REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL On Progress in Bulgaria under the Co-operation and Verification Mechanism
Date: 2010-07-20
Institutions: European Commission
Subjects: Bulgaria, EU control, cooperation policy, corruption, exchange of information, judicial reform, rule of law

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EUROPEAN COMMISSION 

Brussels, 20.7.2010 
COM(2010) 400 final 

REPORT FROM THE COMMISSION 
TO THE EUROPEAN PARLIAMENT AND THE COUNCIL 

On Progress in Bulgaria under the Co-operation and Verification Mechanism 

{SEC(2010) 948} 

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REPORT FROM THE COMMISSION 
TO THE EUROPEAN PARLIAMENT AND THE COUNCIL 

On Progress in Bulgaria under the Co-operation and Verification Mechanism 

1. 

INTRODUCTION 

The  purpose  of  the  Co-operation  and  Verification  Mechanism1  (CVM),  established 
on  the  accession  of  Bulgaria  to  the  EU,  is  to  help  put  in  place  an  impartial, 
independent and effective judicial and administrative system properly equipped inter 
alia  to  fight  corruption  and  organised  crime.  This  involves  making  certain 
fundamental  changes,  which  takes  time  and  also  requires  broad  political  support 
across  the  political spectrum as well as in society at large. At the same time, these 
changes  are  an  indispensible  investment  in  the  future  of  Bulgaria  –  an  effective 
administrative  and  judicial  system  is  necessary  for  sound  public  finances  and  well 
rooted  socio-economic  development.  It is also necessary to enable Bulgaria to play 
its full role as a member of the EU in areas such as justice and home affairs.  
This  report  is  the  fourth  annual  report  since  the  CVM  was  set  up2.  It  sets  out  the 
Commission's  assessment  of 
the  reform  process  and  makes 
recommendations  on  what  needs  to  be  done  next  to  continue  with  the  necessary 
reforms. The Commission considers that the CVM serves a useful purpose: 

the  state  of 

•  for Bulgaria by providing objective assessments and recommendations on where 

action is needed; 

•  for  the  other  Member  States  which  can  follow  progress  and  provide  appropriate 

support to Bulgaria. 

In  this  year's  report  the  Commission  points  to  a  strong  reform  momentum 
which  has  been  established  in  Bulgaria  since  the  Commission's  last  annual 
report in July 2009. The new strategy for judicial reform demonstrates the existence 
of  a  strong  political  will  in  Bulgaria  to  achieve  a  deep  and  lasting  reform  of  the 
judiciary.  The  report  also  recommends  that  Bulgaria  improve  judicial  practice  in 
order to allow the judiciary to act more pro-actively and to show a stronger sense of 
responsibility. 

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Commission  Decision  2006/929/EC  of  13  December  2006  establishing  a  mechanism  for  cooperation 
and verification of progress in Bulgaria to address specific benchmarks in the areas of judicial reform, 
the fight against corruption and the fight against organised crime (OJ L 354, 14.12.2006, p. 58). 
The  report  is  based  on  regular  input  received  from  the  Bulgarian  authorities  notably  in  response  to 
detailed questionnaires from the Commission. The Commission has been assisted in its work by experts 
and has drawn on documentation and input provided by a variety of sources. The accompanying staff 
working paper sets out the Commission's detailed assessment of progress in each of the benchmarks set 
by the decision on the CVM. 

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2. 

STATE OF THE REFORM PROCESS IN BULGARIA 

Achievements 

Since  July  2009,  Bulgaria  has  adopted  important  reforms  of  its  penal  procedures. 
Legislation to strengthen asset forfeiture and to improve protection against conflict of 
interest  is  under  discussion.  The  structural  set-up  of  the  prosecution  to  deal  with 
fraud and organised crime has been strengthened. Organised crime is actively tackled 
for the first time since the inception of the CVM. In June the Government adopted an 
ambitious and far-reaching strategy which provides a blue-print for a comprehensive, 
long  term  reform  of  the  judiciary.  The  most  pressing  reforms  to  improve  the 
efficiency,  accountability  and  consistency  of 
through 
amendments to the Judicial Systems Act are in the process of consultation within the 
Government. 

judicial  process 

the 

The  strong  push  for  reform  by  the  Government  is  showing  some  results  in  the 
judicial system. Allegations of corruption within the judiciary in April are receiving a 
stronger  disciplinary  and  criminal  response  than  in  the  past.  The  number  of 
indictments  for  organised  crime  has 
increased  and  severe  sentences  were 
pronounced, but not yet enforced, in a case involving large scale fraud of EU funds 
in April and June. 

