20 November 2008

Timor-Leste Appeals Court Invalidates State Budget

17 November 2008 Lao Hamutuk Dili - On 13 November 2008, three judges of the Timor Leste Appeals Court issued a unanimous ruling regarding the $788 million mid-year budget which had been passed by Parliament and promulgated on 5 August. In response to a case brought by 16 Members of Parliament, the Court ruled as follows:

1. The $240 million dollar Economic Support Fund violates Timor-Leste’s Constitutional prohibition against secret budgets (Article 145.2) and Parliament’s power to oversee budgetary operations (Articles 95.2(q) and 115(d)).

2. The Budget’s withdrawal of $290.7 million more than the Estimated Sustainable Income (ESI, $396.1 million) from the Petroleum Fund is illegal because it violates the 2005 Petroleum Fund Law’s requirements that petroleum resources must be managed for the benefit of current and future generations. The Government failed to meet the requirements of Articles 8 and 9 of that law to provide a detailed explanation of why it’s in Timor-Leste’s long-term interests to spend more than the ESI.

3. In order to preserve the certainty and security of the state, the effective date of the ruling is the date of its submission of Parliament. As of 13 November, the Economic Stabilization Fund must stop and no money can be withdrawn above the ESI.

4.The court rejected plaintiffs' arguments that parliamentary procedures and chairing during the budget debate unconstitutionally violated Parliament’s powers.

5. The court rejected plaintiffs' argument that allocating 97% of the budget to the Government, with much small amounts for Parliament, President and judiciary, violates the Constitutional separation of powers.

The case was filed on 29 August by 16 Parliamentarians from the Fretilin, PUN and Kota parties.

The decision was signed by judges Ivo Nelson de Caires Batista Rosa (acting President), Claudio Ximenes, and Jose Luis da Goia. Although the decision is dated 27 October, Judge Rosa's cover letter to Parliament was originally dated 11 November and amended to 13 November. It will likely be published in the official Jornal da Republica during the week of 17 November. However, the decision states that it is effective as of the date it was sent to Parliament.

Local media coverage of the court ruling has been inconsistent – it was a banner headline in the 14 November Timor Post, less prominent on Diario's front page, and not mentioned in Suara Timor Lorosae until the next day, or on TVTL's evening news the following two nights.

After the court ruling was sent to Parliament, partisan political accusations from both sides overshadowed the important legal issues discussed by the court.

On 18 November, President of Parliament Fernando La Sama Araujo petitioned the court to reverse its decision.

To date in 2008, the Government has withdrawn $220 million from the Petroleum Fund this year, $140 million in the third quarter and $80 million in October. They asked for $80 million more in November, but it has not yet been transferred. Although the budget unconstitutionally authorized a total withdrawal during 2008 of $686.8 million, the court’s ruling limits this to $396.1 million. It is not clear whether that is sufficient to satisfy the Government’s cash needs for 2008, as many budgetary commitments may not be fulfilled.

From January through September 2008, the Government had spent $218.6 million (including $14.7 million from the Economic Stabilization Fund). An additional $237.6 million has been obligated or committed. Unofficial information indicates that several tens of millions additional were spent from the Economic Stabilization Fund just before the court ruled.

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