(3) introducing the term ‘authority’ or ‘administrative authority’. the polish procedure code refers to ‘public administration bodies’ in section 5(2). 8 thus, the provisions that are the subjects of regulation by the administrative procedure codes are very important since they constitute the procedural basis of administrative activity and co-create the contents of administrative law, as these contents are defined by the german speaking theory as ‘recht der verwaltung’ (compare b. raschauer, allgemeines verwaltungsrecht. 2nd updated edition. 4 [springer, wien, 2003]). in terms of the administrative procedure rules, it is definitely not uninteresting that a relatively isolated sub-sphere – being the administrative procedure law – is established within the administrative law alone as a scientific and pedagogical discipline. this is obvious the most in the czech and slovak republics. the administrative procedure law pays attention to the procedures carried out by administrative bodies and to the administrative procedure rules. the same is confirmed by the professional literature focused on the administrative procedure law. compare s. skulová, et al., správní právo procesní, 2. upravené vydání [administrative procedure law], 2nd updated edition. (aleš čeněk, plzeň, 2012), or m. vrabko et al., správne právo procesné. všeobecná časť [administrative procedure law. general part]. (c. h. beck, bratislava, 2013). 9 in this respect, it is necessary to mention that compared to civil procedure rules, administrative procedure rules are usually briefer and less complicated. the reason for this is the much higher probability of natural persons and legal entities coming into contact with public administration rather than with the court and the fact that public administration is often performed by officers without legal education. hence, administrative procedure rules must be understandable. 10 compare s. skulová et al., správní právo procesní, 2. upravené vydání, 10 [administrative procedure law, 2nd edition] (aleš čeněk, plzeň, 2012). 11 in case of the slovak administrative procedure code, it needs to be stated that administrative procedure represents the core of its legislation. it focuses on other procedures usually available within the public administration only marginally and indirectly. pursuant to section 3(7) of the same code, ‘provisions pertaining to the basic procedural rules stated in paragraphs 1 through 6 shall reasonably apply also to the issue of certificates, opinions, statements, recommendations and other similar measures’. the slovak administrative procedure code also regulates the administrative procedure through all its 85 sections. on the contrary, the polish administrative procedure code regulates not only the administrative procedure but, as stated in section 1 thereof, also the issue of certificates (part seven, section 217 et seq.) and the filing and handling of public administration-related complaints (part eight, section 221 et seq.). in terms of the scope of applicability, it is appropriate to add that the czech administrative procedure code regulates, primarily, the administrative procedure. this legislation forms a crucial part of the administrative procedure code and is included in its parts two and three, that is, in sections 9 through 153, while part four is devoted to regulating the so-called other acts, such as opinions, statements, certificates or standpoints. part five of the same code regulates public contracts. part six regulates a specific institute, being measure of a general nature, and part seven deals with the issue of public administration-related complaints. the hungarian administrative procedure code also focuses on procedures other than administrative as stipulated in section 12 thereof. 12 with the exception stated in the footnote no. 12 13 pursuant to section 9 of the czech administrative code, ‘administrative procedure is a procedure which shall be carried out by an administrative body and the purpose of which shall be to pass a decision establishing, changing or cancelling the respective party’s rights and obligations and declaring that such party shall or shall not have such rights or obligations’. section 1(1) of the slovak administrative procedure code defines the administrative procedure by stipulating that ‘this code shall apply to the procedure within which the administrative bodies decide on the rights, the legally protected interests and the obligations of natural persons and legal entities in the sphere of public administration unless a special law stipulates otherwise’. the polish administrative procedure code, as well as the czech and hungarian administrative procedure codes, does not focus predominantly and solely on the administrative procedure but also on other procedures available within the public administration. section 1(1) of the polish administrative procedure code defines the administrative procedure as ‘a procedure conducted by, and falling within the competence of, public administration bodies resolving individual matters by way of administrative decision’. the hungarian administrative procedure code defines the administrative procedure in section 12(2) a) as ‘a procedure within which an administrative body defines client-related rights or obligations… ’. 14 for the definition in the czech theory of administrative (procedural) law compare s. skulová, et al., správní právo procesní, 2. upravené vydání, 241 [administrative procedure law, 2nd amended edition] (aleš čeněk, plzeň, 2012); for the slovak concept of regular remedial measures compare m. vrabko, et al., správne právo procesné. všeobecná časť, 177 [administrative procedure law. general part] (c. h. beck, bratislava, 2012); the polish definition of regular remedial measures is contained in b. adamiak, j. borkowski, postepowanie administracyjne i sadowoadministracyjne, 7. wydanie, 258 [administrative procedure law and administrative justice procedure law, 7th edition] (lexisnexis polska, warszawa, 2009); and for the hungarian concept of (regular) remedial measures compare k. pollák, achievement of the right to legal remedy in the hungarian administrative procedure, 122 in control of the decision-making processes in public administration as a means of economic efficiency of public administration, compendium of contributions from the international scientific conference ‘bratislava legal forum 2013’ komenský university in bratislava, bratislava. 15 compare, for example, article v of the amendment to resolution 77/31 concerning the protection of individuals in relation to administrative bodies’ acts, according to which the decision needs to state what remedial measures can be applied against the respective individual. the possibility of administrative review is stipulated in article iv paragraph 9 of recommendation 80/2 on the exercise of administrative discretion. article viii of the amendment to recommendation 81/19 on access to information held by public authorities also states the requirement for the review of decisions. article vi of the amendment to recommendation 87/16 on administrative procedures relating to a large number of persons stipulates that information on the regular remedial measures should be given. a crucial article is article 18 paragraph 2 of the code of good public administration [amendment to recommendation 2007/7 on good public administration], pursuant to which a decision must contain a notice of admissibility of regular remedial measures. 16 article 2 b) of the principles of recommendations 2004/20 on the judicial review of administrative acts stipulates that before the court protection and the judicial review of an administrative act is implemented, it is possible to require that all remedial measures available within the procedure conducted by an administrative body are exhausted. this is confirmed by article 22(2) of the code of good public administration [amendment to recommendation 2007/7 on good public administration], pursuant to which an appeal may be filed within the administrative procedure before the review is carried out by the court; such appeals may even be mandatory in certain cases. 17 for the issue of direct and indirect union administration further compare, for example, h. c. h. hofmann, a. h. türk, eu administrative governance (edward edgar publishing, 2006). 18 for this issue compare p. craig, eu administrative law. 2nd edition. 140 et seq. (oxford university press, oxford, 2012), d. gerardin, r. munoy & n. petit (eds.), regulation through agencies: a new paradigm of european governance (edward elgar, cheltenham, 2005), m. pollack, the engine of european integration: delegation, agency and agenda setting in the eu (oxford university press, oxford, 2003); t. zwart, l. verhey (eds.), agencies in european and comparative law (intersentia, antwerp, 2003), or w. weiss, agencies versus networks: from division to convergence in the administrative governance in the eu, 222–249 in h. c. h. hofmann, r. l. weaver (eds.), transatlantic perspective on administrative law (bruylant, bruxelles, 2011). 19 compare the resolution of the european parliament of 15 january 2013, containing a recommendation for the commission relating to the eu law. the recommendation expressly states that ‘union has no uniform and comprehensive set of codified administrative law rules …’ this document then specifically states recommendation 4.10 relating to the issue of remedial measures. according to such document, ‘if so stipulated by the eu laws, administrative decisions shall clearly stipulate that an appeal may be filed and shall specify the procedure for filing such appeal …’ thus, the stated provisions show that the european union counts on the possibility of seeking regular remedial measures against decisions of eu bodies and institutions at the level of the eu administrative governance. however, it is not yet unambiguously resolved whether the right to file an appeal is to be incorporated directly in the eu administrative procedure rules or whether the admissibility of its filing is to be regulated by special eu laws. i believe that it would be more appropriate if the eu administrative procedure rules contained the general possibility of filing an appeal against a decision passed by any of the eu bodies or institutions without excluding that special legislation stipulates otherwise in specific cases and contains an exception to this rule. compare a. meuwese, y. schuurmans & w. voemans, towards a european administrative procedure act. 2 review of european administrative law 3–35 (2009). 20 compare l. klat-wertelecka, (ed.), kodeks postepowania administracyjnego, 13 [administrative procedure code] (oddk, gdańsk, 2012). 21 compare b. adamiak, j. borkowski, postepowanie administracyjne i sadowoadministracyjne, 7. wydanie, 261–262 [administrative procedure law and administrative justice procedure law, 7th edition] (lexisnexis polska, warszawa, 2009), or a. skoczylas, m. swora, administrative remedies, 337–338 in polish administrative law. in d. c. dragos, b. neamtu (eds), alternative dispute resolution in european administrative law (springer, 2014). 22 pursuant to section 188 of kpa, such party may even be the public prosecutor within his control powers towards public administration. compare b. adamiak, j. borkowski, postepowanie administracyjne i sadowoadministracyjne, 7. wydanie, 266–267 [administrative procedure law and administrative justice procedure law, 7th edition] (lexisnexis polska, warszawa, 2009). 23 compare in more detail z. kmieciak, wniosek o ponowe rozpatrzenie sprawy w k.p.a. (odwolanie czy remonstracja?) [renewed procedure in kpa (appeal or remonstrance?)] 3 państvo i prawo (2008), 19–35. 24 compare a. skoczylas, m. swora, administrative remedies in polish administrative law, 339 in d. c. dragos, b. neamtu (eds), alternative dispute resolution in european administrative law (springer, 2014). 25 j.sobihrad, správny poriadok. komentár, šieste prepracované vydanie, 11 [administrative procedure rules; commentary, sixth amended edition] (iura edition, wolters kluwer, bratislava, 2013). 26 m. vrabko et al., správne právo procesné. všeobecná časť, 178 [administrative procedure law. general part]. (c. h. beck, bratislava, 2013). 27 m. vrabko et al., správne právo procesné. všeobecná časť, 178 [administrative procedure law. general part]. (c. h. beck, bratislava, 2013). 28 m. vrabko et al., správne právo procesné. všeobecná časť, 182 et seq. and section 61(2) [administrative procedure law. general part]. (c. h. beck, bratislava, 2013). 29 m. vrabko et al., správne právo procesné. všeobecná časť, 187 [administrative procedure law. general part]. (c. h. beck, bratislava, 2013). 30 compare section 2501(1) of act no. 99/1963 coll., the administrative procedure code. 31 the list of cases when a remedial measure may be sought with a court is provided by m. vrabko et al., správne právo procesné. všeobecná časť, 189 [administrative procedure law. general part]. (c. h. beck, bratislava, 2013), or j. sobihrad, správny poriadok. komentár, šieste prepracované vydanie, 258–261 [administrative procedure rules; commentary, sixth amended edition] (iura edition, wolters kluwer, bratislava, 2013). 32 compare, for example, the judgment of the supreme administrative court of 20 july 2004, file number 5 a 69/2001-80, published under number 746/2006 coll. nss. 33 see the award of the constitutional court of 19 october 2004, file number ii us 623/02. 10.1093/0199251177.001.0001 10.1007/978-3-642-34946-1_11 10.1007/978-3-642-34946-1_11 https://doi.org/10.1093/0199251177.001.0001 https://doi.org/10.1007/978-3-642-34946-1_11 https://doi.org/10.1007/978-3-642-34946-1_11 34 compare the judgment of 27 october 2005, reference number 2 as 47/2004-61, published under number 1409/2007 coll. nss. 35 compare in more detail s. kadečka, et al., dispositional instruments of protection against administrative acts (not in legal force) and their effectiveness, 2–3 international public administration review (2014) 99–122. 36 the statistical data, though not fully complete, is available in the contribution by s. skulová, et al., remonstrance against decision made by central administrative bodies in the czech republic, 2–3 international public administration review (2014) 123–142. it ensues from such data that in the period between 2007 and 2012, remonstrance was the subject of determination in at least 1,200 cases. 37 see: <http://www.parlament.hu/folyamatban-levo-torvenyjavaslatok? p_auth=efbirp6a&p_p_id=pairproxy_war_pairproxyportlet_instance_9xd2wc9jp4z8&p_p_lifecycle=1&p_p_state=normal&p_p_mode=view&p_p_col_id=column1&p_p_col_count=1&_pairproxy_war_pairproxyportlet_instance_9xd2wc9jp4z8_pairaction=%2finternet%2fcplsql%2fogy_irom.irom_adat%3fp_ckl%3d40%26p_izon%3d12233 38 that the hungarian administrative procedure code is conceived in the spirit of the principle of good governance and client-oriented approach is obvious with reference to the addressee of administrative activity being identified as ‘client’. 39 compare a. boros, a. patyi, administrative appeals and other forms of adr in hungary, 288 in d. c. dragos, b. neamtu (eds), alternative dispute resolution in european administrative law (springer, 2014). 40 compare k. pollák, achievement of the right to legal remedy in the hungarian administrative procedure, 121–122 in control of decision-making processes in public administration as a means of economic efficiency of public administration; compendium of contributions from the international conference ‘bratislava legal forum 2013’ komenský university in bratislava, bratislava. 41 the remonstrance pursuant to the czech and slovak legislations comes into play even in the situations when directly a minister or the person leading the central administrative body has passed the first-instance decision and the remonstrance is determined by the same leader again, but on the proposal of the remonstrance commission. unfortunately, the leader is not bound by the remonstrance commission’s proposal and appoints the remonstrance commission. the details regarding the problematic nature of the remonstrance are stated in the contribution by s. skulová et al., remonstrance against decision made by central administrative bodies in the czech republic, 2–3 international public administration review (2014) 123–142. 42 compare j. vačok, možno vždy považovať rozklad za prostriedok nápravy? [is it always possible to consider remonstrance as a means of remedy?] in dny práva – 2008 – days of laws; the second year of the international conference held by masaryk university, faculty of law, available on <http://www.law.muni.cz/sborniky/dp08/files/pdf/sprava/vacok.pdf>. in terms of the czech legislation compare s. skulová et al., remonstrance against decisions made by central administrative bodies in the czech republic, 2–3 international public administration review (2014) 123–142. 10.17573/ipar.2014.2-3.a06 10.17573/ipar.2014.2-3.a07 10.1007/978-3-642-34946-1_10 http://www.parlament.hu/folyamatban-levo-torvenyjavaslatok?p_auth=efbirp6a&p_p_id=pairproxy_war_pairproxyportlet_instance_9xd2wc9jp4z8&p_p_lifecycle=1&p_p_state=normal&p_p_mode=view&p_p_col_id=column-1&p_p_col_count=1&_pairproxy_war_pairproxyportlet_instance_9xd2wc9jp4z8_pairaction=%2finternet%2fcplsql%2fogy_irom.irom_adat%3fp_ckl%3d40%26p_izon%3d12233 http://www.law.muni.cz/sborniky/dp08/files/pdf/sprava/vacok.pdf https://doi.org/10.17573/ipar.2014.2-3.a06 https://doi.org/10.17573/ipar.2014.2-3.a07 https://doi.org/10.1007/978-3-642-34946-1_10 © 2017 dialóg campus, budapest public governance, administration and finances law review vol. 2. no. 2. (2017) • 1, 5–29 articles public administration and literature ádám rixer* * prof. ádám rixer, phd, head of the department of administrative law, faculty of law, károli gáspár university of the reformed church in hungary, head of lajos lőrincz research centre for public law, member of the subcommittee of administrative sciences of the hungarian academy of sciences. (e-mail: rixer.adam@kre.hu) abstract: nowadays law and literature courses become more and more popular worldwide; this is also true for hungary. examining these attempts, we may conclude that legal problems do reach the students through mainly fictitious literary stories instead of real cases. accordingly, the idea of public administration and literature courses can be proposed, as well. among the reasons to introduce such courses we can detect new demands on the side of the students, the need for the methodological renewal of teaching and also the fact that the national university of public service already offers ma levels in administrative sciences. this paper  –  providing several examples  –  summarizes the main fields and subjects of public administration showed in fine literature and it also collects those genres by which administrative topics are most frequently introduced. keywords: hungarian literature; indirect representation of administrative phenomena; law and literature; teaching public administration 1. introduction nowadays the various law and literature courses are gaining popularity all over the world, including our country. if we analyse these trainings and experiments merely from a  methodological point of view, we will see that these courses present legal issues not through real-life cases but through stories belonging to fiction, still showing some similarities with real life. the presentation and interpretation of each legal institution will be thus possible through a shared experience that would otherwise only partially be possible if using other conventional studies, as most students, especially in the prussian type of educational environment, are unprepared or have limited professional preconceptions when attending a  course or a  seminar, and this gives unnecessarily large space for the teacher, who often, at least in hungary, repeats at the seminars the extended version of the theory presented during the courses. similarly to the approach mirrored by the law and literature initiative the public administration and literature course can also be taken into consideration as a  possibility. in case we try to compare the well-known outlines of law and literature with the contours of the newly introduced concept (public administration and fiction), on the one hand we will find that the latter extends its investigations to a  wider range because it goes beyond the law of public administration but on the other hand it is also possible to conclude that 10.53116/pgaflr.2017.2.1 mailto:rixer.adam%40kre.hu?subject= https://doi.org/10.53116/pgaflr.2017.2.1 6 ádám rixer public governance, administration and finances law review • vol. 2. no. 2. the subject of public administration and fiction is narrower than that of law and fiction, given that the non-strict administrative implications of the law are outside the interest of the researchers dealing with this domain. the apparent contradictions and tensions of these two approaches are very well overcome by the fact that the fictional representations of administrative phenomena appear to be predominantly in conflict with the ideals of these phenomena, as conceived by legal instruments, thus relativizing and blurring the theoretical boundaries between law and literature respectively between public administration and literature. the question to which this study also seeks to answer can rise other questions: whether literary and legal texts can provide meaningful contexts to each other, and whether the study of texts belonging to one of these categories can have any benefit with respect to the interpretation of the texts belonging to the other category.1 of course, it is not satisfactory to deal with this problem only from the perspective of intertextuality.2 this paper seeks to explore the possibilities of involving literary works in the formation of public administration students, listing the reasons and arguments that support the need for these kinds of approaches. it is obvious that first of all the contours of a theoretical framework should be created taking in consideration the justification of the existence of public administration and literature as a  separate field of science. in addition to the theoretical challenges, the real, practical significance of the topic is increased by the fact that university education and doctoral training are also taking place in the hungarian public administration professional training , thus  –  presumably  –  the necessity for the justification of methodological and didactic considerations is also increasing. 2. the concept of science of public administration and the transformation of its internal structure the science of public administration can be mostly defined as a  set of disciplines dealing with the same subject  –  that is public administration  –  with different scientific methods, while the diversity of approaches for each subject does not necessarily involve integrating and synthesizing partial results. that is why it is more accurate to talk about public administration disciplines and not about unified administration science. however, among the public administration disciplines, some disciplines have a  prominent, central role, which are called major branches of science by the scholarly literature, especially if their essential and central goal is to investigate the main context of public administration. admittedly, administrative law, political science, or even organizational science may be included among the major branches of science. those branches of science that are loosely associated with public administration or the latter is merely on the periphery of their research, or they focus only on some of the administrative phenomena, or on some of the narrower aspects of public administration  –  according to some authors  –  do not even belong to the public administration disciplines in their narrower sense, thus they are often considered interdisciplinary areas of science by the scholarly literature.3 these include some of the new areas, such as e-administration as an 7 public governance, administration and finances law review • 2. 2017 public administration and literature independent, interdisciplinary field of science. public administration and literature as a  field of study, in principle, might become one of the large numbers of these areas (each having different degree of importance). public administration and literature, as we have already mentioned, is not sharply delimitated from the more traditional and more embedded area in hungary that is law and literature. we must also emphasize that traditionally in hungary, both public administration and the science of public administration have an extremely legal character. however, this is partly natural, because the analysis of public administration with legal methods and having a  fundamentally legal approach towards it is somehow obvious due to the fact that “the issues of public administration can be legally made unambiguous and their mechanisms have been deliberately established since the beginning of the 19th century based on law, and this principle dominates the actual practice as well”.4 of course, legal approaches and descriptions cannot be exclusive; it is not advisable to come to a  conclusion regarding actual changes in society only through changes in law. quoting andrás sajó: “the constraint of adaptation to the new and the over-emphasis of social control of law often indicates significant moves even in segments where nothing happens.”5 public administration and literature as an area of science is trying to reconcile the everyday reality of administrative law and society by using reality-related, but decisively fictive cases in the application of legal experience and in teaching legal history and in the same making inevitable the analysis of the connections from sociological, culturalanthropological, ethical and sometimes explicitly religious perspective. nowadays, the relationship of other social sciences with literature is well documented (scientifically founded), e.g. for sociolog y and sociography, it is evident that certain basic literary works become the imprints of social and cultural life of the given crisis period and as important elements of the cultural life, they have strong impact even upon collective historical consciousness.6 we can also summarize what has been written before by concluding that law is a part of people’s everyday life regardless of the manner we define it: a set of normative rules that are compulsory for everybody or voluntary following of norms related to individual administrative decisions, or institutions that provide protection for the rights of clients, or behaviours defying norms – if these are present in the most common relations of everyday life, they must appear in the literary works that reproduce, represent and interpret these relations. 3. from “law and literature” to “public administration and literature” as we have just mentioned, the so-called law and literature is slowly becoming a  separate discipline also in hungary, intending to interpret and represent the fictional contexts and imprints of legal phenomena. according to the simplest – and perhaps the most commonly used  –  scheme in this research area, there can be distinguished two distinct basic approaches: one that analyses how law appears in literature and the other one that considers the law itself a particular literary genre (law as literature).7 8 ádám rixer public governance, administration and finances law review • vol. 2. no. 2. the law in literature approach is closely linked to the criticism of law and state,8 and in addition to this fact the works of modern novel literature can serve as valuable sources for researches on legal sociolog y. let’s note that some trends in sociography can be seen as a kind of common cross-section of public administration in its broadest sense and fiction – gyula illyés’s works being perhaps the best examples of this.9 we must not forget that the fundamental function of law is to maintain the community, that is why its essence stands in constitutive rhetoric  –  meaning that the retelling of the stories of the community members in a legal frame also contributes, as the final act of the legal conflict, to the integration or reintegration of the individual into the community, or help him find otherwise his homey, meaningful place.10 with some simplification, we may say that the primary purpose of both the administration and of fiction is the restoring of “order and the re-balancing the diseased equilibria”.11 the relationship between law and literature has been in the focus of interest of legal scientists for a  long time, several studies of the scholarly literature analyse the importance of the alternative use of this area and the need to develop relevant didactic tools in legal education.12 through its stand-alone perspectives and tools the law and literature approach may make a useful contribution to the more precise presentation and interpretation of the content of legal texts and even of legal practice using well-crafted artistic examples. in the meantime, we find that in the field of studying and teaching administrative phenomena, the legal-natured approach is still the dominant one, which emphasizes the descriptive presentation of rules and institutions. this approach, however, in itself does not give a  complete picture of a  particular issue of social reality (see the previously quoted study by andrás sajó), thus getting acquainted with the community attitudes developed towards a particular institution, and with the individual motivations13 become essential to get an adequate picture of society (community meaning both the public administration staff and the customers). limiting or adapting the so far described aspects to public administration, we have to say that the emergence of structures, operations and personnel of a  public administration having a  highly legal character in older or contemporary literature can also contribute to a better and more scientific understanding (and research) of the real forms and directions of change of public administration, or of the repetitive features of the studied field. for now, these possibilities are only theoretical, substantive research on these contexts has not so far been conducted in hungary. 3.1. arguments in favour of law and literature there have been attempts to present the existing and possible forms of relationship between law and literature in hungarian scholarly literature,14 but the role of the area in legal and/ or administrative education needs further elaboration. this modest writing intends to take the first and further steps in these two directions: on the one hand it presents the reasons that make this area acceptable and even in some respects necessary in the legal/administrative education; on the other hand, it presents the structured catalogue of the relationship between public administration and literature, 9 public governance, administration and finances law review • 2. 2017 public administration and literature making more accessible the main possibilities of systematization through concrete examples. the transformation of the law and literature method to public administration and literature and its conscious incorporation into the curriculum of law schools and administrative faculties can be recommended for at least eight reasons: 1. it opens up a  new communication channel for those who otherwise  –  or by other means  –  cannot be or can hardly be involved in the education process. this mode of knowledge transfer teaches through play, strengthening the concept of homo-ludens and minimizing the factor of constraint in the process of learning (while being appropriate for the achievement of the goals related to content); creating and accepting new public social agreements is easier if the conveying of the desirable patterns is not made  –  exclusively  –  in a  frontal manner, e.g. through teaching legal or other norms, but indirectly through the stories of imagined worlds. this method is performing similar functions as the tales for children: through the tale children will gain the knowledge of the distinction between good and bad. 2. it educates for life – meaning that it restores the original, natural, and most striking purpose of the academic higher education that is to prepare students for situations that are not closely related to professionalism but have at least the same importance, especially if we accept that the quality of life of the lawyer/administrative practitioner is not determined solely by professional success. it is sufficient here to look at the higher education goals set out in the 2007 london communique towards the european higher education area: instead of descriptive science, the new aspirations of education focus on cause and effect relationships aiming to offer a  qualification for living in a  democratic society, promoting self-realization and educating for life in a narrower meaning of the phrase and – in today’s hungarian usage  –  referring as well to the so-called training of intellectuals. the latter appears at jakab as a special (main) goal amongst the aims of legal education, a goal meant to serve the “education of men with general culture”.15 education for life also means that the training not only presents spaceand timeisolated knowledge and forms of knowledge that can be used merely in a narrow area, but it takes into account the processuality, globality and particularly complex needs and expectations of the new age. this opens new horizons by which the classical, partly legal, partly independent framework for public administration education is stretched out by the concept of the so-called lifelong learning, which does not only involve preparation for public administration or professional exams (etc.), but also training courses tailored to specific sectors and in addition to these more and more education programs in other fields, too. 3. if one is trying to find the most important call words and goals of today’s public administration and its staff, or if one wants to deduce these from the various official programs and plans, one of the most commonly used terms would certainly be integrity (in hungary). modernizing societies have increasingly established relationships  –  and upon these relationships there have been organized more expansive social forms  –  in which the participants became important only from one aspect while their personality as a whole was left out of these forms. each individual thus participates with increasingly specialized roles in modern society, with the disciplined suppression of the rest of his personality, and it is 10 ádám rixer public governance, administration and finances law review • vol. 2. no. 2. this disciplined and socially structured interpretation of roles that the intricate complexity of the society rests on.16 it is therefore indispensable to show to people – in our case students of law schools and public administration faculties, public servants participating in professional training  –  that the process of becoming a  lawyer/administrative expert and the acquisition of new law-enforcement skills is not just a  role, or one of the future roles of the individual, but something that must express a unity with the other important roles, such as the most important areas of private life, of family relationships, and with a sound and clear world view, etc. in this regard, it is also important to note that renunciation of a  comprehensive philosophical worldview is an important symptom of the recent age. thus, it seems unavoidable to re-create the philosophical synthesis between the legal norms governing public administration and the facts of its actual operation. it can be stated in general that, as a result of the crises, social sciences are increasingly forced to investigate the underlying meaning of things and the broader frameworks of the examined phenomena instead of the descriptive aspects of the mode of operation. in times of crisis, when our expectations are shaken by everyday experience, legal and political theory is also radicalized: it is forced to examine and rethink the validity of its own presumptions. philosophizing gains justification again, since from the discourse of political theory (and the theory of public administration) that wants to act as a descriptive scientific discipline it is becoming increasingly difficult to exclude questions that are not related to the mode of operation, but to the meaning (i.e. the framework of interpretation). in the recent decades, legal and especially administrativejurisprudential thinking has not shifted towards philosophical reflection; it was satisfied with the questions and answers necessary from the perspective of practice. one of the impressions of this – in this particular field – is the dominance of commentary-literature as a genre. we also have to face the wrong position, which seeks to reduce the ideas and proposals related to the renewal of legal training/professional training of public servants to the issue of practice or theory.17 it is worthwhile to mention that the training of legal practitioners/ public servants has a  third element, that has a  strong emphasis if related to the other two elements; this is the ethical and moral aspect that has been the most neglected area of the entire legal/administrative higher education in the last 60–65 years.18 for illustrating, interpreting, and exemplifying these problems, it is very helpful to deal with the realistic and life-like dilemma or work-related and vocational difficulties of the literary heroes. since the relationship between public administration and justice is not only a catalogue of ageless problems, but it is also reflected in situations that are very closely related to the age, situation and social constellation, a major pathway of law and literature and public administration and literature courses must obviously and necessarily be the study and interpretation of the works of contemporary literature. this, of course, does not mean the dethronement of classical and modern dramatic literature, or of the fiction of the 19th–20th centuries, but for the education and development of the reader (student), both synchronicity and the possibility of processing situations similar to personal ones related to personal reality have a  decisive influence. equally important is the clarification of the contemporary nature of literary works (conceptual narrowing ): obviously, those literary projections and contemporary works have the strongest explanatory power on a  subject that reflect the elements of the same (or at least similar) legal culture and wider social reality. that is to say, although hungarian literature is only a small cross-section – at least 11 public governance, administration and finances law review • 2. 2017 public administration and literature compared to the entire universal literature – it is not negligible the continuous and analytic incorporation of contemporary hungarian literature into the material and set of arguments of law and literature and public administration and literature courses. 4. transforming attitudes of public administration, rendering values. the picture would not be complete without mentioning, for example, that the weaknesses and shortcomings of public institutions in contact with e.g. the roma are often the results of the faulty attitudes, inappropriate interpretations of roles by the public administration personnel, etc. defective attitudes cannot be changed exclusively by legal regulations, by performance assessment and monitoring, etc.; for the description of the mental state of the public servant and of the concrete social situation and of the interaction of these two, the methodolog y of social psycholog y can also be very useful.19 this modern social psycholog y is no longer exclusively aimed at restoring information asymmetries but rather attempts to promote profound value-changing (!), and outlines a  complex socialization20 process in which one of the decisive elements of “mental programming is the overwriting of unwritten but valid public agreements and rules”.21 the change, therefore, depends, partially, on the programs that,  –  referring to the example used at the beginning of this sub-chapter  –  do not specifically have an impact on roma and roma organizations, but they offer a  “qualification for a  transformed attitude on the side of public administration”.22 in this process the role-play-based development focusing on active participation has or can have an inescapable role while another important factor is the discovery and the individual and group processing of literary parallels. regardless of the manner in which we look at the possibilities (reasonableness) of the public administration and literature method, it is a  fact that the number and the importance of the courses and issues related to ethics and integrity [see also sub-chapter 3. of this chapter] had grown lately, that indirectly also points to the fact that the need for the elaboration of truly new approaches and for the use of original methods is stronger than ever.23 5. we must also take into account the fact that the public servant working in public administration does not simply implement law, provide services and organize activities, but also encounters human conflicts, fates (losses), and in some cases he or she is as well involved. is it possible to resolve a dispute, settle any major legal issue in such a way as to exclude emotional difficulties and mental injuries from the process with complete certainty? éva ancsel writes – referring to wittgenstein that “the education of today is aimed at reducing people’s capacity for suffering”.24 quoting an american saying : “parents are happy if the children have a  good time”. ancsel also adds that education reducing the capacity of suffering and any other impetus that is striving for compassion, at the same time blocks the path from the knowledge available through the experience of these feelings.25 while the literature teacher’s vocation is to teach the students how to read,26 the teacher of legal and administrative sciences must be able to develop, strengthen, and establish the basis of the knowledge of law students and of future administration professionals in order to be altruistic in their future activity. if we remove this (main) function from legal and administrative training, it will mean that we support the view according to which it is possible to train legal and administrative practitioners only by e-learning and distance education without any personal presence, since most things are conveniently learnable from books and electronic interfaces. 12 ádám rixer public governance, administration and finances law review • vol. 2. no. 2. one of the possible forms of teaching how to mourn personal and community tragedies (i.e. the development of human responses expected in the service of the community) is the creation of a  toolkit that permits experiencing and processing through literature and at the same time is partly independent from any worldview. in this case, the stories that appear to be fictitious and those that are realistic, but appear in a  literary masque, will not only be simple legal cases that raise questions that can be easily answered with basic legal knowledge, but complex tasks – emphasizing legal contexts, as well – which will force students of public administration to totally reconsider (think over) the situation through real and inevitably personal relationships, to a certain extent, realizing the goals of self-knowledge and community knowledge of the current psycho-drama courses. it is a  matter of the teacher’s attitude to what degree the law and literature/public administration and literature courses are characterized by the aspiration of moral education, and to what degree by the need to explore the new and emerging problems of interpretation,27 and consequently by the need to develop the basic legal and debating skills, or by the intent to create a  sense of security that is essentially worthless and can be best expressed by the phrase “something i have heard”. however, wherever the focus of training is placed, it is a  fact that the explanation of legal/administrative institutions by literary works is not merely one of the possible aids to “acquire the material, but rather a new approach to legal-administrative communication that has the ability to redefine and refresh the ethical component of the law (and of the public-political sphere) by an overwhelming representation of diversity”.28 if one takes a  look at the scholarly literature, it is obvious that almost all the contemporary authors make proposals regarding the reform of legal and administrative education in which the decisive, sometimes exclusive, element would be the introduction of practice-oriented training.29 this is also consistent with the fact that, according to hungarian experience,30 the most successful trainings in the field of public administration are those based on personal presence: “the strengths of this kind of training programs are practical elements, methodological solutions supporting experience-based learning. there is exceptionally good feedback from participants to training-based programs, where group cohesion between public servants increases, personal relationships are born, and selfknowledge is evolving beyond professional knowledge”.31 these scientific conclusions also highlight the possibilities offered by the method of public administration and literature, and open the way for such and similar experimental programs. 6. indirect exercising of text comprehension, text processing and verbal expression. in addition to the classical problems of our higher education (and generally our hungarian education), new difficulties have also emerged and have become massive in the last decades. the spread of bad reading comprehension skills is added to old mistakes such as self-serving teaching of rules without lacking the undergrounding knowledge. regarding the latter, marcell benedek says: “the curriculum will have goals completely different from the ones planned. it does not teach how to recognize the beauties, it teaches only rules and facts from which the pupil as a reader cannot draw any conclusions.”32 the training and output requirements of administrative professionals can be captured from the side of the social expectations raised towards them. in this circle, besides the 13 public governance, administration and finances law review • 2. 2017 public administration and literature willingness of compassion and the existence of professional knowledge, one of the legitimate expectations raised towards public servants working for the benefit of the community is to have very good oral communication skills and good writing skills making them able to produce texts without distorting effects using appropriate words, style, language, etc., and avoiding mistakes. one of the basic elements of the education and training of public administration employees is (or at least should be) the conscious and direct development of their oral and written skills.33 there is obviously a  need for controlled interactivity and for basic competences on both sides (students and trainers).34 according to our point of view, the concept of public administration and literature is one of the most usefully targeted forms of this interaction.35 7. in addition to the practical considerations  –  related to communication  –  there are more general arguments related to the conscious renewal of the hungarian legal-administrative language. any training that focuses on the questions of language cultivation in its narrower sense, can also contribute to the conscious development of the given specialized vocabulary.36 the hungarian state administration language was created during the language reform that took place in hungary in the reform era. its special suffixes (some of them still used), as well as its overly complicated sentence and phrases, its curious circulars were salient even in those days.37 dezső kosztolányi’s movement for the cultivation of the mother tongue in the early 20th century fights against, among other things, the excessively legal character of this language register (the so-called wooden language [bikkfa-nyelv]). the oldest commonality of official language cultivation is the legal language; today, in particular, the interpretation of various kinds of loan words and loan translations, such as the interpretation of certain phenomena characteristic to the eu language use, and the action against anglicisms have come to the fore. the most obvious problems include the fact that citizens do not understand, or do not properly understand laws or forms, etc., a  reason of which, among others, is the fact that the administrative language (specialized vocabulary of law and administration) is strongly characterized by the lack of preverbs and the use of some specific preverbs in a  manner that contravenes the rules of standard language use. similarly, it is typical that mistaken practice uses phrases compound of a  meaningless verb linked to a  noun; for example, to exercise control, to take an action in sentences where the simpler and more accurate verbs to control and to act would be more suitable.38 it is essential that the introduction and dissemination of a unified terminolog y or the simplification of legal and official texts, the clarification of their content in order to make them customer friendly are tasks that are not possible solely through workshops of the employees of the sectoral ministry; these efforts need to be given a wider range of impulses by a wider circle of participants who – through debates – may reach the best solutions.39 8. the need for more conscious appearance of pedagog y and didactics in legal education. in today’s most widely accepted approach to pedagog y, teaching is primarily to promote the acquisition of socially relevant cultural content, to develop the skills and the abilities to perform certain operations, to develop basic and special competences, to educate for a  cultivated behaviour, to have an appropriate attitude in society (tolerance, cooperation, 14 ádám rixer public governance, administration and finances law review • vol. 2. no. 2. empathy).40 this definition is also suitable for describing the goals of the transfer of legal/ administrative knowledge, with the remark that today’s teaching is strongly lopsided; the systematic transfer of professional dogmatics-based knowledge has become the focus point of the aspirations, to the detriment of the development of human qualities and of the general training of future intellectuals (as possible functions) (see earlier). in the middle ages, the methods used in scholasticism are applied to universities: the presentation of the theses to be proved, the listing of arguments, and of the counter-arguments, the detailed presentation of the theses and the denial of the counter-arguments. the terminolog y of didactics was introduced by comenius, father of didactics, in his work entitled didactica magna. in his work presenting new approaches, he suggests that things be presented through sensuous, experiential, intelligent, self-reflective considerations. his emphasis on authoritarianism is under burden, but he does not stop at the level of empirical knowledge, as he considers that the senses cannot by themselves lead to the knowledge of the essence of things, though their use is inevitable in the process of cognition. the theoretical concept of didactics, in addition to the intellectual elements, is as well built on emotions.41 what should a  child learn?  –  the old question is formulated. according to fináczy a  child should learn that he/she is interested in by his/her natural desire for knowledge: “the main driver of a child when learning is the instinctive curiosity for the things that are unknown to him/her in the outside world.”42 rousseau in his work entitled emil, or education, referring to this curiosity, warns educators, too: “while feeding the child’s curiosity, never hurry to fully satisfy it. offer him/her the question and permit them to solve it by themselves.”43 ready-made knowledge  –  according to rousseau  –  is not worth much: “the child should not learn the science but find it.”44 in the (law and literature), (public administration and literature) courses, one of the most exciting tasks for students is the reconstruction of the story and novel events. in the current system of legal/administrative education, which focuses essentially on the acquisition and dogmatic analysis of rules, the students rarely encounter the task of fact finding. even in those law courses where court decisions are being analysed, students have to deal with already prefixed legal facts that highlight the most relevant elements of the case, so the difficulties and pitfalls of the fact-finding itself have remain unknown for the students.45 the relationship between law and literature (public administration and literature) is a lucky match for all those who want to renew the didactic features of legal/administrative education.46 it is indeed lucky because, with some exaggeration, many of the negative tendencies in today’s legal/administrative education can be handled well and can be controlled by using this method in a deliberate and planned manner. the most disturbing features of higher education in the domain of legal studies in our days – such as the lack of integrity, the rapid decline in the level of general literacy, the lack of interest, the lack of career and vision, the lack of mutual respect in the relationship between teacher and student respectively between students – can be well compensated by a legal/administrative higher education that builds on the relationship between law and literature. it should be emphasized that although higher education has a  certain internal logic and framework elaborated centuries ago, one of the decisive reasons behind the alienation of students is the presence of prussian-type teaching methods and environmental elements that remained unchanged in education. in this context, any method that really contributes to the 15 public governance, administration and finances law review • 2. 2017 public administration and literature development of a  pleasant environment and helps the free expression of opinions can become a real breakthrough in higher education. in this endeavour, increasing the number of practical courses and the forcing of seminarization cannot, in itself, lead to breakthrough results. the introduction of additional stimulating elements is also necessary, such as creating and offering an aha experience as a  result of personal reading experiences; the atmosphere reminding of exams being delayed  –  at least for the seminar and, perhaps the most prominent element: presenting moral dilemmas as a  perspective for the future socialisation of students in the world of legal practitioners, and at the same time as a  tool for enhancing the career image and enhancing self-confidence. thus, according to the didactic-methodological approach, new forms of indirect transfer of knowledge should also be introduced in the process of education (e.g. through reading together literary works that deal with issues of public administration, describing, interpreting, analysing and adapting these works). these indirect methods play a  particularly important role in dictatorships, since the only possibility for free interpretation of reality is art, but these methods may also be useful in a democratic social structure for the perception of processes, and for the understanding of the real weight and value of the social phenomena. the connection between the two areas (administration and fiction) is, of course, not recent. there are also works that use fiction as an excuse to present the author’s administrative, organizational and leadership theories or political ideas. a good example of the latter is balzac’s novel,47 the government clerks, that is the carefully elaborated, detailed, administrative reform plan of the author aiming to reduce bureaucracy. it is also necessary to highlight the civilizational fact that until the first third of the twentieth century legal-administrative literacy was not primarily a  labour-market factor in the public sector and society; it was rather intended to signify the belonging to the respective political elite and ruling class, and its intention. for a  nobleman or a  civilian who respected himself, the opportunity to access higher education and to obtain theoretical education in the field of law or theolog y was precisely the consequence of his social status. it is important, however, to emphasize that this knowledge was in many cases more widespread than good; the social status and the relations, the general culture and the language skills of the public administration staff and state apparatus (german, latin, french, minority languages) in most cases proved to be enough, especially when it was supplemented with the practical knowledge acquired with each case. however, as society became more complex, administrative and other legal activities had become more and more complex, as well and required more48 specialized expertise from those working in different administrative areas. 4. the possible relations between public administration and literature according to the simplest – and perhaps the most commonly used – scheme (see chapter 2) in this research area there can be distinguished two distinct basic approaches: one that analyses how law appears in literature and the other one that considers the law itself 16 ádám rixer public governance, administration and finances law review • vol. 2. no. 2. a  particular literary genre (law as literature).49 this latter may become the subject of literary analysis.50 as a  result, we may state that a  differentiation must be made between public administration that appears in literary works and administrative law as a  literary performance. this study – for practical reasons – uses the former approach to explore the criteria and the exemplified arguments suitable for group-formation that will allow the scientific examination of this area and will make progress in the field possible. 