Agreement on Kingdom Act
News item | 08-02-2022 | 9:00 am
Aruba, Curaçao, Sint Maarten and the Netherlands have reached an agreement on submitting the proposal for the Kingdom Act of the Caribbean Agency for Reform and Development (COHO). The Kingdom Act forms the foundation for a new form of multi-year cooperation between the countries in the Kingdom.
The economies of Aruba, Curaçao and Sint Maarten have been severely affected by the COVID-19 pandemic. The Netherlands offered help in the fight against COVID-19 and also supported with food packages. In addition, EUR 1 billion in emergency aid in the form of liquidity loans was provided to support public finances in the event of a sudden cessation of economic activity.
As a condition for granting the liquidity loans, it has been agreed that the countries will accelerate reforms that will strengthen them. The countries adhere to that agreement. The aim is that the economy and society will be better able to cope with a crisis in the future, so that governments are able to offer new opportunities to residents and businesses. To support the countries in this, it has been agreed that an independent Caribbean Body for Reform and Development will be established.
In anticipation of the formal establishment of COHO, a country package has each been agreed with Aruba, Curaçao and Sint Maarten. The measures from the country packages are further elaborated per country in successive implementation agendas. In this way, every Caribbean country is able to take steps in a way that suits them. COHO will provide support and monitor the implementation of the topics described in the packages. These tasks are currently performed by the Temporary Work Organization (TWO).
The four countries reached a final agreement this week on the elaboration of the Kingdom Act. Changes compared to previous consultations include clearer agreements with the countries about the incorporation of the country packages in the various budgets. It has also been agreed that the objections that exist about the powers of the financial supervisors C(A)ft will be further elaborated in the implementation phase.
Agreements on the possible implications of the elaboration of the cooperation protocol between the C(A)ft and COHO, including the mutual tasks, roles and responsibilities, are also laid down. COHO and the C(A)ft will consult with the governments of the countries about the cooperation protocol before it can be established or amended.
Aruba, Curaçao and Sint Maarten have drawn attention to a number of concerns regarding the enforceability of the law within the constitutional legal order. These points include guaranteeing policy space and autonomy of governments, the convergence between C(A)ft and COHO and the space for investment to be able to implement the reforms and accompanying policies. The Netherlands has promised to discuss this and make agreements.
The bill now goes to the States of the countries and the House of Representatives. Later in the process, the Senate will also consider it.
Council of State
Kingdom Act Caribbean Body for Reform and Development.
By Cabinet Missive of November 10, 2020, no.2020002307, Your Majesty, on the recommendation of the State Secretary for the Interior and Kingdom Relations, submitted to the Advisory Division of the Council of State of the Kingdom for consideration the proposal of a Kingdom Act containing rules regarding the establishment of the Caribbean Body for Reform and Development (State Act Caribbean Body for Reform and Development), with explanatory memorandum.
The proposed Kingdom Act seeks to establish the Caribbean Body for Reform and Development (COHO). The aim of COHO is to promote the implementation of administrative reforms in Aruba, Curaçao and Sint Maarten, the realization of sustainable public finances and the strengthening of the resilience of the economy, including its constitutional embedding.
The proposal that the Division was previously presented for advice only applied to Curaçao. In a letter dated November 18, 2020, the State Secretary for the Interior and Kingdom Relations informed the Department that agreement had also been reached with the government of Aruba about joining the proposal. In addition, the State Secretary has indicated which changes will be made to the proposal and the explanatory notes in connection with this. In a letter dated January 5, 2021, the State Secretary announced that Sint Maarten had also joined and what changes had been made to the proposal. In the absence of a consolidated text, the Division will take the proposal as presented on 10 November 2020 as a starting point.
At the request of the government of Curaçao, supported by Aruba and Sint Maarten, the government submitted a number of questions to the Department. These questions will not be answered individually, but will be discussed in the advice below.
The Advisory Division of the Council of State appreciates the intentions expressed in this proposal to provide aid and assistance to the Caribbean countries. It endorses the need, on the one hand, to provide support to the countries and, on the other, to initiate necessary reforms that should lead to improvements in public finances, the economic structure, education and the functioning of the administration.
The proposal does not only focus on the nature and scope of the reforms, but also indicates the powers and means with which the reforms are to be implemented. The Division does not consider the way in which this approach has been elaborated in the proposal appropriate. COHO’s positioning and package of tasks and its relationship with other actors lead to a lack of clarity about the division of responsibilities and powers between different actors. This weakens the countries’ own responsibility and thus their commitment.
The Division does not consider it advisable to compensate for the countries’ lack of implementation power by making COHO largely responsible for drawing up and implementing action plans. This does not strengthen the implementation power of the countries and makes phasing out the scheme more difficult. It must therefore be doubted whether, with the current set-up, it can reasonably be expected that a reform program will lead to successful results in the short and long term. Partly because of this, questions arise about the compatibility with the constitutional structure of the Kingdom laid down, among other things, in the Charter for the Kingdom of the Netherlands (hereinafter: the Charter), in which the autonomy and individual responsibility of the countries are important starting points.
