Supreme Court’s Landmark Ruling on Municipal Delegation of Public Services

In a pivotal decision, the Supreme Court of Lithuania has put a halt to municipalities’ nearly unchecked ability to delegate public services to their controlled companies. The Lazdijai waste collection case was at the heart of this judgment, where the Court underlined that in-house contracts should only be an exception.

Highlighting a significant move, the Court supported the Appeal Court’s earlier judgment which considered the Lazdijai District Municipality and Alytus Regional Waste Management Centre (ARWMC) agreement as unlawful, emphasizing the necessity for a public tender.

The ARWMC, which had the onus of appointing a private waste manager, faced delays for years. This was largely attributed to a lack of initiated public tenders, which was due to no private sector bids meeting the prescribed maximum service price. In a twist, the ARWMC took over the responsibility of service provision unlawfully. To compound matters, the Court identified that ARWMC’s service price failed to comply with the predetermined maxima, questioning the company’s commitment to public interests.

Notably, while ARWMC was compensated for overseeing service quality, it essentially meant the company was overseeing its own operations. The reality was that no vigilant oversight was in place—neither fines for subpar service nor penalties for tardy payments were issued.

Shining a light on the unchecked provision of services to the public, the Court expressed concerns over unsupervised, unregulated service deliveries with ambiguous remunerations. The contested deal, tainted with unfair competition, was officially ruled illegal.

Daiva Lileikienė, a distinguished partner at NOOR, pointed out that municipalities and their associated companies had taken liberties with the Public Procurement Law, leading them to believe they could unilaterally decide on in-house transactions for public service provision. This Supreme Court ruling leaves no room for such interpretations.

Concluding a rigorous two-year legal tug-of-war, this Supreme Court verdict stands monumental, expected to sculpt future case laws both at the local and national levels.