At  the  same  time,  the  Commission's  analysis  shows  that  important  deficiencies 
remain in judicial practice both at the level of the prosecution and at the level of the 
court.  The  judicial  process  in  Bulgaria  lacks  initiative  and  professional  capacity. 
Complex  investigations  show  a  lack  of  direction  and  purpose,  procedures  are  too 
formal and too long and often fail in court.  

The  Commission's  analysis  also  shows  continuing  shortcomings  regarding  the 
prevention  of  corruption  and  protection  against  conflict  of  interest.  Effective 
implementation  of  the  new  national  anti-corruption  strategy  adopted  in  November 
2009  has  not  yet  started.  The  implementation  of  the  conflict  of  interest  law  is 
insufficiently  effective.  Shortcomings  in  the  implementation  of  public  procurement 
procedures  are  widespread.  To  strengthen  the  prevention  of  corruption  and  conflict 
of  interest,  Bulgaria  should  pursue  its  plans  to  create  a  special  and  independent 
commission for protection against conflict of interest, accelerate the implementation 
of the action plan for the national anti-corruption strategy and strengthen legislation 
on asset forfeiture.  

Reform of the Judiciary 

With amendments to the Penal Procedure Code adopted at the end of May, Bulgaria 
implements  long-standing  recommendations  by  experts  and  the  judiciary  to  reduce 
important procedural restrictions in order to improve the judicial process. With some 
exceptions,  the  amended  Penal  Procedure  Code  now  allows  for  policemen  to  be 
heard as witnesses in court and provides for a protection of the identity of witnesses. 
Reserve  defence  counsels  may  now  be  assigned  by  court  decision  to  prevent  the 
attempts  by  defendants  to  delay  court  hearings  on  unjustified  grounds.  The 
procedural  modalities  for  using  in  court  witness'  statements  collected  during  the 
investigation have been improved and information provided by OLAF may now be 
used  as  evidence.  The  changes  introduced  by  Bulgaria  address  some  of  the  most 

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frequent  procedural  obstacles  encountered  in  Bulgaria  and  can  therefore  be 
considered an important step forward. 

However,  to  achieve  the  expected  benefits  of  increased  flexibility  in  penal 
procedures  in  terms  of  a  higher  number  of  indictments,  shorter  trials  and  deterring 
sanctions, Bulgaria must invest in improving judicial practice.  

Although the law requires magistrates to take action for the benefit of justice once a 
suspicion  of  crime  is  brought  to  their  attention,  this  duty  is  rarely  fulfilled  in  an 
effective way. In practice, the Commission has observed reluctance on the part of the 
prosecution  to  start  investigations  on  the  basis  of  obvious  signals  and  to  pursue 
complex  and  time-consuming  investigations.  For  instance,  a  standard  prosecutorial 
practice  in  the  case  of  indications  for  serious  fraud,  to  execute  search  warrants 
without  prior  warning  is  rarely  applied.  This  lack  of  initiative  by  the  prosecution 
adds  to  practice  at  court  where,  in  the  admissibility  of  evidence,  respect  of  formal 
and still restrictive criteria appears often more important than the quality of evidence.  