4.1. law in literature, public administration in literature in the relationship between law and literature (public administration and fiction), it is an essential question how close the legal motive is to the literary frame and genre? to what extent is the existence of a  kind of symbiotic relationship important/necessary for the presentation of these aspects as a  meaningful, contextual opportunity for interpretation? we instinctively give the answer that the legal/administrative problem appearing in the literary work should be expressed and more or less well-defined and the character of the depicted figure should have sufficiently sharp contours. this means that the presence of the law or of a  legal practitioner/of the administrative phenomenon or of an administrative expert in the literary work is some sort of a guiding motif, or at least must be strongly emphasized in the work. the vast majority of law and literary courses offered in higher education in law, follow the method presented by anna kiss. everyone chooses a  literary work, a  novel, a  poem, a  short story or a  drama and analyses it from a  legal point of view; the end-of-semester evaluation is mainly based on this work.51 obviously, the interpretation of works that deal with administrative problems (that can be regarded narrower or wider than the legal subject matter) is made in a similar way. the path leading to the correct interpretation of literary works is generally suggested to go through  –  not just in the context of law and literature/public administration and literature  –  three stages: contextualization, de-contextualization, and finally through recontextualization. contextualization is the intellectual effort to discover the meaning of the work in the light of the circumstances of its creation. this includes the discovery of the author’s relationship with literary traditions and social problems of the age, as well as the presentation of the work’s place in the author’s oeuvre and the highlighting of the literary themes and aesthetic issues the author was interested in. in short, contextualization aims to outline the author’s intentions, or at least to draw the horizon of acceptable interpretations, which, of course, include a  multitude of possible interpretations, since the author’s intention can never be clarified precisely. in the second phase of the interpretation, that is the stage of de-contextualization, we concentrate our attention on the work itself, as an aesthetic and intellectual whole, thus extracting it from the context of its creation. for a novel, this traditionally includes, for example, an explanation of the plot, of the characters and of the roles played by the characters; of the relationship between the narrator and the characters, and of the dramaturgical structure of the work. the very purpose of our investigations is to bring to surface the meaning hidden in the work, irrespective of the original intent of the author. finally, the re-contextualization of the literary work seeks to 17 public governance, administration and finances law review • 2. 2017 public administration and literature define those aspects of the current literary tradition and of social conditions, that can be used to delimit the variations of the meaning of a  literary work perceived by us and  –  as a  consequence  –  at the same time we can find a  basis for our aesthetic values.52 the most definitive “[d]idactic result of the contextual interpretation may be the amplification of the students’ emotional vibrations existing in the contradiction between reality and imagination, identification and critical distancing, which is not merely the basis of legal profession and literature, but it gives the basic tone of the creative human life in general, too”.53 if we try to make order in the domain of public administration and fiction – thus also helping towards a  more and more conscious use of this method in the areas of legal/ administrative education  –  we need to find the right categorization criteria that can be used to catalogue the dispersed and possibly displayed elements of the existing relationship in literature so far. in this study we will use three major approaches for the purpose of categorization:54 1. firstly, the administrative background and activity of the author of the literary work; 2. secondly, the literary genres used to represent the administrative theme; 3.  and thirdly, i classify the otherwise available (collected) works according to the upcoming administrative themes (problems). 4.1.1. the administrative background of the author of the literary work there are some authors for whom we cannot draw far-reaching conclusions from the fact that they attended law school or studied law when they used to be university students, or later they worked in public administration; in their works, the legal/administrative themes are often absent or only very indirectly present. this group includes georg philipp friedrich von hardenberg, also known as novalis, who first had studied law at the university of jena and then at wittenberg, and later used his knowledge in the mining industry.55 in spite of this biographic fact, his work entitled heinrich von ofterdingen does not deal with the law, the world of law or the mining administration. looking for hungarian (counter) examples: jános arany – one of the greatest writers of our literature who worked both as deputy notary and as public servant in the ministry of the interior and was for a  shorter period of time employed in the hungarian public administration, in his works often recalls neighbourly disputes, and other similar legal problems. perhaps neither would have péter esterházy become who he had become if he didn’t work as an employee of the ministry,56 because the experience gained there obviously helped him in creating a new literary language promoting the legal-administrative wooden language and “interpreting the medium of this linguistic register”.57 the language form used by esterházy in his novel entitled termelési-regény [novel of production] is the result of conscious choice of style; the author could not have found a  more suitable tool for describing and displaying this hard, brittle and in many ways opaque world. as far as the staff of today’s hungarian public administration is concerned (in this respect, not including public servants, teachers, university lecturers), there are not many spectacular literary performances combined with an intensive participation, and even the existing works belong almost exclusively to the category of poems and short stories. 18 ádám rixer public governance, administration and finances law review • vol. 2. no. 2. of  course, our aim cannot be a  subtle evaluation of particular performances or of some kind of total performance, but it must be noted that the visibility of literary forums, workshops and experiments generated by the wider public sector or even within the public sector is low. 4.1.2. the literary genres used to represent the administrative theme 1. the first appearance of the subject under review is bound to the genre of drama. in antigone of sophocles, which is the third most frequently used dramatic work in the law and literature courses, after william shakespeare’s measure for measure and the merchant of venice, antigone and kreon are examples of self-righteousness and legal thinking, as opposed to the figures of ismene and haemon. both kreon and antigone take in consideration only a particular sphere of values – for kreon the city’s prosperity, while for antigone the family’s unwritten rules are the only important issues, and both ignore the values represented by the other. of course, the diversity of viewpoints and interpretations can be explained by the opinion of george steiner, who distinguished the five fundamental conflicts of human life that can be the basis of a dramatic confrontation: man and woman, elderly and young, society and individual, living and dead, and the conflict between humans and gods. according to steiner, antigone is one of the few dramatic works in which all five conflicts appear.58 one of the peculiarities of public administration, particularly in dictatorial circumstances, is that the regime wants to encroach in the relationships of each of the above mentioned opposition pairs. often in the literary representations of administrative systems having basically democratic structure, the focus is on the erroneous methods of solving these basic conflicts thus criticizing the wrong and unreasonable appraisal of the law, the content of the defective legislative instruments, or the attitude of the public servant who represents the lawful but inhumane procedures, sometimes without any consequences. 2. among genres, perhaps the novel is best suited to present a request, an application, or an official decision in its integrity, without damaging the content of the text. woolf has a very particular approach towards the novel: “the novel, and i think art in general, wants to capture our vision of life in its intense and intact entirety and not in its components, or interpreted aspects.”59 this totality of epical tools is the motive for which law cannot lack literature; the institutions and texts of the law are so far from the most subtle contents of the notion of life, that it is worth using the mediating and interpretative role of literature that can offer solutions to understand the context of law. in our days, law in many respects is like a modern novel, which is restricted to the presentation of the story or of the events without any emotions  –  and in this case this is a  negative criticism  –  from which, in virginia woolf ’s opinion, “life disappeared and evaporated like camphor”. similar issues are discussed by peter brooks, who examines the act of confession in the light of law, literature, and psycholog y and concludes that the law is incapable of providing the “fearless story telling”.60 the latter reason is the one that almost compels the literary frame, thereby promoting the linkage of law with life.61 19 public governance, administration and finances law review • 2. 2017 public administration and literature today’s universal literature gives a  number of examples, which cannot be all listed here, dealing with the administrative theme. perhaps it is not coincidental, that the first novel of the most well-known authoress of our time addressed to adults, also presents an administrative problem. j. k. rowling’s the casual vacancy is a  novel about the process and the background of filling a  vacant seat in the council. in the shadow of the elections peppered with passion, tergiversation and astonishing blasts, rowling draws the portraits of social workers and the local teachers in an extraordinarily living way. the plot follows several threads of action and gives a rather complex picture of not only the wider public life of the small town, but also the narrower public administration and its social environment. hungarian fiction, especially in the 19th and early 20th centuries, gives many examples of the faulty, sometimes humorous functioning of the public administration and of the executive power, highlighting at the same time difficult moral dilemmas, as we can see in jókai’s or mikszáth’s works. the newer hungarian novel  –  similarly to international trends – often uses topics of secret services and police investigations. under the pseudonym david j. doesser, dr. jános nag y, a former intelligence officer from the information office, published in 2012 at the athena press in london the book entitled a  very important message which is a  memoir based on real events, disguised as a  novel. the book is mostly based on events taking place in hungary, and the focus of the novel is on the intelligence service of the socialist age, called iii/i and its successor organization, the information office. an interesting thing related to the book  –  due to its author  –  is that nag y, at the time of the first orbán government, was removed from the office for espionage on behalf of the cia. within the genre of the novel, a rarely used form is the verse novel. the most popular piece of the examined field is jános térey’s protokoll. regény versekben [protocol. a  verse novel].62 the protagonist of the novel, ágoston mátrai, the chief of protocols of the hungarian ministry of foreign affairs, leaves behind a  scotian dinner and drives to the beach. he is sitting alone in the middle of the deserted northern landscape and takes account of his life: “there is no way of doing anything, and this makes me sad. / what we had been left, will be handed on by us: the rituals are transmitted. / help everybody, solve everything ? / our show: a  symptomatic treatment.” this resigning recognition is quite different from the life-wisdom that mátrai formulates at the beginning of the volume: “you are my god, frosty protocoll! and you are my gods, you all, / ordinary / mutually agreed / norms! if you don’t exist any more / the unfold jungle will suffocate us.” while this opinion considers protocol a culture-conscious, meaningful and civilizational activity, the former regards it as a  substitute activity that, in most cases, is just an afterthought. there is apparently a  great distance between these two opinions, and this is the journey that the hero of the protocol is taking on the pages of the novel.63 one of the strengths of the novel is that it illustrates the inseparability of politics and public administration, and it also provides an accurate insight into this domain. 3. the genre of the short story is also a  common framework and instrument for representing legal events and cases and characterizing administrative/legal professionals: anton pavlovich chekhov’s short story entitled the death of a  government clerk represented in those days the renewal of the genre. when reviewing the hungarian examples, we also perceive the dominance of, or at least the emphasis, of police activity as 20 ádám rixer public governance, administration and finances law review • vol. 2. no. 2. a  theme in this genre. in the earlier hungarian literature kálmán mikszáth’s short story entitled eg y rendőrzseni [a genius policeman] and in the present days krisztina lamos’ work entitled késésben [being late] are good examples of the genre.64 4. in addition to the dramatic and epic genres, of course, we cannot forget poetry, which also has lots of special instruments like: intense depiction of reality,65 humorous and at the same time revealing rhymes, epigram-like compactness, mysterious atmosphere of ballads  –  all of these contributing to the presentation of problems reaching almost philosophical altitudes related to the life of the community and66 to the representation of the depths and disadvantages of law-making. among the numerous examples here is miklós radnóti’s two lines from one of his poems that is a  masterful example of the genre being a tribute to a lawyer. the poem is entitled tünemény [phenomenon]:67 couldn’t it have become a law for itself, so many smaller rules came to force to help. 4.1.2.1. at the border of fiction beside the most traditional genres, there are also combined genres, as follows: 1. the traditional form of displaying science accessible to the public is the genre of study and that of the essay.68 one of their characteristics is that they often use literary tools in the processing of their subject, and they (also) strive for literary influence. it would be a mistake to hide the fact that both the study and the essay have changed dramatically with the rise of the electronic media. indeed, not only the forms of speaking about the law/public administration, but also the way in which the legal and administrative sphere is operated had been fundamentally changed by the fact that legislative processes and individual decisions are not merely subjects of debate for a  narrower circle (as it is conceived in its traditional sense), but also for the broader popular public, and consequently the media speaks about them as its own.69 one of the peculiarities of the new law life that dissolves in the knowledge about law/public administration is that the otherwise complicated subjects of law are aimed to be presented to the reader with eloquent simplifications renewed and developed day by day. we do not even have to look for faraway cases: the writings concerned with the tax system appear on various websites on hundreds of pages. 2. another genre being at the border of fiction is the biography, which itself as a genre belongs to the essay literature, if its purpose is not (primarily) the scientific research and communication of data but the portraying of the human character, which always requires a  kind of artistic imagination.70 because of the very stylistic nature of the biography, it necessarily shows literary values in the presentation of a  lifeway and of its carrier. these kinds of writings differ from scientific rendering of facts, due to the fact that (auto) biographies having lots of biographical data become a special journal, a work that presents life to the reader, the opinions and the worldview of the protagonist of the biography (both in case of a real self-written journal, and in case of journals having external authors). 3. another genre related to the former is the interview-volume consisting of edited conversations, many examples of this genre being available in hungarian literature. here we 21 public governance, administration and finances law review • 2. 2017 public administration and literature can mention the volume based on a  long series of conversations with the well-known lawyer, dr. györg y bárándy.71 in hungary, there is a  tradition to publish volumes of interviews and biography-like writings with the current prime minister, and these books are not merely scientifically elaborated studies, or collections of newspaper articles, but they want to affect emotions, too.72 4. in addition to interview volumes of prime ministers and ministers, as we have already mentioned, the world of secret services73 is constantly present in our broader literature with a  genre related to the aforementioned genres, that is fact-finding and investigative (essay) literature, because there is demand for such books. 5. the systemic features of the legal-administrative sphere, the universal misery and limitations of the system, can be very well presented by certain genres such as humoresques and pamphlets  –  which are particularly suited for criticizing the law and the lawyer, revealing their plight in a  moral sense, and, in all cases, this presentation is turned into sharp and ruthless criticism – of the society. mark twain’s pamphlet, running for governor (in fact, a short story) is an excellent example of a literary representation that reveals with meticulous accuracy the scandalous reality behind a  satirically exaggerated sloppy jumble, which on the one hand justifies the purpose of selfish means in legal procedures and on the other hand it laughs at its ineffectiveness. during the presentation of different forms of the death of law, the writer is in a  state of difficulty, as he presents a  problem the professional characteristics and legal delicacies of which are not or are hardly accessible to a significant part of his readers. in this case, the most obvious solution is to increase the malaise, pumping it into a giant balloon, and then make it spectacularly ridiculous. 6. we cannot forget about some of the transient or mixed genres either  –  that specifically deal with the subject of public administration. an example of this is the pamphlet-like writing, which essentially mixes the features of the scholarly studies and of the essays, among which the most well-known is c. northcote parkinson’s volume entitled parkinson’s law: the pursuit of progress,74 a  book that does not lack scientifically based arguments, is a  sharp criticism of the bureaucratised public administration, and having an ironic tone in its every sentence, becomes a  totally sarcastic review of public administration. according to parkinson’s calculations, based on mathematical formulas, there is a moderate increase in the number of officials on an average of 6% per year, regardless of the actual workload. that is, bureaucracy not only reproduces itself, but also expands and always has a decisive role to play in its continuous self-importance. 7. moreover, we cannot forget the joke as a  specific literary genre, as it is still a  flourishing area that produces new crops every day, to present law and especially to portray the scumbag lawyer/civil servant.75 in the narrower domain of public administration, the largest number of jokes is about police officers, this type of joke is likely to occur on a  daily basis in at least dozens of jokes in hungary.76 we also encounter books that bring together jokes, short humorous stories (anecdotes [adomák]) from several public areas. one of the most popular such volume is the book entitled mosolygó közigazgatás [smiley public administration] by józsef pogány published before world war ii. “where does the humour of dry formal life generally come from?”– pogány asks, then he answers: “first of all, from the degeneration of the so-called 22 ádám rixer public governance, administration and finances law review • vol. 2. no. 2. bureaucracy, secondly, from the discrepancies between regulations and their implementation, that appear in the very moment when the statutory provisions face the individual. when private life is limited by regulations, people respond by mocking the situation. people would like to survive regulations, so either they try to ignore them or if this is not possible, they – while suffering from their absurdity – make jokes of them. but most of all, the humour of public administration, appears when simple-minded people, lacking any education for official life, gain the right of action (policemen, criers, coroners). it is no wonder, that while they do their work with serious obedience, in their actions or writings humour appears by itself.”77 in conclusion, besides acknowledging the primacy of the novel – we can conclude that there is hardly any literary genre that would not be suitable for displaying certain administrative topics; indeed, because of the characteristics of each genre, certain themes may appear more comfortably and sometimes even more appealing in frameworks dictated by certain representation forms. 4.1.3. the possibility of categorizing according to processed topics due to the diversity of possible topics, i would like to point out only examples in this section; i do not aspire to completeness nor do i want the categories that i describe to be homogeneous. this latter aspect also means that works in a  certain category are in many cases matched to successive categories; some novels would stand in almost all categories… it can be seen that authors and writers of different nations often run along welldefined themes while creating their works. the significance of historical, geographical, cultural and other determinations cannot be overestimated. obviously, in the works of heinrich böll, many of the moral and thus legal conflicts of german society after world war ii appear, and consequently, many aspects of the problematics “i did it for it was an order”, emerge. in case of böll, the great value of the literary gown is that he illustrates not only the peculiarities of defence administration by presenting in an objective manner without any emotions, banal cases like the stealing of butter by mess officers,78 or more serious cases of war crimes, but he also outlines the circumstances, motivations and other legally relevant facts that should otherwise be explored in any case. “oh god, i have often wondered what a terrible power must it be the force that can deprive millions and millions of their will, and can force them to face death – even if they are cowards or frightened – as we have done it in that night.”79 if we were to find out on the basis of our literary works what areas and aspects of the hungarian public administration were in the focus in our post-regime society – assuming that fiction is the imprint of what is really important in the given era – the outlines of some areas could be well perceived. obviously, the privatization or the appearance of the banking world were among the most important topics. these topics, which can be treated as important elements of economic and political transition, have provided many administrative contexts that appear in reference works sometimes with a  documentary character. gábor lenkei’s novel entitled veg yünk bankot! [let’s buy a  bank!],80 the main character of which is péter ovács, a young lawyer, presents the tragicomedy of privatization in 23 public governance, administration and finances law review • 2. 2017 public administration and literature the 1990s in hungary. in the story, the state-owned bank financed its own sale, and ovács with his formerly fired friend from the bank received the cash for the disbursement from the bank. the semblance of legality is maintained all over the story, so the ending of the novel is not at all suspenseful. however, in p. g. woodehouse’s style, the author puts a  curved mirror in front of all the actors of the process: the buyer (ovács who seems to be the successor to psmith), the bank itself and the state officials who let this transaction take place in such a form. during the privatization process, not only gábor lenkei was encouraged to write, but others like istván kerékg yártó also tried to reveal a segment of the life of hungary between 1989 and 1997. his book, vag yonregény  –  ipszilon történet [the book of riches  –  the y-story]81 is a  diary with personal reflections and sociological-political commentaries, the entries being written by two women, responding to each other’s thoughts. the story with surprising methods, however, responds to the state of the public at that time, most of the journal entries correspond to real events, so the novel becomes a picture of the society. of course, the relationship between public administration and fiction can be explored not only according to the particular area of administration, but also taking as a  basis the characteristics of public servants. the applier of the ruthless law reverts to being a  human through literary means, and will become a  sentient creature for whom it is difficult to express the feelings and desires otherwise important for him. in the significant part of these works it is not revealed (because it is not particularly important for the message),82 whether the public servants, the clerks or the officials have any legal studies or they act on birth right, or based on a diploma obtained after graduating a  simple course. not only do we experience in practice that relationships, habit and skills often blur for a certain person the conditions otherwise necessary to fill a particular job; in literature, these details appear to be of even lesser importance because they are not so relevant for the transmission of the message. in the hungarian literature we see that earlier, the actors of the local and regional public administration dominated the market. this is well illustrated by books like a  falu jeg yzője [the village notary] by józsef eötvös or eg y falusi nótáriusnak budai utazása 83 [the village notary’s journey to buda] by józsef gvadányi. the village notary is the most famous novel of józsef eötvös being the first really important intent to give a cross section of the entire society. the novel sets objectives similar to those of balzac’s work.84 in the novel, we get acquainted with a  hungarian county in the reform era with its whole staff and poor people, political struggles and everyday life together with the typical forms and locations of county life. macskaházy who is the lawyer of the sub-prefect’s wife, helps her steal the patent of nobility of tengelyi jónás, the village notary, together with some materials and documents uncomfortable for the lady, thus stopping the clerk from running at the local elections.85 jókai’s work, entitled a  régi jó táblabírák [the good old county judges] deals with a topic related to local-territorial administration.86 in his work he raises questions as whether public interest may be subject to private ownership; or more precisely: can the hungry, floodprone mass be satisfied from the provisions storehouse of the landlord? the basic question is the same in zsigmond móricz’s novel entitled rokonok [relatives]. in the last great móricz novel, the hero, istván kopjáss, is a  young member of 24 ádám rixer public governance, administration and finances law review • vol. 2. no. 2. the gentry who is superior to the average and aims high, using his talent. as a  simple cultural consultant, he still has great plans and dreams, but as soon as he becomes the prosecutor of zsarátnok (a small hungarian town), he soon begins to deny his principles, and is absorbed by the world of the panamas, and he only cares about his own career. by the time he finds out the cruel truth, there is no moral ground for him to mend the situation and he commits suicide… the relatives illustrates that those who make a series of compromises will lose their most precious features and will be just like the born villains. the latest hungarian literature – compared to the above quoted works – is attracted mainly to the institutions and actors of the central administration. what exactly is in the background of this attraction, cannot be exactly known, although it may be suspected that nowadays the everyday life of a ministry is even more accessible for the writers. among the reasons we may include the fact that the literary elite is also in contact with representatives of this sphere, for example, when participating on official dinners, receptions or other social events. lászló andrás in his novel87 entitled eg y medvekutató feljeg yzései [notes of a  bear researcher] presents with means of literary parody the start of a  career in the ministry. zsolt koppány nag y’s novel entitled nem kell vala megvénülnöd 2.0 [you shouldn’t have grown old 2.0] creates a  grotesque world with vitrioliously88 humorous and vigorous precision, a  world that is very similar to our present. jános fényező nag yjuhász, a  civil servant growing old and hungry for love, lives his everyday life in the department for salt and other brining materials that is mugg y with intrigues. in the negative utopia of zsolt koppány nag y, the older civil servants are liquidated, so the protagonist can do nothing but flee and think about his life… counter to the work of lászló andrás (in which we meet the hero at the beginning of his career) nag y presents the emotional, psychological and physical tribulations of leaving office for good. the ministry and the life of a  ministerial employee  –  being an ideal subject of a  novel  –  are recalled in other places, too: the above mentioned verse novel written by térey takes the reader into this world. additionally, one of the most commonly used legal-administrative roles in a  literary work is that of the employee dealing with law enforcement  –  sometimes called a  judge, sometimes having another function (e.g. a  civil servant deciding on neighbouring issues, etc.): as the notion of a  county judge for instance is not valid any more, it should be replaced under the present conditions with another role having an essentially administrative character. a  judge sometimes is an oracle, a  real hero, but sometimes a  person having surprisingly human features: “who was the one who could administer public affairs with wisdom and honour  –  but little money? the good old county judges. who excelled in theolog y, science and morality? the good old county judges.”89 25 public governance, administration and finances law review • 2. 2017 public administration and literature references 1 tamás nag y, jog, irodalom, intertextualitás [law, literature, intertextuality], 39, in péter takács (ed.), ratio legis  –  ratio iuris. ünnepi tanulmányok tamás andrás tiszteletére 70. születésnapja alkalmából [ratio legis  –  ratio iuris. festive studies in honour of andrás tamás on his 70th birthday] (budapest, szent istván társulat, 2011). 2 that is, if we approach from the perspective of literature, either the legal-administrative theme (issue of law, codification problem, etc.) appears directly in fiction, or the legal language used in a  literary oeuvre becomes the subject of the research. as a third possibility: the indirect effect of legal texts on the process of literary creation might become demonstrable. from the point of view of law (science of law), the question arises: what was the role played by the literary works of the age, by the political, social criticism of the particular era, etc. and by some quasi-literary works, for example, the bible, in the formation of legal texts, and that of language use, new terminologies, and so on. 3 tibor kalas, andrás torma, közigazgatási jog i. mag yar közigazgatási jog. általános rész [administrative law i. hungarian administrative law. general part], 65 (miskolc, virtuóz kiadó, 2007). 4 andrás tamás, közigazgatási jogtudomány [the science of administrative law], 67–68, in marianna fazekas (ed.), a  közigazgatás tudományos vizsgálata eg ykor és  ma. 80 éve jött létre a  budapesti jogi karon a  mag yar közigazgatástudományi intézet [a scientific examination of public administration once and today. the hungarian institute for public administration was established at the faculty of law in budapest 80 years ago] (budapest, gondolat kiadó, 2011). 5 andrás sajó, társadalmi-jogi változás [social and legal change], 7 (budapest, akadémiai kiadó, 1988). 6 see e.g.: györg y szerbhorváth, who’s the star of the show ? on the advantages and disadvantages of and the relationships between sociography, sociolog y and literature, 100–112, in intersections. east european journal of society and politics, vol. 1, no. 2 (2015). 7 for details see: istván h. szilág yi, jog és irodalom (habilitációs előadás) [law and literature (habilitation thesis)], 5, in iustum aequum salutare, vol. 6, no. 1 (2010); nag y, supra n. 2, at 38–47; and respectively anna kiss, henriett kiss, j. zoltán tóth (eds.), escapade or sin? 7 (budapest, complex kiadó, 2010). 8 szilág yi, supra n. 8, at 6. 9 empirical sociolog y, the actual sociography, came into being at the beginning of the 20th century, its current mission being the description and characterization of all conditions and status of a  community in a particular age using every possible tool and device. as bartha points out, “emphasis is on ‘every tool and device’, which opens a  wider spectrum to the practitioners of the genre compared to those available for scientific sociolog y. the arena was extending from statistics to economics, from geography to pedagog y, from politics to literature that was theoretically gaining its independence at the time when sociolog y was born, and it was used by our sociographers profoundly in the discussed period. paradoxically […] the complexity of sociolog y was the most elaborated in eastern and central europe”. ákos bartha, szaktudomány vag y szépirodalom? szociográfia a horthy-korszakban [science or fiction? sociography in the horthy era], 54, in debreceni disputa: kulturális-közéleti folyóirat, vol. 14, no. 4 (2010). 10 szilág yi, supra n. 8, at 14–15. 11 rebecca a. hill, law and order in science fiction, 42–43, in voice of youth advocates, vol. 6, no. 4 (2015). 12 see for example: j. zoltán tóth, a „jog és irodalom” felhasználása az eg yetemi oktatásban [using “law and literature” in university education], 231, in balázs fekete, istván h. szilág yi, tamás nag y (eds.), iustitia mesél, tanulmányok a  jog és  irodalom köréből [iustitia, the storyteller: studies from law and literature] (budapest, szent istván társulat, 2013). 13 balázs fekete, a  jog mindenkié? a  jog emberképének belső feszültségeiről irodalmi hősök segítségével [does law belong to everybody? about the inner tensions of the conception of man as reflected in law through literary heroes], v. jog és  irodalom szimpózium [5th law and literature symphosium], 2014. május 15–16. előadások rezüméje. [15–16 may 2014. synthesis of the presentations], 8 (budapest, ppke ják, 2014). https://doi.org/10.17356/ieejsp.v1i2.113 https://doi.org/10.17356/ieejsp.v1i2.113 26 ádám rixer public governance, administration and finances law review • vol. 2. no. 2. 14 tamás nag y, jog és irodalom [law and literature], phd thesis, manuscript (szeged, szte ájk, 2006); and ádám rixer, jog és szépirodalom [law and fine literature], 165–194, in iustum aequum salutare, vol. 8, no. 2 (2012). 15 andrás jakab, a  mag yar jogi oktatás megújításához szükséges lépések  –  reformjavaslat összehasonlító áttekintésre alapozva [the steps required to renew the hungarian legal education  –  reform proposal based on a comparative overview], 201, in mag yar jog, vol. 57, no. 1 (2010). 16 béla pokol, a professzionális intézményrendszerek elmélete [the theory of professional institution systems], 218 (budapest, felsőoktatási koordinációs iroda, 1992). 17 jakab, supra n. 16, at 204. 18 see: ádám rixer, megjeg yzések jakab andrás jogi oktatásra vonatkozó reformjavaslatához [comments on andrás jakab’s reform proposal of legal education], 545–551, in mag yar jog, vol. 57, no. 9 (2010). 19 iwona sobis, michael s. de vries, restoring professionalism: what can public administration learn from social psycholog y? 95, in juraj nemec, b. guy peters (eds.), state and administration in a changing world (bratislava, nispacee, 2010). 20 ibid. 97. 21 ibid. 104–107. 22 ádám rixer, a  roma érdekek meg jelenítése a  jogalkotásban [roma interests in legislation], 178–182 (budapest, patrocinium, 2013). 23 zsolt péter, a  mag yar közszolgálati „etika és  integritás”, valamint az  „integritásmenedzsment” tréningek hatásvizsgálata [impact assessment of the hungarian public service trainings: “ethics and integrity” and “integrity management”], 150–166, in pro publico bono – mag yar közigazgatás, vol. 3, no. 1 (2015). 24 éva ancsel, etikai tanulmány a  tudásról és  a  nem-tudásról [ethical study on knowledge and nonknowledge], 47 (budapest, kossuth kiadó, 1986). 25 ibid. 26 marcell benedek, az olvasás művészete [the art of reading ], 7 (budapest, bibliotheca, 1957). 27 for more details see: istván h. szilág yi, jog  –  irodalom [law  –  literature], 94 (szeged, szte ájk összehasonlító jogi intézet, 2010). 28 in detail: richard h. weisberg, poethics and other strategies of law and literature (columbia university press, 1992). 29 see also balázs fekete, practice elements in the hungarian legal education system, 67–68, in acta juridica hungarica, vol. 51, no. 1 (2010). 30 the legal framework in hungary for the training in the domain of public administration, among others, are act cxcix of 2011 on civil servants and government decree no. 273/2012 (ix. 28.) on the continuous professional training of civil servants. 31 péter princzinger, lászló kisfaludy, a  „jó állam” alapköve: a  közszolgálati továbbképzés rendszere [the cornerstone of the “good state”: the system of public servants’ training ], 143, in pro publico bono – mag yar közigazgatás, vol. 3, no. 1 (2015). 32 benedek, supra n. 27, at 8–9. 33 brian a. ellison, teaching writing in public administration education, 25–31, in teaching public administration, vol. 30, no. 1 (2006). 34 miron mushkat, teaching case analysis to public managers in academic settings, 37–45, in teaching public administration, vol. 25, no. 1 (2001). 35 alistair mcculloch, seeking the holy grail? utopian novels as an aid to teaching and assessing the political analysis component of public administration courses, 73–78, in teaching public administration, vol. 21, no. 1 (1997). 36 in detail: ádám rixer, a mag yar nyelv és mag yar jogi műnyelv megújulása. vitaindító [the renewal of the hungarian language and of the hungarian legal language: keynote], 9–15, in glossa iuridica, vol. 1, no. 1 (2014). https://doi.org/10.1556/ajur.51.2010.1.4 https://doi.org/10.1177/014473940602600103 https://doi.org/10.1177/014473940102100104 https://doi.org/10.1177/014473949701700105 https://doi.org/10.1556/ajur.51.2010.1.4 https://doi.org/10.1177/014473940602600103 https://doi.org/10.1177/014473940102100104 https://doi.org/10.1177/014473949701700105 27 public governance, administration and finances law review • 2. 2017 public administration and literature 37 ferenc gyerg yák, lászló kiss, általános jogalkotási ismeretek. tankönyv a  köztisztviselők továbbképzéséhez [general concepts of legislation. a textbook for postgraduate courses of civil servants], 100 (budapest, kszszk kk, 2007). 38 gyerg yák, kiss, supra n. 38, at 105. 39 ibid. 102. 40 iván falus, elméleti alapok a  tanítás tanulásához [theoretical basis for learning to teach], 10 (budapest, nemzeti tankönyvkiadó, 1998). 41 ibid. 14–15. 42 ernő fináczy, az  újkori nevelés története [history of modern education], 123 (budapest, királyi mag yar eg yetemi nyomda, 1927). 43 j.-j. rousseau, emil, avag y a nevelésről [emile, or on education], 171 (budapest, tankönyvkiadó, 1957). 44 ibid. 177. 45 szilág yi, supra n. 28, at 151–152. 46 see e.g.: zsolt nag y, a  jogi oktatás fejlődése és  aktuális kérdései [the development and current issues of legal education], 115 (szeged, pólay elemér alapítvány, 2007). 47 honoré de balzac, hivatalnokok [the government clerks] (budapest, fapadoskonyv.hu, 2011). 48 as life became more complex, the subtle details, connections, had to be brought to the surface, and this was the mission of legal practitioners. kálmán kulcsár, jogszociológia [legal sociolog y], 197 (budapest, kulturtrade, 1997). 49 szilág yi, supra n. 8, at 5. 50 see: zoltán kulcsár-szabó, olvasás/politika: a  „paul de man-üg y [reading/politics: the paul de man case], 22–30, in tiszatáj, vol. 68, no. 8 (2005). 51 anna kiss, bűnbe esett irodalmi hősök. jog és irodalom [literary heroes fallen in sin. law and literature], 8, in üg yvédvilág, vol. 17, no. 1 (2009), http://ug yvedvilag.hu/laparchivum.php?ref=143 (accessed 1 january 2014). 52 szilág yi, supra n. 28, at 149–150. 53 ibid. 177. 54 i have already made a proposal referring to this categorization: rixer, supra n. 15, at 165–194. 55 novalis, heinrich von ofterdingen, 193–194 (budapest, helikon, 1985). 56 in 1974 péter esterházy obtained a  university diploma in mathematics (the title of his ba thesis was optimum binary search trees). as a  university graduate he worked in the it institute of the kohó és gépipari minisztérium until 1978. 57 esterházy became famous due to his short novel entitled novel of production (1979), especially as a result of his innovative language solutions. 58 szilág yi, supra n. 8, at 8. 59 géza ottlik, maugham salvatore c. novellája [maugham’s short story: salvatore], 98, in áron tóbiás (ed.), tarts nyugatnak! [keep west!] (budapest, arión kiadó, 2007). 60 szilág yi, supra n. 8, at 11. 61 for details see parts 3, 4 and 6 of subchapter 3.1. 62 jános térey, protokoll. regény versekben [protocol. a verse novel] (budapest, magvető, 2010). 63 józsef keresztesi, beatrix visy, két bírálat egy könyvről [two reviews of a book], www.holmi.org/2011/06/ keresztesi-jozsef-visy-beatrix-ket-biralat-egy-konyvrol-terey-janos-protokoll-regeny-versekben (accessed 20 july 2015). 64 kálmán mikszáth, eg y rendőrzseni [a genius policeman], 184–188, in kálmán mikszáth, novellák, karcolatok [short stories, sketches] (budapest, kortárs könyvkiadó, 2011). e-book; and krisztina m. lamos, késésben [being late] in a gregorina-kanyar. moral history pályázat leg jobb írásai. [the gregorina twist. the best works of moral history competition] (budapest, xantusz könyv kft., 2012). http://ugyvedvilag.hu/laparchivum.php?ref=143 http://www.holmi.org/2011/06/keresztesi-jozsef-visy-beatrix-ket-biralat-egy-konyvrol-terey-janos-protokoll-regeny-versekben (accessed 20 july 2015) http://www.holmi.org/2011/06/keresztesi-jozsef-visy-beatrix-ket-biralat-egy-konyvrol-terey-janos-protokoll-regeny-versekben (accessed 20 july 2015) http://www.holmi.org/2011/06/keresztesi-jozsef-visy-beatrix-ket-biralat-egy-konyvrol-terey-janos-protokoll-regeny-versekben (accessed 20 july 2015) 28 ádám rixer public governance, administration and finances law review • vol. 2. no. 2. 65 one of the most well-known hungarian poems – the poem’s aim is to present the willingness of people to start lawsuits, and the shrewdness of judges – is the fülemile [the nightingale], written by jános arany in 1854, outlining a fictitious lawsuit in which the neighbours initiate a lawsuit, the object of which is a twoby-four case: one of them had planted a tree and some of its branches are above the courtyard of the other, the question being to which of them does the whistle of the bird sitting on the branch belong. 66 endre frady: köz (közérdekű közhelyek) [cliches] (budapest, manuscript, 2014). the man is searching for its place in the pack in the meanwhile will he lose his stamp? is the community a pack if persons lack any sense of the pack? will the pack say to the person what to do? without taking its right to do? is the pack for all? or all for the pack? abc: language or shop? and what is the role of the pack? if i write about it will i be the sad sack? thanks pack, but no thanks. 67 pál réz (ed.), radnóti miklós összes versei és versfordításai [miklós radnóti’s poems and poem translations], 296 (budapest, nag y klasszikusok, szépirodalmi könyvkiadó, 1987). 68 benedek, supra n. 27, at 248. 69 richard sherwin, intersections of law and culture. a cross-disciplinary conference hosted by the department of comparative literary and cultural studies. (franklin college switzerland, lugano, october 2, 2009). 70 benedek, supra n. 27, at 250. 71 n. j. kandinszky, attila schmidt, dr., dr. bárándy györg y üg yvéd taláros történetei [talaric stories by dr. györg y bárándy] (budapest, pult kft., 2006). 72 béla ujváry (ed.), hétről-hétre a miniszterelnökkel: gyurcsány ferenc [from week to week with the prime minister: gyurcsány ferenc] (budapest, dela könyvkiadó kft., 2006); and igor janke, hajrá mag yarok! – az orbán viktor-sztori eg y leng yel újságíró szemével [go for it hungarians: the victor orbán story through the lenses of a polish journalist] (budapest, rézbong kiadó, 2013). 73 see for instance: péter kende dr., titkos mag yar szolgálatok [secret hungarian services] (budapest, hibiszkusz könyvkiadó kft., 2004). 74 c. northcote parkinson, parkinson törvénye vag y az érvényesülés iskolája [parkinson’s law: the pursuit of progress] (budapest, minerva, 1990). 75 see lawyer jokes. e.g.: csaba fenyvesi, a jog humora [the humour of law] (pécs, kódex kiadó, 2003). 76 see: péter föld s., nag yon rendőr viccek [the very best of police jokes] (budapest, edit & press bt., 1997). 77 józsef pogány, mosolygó közigazgatás [smiley public administration], 7 (budapest, mag yar távirati iroda, 1934). 78 heinrich böll, a hag yaték [legacy], 124 (budapest, magvető kiadó, 1984). 79 ibid. 154. 80 gábor lenkei, veg yünk bankot! [let’s buy a bank!] (budapest, kávé kiadó, 2002). 81 istván kerékg yártó, vag yonregény [the book of riches] (budapest, magvető, 2001). 82 no one is going to think about what kind of degree was requested for chervyakov – the main character of chekhov’s the death of a government clerk – to fill the position of a will executor. 83 count józsef gvadányi, eg y falusi nótáriusnak budai utazása… [the village notary’s journey to buda] (komárom and pozsony, 1787). 84 antal szerb, mag yar irodalomtörténet [hungarian history of literature], 326 (budapest, magvető könyvkiadó, 5th edition, 1972). 85 see: márton falusi, esszé a jó kormányzásról [essay on good governance], 55–74, in balázs fekete, istván h. szilág yi (eds.), iustitia modellt áll [a picture of iustitia] (budapest, szent istván társulat, 2011). 86 mór jókai, a régi jó táblabírák [the good old county judges] (szentendre, mercator stúdió, 2006). 29 public governance, administration and finances law review • 2. 2017 public administration and literature 87 lászló andrás, eg y medvekutató feljeg yzései [notes of a bear researcher] (budapest, nyitott könyvműhely kiadó kft., 2010). 88 zsolt koppány nag y, nem kell vala megvénülnöd 2.0. [you shouldn’t have grown old 2.0] (budapest, magvető, 2014). 89 jókai, supra n. 88, at 6. public governance, administration and finances law review �e assumptions of a new tax ordinance in poland leonard etel*, mariusz popławski** * prof. zw. dr hab. leonard etel is the rector of university of białystok, head of department of tax law, law faculty, university of białystok; president of general taxation law codi�cation committee. (e-mail: leonard.etel@wp.pl) ** dr hab. mariusz popławski is associate professor of the department of tax law, law faculty, university of białystok, poland; researcher at the center of czech and international tax law at masaryk university, faculty of law, brno, czech republic; member of general taxation law codi�cation committee. (e-mail: mpoplawski@poczta.onet.pl) abstract: in 2014, the general tax law codi�cation committee (gtlcc), responsible for drafting a new tax ordinance, was established in poland. �is paper intends to present, in two parts, the expectations of this new tax ordinance, which has been prepared by the gtlcc. �e �rst details how the protection of taxpayers’ rights will be ful�lled, and the second focuses on the legal constructs used to increase the e�ciency and e�cacy of the tax ordinance. keywords: tax; tax law; tax ordinance; general tax law; codi�cation of tax law; polish tax law 1. introduction �e current tax ordinance, introduced in 1998, has been amended several dozen times, and yet despite this, fails to meet today’s needs and standards. �is was the main driving factor in establishing the general tax law codi�cation committee (gtlcc),1 which was formed by the council of ministers at the end of 2014. �e aim of the committee was to prepare for the development of a new tax ordinance, and (within 2 years from the day of adopting the assumption by council of ministers) to draft a bill for a new general tax act in conjunction with acts regarding its implementation. �e aim of this paper2 is to present the most important elements of the revised tax ordinance objectives3, and will be preceded by a short description of the current tax ordinance. additionally, several reasons will be presented explaining the necessity of this new tax ordinance in being introduced; primarily that these regulations will ful�ll two fundamental objectives. �e �rst is to protect taxpayers’ rights. �is will be accomplished primarily through the mitigation of excessive rigor of the tax ordinance with regard to taxpayers. it is strongly recommended that legal mechanisms protecting taxpayers’ positions in their contact with tax administration should be introduced in the new act. regulations contained therein should be based on the presumption that a taxpayer is a reliable person who does not consciously commit tax law violations. �e second main purpose of the new tax ordinance is an increase 10.53116/pgaflr.2016.1.2 https://doi.org/10.53116/pgaflr.2016.1.2 in the e�ciency and e�cacy of the tax obligation’s ful�llment. tax laws, including tax ordinances, should serve for the collection of tax. greater e�ciency of tax authorities, however, cannot involve the infringement of taxpayers’ rights. 2. outlook of the tax ordinance of 1997 �e currently binding tax ordinance came into e�ect on january 1st 1998. �is act covers institutions of tax law which are common for all taxes that are in force in poland. regulations included in this tax ordinance can be divided into several groups. �e �rst is composed of de�ning catch-all provisions. certain concepts used by the legislator in tax statutes are not concurrently explained therein. however, they have been de�ned in the tax ordinance and may be used, to such an extent, as additional support. �e second includes substantive law institutions that certain obligations from, burdening taxpayers most of all. such an obligation, for example, is the need to pay default interest. �is obligation supplements a primary duty, which is tax payment in due time. within this framework, regulations imposing obligations on other subjects of tax law – third parties, legal successors, heirs, tax remitters, and tax collectors should also be indicated. �e third part includes institutions granting speci�ed rights connected with the execution of liabilities they are burdened with. �ey concern both a taxpayer’s inter alia, the right to recover excess payment or the right to obtain postponement of maturity, but also a tax authority (security of tax obligations execution). �e fourth part is procedural regulations–that is actions which are undertaken inter alia, from the moment tax proceedings are initiated, to the issue and service of tax decisions. 3. �e reasons to introduce a new tax ordinance �ere are approximately seven reasons why the currently binding tax ordinance should be replaced rather than amended. to begin with, there is need to create in the ordinance such mechanisms that would assure a balance between both the public and taxpayers’ interests. justi�able claims to increase the protection of a taxpayer’s position in relation to tax service are commonly postulated. such a delicate matter as tax must be solved not only with due respect paid to taxpayers’ rights but also the state’s interest, i.e., the organization �nanced by all taxpayers, a fact which is frequently forgotten. �e currently binding tax ordinance lacks institutional characteristics of a mature codi�cation of tax law’s general part. �e leading one among them is the need to write down the principles of general tax law. �eir catalogue will contribute to a better understanding and application of tax provisions contained not only in the tax ordinance. secondly, there is an urgent need to establish taxpayers’ rights and duties in the form of a catalogue, included in one legal act of statutory power. �is will improve the relations between taxpayers and tax authorities, which are negatively perceived by society. �e new tax ordinance must embrace an enormous amount of the existing case-law of administrative courts on tax matters. its impact, therefore, on the application of law is substantial. however, not all potential doubts could be successfully dispelled this way, which is why a new law is necessary. �irdly, due to numerous amendments, meaning and understanding of some solutions has changed over time, which can hamper the application of this act. it is now no longer su�cient to understand a legal text and rules of legal interpretation, complemented by the knowledge of judicial judgments, to interpret tax ordinance. it is absolutely necessary to know the history of the multiple changes thereto, and to be knowledgeable of what unexpected outcomes they have sometimes resulted in. additionally, currently binding tax ordinance lacks institutions existing in most modern acts of this type. an example is of the clause against tax evasion, or regulations on soft forms of tax disputes’ settlements not only within tax proceedings (mediations and agreements). moreover, there is a need for greater and more frequent use of electronic communication to contact taxpayers. �is issue should be comprehensively and systematically regulated, which is not possible in the course of continuous amendments of the existing provisions. furthermore, due to poland’s accession to the eu, development of technology – as well as phenomena and processes that are subject to tax law – resulted in the objective expiry of solutions adopted in the tax ordinance several years ago. �e legislator attempted to prevent this by implementing successive amendments thereto, sometimes quite extensively, but such a continually amended ordinance has lost its original structure, which itself has not been free of defects. it has become clear now that the possibilities of improving and updating the tax ordinance in the course of further amendments has been exhausted. finally, it is necessary to harmonize the provisions of a new tax ordinance with other tax law provisions and regulations beyond this area. it is indispensable to clearly and precisely establish the relation of the ordinance to the provisions on, among others, �scal inspection, regulations on administrative execution, the code of administrative procedure, or the act on freedom of economic activity.   4. �e protection of taxpayers’ rights 4.1 the principles of tax law since there is non-equivalence between tax debtors and creditors, there is a need to establish in the new tax ordinance provisions assuring the protection of taxpayers’ rights, as they are a weaker party to the tax law relation than a tax authority. in proposing the introduction of a catalogue of tax law principles to the new tax ordinance, it should be restricted to norms determining the application of legal regulations within the scope of tax law. regulations on tax lawmaking are, and should be left, beyond the scope of tax law principles codi�ed in the provisions of general tax law. �e reason being is that the issues of lawmaking are regulated in the constitution of 1997, so there is no need to repeat the norms thereof in the new tax ordinance. additionally, the matter of general tax law justi�es such a scope of tax law principles. if the tax ordinance does not regulate the process of lawmaking, there are no grounds to include fundamental lawmaking principles within it. tax law principles should therefore exclusively embrace the rules of applicable tax law; fundamental norms determining the relationship between a tax authority and an entity subject to taxation. �e justi�cation for creation of a catalogue for this branch of legal principles, that would be uniform and common for both substantive and procedural tax law, also justify the codi�cation of taxpayers’ rights and duties. 4.2 taxpayers’ rights and duties in order to improve potentially faulty, or even oppressive, operations of tax authorities, it is necessary to articulate to taxpayers their rights, to hopefully eliminate any knowledge disparities. such citizen legal protections are reasonable due to the existence of a catalogue of recognized values, and when one considers contemporary standards of the relationship between citizens and their state authorities, which are based on ancillary roles of the state administration towards society. �e state should use the powers it is entitled to in a manner assuring not only the ful�llment of its set objectives, but also respecting the interests of entities incurring the burden of its functioning (taxpayers). 4.3 new soft forms of tax authorities’ operation �e new tax ordinance act will be provided with the following new forms of tax authorities’ operation: taxpayer’s guide and support; consultation procedures; agreements between taxpayers and tax authorities; tax mediation; and a program of correct settlement based on cooperation. tax authorities are appointed to facilitate correct ful�llment of the duty to provide state authority with taxes. in the new tax ordinance, a taxpayer will be entitled to acquire, and be able to rely on, o�cial information from many sources– deriving protective e�ects from the fact of applying it. within general consultation procedures, an applicant and tax authority shall make arrangements on the past or future settlements of the taxpayer. �is procedure could be done at the taxpayer’s request within the scope of the evaluation of tax consequences of complicated transactions carrying a high tax risk for economic entities, estimation of the taxable object’s value, and evaluation of the transaction object’s character, etc. within the procedure, factual arrangements shall be made, and evidentiary proceedings will be carried out. a decision issued in the procedure will be binding for both the tax authority and taxpayer, and will furthermore be subject to suability. �e use of the consultation procedure will, in principle, be payable. agreements between tax authorities and taxpayers will be concluded in case of doubts as to the matter’s factual state. �is may be di�cult to eliminate, on determination of the value of a taxable object, or transaction, on validity of the application of reliefs in tax payment. �e agreements will be documented by records containing, among others, the scope and content of the arrangements made. a tax authority will be required to re�ect on the arrangements in tax inspection records, or tax decision. �e subject of an agreement will not only cover a case settlement, but will also detail any issues that arise during tax proceedings, or tax inspection, that do not decide on the settlement (e.g. the scope of evidentiary proceedings that should be carried out). �e amount of the tax obligation cannot be directly subject to the agreements. tax mediation shall be the procedure used to solve disputes with the participation of a third party – a mediator. it will be introduced as a procedural mechanism facilitating communication between a tax authority and taxpayer. �is procedure will constitute particular proceedings initiated upon the request of one of the parties of a dispute (a taxpayer, or tax authority) upon agreement of the other party. �is may occur at any stage during the course of the proceedings. �e procedure will be constructed with respect for basic rules on mediation, among others: voluntariness, impartiality, neutrality of a mediator, and con�dentiality. �e parties thereto will select a mediator freely and jointly from the list kept by the minister of finance. mediation costs will be borne by the state or municipality. �e purpose of the program will be to assure the observance of tax law through establishing close relations between tax authorities and taxpayers. �e program will be addressed to strategic entities for the state budget. its purpose is re�ected in the slogan, ‘transparency in return for certainty’. ‘transparency’, because a taxpayer who is a participant of the program reveals any substantive tax issues that are potentially disputable between him/her and an authority. ‘certainty’, because a tax authority responds to questions asked by a taxpayer without delay (after consulting a taxpayer him or herself and in the spirit of agreement and understanding for business). �e program of correct settlement based on cooperation shall be maximally deformalized, and based on a personal obligation of decision-makers in a business entity and tax authority. participation in the program will be not obligatory. conditions of the participation therein shall be well-functioning internal procedures of settlements in an entrepreneur’s business (‘tax governance’), veri�ed by an audit before concluding an agreement with the taxpayer. 