Blog Sofia

Or how to stimulate them to achieve better results

The motivation of the employees is crucial for the success and results of each company. The inclusion of the employees in the process of taking decisions in the company employer is a tool for long-term stimulation, making the employees committed to the success of the company and increasing their commitment. One of the possibilities for the employees to share the company’s financial results is namely the so-called plan for employees to become shareholders. The plan for employees’ participation includes a proposal for acquisition of shares by employees in the capital of a public company (issuer), which in most cases controls international groups of companies or their local subsidiaries.

In the cases, when a public offering of transferable securities or admission to trading with them is carried out on a regulated market in the EU, for the public company (issuer) arises the obligation to publish a prospectus.

The content and manner of publication of the prospectuses are regulated by the Prospectus Directive and transposed into our domestic law, the Law on Public Offering of Securities and the acts for its implementation. The prospectus for public offering or admission to trading on a regulated market may be published only if the competent authority in the Member State, for Bulgaria this authority is the Commission for Financial Supervision, has issued a written confirmation of the prospectus. Therefore, a public company (issuer) may offer securities to individuals solely on the basis of an approved prospectus, unless the issuer is exempt from the obligation for its publication. In this connection, it is provided that the obligation to publish a prospectus does not apply to securities offered, allotted or to be allotted to existing and/or former members of the management or supervisory bodies and/or employees by their employer or from a related person, provided that the registered office or the seat of the employer company is located in the European Union. Furthermore, persons should be given a document, containing information about the ground for offering securities, about their number and type, about the rights to them and the manner of their exercising, about the terms and conditions for acquisition of securities, as well as other information about the offer. Such a document should be prepared in accordance with the guidelines, issued by the European Securities Authority and markets. In addition, the obligation to publish a prospectus does not apply to securities, which are offered to less than 150 natural or legal persons in each Member State that are not qualified investors. The qualified investors are specifically listed in the law (investment consultant, investment broker, etc.).

A number of local and foreign companies, operating at the territory of Bulgaria, introduce the practice their employees to receive shares of the company in Bulgaria and to become shareholders. In the interest of the employees is to familiarize themselves with the document for the offered securities before deciding to invest. Below, we will examine some of the practical issues, which may arise in the realization of such a plan for the employees.

The plan to acquire shares may include different ways and criteria for financial participation of employees. The practice shows that the companies make proposals for consideration transfer of shares, i.e.the employees acquire them against payment most often on preferential terms.

Another part of the management system of the companies is the provision of incentives to the employees in the form of the so-called bonus schemes. For example, the plans to stimulate higher managerial governance may include the possibility a percentage of the annual employee bonus to be paid in the form of shares or in the beginning of each year a certain number of shares to be provided, depending on the level of the achieved annual targets and others. Both cited examples do not fall within the scope of the obligation to publish a prospectus, as they are provided free of charge, while the public offering of securities occurs when there is one or more proposals for consideration transfer and/or one or more invitations for submitting a proposal for acquisition of securities. An opportunity for the employees is to acquire the shares as individual installments after a certain period of time (months or years), as thereby the companies aim to retain the qualified employees in long term. The acquisition of shares is not considered as part of the remuneration of the employees.

For this purpose, the companies must ensure that the acquisition of shares is not included in the documents, concerning the employment relationship (e.g. job offers, employment contract, etc.). The practice shows that often the value of the shares is deducted from their remuneration. Under the provisions of the Labour Code without the consent of the employee deductions from their remuneration cannot be made, except in expressly listed cases, as financial incentives (acquired shares) do not fall among these. In this connection it is recommended in deduction from remuneration for companies to require the prior written consent of the employee. In this connection it is recommended in deduction from remuneration, the companies to require the prior written consent of the employee. It should be considered that the amount of the monthly deductions cannot exceed the dimensions, established in the Civil Procedure Code. Many companies often impose eligibility criteria for the participation of employees in certain plans. There are requirements for the employees to have a minimum length of service in the company in order to take advantage of this right. For example, often in plans for acquiring shares, the companies give priority and preferential conditions for full-time employees, and fur such, appointed on a permanent contract. The current labor law expressly states that in the exercise of the labor rights and duties no direct or indirect discrimination based on differences in the duration of the contract and the duration of working time is allowed.