On the basis of the information given in this advice, the Division is therefore of the opinion that the Kingdom Act proposal is inadequate. It concludes that the proposal should be further considered.
- Content of the proposal and reading guide
a. Content of the proposal
Since April 2020, Aruba, Curaçao and Sint Maarten have received liquidity support from the Netherlands to limit the consequences of the COVID-19 pandemic for the population, business and employment in those countries. Since May 2020, this liquidity support, in the form of loans to the Caribbean countries, has been linked to conditions, the aim of which is to increase the countries’ financial and economic resilience. (see note 1)
For the provision of the third and subsequent tranches of liquidity support to Aruba, Curaçao and Sint Maarten, the Kingdom Council of Ministers has made it a condition, among other things, that the countries agree to the Kingdom Act on the Caribbean Body for Reform and Development (State Act COHO), which proposal is now advice is presented. (see note 2)
The proposal aims at the establishment of COHO. The COHO aims to promote the implementation of administrative reforms in Aruba, Curaçao and Sint Maarten, the realization of sustainable public finances and the strengthening of the resilience of the economy, including its constitutional embedding. (see note 3) The reforms to achieve these goals are laid down in so-called country packages. These country packages are individually agreed upon by the Netherlands and the three Caribbean countries as mutual arrangements on the basis of Article 38, paragraph 1, of the Charter. In the country packages, the subjects, projects, programs and measures with which those goals are to be achieved are broadly formulated. (see note 4) The country packages are then elaborated into an implementation agenda by COHO and the Ministers of General Affairs of the country concerned. (see note 5) In the end, this will often result in concrete plans of approach, to be drawn up by COHO. (see note 6)
The proposal assigns four tasks to COHO. (see note 7) The first task is to support and monitor the development and implementation of projects, programs and measures by government bodies and public enterprises of the countries. The second task of COHO is to initiate and promote projects and programs related to the subjects defined in a country package. Third, COHO provides grants upon request to citizens and private legal entities, including public enterprises, and COHO itself may participate in the equity capital in private legal entities, including public enterprises. Finally, it is COHO’s task to institute, if appropriate, enhanced financial supervision of part or all of the expenditure of the country concerned.
The proposal assigns various powers to COHO to carry out these tasks. For example, COHO can demand data and intelligence from government bodies and companies. (see note 8) It can provide financial resources, expertise and implementation capacity and screen governments and public companies. (see note 9) In addition, COHO may develop and manage projects and commission the provision of goods or services, as well as participate in equity capital. (see note 10)
If COHO is of the opinion that insufficient cooperation is being given to the reform measures, COHO may suspend support. (see note 11) It can also advise the Council of Ministers of the Kingdom to use a supervisory instrument – provided for in the Charter – if measures are not sufficiently implemented. (see note 12) In addition, it will be empowered to institute enhanced financial supervision in agreement with the Council of Ministers of the Kingdom if a country does not make sufficient efforts to comply with obligations under the COHO Kingdom Act, or the Curaçao and Sint Maarten Financial Supervision Act. to comply with the Aruba Financial Supervision Act (R(A)ft) respectively. (see note 13)
The Minister of the Interior and Kingdom Relations is empowered to issue instructions to COHO with regard to an action plan for the development and implementation of a project, program or measure by government bodies and with regard to initiating, promoting and executing projects. (see note 14) In addition, the Minister of the Interior and Kingdom Relations can, on his own initiative, institute stricter financial supervision on part or all of the expenditure of one of the countries if this is required in an important interest. (see note 15)
b. Reading guide
In the following, the Division discusses the effectiveness of the proposal (point 2). The relationship between COHO and existing institutions (national administration, C(A)ft, Minister of the Interior and Kingdom Relations) is central here. The Division also discusses the need to arrive at clear conditions for the expiry of the Consensus Act. The Division then discusses the relationship between this proposal, taking into account the problems of effectiveness and proportionality, and the Statute (point 3). Thereafter, the Section discusses which elements are necessary for a credible and feasible approach to the necessary reforms (point 4). Finally, the Division makes a comment about the unclear legal framework regarding data processing (point 5).
The Division appreciates the intentions expressed in this proposal to provide aid and assistance to the Caribbean countries. This fulfills Article 36 of the Charter. The Department endorses the need on the one hand to provide support to the countries and, on the other hand, to initiate necessary reforms that should lead to improvements in public finances, the economic structure, education and the functioning of the administration. The Division also appreciates the positive fact that the proposal not only provides for the identification and prescription of reforms deemed necessary, but is also aimed at actually providing support to the countries in achieving them. Furthermore, the Division considers it appropriate in itself that the framework for this is laid down in consensus national legislation on the basis of Article 38, second paragraph, of the Statute. This expresses the fact that the Netherlands, Aruba, Curaçao and Sint Maarten endorse the desire and necessity to bring about reforms and to work together to that end.
