1. General points
a) range
The right of establishment is regulated in Articles
52-58 of the Treaty. In the Europe Agreement the right of
establishment is regulated in Section II, Articles 45-55.
Closely connected with it is the right to provide
services, stipulated in Articles 59-66 of the Treaty and in Section
III, Articles 56-58 of EA.
The right to provide services will be considered in
this part as far as the general principles are applied to the two
rights and sometimes it is difficult to draw the exact
differentiating line between them. The theory anyhow stresses more
upon the similarities than upon the differences between those two
rights, although under certain circumstances the differences may be
much more important.
b) definitions
They are included in the Treaty and EA.
The right of establishment includes the right of
citizens and companies of one member state to undertake and perform
economic activity as self-employed persons, under the conditions
foreseen for the own citizens and companies in the legislation of
the member state, where the establishment takes place.
As for the right to provide services, the person
providing service may temporarily perform his economic activity in
the state where he offers the service under the same conditions
valid for the citizens of the respective state. That right is
granted also to companies and firms established after the
legislation of a member state.
The differences between those rights is more in the
degree than in their type. Both rights are applied to economic or
professional activity, aiming at "profit" or "benefit". The right
of establishment is the right of a natural person, citizen or
collective partnership or company to be established in another
state permanently or predominately with the aim of performing
definite economic activity. The right to provide services is rather
related to providing services in a given member state temporarily
or periodically by a person established in another member state. In
this case is not necessary the person to live even temporarily in
the member state, where the services are offered.
The right of establishment is closely connected with
company law and overlaps with it considerably.
2. Acts regulating the above rights
The basic regulation is stipulated in the
Treaty.
Parallel to that there exists a big in volume
secondary legislation which provides detailed regulation through
regulations (comparatively rarely) or through directives which are
to be implemented in the internal legislation of the member states.
The matter is not systematic at all, it can be called random, as it
concerns the right of establishment of different subjects on one
hand, and on the other the conditions applied in different fields
of economic activity the respective subjects are going to
perform.
One finds an difference in the regulation of the
right of establishment and protection of competition in EC
legislation. As was shown above the protection of competition is
done mostly through regulations which have a direct effect in the
member states. Through those the EC Commission directly introduces
into the internal legislation of the member states norms for
protection of competition. The selected approach is due to the
specific matter for protection of competition on one hand, as well
as to the special authority, given to the Commission in the EC in
the field of protection of the competition. The latter is perhaps
also due to the fact that the protection of competition is a
particularly delicate a field where the issues are often considered
painful for the member states and if with respect to that field the
regulation through directives approach had been selected, requiring
the indivdual member states to implement them in their naional
legislation, the process of establishment of unified rules for
protection of competition in all its aspects (especially the state
aids and state monopoly) would have been considerably delayed,
which would delay the formation of the common market.
The Right of establishment, on the other hand, does
not affect so directly vital interests of the states, and its
regulation in the different states (Bulgaria included) is unified
to a high degree. That is why from the very beginning the opposite
approach was adopted for the right of establishment. The regulation
is providedat European level through directives to be introduced in
the national legislation of the separate member states.
Due to the abovementioned, with reference to the
right of establishment we will not meet the paradox of the
protection of competition - the associated states are obliged to
harmonise their legislation with that of the EC, while that
obligation does not refer to the member states.
3. Level of harmonisation achieved in the EC
In company law since 1970 till now the EC Commission
has proposed 12 Directives to the Council, 9 of them being
accepted. Most of them directly concern the right of establishment
as they treat the questions under what conditions an enterprise of
one member state may start perform economic activity in another.
The First Company Law Directive was passed in 1968 and stipulates
the basic requirements for private and public enterprises,
including provisions regulating the register of enterprises, when
the enterprise may be proclaimed invalid, access to certain
information and validity of the engagements, undertaken by the
enterprise. The Second Company Law Directive was adopted in 1976
with the aim of approximation the formation and maintenance of
capital of the shareholding companies, as well as what should the
establishment document include. The Third Company Law Directive was
passed in 1978 with the aim of facilitating mergers and at the same
time ensuring the interest of the creditors, the workers and
administration, of the shareholders and bondholders. The Fourth
Company Law Directive, passed in 1978, regulates the methods for
preparation of the annual financial reports of undertakings or
partnerships. The Sixth Company Law Directive was passed in 1982 to
complement the Third Directive and regulates the division of
shareholding companies when they cease their activity without
liquidation. The Seventh Company Law Directive (1983) is focused on
increasing the transparency of the financial situation of the
companies. The Eighth Company Law Directive (1984) regulates the
approval of the auditors. The Eleventh Company Law Directive (1989)
regulates the requirements for supply of information, in case a
member state company opens a branch in another. The Twelfth Company
Law Directive (1989) regulates the establishment and activity of
limited liability companies, private and public, when they have a
single owner.
Parallel to those basic directives a number of other
documents also discuss the right of establishment, as for example
in Council Directive No611/85 on undertakings for collective
investment in transferable securities, in Council Directive No22/93
on investment in the services field, etc.