Most member states of the EU, as well as Bulgaria have introduced legislation, prohibiting the discrimination based on the criterion “age”. Companies should be careful to more favorable treatment to employees who reach a certain age. This more favorable treatment may violate the EU laws. The practice of the European courts indicates that there must be an objective and reasonable justification for the choice, made in favor of the older employees and to be based on a legitimate objective. The increasingly widespread used methods of acquisition of shares, as financial participation of the employees in the companies increases the competitiveness and aims to pull down the barriers between employers and employees.

The article has been published in Bulgarian, in Capital Daily.

In focus in Bulgarian legislation

Law on supplement of the Penal Procedure Code (SG 42 as of 09.6.2015)

The adopted legislative changes are designed to increase the safety and efficiency when imposing security measures and other forms of procedural coercion that apply to defendants and culprits to ensure the smooth conduct of criminal proceedings and the implementation of the entered into force sentence.

What are the main changes in this direction?

when the defendant is found guilty, is sentenced to imprisonment, the execution of which is deferred under art. 66 of the Penal Code and there is a real danger of absconding, the court may replace the security measure with more severe, or to take such.
when the culprit is found guilty and is sentenced to not less than ten years’ imprisonment or a heavier punishment, it is assumed that the real danger the culprit to abscond occurs unless the evidences in the case establish otherwise.

The changes in the PPC affect a major issue, related to the special investigative means, as the amendment states that:

the permit for using special investigative means in respect of judges, prosecutors and investigators shall be given in advance only by the chairman of the Supreme Court of Cassation or by expressly authorized by them vice-chairman, at the request of the head public prosecutor or a specifically authorized by them vice.

Bill of the Law on Energy Sector Act

The proposed bill aims to allow the Commission for Energy and Water Regulation (CEWR) to extend the regulatory period, ending on 30 June 2015, for the prices for companies in the sector “Electro energy” and “Thermo energy” to 31 July 2015.

In the motives to the bill, the importer directs CEWR to take into account some “current issues” for the formation of its final decision, namely:

The scope of the regulation for reducing the burden, related to the costs for energy from renewable energy sources and the need for communication with the EC.
The declared intentions of the government for reducing costs in the state companies.
The ongoing monitoring of the Agency for state financial inspection in the companies, producing electricity from renewable energy sources.

News on European Union Law

With Council Decision (EU) 2015/809 of 19 May 2015 designating the European Capitals of Culture for the year 2019 in Bulgaria and Italy, the Council of the European Union has adopted the decision that Plovdiv is designated as „European Capital of Culture 2019”.

A request for a preliminary ruling from the Administrative Court Sofia-city (Bulgaria) lodged on 16 March 2015 – H. M. v Agency for State Financial Inspection (ASFI) is published in the EU Official Journal – C171 26.05.2015, in which the court refers the following questions: 1.Is Article 1 (9) of Directive 2014/18/EC1 to be interpreted as meaning that a body/company is a body governed by public law merely because over 30% of its revenue from its activity in the previous year is derived from medical activities which were paid for out of the National Health Insurance Fund and carried out in conditions of effective competition with other medical establishments. 2.Is Article 1 (9) of Directive 2004/18 to be interpreted as meaning that the provision of medical services in conditions of effective competition by private companies established for profit-making purposes may be regarded as ‘meeting need in the general interest’. 3.Is Article 1 (9) of Directive 2004/18 to be interpreted as precluding Paragraph 1, point 21 of the Additional Provisions of the Law on public procurement, according to which it is sufficient, for the purposes of determining that a body is a body governed by public law, if just one of the criteria corresponding to the cumulative criteria laid down by that directive is met.

