Law school teeters on financial abyss

  • 2005-05-11
  • By Aaron Eglitis
RIGA - The Riga Graduate School of Law, for years the Baltic states' leading legal education center, has come face-to-face with bankruptcy, and will have to undergo wholesale reform over the next few months in order to survive, sources at the school said.

The law school and its owners are considering three different options; two that involve mergers with other educational institutions, the third 's simply closing its doors. The university could slip into insolvency by the end of this month, or at the latest in July if an agreement is not reached, sources at RGSL said.

The institution's debt 's over 4 million euros 's has turned into a time bomb as the principal will soon mature and two of the sponsors have suspended funding.

Two universities have come forward, saying they would merge with the facility and offer two distinctly different ways out. The Stockholm School of Economics in Riga, which is located next door and shares some facilities, has offered one proposal, while University of Latvia has offered a second. The Ministry of Science and Education submitted its recommendations concerning the two proposals on May 10.

The fate of RGSL may be decided by a Cabinet of Ministers meeting later this week, but the owners would then have to decide how to proceed.

The graduate school was created in 1997 by the Swedish government, the Soros Foundation and Latvia, with a view that market reforms would get a boost by the establishment of an organization with a foreign faculty to provide a top-notch legal education.

RGSL has been burdened by refurbishment-related debt dating back years. The Soros Foundation initially bestowed the building to the law school to serve as an endowment. Revenue from renting out facilities would serve to offset some of the costs of running the institution.

Thus, the debt essentially comes down to refurbishment costs, high salaries, small classes that paid no tuition until last year and a decline in the value of the Swedish kroner, making the Swedish government's initial commitment of 40 million kroner ultimately less valuable.

But it is coming due, and since the state has guaranteed the initial loan with Nordic Investment Bank, it will have to come up with the cash if bankers are unwilling to renegotiate. In the event of bankruptcy, the state could also lose out on the historic Art Nouveau building, since the school's property agreement stipulates that the building should go to a nonprofit organization.

But the prospect of a takeover raises additional questions. A takeover by Latvia University would likely solve the money problem, but would lead to a decline in quality, many experts said.

One University of Latvia faculty member, who spoke on the condition of anonymity, said that much of the university's law school curriculum takes place by rote, that it had Soviet-style management and was run by an old guard of professors who taught during the Communist period. He declined to let his name be used since the issue has become politically sensitive.

Daimars Skutans, a lawyer who studied undergraduate law at the University of Latvia and later did his LL. M., or master's of law, at Cambridge University, agreed: "Many of the professors are post-Soviet style at LU and lack the knowledge that is demanded internationally."

Skutans added that he did not support the merger between the graduate law faculty and University of Latvia and wondered if the university was not just after the RGSL's law library - the largest in the country.

Some University of Latvia critics have termed it a hostile takeover. In an open letter to the newspaper Diena, faculty members and former students decried the proposed merger with the state-run school. The signatories included a member of Estonia's parliament and Lithuanian Foreign Ministry employees, as well as Latvians working in banks and law offices.

Many concede that the University of Latvia lacks the academic quality and rigor of the Riga Graduate School of Law. Some said openly that they would be happier seeing the entire facility close down rather than merge with the University of Latvia.

"I can understand that the current situation may cause some people to criticize the University of Latvia. However, this criticism is untrue and unfounded to a large extent," Kaspars Balodis, rector of the university's law program, said. "As to the method and quality of teaching, we do not the privilege to work with small student groups, contrary to RGSL."

Yet the latter's proposal is stronger from a financial aspect than the projected combination with SSE-Riga, particularly because LU is willing to take over the debt.

Others countered that the future financial situation looks good: if the debt burden can somehow be removed, then the university can exist on tuition and rent income. If combined with SSE-Riga, supporters say they could create a regional center for graduate education in law and economics.

John Burke, current rector of RGSL told The Baltic Times he believed the academic vision put forward, which would combine the two adjacent schools, is the best. Costs could be reduced by eliminating redundant departments, he added, and a study program could be devised playing to their strengths of law and economics. This would produce a joint MBA/LL.M program similar to those in America, Burke said.