Company law

In order to avoid the abuse of rights by small shareholders, LFMI’s policy analysts evaluated positively a draft amendment to the Law on Joint-Stock Companies, initiated by the Ministry of Economy. The proposed amendment stipulates that the minority of shareholders shall consist of shareholders holding no less than 10 percent of the total number of votes in the company. On the one hand, all shareholders should be granted equal rights; on the other, a limit should be set for the number of shareholders needed in order to influence the decision-making in the company, so that the decisions necessary for the management and activities of the company were passed efficiently.

LFMI also analysed a draft law on sole proprietorships and submitted comments to the Ministry of Economy. LFMI proposed to allow for one person to own several sole proprietorships and to restructure sole proprietorships by way of both mergers and divisions.

LFMI’s policy analysts also studied draft amendments to the Enterprise Bankruptcy Law and pointed out questionable draft provisions regarding the liability of the head of company and the owners, the right of the interested persons to cover the court and administration expenses, and the court’s refusal to initiate bankruptcy proceedings. However, the parliamentary committees turned down LFMI’s proposals.

Deregulation

Licensing. In the past years, a number of changes to the legal framework of licensing were implemented. Yet, major problems remained unsolved. In light of this, LFMI’s policy analysts carried a comprehensive overview of specific features of licensing regulation and procedures that build preconditions for corruption and abuse of official power and submitted recommendations to government institutions regarding the principles of licensing reform. LFMI’s policy analysts also participated in a working group on licensing regulation and submitted proposals on the licensing principles that would allow ensuring consistency in reforming the existing licensing rules and procedures as well as safeguarding against eclectic and unjustified decisions.

Building and land purchase. Implementing a project “Real Estate Registration and Mortgage Systems in Lithuania”, LFMI hosted, Nov. 14, a seminar “Is It Easy to Become a Real Estate Owner?” Recently on a rise, the real estate market further highlighted the drawbacks of the system of real estate registration. Despite the fact that the real estate register ranks among the technically best-maintained registers in Lithuania, the buyers and sellers of real estate still need to go through lengthy and costly real estate registration procedures in order to buy, sell and (or) mortgage real estate. The seminar addressed possible solutions for improving the system of real estate registration, which would facilitate the sale and purchase of real estate and would help the banks to shorten the time of granting loans and the people and companies – to acquire real estate more easily. LFMI will continue its activities in this area and will further propose essential changes in the system of registers.

Customs. LFMI’s policy analysts have repeatedly called for the simplification of import procedures and have invited relevant government authorities to scrap customs-related business restrictions. As of January 2003, a new procedure of import of telecommunications equipment came into force in Lithuania, no longer requiring a license for importing telecommunications equipment that meets the EU requirements. Also, administrative taxes have been abolished, and conformity documents issued in the EU countries are now recognised in Lithuania. The new procedure has significantly facilitated the import of mobile telephones, car security systems, analogous and digital telephones, faxes, modems and other items.

Education

LFMI and the Knowledge Economy Forum organised a conference ‘Higher Education in Lithuania: Diagnosis and Prognosis,’ which was held in Vilnius Nov. 5. The goal this event was to generate a discussion on Lithuania’s higher education policy, which would contribute to the creation of an effective system of higher education, improvement of the quality of higher education in line with technological advances and market demand, and development of high-quality student-orientated study courses with the demand on the market. LFMI presented a framework of the proposed reform in higher education system.

In its resolution regarding granting state loans to students, the Government included LFMI’s proposals and set out the conditions of loan repayment that allow paying off a loan from funds of any economic entity and not necessarily in cases when the said-provision is included in a labour contract. Moreover, a provision was rejected allowing the writing-off of a loan for those students who have worked in a state or municipality institution for five years. The said resolution also indicates that loan quotas for higher education establishments will be fixed on the basis of the number of students paying for their tuition rather than the total number of students at those establishments.

At the request of the Open Society Fund Lithuania (OSF), LFMI has carried out an analysis to evaluate whether a draft law on education will help or hamper non-public education. At a meeting at the Parliament, Nov. 18, the Education Studies Centre of OSF presented its experimental assessment of the draft law on education, incorporating the conclusions by LFMI.

