CASE OF KULINOV AND OTHERS v. BULGARIA

 

 

 

THIRD SECTION

CASE OF KULINOV AND OTHERS v. BULGARIA

(Application no. 28151/15 and 2 others – see appended list)

 

 

 

 

 

JUDGMENT

 

STRASBOURG

13 April 2023

 

 

 

This judgment is final but it may be subject to editorial revision.

 

In the case of Kulinov and Others v. Bulgaria,

The European Court of Human Rights (Third Section), sitting as a Committee composed of:

 Darian Pavli, President,
 Ioannis Ktistakis,
 Andreas Zünd, judges,

and Viktoriya Maradudina, Acting Deputy Section Registrar,

Having deliberated in private on 23 March 2023,

Delivers the following judgment, which was adopted on that date:

PROCEDURE

1.  The case originated in applications against Bulgaria lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) on the various dates indicated in the appended table.

2.  The Bulgarian Government (“the Government”) were given notice of the applications.

THE FACTS

3.  The list of applicants and the relevant details of the applications are set out in the appended table.

4.  The applicants complained of the forfeiture of alleged proceeds of crime.

THE LAW

JOINDER OF THE APPLICATIONS

5.  Having regard to the similar subject matter of the applications, the Court finds it appropriate to examine them jointly in a single judgment.

ALLEGED VIOLATION OF ARTICLE 1 of Protocol No. 1

6.  The applicants complained of the forfeiture of alleged proceeds of crime. They relied, expressly or in substance, on Article 1 of Protocol No. 1, which reads as follows:

“Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.

The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.”

7.  The cases are of the type examined in the leading judgment Todorov and Others v. Bulgaria (nos. 50705/11 and 6 others, 13 July 2021).

8.  In the case of Timchenko and Others (application no. 30642/21) the Government raised two objections of inadmissibility. They argued, first, that the applicants had failed to exhaust the available domestic remedies, because they had not sued the State in tort, seeing that part of the forfeiture application against them had been rejected (see the description of the facts in the appended table). However, identical objections were already dismissed in Todorov and Others (cited above, § 138), and the Court does not consider it necessary to reiterate the reasons already given. The Government argued also that the applicants had abused their right to individual application, because they had allegedly not informed the Court in due time of their attempt to have the forfeiture proceedings reopened (see, once again, the description of the facts in the appended table). The Court dismisses this objection as well. The applicants did inform it of the dismissal of their reopening application in September 2022, shortly after the Supreme Court of Cassation gave its decision in August 2022. In addition, the information concerning an unsuccessful reopening attempt is not essential, nor relating to the core of the case, and any failure on the part of the applicants to inform the Court of it would not have warranted the dismissal of the application on the grounds of abuse.

9.  As was already noted, the Court has adopted a leading judgment against Bulgaria on the forfeiture of proceeds of crime under the same legislation as applied in the cases at hand, namely the Forfeiture of Proceeds of Crime Act 2005 (hereinafter “the 2005 Act”) – see Todorov and Others (cited above). The Court identified some potential flaws in the 2005 Act and in the manner in which it had been applied, in particular the combined effect of the wide scope of its application – as to predicate crimes and as to the periods for which the defendants’ revenues and expenses were being checked, of the difficulties for defendants to prove what the courts considered “lawful” income during such a period, marked, moreover, by inflation and economic changes, and of the presumption that any asset not shown to have had a “lawful” provenance was the proceed of crime (see Todorov and Others, cited above, §§ 200-09). The Court’s position was that, while these potential flaws were not sufficient to render each forfeiture under the 2005 Act contrary to Article 1 of Protocol No. 1, they certainly placed a considerable burden on defendants in forfeiture proceedings and could tilt the balance in favour of the State. Thus, as a counterbalance and a guarantee of the applicants’ rights, it was crucial that the national courts provided in their decisions some particulars as to the criminal conduct in which the assets to be forfeited were alleged to have originated, and showed, in a reasoned manner, that those assets could have been the proceeds of such criminal conduct (ibid., §§ 210-15).

10.  Applying these requirements to the specific cases examined in the leading judgment, the Court found a violation of Article 1 of Protocol No. 1 in those of them where the national courts had failed to justify the existence of the causal link defined above, and had ordered forfeiture relying on the presumption contained in the 2005 Act and on discrepancies between the applicants’ expenses and their “lawful” income during the relevant periods (see §§ 217-50 of the judgment). On the other hand, the Court found no violation in the cases where such a causal link had been shown to exist, and where the domestic courts had established in a reasonable manner that the assets for which forfeiture was being sought were the proceeds of crime (see §§ 251-81).

11.  The Government argued that, as in the cases examined in Todorov and Others where no violation of the applicants’ rights had been found, in the cases at hand the domestic courts had performed the necessary analysis and had “clearly established” a causal link between “criminal activities” of the applicants and the forfeited assets.