In the field exist also several regulations,
directly stipulating certain relations. Such is the Council
Regulation on the European economic interest grouping of 1985
stipulating for the first time the unification of merchants of
different member states at European level, Council Regulation
No2186/93 for co-ordination at the level of the European Community
for compiling trade registers, etc.
4. What are the limitations, still applicable,
as per the EC Right?
The right of establishment and the right to provide
services are proclaimed as "fundamental rights of the Community" by
the Court of Justice. The exceptions allowed for restriction of
those two fundamental rights are for reasons of public order,
public security and public health, as well as for infringement of
the right of the official authority in the receiving state. At the
same time those two rules are not absolute. Parallel to the
abovementioned exceptions, they are liable to one very important
restriction, namely that the right of equal opportunities, as per
Article 52(2) and 60(3) of the Treaty, might be exercised only
under the conditions, stipulated by the national legislation in the
receiving state.
5. Valid regulations and directives in the field
of Right of establishment and the respective Bulgarian
legislation.
In this article are taken into consideration also
the advises of the EU White Paper on the Company Law.
The Right of establishment in the Bulgarian
legislation are stipulated mainly in the Law for Economic Activity
of Foreign Persons and Protection of Foreign Investments
(LEAFPPFI). As a principle the Bulgarian legislation provides for
the foreign persons, performing economic activities in Bulgaria a
regime of national treatment. The limitations in the Right of
establishment are mainly in two aspects: as far as the form of the
enterprise, performing economic activity is concerned, and as for
the fields of economic activity. There is a third aspect, directly
concerning the above two - that is acquiring prop[erty right and
limited right over real estate.
a) Concerning the form of the enterprise
aa) the LEAFPPFI stipulates that foreign persons may
perform economic activity in Bulgaria, as well as to acquire shares
and be share holders in commercial companies, as per the order
concerning Bulgarian citizens and juridical persons.
The restrictions, as per Article 3, Paragraph 4 of
the same law introduce the preliminary requirement for the foreign
citizen, who intends to perform economic activity as single owner,
member of co-operation, shareholder in collective partnership,
partner with unlimited liability in a limited joint stock company
or in limited liability joint stock company with shares, to have a
permission for permanent residence in Bulgaria.
With Article 8, Para 4 of the Law for Residence of
Foreigners in the Republic of Bulgaria the foreigners, who have
legal registration for performance of economic activity are issued
permission for residence in Bulgaria for a period of 1 year, liable
to prolongation. The permanent residence permission of a foreigner
in Bulgaria is stipulated in Article 8a of the same law, but there
are marked criteria, which does not include the restrictions,
introduced by the LEAFPPFI.
That is why a conclusion can be made that up till
now in fact and legislatively the foreign persons cannot commence
performing economic activity under the forms, stipulated in Article
3, para 4 of the LEAFPPFI. The latter is considerable restriction
of the Right of establishment and in this aspect the Bulgarian
legislation is considerably lagging behind the offering of national
regime. Underneath - with view to the changes which have to be
introduced in our legislation, aiming mainly to its approximation
to that of the EC, those documents will be considered, through
which the EC on one hand guarantees for all types of economic
activity and enterprises equal treatment in the member states, and
on the other - ensure the necessary protection of third
persons.
Here it should be noted that by the publication
(though in a strange and contradictory way) in the "State Gazette"
of the already in force EA, as far as Article 5, Para 4 of the
Constitution is concerned - its norms are "prevailing over the
internal legislation provisions". As far as the exceptions to the
right of establishment, listed in the Appendices XV a-d do not
include the sole proprietor, the general partnership, etc., each
national of the EU may already claim in Bulgaria, on the basis of
EA, to be registered as sole proprietor, unlimited liability
partner, etc. He may claim that right before a Bulgarian court.
After entering into force of the Act of accession of Bulgaria to
the respective treaties (of Rome and the others) that right will be
claimed to the Court of Justice, as well, if the Bulgarian courts
have not settled it till then.
In that sense exceptions from the national
treatment, foreseen in the LEAFPPFI and not included in Appendix XV
a-d of EA - namely the prohibition of foreign person to perform
economic activity as sole proprietor, member of a co-operative,
partner in a general partnership, unlimited liability partner in a
limited partnership or a partnership limited by shares - without
permission for permanent residence in Bulgaria should already be
considered invalid for EU nationals and is a matter of correct
application of the legislation in court. In that aspect no
corrections in the LEAFPPFI are necessary for approximation of our
legislation with that of the EC.
As far as the sense of the exception is in the
difficulty to be defended eventual creditors of a person without
permanent residence in Bulgaria, who undertakes unlimited liability
responsibility and as far as for the EC citizens this restriction
(at least formally) is not applied as per the strength of the
advantage of the international contract norm, our state has to
assure the persuasion of unlimited responsible debtors within the
borders of the EC through a system of bilateral and multilateral
contracts for legislative aid.