EU integration

LFMI has conducted a study “Debate on the Future of Europe: a View from Lithuania,” which presents an analysis of the issues currently debated in the EU and gives recommendations on how to respond to major challenges that the EU is facing before accepting new members. The study is the first exhaustive collection of analysis-based recommendations in Lithuania, presented in response to the invitation to join the discussion on the future of Europe. The study appears in Lithuanian and English. It has been presented to Lithuania’s government institutions and the EU institutions as well as the organisers of the Convention on the Future of Europe.

Foreign trade

In fulfilment of its obligations to the World Trade Organisation, the Government has changed or lifted import duties from some goods brought into Lithuania. New import duties became effective as of December 16, 2002. Seeking to harmonise competition conditions for oil producers and importers, the conventional import duty tariff on engine and gearbox oils was reduced from 10 percent to the 3.7 percent rate applied in the EU. LFMI’s policy analysts, involved in the activities of the Tariff and Non-tariff Barrier Elimination Commission, have regularly opposed the introduction of new import duties and advocated the abolishment of the existing ones.

Health care

LFMI has continued participating in the debates on draft national pharmaceuticals policy at the parliamentary Committee on Health Affairs. After LFMI submitted its policy recommendations, the draft document was improved significantly, although still failing to provide for the reform of pharmaceuticals policy.

While debating draft amendments to the Law on Health Insurance, the parliamentary Committee on Health Affairs took into account two principal recommendations by LFMI regarding the laying down of the obligation by the State Patients’ Funds to pay fines for delayed payments and the size of contribution for persons insured by the state. The Committee rejected many other recommendations, e.g., to narrow the list of state-insured persons and the services to be compensated for. Also, the Committee did not turned down a new provision stipulating that “the manufacturer’s prices used for calculating the base price of a pharmaceutical to be compensated for shall be lower or not higher than 5 percent than the lowest price of the corresponding pharmaceutical produced in the EU countries.” LFMI believes that a possible ambiguous interpretation of this provision will have negative consequences for the consumers of pharmaceuticals.

LFMI also took part in a working group under the President of the Republic of Lithuania that was set up to develop strategic regulations for pharmaceutical activities and control thereof which developed a draft of the final document. At a meeting with the President, the working group presented the key elements of the reform which are vital for ensuring transparent compensation for pharmaceuticals. LFMI’s Vice-president Guoda Steponaviciene underlined that pharmaceutical activities would lack transparency for as long as there existed a list of medicines entitled to compensation. MPs sitting on the working group also acknowledged that the general and strengthening position of the group was to replace the list of pharmaceuticals entitled to compensation with the list of diseases entitled to compensation. To eliminate the list of compensated pharmaceuticals, as a step towards greater transparency and competition in the pharmaceutical system, was also proposed by the State Control.

LFMI organised a workshop Oct. 2 to discuss major problems in health system as identified by LFMI when analysing the health care system. The workshop was attended by 23 health professionals, among them physicians, insurers, pharmacists and analysts. It was aimed at identifying the problematic elements of a viable health model as well as formulating proposals for their elimination.

Housing policy

After the Government opposed the introduction of contractual savings system (the so-called “Bausparkassen”) and after the Parliament started debating a draft law regulating this model, LFMI submitted to the parliament its comments on the expediency of the said piece of legislation. LFMI’s policy analysts also took part in the debates of the draft law at the parliamentary Committee on Economics and pointed out the negative effects of its introduction.

When drafting a law on mortgage bonds and mortgage lending, a working group included LFMI’s proposals and eliminated the restrictions on credit beneficiaries and the utilisation of the credit. Currently debated by the Parliament, the draft law will regulate a new housing financing instrument, a mortgage lending system. On Nov. 14 LFMI hosted a seminar “Is It Easy to Become a Real Estate Owner?” which highlighted once again the shortcomings of the bill: it is laid down that mortgage-lending services will be provided and mortgage bonds will be issued by credit institutions only. In principle welcoming this model of housing financing, LFMI proposed the parliament to soften the said restrictions and thus create more favourable conditions for introducing a more flexible and locally-suited model of mortgage lending in Lithuania (as compared to the contractual savings system).