The Division considers it self-evident that the liquidity support is linked to a reform programme. Financial support subject to conditions is in line with the international practice of, for example, the IMF and the European Union (see note 16), which is also characterized by lending under (strict) conditions, including the structural adjustment facilities aimed at structural reforms. The Division notes, however, that it is unclear which money flows will go through the COHO and which will take place directly between the Netherlands and the country concerned. It is also not clear to what extent there will be loans or gifts.
The proposal focuses not only on the nature and scope of the reforms, but also sets out the path with the powers and means through which the reforms are to be implemented. On this point, the proposal encounters several objections that could seriously undermine the effectiveness of the proposal. The Division notes the following in this regard.
b. Relationship between COHO and government
It is customary for countries to provide financial support with conditions, not only with a view to the proper use of the resources involved, but also with a view to achieving certain policy goals, such as improving public finances and strengthening the economic structure. In addition, forms of monitoring are usually also provided for. If the pre-agreed conditions are met, the country will receive the promised financial support.
In that usual approach, the conditions attached to the aid affect decision-making in the country concerned. After all, that decision-making is framed by the conditions that have been set. However, this does not interfere with domestic (constitutional) relationships. In other words, the granting of aid has no formal consequences for the tasks and powers of the domestic institutions concerned. This method has also been followed in the aid granted to countries of the Kingdom at various times to date. A recent example of this is the Growth Agreement with Curaçao in 2019.
A different approach has been chosen for the present proposal. The basis for the measures to be taken is formed by the so-called country packages. (see note 17) These country packages are still not very concrete in terms of the goals to be achieved. The country packages are then elaborated into an implementation agenda by COHO and the Ministers of General Affairs of the countries. (see note 18) This will ultimately often result in concrete plans of approach, to be drawn up and, in a number of cases, also implemented by COHO. (see note 19)
This means that aid provision is not based on a clear plan on which aid recipient countries are assessed. To that extent, there is an open commitment, whereby there is insufficient clarity beforehand as to what conditions are set for the granting of support. This carries the risk that countries will feel less responsible for meeting the conditions, which will lead to less achievement of the intended goals, or that new conditions will be imposed during the reform process in order to actually obtain the promised aid.
That risk is amplified by the combination of tasks assigned to COHO. (see note 20) The Division notes that COHO’s tasks go further than supporting and supervising the implementation of the country packages by the country governments. COHO’s powers also go beyond what is necessary for the performance of those tasks. For example, COHO has the task of establishing an implementation agenda with the national government. (see note 21)
It is then unclear whether the national government is still independently authorized to adopt such an agenda. In addition, COHO has the task of initiating, promoting and implementing projects and programs and can draw up action plans for this. Furthermore, COHO has the power to order the supply of goods or services and to participate in share capital, without the government concerned having control over this or having the means to prevent it. (see note 22) This also applies to granting and granting subsidies to citizens and participations in legal entities, even in the case of public companies. (see note 23)
In addition, COHO can cooperate with institutions and bodies of institutions of the European Union and other organizations under international law and with institutions and bodies of institutions of the Netherlands and other countries within the Kingdom with a development, financing, supervision or general administrative task. Where appropriate, COHO will draw up a cooperation protocol with the institution or organization concerned. In the alternative set-up that the Division outlines in point 4, in which more responsibility is left to the countries, it is obvious that they too could enter into such cooperation.
COHO thus has far-reaching powers that also belong to the national government. Thus competing responsibilities and powers arise. When it comes to drawing up the implementation agenda, a joint responsibility arises.
With the structure chosen in the proposal, it is not sufficiently clear who is responsible for what. After all, both COHO and the national government are responsible and competent. The Division considers this to be problematic: COHO and the national government can thus get in each other’s way, but a situation can also arise in which COHO and the national government start pointing at each other. This is all the more pressing now that COHO and the national government have to be accountable to various bodies. (see note 24) Moreover, a consequence of this design may be that the national government will experience less ‘ownership’, will feel less responsible for the implementation of the national package and will refer or refer to COHO in the event of any problems. That chance is further increased now that the countries have little influence on the composition of the COHO board.
These ambiguities and risks are not removed by the provision that, in the performance of its duties, COHO cannot exercise powers that are vested in a government body under the national law of a country. (see note 25) The Division understands the intent of this regulation, but notes that it increases the lack of clarity identified above rather than removes it. After all, when it comes to powers relating to the realization of administrative or economic reforms, these are simply vested in (organs of) the land administration.