EFTA Surveillance Authority Decision №301/14/COL of 16 July 2014 amending the procedural and substantive rules in the field of State aid by adopting new Guidelines on State aid for environmental protection and energy 2014-2020 [2015/790] is published in the EU Official Journal – L131 28.05.2015, as Part III – Horizontal rules. Guidelines on State aid for environmental protection and energy 2014-2020 regulates the aid to energy from renewable sources, namely general conditions for investment and operating aid to energy from renewable sources, operating aid granted to energy from renewable sources, energy-efficiency measures, including cogeneration and district heating and district cooling, aid for resource efficiency and in particular aid to waste management, aid to carbon capture and storage, aid in the form of reductions in or exemptions from environmental taxes and in the form of reductions in funding support for electricity from renewable sources, aid to energy infrastructure, aid for generation adequacy, aid in the form of tradable permit schemes, aid for the relocation of undertakings.

A Notification from the Republic of Bulgaria pursuant to Directive 94/22/EC of the European Parliament and of the Council on the conditions for granting and using authorizations for the prospection, exploration and production of hydrocarbons is published in the EU Official Journal – C179 02.06.2015, according to which Bulgaria notifies the information below pursuant to art.10 of the Directive. In accordance with the Underground Natural Resources Act, the Council of Ministers of the Republic of Bulgaria is the competent authority for the granting of authorizations to prospect and/or explore for oil and gas and the granting of concessions to extract oil and gas on the proposal of the Minister for Energy. The Council of Ministers accordingly empowers the Minister of Energy to conclude a contract for prospecting and/or exploring for oil and gas or to conclude a contract for extracting oil and gas.

Regulation (EU) 2015/848 of the European Parliament and of the Council of 20 May 2015 on insolvency proceedings is published in the EU Official Journal – L141 05.06.2015. This Regulation shall apply to public collective proceedings, including interim proceedings, which are based on laws relating to insolvency and in which, for the purpose of rescue, adjustment of debt, reorganization or liquidation: a) a debtor is totally or partially divested of its assets and an insolvency practitioner is appointed; b) the assets and affairs of a debtor are subject to control or supervision by a court; or c) a temporary stay of individual enforcement proceedings is granted by a court or by operation of law, in order to allow for negotiations between the debtor and its creditors, provided that the proceedings in which the stay is granted provide for suitable measures to protect the general body of creditors, and, where no agreement is reached, are preliminary to one of the proceedings referred to in point a) or b). Where the proceedings referred to nay be commenced in situations where there is only a likelihood of insolvency, their purpose shall be to avoid the debtor’s insolvency or the cessation of the debtor’s business activities. The Regulation shall not apply to proceedings referred to a) insurance undertakings; b) credit institutions; c) investment firms and other firms, institutions and undertakings to the extent that they are covered by Directive 2001/24/EC; or d) collective investment undertakings.

Judgment of the Court of 23 April 2015 (request for a preliminary ruling from the Supreme Administrative Court (SAC) – Bulgaria (Case C-111/14) is published in the EU Official Journal – C205 22.06.2015. Referring court is SAC, while parties to the main proceedings are: applicant GST – Service AG Germany and defendant: Director of Directorate “Appeal and tax-insurance practice” Plovdiv at the Central Administration of the National Revenue Agency (NRA). According to the operative part of the judgment: 1.Art.193 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, as amended by Council Directive 2010/88/EU of 7 December 2010, must be interpreted as meaning that the only person liable to pay the value added tax is the taxable person supplying services, where those services were supplied from a fixed establishment located in the Member State in which the value added tax is payable. 2.Art.194 of Directive 2006/112, as amended by Directive 2010/88, must be interpreted as not permitting the tax authorities of a Member State to regard as liable for the payment of value added tax the recipient of services supplied from a fixed establishment of the supplier, where both the latter and the recipient of those services are established in the territory of the same Member State, even if that recipient has already paid that tax on the mistaken assumption that the supplier did not have a fixed establishment in that State. 3.The principle of the neutrality of value added tax must be interpreted as precluding a national provision which permits the tax authorities to refuse to grant the supplier of services a refund of the value added tax which the supplier has paid, when the recipient of those services, who has also paid the value added tax in respect of the same services, is refused the right of deduction on the ground that that recipient did not have the corresponding tax document, any adjustment of tax documents being precluded under national law where a definitive tax adjustment notice exists.