For the LEAFPPFI to be compatible with EA and the EC
legislation, it needs certain other changes, which are going to be
shown at the respective place.
bb) The introduction to the First Company Law
Directive already proclaims that it aims at the creation of unified
regime, with view to abolishment the restrictions in the Right of
establishment. The more important in it:
- First of all it sets the requirement all the
member states to have a central commercial register of the
enterprises;
- All the documents, concerning the creation,
activity, representation, the changes in capital, the financial
situation, including the annual balance, etc. of a given company
have to be submitted in this register by the enterprise and kept
there;
- Reality of the obligations, undertaken by the
enterprise - non-application for third persons of the restrictions
in the representative authority of the executive organs or of
restrictions in the subject of activity;
- The motives for invalidity of the companies to be
strictly restricted to cases of formal infringement of the law,
which cannot be corrected, accepted by the court.
As for the real legislative requirements for
validity of the registered company and for validity of the
undertaken engagements, those questions are satisfactory regulated
in the Trade Act. It is advisable in the nearest future, through
amendments and changes in the Trade Act, within short period of
time the following questions to be settled:
- creation of a central trade register. At present
we have separate registers to the regional courts, but there is no
general register of the enterprises. Once such a register existed
to the Bulgarian Chamber of Commerce and Industry. Now such a
register might be created through a computer network, covering the
registers of all regional courts. It will be obviously necessary to
seek for the aid of the EC in that respect;
- introduction of additional requirements for the
documents, submitted for the company files in the regional courts,
as well as active control for the fulfilment of those requirements.
This means annual submission of documents for the financial status,
including the annual balance, to that register and their keeping
there. The abovementioned requires substantial financial means for
the development of the material base, which have to be voted in one
of the following budgets, together with seeking financial aid from
the EC. The change for the limited liability companies, compared to
the existing regulation, will be principle, as it will make their
financial status public;
- change in Article 5 of the Trade Act, as
regardless the clear formulation of the existing text, some courts
(the Sofia City Court and the Sofia Regional Court for example)
through its unusual interpretation refuse access to company files
and the providing of copies. The change should refer to
establishment of explicit and undeniable obligation in that
aspect;
- intensification of the control to the fulfilment
of the Trade Act norms about registration and drastic increase of
the fines for infringement. Introduction of serious punishments for
administrators, who refuse to obey to legislative norms.
cc) the Second Company Law Directive 91/77 of 13.
12. 1976 stipulates the formation and maintenance of capital of
shareholding companies for the insurance and co-ordination of the
protection of the shareholders and third persons.
The reason for issue of that directive is the
dominating role of the shareholding companies in the economy of the
member states and the often extension of their activity beyond the
borders of a given state.
The directive certifies at first place the
companies, for which it will be applied in the different member
states. It enumerates the minimal requirements, to be contained in
the statute and the establishment contract, namely: the type and
name of the shareholding company; subject of activity; volume of
capital; number and mode of determination of the managing organs,
as well as the relations between them; term of validity of the
company, if determined. Obligatory is the requirement for entering
into the public register of the statute, as well as of the
additional information as: headquarters and address of management;
nominal value and number of registered shares (at least once
annually); the restrictions, if any, for shifting of shares; the
share classes and what rights each class possesses; whether the
shares are at sight or by name; the volume of the registered and
authorised capital (the second term does not exist in our
legislation), etc. That is data is required, giving information
about the company, not only at the time of its establishment, but
also about its current condition. It is required the member states
to introduce minimum capital for establishment of a joint venture
to the amount of 25000 ECU, 25% being reimbursed at the moment of
registration. The directive regulates in detail the conditions for
increase and decrease of the shareholding company capital.
The directive concerns especially the question for
purchase by the shareholding company itself of its own shares, or
by other person, acting on its behalf, but to the account of the
company. Article 18 (1) of the Directive particularly prohibits the
company to register shares to its name. The following texts
regulate in particular detail when, under what conditions and with
what required formal acts the shareholding company may purchase
back its own shares, as well as what the annual financial report of
such a company should contain.
The shareholding company is stipulated in the Trade
Act, Chapter XIV. The directions, this matter should be developed
in are the following:
- introduction of requirements for regular
submission of data (especially about the financial situation) of
the company file for shareholding company in the commercial
register;
- much more detail and precise regulation of the
condition for increase and decrease of capital of the company;
- regulation of the purchase or prohibition of the
purchase by the shareholding company of its own shares. Obviously
in a lot of the member states such a purchase is prohibited by law,
but where it is allowed the directive requires to be introduced the
stipulated in it conditions and requirements.
As far as the First and Second Directives do not
require any changes, which are complex from legal standpoint, but
at the same time increase the legislative security and discipline
and thus being able to have direct contribution for increase of the
foreign investments, it is advisable those changes to be developed
with priority, of course after provision of the necessary aid from
EC and/or budget financing.
dd) Eleventh Company Law Directive No666/89. This
directive is closely connected with the Right of establishment, as
it regulates the requirements for opening a branch in a member
state by a company, established and regulated after the law of
another member state. Its purpose is to escape the differences in
the legislation of the different member states, which may infringe
the Right of establishment, protection of third persons, working
with the companies through their branches, as well as approximation
of the requirements for opening of branches in different member
states. With view to avoiding the discrimination on the bases of
nationality of certain enterprise, this directive stipulates also
the opening of branches of the company in the non member states of
the EC.