From this point of view, Article 4, second paragraph, means that COHO does not have any powers. This raises the question of when powers are vested in a government body. This uncertainty is certainly present where COHO’s powers are concerned with subsidies and participations. A strict interpretation of this paragraph could mean that various powers that the proposal confers on COHO cannot be exercised by COHO at all. A flexible interpretation would quickly mean that Article 4, second paragraph, does not preclude the exercise of the powers given in the proposal, but that this paragraph then has no real meaning.
c. Relation to R(A)ft
One of the tasks assigned to COHO in the proposal is to institute stricter financial supervision of one of the countries, in agreement with the Council of Ministers of the Kingdom. This authority of COHO does not only apply if a country does not make sufficient efforts to comply with the obligations imposed on the country concerned by or pursuant to the proposed Kingdom Act, but also if, in the opinion of COHO, the country makes insufficient efforts to to fulfill the obligation under or pursuant to the R(A)ft. (see note 26) The enhanced supervision is exercised by the C(A)ft. If a compelling interest so requires, the Minister of the Interior and Kingdom Relations, in agreement with the Council of Ministers of the Kingdom and after the COHO and the Financial Supervision Board have been heard, may
In the R(A)ft, financial supervision is regulated by the Kingdom Council of Ministers on Aruba, Curaçao and Sint Maarten. The obligations for the countries are laid down in those Kingdom Acts. It also provides that the C(A)ft monitors compliance with obligations arising from the R(A)ft, applying the rules set by the R(A)ft for this purpose. (see note 27) One of the tasks of the C(A)ft is to assess whether a country is making sufficient efforts to comply with the obligations imposed by or pursuant to the R(A)ft. This raises the question of why it is necessary that COHO also has the power to assess whether the countries are making sufficient effort to fulfill their obligations under or under the R(A)ft. After all, the consequence of this is that two bodies supervise compliance with the standards in the R(A)ft,
In this regard, the Division further points out that assigning the same task to two bodies entails the risk of ambiguity and divergent judgments. It is unclear how the intensified supervision under the proposal and the issuing of an instruction under the R(A)ft relate to each other. Moreover, the independent position of the C(A)ft anchored in Article 7 R(A)ft and the division of responsibility as laid down in the R(A)ft with regard to the supervision of compliance with the budgetary standards.
These consequences are reinforced by the possibility for the Minister of the Interior and Kingdom Relations to institute stricter supervision in agreement with the Council of Ministers of the Kingdom. After all, in the R(A)ft it is up to the C(A)ft to assess whether there is a situation in which there is reason to issue an instruction and it is then up to the RMR to decide on the basis of an advice from the C(A)ft to decide to issue an instruction. These powers for the Minister of the Interior and Kingdom Relations interfere with the powers of the C(A)ft laid down in the R(A)ft.
Tightened financial supervision leads to an approval regime for all or part of the expenditure incurred by a country. (see note 28) According to the proposal, this approval regime does not have to be limited to expenditure incurred in the context of the implementation of the country packages, but can extend to all expenditure of a country. Moreover, the approval regime goes much further than the budget supervision regulated in the R(A)ft and relates to intended expenditure. On the basis of the R(A)ft, the C(A)ft only monitors the balance of government finances and thus allows the governments of the countries to choose which expenditure or income measures are taken.
Finally, the Division points out that countries will have to report to two authorities on virtually the same subject. In the view of the Division, this lays too heavy a claim on the countries’ already limited implementation capacity.
The Division can imagine that it must be possible to take measures if problems arise during the implementation of the country packages. It is then obvious that COHO takes such measures. If there were separate grounds for the desire to increase the effectiveness of the R(A)ft, provisions should be made for this purpose in the R(A)ft itself, instead of mixing the two tracks currently proposed. .
d. Relationship COHO – Minister of BZK and government
According to the proposal, COHO appears to carry out its tasks with a high degree of independence. Large parts of the Framework Act for Independent Administrative Bodies have been declared applicable. (see note 29) This does not alter the fact that the proposal gives the Minister of the Interior and Kingdom Relations the authority on a number of important points to give instructions or to limit or flesh out COHO’s powers. For example, the Minister of the Interior and Kingdom Relations can determine how financial resources made available to COHO should be spent by COHO (see note 30) and the provision of resources can also be stopped or suspended if – in short – the Minister of the Interior and Kingdom Relations considers that the country concerned is making too little progress. (see note 31)
Furthermore, the Minister of the Interior and Kingdom Relations can, within the outlines described in a national package, after consultation with the relevant Ministers, give COHO an instruction regarding an action plan for the development and implementation of a project, program or measure by government bodies. , as well as provide guidance with regard to initiating, promoting and executing projects. (see note 32)
The above shows that COHO functions to a significant extent under the direction of the Minister of the Interior and Kingdom Relations. There are two restrictions in this regard: an obligation to consult with the relevant minister(s) of the country concerned, and the requirement that the minister must remain within the broad outlines described in a national package. The Department notes the following in this regard.
Although the Minister of the Interior and Kingdom Relations has an obligation to consult with the minister(s) concerned, he is not required to reach an agreement.
With regard to the country packages, it should be noted that they contain few or no concrete measures as yet. Nor are concrete objectives, for example in the area of public finances, included. This means that the condition that the minister must remain within the outlines described in a national package also has little normative effect.
