Blog Sofia

What known and lesser-known mechanisms for doing business provides the membership of Bulgaria in the EU

“The XXI century will be the century of the social sector organizations. The more economy, money and information become global, the more community will matter” – Peter Drucker

The words of the American specialist in business management reflect without doubt in the increasing interdependence of the national economies in the world and the increased cross-border movement of goods, services, technologies and capital.

In Europe, these irreversible processes and the need for economic cooperation after the Second World War initiate a unique economic and political organization, which we call today European Union and which has become without doubt a major driving force of the business progress on the Old Continent. As one of the twenty-eight Member States Bulgaria offers its citizens an opportunity to have all euro mechanisms for the development of own business and support of the global economic progress. For us, Bulgarians, remain the questions what we know, what we want and how to do it.

Starting a business

Any EU citizen can start their own businesses, including as a sole trader, or establish a branch of an existing enterprise of the EU in each Member State. The requirements vary in the different countries, but the EU encourages the Member States to comply with the basic uniform rules on the deadlines, prices and methods of registration, namely:

the establishment to be carried out for no more than 3 working days;
to cost no more than 100 Euro;
all registration formalities to be carried out online;

European company

With the purpose of maximum facilitation and expansion of the business opportunities within the territory of the EU, the Community legislation (Regulation (EC) № 2157/2001) provides a possibility for establishment of a European public limited company, which could be easily described as a mirror of the global economic progress.

The European company is a legal entity with capital, denominated in euro and divided into shares. The subscribed capital cannot be less than 120 thousand euro and the shareholders are responsible to its amount. What is achieved through the establishment of the European Company (ES) is easier doing of business at lower costs in more than one EU country, because the different activities can be united through it under a common European brand.

Main feature of the ES is also the ensuring of greater mobility of the single market, which is expressed in the possibility to transfer its registered office in another EU country without the need for its closure and re-establishment.

The European company can be seen as a “framework” for cross-border activities, as its establishment allows the use of staff, employed in more than one EU country, and the managing of the business, without the need for establishment of a network of subsidiaries.

Regulation (EC) №2157/2001 provides several options for establishment of a European company:

by merger of public limited companies from at least two different Member States;
by establishment of a holding company or a joint subsidiary for joint stock companies and limited liability companies with registered offices in different EU countries or which have branches/subsidiaries in EU countries, other than the country, in which they have been established for more than 2 years;
by simple transformation of a joint stock company if it has its registered office in a Member State and a subsidiary in another branch for more than 2 years.

The registered office and the headquarters of the European company must be in the same Member State, as the liquidation and bankruptcy shall be governed by the laws of that particular country.

Mergers with foreign companies

The European legislation regulates numerous rules on business opportunities, relating to the merger of two or more companies of different Member States.

In the event that one or more companies have been bought by a third company, all assets and liabilities of the purchased companies are transferred to the acquiring company. That practically means a cessation of activity of the acquired companies, but it is not officially considered as liquidation. The acquiring company must issue securities (e.g. shares), representing the capital of the company, in exchange for the assets, received by it by the transferring. A need for cash payments can arise, but they may not exceed 10% of the nominal or book value of the securities of the acquiring company.

When two or more companies transfer all their assets and liabilities to an entirely new company, which they form, the activity of the companies, transferring the assets, will also be terminated at the end of the process, without having to undergo any formal liquidation. The newly established company will have to issue securities (e.g. shares), representing its capital to the owners of the transferred assets companies. In need of payments they again cannot exceed 10% of the nominal or book value of these securities.

In the case, when a company transfers all its assets and liabilities to another company, which already owns all of its securities, the activity of the transferring assets company shall be terminated, without undergoing any formal liquidation.

Companies with a turnover, exceeding a certain threshold (at least 2.5 billion euro combined total worldwide turnover), which do business in the EU and wish to merge, need to request approval from the European Commission. The Commission shall examine the effects of the proposed merger on competition in the EU, as especially monitors and leaves without approval mergers that would lead to a significant restriction of the competition in the EU.

Public procurements

Each merchant, registered in a Member State, is entitled to participate in public procurements, announced in other EU countries. In order to ensure equality of enterprises in Europe, the European legislation establishes minimum harmonized rules on the procurement within the community.

