I/1996
Issue
The first part of this study deals with land reform and current Estonian land use legislation.
Privatisation in formercommunist economies is part of a wide process of transition from a command system economy to a free market economy. Despite the similarity of basic issues, the privatisation process must be seen from a different perspective because of the relatively different circumstances in a given country and diversity of starting positions.
One of the primary goals of environmental policy in Estonia is to carry out land reform in such a way that existing natural values are maintained sustainably and biodiversity does not suffer damage from the reforms. Thus the privatisation of land requires new land-use regimes, different from those characteristic of Soviet Law, which was based on the principle of state sole ownership of land and other natural resources. Transition to private ownership must be correlated with the objectives of environmental policy. Unfortunately, in Estonian land reform the environmental protection considerations are not the major issue.
In formercommunist countries the common point of view is that private ownership of natural resources can potentially give rise to the situation where the interests of landowners and environmental protection considerations easily get into conflict. No doubt, that with a fundamental change of social circumstances the legal framework for nature protection should be essentially different.
Positive social changes in property relations, that is a transition from state to private ownership of natural resources have hypothetically presented new risks for nature protection. These risks may be intensive pressure from landowners requesting the maximum exploitation of land without any regard to conditions for its protection.
However, at least in Estonian circumstances, most of the mentioned risks are hypothetical, as most of the land is still in state ownership. There is no data yet that proves over-exploitation of natural resources. As an example, in 1994 forest management plans allowed 3,171,800 solid meters of liquid timber to be felled but actually 2,347,600 was felled (Estonian Environment 1994, Tallinn 1995, P.25). Substantial changes have also taken place in agricultural land-use. In many regions, on the contrary, under-exploitation of agricultural land is obvious. Also due to the changes in agrarian practice, fertilisers, pesticides, and other chemicals dangerous to soil will probably not be used as intensively over the next few years.
However, this situation is bound to change, and therefore preventive measures need to be taken beforehand, and the mentioned risks must be taken into account in land-use legislation. There exists a unique opportunity to set up land-use regulations within the privatisation process, as preconditions for privatisation or restoration of land ownership rights. In this case it must be mentioned that from the legal point of view it is more complicated to change existing uses of land, than to regulate new land uses.
Estonian land reform contributes to several objectives: political, social and economic. The question is how to achieve these goals from the sustainable development point of view, and whether environmental protection considerations are taken into account or not.
The concept of land reform has varied over time according to the function performed by land, that is as a factor of production, as a store of value and wealth and a source of political and social influence. In earlier Estonian land reforms (which took place in the 19th century and during 1919-1940) the main idea of reform the reformation of the tenure system or redistribution of land ownership rights. In present land reform, the concept must be broader, and based on the social function of land, and recognition of land as the main store of biological diversity and its components. The Land Reform Act and other regulations address this issue by imposing for privatisation and restoration of land ownership rights several preconditions, whose aim is to balance the restoration of the property rights and present and future wealth in land.
In addition to the Land Reform Act there exists several other pieces of legislation which prescribe land use requirements in Estonia. These are the Act on Protected Objects of Nature, the Water Act, the Forest Act and the Planning and Building Act.
The Act on Protected Objects of Nature(RT 1994, No. 46, Art. 773) of June 1, 1994 determines the procedure for taking natural objects into protection and establishes the rights and obligations of land owners with regard to such objects by listing prohibited or restricted activities within the protected areas.
At this time it is estimated that protected areas cover approximately 10-15% of the territory of Estonia. This figure includes also landscape conservation and biosphere protection areas, in which most economic activities are allowed (Estonian Environment 1993. Tallinn 1994. P.61). In other countries such areas are usually not labelled as nature reserves
All natural objects which are under protection are accorded an equal level of legal protection regardless of whether the natural object is in public or private ownership. Placing a natural object under protection may be performed by Parliament, the Government or the Minister of the Environment.
All protected areas, such as national parks, nature protection areas, protected landscapes and programme areas are divided into special parts (zones) where the type and extent of imposed restrictions and obligations are different. As under the provisions of the Constitution of the Republic of Estonia property rights may be restricted only by law, all possible restrictions of land use are fully defined in sections 11-13 of the Act on Protected Objects of Nature. The land use requirements defined in the Act may be applied in different zones of different areas fully or partly, permanently or temporarily (seasonally) and are implemented by way of the Protection Rules of the area, approved by the Government.