The foregoing means that the powers of the Minister of the Interior and Kingdom Relations are hardly limited. They cover the entire range of drawing up plans of approach, drafting, initiating and implementing projects, programs and measures, as well as their financing. This places the Minister of the Interior and Kingdom Relations not only above COHO, but also above the national administration of the country concerned. (see note 33) The powers assigned to the minister thus infringe the responsibilities and problem ownership of the countries.
e. Phasing out of the scheme
In principle, the law expires after 6 years. At the request of the Netherlands or one of the countries, this term can be extended by 2 years each time. (see note 34) The Netherlands and the countries can also agree that the law will expire earlier. However, neither the bill nor the explanatory memorandum address the question under which circumstances and on the basis of which facts an extension or early termination could be appropriate. This is relevant because the relationship between the Netherlands and the other countries was not always equally good during the preparation of this Bill of Rights and there seems to be a distrustful attitude on both sides. In such a situation it is all the more important to be clear on the grounds on which it will be decided that the objective of the proposal, namely to carry out reforms,
This question arises with this proposal because it differs from previous partnerships between the Caribbean countries and the Netherlands. (see note 35) In those cases, all responsibilities remained with the (national) government. In the proposal, however, a number of responsibilities are shifted to COHO and it must therefore be clear at what time these will be transferred back to the (national) government. (see note 36) Before this can be done, sufficiently concrete and tangible results must have been achieved. It is particularly important here that the living environment of the population of the three countries is structurally improved.
In the light of the foregoing, the Division considers the proposal in this form problematic. COHO’s positioning and package of tasks and its relationship with other actors lead to a lack of clarity about the division of responsibilities and powers between different actors. The Division does not consider it advisable to compensate for the countries’ lack of implementation power by making COHO (jointly) responsible for drawing up and implementing action plans. This does not strengthen the implementation power of the countries, weakens their commitment and personal responsibility and makes it more difficult to phase out the scheme. It must therefore be doubted whether it can reasonably be expected that a reform program will lead to success in the short and long term with the current set-up.
In the light of these comments, the Division recommends reconsidering the chosen set-up.
- Relationship with the Staff Regulations
a. T er introduction
The Charter prescribes ‘mutual consultation’ when it comes to a Consensus Kingdom Act. (see note 37) The Division notes that these consultations have taken place and that the governments of Aruba, Curaçao and Sint Maarten have agreed to submit this proposal to the Division. The Division therefore assesses the proposal as it was presented to it, namely as a consensus law.
b. Statutory principles
As can be seen from the foregoing, the approach chosen by the government poses risks to the effectiveness of the reforms. This is partly due to the fact that the national institutions themselves bear only a limited degree of responsibility for carrying out the reforms. The powers of COHO overlap with the powers of the national governments. This undermines the effectiveness of the approach. In addition, COHO is largely under the direction of the Minister of the Interior and Kingdom Relations, who in a certain sense will be placed above the governments of the countries.
The above aspects are also relevant from the point of view of the Staff Regulations. The fact that in this specific case there is a consensus Act, and thus a political compromise, does not affect the principles underlying the constitutional structure of the Kingdom. The principle of the autonomy of the countries and in particular the restraint that the Kingdom government and the Netherlands as the largest country must exercise in limiting the countries’ own responsibility is an important factor in this regard (see note 38).
In that light, the Division notes that it is insufficiently clear from the explanation why the limitations of that individual responsibility, as is now provided for, and the far-reaching influence of the Minister of the Interior and Kingdom Relations, are necessary and proportional in the light of the principles of the Statute. The Department’s earlier observation is important in this regard that the powers of COHO go beyond what is necessary for the performance of its tasks.
The Division recommends further consideration of the bill on this point.
c. Binding to international economic and financial agreements
As described above, COHO may cooperate with institutions and bodies of institutions of the European Union and other organizations under international law. It does not appear from the proposal that any consultation with the country concerned will take place in this regard prior to the decision to enter into such cooperation. The Department realizes that, formally speaking, it is COHO, and not the country involved, that makes these agreements. In view of the tasks of COHO, however, it is obvious that the country concerned is also actually bound by these agreements. It is not clear from the explanation how this relates to the fact that the Caribbean countries can declare that they do not wish to be bound by an international economic and financial agreement. (see note 39)
The Division recommends that the above be discussed in the explanatory notes.
d. Powers of the governors
On the basis of the bill, COHO can in certain cases advise the Council of Ministers of the Kingdom to make a provision by virtue of the Charter. (see note 40) The explanatory statement rightly states that this proposal does not interfere with the powers of the governor on this point. After all, the governors have independent powers in the context of their task of supervising, among other things, compliance with Kingdom Acts, including a Kingdom Act such as a proposal to that effect. (see note 41) Given that the Governor will therefore also have to monitor compliance with this law, the powers of the Governor and COHO may overlap in this regard.
As noted above about the relationship between the C(A)ft and the COHO, such an overlap of powers entails the risk of ambiguities, overlapping powers and divergent judgments. In concrete terms, this can mean, for example, that the Governor adopts a national ordinance or national decree, and therefore does not use his authority not to adopt it because of conflict with higher law, while the COHO sees this national legislation as a reason to grant a provision by virtue of the Charter. to request.
The Division recommends that further attention be paid to this in the explanatory notes and that the proposal be amended if necessary.
- What is the need for?
