Published on 21 March 2022
FOURTH SECTION
Application no. 26473/18
Nevin Ramadan BOZADZHIEVA and Others
against Bulgaria
lodged on 30 May 2018
communicated on 28 February 2022
STATEMENT OF FACTS
A list of the applicants is set out in the appendix. The first and second applicants are spouses, and the third applicant is a limited-liability company fully owned by the second applicant.
The circumstances of the case
The facts of the case, as submitted by the applicants, may be summarised as follows.
In a judgment of the Razgrad Regional Court of 26 March 2014, which became final on an unspecified date, the first applicant was convicted for two offences. First, despite having received between 2008 and 2013 through Western Union and Money Gram numerous payments from persons living abroad, totalling about 163,000 euros (EUR), she had failed to declare the income to the tax authorities, evading the payment of income tax in the global amount of 52,317 Bulgarian levs (BGN), the equivalent of EUR 26,760. Second, between 2008 and 2011, using false documents, the first applicant had fraudulently received BGN 2,300 (EUR 1,176) in child allowances without having the right to; the money had been paid back by her in the meantime.
Since the offences committed by the first applicant fell within the scope of the Forfeiture of Unlawfully Acquired Assets Act (hereinafter “the 2012 Act”), in 2014 the Commission for the Forfeiture of Unlawfully Acquired Assets (hereinafter “the Commission”) opened proceedings against the three applicants, checking their financial situation between 2004 and 2014. In 2015 it introduced a forfeiture application against them, seeking the forfeiture of the following assets: a flat in Razgrad and several plots of land, some of which with buildings constructed on them; sums of money received from the sale of other plots of land and a car; the value of the second applicant’s shares in the third applicant and monetary contributions to the company on his part; sums of money placed by the first and second applicants in numerous bank accounts; a sum of money equalling the remainder of the EUR 163,000 received by the first applicant, namely minus the investments in the assets described above. It was argued that the sum of EUR 163,000 had been of “unestablished origin”. According to the Commission, at the time of submission of the forfeiture application the total value of the assets for which forfeiture was being sought was BGN 535,624 (about EUR 274,000).
In a judgment of 19 October 2019 the Razgrad Regional Court dismissed the forfeiture application, finding in particular that the EUR 163,000 received by the first applicant was not unlawfully acquired asset.
However, on 24 February 2017 the Varna Court of Appeal reversed this decision and allowed the application in its entirety.
It noted that during the period under examination the first and second applicant had received about BGN 62,500 (EUR 32,000) from salaries, from the sale of different assets and in bank loans. Their daily and extraordinary expenses (including for travel, taxes and fines) had amounted to about BGN 190,000 (EUR 97,000). As mentioned, the first applicant had received significant sums of money from abroad, and the three applicants had used them to acquire different assets.
The salient issue in the case was whether the money received by the first applicant – EUR 163,000 in total – could be considered of lawful origin. The applicants claimed that the money had been from gifts, some of which on the occasion of marriages and other family celebrations, and from loans. However, the Varna Court of Appeal considered that these unsubstantiated claims were insufficient to justify the money’s lawful provenance; nor could the tax authorities’ finding that the money was taxable income prove such provenance.
The above meant that the applicants held significant assets acquired with unlawful income, which was therefore subject to forfeiture.
In a final decision of 6 December 2017 the Supreme Court of Cassation refused to accept for examination the applicants’ appeal on points of law.
RELEVANT LEGAL FRAMEWORK AND PRACTICE
Legislative history and general approach of the 2012 ActThe Forfeiture of Proceeds of Crime Act (Закон за отнемане в полза на държавата на имущество, придобито от престъпна дейност, hereinafter “the 2005 Act”) was adopted in 2005. It provided for the forfeiture of proceeds of crime and thus required a conviction, as well as, in accordance with the practice of the national courts, a causal link between the offence committed and the assets to be forfeited. The 2005 Act has been described in more detail in Todorov and Others v. Bulgaria (nos. 50705/11 and 6 others, §§ 90-110, 13 July 2021).
The 2005 Act was repealed in 2012 when the Forfeiture of Unlawfully Acquired Assets Act (Закон за отнемане в полза на държавата на незаконно придобито имущество, “the 2012 Act”) was adopted. The explanatory note accompanying the Bill in Parliament stated that “a different legislative approach” ensuring greater efficiency was necessary. The main deficiency of the 2005 Act was identified as the need to await the conclusion of the criminal proceedings against the defendant in order to proceed with the forfeiture, which “very often rendered[ed] the State interference ineffective”.
The 2012 Act’s main novelty was that it provided for the forfeiture of “unlawful” assets and not necessarily proceeds of crime.
In a judgment of 13 October 2012 the Bulgarian Constitutional Court found that the 2012 Act’s general approach was in accordance with the provisions of the Constitution guaranteeing the right to property (Решение № 13 от 13.10.2012 г. на КС по к. д. № 6/2012 г.). It held in particular the following:
“What is subject to forfeiture are not assets acquired through lawful sources, but assets of unlawful origin ... The Act aims at countering the consequences of unjustified enrichment at the expense of other individuals or the society as a whole, enrichment resulting from activities which are forbidden.”