Court practice

By ruling as of 8 May 2015 under civil case № 1867/2015, the Supreme Court of Cassation (SCC) ruled that claims against government agencies for damages, caused by their acts, actions or omissions, contrary to the law of the European Union (EU) will be heard by national courts under the Act on liability for damages incurred by the state and the municipalities (ALDSM). The ruling provides real access to court for the seeking compensation from the state for violations of the EU law.

In the proceedings under the ALDSM a state fee of 10 leva for individuals and 25 – for legal entities shall be paid, but expenses in these cases are not paid in advance by the claimants. If their claim is upheld – in whole or in part, the defendant shall pay all costs, including the paid by the claimant state fee and remunerate for a lawyer. Costs of witnesses, expert reports, transfers and others are paid from the budget of the court or the defendant. Only if the claim is entirely dismissed, as well as withdrew and denied, the claimant shall pay costs after completion of the case.

News of the Law firm

On 28.05.2015, Sofia Court of Appeal rendered a decision under case, initiated and led by the Law Firm McGregor and Partners, about returning of the paid by a RES producer to CEZ Distribution Bulgaria AD access fee, determined by Decision № C-33 as of 14.09.2012 of SEWRC. With its decision, the Court of Appeal revoked the decision of Sofia City Court as incorrect and judged CEZ to pay to the RES producer the temporary price paid for access to the electricity distribution network. According to the deciding panel of the court, CEZ has no right to withhold the paid in this amount access fee. In burden of the EDCs is to establish that the collected pursuant to the revoked Decision C-33 access fee to its determined amounts is payable by the RES producers under the mandatory rules of the law. This is another success for the RES producers against EDC in connection with the controversial access fee.

It is widespread as a legal means of regulating relations between traders

The market plays an important role in regulating the production, exchange, distribution and consumption of goods and services. The practice shows that it is not enough consumers to be only provided with an opportunity to receive satisfying their needs products and services, but it is necessary these products and services to be available in adequate quantities and quality on an accessible location and at a convenient time. These aspects, namely, define the distribution as an opportunity, through which, on the one hand, individuals and groups of people receive what they need, and, on the other, producers realize the results of their activity.

The distribution agreements are inherently a tool by which one party (producer, supplier) uses the skills, effort and network of the other party (distributor) for realization of the products and/or services on the market. The distribution agreement is widespread as a legal mean of regulating relations between traders in the real economic relations, as the distributor sells at their own name and for their own account, reselling the goods, purchased from the producer, and receiving commercial gain, but the legal regulation of this type of agreements in Bulgaria is limited.

The parties are free to negotiate the terms of the distribution agreements, provided they do not conflict with the general provisions of the law. Due to the similarity of the distribution agreement with the buy-sale agreement and the commercial agency agreement, thereto shall apply the rules, established for these institutes, but at the same time introduced are some additional elements, for example relating to the granting of exclusive or non-exclusive right of the distributor to sell the goods of the producer, obligation of the distributor to organize and maintain service for the goods, establishing a common pricing policy and others. Namely because of the specific activity of producers and distributors and public relations that govern these agreements, it is necessary to take into account the norms, relating to the requirement for no limiting and distorting competition.

In terms of competition law, the distribution agreement falls within the scope of the so-called vertical agreements. These are buy-sell agreements of goods or services, which are concluded between undertakings, operating at different levels of the market.

Usually, the vertical agreements, where the undertakings only define the price and the quantity of the product, subject to buy-sell, do not restrict competition. Moreover, under Regulation (EU) №330/2010 of the Commission certain vertical agreements may lead to increase the economic efficiency by facilitating better coordination between the participating undertakings. They can lead to cost reduction and optimization of sales and investments.