4.4 advance tax rulings tax law is a complex �eld of law. �is is, among other things, due to: the existence of di�erent taxes and forms of taxation; their frequent changes; and binding eu and international law regulations, which all contribute to increasing complexity of law and uncertainty regarding its content and, in consequence, its interpretation and application. it is a source of potential con�ict between the interests of taxpayers, and the tax administration which represents the state’s �scal interests. �at is why, advance tax rulings (atrs) of general and individual character, should be treated as a signi�cant extension of the scope of protection of taxpayers’ economic rights and freedoms. additionally, atrs are an important and stabilizing element of solving disputes between a taxpayer and tax authority. atrs are one of the most vital guarantees protecting taxpayers’ subjective rights. undeniably, on the basis of these rulings, a taxpayer acquires knowledge within the scope of rules which, together with tax law provisions, co-create a potential legal situation of each addressee of tax law. �ese entities develop their sense of legal certainty and security not only on the basis of tax acts, but also on the basis of application of tax law by tax administration. within the scope of the ful�llment of fundamental objectives of the new tax ordinance, and the enhancement of guarantees resulting from binding rulings of tax law provisions, two aims should be achieved. first, we should strengthen the importance of general atrs. �us, there would be primacy of general rulings over individual ones. individual rulings would be issued when general ones do not function in a given factual state; a possibility of quoting general rulings in an equivalent factual state. at present, a considerable number of individual rulings in�uences a lack of transparency in understanding tax law, and causes doubts in its application. �e adopted solution will be to assure the elimination of divergent interpretations referring to the same factual state, and the need for multiple applications for the issue of individual rulings in the same factual state. �e adopted solutions regarding solely general interpretations should introduce a possibility of asking legal questions by an authority authorized to issue such rulings to the supreme administrative court. second, there should be a centralization of the process of issuing atrs. �e introduction of uniform principles within this scope, with regard to the entirety of tax law provisions’ rulings, regardless if a particular taxpayer constitutes income of the state budget, or local self-government units. it results from the need to undertake actions leading to the extension of the scope of services provided for the bene�t of taxpayers and quality improvement. a modern, e�cient, and national point of uniform tax information for taxpayers and tax administration employees should be created within this scope. �is will guarantee uniform procedures and standards within the scope of issuing individual atrs. 4.5 discretionary reliefs �e new tax ordinance will prefer forms of support not resulting in failure to pay tax but allowing late, yet still e�ective, ful�llment of a tax obligation. �e catalogue of applied discretionary reliefs shall be extended by the introduction of the possibility of a tax remission, or its part, in order to avoid the occurrence of tax arrears for a taxpayer, and is a condition of applying the relief. on the other hand, reliefs will be applied according to the principle of balance between public and taxpayers’ interests using soft forms of arranging matters. in the case of tax-constituting municipal revenue, the application of reliefs to pay tax should be decided solely by municipal tax authorities. 4.6 representation �is tax ordinance will also contain comprehensive regulation of powers of attorney, and proposes three distinguished categories: general, limited, and for ‘service of process.’ �e general power of attorney will apply to all participants of tax procedures. �e appointment of a general agent will eliminate any potential nuisance connected with the obligation to submit a power of attorney, or o�cially certi�ed transcript of a power of attorney to be attached to the �les of each tax case. �is will not only limit bureaucracy in tax authorities, but also simplify representation of the party by an agent. general powers of attorney will be gathered in the electronic database, entitled central register of general powers of attorney, and will be instantly available for all state and self-government tax authorities, as well as tax inspection bodies. limited agents will be authorized to act in the indicated tax case, or other indicated case within the jurisdiction of a tax authority, after submitting a power of attorney to the �les of the speci�c case. �e new tax ordinance will maintain the institution of an agent for service of process. �e appointment of such an agent in poland will be compulsory when a general, or limited attorney, has not been appointed, and communication with a participant of tax procedure may be hampered due to a change of place of residence (stay), or lack of place of residence (stay) in poland, or another eu member state. �e new tax ordinance will introduce the institution of a temporary limited agent instead of a representative of an absent person. �e prerequisite to appoint this type of agent shall only be for urgent cases, and a temporary agent will be appointed by a tax authority for an absent natural person. whereas for a legal person, or organizational unit without legal personality, a temporary agent shall be appointed if their bodies are not present, or if it is not possible to establish the address of their o�cial seat, the place of running a business activity, or the place of residence of persons authorized to represent their matters. such a temporary agent would be empowered until a court appoints a guardian. 4.7 limitation of tax obligations during works on limitation, it is particularly important to distinguish the limitation of the right to tax assessment, and the right to collect tax. in the proposed model, a tax authority has time, determined by the provisions of law, to assess tax understood as submitting a decision determining, or establishing in nature by a �rst instance tax authority. �us, it would be the period of time to question the correctness of tax settlements made by a taxpayer (e.g. in a submitted tax declaration), or issue a determining decision if a declaration is missing. moreover, this time limit would bind a tax authority within the scope of issuing a decision determining the amount of tax obligation if the act envisions such a manner of tax chargeability. during such a period of time, it should be possible to issue decisions aiming at recovery of dues the state is entitled to that have been wrongly remitted, or credited towards a taxpayer and which are subject to tax ordinance including, among others, the use of loss, or tax to be carried over, etc. in the case of a decision determining tax loss, one should support the solution according to which this decision could be issued during the period of limitation of the assessment of tax obligation during which a taxpayer settles the loss. �e second type of limitation, limitation of the right to tax collection, would be applied when tax obligation exists and its amount is known (it results, in principle, from a correctly submitted tax declaration, or declaration’s correction, or served decision). �is limitation would apply after the period lapse of the limitation of tax assessment. as far as the limitation of assessment is concerned, two periods of limitations should be introduced: three or �ve years, counted from the lapse of the term of payment, or tax obligation occurrence. a three-year-long period of the limitation of assessment would be applied with regard to tax settlements not connected to a business activity. a �ve-year-long period would refer to those tax settlements connected with a business activity. �us, a three-yearlong period of the limitation of assessment will cover taxpayers whose settlements, in principle, are of uncomplicated matters. �is mechanism will concern, among others, most taxpayers subject to a natural person’s income tax. and after the three-year lapse (not after �ve years as it is now), a large group of taxpayers will be exempt from the duty to keep records of documents regarding tax obligations. �is shall be the case of the new tax ordinance except in certain situations where the limitation of assessment will occur after a �ve-year lapse. speci�cally, the following cases should be covered by the �veyear-long period of the limitation of assessment: – tax connected with running a business activity, i.e. tax that requires keeping tax records pursuant to separate provisions (the current tax ordinance de�nes tax records as accounts, revenue and expense ledgers, and registers and records taxpayers, remitters, or collectors are obliged to keep pursuant to separate provisions). – income tax owed for the so-called revenue from undisclosed sources. – income tax owed for the sale of real estate. �e introduction of a �ve-year-long period of the limitation of assessment in the above mentioned cases is supported by a more complicated nature of these settlements, which entails the need of using a wider catalogue of evidence during proceedings, or a greater number of tax law institutions (e.g. estimation). �e introduction of a �ve-year-long period of the limitation of tax collection should be postulated, because the introduction of a shorter period does not seem justi�ed. if the obligation results from a submitted and correct tax declaration, or a �nal decision (possibly veri�ed by a binding court ruling), pursuant to the principle of tax fairness, it should be executed. �erefore, it should go without saying that if someone is obliged to pay the tax whose existence and amount are, in principle, correctly established, s/he should pay it. for this reason, the enforcement of tax owed is justi�ed over a longer time period. �e institution of a tax limitation should be feasible in nature. under this limitation of assessment, the possibility of an exclusion of the limitation should be regulated, whereas its suspension should occur solely for objective reasons. �is would be independent of a tax authority in events such as: taxpayer’s death; the need to obtain information necessary for taxation from another state; applying to a common court with a motion to establish the existence of a legal relation or right; suspension of proceedings due to the settlement of a representative case; as well as submission of a complaint to an administrative court. �e application of prerequisites for the suspension of limitation of assessment should not prolong the period of limitation of assessment by more than �ve years in total. under the limitation of collection, prerequisites of the suspension or interruption of its activities should be restricted as well. under the limitation of collection, the preservation of the following prerequisites of the suspension, or interruption of the activities of limitation should be postulated: division into installments; deferment of the deadline to submit a declaration, or payment; prolongation of the term of payment; voluntary or executive pledge; announcement of insolvency; or application of enforcement measures. �e new ordinance should prepare and introduce solutions which would allow a maximum period for the prolongation of the period of limitation of collection, due to the suspension or interruption of the course of activities of the limitation of collection. 4.8 excess payment it is necessary to introduce legislative solutions within the scope of cases for when tax is paid unduly by a taxpayer who did not bear the economic burden thereof. �e construction of some tax, particularly indirect, allows to transfer such burden upon a consumer of goods or services. legal solutions and mechanisms within the scope of excess payment should not lead to unjust requirements of a taxpayer. �erefore, the introduction of the mechanism allowing the acquirement of excess payment by taxpayers subject to indirect tax should be postulated, provided they bear the economic burden of the tax. changes within the scope of legal regulations on tax excess and return should also contain the following: – we should aim at the introduction of similar procedures for tax excess and return. however in the latter case, they will be applied if special provisions regulating the construction of the individual kind of return do not stipulate otherwise. – it is reasonable to simplify the procedure of claiming tax excess and return, on proceedings to con�rm overpayment initiated ex o�cio, or if a request should be introduced. a tax authority should, ex o�cio, in a simpli�ed procedure (if possible), among others without the need to initiate proceedings, con�rm overpayment each time it acknowledges its existence. – �e catalogue of cases where overpayment shall be returned without issuing a decision should be extended in instances, among others, when: overpayment results from a declaration, or the correction of a declaration is not questioned by an authority; when excess payment is a results of the motion of a taxpayer to con�rm overpayment that is fully accepted by an authority; or when excess payment is con�rmed ex o�cio. in the above-mentioned cases, a decision should be issued, but only when it is requested by the party. if an authority con�rms excess payment without a decision, it also should not be obliged to issue decisions on overpayment (e.g. in the matter of crediting overpayment towards tax arrears), unless the party applies for it. discontinuance of the issuing decisions mentioned above should be accompanied by the rule according to which a tax authority should inform the party about the settlement (e.g. crediting overpayment towards tax arrears), by means of electronic communication, or by a telephone. simultaneously, the information regarding con�rmed overpayment may also be delivered in this form. a vital supplement of the above-mentioned mechanism should be the solution according to which the settlement on interest (i.e. con�rmation of its existence, or lack thereof ), will be an element of the decision on overpayment. however, the subject of this settlement should not be the calculation of the amount of due interest, and it will not be necessary to initiate separate proceedings in the matter of interest. if an authority does not issue a decision to con�rm overpayment, and a taxpayer is entitled to interest, an authority transfers interest without issuing a decision thereon. nevertheless, each time a taxpayer should have the possibility of applying for granted interest which should be settled in the form of a decision, unless it is fully accepted. – determination of the relation between proceedings to con�rm overpayment and proceedings establishing the amount of tax obligation (e.g. with a statutory exclusion of the obligation to conduct recovery proceedings before the examination of a request to con�rm overpayment). – extension of cases where overpayment is returned together with interest. excess payment should be returned together with interest calculated from the payment date when it results from defective lawmaking (con�rmed by the judgment of the constitutional tribunal, or the court of justice of the european union), or the application of law. additionally, from the lapse of the term of overpayment, if it was not returned within this time, and a taxpayer did not contribute to the delay. a taxpayer should not incur negative consequences connected with defective operation of the state authority, both within law making and the application of law. an important supplement of the above-mentioned mechanisms should be the solution according to which the settlement on interest (i.e. con�rmation of its existence, or lack thereof ) will be an element of the decision on overpayment. – extension of the group of entities entitled to obtain excess payment by all entities covered by the tax law relation, among others remitters, collectors, legal successors, or third parties, including such problems as, for example, the loss of tax capital group status, the loss of law existence, legal capacity or capacity for legal actions, and/or insolvency. – a possibility to introduce the return of overpayment to entities indicated by a taxpayer. 4.9 electronic communication contact with a taxpayer through modern communication technologies should be further emphasized. �anks to this, proceedings’ dynamics will increase, while their costs will diminish. it is not economical to instigate tax proceedings when the cost of their pursuit, including tax authorities’ expenditures and costs of letter services, exceeds the in�icted amount of obligation. �e new tax ordinance should enshrine the concept of a simpli�ed legal environment, and the creation of facilities for taxpayers–including entrepreneurs. indicated legal mechanisms and instruments are necessary for the development of eadministration. �ey con�rm changes occurring in the approach of administration towards an individual. �ey also demonstrate a supportoriented attitude to individuals, and the need to provide them with more e�cient, and e�ective, contacts with administration. development of new it and communication technologies, including electronic communication, exerts a positive impact on digital society’s development. �is is particularly important within the rapid paced and progress-oriented context of the surrounding world. 4.10 complaints �e new tax ordinance will contain provisions on complaints. under the current legal status, the code of administrative procedure applies thereto, however preservation of this status is unsubstantiated. it disrupts regulative uniformity of tax procedures, and limits taxpayers – who are potentially interested in submitting a complaint or request – from getting acquainted with the provisions specifying a relevant course, or even being aware of their existence. �ese provisions were previously located in another act, but failure to adjust some of them to the speci�city of tax cases can result in their identi�cation and corrective potential to be unused. 5. increased e�ciency and e�cacy of tax obligation’s assessment and collection 5.1 increased efficiency of tax proceedings �e right of a party to challenge a decision should be made feasible. �e time limit to submit an appeal or complaint should be prolonged (up to thirty and fourteen days respectively). �is will allow better preparation for a party to formulate complaints against a decision or order and more precise preparation of motions for evidence. for the same reasons, the time limit to apply for the withdrawal of a �nal decision after the judgment of constitutional tribunal, or court of justice of the european union, should be prolonged from one to three months. one of the general principles of tax proceedings is of expeditious proceedings. inactivity of a tax authority, or protracted pursuit of proceedings, threatens citizen’s con�dence in state bodies. �erefore, it is reasonable to strengthen the position of a party to the proceedings through equipping it with e�ective legal measures for action in the situation of inactive, or protracted conduct, of a tax authority. �e economics of tax and judicial administrative proceedings justi�es the creation of a possibility of suspending proceedings in similar cases, or in closely related ones. to begin with, a dispute in the ‘representative’ matter should be settled, while other cases should be suspended. �is will allow a taxpayer to rationalize procedural costs and eliminate a risk of massive enforcement of decisions that may appear defective. tax authority should be authorized not to instigate and discontinue proceedings initiated ex o�cio if the expected amount of the obligation does not exceed a speci�ed numerical limit. �e new tax ordinance should follow the direction of standardization of motions in tax cases. provisions on disciplinary penalties require fundamental changes. �e codi�cation committee decided not to recommend for further works: renouncement from an appeal for the sake of a direct complaint to a court, and presentation of the case’s legal evaluation by an authority before issuing a decision. 5.2 tax authorities �e new act should be aimed at simpli�ed provisions concerning local jurisdiction, and would be more expansive than current applications of the same principle, which is binding in cases of all taxes collected by the authorities subordinate to the minister of finance. moreover, changes within the scope of jurisdiction should embrace principles concerning the so-called ossi�cation of jurisdiction which dictates that an authority involved at the moment of launching an inspection shall remain involved in all relevant issues connected with the subject of the case, both in tax and interlocutory proceedings (e.g. concerning security). �ere are almost 2500 self-government tax authorities in poland. due to this, their expectations and needs cannot be ignored while creating a new tax ordinance. �is is an issue of particular importance for tax authorities but also from the point of view of taxpayers. self-government taxes such as real estate, agricultural, or forest taxes should be simpli�ed due to their common nature. it is necessary to assume that all tax authorities should have similar powers as far as general tax law provisions are concerned. deviations from this principle (including, most of all, speci�city of tax assessed and collected by the corresponding category of tax authorities) will occur. nevertheless, they must be su�ciently justi�ed (the principle of adequacy). moreover, the issue of complementary regulation of the status of municipal tax authorities in the provisions of general tax law and structural system provisions is valuable. �ere is no legal act regulating structural, organizational, or functional matters of local self-government tax administration, except self-government appeal boards. in the long term, proposed actions are to improve self-government tax authorities’ operations, increase their e�ciency, and facilitate correct ful�llment of taxpayers’ obligations connected with the settlement of taxes and fees constituting self-government revenue. 5.3 tax inspection it is proposed to establish a uniform and integrated procedure of tax inspection in the new tax ordinance provisions for taxpayers who, in principle, ful�ll their duties, and introduce a separate regulation for more rigorous inspection procedures directed at �ghting common revenue o�ences. �e current procedure of tax inspection is, on the one hand, sometimes too burdensome for most taxpayers. conversely, it can be too ine�ective with regard to tax evaders. �erefore, it is important to diversify inspection procedures where the criteria of applying individual procedures should refer to the seriousness of irregularities, or the degree of harmfulness of committed revenue o�ences and the need to secure evidence promptly. �e procedure which refers to inspections aimed at �ghting tax fraud and revenue o�ences should be contained in a legal act separate from the tax ordinance (law on fiscal inspection) and connect the elements of current solutions of the tax ordinance, law on fiscal inspection and criminal procedure. �e legitimacy of the introduction of this procedure is con�rmed by a recently observed increase in tax o�ences, particularly within the scope of value-added tax scams. �ese o�ences are especially detrimental because they result, on the one hand, in billions of pln loss for the state treasury (threatening its �nancial security) and on the other, in immeasurable consequences for the principles of competence, as well as the danger of eliminating honest entrepreneurs from the market. it is purposeful to create a catalogue of cases where this procedure would be applied. it should be used, in particular, in the following cases: activities in organized crime, or organizations aiming at committing revenue o�ences; money laundry; issuing documents on activities that have not been performed, or intentional forgery of tax documents. 5.4 the clause against tax evasion �ere is a need to establish an anti-avoidance rule in new tax ordinance. �e application of this clause will both deprive taxpayers of the tax bene�ts they intend to obtain, or those bene�ts obtained due to undertaking arti�cial arrangements which lacked economic justi�cation, but were done for the purpose of obtaining tax bene�ts. financial sanctions are not envisaged. �e most vital form of the clause’s impact should be prevention. �e clause will embrace all state and self-government taxes except the value-added tax. one of the authorities entitled to apply this rule will be the minister of finance. taxpayers could request the issuance of a decision by their specially appointed consulting body independent of tax administration. 5.5 solidarity in tax law currently binding tax ordinance regulates the occurrence of joint/several obligations to a limited extent, particularly when it is necessary to issue and serve a decision thereto. tax procedures conducted by tax authorities are not su�ciently regulated in binding provisions within the context of solidarity but also, for example, in the self-calculation of tax. similar problems occur within the scope of the institution of reliefs to pay tax obligations when only some joint/several debtors apply for the relief. suitable changes connected with solidarity in tax law should be introduced to individual institutions regulated in the new tax ordinance. basic principles of solidarity in tax laws, however, should be somehow factored out of general provisions due to their universal character. �is solution is also supported by the heterogeneous character of joint and several liability in tax law which can be connected with the obligation of this nature, including those arising through the service of a decision. nevertheless, it may also be the liability for another person’s debt, therefore it may be the institution connected both with the stage when the tax law relation arises, and the assessment and performance of tax obligations. 5.6 default interest default interest is the consequence of an occurrence of tax arrears, and the obligation to assess it exists regardless of the cause(s) of occurrence and taxpayer’s fault within this scope. it should be required to pay interest without the notice of tax authorities, whereas payments towards tax arrears and default interest thereon should be proportionally credited. �e catalogue of cases of non-application of default interest with regard to the binding legal status should be extended by a new case. �is would then be connected with nonapplication of interest during the period of judicial administrative proceedings on checking legitimacy of a tax authority’s decision establishing, or determining, tax obligation that is pending for more than twelve months. moreover, the prerequisite of non-application of default interest when a tax authority did not verify the declaration containing mathematical errors, or apparent mistakes under examinations thereof during two years should be modi�ed. �e maintenance of a two-year-long period envisioned in the currently binding provision, when tax authorities use electronic tools for a declaration’s validation within the scope of arithmetic errors and apparent mistakes, cannot be justi�ed. �is period should be shortened to one year. �e instrument aimed at maximizing the level of voluntary ful�llment of tax obligations in the new act’s provisions should be the introduction of a lowered default interest rate for taxpayers wishing to correct irregularities in the original declaration and immediately settle tax arrears with the simultaneous indication of time limits during which it will be possible. 6. conclusion for two primary reasons, the new tax ordinance has a chance to be a positive change in the �eld of polish general tax law. first, it will introduce new institutions which currently do not exist in polish legislation, such as the introduction of tax law principles, and the catalogue of taxpayers’ rights and duties to the new tax ordinance. by introducing these legal solutions, a relationship will develop between tax debtors and creditors assuring necessary protection to the weaker subject. �e complaint procedure, which will be introduced in the new act, will become an important element in the system of protection for taxpayers’ rights. �e course of submitting complaints will be most suitable to report possible infringements of some rights (such as the right to polite and professional treatment by civil servants). among other things we can outline new soft forms of tax authorities’ operations. �e advantages of this are clear. �is will create the conditions to observe and apply tax law in a way that is simultaneously e�cient, e�ective, and appropriate. �is will favor cooperation between tax authorities and taxpayers and discourage disputes. another very essential elements of the new tax ordinance is the general antiavoidance rule. �is construct aims at setting a limit between tax planning and tax avoidance, sometimes referred to as aggressive tax planning. such a norm will establish the limits of a taxpayer’s right to minimize his or her tax obligations. second, it will improve some tax legal constructs, which were claimed to operate improperly. limitation stabilizes economic turnover through the restriction, or exclusion, of a possibility of redress. in tax law, limitation prevents either the assessment of tax obligation, or leads to its expiry. however, in the currently binding act, a consequence of several exceptions to the general rule is that its guaranteeing function is impaired. �e construction of new provisions on excess payment should be accompanied by endeavors to simplify the procedure leading to the transfer of excess payments to authorized entities, as well as eliminate currently existing shortcomings in the application of this institution. tax procedure must be modernized so that it may satisfy contemporary needs of taxpayers in a better way. nowadays, in many �elds of life and economy, procedures that are based on prompt and deformalized contact are developing. basic issues within the scope of electronic communication should be contained in the general provisions of the new tax ordinance. moreover, further provisions thereof will include special regulations connected with concrete institutions of tax law and reference to the issue of using modern it and communication technologies. references 1. formation of that entity are presented in council of ministers regulation of 29.10.2014 on the creation, organization and operation of general taxation law codi�cation committee (journal of laws of 2014, item 1471). 2. �is article was based on the assumptions presented in: leonard etel (ed.), tax ordinance directives on constituting a new regulation [ordynacja podatkowa. kierunkowe założenia nowej regulacji] (białystok temida 2, 2015). 3. �e assumptions of the new ordinance is published at: http://145.237.239.199/documents/764034/12688111/20150317_kierunk owe_zalozenia_ordynacji_podatkowej.pdf (acessed 6 october 2015) http://145.237.239.199/documents/764034/12688111/20150317_kierunkowe_zalozenia_ordynacji_podatkowej.pdf © 2021 the author public governance, administration and finances law review vol. 5. no. 2. (2020) • 17–31 . governments’ measures to govern the coronavirus crisis and the lessons learned saqer sulaiman*  * saqer sulaiman, university of public service, doctoral school of public administration science, e-mail: saqersul@yahoo .com, orcid: https://orcid .org/0000-0002-4866-7694 abstract: since its appearance in late 2019 in china, the coronavirus pandemic has posed a  real challenge to humanity and governments . no country was safe from the effects of the virus, whether from a  medical, economic, or social point of view . in the absence of international coordination, countries began to rely on their own capabilities to curb the pandemic and mitigate its negative effects . to achieve these goals, different strategies and measures have been adopted . despite the challenges governments faced, these measures definitely helped alleviate the severity of the epidemic and slowed its spread . these measures include, but are not limited to, lockdown, border restrictions, home quarantine, the imposition of wearing masks and social distancing . this crisis stresses the importance of a country’s financial, technical and human capabilities in governing crises . moreover, it revealed that the absence of international cooperation in managing international crises has dire consequences for the international community . keywords: coronavirus pandemic, covid-19, economic implication, governmental measures, crisis 1. introduction coronavirus first appeared “on december 31, 2019, when china reported to the world health organization (who) cases of pneumonia in wuhan, hubei province, china, caused by a  novel coronavirus, currently designated 2019-ncov” . (phelan et al ., 2020, p . 709) “the clinical spectrum of coronavirus infections ranges from mild to critically ill cases” . (yang et al ., 2020: 275) the behaviour of the virus was characterised by its rapid spread from one region to another, and its ease of transmission from one person to another, which makes the virus more severe and difficult to control . thus, the total number of patients has been on a continuous and steep rise since the outbreak of the pandemic . up to date (november 6, 2020), the total number of confirmed cases worldwide is 49,587,145; the total number of deaths is 1,246,985; the total number of those recovered is 35,208,404 .  (worldometer, 2020) the corona pandemic has affected all aspects of people’s lives, and its negative effects not only represented a health crisis, but also extended to the economic-social, educational and political aspects . there is no doubt that the coronavirus pandemic has affected the global economy significantly, as global trade rates have decreased as a result of the impact of the coronavirus pandemic on the economies of many developed countries like the usa, china, japan, germany, italy and thereby . global growth is projected at 4 .9% in 2020, 1 .9 percentage points below the april 2020 world economic outlook update . (international monetary fund, 2020, p . 1) along the same doi: 10.53116/pgaflr.2020.2.2 mailto:saqersul%40yahoo.com?subject= https://orcid.org/0000-0002-4866-7694 https://doi.org/10.53116/pgaflr.2020.2.2 18 saqer sulaiman public governance, administration and finances law review • vol. 5. no. 2.  vein, growth in the group of emerging market and developing economies is forecast at –3 .0% in 2020, 2 percentage points below the april 2020 weo1 forecast . growth among low-income developing countries is projected at –1 .0% in 2020, some 1 .4 percentage points below the april 2020 weo forecast 2020 . (ibid, p . 6) moreover, this epidemic has pushed more people to sink below the extreme poverty line . according to the world bank, “covid-19 could push 71  million people into extreme poverty in 2020 under the baseline scenario and 100 million under the downside scenario . as a result, the global extreme poverty rate would increase from 8 .23% in 2019 to 8 .82% under the baseline scenario or 9 .18% under the downside scenario” . (world bank, 2020, p . 1) education is no exception, the lockdowns and other measures have interrupted conventional education in most countries . students have had to depend more on their own resources to continue learning online . furthermore, schools, universities and teachers have had to adapt to new ways of delivering teaching, which they may not have been trained for before . spending on education is still one of the challenges for families and governments as “the public funds are directed towards health and social welfare . indeed, long-term public spending on education is at risk despite short-term stimulus packages in some countries” . (schleicher, 2020, p . 5) it is also equally important to mention that the coronavirus crisis has affected international student mobility . “the crisis has affected the continuity of learning and the delivery of course material, the safety and legal status of international students in their host countries, and students’ perception of the value of their degree” . (ibid, p . 9) school closures are also likely to affect the increase in the gender gap in education . it is important to mention that some estimates pointed out the relationship “between the pandemic and the existing gender gap in mena region in several areas including education, employment, social protection, care work, and gender-based violence” . (oecd, 2020, p . 3) to restrict the spread of the pandemic and mitigate its negative effects, countries have taken certain measures to protect their citizens and their economies . by reviewing the international reactions that accompanied the outbreak of this epidemic in the first weeks and months, one can distinguish different approaches implemented by governments . however, it is important to mention that some countries have been relatively successful in achieving this goal, while others stumble and incurred heavy human and economic losses . in this article, i will try to address this thorny topic and review the countries’ responses to the coronavirus pandemic, taking into account the challenges these countries face in their difficult task to mitigate the effects of this pandemic . i will also try to study the palestinian case and how the palestinian government has dealt with the effects of this pandemic that is still ravaging the world now . therefore, this article addresses four main questions: what are the strategies used to limit the spread of the pandemic and mitigate its impacts? what are the challenges faced by countries and governments in governing the coronavirus crisis? how was the crisis managed in palestine? what are the lessons learned from governing this crisis? 1 world economic outlook update. 19 public governance, administration and finances law review • 2. 2020 governments’ measures to govern the coronavirus crisis and the lessons learned 2. strategies used to limit the spread and effects of the pandemic there are two types of crises; the first type is the expected crises, where the government or organisation prepares plans and interventions in advance to face them in case they occur . the second type is the unforeseen and often confusing crises and has a profound effect on people and institutions . this type is characterised by being sudden and hazy due to the lack of prior information about it, which leads to a loss of control, especially at the beginning of the crisis . the main goal of crisis management is to control the adverse impact of crises and achieving desirable results . “there are four ways through which the organizations can deal with risks: avoidance, transfer, mitigation, and assumption” . (sulaiman, 2019b, p . 204) the severity of the crisis determines the level and speed of the response . nevertheless, the degree of severity of the crisis depends on the speed of its spread and the depth of its impact . coronavirus has had these two features, and this is among the reasons why the world health organization considered it a  pandemic . shortly before that, the world health organization had declared coronavirus disease 2019 a public health emergency of international concern . (sohrabi et al ., 2020, p . 4) to control the spread of the virus, countries closed their borders and took measures in the absence of any international coordination to collectively manage the pandemic . some of these countries succeeded in managing the crisis while others failed . nevertheless, it must be emphasised that the success or failure in managing the coronavirus crisis was uneven and relative, so it is not possible to talk about complete success or complete failure . crisis management methodologies depend on a  set of options that must be followed in order to reduce the effects of the pandemic . although the countries of the world were exposed to the same virus, there was a variation in the response and measures taken by governments around the world . nevertheless, one can summarise four main schools or approaches that appeared in managing and dealing with this exceptional circumstance that surprised the world . the first approach is confusion and indecision as we saw countries like the usa and the u .k . that received the crisis with hesitation and confusion in decisions . however, later they changed to an approach completely different from what was the case at the beginning of the crisis . the reactions of the people of these countries were a  mixture of frustration and loss of confidence in their governments and leaders . however, the second approach is helplessness and panic . people over the world observed countries declaring their internal helplessness and disappointment in their partners and allies who had abandoned them . the citizens of these countries were evident in their criticising of their allies’ regional political groupings such as the european union . as for the third approach, it relied mainly on closures and restrictions . some countries have adopted a  comprehensive closure policy, especially countries suffering from a  shortage of medical resources . this approach has been adopted in many arab countries, such as jordan and palestine . the fourth approach in dealing with the coronavirus crisis is entitled firmness and efficiency through a  policy of initiative and transparency where the precautionary measures were gradually developing according to the developments in the epidemiological situation . this approach was adopted by many european countries and some arab countries, such as saudi arabia and the united arab emirates . furthermore, 20 saqer sulaiman public governance, administration and finances law review • vol. 5. no. 2.  with the spread of the coronavirus in different countries of the world, the most prominent measures taken by countries were as follows: ƿ declare a state of emergency in the country . ƿ some countries imposed bans on the export of protective equipment and tools to ensure that their domestic needs are covered . ƿ many countries imposed travel restrictions on affected countries . ƿ some countries banned large gatherings, while only allowed gatherings in very limited numbers . ƿ closing schools, universities, sports clubs, restaurants, places of worship and other gathering places . online learning was also used in schools and universities . ƿ opening new hospital departments for covid-19, as well as establishing field hospitals to accommodate more people infected with the coronavirus . ƿ in many countries, hotels and public facilities were used for quarantine purposes . ƿ increasing the manufacture of medical equipment, especially masks, sterilisers and ventilators . ƿ educating people about the seriousness of the epidemiological situation and the virus and urging them to social distancing as an effective way to limit the spread of the virus . ƿ working from home becomes one of the popular methods in many companies and institutions . ƿ however, the following is a summary of the experiences of some countries to reduce the spread of the coronavirus pandemic and mitigate its negative impacts . 2.1 china the chinese experience in confronting the coronavirus is considered one of the experiences worth studying, especially as it is the first country in which the virus appeared . however, the chinese performed remarkably compared to other countries . since the beginning of the outbreak in wuhan province, china has begun its plan to confront the spread of the epidemic with a large-scale campaign aimed at isolating the entire region and placing it under quarantine, conducting large-scale coronavirus tests, and establishing new hospitals to treat and take care of infected people . china has used robots to provide services to people quarantined in hotels and quarantine centres . it has also used technolog y and smart applications to track down infected and suspected people . the quality of these measures and the speed of decision-making called many to praise the chinese experience, especially the world health organization, which considered the chinese experience in dealing with the pandemic a role model . nonetheless, china was criticised by a number of countries, led by the united states, for initially concealing the existence of the virus, and its statistics on the number of victims were in doubt . 21 public governance, administration and finances law review • 2. 2020 governments’ measures to govern the coronavirus crisis and the lessons learned 2.2 germany from the beginning, germany appears to be in an exceptional condition in response to the coronavirus epidemic outbreak . during the first few months, the number of people infected with coronavirus in germany was the lowest in europe compared to the number of infected cases . so far (november 6, 2020), the total number of people infected with coronavirus in germany has reached 641,362 . as for those who fully recovered: 273,500, while the total deaths reached 11,364 . (worldometer, 2020) without adopting a comprehensive closure strateg y, germany imposed some restrictions on all its lands to limit the spread of the epidemic, such as closing schools and cultural places, as well as preventing gatherings of more than a  specified number of people . what distinguishes the german experience is that it focused on intensifying the examination of the coronavirus in order to detect the largest possible number of infected persons . indeed, this strateg y has been effective in curbing the epidemic and flattening its curve . there is no doubt that the quality of health services and the availability of the basic requirements of the health system in germany were crucial to the ability of health authorities to manage the corona pandemic with minimal losses . besides, the country’s absorptive capacity has contributed to the implementation of social protection programs for the vulnerable groups and those affected by the pandemic . 2.3 the united arab emirates the governance of the coronavirus crisis in the uae is a  distinguished case, as the comparative advantages of the uae have been employed in curbing the coronavirus epidemic . according to the adopted strateg y, more emphasis was placed on the dynamics and effectiveness of government administration, which enabled the government to efficiently manage the crisis and take the necessary decisions urgently . it is also equally important to mention that the financial capabilities of the country were critical in managing the crisis and taking precautionary measures regardless of the financial cost . the uae strateg y to confront the epidemic is based on the following elements: ƿ it did not implement complete lockdown, but gradual steps to reduce the spread of the epidemic . ƿ for detecting cases, it established the largest modern laboratory outside china, to conduct tens of thousands of tests . ƿ harnessing technolog y in restricting the epidemic and managing the crisis such as the use of drones to sterilise cities and mobile pharmacy services to deliver medicines to homes . ƿ finally, one of the elements of the uae strateg y was to reduce the economic effects of the crisis on the business sector, as an economic support package was presented to banks and m&s enterprises operating in the uae in order to enhance their ability to deal with the negative economic impacts resulting from the coronavirus crisis . 22 saqer sulaiman public governance, administration and finances law review • vol. 5. no. 2.  3. the palestinian experience in governing the coronavirus crisis like other countries, palestine has not been spared from this virus and its health, economic and social repercussions . the first six cases of the new coronavirus epidemic appeared in palestine on march 5, 2020 . the virus was transmitted to them through a group of tourists who visited bethlehem from greece . like other countries, the rate of infection with the coronavirus is constantly increasing . according to the palestinian health ministry, since the beginning of the outbreak on march 5, 2020, the number of confirmed people infected with the coronavirus in palestine stands at 69,181 on november 6, 2020, while the recovered cases are 61,033 and those who deceased is 583 . since the emergence of the epidemic, the palestinian government responded quickly and strictly in order to limit the spread of the virus to protect the life of its people . a state of emergency was declared in palestine on march 5, and after several days, the borders and land crossings were closed . furthermore, a  set of measures have been applied including restricting people’s mobility, closing down cities and preventing movement between provinces . it also includes suspending official departments, government offices, companies and banks for specific periods . schools, universities, and kindergarten were closed . in fact, these institutions put more reliance on online learning . despite the measures taken by the palestinian government, “the number of infected people started to rise after the accelerated outbreak of the coronavirus in israel and the successive transmission of infected cases to the west bank” . (mas, 2020, p . 3) actually, israel became the main source for the spread of the virus in the west bank through palestinian workers . in general, the governmental measures to mitigate the effects of the pandemic were based on three tracks: health protection measures, social protection measures and measures to mitigate the economic effects of the pandemic . 3.1 health protection measures the response of the responsible authorities in the health sector, headed by the ministry of health, was characterised by the following : ƿ adhere to the instructions of the world health organization and the health protocol approved by it regarding the diagnosis, quarantine, treatment and case recovery . ƿ the diagnosis was carried out using devices and materials that were received from the world health organization and under its direct supervision and follow-up . according to the gazette of medical sciences, “laboratory investigation included genomic sequencing, rt-pcr, and serological methods (such as enzyme-linked immunoassay, elisa” . (shalalfa et al ., 2020, p . 15) . as for quarantine for patients and suspects, it was previously done in hotels and certain centres equipped by the ministry of health, but due to the increase in cases in the recent period, the shift has been made to the application of home quarantine . as for the period of quarantine, it was initially 14 days, and then it was reduced to 10 days, based on the recommendation of the world health organization . a  person is considered 23 public governance, administration and finances law review • 2. 2020 governments’ measures to govern the coronavirus crisis and the lessons learned infected if they are tested positive for covid-19 and if the result is negative, they repeat this to ensure he or she is clear of the virus . ƿ certain hospitals have been identified and new hospitals opened to receive and treat covid-19 patients, and they have also been provided with the necessary equipment and supplies to enhance their ability to provide services to patients . ƿ data sharing was one of the main policies of the ministry of interior, to achieve this purpose, a  website was launched to inform the public about the development of the epidemiological situation in the country and to provide them with data on an on-going basis . furthermore, sharing information and data with the who and other countries was crucial in this regard . 3.2 social and economic protection measures in order to effectively manage the crisis, the government has taken measures to mitigate the social and economic impacts of the epidemic, especially on the most vulnerable groups, which are more likely to be negatively affected than others, including those in the tourism sector, s&m companies and irregular employment . social protection measures: protecting employees by reducing their numbers in their workplaces, whether in the government or private sector, as well as expanding the social protection network to include more beneficiaries, especially those who have lost their jobs due to the epidemic . additionally, one of the main interventions of the palestinian government is community participation in efforts to curb the epidemic . they engaged through the formation of emergency committees to assist the security services and medical staff in carrying out their tasks or by launching community initiatives to raise awareness of preventive measures such as social distancing . solidarity initiatives have also been launched among members of the palestinian community, such as the establishment of the “waqft ezz” virus relief fund . this fund was established by the government, in cooperation with the private sector to receive donations from individuals, and institutions to help the poor and most affected groups from the pandemic . as for the macroeconomic level, the palestinian government has taken several measures to mitigate the economic effects of the coronavirus pandemic . in this regard, the palestinian government has succeeded, through its successful economic measure, in mitigating the shock of the emerging coronavirus pandemic, as the negative impact of the epidemic would have been more serious had these measures not been taken . in the first weeks of the pandemic, there was a  preference to preserve human life by imposing a  comprehensive closure, which greatly harmed the palestinian economy, but then the government realised the need to restart the economic facilities to alleviate the economic deterioration that began to afflict the local economy . however, the government’s ability to allocate financial and material resources remains the main factor in facing disasters and crises such as the coronavirus pandemic . when comparing the financial and economic capabilities of the state of palestine with other neighbouring countries, we notice the difficulty of the situation . the palestinian government is already suffering from a  financial crisis because israel has stopped 24 saqer sulaiman public governance, administration and finances law review • vol. 5. no. 2.  transferring clearance revenues, and this leaves it in an unenviable position . it was not able to compensate the workers who were affected by the closure . likewise, social protection programs did not cover all families affected by the pandemic, and even the “waqft ezz”, which was established at the beginning of the pandemic, could not collect more than $17 million . it was spent on workers and needy families who have been affected as a result of the outbreak of coronavirus in the palestinian territories . 3.3 challenges faced by the palestinian government in governing the coronavirus crisis despite the efforts made by the palestinian health authority to flatten the curve of the disease in order to reduce the number of cases that need intensive care and thus relieve the pressure on hospitals and health services, achieving this goal is not an easy task and it is actually under threat due to many challenges . these challenges include, but are not limited to, the shortage in financial resources, and shortage in some specialised professions especially in the field of nursing and highly skilled physicians, social culture, in addition to the israeli occupation obstacles . ƿ shortage of resources: the ministry of health’s expenditures on primary and secondary health care have increased over the years . financing of the health sector is derived from taxes, health insurance premiums, co-payments, out-of-pocket payments, international aid, and grants as well as nongovernmental resources . the shortage of financial resources is an obvious obstacle to the possible development of the health sector . indeed, “spending by  government,  ngos, unrwa clinics, and the private sector has increased from $397 .2  million in 2000 to about $1,347 .4 million in 2013” . (fanack newsletter, 2016) compared to its neighbours, such as israel, funds are not sufficient to provide real development and stimulation to healthcare in palestine . in general, the palestinian health sector is burdened with the volume of services it provides to people, and the covid-19 pandemic came to increase this suffering, especially in certain areas such as the shortage of doctors and hospital beds . “the total number of doctors working in palestinian hospitals in 2018 was 5,536, of which 52 .3% work in public hospitals . as for  the number of beds per 100,000 populations, the ratio in the west bank was 158 .8 beds compared to 168 .2 beds in the gaza strip” . (falah et al ., 2020, p . 31) although the palestinian government recruited new doctors at the start of the epidemic, this number is less than required, as is the case with nursing . this indicates that the palestinian ministry of health faces real challenges in providing appropriate medical service to patients, and in the event that the situation worsens and the number of infected cases increases, the ability of the palestinian health sector to withstand and continue to provide the service will be in doubt . ƿ israeli obstacles: the occupation remains the main factor that restricts all areas of palestinians’ lives, physically and/or mentally . this was evident from the arbitrary measures taken by the israeli authorities against palestinians before and after the epidemic . the on-going israeli occupation and violations of palestinian health 25 public governance, administration and finances law review • 2. 