>

Initiatives to change the way institutions supervise economic entities has been ongoing in Lithuania since 2009. The main purpose is to ensure that supervisory institutions become business consultants rather than punishment assessors. Initiatives are aimed at reducing the burden on economic entities that can result from the performance of supervisory functions, decreasing preconditions for corruption, and ensuring that legal requirements related to supervision are not only understandable but also easily and conveniently accessible. Ministry of Economy and Innovation coordinates

Priority is given to implementing the following progressive means in supervisory institutions:

  • preparation and application of business-friendly checklists during inspections;
  • uniform telephone consulting featuring recorded consultations that are binding on the institution;
  • use of risk management systems in planning supervisory activity;
  • uniform and adequate evaluation of minor breaches of legal requirements;
  • implementation of common commencement dates;
  • evaluation of institutions' results, effectiveness, and efficiency;
  • implementation of the Declaration on the First Year of Business.

Ministry of Economy and Innovation coordinates the implementation of these means and shape business supervision policy.

Please feel free to send your comments, complaints, or proposals related to this reform to: [email protected]

When carrying out business inspections, business supervisory institutions use control checklists. This is a unified list of requirements to be checked and is intended for both the inspector and the inspectee. An entrepreneur can more easily prepare for an inspection with the help of control checklists.

Control checklists comprise test questions that reflect the most important legal requirements applicable to economic entities and are worded in a clear and understandable manner. The supervisory institution does not impose any sanctions (such as fines) for requirements that are not included in a control checklist, providing consultation instead. The only exceptions are in rare cases where sanctions are necessary to prevent significant harm or threats to the public or the environment (i.e., where a certain requirement that is not included in the checklist is essential under certain circumstances) or to prevent the economic entity from deliberate non-compliance with legal requirements when it has already been warned and provided consultation.

Control checklists are useful for both businesses and supervisory institutions. Checklists can serve as a guide for business representatives in becoming aware of what will be checked by the inspector and in obtaining assurance that no fines will be imposed for violations of any requirements that are not included in the checklist unless they deliberately ignore the inspector’s instructions to rectify the violations or the violations pose a threat to others. Supervisory institutions are aware of what their inspectors are checking, while inspectors know what they must check. Thus, the goal is to add more clarity, transparency, and efficiency to the inspection process.

At present, control checklists are used in various fields of activity - for inspections in small public catering companies, small retail companies, hairdressing and beauty salons, auto repair shops, construction companies and builders, etc. General and Specialized control checklists are available on the website https://inovacijuagentura.lt/pradek-versla/kontroliniai-klausimynai/.

Risk assessment of supervised entities (subjects, activity fields, and so forth) is a progressive and necessary practice that is mandatory for business supervisory institutions in planning and carrying out supervisory actions.

Risk management systems are organisational and technical tools implemented by supervisory institutions, allowing them to establish the probability that an economic entity does not comply with legal requirements, determine the severity of the harm that can result, and plan their supervisory activity accordingly.

When applying this system:

  • supervision is focused on high-priority areas, with the most dangerous violations being eliminated;
  • the institution's resources are used in the most efficient manner, without being wasted on random activities, such as inspections in response to complaints that have no significance in terms of risk;
  • supervisory actions are transparent, justified, and proportional to the violation, thereby ensuring the non-discrimination of economic entities and equality before the law;
  • the biggest supervisory burden is incurred by major violators and repeat offenders, thus putting the principal of proportionality into practice and improving business conditions for those who abide by requirements.

In autumn 2011, the vast majority of business supervisory institutions signed the Declaration on the First Year of Business.  By means of this document, the institutions obligated themselves to offer advice and assistance to companies during their first year of operations, with the aim of helping abide by acts of law rather than rushing to hand down fines.

In implementing the declaration and in seeking to spread the word among the business community as widely as possible, it is recommended that business supervisory institutions inform the public about their ratification of this declaration on their web sites.  Institution leaders are also encouraged to organize meetings and seminars with regional division leaders regarding proper implementation of the declaration.

It is recommended that, prior to starting inspections of new businesses, business supervisory institutions present them with the declaration and an informational sheet containing contact details that business owners can use for questions related to the institution’s field of supervision.  In this way, it is hoped that businesses in their first year of operations will have an opportunity to become familiar with their rights.

In the declaration, which was initiated by the Ministry of Economy and Innovations, the institutions obligate themselves to refrain from issuing fines or limiting the operations of any business that is beginning operations.  Upon the determination of a violation, a deadline for compliance will be set, with an extension possible if circumstances warrant.

Fines and operations limitations will be applied only in exceptional cases, as a last resort, after assessing whether compliance with acts of law can be ensured by other means.  The declaration has been signed in seeking to improve the business environment, encourage job creation and retention, and decrease the administrative burden on businesses and residents.

