Communicated on 28 February 2019
FIFTH SECTION
Application no. 71694/12
Zhivko Zhekov ZHEKOV and others
against Bulgaria
lodged on 3 November 2012
STATEMENT OF FACTS
The applicants, Mr Zhivko Zhekov Zhekov (“the first applicant”), Ms Emilia Ruseva Zhekova (“the second applicant”) and Mr Zheko Zhivkov Zhekov (“the third applicant”), are Bulgarian nationals who were born in 1966, 1971 and 1991 respectively. The first and second applicant live in Plovdiv and the third applicant lives in Athens, Greece. The applicants are represented before the Court by Mr D. Kalinchev, lawyer practicing in Plovdiv.
A. The circumstances of the case
The facts of the case, as submitted by the applicants, may be summarised as follows.
The second applicant is the first applicant’s wife, and the third applicant is his son from a previous marriage.
1. The first applicant’s conviction
In a judgment of the Plovdiv Regional Court of 26 May 2008 the first applicant was convicted of document forgery committed in complicity with the second applicant and of participation in an organised criminal group – offences under Article 308 § 3 and Article 321 § 1 of the Criminal Code. It was established that between January and June 2007 the applicants had created false identity papers and other official documents and had forged such existing documents, including issued by other countries, with the aim of obtaining a financial gain.
2. Forfeiture proceedings
(a) Forfeiture application
Since the offence the first applicant had been convicted of fell within the scope of the Forfeiture of Proceeds of Crime Act 2005 (hereinafter “the 2005 Act”, see “Relevant domestic law and practice” below), in the beginning of 2009 the Commission for Uncovering Proceeds of Crime (hereinafter “the Commission”) filed an application with the Plovdiv Regional Court, seeking the forfeiture of the following assets: a flat in Plovdiv bought by the first applicant in 2002; another flat in Plovdiv, bought in the third applicant’s name by his mother in 2007; two cars bought by the first applicant respectively in 2002 and 2003; 14,400 euros (EUR) and 730 United States dollars (USD) in cash, found in the first and second applicants’ home during search and seizure in 2007; sums deposited on bank accounts owned by the first and second applicants. According to the Commission, the value of all assets above totalled 268,709 Bulgarian levs (BGN), the equivalent of EUR 137,000.
The forfeiture application was the result of checks and verifications by the Commissions on the first applicant’s financial situation between 1 January 1985 and 31 December 2008, and the second applicant’s situation between 1 March 1997 and 31 December 2008.
(b) Judgments of the Plovdiv Regional Court and the Plovdiv Court of Appeal
In a judgment of 5 August 2010 the Plovdiv Regional Court dismissed the forfeiture application.
It found that while, indeed, the first applicant had been convicted of an offence falling within the scope of the 2005 Act and, in addition, during the period under examination the three applicants had acquired assets of considerable value, the preconditions for forfeiture had not been fulfilled, because the applicants had in fact proven sufficient income from legal sources to acquire such assets. These included the first applicant’s disability pension, sums given to the second applicant by her parents in whose farming business she had participated, sums donated to the first and second applicant at their wedding, and sums given to the three applicants by the first applicant’s father who had inherited considerable assets from his own father.
Upon an appeal lodged by the Commission, on 18 February 2011 the Plovdiv Court of Appeal upheld the above judgment. It affirmed the Plovdiv Regional Court’s reasoning, adding, as concerns the second applicant’s participation in her parents’ farming business, that even if the parents had not been registered as farmers and had not paid the taxes due, this did not in itself mean that any income received by the second applicant was to be considered illegal.
(c) Judgment of the Supreme Court of Cassation
The Commission lodged an appeal on points of law. In a decision of 13 December 2011 the Supreme Court of Cassation accepted it for cassation review, and in a final judgment of 4 May 2012 allowed the forfeiture application, ordering the forfeiture of all assets described above.
