Last Updated on June 17, 2019 by LawEuro
Communicated on 28 February 2019
FIFTH SECTION
Application no. 63214/16
Dimitar Genchev DIMITROV
against Bulgaria
lodged on 21 October 2016
STATEMENT OF FACTS
The applicant, Mr Dimitar Genchev Dimitrov, is a Bulgarian national, who was born in 1976 and lives in Provadia.
A. The circumstances of the case
The facts of the case, as submitted by the applicant, may be summarised as follows.
1. The applicant’s conviction
The applicant exercised commercial activity as sole trader.
In a judgment of 12 May 2010, which became final on 28 May 2010, the Varna Regional Court convicted him of tax fraud, namely of having made untrue statements to the authorities in several tax declarations submitted between December 2000 and May 2001, thus evading the payment of value-added tax related to his commercial activity in the amount of 294,897 Bulgarian levs (BGN), the equivalent of 150,842 euros (EUR) – an offence under Article 257 § 1 (currently Article 255) of the Criminal Code.
2. Forfeiture proceedings
(a) Forfeiture application
Since the offence the 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 July 2011 the Commission for Uncovering Proceeds of Crime (hereinafter “the Commission”) filed an application with the Varna Regional Court seeking the forfeiture of his assets. It considered that the amount of taxes the applicant had evaded paying, together with the lack of sufficient legal income, proved a causal link between the offence he had been convicted of and the assets at issue.
The forfeiture application was the result of checks and verifications of the financial situation of the applicant for the period from 1 January 1999 to 31 December 2010.
(b) Judgment of the Varna Regional Court
In a judgment of 24 February 2015 the Varna Regional Court rejected the application. It reached the conclusion that the Commission had failed to prove the existence of a causal link between the offence the applicant had committed and the assets for which forfeiture was being sought and, at the same time, that the applicant had had sufficient legal income to acquire those assets. In that latter respect the Varna Regional Court found, in particular, that the applicant had, as claimed by him, received money from his parents and from his partner and her parents, and that when he had acquired certain immoveable properties he had done so at the price declared in the respective notary deeds (considerably lower than what was shown to be the market value), receiving significant income soon after that when reselling those properties at a much higher price.
(c) Judgment of the Varna Court of Appeal
Upon appeal, the Varna Court of Appeal gave a judgment on 27 October 2015. It quashed the lower court’s judgment and ordered the forfeiture of the following assets of the applicant: a plot of land in a village close to Varna bought by the applicant in 2007; a flat in Varna, together with a share of the land it was constructed on, bought by the applicant in 2008 and serving at the time as his family’s main dwelling; BGN 117,300 (EUR 60,000), the monetary equivalent of shares in several companies acquired by the applicant between 2008 and 2010, and BGN 4,500 (EUR 2,300) received at the sale of other shares in 2010; BGN 165,000 (EUR 84,400) which the applicant had received when selling, in 2008 and 2010, soon after having acquired them, two immoveable properties; BGN 55,000 (EUR 28,130), which represented the market value of two cars bought by the applicant in 2007 and 2008 and resold to third parties soon after that.
The Varna Court of Appeal noted that there was no proof that the applicant had paid in to the State budget the amount of tax he had evaded to pay in 2001. It observed furthermore that the applicant had been implicated in “criminal activity”, since he had previous convictions, notably for document forging and possession of stolen goods, and was the subject of fresh criminal proceedings for tax evasion.
As to the applicant’s revenues and expenses during the period at issue, the Varna Court of Appeal made several observations. First, even though for parts of this period the applicant had paid social insurance – in principle payable only when income has been received – in the absence of other evidence it could not be concluded that he had in fact received such income. Other revenues claimed by the applicant, including winnings from betting, were also found to be unproven. Second, it was not shown that the applicant had received, as claimed by him, substantial sums of money from his parents, since their own income had been insufficient. As to money the applicant claimed to have received from his partner and her parents, the witness testimony in that regard was contradictory and the applicant’s allegations were unconvincing. Third, as to the immoveable properties the applicant had purchased and subsequently resold, what had to be taken into account with regard to the purchase was their market value and not the much lower value indicated in the notary deeds. This meant that the higher prices at which the applicant had resold some of these properties soon after acquiring them could not be considered a lawful gain. And fourth, even though it had been proven that the applicant had received dividends from the companies he had shares in, the only payment of such dividends had been shown to have taken place in 2011, outside the period under examination.
On the basis of the above considerations, the Varna Court of Appeal concluded that the applicant had not established a lawful source of income allowing him to acquire the assets for which forfeiture was being sought, while it could appear that those assets were acquired with the sums he had evaded paying in taxes in 2001. Even though the assets at issue had been acquired later, between 2007 and 2010, the fact remained that at that time the applicant had had at his disposal substantial sums of money, while lacking legal income. Thus, based “on logic and experience”, a causal link might be assumed to exist between the assets to be forfeited and the offence the applicant had been convicted of.
(d) Decision of the Supreme Court of Cassation
In a final decision of 21 April 2016 the Supreme Court of Cassation refused to accept for examination the applicant’s appeal on points of law. In particular, it found that the Varna Court of Appeal had correctly established a causal link between the assets to be forfeited and the offence having given rise to the forfeiture procedure, as required by the Interpretative Decision of 30 June 2014 (see “Relevant domestic law and practice” below).
(e) Subsequent developments
In a judgment of 6 January 2017 the Varna Regional Court dismissed an additional claim by the Commission for the forfeiture of the market value of a car bought by the applicant in 2008 and sold to a third party in 2009.
Upon appeal, in a judgment of 4 April 2017 the Varna Court of Appeal reversed and ordered the forfeiture of BGN 21,972 (EUR 11,240) which, according to an expert, equalled the market value of the car in 2009. The domestic court confirmed its earlier conclusion that at the time of buying the car the applicant had not had legal income, considering that he had used instead of that money received from the sale of properties described above, themselves the proceeds of crime.
In a final decision of 20 February 2018 the Supreme Court of Cassation refused to accept for examination the applicant’s appeal on points of law.
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 (Решение № 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 applicant complains under Article 6 § 1 and Article 13 of the Convention and Article 1 of Protocol No. 1 of the forfeiture of his property and the fairness of the proceedings which resulted in it. In particular, he argues that it was not shown that the forfeited assets had been the proceeds of crime, and that his claims that he had received additional legal income were unjustifiably dismissed.
The applicant complains in addition under Article 7 of the Convention that the forfeiture of his property, on the basis of legislation applied retroactively, amounted to additional punishment for his offences.
QUESTIONS TO THE PARTIES
1. Was the forfeiture of the applicant’s property, 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 had been 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?
3. Was a heavier penalty imposed on the applicant than the one which was applicable at the time of the commission of offences by him, as proscribed by Article 7 of the Convention?
4. Did the applicant have at his disposal an effective domestic remedy for his complaint under Article 1 of Protocol No. 1, as required under Article 13 of the Convention?
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