Shortcomings regarding the accountability of the judiciary persist. Since July 2009, 
the  Bulgarian  judiciary  has  faced  a  series  of  allegations  of  corruption,  trade  of 
influence  and  mismanagement  which  have  damaged  its  public  reputation.  In  its 
interim  report  of  March  2010,  the  Commission  insisted  on  full  disciplinary  and 
criminal  examination  of  these  allegations.  Regarding  allegations  of  corruption  in 
relation to senior judicial appointments in the second half of 2009, three magistrates 
were dismissed, 15 other disciplinary sanctions were imposed. Two members of the 
SJC  resigned  but  kept  their  positions  as  magistrates.  Disciplinary  proceedings 
initiated  against  one  of  them  are  still  ongoing.  The  latest  case  in  April  this  year 
regarding the transfer of valuable real estate below market price to family members 
of senior magistrates, prompted the SJC and the prosecution to start disciplinary and 
criminal investigations against all magistrates involved, the outcome of which is not 
yet  known.  To  protect  the  reputation  of  the  magistracy,  Bulgaria  must  further 
strengthen the accountability of the judiciary through a strict application of all legal 
and disciplinary means to sanction corruption.  

Comprehensive  reforms  are  required  to  improve  judicial  practice.  These  reforms 
relate to improvements in the curricula of legal studies and training, to changes in the 
appraisal system in order to create career incentives for pro-active behaviour and to 
improvements in selection and appointment procedures. Bulgaria's new strategy for 
the  reform  of  the  judiciary  focuses  on  the  development  of  human  resources  within 
the judiciary to address many of these weaknesses. Draft amendments to the Judicial 
Systems Act, which would introduce some important improvements in this area, are 
in the process of consultation within the Government. 

Amendments  to  the  Judicial  Systems  Act  should  also  lead  to  considerable 
strengthening of the role and responsibilities of the Supreme Judicial Council (SJC). 
If adopted, the act will require the SJC to prepare an annual analysis of workload and 
authorise the council to re-balance personnel and open or close courts on the basis of 
workload  data  gathered.  The  amendments  will  also  increase  the  transparency  of 
appointment decisions and improve accountability by introducing an open vote and 
detailed reasoning of decisions and by concentrating all disciplinary powers with the 
SJC.  In  addition,  members  of  the  council  will  now  explicitly  be  prohibited  from 
voting in situations where they could be in a conflict of interest.  

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Since July 2009, the inspection of the SJC has continued to identify weaknesses in 
judicial practice, which are brought to the attention of heads of courts in the form of 
recommendations  and  followed  up  in  subsequent  inspection  visits.  Except  for  the 
Sofia  Appellate  Region,  regular  inspections  by  the  SJC's  Inspectorate  have  now 
reportedly  covered  the  whole  Bulgarian  judicial  system.  Together  with  its  own 
monitoring  of  high-level  cases,  the  council  now  has  a  good  basis  of  information 
regarding weaknesses in structure, discipline and practice. With the adoption of the 
forthcoming amendments to the JSA, the SJC should use its stronger role in order to 
launch  initiatives  to  improve  the  efficiency  of  justice,  the  consistency  of  judicial 
practice  and  the  accountability  of  the  judiciary.  The  Commission  will  monitor 
progress in this respect in its next report. 

Fight against Organised Crime 

Following  a  recommendation  of  the  Commission,  Bulgaria  created  permanent  joint 
teams for organised crime cases under the leadership of the prosecution. The teams 
include  police-officers,  investigating  magistrates  and  staff  members  of  the  State 
Agency for National Security (SANS). For the time being, these teams target a small 
number of high-profile cases which are assigned in agreement between the General 
Prosecutor, the Minister of the Interior and the Director of SANS. The extension of 
this  promising  organisational  set-up  to  all  organised  crime  cases  should  be 
considered, as well as including members of the Commission for the establishment of 
property  acquired  through  criminal  activity  (CEPACA)  at  an  early  stage  of  the 
investigation.  

Bulgaria  also  stepped  up  efforts  by  carrying  out  a  number  of  police  raids  on 
organised  crime  groups  although  little  judicial  follow-up  to  these  raids  has  been 
reported.  

Since  July  2009,  Bulgaria  can  demonstrate  an  increased  number  of  indictments  in 
organised  crime  cases.  However,  at  court  level,  important  cases  have  seen  little 
development.  To  date,  the  large  majority  of  sentences  in  organised  crime  cases  are 
achieved  through  plea-bargaining  and  expedited  procedure,  sometimes  below  the 
legal  minimum  of  the  penalty,  following  a  confession  of  the  defendant.  The 
Bulgarian  judiciary  must  demonstrate  that  it  is  also  able  to  pronounce  deterrent 
sanctions for serious crime. 