It specifies mainly the documents, which have to be
submitted for opening of branch, with application of the general
rule, that they have to be those, required by the legislation of
the member state, where the branch will be open. Parallel to that,
anyhow, with view to harmonising the legislation of the member
states is also listed the data, which the company, opening the
branch, should obligatorily submit with the registration
application. In short they are: the headquarters and address of
management of the branch; the activity; the registration number of
the company; data about the owner of the company from the register,
he is listed in; the name and the legislative form of the company,
opening the branch; the persons, who are going to represent the
branch, as well as the way of their firing and employment, the
volume of their rights, etc. In addition the member states might
require, after their own appraisal: sample of the signature of the
person, representing the branch, certificate from the register of
the company, opening the branch - certifying whether it exists or
not, etc.
An important difference with the regulations after
our Trade Act is the opportunity the branch not to prepare separate
balance, if it submits consolidated balance of the whole company.
Such a change should be foreseen in our Trade Act, as well, at the
same time guaranteeing the tax income from the profit of the branch
activity.
For companies, originating from non member states,
the requirements for opening of branch follow the law of the member
state, where it will be open, but the minimum obligatory
requirements, as per Eleventh Directive refer also to them,
together with some additional, as for example the law of the state.
which follows the company, opening the branch.
ee) The Twelfth Company Law Directive No667/89
concerns single-member private limited liability companies,
applicable also for public limited companies, where the legislation
of the member state allows the owner to be one man. Companies with
single owners are also regulated by Council Directives 151/68 and
660/78 on the right of establishment.
It is true that the EC right grants special
importance and aims at detailed regulation of the one man
companies. The reason lies in the fact that a good legislative
defence is necessary for the interests of third persons and
abolishment of the risks, which such enterprises may cause, due to
their one man owner.
- Definition - company with limited liability with
one man owner (natural person or other company) is that, which has
been one man owned at its establishment or has turned into one man
owned later.
- Requirements - parallel to the documents,
certified in Council Directives 151/68 for company registration, it
should be entered in a public register, that the company is with
one man owner, as well as his personality. The member states may,
depending on their national legislation, referring to holdings, to
introduce regulation or sanctions in case that:
- certain natural person is one man owner of several
companies;
- one man company or another legal person is one man
owner of other company.
- Management and validity of the contracts - the one
man owner exercises the rights of the General Assembly, and all the
decisions, taken by him should be in protocol or in writing. The
contracts, signed between the one man owner and his company,
represented by him, should also be in protocol or in writing and
they are liable to special requirements for publicity.
Parallel to the cases of Article 61 of the Trade Act
(TA), permitting the creation of state-owned one man shareholding
company, the Bulgarian legislation foresees only two forms of
companies, where the owner may be one man - the one man company, as
per Article 56 of the TA and one man limited liability company -
Article 147 of the TA.
The single owner limited company as a whole is
compatible with the European legislation, but here also more
serious European criteria should be introduced for control of the
financial situation and relations between the one man owner and the
company, with view to protection of third persons. This should be
done through change in the Trade Act. As it is not considerable
deviation from the existing legislation, but rather its further
development and perfection and it does not create serious
difficulties, we consider it advisable the amendment to be made
even at the first stage, together with the changes and amendments
as per the First and Second directives.
ff) Mergers of companies, divisions of companies. As
here the right of establishment is directly concerned, it should be
mentioned that the EC has considerable legislation about such
deals. That is comprised mainly of the Third Council Directive
No855/78, concerning the merger of public limited liability
companies and the Sixth Council Directive No891/82 - concerning the
division of public limited liability companies, as well as a lot of
other, concerning taxation, submission of consolidated annual
balances, etc. Both the directives are issued within the limits of
the General Programme of the EC for abolishment of the restrictions
upon the right of establishment and contain detailed regulations of
those legal acts. Both the directives contain definitions, as well
as a very detailed procedure, which can be generally characterised
as defending the interests of third persons, as well as of the
shareholders themselves. Important element of the procedure is the
obligation for submission of information at a very early stage
about the intentions for merger or fusion, separation or division.
That information should provide the shareholders with information
on the forthcoming operation, on one hand, regardless of the fact
whether they have a decisive voice or are a minority, the creditors
and bond owners, so that their interests are defended, and on the
other - to be accessible for third persons.
This matter, anyhow, may be left for the second
stage of the transition period. It is particularly complicated - on
one hand and certain practice is necessary for the Bulgarian
legislative and legal organs to go into the details of the content
of the new regulations. On the other hand the mergers, fusion and
unification will be regulated through the second stage (most
probably) also from the standpoint of the protection of the
competition, so the regulations of the two laws - the Trade Act and
the Act of Protection of Competition to be approximated.
gg) ZCouncil Regulation No 2137/85 on the European
economic interest grouping (thereunder called Consortium) - this is
a document, directly connected with the legislation at the level of
the European Community and is the only one, regulating the
integration of traders from the member states for development of
economic activity under unified corporate form at European level,
at the same time preserving their national legal form and economic
independence. It stipulates:
- the statute and the applicable law of the European
Consortium - concerning the statute - each member state is given
the opportunity to determine whether the consortiums, listed in its
registers, will be legal persons or not. The applicable law from
the standpoint of the contract for the establishment of the
consortium, as well as for its internal organisation, will be the
internal legislation in the state, which is listed as headquarters
of the consortium in the establishment contract.