In many cases, the parties to such contracts negotiate certain restrictions, such as an obligation of the distributor not to buy goods from a competing brand, an obligation for the producer to sell their products only to a particular distributor, an obligation of the producer not to sell to another distributor in a specific territory, defining of a selling price, prohibition of sale to end customers outside the region of the distributor and others.

The agreements, defining directly trade restrictive conditions, are prohibited under the Bulgarian legislation.

According to the Law on protection of competition all types of agreements between undertakings, which have as their purpose prevention, restriction or distortion of the competition in the market, are prohibited, such as: (i) directly or indirectly defining of prices or any other trading conditions; (ii) allocation of markets or sources of supply; (iii) limiting or controlling the production, trade, technical development or investments; (iv) applying different conditions for the same type of agreements in respect of certain partners, thereby placing them at a disadvantage as competitors; (v) making the conclusion of contracts subject to acceptance by the other party of supplementary obligations or concluding additional agreements, which, by their nature or according to the usual commercial usage are not connected with the subject of the main agreement or with its implementation.

These agreements are void and do not lead to any legal effect. The purpose of the introduced prohibition is to guarantee that any undertaking, involved or potentially involved in the market, will have the ability to independently choose its trading practices (including the relations with its customers and suppliers).

According to the constant practice of the Commission for protection of competition (CPC), in order a violation of the general prohibition to be established, the cumulative presence of the following elements is necessary: 1. a participant on the respective market that possesses the characteristics of an independent “undertaking”. The distributor, participant in a specific agreement, is an independent economically principal, if they undertake the financial and commercial risk, arising from the agreement, and their behavior on the marked does not characterize it as part of the undertaking producer. 2. existence of an agreement between undertakings. It can be formal informal, preliminary or framework agreements and others. 3. the agreement has to be likely to cause certain anti-competitive effect, expressed in purpose or result prevention, restriction or distortion of the competition. In its practice the CPC points that the establishment of an anti-competitive purpose of a specific agreement does not refer to the subjective intention of the parties, but to the creation of an objective possibility in the particular economical context, in which the agreement will have effect, to lead to violation of the competition on the relevant market. With other words, the existence of an anti-competitive purpose is sufficient to prove the committed violation of the general prohibition, without any need of proving an anti-competitive result.

In the practice, the direct or indirect determination of prices is seen as limitation of the competition by purpose. In the vertical agreement the determining of prices can be made by agreement of the parties to fix resale prices, at which the distributor to provide certain goods and services on the market, depriving in this was the possibility to freely and independently determining of prices of the products for their customers under the effect of the natural market forces and pressure from their competitors. In a number of contracts are formulated specific obligations on distributors to comply with the so-called recommended resale prices. The created obligations in this way for adherence of the resale price, combined with the possibility to sanction the violation of this obligation leads to the conclusion that in practice counterparties agree to fix resale prices. Thus achieves control on pricing on the entire chain of realization of the product from the supplier level to end customer, whose purpose is to achieve a certain final price in the retail network.

In a number of standard contracts between suppliers and distributors the specific area, in which the distributor performs the activity, is identified. The CPC believes that it creates prerequisites for limiting distributors, depriving them of incentives to optimize the distribution in direction of expanding the territory of activity. However, when the established territorial scope of the distribution agreements is not related to market partitioning by territorial principle or by customer group there is no anti-competitive effect.

The article has been published in Bulgarian, in Capital Daily.

In focus in Bulgarian legislation

Law on supplement of the Markets in financial instruments act (SG 34 as of 12.5.2015)

The National Assembly adopted the amendments to the MFIA, with which the limits for acquisition of agricultural land to the Farm lands ownership and use act will not apply to public companies. With the introduced amendments the fines of 100 leva per acre for companies with agricultural lands, which have shareholders from countries outside the European Union and the European Economic Area, will drop, as they already can freely acquire and own agricultural lands in our country.