The results of LFMI’s survey on Lithuanian households became an important element of the draft National Housing Strategy, currently under preparation by the Ministry of Environment, providing exhaustive information to those putting forward housing policy solutions.

Whilst implementing a project on the assessment of housing support programmes, LFMI, in co-operation with the Urban Institute, U.S.A., analysed the existing policies of housing support. Two interim presentations of the results have been held at the Ministry of Environment and LFMI’s proposals, formulated in a project material, have been included into the draft National Housing Strategy.

Information technologies

LFMI’s Vice-president Guoda Steponaviciene is a member of a working group under the parliamentary Committee on the Development of Information Society, which is to draft a new version of the Law on Electronic Signature. The working group presently holds discussions on whether a state centre for the certification of electronic signature should be established. LFMI maintains that the provision of the effectual Law should be preserved, according to which market participants who will need electronic signature certification will create such services themselves.

The majority of proposals by LFMI have been included into the concept of e-government adopted by the Government Dec. 31. Their essence is to maintain the principle of decentralisation and commercialisation of e-government projects, which are embedded in a draft of the document. The team that drafted the concept failed to avoid a number of unnecessary and populist provisions and attached too great importance to institutional supervision. The latter might create conditions for centralising the management and implementation of e-government projects.

As the Parliament started debating draft amendments to the Law on Copyright and Related Rights, LFMI analysed provisions regulating the author’s remuneration. LFMI argued that taxation of blank medium and equipment used for reproduction, embedded in the draft document, is inappropriate. LFMI proposed other models for regulating author’s remuneration based on the traditional interpretation of ownership rights and on modern technologies which would ensure protection of these rights.

Knowledge economy and telecommunications

Knowledge economy and telecommunications LFMI’s Vice-president Guoda Steponaviciene presented to the Knowledge Society Council under the President of Lithuania LFMI’s position regarding problems of the regulation of the telecommunications market encountered in the implementation of the new Law on Telecommunications. Ms. Steponaviciene pointed out that a major problem in this regard is not in the timely development of secondary legislation but rather in ensuring the appropriate quality of the legislation adopted. The main hurdles in the liberalisation of the telecommunications market are the instability of legal environment and failure to meet the principle of minimum regulation (especially in drafting secondary legislation).

Guoda Steponaviciene has also been participating in a working group to draw up a conceptual framework of the law on electronic communications. With regard to the funding of Communications Regulatory Authority (CRA), LFMI submitted a proposal that CRA should be financed from fees paid by economic entities for its traditionally provided services and from the budget for the performance of the market supervision functions entrusted to it by the new Law on Telecommunications (similar to the funding of the Competition Council). As a result of debates on this issue, a compromise was reached and the wording was adopted, under which CRA is funded from two sources as it is provided for in the new law (without specifying which functions are financed from which sources). LFMI also put forward a proposal on the key issue raised in the said conceptual framework – the efficient frequency allocation. LFMI’s proposal to allow the holders of frequency bands to re-rent them out on the market was rejected. In LFMI’s opinion, the conceptual framework developed by the working group is formal, leaving all the essential and contentious issues open, which will eventually result in their resurfacing in the further drafting of the law. Therefore, LFMI’s vice-president abstained from voting on the final document.

LFMI presented its comments regarding the World Bank report on the overall business environment, higher education system and innovation when the World Bank mission was visiting Lithuania to assess the possibilities for knowledge economy capabilities in the country. After the mission developed a new report, LFMI submitted its comments identifying the essential flaws in the proposals made by the World Bank. LFMI criticised a weighty focus on institutions (rather than their functions), the inadequacy of measures proposed for higher education reform (the proposed measures would fail to make a real difference as the system’s problems lie in the principles of its financing), and a sketchy assessment of the impact of tax reform on the activities of high-tech companies, without assessing the ineffectiveness of the state’s initiatives and its detrimental impact on competition and motivation of market participants.