Although  data  for  2009  show  a  continuous  positive  track  record  regarding  freezing 
and forfeiture of criminal assets by the Commission for the establishment of property 
acquired  through  criminal  activity  (CEPACA),  the  number  of  confirmed  forfeiture 
decisions by courts remains very low. Two final decisions have been registered after 
May 2009 and 2 cases have been rejected, while 206 requests are still pending with 
courts.  As  the  freezing  and  forfeiture  of  presumed  criminal  assets  is  an  effective 
sanction and carries an important deterrent effect in the fight against organised crime, 
Bulgaria should strengthen further this effective instrument .  

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Fight against Corruption 

Bulgaria has stepped up its efforts to fight against high-level corruption. Since July 
2009, a number of indictments were registered against two Members of Parliament, 
three  former  ministers,  three  former  deputy  ministers  and,  for  the  first  time  also 
against an acting minister. In addition, a number of high-level officials and mayors 
were  also  indicted  for  high-level  corruption.  Bulgaria  strengthened  the  capacity  of 
the joint team dealing with EU fraud; a sentence for imprisonment of one high-level 
official for corruption involving EU funds has been pronounced, as well as sentences 
in two emblematic cases regarding fraud with EU funds and money laundering. High 
sentences of 10 and 12 years imprisonment for the main defendant were pronounced, 
but detention orders were not imposed by the court. 

The  Commission's  analysis  of  judicial  practice  in  this  area  points  to  a  number  of 
weaknesses  that  should  be  corrected.  In  its  investigation  of  fraud  involving  EU 
funds,  a  comprehensive  and  pro-active  investigative  strategy  by  the  prosecution  is 
necessary.  This  strategy  should  lead  to  systematic  investigations  of  links  between 
related  cases,  aspects  of  organised  (financial)  crime  and  links  in  fraud  schemes  to 
administrative authorities. In order to step up the fight against high-level corruption, 
Bulgaria  should  also  consider  a  more  forceful  protection  of  witnesses  in  line  with 
best practice in other Member States. 

The data provided by Bulgaria on the first year of implementation of the law on the 
prevention of conflicts of interest which was introduced in late 2008 show that still 
few cases of conflict of interest have been identified or sanctioned and few signals on 
corruption  have  been  sent  to  the  prosecution.  However,  regarding  the  central 
administration, inspections have become more frequent and a number of cases led to 
disciplinary  sanctions  or  have  been  forwarded  to  the  prosecution3  Bulgaria  should 
strengthen  as  soon  as  possible  the  law  on  the  prevention  of  conflict  of  interest  in 
order  to  create  an  independent  central  Commission  in  charge  of  implementing  the 
law. 

Bulgaria  adopted  a  National  Anti-Corruption  Strategy  in  November  2009  and  an 
action  plan  for  its  implementation.  The  action  plan  foresees  ambitious  prevention 
activities  across  the  public  sector  with  the  help  of  foreign  assistance;  however 
implementation has not yet started. Bulgaria has not yet addressed the Commission's 
recommendations as to the strengthening of inspectorates and cannot report results in 
strengthening the regional anti-corruption councils. 

The  implementation  of  public  procurement  legislation  in  Bulgaria  shows  important 
weaknesses.  Bulgaria  initiated  checks  by  its  competent  authorities  which  have 
established an irregularity rate of 60% among all tenders verified. This rate reaches 
almost  100%  for  large  public  infrastructure  projects  where  the  authorities  have  an 
obligation of ex-ante control. 

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During  the  period  August  2009  -  May  2010,  Bulgaria  reports  that,  in  the  framework  of  the  central 
administration, 185 signals were filed under the law for the prevention and detection of the conflict of 
interest and 198 inspections were carried out. In 33 cases disciplinary sanctions were imposed and penal 
orders were issued against 7 individuals. 