These rules, transposed into the national legislation, apply to tenders, whose monetary value exceeds certain thresholds, such as 5.186 million euro for building contracts. The European legislator assumes that the tenders of value “above the threshold” are cross-border interest, or in other words, the contract value to them is large enough to interest an enterprise abroad.

For tenders with lower value apply the national rules, which although have to respect the general principles of EU law.

These rules are outlined in Directive 2014/24/EC of the European Parliament and of the Council as of 26 February 2014 on public procurements, as they regulate all matters and basic principles, relating to the criteria for assigning contracts, the publication of the contract notices and its assignment.

European funding

In order to support the business, the EU through its bodies provides various initiatives to finance sustainable projects with a significant socio-economic impact by providing low-interest loans, bank guarantees and equity investments, as the most recent example is the program JESSICA, which allows an opportunity for joint investment of public and private sector in urban development projects in the 7 largest cities in Bulgaria.

Most often the funding goes through several stages, including publishing of an invitation for project funding, submission of an application form, submission of a business plan of the project, evaluation of the submitted project, a statement of the bank partner, approval decision and conclusion of contract project financing.

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

In focus in Bulgarian legislation

Law on supplement of the Law on copyright and related rights (SG 14 as of 20.2.2015)

Orphan works and sound records have been introduced in the Law on the copyright and related rights. These are works in which the rightholder is not identified or, if identified, he/ she is not located.

The legislative initiative has been undertaken in response to the requirement to transpose the provisions of Directive 2012/28/EU of the European Parliament and of the Council of 25 October 2012 on certain permitted uses of orphan works in the Bulgarian legislation.

The new regulation includes rules on the procedure for diligent search of orphan works and sound records, the mutual recognition of their status in respect to Member States, the termination of their status and their use.

The main purpose of the new section is to facilitate the digitization and distribution of such works in the publicly available institutions such as libraries and schools.

Draft Law on protection of over-indebted individuals

The economic situation in Bulgaria and the backwardness of our legislature compared to the current international trends for extension of the bankruptcy proceedings against non-trading individuals, led to the re-opening of the debate on the need to adopt Law on protection of over-indebted individuals.

The draft law has been submitted in the National Assembly aiming to create an effective protection for debtors – individuals, allowing them to get a second chance.

The protection provides a procedure by which the bona fide bankrupt citizens can settle their obligations within a maximum of three years, where under certain conditions there is even a possibility for debt relief.

Interpretative decision 5 of 22.12.2014

By Interpretative decision 5 as of 22 December 2014, the criminal chamber of the Supreme Cassation Court holds that the manager, respectively the chairman of a company or cooperative should be criminally liable, if within 30 days of the suspension of payments does not request the court to start insolvency proceedings. For the implementation of such obligation, it is not necessary to have an explicit assignment by collective management body.

News on European Union Law

With the EU Official Journal – C50 12.02.2015 with a view to adoption of Directive of the European Parliament and of the Council, amending Directive 98/70/ЕО relating to the quality of petrol and diesel fuels and to Directive 2009/28/ЕО on the promotion of the use of energy from renewable sources, the Commission proposes to start the transition to biofuels that provide significant reductions in greenhouse gas emissions when also reporting on the indirect land use change emissions estimates. The text of the Council addresses the issue of the rates for calculation of the contribution of energy from renewable sources, which is consumed by the electric multi units in the rail transport and the electric automobiles, so that to expand their use and market penetration.

Decision 2009/861/EC as of 30.11.2009 of the Commission provides for the introduction for the listed therein milk processing enterprises in Bulgaria of certain derogations from the requirements, set out in Annex III to Regulation (EC) №853/2004, which determines specific hygiene rules for food of animal origin in the enterprises for foodstuffs, including hygiene requirements for raw milk and dairy products. Certain milk processing enterprises, listed in Annex I to the Decision, can process both compliant and non-compliant milk, provided that the processing is carried out on separate product lines, and the listed in Annex II can process non-compliant milk without separate production lines. Bulgaria has sent to the Commission an amended and updated list of those enterprises.