- requirements for registration:
- the consortium should be formed at least by two
legal persons, with headquarters in different member states; or by
at least one legal and natural person, with respective headquarters
and place for economic activity in different member states;
- establishment contract, which has to contain at
least the company of the consortium, its headquarters, the targets
it is created for, data for each of the members and the period, it
is created for, if any;
- the subjects, who may be members of such a
consortium - as per Article 58, para 2 of the Treaty they are
specified as: legal persons, private or public, established in
correspondence with the legislation of the member state and with
headquarters in some of the member states and natural persons,
performing economic activity or offering professional or other
services in the Community;
- in detail are settled the questions of change of
the headquarters, decision making and the right of vote (including
when the decisions have to be unanimously accepted), the management
and the representation of the consortium, the responsibility of the
partners to third persons (unlimited and in solidarity), the
including of new partners, the leaving and expelling of partners,
discontinuation and liquidation (applied is the law of the state,
where the headquarters is).
The consortium as a form of company, stipulated in
Article 275 and 276 of the Trade Act, the text foreseeing that the
rules of civil partnership, as per Article 357 and the following
from the Law of Obligations and Contracts, will be applied for the
consortium or those of the company, in the form of which the
consortium is organised. As an advise might be given the wish the
civil partnership (company), after the Law of Obligations and
Contracts, to receive serious regulations, as it faces a number of
technical obstacles (for example if has no registration, due to
which it cannot open its own bank account) - on one hand, and - on
the other - the lack of contemporary regulations might limit the
right of establishment of foreign persons, willing to establish
joint projects with other Bulgarian or foreign persons, without
registering companies, as per the Treaty.
Otherwise we are of the opinion that there is no
legal obligation to regulate this type of international consortium.
With our annexing to the EC that regulation will start directly to
function here, and until then - if the regulations concerning the
civil partnership are updated, this will to a great extend fulfil
our obligations of approximation.
As is obvious from the Acts, considered up till now,
the EC aims on one hand through approximation of legislation of the
member states to warrantee the right of establishment of all the
subjects of the economic activity and on the other-to provide
maximum protection of third persons. The accepted approach, anyhow,
is creation of centralised public registers by the member states of
the subjects, performing economic activity, unlimited access to the
information, kept in them, introduction of clear and correct
criteria for economic activity.
b) As far as the fields for performance of economic
activity are concerned
Under license regime for foreign persons, performing
economic activity independently or through other company, as per
Article 5, para 3 of the LEAFPPFI are:
aa) the production and trade with weapons,
ammunitions and military equipment
- production - as per Article 18, para 4 of the
Constitution of the Republic of Bulgaria a state monopoly might be
established over the production of weapons and explosives, which is
also stipulated by the Law for Control over the Explosives, Weapons
and Ammunitions (published in the State Gazette No128 of 1950, with
respective changes and additions in the St. Gaz., No26 of 1968) and
the Regulation for its application. So in that field the Bulgarian
state should estimate its concerns about social order and security,
as well as the public economic interest in the process of
restructuring of economy towards market economy, before abolishing
the monopoly and introducing freedom of establishment in that
sphere.
- trade - in the field of home and foreign trade
with weapons, ammunitions and military equipment exists no state
monopoly. That field is regulated by the Law for Control over the
Explosives, Weapons and Ammunitions (ST. GAZ. No128 of 1950, with
final changes and amendments of ST. GAZ. No26 of 1968) and the
Regulation for its application and the Regulation for Control of
the Foreign Trade Activity with Special Production, adopted by
Decree No51 of the Council of Ministers of 1994, published in the
ST. GAZ. No29/94.
By all means in the field of the trade with weapons,
ammunitions and military equipment an overall review of the
legislation should be performed, taking consideration of the real
conditions, the public interest, order and security.
bb) Performance of bank and insurance activity and
participation in bank and insurance companies
- the bank and credit activity - it is stipulated in
the Law for Bank and Credit Activities and Regulation No2 of 11.
02. 1993 for the licenses, issued by the Bulgarian National Bank,
changed in the St Gaz. No20 and No91 of 1994.
As per those two acts liable to licensing are
Bulgarian, as well as foreign persons, wishing to perform banking
and credit activities. The additional requirements for foreign
persons (as per Article 5, para 3 of the LEAFPPFI) concern mainly
the documents, certifying their headquarters, as well as such
referring to their reliability and good name.
Here should be mentioned the Second Directive of the
Council of 15. 12. 1989, which is considered important instrument
for management of the internal market from the standpoint of
establishment and the right to provide services in the field of
credit institutions. This directive is applied not only for the
institutions, assigned specially by the state with specific
functions of regulation policy in the banking.
