20 years together

July 2014

31 July 2014

A team of Dimitrov, Petrov & Co. successfully advised a factoring financing deal with matter value of EUR 8 million

In July 2014, a team of Dimitrov, Petrov & Co., headed by Metodi Baykushev, Partner, successfully represented a leading Bulgarian retail chain in а factoring financing deal with a Bulgarian bank with matter value of EUR 8 million. The team led rigorous negotiations on the structuring of the relevant collaterals.

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Interpretative Decision No. 3 of July 03, 2014 of the Supreme Administrative Court


The General Assembly of the Colleges of the Supreme Administrative Court (GAC of SAC) has adopted an interpretative decision on the following issues:

1.    Are the prescription terms provided for implementation of the administrative penalty “fine” in article 82, paragraph 1, b. “a”, related to paragraph 2 and paragraph 3 from 
Administrative Breaches and Penalties Act (ABPA) with regard to the penalty payment, imposed with a penal enactment which has come into force?

2.    Is the regulation of article 175, paragraph

3 from the Tax-Insurance Procedure Code (TIPC) applicable to, with regard to the penalty payments as well?

In relation for these issues, the GAC of SAC has taken into consideration the following:

The legislator makes a clear distinction between a fine and a penalty payment as legal terms and legal establishments. Both establishments are regulated independently, and initiated with different provisions. The difference between the “fine” penalty for the physical entities and the “penal enactment” for the legal entities and the sole traders comes down to the subject of responsibility and namely, from this difference in the subject and because of the fact that the Bulgarian legislation excludes penal and/or administrative penal responsibility for the legal entities, the responsibility under article 83 from the ABPA is defined as objective, without any guilt responsibility.

These differences do not allow any application by analogy of the regulations, which refer to the penalty fine, as well as penalty payment.

In accordance with the text of article 82, paragraph 1, b. “a” from the ABPA, the administrative penalty is not enacted if two years have been elapsed when the imposed penalty is “fine”. The prescription begins to pass from the moment when the act which implements the penalty comes into force and it is discontinued with every action of the proper authorities, undertaken for the implementation of the penalty by which the prescription has been discontinued and a new prescription begins to pass. Regardless of the discontinuation or cancellation of that prescription, the administrative penalty is not enacted if the prescription terms which exceed by a half the term under article 1, in compliance with the regulation of article 3 from paragraph 82, from the ABPA, have elapsed. In accordance with article 4 from the same regulation, paragraph 3 is not applied when the same is related to the “fine”, when it is a question of its collection in the term under paragraph 1 and it is set up an execution procedure.

These regulations have as an applied field the prescription terms for the execution of the penalty “fine” and, there are no legislative gaps or incompleteness in the act, to be considered that these regulations are applicable for the “penalty payment” as well.

For the penalty payment under article 83 from the ABPA, as kind of a public claim under article 162, paragraph 2, item 5, related to item 7 from TIPC, the prescription terms are set up in article 171 from TIPC. In accordance with paragraph 1 of article 171 from the TIPC, public claims are lapsed after the prescription terms of 5 years as from the 1st of January of the year, following the year, in which it was the public obligation to be paid, unless a shorter period of time is provided for in the act. The absolute limitation period of a payment for the public claims is provided for in the regulation of paragraph 2 of article 171 from TIPC, which says the following: after the prescription terms of 10 years as from the 1st of January of the year, following the year in which it was the public obligation to be paid, regardless of the discontinuation or cancellation of the prescription period, except for the cases, in which the obligation is adjourned or deferred.

The short 2-year limitation period of a payment under article 82, paragraph 1, b. “a” from ABPA is an exception within the meaning of the last tendered from paragraph 1 of article 171 from TIPC – “it is provided for in an act a shorter prescription term”, but it is applicable only for the explicitly provided for in the regulation, administrative penalty “fine” and it cannot be applied by analogy for “penalty payment” as well.