Uniting of several applications in one with priority is an important change in the international protection of human rights

One of the major and important changes in the international protection of human rights is aimed at improving the functioning of the European Court of Human Rights (ECHR or the Court) and reducing the number of applications received in the Registry of the Court. According to official data, the pending applications against Bulgaria for the past two years are beyond 5000. In this connection, the ECHR in its practice and its subsequent rules has adopted the procedure, known as pilot judgment, changing the existing understanding of the European Convention of Human Rights (the Convention) and significantly exceeding the specific case of the applicant, combining several applications in one with priority.

When do we have a pilot judgment

Pilot judgment occurs when there is a large number of applications, referred to the Court, relating to similar repeating infringements of the rights and freedoms, guaranteed by the Convention and the protocols thereto, and due to the same structural or systematic domestic problem in the state, against which such a decision is stated. At its discretion, the Court may choose one or more applications for priority review, as in this way the applicants will receive faster compensation, than if their cases are processed separately in the Court.

The implementation is the most important part of the pilot judgment, as in case of failure, the integrity of the national or the international legal system would be put into question. Namely, for that reason, in the procedure for implementation of the judgments of the Court, the pilot judgments have priority over those of the Committee of Ministers of the Council of Europe. In the pilot judgments unlike the ordinary judgments, the Court’s task is not only to decide whether there is a violation of the Convention and to determine the due compensation in the specific case, but also to identify the systematic problem, to determine a deadline for its removal and to give the respondent state clear indications, concerning the kind of measures that it should take.

Ability to postpone hearing of other related cases

An important feature of the pilot procedure is the possibility of adjourning or freezing the examination of all other related cases for a certain period of time. This is an additional mean of encouraging the respondent state to take the necessary steps for changing the legislation. In practice, the Court stops hearing the pending applications, raising the same legal issue, until stating the appropriate effective domestic mean of protection. For example, due to the first two pilot judgments in 2011 “Finger vs. Bulgaria” and “Dimitrov and Hamanov vs. Bulgaria”, concerning the structural problems in Bulgaria about slow justice in criminal and civil proceeding, some amendments to the Act on liability for damages incurred by the state and the municipalities (ALDISM) and to the Judiciary System Act (JSA) were introduced, as it was provided for the state to be responsible for the damages, caused to citizens and entities by violation of the right to hear and decide the case within a reasonable time in accordance with the Convention and therefore there was provided a possibility for filing an application for compensation for slow justice to the Inspectorate to the Supreme Judicial Council (SJC). The Inspectorate to the SJC has established a number of violations of the right to hear and decide the case within a reasonable time in violation of the Convention (failure to meet the provided by the procedural laws deadlines for stating the judicial acts; lack of knowledge by the magistrates of the Convention, as well as of the court practice of the ECHR; long duration of criminal proceedings of the pre-trial phase, etc.).

The changes will also apply to already filed applications

Moreover, the new legal mechanisms will be applicable for the already filed and registered applications, i.e. the Court will declare all pending applications before it inadmissible for failure to exhaust the newly created domestic means of protection. Considering that the application, filed before the Court, shall be considered average within 5 to 7 years, Bulgarian applicants will have to use the new mechanisms for compensation.

In witness whereof, the first two judgments that are not pilot and on which the Court has ruled in 2013, are “Valcheva and Abrashev vs. Bulgaria” and “Balakchiev and Others vs. Bulgaria”, in which the Court has declared the applications inadmissible and has accepted that the provisions of the JSA and the ALDISM about the possibilities for seeking an compensation can be considered “effective domestic legal means for protection against the excessive length of the proceedings before the civil, criminal and administrative court in Bulgaria”. In its practice, the Court has accepted that the existence of doubts about the effective functioning of the new means of protection does not exempt the applications from the obligation to use them before the national judicial authorities.

Impact on the countries for strict observance of the rights and freedoms

Another systematic structural problem in the Bulgarian justice effects also the completely new pilot judgment of this year “Neshkov and Others vs. Bulgaria”. The Court and the Committee for prevention of torture have repeatedly stressed the existence of severe overcrowding in Bulgarian prisons (prison cell with area: 1 m²) and the poor material and sanitary conditions, which is in breach of the provisions of the Convention, concerning the prohibition of inhuman and degrading treatment. In its judgment the Court also brings to mind that in these violations there is lack of effective mean of protection in the Bulgarian legal system. Interesting here is that the Court, contrary to its practice, has decided not to “freeze” the hearing of the pending similar applications.

