Privatization of ports must not be allowed

Imants Vīksne schedule21.feb 2022

A third of the Members of the Saeima have called for the suspension of the new Ports Law, and the President of the Republic has postponed its entry into force for two months to see whether a popular referendum will be called to follow it up. The law is bad. It nationalizes the ports managed by the municipalities of Riga and Ventspils, which could lead to their privatization in the future.

By incorporating the Freeport area into the share capital of a state capital company, basically half of the city of Ventspils - with its residential houses, kindergartens and factories - becomes the property of one capital company. Riga would also have to give up important city-owned properties for unknown purposes. This is neither economical nor fair.

A paragraph in Kariņš' declaration

Neatkarīgā raised the alarm about the intentions of the then still nascent government coalition regarding Latvia's major ports already in January 2019, in the publication "Government plans for privatization of ports." The declaration on the intended activities of the Cabinet of Ministers headed by Arturs Krišjānis Kariņš states in paragraph 82:

"We will apply the OECD principles of management of state capital companies to the operation of large ports, increase the state's influence in decision-making and ensure more efficient use of resources. We will assess and reform the governance model of large ports, with the transformation of large ports into state-owned companies as a priority solution." But what is really at stake is not efficiency or better governance, but the objective of a particular political grouping to gain access to the benefits of municipalities and their citizens:

"Translated from the language of politicians into the language of ordinary people, the future government intends to sideline municipalities from decision-making on major port issues in order to prepare major ports for privatization within a few years."

With a third of MPs asking the President to halt the publication of the law, the plan is stuck halfway.

The territory of the Freeport of Ventspils

How to seize half the city

Latvia has three major ports - Riga, Ventspils and Liepāja. But the law affects only two of them - Riga and Ventspils. The fact that Liepāja has been made an exception, as it was repeatedly during the administrative-territorial reform, is only a confirmation of the fact that "cleaning up" the ports is a political business project. It must be understood that this is not just about ports. The Freeport of Ventspils is not just berths, cranes and terminals. It is a significant part of the city, with all its people, jobs, homes, businesses and development plans. It is a living city, the management of which this law intends to entrust to a single company, owned first by the state and then by God only knows who.

This is what the letter sent to the President of Latvia emphasizes:

"According to the adopted amendments to the Law on Ports, 42.37% of the entire administrative territory of the city of Ventspils (including municipal property worth more than €150 million) will be transferred to the indefinite and gratuitous use of a state capital company without any economic and legal justification. This will prevent the municipality from any way of dealing with its property located in this area, including two pre-school educational institutions and several apartment buildings, which is a legally and factually absurd situation."

The last barrier - the President of Latvia

Before the draft law was considered in the third reading, the Ventspils Municipal Council appealed to the Saeima not to adopt the law, pointing out a number of shortcomings in the law. Municipal property is transferred to the state capital company for compulsory possession and gratuitous use, thus violating the territorial and financial autonomy of the municipality. The income from the use of the municipal property will be freely used by the capital company outside the territory of Ventspils, which is contrary to the rights and interests of the local community. Moreover, no assessment has been carried out at all on the proposed activities of the capital company. The company would be given huge assets, but there is no plan for their management! The municipality called for the ports draft law to be referred back to the Economic, Agricultural, Environmental and Regional Policy Committee to address all identified shortcomings. However, the law was adopted by the Saeima. Apparently, some of the MPs support the plan to nationalize/privatize the ports, some of them did not look into the merits of the matter at the time. When the draft law reached the last barrier, Ventspils Mayor Jānis Vītoliņš sent an appeal to President Egils Levits to return the Law on Ports to the Saeima for a second reading. Article 71 of the Constitution provides for this possibility:

"Within ten days of the adoption of a law by the Saeima, the President, by means of a written and reasoned request to the Chairperson of the Saeima, may require that a law be reconsidered. If the Saeima does not amend the law, the President then may not raise objections a second time."

Another Constitutional mechanism triggered

Meanwhile, in the Saeima, Ventspils' allies - the Union of Greens and Farmers (Zaļo un zemnieku savienība) - started collecting signatures last week to suspend the publication of the amendments to the Law on Ports adopted by the Saeima for two months. 36 signatures were quickly collected, triggering a completely different legislative mechanism that automatically suspends the progress of the law. This is provided for in Article 72 of the Constitution:

"The President has the right to suspend the proclamation of a law for a period of two months. The President shall suspend the proclamation of a law if so requested by not less than one-third of the members of the Saeima. This right may be exercised by the President, or by one-third of the members of the Saeima, within ten days of the adoption of the law by the Saeima. The law thus suspended shall be put to a national referendum if so requested by not less than one-tenth of the electorate. If no such request is received during the aforementioned two-month period, the law shall then be proclaimed after the expiration of such period. A national referendum shall not take place, however, if the Saeima again votes on the law and not less than three-quarters of all members of the Saeima vote for the adoption of the law."

Augulis: privatization must not be allowed

So, for the moment, the publishing of the law is suspended, regardless of which side the President of Latvia personally sides with - the privatizers of ports or the municipalities and their residents. This is also underlined in a statement issued by the President's Office: "If such a request comes in, the President can't not suspend it or reject it, even if he disagrees with it - this is a constitutional right granted to the minority of the Saeima." The full text of the statement can be found here.

Of course, there is a strong possibility that the necessary tenth of the electoral votes to initiate a referendum, currently around 155,000, will not be collected. Maybe it will. But either way, time and more allies will be gained to correct this strategic mistake. And, after all, if the law does come into force, there is still the possibility of an appeal to the Constitutional Court. The request of the 36 Members of the Saeima to the President states that "the Saeima approved the Law on Ports in a wording that sets an unacceptable precedent and further threatens the territorial and financial autonomy of virtually any municipality in the Republic of Latvia by implementing undiscussed, unjustified and essentially unnecessary public administration reforms". And this cannot possibly be in the spirit of the Constitution.

For decades, it has been municipalities that have promoted the development of ports, attracted European Union funding, developed entrepreneurship and managed as a caring master should. It would not be right to give this well-ordered economy now into the hands of those who can neither buy trains nor build a national concert hall.

As Uldis Augulis, one of the signatories of the letter, points out:

"The assets that the new capital companies will be working with will be worth half a billion euros, while at the same time no assessment has been made to justify the hasty and undiscussed change of management of the ports. The poorly drafted law raises concerns that the conditions are being created for ports to stagnate rather than develop, and it is an attempt to move towards privatization of ports, which is totally unacceptable and not in the public and national interest.