VILNIUS, April 24, 2026 — Lithuania’s Competition Council of Lithuania has presented its position to the Seimas on draft legislation that would significantly tighten the rules governing municipalities’ use of in-house contracts with companies they control.
Under the proposed amendments, municipalities would be allowed to conclude such “internal transactions” only in exceptional cases and only after assessing their potential impact on fair competition.
Constitutional Court ruling
The legislative reform follows a ruling by the Constitutional Court of Lithuania in October 2024, which found that provisions in the Law on Local Self-Government allowing municipalities to award contracts directly to their own companies without evaluating competition effects were unconstitutional.
In response, Lithuania’s Ministry of the Interior of Lithuania prepared draft amendments intended to balance municipal interests in providing public services with the need to maintain competitive markets.
New safeguards for competition
Under the proposed framework, municipalities wishing to award a contract to a municipally owned company would first have to justify that decision through specific procedures.
These may include:
- conducting a public procurement process;
- holding market consultations; or
- carrying out a data-based analysis demonstrating the need for an internal transaction.
The Competition Council said it had no objections to the proposed approach, noting that the mechanisms ensure internal transactions remain a limited option rather than a routine alternative to competitive procurement.
Role of methodology
The authority emphasized that a future methodology for assessing internal transactions, to be approved by the government or a designated body, will be crucial for determining whether municipalities can legally bypass competitive procurement.
According to the council, the methodology must ensure that municipalities resort to internal transactions only in exceptional circumstances and after properly evaluating their impact on fair competition.
Next steps
The Competition Council provided its expert opinion at the request of the Seimas Audit Committee and said it will review the methodology once a draft is available and provide further recommendations if needed.
The authority also assessed related amendments to Lithuania’s Public Procurement Law and legislation governing procurement in sectors such as water management, energy, transport and postal services.