2020 governments’ measures to govern the coronavirus crisis and the lessons learned rights are likely the most important reasons behind the weaknesses in the palestinian health sector and its inability to improve . (fanack newsletter, 2016) the main challenge faced by palestinians is that israeli authorities have control over all international borders . this creates a  situation in which all goods and machines are subject to inspection by the israeli army, which tighten the hand of the palestinian government to bring machines and medical materials needed to curb the disease . meanwhile, the time required at the border because of israeli procedures is the biggest obstacle to bring materials into palestine . in some cases, as a result of the delay in their delivery to the palestinian territories due to the obstacles of the occupation, the coronavirus test kits have expired and were destroyed before reaching palestinian hospitals . moreover, the israeli occupation forces prevent palestinian security services from applying the law and implementing lockdown measures in palestinian rural areas that are still under their control . along the same vein, “israeli authorities did not commit to its announcement regarding preventing palestinian workers who decide to stay inside israel from returning to the occupied palestinian territories” . (mas, 2020, p . 3) ƿ economic challenge: the biggest challenge facing the palestinian government is its ability to bear the economic repercussions of the coronavirus epidemic and mitigate it as much as possible . the economic challenge is significant and as important as the health challenge . undoubtedly, the pandemic affected many aspects of palestinian life, on top of which the tourism sector and the small and medium-sized companies had to lay off a  number of their workers due to the closure and the decline in production and marketing . indeed, the most important implications of the coronavirus crisis were the economic recession that accompanied the health crisis, lockdown measures, and the closure of companies and shops, which led to many employees losing their jobs . consequently, the unemployment rate increased to unprecedented rates . additionally, the impact of the coronavirus pandemic on the labour market shows that “the number of employed persons decreased from 1,009,900 in the 1st quarter of 2020 to 888,700 in the 2nd quarter of 2020, by 12% compared to the 1st quarter of 2020 . meanwhile, the unemployment rate for males in palestine reached 23% compared to 41% for females” . (palestinian central bureau of statistics, 2020) this data shows that the labour market is the most affected sector during the coronavirus pandemic . clearly, the impact of the coronavirus pandemic will be more severe on the palestinian economy, as it will add additional economic burdens to the palestinian economy in the future, especially in light of the modest capabilities of this economy . the precautionary measures taken by the palestinian government to combat coronavirus will lead to an increase in public expenditures as a result of the increase in government spending for the healthcare sector . health expenditures include purchasing medical equipment, expanding health services, and operating new hospitals and thereof . furthermore, spending on security services, which is responsible for implementing lockdown and preventive measures, is another burden on the government’s budget . as a result of declaring a state of emergency in the palestinian territories and closing palestinian crossings and borders with the outside world, the public treasury was 26 saqer sulaiman public governance, administration and finances law review • vol. 5. no. 2.  affected . the suspension of foreign trade has led to a decrease in clearance revenues, which are tax revenues that israel collects on behalf of the palestinian national authority according to the paris economic protocol . “in many cases, israeli authorities hold over these revenues for political reasons” . (al-razeq, 2016, p . 6) undoubtedly, these changes exacerbated the palestinian economic situation, increased economic stagnation, and reduced the government’s ability to fulfil its obligations, especially concerning paying employees’ salaries . the palestinian public debt is also likely to increase, especially, “the palestinian ministry of finance data show that the public debt ratio started from zero, then gradually increased and wobbled according to general economic conditions and international aid” . (sulaiman, 2019a, p . 134) it is worth mentioning that “by the end of 2019, public debt rose to usd 2 .8 billion (nis 9 .7 billion), constituting 16 .4% of gdp . this is ascribed to clearance revenues withheld during the year, which has led the government to borrow from banks to meet part of its commitments” . (mas, pcbs, pma, pcma, 2019, p . 14) accordingly, the estimates of economic experts in the first months of the pandemic showed that the loss of the palestinian economy is expected to be great . “the palestinian economy expected losses about nis 33 .7  million (usd 9 .8  million) per day, which was pumped into the palestinian economy” . (helles, 2020, p . 4) despite the negative impact of the coronavirus pandemic on the palestinian economy, some have benefited from the spread of this disease . indeed, some companies have started manufacturing different types of virus prevention tools . for example, the zaatari factory in the city of hebron produced masks and marketed them to the local market . furthermore, the hygiene and sterilisation materials industry has boomed . (ibid, p . 7) ƿ last but not least, and despite the success of the palestinian government in managing the coronavirus crisis so far, it still faces one of the most important challenges, which is to keep the curve of infected cases flattening and stopping the spread of the disease . this requires expanding the virus tracking map and increasing the number of coronavirus tests . citizens’ commitment to following preventive and public safety measures is another challenge to the success of the flattening strateg y . 4. lessons learned from the coronavirus crisis lessons learned are an important tool that must be used continuously to benefit from past experiences . according to rowe and sikes (2006), lessons learned are the documented information that reflects both the positive and negative experiences of a  project . it is important to note that it is not possible to prevent such epidemics from occurring in the future, but we must learn from our current experience to be more prepared if they arise again . however, the following is a  summary of the most important lessons learned from the coronavirus pandemic crisis . in the absence of common international mechanisms to confront this crisis, there was reliance on national and local capabilities, and citizens became dependent in the first place 27 public governance, administration and finances law review • 2. 2020 governments’ measures to govern the coronavirus crisis and the lessons learned on the actions of their governments . it seems that covid-19 has converted regional and international relations . after such a crisis, the tendency to national hard power is now the most dominant approach . it is important to mention that in the absence of external support as the allies’ preoccupation with their problems, reliance on self-capabilities remains the basis for facing crises . obviously, the success in crisis management depends primarily on national capabilities and the existence of a survival strateg y . most importantly, providing such capabilities and strateg y is the task of the government . there is no doubt that surviving the epidemic depends on the single national solid power of the country and the efficiency of its medical system . in developing countries, one of the most important lessons learned is that the security of any country is not only achieved through the accumulation of weapons, but also by strengthening its economic and health capabilities . thus, one of the lessons learned from this epidemic is to give more attention to scientific research and to harness it to serve people, solve problems and create solutions . the coronavirus crisis was a  real challenge to the principle of solidarity on which regional and international alliances and partnerships are based, which means that international relations may be undergoing profound transformations in the aftermath of this crisis . however, and regardless of the nature of the international system that will emerge from the coronavirus crisis, there is no doubt that the winners in managing this crisis are the ones who will shape the world’s future . undoubtedly, the exchange of health information and data between countries facilitated the process of curbing the virus . the coronavirus crisis showed that there is a  state of interdependence between the countries of the world . moreover, and regardless of the diverse interests and values, the world continues to share the same fate, which creates the need to activate common frameworks that can be relied upon in such crises . despite the failure of the international community to collectively confront this crisis, regional and international cooperation remains the best and safe option to manage and curb such crises and disasters . the experiences of countries varied in their management of the coronavirus crisis . this crisis demonstrated the role of effective management in limiting the spread of the crisis and mitigating its effects . moreover, countries’ experience shows that the speed of response and developing a clear-cut strateg y on how to professionally manage the crisis was crucial . for example, some east asian countries ( japan and singapore) analysed the situation and responded quickly and were able to limit the spread of the virus, save the lives of their citizens as well as reduce their economic losses . meanwhile, countries like the united states, italy and spain underestimated the crisis and responded too late . even though these countries possess highly efficient healthcare systems, they were not able to curb the pandemic and incurred huge human and economic losses . “the american case represents a  special experience in managing the crisis, despite all the measures that were taken at the federal and local levels, these efforts were described by some experts as the most dangerous crisis facing president trump” . (sudairy, 2020) it is important to emphasise that effective crisis management must have the following characteristics: the existence of a  clear vision and specific goals; the existence of coordination and integration between the various institutions; an efficient crisis management team; the existence of a professional operating system that improves the optimisation of resources and applies best practices . 28 saqer sulaiman public governance, administration and finances law review • vol. 5. no. 2.  the coronavirus crisis has highlighted the danger of weapons of mass destruction, including biological weapons, as a  threat to human civilisation . besides, the danger of epidemics is increasing in light of globalisation and the ease of movement from one place to another around the world, which facilitates the spread of the virus . there is no doubt that this represents a  challenge to the human being that did not exist in the past . the coronavirus that began in china at the end of 2019 spread over the world within a short period . as for the overlap between crises and politics, this crisis shows the extent to which a  politician can use the crisis for political reasons . it also affected international relations, especially between major countries such as the united states and china . this tension was evidenced through china’s announcement that americans had transferred the disease to the chinese city of wuhan, which is an accusation that the united states had exported the disease to china . on the other hand, the u .s . president called the virus “the chinese virus” . moreover, the u .s . president accused china of concealing the spread of the virus and did not inform international organisations and other countries in time to take preventive measures . this crisis sheds more light on the role of civil society organisations, the private sector and volunteer work during crises, which greatly supports the role of government agencies, and this has been demonstrated through donation campaigns to help those affected by the pandemic and volunteer work to educate people and help patients in many countries . the coronavirus crisis demonstrated the importance of the role of the media and social media in managing crises . such epidemics existed in the past and were more dangerous than they are today, as there were no laboratories, technolog y, or media to guide and educate people to avoid their risks . in the coronavirus pandemic, there was a  heavy reliance on social media platforms to reach as many people as possible to send messages related to the developments of the pandemic and to educate them about prevention measures . although these means are distinguished by their ability to reach large numbers of people, they are also effective and inexpensive tools, given the scarcity of resources and the weak capacities of developing countries . another advantage is the speed in publishing and mobilising public opinion . the covid-19 virus has exposed inequalities that were already present in our societies which were exacerbated by lockdowns or other changing aspects of our daily life during the pandemic . this crisis sheds light on the most vulnerable and disadvantaged groups . income inequality causes inequality in the standard of living . the spread of covid-19 in slums is much faster than in other parts of cities because these slums are built in a way that makes it impossible for social distancing and other precautionary measures . certainly, it is the responsibility of governments and ngos to address these grievances and support vulnerable groups . the coronavirus pandemic crisis emphasised the importance of assessing risks, using scientific data in creating evidence-based policies, and making appropriate preparations and responses based on this assessment . despite the growing awareness of the importance of data in policy-making and the preparation of evidence-based interventions, providing this data remains a major challenge for many countries, especially developing countries, as these countries are unable to allocate sufficient resources to collect data on various human 29 public governance, administration and finances law review • 2. 2020 governments’ measures to govern the coronavirus crisis and the lessons learned phenomena . the coronavirus pandemic has added more difficulties in terms of surveys and data collection in these countries . according to a survey conducted in may 2020, 96% of national statistical offices partially or completely stopped collecting face-to-face data at the height of the epidemic . (united nations statistics division, 2020) the lack of realistic and sound data on many marginalised groups such as persons with disabilities and the elderly, as well as gender-based marginalisation, lead to the further deterioration of their cases as a result of the lack of data clarifying their status . 5. conclusion the adverse event may have one of the following negative effects: health crisis, financial losses, disruption to work, difficulties in education and mobility barriers thereof . however, all these effects accompanied the coronavirus pandemic simultaneously . undoubtedly, the rapid and widespread spread of the virus in various countries of the world has resulted in human and economic losses . indeed, tens of millions of workers around the world have lost their jobs and become unemployed . the response of governments to the epidemic varied between a  rapid response, where strict measures were imposed to preserve people’s lives, and others that were characterised by the gradual application of measures to achieve harmony between preserving people’s lives and preventing the collapse of the economy . obviously, the coronavirus pandemic has led to an increase in unemployment rates, as well as a  significant increase in the number of people below the poverty line . this undoubtedly increases the challenges facing countries, especially developing countries that are already suffering from limited resources . the experiences of countries indicated that there are countries that succeeded in managing the coronavirus pandemic through the application of rapid measures and innovative policies that were based on an increase in the number of coronavirus tests and follow-up procedures for infected cases, as is the case in japan, singapore and germany, while there are countries that failed, such as the united states . however, the safest measure to mitigate the impact of this virus is to take preventive measures until the vaccine or appropriate treatment is discovered . the epidemic has also shown the weakness of the health system, whether at the global or national level, in curbing the epidemic . in addition, the response in some countries was slow, which facilitated the spread of the virus . one of the conclusions that can be drawn from the coronavirus pandemic is the importance of social media and data management in controlling the pandemic and thus reducing its negative impacts . it is also worth mentioning that the coronavirus pandemic has revealed that national hard powers and self-reliance are key factors in countries’ ability to endure and overcome difficulties and crises . finally, the measures taken by countries to deal with such crises must be transparent and must depend on sharing information with local society and international institutions, as well as possessing trained competencies capable of dealing with extraordinary situations . the response of the palestinian government to the coronavirus epidemic was very fast, which contributed to reducing the number of infected cases, especially in the first wave of the epidemic . however, the government measure and lockdown adversely affected 30 saqer sulaiman public governance, administration and finances law review • vol. 5. no. 2.  the palestinian economy and increased the rate of unemployment and poverty among palestinians . palestine is an unstable country that has suffered from crises for a  long time, yet the implications of the coronavirus pandemic have made matters worse . sectors such as health, the economy and tourism were among the sectors most affected by the pandemic . references al-razeq, a . o . (2016) . assessing fiscal policies of the palestinian national authority . palestine economic policy research institute (mas) . falah, b ., meshal, j ., & betawi, w . (2020) . palestinian health sector assessment: macro-analytical study . palestine economic research institute . www .mas .ps/files/server/2020/healthsectorstudyenglish .pdf fanack newsletter (2016) . the health sector in palestine . https://fanack .com/palestine/governance-and-politicsof-palestine/the-health-sector-in-palestine/ helles, r . (2020) . the economic repercussions of the coronavirus on the palestinian economy . democratic arabic centre for strategic, political and economic studies . (translated from arabic .) https://democraticac . de/?p=69086 international monetary fund (2020) . world economic outlook update, june 2020 . www .imf .org/en/publications/ weo/issues/2020/06/24/weoupdatejune2020 oecd (2020) . covid-19 crisis in the mena region: impact on gender equality and policy responses . https:// read .oecd-ilibrary .org/view/?ref=134_134470-w95kmv8khl&title=covid-19-crisis-in-the-mena-regionimpact-on-gender-equality-and-policy-responses palestine economic policy research institute (mas), palestinian central bureau of statistics (pcbs), palestine monetary authority (pma), & palestine capital market authority (pcma) (2019) . economic monitor 60 . www .mas .ps/files/server/20200209151855-1 .pdf palestine economic policy research institute (mas) (2020) . economic monitor, special supplement 2020, preliminary assessment of the possible impacts of covid-19 health crisis on the palestinian economy . www .mas .ps/files/server/2020/monitorsupplement%20en%20d1%20rk%20clean .pdf palestinian central bureau of statistics (pcbs) (2020) . press release on the results of the labour force survey second quarter (april–june, 2020) round . www .pcbs .gov .ps/site/512/default .aspx?lang=en&itemid=3809 phelan, a . l ., katz, r ., & gostin, l . o . (2020) . the novel coronavirus originating in wuhan, china: challenges for global health governance . jama, 323(8), 709–710 . https://doi .org/10 .1001/jama .2020 .1097 rowe, s . f . & sikes, s . (2006) . lessons learned: taking it to the next level . paper presented at pmi global congress 2006 . seattle (wa), project management institute . schleicher, a . (2020) . the impact of covid-19 on education: insights from education at glance 2020 . oecd . www .oecd .org/education/the-impact-of-covid-19-on-education-insights-education-at-a-glance-2020 .pdf shalalfa, n ., kaila, m ., shakhra, k ., odah, a ., heeh, i . a ., & amro, w . (2020) . novel corona virus outbreak in palestine . the gazette of medical sciences, 1(3), 13–17 . https://doi .org/10 .46766/thegms .virology .20072407 sohrabi, c ., alsafi, z ., o’neill, n ., khan, m ., kerwan, a ., al-jabir, a ., & agha, r . (2020) . world health organization declares global emergency: a review of the 2019 novel coronavirus (covid-19) . international journal of surgery, 76, 71–76 . https://doi .org/10 .1016/j .ijsu .2020 .02 .034 sudairy, n . (2020, april 20) . international relations at the time of corona challenges and strategies . journal of law and international business . (translated from arabic .) www .droitetentreprise .com/?p=18983 sulaiman, s . (2019a) . public administration in palestine . aarms–academic and applied research in military science, 18(1), 129–136 . https://doi .org/10 .32565/aarms .2019 .1 .8 sulaiman, s . (2019b) . risk management in palestinian institutions . repüléstudományi közlemények, 31(2), 203–210 . https://doi .org/10 .32560/rk .2019 .2 .15 http://www.mas.ps/files/server/2020/healthsectorstudyenglish.pdf https://fanack.com/palestine/governance-and-politics-of-palestine/the-health-sector-in-palestine/ https://fanack.com/palestine/governance-and-politics-of-palestine/the-health-sector-in-palestine/ https://democraticac.de/?p=69086 https://democraticac.de/?p=69086 http:// www.imf.org/en/publications/weo/issues/2020/06/24/weoupdatejune2020 http:// www.imf.org/en/publications/weo/issues/2020/06/24/weoupdatejune2020 https://read.oecd-ilibrary.org/view/?ref=134_134470-w95kmv8khl&title=covid-19-crisis-in-the-mena-region-impact-on-gender-equality-and-policy-responses https://read.oecd-ilibrary.org/view/?ref=134_134470-w95kmv8khl&title=covid-19-crisis-in-the-mena-region-impact-on-gender-equality-and-policy-responses https://read.oecd-ilibrary.org/view/?ref=134_134470-w95kmv8khl&title=covid-19-crisis-in-the-mena-region-impact-on-gender-equality-and-policy-responses http://www.mas.ps/files/server/20200209151855-1.pdf http://www.mas.ps/files/server/2020/monitorsupplement en d1 rk clean.pdf http://www.pcbs.gov.ps/site/512/default.aspx?lang=en&itemid=3809 https://doi.org/10.1001/jama.2020.1097 http://www.oecd.org/education/the-impact-of-covid-19-on-education-insights-education-at-a-glance-2020.pdf https://doi.org/10.46766/thegms.virology.20072407 https://doi.org/10.1016/j.ijsu.2020.02.034 http://www.droitetentreprise.com/?p=18983 https://doi.org/10.32565/aarms.2019.1.8 https://doi.org/10.32560/rk.2019.2.15 31 public governance, administration and finances law review • 2. 2020 governments’ measures to govern the coronavirus crisis and the lessons learned united nations statistics division (2020) . covid-19 widens gulf of global data inequality, while national statistical offices step up to meet new data demands . http://covid%2019%20response .unstatshub .org/ statistical-programmes/covid19-nso-survey/ worldometer (2020) . covid-19 coronavirus pandemic . www .worldometers .info/coronavirus/ world bank (2020) . projected poverty impacts of covid-19 (coronavirus) . www .worldbank .org/en/topic/ poverty/brief/projected-poverty-impacts-of-covid-19 yang, x ., yu, y ., xu, j ., shu, h ., liu, h ., wu, y ., & wang, y . (2020) . clinical course and outcomes of critically ill patients with sars-cov-2 pneumonia in wuhan, china: a single-centered, retrospective, observational study . the lancet respiratory medicine, 8(5), 475–481 . https://doi .org/10 .1016/s2213-2600(20)30079-5 http://covid%2019%20response.unstatshub.org/statistical-programmes/covid19-nso-survey/ http://covid%2019%20response.unstatshub.org/statistical-programmes/covid19-nso-survey/ http://www.worldometers.info/coronavirus/ http://www.worldbank.org/en/topic/poverty/brief/projected-poverty-impacts-of-covid-19 http://www.worldbank.org/en/topic/poverty/brief/projected-poverty-impacts-of-covid-19 https://doi.org/10.1016/s2213-2600(20)30079-5 public governance, administration and finances law review articles good governance and good public administration andrás patyi* * prof. dr. andrás patyi (born in 1969), university professor of public law. editor and main author of four university textbooks (administrative law), having almost 100 scienti�c publications. after �nishing his legal studies in 1993, he started working at the constitutional court. after a decade of administrative experience as a senior ranking civil servant (‘notary’ of the twelfth district local government in budapest) he returned to the constitutional court as chief counsellor. he has been appointed to justice of the supreme court in 2009. he submitted his ph. d. thesis in 2002, succeeded in the habilitation process and became university professor in 2011. from the 1 january 2012 – �nishing his service as justice at the hungarian supreme court – he is the rector of the hungarian national university of public service (nups). from the 30 september 2013 he is the president of national electoral commission and since 2014 the chairman of the state reform committee. his main �elds of research are: the judicial review of administration, administrative procedural law, and the general doctrine of public administration. (e-mail: patyi.andras@uninke.hu) abstract: �e following article will examine the main principles of good governance and good public administration. it will outline the structure of reforms which have been accomplished in hungary since the change in government in 2010, with special attention paid to the provisions of the new constitution of hungary that entered into force in 2012, and the magyary zoltán public administration development program, which will elaborate on the characteristics of what is considered the ‘good state.’ keywords: good governance; good public administration; good state 1. ‘comprehensive’ thoughts �ere have been signi�cant reforms in hungary since 2010,1 and these increased e�orts toward policy-making are a stark contrast to the relatively silent two-decade-long period immediately after the regime change, from approximately 1989/1990 to 2010.2 yet, it also re�ects hungary’s shift towards an action-driven and fast-paced environment where rapid legislative3 and government (as well as constitutional4) decisions can occur.5 2. good governance6 10.53116/pgaflr.2016.1.1 https://doi.org/10.53116/pgaflr.2016.1.1 in the 1990s, the term ‘good governance’ began emerging fairly often as a demand on behalf of international �nancial institutions toward recipient countries concerning the structure and operation of their political institutions.7 namely, that neither concrete objectives of development policies nor general macroeconomic ideas can be realized without having an operational system of governance, regulation, and implementation in a country’s political and economic units.8 over the years, there has been an evolution in the understanding of ‘good governance.’ currently, this term de�nes characteristics of a desirable regulating and governing system, and represents a general reference framework for the evaluation of political governance.9 good governance is an global phenomenon, and as such it is and should be considered at the international level. a legally binding norm is either the part of a national legal system, or somehow belongs to the international law (treaty law, customary international law).10 legal systems themselves are of course not free from the in�uence of globalization, as interchange of legal institutions and interactions between legal orders are everyday phenomena in our world today.11 in international treaty law (conventions of human rights) three fundamental rights, the freedom of opinion and freedom of expression,12 the right to peaceful assembly13 and the freedom of association14 are crucial preconditions to good governance.15 additionally, a non-discrimination clause can be considered as a basic prerequisite for all the principles of good governance.16 equality as the principle of good governance is guaranteed in the nondiscrimination clauses of the international bill of human rights.17 article 2 of the international covenant on civil and political rights (iccpr) contains a non-discrimination clause that is ampli�ed by article 3, which contains an undertaking to respect the principle of equality of men and women in enjoyment of rights secured:18 good governance is not only understood at national or state levels, it is also a set of principles for good urban government, and better local governments. �e main principles of good (urban) governance are: equity, civic engagement, transparency, and accountability, which all incorporate aspects of human rights law. other principles like sustainability, subsidiarity, e�ciency, and security do not have any existence in human rights laws. in this regard, it can be stated, that the �ve core principles of good governance are: equity, e�ciency or e�ectiveness, accountability, participation and security. un-habitat’s19 proposed list of seven norms20 can be subsumed under these abovementioned �ve principles. �e united nations millennium declaration21 clearly states that good governance is a key tool for the elimination of poverty. �is declaration is not legally binding, but it is a document of intent in which the member states of the un commit themselves to promote good governance within their countries. �is applies to all level of governance, including at the state, regional, and urban governance levels. although the term ‘good governance’ has no generally accepted de�nition, its elements – the characteristics of a desirable governance – re-emerge in di�erent descriptions: participative, equitable and inclusive, it is in line with the rule of law and is transparent, responsive, e�ective and e�cient, and consensus-oriented and accountable.22 �ese principles are general enough to say that their validity is not limited to present governance; they can be found – although not always explicitly – in the political thought of the past as well.23 upon closer examination of the main legal elements of good governance, equity can be de�ned as equal access to decision-making processes, and the basic necessities of local and community life.24 practically, this means the inclusion and creation of fair and predictable regulatory frameworks, according to relevant international documents. e�ciency25 refers to the ratio between the outputs (products, services) and inputs (resources used).26 e�ciency or e�ectiveness requires that institutions and processes achieve their goals while making the best use of resources.27 e�ective governing is when policy goals are achieved at the lowest possible cost and in due time.28 e�ective governing is concerned with the e�ective coordination of key policy actors: state institutions and social actors.29 civic engagement implies that living together is not a passive exercise; it pertains to people’s right to participation and those mechanisms supporting people’s participation. civic engagement is well guaranteed in article 25 of the iccpr.30 practical means of realizing these norms include inter alia, establishing the legal authority for civil society to participate e�ectively in such mechanisms as development councils. �erefore participation is also often considered a cornerstone of good governance.31 �e key element of participation is that the interests of almost every citizen, every class of society – including people with the lowest ability to promote their concerns – should be taken into account in the course of political decision making.32 �is requirement can be ful�lled with direct participation of the people33 and by the representative organizations as well.34 according to frivaldszky (2012), the popularity of presently emerging ideas of ‘good governance,’ as well as their increased legitimacy is, “not only due to governmental e�ectiveness, but also to the closely related participatory governance.”35 and citizen participation is a key element in promoting transparency and accountability. transparency and accountability are of key importance if we want to increase the quality of governance.36 transparency is an invaluable element and precondition to any government reforms.37 �is is easy to comprehend: if the citizen possesses more knowledge, he has acces to more possibilities.38 however, in countries where government upholds and distorts information about the economy and economic policy, the independent media can become weak, or the parliament cannot control the government, and the quality of governance decreases.39 �e accountability of local, regional and national authorities to their citizens is a fundamental tenet of good governance. similarly, there should be no place for corruption in any state organization, because it can undermine government credibility40 and deepen poverty.41 transparency and accountability are essential to a stakeholder’s understanding of government, and to who is bene�ting from decisions and actions. access to information is therefore fundamental to this understanding and to good governance. furthermore, laws and public policies should be practised in a transparent and predictable manner. elected and appointed o�cials and other civil servant leaders must set an example of high standards of professional and personal integrity. among practical means of realizing these norms we can observe, inter alia: – transparent tendering and procurement procedures and the use of integrity pacts and monitoring mechanisms in the process; – regular, independently executed programmes to test public o�cials’ integrity response; – promoting an ethic of service to the public among o�cials while putting into place adequate remuneration for public servants; and – establishing codes of conduct and provision for regular disclosure of assets of public o�cials and elected representatives. transparency requires decision-making processes which follow clear regulations.42 information concerning that process should be freely available for a�ected citizens.43 further, not only must the decision-making be transparent, the enforcement of the decision is also subject to open procedural rules.44 transparency is a key feature of not just the government, but of the private sector as well,45 and there is a correlation between the need for transparency in the public and private sectors.46 unfortunately, where transparency and accountability of the public sphere is low, the probability of ‘state capture’ and other kinds of illegal business in�uences on the governance is higher.47 3. good administration good public administration is a prerequisite for good governance.48 �e expression ‘good administration’ has become somewhat fashionable and appears in various instruments both in european and in national level, but authors provide varying de�nitions.49 it is therefore necessary �rst to acknowledge that there are di�ering concepts of good governance at the international and european levels. �e european union charter of fundamental rights and freedoms includes50 the right to good administration.51 �is article 41 is based on the existence of the union as subject to the rule of law, the characteristics of which were developed in the case law enshrining inter alia good administration as a general principle of law. according to the charter, every person has the right to have his or her a�airs handled impartially, fairly, and within a reasonable time by the institutions, bodies, and agencies of the union. �e right to good administration is only applicable in legal relations with eu institutions, irrespective of national authorities, although there are scholars who argue the need to extend it to them, at least when applying eu law.52 �is right includes: – the right of every person to be heard, before any individual measure which would a�ect him or her adversely is taken; – the right of every person to have access to his or her �le, while respecting the legitimate interests of con�dentiality and of professional and business secrecy; and – the obligation of the administration to give reasons for its decision(s). �is right is understood more widely by the recommendation of the council of europe.53 �e basic principles, introduced by the recommendation on good public administration, establish the goodness of public administration by the basic values of the rule of law: legality, equality, impartiality, proportionality, legal certainty, proceeding within reasonable time, involvement, respect for privacy, and transparency.54 according to the recommendation, public authorities shall act in accordance with the law. public authorities shall further act in accordance with rules de�ning their powers and procedures laid down in their governing rules and exercise their powers only if the established facts and the applicable law entitle them to do so, and solely for the purpose for which they have been conferred.55 �is recommendation also includes several suggestions to member states in promoting good governance.56 among them, one is of the adoption of standards established in a model code which is attached as an appendix to the recommendation itself.57 however, this recommendation is directed to the exercise of public power at the national (not the international) level, but with the increasing powers of international organizations, the principles listed are also becoming of growing relevance at the international level.58 �e requirements of a right to good administration stem from the fundamental principles of the rule of law,59 such as those of lawfulness, equality, impartiality, proportionality, legal certainty, taking action within a reasonable time limit, participation, respect for privacy, and transparency. while the rule of law is clearly a constitutional idea, its concretization in speci�c standards should be regarded as being of a more administrative nature.60 �ese principles provide procedures to protect the rights and interests of private persons, inform them and enable them to participate in the adoption of administrative decisions. jurisprudence distinguishes three aspects of the rule of law. firstly, the principle expresses a, ‘preference for law and order within a community rather than anarchy’, which is the philosophical view of society linked with basic democratic notions. secondly, the rule of law, ‘expresses a legal doctrine of fundamental importance, namely that government must be conducted according to law, and that in disputed cases what the law requires is declared by judicial decision’. �irdly, ‘the rule of law refers to a body of political opinion about what the detailed rules of law should provide’ in matters both of substance and of procedure.61 under the council of europe, understanding good administration is an aspect of good governance. it is not just concerned with legal arrangements, but depends on the quality of organization and management, and it must meet the requirements of e�ectiveness, e�ciency, and relevance as determined by the needs of society. good administration must maintain, uphold, and safeguard public property and other public interests. it must comply with budgetary requirements, and (similarly to the un requirements) it must preclude all forms of corruption. any form of good administration is also dependent on adequate human resources available to the public authorities, and on the qualities and appropriate training of public o�cials. �e european legislator now focuses ‘not just on speci�c administrative acts, but also on the administrative procedures themselves. in other words, there has been a shift in emphasis from the outcome of administrative action (result) to the administrative behaviour (functioning).’62 4. measures of the hungarian state for the vindication of the good governance’s principles �e following is to consider what hungary has done for the vindication of the principles of good governance. 4.1 provisions of the hungarian constitution on 1 january 2012 the new constitution of hungary entered into force, and is referred to as ‘fundamental law’ or ‘basic law’.63 fundamental law incorporates many provisions that are in close connection, and therefore contributing, to the enforcement of the principles of good governance. when compared to the former constitution, some of these provisions are new, 64 but some were also previously present.65 �e national avowal66 of the fundamental law states that: – we believe that we have a general duty to help the vulnerable and the poor. as it was previously mentioned, the united nations millennium declaration clearly states that good governance is a key tool for the elimination of poverty. – we believe that the common goal of the citizens and the state is to achieve a good quality of life, safety, order, justice, and liberty. referring back to philosophical views of good governance, happiness and the ‘good life’ for people can prove the worthiness and e�ciency of government actions.67 – we hold that democracy is only possible where the state serves its citizens and administers their a�airs in an equitable manner, without prejudice or abuse. additionally: – article b states: hungary is a state under the rule of law.68 – article n declares the principle of balanced, transparent and sustainable budget management, and in the course of performing their duties, all state organs (public administrative authorities, local governments, etc.) shall be obliged to respect this principle. – article xxiv declares the key element of the right to good administration, that is: every person shall have the right to have his or her a�airs administered by the authorities in an impartial, fair and reasonably timely manner. �is right shall include the obligation of the authorities to justify their decisions as determined by law.69 �e impact of the charter is rather obvious on this provision because the last phrase of article 41 para. 1 and 2 item c are textually present here (administration in an impartial, fair and reasonably timely manner, and the obligation to justify decisions).70 equal contents can be found in para. 2 of the fundamental law and article 41 para. 3 of the charter, both regulating compensation of the damages from unlawful conduct.71 4.2 magyary zoltán public administration development program �e magyary zoltán public administration development program (the magyary program), which was expanded in 2011, contains the reforms and principles of the public administration system which was introduced by the conservative government that formed in 2010. �e magyary program72 is rooted the concept of the good state, which itself is closely linked to concepts of good governance, and good administration.73 �e magyary program became one of the frameworks, and the continuously renewing and ‘rephrased’ base – beyond public administration – of the hungarian government’s ideas regarding the good state after 2010.74 �e ‘good state’ concept, which is closely related to the idea of good governance and good administration underpins the ethical norms of both the common good and good public service. 75 if one had to de�ne the core idea of the ‘good state’ one could say that it is the ability to re�ect on real social problems.76 and, that it emerged as a solution for an impending crisis further underlines the signi�cance of legal requirements towards a good state and stresses that necessity.77 �e magyary program on the one hand set down the legitimacy and results of the reform that began in 2010, but also appointed the public administration reform’s main tasks. �e magyary program also elaborates on the characteristics of the good state.78 according to the magyary program (and to the opinion of the ministry for public administration and justice) this concept is able to mark the main direction for the state management model. �e concept of the good state as a de�nition could be understood as follows: a state may be regarded as good if it serves the needs of individuals, communities and businesses in the interest and within the boundaries of the common good, in the best possible way. �e concept of common good is that: – the state creates a lawful and equitable balance between a number of interests and needs, allowing the enforcement of claims in this way and provides protection; – the state proceeds with due responsibility in the interest of the protection and preservation of the nation’s natural and cultural heritage;79 and – the only self-interest of the state is that it should be able to enforce the above two elements of the common good (under any circumstances and of course e�ectively); in other words, the state should create an e�ective rule of law, therefore should provide the functioning of its institutions, and should provide the honouring and accountability of individual and collective rights.80 a smart state is de�ned as: good state, simpler state, better public services, better procedures, better civil, and public servants.81 5. summary good governance is a global phenomenon and should be understood at the international level. norms, requirements, and the supporting practical means previously addressed are based on the international law of human rights, and are binding to all member states of the un. �e un general assembly’s millennium declaration (while not legally binding under international law) stresses the following: success in meeting the objectives of conducive development and elimination of poverty in the world depends, inter alia, on good governance in each country. it also depends – according to the un declaration – on good governance at the international level and on transparency in �nancial, monetary, and trading systems.82 good public administration is a prerequisite for good governance. �e european union charter of fundamental rights and freedoms include the right to good administration. �e fundamental law of hungary (the constitution which entered into force in 2012) incorporates many provisions that are in close connection, and therefore contributing to, the enforcement of the principles of good governance. �e impact of the charter is obvious on these provisions of fundamental law. �e hungarian government set the formation of a good state as its objective. �e magyary program established the legitimacy and results of the reform that began in 2010, and also appointed the public administration reform’s additional main tasks. �e magyary program elaborates on the characteristics of the good state. references 1. �e government that stepped into power in 2010 had a two-thirds majority in parliament. even with such unprecedented support, it had to face the economic crisis while dealing with the systemic controversies of the transitional period. as part of this double e�ort, the government launched a vast reform agenda for the entire public administration system. in general terms, the reform can be summarized as the centralization of institutions (fewer ministries), centralization of competencies from municipal (local government) level to territorially distributed central public administration organs. márton gellén, governance in administrative reforms: hungary and the current trends in europe, 68, in krisztián kádár (ed.), good governance: international dimensions (budapest, national university of public service, 2015). 2. for a long time, hungary has been known as the ‘preeminent student’ of westernstyle democracy and capitalism in the post-communist bloc. democratic transition was marked by enormous development in the rule of law, public institutional development, rapid economic liberalization, as well as the momentous and profound democratization of the entire society. with the perspective of the more than two decades that have passed since the regime change, the trends in the western model societies during the same historic period in appear to also be a decisive factor in the long-term characteristics of local transitions. �e exceptionally long, steady growth period and dynamics of the ‘roaring nineties’ used to provide a supportive external atmosphere for transitional reforms in the state institutions. on the other hand, however, this period veiled the substantial issues of whether the models taken as guidelines for the transition were truly the optimal one for the long run. transition countries – including hungary – were not prepared for any of the systemic problems of the western model. nevertheless, times changed, and when the economic crisis erupted in 2008, hungary found itself in a situation in which the internal challenges of the still ongoing transition and the sudden and enormous external challenges merged and created a truly ‘wicked’, multi-faceted crisis. gellén, supra n. 1, at 67. 3. between the summers of 2010 and 2011 legislation was extremely ‘revolutionary’ in hungary, as the 266 approved acts (from which 95 were brand-new, while 171 were modi�cations of previous acts) and 172 decisions of the parliament signi�cantly exceed the annual statistics of the �rst years of previous governmental cycles (before and after the change of the political system in 1990). between 2006 and 2010 these numbers in total are 263 (new) and 328 (modi�cation). almost one-third of the acts enacted in 2011 were modi�ed in the same year: in december 63 of the 213 acts approved in 2011 – which was a new record – were modi�ed. ádám rixer, attempts of the good state in hungary: new contents of norms created and maintained by the state, ix. iustum aequum salutare, 129, 130 (2013). 4. in the years 2010 and 2011 the constitution of hungary was amended more than ten times, before the new constitution entered into force in 2012. 5. �e establishment of the national university of public service by the act of parliament in 2011 is a perfect example for that; the interval between the very idea emerged and the operations of the new university started were only 1,5 years. and it is worth underlying that the university was not a direct or immediate answer to any global phenomenon or global need. it has rather developed as a cornerstone of the comprehensive hungarian state reforms: the restructuring and reconstruction of the state in hungary. 6. literature on good governance is incredibly extensive and comprehensive, and for these reasons it would be impossible to provide a concise summary in this article. zsolt boda, some notes on fairness, trust and good governance, ix. iustum aequum salutare, 9, 17 (2013). for a recent analysis of conceptions of governance and good governance in the hungarian and international academic discourse see györgy hajnal, gábor pál, some re�ections on the hungarian discourse on (good) governance. ix. iustum aequum salutare, 95–106 (2013). hajnal and pál indicate that in a signi�cant part of domestic literature – contrary to the trends in international literature – the homogeneous conglomerate of good governance and new public management ideas are put into contrast with a raw, simpli�ed way with good government ideas and the neo-weberian approaches identi�ed with them. see ádám rixer, introduction, in andrás patyi, ádám rixer (eds.), hungarian public administration and administrative law, 69 (passau, schenk verlag, 2014). rixer also explicates that the contents of the expression ‘good governance’ is almost fully identi�ed with the new public management approach and its contents in the domestic literature. see rixer, ibid. 7. lászló komáromi, good governance and direct democracy. examples and lessons from past and present, ix. iustum aequum salutare, 107 (2013). 8. uwe holtz, entwicklungspolitisches glossar, 71–72 (complete revision and extension of the version of 2006, university of bonn, 2009), http://www.uni-bonn.de/~uholtz/virt_apparat/ep_glossar.pdf (accessed: 17 december 2012). for the evolution of the term ‘good governance’ see further rudolf dolzer, good governance: genese des begri�s, konzeptionelle grundüberlegungen und stand der forschung, in rudolf dolzer, matthias herdegen & bernhard vogel (eds.), good governance: gute regierungsführung im 21. jahrhundert, 13–23 (freiburg, konradadenauer-stiftung e.v. – herder verlag, 2007), http://www.kas.de/upload/dokumente/verlagspublikationen/governance/gov http://www.uni-bonn.de/~uholtz/virt_apparat/ep_glossar.pdf http://www.kas.de/upload/dokumente/verlagspublikationen/governance/governance_dolzer.pdf ernance_dolzer.pdf (accessed 19 december 2015). cited by komáromi, supra n. 7, at 107. 9. komáromi, ibid. 107. 10. under the term ‘international law’ i mean those laws governing the legal relations between nations, rules and principles of general application dealing with the conduct of nations and of international organizations and with their relation inter se, as well as with some of their relations with persons, whether natural or juridical. see henry campbell black, black’s law dictionary, 565 (st. paul, west group, 1998). 11. for the globalisation of constitutional law see e.g. mark tushnet, �e inevitable globalization of constitutional law (paper no. 09-06, harvard law school, public law & legal �eory working paper series); david s. law, mila versteeg, �e evolution and ideology of global constitutionalism (paper no. 10-10-01, washington university in st. louis, school of law, faculty research paper series, 2010); for the globalisation of administrative law see e.g. edoardo chiti, bernardo giorgio mattarella, global administrative law and eu administrative law: relationships, legal issues, and comparison (berlin–heidelberg, springer, 2011). 12. at a national level, freedom of expression is necessary for good government and therefore for economic and social progress. freedom of expression and freedom of information contribute to the quality of government in various ways: e.g. they promote good governance by enabling citizens to raise their concerns with the authorities. if people can speak their minds without fear, and the media are allowed to report what is being said, the government can become aware of any concerns and address them. https://www.article19.org/pages/en/freedom-of-expression.html (accessed 5 january 2016) freedom of expression is an essential pillar of governance more broadly, because this right enables as many citizens as possible to contribute to, as well as monitor and implement, public decisions on development. �e importance of press freedom in promoting good governance is underlined by the increasing numbers of people who have access to an expanded realm of media platforms. http://www.unesco.org/new/en/unesco/events/prizes-andcelebrations/celebrations/international-days/world-press-freedom-day/2014http://www.kas.de/upload/dokumente/verlagspublikationen/governance/governance_dolzer.pdf https://www.article19.org/pages/en/freedom-of-expression.html http://www.unesco.org/new/en/unesco/events/prizes-and-celebrations/celebrations/international-days/world-press-freedom-day/2014-themes/free-media-contribute-to-good-governance-empowerment-and-eradicating-poverty/ themes/free-media-contribute-to-good-governance-empowerment-anderadicating-poverty/ (accessed 5 january 2016) for the role of free press in promoting good governance see pippa norris, �e role of the free press in promoting democratization, good governance and human development, 66–75, in section 2 of mark harvey (ed.), media matters: perspectives on advancing governance and development (global forum for media development, internews europe, 2008). 13. in october 2012, the human rights council renewed its commitment to promote and protect the rights to freedom of peaceful assembly and of association, by adopting resolution 21/16 (october 2012) and resolution 24/5 (october 2013), in which it inter alia reiterated the important role of new information and communications technologies in enabling and facilitating the enjoyment of the rights to freedom of peaceful assembly and of association, and the importance for all states to promote and facilitate access to the internet and international cooperation aimed at the development of media and information and communications facilities in all countries; furthermore recognized the importance of the freedoms of peaceful assembly and of association, as well as the importance of civil society, to good governance, including through transparency and accountability, which is indispensible for building peaceful, prosperous and democratic societies; declared itself aware of the crucial importance of active involvement of civil society in processes of governance that a�ect the life of people. see the website of the o�ce of the united nations high commissioner for human rights http://www.ohchr.org/en/issues/assemblyassociation/pages/srfreedomass emblyassociationindex.aspx (accessed 19 december 2015). 14. freedom of association is more than a fundamental right, it is also a means of supporting democracy. for further details about the freedom of association and good governance see b. c. smith, good governance and development, 128 (london, palgrave macmillan, 2007). 15. for some key principles of good governance and an explanation of how each is linked with a particular type of human right see john graham, bruce amos & tim plumptre, principles for good governance in the 21st century, 15 (policy brief 4), http://iog.ca/wphttp://www.unesco.org/new/en/unesco/events/prizes-and-celebrations/celebrations/international-days/world-press-freedom-day/2014-themes/free-media-contribute-to-good-governance-empowerment-and-eradicating-poverty/ http://www.ohchr.org/en/issues/assemblyassociation/pages/srfreedomassemblyassociationindex.aspx http://iog.ca/wp-content/uploads/2012/12/2003_august_policybrief151.pdf content/uploads/2012/12/2003_august_policybrief151.pdf (accessed 5 january 2016); adel m. abdellatif, good governance and its relationship to democracy and economic development. global forum iii on fighting corruption and safeguarding integrity, 26 (seoul 20–31 may 2003, workshop iv democracy, economic development, and cultureannex iii). http://web.iaincirebon.ac.id/ebook/moon/bureaucracygovernance/goodgov.pdf (accessed 5 january 2016) while good governance doctrines re�ect political and civil rights, it is less clear to what extend in the practice of institutions they also re�ect social, economic and cultural rights. frederick m. abbott, christine breining-kaufmann & �omas cottier (eds), international trade and human rights: foundations and conceptual issues, 101 (ann arbor, university of michigan press, 2006). 16. all form a part of the international covenant of civil and political rights – iccpr 17. art. 7 of the universal declaration of human rights declares the principle of equal protection before the law. 18. art. 3. �e states parties to the present covenant undertake to ensure the equal right of men and women to the enjoyment of all civil and political rights set forth in the present covenant. 19. united nations human settlements programme, www.unhabitat.org 20. �e seven norms of good urban governance as de�ned by the unhabitat are sustainability, subsidiarity, equity, e�ciency, transparency and accountability, civic engagement and citizenship and security. �e challenge of slums: global report on human settlements, 182 (united nations human settlements programme, 2003). 