The Supreme Court of Cassation noted that the lower courts had accepted as evidence documents concerning the first applicant’s father’s inheritance, which had in fact been submitted by the applicants after the relevant time-limit to do so had expired. Accordingly, that evidence was inadmissible and had to be excluded from the case file. On the basis of the remaining evidence concerning that inheritance – in particular the witness testimony of family members, which was controversial and in addition unreliable since they were interested in the outcome of the case – it could not be concluded that the first applicant’s father had indeed been able to provide the money necessary for the acquisition of the disputed assets. As to the income allegedly received from the farming business of the second applicant’s parents and the monetary gifts made at the first and second applicant’s wedding, these had not been proven by any documents but, again, the applicants had relied on the witness testimony of family members. Lastly, it had not been shown that the third applicant’s mother (the first applicant’s first wife) had had sufficient legal income to purchase a flat for her son in 2007.
Accordingly, it had not been proven that during the period under examination the applicants had had sufficient legal income to acquire the assets for which forfeiture was being sought. This meant that it could be reasonably assumed that those assets were the proceeds of crime.
B. Relevant domestic law and practice
1. The 2005 Act
The Forfeiture of Proceeds of Crime Act 2005 (Закон за отнемане в полза на държавата на имущество придобито от престъпна дейност, “the 2005 Act”) was enacted by Parliament in February 2005. In 2012 it was superseded by other legislation, with the proviso that all pending proceedings would continue to be governed by it.
Proceedings under the 2005 Act could be opened when it was established that a person charged with a relevant criminal offence had acquired assets of “considerable value” in respect of which a reasonable assumption could be made that they were the proceeds of crime (section 3(1)). “Considerable value” was defined as more than BGN 60,000 (approximately EUR 30,700). In practice, for the purpose of cross-time comparisons, that amount was also presented as the equivalent of 400 minimum monthly salaries. According to the Supreme Court of Cassation, that had to be the aggregate value of the assets, determined on the basis of their fair market value at the time of their acquisition (see реш. № 89 от 29 януари 2010 г. по гр. д. № 717/2009 г., ВКС, III г. о.).
The offences that could trigger the opening of proceedings under the 2005 Act were enumerated in section 3(1).
Assets that could be forfeited under the 2005 Act were those that had been acquired by persons convicted of a criminal offence and in respect of which it could reasonably be assumed that they were the proceeds of crime, in as much as no legal source had been established (section 4(1)).
The State’s right to forfeit an asset expired twenty-five years after it had been acquired (section 11).
The authority in charge of initiating and pursuing proceedings under the 2005 Act was the Commission for Uncovering Proceeds of Crime (“the Commission”). The forfeiture itself was to be ordered by the courts.
The remaining relevant provisions of the 2005 Act have been summarised in Nedyalkov and Others v. Bulgaria (dec.), no. 663/11, §§ 33‑61, 10 September 2013).
2. Case law of the domestic courts and Interpretative Decision No. 7 of 30 June 2014
Until 2014 the national courts were taking diverging views on the necessity under the 2005 Act to establish a causal link between the specific criminal activity for which the target had been convicted and the assets to be forfeited. Thus, in some cases the courts held that no causal link had to be proven, in as much as section 4(1) the 2005 Act established a presumption that all assets for which no legal source had been shown represented proceeds of crime (Решение № 671 от 9.11.2010 г. на ВКС по гр. д. № 875/2010 г., IV г. о.; Решение № 156 от 29.05.2013 г. на ВКС по гр. д. № 890/2012 г., IV г. о.). In other cases the courts required the establishment of a causal link, considering that, even where no lawful source of income had been shown to exist, this did not automatically mean that the assets at issue had been proceeds of crime (Решение № 607 от 29.10.2010 г. на ВКС по гр. д. № 1116/2009 г., IV г. о.; Решение № 209 от 26.07.2011 г. на ВКС по гр. д. № 1462/2010 г., III г. о.).