Bill of the Law on supplement of the Obligations and contracts act

The bill provides a new article, which introduces a ten year limitation period for extinction of all unsecured claims against individuals (does not apply for sole traders), regardless of the interruption of the limitation period, except in the cases, when the obligation is deferred or rescheduled. The main reasons of the importers of the proposed change are the introduction of an alternative to the missing in our country system for physical bankruptcy, as well as elimination of the figure of the “eternal debtor.” The new text aims to give the citizens a chance to start to build cleanly in one period their family economy, without prejudicing the interests of the creditors, because ten years is a long period of time in which they can actually collect their receivables.

News on European Union Law

The amended Rules of Procedure of the General Court are published in the EU Official Journal – L105 23.04.2015, whose purpose is to equip the General Court gradually with provisions enabling it to deal under the best possible conditions with different kinds of cases falling within increasingly varied areas.

Council Directive (EU) 2015/652 of 20 April 2015 laying down calculation methods and reporting requirements pursuant to Directive 98/70/EC of the European Parliament and of the Council relating to the quality of petrol and diesel fuels is published in the EU Official Journal – L107 25.04.2015. The Directive lays down rules on calculation methods and reporting requirements in accordance with Directive 09/70/EC, as it applies to fuels used to propel road vehicles, non-road mobile machinery (including inland waterway vessels when not at sea), agricultural and forestry tractors, recreational craft when not at sea and electricity for use in road vehicles.

An Opinion of the European Committee of Regions – an EU Strategic Framework on Health and Safety at Work 2014-2020 is published in the EU Official Journal – C140 28.04.2015, in which the seven main strategic objectives are determined: a) to further consolidate national strategies; b) to facilitate compliance with health and safety at work legislation, particularly by micro and small enterprises; c) better enforcement of health and safety at work legislation by Member States; d) to simplify existing legislation; e) to address the ageing of the workforce and emerging new risks; f) to improve statistical data collection and develop the database; g) to better coordinate EU and international efforts.

There is preparation for adoption of Regulation of the European Parliament and of the Council on insolvency proceedings, as the position of the Council at first reading and the statement of the reasons are published in the EU Official Journal – C141 28.04.2015. The Regulation shall apply to public collective proceedings, including interim proceedings. The Regulation shall not apply to proceedings that concern insurance undertakings, credit institutions, investment firms and other firms, institutions and undertakings to the extent that they are covered by Directive 2001/24/EC, or collective investment undertakings.

The Supreme Court of Cassation ruled on the controversial issue for the access fee and the retroactive effect of the cancelation of Decision № C-33 of SEWRC.

On May 20, 2015 the Supreme Court of Cassation (SCC) ruled in a case, brought by a producer of renewable energy source (RES) against an electricity distribution company (EDC) for reimbursing the price, paid for access, determined by Decision № C-33 as of 14 September 2012 (Decision № C-33) of the State Energy and Water Regulatory Commission (the Commission). With its Ruling, the SCC answers to a question, which is the basis of the long-lasting legal battles between the RES producers and the grid operators, and namely the SCC took the position that the decision for cancelation of an individual administrative act, such as Decision № C-33 is, has a retroactive effect, i.e. its legal consequences are repealed retroactively.

In 2012 and 2013, the grid companies collected from the RES producers around 300 million leva1 by the controversial measure “temporary access fee”, introduced by Decision № C-33. The Ruling of the SCC as of May 20, 2015 supports the view that the price paid for access from the RES producers on a lapsed ground – the canceled Decision № C-33, should be reimbursed by the grid operators.

How it all comes to that

With Decision № C-33, as of 18 September 2012 the Commission determined temporary access fees to the transmission and distribution grids of the “Electricity System Operator” EAD (ESO), EVN ER (EVN), “Energo-Pro Grids” AD (Energo-Pro), “CEZ Distribution Bulgaria” AD (CEZ). According to the Decision, the fees had to be paid monthly, depending on the accession to the respective grid, by the RES producers, which benefit from preferential prices for the sold electricity. The RES producers appealed Decision № C-33 and with a series of final court decisions in 2013 the Supreme Administrative Court (SAC) repealed it in most of its sections and points as unlawful. In its canceling decisions the SAC ruled as part of its reasoning that the annulment of Decision № C-33 has a retroactive effect. In practice, however, in order to claim reimbursement of the unduly paid amounts for access fee, the RES producers would have to file civil proceedings against ESO, EVN, Energo-Pro or CEZ, respectively.