As regards to the fines, there is a special implemented regulation of article 175, paragraph 3 from the TIPC, which provides for that, interests on fines are not due. This special rule, which excludes incurring of fines, concerns only the fines, as an exception for the penalty payments, is not provided for. The penalty payment is not a fine, but another kind of a public claim, as for the differentiation has been made in the regulation of paragraph 162, article 2 item 5 from TIPC, which indicates these two types of public claims independently, which confirms that the legislator differentiates the two institutes clearly.

Under the reasons stated, GAC of SAC adopted the following:

1. The prescription terms, provided for execution of the administrative penalty “fine” in article 82, paragraph 1, b. “a”, related to paragraph 2 and paragraph 3 from the ABPA, are not applicable, as regards to the “penalty payment”, imposed with a penal enactment, which has come into force.

2.  The regulation of article 175, paragraph 3 from TIPC is not applicable, as regards to the penalty payments.

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Interpretative Decision No. 6 of July 15, 2014 of the Supreme Court of Cassation

The General Assembly of the Civil College of the Supreme Court of Cassation (GACC of SCC) has adopted an interpretative decision on the following issues:

1. Are the negative factual allegations of the parties in civil case procedures subject to proving, how is the burden of proof distributed?

2. In case of initiating a claim under Art. 344, Para.1, item 3 of the Labour Code (LC) in relation to Art. 225, Para.1 of LC who bears the burden of proof to ascertain the fact that the employee has become unemployed and has not received remuneration - the employee or the employer?

With regard to these issues, the GACC of SCC has taken into consideration the following:

Becoming unemployed due to dismissal is a legally relevant fact, part of the hypothesis of the legal regulation of Art. 344, Para.1, item 3 of LC. A right to compensation arises for the claimant from the fact of being unemployed during the six-month period after the unlawful dismissal of the latter. Due to this fact and on the grounds of Art.154, Para.1 of the Civil Procedure Code, which stipulates that each party is obliged to ascertain the facts on the grounds of which they base their claims, the claimant shall bear the burden of ascertaining the fact that after the dismissal the latter has become unemployed and has not received remuneration (or has received a remuneration of smaller amount). The proving of negative factual allegations may be done via a set of positive facts which serve as the basis for evidentiary conclusions regarding the negative fact. Adopting the contrary position that the factual allegation for becoming unemployed is not subject to proving by the claimant means accepting the statement as true in the cases when no reply to the claim is submitted. The procedural rules do not provide for such an opportunity and the court practice of SCC sustainably adopts that the lack of reply does not release the claimant from the obligation to prove the legally relevant facts, on the grounds of which they base their claims.

The state of being unemployed may be proven by ascertaining the lack of a registered subsequent employment relation in the record of service of the claimant, the lack of registered employment relation in the National Revenue Agency (NRA) during the claim period, the registration of the claimant in the Employment office as unemployed or by ascertaining other facts which may lead to the conclusion for unemployment.  The record of service is an official document certifying the circumstances recorded in it which is kept by the worker/ employee pursuant to Art. 1, Para. 2 of the Ordinance on the record and length of service. Taking into account the obligation of the employer under Art. 62, Para.3 of the LC to register the labour contracts within a three-day term, the NRA certificate may as well be deemed sufficient evidence for ascertaining a state of unemployment relation. The declaration via which the claimant declares their unemployment after the dismissal is a private evidential document and as such does not cover the criminal responsibility under Art. 313 of the Penal Code, hence, it may not certify the claimed circumstance.

With a view to the above-mentioned, the GACC of SCC has adopted the following:

In case of initiating a claim under Art. 344, Para.1, item 3 of the Labour Code (LC) in relation to Art. 225, Para.1 of LC the burden of proof to ascertain the fact that the employee has become unemployed and has not received remuneration shall be borne by the claimant.

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Ordinance for Amendment and Supplement to Ordinance No 8 from 2008 on the Functions and Organization of the Activity of the Criminal Records Bureaus (OASOFOACRB)

The OASOFOACRB was promulgated in the State Gazette, issue 58 of July 15, 2014.

The OASOFOACRB expands the scope of application of electronic signatures and electronic documents in the activity of the criminal records bureaus. This amendment appears as a logical continuation of the introduction of the option for issuing a certificate of no criminal conviction electronically, which came into force with the amendment from February 15, 2013.

