REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL On Progress in Bulgaria under the Co-operation and Verification Mechanism
Date: 2011-07-20
Institutions: European Commission
Subjects: Bulgaria, EU control, cooperation policy, corruption, exchange of information, judicial reform

EUROPEAN COMMISSION 

Brussels, 20.7.2011 
COM(2011) 459 final 

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND 
THE COUNCIL 

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

{SEC(2011) 967 final} 

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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  Co-operation  and  Verification  Mechanism1  (CVM)  was  established  on  the 
accession  of  Bulgaria  to  the  EU  to  help  Bulgaria  put  in  place  an  impartial, 
independent and effective judicial and administrative system. Changing the legal and 
judicial  system  to  further  align  it  with  other  Member  States  is  a  national  task.  It 
requires  the  government  to  prepare  and  propose  the  key  framework  laws,  the 
Parliament to adopt them and the judiciary to change its procedures and practise to 
implement  them  as  intended.  Since  2007  the  CVM  has  played  a  supportive  role  in 
helping Bulgaria put in place the structures of a modern judicial system. At times the 
CVM  has  been  contested  and  criticised  by  one  or  other  element  of  this  necessary 
national  consensus  but  today  it  is  widely  acknowledged  that  it  has  helped  promote 
change in a positive direction. The Bulgarian Government has shown determination 
and commitment in driving the reform process. In five years the emphasis has shifted 
from the preparation and adoption of laws to their implementation. The elements of 
the  legal  framework  needed  for  the  reform  are  now  largely  in  place,  even  if  not 
complete.  As  will  be  seen  from  this  report  the  next  necessary  steps  in  this  process 
should focus on implementation by the judiciary and the police of the new laws.  

This  report  is  the  fifth  annual report  since  the  CVM  was  set  up.2  In  summer  2012, 
five  years  after  the  inception  of  the  CVM,  the  Commission  will  make  an  overall 
assessment  of  Bulgaria's  progress  under  the  CVM  since  accession,  and  will  make 
appropriate  proposals  in  the  light  of  this  assessment.  The  present  report  includes  a 
number  of  specific  recommendations  to  help  Bulgaria  to  prepare  for  this  overall 
assessment.  

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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 
independent experts and has drawn on documentation and input provided by a variety of sources. The 
accompanying supporting document 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 and Challenges 

Since the Commission's last report in July 2010, Bulgaria strengthened the Supreme 
Judicial  Council  and  improved  rules  for  the  appointment,  professional  training, 
appraisals  and  promotions  of  judges.  Bulgaria  took  steps  to  improve  protection 
against conflict of interest. Reform of police investigations was started and a decision 
to establish a special court for organised crime cases was taken. A new law on asset 
forfeiture was presented to Parliament but was rejected by it on 8 July. Amendments 
to the Act on Public Procurement have been prepared. First results of amendments to 
the  Penal  Procedure  Code  became  available  in  spring  2011  and  the  effects  of 
monitoring of high level cases by the Supreme Judicial Council are visible. Several 
organised  crime  and  corruption  cases  have  reached  verdicts  in  court.  At  the  same 
time,  an  increased  number  of  indictments  in  cases  related  to  organised  crime  and 
fraud with EU funds have been achieved.  

However,  the  Commission's  assessment  also  points  to  important  challenges.  Since 
last  summer,  a  number  of  acquittals  in  cases  involving  high-level  corruption,  fraud 
and  organised  crime  have  exposed  serious  deficiencies  in  judicial  practice  in 
Bulgaria. These deficiencies have not been properly analysed or followed up by the 
leadership of the judiciary, the Supreme Judicial Council, the General Prosecutor and 
the  President  of  the  Supreme  Court  of  Cassation.  Although  the  revised  Judicial 
System Act adopted in December strengthens the judiciary's accountability, the law 
has  not  yet  been  implemented  as  intended. The  quality  and  transparency  of  several 
important  appointments  within  the  judiciary  since  the  beginning  of  this  year  have 
been  questioned, leading to unprecedented public protests and a debate on possible 
constitutional amendments. In addition, allegations of corruption within the judiciary 
are still not pursued in a systematic way as recommended by the Commission.  