In implementation of the pilot judgment procedure, the Court has given specific instructions and a deadline of 18 months of its entry into force for amendments to the Bulgarian legislation, having noted that a special body responsible for the places of imprisonment can be created, or a court to oversee the execution of the sentences. A common mean of protection against violations in inhuman and degrading treatment should be introduced or special provisions, under which the applications of prisoners should be heard. There can be provided an amount of money or reduction of the sentence, as form of compensation. The failure to comply with the instructions, given in the pilot judgment could lead to political sanctions by the Committee of Ministers of the Council of Europe and an avalanche of compensations, awarded to the applicants.

It is not an exaggeration to say that the pilot judgments have a relevant influence on the countries for greater compliance with the rights and freedoms, guaranteed by the Convention, and to take timely measures in a particular field. Nevertheless, the respondent state remains free, complying with the conclusions, set out in the pilot judgment of the Court to choose the means, by which to fulfill its obligations. The procedure cannot claim to be solution of all the difficulties, faced by the countries in their national legal systems, but it aims to provide a solution for the removal of some major problems and the establishment of legal protection for us, the Bulgarian applicants.

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

What do the creators of such programs need to know?

The copyright provides protection on the code of the mobile software, but not on the ideas, put into it, and not on the process of operation and communication between the application and the mobile device.

You need to order a taxi, check the weather forecast, make a payment on your consumer credit or write a few lines to a friend. All this is now possible only by some clicks on a smartphone or a tablet. Welcome to the world of the mobile applications. The increasing penetration of mobile technologies in our everyday life has turned the creation of mobile applications into a profitable business niche. Unlike most commercial initiatives in which the assets have been materialized in the form of tangible property, in case you decide to create a mobile application, you will acquire a set of intangible assets, or the so-called intellectual property rights. All this sets on the agenda the question about the nature of these rights and to what extent they are protected by the law.

Copyright

Copyright on mobile applications arises with the creation of the application itself – with its fixation on an electronic carrier so that it can be reproduced and perceived by the consumers. According to the Bulgarian legislation, there is no need of registration for copyright to occur in favour of the author of the mobile application.

On the one hand, the object of copyright protection is the software of the mobile application. It is worth mentioning that the copyright provides protection to the technical expression, the code of the mobile software, but not to the ideas, and the process of operation and communication between the application and the mobile device.

On the other hand, the content of the application, which is displayed on the mobile device, is also subject to protection by copyright. This includes all images, photos, melodies, databases and more, so far as the same are created by the author and are independent works. It happens often that the creator uses an already existing software in the application (if a map is needed, Google Maps might be used for example) or images and melodies, created by other authors. In these cases it is important to check the license conditions of the software for commercial purposes, respectively to obtain permission from the authors of the works.

Practice in this business is the software of the mobile application also to be “written” by a team of programmers, especially hired for this. In such cases it is good to know that copyright does not pass automatically in favour of the owner of the mobile application, although the latter has paid for the creation of the software. A software assignment agreement with the programmer – author of the software is necessary, where it is explicitly stipulated that with its creation the copyright is transferred in favour of the assignor.

According to the Bulgarian law, copyright is protected throughout the whole life of the author, as well as 70 years after that. Copyrights are inheritable and can be transferred (with the exception of some intangible rights).

Trademark

The trademark is the element of the mobile application that identifies its origin and distinguishes it from the others. In practice, the mobile application is identified by its name and logo, as the latter represents the icon you see after its installation. That is why it is equally important that the name and the logo be protected as trademarks, as usually these are registered individually.

The choice of the trademark, however, will have to comply not only with the preferences of its owner, but also with some legal specifics. Thus, some trademarks are stronger than others, when they have to overcome the obstacles for registration – these are the fanciful marks, usually coined words without semantic meaning (such as Skype). The owner of the mobile application would often choose a descriptive name to direct the consumers to the use of the application (e.g. Internet calls), but such name would be highly unlikely to be registered as a trademark, because it does not meet one of the essential requirements – the mark to have a distinctive character. Other important aspects that should be assessed are for which classes of goods and services the mark to be registered and in which countries a protection to be sought. For the answer to these questions a balance between the estimated budget and the need for legal protection should be sought according to the specific business model.

