Банкеръ Weekly



Imagine you are a foreign investor who has decided to invest part of his capital in Bulgaria. You sign a contract, but the other party fails to make the necessary payments to you and you go to court. In the best of cases, even with undeniable evidence on your side, you will not have your right acknowledged earlier than in two years. However, even the end of the three-instance nightmare does not necessarily mean that you will get your receivables back. Practice in Bulgaria has shown that frequently a court decision in favour of a creditor is just a useless sheet of paper. The reason is the sluggish and inefficient execution for which Bulgaria was much criticized by the World Bank, the European Commission, and other authoritative international institutions.In the jungle of the Bulgarian jurisdiction and the execution process in particular, foreign companies (and local ones, too) could have reacted in two different manners against improper payers so far. One of them was to use the services of the so called shadow structures which bring the debtor into line in return to a decent percentage of the amount due. Otherwise, the companies had to simply forget about the amount lost and go to another business. Some hope that the situation might change for the better aroused when the bills on private execution and on amendments to the Civil Procedure Code were brought up in Parliament. The two documents stipulate that no later than 2008 the collection of private receivables be transferred from state bailiffs to private agents. Among their authors are the Parliament Chairman Ognyan Gerdzhikov, his deputies Kamelia Kassabova and Lyuben Kornezov, the head of the legal commission Anelia Mingova, and her colleague from the economic commission Valeri Dimitrov. The bills were developed within the initiative for reforms in the Bulgarian commercial law, financed by the US Agency for International Aid. Last week the agency organized a public discussion on the privatisation of the execution. The participants in the forum declared that if the texts were to be voted by the National Assembly, that would mean a kind of a small revolution.The inefficiency of the Bulgarian execution proceedings and the need of changes have been discussed for a long time. The Ministry of Justice spent huge amounts from the European Union PHARE program on the preparation of the respective amendments, but eventually the first real projects were written with US assistance. Anyway, should the forecast that the two bills will be adopted by year-end come true, nearly 300 bailiffs currently sponsored by the budget will share the fate of their colleagues in the notary's office and will be forced to go private. The remunerations of the future private executors will depend on the fees collected from customers and that should raise their motivation significantly. The agents are now paid a permanent monthly salary, regardless of the level of collected receivables. When the current restriction for territorial competency of the bailiffs (only in the region of the regional court where they are located) is eliminated, there will be conditions for real competition in a national scale.The proposals were not unanimously accepted by the branch experts. Some bailiffs even sent a letter to the media protesting against the prepared change. However, one of the authors of the bill - Valeri Dimitrov, claimed that Bulgaria would not be able to join the EU completely without efficient execution proceedings that can guarantee the interests of the creditors. His opinion was also shared by Tatyana Doncheva, representative of the Bulgarian Socialist Party, who said that receivables in most countries of the EU were collected by private agents. The Chairman of the Supreme Administrative Court Konstantin Penchev defended the amendments to the commercial law, too.The model of the Notaries and Notary Activity Act was used for preparation of the document. According to the proposed text, the right to act as a private executor will be ceded to persons with legal education, three-year practical service, and age below 60. Moreover, candidates must not have been deprived of their right or be subject to insolvency proceedings. The status of private executor will be acquired after a special competition in the Ministry of Justice and will be incompatible with the mandate of an MP, mayor, or municipal councillor. Private executor's rights will neither be given to lawyers and members of supervisory or managing bodies of commercial companies and co-operations.Debates will probably arise in the Parliamentary commissions on the intentions for authorizing the private executors to access the archives of the court and the state administration, including the tax authorities, the National Social Security Institute, the Central Depository, etc. Moreover, the creditor whose receivable has to be collected may authorize the private executor to make inquiries about the property of the debtor and find the necessary documents. Private executors may also be allowed to act as syndics in insolvent companies, as soon as a court decides so. The executors will be obliged to open a special account of their own in a commercial bank where the cashed amounts of the property will be added. The accounts will be used for making payments to the creditor to which the execution list has been issued.The clauses of the bill for amending the Civil Procedure Code sound as radical as these above. They aim at accelerating the processes of execution. For example, when solving a disputable case the court will define a term within which its decision has to be executed and will order the decision to be carried out compulsively after the term expires. One more innovation - by request of the plaintiff, along with the judging decision, the debtor may be informed about the order of the execution. In his request to the private executor, the creditor is obliged to give instructions on one enforcement method to be used which may be changed later. The current regulation allows for instructing on various methods such as sale of movable or immovable property, receivables from third parties, etc. The parties will have less chances to appeal against the actions of the private executor. The creditor will only be able to protest in the regional court against a refusal of the executor to fulfil the order for assignation of the estate offered for public sale. Much more limited will be the rights of the debtor who will be allowed to appeal only against fines imposed during the execution proceedings. As a compensation, the debtor may claim damages from the creditor in accordance with the Law on Obligations and Contracts.Execution cases will be terminated by the court if sales appointed by the private executor have ended unsuccessfully or if there is evidence that the debtor possesses no property subject to execution. In case the sentenced person owns neither things nor estates that can be cashed down, he will have to declare it to the court.Changes are also proposed to the proceedings by which private executors organize the public sale of movable or immovable property. One idea is to abolish art. 362, according to which the bailiff prepares an assessment of the sold property by its market value. Legal experts comment that this regulation is exactly the one that hides the key to blocking the execution proceedings because debtors appeal against the assessments incessantly. Also, when real estates are to be sold, open bidding will be allowed simultaneously with the currently permitted procedure of submitting offers in closed envelopes.

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