The points above discussed bottlenecks and possible undesirable consequences of the currently proposed approach that entail risks for its effectiveness. This raises the question of a different approach, which has less such risks, which could be a better approach. Below, the Department provides some information in this regard and outlines some contours.
a. Credible, feasible and flexible
It is a great advantage that the three goals (administrative reforms, sustainable public finances and strengthening the resilience of the economy) are pursued in conjunction with the proposal. At the same time, it must be recognized that these goals can be at odds with each other and can (temporarily) frustrate each other. For example, strengthening economic resilience and implementing reforms, certainly in the shorter term, can lead to tension with the objective of achieving sustainable and sustainable public finances. Measurement and coordination are therefore necessary to arrive at a balanced approach. This requires flexibility.
The Division notes in this regard that the proposal does not provide for an adjustment of the budget standards in the Rft. (see note 42) This raises the question of whether sufficient flexibility has been built into the law to arrive at the required dimensions in practice. The Division deems it desirable from this point of view to consider all of the measures that will apply (in any case the liquidity support, the R(A)ft and the present proposal).
Furthermore, the Division considers ‘ownership’ and commitment of the countries to be crucial for the success of this approach. This is the only way to achieve fruitful cooperation and achieve sustainable results that will last even after the program has ended. In recent decades, the implementation power has been problematic in the implementation of the various measures.
As discussed above, the Division does not consider it useful to try to compensate for this lack of implementation power by making COHO (partly) responsible for drawing up and implementing action plans. This does not strengthen the implementation power of the countries. The responsibility for drawing up and implementing their own action plans should lie with the countries themselves. This does justice to the individual responsibility of the countries. This is also in line with the practice and experiences of international organizations such as the IMF and the European Union’s recovery instrument set up in connection with the corona crisis. Strengthening the implementation power of the countries themselves is one of the main goals of the measures to be taken,
This does not alter the fact that COHO has an important role to play in strengthening the administrative power of the Caribbean countries. It is therefore important that COHO can support the country governments in drawing up projects, programs and measures and in implementing the projects, programs and measures agreed by the countries. At the same time, this will require countries to be open to COHO’s proposals and, where possible, to make the requested and necessary efforts to implement the necessary reforms and strengthen governance. This may also be asked of the countries where the financial resources for the projects concerned are also supplied via COHO.
Only if COHO can fulfill its important role and the Caribbean countries accept that role will a fruitful cooperation between COHO and the national governments be possible. Linking liquidity support and support in tranches to achieving the objectives to be achieved is an important incentive to actually achieve those objectives. If the implementation of projects, programs or measures is insufficient, COHO may suspend support. (see note 43) In the unlikely event that this does not lead to the intended results and it turns out that, despite this support and the appropriate use of the power to suspend, insufficient progress is made to increase the administrative power and to fulfill the responsibilities independently in the long run, ultimately more compelling measures, whether initiated by COHO or not, are unavoidable. (see note 44)
In view of this, the Division considers it appropriate that the following tasks be assigned to COHO:
a) Approve the implementation agenda and the plans of approach of the countries for the implementation of projects, programs or measures, with clear performance requirements to which the availability of financial resources are linked over time;
b) Monitoring the progress of implementation by the countries;
c) Technical and other assistance support, for which COHO has its own budget;
d) Supervising the achievement of performance requirements, enabling the provision of financial resources.
In this context, the composition and appointment of the COHO board also deserves attention. In view of the role of the Netherlands and the role of COHO, a heavy Dutch stamp on COHO is understandable. However, support, ownership and commitment from the countries as well as insight into the local situation can be increased by representation in the board of COHO that finds support among the Caribbean countries. The importance of support from the countries increases as the tasks of COHO overlap more with tasks that also belong to the national governments. Under the proposed regulation, one of the members of COHO will require demonstrable affinity with the Caribbean part of the Kingdom. The question is whether this sufficiently ensures the necessary support from the Caribbean countries.
c. Clear frameworks
Support in the manner outlined is, of course, not without obligation. It goes without saying that conditions are attached to (financial) support and that compliance with those conditions and the (progress of) implementation of the measures to be taken are closely monitored. In this respect, COHO has an important role to play in monitoring the progress of the plans and programmes, providing support in the form of technical assistance and releasing financial resources as the action plans are implemented.
But that does require a clear approach. The Section points to the practice in IMF credit programs as well as in the context of the European Union (see note 45) where extra financial support is linked to pre-agreed performance indicators. It must be prevented that countries have to focus on moving targets in order to obtain support and financial support. This risk is high with the approach now followed, in which the measures in the country packages are formulated in a very open manner and COHO has a lot of room to flesh out the details. This is further enhanced by the intervention options of the Minister of the Interior (whether or not in response to reactions from the States General).