In addition to restrictions of property rights in protected areas management rules may also define mandatory activities whose aim is to preserve a natural object, features or the species composition of natural or semi-natural associations. Art. 27 of the Act prescribes that expenditure related to the management of an area shall be borne by the authority which has placed the object under protection (usually the Government), unless otherwise specified by agreement between the authority and the landowner. Such co-operation between landowners and governmental authorities in the form of voluntary management agreements is widely used also in other countries (Netherlands).
Natural or natural-historic monuments are also among the protected natural objects under the Act on Protected Objects of Nature. A limited management zone of up to 50 meters is established around each such monument, with restrictions determined in the Act.
A significant part of the Act on Protected Objects of Nature is section - Protection of species under protection category I (strictly protected). It prescribes that upon receipt of information concerning a newly discovered habitat of a species, a temporary protection zone may be established for two months, during which all economic activity is terminated. Within these two months the feasibility of establishing a protected area, its type and boundaries will be determined.
The main weakness of the Act on Protected Objects of Nature is its implementation. Many procedures are not defined in the Act and thus require adoption of governmental or ministerial regulations. From one perspective, such an arrangement can make the administrative scheme more flexible. However before all the necessary regulations are passed, the Act will not work, and its implementation in many cases is impossible.
The Planning and Building Act establishes planning systems in four stages. Hopefully, this Act will be of significant importance in Estonia’s land use law, especially with respect to landscape management. The privatisation of land and other natural resources is affecting the stability of landscapes. At the present time the priority in planning the rural landscape is the maintenance and creation of optimal diversity of landscape patterns. This can be realised through the creation of a multilevel system of compensating areas and ecological infrastructure of territories (IUCN East European Programme. Environmental Status Reports: 1993. Volume Five. Estonia, Latvia, Lithuania. P.50.).
The following part of this study will deal with some of the basic principles of land use regulation.
First of all, it must be stated that property is considered to be a social institution. Absolute control of property by the owner does not exist in modern society. This absence of absolute property rights emphasises the importance of ownership as part of an organised scheme of social relations which gains its significance with reference to the values and institutions of a society considered as a whole (See: A.I. Hallowell, The Nature and Functions of Property as Social Institution, Journal of Legal and Political Sociology, Vol.1, No. 3-4, April, 1993.). Also important to stress is that all property relations are the object of collective choice, and influence individual choice in certain directions that may or may not be considered in the public interest.
With respect to the basic principles of land use law, the following considerations are relevant for the choice of an appropriate method of regulation:
1) the natural values of the area;
2) the potential threats ; and
3) the object of land use regulation.
Attention must be paid to the object of land use regulations. In this case, environmental law principles may be used as the point of departure.
The Constitutions of many countries (e.g.Spain, Portugal, Hungary, Romania) either state the principle that an environment of a specified quality constitutes a human right or imposes duties upon the state. At the international level, there is a growing discussion of a human right to a safe and healthy environment. Although the 1950 European Convention on Human Rights does not contain a right with respect to the environment, case law of the European Commission and the Court of Human Rights indicates that environmental deterioration can lead to a violation of human rights that are recognised by the Convention (Oerlemans v. Netherlands, Judgement of 27 November 1991, Eur.Ct.H.R.Ser.A, vol.219)
According to international experience the best environmental policy is to prevent the creation of pollution or nuisance at their source, rather than subsequently trying to conteract their effects. However, the consequences of decisions and actions are not always fully known in advance. Thus this precautionary principle signifies that measures of environmental protection should be taken in advance of any known risk. Taken to the extreme, the precautionary principle could lead to prohibition of the majority of economic developments, as almost all involve some risk of environmental harm. The problem in applying the precautionary principle is to balance the risk or probability of harm against the economic costs of the measures proposed and likelihood that the measures will be effective in avoiding the harm. In order to justify the measures, their costs should be less than the costs of the environmental damage avoided (See: A. Kiss, D. Shelton. Manual of European Environmental Law. Cambridge,1991.)