Overall, the Commission finds that the Bulgarian Government has shown sustained 
political  will  and  commitment  to  pursue  its  reform  strategy.  This  commitment  will 
have to be sustained in all areas where laws have been improved and new structures 
have  been  created.  A  stronger  engagement  by  professional  associations  of 
magistrates  and  civil  society  is  also  supported  by  increased  public  demand  for  an 
irreversible reform process. But the leadership of the judiciary has yet to show a real 
commitment  to  thorough  judicial  reform  as  slow  progress  is  not  just  the  result  of 
shortcomings in judicial practice and in the Penal Code. 

Reform of the Judiciary 

With amendments to the Judicial System Act in December, Bulgaria created the legal 
basis  for  important  structural  improvements  within  the  judicial  system.  The 
amendments  improve  procedures  for  appointments,  training  and  appraisal  and 
strengthen  integrity.  These  improvements  must  be  considered  an  important  step  to 
deliver  on  two  of  the  long-term  objectives  of  Bulgaria's  justice  reform  strategy: 
improving  accountability  and  increasing  professionalism  within  the  judiciary. 
Considerable efforts will be required in the following period to implement these new 
legal provisions. More specialised training is needed. It should focus in particular on 
improving  the  investigative  capacity  needed  to  effectively  tackle  corruption  and 

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organised crime, notably as regards complex economic and financial investigations. 
Overall,  the  Supreme  Judicial  Council  will  need  to  show  a  strong  commitment  to 
reform by translating the new law into practice in order to effectively strengthen the 
management of judicial bodies, notably in terms of allocation of workload, in close 
cooperation with the Ministry of Justice, professional association and civil society. 

Judicial  appointments  still  lack  the  necessary  level  of  transparency  and  credibility. 
An  important  senior  appointment  by  the  Supreme  Judicial  Council  in  November 
2010 raised concerns as regards the lack of transparency and competitive character. 
The entry into force of the newly amended provisions of the Judicial Systems Act in 
January  2011,  has  unfortunately  not  yet  improved  the  situation  as  regards  senior 
appointments,  which  have been  still carried out under the old rules and lacked real 
assessment of the professional qualifications, managerial skills and personal integrity 
of  candidates.  Furthermore,  a  recent  nomination  was  followed  by  allegations  of 
conflict  of  interest  and  procedural  irregularities  in  an  ongoing  trial  handled  by  the 
successful  candidate.  As  a  protest,  two  members  of  the  Supreme  Judicial  Council 
resigned and criticised the appointment decisions as pre-determined. The subsequent 
mobilisation of professional associations of magistrates and civil society calling for 
reform  of  the  Supreme  Judicial  Council  sends  an  important  signal  of  support  for 
judicial  reform.  Recommendations  by  civil  society  to  hold  public  debates  and 
announce the names of candidates at an earlier stage are laudable. The appointment 
of  highly  competent  and  motivated  magistrates  of  unquestionable  integrity  via 
transparent  procedures,  in  particular  for  the  new  specialised  court  for  organised 
crime, is indispensable to successfully implement judicial reform. 

The  accountability  of  the  judiciary  remains  an  area  of  serious  concern.  Since  the 
Commission's  last  annual  assessment,  several  new  disciplinary  cases  have  been 
opened  and  two  magistrates  have  been  excluded  from  the  judiciary.  At  the  same 
time,  allegations  against  magistrates  are  not  always  systematically  investigated  by 
the  judicial  inspectorate  and  some  disciplinary  sanctions  appear  lenient.  Criminal 
investigations  against  magistrates  are  still  not  systematically  launched  by  the 
prosecution  upon  allegations  of  corruption.  The  decision  of  the  Supreme  Judicial 
Council in June to involve a magistrate with a disciplinary record in the recruitment 
panel for the new specialised criminal court raises serious concerns. Overall, there is 
a  lack  of  consistent  disciplinary  practice.  These  problems  remain  a  major  factor 
undermining public trust in the judiciary.  