NGO legislation

LFMI has analysed a draft of a new version of the Law on Lobbying Activities and submitted its comments to the Parliament. Under the draft law, virtually any kind of activity including the expression of opinion on draft legislation would become lobbying. LFMI’s policy analysts stated that such amendments constitute an unjustified restriction of human rights, endanger democracy and do not conform to the globally accepted understanding of lobbying, while translating such provisions into practice would be impossible. According to LFMI, a new version of the Law on Lobbying Activities in unnecessary and might cause a chaos in the regulation of lobbying activities and law making. LFMI presented its position at a preliminary sitting of the parliamentary Committee on Legal Affairs. Representatives of LFMI also attended a press conference held by Non-Governmental Organisations Information and Support Centre, during which the NGOs’ representatives voiced concern over the said draft law debated by the parliament. As a result of these efforts, certain changes were introduced in the draft law, yet, the major shortcomings were not eliminated.

Pension system reform

The Parliament has eventually enacted the Law on Pension System Reform. Welcoming the adopted model of the reform, LFMI’s policy analysts pointed out that the Parliament could have set a considerably larger share of social insurance contribution, at least 5 percent, which will be diverted from the government-run social insurance system to private personal accounts. The adopted law provides that only 2.5 percent of the contribution will be transferred for private accumulation.

Public administration

Ethics of civil servants: In a press conference, Nov. 26, LFMI presented the results of a survey aimed at finding out the opinion of people in Lithuania about the ethics of civil servants and politicians. The survey was carried out in co-operation with the international anti-corruption organisation ‘Transparency International.’ On Nov. 27 LFMI’s President Ugnius Trumpa and Policy Analyst Aneta Piasecka presented the results of the survey to Chairman of the Parliament Arturas Paulauskas and the parliamentary Anti-corruption Commission.

Legislation: A specialist commission headed by LFMI’s Policy Analyst Remigijus Simasius developed a draft plan of legislature improvement which is aimed at stopping chaotic law-making and ensuring better co-ordination of legislative initiatives of different institutions.

Social policy

After the Government approved a draft law on monetary social support and submitted it to the Parliament, LFMI revised its policy recommendations (formulated for the initial draft of the law) and submitted them to the Parliament. LFMI thinks that the government-approved draft law regulates the rendering of monetary support more clearly but fails to remedy the major shortcoming of social welfare system in Lithuania – the linking of social benefits to several criteria and the variety of the forms of support.

LFMI’s policy analysts also underlined that even though a conceptual framework of social insurance against unemployment, drawn up by the Ministry of Social Affairs and Labour, attempts to adapt social insurance to the principles of insurance, this is a costly process that fails to change the taxing nature of social insurance.

Tax policy

LFMI, in co-operation with the Heritage Foundation and the Friedrich Naumann Foundation, held a two-day international conference “Tax Competition and Competitiveness. Ten Years of Experience and Challenges for the Future” Dec. 5-6, Vilnius. The conference was held under the courtesy of His Excellency Valdas Adamkus, President of the Republic of Lithuania. The conference addressed the specific features of tax systems in the Baltic States and Russia and their impact on business, investment and economic growth, the role of tax planning in seeking competitiveness and the policy of the said countries regarding “tax havens.” Also, a presentation of the EU tax legislation and the practice of tax harmonisation and tax competition was made. The event gathered around 250 participants including parliament members from the Baltic States and Russia, high-ranking government officials, ministry executives, policy analysts from the Baltic States, Russia and the EU, and representatives of international institutions and the academia.

The working group on taxation at the Sunrise Commission, headed by LFMI’s Vice-president Ruta Vainiene, continued its work and discussed the following issues and drafts of legal documents: the procedure of taxation of income in kind, a draft law on inheritance tax, draft amendments to the law on profit tax, and the problems of leasing companies pointed out by the association of leasing companies. The Ministry of Finance backed the majority of proposals by the working group.