Meanwhile, as the initiated from the RES producers civil proceedings were awaiting the court decisions, in March 2014 the Commission made two new Decisions № КМ-1 and № C6 concerning the access fee in question. As a result of these for the RES producers to which the access fee is not repealed under Decision № C-33, compensatory measures are applicable and the grid operators were to recover the difference between the temporary and the final price for access by April 15, 2014. For the rest of the producers, which do not fall within the scope of the compensatory mechanism, the possibility remained to bring claims against the EDCs and ESO under the civil law.

What happened in the civil courts

Along with the already initiated court proceedings, after Decisions № C-6 and № КМ-1, and particularly with a view to the position of the Commission in Decision № KM-1 that the cancelation of Decision № C-33 has a retroactive effect, a big number of subsequent claims against the grid operators were filed. The legal battle was on three fronts according to the seat of the defendant EDC or ESO, respectively in Sofia, Plovdiv and Varna courts. The Civil courts, however, are not bound by the stated by the SAC and confirmed by the Commission retroactive effect of the cancelation of Decision № C-33. This led to opposite decisions and reasoning of Sofia, Plovdiv and Varna courts, in their different panels, on the controversial issue. While some panels of the appellate courts agreed with the SAC and ruled for the grid companies to reimburse the unduly paid amounts for access to a number of RES producers, others expressed radically different interpretation of the legal provisions and principles concerning the annulment of an individual administrative act, such as Decision № C-33 is. For example, the Varna Appellate Court accepted in its decision that the cancelation of Decision № C-33 does not have a retroactive effect, but has a constitutive effect for the future and it only means that the administrative act shall be deemed repealed in respect to everyone. Currently, both lines of decisions of the courts of appeal – some in favour of the RES producers, and others – of the grid operators are subject to cassation appeal before the Supreme Court of Cassation.

The Ruling of the SCC as of 20 May 2015 and what comes next?

With its Ruling the SCC expressed its firm position on the issue of the retroactive effect of the cancelation of Decision № C-33. The SCC did not allow the cassation appeal of EVN, stating that there is a practice of the courts in the country on the issue of the retroactive effect of the cancelation of an individual administrative act, by referring to a final decision of a district court, according to which after the cancelation of IAA the ground, on which the defendant had his receivable, was repealed retroactively.

According to the SCC with the question for the retroactive effect of the IAA (as Decision № C-33 is) “the need of amendment or updating is not justified in view to changes in legislation and social conditions, neither there are legal provisions that are incomplete, unclear or contradictory and there is no case law under them”.

The Ruling of the SCC is beyond question a success for the RES producers in the battle on the controversial access fee, but what comes next with the pending proceedings under similar cases?

The Ruling of the SCC is not binding for the civil courts and it is possible that the controversial practice of the first instance and appellate courts in Sofia, Varna and Plovdiv concerning the retroactive effect of Decision № C-33 continues. It is neither impossible (although the chance is quite limited in view to the consistency of the SCC) another panel of the SCC to rule in the opposite sense on the same issue and thus to lead to controversial practice of the SCC itself. On the other hand, it is worth noting that in their previous decisions in favour of the grid operators the appellate courts also gave other reasons, besides the lack of retroactive effect, on the dismissal of the claims for reimbursement of the access fee. It remains to be seen whether the SCC will allow other cassation appeals and what its decisions on them will be. In any case, what is possible both in theory and practice, is the result in similar cases to be controversial, and namely to have final decisions in favour of RES producers and in favour of grid operators at the same time. This would lead to another legal absurdity – the RES producers who fall within the scope of the compensation mechanism under Decision № KM-1 to receive back an essential part of the access fee under Decision № C-33, while the producers who would lose their civil cases to have no legal mechanism to recover the unduly paid amounts under the same Decision № C-33, although the latter has been repealed and according to the SCC it does not exist in the legal order.