In order to obtain protection in the territory of Bulgaria, the mark should be registered in a special register at the Patent Office. At the same time a Community trademark for the territory of all Member States can be acquired. In the latter case the application may be submitted directly to the Office for harmonization of the internal market of the EU, or by the Bulgarian Patent Office.

What makes the trademark extremely valuable asset of intellectual property, is, that once registered, it can be renewed indefinitely. Moreover, in practice, its owner obtains a monopoly right and can limit the other persons to use it in their commercial activity without righholder’s consent. However, if the owner of a registered mark does not actually use it for five years, it can be invalidated.

Design

The icon of the mobile application (or its logo) can be protected also as design. In this case, the same object can be protected as a trademark and a design, where these two do not compete and can coexist. The owner of both will have a different kind of protection – while the function of the mark is to indicate the origin of the product, the design protects its appearance and functionality.

Consumer interfaces, graphical objects, visual layouts, as well as all other original visual components of the mobile application, can also be registered as designs.

Bulgarian law uses the term “industrial design” and defines it as the visible outer appearance of a product or part of it determined by the features of the form, the lines, the contours, the ornamentation, the colours or a combination thereof. The main requirements for design registration are that it has to be new and original. The registration for the territory of Bulgaria is carried out by the Patent Office, and for the Community – by the Office for harmonization of the internal market. The European legislation provides also protection for unregistered design within 3 years from the date on which the design has become publicly available.

Patent

It has been a long due question, as to whether mobile applications can be regarded as patentable inventions. According to Bulgarian and European legislation computer programs are expressly excluded from the scope of the inventions, subject to patent. In practice, however, it appears that not only computer programs are patentable, but this is one of the fastest areas of growth in the European Patent Office (EPO). The reason for this is that the mentioned prohibition applies to computer programs, as far as legal protection is required for them as such. According to the EPO the question “Is there an invention” must precede all other patentability assessments (novelty, inventive step and industrial applicability), and it tacitly implies the further essential question: “Does the claimed subject-matter have a technical character?” Therefore, in the case of mobile application, the software must be part of or must be incorporated in an invention (technical device, method or system), resolving a technical problem in a new and non-obvious way.

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

Or what are Bulgarian magistrates responsible for in insufficient qualification and breach of the professional ethic

The Supreme Judicial Council assumes in its practice that the magistrates in their performances and contacts should refrain from actions that could compromise them.

Bulgarian magistrates take as their commitment to the Bulgarian society the requirement to implement and deploy in their professional activity and personal life the rules for ethic behavior, provided in the Code of Ethics for the behavior of Bulgarian magistrates. There is introduced a standard for behavior of the magistrates for their professional status and public expectations of fairness. The compliance with the rules for ethic behavior of the magistrates is an obligation while exercising their professional activity and personal life. The SJC assumes in its practice that the magistrates in their performances and contacts should refrain from actions that could compromise them and to form a negative attitude towards the judiciary and to undermine its authority. Behavior of the magistrates, which is contrary to those standards, points to a violation of the law and the ethical rules and it is a ground for engaging the disciplinary liability.

The Judiciary System Act

determines the disciplinary violations, in the performance of which the liability of the Bulgarian magistrate is engaged. In the Code, there are listed the basic principles that outline the framework for regulating their behavior in and out of the service they perform, namely: independence, impartiality, fairness and transparency, courtesy and tolerance, decency and propriety, competence and qualification, confidentiality. Competent and qualified is the well prepared magistrate, who knows the legislation of the Republic of Bulgaria and the European Union law. The competence and the qualification are a prerequisite for the proper implementation of the duties of the magistrate and for their professional career and therefore should be continuously improved.

Firstly, a self disciplinary violation is the systematic violation of the terms, provided in the procedural laws. The judgment on compliance with the terms and the existence of the element orderliness includes an assessment of the workload of the magistrate and their ability to objectively deal within the relevant terms with the workload assigned. In the practice it its assumed that in order to justify such a disciplinary violation, it is necessary to establish whether the particular failure to comply with the deadline is determined by the mentioned objective factors, or it is a result of the solely fault of the magistrate.