12.  However, the Court observes that in the cases under examination the predicate offences had not yielded any financial gain, and the authorities did not indicate what other “criminal activity” the applicants could have been engaged in. It could appear that in the case of Kulinov (application no. 28151/15) the national courts assumed that the applicant had committed other offences of the same type as the one having triggered the forfeiture proceedings, seeing that they noted the date on which such offences had been criminalised (see the description of the facts in the appended table), but such an assumption was not supported by any evidence. In the case of Slavkov (application no. 7413/21) the forfeited assets had been acquired many years after the predicate offence, and after the applicant had left Bulgaria to live in another country. As to the case of Timchenko and Others (application no. 30642/21), Mr V. Timchenko had been convicted for an offence committed between 2006 and 2008, but the national courts appeared to assume that he had been implicated in unspecified criminal activities yielding proceeds of crime as of 1998, namely when his company had started being economically active.

13.  In this situation the Court does not consider that the authorities provided any relevant particulars as to criminal conduct which could have generated the alleged proceeds of crime, as was required in Todorov and Others (cited above). Nor did they show in a reasoned and adequate manner that the particular assets under examination could have been the proceeds of crime. As evident from the description of the facts, the national courts relied mostly on the potential of offences of the type committed by the applicants to generate income or, in the case of Timchenko and Others, on the fact that Mr V. Timchenko’s company had started its economic activity in 1998, and on discrepancies established by them between the applicants’ income considered “lawful” and their expenses. The Court stated in Todorov and Others (cited above, § 216) that in such type of cases it would generally defer to the national courts’ assessment as to the existence of a causal link between any criminal conduct of the applicants and the assets subject to forfeiture, save where such assessment is arbitrary or manifestly unreasonable. The latter seems to be the case here, as the reasons provided to substantiate such a link are clearly insufficient.

14.  These complaints are therefore admissible and disclose a breach of Article 1 of Protocol No. 1.

APPLICATION OF ARTICLE 41 OF THE CONVENTION

15.  Article 41 of the Convention provides:

“If the Court finds that there has been a violation of the Convention or the Protocols thereto, and if the internal law of the High Contracting Party concerned allows only partial reparation to be made, the Court shall, if necessary, afford just satisfaction to the injured party.”

16.  The applicant in the case of Kulinov (application no. 28151/15) did not claim pecuniary damage. In respect of non-pecuniary damage, he claimed 20,000 euros (EUR).

17.  The applicant in the case of Slavkov (application no. 7413/21) submitted no specific claims under Article 41.

18.  In the case of Timchenko and Others (application no. 30642/21) the applicants claimed, under the head of pecuniary damage, the value of their forfeited assets. They argued that this was the sole means allowing them to obtain fair redress, and urged the Court to depart from its approach in Todorov and Others (cited above, §§ 320-22), where it stated that the forfeiture proceedings had to be reopened and the claims against the applicants re-examined at the domestic level. The fourth applicant (the company Tim-Air EOOD) claimed in addition the equivalent of about EUR 170,000 – lost profit resulting from the forfeiture proceedings against it. In respect of non-pecuniary damage, the applicants in Timchenko and Others claimed EUR 5,000 for each of them.

19.  The Court cannot speculate on whether the applicants’ forfeited assets were or were not the proceeds of crime, and cannot thus determine any pecuniary damage which the applicants might have suffered as a result of unjustified forfeiture. Accordingly, it dismisses the applicants’ claims in the case of Timchenko and Others related to the value of the forfeited assets, and reiterates, as in Todorov and Others (cited above, §§ 320-22), that the most appropriate means to remedy the violation is the reopening of the domestic proceedings and the re-examination of the matter by the domestic courts, in compliance with the requirements of Article 1 of Protocol No. 1. As to Tim-Air EOOD’s claim related to loss of profit, whether or not such loss was the result of unjustified actions on the part of the State is likewise a matter of speculation. Moreover, the company will be able to seek compensation at the domestic level if eventually the forfeiture claims against it are fully or partially dismissed. Accordingly, the Court dismisses this claim as well.

20.  As to non-pecuniary damage, the Court, taking note of the circumstances of the case, awards the amounts indicated in the appended table.

21.  As concerns costs and expenses, the applicant in the case of Kulinov claimed EUR 1,620 for his legal representation before the Court. He requested that EUR 122 of the award under the present head be paid to him, and the remainder be transferred directly to his representative. The applicants in the case of Timchenko and Others claimed, for their part, EUR 3,218, for their legal representation before the Court and for translation and postage. The Court, taking into account the circumstances of the case, finds it appropriate to award the sums indicated in the appended table.

22.  Lastly, the applicants in the case of Timchenko and Others claimed the equivalent of EUR 48,569, paid by them for legal representation and court fees in the domestic proceedings. The Court rejects this claim, noting that the applicants would be entitled to seek the reimbursement of any costs already paid in case they are successful at any fresh examination of their case (Articles 245 § 3 and 309 of the Code of Civil Procedure).

FOR THESE REASONS, THE COURT, UNANIMOUSLY,

Decides to join the applications;Declares the applications admissible;Holds that these applications disclose a breach of Article 1 of Protocol No. 1 concerning the forfeiture of alleged proceeds of crime; Holds

(a)  that the respondent State is to pay the applicants, within three months, the amounts indicated in the appended table, to be converted into the currency of the respondent State at the rate applicable at the date of settlement;

(b)  that from the expiry of the above-mentioned three months until settlement simple interest shall be payable on the above amounts at a rate equal to the marginal lending rate of the European Central Bank during the default period plus three percentage points;

Dismisses the remainder of the applicants’ claims for just satisfaction.