With an approach as outlined above, the concurrence between the proposal and the R(A)ft, between COHO and Cft, as outlined in point 3b, can be avoided in a simple manner. COHO can then focus on monitoring and support through technical assistance and release of funding as action plans are implemented. The C(A)ft continues to focus on maintaining a balanced budget.
d. The importance of differentiation
The proposal concerns all three Caribbean countries of the Kingdom. Each of these countries has its own history and its own administrative culture. There are also differences with regard to, for example, the implementation capacity and reforms that have already been implemented, for example in response to the Growth Agreement (Curaçao), protocols on financial supervision (Aruba), liquidity support after Hurricane Irma (Sint Maarten) and the experiences with the reconstruction facility established in cooperation with the World Bank. The challenges are partly the same, but it is important to recognize that the reform agenda is different for each of the three countries. COHO will therefore have to be enabled to differentiate in the performance of its tasks.
As explained above, the submitted proposal only applies to Curaçao. No attention has been paid to the foregoing in the explanation. In the letter about the expansion to Aruba it is stated on this point that the backgrounds differ per country and that the explanation on this point will be supplemented, but that these adjustments will be minimal because the differentiation will mainly be discussed in the various country packages. This point is not mentioned at all in the letter about the connection of Sint Maarten. The Division considers it insufficient that the necessary differentiation is only considered fundamentally in the national packages.
- Data Protection
Under the bill, all government bodies and public enterprises are obliged to provide, upon request, data and information that COHO needs to carry out its duties. (see note 46) It is not clear from the explanation whether this also concerns personal data. If this is the case, the processing of these personal data by COHO is subject to the GDPR. After all, it is established in the European part of the Netherlands and has legal personality under Dutch law.
In that light, the Division notes that provisions on data processing, including the appointment of a controller, are missing in the proposal. In addition, the explanation does not discuss the possible transfer of personal data by COHO to the Caribbean countries. If this is the case, the GDPR regime for transfers to third countries applies. (see note 47)
Since the European Commission has not taken an adequacy decision with regard to the Caribbean countries of the Kingdom, and the government has indicated that it cannot simply be assumed that such a level of protection can be offered in the Caribbean countries, the controller must provide appropriate safeguards. (see note 48) This requires data subjects to have enforceable rights and effective means.
The Division recommends discussing the processing and transfer of personal data in the explanation and adjusting the proposal where necessary.
The Department endorses the chosen approach of linking aid to the Caribbean countries with a reform program to make the economies and public finances of the countries sound, strengthen public administration and improve the conditions of the populations of Aruba, Curaçao and Sint Maarten. .
However, the Division does not consider the way in which this approach has been elaborated in the proposal appropriate. COHO’s positioning and package of tasks and its relationship with other actors lead to a lack of clarity about the division of responsibilities and powers between different actors.
The Division does not consider it advisable to compensate for the countries’ lack of implementation power by making COHO (jointly) responsible for drawing up and implementing action plans. This will not strengthen the implementation power of the countries, affect their own responsibility and ownership and make it more difficult to phase out the scheme.
It must therefore be doubted whether, with the current set-up, it can reasonably be expected that a reform program will lead to successful results in the short and long term. Partly because of this, questions also arise about the compatibility with the constitutional structure of the Kingdom laid down in, among other things, the Charter, in which the autonomy and individual responsibility of the countries are important starting points.
On the basis of the information given in this advice, the Division is therefore of the opinion that the Kingdom Act proposal is inadequate. It concludes that the bill must be reconsidered and therefore cannot be submitted in this form to the parliaments of the countries of the Kingdom.
The Advisory Division of the Council of State of the Kingdom has a number of comments on the draft Kingdom Act and advises not to submit the draft Kingdom Act to the House of Representatives of the States General, the States of Aruba, that of Curaçao and of Sint Maarten, unless it is modified.
The Vice-President of the Council of State of the Kingdom
Annex I: questions from Curaçao
The general question included in the request for advice has been further elaborated in the following specific questions:
- Is Article 2, fourth paragraph, read in conjunction with Articles 22 and 23 of the Framework Act for Independent Administrative Bodies, and the lack of involvement on the part of Curaçao in that decision-making, with Article 37 and Article 38 of the Charter?
- Is the composition and manner of appointment of the members of the Body as referred to in Article 7(1) in line with Articles 37 and 38 of the Statute?
- Is Article 6 of the proposal related to Articles 24 to 28 of the Statute for the Kingdom?
- Is Article 17, second paragraph, related to the budget law of the States of Curaçao with regard to the expenditure of liquidity support, referred to in Article 17, first paragraph, under b?
- Is the lack of involvement on the part of Curaçao in the decision-making, as referred to in Article 22 and Article 27, related to Article 28 of the Constitution of Curaçao and in particular the third paragraph thereof (ministerial responsibility)?
- Is the lack of provisions for the independent review of the decisions referred to in Article 17(4) and (5) and Article 23 in accordance with the principles of corporate governance as referred to in Article 43 of the Charter?
