Communicated on 28 February 2019<\/p>\n
FIFTH SECTION<\/p>\n
Application no. 63214\/16
\nDimitar Genchev DIMITROV
\nagainst Bulgaria
\nlodged on 21 October 2016<\/p>\n
STATEMENT OF FACTS<\/strong><\/p>\n The applicant, Mr Dimitar Genchev Dimitrov, is a Bulgarian national, who was born in 1976 and lives in Provadia.<\/p>\n A.\u00a0\u00a0The circumstances of the case<\/strong><\/p>\n The facts of the case, as submitted by the applicant, may be summarised as follows.<\/p>\n 1.\u00a0\u00a0The applicant\u2019s conviction<\/em><\/p>\n The applicant exercised commercial activity as sole trader.<\/p>\n 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\u00a0Bulgarian levs (BGN), the equivalent of 150,842 euros (EUR) \u2013 an offence under Article 257 \u00a7 1 (currently Article 255) of the Criminal Code.<\/p>\n 2.\u00a0\u00a0Forfeiture proceedings<\/em><\/p>\n (a)\u00a0\u00a0Forfeiture application<\/strong><\/p>\n Since the offence the applicant had been convicted of fell within the scope of the Forfeiture of Proceeds of Crime Act 2005 (hereinafter \u201cthe 2005 Act\u201d, see \u201cRelevant domestic law and practice\u201d below), in July 2011 the Commission for Uncovering Proceeds of Crime (hereinafter \u201cthe Commission\u201d) 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.<\/p>\n 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.<\/p>\n (b)\u00a0\u00a0Judgment of the Varna Regional Court<\/strong><\/p>\n 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.<\/p>\n (c)\u00a0\u00a0Judgment of the Varna Court of Appeal<\/strong><\/p>\n Upon appeal, the Varna Court of Appeal gave a judgment on 27 October 2015. It quashed the lower court\u2019s 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\u2019s main dwelling; BGN 117,300 (EUR\u00a060,000), the monetary equivalent of shares in several companies acquired by the applicant between 2008 and 2010, and BGN 4,500 (EUR\u00a02,300) 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\u00a02010, soon after having acquired them, two immoveable properties; BGN\u00a055,000 (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.<\/p>\n 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 \u201ccriminal activity\u201d, 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.<\/p>\n As to the applicant\u2019s 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 \u2013 in principle payable only when income has been received \u2013 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\u2019s 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.<\/p>\n 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 \u201con logic and experience\u201d, a causal link might be assumed to exist between the assets to be forfeited and the offence the applicant had been convicted of.<\/p>\n (d)\u00a0\u00a0Decision of the Supreme Court of Cassation<\/strong><\/p>\n In a final decision of 21 April 2016 the Supreme Court of Cassation refused to accept for examination the applicant\u2019s 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 \u201cRelevant domestic law and practice\u201d below).<\/p>\n (e)\u00a0\u00a0Subsequent developments<\/strong><\/p>\n 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.<\/p>\n 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.<\/p>\n In a final decision of 20 February 2018 the Supreme Court of Cassation refused to accept for examination the applicant\u2019s appeal on points of law.<\/p>\n B.\u00a0\u00a0Relevant domestic law and practice<\/strong><\/p>\n 1.\u00a0\u00a0The 2005 Act<\/em><\/p>\n The Forfeiture of Proceeds of Crime Act 2005 (\u0417\u0430\u043a\u043e\u043d \u0437\u0430 \u043e\u0442\u043d\u0435\u043c\u0430\u043d\u0435 \u0432 \u043f\u043e\u043b\u0437\u0430 \u043d\u0430 \u0434\u044a\u0440\u0436\u0430\u0432\u0430\u0442\u0430 \u043d\u0430 \u0438\u043c\u0443\u0449\u0435\u0441\u0442\u0432\u043e \u043f\u0440\u0438\u0434\u043e\u0431\u0438\u0442\u043e \u043e\u0442 \u043f\u0440\u0435\u0441\u0442\u044a\u043f\u043d\u0430 \u0434\u0435\u0439\u043d\u043e\u0441\u0442, \u201cthe 2005 Act\u201d) 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.