Improving judicial practice remains the main challenge for the Bulgarian judiciary. 
Amendments to the Penal Procedure Code in spring 2010 and a strict monitoring of 
high-level cases by the Supreme Judicial Council has shown positive results in some 
cases. In the last reporting period, 9 of the cases monitored by the Commission have 
been decided by court, including four with final decisions.  

However, despite some individual actions, the judiciary did not engage in a serious 
effort  to  address  the  Commission's  recommendations  in  this  area.  Shortcomings  in 
judicial  practice  have  not  been  systematically  analysed  and  addressed, 
comprehensive training programmes and coaching schemes have not been launched. 
The  generally  passive  attitude  of  the  judiciary's  leadership,  the  Supreme  Judicial 
Council,  the  General  Prosecutor  and  the  President  of  the  Supreme  Cassation  Court 
towards considerable shortcomings in judicial practice raise serious concerns. There 
is  a  need  to  improve  judicial  practice  and  reform  the  management,  structures  and 

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cooperation  between  the  judiciary  and  other  investigative  bodies,  including  the 
police.  The  judiciary  and  the  Government,  in  association  with  civil  society,  should 
cooperate to identify and overcome the existing shortcomings and bottlenecks, while 
fully respecting the independence of the judiciary.  

Fight against Organised Crime 

Since the last annual report of the Commission, Bulgaria has pursued police reform. 
A  reorganisation  of  the  competent  police  directorates  led  to  an  integration  of 
operative and investigative police work and to a substantial increase in the number of 
police investigators. Bulgaria should continue its efforts for police reform and link it 
to a wider reform of pre-trial investigations. This will require establishing effective 
operational cooperation with the prosecution and other authorities, the application of 
the  principle  of  joint  teams  in  all  serious  crime  cases  and  investment  in  equipment 
and specialised training. 

In  spite  of  persevering  police  actions  to  tackle  organised  crime,  the  overall  results 
need  to  be  significantly  improved.  Although  the  joint  team  on  organised  crime 
achieved several indictments related to important organised crime-groups and some 
convictions  have  been  rendered,  other  important  cases  have  been  concluded  with 
acquittals  since  the  Commission's  last  annual  report.  In  appeal,  severe  detention 
sentences  have  been  pronounced  but  not  yet  enforced  in  one  emblematic  organised 
crime  case.  Weaknesses  exist  in  the  collection  of  evidence,  the  protection  of 
financial 
witnesses  as  well  as 
investigative  strategies,  comprehensive 
investigations  and 
the  securing  of  assets.  The  General  Prosecutor  should 
systematically  analyse  the  reasons  for  acquittals  in  high  level  cases,  make 
recommendations  for  the  handling  of  future  cases  when  shortcomings  in  the 
procedure  have  been  identified  and  appeal  the  acquittal  decisions  when  it  appears 
that the Courts did not properly assess the evidence provided. 

in 

Since  the  Commission's  last  annual  report,  Bulgaria  decided  to  reform  the  judicial 
structures  that  deal  with  organised  crime  cases.  A  specialised  criminal  court  and 
prosecution  office  will  be  established  by  January  2012.  In  the  preparation  for  the 
setting up of the specialised structure, it will be important to secure its effectiveness 
and  independence.  In  particular,  the  court's  attribution  of  cases  must  be  balanced 
with  its  staff  capacity  in  order  to  allow  for  swift  and  effective  investigations, 
prosecution  and  sentencing  of  organised  crime  cases.  The  court  must  receive 
experienced staff with undisputable integrity and professional record. The concept of 
joint teams should be preserved at the level of the prosecution. 

