Overall compensation allocation: everything you need to know about the court case of the Collectivité

What is the overall compensation allocation (DGC)?

Until 2007, Saint-Martin was a municipality of the Guadeloupe Department and Region. As such, it collected allocations from this Region and this Department as well as allocations from the State, just like all the other communes in France.

When Saint-Martin became a collectivité in 2007, it obtained jurisdictions as a Region and as a Department in addition to that of the commune. For that, it noted that to exercise all of these jurisdictions, the State needed to grant it the corresponding budget envelopes (or allocations). In other words, instead of paying the Guadeloupe Region and Department as it had done until 2007, it should directly pay the Collectivité of Saint-Martin.

According to the code général des collectivités territoriales, there are four financial compensation instruments: the tax transfer, the overall operating allocation, the overall construction and school equipment allocation as well as the overall compensation allocation (DGC).

The amount of the DGC was defined by the amending Finance Law of 2007.

Why is the Collectivité litigating?

The Saint-Martin Collectivité considers that the methods for calculating the DGC are not compliant with the French Constitution. It therefore filed a priority constitutionality issue (QPC) which will be examined by the Constitutional Council. The public hearing took place on Tuesday June 21 in Paris. Aline Hanson, René-Jean Duret (territorial advisor), David Girardot and Odile Winner from the tax department as well as Thierry Gombs were notably present.

What are its arguments?

"It’s clear that the overall compensation allocation has not played its adjustment variable role since its amount was less than the dock dues which financed the operating costs of the commune", explained Maître Marie-Yvonne Benjamin, the lawyer of the Collectivité at the Constitutional Council hearing.

Basically, the Colllectivité maintains that it no longer receives the same allocation that it received when it was a commune. Specifically, the envelope corresponded to the dock dues of an annual amount of approximately 11 million euros. Indeed, as a commune of Guadeloupe and since Guadeloupe applied the dock dues, the commune of Saint-Martin received a part of this resource which covered its "operating expenses".

In 2007, it was decided that this resource would be paid in 2008 and 2009 in order give the Collectivité time for financial planning. Since then, it longer receives the 11 million euros every year, which is why it’s blowing the whistle.

Its premise is based on the texts of the code general des collectivités territoriales and the Constitution which maintain "a concomitant transfer of resources" and the "granting of an allocation equivalent to that which was given" before.

In other words, the Collectivité considers that it should still receive the 11 million euros since at the time when it became a collectivité, it was the amount that the commune received.

What are the State’s arguments?

However, the Prime Minister’s legal counsel had a different interpretation of the texts. According to him, the Constitution grants compensatory allocations "during jurisdiction transfers between the State and a collectivité, and not during a transfer from one collectivité to another collectivité", which was the case of the dock dues which was a local resource.

He also specified that the State must of course compensate, but not necessarily for the total amount of expenditure.

What will be the Constitutional Council’s decision?

The case has been adjourned for further deliberation by the President, Laurent Fabius. The decision will be made public on July 1.

The legal proceedings which have been initiated by the Collectivité since 2010 and the judges seized will need to take account of the Constitutional Council’s ruling.

If the Collectivité wins its case, it remains to be seen to what extent the State will be able to supplement the allocation and also whether the ruling is retroactive or not.