What can be transferred? The constitutional responsibility itself or the right to exercise a responsibility?

The effect of each agreement should be determined on a case by case basis given that each agreement has its own object and modalities. Two main variables seem to apply for any determination of which elements are being transferred: (1) What does the Constitution allow to be transferred? (2) What does the agreement itself provides?

What is allowed to be transferred? Article III.5(a) could be interpreted as only allowing Entities to transfer to Bosnia and Herzegovina a right to exercise responsibilities rather than the full responsibilities themselves. We tend to disagree with such an interpretation. Our position is mainly motivated by the need to ensure the highest level of stability and coherence in the constitutional system of the allocation of responsibilities. By allowing Entities to revisit the initial allocation of competencies operated by the Constitution, the transfer agreement mechanism foresees a number of ways by which the stability and coherence of this system can be disturbed.²⁶⁴⁸ It is our view that Article III.5(a) should thus be interpreted in a manner that seeks to protect the coherence and sustainability of the system put in place by the Constitution and should not automatically open the door to arrangements that would introduce irrationality into this system.

Moreover, transfer agreements will often be followed by the adoption of legislation and the establishment of complex administrative structures delivering concrete public services to the population. This in itself argues for a clear constitutional framework allowing the transfer of responsibilities to occur in a rational and coherent manner. In the absence of clear provisions to the contrary in the transfer agreement itself, it is argued that a transfer agreement concluded under Article III.5(a) should be construed as transferring the relevant responsibility as a whole together with all accessory responsibilities required for the exercise of the principal responsibility.²⁶⁴⁹

What does the agreement itself provide for? As indicated above, Entities may wish to agree to a more restrictive set of arrangements.²⁶⁵⁰ While the extent to which they are entitled to do so has not been fully clarified yet, the developments in U 14/04 provide a number of preliminary indications. The applicant in this case challenged the constitutionality of laws adopted by the Federation of Bosnia and Herzegovina relating to responsibilities that had been transferred by Entities in the field of indirect taxation.²⁶⁵¹ Following the transfer of such responsibilities, Bosnia and Herzegovina had enacted a Law on Indirect Taxation System in Bosnia Herzegovina (hereinafter: Law on Indirect Taxation)²⁶⁵² through which it established an Indirect Taxation Authority with a Governing Board (hereinafter Board) composed of the Finance Ministers of Bosnia and Herzegovina and the Entities as well as three experts. This Board was vested with the authority to give prior approbation to the promulgation or amendment of legislation on indirect taxation to be enacted by the Federation, Republika Srpska or the Brcko District.²⁶⁵³ In more simple terms, the Entities had maintained their capacity to adopt legislation in the field of indirect taxation, but had conditioned their capacity to do so by transferring a right of prior approval to a body established by Bosnia and Herzegovina.

The laws contested by the applicant in this case purported to amend existing legislation from the Federation of Bosnia and Herzegovina regulating fiscal matters in the field of indirect taxation. Considering that the Board’s approval had neither been sought nor given, the applicant argued that the laws adopted by the Federation were unconstitutional. In an important decision, the Court held that the failure by the Parliament of the Federation of Bosnia and Herzegovina to obtain the consent of the Board amounted to a violation of Articles III.3(b) and III.5(a) of the Constitution, thus implicitly validating the notion that Entities can transfer less than their whole responsibilities.²⁶⁵⁴