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At the same time, the administrative and judicial authorities are not in a position to 
protect  public  procurement  against  conflict  of  interest  in  an  effective  way.  This  is 
due  to  a  number  of  weaknesses  in  structures  and  procedures.  The  capacity  of 
administrative authorities to advise on public procurement procedures and to perform 
checks  is  insufficient.  The  capacity  of  the  Public  Financial  Inspection  Agency  has 
been reduced substantially; as a result, the agency performed ex-post controls in only 
12% of all public tenders in 2009. At the same time, ex-post administrative checks 
do  not  follow  a  proper  risk  assessment.  The  introduction  of  the  system  of  ex-ante 
control  should  help  to  remove  shortcomings  in  the  procedure  for  big  structural 
projects. However, the Public Procurement Agency lacks sufficient capacity to verify 
the  legality  of  tenders  through  ex-ante  checks  and  to  follow  up  whether  its 
recommendations have been followed. 

The  different  administrative  authorities  in  charge  of  implementing  the  various 
aspects  of  public  procurement  legislation,  providing  guidance,  drafting  legislation, 
following  up  to  complaints  and  performing  checks  on  public  tenders,  do  not 
cooperate systematically with each other to the benefit of the implementation of the 
law. Administrative sanctions that can be imposed are not sufficiently deterrent in the 
case of conflict of interest or corruption. In addition, internal procedures do not allow 
for an effective detection of conflict of interest which could be communicated to the 
prosecution authorities. A systematic follow-up of irregularities with disciplinary or 
criminal sanctions should be ensured. 

3. 

CONCLUSIONS 

Since  July  2009,  Bulgaria  has  established  a  strong  reform  momentum.  Bulgaria 
adopted improvements in its penal procedures and can demonstrate a higher number 
of  indictments  for  cases  involving  high-level  corruption  and  organised  crime.  Still 
too  few  cases  are  concluded  in  court.  There  is  a  need  for  improvements  of 
professional  practice  within  the  police,  prosecution  and  courts  for  which  external 
assistance will be needed. The judiciary must take the initiative more often and show 
a stronger sense of responsibility. Public funds must be better protected against fraud 
and conflict of interest.  

Bulgaria's new strategy for judicial reform, approved by the Government on 23 June 
demonstrates  political  determination  to  achieve  a  profound  reform  of  the  judiciary. 
The  strategy  addresses  the  current  shortcomings  which  should  be  addressed  by 
Bulgaria as a matter of national priority and in a joint effort by the political level, the 
judiciary and Bulgarian society.  

Success will require a sustained commitment by Bulgaria, the Commission and other 
Member States. 

Bulgaria  has  established  a  new  partnership  with  the  Commission  and  improved  the 
quality of its reporting on progress under the CVM. The Commission will continue 
to support Bulgaria in achieving further progress under the CVM and provide its next 
assessment in summer 2011. 

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4. 

RECOMMENDATIONS 

In the light of its assessment of progress by Bulgaria in meeting the benchmarks set 
out  in  the  CVM,  the  Commission  invites  Bulgaria  to  take  immediate  action  in  the 
following areas: 

Recommendations regarding the Reform of the Judiciary 

While recalling the outstanding recommendations of July 2009, notably regarding the 
requirement for all courts to publish their judgements online, the Commission invites 
Bulgaria to take immediate action in the following areas: 

(1) 

(2) 

(3) 

Implement the new judicial strategy in order to achieve a profound reform of 
the judiciary. Adopt and implement changes to the Judicial Systems Act that 
aim at improving training, appraisal and appointment within the judiciary and 
to  strengthen  the  accountability  and  efficiency  of  the  Supreme  Judicial 
Council.  Strengthen  the  accountability  of  the  judiciary  through  a  strict 
application  of  all  legal  and  disciplinary  means  to  sanction  corruption  and 
trade in influence. 

Improve  judicial  practice  within  the  prosecution  and  the  courts  through  a 
detailed  analysis  of  shortcomings,  in  cooperation  with  foreign  experts. 
Develop  manuals  of  best  practice,  training  programmes  and  coaching 
schemes for specific cases and introduce systematic management supervision 
in  courts  and  prosecutors  offices.  Promote  specific  training  and  the 
specialisation  of  police  services,  prosecutors  and  judges  to  enhance  their 
expertise and effectiveness in pursuing complex cases in particular regarding 
economic and financial crime and organised crime. 