21. one of the most important aims of the united nations’ programme of reinventing government is to promote good governance towards the realization of the united nations’ millennium development goals (mdgs). �e mdgs are a set of targets on certain human development variables adopted by the millennium declaration of the un general assembly in 2000. http://www.un.org/millennium/declaration/ares552e.htm (accessed 5 january 2016); for further details see governance for the millennium development goals: core issues and good practices, 7th global forum on http://iog.ca/wp-content/uploads/2012/12/2003_august_policybrief151.pdf http://web.iaincirebon.ac.id/ebook/moon/bureaucracy-governance/goodgov.pdf http://www.un.org/millennium/declaration/ares552e.htm reinventing government building trust in government 26–29 june 2007, vienna, austria (a united nations publication, printed in the united states of america 2006), http://unpan1.un.org/intradoc/groups/public/documents/un/unpan025110. pdf (accessed 5 january 2016). �is book constitutes the �rst attempt to link the mdgs to the important concept of governance. as such, it delineates the theoretical and empirical links between policy making and sound governance while at the same time contributing to the debate on democratic governance. 22. kioe sheng yap, what is good governance? united nations economic and social commission for asia and the paci�c (s. a.), http://www.unescap.org/pdd/prs/projectactivities/ongoing/gg/governance.p df (accessed 17 december 2012), cited by komáromi, supra n. 7, at 107– 108. 23. komáromi, supra n. 7, at 108. 24. regarding equity kiss indicates that an important aspect of public services is how the bene�ts are distributed among the various groups of the society (groups can be formed based on, for example, socio-demographic or geographical factors). in a narrower sense, equity may refer to equality in access to services (for example, the chance for students in smaller villages to access high quality education). �is narrower approach, however, ignores that several factors other than access to services also have an in�uence over outcome and impact indicators. norbert kiss, public policy making and organization of public services, in krisztián kádár (ed.), good governance: international dimensions, 165 (budapest, national university of public service, 2015). 25. �e term ‘productivity’ is also often used instead of ‘e�ciency’. most often, ‘e�ciency’ refers to an input/output ratio (for example, total unit cost of products produced or serviced delivered), while productivity is a measurement of output/input (for example, units produced per employee). kiss, ibid. 171–172, endnote 4. 26. an organization is more e�cient than another if it is able to produce the same level of output by using fewer input resources, or is able to produce http://unpan1.un.org/intradoc/groups/public/documents/un/unpan025110.pdf http://www.unescap.org/pdd/prs/projectactivities/ongoing/gg/governance.pdf more outputs from the same amount of inputs. outputs contribute to the achievement of shorter term outcomes and longer term impacts (which address social needs), e�ectiveness refers to how much outputs contribute to expected outcomes. actual measured impacts are often dependent on environmental factors as well. kiss, ibid. 165. kiss indicates that the performance of public service is generally described by the 4e model, referring to economy, e�ciency, e�ectiveness, and equity as building blocks of public service performance. kiss, ibid. 157. 27. yap, supra n. 22, at 3, cited by komáromi, supra n. 7, at 114. footnote 25. 28. boda, supra n. 6, at 9. 29. boda, ibid. 9. 30. art. 25. every citizen shall have the right and the opportunity, without any of the distinctions mentioned in art. 2 and without unreasonable restrictions: (a) to take part in the conduct of public a�airs, directly or through freely chosen representatives; (b) to vote and to be elected at genuine periodic elections which shall be by universal and equal su�rage and shall be held by secret ballot, guaranteeing the free expression of the will of the electors; (c) to have access, on general terms of equality, to public service in his country. 31. komáromi, supra n. 7, at 108. 32. komáromi, ibid. 108. 33. �e majority of scholars are of the opinion that direct democratic processes may reduce the e�ciency of a political system in the short run. popular rights can restrict the government’s scope of action. �e more participants have a share in decision-making, the more information, opinion-forming, co-ordination, con�ict-regulation, mobilisation etc. are required. however, these additional costs may be recovered in the long run. komáromi, supra n. 7, at 114. 34. komáromi, ibid. 108. 35. jános frivaldszky, a jó kormányzás és a helyes közpolitika formálásának aktuális összefüggéseiről [on the present context of good governance and shaping proper public politics], 61, in szabolcs szigeti (ed.), a jó kormányzásról: elmélet és kihívások [on good governance: �eory and challenges] (jtmr faludi ferenc akadémia – jezsuita európa iroda-ocipe magyarország – l’harmattan, 2012), cited by ádám rixer, �e relationship between civil organisations and public administration in hungary, with special regard to their participation in legislation, 253, in andrás patyi, ádám rixer (eds.), hungarian public administration and administrative law (passau, schenk verlag, 2014). 36. boda, supra n. 6, at 18. 37. norbert kis, �e quality of governance and its assessment, in krisztián kádár (ed.), good governance: international dimensions, 71 (budapest, national university of public service, 2015). 38. kis, supra n. 37, at 71. 39. boda, supra n. 6, at 18. 40. gerald e. caiden, undermining good governance: corruption and democracy, 5 asian journal of political science, 1–22 (1997). 41. however poverty may also lead to corruption. jonada tafa, examining the relationship of corruption with economic growth, poverty and gender inequality albanian case, 192–193, 1 european journal of social sciences education and research (2014). 42. komáromi, supra n. 7, at 112. 43. komáromi, ibid. 112. 44. komáromi, ibid. 112. according to komáromi direct democratic decision-making processes can enhance transparency from many aspects. compared to representative decision-making, where a signi�cant part of the process runs behind the scenes – in hidden debates of party boards, members of the coalition, experts, interest groups and commissions – the steps of direct democratic actions are much more transparent. peter müller, elemente direkter beteiligung auf bundesebene: ein plädoyer für mehr demokratie in der aktiven bürgergesellschaft, 736, 733–744, in stefan brink, heinrich amadeus wol� (eds.), gemeinwohl und verantwortung: festschrift für 10.1080/02185379708434101 https://doi.org/10.1080/02185379708434101 hans herbert von arnim zum 65. geburtstag (berlin, duncker & humblot, 2004), cited by komáromi, supra n. 7, at 112. footnote 20. 45. boda, supra n. 6, at 18. 46. boda, ibid. 17. 47. boda, ibid. 17. 48. kis, supra n. 37, at 45. 49. see some of these de�nitions: péter váczi, �e institution of good administration in the council of europe, 1–2. https://www.law.muni.cz/sborniky/cofola2008/�les/pdf/sprava/vaczi_peter.p df (accessed 5 january 2016). 50. european union charter of fundamental rights, art. 41. it is also important that the e�ects of the principles of ‘good governance’ on administration appear in a legally relevant form in the charter of fundamental rights of the european union (art. 41), but are detailed only in the ‘european code of good governance’. �e code basically covers the bodies of the european union but through the european administrative area it has also ‘sneaked into’ the public administration of member states. rixer, supra n. 6, at 121, footnote 360. 51. �is is an evidence of the existence of a common european background in relation to administrative procedure and good administration. chiti, mattarella, supra n. 11, at 139. 52. eva nieto-garrido, isaac martín delgado, european administrative law in the constitutional treaty, 86 (oxford, hart, 2007), cited by chiti, mattarella, ibid. 139, footnote 14. however, it is unavoidable, that the concept of good administration keeps seeping into national law through the work of domestic court. 53. recommendation cm/rec(2007)7 of the committee of ministers to member states on good administration. �e council of europe has been active in the �eld of good administration, and started its work in the sphere of administrative law already in 1977 when its �rst resolution on the protection of individuals with regard to actions of administrative authorities was issued. (adopted by the committee of ministers on 28 september 1977 https://www.law.muni.cz/sborniky/cofola2008/files/pdf/sprava/vaczi_peter.pdf at the 275th meeting of the ministers’ deputies). although in its text there is no speci�c reference to the term ‘good administration’ either, but there are a number of principles designed to achieve this end. chiti, mattarella, supra n. 11, at 138. 54. kis, supra n. 37, at 45. for the recent development of transparency regulations in hungary see kis, ibid. 73–74. 55. �ese requirements of the formal rule of law have been interpreted by the hungarian constitutional court in many decisions [56/1991. (xi. 8.) constitutional court decision, abh 1991, 454, 456; 8/2011. (ii. 18.) constitutional court decision, abh 2011, 49, 79]. see andrás patyi, andrás téglási, �e constitutional basis of hungarian public administration, 205, in andrás patyi, ádám rixer (eds.), hungarian public administration and administrative law (passau, schenk verlag, 2014). 56. chiti, mattarella, supra n. 11, at 138. 57. chiti, mattarella, ibid. 138. 58. jan klabbers, anne peters & geir ulfstein, �e constitutionalization of international law, 63 (oxford university press, 2009). 59. although the whole practice of state power shall be bound to legal regulations and respect of the rule of law, there is a constant tension between direct democracy und rule of law. see andreas auer, direkte demokratie und rechtsstaat, 31–42, in giovanni biaggini, georg müller, jörg paul müller & felix uhlmann (eds.), demokratie – regierungsreform – verfassungsfortbildung: schwerpunkte aus dem wissenschaftlichen werk von rené rhinow dargestellt von schülern, kommentiert von freunden und kollegen (symposium für rené rhinow zum 65. geburtstag) (basel, helbing lichtenhahn verlag, 2009). from earlier literature see further werner kägi’s basically theoretical paper preferring ‘demokratischer rechtsstaat’ rather than ‘rechtsstaatliche demokratie’: werner kägi, rechtsstaat und demokratie (antinomie und synthese), 107–142, in demokratie und rechsstaat: festgabe zum 60. geburtstag von zaccaria giacometti (26. september 1953) (zürich, poligraphischer verlag, 1953); and hans schneider’s work which comes to a negative evaluation of direct democracy on the basis of practical experience: hans schneider, 10.1093/ acprof:oso/9780199543427.001.0001 10.1093/acprof:oso/9780199543427.001.0001 volksabstimmungen in der rechtsstaatlichen demokratie, 155–174, in otto bachof, martin drath, otto gönnenwein & ernst walz (eds.), forschungen und berichte aus dem ö�entlichen recht: gedächtnisschrift für walter jellinek, band 6 (münchen, günter olzog verlag, 1955); cited by komáromi, supra n. 7, at 111, footnote 15. 60. klabbers, peters & ulfstein, supra n. 58, at 63. 61. anthony wilfred bradley, keith d. ewing, constitutional and administrative law, 105 (12th ed., london and new york, longman, 1997). 62. �eodore fortsakis, principles governing good administration, 11, european public law, 207, 217 (2005). 63. according to lászló trócsányi a possible justi�cation for the denomination ‘basic law’ in lieu of ‘constitution’ is that a reference to the historical constitution appears in the text of the basic law and the constitutional legislator intended to declare in the basic law that hungary honours the achievements of the historical constitution and the holy crown, which embodies the constitutional continuity of hungary’s statehood and the unity of the nation. trócsányi’s opinion is that, by applying the denomination ‘basic law’, the constitutional legislator indirectly declared the importance of the achievements of the historical constitution, which enables the judicial bodies to make references thereto. lászló trócsányi, �e creation of the basic law of hungary, 10, in lóránt csink, balázs schanda & andrás zs. varga, �e basic law of hungary: a first commentary (dublin, clarus press, 2012). 64. �e previous constitution of hungary was originally adopted in 1949, during the soviet occupation of hungary. in 1989 during the change of the political system the legislature approved a total amendment of the constitution, though formally (de jure) hungary remained the only one among the former post-socialist countries that had not adopted a new constitution after the fall of communism, since 2011. in spite of these, we refer to the hungarian constitution since 1989 as a new one, because in the sense of it content, it became a ‘rule of law constitution’. patyi, téglási, supra n. 55, at 205. 65. about the methods of how the constitutional court of hungary handled the adoption of the new constitution and how the new constitution in�uenced the protection of basic human rights in the jurisprudence of the constitutional court see thoroughly: andrás téglási, �e protection of fundamental rights in the jurisprudence of the constitutional court of hungary after the new fundamental law entered into force in 2012, 77– 93, in zoltán szente, fanni mandák & zsuzsanna fejes (eds.), challenges and pitfalls in the recent hungarian constitutional development: discussing the new fundamental law of hungary (paris, éditions l’harmattan, 2015). 66. �e �rst chapter of the hungarian fundamental law is identi�ed as national avowal. according to lászló trócsányi the national avowal is more than a preamble as a conventional element of national constitutions. in its content it resembles a festive declaration, but it does not place emphasis on the celebratory statement of the rights of the individual. trócsányi, supra n. 63, at 10. 67. kis, supra n. 37, at 34. 68. �e hungarian government has been received severe international criticism for violation of rule of law standards since the constitutional process for the new fundamental law started in 2011. however, according to norbert kis, the government has the power, depending upon its political/parliamentary strengths, to amend the constitutional conditions of the rule of law. kis, supra n. 37, at 49. 69. �e fundamental law regulates due process regarding administrative and judicial proceedings in two separate articles: xxiv and xxviii; art. xxiv para. 1 �lls a lacuna uncovered by the practice of the constitutional court by the formulation of the right to fair administration. �is adds a general meaning to the right to and requirement of a due process and the elements thereof, exceeding the range of criminal procedures. �is right has not been mentioned in the constitution in relation to administrative proceedings, but the constitutional court derived it from the right to a fair and impartial court hearing and the procedural guarantees emerging from the notion of rule of law. zsolt balogh, barnabás hajas, rights and 10.1556/2052.2016.57.2.7 https://doi.org/10.1556/2052.2016.57.2.7 freedoms, 95, in lóránt csink, balázs schanda, & andrás zs. varga, �e basic law of hungary: a first commentary (dublin, clarus press, 2012). 70. balogh, hajas, ibid. 96. 71. balogh, hajas, ibid. 96. 72. �e set of hungarian reforms dubbed the magyary programme are a clear, and furthermore, somewhat extreme example of centralization. gellén, supra n. 1, at 67–68. 73. all of these concepts are aimed at bettering state activities and functions while complying with the requirements of the e�ective and e�cient administration under the rule of law. 74. rixer, ibid. 52. 75. tamás kaiser, introduction, in good state and governance report 2015, 1, http://ati.uni-nke.hu/uploads/media_items/good-state-andgovernance-report-2015-�nal.original.pdf (accessed 5 january 2016). 76. rixer, supra n. 3, at 135. 77. rixer, ibid. 139. 78. lászló konrád, reorganization of the hungarian regional public administration – in the centre: district o�ces, 222, in csilla gömbös, jános kálmán & barna arnold keserű (eds.), global and local issues from the aspects of law and economy (győr, univeristas nonpro�t kft. – batthyány lajos szakkollégium, 2014), http://blszk.sze.hu/images/dokumentumok/kiadv%c3%a1nyok/tanulm% c3%a1nyk%c3%b6tet/ny%c3%a1ri%20egyetem%202014/konr%c3% a1d.pdf (accessed 5 january 2016). 79. according to art. p) of the fundamental law of hungary natural resources and the cultural assets shall form part of the nation’s common heritage, the state and every person shall be obliged to protect, sustain and preserve them for future generations. 80. magyary programme (2012) 6. 81. �e importance of the adequate human resources cannot be overemphasised. �e creation and the sustainability of good governance, good http://ati.uni-nke.hu/uploads/media_items/good-state-and-governance-report-2015-final.original.pdf http://blszk.sze.hu/images/dokumentumok/kiadv%c3%a1nyok/tanulm%c3%a1nyk%c3%b6tet/ny%c3%a1ri%20egyetem%202014/konr%c3%a1d.pdf administration and the rule of law is inconceivable without well trained, well positioned and well educated public servants – being law enforcement o�cers, o�cers of the army, civil servants, or only employees of the government. �is gives one of the reasons for the missions of the national university of public service. 82. �e un member states are committed to an open, equitable, rule-based, predictable, and non-discriminatory multilateral trading, and �nancial system. public governance, administration and finances law review vol. 8. no. 1. (2023) • 121–137 . © the author 2023 doi: 10 .53116/pgaflr .6811 central european with a post-socialist limp on the slovene legal identity marko novak* ¤ * full professor, european faculty of law and faculty of government and european studies, new university, nova gorica, slovenia, e-mail: marko .novak@epf .nova-uni .si abstract: according to david and grasmann, the recognised comparative law scholars, there are basically three main criteria for differentiating between legal families and their subgroups: 1 . meta-legal considerations; 2 . legal sources; and 3 . dogmatic legal structures . concerning the last two criteria, which could also be designated as formal elements of a  country’s legal identity, slovenia has been deeply “immersed” in the civil law of a central european type . even after the decline of the habsburg empire, what remained to apply on the territory of nowadays slovenia as part of the then kingdom of yugoslavia, was to an important extent austrian law . moreover, even the “decadent capitalist code” such as the allgemeines bürgerliches gesetzbuch (abgb) more or less survived in spite of the communist “withering away of the state and law”, and can today still be applicable to some older cases . after one thousand years of germanic dominance, the slovenes turned to the east in trying to build their national identity, one hundred years ago when the empire collapsed . although that seemed to be a  necessary move towards stronger national identity, it was their first step away from the rule of law . the second step away from that was the period of communism that endured almost half a  century . nevertheless, the formal part of the central european legal identity somehow survived in slovene law, with certain “injuries” of course, but it is mainly the meta-legal considerations, their sociological and psychological elements in particular, that nowadays make a difference between the situations of the rule of law in the republic of slovenia and, for example, in the republic of austria, both parts of the onetime joint empire . keywords: legal culture, legal consciousness, slovenia, formal law, informal law 1. the slovene historical overview in a nutshell at the beginning of christian times, the territory of the present slovene state was an integral part of the roman empire, which was mainly populated by celtic and illiric tribes, to a  certain extent romanised . at the great migration period, between the 4th and 6th century, a  number of germanic tribes crossed the territory on the way to nowadays italy, leaving behind only pieces of the onetime great empire . thus, when https://orcid.org/0000-0001-8401-2567 mailto:marko.novak@epf.nova-uni.si 122 marko novak public governance, administration and finances law review • vol. 8. no. 1.  slavic tribes moved here, in the 7th century, they faced almost an empty territory (granda, 2008, pp . 16–42) . the slavs established at least two barbaric micro states: the dukedom of carinthia is quite well documented,1 which is not exactly the case concerning the dukedom of carniola . when the slavic tribes were baptised, their barbaric states lost sovereignty to be subdued first by the bavarians and later the franks to eventually become part of the frankish kingdom (granda, 2008, pp . 42–47) . the slavs brought with them their tribal customary law, and also got in touch, at least indirectly, with roman law (ius civile). moreover, with the process of early feudalisation in the frankish kingdom of charlemagne, they needed to apply frankish state feudal law (such as capitularies) (vilfan, 1996, p . 23) . with the fall of the frankish kingdom, the slovene territory remained part of the holy roman empire (ethnically german) (granda, 2008, p . 53), in which a plurality of customary legal sources (territorial customs) as well as canon law applied . in the late medieval period, a very significant influence on legal culture came from the reception of roman law (gradually ius commune as the “learned” law of law faculties was developed, based on roman law, canon law and parts of feudal law) (škrubej, 2010, pp . 225–228), as well as from newly emerging town law (vilfan, 1996, p . 146) . more than one thousand years of germanic dominance ended with the fall of the habsburg empire after the first world war . due to such long-term historical influence, in terms of comparative law criteria, the slovenian legal system is generally considered to be a typical central european legal system within the broader civil law family . one of the strongest incentives shaping the slovene legal identity was the austrian civil code (abgb),2 adopted in 1811, that de facto applied in part all the way until 2002, when the slovene code of obligations was enacted, which not only broke with the former yugoslav obligational relations act, but also finally with the abgb.3 moreover, until 1919 when the university of ljubljana was established with the faculty of law being one of the founders, the education of lawyers was predominantly austrian, and thus in german language .4 moreover, especially in constitutional law and legal theory, great intellectual 1 thanks to the writing by the archbishop of salzburg, conversio bagoariorum et carantanorum, from 871 (škrubej, 2010, pp. 104–106). 2 based on the “revolutionary” federal yugoslav statute of 1946, which repealed all pre-second world war legislation, the abgb was also formally repealed but still remained in force de facto, since major civil legislation (in the area of torts, contracts, real estate and inheritance) was enacted only in the ’70s of the previous century. if the abgb had not applied in some manner, there would have been large gaps in the law in civil legislation for several decades (pavčnik, 2007, pp. 397–398). 3 until 2002, the contract of donation was regulated solely by the abgb, which was one of the reasons why the relevant abgb provisions were applied between 1978 and 2002. finally, the contract of donation was included in the slovene code of obligations, in 2002. 4 the slovene legal terminology was basically established 151 years ago when attorneys began to be appointed by the slovene bar association, instead of the austrian king, and the use of slovene language started to be at least partially allowed in offices and courts (razdrih & premzl, 2018). the crucial year for this development was the revolutionary year of 1848, when statutes were decided to be published in all major languages of the monarchy (babnik, 1894). 123central european with a post-socialist limp public governance, administration and finances law review • 1. 2023 inspiration for slovene lawyers to last for decades came from hans kelsen, the famous austrian professor of law and judge .5 after the decomposition of the austrian–hungarian empire, the slovenes finally stepped out of the long-lasting germanic influence to join croats and serbs and other yugoslav nations in what was after 1929 called the kingdom of yugoslavia (or, colloquially, the “old” yugoslavia) . that country was a unitary constitutional monarchy dominated by the serbian king, in which serbian nationalism was constantly in tension with the aspirations of other nations, mostly the croats as the second biggest nation . although the old yugoslavia was formally more promising than before for the development of slovene nationality and their “own” law, e .g . there was own university legal education possible for the first time, and what applied in the territory of slovenia was mostly slovene and old austrian law, the actual grounds for legal development were far from ideal . although the first yugoslav constitution was adopted democratically in 1921, it was soon replaced by a constitution imposed by the king . due to constant national tensions, a greater wave of the unification of laws, mainly in the area of criminal law, came not until the last decade of the monarchy, when the king’s dictatorship ruled . the old yugoslavia was generally not fertile soil for the rule of law, democracy and human rights to flourish . however, compared with the life in the austrian–hungarian monarchy, there was a slight step forward for the slovenes in their continued building of national identity, creating potentials for own statehood to come in less than a century thereafter, and making at least the contours of what later became their own legal system .6 still the overall legal culture in the old yugoslavia decreased in comparison with the one existing especially in the last decades of the habsburg empire, especially after the bourgeois revolution in 1848, when greater autonomy of the nations within the monarchy, constitutionalism and human rights including language rights of the nations were emphasised . after the second world war, slovenia was recognised as a separate republic within the federal (new) socialist yugoslavia, having its own constitution and legal system in the framework of the federal constitution and legal system . it was another step forward towards the “final self-determination” of the slovenes on their way to achieving statehood . however, the totalitarian system of socialism, preventing democracy and human rights, and the communist idea of “withering away of state and law”, in which the principle of the rule of law was not very high in the social pyramid of values, were serious obstacles for a prosperous legal culture to develop . in the communist yugoslavia, all the pre-war laws were officially annulled immediately after the second world war by a special law, which means that the principle of discontinuation regarding the previous law was introduced . for that reason, soon after the war a new constitution was established as well as new laws 5 it was his reine rechtslehre and particularly the general theory of law and state, which determined the curriculum of all kinds of courses in legal theory and legal philosophy for decades to come, not only in slovenia but in the whole region. furthermore, the first dean of the ljubljana law school was his student and fellow discussant (pitamic, 2005). 6 there were certain legal acts by an autonomous slovene government enacted (called “naredbe”) in 1918 when the habsburg monarchy was falling apart and the slovene did not yet join the croats and the serbs in a new state (škrubej, 2010, pp. 298–301). 124 marko novak public governance, administration and finances law review • vol. 8. no. 1.  introduced mainly in the area of criminal law, where “political” crimes against the state were severely punished, nationalisation regarding large areas of land and factories took place, and also an agrarian reform was implemented . furthermore, in the area of civil law when large gaps in the law were faced, the austrian abgb de facto still applied,7 all the way until the late ’70s when the new obligational relations act, inheritance act and basic ownership relations act8 were enacted, replacing the abgb, however, not entirely . 2. independent slovenia’s legal identity: “returning” to central europe after the collapse of communism in central and eastern europe and yugoslavia’s disintegration, the republic of slovenia was established, which in its constitution of 1991 left out the elements of socialist law and “promised” to return to the classical legal family of civil law, the central european subgroup . what is typical for that subgroup is inter alia a  well-developed dogmatic structure thanks to the strong influence of the reception of roman law including the pandectist movement, a  great role of legal academics, and the influence of the german bgb and the austrian abgb. according to article 1 of the constitutional act to implement the rs constitution,9 slovenia relied on the principle of continuity with the former yugoslav and socialist slovene law unless it was contrary to the new constitution of 1991 . all major laws from the communist period were indeed superseded by slovene ones: e .g . following denationalisation and privatisation laws, the first criminal substantive and procedural laws were adopted in 1994, whereas major civil laws in 2002 (the code of obligations and the real estate code) . however, our inheritance act is still from 1976, in which only a  small number of provisions were substituted due to the new constitutional order . technically, you can even found a law from 1946 that would be still applying, at least in part . the idea that the slovene law was to “return” to the central european subgroup of the civil law legal family after the communist “experiment” seems to be obvious . according to david and grasmann, there are basically three criteria to determine a legal system’s place in the comparative law taxonomy: legal sources, dogmatic legal structures and meta-legal considerations (david & grasmann, 1988) . what follows from those criteria is their formal and informal aspects .10 7 even though it was officially abolished along with all other pre-war laws, it actually remained to apply with some limitations stemming from the constitution and other leges specialis, at least when it concerned the prohibition to own private property beyond a certain limit. 8 dealing with real estate law. 9 off. gaz. rs, nos. 33/91-i and 21/94. 10 cf. zweigert’s and kötz’s five criteria of classification including historical background and development, a predominant and characteristic mode of thought in legal thinking, distinctive institutions, the kind of legal sources a legal system acknowledges and the way it handles them and its legal ideology (zweigert & kötz, 2011, p. 68). 125central european with a post-socialist limp public governance, administration and finances law review • 1. 2023 according to the traditional role of legal sources, slovenia would be a country of the austrian law-oriented member of the central european subgroup of the civil law legal family . the decisive factor for that was the historical influence of the austrian law, in the area of civil law mostly the abgb. it was already emphasised that the code remained to apply in slovenia even after the empire’s falling apart and was, together with large parts of other austrian laws from other areas, in force there until 1946, when it was formally repealed by the communists . still, under the communist rule there was no civil law legislation adopted until the ’70s,11 the abgb remained in force de facto, and remained as such for certain areas of law (such as the contract of donation) all the way until 2002 when the slovene code of obligations and the real estate code were enacted, already in the second decade of the (independent) republic of slovenia . nevertheless, slovenia did not opt to re-adopt a great civil code like it had existed before . the strong historical influence of austrian law was more or less also exerted in other fields of law, e .g . in criminal law and administrative law . although there was some legislative activity in the kingdom of yugoslavia, the basic tenets from the historical predecessors remained, which could also hold true, to some extent, for the period of communist yugoslavia except for those areas that were changed for ideological reasons . concerning the dogmatic structures criterion, it needs to be said that there has been a great influence of roman law in the area of civil law, which was manifested through several waves of reception, and the teaching thereof at the university, where the concept of ius commune was created (robinson et al ., 2000, pp . 106–124), consisted of roman law, canon law and parts of feudal law, which even formally, however subsidiary if there was no local legal custom, applied in the holy empire . associated with that is the tradition of great abstraction, generality and systemisation of law, which contributed to its typical dogmatic structures . when the above-mentioned first two criteria are concerned, the slovene legal system seems to be a typical central european legal system within the legal family of civil law . however, when it comes to the third criterion, i .e . meta-legal considerations, which include historical, psychological and sociological circumstances, the situation is already quite different . this criterion is more specifically studied in the confines of legal sociolog y, and is usually depicted as legal culture, being an informal rule of law or legally oriented social behaviour . in comparison with older european democracies within the subgroup of central european law, it seems that this criterion in particular shows why the slovene legal system has not yet returned fully to its historical family . this also seems to be a common feature of other ex-communist countries in central european, such as poland, hungary, the czech republic, slovakia and the countries in ex-yugoslavia . their desired transition from the group of socialist/communist countries to the traditional group of central european legal systems was also not fully successful . theorists who deal with such issues suggest that we should have the group of post-socialist countries as a special subgroup within the legal family of civil law . the mentioned countries share certain common characteristics, such as lower trust of their people in legal 11 1978 – obligational relations act; 1976 – inheritance act; 1976 – marriage and family relationships act; 1980 – basic property relations act. 126 marko novak public governance, administration and finances law review • vol. 8. no. 1.  institutions and the rule of law in general, too frequent changes in legislation, court delays with long duration of proceedings, legal formalism, etc . (kühn, 2011; manko, 2013a; manko, 2013b, pp . 207–233; uzelac, 2010, p . 377) . from the formal point of view, there is no huge difference between post-socialist laws and their fellow legal systems of older democracies in the same subgroup of central european states .12 what makes a difference is legal consciousness or the informal part of legal culture, which proves that the idea of the rule of law has not yet sufficiently been normatively integrated among the people after the transition . 3. slovene post-socialist legal culture 3.1. a concept of legal culture it is a  commonplace today to deal with ‘legal culture’ instead of merely with (formal) ‘law’ when we try to come to a  broadest possible picture of law . this kind of shift of attention in the definition of law from formal (or ‘positive’) law to ‘law in practice’ seems to have become important with the advent of sociolog y, and subsequently legal sociolog y, and also the relevance of psycholog y in law, when sheer legal positivism was departed from in order to take into account a  more comprehensive notion of law in society . in this context it is important to consider pound’s (1910) differentiation between “law in books” and “law in action” since these two syntaxes when juxtaposed can have a  very different meaning, not being mere reflections of each other . as we will see in the continuation, this is of additional importance when different legal cultures are compared with one another . the concept of legal culture was introduced in legal science by friedman in 1975 . it was derived from the concept of general culture being either everything human in opposition to the natural or biological (being a broader definition of culture) or what is as such culturally specific (as a narrow definition of culture) (silbey, 2001, p . 8624) . friedman, who found that there is 1 . internal legal culture being a culture of legal professionals; and 2 . external legal culture composed of the general public’s attitude toward the law, conceived it as those parts of the general culture such as customs, opinions, ways of doing and thinking that bend social forces toward or away from the law (friedman, 1975, p . 15) . in the context of such what interested him were a) the “social and legal forces that make the law”; as well as b) the “impact of the law on the behaviour in the outside world” (friedman, 1975, p . 3) . he was aware of the fact that patterns of social attitudes and behaviour towards law and legal systems vary depending on specific legal cultures, groups, organisations or states (friedman, 1975, p . 194) . legal culture (considered as a collective or social concept) as well as legal consciousness (more used to depict individual perceptions) are concerned with the understandings and meanings of law, legal institutions, and legal actors that circulate in social relations (silbey, 2001, pp . 8623–8624) . both the mentioned concepts became of interest for legal 12 slovenia is for that reason frequently compared with their northern neighbour austria. 127central european with a post-socialist limp public governance, administration and finances law review • 1. 2023 scholars when formal legal institutions (such as formal legal materials, formal offices and institutions) and everyday social relations began to intersect and share cognitive resources .13 according to varga, the concept of legal culture is intended “to express how people experience a legal phenomenon, conceived as a kind of objectified potentiality; how and into what they form it through their co-operation; how and in what way they conceptualise it, and in what spirit, frame and purpose they make it the subject of theoretical representation and operation . in the beginning, it was “sociological interest that brought the conceivability of such an interest into jurisprudential thought” (varga, 1992, p . 82) . legal culture has become an interesting subject of study not only in general jurisprudence and legal sociolog y but also in comparative law . this was an evolution made in recent decades, since from the beginning of the 20th century within comparative law the main focus was on (legal sources and particularly) civil law when the general jurisprudence and also other legal disciplines were very much influenced by positive law . the interest in comparative legal cultures rather than just comparative law could also be considered a shift of attention from positivistic to more multidimensional accounts of law in particular societies . before it is discussed in what manner the slovene legal ‘system’, or better called legal ‘culture’,14 deviates from all the typical characteristics of the central european subgroup, we need to describe at least the basic tenets of the (ideal) model of such legal culture . then it becomes easier to discuss departures from the model . a model that integrates elements of formal and informal law can be designated as an integral model of legal culture . according to friedman, in relation to informal law, legal culture or its informal part is further divided into ‘internal’, being the culture of legal professionals, and ‘external’ legal culture, as the legal culture of ordinary people . moreover, a model according to a four-dimensional concept of law is built, in which the four elements of legal norms, legal values, legal relations and adr elements inseparably converge (novak, 2016) . 3.2. the integral concept of legal culture one way of defining it is through a  three-dimensional theory of law15 as developed by reale and other legal philosophers, mainly associating law with its three basic features such as legal norms, legal values and legal relations . this theory of law is otherwise also known as the integral theory of law . it finds the elements of law such as legal norms, 13 there are basically two approaches to studying legal culture: a) taking it as an analytical concept within a theory of social relations; and b) dealing with it as concrete measurable phenomena (silbey, 2001, p. 8625). 14 when ‘informal’ characteristics such as meta-legal considerations are added to the ‘formal’ portrait of a legal system, the thusly composed entire picture, of formal and informal law, is begun to be called (legal) ‘culture.’ 15 the founder of this theory was allegedly kantorowicz, who already at the beginning of the 20th century developed the following trialism: legal philosophy, legal dogmatics and legal sociology (kantorowicz, 1925; pokrovac, 2018). this theory was in the global context mostly propagated by reale (1968); see also lima (2008). one of the most influential adherent of this theory in former yugoslavia was visković (1976). however, the three-dimensional theory of law is still alive – see in particular falcón y tella (2010). 128 marko novak public governance, administration and finances law review • vol. 8. no. 1.  social values and social facts as being part of an integral whole . this means that any of these elements cannot be understood alone – but all of them can only be comprehended in the whole: any fact in these legal worlds (i .e . legal norms, legal values and legal relations) has an impact on the two other worlds (visković, 1976, p . 112) . every aspect of this theory: i .e . legal norms, legal relations and legal values constitutes the whole and, vice versa, the whole is expressed through any of them . for example, due to an economic crisis, a state introduces a new tax to burden real estate valued 1 million euros or more, by amending tax legislation in order to fight the crisis . certainly this amendment would have normative (positive law) consequences that are easily recognised in the legal system as certain legal rules are changed . from the axiological point of view this would have positive effects at least for a majority of people as they would perceive such a measure as justified as imperatives of social justice were allegedly followed . moreover, this would also have implications on legal relations (both between individuals as taxpayers and the state and between the taxpayers themselves in their transactions that are “taxed”) . this normative change of legal rules would on the one hand “activate” the axiological dimension in society and also the sociological-psychological dimension in the sense that some people would try to evade this tax and would try to seek gaps in the legal regulations of this tax . furthermore, the (meta) principle of the rule of law, being the apex of legal culture, can be understood in the sense of the integral theory of law . in this context what can be understood under the normative-dogmatic component of the rule of law is a set of (positive or formal) legal rules and legal principles (i .e . legal norms), which are part of a legal system, either in the form of general legal acts (constitution, statutes, executive regulations), which are generally created in the process of law creation, or individual legal acts (judgements, orders, decisions) that are basically made in the process of law application . the axiological dimension of the rule of law would moreover indicate how the positive law is a reflection of dominant social (or individual) values such as legal certainty and justice . as the social component of the rule of law we could reflect on the (informal) legal culture in a certain state, or how the rule of law as the normative-dogmatic concept is perceived in the society referring to legal consciousness or normative integration about the rule of law in such a society . as to this aspect of the rule of law we want to know how its normative-dogmatic aspect “works” in the real world – how it is reflected as a fact in legal relations . to these three dimensions (legal norms, legal values and legal relations) this author has added a  fourth dimension which is resolving social conflicts by adr techniques (novak, 2016) . these are alternatives to formal legal proceedings . they are complementary to the operation of the rule of law in a state and society, as they contribute to resolving social disputes out of court and thereby help courts operate more efficiently . therefore, to form a concept of legal culture one needs to extend one’s concept of law or legal system being composed of these four dimensions, into comprehending that legal system both formally and informally . this actual dimension of legal culture is very important because often two legal cultures could appear quite close concerning formal legal 129central european with a post-socialist limp public governance, administration and finances law review • 1. 2023 norms, but are in fact very apart regarding how these formal norms work in practice, or what the attitude of people is towards such norms . hence we deal with the sociological and psychological aspect of formal legal norms . the same would apply to a distinction between the formal and actual aspects of legal values and legal relations, as well as adr methods . thus, a  broad view of legal culture includes both formal law (like pound’s law in books), referring to ‘legalistic’ (positivist) or normative-dogmatic aspects of law, and informal law (pound’s law in practice) encompassing axiological, psychological and sociological dimensions of law . it is more than clear that an overall legal culture existing in a certain (state) territory encompasses also the major constitutional principles such as the democratic state and the rule of law principle . moreover, the latter seems to be the synonym for legal norms applying in a  certain legal system as being an overarching principle defining the legal system . what follows is a short analysis of the above-mentioned (four) components of the rule of law, in the sense of its integral conception, of which the normative-dogmatic aspect of the rule of law is dealt with first . firstly, the normative-dogmatic component of the rule of law primarily concerns (positive or formal) legal norms being part of a legal system . this subject matter is usually considered by the general theory of law .16 what are dealt with in this context are legal norms (legal rules and legal principles), legal relations, legal acts, which appear in law creation and law application processes . included with that could also be legal interpretation, gaps in the law and systemisation of law (see novak, 2010, pp . 6–11) . secondly, concerning axiolog y in law legal values are considered with regard to deontolog y or ethics in law . thus the axiological-deontological component of the integral theory of law deals primarily with (ideal) law (and the rule of law) as it ought to be . immanent to/in law are the following values: legal certainty, justice, constitutionality, legality, clearness and determinacy of legal norms, etc . a majority of the mentioned values can be found in the overarching constitutional principle of the rule of law, which seems to be the red thread of all law . moreover, law itself regulates certain values such as human dignity, respect for human beings, etc . (visković, 1976, pp . 105–145) . thirdly, the sociological aspect of law (legal culture with respect to the rule of law) needs to be mentioned which unlike formal normativity addresses an actual state of affairs concerning law and its normativity . from legal sociolog y it follows that for the effectiveness of a legal system legal culture, which stimulates spontaneous law abiding – certainly if there exists a certain consensus or rule of recognition with respect to the legal system as being perceived as democratic and legitimate – is more important than forceful implementation of legal rules by the state or its agents (novak, 2012, pp . 93–105) . legal culture is otherwise a concept from the province of legal sociolog y, however, by its complexity it seems to exceed the frameworks of that discipline since it deals with a  collective legal consciousness that involves all aspects of the integral concept of law 16 according to barberis, a major task of general theory of law is to establish what (positive) law is, while legal philosophy deals with what this positive law ought to be (barberis, 2012, pp. 15–16). 130 marko novak public governance, administration and finances law review • vol. 8. no. 1.  (including legal rules, legal values and legal relations) . to this, the fourth element of the integral theory of law, namely adr as an important component of modern law, could be added . 3.3. the (integral) model of central european (ce) legal culture what needs to be described in such a model, firstly, is its formal law component . when it comes to legal norms, there is a traditional ce requirement that the norms of general legal acts (such as statutes) need to be as short as possible, concise and clear . here one should remember the advice of the german scholar von ihering that the legislature should think as a  philosopher and speak as a  peasant (heindl & schambeck, 1979, p . 189) . a tendency towards systemisation, classification and abstraction within that subgroup historically culminated in the pandectist tradition in the 19th century (robinson et al ., 2000, pp . 273–275) . with respect to individual legal acts (such as court judgements) it has been required that ideal ones must be as short as possible, concise and comprehensible .17 moreover, this subgroup was also very much influenced by hans kelsen and his pure theory of law, in which legal norms are to be arranged in a strict hierarchical pyramid, almost alike with the pandectist tradition or the rationalist german natural lawyers that insisted on a rigid schematic approach (robinson et al ., 2000, pp . 218–220) . also, kelsen importantly contributed to the birth of the european model constitutional court, whose most prominent and model example within the subgroup became the german bundesverfassungsgericht after the second world war . thus, the strong requirement of constitutionality and legality, that lower general legal norms be in conformity with superior ones and individual legal norms consistent with general legal norms, is in the “genes and tissues” of this subgroup’s legal systems . concerning legal values, the ce post-war tradition began with gustav radbruch, his insistence on the importance of human rights as the minima moralia of our civilisation, and his formula of denial (non-law) and unbearableness suggesting, inter alia, that legal norms must contain particularly legal values of moral nature (such as equality, justice, human rights, legal certainty), in a  proper manner and extent (radbruch, 1973, pp . 345–346) . radbruch’s ideas referred to extreme situations of injustice, however, it symbolically presented an important link between law and morality . with respect to legal relations, there is a standard requirement in the ce group, as in any legal system aiming at stability and normative integration (vertovec, 2010), that legal social relations should not be regulated in every detail, and that too frequent changes in general legal acts are not welcome . this is not a  particular feature of only the ce subgroup but may well be a part of any legal system’s model . 17 this is a typical stylistic feature which differentiates the ce subgroup from the western subgroup. for that reason, consider within the civil law family the difference between the style of judgements’ reasoning in germany and france (david & grasmann, 1988). 131central european with a post-socialist limp public governance, administration and finances law review • 1. 2023 finally, concerning adr , such possibilities for dispute resolution must be available to a sufficient extent in the norms of general legal acts, and adr is to be provided as an effective alternative to formal legal procedures . in a  well-organised and functioning society, there should not be too much pressure on courts to resolve disputes, but people should also try the so-called alternative ways to resolve their disputes, which many times contribute to better social effects than court proceedings . it is certainly not possible to say what the right proportion between adr channels available and court proceedings initiated is but the fact that adr facilities exist and people do make use of them points to a conclusion that traditional legal proceedings are not the only manner of resolving disputes . furthermore, the model’s informal law component demands in its a) internal variant, concerning the legal profession, the following : legal norms must be consistently applied in legal practice or there should only be minor discrepancies . if lawyers as legal professionals, so to say the “servants” of the rule of law, do not follow legal norms, how could that be expected from lay individuals? then, legal values should be perceived as appropriately contained in the formal legal system, and legal rules should in general be perceived as consistent with the legal values encoded . if that is not the case, it is very hard to speak of the legitimacy of a legal system, and when trust in the legal system is lost what usually follows is anomie . moreover, with respect to legal relations, (cogent) formal legal relations need to be quite seriously respected in actual legal relations, or only minor discrepancies are allowed thereof . if this is not the case, it is difficult to say that legal norms are generally abided by and that the rule of law generally applies . finally, with respect to adr, its possibilities are relatively frequently resorted to . this points to the fact that there is still trust in less formal ways of dispute resolution . concerning the b) external (non-professionalist) variant of the model’s informal component, relating to legal norms there should be a high degree of normative integration: legal norms are relatively strictly followed in everyday life, or there are only minor deviations . as to legal values, legal norms need to be generally perceived as conforming to legal values, and actual relations should be perceived as legally consistent with legal values . concerning legal relations, there should be a  high degree of normative integration meaning that actual legal relations are not far from formal legal relations . last but not least, there should be a spontaneous use of adr methods in everyday life, and not too many request for disputes to be resolved in formal legal procedures . the model is also presented below in the form of a  table with all essential characteristics . 132 marko novak public governance, administration and finances law review • vol. 8. no. 1.  table 1 . the model of central european legal culture formal law informal law internal legal culture external legal culture legal norms general acts: short, concise and clear individual acts: short, concise and comprehensible; proper time for adoption or issuance proper consistency among general acts and individual with general legal norms are strictly applied in legal practice (negligible deviations) high degree of normative integration: relatively strict abiding by legal norms in everyday life (negligible deviations) legal values contained in legal norms: in a proper manner and extent legal values are viewed as properly incorporated in the legal system legal rules are predominantly viewed as consistent with legal values legal norms are viewed as consistent with legal values actual relations viewed as legally consistent with legal values legal relations legal relations not overregulated changes in general legal acts not too frequent formal legal relations relatively strictly adhered in actual legal relations (negligible deviations) high degree of normative integration: actual relations not too far from formal legal relations adr accessible through legal rules in a proper manner provided as an effective alternative to formal legal procedures frequent applications of adr methods spontaneous application of similar methods in everyday life: formal legal procedures not too frequently requested source: compiled by the author . 4. slovene (post-socialist) departures from the model what needs to be followed is an analysis how a  particular legal culture such as the slovenian departs from a typical (above mentioned) central european model . when slovenia had declared independence, it wanted to return from the group of socialist law countries to the central european family within the european continental legal systems, due to historical influences in this territory mostly from austrian law . for that reason, it even changed its constitution to adopt a new one following the german model . however, today it is impossible to say that the slovene legal culture is central european such as the german, austrian, or swiss since it is (still) quite different from these systems . due to several decades of socialism which have very much changed the pre-war slovene legal system and many elements thereof have not yet been eradicated, it needs to 133central european with a post-socialist limp public governance, administration and finances law review • 1. 2023 be described as a  part of the post-socialist legal culture, which is still in transition . concerning the problems the slovene legal system has been facing there are quite a few resemblances with other former communist systems . in his article on general failings of the croatian legal system when compared with modern developed democracies, which is quite typical for virtually all former yugoslav republics including slovenia, uzelac stems from the position that post-socialist legal systems are necessary heirs of their socialist past . in socialism law was mainly instrumentalised: to serve economic and political policies in order to overcome socially and economically unjust ideals of bourgeois law (uzelac, 2010, p . 377) . this idea is still to some extent reflected in certain fundamental features of post-socialist legal traditions: 1 . a legal process as the tool for the protection of the interests of political elites; 2 . fear of decision-making ; 3 . low but comfortable status of judges; 4 . feminisation of the judiciary; 5 . deconcentrated proceedings; 6 . orality as pure formality; 7 . excessive formalism;18 8 . lack of planning and procedural discipline; 9 . multiplicity of legal remedies that delay enforceability; and 10 . endless cycles of remittals (uzelac, 2010, p . 