- Do Article 4, first paragraph, under d, Article 24 and Article 33 of the proposal relate to the legal order for the Kingdom provided for:
a) Articles 50 and 51 of the Statute, in particular with regard to the granting of the authority rather than the Kingdom Government to decide on the use of an instrument of higher supervision; and
b. Articles 15, paragraph 1, 20 and 21 of the Regulations for the Governor.
a. Article 33, first paragraph, with regard to non-compliance with obligations under the Financial Supervision Act as a basis for considering the introduction of stricter financial supervision, and
b. the designation of Article 41, second paragraph, of the proposal as a lex specialis (see explanatory memorandum) in relation to the Financial Supervision Act, is based on the principle of consensus on a mutual arrangement as referred to in Article 38 of the Charter that is the basis is it due to the realization of the Kingdom Act on financial supervision? Is it advisable to apply Article 4, second paragraph, of the Financial Supervision Act instead of including Article 41 in the Kingdom Act proposal? As a result, a special instruction can be given to the Financial Supervision Board to hear the Body when assessing an application for a loan as referred to in Article 16 of the Financial Supervision Act.
(1) Parliamentary Papers II 2019/20, 35420, no. 12, no. 18 and no. 34.
(2) Parliamentary Papers II 2019/29, 35420, no. 37.
(3) Proposed Article 3.
(4) Proposed Article 5.
(5) Proposed Article 6.
(6) Proposed Article 22.
(7) Proposed Article 4.
(8) Proposed Article 20.
(9) Proposed Article 21.
(10) Proposed Article 26.
(11) Proposed Articles 24 and 40.
(12) Proposed Article 25.
(13) This enhanced supervision means that part or all of the expenditure of the country must be approved by the Cft. The Cft may withhold approval of a publication due to conflict with the law or the public interest: proposed article 35, first paragraph, and 36.
(14) Proposed Articles 23 and 28.
(15) Proposed Article 35, second paragraph,
(16) Reference should be made to the recovery instrument (Next Generation EU), which is included in the Own Resources Decree (see Parliamentary Papers II 2020/21, 35711 ).
(17) Article 5, first paragraph.
(18) Proposed Article 6.
(19) Proposed Article 22.
(20) See point 1 for an overview of these tasks.
(21) Article 6.
(22) Articles 4(1)(b) and 26.
(23) This may concern, for example, the establishment of basic facilities such as schools, hospitals and similar (public) facilities.
(24) The Court of Audit has pointed out in this regard that the proposal is also insufficiently clear about the origin of the funds made available to COHO and has drawn attention to the design of accountability for and supervision of management. by the COHO of the resources where they are provided to the COHO from the Dutch national budget. Letter of the Court of Audit to the State Secretary for the Interior and Kingdom Relations, concerning COHO; consultation pursuant to Article 7.40 Accounts Payable Act 2016, 2 February 2021.
(25) Article 4, second paragraph.
(26) Article 4, first paragraph, under d, and 35.
(27) Article 4, first paragraph, of the Rft and Article 2, first paragraph, of the RAft.
(28) Article 36.
(29) Article 2, fourth paragraph.
(30) Article 18, second paragraph.
(31) Article 18, paragraphs 4 and 5.
(32) Articles 23 and 28.
(33) See also what the Division noted above under a.
(34) Proposed Article 45.
(35) Fondo Desarollo Aruba, Netherlands Antilles Development Foundation and the Groeik Agreement with Curaçao.
(36) In this regard, the Court of Audit has pointed out that the proposal must also clarify what will happen to any shares, remaining funds and outstanding loans or advances after the closure of COHO.
(37) Article 38(2) of the Statute.
(38) See, inter alia, Article 41 of the Staff Regulations. The restraint that the Kingdom must exercise was previously discussed in the Decree of November 24, 2020 on the appeal of the Council of Ministers of Curaçao against the Decree of July 12, 2019, containing an instruction to the board of Curaçao to adjust of the 2019 budget, taking into account the standards referred to in Article 15 of the Financial Supervision Act for Curaçao and Sint Maarten, point 2.1 (Stb. 2020, 537) and in the Information of 17 September 2015 of the Department about giving instructions to the Governors of the countries in the Caribbean part of the Kingdom, item 1b (W04.15.0112/I/Vo).
(39) Article 25(1) of the Staff Regulations. It appears from Article 24, first paragraph, that this not only concerns agreements with other powers, but also agreements with international organisations.
(40) This includes, in particular, substitution and destruction powers under Articles 50 and 51 of the Staff Regulations.
(41) Article 20 ff of the Regulations for the Governor of Curaçao, the Regulations for the Governor of Aruba and the Regulations for the Governor of Sint Maarten.
(42) With regard to the RAft, the Division refers to the advice also issued today in the proposal of the Kingdom Act on this matter (W04.20.0423/I/K).
(43) Article 24 of the proposal.
(44) This is the case, for example, if the soundness of the administration can no longer be guaranteed, or if the present Kingdom Act is not or not sufficiently complied with. The Staff Regulations provide for various instruments in such cases. See also Article 25 of the proposal regarding the possibility for COHO to advise the RMR on making a provision under the Statute.
(45) Reference should be made to the recovery instrument (Next Generation EU), which is included in the Own Resources Decree (see Parliamentary Papers II 2020/21, 35711).
(46) Article 20 of the draft Kingdom Act.
(47) Chapter V GDPR.
(48) Letter from the Minister for Legal Protection of 13 March 2020, Parliamentary Papers II 2019/20, 32761, 161, p. 2.