Fight at the Constitutional Court over payment transaction fees

Ministry of Finance, headed by the Minister Novica Vuković believes that certain fees charged by the Central Bank of Montenegro (CBCG) are not in accordance with the Constitution, which is why it has asked the Constitutional Court to assess their constitutionality and legality. This initiative was submitted on behalf of the Ministry by the Protector of Property and Legal Interests of Montenegro, and "Vijesti" has access to the document dated May 13 this year.

The part of the Decision on determining the tariff according to which fees are calculated for the provision of services of the supreme monetary institution is disputed in the part relating to payment transactions abroad, where a fee of 0,20 percent of the value of the order is charged for executing transactions through the Central Bank account, with a minimum of 10 euros. Also disputed is the part relating to payment transactions in the country, where in the RTGS system commercial banks pay 1,50 euros per order regardless of the amount of funds transferred, while the Main State Treasury (Ministry of Finance) pays a proportional fee of 0,10% of the amount of each order, which, as claimed in the initiative for the assessment of constitutionality, means that it pays significantly more for larger amounts.

Same tariff for the state for 20 years

"Vijesti" is awaiting answers on this topic from the Constitutional Court and the Ministry of Finance, while from the Central Bank of Montenegro, headed by the Governor Irena Radović said that the fees for the services they provide are regulated by a special decision, which the Central Bank of Montenegro adopted based on the authorization established by law, and in accordance with the principles of efficiency, sustainability and cost recovery for the provision of those services.

“This decision refers to specific services that the Central Bank of Montenegro provides to credit and other financial institutions, including state bodies and organizations. It is particularly important to emphasize that the fees charged for executing payment transactions for the needs of the state have not been changed for 20 years, despite changes in the financial market and the growth of operating costs, thereby demonstrating the Central Bank's responsible approach to public funds. Regarding the part of the Decision regulating fees for executing payment transactions for the needs of the state, an initiative was submitted for the assessment of constitutionality and legality, according to which proceedings are currently being conducted before the Constitutional Court of Montenegro. Having this in mind, the Central Bank of Montenegro, out of respect for the integrity of the court proceedings, is refraining at this time from making comments or statements regarding the aforementioned decision. This restraint also includes issues of inter-institutional communication on certain aspects of that decision that are the subject of court proceedings, including issues within the scope of your interest,” the Vice Governor told “Vijesti”. Zorica Kalezić.

It was noted that this tariff model has negative implications for the efficiency of public finances, and the impression is that the Main State Treasury is being burdened financially in a discriminatory, additional and unjustified manner, the initiative states.

Unclear criteria

The initiative to the Constitutional Court states that the disputed provisions of the tariff are not precise enough, nor based on clear criteria and legal authorization, which is contrary to the principle of legality, i.e. contrary to Article 145 of the Constitution of Montenegro and the principle of proportionality in the burden on taxpayers. Namely, the tariff items do not clearly define on the basis of which costs the fees are determined, nor whether they relate to actually incurred costs or represent a source of income for the Central Bank beyond its legally prescribed scope.

It is further stated that when it comes to the fee for executing payment transactions in the RTGS system, the Main State Treasury is treated discriminatoryly, since the fee of 0,10% of the transaction always results in significantly higher amounts than the fixed fee of 1,50 euros, which is paid by commercial banks.

"Especially with transactions in multi-million amounts that are very common in the work of the State Treasury. In this way, the public sector is additionally financially burdened without clear criteria or legal basis. The decision in question in the mentioned part does not contain an explanation or cost analysis that would justify the different fee structures, nor is it clear whether the proportional fee of 0,10% is based on regular processing costs. The basic function provided by the Central Bank of Montenegro, the technical processing of orders, does not differ depending on the user, so in this sense commercial banks and the Main State Treasury are put in an unequal position, and all are equal legal entities in the payment system," the initiative reads.

It was concluded that this tariff model has negative implications for the efficiency of public finances, and the impression is that the Main State Treasury is being burdened discriminatoryly, additionally and unjustifiably financially. Therefore, there is neither a justified nor clear cost or legal justification for the different fee structures, and since the Main State Treasury is treated less favorably, it is clear that the principle of equality and prohibition of discrimination from Articles 8, 17 and 19 of the Constitution of Montenegro has been violated.

It is particularly important to emphasize that the fees charged for executing payment transactions for the needs of the state have not been changed for 20 years, despite changes in the financial market and the growth of operating costs, thus demonstrating a responsible approach to public funds by the Central Bank of Montenegro, Kalezić emphasized.

"At the same time, the Central Bank of Montenegro has the exclusive infrastructure for performing payment transactions in the country (RTGS and DNS system), which gives it a monopoly on the market for clearing and executing interbank transactions, as well as transactions of state institutions. Also, the Law on Budget and Fiscal Responsibility defines that the Ministry of Finance concludes a contract with the Central Bank of Montenegro to perform operations on behalf of the state. In this way, its status allows it to impose unfair business conditions, which is the case with the Ministry of Finance. This further means that the public sector is denied equal access to the financial infrastructure under fair and impartial conditions, which is contrary to Articles 8 and 15 of the Law on Protection of Competition. The tariff structure introduced by the Central Bank of Montenegro imposes higher costs on public institutions compared to commercial banks, which is unacceptable," the document states.

Fixed percentage instead of actual costs

When it comes to the fee in the amount of 0,20% of the transaction amount, prescribed by tariff number 3, item 3.1, which is charged for executing payment transactions through the CBCG account abroad, it is worth noting that the amount of the fee does not depend on the costs incurred in executing the transaction, or more demanding procedures, due to different amounts, but rather a fixed percentage is applied to the entire amount, regardless of the transaction amount.

"Which is contrary to the principles of legality, fairness, and the prohibition of arbitrary fiscal burdens, because no distinction is made between smaller and larger transactions, which shows that the actual cost borne by the Central Bank of Montenegro for each individual transaction is not clear. This tariff item does not contain an explanation or basis for the determined amount of the fee. Article 66 of the Law on the Central Bank of Montenegro implies that fees should be based on actual costs and be justified, so such determination of the amount of the fee is contrary to the aforementioned provision. It is also worth noting that in foreign systems, the Main State Treasury does not pay or pays a minimum fee to the Central Bank for executing payment transactions, which further indicates the unjustification of the amount of the fee prescribed in this way. In particular, the amount of the fee is questionable when the funds of the Ministry of Finance are held in an account with the Central Bank of Montenegro abroad, because then direct payment transactions with abroad are not carried out, but only transactions from abroad are carried out," the initiative to the Constitutional Court states.

The Central Bank of Montenegro transferred 17,7 million in profits to the state budget in five years

Vice Governor Kalezić states that the CBM, in accordance with the provisions of Articles 41 and 42 of the Law on the Central Bank, has concluded an agreement with the Ministry of Finance on the provision of fiscal agent and depository services. Based on that agreement and the Decision on Tariffs according to which fees for the services it provides are calculated, the CBM calculates interest on deposits, i.e. charges fees for providing services to the state.

"According to the above, in the period 2020-2024, the Central Bank of Montenegro collected a total of 4,67 million euros from the Ministry of Finance based on fees for registering treasury bills and servicing foreign debt. At the same time, based on accrued interest on deposits with the Central Bank of Montenegro, the Ministry of Finance realized a total of 18,98 million euros. Additionally, based on the profit realized by the Central Bank of Montenegro for the past five-year period, the Central Bank of Montenegro paid an additional 17,78 million euros to the account of the Ministry of Finance," said Kalezić.