The newly provided options for the criminal records bureaus to send reports and certificates of no criminal conviction electronically will improve the communication opportunities of the administration bodies among themselves, with regard to the aforementioned documents. From a substantive point of view this is carried out through the supplementation to Art. 12, Para. 1, Art. 34, Para. 4 and the creation of Art. 36a. The new Art. 36a provides evidential power for the electronic list of convictions, when the latter is reproduced on paper and verified by the official/s under Para. 3 of the same Article.

Bulgarian citizens abroad should pay special attention to the opportunity stipulated by Art. 34, Para. 4: certificates of no criminal conviction can be sent to Bulgarian foreign offices in the form of electronically signed documents. This innovation will facilitate  Bulgarian citizens’ starting work abroad by  reducing the time for communication among institutions.

The requirement for citizens to have a qualified electronic signature within the meaning of the Electronic Document and Electronic Signature Act in order to have electronic certificates of no criminal conviction issued remains in this version of Ordinance No 8 as well a major obstacle to the wide spreading of the use of this service.

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Act for Amendment and Supplement to the Consumer Protection Act

In the State Gazette, issue 61 of July 25, 2014, the Act for Amendment and Supplement to the Consumer Protection Act (AASCPA) was promulgated. With it, the following major amendments were introduced:

Firstly, the scope of the general obligation of traders to provide information that applies to all types of contracts is extended.

Secondly, a new framework of distance contracts and off-premises contracts is introduced, which differs from the one of the current Consumer Protection Act, the provisions applying to both services and goods:

- the content of the mandatory pre-contractual information provided by the trader is set out;

- detailed requirements, regarding the form of the two types of contracts are introduced;

- the consumer’s right of withdrawal from the distance contract or off-premises contract is regulated and the term for its exercising is increased from 7 to 14 days;
 
- provisions regarding the way of exercising the consumer’s right of withdrawal from the executed contract are introduced, as well as  the effect of the withdrawal and the trader’s and consumer’s obligations, in case of a withdrawal from the contract; some exceptions from the right of withdrawal are also introduced.

Thirdly, some aspects of the contract of sale are regulated:

- The supply of goods and risk transfer;

- charging consumers for using a means of payment more than the cost, incurred by the trader for the use of the same means of payment, is prohibited.

- an obligation on the part of the trader to obtain prior consent from the consumer for making additional payments, which are not provided for in the contract.

The provisions of AASCPA regulate also the water, gas, electricity supply contracts, where they are not packaged in a limited volume or a defined quantity, as well as the central heating or digital content contracts, where the latter is not provided on a tangible medium of expression.

Changes have been made in relation to guarantees and complaints of goods as well. The regulation on unfair commercial practices has been also further developed. The articles, in which these major changes are incorporated, will be considered below.

As already mentioned in the AASCPA, the volume of information that the trader must provide the consumer before the latter be bound by the contract is expanded. Art. 4 states that the consumer should be provided not only with all the information, required untill now, but also with the trader’s name/designation, seat and registered address, phone number as well as e-mail address and website, if any; availability of goods or services, etc.

The amended Art. 44 and 45 define off-premises contracts and distance contracts. Art. 47 stipulates the increase of the information that the trader must provide to the consumer before the latter be bound by any distance or off-premises contract, or by a similar proposal for conclusion of a contract.

The burden of proof for performing the obligation to provide information lies with the trader. Art. 48 regulates the way information must be provided. An innovation in Art. 49 is the introduction of conditions and volume of information necessary for a conclusion of a distance contract electronically via the Internet, which stipulates an obligation for the consumer to make a payment. Much more complete and well-structured is the regulation of the right of withdrawal from a distance or off-premises contract – Art.50-56:

Art. 50 specifies the cases in which the consumer has the right to withdraw from a distance or off-premises contract, without stating a reason, paying a compensation or a penalty.

