Opinion of the European Central Bank of 9 June 2006 at the request of the Latvian Ministry of Finance on a draft law amending the Latvian Constitution (CON/2006/27)
Date: 2006-06-09
Institutions: European Central Bank
Subjects: Latvia, central bank, institutional activity, national law

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 9 June 2006  

at the request of the Latvian Ministry of Finance 

on a draft law amending the Latvian Constitution 

(CON/2006/27) 

Introduction and legal basis 

On  8  May  2006,  the  European  Central  Bank  (ECB)  received  a  request  from  the  Latvian  Ministry  of 

Finance for an opinion on a draft law entitled amendments to the Constitution of the Republic of Latvia 

(hereinafter the ‘draft law’). 

The  ECB’s  competence  to  deliver  an  opinion  is  based  on  Article  105(4)  of  the  Treaty  establishing  the 

European Community and the third indent of Article 2(1) of Council Decision 98/415/EC of 29 June 1998 

on  the  consultation  of  the  European  Central  Bank  by  national  authorities  regarding  draft  legislative 
provisions1,  as  the  draft  law  relates  to  the  status  of  Latvijas  Banka  under  the  Latvian  Constitution 

(hereinafter  the  ‘Constitution’).  In  accordance  with  the  first  sentence  of  Article  17.5  of  the  Rules  of 

Procedure of the European Central Bank, the Governing Council has adopted this opinion.  

1.  

Purpose of the draft law 

1.1  The  draft  law  is  designed  to  reconcile  the  text  of  the  Constitution,  which  provides  that  all 

administrative institutions of the State shall be under the authority of the Cabinet of Ministers, and 

the existence in practice of independent administrative institutions, which are not placed under the 

authority of the Cabinet of Ministers.  

1.2  These provisions concern, inter alia, Latvijas Banka. While the general principle provided for in the 

draft law is to entitle the Parliament to designate those institutions which are not subordinated to 

the Cabinet of Ministers and to legislate on their tasks and structure, Latvijas Banka is explicitly 

mentioned in the text of the draft law as a central bank whose organisation and competences are 

provided for by a special law and which is supervised by the Parliament.  

1  

OJ L 189, 3.7.1998, p. 42. 

 
 
 
 
 
                                                      
2.   General observation 

The  ECB  welcomes  the  fact  that  the  draft  law  aims  to  confirm  Latvijas  Banka’s  status  in  the 

Constitution and would like to stress the importance of ensuring that the proposed amendments do 

not entail any changes with regard to the status and functions of Latvijas Banka, but only restate its 

position in the hierarchy of different institutions at the constitutional level.  

3.  

Specific observations 

3.1   The ECB has two concerns with regard to the content of the provisions governing Latvijas Banka 

in  the  draft  law.  First,  the  ECB  takes  note  of  the  fact  that  the  wording  used  in  Article  88  of  the 

Constitution in relation to Latvijas Banka is different from the wording in Article 87 in relation to 

the  State  Audit  Office.  Following  adoption  of  the  draft  law,  the  State  Audit  Office  and  Latvijas 

Banka  will  be  the  only  independent  bodies  defined  specifically  in  the  text  of  the  Constitution. 

However, while Article 87 clearly provides that the State Audit Office is an independent collegial 

body, Article 88 on Latvijas Banka merely identifies Latvijas Banka as the central bank. For details 

concerning the central bank’s organisation and competences, Article 88 instead refers to a specific 

law, namely the Law on Latvijas Banka, which in turn provides that Latvijas Banka is independent 
in the adoption of its decisions and in their practical implementation2.  

3.2  The ECB notes that the independence of Latvijas Banka, which is also a member of the European 

System of Central Banks, is laid down in Article 108 of the Treaty and Article 7 of the Statute on 

the  European  System  of  Central  Banks  and  of  the  European  Central  Bank.  These  two  provisions 

prohibit the national central banks (NCBs) and the members of their decision-making bodies from 

seeking or taking instructions from Community institutions or bodies, from  any government of a 

Member  State  or  from  any  other  body.  In  addition,  they  prohibit  Community  institutions  and 

bodies and the governments of the Member States from seeking to influence those members of the 

NCBs’  decision-making  bodies  whose  decisions  may  affect  the  fulfilment  of  the  NCBs’  ESCB-

related  tasks.  These  requirements  already  apply  to  Latvia,  and  the  ECB  understands  that  the 

wording  of  Article  88  of  the  Constitution  does  not  entail  a  restriction  on  Latvijas  Banka’s 

independence. If, however, this understanding is incorrect, the wording of Article 88 will need to 

be further considered and amended in order to reflect the independent status of Latvijas Banka.  

3.3   Second, the ECB notes that the draft law provides that ‘Latvijas Banka shall be supervised by the 

Parliament’.  Although  this  provision  might  be  intended  to  clarify  that  Latvijas  Banka  is  not  an 

institution  under  the  authority  of  the  Cabinet  of  Ministers,  but  instead  an  independent  authority 

under the Parliament, there is a clear risk that the language used will be interpreted differently. The 

ECB notes in particular that the absence of a similar provision in Article 87 in relation to the State 

Audit  Office,  together  with  the  absence  of  constitutional  confirmation  of  Latvijas  Banka’s 

independence, may be interpreted as limiting Latvijas Banka’s independence.  

2  

Article 13(2) of the Law on Latvijas Banka.  

2 

 
 
                                                      
3.4  While similar wording is currently used in Article 43(1) of the Law on Latvijas Banka, the ECB 

notes that the term ‘supervision’ is usually applied to designate a much stronger link between the 

supervisor and the supervised entity than, for example, oversight or accountability. The ECB would 

therefore like to stress that the notion of ‘supervision’ is misleading, since it could be interpreted as 

allowing the Parliament to interfere with Latvijas Banka’s tasks in a manner which goes beyond the 

level  covered  by  the  accountability  regime  and  does  not  adequately  reflect  the  requirement  of 

central  bank  independence  under  the  Treaty  and  the  Statute.  The  ECB’s  May 2006  Convergence 

Report,  contains  the  following  statement:  ‘dialogue  between  NCBs  and  third  parties,  even  when 

based  on  statutory  obligations  to  provide  information  and  exchange  views,  is  compatible  with 

central  bank  independence  provided  that:  (i)  this  does  not  result  in  interference  with  the 

independence  of  the  members  of  the  NCB’s  decision-making  bodies;  (ii)  the  special  status  of 

Governors  in  their  capacity  as  members  of  the  ECB’s  General  Council  is  fully  respected;  and 
(iii) confidentiality  requirements  resulting  from  the  Statute  are  observed’3.  In  accordance  with 

Article 113(3) of the Treaty and Article 15.3 of the Statute, the ECB addresses an annual report on 

the activities of the ESCB and on the monetary policy of both the previous and the current year to 

the  European  Parliament,  the  Council  and  the  Commission,  and  also  to  the  European  Council. 

Against this background, the ECB would welcome it if the proposed provision pursuant to which 

Latvijas Banka will be supervised by the Parliament were replaced by a provision on the status of 

Latvijas Banka as an independent authority under the Parliament or, alternatively, if this provision 

were deleted. 

This opinion will be published on the ECB’s website. 

Done at Frankfurt am Main, 9 June 2006. 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

3  

ECB Convergence Report May 2006, p. 63.  

3