IN THE NAME OF THE REPUBLIC OF ARMENIA
ON THE CASE CONCERNING THE DETERMINATION OF CONFORMITY WITH THE CONSTITUTION OF THE PROVISIONS SPECIFIED IN THE DEVELOPMENT CREDIT AGREEMENT (NORTH-WEST AGRICULTURAL SERVICES PROJECT) BETWEEN THE REPUBLIC OF ARMENIA AND THE INTERNATIONAL FUND FOR AGRICULTURAL DEVELOPMENT DATED SEPT. 2nd, 1997.
Yerevan, 3 March, 1998
The Constitutional Court of Armenia composed of G. Harutiunyan (Chair), V. Hovhannisyan (Deputy Chair), A. Giulumyan, A. Tokhyan, H. Nazaryan, R. Papayan, V. Sahakyan, V. Selyan (Members of the Constitutional Court), V. Movsisyan, the official representative of the President of the Republic of Armenia, the Minister of Agriculture of Armenia, A. Tavadyan, an invited person, Chair of the Supervisory Board of the National Assembly, according to the Article 100 (par. 2) and the Article 101 (par. 1) of the Armenian Constitution as well as to the Article 5 (par. 2), the Article 25 (par. 1) and the Article 56 of the Law on the Constitutional Court of the Republic of Armenia, held an open-door meeting hearing the case on determination of conformity with the Constitution of the provisions fixed in the Agreement between the Republic of Armenia and the International Fund for Agricultural Development (North-West Agricultural Services Project).
The case consideration was caused by an official application of the President of the Republic of Armenia to the Constitutional Court on determining the conformity with the Constitution of the provisions specified in the above mentioned Agreement.
Upon hearing the case a report by H. Nazaryan, Member of the Constitutional Court, comments by V. Movsisyan, a Representative of the President of Republic of Armenia, clarification by A. Tavadyan, Chair of the Supervisory Board of the National Assembly of RA, and upon examining the Agreement with the relevant documentation, the Armenian Constitutional Court HAS DETERMINED:
The Credit Agreement between the Republic of Armenia and the International Fund for Agricultural Development was signed in Rome on December 5th, 1997. A credit line of some nine million five hundred thousand Special Drawing Right units (SDR 9.500.000) shall be provided for construction ang efficient operation of irrigation systems, production of improved seeds, improvement and development of animal health care service, financing the rural banking system, community development and other components of agricultural development of Shirak, Aragatzotn and Lori regions of the Republic of Armenia.
Against the usage of the credit, as stipulated by the Agreement, the Fund shall receive a service fee, to be subtracted from the annual credit capital, amounting to the fourths of one percent from the credit unpaid at that moment (0.75%), to be paid within a half-year period, on June 15th and December 15th each year. The debt refunding shall start on June 15the, 2008, and terminate on June 15th, 2037.
The Agreement`s provisions provide for an order and terms of credit capital utilization and Project implementation. Procurement of goods and civil works contracts to be financed under the Project shall be made on the basis of competitive bidding, as specified in the Section 3 of the Agreement.
In accordance with the Agreement, the Government of the Republic of Armenia has committed itself to exempt the Project from all import duties, excise taxes and value-added taxes, as well as to pay directly all social security charges of Project staff to the Social Security Fund.
The Agreement shall be entered into force after 90 days at least.
According to the Article 67 (Section 1) of the Law on the Constitutional Court of the Republic of Armenia,
having comprehensively examined the law enforcement practice formatted around the programme for rehabilitation of Armenian irrigation system in the framework of previous credit agreements between the Republic of Armenia, and the International Agricultural Association and the International Fund for Agricultural Development, the Constitutional Court has determined the following:
1. In accordance with the testimonial presented by the Ministry of Agriculture of RA and attached to the case file, the total amount designed by the Project to rehabilitate the Armenian irrigation system is US$ 57.000.000 including US$ 43.000.000, while the Credit Agreement concluded with the International Fund for Agricultural Development on June 14th, 1995, provides US$ 8.000.000. To implement the Project, the capital investments of the Government of the Republic of Armenia and water users shall constitute US$ 4.150.000 and US$ 2.000.000 respectively. The Project was started in December, 1994, and shall be finished up to 2000. As of January 1, 1998, the Project-allocated credit funding was expended at the amount of US$18 400 000. As a result, with the purpose to achieve an improvement of Armenian irrigation system, some activities have been done within the Project to rehabilitate the irrigation network, to organize special training, as well as to carry out necessary structural renovation of the irrigation system.
2. The competent agencies of the Republic of Armenia failing in their duties have committed a number of inadequacies in the targeted and efficient expenditure of the credit assets while implementing the Project intended for the rehabilitation of the irrigation system.
In particular, in 1994-1996, the targeted use of the credit and loans was not approved on an appropriate level in the irrigation structure of the Ministry of Agriculture, what according to the clarifications of the representatives of the Supervisory Board of the National Assembly of RA and the Prosecutor’s Office resulted in multiple financial violations of the law. Proceedings was instituted against the guiltes and after preliminary investigation they were prosecuted.
The Constitutional Court of the Republic of Armenia has determined that in accordance with the powers defined in the Article 89 of the Armenian Constitution, the Government of the Republic of Armenia is charged to take necessary measures to provide a better reliability in the future implementation of the obligations stipulated by the Agreement. According to the Article 77 of the Constitution, this subject should be under continuous supervision of the National Assembly of RA.
Besides, the Constitutional Court of Armenia indicated that the entire nature of the Project within the Agreement as well as the whole range of components linked with agriculture, demand an exact and continuous operating mechanism of monitoring the implementation of the Agreement, which will provide a basis to avoid the defects and omissions of the previous agreements that have occurred in law enforcement practice, as well as to avoid the possible violations of the provisions of the Armenian Constitution.
After discussions concerned, being governed by the Article 100 (par. 2), Sections 1 and 2 of the Article 102 of the Constitution, and by the Articles 5 (par. 2), 67 and 68 of the Law on the Constitutional Court of RA, the Constitutional Court of the Republic of Armenia HAS DETERMINED:
1. The provisions specified in the Agreement between the Republic of Armenia and the International Fund for Agricultural Development (North-East Agricultural Services Project) conform to the Constitution of the Republic of Armenia.
The Constitutional Court has additionally determined that the provisions included in the credit agreements can conform to the Constitution not only in the sense that it applies in the framework of powers of state bodies but bases on the main human rights and freedoms. Scattering and non-efficient using of credits result in accumulation of unjustified debts for furhter generations.
Thus, taking into consideration that the Project to be implemented under the Agreement contains a great risk of funding fragmentation and diverted usage, as well as in view of the faulty law enforcement practices having taken place in implementing the previous credit projects, the Constitutional Court determines that in order to avoid the unconstitutional situation while implementing the said Agreement, the National Assembly and the Government of RA shall establish special control within their constitutional competence concerning the allocation of the funding borrowed with the purpose to implement the North-West Agricultural Services Project.
2. Subject of the Article 102 (Section 2) of the Armenian Constitution, this dicision is final, is not subject to revision, and enters into force from the date of publication.
G. Harutiunian
President of the Constitutional Court