Art. 51 and 52 set out the terms and conditions upon which consumers may withdraw from the distance or off-premises contracts.Art. 53 states the consequences of exercising the right of withdrawal. Art. 54 regulates the trader’s obligations after the consumer has exercised their right of withdrawal from a distance or off-premises contracts. Art. 55 regulates the delivery of the goods, the cost of returning the goods, the responsibility of reducing the value, as well as the costs the consumer should not pay, when exercising the their right of withdrawal.

Art. 56 points out that, in case of exercising the right of withdrawal, any additional contract shall be terminated automatically. A new Art. 57 is created in which there is a thorough list of the contracts, in respect of which the provisions of Art. 50-56 do not apply.

Attention should be given to the newly created Art. 103a, 103b, and 103c. They aim to ensure consumer protection in the supply of goods and the time when the risk of loss or damage passes to the consumer is determined.

The following new provisions of Art. 147a and Art. 147b arouse interest.

There are several new aspects in Art. 147a:

- when signing a contract with a consumer under general terms, they are binding for the consumer only if they have been provided to the consumer and the consumer has agreed with these terms.;

 – the consumer’s consent with the general terms is certified by the signature of the latter;

- the burden of proof for the consumer’s consent with the general terms and their receipt upon signing the contract lies with the trader.

- the clause of consent with the general terms of the contract and a declaration of their receipt by the consumer, included in the individual contracts, is not an actual proof of acceptance of these general terms and for the receipt of a copy by the consumer.

Special attention is given to the burden of proof in disputes. It lies with the trader, who in case of a claim on the part of the consumer that the latter has not received and has not consented to the general terms, must prove these facts. What is interesting here is that the declaration of the fact of receipt and consent in the individual contracts is not a proof.

The new aspects in Art. 147b are the following:

- the period within which the trader must notify the consumer of any amendments to the general terms is 7 days as of the occurrence of this circumstance.

- in case of disagreement with the general terms, the consumer can either withdraw from the contract without stating any reason and without paying a compensation or penalty, or continue performing it under the general terms that were in force prior to the amendment.

- the consumers can exercise their right to withdraw from the contract or to continue performing it under the general terms that were in force prior to the amendment, by sending a written notice to the trader within one month as of the receipt of the notice for the amendments;

A new Art. 202 is created, which refers to imposing a fine in case of a failure to carry out the provisions of Art. 147 and 147b.

It should be noted that there is a significant increase in the amount of fines imposed upon establishment of an unfair commercial practice, which aims to protect the rights and interests of consumers to a greater extent. As an example Art. 201a, can be given, according to which, in case of infringement of Art. 68c, Art. 68d, Art. 68g items 1-11, 13, 15, 18-23 and Art. 68j, items 3-6 the responsible persons shall be imposed a fine, and the sole traders and legal entities – a pecuniary sanction from BGN 1,000 to BGN 30,000, compared to from BGN 500 to BGN 10,000, provided for in the Consumer Protection Act before its amendment.

Another novelty is that the acts for establishment of administrative violations and the penal orders under the Administrative Violations and Penalties Act and the individual administrative acts under the Administrative Procedure Code can be served to a natural person, who is located in the establishment and the same is in civil or labour relations with the entity against whom these acts were issued. All of this is regulated in Art. 233, Para. 4.

In the additional provisions some significant amendments and supplement were made. With regard to some special aspects of unfair commercial practices, in case of contradiction between the provisions of Chapter Four, Section III and the provisions of the European Union legislation or the Bulgarian legislation, introducing the requirements of the EU legislation, the provisions of the EU legislation and the Bulgarian legislation shall apply. It becomes clear that the changes are in compliance with the basic principle of the primacy of EU legislation over domestic law in case of contradiction.

Another novelty is the definition of the web sites, which allow consumers to keep received information for a sufficiently long period of time without the possibility of it being changed by the trader, as durable media.

Annex No. 6 to Art. 47, Para. 1, item 8 and Art. 52, Para. 2 and 4 Standard Form for Exercising the Right of Withdrawal from a Contract and Annex No. 7 to Art. 47, Para. 4 Standard Guidelines for a Withdrawal are created. This aims to give greater clarity with regard to the right of withdrawal and help consumers to exercise it.

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