<\/p>\n 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 \u201cconsiderable value\u201d in respect of which a reasonable assumption could be made that they were the proceeds of crime (section\u00a03(1)). \u201cConsiderable value\u201d 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 (\u0420\u0435\u0448\u0435\u043d\u0438\u0435 \u2116 89 \u043e\u0442 29\u00a0\u044f\u043d\u0443\u0430\u0440\u0438 2010 \u0433. \u043f\u043e \u0433\u0440. \u0434. \u2116 717\/2009 \u0433., \u0412\u041a\u0421, III \u0433. \u043e.).<\/p>\n The offences that could trigger the opening of proceedings under the 2005 Act were enumerated in section 3(1).<\/p>\n 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)).<\/p>\n The State\u2019s right to forfeit an asset expired twenty-five years after it had been acquired (section 11).<\/p>\n The authority in charge of initiating and pursuing proceedings under the 2005 Act was the Commission for Uncovering Proceeds of Crime (\u201cthe Commission\u201d). The forfeiture itself was to be ordered by the courts.<\/p>\n The remaining relevant provisions of the 2005 Act have been summarised in Nedyalkov and Others v. Bulgaria (dec.), no. 663\/11, \u00a7\u00a7\u00a033\u201161, 10 September 2013).<\/p>\n 2.\u00a0\u00a0Case law of the domestic courts and Interpretative Decision No. 7 of 30 June 2014<\/em><\/p>\n 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 (\u0420\u0435\u0448\u0435\u043d\u0438\u0435 \u2116 671 \u043e\u0442 9.11.2010 \u0433. \u043d\u0430 \u0412\u041a\u0421 \u043f\u043e \u0433\u0440. \u0434. \u2116\u00a0875\/2010 \u0433., IV \u0433. \u043e.; \u0420\u0435\u0448\u0435\u043d\u0438\u0435 \u2116 156 \u043e\u0442 29.05.2013 \u0433. \u043d\u0430 \u0412\u041a\u0421 \u043f\u043e \u0433\u0440. \u0434. \u2116 890\/2012 \u0433., IV \u0433. \u043e.). 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 (\u0420\u0435\u0448\u0435\u043d\u0438\u0435 \u2116 607 \u043e\u0442 29.10.2010 \u0433. \u043d\u0430 \u0412\u041a\u0421 \u043f\u043e \u0433\u0440. \u0434. \u2116 1116\/2009 \u0433., IV \u0433. \u043e.; \u0420\u0435\u0448\u0435\u043d\u0438\u0435 \u2116 209 \u043e\u0442 26.07.2011 \u0433. \u043d\u0430 \u0412\u041a\u0421 \u043f\u043e \u0433\u0440. \u0434. \u2116 1462\/2010 \u0433., III\u00a0\u0433. \u043e.).<\/p>\n The matter was settled in a binding Interpretative Decision No. 7, given by the Supreme Court of Cassation on 30 June 2014 (\u0422\u044a\u043b\u043a\u0443\u0432\u0430\u0442\u0435\u043b\u043d\u043e \u0440\u0435\u0448\u0435\u043d\u0438\u0435 \u2116 7\/2014 \u0433. \u043d\u0430 \u0412\u041a\u0421 \u043f\u043e \u0442. \u0434. \u2116 7\/2013 \u0433., \u041e\u0421\u0413\u041a), 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,<\/p>\n \u201cbut in all cases that link has to be established, or its existence must be presumable.\u201d<\/p>\n The presumption at issue had to be \u201clogically justified\u201d and \u201cbased on the facts and circumstances\u201d. The Supreme Court of Cassation held further that<\/p>\n \u201c[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.\u201d<\/p>\n 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 \u201cpenalty\u201d without a conviction.<\/p>\n 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\u2019s criminal activity, notwithstanding the fact that no lawful source had been shown to exist for some of the latter\u2019s revenues (\u0420\u0435\u0448\u0435\u043d\u0438\u0435 \u2116 256 \u043e\u0442 14.10.2014 \u0433. \u043d\u0430 \u041e\u0421 \u041b\u043e\u0432\u0435\u0447 \u043f\u043e \u0433\u0440. \u0434. \u2116 603\/2011 \u0433.; \u0420\u0435\u0448\u0435\u043d\u0438\u0435 \u2116 79 \u043e\u0442 22.05.2015 \u0433. \u043d\u0430 \u0410\u0421 \u0412\u0430\u0440\u043d\u0430 \u043f\u043e \u0432. \u0433\u0440. \u0434. \u2116 154\/2015 \u0433.; \u0420\u0435\u0448\u0435\u043d\u0438\u0435 \u2116 194 \u043e\u0442 5.11.2015 \u0433. \u043d\u0430 \u0410\u0421 \u041f\u043b\u043e\u0432\u0434\u0438\u0432 \u043f\u043e \u0432. \u0433\u0440. \u0434. \u2116\u00a0442\/2015\u00a0\u0433.).<\/p>\n