Pursue work on a new Penal Code in the light of the new Concept of Penal 
Policy  adopted  by  the  Government  on  23  June  2010,  which  contributes  to 
judicial  efficiency  through  i.e.  a  decriminalisation  of  obsolete  and  petty 
offences.  Continue  monitoring  the  implementation  of  the  new  procedure 
codes  and  consider  further  improvements.  Pursue  the  creation  of  a  medical 
inspection  agency  to  improve  the  quality  and  expediency  of  medical 
certificates requested by court. 

Recommendations regarding the Fight against Organised Crime 

While  recalling  the  outstanding  recommendations  of  July  2009,  notably  regarding 
specialisation  within  the  judiciary,  the  Commission  invites  Bulgaria  to  take 
immediate action in the following areas: 

(4) 

Strengthen  the  capacity  of  the  joint  teams  on  organised  crime,  extend  their 
competence to all organised crime cases and associate CEPACA to assure the 
freezing  and  forfeiture  of  relevant  assets  during  the  investigative  phase 
according to operational requirements. 

(5) 

Pursue  the  reform  of  police  in  order  to  create  a  competent  criminal  police 
force able to apply best practices of other Member States. 

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(6) 

Strengthen further asset forfeiture legislation following the principle of "non-
conviction based civil confiscation" and recommendations by the Council of 
Europe's  Venice  Commission,  in  particular  to  ensure  the  application  of  law 
while  respecting  fundamental  rights  and  freedoms.  Consider  a  right  of 
initiative for the Commission for the forfeiture of Criminal Assets (CEPACA) 
to  initiate  proceedings  to  secure  and  forfeit  assets,  introduce  rules  to  secure 
assets early in the investigative phase in cooperation with the prosecution and 
extend the group of related persons to better target criminal activity through 
forfeiture. 

Recommendations regarding the Fight against Corruption 

While recalling the outstanding recommendations of July 2009, notably regarding the 
promotion  of  ex-officio  investigations  into  allegations  of  corruption  and  conflict  of 
interest  by  administrative  authorities,  further  strengthening  the  inspectorates  and 
regional  anti-corruption  councils  and  safeguarding  of  whistle-blowers, 
the 
Commission invites Bulgaria to take immediate action in the following areas: 

(7) 

(8) 

(9) 

Improve judicial practice in high-level fraud and corruption cases in line with 
best practice in other Member States. Apply a comprehensive and pro-active 
investigative strategy which systematically investigates links between related 
cases,  aspects  of  organised  crime  and  links  to  administrative  authorities.  In 
order to step up the fight against high-level corruption, Bulgaria should apply 
legal possibilities for detention in serious cases more strictly and improve the 
protection of the witnesses in line with best practice in other Member States. 

Strengthen the law on the prevention of conflicts of interest, notably through 
an  authority  with  a  pro-active  mandate  in  charge  of  identifying  and 
sanctioning  conflict  of  interest.  Accelerate  the  implementation  of  the  action 
plan to implement the National Anti-Corruption Strategy. 

legislation  and 

Perform a continuous risk assessment regarding the implementation of public 
procurement 
target  prevention  and  control  activities 
accordingly  in  a  pro-active  and  result-oriented  manner.  Strengthen  the 
capacity  of  the  competent  administrative  authorities  to  perform  ex-ante  and 
ex-post checks and strengthen the capacity of its help desk where contracting 
authorities  can  seek  advice.  Ensure 
that  all  existing  sanctions  for 
infringements  of  public  procurement  rules  against  individuals,  including 
disciplinary measures, are fully implemented to strengthen deterrence. 

(10)  Encourage  cooperation  between  procurement  authorities  to  regroup  tenders 
with  a  view  to  pool  expertise  and  create  economies  of  scale.  Strengthen  the 
training  efforts  for  officials  of  the  competent  authorities  in  order  to  identify 
and  prevent  conflict  of  interest  and  other  important  irregularities  in  public 
procurement.  Develop  and  apply  best  practice  of  systematic  cooperation 
between competent administrative authorities with judicial authorities. 

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