The government and the executive bodies are not entitled to make a decision that imposes a financial burden not covered by the Budget Law.
The authority to make budget decisions have been entrusted to the parliament, which issue has been mentioned in various laws and regulations. However, judicial verdicts are excluded from this stipulation.
Apparently, the reasoning behind this exception is that the judicial system should independently examine and make decisions without limiting itself to budgetary considerations. The judge should vote on the basis of justice and not whether the government has funds for it or not, but this exception at times leads to far-reaching consequences that cannot be ignored.
Hamid Qanbari, a senior central banking expert, has elaborated on this issue and proposed a solution to the problem in an editorial for the Persian economic daily Donya-e-Eqtesad. A translation of the full text follows:
Legal Provision
According to Article 71 of the Law on Permanent Decrees of Development Programs, all approval letters, circulars, instructions, decisions and approvals of boards of trustees and executive authorities and bodies, with the exception of judicial rulings that imply a financial burden for pension funds or executive bodies and the government, are only enforceable if the resulting burden has already been calculated and provided for in the national budget or the annual budget of the relevant institution or fund. By extension, the creation and imposition of any financial burden in excess of the figures listed in the annual budget laws or the relevant fund is forbidden, as the action of the authority is considered an excessive commitment that is not subject to payment by the relevant institutions or funds.
The implementation of such orders is only possible within the limits of the said resources. In any case, imposing a budget deficit on the government and executive bodies and funds is unacceptable. The responsibility of implementing the provisions of this article rests with the heads of the institutions and funds, managers and relevant officials.
According to what has been stated in the above article, the government has no right to pass a resolution whose financial burden has not been incorporated in the annual budget laws, but the judiciary can issue a verdict whose financial burden is not included in the budget of executive bodies.
The judicial system deals with a dispute and issues a verdict and orders one party to pay an amount to the other group, which is binding. Now the question is, what should be done if the party that loses in the court is a government agency? The answer is that the government agency is not exempt from the execution of the rulings and must pay the said amount.
Of course, regulations in this regard clarify that the fine must be incorporated in the budget before making the payment.
There is another issue before executing the rulings. Let's assume that the decision of the judicial system is about an important budget issue that will have wide repercussions and consequences for the budget. Isn't granting decision-making authority to the judge in this case a kind of intervention of powers in each other's work? Let's suppose that the judge has given a decision about a case that decrees a payment, but the resource is not allocated. Will the judge's decision in this regard not disturb the budget balance?
Foreign Exchange Cases
An example of the above case is the verdict issued by judicial courts in foreign exchange cases and in issues related to compensation. In such cases, sometimes a court rules that the currency should be sold to the importer at a preferential rate [say, 4,200 tomans for one USD]. This is while according to the budget rules and regulations, the application of such a verdict is practically not possible. The quota of preferential currency is specific and limited, and it is spent on the import of essential goods and medicines, and the surplus of the government's share of oil revenues is deposited into the treasury at the secondary rate [called NIMA rate] and spent on the current and development expenditures of the government.
The order to sell foreign currency at the preferential rate to certain importers, or not to receive the price difference from them, is tantamount to entering amounts as expenses into the balance sheet of banks and the Central Bank of Iran, which will have negative effects and consequences for the balance sheet of banks and CBI, as well as on cash overdraft; or it eventually becomes the government's debt to the central bank, which has adverse effects on the monetary base and liquidity. Currently, the judges have nothing to do with these issues and only check whether the petitioner is right or the respondent; how the resultant financial burden should be met is the problem of the government, the CBI and the banks, and according to the Law on Permanent Decrees of Development Programs mentioned above, judicial orders are exempt from such considerations.
But in some cases, such as the one mentioned above, it can have extensive financial and economic implications, and sometimes a vote or a set of votes issued on a specific issue or similar issues may have serious inflationary impacts.
Solution
It is clear that the judge cannot be prohibited from dealing with the issue, or subject the court's decision to the availability or absence of resources. However, some suggestions could be made to ease the current situation:
1. All claims against the executive bodies that are more than a certain amount [for example, 1 billion tomans] should be filed against the Plan and Budget Organization, in addition to being filed against the executive body so that the organization is aware of the matter from the very beginning and takes necessary measures to secure the budget for implementing the decision [if the decision is issued against the respondent].
2. In all cases where the CBI and banks have taken actions on behalf of the government [such as buying and selling currency by the order of the government and based on the registration of orders approved by the government], issuing judgments against the CBI and banks is avoided and the treasury is implicated instead in order to prevent the implementation of the decision from the resources of the Central Bank of Iran or banks, and the resulting inflation.
With the implementation of these two proposals, while the powers of the judicial system will remain in force, the effects of inflation caused by the implementation of judicial decisions will also be controlled to some extent. And the government will also be more careful when it comes to decisions whose implementation or interpretation could give rise to a financial burden, since it has to pay the cost directly and cannot transfer the task to the banking network.