382) . what about slovenia? how much its rule of law, legal system and legal culture departs from the ideal model described above? if we compare the normative-dogmatic element of the integral theory of law from the ideal model of the rule of law with the one existing in slovenia, we will find certain deviations in the latter from the former . both in the area of law creation as well as law application . in the relation to the first process, general legal acts (particularly statutes and executive regulations) seem to be sometimes too long and not always well prepared, too many in number and too frequently amended . their texts are often too detailed, often they are difficult to be interpreted . legal formalism is still too much embedded in the legal profession . secondly, referring to law application, individual legal acts (i .e . judgments and decisions) are often adopted only until very long proceedings, tend to be quite long and also their language is less comprehensible and their style is sometimes poor, with procedures for their making often being too long . additionally, with respect to legal relations, it follows that slovene social relations are many times legally overregulated . despite the above-mentioned failings of the slovene contemporary legal system, the normative-dogmatic aspect of the legal culture is, however, not the gravest problem of slovene law . in the context of such, slovenia does not seem to depart that much from more developed european legal cultures . thus, one of the main ideas of this chapter is that the problem of our law is not that much of a normative-dogmatic character . we will notice that when a difference between formal and informal elements of the model is concerned, there are greater deviations with respect to the informal elements than the formal ones . in the formal dogmatic-normative sense, our legal system is not ideal but seems to be comparable with other systems in the subgroup . the problem appears when we move from the formal level of the rule of law to its informal level . here we meet the greatest problems, which are typically analysed by sociolog y of law, such as problems with regard to 18 in a similar manner manko has criticised the hyperpositivism of polish (ordinary) courts by arguing that those courts still very much rely on linguistic and logical interpretation instead of also applying purposive interpretation, balancing and legal policies (manko, 2013a; manko, 2013b). moreover, kühn criticised the judiciary of new eu countries as being outmoded and unprepared for new tasks in the eu (kühn, 2011). 134 marko novak public governance, administration and finances law review • vol. 8. no. 1.  normative integration, legal consciousness, legal effectiveness and legal culture (see igličar, 2004) . therefore, concerning the model’s informal law component in its a) internal variant, concerning the legal profession, with respect to legal values, sometimes there is a wish that they be more directly considered in legal practice . also, concerning adr, legal professionals do not often enough make use of adr procedures . concerning the b) external (non-professionalist) variant of the model’s informal component, relating to legal norms there is a low level of normative integration: people less than ideally abide by legal norms in everyday life (e .g . still too many try to avoid taxes, abuse social benefits) . with respect to legal values, legal norms are perceived as often inconsistent with legal values, and actual relations are perceived as legally incompletely regulated with respect to legal values . as to legal relations, there is a low level of normative integration: actual social relations are remoted from legally regulated relations . finally, with respect to adr, there is a  less spontaneous use of similar methods in everyday life – there are still too often requests to have formal legal procedures . the above-discussed slovene deviations are also presented in a special table below, in which they are depicted in italics to be separated from those characteristics where the slovene legal culture meets the model more or less . table 2 . slovene (post-socialist) departures from the model formal law informal law internal lc external lc legal norms general acts: too long and badly prepared; too many; too often changed individual acts: too long and not enough understandable; excessive length of proceedings19 major following in legal practice (minor departures) low degree of normative integration: lack of major following in everyday life legal values contained in legal norms: conformity of legal norms with legal values perceived as properly included in the legal system legal norms perceived as consistent with legal values occasional wish that legal values would be more seriously considered legal norms perceived as often inconsistent with legal values actual relations perceived as not fully regulated in conformity with legal values 19 all those characteristics of post-socialist legal procedures that are mentioned by uzelac in his article contribute to the overall length of legal proceedings (uzelac, 2010, pp. 380–382). 135central european with a post-socialist limp public governance, administration and finances law review • 1. 2023 formal law informal law internal lc external lc legal relations high enough mutual conformity of legal acts (in terms of constitutionality and legality): individual legal acts consistent with general legal acts over-regulated taken into consideration in actual relations (minor departures) low degree of normative integration: actual relations quite apart from legally regulated relations adr properly accessible in legal norms regulated as rather effective alternative to formal legal procedures not frequent enough use of adr less spontaneous use of similar methods in everyday life: too much demand for formal legal procedures source: compiled by the author . 5. going forward? if we want to remedy the defects, deviations, or departures from the model, we need to know the reasons and causes for them . as it was emphasised, there is a  great problem with the informal part than the formal elements of our legal culture . you can replace formal laws as a relatively quick step, but it takes time to change informal patterns . the theory of normative integration points to the effectiveness of law being dependent on how legal norms are internalised, which means that people follow them spontaneously . they internalise legal norms if they take them as being “theirs”, legitimate, meaningful, or simply needed .20 connected with normative integration is the concept of (personal and collective) legal consciousness . ross differentiated formal legal consciousness, which requires that we abide by law, from material legal consciousness that signifies following law that is legitimate (ross, 2004, pp . 54–56) . if legal norms are well-integrated assuming to be legitimate, the collective legal consciousness would be at a higher level, because it would dictate their respect . the level of both normative integration and legal consciousness may result in a greater or lesser effectiveness of a legal system . the connection here is causal: the greater the normative integration and higher the legal consciousness the greater the effectiveness of the legal system . the effectiveness of law could also be viewed either in a  formal manner as the activities of legal authorities, or in a  material manner meaning law application in real life (ross, 2004, pp . 54–56) . if that is below a certain degree, people would not spontaneously follow legal norms, and no control and sanctioning would improve that . 20 what is important here is not only a general situation in the society, but also family upbringing and the process of internalising social norms, which is the subject of study by social psychology and psychoanalysis (see olivecrona, 1971, pp. 246–260). 136 marko novak public governance, administration and finances law review • vol. 8. no. 1.  in slovenia, the level of normative integration, and in relation with such also the most general level of legal culture, is lower than in older western democracies . since that was at a higher level at the time of the austrian–hungarian empire, and perhaps to some extent also during the old yugoslavia (pavlin, 2012), it could be ascribed to consequences of the communist experiment with the “withering away of state and law”, and too slow a  process of revitalisation of the rule of law in the independent slovenia .21 if during socialism, there was a high level of collective consciousness concerning economic and social rights (or welfare state), this cannot be said for the formal aspect of the rule of law and law’s general authority in society . a discrepancy between the normativity and actuality of a legal system and consequently lesser effectiveness occurs when the said dimensions are too much apart . the legal system of the socialist federal republic of yugoslavia (as well as the socialist republic of slovenia) was quite alienated from the slovenes particularly for two reasons: a) it was not democratic having being appropriated by political elites; and b) it was not autonomous in the national point of view . in order that the contemporary legal system works better, given that the mentioned reasons ceased to apply, it would be necessary to raise the level of normative integration and collective legal consciousness . a lower level of legal consciousness from desired has also resulted from many negative stories of economic transition . the entrance into the eu, with the prior incorporation of legislations 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(2011) . an introduction to comparative law . oxford university press . https://ssrn.com/abstract=1124461 https://doi.org/10.1007/978-3-319-30643-8 https://doi.org/10.1016/b0-08-043076-7/02913-2 https://doi.org/10.1016/b0-08-043076-7/02913-2 https://ssrn.com/abstract=2498760 public governance, administration and finances law review vol. 8. no. 1. (2023) • 73–89 . © the author 2023 doi: 10 .53116/pgaflr .6850 principles for the europeanisation of public administration in search of the european procedural administrative principles balázs szabolcs gerencsér* ¤ * associate professor, department of public administrative law, pázmány péter catholic university, budapest, hungary, e-mail: gerencser .balazs@jak .ppke .hu abstract: administrative regimes are no longer isolated phenomena: they are constantly confronted with international influences, which shape the internal structure and system of the states . the cooperation between the european union and the member states’ administration is today a  kind of convergence in principles . this is what the eu expects from the candidate countries and in the neighbourhood policy . the main question of the study is whether the content of the principles used by the eu is cognisable and consistent . the study covers two policy instruments: the sigma project, which is a  joint eu–oecd collaboration, and the comparative legal activities of the reneual . these instruments testify two completely different attitudes: one does not explain the principle but holds it accountable, the other seeks the means to understand its content and the reasons for the differences in interpretations . both programs have undergone internal development, but while sigma has moved away from its administrative procedural roots, reneual has confirmed it . the paper is another argument in favour of the need for administrative research using the tools of comparative law . keywords: eu, oecd, sigma, reneual, principles, accountability 1. integration and sovereignty – the path towards cooperation on fundamental principles 1.1. peaks and troughs the europeanisation of public administration faces constant challenges . ever since the european economic community came into being, the western half of europe has aimed for economic cooperation . in his speech at the university of zurich on 19 september 1946, sir winston churchill mentioned his vision of a ‘united states of https://doi.org/10.53116/pgaflr.6850 https://orcid.org/0000-0002-7469-1313 mailto:gerencser.balazs@jak.ppke.hu 74 balázs szabolcs gerencsér public governance, administration and finances law review • vol. 8. no. 1.  europe’, which has since become the identity-shaping symbol of european international organisations (in particular the council of europe and the european communities) . the initial enthusiasm and desire for unity soon evolved into ‘convergence’, as it became clear how strongly member states were attached to their sovereignty and power positions within europe . this was probably one of the reasons that the expansion of the community’s sphere of competence, and later that of the union, has been such a gradual process . it was also that, until the late 1980s, regional policy and the related statistical cooperation were the most prominent examples of active and genuinely harmonised administrative cooperation . during the decades preceding its codification, the nuts system became an influential factor, by establishing a  link between the territorial structure of member states and statistical reporting . indeed, all member states’ spatial structure have become comparable on a european scale . the transformation into a union in 1992 and the emergence of the ten candidate countries provided further impetus for administrative convergence, or to put it more aptly, the development of a ‘willingness and ability’ for cooperation . the sigma program, to be further discussed below, is a good illustration of the fact that there has been no ‘unification’, in the churchillian sense, in the european union since its beginnings . instead, the focus has been on providing support to individual member states and disseminating good practices in an effective manner . in the first decade of the 2000s, the significance of coordinative and networked bodies, such as the so-called ‘agencies’, increased within the operation of the eu (polt, 2019, pp . 67–70) . the reason for convergence replacing uniformity is that member states are so strongly attached to sovereignty and autonomy . first, it is therefore worth taking a closer look at this issue . 1.2. the external necessity for cooperation among administrations as a forceshaping sovereignty “in society, power is a  fact” (varga, 2020, p . 258) . power, a  conceptual element of the establishment and functioning of the state, is also an essential component of sovereignty (tamás, 2010, p . 67) . sovereignty is conventionally defined as an “actual and theoretically absolute (supreme) power within a  given territory over a  given population, which is acknowledged as such by other similar power holders” (varga, 2020, p . 259) . according to the traditional differentiation between the external and internal aspects of sovereignty, the former includes independence, autonomy and decision-making capacity without external control, whereas the latter includes the right to command and the obligation of subordination (obedience) (varga, 2020, p . 259) . also according to the conventional approach, administration means functioning on the basis of popular sovereignty; in other words, functioning based on a position of power (waldo, 2006) . this way, the relationship between administration and power points to the internal aspects of sovereignty, as administration is an activity of executive power, which results, among other things, in the actual performance of state functions through governance in possession of the state’s authority (varga, 2017, p . 91) . the conceptual 75principles for the europeanisation of public administration public governance, administration and finances law review • 1. 2023 framework makes it clear that, within the public law doctrine, administration is an internal power, characteristic of the state . on a conceptual level, one could stop here, as it is at the discretion of each state to choose the kind of internal set of rules, functioning and implementation; taken altogether, the kind of administration it wants . this diversity is illustrated, for example, by the fact that, in germany, certain aspects of federalism, namely judicial review and parliamentary governance, have supported and applied that public administration should continue to be the ability of general government branches to define and pursue rational policies while respecting constitutional requirements . in france and the united states, however, administrative agencies partly reflect a departure from regular governmental power in order to protect the public interest better (rose-ackerman et al ., 2019) . experience, however, shows that the administration of each state is subject to significant external influences . rather than stemming from power, such influences emerge on the basis that the external and internal aspects of sovereignty continuously interact with and thus influence each other . rather than being seen as isolated phenomena, countries should be interpreted as parts of larger or smaller systems of relationships . these may be bilateral relationships between countries with or without a  common border, looser (political or economic) multilateral cooperations (such as the visegrád cooperation between poland, the czech republic, slovakia and hungary), or a stronger political and legal relationship (such as the european union, the council of europe or other international organisations) . in order to be able to maintain the balance among its diverse external and internal relationship networks, it is necessary for each european country to understand, receive and process the impacts affecting its internal functioning . that attention to external influences may thus also shape the administration . in terms of their legal binding force, these external influences on public administration can be examined from two different aspects: either as a  normative influence, as exemplified by the convention on the rights of the child adopted by the un in 1989, which has shaped the participating states’ child protection legislation . in hungary, this is expressed by imposing a legislative obligation in order to comply with a mandatory international standard . however, the external influence on administration may also be of a cooperative nature, as exemplified by the services of the unpan (united nations public administration network) or the supportive functions of the oecd, to stay within the realm of international public law (heidbreder, 2011, pp . 709–727) . the rest of this paper will focus on normative influences on public administration from the perspective of the european union . 1.3. the europeanisation of administration and administrative law the europeanisation of public administration has been discussed repeatedly and extensively . from the point of view of the analysis presented in this paper, europeanisation includes, in a  broader sense, any influence exerted by the european union on administration and administrative law (grabbe, 2003, pp . 319–320) . on the whole, it is a process that includes activities to set up institutions, create norms, develop procedures 76 balázs szabolcs gerencsér public governance, administration and finances law review • vol. 8. no. 1.  for managing conflicts and resolving problems and to establish formal and informal networks at union level in order to address the challenges posed by integration . on the other hand, it encompasses the changes in national policies, legislation and institutional structures as a  result of union policies and legislation and the rearrangement of the interests of various member states (láncos & gerencsér, 2015, p . 121) . closely related to europeanisation is the concept of ‘european (public) administration’, which has been defined by union law in very general, one might say ‘fogg y’, terms only (reneual, 2014, p . 17 . para . 43) . article 9(3) of the treaty of amsterdam and the first indent of article 24(1) of the treaty of 1965 were replaced by article 298(1) of the tfeu . this provision refers to ‘an open, efficient and independent european administration’ . in the primary (narrowest) interpretation of the term, european (public) administration means the administrative dimension of union law, meaning any piece of union legislation that is applicable to the implementation of eu decisions by union bodies (institutions, offices and agencies) and the organisation and functioning of such bodies (balázs, 2020a, [12]–[19]; torma, 2011, p . 201) . it is not by accident that the term ‘public’ is absent in the tfeu, given that eu executive bodies lack the kind of sovereignty and authority vested in the bodies of member states . therefore, the eu relies on the efficient implementation of its decisions by the public administrations of member states . in its secondary (broad) interpretation, ‘european (public) administration’ therefore presupposes the active participation of administrative bodies of the member states in the implementation of union decisions (balázs, 2020b, 86–87) . given that the implementation of eu decisions, particularly in matters of exclusive or joint eu competence, greatly relies on the administrative bodies of member states, such a broader approach is considered more relevant by the research of eu procedural law discussed below (reneual) .1 the implementation of eu decisions thus creates a direct link between eu law and member state administrative law, which is no longer ‘vague’ but manifests itself in a tangible legal form .2 as administrative norms are traditionally understood on the basis of substantive, organisational and procedural provisions, it is worth examining the administrative law links between the union and the member state on the basis of these guiding principles . it is evident from the treaty on the functioning of the european union (tfeu) that the primary form of the relationship concerns substantive law. as far as the exclusive, shared and supportive functions of the eu are of an administrative nature, they clearly have a substantive law dimension: see in particular competition rules for the single market among exclusive competences [article 3(1)(b) tfeu], agricultural law, environmental protection, consumer protection, transport and energ y among shared competences [article 4(2) tfeu], or any of the supportive, coordinating or supplementary functions under article 6 . such substantive law cooperations between the eu and the member state are provided for in the treaties, while their actual provisions are determined by secondary 1 paragraph i-1(2) of the model rules clearly states that national bodies must also apply the eu procedural rules where they are obliged to do so by eu law (provided, obviously, that they apply eu law). 2 for the purposes of this paper, ‘legal form’ should be understood as referring to both the provisions of an administrative nature in secondary eu legislation and decisions of the cjeu that affect public administration. 77principles for the europeanisation of public administration public governance, administration and finances law review • 1. 2023 legislation, often as a  combination of substantive and procedural rules, similarly to member state law . the eu does not have significant influence on organisational law, given that this field is determined primarily by the characteristics of member state sovereignty as referred to above . similarly, it is obvious that, since the eu strives for efficiency through specific cooperations, it tends to leave the shaping of the organisational framework to the member states . in other words, it does not provide for an explicit organisational norm that would be binding for both union and member state law . the initial distance and respect for member state autonomy have, however, changed and it can now be observed that eu law is capable of transforming the organisational rules of member states . this is exemplified by the increasing prominence of autonomous bodies within central administration, as the independence of those bodies from the government does not fall into the (exclusive) discretion of the member states . for example, recital (8) of the ecn+ directive3 states that “there is a  need to put in place fundamental guarantees of independence, adequate financial, human, technical and technological resources and minimum enforcement and fining powers [ . . .] for applying national competition law [ . . .] so that national administrative competition authorities can be fully effective” . similarly, recital (37) of the european electronic communications code4 provides that the “independence of the national regulatory authorities was strengthened in the review of the electronic communications regulatory framework completed in 2009 in order to ensure a more effective application of the regulatory framework and to increase their authority and the predictability of their decisions” . the secondary legislation is thus capable of formulating requirements that member states are only able to fulfil by also harmonising their organisational rules .5 as far as the provisions of eu organisational law are concerned, territorial administration is the only area where the organisational framework can only be filled by an eu administrative institution and by the explicit cooperation by the member states . these are called european groupings of territorial cooperation (egtc), which were developed with a view to facilitating cross-border, transnational and interregional cooperation between member states and regional and local authorities . egtcs enable partners to carry out joint projects, share expertise and improve coordination in territorial development . an egtc may be set up by partners established in at least two member states (or a member state and one or more non-eu countries) . apart from businesses, however, the parties involved in the cooperation may include national authorities (i .e . administrative bodies), as well as regional and local authorities . the egtcs thus provide an organisation framework for cross-border cooperation, which is able to adapt flexibly to the administrative structure of the member states concerned . 3 directive (eu) 2019/1 of the european parliament and of the council of 11 december 2018 to empower the competition authorities of the member states to be more effective enforcers and to ensure the proper functioning of the internal market (italics added). 4 directive (eu) 2018/1972 of the european parliament and of the council of 11 december 2018 establishing the european electronic communications code (italics added). 5 it should be noted that the authorities under the two examples cited above were identified by the hungarian parliament as autonomous administrative bodies more than a decade before the publication of the aforementioned eu norms. that said, the obligation for harmonisation with eu law still affects an organisational issue. 78 balázs szabolcs gerencsér public governance, administration and finances law review • vol. 8. no. 1.  finally, mention must be made of the eu and member state cooperation on procedural rules. the current rules governing administrative procedures (or procedures of an administrative nature) in the eu are fragmented (i .e . there is no uniform norm) and tend to be industry-specific (della cananea & bussani, 2019) . as part of the substantive law cooperation referred to above, the various industries have developed their procedural guarantees, which have been adopted by both eu bodies and member state administrative bodies applying eu law . the fragmented nature of industry-specific rules has led to a situation where “it is not always possible to have a coherent interpretation of the rules that apply in different sectors, even though they are intended to be similar” .6 however, the harmony and readiness to cooperate between the procedural regimes also draw our attention to an important aspect: while the definition of procedural rules also lies within the exclusive competence of the member state owing to its sovereignty, all procedural rules are based on identical or similar patterns, while public administration is based on similar conditions, the entirety of which may be termed the convergence of fundamental principles. as the following chapters reveal, since the 1990s, procedural law principles have become the driving force for eu convergence, establishing a common denominator for european countries with diverse legal traditions . in particular, the criteria of legality, equality and fair procedure serve as the basis for the functioning of all types of democratic administrative regimes, the mutual recognition of which facilitates cooperation between the member states as well as between eu bodies and the member states . however, how can one get to know what the fundamental principles are? the difficulty lies in the fact that no positive legislation provides for the content of fundamental principles, while each law-enforcement decision of a judicial body (e .g . the cjeu, member state courts and constitutional courts) relates to an individual case . in order for a fundamental principle to be truly applicable and be a tool capable of measuring convergence, its content should be properly understood . the content of the principles applied by eu law can be found primarily in eu administrative law and its more general rules on public administration7 (reneual, 2014, p . 9) . the following is a discussion of two well-known european or partly european tools affecting public administration, which include fundamental principles pertaining to administration in all member states . however, these two document systems that generally support administration, differ from each other mainly in their methods and their attention to understanding the content of fundamental administrative principles . for simplicity, the first is referred to below as a system of ‘declared principles’ . as will be seen, in this system, concepts are not individually justified; their content is taken for granted and is only communicated to recipients in the form of a catalogue . the second is referred to as ‘systematic principles’ . it consists of well-founded, thoroughly explained and interpreted information that was collected according to a systematic methodolog y using transparent 6 reneual 1.0 model rules book i definitions. 7 for example, the european code of good administrative behaviour issued by the european ombudsman (https://www.ombudsman.europa.eu/hu/publication/en/3510), and the charter of fundamental rights of the european union [2007] oj c 303/1. https://www.ombudsman.europa.eu/hu/publication/en/3510 79principles for the europeanisation of public administration public governance, administration and finances law review • 1. 2023 research . both methods’ starting point is procedural law, which reveals the true face and guarantees of public administration as a functioning tool . 2. declared fundamental principles in the sigma program 2.1. the first phase of sigma the accession process, which started in 1994, posed political, economic and legal challenges for the ten candidate countries .8 the first of these challenges was addressed by the phare programme of the european union, which served as one of the main facilitating measures in the accession of central and eastern european countries .9 it ran in parallel with the sigma program,10 designed to provide administrative (mainly government) and state management support, established within the oecd in 1992 . sigma’s original goal was to provide information and expert analysis on public administration to policy-makers and to facilitate communication between and pooling experience among leaders in the public sector . the countries were provided support with a view to improving good governance and the efficiency of public administration and developing the public sector, putting the emphasis on democratic values, ethics and the rule of law . to achieve these objectives, it provided knowledge support to the participating governments through the provision of expert networks, information and technical expertise (sigma, 1999, p . 2) . to this day, the program has been providing practical knowledge .11 while support has been country-specific, it is based on uniform principles: from the beginning, the eu and the oecd have been aware that the acquis communautaire is unable to support government reforms adequately, and there are no union norms or practices that could be adopted by the candidate countries . therefore, they gathered the principles that the program organisers considered necessary in order to achieve good governance and gave them a common name: it became the european administrative space .12 four types of principles are named in the 1999 sigma paper: reliability and predictability; openness and transparency; accountability and efficiency; and effectiveness (sigma, 1999, p . 9–14) . as far as those principles are concerned, the paper only says that they “can be found in administrative law across all european countries” (sigma, 1999, p . 14) . apart from some excellent studies, it cites the case law of the court of justice of the european union in general among its sources . importantly, the paper states, however, 8 cyprus, the czech republic, estonia, poland, latvia, lithuania, hungary, malta, slovakia and slovenia. 9 phare was a supporting tool to facilitate accession, one of the tools helping candidate countries to fulfil the accession criteria. it was replaced by the instrument for pre-accession assistance (ipa) during the 2007–2014 cycle. 10 originally: support for improvement in governance and management in central and eastern european countries. since the focus shifted towards the balkans and eastern europe following the 2004 round of accession, the former geographical reference to central and eastern europe was subsequently removed. the first group of countries receiving support: albania, bosnia and herzegovina, bulgaria, the czech republic, estonia, macedonia (fyrom at that time), hungary, latvia, lithuania, poland, romania, slovakia and slovenia (sigma 1999, p. 2). 11 see in particular the ‘sigma papers’ series published by sigma (https://doi.org/10.1787/20786581). 12 “european administrative space” (sigma, 1999, p. 14). https://doi.org/10.1787/20786581 80 balázs szabolcs gerencsér public governance, administration and finances law review • vol. 8. no. 1.  that these principles tend to appear scattered among different pieces of legislation, from the constitutional level to acts of parliament and delegated legislation as well as the case law of courts . it specifically emphasises the significance of administrative procedural rules, whether they are contained in codified law or otherwise (sigma, 1999, p . 8) . for us, this may carry the message that the most comprehensive principles defining public administration may focus on the functioning and actions of public administration and, in particular, specific acts of the authorities . sigma did not come to an end with the accession of the originally supported countries in 2004 . relying on the experiences of the first decade, the program has been further developed and has now become a support for knowledge in general and a tool for measuring ‘development’ for countries aspiring for accession to the european union and other countries in the eu’s neighbourhood policy area (sigma–oecd, 2019) . 2.2. the reform of sigma and its separation from procedural rules the enlargement process continues to place emphasis on each candidate country’s public administration, which plays a  key role in achieving economic growth, competitiveness and a better quality of life . according to the 2021 monitoring documents, “democratic governance and the rule of law require capable, accountable and effective public administrations” (sigma–oecd, 2021, p . 4) . in its 2018 enlargement strateg y, the commission emphasised three fundamental areas: “the rule of law, fundamental rights and good governance” (european commission, 2018, p . 4) . in addition to being a  recommendation, these three areas, which are all based on the reform of public administration, also constitute a  benchmark, on the basis of which candidate countries are examined and assessed by the eu . apart from taking the goals of the enlargement strateg y of the union into consideration, the oecd is actively interested in taking part in the accession process, in particular given that, in addition to the eu, the united states also pays significant attention to the west balkans and the supported regions of the middle east and north africa .13 in 2014 and 2017, sigma further improved its now approximately one hundredpage document entitled the principles of public administration (sigma–oecd, 2017) . sigma’s transformed and thoroughly reconsidered goal is to achieve stability, security, prosperity and democracy by furthering policies that enhance economic prosperity and social well-being . the program has measured and evaluated (by monitoring ) progress in the public administration reform in six areas: 1 . the strategic framework of public administration reform (sántha, 2021, p . 57); 2 . legislation, policy development and coordination; 3 . civil service and human resource management; 4 . accountability; 5 . services; and 6 . public finance, public procurement and external audit . 13 list of the countries supported in 2022: albania, algeria, azerbaijan, armenia, bosnia and herzegovina, egypt, georgia, jordan, kosovo, lebanon, moldova, montenegro, morocco, north macedonia, serbia, tunisia, turkey and ukraine (https://www.sigmaweb.org/countries/). https://www.sigmaweb.org/countries/ 81principles for the europeanisation of public administration public governance, administration and finances law review • 1. 2023 this expanded and edited publication has retained the formal characteristics of the previous document in terms of not being an academic document, in that it does not explain the reasons for imposing a  regulatory condition, does not cite arguments or provide evidence . however, the title and the content of the document now differs from that of its 1999 counterpart: instead of ‘european’ principles, it now talks about public administration principles in general, abandoning (or rather transforming ) the former categories of principles (including the concept of the european administrative space), focusing on the six areas referred to above . rather than being legal principles,14 some of them are associated with the toolkit of governance (management) . it uses concepts (e .g . responsibility, transparency, efficiency) without defining them but refers to them as ‘main requirements’, in other words ‘criteria’ that will later be assessed by a body of the eu .15 it is thus a management tool supported by a legal framework . sigma monitors the balkans region, for example, by assessing the state of affairs in the six focus areas in 2017 and then monitoring progress in 2019 and 2021 . the three sets of data recorded are comparable and a certain trajectory can be described in each country .16 the program, however, has not lost sight of its fundamental objective, of preparing these countries for accession: it states that “the eu enlargement criteria recognise and emphasize the need for countries to build a strong national public administration with the capacity to pursue the principles of good public administration, and effectively transpose and implement the eu acquis” (sigma–oecd, 2017, p . 6) . the principles have transcended the procedural framework established in the 1999 version . in their current form, they specify what good governance entails in practice and outline the main requirements with which countries are expected to comply throughout the integration process . they also include a monitoring framework, which enables progress in implementing the principles to be analysed regularly and the reference values for each country to be determined . based on the individual country assessments,17 i specifically examined the accountability principle which, unlike the other criteria, is both present in the 1999 and 2017 sigma system as a genuine principle of public administration . my review focused on the specific meaning attributed to that principle by the oecd . each monitoring report breaks down the accountability principle into five sub-principles (review criteria): 1 . the overall organisation of central government is rational, follows adequate policies and regulations and provides for appropriate internal, political, judicial, social and independent accountability . 2 . the right to access public information is enacted in legislation and consistently applied in practice . 3 . functioning mechanisms are in place to protect both the rights of the individual to good administration and the public interest . 14 compared to the previous version, the principle of ‘transparency’ has retained most of its former legal relevance in the oecd document. 15 similar phrases appear in each monitoring report (e.g. sigma–oecd, 2021, p. 6). 16 see the sigma–oecd data portal (https://par-portal.sigmaweb.org/). 17 the country reports are available on the sigma website (https://www.sigmaweb.org/publications/monitoringreports.htm). https://par-portal.sigmaweb.org/ https://www.sigmaweb.org/publications/monitoring-reports.htm https://www.sigmaweb.org/publications/monitoring-reports.htm 82 balázs szabolcs gerencsér public governance, administration and finances law review • vol. 8. no. 1.  4 . fair treatment in administrative disputes is guaranteed by internal administrative appeals and judicial reviews . the public authorities assume liability in cases of wrongdoing and guarantee redress and/or adequate compensation . further ‘indicators’ are added to each review criterion, the fulfilment of which is rated using a five-point scale . regarding review criterion 1, the indicators have the same title for each country under review: i. policy and legal framework for the central government organisation 1 . clarity and comprehensiveness of the official typolog y of central government bodies 2 . adequacy of the policy and regulatory framework for managing central government institutions 3 . strength of basic accountability mechanisms between ministries and subordinated bodies 4 . managerial accountability mechanisms in the regulatory framework ii. central government’s organisation and accountability mechanisms in practice 5 . consistency between practice and policy in government reorganisation 6 . number of public bodies subordinated to parliament 7 . accountability in reporting between central government bodies and parent ministries 8 . effectiveness of basic managerial accountability mechanisms for central government bodies 9 . delegation of decision-making competence within ministries each of the above indicators is individually assessed by the monitoring reports . however, they are not analysed using a  comparative legal methodolog y . in fact, there are no benchmarks associated with any findings in the report,18 against which to compare the mechanisms of the country under review . as countries are not compared with each other in the explanation of indicators, there is no way to tell whether a  piece of legislation, or the lack of it, should be attributed to a factor in the regional legal culture or whether it should be regarded as a  general and fundamental legal or administrative deficiency . rather than statistical codes, the fulfilment of indicators is shown by assessment along a  scale of 1 to 5, the reference points for which are not specified . the absence of a  comparative toolkit entails that the social and legal characteristics of the region under review are omitted . 18 for example, the 2021 serbia report declares that the “organisation of public administration lacks clear policy direction” (sigma–oecd, 2021, p. 95) without specifying a relevant benchmark. 83principles for the europeanisation of public administration public governance, administration and finances law review • 1. 2023 3. systematic principles in reneual projects 3.1. innovative codification a completely different method is outlined in the study by the research network on eu administrative law,19 which was set up in 2009 under the leadership of herwig c . h . hofmann, jens-peter schneider and jacques ziller (reneual, 2014, iii) . the research network covers the entire european union and has included researchers from all member states . five years of research, conducted in cooperation with the commission, resulted in the ‘model rules’ document, first published in 2014 (reneual, 2014), and designed primarily to promote the improvement of implementing eu law and policies while ensuring that the constitutional values of the eu should be enforced in the course of exercising public power . the model rules, published as an academic paper rather than as part of the legislative process, demonstrated that, from a  legal point of view, it is possible to draft a standard text for public administration procedure, “adapted to the sometimes complex realities of implementing eu law by union bodies and member states in cooperation . according to reneual, the evolution of the european legal system has reached a  point where such codification is not only possible but also necessary for the eu’s future development as a regulatory system” (ziller, 2015, p . 247) . the authors of the reneual model rules have made a proposal for ‘innovative codification’ . the draft is therefore intentionally not limited to ‘consolidation’ (‘codification à droit constant’), norms and jurisprudence . according to schindler, at first sight, the draft is different from verwaltungs-vollstreckungsgesetz (vwvg), which aimed at achieving ‘minimum codification’ in order to harmonise existing legislation . in a speech before the association of german constitutional law professors (vereinigung der deutschen staatsrechtslehrer) prior to the vwvg, the author of the preliminary draft (max imboden) described that effort as a “modest legislative programme” (schindler, 2017) . the document itself was drafted on the basis of ‘innovative’ practices, as is reiterated in the text . the model rules comprise a uniform document, combining existing principles scattered in various pieces of legislation and the jurisprudence of the courts (reneual, 2014, p . 2) . in my opinion, however, in addition to the compilation effort, the really forward-looking aspect of the project was that no time and energ y was spared by the large number of contributing researchers, who worked in several working groups conducting systematic and transparent analyses, on the basis of which the six books of the model rules could subsequently be drawn up (ziller, 2014, p . 248) . the document, however, was not created for scientific purposes alone . the real purpose was to enable the european union to draft a regulation on procedures if policymakers decided to do so . to that end, the document also includes a draft standard . as european ombudsman emily o’reilly put it, “the model rules make sense both as a basis for possible future legislation and as a persuasive synthesis of principles to be found in the existing law” (reneual, 2017, iv) . that twofold objective, namely drawing up draft 19 research network on eu administrative law (reneual). 84 balázs szabolcs gerencsér public governance, administration and finances law review • vol. 8. no. 1.  legislation and, at the same time, conducting a detailed analysis of content, can be detected throughout the document . in 2015, the year following its first publication, the model rules were revised . hereinafter, all literal citations from the document will be based on that second edition (reneual, 2017) . 3.2. the awakening of eu administrative law: reneual 1.0 (2009–2015) throughout its activities, the research network on eu administrative law has focused primarily on eu legislation, intending to reveal the intersections of administration that are identical when implementing the rules falling under any kind of eu administration, regardless of whether the rule is implemented by an eu body or a  body of a  member state . only a narrow range of the principles applied in public administration are specified in the treaties of the union . such principles include article 298(1) tfeu, which was referred to above and which invokes the principle of openness, efficiency and independence as the – perhaps, from an eu perspective, most important – attributes of administration . lower-level eu sources may also include procedural aspects, particularly in the field of substantive law . another important international source in addition to the above is the council of europe’s recommendation on good administration .20 as a  general principle, the recommendation invokes the rule of law as one essentially consisting of procedural principles such as lawfulness, equality, impartiality, proportionality, legal certainty, taking action within a reasonable time limit, participation, respect for privacy and transparency.21 as observed below, these principles will reappear later in the model rules as common values in european public administration . while the drafting of the model rules in 2014 did not lead to new eu legislation, two soft law documents were published in that context, providing general guidance for eu administration . these include the 2013 recommendations for commission procedures, which is in fact a call for drafting a regulation on the basis of the model rules in the form of a european parliament resolution,22 or the resolution on an open, efficient and independent european union administration, adopted in 201623 (boros, 2018, pp . 202–209) . according to the ep resolution referred to above, higher value is attached to 20 council of europe recommendation cm/rec(2007)7 of the committee of ministers to member states on good administration. 21 recommendation (2007)7, preamble, last paragraph; moreover, these principles are discussed in more detail in articles 2 to 10. 22 european parliament resolution of 15 january 2013 with recommendations to the commission on a law of administrative procedure of the european union, 2012/2024(ini). 23 resolution on an open, efficient and independent european union administration, 2016/2610(rsp). similarly to the model rules, this resolution puts forth a legislation initiative, although with a significantly different approach: it sets out laconic provisions on the basic legal requirements for the initiation and conclusion of eu administrative procedures, administrative review and standard administrative decisions. it is, however, less detailed than the model rules. https://oeil.secure.europarl.europa.eu/oeil/popups/ficheprocedure.do?lang=en&reference=2012/2024(inl) 85principles for the europeanisation of public administration public governance, administration and finances law review • 1. 2023 eu administration since, with the development of the competences of the european union, citizens are increasingly directly affected by the union’s administration, from which they expect transparency, efficiency and swift action . however, the fact that the union lacks a coherent set of rules and the complexity of legal texts make it difficult for citizens to understand eu law, hinders the application of eu law . according to the resolution, drafting uniform procedural rules is therefore in the interest of both the bodies of the union and the citizens of the eu . of the recommendations set out in the resolution (recommendation 3), it stresses the principles specified in the council of europe recommendation referred to above, almost in the same order and with almost the same wording as in that document . having studied the rules of the public administrative procedure of the eu and member states, the research network set out the principles in the preamble to the model rules . while they did not intend to reiterate the principles already articulated in the founding treaties, they considered it important to recall them here (reneual, 2017, p . 32) . the draft model rules can be interpreted as distinguishing four groups of actors when summarising the principles defining public administration . 1 . public authorities in the eu and, where they apply eu law, in the member states, are bound by the principles of the rule of law, the right to good administration and other related principles of eu administrative law . 2 . every person reading and applying the standard provisions of the model rules must have regard to equal treatment and non-discrimination, legal certainty, fairness, objectivity and impartiality, participation, proportionality, protection of legitimate expectations, transparency, and due access to effective remedies. 3 . public authorities24 must have regard to efficiency, effectiveness and service orientation . 4 . the parties applying european administrative procedures must respect the principles of subsidiarity, sincere cooperation and a clear allocation of responsibilities. according to the explanations to the model rules, the latter are especially important for the design of complex procedures, but are also applicable to other types of european administrative procedures (reneual, 2017, p . 32) . the principle of clear allocation of responsibilities is very important with regard to complex procedures in order to provide appropriate access to effective judicial review and other remedies . moreover, the responsibilities must be clearly delimited, not only regarding the various public authorities but also within the various institutions, bodies, offices and agencies, in particular in the case of the most influential european authority, the european commission . rather than dividing the principles, the groups of principles draw the attention of the parties applying the law (whether decision-makers or citizens applying the law or seeking remedy in an individual case) to the importance of principles in administration in line with the ep resolution and the council of europe recommendation referred to above . 24 in eu law, the category of ‘public authorities’ is broader than authorities that can adopt specific decisions (in the hungarian law in general: ‘államigazgatási szervek’), as they also include bodies authorised to adopt normative decisions (see, for example, local authorities). the nuts regulation [regulation (ec) 1059/2003 on the establishment of a common classification of territorial units for statistics (nuts)], in particular its article 3(1) is similarly a regulating union legislation. 86 balázs szabolcs gerencsér public governance, administration and finances law review • vol. 8. no. 1.  3.3. assessing the situation and diving deeper: reneual 2.0 the model rules have so far not been published in the form of an eu regulation, which means that they have not become a genuine standard . while one of the twofold objectives, legislation, has not been achieved, the other objective, of a research network bringing to the surface genuine and substantiated scientific results, has been successfully achieved beyond dispute (della cananea & bussani, 2019) . today, the continued existence of the research network does not mean drafting a uniform document . instead, it has defined topical administration-specific research issues . retaining the earlier working practices, research is still conducted in working groups . research units have been set up on three topics: 1 . ‘common european principles of administrative law and good administration’; 2 . digitalized public administration in the eu; and 3 . international and transnational administrative law . work in the first research group focuses on the principles of administrative law shared by the national administrative law of member states, the legal system of the european union and the law of the council of europe . the comparative analysis conducted for drafting the model rules and the review of supranational rules has been developed in two main directions: on the one hand, it considers administrative standards applied by european legal systems and the content of procedural guarantees on the basis of a factual methodolog y; in other words, it conducts a  comparative analysis of member state responses to hypothetical cases (vignette research methodolog y) .25 on the other hand, it reveals the administrative law principles applied in the national administrative law of member states in the light of the activity of the council of europe, including not only the judgments of the court of justice of the european union but also the soft-law documents adopted by the committee of ministers .26 in fact, there are two projects that aim to set up a ‘european administrative law toolkit’, revealing the deeper motives for legal tools considered necessary or at least useful for enforcing the democratic principles in states under the rule of law, including, for example, the right of individuals to administrative protection, transparency and the democratic legitimacy of administrative procedures .27 the exploration of the genuine and up-to-date substance of the common european administrative principles and the communication of results are still in progress, as the reneual 2 .0 research project (della cananea & caranta, 2020; della cananea & andenas, 2021; conticelli & perroud, 2022) is currently underway at the date of this paper . it has, however, become clear that the guarantees related to administration as operation can be obtained from the comparative analysis of the various laws of administrative procedure (della cananea, 2017, p . 2) . in the view of giacinto della cananea, the concept of administrative procedure is becoming increasingly important in modern public law (della cananea, 2017, p . 23) . law plays a key role through the procedures in furthering the objectives of the state and protecting individual interests . in addition to the action of the administrative body, the current reneual 2 .0 research also focuses on its judicial 25 the title of the project is common core of european administrative laws (coceal). 26 the research project, the hub of which is in germany, is entitled the development of pan-european general principles of good administration by the council of europe and their impact on the administrative law of its member states. 27 for details see the website of reneual (http://www.reneual.eu/projects-and-publications/reneual-2-0). http://www.reneual.eu/projects-and-publications/reneual-2-0 87principles for the europeanisation of public administration public governance, administration and finances law review • 1. 2023 review, thus treating the jurisprudence of courts as an indispensable source, in addition to positive legislation and providing a truthful picture for the assessment of the validity of administrative acts and actions . 4. conclusions the goal of the european union is to strengthen integration in order to ensure common economic and social development for the member states . the level and extent of integration has been a  matter of dispute essentially ever since the founding member states agreed on cooperation . the internal functioning of member states and, in particular, the structure of executive power, is indisputably one of the crucial pillars of member state sovereignty and autonomy . however, with the progress of integration, the expansion of the competences of the union and the evolution of globalisation processes, national public administrations are facing an increasing number of external influences . that phenomenon need not be assessed here; for the purposes of this study, it seems sufficient to acknowledge it as a fact . the public administration of the member state is able to rely on the international network for a number of resources . from digitalisation to statistical activities and the most diverse branches of administration, there is a global pool of expertise available, which would be inaccessible without this type of cooperation . these externalities may, however, also take the form of a legal framework, just as the administrative principles examined above are also reflected in both eu and national legislations . the increasingly close cooperation between systems of administration within the european union has become a sort of value synthesis ( józsa, 2003, pp . 