Done in English, and notified in writing on 13 April 2023, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court.

 

 Viktoriya Maradudina Darian Pavli

 Acting Deputy Registrar President

 

 

 

APPENDIX

List of applications raising complaints under Article 1 of Protocol No. 1

(forfeiture of alleged proceeds of crime)

No.

Application no.

Date of introduction

Applicant’s name

Year of birth/ registration

 

Representative’s name and location

Predicate offence

Forfeited assets

Period for which the applicant’s income and expenses were checked

Reasons given by the courts

Final decision in the forfeiture proceedings

Amount awarded for non-pecuniary damage (in euros)

[1]

Amount awarded for costs and expenses per application

(in euros)[2]

   

28151/15

01/06/2015

Svetoslav Metodiev KULINOV

1974

Dimov Delyan Plamenov

Sofia

Plea agreement approved by the Slivnitsa District Court on 3 February 2009 – the applicant was convicted for having acted as an intermediary for the return of a stolen car. The offence, committed in September 2008, had not yielded any financial gain.

A flat in Sofia valued at BGN 66,000 (EUR 33,800) bought in 2008;

shares in a company;

BGN 72,715 (EUR 37,200) available on a bank account of the applicant;

a motorcycle;

sums of money received from the sale of a plot of land and two cars.

1992-2010

The offence the applicant was convicted for was criminalised in 2004; thus, there were no grounds to order the forfeiture of assets acquired prior to that. The applicant’s income during the period under examination amounted to the equivalent of 1,155 minimum monthly salaries, which also included money received from his parents. His expenses, including for the acquisition of immoveable property, equalled 3,704 minimum monthly salaries. It could be reasonably assumed that the assets to be forfeited were the proceeds of crime, seeing that the applicant had not established the lawful provenance of the money paid to acquire them. Some of those assets had been acquired “immediately before and after” the predicate offence and were thus directly connected to it. The “criminal activity” of the applicant was such that it could generate profit.

22 December 2014 – decision of the Supreme Court of Cassation

3,000

200,

EUR 122 of which to be paid to the applicant, and the remainder directly to his legal representative.

   

7413/21

20/01/2021

Tsvetomir Donchev SLAVKOV

1978

 

 

Plea agreement approved by the Ruse District Court on 6 October 2003 – the applicant was convicted for fraud committed in 1999; he had fraudulently received the equivalent of EUR 614, which he had eventually returned to the victims (about 40 people).

Five studio flats in Sofia bought in 2007; a car; sums of money totalling EUR 122,000 which had been deposited in bank accounts of the applicant and withdrawn by him between 2000 and 2010.

1996-2012

Between 2001 and 2007 the applicant had lived in the United Kingdom, and even though money from this country had been transferred to his accounts during this period (and served for the acquisition of the studio flats – see the description of the forfeited assets), its lawful provenance had not been proven, the applicant not having in particular presented a written employment contract, despite his statements that he had been employed. At the same time, the applicant’s offence (a continuous offence with numerous victims) was such that it allowed financial gain.

31 July 2020 – final decision of the Supreme Court of Cassation

3,000

-

   

30642/21

07/06/2021

(4 applicants)

Valentin Evgeniev TIMCHENKO

1951

 

Milka Petrova TIMCHENKOVA

1953

 

Plamen Valentinov TIMCHENKO

1973

 

 TIM-AIR EOOD

1999

 

Ekimdzhiev Mihail Tiholov

Plovdiv

Judgment of the Ruse Regional Court of 4 March 2013 – the first applicant was convicted for tax evasion – between 2006 and 2008 he had evaded the payment of excise duty related to the activities of his company (the fourth applicant) totalling BGN 155,281 (EUR 79,400); the money had eventually been paid to the State budget.

Numerous immoveable properties, acquired between 2001 and 2012, and cars; two agricultural aircrafts acquired by the fourth applicant in 2005; sums of money received from the sale of other vehicles or deposited in bank accounts.

1988-2013

During the period under examination the first applicant and his family (the second and third applicants) had received income from proven lawful sources equalling 2,327 minimum monthly salaries, while their expenses equalled 6,507 minimum monthly salaries. The first applicant’s criminal offence had led to financial gain; even though the offence had been committed in 2006-08, it was significant that his company’s economic activity had started in 1998. The above justified the conclusion that the assets to be forfeited were the proceeds of crime.

The forfeiture application was, on the other hand, rejected with regard of some of the assets initially indicated by the Commission for Uncovering Proceeds of Crime.

7 December 2020 – decision of the Supreme Court of Cassation.

In 2021 the applicants applied for the reopening of the proceedings, which was refused by the Supreme Court of Cassation on 11 August 2022.

3,000 to each of the first, second and third applicants

2,000

 

 

[1] Plus any tax that may be chargeable.

[2] Plus any tax that may be chargeable to the applicants.

Full & Egal Universal Law Academy