 

The full text of the declaration can be found below:

DECLARATION on the first year of business, 14 September 2011, Vilnius

We, the undersigned business supervisory institutions (hereinafter referred to as supervisory institutions), represented by the supervisory institution heads, in seeking to increase the state’s competitiveness, improve the business environment and business supervision functions, encourage job creation and retention, and decrease the administrative burden on businesses and residents, having determined that businesses starting operations need methodological assistance and consultation and that supervisory institutions are competent to provide such assistance, in seeking to help new businesses operate successfully in a competitive environment, noting that the most important supervisory task is ensuring adherence to acts of law and that fines and other sanctions are only one means toward this end, rather than an end in itself, recognizing that fines are not the most suitable means to apply to new businesses, especially small ones,

obligate ourselves:

  • to refrain from applying punitive measures (fines, restrictions on activity, and so forth) during the first year of a business (no less than twelve months from the moment when the business—natural person, legal entity, or other organisation or a subsidiary of a legal entity or other organisation undertaking legally regulated economic activity within the territory of the Republic of Lithuania—or its activity came under the supervision of a supervisory institution) and, upon identifying a violation, to first determine an appropriate deadline for correcting the violation, a deadline which can be extended in the event of objective circumstances;

  • to devote resources for consultation and providing methodological assistance to businesses during their first year of operations (for example, contacting a new business and offering consultations services, preparing consultative seminars, answering businesses’ inquiries and requests, etc.).

    Appreciating that acts of law grant supervisory institutions the right to apply punitive measures and without restricting the discretion of supervisory institutions to apply them through this declaration, we jointly obligate ourselves to apply punitive measures to businesses during their first year of operations only in exceptional cases, as a last resort, after first evaluating whether adherence to acts of law cannot be ensured by other means (for example, by issuing an order or by consulting), and only when they are necessary and unavoidable in seeking to prevent harm to society, the interests of other persons, or the environment when such harm or danger is of great significance.

  1. Environmental Protection Agency
  2. Environmental Protection Department under the Ministry of Environment
  3. National Land Service under the Ministry of Environment
  4. Competition Council of the Republic of Lithuania
  5. Public Procurement Office
  6. Communications Regulatory Authority of the Republic of Lithuania
  7. National Energy Regulatory Council
  8. Bank of Lithuania
  9. Department of Cultural Heritage under the Ministry of Culture
  10. Ministry of Education, Science and Sports of the Republic of Lithuania
  11. State Language Inspectorate
  12. The Office of the Inspector of Journalist Ethics
  13. The Radio and Television Commission of Lithuania
  14. The Customs Department under the Ministry of Finance of the Republic of Lithuania
  15. State Tax Inspectorate under the Ministry of Finance of the Republic of Lithuania
  16. Lithuanian Bioethics Committee
  17. National Transplantation Bureau under the Ministry of Health
  18. Drug, Tobacco and Alcohol Control Department 
  19. Radiation Protection Centre
  20. The State Accreditation Service for Health Care Activities under the Ministry of Health
  21. State Medicines Control Agency under the Ministry of Health of the Republic of Lithuania
  22. National Public Health Center under the Ministry of Health
  23. Lithuanian Metrology Inspectorate
  24. Public institution Construction Sector Development Agency
  25. Service of Technological Security of State Documents under the Ministry of Finance
  26. Public institution Lietuvos Prabavimo Rūmai (Lithuanian Assay Office)
  27. State Data Protection Inspectorate
  28. State Food and Veterinary Service
  29. State Plant Service under the Ministry of Agriculture
  30. State Consumer Rights Protection Authority
  31. Fisheries Service under the Ministry of Agriculture of the Republic of Lithuania
  32. The Public Enterprise Transport Competence Agency
  33. Lithuanian Transport Safety Administration 
  34. The Fire and Rescue Department under the Ministry of the Interior
  35. Department of Supervision of Social Services under Ministry of Social Security and Labour
  36. State Nuclear Power Safety Inspectorate
  37. State Labour Inspectorate of the Republic of Lithuania under the Ministry of Social Security and Labour
  38. State Territorial Planning and Construction Inspectorate under the Ministry of Environment
  39. Audit, Accounting, Property Evaluation and Insolvency Management Service under the Ministry of Finance of the Republic of Lithuania
  40. Employment Service under the Ministry of Social Security and Labour of the Republic of Lithuania
  41. The Lithuanian Chamber of Auditors
  42. Architects' Chamber of Lithuania
  43. Agency of Agriculture under the Ministry of Agriculture
  44. The Office of the Chief Archivist of Lithuania
  45. Police Department under the Ministry of the Interior of the Republic of Lithuania
  46. Gaming Control Authority under the Ministry of Finance of the Republic of Lithuania
  47. National Agency for Education
  48. National Health Insurance Fund under the Ministry of Health
  49. Lithuanian Geological Survey under the Ministry of Environment
  50. The State Social Insurance Fund Board under the Ministry of Social Security and Labour

Seeking to ensure that economic entities have sufficient time to get to know with new legal requirements and to prepare to implement the obligations imposed by legislation on business, legal acts that make changes to business conditions should enter into force on 1 May or 1 November, i.e. the common commencement dates (a.k.a., the two-date rule.) Legal acts are adopted no later than three months prior to their date of entry into force, i.e. by 1 February or 1 August, respectively.