As per that directive each member state will insure
for the activities (listed in detail in the annex to the
directive), performed on its territory by credit institutions,
authorised and controlled by competent organs of another member
state, to be applied the conditions of that directive. The same
regime will apply for the financial institutions - whether a branch
of the credit institution or own branch of two or more credit
institutions, with some additional conditions, introduced for them.
The activity of the credit institutions and of the respective
financial institutions might be performed through a branch or
through offering services.
One of the basic targets of that directive is the
attaining of considerable approximation, necessary and enough to
insure the mutual acceptation of authorisation of the
abovementioned institutions and control systems, making possible
the given license in one member state to be recognised in the whole
community. In this sense the directive is directed towards
approximation of the authorisation conditions, the authorisation
cancelling conditions, as well as towards protection of third
persons. The directive regulates in detail those acts through the
introduction of severe criteria for the activity of those
institutions, detailed requirements for submission of information
about their activities and creation of systems for close and
regular co-operation between the competent authorities of the
member states.
It is obvious from the abovementioned that the
integration in the field of credit activities in the EC is very
serious and directed towards abolition of the borders between the
different member states. From this standpoint in the Bulgarian
legislation should be paid attention for the gradual introduction
of European criteria for submitting licenses to the bank and credit
institutions, for control of their activity, as well as for usage
of protection mechanisms, created in the EC for protection of the
investors.
As far as paragraphs aa) and bb) are concerned it is
important to note, that the limitations refer to the very
establishment only, but not to the functioning of certain
investment after receiving the necessary license. Of course already
established here company of the EC should also receive a license
about the abovementioned activities, but once having it - it may
perform the licensed activity under the national regime
conditions.
The restrictions, as per paragraphs aa) and bb)
above are stipulated in the Annexes XVb and XVc to EA, but only as
temporary, as given in Article 45, paragraph 6 of EA, so it is
logical within a reasonable term - with an opportunity this to be
in the second stage, those to be abolished through a change in
LEAFPPFI. Otherwise after coming into force and publication of the
ACT for our annexing to the Treaty and the rest of Treaties, they
automatically will cease functioning for citizens and companies
from the EC.
With view to the abovementioned the LEAFPPFI can be
changed, the listed activities being subdued to national regime. On
the other hand is possible after contract - even before annexing
Bulgaria to the EC to introduce the change for citizens and
companies of the EC only, for example through amendment of the
Europe Agreement.
This could happen under the above mentioned
circumstances in a moment when a customs union between Bulgaria and
EC start functioning, in order to avoid the most favoured nation
treatment , which is fixed in all our contracts , concerning
protection of investments (treatment, given to investors from
countries, which the receiving state is in customs union with , is
not considered when defining the treatment , that will be given
according to the MFN clause.
If it is necessary to apply restraints to foreign
citizens, it could be done through changes of other laws, f. e. the
Law for the residence of foreigners in Bulgaria, which could assume
additional requirements for achieving residences rights in
Bulgaria.
Obviously the above does not exclude the application
of the general rule for public order and national security, but it
is used just in cases , when the freedom of settlement is regulated
as a rule.
cc) Our legislation wasn't regulating till recently
the statute of stocks and the security exchange , including the
investment companies. We hope this gap will be filled by
regulations corresponding to the European standards with the
recently voted at the National Assembly Law of stock exchange and
securities ( not issued yet ), which includes the investment funds
too.
dd) Acquiring estates in definite geographic regions
determined by the Council of Ministers - a list of the geographic
regions with licence regime for acquisition of estates by foreign
citizens has not been published since the Law for protection of
foreign investments came in force.
ee) Concessions
Article 18 , paragraph 1 - 4 of the Constitution of
the Republic of Bulgaria states the projects and activities , which
are of exclusive state property or over which the state exercises
its sovereign rights. Par. 5 of the same Article provides the
possibility the state to grant concessions for them and the terms
and order for it will be regulated with a law . The draft law
concerning the concessions is to be introduced to the National
Assembly.
The law of EC does not regulate the way and terms of
committing concessions , for they usually concern projects , which
the countries prefer to keep sovereign. This matter is not
regulated by EC law and it's a subject of the national
legislation.
c) Acquisition of property rights upon land and
restricted real rights upon estates.
A general restraint of the foreigners' rights to
acquire property of land , including through a branch or as one man
company is established by Art. 5, par. 2 of LEAFPPFI. They can
acquire property rights upon buildings and limited real rights upon
lands (despite of this text, that is newer and special to Art. 29
of the Law of property , in Bulgaria was imposed through the
interpretation the more conservative approach to the matter, saying
that acquiring property rights upon industrial buildings and
restricted real rights upon lands is legal without the permission
of the Ministry of finances only for legal persons), while for
acquiring a house of dwelling the foreign citizen must use his
rights for construction.
Again according to this Article a company with
foreign ownership over 50 % can not acquire real rights upon
agricultural lands. And in accordance with the last changes of the
Law of property and exploitation of agricultural lands (published
SN No 45/95) companies with foreign ownership ( no matter of its
percentage ) can not acquire real rights upon agricultural lands at
all.
