Shopping centres apply to the Constitutional Court in connection with the ban on the operation of stores in large shopping centres imposed by the state due to Covid-19
The largest shopping centres in Latvia have prepared an application to the Constitutional Court, and the largest regional shopping centre in Latvia “Valleta” (Valmiera) was the first to submit this application on 26 May. In the application, shopping centres challenge the regulations of the Cabinet of Ministers, which as of 7 April creates an unequal situation between players in the trade sector and negatively affects traders, landlords, the national economy, and certain groups of society. In the application the submitters point out the inconsistency of this prohibition of trade with the rights of a person to property and equality before the law guaranteed by the Constitution, and request the Constitutional Court to declare it invalid.
Sub-paragraph 2418 of the Regulation of the Cabinet of Ministers “Epidemiological Safety Measures for Limiting the Spread of Covid-19 Infection” currently in force since 7 April provides for significant operating restrictions for those shopping centres in Latvia with a total trade area of more than 7,000 m2. Only traders of certain groups of goods and shops with a separate external entrance are allowed to operate in such shopping centres, but all other shops are prohibited from working. On the other hand, all stores outside the large shopping centres can operate freely, complying with the requirements of safe trade. Shopping centres have repeatedly pointed out that this creates an unequal, competition-distorting and discriminatory situation in the sector, and now this issue has been referred to the Constitutional Court.
The application submitted to the Constitutional Court indicates a violation of the fundamental rights of the submitters, which manifests itself in two ways. First, the property rights guaranteed by the Constitution of large shopping centres are significantly violated, preventing them from receiving income from already concluded lease agreements and practically excluding the possibility to lease available premises to new customers, as the number of stores allowed to operate in large shopping centres is relatively small. Thus, as a result of the regulations adopted by the Cabinet of Ministers, the rights of the owners of shopping centres to carry out the usual commercial activities are significantly impeded and significant losses occur. To date, no state aid measures have been introduced in Latvia that would be able to effectively address this situation and prevent the resulting damage, including material damage, stated in the application.
Secondly, the right to equality before the law or equal regulation of commercial activities guaranteed by the Constitution of large shopping centres is violated - the adopted regulations make the owners of large shopping centres uncompetitive with other lessors of retail premises, which are not covered by the ban on shops. The unequal situation is caused by the fact that the only criterion for the difference in treatment is whether the retailer carries on his business in one of the large shopping centres or outside it. There is no objective and reasonable basis for such unequal treatment, according to the application - in both places of business (both in and outside large shopping centres) it is equally possible to ensure compliance with epidemiological requirements for safe retail by organising the flow of visitors accordingly. In addition, retailers who continue to do business outside large supermarkets receive benefit in multiple ways: they continue to operate by avoiding competition with large supermarkets and, as demand for specific goods increases, they have the opportunity to increase commodity prices. As a result, consumers suffer in the short and long term from reduced choice and higher prices.
“The decision taken at the beginning of April to allow individual traders and shopping centres with an area of up to 7,000 m2 to operate has created an absurd and unfair situation in the industry. The distortion of competition and the ban on traders has currently resulted in the average loss of shopping centre rents in April, reaching 55% of planned revenues. However, large shopping centres are the most epidemiologically safe place to shop compared to small, poorly ventilated shops, and this has also been confirmed by air quality (CO2 level) measurements performed by researchers at Rīga Stradiņš University. However, the arguments and scientifically substantiated facts of shopping centres have unfortunately not been heard, so now we have gone a step further by applying to the Constitutional Court to restore fair competition in the industry,” says Mārtiņš Vanags, Chairman of the Board of the Alliance of Real Estate Developers.
“During the legal research, we found that the different treatment of stores in large shopping centres is unreasonable and unjustifiable. The ban on trade imposed by the Government has no objective and reasonable basis, and it violates the fundamental rights guaranteed by the Constitution. The materials of the development of the Contested Norm show that the prohibition is not based on facts, such as scientific studies or measurements, which would justify an increase in the risk of infection in a situation where commercial activity is allowed in large shopping centres, but only on subjective opinion and assumptions. There has been no comprehensive and complete assessment of the situation, as would be expected before the introduction of such a radical measure as a general ban on commercial activities. No statistics or other quantitative data have been evaluated to substantiate the assumptions made. In a democratic country, such a careless approach to the development of regulatory enactments is not permitted. In addition, a comparative study of the current regulatory framework in other European countries in cooperation with Ellex offices in Lithuania and Estonia and the Lex Mundi network of international law firms did not identify any countries with similar restrictions on large shopping centres. It must be concluded that the discriminatory restrictions set in Latvia are unique,” explains Raivis Leimanis, a sworn attorney of the law firm Ellex Kļaviņš.
In order to correct the unfair situation in the trade sector in Latvia, the shopping centres in the submitted applications call on the Constitutional Court to recognise the specific regulation of the Cabinet of Ministers as inconsistent with the Constitution of the Republic of Latvia.