The matter was settled in a binding Interpretative Decision No. 7, given by the Supreme Court of Cassation on 30 June 2014 (Тълкувателно решение № 7/2014 г. на ВКС по т. д. № 7/2013 г., ОСГК), which endorsed the latter view. The Supreme Court of Cassation stated that the acquirement of assets by a person having committed an offence among those enumerated in section 3(1) of the 2005 Act could be directly or indirectly linked to proceeds of crime,
“but in all cases that link has to be established, or its existence must be presumable”.
The presumption at issue had to be “logically justified” and “based on the facts and circumstances”. The Supreme Court of Cassation held further that
“[t]he failure to establish a lawful source for an asset does not replace the justified presumption that it is linked to criminal activity, but merely absolves the Commission from the burden to prove such a link beyond doubt.”
Lastly, the Supreme Court of Cassation was of the view that the forfeiture of assets unlinked to proven criminal activity would amount to the imposition of a “penalty” without a conviction.
Subsequently, relying on this Interpretative Decision, the national courts dismissed forfeiture applications under the 2005 Act lodged by the Commission, holding that no causal link had been established between the assets for which forfeiture had been sought and the target’s criminal activity, notwithstanding the fact that no lawful source had been shown to exist for some of the latter’s revenues (Решение № 256 от 14.10.2014 г. на ОС Ловеч по гр. д. № 603/2011 г.; Решение № 79 от 22.05.2015 г. на АС Варна по в. гр. д. № 154/2015 г.; Решение № 194 от 5.11.2015 г. на АС Пловдив по в. гр. д. № 442/2015 г.).
C. Relevant international and European Union law
The relevant international and European Union law has been summarised in G.I.E.M. S.R.L. and Others v. Italy (merits) ([GC], nos. 1828/06 and 2 others, §§ 139-53, 28 June 2018).
COMPLAINTS
The applicants complain under Article 6 §§ 1 and 2 of the Convention and Article 1 of Protocol No. 1 of the forfeiture of their property. They point out in particular that: no causal link was established between the offence the first applicant was convicted of and the forfeited assets – part of which had been acquired several years earlier; the period to be examined was too lengthy, which rendered the establishment of facts on their part difficult; the Supreme Court of Cassation’s refusal to accept the testimony of family members, considering them interested in the outcome of the case, deprived them of the possibility to prove facts in their favour; the forfeiture of their property was a disproportionate measure.
Relying on Article 7 of the Convention, the applicants also complain of the forfeiture of assets of the third applicant, who has not committed any offence.
QUESTIONS TO THE PARTIES
1. Was the forfeiture of the applicants’ assets, in proceedings under the Forfeiture of Proceeds of Crime Act 2005, in compliance with the requirements of Article 1 of Protocol No. 1? In particular, has it been sufficiently established that the assets at issue were the proceeds of crime?
In that regard, the parties are invited to comment on the manners in which the domestic authorities calculated the respective persons’ revenues and expenses, having regard to the lengthy periods of time to be verified and the resulting risk of imprecision and uncertainty (see, for example, Dimitrovi v. Bulgaria, no. 12655/09, §§ 47‑49, 3 March 2015.
2. Could the forfeiture proceedings be considered fair for the purposes of Article 6 § 1 of the Convention? In addition, was the first applicant’s right to be presumed innocent under Article 6 § 2 of the Convention breached, having in particular regard to the assumption made in the forfeiture proceedings that he had been involved in criminal activity other that the offence committed by him in 2007?
3. Did the forfeiture of the third applicant’s property amount to “punishment” within the meaning of Article 7 of the Convention, and if so, were the requirements of that provision satisfied, seeing in particular that the third applicant has not been convicted of a criminal offence (see G.I.E.M. S.R.L. and Others v. Italy (merits) ([GC], nos. 1828/06 and 2 others, §§ 186-275, 28 June 2018?
The parties are requested to provide a copy of the judgment of the Plovdiv Regional Court of 9 August 2008, convicting the first applicant of criminal offences.
Full & Egal Universal Law Academy