Considering the restraints, put with LEAFPPFI must
be promptly noticed, that Appendix XVъ to EA hints exactly these
very restraints. In accordance with Art. 45, par. 6 of EA , the
restraints for acquisition of lands, houses of dwelling , except
the cases of using the construction right or in order , regulated
with a law and acquiring real property in separate geographic
regions , as it is provided with Art. 5 , par. 3 , i. 3 of LEAFPPFI
are concerned differently compared to the restraints , provided in
Apendix XVн and XVb. It is not foreseen for the first " studying
the possibility for accelerating the granting national treatment "
, but just the possibility for including separate "sectors or
questions" to national treatment, i.e. the first kind restraints
are accepted as lasting during the transition period, while the
second are accepted as temporary. Proceeding from the fact, that
the above restraints are laid down in the Constitution it will not
be justifiably or even possible to make Constitutional changes,
concerning them. When the act of our joining to the Rome and the
other contracts comes in force, their regime will automatically
start operating in Bulgaria . Based on the pointed out advantage of
the EC law compared even to the Constitution law of the countries
members , the veto on the real property will be removed regarding
to persons and companies from EC.
We must notice that the change in the law of
property and the exploitation of agricultural lands contradicts the
taken by Bulgaria obligation according to Art. 45, par.4 from
Europe Association Agreement , stating that Bulgaria will not issue
new normative acts or take up other measures leading to
discrimination in regards to settlement during the transitional
period. This example that it is necessary to create a more reliale
mechanism of co-ordination between the executive and the
legislative branches with respect to the compatibility of draft
laws with the law of EC.
6. Conclusion
As it was above mentioned the rights for settlement
and placing services are among the basic rights , protected by the
Rome contract . These rights touch all the spheres of economic
activity, which is the reason for a larger in volume legislation on
European level. It is obvious the aspiration of the member states
to standardise gradually and permanently their legislation with a
view to provide a common treatment to the economic agents on one
part, but on the other to create gradually conditions for the
successful functioning of a common home market within the
boundaries of EC by mutually recognition of authorisations ( at the
credit institutions f. e.) , imposing clarity when the subjects
from the member states do economic activity and creation of common
control mechanisms.
Here must be emphasised the fact, that in 60s the EC
Commission had started to discuss the possibility for creation of
an European law for the commercial companies and in 1970 it
proposed to be adopted a Statute of European commercial companies.
Because of various reasons, some of them political , it was not
possible till 1985, when the Rome contract was complemented and
changed by the Act of united Europe, which confirms the willingness
of the member states to create a common market. The same year the
Commission is working out a White Book, marking an ambitious ,
legislative programmeme to create a common home market, where as a
main aim is included the European law of commercial companies. So
the Commission presents a new project for an European commercial
compay statute in 1989. Such a statute has not been accepted yet,
but after all the aim will be achieved.
The Council votes the Regulation of an European
incorporation (consortium) for achieving economic aims in 1985. The
Consortium is not a substitute for the European commercial company,
but comes a step ahead to it.
One of the basic tasks in the field of the
legislation approximation is to be explained at all levels of the
administration and society the enormous scale of work, the
significance and urgency of the task and its long term character .
The scale of this activity requires public and political support ,
which solely can provide the needed human and other resources and
to put the task as a priority.
The specific character of the approximation
activity, on the other hand could lead to lack of co-ordination
between the separate departments or sectors . To avoid this risk
the approximation activity must always be connected and
subordinated to the general aim for integration the EC. Explaining
the scale and the essence of the process of approximation requires
knowledge of what the common market is and what the law of EC
represents, on what principles it is based, which rules, norms and
standards keep their national nature and why, what independence the
national legislator has got in order not to break the harmonisation
of the EC law, what is the common policy of EC in the separate
fields and branches, including the question of law development
etc.
Solving this common problem is a necessary minimum
for setting up the basis for fulfilment of the approximation
process , which could pass several stages. We must promptly notice
, that the given terms for the stages are absolutely conventional.
The terms will depend on plenty of factors , which include
readiness of the economy, political stability , psychological
willingness , ability of EC to provide the necessary support
etc.
The first stage most generally could be expected to
long for the next 3 - 5 years . During this stage the law and the
attendant secondary legislation changes should be done, which
changes could be accepted more easily compared to the present
transition period . For instance in the field of the company law
could be issued changes in the commercial law, concerning the
commercial register, the publicity, the discipline , the financial
clarity etc . In the field of the protection of the competition is
to be worked out within 6 - 12 months a programmeme for legislative
changes. This programmeme should include a new draft law of
protection of the competition and secondary legislation acts in
harmony with the basic EC acts in the field of cartels and
partially i the field monopolies, as well as acts for setting a new
Commission ( Agency ) for protection of competition . A reasonable
policy is to be worked out towards the state aids and the state
monopolies , which could be under the protection of Association
Council. These measures could be discussed at the Council of
association the next year and to start prompt execution immediately
or respectively when the 1997 budget is being accepted.