Since the Commission's last annual report, the Bulgarian authorities pursued plans to 
strengthen  asset  forfeiture  following  recommendations  by  the  Commission:  A  new 
legislative  act  was  prepared  in  cooperation  with  the  Council  of  Europe,  but  was 
rejected by Parliament. The proposal foresees the forfeiture of assets independent of 
a criminal conviction. It also foresees ex-officio asset verification of senior officials 
and politicians. Bulgaria needs to pursue urgently the adoption of this asset forfeiture 
legislation,  despite  recent  setbacks  in  Parliament.  Other  weaknesses  of  asset 
forfeiture  must  still  be  addressed:  Assets  must  be  identified  and  secured  at  early 
stages  of  investigations  before  they  can  be  hidden  or  moved.  For  this  purpose, 
efficient  cooperation  must  be  established  between  the  asset  forfeiture  commission, 

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financial  institutions,  administrative  authorities  and  the  prosecution  including  the 
joint teams. 

Fight against Corruption 

The fight against high-level corruption has not yet led to convincing results. There 
have  been  very  few  final  and  enforced  verdicts  in  this  area  and  there  are  no 
indications of active targeting of high-level corruption.  

Since last summer, two suspended sentences were pronounced in cases of high-level 
fraud and corruption. Two cases against former ministers finished with an acquittal. 
Two  other  cases  involving  a  former  minister  and  a  high  public  official  have  met 
difficulties and delays in court.3 Appeals in two cases involving fraud of EU funds 
and  money  laundering,  reported  last  year,  remain  pending  in  court  with  little 
movement.  A  number  of  cases  involving  EU  funds  were  terminated  by  the 
prosecution  despite  indications  of  fraud  provided  by  OLAF  and  the  judicial 
authorities  of  another  Member  State.  Since  the  Commission's  last  annual  report, 
Bulgaria registered acquittals in a number of important fraud and corruption cases. A 
Member of Parliament has been acquitted of conflict of interest charges and a former 
director of a Paying Agency for EU funds has been acquitted of abuse in office and 
concluding  unfavourable  contracts  in  three  separate  cases.  The  reasons  for  such 
acquittals  should  be  carefully  analysed  by  the  General  Prosecutor  and  corrective 
measures should be taken where appropriate. This should include recommendations 
for  the  handling  of  future  cases  when  shortcomings  in  the  procedure  have  been 
identified  or  appeal  when  it  appears  that  the  Courts  did  not  properly  assess  the 
evidence provided by the prosecution. 

lack  of 

the  general 

investigative  strategies,  comprehensive 

The  analysis  of  some  of  these  cases  by  the  Commission  and  independent  experts 
demonstrated  serious  weaknesses  in  judicial  and  investigative  practice.  These 
weaknesses  mainly  concern  the  collection  of  evidence,  the  protection  of  witnesses 
and 
financial 
investigations  and  securing  of  assets.  Coordination  within  the  prosecution  and 
between  the  prosecution  and  the  police  should  be  improved.  These  weaknesses  are 
compounded  by  an  out-dated  Penal  Code.  Court  practice  is  permissive  and 
excessively  cautious,  overly  attentive  to  procedures  at  the  expense  of  delivering 
justice.  While  the  revision  of  the  Penal  Code  is  advancing,  immediate  corrective 
measures, such as the use of interpretative rulings by the Supreme Court of Cassation 
or legislative amendments should be considered, since the new Penal Code cannot be 
expected to enter into force before late 2013.  

In  November  2010,  Bulgaria  adopted  a  strengthened  law  on  conflict  of  interest. 
Delays in the nomination of the members of the dedicated commission created by the 
law and in the set-up of its administration have led to an interruption in the follow-up 
of  signals  of  conflict  of  interest  since  the  first  quarter  of  2011.  As  a  consequence, 
allegations of conflict of interest were not followed up in an important case involving 
a  senior  magistrate  in  June.  The  commission  in  charge  of  conflict  of  interest  was 
established in June 2011 although premises and staff still need to be found and rules 

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One case involving a previous director of a state agency was returned to the Prosecution in June 2010 
and retried after a new judge was appointed to the case, witness statements were withdrawn in another 
case involving a previous minister. 

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of procedure need to be developed. In this context, concerns must be raised regarding 
weaknesses  in  asset  declarations  and  verifications  of  politicians,  magistrates  and 
senior civil servants. Currently, false declarations are not effectively sanctioned and 
discrepancies  are  not  followed-up.  Following  the  recent  amendments  to  the  law  on 
the  trade  register,  which  aim  to  strengthen  data  protection,  the  new  procedures 
should be implemented to preserve transparency of information on companies.  

