Legal Reform in Latvia

The Bank’s approach to legal reform work in Latvia is broadly designed to continue and deepen EBRD’s support to private companies to enable them to strengthen their business and governance model, expand their markets and enhance their competitiveness. With this in mind the bank has published or will shortly be publishing results of assessments recently undertaken in relation to corporate governance, Insolvency Office Holders, public procurement, public private partnerships and secured transactions.

 

Access to Finance

The Latvian Civil Code of 1937 (adopted 23 January 1937, effective 1992) governs the creation, registration and enforcement of security rights. There is no specific mortgage law in Latvia, but several special pledges are covered by specific laws and recent legal reforms have affected the enforcement of security rights. Mortgages are registered with the Land Register departments of the regional courts. The electronic database is centralised and freely searchable via the Internet.
On 1 January 2008, the Credit Register of the Bank of Latvia was launched. Without a public registry or private credit bureau in operation, credit histories of only 2.8 per cent of the Latvian population were available in 2008. The new public registry has increased the coverage rate significantly to 57.2 per cent according to the World Bank’s Doing Business 2011 report. The Credit Register is allowing participants to better assess the credit worthiness of borrowers and manage credit risks more efficiently.
 
In 2014 the EBRD conducted an assessment on secured transactions which examined the availability of collateralising different types of assets regardless of the underlying legal instruments used to achieve the establishment of secured creditor’s rights. In addition to the classic security interests (pledges and mortgages the assessment also covered usual types of quasi security, such as sale and lease back transactions. The assessment also covered related issues such as enforcement and syndicated lending. The links below take you to the assessment results for Latvia.
 
 
 

Capital Markets

Following the adoption of the EU acquis communautaire, securities market legislation complies with high international standards. The single financial markets supervisor is seen as effective.
The Bank, with assistance from the Legal transition team where applicable will continue to strengthen governance and transparency among its clients and maintain a dialogue with the authorities on the implementation of best international practice with regard to the development of local capital markets and regulation.
 
 

Contract Enforcement and Judicial Capacity

In the most recent EBRD – World Bank Business Environment and Enterprise Performance Survey (BEEPS), 2012-2013, most business respondents agreed that the courts still pose some obstacles for business, and only 14% agreed that the court system was fast.
 
 

Corporate Governance

The 2007 EBRD assessment on corporate governance showed Latvia being in “Medium Compliance” with the OECD Principles of Corporate Governance (please see Chart 2 below). The assessment showed some shortcomings especially in the sectors on “ensuring the basis for an effective corporate governance framework” and “the role of stakeholders in corporate governance” (see Chart 3 below). The Latvian framework has been progressively improved so as to transpose the relevant Acquis Communautaire and at 8 April 2011, Latvia appears to have duly transposed all Acquis in the field of company law.
 
 
 

Debt restructuring and bankruptcy

The Latvian Insolvency Law (LIL) effective from 2010 (as amended) and the Latvian Civil Procedure Law (LCPL) effective from 1999 (as amended) regulate the insolvency of legal entities and natural persons.
Based on the results of the pilot assessment, a legal framework exists for the IOH profession in Latvia, which prima facie, displays a number of key strengths. Nevertheless, the framework would benefit from further improvements to address certain key areas of weaknesses and thus further improve IOH capacity and performance.
 
 
 

Electronic Communications

The main legal basis for electronic communications regulation is the Law on Electronic Communications Act. Amendments to transpose the EU 2009 regulatory framework were adopted in May 2011, but some amendments did not come into force before 1 January 2012. In the 2012 assessment of the Electronic Communications sector Latvia was rated as in high compliance as it had largely adopted best practice.
 
 
 

Energy and resource efficiency

Latvia is one of the most heavily import-dependent countries in the EU with respect to energy resources, but one of the highest in terms of its domestic energy produced through renewable resources (primarily hydro power).
The Energy Law defines renewable energy resources, and the Electricity Market Law requires that the percentage of electricity produced from renewable energy resources is gradually increased so that by 31 December 2010 it is not less than 49.3% of the total electricity consumption.
 
 

Energy legal and regulatory reform

According to the 2010 energy sector assessment Latvia performs well overall but
slightly below the regional average for electricity, and well below the regional average for gas.
 
 
 

PPP/Concessions

There is a single generalised act – the Law on Public-Private Partnership – in force in Latvia since 1st October 2009, incorporating the legal framework for PPP, including Concessions. The 2012 assessment results found Latvia in overall medium compliance with best practice; high compliance for the extensiveness of its legislation, and low compliance for the effectiveness of its practice.
 
 
EBRD Legal reform projects
 
The EBRD was requested by the Latvian Ministry of Economy to provide technical assistance with the development of the PPP/concession legal framework. The project, completed in 2006, included the following elements: advice on the draft new concession law and the development of a checklist/manual for contracting authorities on concession agreements.
 
 

Public Procurement

Public procurement in Latvia is regulated by The Public Procurement Law, adopted in 2006 and The Law on Procurement for the Needs of Public Utilities Providers, adopted in 2004. The latter provides a separate regulation for public procurement in the utilities sector.
The aforementioned laws provide modern, uniform, and comprehensive regulation of public procurement and the legislative provisions are in accordance with the EU Public Procurement Directives. The EBRD 2010 assessment of public procurement laws revealed that the Latvian legal framework is in high compliance with international practise and standards. The laws clearly promote transparency and competition in public procurement system and the local policy is focused on adopting transparency safeguards. The laws are less comprehensive when it comes to implementing procurement efficiency instruments.