To apply the basic principles of environmental law various interrelated techniques have been developed:
Preventive measures. These aim to avoid harm or to eliminate the risk of harm. From a land use point of view, direct regulation by means of restrictions and prohibition is significant. The number and type of restrictions are almost unlimited. However, there are certain ones that are more commonly used:
Harmonisation of the desire of land owners to achieve maximum profits from the land and other natural resources with environmental quality considerations constitutes the primary objective of modern land use legislation.
The privatisation of land and other natural resources requires several amendments at the legislative level. This entails from one side the imposition of restrictions on property rights to protect the environment, and from the other side, the adoption of a series of economic incentives and disincentives to stimulate a favourable attitude of owners towards environmentally relevant uses and land conservation.
Four major institutional mechanisms are used to control environmental risks and regulate land-use: direct government regulation, market forces, liability and insurance. Although government regulation is widely used all over the world, non-regulatory alternatives are becoming increasingly important. Each of the four institutional mechanisms has its strengths and weaknesses. Market forces can control risks rapidly and efficiently only if there is a choice of alternatives. Unlike direct governmental regulation, liability schemes can provide compensation for environmental damage but at the same time there are difficulties in proving the causal link. Insurance helps to ensure that compensation will be available but can also reduce the incentive to prevent environmental damage. However, direct government regulation and its alternatives are not in conflict. The major issue is to find the proper mix of these institutional mechanisms (See: R.V. Persival, A.S. Miller, C.H. Schroeder, J.P. Leape, Environmental Regulation. Law, Science, and Policy, 3d ed. 1992, PP.128-135.).
A common mistake in land use legislation is incorporating in the law some far reaching objectives without outlining how to achieve these objectives. A law must provide for its implementation. In Estonian legislation there are a number of regulations which correlate poorly with other pieces of legislation resulting in regulations with objectives but no functioning implementation.
The last part of this study deals with the limitation of government action in setting up restrictions on property rights and probable manner of compensation for economic loss caused by these regulations.
The main principle with respect to direct government regulation is that whatever interest the governmental body restricts, it is required to pay just compensation for it. In this case two main considerations appear:
1) which restrictions need to be compensated; and
2) the manner of compensation.
As discussed earlier, in many cases, restrictions on property, and imposed land use regimes prevent the land owner from using the land to its full short term economic potential. In this case, it is necessary to develop a system of compensation. In former communist countries various compensation systems are used:
1) tax reductions or breaks;
2) direct payments;
3) compensatory bonds; and
4) the replacement of land.
Just compensation is usually defined as the fair market value of the interest restricted or land taken. At the same time, the fair market value standard rarely gives the land owner full compensation for the economic loss that the owner suffers as a result of restrictions and obligations imposed by government action.
A generally recognised rule is that where the government takes land permanently (acquisition of land) for a public use, direct compensation must be paid. But only in a few jurisdictions is the government required to pay direct compensation when a governmental body imposes a regulation concerning the prospective use of land, even if such land use regulation substantially decreases the market value of the property. This last principle is controversial of course but still suitable for Estonia in the present circumstances.
Moreover, the mentioned theory is fair from a legal point of view. The economic point of view may be different. Under this latter perspective “regulations” that cause economic loss must also be compensated. Here another principle may be employed, that is, if from such regulations there are more benefits than costs, recovery should be paid by those who enjoy the benefits. The only issue that remains, is how to estimate these benefits and costs and how this system may be made available in Estonian circumstances.
Experience of modern countries indicates that various tax breaks can be used to promote certain types of land use. The State of Hawaii in the United States of America has attempted to integrate tax and land use policies. For example if an owner makes improvements under a local redevelopment project, the owner’s taxes will not increase for seven years. Similarly, if repairs or improvements are made to meet state health, sanitation or safety requirements, taxes will not be increased for a certain time period.
Under the Estonian Land Tax Act (RT 1993, No. 24, Art. 428) of June 5, 1993 the rate of land tax depends on the restrictions on property rights of the land owner. Depending on the extent of the restrictions the land may be abated or exempted from the land tax. A regulation of the Government (RT 1993, No. 71, Art. 1003) of October 20, 1993 provides for the exemption of 200,000 hectares of land from state and local land tax.
In conclusion it must be emphasised that in Estonia’s present circumstances, compensation for direct government regulation of land owner’s rights and interests must be recovered not through direct subsidies and grants but by financial measures taken through the taxation system, both, to encourage certain kinds of land use and to compensate for probable economic loss caused by public action.
pp.48-52