The case “access fee” for the RES shows off some of the flaws of the Bulgarian judicial system. The stakes are high and the majority of the investments in the sector are foreign, which could lead to a serious challenge for the Bulgarian state in case that foreign investors bring before an international arbitration tribunal claims for breaching of investment standards (such as “fair and equitable treatment”), which Bulgaria has undertaken under international bilateral investment treaties and the Energy Charter Treaty.

The article has been published in Bulgarian, in Capital Daily.

In focus in Bulgarian legislation

Law on supplement of the Bank Bankruptcy Act (SG 22 as of 27.3.2015)

In the Bank Bankruptcy Act are included new rules, regarding the security measures, which must be taken by the court before stating a decision for starting insolvency proceedings.

The legislator requires the court to appoint a provisional receiver, proposed by the Fund, in the event that the conservators are appointed by the Central Bank prior to the decision for revoking the license to conduct banking activity. The provisional receiver performs most of the functions of the permanent receiver until the appointment of the latter, and the powers of the conservators are terminated.

The provisional receiver has the right to file claims before the bankruptcy court for returning of the property received, originating from the bank against any third party.

Draft Law on supplement of the Code of Civil Procedure

The proposed legislative change affects art.280, para.2 of the CPC about the grounds for admission of an appellate decision to cassation appeal.

The importer of the draft law suggest the decisions on appellate commercial cases with claims of up to 20000 leva not to be admitted to cassation appeal, which would further restrict the possibility for exercising cassation control, since at the time the law requires a minimum of 10000 leva price of the claim on appellate commercial cases.

In the event the draft law is finally adopted, the submitted before its entry into force cassation claims will be heard under the rules of the current CPC.

News on European Union Law

With the EU Official Journal – L95 10.04.2015 with a view to adoption of Commission Directive (EU) 2015/559 amending Council Directive 96/98/EC on marine equipment, the European Commission, according to which Annex A to Directive 96/98/EC is replaced by the text in the Annex to Directive 2015/559, as the equipment listed in column 1 of Annex A.1 as having been transferred from Annex A.2 which was manufactured before 30 April 2016 in conformity with procedures for type-approval already in force before that date within the territory of a Member State, may continue to be placed on the market and on board a Community ship until 30 April 2018.

Decision (EU, Euratom) 2015/578 of the Representatives of the Governments of the Member States of 1 April 2015 has been published in the EU Official Journal – L96 11.04.2015, appointing Judges and Advocates-General to the Court of Justice. The following are appointed Judges to the Court of Justice for the period from 07.10.2015 to 06.10.2015: Mr Lars Bay Larsen, Mr Francois Biltgen, Mr Endre Juhasz, Ms Küllike Jürimäe, Mr Sinisa Rodin, Mr Allan Rosas, Mr Marek Safjan, Mr Daniel Svaby. The following are appointed Advocates-General to the Court of Justice for the same period: Ms Juliane Kokott, Mr Henrik Saugmandsgaard OE, Ms Eleanor Sharpston.

In the EU Official Journal – C126 18.04.2015 are published Decision №807 as of 04.12.2014 on the opening of a procedure for granting authorization for prospecting and exploration of oil and natural gas – subsurface natural resources under Article 2(1) point 3 of the SRA in the area of “Block1-22 Teres”, located in the exclusive economic zone of the Republic of Bulgaria in the Black Sea, and on the notification of the granting of authorization through a competition and Decision №808 as of 04.12.2014 on the opening of a procedure for granting authorization for prospecting and exploration of oil and natural gas – subsurface natural resources under Art. 2(1) point 3 of the SRA in the area of “Block 1-14 Silistar”, located in the continental shelf and the exclusive economic zone of the Republic of Bulgaria in the Black Sea, and on the notification of the granting of authorization through a competition.