Bulgaria  continues  to  implement  an  integrated  strategy  to  prevent  and  sanction 
corruption and organised crime and took a number of measures in this framework. At 
the  same  time,  the  2010  action  plan  focusing  on  tackling  organised  crime  has  not 
been  fully  implemented  and  has  not  been  updated  in  2011.  This  makes 
implementation and coordination more difficult. A comprehensive project to analyse 
and  design  anti-corruption  measures  in  all  areas  of  the  administration  launched  in 
early 2010, has not yet delivered tangible results or a timetable for implementation. 
Bulgaria  should  consider  establishing  a  set  of  concrete  targets  for  the  fight  against 
corruption  and  organised  crime  for  the  different  institutions  involved  in  the 
implementation  of  the  Integrated  Strategy.  Bulgaria  should  also  involve  external 
experts and civil society in the evaluation of the results of the Integrated Strategy. 

Responding to the Council of Europe's Group of States against Corruption (GRECO) 
recommendations  on  transparency  in  political  party  funding,  Bulgaria  included  11 
out of 16 recommendations in the new Electoral Code adopted in January 2011. The 
first  test  case  of  implementation  of  the  Electoral  Code  will  be  in  the  forthcoming 
Presidential and local elections. 

Since  the  Commission's  last  annual  report,  Bulgaria  has  prepared  a  number  of 
changes  to  the  Public  Procurement  Law  which  inter  alia  aims  at  simplifying  and 
speeding-up public procurement procedures. Bulgaria also intends to amend the law 
on the Public Financial Inspections Agency in order to allow for ex-officio checks of 
public  tenders  and  develop  checks  based  on  risk  assessment.  These  legal 
improvements  are  welcome.  However,  the  main  challenge  in  the  field  of  public 
procurement remains a substantial improvement in administrative capacity and in the 
quality of administrative action.  

3. 

CONCLUSIONS 

Since the Commission's last assessment in July 2010, the Bulgarian Government has 
shown determination and commitment in driving the reform process. It continued to 
reform the judicial system, strengthened legislation on conflict of interest and started 
a  structural  reform  within  the  police  and  the  criminal  court  system.  Continuous 
commitment over the next period will be necessary to implement these reforms and 
to achieve factual improvements regarding appointments, appraisals and skills within 
the judiciary and to set up efficient structures to deal with organised crime cases. The 
adoption  of  the  new  law  on  asset  forfeiture  will  be  an  important  deliverable  to 
improve the protection against organised crime and corruption. 

There  is  an  urgent  need  for  considerable  improvements  in  accountability  and 
professional practice within the judiciary and the investigative authorities in order to 
achieve convincing results in the fight against corruption and organised crime. As a 

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matter  of  national  priority,  Bulgaria  should  urgently  pursue  its  judicial  reform 
strategy and take further steps towards a fundamental reform of the judicial system. 

4. 

RECOMMENDATIONS 

The Commission invites Bulgaria to take action in the following areas in the light of 
its  assessment  of  progress  achieved 
in  Bulgaria  since  July  2010.  These 
recommendations  should  help  Bulgaria  to  focus  its  efforts  in  preparing  for  the 
Commission's overall assessment of progress in Bulgaria under the CVM in summer 
2012. 

1.  Reform of the judicial system 

(a)  Establish  proposals  for  a  reform  of  the  Supreme  Judicial  Council,  the 
Supreme  Cassation  Prosecution  Office  and  the  Prosecution  in  general 
regarding  structures,  legal  attributions,  composition,  appointments  and 
internal organisation; 

(b) 

Implement 
legislative amendments. 

these  proposals 

through  administrative  measures  and 

2.  Transparency and accountability of the judiciary 

(c)  Demonstrate  a  track  record  in  judicial  appointments  and  appraisals, 
including  appointments  to  the  Supreme  Judicial  Council,  which  fully 
respect  the  principles  of  transparency,  independence,  integrity  and 
professional merit; 

(d)  Demonstrate  a  track  record  of  disciplinary  and  criminal  follow-up  to 

corruption and malpractice within the judiciary; 

(e)  Ensure complete electronic access to court verdicts and motivations and a 
strict application of the principle of random allocation of court cases. 