In the years , following the first stage should be
voted the laws , concerning the coming and the abuse of a monopoly
state , the state aids and the state monopolies, and in the end of
the second stage must be achieved a practically full approximation
to the EC law, including as regards to the control functions of the
Commission (Agency) for protection of the competition. In the
sphere of the protection of the intellectual property could be
given a priority to the new law of trade marks and the patent law
in respect with an additional protection of the medical products, a
law forbidding the import, export and re-export of imitations and
products of piracy.
It is of great significance to be created in the
sphere of intellectual property rights reliable mechanisms for
applying these rights and the main efforts should be directed to
this matter.
In the other fields should be worked out similar
programmemes in order to recognise both the short term tasks and
the necessity of immediate starting of their accomplishment , and
the long term, which could be postponed till the beginning of the
second stage , but which require bigger profundity of the
changes.
One of the main tasks till the end of this year is
to provide the necessary texts of the normative acts of EC, through
supplying the needed money and equipment for electronic entry to
the Community acts and conditions for translation too . This
process should develop in parallel to the enlargement of the
general knowledge of the EC laws' essence , of the EC policy in the
various branches, of the character of the approximation process
etc.
During a third, last stage, if necessary, the work
on checking the present secondary legislation in the various
branches and its modernisation should be completed as well as the
passing of new secondary legislation in pursuance of the new
legislation in the fields , where it has not been done till the
relevant moment.
As some of the passed laws and normative acts are
bound to be of a transitional character , i. e. they will aim to
secure partial approximation at the first stage till the complete
integration is practically possible, these normative acts could be
accepted with similar understanding by recognising their
transitional character.
The adopting of norms, harmonised with the law of EC
is insufficiently as a sole act. The main challenge, that stands in
front , as it is pointed out in the EC White Book is not the
harmonisation of the legal texts, but the adaptation of the
administrative mechanisms and the society to the conditions ,
necessary for effective application of the law norms . It is a
complex process, requiring the formation of institutions and
structures ( or adapting the present existing ones ), which
involves essential changes in the administrative and the legal
systems.
The mechanism of harmonisation of our law with the
law of EC should consist of the following basic elements :
1. To be created specialised sectors to all the
concerned Ministries and other departments , which will have the
assignment to evaluate to what extend the law in the field
corresponds to the law of EC . The valuation is supposed to be done
in accordance with the following three criteria :
- to what extend the present laws and secondary
legislation of the given sector/ branch correspond to the law of
EC;
- what are our priorities to the future legislative
creativity at the sector , in the context of the approximation of
our law to the law of EC;
- what technical and financial aid is needed from
the European Commission in letter and in spirit.
2. The whole control over the fulfilment of the
approximation process to be given to a centralised sector, which to
co-ordinate and direct the process. This sector could be either the
Legislative Council at the Ministry of Justice, or an agency
created specifically for this purpose sector, consisting of
qualified lawyers at the basic law branches . The centralised
sector will co-ordinate , direct and control the proceeding of the
process of approximation of Bulgarian law to the EC law in the
different sectors through summary and analysis of the results and
setting of priorities and directions for the future activity.
3. The centralised agency, on the recommendation of
the respective units at the various ministries and other
departments, should put forward proposals for providing technical
assistance primarily for:
a) specialised education and training of specialists
in concrete law and economic matters, closely connected with the
process of law approximation;
b) granting all kind of information about the EC
law, the relevant databases , current information , scientific
works, textbooks, dictionaries , terminological reference books
etc.
This mechanism is supposed to function , carrying
out the government programmeme for approximation of the legislation
, in which have to be included the following elements :
1. Inspection of the operative laws and secondary
legislation in the light of their compatibility with the law of the
EC.
2. Work - schedule for changes and supplements to
the present normative organisation and its harmonisation with the
law of EC.
3. Work - schedule for adopting new normative acts
in accordance with the priorities, that must be presented in the
government programmeme.
The mechanism of harmonisation of our law with the
EC law should establish new requirements to the procedure of laws'
adopting and voting.
1. All the Ministries and other departments that
introduce to the Council of ministers drafts of normative acts to
inform in a written form how far the introduced draft corresponds
to the law of EC and to the obligations , taken by Bulgaria in
virtue of the Europe Association Agreement ( EA ).
2. The centralised group (respectively the Council
of legislation at the Ministry of justice ) to exercise control
over the passed to the Council of Ministers drafts for normative
acts from the viewpoint of their accordance with the EC law and our
obligations under the EA.
3. With a change in the Regulation of the work of
the National Assembly all deputies introducing draft laws will be
obliged to state their arguments to what extend the draft
corresponds to the law of EC and to our obligations under EA . The
control over the accordance of the draft laws with the EC law and
EA could be exercised by the centralised sector ( respectively the
Council of legislation at the Ministry of justice ) in a good
interaction between the legislative and the executive power , and
an introducing of a requirement in the Regulation of the National
Assembly's activity for a statement of the executive power about
the question , of the compatibility of those draft laws , that have
not originated in the sectors of the executive power. A control
functions could be represented to the Council of legislation ,
formed at the National Assembly or to the European integration
Commission at the National Assembly ( as it is in Poland), but
considering that the Bulgarian lawyers are not well grounded in the
EC law ( yet ), as well as its specific character we would advise
to concentrate the control at a single sector of the executive
power.
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