The Constitutional Court gave examples of such forbidden activities – tax evasion, smuggling, corruption, trafficking in human beings or drugs, large-scale thefts – pointing out however that the forfeiture proceedings under the 2012 Act did not aim to establish the details of such activities.
It considered the previous approach under the 2005 Act ineffective in some cases:
“for instance, where the evidence shows explicitly that certain assets are of unlawful origin, but is at the same time insufficient for a conviction for an offence proven beyond reasonable doubt, as well as where the criminal prosecution is temporarily or permanently barred by an obstacle such as the death of the perpetrator, amnesty, the expiry of a limitation period for criminal prosecution, an immunity, objective impossibility to find the perpetrator to ensure his participation in the criminal proceedings, mental disorder excluding criminal liability etc.”
The Constitutional Court pointed out that the 2012 Act’s approach did not breach the principle of legal certainty and that the Act guaranteed sufficiently the rights of third parties.
The 2012 Act remained in force until 2018 when it was repealed with the adoption of the Counteraction Against Corruption and Forfeiture of Unlawfully Acquired Assets Act (Закон за противодействие на корупцията и отнемане на незаконно придобито имущество).
Substantive provisionsThe 2012 Act provided for the forfeiture of unlawfully acquired assets, defined as “assets for which no lawful origin is established” (section 1(2)). By section 3(2), the Act had to be applied while respecting the rights of the persons affected and avoiding “any risk of unfairness”.
Forfeiture could be sought where it could be reasonably assumed that an asset was unlawfully acquired (section 21 of the 2012 Act). There had to be a “significant discrepancy” between the defendant’s revenues and assets, namely in the amount of at least BGN 150,000 (EUR 76,700). Any asset was to be assessed in that regard taking into account its actual market value at the relevant time. The Constitutional Court noted in its judgment of 13 October 2012 (cited above) that what had to be established was the defendant’s assets at the beginning and at the end of the period under examination, any increase of these assets from lawful sources, as well as the expenses made.
Forfeiture proceedings could be opened once charges had been brought against the defendant, concerning offences enumerated in section 22(1) of the 2012 Act. The list is mostly the same as in section 3(1) of the 2005 Act (see, for more detail, Todorov and Others, cited above, § 95), with the addition of some corruption offences, offences against the tax and fiscal systems, and human trafficking.
Proceedings could also start after a final decision of the relevant authorities established an administrative offence having resulted in substantial profit – at least BGN 150,000 (EUR 76,700), amount lowered to BGN 100,000 (EUR 51,150) in 2016 – and where such profit could not be recovered by the State through other means.
The State’s right to forfeit an asset expired ten years after the asset had been acquired (section 73).
ProcedureThe body in charge of initiating and pursuing proceedings under the 2012 Act was the Commission for the Forfeiture of Unlawfully Acquired Assets (“the Commission”). It had five members, appointed by the Prime Minister, Parliament and the President of the Republic. The Commission had regional offices.
Once it was notified by the other competent bodies that a person had been charged with an offence among the ones enumerated in section 22(1) of the 2012 Act, or of an established serious administrative offence, the respective regional office opened an investigation, seeking to establish the assets, revenues and expenses of the defendant. On the basis of these findings, the Commission took decision to discontinue the proceedings or to bring a forfeiture application. Such application was examined by the courts, under the rules of civil procedure.
A forfeiture application could be introduced in court on the basis of the charges brought and did not necessarily require a final conviction. The forfeiture could be proceeded with even where the criminal proceedings against the defendant had been discontinued or the defendant had been acquitted.
COMPLAINTS
The applicants complain under Article 1 of Protocol No. 1, Article 6 § 1 and Article 13 of the Convention that the forfeiture of their assets was unfair and arbitrary, in particular because those assets had not validly been shown to be of unlawful provenance.
QUESTIONS TO THE PARTIES
1. Did the applicants have a fair hearing in the determination of their civil rights and obligations, in accordance with Article 6 § 1 of the Convention? In particular, are the national courts’ conclusions that the applicants’ assets had been unlawfully acquired adequately and sufficiently reasoned?
2. Has there been a violation of Article 1 of Protocol No. 1? In particular, did the forfeiture of the applicants’ assets under the Forfeiture of Unlawfully Acquired Assets Act pursue a legitimate aim and was it proportionate to that aim?
3. Did the applicants have at their disposal an effective domestic remedy for their Convention complaints, as required by Article 13 of the Convention?
APPENDIX
Application no. 26473/18
No.
Applicant’s Name
Year of birth
Nationality
Place of residence
1.
Nevin Ramadan BOZADZHIEVA
1977
Bulgarian
Yasenovets
2.
Gyulver Ismail HASAN
1968
Bulgarian
Yasenovets
3.
RUZH-DIL EOOD
2007
Bulgarian
Yasenovets