Monday, 1 July 2013

Making bureaucracy help not hinder

This article was published in The Malta Independent on Sunday - 30th June 2013

Without bureaucracy there would be anarchy. Too little of it and you have the law of the jungle. Too much of it and you have abuse of power, corruption and a serious drag on economic activity and development. The challenge for the country is to have the right dose of bureaucracy: one where it is a help – not a hindrance – to social and economic development.

Nowhere is bureaucracy – and sometimes the lack of it – more asphyxiating than in the Justice and Rule of Law systems.   Two examples relating to property ownership will illustrate this point.

In 1982, Malta passed the Land Registration Act. This was intended to be the beginning of a process whereby all property in Malta would be registered, with rights and obligations, in order to facilitate and minimise the cost of property transfers and establish property rights more clearly. Thirty years down the line we still have a dual system whereby part of Malta is a compulsory registration area and other parts are voluntary. Progress towards total registration is glacial.

As a consequence, property transfers are still subject to extensive but unofficial searches in title of current and prior owners, involving substantial effort in terms of time and expense. Yet we still have a system where no one can be totally certain of the property rights acquired on transfer contracts, to the extent that notaries are having to insert substantial disclaimers and health warnings in their contracts to indemnify themselves from liability that could otherwise befall them in terms of law.

Take another example. Few remember the clashes of the 1980s between the then Labour Government of Mintoff and Mifsud Bonnici and the Church to render its school services free of payment. A temporary solution was reached in the mid-1980s for the government to begin subsidising Church schools and for negotiations to start for the Church to transfer to government its extensive property inventory that was not required for ecclesiastical purposes. The intention was that through such “sale” of property to government, the Church could gain access to liquid funds that could be used to finance its schools. This agreement was concluded in 1991 and led to the Ecclesiastical Entities (Properties) Act of 1992 which set up the Joint Office.

This was a one-sided agreement if ever there was one and Prime Minister Muscat would do well to include its revision on the agenda of negotiations with the Church. Through this law, a Joint Office was created for the management and registration of all Church property transferred to the government and for which the Church was richly compensated. It was given 10-year bonds with interest coupons of seven per cent and with a premium of 10 per cent payable on maturity. These bonds have long since been cashed and re-invested by the Church, as they matured in 2002.

Yet the government is still bound by all the conditions of the agreement that limit what it can and cannot do with the property, and the Church still has the rights of supervision over such land as if it were still the owner. Furthermore, 20 years down the road we still have a Joint Office which apparently is still grappling with problems regarding title of property transferred and paid for. What is even worse is that nobody in Malta can really be sure of their private property rights, knowing that the Joint Office legislation gives it the right to register its title retroactively without actually having to prove it. So if the Joint Office were to decide that a third party-owned house is built on land included in the Joint Office agreement, it can register its claim even without the need for proper documentary proof, and cause serious problems with third party rights to private property.

Surely, 20 years is long enough for government to know exactly what property it has taken over from the Church and to have its proper title verified and registered in order to give third parties peace of mind about property rights in Malta.

Bureaucracy in the Courts of Justice sets a standard that challenges anybody’s patience. Cases that are just postponed for judgement on a never-never basis, dozens of cases called at the same time, so that you have to be at court by 9am but may have to wait your turn until 11 – if not face a postponement without any hearing, lawyers that are expected to be in three court halls defending three separate cases at the same time, expensive procedures to summon witnesses that have to be repeated and paid again if the case is postponed by the magistrate or judge, and so on and so forth.

We have come to accept this as an unavoidable way of life, a cross we have to carry – just like sickness and old age. But things should not be like this and fortunately something now seems to be moving.

The first report launched for public consultation by the specially appointed Commission chaired by Mr Justice Giovanni Bonello for a holistic reform of the justice sector makes a noble effort to uproot justice systems from their present dysfunctional state and put them on a platform where their modus operandi and efficiency is transparent and accountable to the public that the Courts are supposed to serve.

The Chief Justice’s complaint about a lack of consultation with the judiciary before the publication of the report is a symptom of how the Bench has acquired a forma mentis where they consider themselves a cut above the rest of society. The report was launched for general consultation with all interested parties, including the judiciary, the legal profession, the administration and the general public. Why the judiciary expected to be consulted before everyone else demands an explanation.

Then we recently had criticism from the EU Commission that the lack of reform of our justice system, which remains mired in inefficiency, is a drag on our economic development and will continue to deter foreign investment that expects to operate within clear and defined property rights. The Commission was referring to civil rights which establish how lenders can protect the security rights obtained from borrowers and the procedure to enforce such security rights where necessary. It also refers to our grossly outdated bankruptcy laws, by which creditors have to wait for ever for recovery of their claims from the bankruptcy process and debtors have no facility for a court-approved Chapter 11-style restructuring that would give them a fair chance of continuing operations following debt restructuring if the Court feels that the business can still be saved, if restructured.

But one cannot put all the blame on the Court. It is not the Court’s fault if we do not have proper and modern bankruptcy laws. Laws are enacted by parliaments – not by courts. And the Court does decide cases that are meant to defend the interests of the general public, even where the politicians seem incapable of doing so. Take the decision of Mr Justice Ellul this week regarding the illegal boathouses at Armier.

The Court ruled that construction on publicly-owned land at Little Armier is illegal and caravan occupants have no legal title to the land. Any logical human being would reach the same conclusion. But politicians held at ransom by narrow segments of the electorate entered into negotiations to reach a compromise where there should be none.

The Court added that the letter sent by the government in April 2003 could not be deemed a binding contract for the parties who were carrying out the negotiations. The letter was explaining what the government was proposing. It was inconceivable, the Court said, that that letter could be construed as a binding contract that allowed those who had illegally occupied public land to continue occupying it. Neither was the confirmation issued in 2008 a binding contract between the parties, for no one was entitled to occupy public land without a legal title. Referring to the fact that the caravans had been provided with water and electricity services, the Court said that the law of the land was clear.
Transfers of public land had to be carried out in terms of the law.

Whilst denying no one the right of appeal in respect of the Court’s decision, politicians should be joining hands and celebrating that they have been freed from their bondage and can begin making plans for the proper development of the area in the public interest.

And if any preferences are to be given for the right to use or purchase any such re-development, the privilege should not be given to those who have illegally occupied the land for decades. They have had their turn already. It is now time for the rest of law-abiding society to have a fair chance.

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