As another violation the legislator has defined an action or omission, which unduly delays the proceedings. Practically, there are almost no proposals for imposition of disciplinary penalty of a magistrate only for acts or omissions that unduly delay the proceedings. The violation of the law, as well as the action or omission of a magistrate, which undermines the authority of the judiciary are also disciplinary violations, which are similar and often the behavior of the magistrate qualifies both as a breach of the ethical rules and diminishing the authority of the judiciary.

Violations categories

The review of the disciplinary action of the SJC in disciplinary penalties of the magistrates for committed violations of the Code shows a formation of several categories: lobbying, use of official position for personal gain, actions/omissions that contain elements of a criminal offense and also violate the ethical rules and undermine the authority of the judiciary, behavior and/or contacts in the private life, which reflects negatively on the professional, public image of the magistrate and damages the image of the institution and the integrity of the profession, violations of the ethical rules at the workplace and while exercising the official, functional powers. As examples of lobbying* are showed cases of contacts of magistrates with individuals, for whom there are details for implementation of an impact on member of the SJC in the appointment of administrative heads in the judicial authorities. The SJC and the court qualify such behavior as unacceptable in terms of the ethical rules, with which the external creditability of the independence of the judiciary is undermined. Except such conduct that creates suspicion of corruption practices and compromises the independence of the judiciary, the magistrate undermines the authority of the judiciary (*source SJC – review).

As an example for attracting disciplinary responsibility of magistrates because of evidences of possible use of official position for personal gain are considered cases under initiated disciplinary proceedings against judges in connection with information in the media of acquired properties from their relatives in the same municipality.

According to the practice of the SJC non-compliance and violation of the law should also be interpreted as a disciplinary violation. In this sense are decision under disciplinary case №22/2010 and disciplinary case №24/2008, where it is assumed that the compliance with the rules for tribal and local jurisdiction is associated with the movement of the case and for their violation the judge should be disciplinary liable. The Supreme Administrative Court, however, has a different opinion and principally believes that the incorrect application of the law by magistrates is no reason for imposition of disciplinary penalties, and their acts can be appealed to the higher instance.

The penalties

In this sense, the question remains open whether the gaps of the law, jurisprudence and doctrine development, in other words, the insufficient initial and/or further qualification of the magistrate should be treated as a violation of the Code of Ethics and hence as a disciplinary violation. This question arises regularly not only in view of the practice of the SJC, but also in view of the general expectation that the impeccability of the magistrate is due in addition to the above, and to their preparedness to decide the specific case fairly, applying the law in development. The answer is imperative, because the misapplication of the law by a magistrate, thereby violating rights and legitimate interests of the parties, can be due to the usual ignorance of the law, as well as to other reasons.

In conclusion, the review of the practice of the SJC, covering disciplinary proceedings in the period 2009-2013 shows that most often the subject of disciplinary cases are violations, regarding breach of official duties of magistrates, in connection with the application of the procedural deadlines. There are not few cases of disciplinary sanctions for violations of the ethical rules and norms and undermining the reputation of the judiciary, committed by the magistrates. For the violations, committed in most cases by magistrates there is imposed a disciplinary penalty – reducing the base salary from 10 to 25 percent for a period of six months to two years in different amount and for different period of time, as there cannot be accounted any system in determining the disciplinary penalty in similar parameters for similar cases.

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

Or when to request a state’s compensation for caused damages

Competent to hear the cases, relating to claims of citizens against the state is the court at the place of the damage or the current address or registered office of the damaged.

One of the basic principles of the public law is that the state as power is not responsible, because the sovereign cannot be held responsible for their actions. However, the administrative authorities’ actions appear in a number of cases to be reason for damages, caused to citizens. Under administrative authorities’ actions we should understand acts and omissions of individuals, occupying a post in the public administration. Therefore, of particular importance are the selection and the appointment of these persons.

Regulatory framework

The responsibility of the state and the municipalities for damages, caused to citizens and legal entities by unlawful acts, deeds or omissions of state or municipal authorities and officials during performance of administrative work, occupies a central place in the public life and the legal order. Therefore, this is one of the questions, set by the constituent power in the Constitution of the Republic of Bulgaria. Its principle position is enshrined in art.7 of the basic law and is further developed in the Act on liability for damages incurred by the state and the municipalities.