About the NĪAA
The Alliance of Real Estate Developers brings together the most significant players of the industry in order to achieve the sustainable development of the real estate industry, represent it in a collective manner on a state and local government level, as well as emphasise the role of real estate developers and investors within the economy of Latvia.
For further information:
Mārtiņš Vanags - Alliance of Real Estate Developers (NĪAA)martins.vanags@niaa.lv
Sub-paragraph 2418 of the Regulation of the Cabinet of Ministers “Epidemiological Safety Measures for Limiting the Spread of Covid-19 Infection” currently in force since 7 April provides for significant operating restrictions for those shopping centres in Latvia with a total trade area of more than 7,000 m2. Only traders of certain groups of goods and shops with a separate external entrance are allowed to operate in such shopping centres, but all other shops are prohibited from working. On the other hand, all stores outside the large shopping centres can operate freely, complying with the requirements of safe trade. Shopping centres have repeatedly pointed out that this creates an unequal, competition-distorting and discriminatory situation in the sector, and now this issue has been referred to the Constitutional Court.
The application submitted to the Constitutional Court indicates a violation of the fundamental rights of the submitters, which manifests itself in two ways. First, the property rights guaranteed by the Constitution of large shopping centres are significantly violated, preventing them from receiving income from already concluded lease agreements and practically excluding the possibility to lease available premises to new customers, as the number of stores allowed to operate in large shopping centres is relatively small. Thus, as a result of the regulations adopted by the Cabinet of Ministers, the rights of the owners of shopping centres to carry out the usual commercial activities are significantly impeded and significant losses occur. To date, no state aid measures have been introduced in Latvia that would be able to effectively address this situation and prevent the resulting damage, including material damage, stated in the application.
Secondly, the right to equality before the law or equal regulation of commercial activities guaranteed by the Constitution of large shopping centres is violated - the adopted regulations make the owners of large shopping centres uncompetitive with other lessors of retail premises, which are not covered by the ban on shops. The unequal situation is caused by the fact that the only criterion for the difference in treatment is whether the retailer carries on his business in one of the large shopping centres or outside it. There is no objective and reasonable basis for such unequal treatment, according to the application - in both places of business (both in and outside large shopping centres) it is equally possible to ensure compliance with epidemiological requirements for safe retail by organising the flow of visitors accordingly. In addition, retailers who continue to do business outside large supermarkets receive benefit in multiple ways: they continue to operate by avoiding competition with large supermarkets and, as demand for specific goods increases, they have the opportunity to increase commodity prices. As a result, consumers suffer in the short and long term from reduced choice and higher prices.
“The decision taken at the beginning of April to allow individual traders and shopping centres with an area of up to 7,000 m2 to operate has created an absurd and unfair situation in the industry. The distortion of competition and the ban on traders has currently resulted in the average loss of shopping centre rents in April, reaching 55% of planned revenues. However, large shopping centres are the most epidemiologically safe place to shop compared to small, poorly ventilated shops, and this has also been confirmed by air quality (CO2 level) measurements performed by researchers at Rīga Stradiņš University. However, the arguments and scientifically substantiated facts of shopping centres have unfortunately not been heard, so now we have gone a step further by applying to the Constitutional Court to restore fair competition in the industry,” says Mārtiņš Vanags, Chairman of the Board of the Alliance of Real Estate Developers.
“During the legal research, we found that the different treatment of stores in large shopping centres is unreasonable and unjustifiable. The ban on trade imposed by the Government has no objective and reasonable basis, and it violates the fundamental rights guaranteed by the Constitution. The materials of the development of the Contested Norm show that the prohibition is not based on facts, such as scientific studies or measurements, which would justify an increase in the risk of infection in a situation where commercial activity is allowed in large shopping centres, but only on subjective opinion and assumptions. There has been no comprehensive and complete assessment of the situation, as would be expected before the introduction of such a radical measure as a general ban on commercial activities. No statistics or other quantitative data have been evaluated to substantiate the assumptions made. In a democratic country, such a careless approach to the development of regulatory enactments is not permitted. In addition, a comparative study of the current regulatory framework in other European countries in cooperation with Ellex offices in Lithuania and Estonia and the Lex Mundi network of international law firms did not identify any countries with similar restrictions on large shopping centres. It must be concluded that the discriminatory restrictions set in Latvia are unique,” explains Raivis Leimanis, a sworn attorney of the law firm Ellex Kļaviņš.
In order to correct the unfair situation in the trade sector in Latvia, the shopping centres in the submitted applications call on the Constitutional Court to recognise the specific regulation of the Cabinet of Ministers as inconsistent with the Constitution of the Republic of Latvia.
About the NĪAA
The Alliance of Real Estate Developers brings together the most significant players of the industry in order to achieve the sustainable development of the real estate industry, represent it in a collective manner on a state and local government level, as well as emphasise the role of real estate developers and investors within the economy of Latvia.
For further information:
Mārtiņš Vanags - Alliance of Real Estate Developers (NĪAA)