724–725) . this is a  set of public administration principles that are recognised and applied by both the member states and the bodies of the european union . one could safely say that ‘unification’ in the churchillian sense has reached its political zenith and that the administration systems cannot be expected to become more ‘unified’ than that under the current eu policy framework . the issue of uniformity emerges on a theoretical level, in the value synthesis referred to above . in order to achieve at least the coherence (and convergence) of principles, the principles first need to be understood . the sigma and reneual documents, described in the previous pages, also reflect the need for a principle to be interpreted uniformly by all actors . however, this requires a method capable of understanding and processing both written legislation and the law applied by the court . it is a common feature of the two tools referred to above that they are both based on principles of administrative procedure (sigma’99 and reneual 1 .0), which indicates that the dynamic characteristics of administration are pivotal for the analysis of good governance . a major difference between the two methods, however, is that sigma’17, as a support program related to the eu’s enlargement strateg y, has now been ‘disconnected’ from the procedural law environment, vesting management content with legal force (the fulfilment of accession conditions), and thus giving rise to an inconsistency of concepts . studies of the reneual research network (both the model rules and the partial publications of current research) have, however, stressed that the internal nature of 88 balázs szabolcs gerencsér public governance, administration and finances law review • vol. 8. no. 1.  member state laws must be understood in order to achieve a value synthesis in administration . the reneual research, conducted with a comparative law toolkit, may lead to sound results, given that the methodolog y is sufficiently transparent to reveal the genuine content of each principle . finally, the principal research mechanisms under review have also neatly illustrated why legal concepts must not be used in non-legal contexts . similarly, sigma’s evolution has illustrated that while the first version set out an analysis of legal principles, its current version has mainly focused on the description and monitoring of management tools . the major challenge for sigma (and ultimately the union and the oecd) in that context is that legal tools and management tools and the legal and political tool, as well will also have to be distinguished in the future, in the same way as there is a difference between administration and administrative law, management and normativity, structure and system (tamás, 2010, p . 68) . references balázs, i . 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(2015) . the reneual model rules on eu administrative procedure: method, contents and prospects . in b . gerencsér, l . berkes & zs . a . varga (eds .), a hazai és uniós közigazgatási eljárásjog aktuális kérdései [current issues of the national and eu administrative procedures (the reneual model rules)] . pázmány press . https://bit.ly/45zodyd https://bit.ly/3ntsl0j https://doi.org/10.3790/verw.50.1.51 https://www.sigmaweb.org/publicationsdocuments/36972467.pdf https://www.sigmaweb.org/publications/principles-of-public-administration-2017-edition-eng.pdf https://www.sigmaweb.org/publications/principles-of-public-administration-2017-edition-eng.pdf https://bit.ly/3jd2dup https://www.sigmaweb.org/publications/monitoring-report-2021-serbia.pdf https://www.sigmaweb.org/publications/monitoring-report-2021-serbia.pdf public governance, administration and finances law review vol. 8. no. 1. (2023) • 5–22 . © the author 2023 doi: 10 .53116/pgaflr .6816  should liberal democracy respect group rights that discriminate against women and apostates?1 raphael cohen-almagor* ¤ * olof palme visiting professor, centre for advanced middle eastern studies, lund university, lund, sweden, e-mail: raphael .cohen-almagor@svet .lu .se abstract: the paper examines the limits of state interference in proscribing cultural norms by considering gender discrimination, right of people to leave their community free of penalties, denying women appropriate education, and forced or arranged marriages for girls and young women . the discussion opens by reflecting on the discriminatory practices of the pueblo tribes against their women and analysing an american court case, santa clara v. martinez. it is argued that the severity of rights violations within the minority group, the insufficient disputeresolution-mechanisms, and the inability of individuals to leave the community if they so desire without penalty justify state intervention to uphold the dissenters’ basic rights . next, a canadian case, hofer v. hofer, illustrates the problematics of denying reasonable exit right to members who may wish to leave their community . subsequently, the discussion turns to the issue of arranged and forced marriages of girls and young women . while the latter is coercive the former is not . while forced marriages should be denounced as unjust, arranged marriages can be accepted . finally, the paper considers denying education to women, arguing that such a denial is unjust and discriminatory . keywords: canada (ag) v. lavell, culture, education, forced marriages, gender discrimination, hofer v. hofer, pueblo tribes, religion, santa clara v. martinez 1. introduction consider the following : a religious community within liberal democracy discriminates against women . when women complain, justification is produced that “this is how we conduct things in this community for hundreds of years . rights of the group supersede your individual rights” . should the liberal state intervene and come to the aid of the discriminated women? or should it perceive this as a  “private matter” to be left for the group to sort and resolve? 1 a former version of this article was published in raphael cohen-almagor, just, reasonable multiculturalism: liberalism, culture and coercion (new york and cambridge: cambridge university press, 2021). permission to publish this article has been granted by cambridge university press. https://doi.org/10.53116/pgaflr.6816 https://orcid.org/0000-0002-5869-9243 mailto:raphael.cohen-almagor@svet.lu.se 6 raphael cohen-almagor public governance, administration and finances law review • vol. 8. no. 1.  this paper examines the limits of state interference in proscribing cultural norms by considering gender discrimination, right of people to leave their community free of penalties, denying women appropriate education, and forced or arranged marriages for girls and young women . by “appropriate” i mean education that would enable individuals comfortable integration into the wider society if they so wish . cases in point are practices that force children to marriage at a  very young age, and denial of education to vulnerable populations . both constitute serious harms . the discussion opens by reflecting on the discriminatory practices of the pueblo tribes against their women and analysing an american court case, santa clara v. martinez. a canadian case, hofer v. hofer, illustrates the problematics of denying reasonable exit right to members who may wish to leave their community . subsequently, the discussion turns to the issue of arranged and forced marriages of girls and young women, considering the jewish–yemenite immigrants who came to israel during the 1950s . as customary in yemen, young girls were married to much older men . finally, the paper criticised the denial of education to women, arguing that the liberal state has a role to play in protecting basic rights of vulnerable populations . in each of these cases, the question is whether a  dominant culture has a  right to interfere in the business of a cultural minority, if one or more of their practices or norms cause some harm to members of that same minority culture . groups employed internal restrictions and erected external protections to protect themselves . in the name of culture and religion, they deny women basic human rights and undermine their ability to develop themselves as autonomous beings . john rawls has argued that the various conceptions of justice are the outgrowth of different notions of society against the background of opposing views of the natural necessities and opportunities of human life . a conception of social justice is to be regarded as providing in the first instance a standard whereby the distributive aspects of the basic structure of society are to be assessed (rawls, 1971, p . 7) . a complete conception defining principles for all the virtues of basic structure, together with their respective weights when they conflict, is a social ideal that encompasses the aims and purposes of social cooperation (rawls, 1993, p . 60) . following susan moller okin (1999), it is argued that practices and arrangements that serve to undermine women’s equal dignity and equal access to opportunities are incompatible with these two basic tenets . the preamble to the universal declaration of human rights (udhr), 1948 accentuates the need to protect human rights as “disregard and contempt for human rights have resulted in barbarous acts which have outraged the conscience of mankind” . the international covenant on civil and political rights (iccpr), 1966 and the international covenant of economic, social and cultural rights (icescr), 1966 are also designed to promote and protect basic human rights . other important conventions are the 1967 international convention for elimination of all forms of discrimination against women, the 1981 declaration on the elimination of all forms of intolerance and of discrimination based on religion or belief, and the 1990 convention on the rights of the child . they all aim to safeguard the inalienable rights of women and children, perceived vulnerable and therefore in need of protection . specifically, let me mention article 26 of the international covenant of economic, social and cultural rights, 1966: 7should liberal democracy respect group rights that discriminate against women and apostates? public governance, administration and finances law review • 1. 2023 all persons are equal before the law and are entitled without any discrimination to the equal protection of the law . in this respect, the law shall prohibit any discrimination and guarantee to all persons equal and effective protection against discrimination on any ground such as race, colour, sex, language, religion, political or other opinion, national or social origin, property, birth or other status . 2. gender discrimination – the case of the pueblo indian communities it is estimated that 370 million people in 90 countries belong to indigenous people (kedar et al ., 2018, p . 160) . most of them experienced great suffering at the hands of the white men who colonialised them, took their lands and exploited them . many indigenous people were forced to forfeit their sources of substance . the colonialising powers dispossessed and subjugated the local communities by brute force, showing little regard to the indigenous just claims on land and natural resources . during the 20th century, many western countries recognised the evil that their forefathers brought on the indigenous people . in their repent, they have aimed to compensate them in various ways . the old school repressive methods have been reversed . instead of trying to suppress indigenous cultures, liberal democracies have been acknowledging cultural value and importance . steps were taken to accommodate cultural rights . in the united states, some pueblo indian communities enjoy extensive rights of self-government . they limit freedom of conscience of their own members and employ sexually discriminatory membership rules . similarly, some immigrant groups and religious minorities use ‘multiculturalism’ as a pretext for imposing traditional patriarchal practices on women and children . some immigrant and religious groups demand the right to stop their children (particularly girls) from receiving a proper education, so as to reduce the chances that the child will leave the community; some other communities uphold compulsory arranged marriages . pueblo peoples are thought to be the descendants of the prehistoric ancestral pueblo (anasazi) culture . this indian tribe has been in existence for more than 600 years . they established villages in new mexico along the rio grande and in northern arizona (britannica s . a .) . like many traditional communities, some pueblo indian communities apply discriminatory practices regarding women and people who decide to abandon the tribes . they discriminate in the distribution of housing and if female members marry outside the tribe, their children are denied membership .2 should the american federal government intervene in the pueblo affairs to protect the rights of women and children? in 1968, the american congress passed the indian civil rights act (icra) which recognises the tribes’ sovereignty and their right to self-government but stated that tribes are subject to constitutional guidelines resembling the bill of rights . this legislation was 2 this discriminatory rule was upheld in santa clara pueblo v. martinez 436 us 49 (1978), discussed infra. for further discussion, see shachar (2001); resnik (1989). 8 raphael cohen-almagor public governance, administration and finances law review • vol. 8. no. 1.  widely opposed by indian groups who perceived it as an unjust federal intrusion into tribal affairs, and for understandable reasons (christofferson, 1991; schneiderman, 1998) . the assumption that all governments within a country should be subject to a single bill of rights, enforced by a common supreme court, was perceived inappropriate in the eyes of the pueblo and other incorporated national minorities . after all, the indigenous population preceded the establishment of the united states . most of their valuable assets were taken away from them by the colonising power . since the 19th century, indian tribes were recognised by the courts to have a distinct political society . they are domestic dependent nations, capable of managing their own affairs and of governing themselves; yet they are dependent on the united states to whom the relation resembles that of a ward to a guardian (brown, 1930) . still, many indian leaders argued that indian governments should be exempt from the bill of rights in order to maintain their coherence and unity . they fear that the united states will abuse its power to take their land, as white people did when they arrived to america, and they do not trust white judges to do a good job in protecting their rights . pueblo communities wish to retain responsibilities for their communal affairs .3 spinner-halev (2001) asserted that avoiding the injustice of imposing reform on an oppressed group is often more important than avoiding the injustice of gender discrimination . the american supreme court legitimised the acts of colonisation and conquest, which dispossessed the pueblo of their property and power . the pueblo have never had any representation on the supreme court . thus, the american federal constitution and courts do not enjoy obvious legitimacy in the eyes of an involuntarily-incorporated national minority . why should the pueblo agree to have their internal decisions reviewed by a body, which is, in effect, the courts of their conquerors? the pueblo have their own internal constitution and courts, which prevent the arbitrary exercise of political power . to be sure, while the pueblo constitution is not liberal, it is a form of constitutional government . as graham walker (2000) notes, it is a mistake to conflate the ideas of liberalism and constitutionalism . there is a genuine category of non-liberal constitutionalism, which provides meaningful checks on political authority and preserves the basic elements of natural justice, and which thereby helps ensure that governments maintain their legitimacy in the eyes of their subjects . in an earlier article, kymlicka and i (kymlicka & cohen-almagor, 2000) argued that the liberal state should not intervene in indigenous affairs because they have strong claims for self-government . balancing group rights and gender rights, they gave more weight to the former . kymlicka (1989; 1997, pp . 72–87; 2000, pp . 35–48) has long been arguing that liberal societies should extend group rights and special arrangements to cultural communities, especially to disadvantaged national minorities and some polyethnic or immigrant groups – as a matter of liberal justice . i have changed my mind . now i argue 3 the basic attitude of the american supreme court towards indian sovereignty was determined by chief justice john marshall’s judgement in johnson v. m’intosh, 21 u.s. (8 wheat.) 543 (1823). in this judgement, marshall said that “conquest gives title which the courts of the conqueror cannot deny”, the validity of which “has never been questioned by our courts” (pp. 587–588). marshall’s approach continues to determine the court’s approach to indian rights, not just in the united states, but also in other settler societies, such as canada and australia. on this, see wilkins (1994, 161–168); williams jr. (1995, 146–202); wilkinson (2006); tsosie (2011, 923–950). 9should liberal democracy respect group rights that discriminate against women and apostates? public governance, administration and finances law review • 1. 2023 for state interference to redress gender injustice . let me explain by reflecting on the landmark cases regarding the federal government’s jurisdiction over indian tribes . 3. denying basic rights to women – santa clara v. martinez in santa clara v. martinez 436 us 49 (1978), the supreme court contended with the issues of indian autonomy and gender discrimination . julia martinez and one of her children, audrey martinez, challenged the santa clara pueblo membership ordinance that disqualified martinez’s children because she had married outside the tribe . the same ordinance did not place similar restriction on men . martinez appealed to the american justice system, seeking declaratory and injunctive relief, claiming that this ordinance discriminated against her on basis of gender, in contravention of icra which states that no indian tribe in exercising powers of self-government shall “deny to any person within its jurisdiction the equal protection of its laws or deprive any person of liberty or property without due process of law” .4 although the martinez children were raised on the reservation and continued to reside there as adults, they were denied basic rights . as a result of their exclusion from membership they were not eligible to vote in tribal elections or to hold secular tribal offices . they had no right to remain on the reservation in the event of their mother’s death, or to inherit their mother’s home or her possessory interests in the communal lands . the pueblo successfully erected external protections to exclusively reserve land for their own community and did not wish to forfeit possession . respondent julia martinez engaged with the tribe elders in an attempt to change the membership rule, but to no avail . then she appealed to the courts, seeking justice . she was certified to represent a  class consisting of all women who were members of the santa clara pueblo and who had married men who were not members of the pueblo, while audrey martinez was certified as the class representative of all children born to marriages between santa claran women and men who were not members of the pueblo .5 the santa clara pueblo argued that the 1968 icra did not authorise civil actions in federal court for relief against a tribe or its officials . the supreme court, per justice thurgood marshall who delivered the opinion of the court, in which justices burger, brennan, stewart, powell, stevens and rehnquist joined ( justice blackman took no part in the consideration or decision of the case) agreed, guaranteeing strong tribal autonomy except when congress provided for federal judicial review . marshall j . conceded that indian tribes have been recognised as possessing common law immunity from suit traditionally enjoyed by sovereign powers (santa clara pueblo v. martinez 436 us 49 [1978], p . 58) . the pueblo successfully campaigned for external protections for devolution of powers to enable them to make decisions regarding their community . the court emphasised that the role of courts in adjusting relations between and among tribes and their members is restrained .  the tribes are better suited to understand their own culture . 4 the indian civil rights act of 1968 (icra), 25 u.s.c.§§ 1301–1304 (icra). 5 santa clara pueblo v. martinez 436 us 49 (1978), p. 53. see also newton (1984, pp. 195–288). 10 raphael cohen-almagor public governance, administration and finances law review • vol. 8. no. 1.  congress retains authority expressly to authorise civil actions for relief in the event that the tribes themselves prove deficient in applying and enforcing its substantive provisions . “but unless and until congress makes clear its intention to permit the additional intrusion on tribal sovereignty that adjudication of such actions in a federal forum would represent”, the court is constrained to find that icra “does not impliedly authorize actions for declaratory or injunctive relief against either the tribe or its officers” .6 justice white disagreed . in his dissent he wrote that the court in its majority decision had substantially undermined the goal of the icra, in particular its purpose to protect “individual indians from arbitrary and unjust actions of tribal governments” (santa clara pueblo v. martinez 436 us 49 [1978], p . 73) . while acknowledging that indian tribes have had special status in american law, white j . did not think that the tribe was insular from state scrutiny (santa clara pueblo v. martinez 436 us 49 [1978], p . 75) . he thought that in this case there was a need to interfere in the pueblo affairs because its membership law was unjust . white j . reminded his fellow justices that the icra in itself was an intrusion into tribal affairs . thus, he thought that the federal courts have jurisdiction to consider the merits of the respondents’ claims (santa clara pueblo v. martinez 436 us 49 [1978], p . 83) . i side with white j . the non-liberal constitutionalism of the pueblo is unjust from the point of view of liberal principles . the court judgment left native american women with a  general right but without recourse for remedy . the pueblo courts were left to uphold their rules which discriminated against women (as well as christians) . clearly, for the federal courts to overturn the decisions of the pueblo courts and impose liberal principles is a problematic move . we need to seek a solution that would take into account the risk of denigrating the group’s own system of government and courts, the high levels of legitimacy of the governance system in the eyes of its own members as well as rights of women and children, and the liberal goal of arriving at just and reasonable formula . reasonableness consists in equitableness whereby an individual respects other persons’ rights as well as her own (gewirth, 1983) . in this case, mutual respect is clearly lacking . the severity of rights violations within the minority group, the insufficient dispute-resolution-mechanisms, and the inability of individuals to leave the community if they so desire without penalty justify state intervention to uphold the dissenters’ basic rights . while acknowledging that imposing liberal principles on self-governing national minorities is problematic, and that attempts to impose liberal principles might backfire since they are perceived as a form of aggression or paternalistic colonialism, it is unjust to accept that it is, according to the pueblo, a matter of cultural survival to oppose women claim for upholding their natural right to equality . after the martinez decision, women who were denied tribal membership lost essential benefits including federal payments, education and medical care . julia martinez’s daughter was denied medical treatment and later died from strokes relating to her illness (christofferson, 1991, p . 169) . in the name of culture, the pueblo should not deny women equal individual protection that every american citizen enjoys . reconciling multiculturalism and liberalism requires invoking 6 santa clara pueblo v. martinez, 72. for further discussion, see valencia-weber (2004). 11should liberal democracy respect group rights that discriminate against women and apostates? public governance, administration and finances law review • 1. 2023 the rawlsian principle of equal liberty: each person has an equal right to the most extensive liberties compatible with similar liberties for all . the state should provide education, minimum income and health care for all (rawls, 1971, p . 302; shalev, 2005) . by accentuating tribal sovereignty and narrowly interpreting the statutes in such a way that saw no urgency to interfere in the pueblo affairs, the court failed to appreciate martinez’s and other women’s predicament . the court accorded respect for tribal sovereignty, protected the “unique political, cultural, and economic needs of tribal governments” (santa clara pueblo v. martinez [1978], p . 62)7 and had deliberately chosen not to extend every provision of the bill of rights to tribes, thereby accepting the pueblo claims . balancing tribal sovereignty vis-à-vis gender rights, my view – on the other hand – decidedly favours the latter . it is the duty of the liberal state to protect basic rights of vulnerable population and not to leave women at the mercy of men who employ cultural justifications to harm them and undermine their existence . gender equality and mutual respect should be promoted as vital values . chauvinistic group discrimination should not enjoy any form of legitimacy . granted that liberal institutions can only work if liberal beliefs have been internalised by the members of the selfgoverning society; therefore, education and dialogue should be implemented rather than granting legitimacy to unjust discrimination . principally, as brian barry (2001, p . 89) noted, the pueblo cannot run a sub-state that is religiously exclusive, certainly not in a liberal society . if the pueblo want to retain their special political status, they should be required to observe the constraints on the use of political power that are imposed by liberal justice . they should have to accept that exercising political power cannot legitimately be used to foster religious and gender discrimination . this is in line with the convention on the elimination of all forms of discrimination against women (cedaw) (1979) which holds (article 16) that men and women have the same right to enter into marriage, and that both spouses enjoy the same rights in respect of the ownership, acquisition, management, administration, enjoyment and disposition of property . the preamble of the same convention holds that the full and complete development of a country, the welfare of the world and the cause of peace require the “maximum participation of women on equal terms with men in all fields” . conversely, chandran kukathas (2003, p . 76) supports group rights and autonomy even if they trump individual rights . he argues that the good society is a free society and a free society is one that upholds freedom of association . in his extreme liberal view, there are hardly any restrictions on what communities can do to their members . kukathas simply mistrusts the government to act prudently without exploiting its powers . he assumes that any government intervention is likely to violate individuals’ freedom association and freedom of conscience and, therefore, hands-off policy is warranted . 7 for further discussion about the tensions between minority group rights and gender equality, and about conflicts over the culture defence in american criminal law, aboriginal membership rules, tribal sovereignty and polygamy, see song (2007). 12 raphael cohen-almagor public governance, administration and finances law review • vol. 8. no. 1.  kukathas’s theory (1997; 2003) does not see “cultural integration” or what he terms “cultural engineering” as a part of the state’s raison d’être. he rejects the idea of making the boundaries, the symbols, and the cultural character of the state matters of justice . consequently, overarching tolerance is advocated regarding a wide array of controversial practices that include the denial of school education to children, arranged marriages, denial of medical care to members and inflicting cruel punishment on members . all of this is possible in kukathas’s (2003, p . 134) concept of toleration . kukathas explains at length why a free society should tolerate a variety of associations and practices, including those that do not value freedom or abide by the principle of toleration, and that embrace intolerable practices . while kukathas acknowledges the importance of individual choice, he does not think it is important to ensure that the conditions within communities exist to ensure that individuals are free to make their own choices and live by them . in accordance with kukathas’s liberal theory, illiberal communities within liberal democracy can inflict all sorts of harm – physical and non-physical, on their own members . kukathas’s theory celebrates tolerance . indeed, the idea of tolerance embodies a normative stance geared to promote equal respect and self-determination when the latter results in allocation of resources and involves some form of legal coercion (cohenalmagor, 2006a) . respecting our fellow citizens entails that we should see them, in kantian terms, as ends rather than means, appreciate diversity and differences, and not be quick to judge the others as “strange” or “peculiar” only because they adhere to a different way of life, or to a different conception of the good . in a democracy, government is said to tolerate people, providing others with scope to develop themselves and their respective ways of life . however, the important proviso is to tolerate as long as the subject of tolerance does not harm others . tolerance should not be exploited to enable gross abuse of human rights . as karl popper (1962, p . 265) said, it is absurd to assume that we should tolerate the intolerant with little or no regard to consequences . the delicate task is to maintain a  balance between tolerance and intolerance, between group rights and the preservation of basic human rights, otherwise the very foundation of tolerance might provide the intolerant the tools for continued abuse . kukathas (2003, p . 188) does not trust liberal justice because this concept of justice would lead to state interference and compulsion . liberal justice cannot condone deep cultural diversity . he acknowledges that clitoridectomy, the denial of blood transfusions and religious coercion are all oppressive . yet kukathas (2003, pp . 135–136) maintains that if the concern is oppression, “there is just as much reason to hold (more) firmly to the principles of toleration –since the threat of oppression is as likely to come from outside the minority community as it is from within” . kukathas is more concerned with speculative future consequences of oppression than the here-and-now tangible oppression . hypothetical fear of government abuse is more persuasive for him than present denial of basic rights . but silence and passivity will not stop abuse . kukathas (2003, pp . 136–137) concedes that there are cases where there is clear evidence of terrible practices . he believes that persuasion, rather than force, is the preferred, more effective and less damaging means of fostering change from the outside . granted that government should first resort to mechanisms of deliberative democracy as the prime means to bring about change . but what if the leaders of the community are not 13should liberal democracy respect group rights that discriminate against women and apostates? public governance, administration and finances law review • 1. 2023 open to debate and persuasion? kukathas would then say: “at least i tried”, and leave the continuation of abuse intact . whereas i argue that there are instances where external argumentation might fall on deaf ears and then we should resort to action that is deemed necessary to end abuse and preserve basic human rights . kukathas’s arguments might be convincing in the realm of philosophy alone, not in reality .8 while the argument regarding paternalism contains some force, it is not sufficiently powerful to override considerations that concern the very existence of human life . fundamentally, the question is whether norms of the kind mentioned, which deny basic rights that everyone is supposed to respect, have a place in a liberal democratic society . true as it is that to ban those cultural norms is certainly to interfere with cultural norms . yet by the same token, gender discrimination destroys the woman’s right to seek meaningful choice for herself, and it contradicts the two basic liberal norms that hold society together: gender discrimination violates the requirement of not harming others and that of mutual respect for others as enunciated in liberal democracy (cohen-almagor, 1994) . another north american country, canada, has also experienced similar challenges with its indigenous people . the following case is concerned with granting just and reasonable exit rights to those who wish to lead their lives independently of their community . having an exit opportunity is vital for members who feel oppressed by their culture . whether it is justified for the liberal state to intervene in affairs of an indigenous tribe that restricts its members’ freedom of conscience depends on how the community in question is governed; whether it is governed by a tyrannical leader who prevents members from leaving the community, or whether the tribal governance has a broad support and religious dissidents are free to leave . 4. denying reasonable exit right –  hofer v. hofer and canada v. lavell in canada, the relationship between the government and the native peoples was marred by policies of genocide, countless broken treaties, and canada’s ongoing failure to recognise the nationhood of aboriginal peoples (deveaux, 2009, p . 129) . hofer v. hofer (1970, p . 958) dealt with the powers of the hutterite church over its members . the hutterites are spiritual descendants of the anabaptists . they live in large agricultural communities and closely guard their religion by expelling those who abandon or renounce their religion . members of the hofer family who renounce their religion were expelled for apostasy but they did not wish to leave with nothing as for many years they contributed to the wealth of their community . the hutterites refused to give them any share of the community and the offers sought relief at the canadian courts .9 the hutterites argued that freedom of religion of the group limits individual freedom . 8 for further critique of kukathas, see spinner-halev (2000, pp. 81–85); barry (2001, p. 239); deveaux (2009, pp. 41–53). 9 for further discussion, see janzen (1990, p. 67). on exit rights, see vitikainen (2015, pp. 127–150). 14 raphael cohen-almagor public governance, administration and finances law review • vol. 8. no. 1.  people who wished to leave the community were subjected to designated mechanisms of coercion to make their lives difficult, forcing them to reconsider their decision (cohenalmagor, 2021b) . is this just and reasonable? the canadian supreme court in a six to one decision accepted this hutterite claim, holding that the “principle of freedom of religion is not violated by an individual who agrees that if he abandons membership in a specified church he shall give up any claim to certain assets” (hofer et al. v. hofer et al. [1970], p . 963) . yet again i side with the minority opinion . justice louis-philippe pigeon’s dissent represents a just, liberal approach . pigeon j . established that the colony was a commercial undertaking, not a church . the land was used essentially for growing crops and raising livestock . its major part was sold to customers (hofer et al. v. hofer et al. [1970], p . 982) . therefore, the case should not be decided by the application of rules of law governing churches . justice pigeon acknowledged that the hofer conduct was obviously of concern to the hutterites and that the dispute was real and painful . the way to decide the dispute was through deciphering the principle of freedom of religion . justice pigeon noted that the usual liberal notion of freedom of religion “includes the right of each individual to change his religion at will” (hofer et al. v. hofer et al. [1970], p . 984) . hence churches “cannot make rules having the effect of depriving their members of this fundamental freedom” (hofer et al. v. hofer et al. [1970], p . 984) . pigeon j . thought that it was as nearly impossible as can be for people in a hutterite community to reject irreligious teachings, due to the high cost of changing their religion, and so were effectively deprived of freedom of religion (hofer et al. v. hofer et al. [1970], p . 985) .10 the hutterite church enforced unjust coercion . canada, like other liberal societies, commonly reach just and reasonable solutions via the mechanisms of compromise and deliberative democracy . the essence of democratic legitimacy lies in people’s ability to collectively engage in authentic deliberation about their conduct . deliberative democracy presents an ideal of political autonomy based on the practical reasoning expressed in an open and accountable discourse, leading to an agreed judgment on substantive policy issues concerning the common good . jürgen habermas (1996) notes that the success of deliberative democracy depends on the institutionalisation of the corresponding procedures and conditions of communication and on the interplay of deliberative processes and informed public opinions (habermas, 1990) .11 deliberative democracy enables an understanding of cultures as continually creating , re-creating , and renegotiating the imagined boundaries between “us” and “them” (benhabib, 2002) . securing and promoting human rights are desired goals, especially of vulnerable populations . incentives can be provided, in a non-coercive way, for liberal reforms that promote gender equality in a  deliberative, consensual way, by explaining the merits of just distribution of resources, mutual respect and reasonable accommodations that value tradition and the inherent dignity of all members of the community, notwithstanding gender . 10 for general discussion, see katz & lehr (2012). 11 see also habermas (1990); bächtiger et al. (2018); dryzek (2002; 2012); o’flynn (2021). 15should liberal democracy respect group rights that discriminate against women and apostates? public governance, administration and finances law review • 1. 2023 5. arranged and forced marriages for girls we need to distinguish between arranged marriage in which families take a leading role, but the parties have the free will and choice to accept or decline the arrangement, and forced marriage where one or both people do not (or in cases of people with learning disabilities cannot) consent to the marriage and where pressure or abuse is used . while the latter is coercive the former is not . while forced marriages should be denounced as unjust, arranged marriages can be accepted . in england and wales, arranged marriage is permitted while forced marriage is illegal . forced marriage includes taking someone overseas to force her to marry (whether or not the forced marriage takes place) or marrying someone who lacks the mental capacity to consent to the marriage .12 it is estimated that 10% of the arranged marriages are forced (deveaux, 2009, p . 164) . arranged marriages for girls with adults under the age of sixteen or eighteen years old might constitute serious mischief to these girls . we can assume that such unequal marriage will result in subordination, discrimination, coercion and abuse . commonly, such a marriage is between a grown-up man and a young female (i never heard of a cultural phenomenon in which female adults marry young males) .13 in such a marriage, the young female will have great difficulties in developing relationships that are built around values of equality, mutual respect and self-determination . such inegalitarian arranged marriages are unreasonable in liberal terms . they gravely undermine children/adolescent’s ability to enjoy long-term basic human goods and relationships as they are hampered by a commitment decided for them by their families without their consent . the question is whether the state can and should intervene to prohibit them . consider the following : saadi (42-year-old) and tohar (15-year-old), another yemenite married couple, immigrate to a liberal society . they have been living together for six years . should liberal democracy recognise the marriage? this is a hard case . it is harder if the couple have children . the line of reasoning i wish to pursue has principled as well as consequentialist dimensions . we need to examine whether the culture has historical claims, whether or not it coerces others to follow its norm, and whether children and their families have protected exit right if they do not wish to follow the cultural norm . we need to weigh the rights of the child, the harms of separation, the pros and cons of state interference to the child and to the family at large . the liberal state should certainly reflect and consider, aiming to reach a  solution through means of deliberation that would be just and reasonable . let me demonstrate the relevant considerations by considering the behaviour of the israeli establishment towards the jewish–yemenite immigrants during the 1950s . 12 forced marriage, https://www.gov.uk/stop-forced-marriage. in the united kingdom, the forced marriage unit (fmu) is a joint foreign and commonwealth office and home office unit which leads on government policy, outreach and casework. its jurisdiction includes the uk where support is provided to any individual and overseas where consular assistance is given to british nationals. the fmu operates a helpline to provide advice and support to forced marriage victims as well as to professionals. the assistance includes safety advice and helping ‘reluctant sponsors’. in extreme circumstances the fmu assists with rescues of victims held against their will. see forced marriage, https://www.gov.uk/guidance/forced-marriage 13 there are, of course, individual cases where older women marry younger men but this has nothing to do with group rites. https://www.gov.uk/stop-forced-marriage https://www.gov.uk/guidance/forced-marriage 16 raphael cohen-almagor public governance, administration and finances law review • vol. 8. no. 1.  for these immigrants, who were jewish observant, arrival in israel presented a cherished opportunity to practice religion even more strongly in the sanctity of the holy land . they did not wish to break with tradition, their old customs or cultural heritage . they wished to maintain their traditional way of life, folkways and norms . they expected that the place of men and women, their status and honour will be as it was in yemen . at that time, testimonials were brought before the two chief rabbis of israel, rabbi herzog and rabbi uziel, that young women were encouraged to leave their older husbands . this action was made upon the assumption that teenage girls were forced to marry older people in yemen .14 in 1950, the marriage age law 5710-1950 was passed, setting the minimum age at 17 .15 the motivation was well-intended . israeli decision-makers wished to “save” women from their “locked” situation . the problem was that in many instances no action was taken to verify whether or not girls preferred to live with their husbands . social workers and advisors took the liberty of interfering in this delicate issue of marital matters without checking other factors besides the age of the woman . the age factor, in their view, was the only significant consideration that justified intervention, aiming to break the marriage . this behaviour was a  reflection of the then prevailing governmental attitude toward immigrants from asia and africa (cohen-almagor, 1995, pp . 461–484; margalit-stern, 2006, pp . 115–144; menelson-maoz, 2014; frantzman, 2016; altman, 2018) . the absorbing elite believed that the best of the people and the best of the nation required paternalism; that they had to show “the light” to the yemenite immigrants, and that in due course these immigrants would thank them for this involvement . this was not the case . the immigrants perceived this paternalistic measure as an arrogant interference in their affairs, displaying ethnocentrism and misunderstanding of their norms . with due appreciation of the sincere motives on the part of the establishment, it was done in a crude way that disrespected the feelings of the people concerned, and probably resulted on many occasions in more harm than good . instead of opening channels of communication with the community, identifying desirable ends and seeking accommodation that would benefit first and foremost the women in question, the state behaved more as a bull in a china store, dictating instead of deliberating, using its coercive authority rather than seeking constructive compromise . women, of course, young and old, should have the opportunity of opting out and asking for divorce . but their opinion should be sought and be taken into account . another pertinent issue was polygamy . in the yemenite culture, polygamy was accepted and the state of israel could not have it . freedom of choice is important provided it is not discriminatory . it is just to prohibit polygamy because it discriminates against women .16 but if both men and women would be free to marry as many partners as they wish, meaning that both polyg yny and polyandry were to be allowed in a certain community, then we may honour freedom of choice . marriage between two individuals is 14 archives of the state of israel, g5543/3631, file 607 (ii). see also g5543/3631, file 607 (iii). 15 in 2013, the minimum age for marriage was raised to 18. 16 polygamy has been documented in 80% of societies across the globe often to the detriment of women. in times of war, when many men are away and possibly not return home, some women would rather share a man than have no man. see hassouneh-phillips (2001, pp. 735–748); elbedour et al. (2002); house of commons (2018). 17should liberal democracy respect group rights that discriminate against women and apostates? public governance, administration and finances law review • 1. 2023 normative, and norms may change . indeed, norms have been changing . in this age of time, marriage between people of the same gender is becoming more acceptable . this idea was perceived as an aberration in previous centuries (noble, 2015) . today, most countries that permit polygamy are countries with a muslim majority or with a sizeable muslim minority . in india, polygamy is legal only for muslims . in russia and south africa, polygamy is illegal but not criminalised (burton, 2018) . legal and social contexts, informed by gender, race, sexuality and class, shape the experiences of social relationships (heath, 2023) . 6. denying education to women and children in israel, while secular women are not equal to men in the job market, they are not denied education . indeed, more than 50% of the students in institutions of high education are women (report of the committee for the advancement and representation of women in institutions of high education, 2015) . 58% of women in israel in the young adult group (25–34-year-old) have a  college education, compared to 38% of men (gertel, 2019) . the picture is very different where ultra-religious (haredi) women are concerned . in 2018–2019, the haredi population was just over one million and of them 8,400 haredi women attended israeli institutions of higher education (malach & kahaner, 2018; zaken, 2019) . haredi women tend to marry young and have large families . while there is a  notable improvement in their education, forced by the fact that their husbands prefer to study in yeshivot (religious institutions where they study only judaism) and have 7 children on average,17 they lack educational opportunities that are opened for secular women . ultra-orthodox women are expected to first fulfil family roles in optimal manner . the family comes first, and haredi women prefer to work in their community and not in the larger secular job market (malhi & abramovsky, 2015) . the ideal of being “the queen of the house” is central to the traditional education rooted in the ultra-orthodox community . women have to juggle between their various demanding duties  –  taking care of their husbands, children and the home, and at the same time be the breadwinners of their large families . the global gender gap report, published by the world economic forum (wef), ranks countries according to participation by women in the workforce, their access to education and health, and opportunities for representation and promotion in politics . in 2020, israel was ranked 64 out of the 153 countries rated . this ranking is explained by lack of representation and power for women in politics, reflected in the low number of parliamentarian women, their weak representation in government service, the substantial salary gap between women and men, and low women participation in the labour force (global gender gap report, 2020; uni, 2019) . 17 in 2015–2017, the average fertility rate of ultra-orthodox women was 7.1 children per woman. malach and kahaner (2018). 18 raphael cohen-almagor public governance, administration and finances law review • vol. 8. no. 1.  7. conclusion the theory of just, reasonable multiculturalism is about inclusion as well as exclusion, about freedom of religion and freedom from religion, about providing circumstances for people to promote their way of life as well as deserting it at will and having the ability to adopt another (cohen-almagor, 2021a) . a fair and reasonable balance needs to be maintained between individual rights and group rights (cohen-almagor, 2022) . in both the hutterite and the pueblo cases, the courts supported the claims of illiberal groups, in the name of freedom of religion . the courts were reluctant to interfere in tribal affairs, viewing interference as an imposition of their own values on distinct minorities . the judges failed to realise that clinging to the principle of neutrality contradicts two other important liberal principles, those of gender equality and freedom . hence, it seems that their judgments do not settle the disputes between liberal values and illiberal minorities . tolerating tribal conduct had resulted in intolerant behaviour towards some tribe members . since liberal tolerance is individual freedom-based, not group-based, it cannot justify internal restrictions that limit individual freedom of conscience . people should be free to move in and out of their cultural communities without penalties . they should not be coerced to stay in order to serve group interests . israel is an economically developed democracy that strives to maintain a particular jewish tradition and religious identity in a heterogeneous society . as a result of its distinct preference to jewish orthodoxy, israel has failed to adopt national standards for women that would bring israeli law into compliance with international human rights . the constant challenge for israeli democracy is to secure basic human rights for all . improvement in women’s status is possible if there will be a growing egalitarian consciousness to counteract the coercive nature of jewish orthodoxy supported by continued advancement of socioeconomic conditions (israel ministry of foreign affairs, 2013; halperin-kaddari & yadgar, 2010, pp . 905–920; halperin-kaddari, 2004; cohen-almagor & maroshekklarman, 2023) . finally, i argued that the state should come to the aid of women who are denied education . it is incumbent on the liberal state to help women when men use their authority to deny the right of education to women, just because they can . women should enjoy equal opportunities to develop themselves and become the persons they perceive in their dreams . education is a key to self-development and to reaching interesting and fulfilling positions in society . these positions should be open to all, not just men . cultural claims should not enable discrimination and coercion . the principles of respecting others, and not harming others, require the state to intervene when basic human rights are violated . we should recognise the inner spark that women possess . dignity as liability requires the state to ensure that all people are accorded equal treatment from birth (kant, 1969; bird, 2006) . women have a right to develop themselves as autonomous human beings exactly as men do . dignity as liability requires us all to respect persons qua persons (mccrudden, 2014) . people deserve to be accorded a certain treatment from birth . we are endowed with dignity and have the right to be treated with dignity . while people cannot expect genuine concern from fellow humans, we can expect respect from others . gender should not constitute grounds for discrimination . 19should liberal democracy respect group rights that discriminate against women and apostates? public governance, administration and finances law review • 1. 2023 references altman, y . (2018, october 21) . where did the assets of yemenite immigrants disappear . israel hayom (israeli daily, hebrew) . archives of the state of israel, g5543/3631, file 607 (ii) . see also g5543/3631, file 607 (iii) . bächtiger, a, dryzek, j . s ., mansbridge, j . & warren, m . (eds .) (2018) . the oxford handbook of deliberative democracy . oxford university press . online: https://doi .org/10 .1093/oxfordhb/9780198747369 .001 .0001 barry, b . (2001) . culture and equality . harvard university press . benhabib, s. (2002). the claims of culture: equality and diversity in the global era .  princeton university press . bird, g . (ed .) (2006) . a companion to kant . blackwell . britannica (s . a .) . ancestral pueblo culture . online: https://www .britannica .com/topic/ancestral-puebloculture brown, r . a . (1930) . the indian problem and the law . yale law journal, 39(3), 307–331 . online: https:// doi .org/10 .2307/789897 burton, n . 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(2019, december 24) . thanks to women: the standard of living of ultra-orthodox society is steadily rising . globes . https://doi.org/10.1086/322741 https://bit.ly/3pyps01 https://bit.ly/3pyps01 http://www.un.org/en/universal-declaration-human-rights/ http://www.un.org/en/universal-declaration-human-rights/ https://2009-2017.state.gov/s/srgia/154553.htm https://2009-2017.state.gov/s/srgia/154553.htm https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2265961 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2265961 https://doi.org/10.1057/9781137404626 public governance, administration and finances law review vol. 8. no. 1. (2023) • 23–41 . © the author 2023 doi: 10 .53116/pgaflr .6884 ‘hamlet without the prince’ – the u .s . supreme court on religious practice changes in case law in the light of the kennedy v . bremerton school district case helga kovács* ¤ * phd student, pázmány péter catholic university, faculty of law and political sciences, budapest, hungary, e-mail: helga .m .kovacs@gmail .com abstract: the supreme court of the united states of america has recently issued a  decision in several cases that are closely related to first amendment rights . in doing so, the court has changed its own set of criteria from its earlier practice . the reasons for these decisions have attracted increased interest among practitioners and academics, as it is a  long time since the court has so clearly distanced itself from its own precedent and called lower courts to account for failing to take certain criteria into account . by analysing the court’s reasoning on the role of history and tradition and the compelling nature of religious belief, this paper seeks to answer the question whether the change in the supreme court’s practice can indeed be considered truly substantial . i argue that the change is significant, but as a process is not without precedent, and is not necessarily unacceptable in terms of its consequences . keywords: religious freedom, religious neutrality of the state, first amendment, u .s . supreme court, endorsement test, reasonable observer, prayer in school 1. content of the first amendment the first amendment (1791) to the constitution of the united states (1787) protects five cherished values: freedom of religion, speech, press, assembly and petitioning the state . each of these fundamental rights is linked to freedom of conscience, protecting the possibility of people to think and speak according to their beliefs . the document reads: congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the government for a redress of grievances . https://doi.org/10.53116/pgaflr.6884 https://orcid.org/0009-0002-1932-530x mailto:helga.m.kovacs%40gmail.com?subject= 24 helga kovács public governance, administration and finances law review • vol. 8. no. 1.  the first amendment therefore contains two clauses related to religion: one prohibiting the establishment of a state church and the other protecting free religious practice . the establishment clause is clear in that the establishment of a religion by the congress, its ‘officialisation’ or a direct coercion to religious belief is a prohibited area of interference . however, the first amendment’s clauses on the free exercise of religion and freedom of speech protect individuals who engage in personal religious observance from state retaliation, and the constitution does not authorise the government to suppress such religious expression . perhaps it is thanks to this that most of the decisions related to the establishment clause have not been adopted in cases that can clearly be judged by a semantic interpretation of the first amendment, but are in the ‘grey area’ of the rule, where courts have had to decide whether some governmental manifestation related to religion is at all covered by the constitutional prohibition . the establishment clause was the result of a  current affairs policy consensus, a significant element of which was the exclusion of the institutionalisation of religion from the powers of congress – as a lesson from what had happened to the church of england . nevertheless, the colonists and their descendants considered themselves god-fearing people, much of american society is still religious today, and the united states has observed the national day of prayer and thanksgiving every year since its proclamation on 25 september 1789 .1 unlike other protestant nations, religion has remained central to american identity today (huntington, 2005, p . 106) . there is no doubt that president george washington did not only use his thoughts on the providential grace of almighty god as a rhetorical tool when designating thanksgiving day, and that the president who sought to establish a peaceful constitutional government demonstrated his religious tolerance, occasionally ahead of his time . in contemporary america, of course, there were serious anti-religious forces in the footsteps of david hume, voltaire and jean-jacques rousseau, and the personal presence of many (e .g . thomas paine), but this was not expressed explicitly in setting the content of the first amendment . when thomas jefferson presented his commentary on the first amendment to a presbyterian minister, the minister asked him why he had not issued a thanksgiving day proclamation (unlike washington and john adams) . jefferson replied that religion was clearly a matter for the states . he explained that the u .s . government should not interfere with the work, doctrines, dogmas and practices of religious institutions . no such power has been delegated to it by the member states, and therefore, if any human power has a say in such matters, the right to act is a matter for the individual states. the view, attributed to jefferson, though not derived from him,2 that there should be an imaginary wall separating church and state, originally did not exist between the government and the people, but between the federal government and the individual states ( johnson, 1997,pp . 