3.  Judicial practice in criminal cases 

(f)  Analyse  in  cooperation  with  international  experts  the  organisational 
structures  and  practice  of  investigative  authorities,  the  prosecution 
(including the joint teams) and courts to enhance the effectiveness of the 
investigation  and  trial  of  high  level  cases;  improve  the  cooperation 
among judicial authorities and with the relevant administrative bodies; 

(g)  Adopt  and  implement  a  detailed  action  plan  to  correct  shortcomings  in 
structures,  management,  staffing,  training,  cooperation  and  professional 
practice  in  cooperation  with  international  experts  and  civil  society  and 
create a joint monitoring group for its implementation; 

(h)  Systematically  request  interpretative  rulings  by  the  Supreme  Court  of 
Cassation  in  areas  of  inconsistent  jurisprudence  and  improve  the  track 
record of the court in this area. 

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4.  Fight against organised crime 

(i)  Allocate  appropriate  resources  and  staff  and  properly  define  the  scope 
and  internal  organisation of the  specialised court and prosecution office 
for  organised  crime  in  order  to  assure  an  effective  judicial  treatment  of 
the most important cases; 

(j)  Continue  the  reform  of  the  police,  by  improving  capacity,  skills  and 
equipment of police investigators and addressing shortcomings regarding 
the  integrity  and  independence  of  police  action,  evidence  gathering  and 
witness protection;  

(k) 

Improve  the  overall  coordination  of  activities  to  fight  organised  crime 
and  corruption  through  the  implementation  of  detailed  action  plans  and 
monitoring mechanism in both areas in cooperation with civil society. 

5.  Asset forfeiture  

(l)  Adopt  legislation  providing  for  non-conviction  based  confiscation  and 
ex-officio  verification  of  assets  of  senior  officials,  magistrates  and 
politicians and demonstrate a track record in this area; 

(m)  Establish  efficient cooperation between the asset forfeiture commission, 
financial  institutions,  administrative  authorities  and  the  prosecution 
including  the  joint  teams  and  develop  a  track  record  in  securing  assets 
upon the launch of investigations; 

6.  Fight against corruption  

(n)  Establish and train networks of specialised prosecutors and investigators 
in  economic  and  financial  crime  in  cooperation  with  foreign  experts, 
involve them systematically in all cases related to economic and financial 
crime,  corruption,  fraud  and  money  laundering  and  ensure  through 
common  trainings  and  seminars  that  these  prosecutors  have  the  same 
understanding  of  the  standard  of  proof  regarding  these  cases  as  the 
judges; 

(o)  Assure  the  application  of  comprehensive  and  pro-active  investigative 
strategies by the prosecution, the linking of related cases and systematic 
financial investigation; 

(p)  Amend  the  Penal  Code  in  order  to  facilitate  the  legal  follow-up  to 

economic and financial crime and abuse of office;  

(q)  Demonstrate a convincing track record of sanctions under the revised law 

on conflict of interest. 

7.  Preventing corruption  

(r)  Demonstrate  concrete  results  in  the  implementation  of  a  comprehensive 
project ("Borkor") to analyse and design anti-corruption measures; 

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(s)  Revise  the  asset  declaration  and  verification  system  turning  it  into  an 

effective tool to detect illicit enrichment; 

(t) 

Implement all GRECO recommendations with regard to transparency of 
financing for political parties 

(u)  Strengthen  the  administrative  capacity  of  competent  authorities  in  the 
area  of  public  procurement  to  advise  contracting  authorities  and  verify 
public tenders ex-ante and ex-post following risk assessments; 

(v)  Apply  equal rules for  conflicts  of  interest  and  incompatibility  to  public 
employees  whether  they  are  permanent  officials  or  recruited  under 
individual service contracts. 

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