A ground for imposing this kind of liability will be there always, when the damages are caused to individuals and legal entities by unlawful acts, deeds or omissions of their authorities or officials upon or on the occasion of implementation of their administrative activity.

The nature of the responsibility consists in the possibility of the victim to receive a compensation for all material and moral damages, which are a direct and immediate consequence of the damage, independently whether caused by fault of the official. This is the main difference between this type of liability and the civil liability, where the presence of fault is a mandatory prerequisite for its realization.

For holding the state responsible, it is not necessary to establish the damage’s causer, for example the particular official. In case the damage is caused due to the exclusive fault of the victim, any compensation is not due, and under a contributory negligence on the part of the victim, the compensation is reduced proportionately.

Procedural order for realization of liability

The responsibility is realized under administrative procedure order. The claims for compensation are considered under a special procedure, regulated by the Administrative Procedure Code.

A prerequisite for a claim for compensation is the cancellation of the unlawful administrative act. This is because the establishment of unlawfulness or invalidity of the administrative act, accordingly unlawfulness of the deed or the omission, constitutes a preliminary question in resolving the legal dispute under the claim for compensation. Unlawful is the act, which significantly violates any of the legal requirements – to be issued by a competent authority, to be formulated in the form prescribed by the law, the administrative procedure rules in issuing it to be met, to conform to the substantive provisions of the law and to be consistent with the objective of the law.

In order to be unlawful the omission of the administrative authority, the latter shall be obliged to perform a particular action, and in a certain way, but not when the authority has discretion whether to act or to refrain from acting.

Legitimated to file a claim is any individual or legal entity, who has suffered damages by an unlawful act, deed or omission. Upon death of the damaged their right for compensation for property damages is inherited and therefore their inheritances acquire active legitimacy. As for the moral damages, the claim has to be filed before the court by the damaged and the successors are inheritances to continue the process.

The claim for damaged has to be filed against the entity, represented by the authority, from whose unlawful act, deed or omission the damages are caused, as the participation of a prosecutor is required.

Jurisdiction, fees and costs

Competent to hear cases under claims of citizens against the state is the court at the place of the damage or the current address or registered address of the damaged against the authorities, from whose unlawful acts, deeds or omissions the damages are caused.

If the claim is denied entirely, the court judges the claimant to pay the costs under the proceedings. The costs are paid by the claimant upon withdrawal of the claim in whole or upon denial of the claim entirely. If the claim is accepted in whole or in part, the court judges the defendant to pay the costs under the proceedings, as well as to pay the claimant the paid state fee. The court judges the defendant to pay the claimant for a lawyer, if there was such, in proportion to the accepted part of the claim.

Separation of the claim for compensation

The claim for compensation can be separated at the request of a party or after the discretion of the court, if its hearing makes more difficult the contestation of the administrative act. The examination of the separated claim continues in the same court after the entry into force of the declaration of invalidity or cancellation of the act, as this rule is imperative.

Termination of the proceedings under the claim for compensation

When the proceedings upon the contesting of the administrative act is terminated, the proceedings upon the compound with it claim for compensation is terminated also, unless it is for a compensation for damages under an invalid administrative act or the proceedings upon the contesting has been terminated because of the withdrawal of the administrative act.

The proceedings under the claim are terminated if the contestation of the administrative act has been rejected. Upon termination of the proceedings, there can be achieved an agreement between the parties to the amount of the compensation.

The principle of state liability for damages, caused to citizens, is an expression of the generally accepted human values, enshrined in the European Convention for the Protection of Human Rights and Fundamental Freedoms, namely any legal entity to have reliable “internal” remedies against the state.

The institute of state liability is a kind of proof for the achieved legal order in modern societies. On the one hand, the citizens are responsible for their actions before the state, but on the other, it could also suffer adverse consequences for their damaging actions. This legal balance, however, is not a guarantee for the advancement of society, since a crucial role for it plays the civil consciousness of moral society.

Or, as Margaret Thatcher said: “We are society, where people are free to make choice, to make mistakes, to be generous and compassionate. This is what we mean by moral society, not that one, where the state is responsible for everything and no one is responsible for the state.”

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