145-146, pp . 214–215) . the separation of church and state did not originally mean that there was an impenetrable wall between the two, but that the 1 on 25 september 1789, president washington declared november 26 a national holiday of thanksgiving. 2 for example, the sixteenth century anglican theologian richard hooker used the term ‘wall of separation’ in his writings, and baptist roger williams, the founder of rhode island, wrote in 1644 that the bible teaches that there should be ‘the hedge, or wall of separation, between the garden of the church and the wilderness of the world’ (williams, [1644] 1848, p. 435). 25‘hamlet without the prince’ – the u.s. supreme court on religious practice public governance, administration and finances law review • 1. 2023 founding fathers were convinced that the union of church and state power would inevitably lead to tyranny . however, the doctrine of the ‘wall of separation’,3 developed as a theory in the second half of the twentieth century, envisaged a very rigid wall of separation, which grew thicker and thicker, and eventually expressed the desire for government to be entirely secular, free from religious influence, and that religion should be in the homes of people and in the church . although the constitutional text itself only refers to the federal government (congress), by 1833 all states had abolished ‘official’ religion, and the court ruled in the 1940s that the provision applied to individual states .4 this process has also taken place for other constitutional provisions: the same has happened with the constitutional prohibition of restrictions on freedom of speech, which covers all constitutional bodies and, since 1925, the member states and their bodies (koltay, 2009, p . 98) . 2. subjects of the first amendment’ interpretation russell l . weaver lists five areas that have from time to time raised points of law that need to be answered . the reason for their recurrence may be that, in the absence of generally valid criteria for their assessment, courts have been bound by the facts and circumstances of the particular case before them and have consequently been wary of making valid findings outside the scope of the case . the supreme court has done the same, keeping parallel several of the tests it has developed over time, and their modifications, in the system of judiciary . however, an overly fact-specific approach can obviously have a narrow scope, and personality law cases are not characterised by the routine repetition of situations . the five issues mentioned include unconstitutional financial aid for religion, various schooling benefits, state support for prayer, the inclusion of prayer in the curriculum and support for religious manifestations.5 in a  different approach, the vast majority of cases involving establishment clauses have arisen in four main areas: financial aid for religious education6 or other social welfare activities carried out by religious institutions, government sponsorship of prayer,7 the removal of religious dissidents from generally applicable laws,8 and in cases related to government owned or sponsored religious symbols.9 these 3 for more information on the wall of separation doctrine see baker, 2009. 4 in everson v. board of education of the township of ewing 330 us 1 (1947), all nine justices agreed that the establishment clause applies to both the state and local governments. 5 for the definition and detailed processing of the case groups see weaver, 2017, pp. 274–321. 6 everson v. board of education of the township of ewing 330 us 1 (1947); board of education v. allen 392 us 236 (1968); aguilar v. felton 473 us 402 (1985); zelman v. simmons-harris 536 us 639 (2002); rosenberger v. rector and visitors of the university of virginia 515 us 819 (1995). 7 engel v. vitale 370 us 421 (1962); abington school district v. schempp 374 us 203 (1963); lee v. weisman 505 us 577 (1992); santa fe independent school district v. doe 530 us 290 (2000); marsh v. chambers 463 us 783 (1983); town of greece v. galloway 572 us 565 (2014). 8 texas monthly, inc. v. bullock 489 us 1 (1989); cutter v. wilkinson 544 us 709 (2005); hosanna-tabor evangelical lutheran church and school v. eeoc 565 us 171 (2012); burwell v. hobby lobby stores, inc. 573 us 682 (2014). 9 lynch v. donnelly 465 us 668 (1984); county of allegheny v. aclu 492 us 573 (1989); mccreary county v. american civil liberties union of kentucky 545 us 844 (2005); van orden v. perry 545 us 677 (2005). 26 helga kovács public governance, administration and finances law review • vol. 8. no. 1.  groups of cases, through their considerable diversity, have encouraged the court to develop new tests for the effectiveness of the constitutional test . 3. state-sponsored prayer of the foregoing subjects, the assessment of cases of state-sponsored prayer is a particularly complex area, as reflected in the court’s less than consistent practice . the first two of the court’s best-known decisions ruled unconstitutional the practice of public school pupils starting the school day with prayer or bible reading, even if this is ostensibly voluntary .10 although the reception of these decisions has been rather controversial,11 the court has gradually extended the ban to prayers at graduation ceremonies12 and even to school sports events .13 the school district practice under scrutiny in engel and schempp clearly consisted of regulating an act with a religious content, with prayer being regularly included in the institution’s agenda, with a controlled content . in these cases, the court, referring back to the principle of religious neutrality, declared that the mere support of religion in general resulted in an unconstitutional practice, in the assessment of which circumstance the voluntary participation in prayer or the sectarian neutrality of prayer was of no material importance (koltay, 2016, p . 168) . while the majority opinion in engel did not refute the religious character of american society, it did emphasise that when the power, authority and support of government is placed behind the cause of a single religion, the interests of dissenters are harmed . in this case, religious minorities are under indirect coercion and must adapt to the religious preferences of the majority . it is therefore inadmissible to make any religion officially accepted . the ruling went on to say that the constitution accepts other points of view, and that the right of atheists or agnostics to follow their own path cannot be denied . overall, the court declared that believers (and everyone) would benefit from a religion-neutral government . the court has already supported its finding of the need for neutrality in schempp with a further argument, the religious diversity of american society, as demonstrated by demographic changes . the court dismissed the arguments based on the historical practice of constitutional amendment (i .e . its narrower range of interpretation) by arguing that the practices of jefferson and james madison’s time could be highly offensive to many today (including believers and non-believers) .14 the engel and schempp decisions thus relied heavily on the religious minority and non-believer criteria in finding a  violation of the establishment clause . consequently, the court extended the interpretation of the clause as early as the 1960s, not only to the effect that the state may not establish a national 10 for a detailed treatment of the relevant cases see koltay, 2016, pp. 165–178; see also weaver, 2017, pp. 297–304. the two cited cases are the engel v. vitale 370 us 421 (1962) and abington school district v. schempp 374 us 203 (1963). 11 thomas c. berg, who wrote the detailed history of the engel and schempp cases, analyses at length how some members of congress, outraged by the engel case, made efforts to invalidate the decision by the amendment of the constitution. these efforts continued after the schempp judgment: by may 1964, 147 amending proposals had been made, but all ultimately failed in senate hearings and house debates (see berg, 2011, p. 221). 12 lee v. weisman 505 us 577 (1992), p. 632. 13 santa fe independent school district v. doe 530 us 290 (2000). 14 abington school district v. schempp 374 us 203 (1963), p. 235. 27‘hamlet without the prince’ – the u.s. supreme court on religious practice public governance, administration and finances law review • 1. 2023 church, but also to the effect that state support for certain religious practices is impermissible because it marginalises non-believers or those of other religions (levine, 2012) . in lee v. weisman, the court, in assessing the circumstances, emphasised that the decision to invite a rabbi to pray and give blessings at a school celebration was made by the principal,15 acting on behalf of the state, and hence, in essence the content of the prayers was directed and controlled by the principal . the presence of the rabbi had a coercive effect on the pupils present, in that the school obliged all of them to attend the religious event . this procedure was described by the court as pressure, ‘subtle coercion’ . it cannot be overlooked that in lee, which came to trial two decades after the schempp judgment, the lemon test of absolute religious neutrality and the endorsement test had been part of the case law for ten years as the fundamental tests of the first amendment . in lemon v. kurtzman, the court held that direct government aid to denominational schools was unconstitutional .16 to determine whether a law or other government action is constitutional, it developed a three-step test . the first test is whether the challenged state action has a secular purpose, the second is whether it has the primary effect of promoting or inhibiting religion, and the third is whether it does not involve excessive entanglement of state and religion . the second test for endorsement was proposed by justice o’connor in lynch v. donelly.17 the court did not find unconstitutional the display of a  nativity scene surrounded by other festive decorations in the heart of a shopping district, stating that it ‘engenders a friendly community spirit of goodwill in keeping with the season’ .18 under the endorsement test, the court is to examine whether the state intended to convey a message of ‘endorsement’ or ‘disapproval’, and whether the act had such a communicative effect . accordingly, a violation of the establishment clause occurs when, to a reasonable, informed observer, the government’s action appears to be an endorsement of religion . the endorsement test, which modified the first two criteria of the lemon test, did not attack the speech of the religiously inclusive community and was more respectful of the identities of citizens of different religions, because it focused expressly on the government’s message . the informed and reasoned observer benchmark was most often applied in cases involving religious symbols, although the court also used it to judge a one-minute silence (meditation or silent prayer during school hours) a year after the lynch decision .19 the third test, called the coercion test, was developed by justice kennedy in 1992 in lee.20 the criteria of the test are designed to determine whether the government’s actions pressure or coerce someone to participate in a religious event or to remain passive in a situation of discomfort . the coercion test, despite its increased importance, has remained a doctrinal tool and has not replaced the other tests of the court (rode, 2016, p . 7) . eight years after the lee ruling, the subject of the investigation was prayer on school grounds, no longer in classrooms but on the sports field instead . in santa fe v. doe, the 15 lee v. weisman 505 us 577 (1992). 16 lemon v. kurtzman 403 us 602 (1971). 17 lynch v. donnelly 465 us 668 (1984). 18 lynch v. donnelly 465 us 668 (1984), p. 685. 19 wallace v. jaffree 472 us 38 (1985); mcgrath, 2022. 20 lee v. weisman 505 us 577 (1992). 28 helga kovács public governance, administration and finances law review • vol. 8. no. 1.  court ruled that a school policy allowing student-initiated and led prayer at a high school football game violated the establishment clause .21 the policy required a vote first on whether to have a  prayer and then on who should lead it . according to the decision, students and others present were forced to participate in a religious act . the court focused on the active role of the school in the mechanism for selecting the student to lead the prayer . it attached importance to the fact that participation in the matches was not voluntary for the students and to the fact that the significant social pressure for such prayer was in a special environment. the court assumed that students obviously perceived the situation as one in which participation was unavoidable, and that the pre-game prayer was endorsed and supported by the school . the court concluded that the school policy clearly involved not only a perceived but also an actual endorsement of religion . as such, the presumed influence and action dynamics of the age group and the influence of the school’s authority played a major role in the constitutional assessment of these practices at school events involving children or adolescents . by comparison, at events in less coercive circumstances, essentially involving adults, the court has generally not considered public prayer in a public institution to be unconstitutional . in marsh v. chambers, the court held that prayer in public at the opening of a legislative day was such a practice .22 in town of greece v. galloway, the court ruled the same way in relation to a prayer at the beginning of a town council meeting, where the town accepted any prayer without discrimination of religion .23 in both decisions, the assessment was based on the practice built into historical tradition and its acceptability . the combination of these two factors, namely the low degree of coercion to participate in the prayer and the action as a  tradition, prevented the practice from being found unconstitutional . some find it curious that while in schempp the court was keenly concerned with the sensitivity of people of other religions and non-believers, these aspects were not at all relevant in the majority decision in its assessment of the practice of legislative prayer, which favoured the dominant religious views (levine, 2012, p . 785) . in town of greece v. galloway, however, the court explained that the outcome of the inquiry is emphatically fact-dependent, and must take into account the context in which the prayer was said and the audience .24 the court also suggested that it would have considered the legal issue differently if the town council had persuaded the audience to participate in the prayer, and singled out dissenters, or indicated that agreeing to prayer would influence its decision making . however, these circumstances did not arise in the case25 (levine, 2012, p . 785) . in each of these cases, the ‘democratic tradition’ based on the separation of church and state has been a solid starting point for the court . however, it is not easy to separate these two crucial forces of human existence . from the 1950s until roughly the early 2000s, the court decided the cases before it by gradually widening the interpretative boundaries of the establishment clause, with only a few exceptions based on historical tradition . the 21 santa fe independent school district v. doe 530 us 290 (2000). 22 marsh v. chambers 463 us 783 (1983). 23 town of greece v. galloway 572 us 565 (2014). 24 town of greece v. galloway 572 us 565 (2014), p. 587. 25 town of greece v. galloway 572 us 565 (2014), p. 588. 29‘hamlet without the prince’ – the u.s. supreme court on religious practice public governance, administration and finances law review • 1. 2023 court applied its own constitutionally-constructed test to the facts found by the lower courts and, if their identification reached a ‘critical mass’; in other words, if they fitted the elements of the test, decided on the constitutional issue . where the facts did not fully fit the criteria known from previous cases, this resulted in either the constitutionality of the practice or the need for creating further tests . the prayer in the legislature escaped because it was uttered before persons of age, distinguished patrons and had a two hundred year tradition . the school morning prayer, on the other hand, was ruled unconstitutional because the court presumed a high degree of influence on children or those on the verge of young adulthood . in these cases, however, the state school could always be identified as the initiator of the practice under scrutiny . the school prayer was therefore the decision of the institution, not of one of its employees . in the cases just discussed, there was a competition between the first amendment’s coverage of the establishment clause and the free exercise of religion . the latter, however, concerned the prayer of the pupils of the school rather than the religious practice of the school’s employees . the state school could therefore always be identified as the initiator of the practice under scrutiny . of course, life produces other variations – for example, the case of the deeply religious school coach . 4. kennedy v. bremerton school district26 in kennedy v. bremerton school district, the point of law was whether the public school violated the first amendment by firing a  high school football coach for praying after school football games . in other words, the courts had to decide whether a public school employee’s prayer during school sports activities was constitutionally protected or could be prohibited by the employer to avoid violating the establishment clause . joseph kennedy, an employee of the bremerton school district in washington state, was a football coach at a public high school . as a christian man of faith, he continued for many years (from 2008 to 2015) the practice of kneeling on the 50-yard line after school games for a short (about half a minute) prayer on the field, giving thanks for the players and the game . the prayer was done without public address and any member of either team was free to join in . according to his employer, the school, the coach violated the constitutional separation of church and state by this practice and was ordered to stop praying . apart from a brief break, kennedy refused to give up the practice, which had become a habit . he was then suspended and then dismissed by the school district . he sued his employer, claiming that the school district violated his rights under the civil rights act of 1964 and restricted his right to freedom of religious practice and freedom of speech . the lower courts ruled in favour of the school district . the trial court ruled that the school did not violate kennedy’s constitutional rights to freedom of speech and freedom of religious practice . the court set kennedy’s rights against the school’s constitutional rule derived from the separation of church and state . according to the court’s reasoning, the public school coach’s duties did not end at the conclusion of the game, and that those on 26 kennedy v. bremerton school district 597 us (2022). 30 helga kovács public governance, administration and finances law review • vol. 8. no. 1.  the scene could not be convinced that the coach was off duty when he prayed on the field . his ‘speech’ was therefore not of a private nature, but a public service employee’s speech . it was relevant that the coach, by virtue of his position, had an influence on the players, who obviously wanted to please their role model . therefore, by his action, he exerted a ‘subtle coercive influence’ on the pupils, who were in a heightened emotional state at the sporting event, to participate in prayer . in the circumstances, it might have appeared to an outside observer at the event that the coach was conducting the prayer with the support of his employer and, ultimately, with the endorsement of the state . the court of appeal made the same assessment of the circumstances of the case and agreed with the first instance decision . however, the supreme court reversed the decision (with 6 to 3 votes) . it ruled that the bremerton school district had violated kennedy’s right to freedom of religion and freedom of speech . judge gorsuch, who wrote the majority opinion, reasoned that the coach’s prayer constituted private speech that was not generally within the scope of his coaching duties . the court also rejected, for lack of evidence, the defence that kennedy’s actions compelled the students to pray . the majority also announced the rejection of the lemon test, which had been the standard test that far . according to the court, irrespective of whether the free exercise clause or the free speech clause is the legal basis for the inquiry, a different test must be applied .27 the school district was required to prove that the restriction on the plaintiff ’s constitutionally protected rights passed the strict scrutiny test, served a  compelling interest and was focused solely on that purpose . kennedy’s silent prayer on the field did not have the effect of compelling student athletes to join . although some may have witnessed the religious act and heard the prayer, learning to tolerate speech or prayer of any kind is ‘part of learning how to live in a pluralistic society’ .28 the court stated that: respect for religious expressions is indispensable to life in a free and diverse republic – whether those expressions take place in a sanctuary or on a field, and whether they manifest through the spoken word or a bowed head . here, a government entity sought to punish an individual for engaging in a brief, quiet, personal religious observance doubly protected by the free exercise and free speech clauses of the first amendment . and the only meaningful justification the government offered for its reprisal rested on a mistaken view that it had a duty to ferret out and suppress religious observances, even as it allows comparable secular speech . the constitution neither mandates nor tolerates that kind of discrimination .29 the court also held that kennedy’s speech and religious exercise were protected even at a  lower, intermediate standard . it declared the application of the long-criticised lemon test in the kennedy case ‘long outdated’, and abandoned it . justice sotomayor and the two justices30 who joined him in the dissenting opinion disagreed with the court’s preference for the constitutional clause on the free exercise of 27 kennedy, 142 s. ct. 2407, p. 2427; for an analysis of the tests applied by the courts see ruello, 2023. 28 597 u. s. ____ (2022), p. 26. 29 597 u. s. ____ (2022), p. 5. 30 sotomayor j. filed a dissenting opinion, breyer j. and kagan j. joined. 31‘hamlet without the prince’ – the u.s. supreme court on religious practice public governance, administration and finances law review • 1. 2023 religion over the establishment clause . they argued that kennedy’s prayers were said during his service as a coach . the prayers, visible to the students, compelled them to join him as a role model for the students . therefore, allowing a school district employee to ‘publicly and communicatively display his personal religious beliefs at a  school event’ violates the establishment clause . it can thus be seen that the justices of the court, in their majority and minority opinions, interpreted the same facts in different ways, attributing different relevance to the circumstances of the case . while the justices in the minority did not consider the applicability of the previous tests to be excluded, the majority announced a change of direction in the way cases with similar facts were judged . this case can therefore be seen as a ‘battle of tests’ . its real significance lies in the court’s explicit rejection of the previously accepted establishment clause doctrine, the lemon test, which held the government’s permitting the expression of pro-religious messages unconstitutional (s . d . smith, 2022, pp . 26–28), and which lower courts had previously been obliged to consider and apply . its other equally significant element is that what was previously considered a subtle influence, an indirect coercion, no longer creates the possibility of restricting religious speech, according to the court, but only in the event of direct coercion . 5. weighing opposing arguments the kennedy case attracted particular attention because the coach suffered disadvantage because of his religious activity during working hours, which led to the simultaneous application of several fundamental rights tests: freedom of expression, freedom of religious practice (kennedy claimed a  violation of both rights) and the establishment clause, which do not at all consist of identical criteria . the courts apply the pickering test in analysing31 whether the interests of the employee or the state are to prevail when the state seeks to restrict the employee’s speech . the test itself consists of two parts . first, the employee must prove whether the speech can be considered a public utterance . if it is not within the scope of public discourse then the employer’s interests shall prevail and the employee cannot claim constitutional protection for the speech . if the speech concerns a  matter of public concern, then, as a  second step, the interest of the state (as employer) in the efficiency of the public service must be balanced against the interest of the public employee in participating in matters of public concern . it is for the employer to prove the applicability of the measure . in garcetti v. ceballos, the court expanded this framework and imposed a two-step test for determining whether a public employee’s speech is entitled to protection .32 here again, the first step is to determine whether the employee has spoken as an ordinary citizen on a public matter . if not, their speech is not constitutionally protected through the first amendment . if so, it must be examined whether the public body concerned had proper grounds for discriminating against the employee . in fact, the test in garcetti focused on 31 pickering v. board of education 391 us 563 (1968). 32 garcetti v. ceballos 547 us 410 (2006). 32 helga kovács public governance, administration and finances law review • vol. 8. no. 1.  whether the employee made a proper statement in a manner that did not violate his official duties . freedom of expression does not apply when it is exercised in the course of the performance of official, job duties . eight years later, in lane v. franks, the court limited this test to the question of whether the speech in question fell within the scope of the employee’s duties in general .33 accordingly, if the speech falls outside the employee’s normal employment duties, the speech is protected . in the kennedy case, both parties requested the court to apply certain parts of the pickering test . it was obvious that not all aspects were necessary to assess the circumstances of the case, since, for example, the very first step (whether the speech was on a matter of public interest) led to a clear affirmative answer . the parties considered this in the same way, so no discussion was necessary .34 however, the relevant circumstances to be examined were whether the person concerned spoke as an individual or as a  public employee; whether the school had an appropriate reason to discriminate against the employee and whether the school would have taken the adverse employer action even without the protected speech . according to kennedy, when he said the short, silent prayer at the 50-yard line, he was speaking as a private citizen . his statement cannot be classified as being within the scope of his normal public employee duties . he further argued that a reasonable observer would not consider the prayer to be school-sponsored . given the coach’s past practice, a reasonable observer would know that the school’s players had joined in religious expression in the past, but would also be aware that they had never been required, coerced or actively encouraged to participate in religious activity . a reasonable observer would only see the coach kneel down and conclude that he is experiencing personal silence . according to the defendant, the school considered this utterance to be a  public employee’s speech, which it sought to prove by the circumstances . the coach performed the prayer during working hours when he supervised and controlled the players . as these duties continued after the match, his ‘speech’ was delivered during his usual work duties . according to the school, the coach’s conduct was an infringement under all tests, including the endorsement test, the coercion test and the lemon test . first, the students who witnessed kennedy’s demonstrative religious practice concluded that he enjoyed the school’s endorsement . second, because the coach decides who plays in games and for how long, arguing with the coach’s ideas is a deterrent, and thus subtle coercion was present in this case . third, the school believed that the coach’s prayer practice had no secular purpose and the supposed school endorsement had no such effect . 6. error in the choice of tests to be used as opposed to the above, the court clearly distinguished government speech in support of religion, prohibited by the first amendment, from protected private speech in support of religion . it stated that the district court did not choose the ‘appropriate test’ for 33 lane v. franks 573 us 228 (2014). 34 kennedy, 142 s. ct. 2407, p. 2424. 33‘hamlet without the prince’ – the u.s. supreme court on religious practice public governance, administration and finances law review • 1. 2023 considering the circumstances of the case, as it applied the ‘while at work’ formulation in analysing the coach’s practice, rather than the ‘within the scope’ formulation in the lane case . the court then focused on the coach’s role, without properly examining the prayer in the light of the criteria set out in the lee and santa fe cases, and, as a result of the inconclusive protocol, the court arrived at the wrong legal conclusion . the district court held that kennedy spoke as a public employee when he prayed at the 50-yard line because he was still at work at the time . this reasoning may be consistent with the reasoning given in garcetti (statements made by an employee in the performance of his official duties are not considered private speech), but it is clearly contrary to the standard applied in lane, which held that the key question is whether the speech in question is within the scope of the employee’s duties in general . in assessing this, the time, place and attire of the employee and the immediate context of the action (its perceptibility) must be considered jointly in relation to the utterance . none of these can be separated from the assessment, because they are not decisive in determining whether the employee acted within the scope of his duties in making the utterance . in contrast to the former, the content of the utterance must be given decisive weight: on this basis, the prayer was not part of the coach’s duties . had the lane rule been applied, it would have been clearer that kennedy was speaking as a private individual . the court held that, as to whether kennedy was on duty at the time of the prayer, rather than whether his prayer was part of his normal job duties, the district court considered a relevant element only that if he was acting while at work then it was in any event a  public employee’s manifestation . this is not a  persuasive reasoning, and it violates the interpretive criterion announced in lane by overly expanding the scope of public employee speech, thereby rendering virtually any prayer that is said while at work unconstitutional (rode, 2016, p . 17) . under this approach, the court ruled, a  school could dismiss a  muslim teacher for wearing a  headscarf in the classroom or prohibit a christian employee from praying silently in the cafeteria while eating their lunch . unlike the prayer in the santa fe case, the coach’s silent, and brief prayer was not broadcast over a public address system to the ‘captive audience’,35 and those who did not attend could not hear it . furthermore, it is a rather unrealistic assumption that the school teachers are acting solely in the course of their official duties while at work . at bremerton, after sports matches, as is school custom, all employees were allowed a few minutes for personal activities (such as mobile phone calls, informal chats with spectators or team members), the legitimacy of which was never questioned by the school . kennedy prayed during this time, for half a minute, on the pitch . it is unlikely that any reasonable outside observer would have regarded this activity as speech explicitly endorsed by the school . the post-match situation is more akin to a short break after a meeting, or a few minutes during working hours when everyone is minding their own business . in this trial, the shortcomings of the endorsement test were also demonstrated . the constitutional criteria were essentially defined for cases concerning the permissibility of religious symbols, where the question of whether the display of a work of art or other 35 the use of the term ‘captive audience’ is analysed by garry, 2009. 34 helga kovács public governance, administration and finances law review • vol. 8. no. 1.  object in public enjoys the endorsement of the state must be examined from the point of view of an impartial, objective observer . in school prayer cases, it is no longer easy to identify an observer with similar characteristics . it is unlikely that an objective observer, as envisaged by judge o’connor in the kennedy case, would have happened to be on the field, as typically people with an interest in the match are present . even if this were the case, it is not unusual for the game to be disconnected from the circumstances, as the atmosphere on all sides is heightened, everyone is usually more or less ecstatic, and at the end of the game neither the fans nor the students are concerned with what one coach is doing on the field . the context of a school team game is simply different from, say, a war memorial cross or the aspect of people gazing around a nativity scene in a shopping centre . in such circumstances, it is difficult to imagine an objective and rational outside observer wondering whether the coach is acting with the endorsement of the state in the halfminute in question . it is even more difficult to identify with the idea that we should judge what happened on the pitch, namely the behaviour of the participants and the impact of the prayer on them, from his point of view . it is to be noted that coaches and players also kneel down on many less solemn occasions . in the event of a serious injury sustained during a game, it is common for coaches and players to kneel and fans to bow their heads, all praying for the same purpose in the silence (rode, 2016, p . 21) . it is unlikely, however, that any school would see this as a real threat to violate the establishment clause . in addition, there have been examples of teams kneeling before matches on the basis of other preferences, not as a personal time, but for explicit demonstrative purposes . despite the religious origin of the gesture, no discrimination against this act has ever occurred . otherwise, in kennedy’s case, the facts suggested that there was a complete lack of school participation in the prayer . bremerton did not supervise or control the subject matter or content of the prayer; the prayer was not the result of the school’s policy of encouraging religious expression, and the school was unaware of the practice during the first eight years of the coach’s career . hence, because kennedy’s prayer was not influenced by the school, it could not be construed as having been endorsed by the school, so there were strong arguments for the private nature of his speech . the court also judged the effect of the coach’s action differently from the lower courts . the court found a fundamental difference from the lee case in that the school did not participate in kennedy’s prayer, and the prayer itself was not officially known until eight years later, through a complaint from a parent . no one disputed that the coach did not encourage the students to join in, and that the students who voluntarily prayed with him were not a homogeneous group, either in terms of their identity or numbers . this calls into question whether they chose to participate in prayer under coercion . in contrast to the prayer at a graduation ceremony (lee) or a student-led prayer before a football match (santa fe), kennedy prayed after the players had left the field and the fans had left or were about to leave . therefore, there was not even a question of direct coercion on the students . on the question of the assessment of coercion, some differences emerged on the basis of an analysis of the analog y of the facts . in santa fe, the prayer broadcast over the public address system immediately preceded the match, so it would have been rather difficult to argue that the players had a way of distancing themselves, so the court obviously did not 35‘hamlet without the prince’ – the u.s. supreme court on religious practice public governance, administration and finances law review • 1. 2023 use the term ‘captive’ audience by chance . such a situation did not occur in the kennedy case . however, the school’s concern about the role of the coach is more understandable . the coach is undoubtedly a leading figure for the team members; he has control over their place in the game, their playing time and influence over their careers as athletes based on his professional opinion . his role is not solely educational through sporting objectives: he bears more responsibility for the team’s performance than, for example, a physics teacher for the class average . he gets to know the team members and their environment better, following not only their physical but also their mental development . the coach is a kind of role model, who can be perceived positively or negatively, and whose adaptation is driven by recognition or fear, but whose respect based on authority is undoubtedly present in the sporting world . it is likely that kennedy’s players were involved in prayer because of this complex, unique relationship, and it seems plausible that this could be seen as a subtle coercive effect of his person . but what about those who joined the prayer from the opposing team or the spectators? in their case, it is not very logical to assume such a  coercive effect, if only because of the aforementioned lack of personal connection . moreover, the members of bremerton’s team did not always join him, and they varied in composition from one occasion to another, so the supposed coercive element must have been quite remote . the court simply did not consider the subtle coercive effect sufficient to justify a restriction on the coach’s exercise of religion . in this respect, quoting from the lee decision, it valued, as a constitutional tradition, the tolerance of a wide range of human behaviour as part of living in a plural society . 7. implications of the kennedy case for the assessment of coercive effect gorsuch j . noted in advance that members of the court sometimes disagreed on what exactly qualifies as impermissible coercion in light of the original meaning of the establishment clause,36 yet it seems that the court in this case has clearly rejected the decisive importance of the ‘subtle coercive effect’ that remains below the threshold of direct compulsion . consequently, in future cases before the courts, as long as the employer cannot prove direct coercion, prayer as an expression of free exercise of religion in the workplace cannot be restricted under the establishment clause . that is, as long as it is not said in school, ‘you must come and pray’, but only ‘who wants to come?’, some degree of constitutional protection cannot be denied from a  religious exercise . the presumption of ‘psychological coercion’ used in the early cases of school prayer (engel, schempp) became questionable with the kennedy decision . research into psychological coercion was essentially concerned with whether the institution exerts undue pressure on pupils with the view to participate in religious activities . criteria to 36 members of this court have sometimes disagreed on what exactly qualifies as impermissible coercion in light of the original meaning of the establishment clause; compare lee v. weisman 505 us 577 (1992), pp. 593, 640–641 (scalia j. dissenting). 36 helga kovács public governance, administration and finances law review • vol. 8. no. 1.  help determine this included: whether participation is compulsory, the extent of school involvement, who says the prayers, or the degree of involvement of the lead person (mcgrath, 2022, p . 2464) . however, it is apparent prima facie that it is an impossible undertaking to establish a presumption as to the degree of coercion exercised on a target audience with a different composition in every case .37 justice scalia, dissenting in lee, strongly criticised such an expansion of the concept of coercion, stating that the majority opinion’s notion of coercion is evidence of a confused understanding of the true meaning of ‘coercion’, a psycholog y practiced by amateurs that is boundless and subject to limitless manipulation . only a combination of facts with concrete consequences for the person subjected to the coercion can be considered coercive, provided the correct approach is followed . in the kennedy case, the defendant did not prove such a coercive effect . nor has state aid or government endorsement proved to be an easily applicable standard . the very fact that this test can be applied in school prayer-type disputes has made the practice uncertain, since coercion must be examined from the state’s perspective and cannot be extended to the protected freedom of expression of the person saying a voluntary prayer . this uncertainty was intensified by the facts of the kennedy case . the case is therefore seen by some as a symbolic parting of the waters, as it has made clear a constitutional change of direction that has been observable in the court’s decisions for a decade or even more (s . d . smith, 2022, p . 27) . in the american constitutional order, the ‘wall of separation’ theory of the relationship between church and state, developed in the second half of the twentieth century, dominated legal thinking for decades after the everson case in 1947 .38 this doctrine, which was maintained for nearly seventy years, required the two spheres to be kept separate . according to this view, the experience of religion is essentially a private matter, to be protected only in the private sphere, but public and governmental functions (including public schools) must be neutral and therefore secular . prior to the kennedy verdict, public schools had strong powers to control the religious communications of teachers and students under their responsibility (lupu & tuttle, 2023, p . 47) . those who have challenged the endorsement test over time have often argued that it relies on figurative abstractions that do not have their origin in constitutional tradition . a typical example of it is the three-step test created in the lemon case, which cannot be derived from the text of the establishment clause . the court’s jurisprudence has subsequently required that governmental action must not even symbolically endorse religion, but there was no clear guidance on how to recognise symbolic endorsement . in contrast, according to those who oppose an overly expansive interpretation of the establishment clause, the drafters of the constitution were aware of the different meanings of ‘establishment’ and ‘endorsement’ when drafting the establishment clause and chose the former to express their intentions . they therefore challenged the constitutional jurisprudence by arguing that the original meaning of the establishment clause (the prohibition of the institutionalisation of religion) had been changed by the lemon test 37 lee v. weisman 505 us 577 (1992), p. 632. 38 everson v. board of education of the township of ewing 330 us 1 (1947); for an analysis of the case, see ward, 2009. 37‘hamlet without the prince’ – the u.s. supreme court on religious practice public governance, administration and finances law review • 1. 2023 and its ‘successors’ . they allow the judge to make a subjective assessment of whether the state actor had a secular purpose, so that the judge can engage in relatively informal speculation about the state of mind of another government official and draw a  subjective conclusion about whether the government actor’s purpose is secular . if the court finds that there was no secular motive, it must find that the state action violated the establishment clause .39 the requirement of a secular purpose as created by judges, and the prohibition on endorsing religion, is, according to opponents of the doctrine, a stretch of the judicial power under article iii of the constitution . however, by overruling the lemon test, the court has called into question the justification of the criteria (religious purpose, effect on religion, interconnection between the two spheres) on which the practice of the establishment clause was based . the court has not been able to establish, despite serious efforts, a coherent rule for assessing the infringement of the establishment clause . 8. the role of tradition in judging cases according to the change of direction announced by the court, courts in future will have to decide whether a  law or practice violates the establishment clause by taking into account history and historical tradition and going back to the original meaning of the text as drafted by the founding fathers . this brings back on the agenda the not so recent debate between liberal and conservative interpreters of the constitution as to whether subsequent practice of the constitution can override its original understanding . the question of the nature of the mutual criticism between the two sides cannot be answered correctly by contrasting the extremes of their differences . to understand the differing views, we must accept that both approaches are ultimately based on a  choice between value preferences, influenced by debates about the interpretation method of the constitution . the history of dissenting opinions of the justices of the court is also the history of how, and under what conditions, the liberal view of the constitution (as an evolving organism) and the conservative approach of defending the original meaning of the constitution can prevail over each other . in the kennedy case, the court instructed the lower courts to interpret the establishment clause by reference to historical practices and interpretations, rather than applying the lemon test and the endorsement test . this finding had already been made in the 2014 town of greece and 2019 american legion cases,40 and the court also referenced it . according to the legal reasoning of the former judgment, ‘the line we must draw between the permissible and the impermissible is one which accords with history and faithfully reflects the understanding of the founding fathers’ .41 in doing so, the court wished to emphasise that an analysis focusing on the original meaning and history is not a feature of the kennedy case but a long-standing rule, that is, it is not an exception to the 39 a summary of the criticisms of the lemon and endorsement tests can also be found in the amicus filed in the kennedy case (february 2022). 40 town of greece v. galloway 572 us 565 (2014); american legion v. american humanist association 588 us ____ (2019). 41 town of greece v. galloway 572 us 565 (2014). 38 helga kovács public governance, administration and finances law review • vol. 8. no. 1.  court’s jurisprudence on the establishment clause . this should have been recognised by the courts of first and second instance . in marsh, the court emphasised the idea that the legislature’s chaplaincy goes back to the first congress, which is why it is such an old tradition that it has become part of the fabric of society .42 although the court considered the decision an exception due to the limited context in which the prayer was said .43 and, in american legion, the court considered the lemon test inappropriate for adjudicating the point of law,44 instead deeming the tradition-based reasoning appropriate to overcome the courts’ overly broad interpretation of the establishment clause . some of the analysts of that thesis missed the set of application criteria of history and tradition as standard . they stressed that the court had not revealed the techniques that would allow a  more thorough understanding of the historical context of the original meaning and determining the historical tradition (analysed by cooley, 2023, p . 61) . it defined the scope of the establishment clause by reference to historical practices and perceptions, but did not carry out the analysis itself (mapping the historical practice and relating it to the facts of the case), referring only to its previous precedents (m . l . smith, 2022, pp . 38–39) . in doing so, the judges exposed the constitutional case law to the risk of inconsistency, thus ultimately creating the potential for undermining legal certainty . the originalists also argued with legal certainty . since such an approach to constitutional interpretation requires the identification of the communicative content of the constitutional text, it is essential to collect and evaluate all the evidence on the historical and traditional meaning . these then act as constitutional limits on judicial decisions and the formulation of doctrines . where the text of the constitution is vague, history and tradition can be the basis for the choice of the right doctrine, whereas the idea of a living constitution undermines the predictability of the law, empowering judges to interpret the content of the constitution according to their own convictions . the rule of law (as an important political value), the separation of powers (including the desire for judges to rule according to existing rules) and popular sovereignty (as a political value of democratic legitimacy) are common premises of the different versions of originalism . however, the validity of the three elements is doubtful if the idea of a living constitution derives its primary definition of meaning not from social practices but from artificial, abstract principles and values (barnett & solum, 2023, pp . 2, 14) . 9. moving towards the free religious practice what does all this mean for the kennedy case? if the focus of legal judgment is on the fact that kennedy is identified as a coach during his prayers, the court’s reasoning effectively makes any religious expression by public employees categorically prohibited . in this approach, the content of the utterance is irrelevant and, since the religious element is ignored, the case will be decided on the constitutional aspects of the employee’s 42 marsh v. chambers 463 us 783 (1983). 43 town of greece v. galloway 572 us 565 (2014). 44 according to the ruling, the bladensburg cross on the world war i memorial did not violate the establishment clause, and the historical approach should be taken as the guiding principle in the assessment of religious symbols. 39‘hamlet without the prince’ – the u.s. supreme court on religious practice public governance, administration and finances law review • 1. 2023 freedom of speech . the conflict between the two competing interests precludes the free religious practice under the first amendment, even though the employer also discriminated against the employee for fear of violating the establishment clause . the employee, on the other hand, cannot effectively invoke his right, at all, to freedom of religious exercise, which is in fact in conflict with the establishment clause . in my view, this is the one-sided situation, which the court has recognised and which has led it to take a different starting point in its adjudication of the case . namely, the first amendment protects not only two but all three values (the prohibition of the institutionalisation of the church, freedom of expression and freedom of worship) simultaneously, and does not establish any inherent hierarchy between them . the legal assessment of these matters will require a more comprehensive optic in the future, rather than the proverbial thinking that ‘there are three kinds of people: those who can count, and those who cannot’ . it is true that the founding fathers said nothing about how they intended the constitution to be interpreted, but these values were not placed side by side in the first amendment by chance . the court recalled a precedent that in anglo–american history, government repression of speech has often been directed at religious speech, even though private religious speech is by no means an orphan child of the first amendment, but is – from the point of view of freedom of speech – fully protected to the same extent as secular speech . therefore, ‘free speech clause without religion would be hamlet without the prince’ .45 the fact that the first amendment doubly protects religious speech (both through free speech and independently) is not accidental, but a natural consequence of the framers’ distrust of government attempts to regulate religion and suppress dissent . the court thus expressed the view that early opponents of the religious establishment were not concerned with the separation of church and state, but rather with state-sponsored religious discrimination . however, this had a  well-defined, small number of issues, which the court gradually broadened, increasing the wall of separation . this approach ignores the fact that there has never really been a consensus on the separation of church and state, nor that, in history, governance has always been conducted with some degree of cooperation between the two spheres . the complete rejection of state endorsement for the church has never been achieved, as the church takes over certain public functions from the state, typically in the areas of education, running the social system and the pursuit of cultural goals . the institutional interactions that develop in the process are realities of the recent case law, of which the court takes note .46 in other cases of the establishment clause, such as the performance of prayer in a state institution or the display of religious symbols in public spaces, a narrow, exceptional range existed from the outset, precisely due to this historical tradition . in the lynch case, the nativity scene in bethlehem did not violate the establishment clause because of its christmas context, its historical tradition and its friendly, community 45 the capitol square review and advisory board. v. pinette 515 us 753, 760 (1995). 46 in carson v. makin 596 us ____ (2022), there was a change of aspect. the court’s prior case law had held that the state could permit the allocation of public funds to religious purposes in certain cases, but in carson, it concluded that if a public funding program funds secular purposes similar to those of a church-maintained institution, then the allocation of public funds should be permitted. 40 helga kovács public governance, administration and finances law review • vol. 8. no. 1.  aspects . however, in county of allegheny v. american civil liberties union,47 a majority of judges held that the mere display of a nativity scene on the main staircase of the courthouse violated the establishment clause because its display was ‘indisputably religious – indeed sectarian’ . in kennedy, the court in effect simply reaffirmed the doctrine that some degree of governmental recognition and accommodation of religious utterances is a good practice that is part of the national heritage . in its interpretation, a  religious person need not choose between adherence to his religious identity or participation in activities protected by the first amendment . this ruling also suggests that freedom of expression and freedom of religion are not overtaking but complementing each other . the flaw in the doctrine of the state that is indifferent to religion is that it misconstrues religion and religious sentiment . some people undoubtedly regard their faith as absolutely personal, but religion has never been (by its very nature) purely private for countless people, and the court’s precedents have not changed this (s . d . smith, 2022, p . 27) . the kennedy ruling of 2022 ultimately moved the jurisprudence towards a freer religious practice and away from the separation of church and state . what are the prospects? if the kennedy decision is correct, and the arguments it makes are subsequently confirmed by the court and incorporated into jurisprudence, this consequence may be seen as a correction of the court’s interpretation of the establishment clause . if religious activity in the personal time of a public school employee is protected in the same way as any profane speech then the prohibition of discrimination can function as a guarantee of the free religious practice . in this approach, the establishment clause and freedom of religious practice are not necessarily in conflict . tolerance of the expression of religion does not make it a condition of respect that religious persons substitute a conscientiously determined purpose based on secular beliefs or traditions for a purpose based on religion (expecting them to act with a secular purpose, and not to support religion even in symbolic ways) . if the kennedy ruling is wrong, then the court has unnecessarily contradicted its own seventy years of practice, leaving the establishment clause vulnerable to vague, easily manipulated and emphatically non-legal notions of historical practice and tradition . the lack of clear legal criteria makes this jurisprudence uncertain and inconsistent, and favours a result-oriented, distorted search for precedents, in which the judges’ own legal conceptions are strongly present .48 history and tradition include, among other things, the recent precedent history, in which the wall metaphor has been explicitly applied over a long period of time, and cannot be disregarded without any consideration . the court, by narrowing the doctrine of coercion to direct coercion, has allowed religious expression in public schools to an unprecedented extent, opening the door wide to the expression of any religious belief in a public institution . we will see what happens . 47 county of allegheny v. aclu 492 us 573 (1989). 48 on the technique of selecting precedents according to a predefined outcome, see cross and harris, 1991, pp. 63–71, cited by jany, 2021, p. 147. 41‘hamlet without the prince’ – the u.s. supreme court on religious practice public governance, administration and finances law review • 1. 2023 references baker, j . s . jr . 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