The hope is that common commencement dates, along with other progressive supervisory means, will have a tangible impact on creating a more favorable legal and economic environment for business.

Common commencement dates are not applicable where legal acts are adopted:

  • to implement obligations imposed under EU legislation;

  • to meet the requirements laid down in international treaties of the Republic of Lithuania;

  • in other cases provided by law;

  • to entrench more favorable regulatory treatment for economic entities.

Providing consultation services to business entities and other individuals represents one of the core functions conducted by public administrative bodies. The duty to ensure a sufficiently high level of consulting services flows from general principles of public administration, while consultations that are binding on public administrative bodies are consistent with principles of legal certainty and clarity, resonsible management, and equality before the law as expounded in the decisions of the Constitutional Court of the Republic of Lithuania.

Implementing consistent and high-quality consulting practices help:

  • Effectively implement supervisory function optimization tasks intended to reduce conditions fostering corruption, ensure supervisory requirements are understandable and easily accessible, and change the understanding of the mission of supervisory institutions—with a greater emphasis on providing assistance to businesses so that they can abide by legal requirements;
  • Avoid incorrect and inconsistent consultations;
  • Ensure that public administrative institutions provide polite and high-quality customer service, thereby promoting greater trust in the operations of state institutions;
  • Reduce the number of legal violations, which leads to a corresponding reduction in the workload of courts and other institutions that resolve disputes between individuals and public administrative bodies;
  • Ensure legal certainty in the course of standard transactions, thus creating a more stable business environmet and greater opportunities to attract foreign investment.

The purpose and goal of every supervisory institution is to bring about improvements in the fields they supervise and to prevent significant harm or danger to society, the interests of other individuals, or the environment as well as to reduce the damage resulting from a harmful incident as quickly and effectively as possible.

With conditions in supervised fields constantly changing and management decisions being made every day, only constant observation and evaluation of an institution's operational results can help identify and analyze changes in the area being supervised and in operational results, discover their causes, and make timely and correct management decisions for improving operations.

Supervisory institutions' operational efficiency and effectiveness performance indicators are meant to:

  • ensure that institutions' goals are achieved and timely and suitable management decisions are made
  • publicize the institution's usefulness to society and its efforts to improve the quality of business supervision
  • ensure feedback from business

Key performance indicator results or the averages of the results for the last three months should be published each month on the supervisory institution's web site.

When preparing annual strategic planning documents, supervisory institutions must establish evaluation criteria and their target values in accordance with the institutions' long-term goals.

How ambitious the evaluation criteria target values are and the degree to which they are achieved influence the evaluation of supervisory institutions' operations, therefore achieved evaluation criteria values should be included in supervisory institutions' annual operations reports.

When planning their operations, preparing strategic planning documents and measures, and allocating resources, supervisory institutions should do so in a way that allows for their evaluation criteria target values to be achieved.

For more information about the introduction of key performance indicators by supervisory institutions, please write to [email protected].

By Resolution No. 511 of the Government of the Republic of Lithuania of 4 May 2010, Regarding the Optimisation of the Supervisory Functions Performed by Institutions, the decision was made to form a Panel of Experts on the Optimization of Supervisory Functions Performed by Institutions (hereinafter referred to as the Panel of Experts).

The Panel of Experts has been tasked with performing the following functions:

  • To prepare methodological material, guidelines, and recommendations related to the optimization of supervisory functions, including methodological material, guidelines, and recommendations on introducing risk management systems, drafting checklists, ensuring consistent and high-quality consulting services, conducting surveys of businesses, and evaluating supervisory institutions using key performance indicators;
  • To submit methodological material, guidelines, recommendations, and suggestions regarding optimization of supervisory functions to the Minister of Justice and the Minister of Economy and Innovation;
  • To provide necessary institutional assistance with implementing the methodological material, guidelines, and recommendations to institutions that do not participate in the activity of the Panel of Experts;
  • To initiate and implement means for committees of supervisory institution heads to exchange supervisory function performance and optimisation best practices.

The Panel of Experts consists of:

  • A representative of the Ministry of Economy and Innovation (head of the Panel of Experts);
  • A representative of the Ministry of Justice;
  • A representative of the Office of the Government;
  • A representative of the Ministry of Environment;
  • A representative of the Environmental Protection Department;
  • A representative of the State Labour Inspectorate;
  • A representative of the Lithuauniain trasport Safety Administration;
  • A representative of the State Food and Veterinary Service;
  • A representative of the State Tax Inspectorate Under the Ministry of Finance;
  • A representative of the Sate Consumer Righst Protection Authority;
  • A representative of the Fire and Rescue Department Under the Ministry of the Interior;
  • A representative of the State Territorial Planning and Construction Inspectorate Under the Ministry of Environment;
  • A representative of the Ministry of Health;
  • A representative of the Lithuanian Confederation of Industrialists;
  • A representative of the Lithuanian Small and Medium Sized Business Council.

Last updated: 13-03-2024