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The Bulgarian Constitution and the Law on Liability of the State and Municipalities for Damages (LLSMD) provide for the liability of the State for damages. These should be caused by unlawful acts, actions or omissions. But can this liability be engaged if the State has changed a law, thereby harming the legitimate expectations of the legal subjects? Should the relevant legislation be repealed as unconstitutional in order for the affected parties to claim damages?
And which right is actually being violated, the national right or the right of the European Union? In order to answer these questions, we will analyze the European case law, as well as that of the Bulgarian Constitutional Court and the Supreme Court of Cassation.
Termination of proceedings for acquisition of Bulgarian citizenship for investment
In this paper we will consider the case of a third-country national who has applied for Bulgarian citizenship for investment under the (repealed) Article 14a, par. (1), p. 6(b) of the Bulgarian Citizenship Law (“BCL”). After the foreigner passes all stages of the procedure and makes the necessary investments, his application is approved by the Citizenship Council and sent to the President of the Republic of Bulgaria for the issuance of a decree.
In the meantime, however, the amendment of the BCL (SG No. 26 of 2022) repealed the norm of Article 14a. On this basis, the Administration of the President terminates the naturalization procedure, as a result of which the applicant does not obtain Bulgarian citizenship.
Legal certainty and legitimate legal expectations
The principles of legal certainty and legitimate expectations enable legal subjects to foresee the consequences of their actions. These principles aim to limit the ability of the state to change the outcome of legal events that have already occurred. This cannot, of course, change the policy of government if the public interest requires it, but that interest should be clearly defined and justified.
The basic principles of legal certainty and legal expectations play an important role in Bulgarian justice, as Bulgarian courts are obliged to apply European law properly. However, to what extent could the failure to apply these principles be interpreted as an unlawful act or omission under the LLSMD? It is this question that this paper will attempt to answer.
The principle of legal certainty is not absolute
It is important to note that the principle of legal certainty and legitimate expectations are not absolute. For example, the provisional implementation of an administrative act that has not entered into force leaves the beneficiaries of this (non final) act in a situation of legal uncertainty. This is legally justified, and the beneficiaries can also avoid falling into legal uncertainty by simply waiting for the act to enter into force, without making use of their right of pre-execution.
Another, quite exotic hypothesis, in which legal expectations should not be considered as justified, is the norm of Art. 292, par. 1, p. 2 of the Bulgarian Penal Code. In this case, the “perjurer” may withdraw his false testimony within a certain time limit, which time limit, however, depends only on circumstances over which the “perjurer” has no control. Thus, although the Penal Code provides for exemption from criminal liability if the perpetrator renounces his false testimony, he may not have the opportunity to do so if, for example, he is indicted within a short period of time. Thus, the provision of the Penal Code, while providing for the possibility of exemption from criminal liability, in no way guarantees the subject the right to avail himself of it.
The principle of legal certainty in the case law of the Court of Justice of the European Union (CJEU)
The principle of legal certainty and legitimate expectations is deeply rooted in the case law of the CJEU. Generally speaking, the state should respect three basic principles:
- To provide a predictable and clear legislative basis;
- Legislation should not have retroactive effect except in exceptional cases;
- Legislation is coherent.
According to the CJEU (see EU:C:2015:145), any legal subject who has been given a legitimate expectation by a European Union institution by means of specific assurances it has given him is entitled to rely on the principle of legitimate expectations. However, if a prudent and intelligent economic operator is able to foresee the adoption of a Union measure of a nature to affect his interests, he cannot rely on that principle when the measure in question is adopted. In other words, in order for the principle of legitimate expectations to be properly invoked, the rule in question must not contain any foreseeable hypothesis of its non-fulfilment.
According to the case law, the right to claim the protection of legitimate expectations presupposes the existence of three conditions. First, the Community administration must have given the person concerned specific, unconditional and uncontradicted assurances derived from authorized and reliable sources. Second, those assurances must be of a nature to create a legitimate expectation in the mind of the person to whom they are addressed. Third, the assurances given must be in accordance with the applicable rules (judgment of the Court of First Instance of 23 February 2006 in Case T-282/02 Cementbouw Handel & Industrie v Commission [2006] ECR II-319, paragraph 77, and the case-law cited).
EU:T:2009:27
Citizenship by Investment – essentially a contract with the State
But in our case, the norm of the repealed Article 14a of the BGB stipulates the possibility for any foreigner who has fulfilled the legal requirements, including making an investment, to obtain Bulgarian citizenship. Although the statutory provision does not warrant the issuance of a Presidential Decree, it is not conditioned in any way. In fact, the statutory provision by its very nature has the characteristics of a contract under Article 8 of the Bulgarian Law on the Obligations and Contracts. In essence, the State requires the foreigner to make an investment in the national economy, and in return the foreigner may obtain Bulgarian citizenship. It is assumed that both parties (the State and the foreigner) benefit from this “contract”. The state receives capital resources and the foreigner – Bulgarian citizenship, which gives him certain additional rights.
In the present case, all conditions are indisputably met. The specific, unconditional and uncontradictory assurances are enshrined in the statutory provision of the BCL. These assurances derive from a reliable source, a law promulgated in the Official Gazette. Unquestionably, the statutory provisions create a legitimate expectation in the minds of the addressees. Finally, the statutory provisions are of a high legal rank, i.e., consistent with legal norms.
The Mulder case – practice of the CJEU
The Mulder case is an interesting case from the case law of the CJEU that can be analysed by analogy with the present case. In that legal dispute, Mr Mulder signed a contract with the Dutch Agricultural Fund, committing himself to suspend his production for a certain period in return for financial compensation. Shortly before the expiry of the period for which Mr Mulder committed to refrain from production, he applied for a milk production quota. However, he was refused a quota on the ground that he had not produced milk in the previous period. It is important to note that the quota system was adopted after Mr Müller had undertaken to cease production.
In appealing against the refusal to grant him a quota, Mr Mueller relies on his right to legitimate expectations and legal certainty. In the subsequent reference for a preliminary ruling, the CJEU considered that Mr Müller had been encouraged to participate in the measure and to undertake to suspend his production. However, in doing so, he could not have foreseen that this action might have negative consequences for him in the future. On the contrary, the measure proposed to him gives rise to a legitimate expectation in him that he will in no way be subjected to future measures which may adversely affect him. The logical conclusion of the Court is that the requirement that the producer must have produced milk in the past period in order to be granted a quota is invalid!
And again about the Bulgarian citizenship for investments according to the abolished norms of the BCL
Analyzing the European practice, in our opinion the conclusion is unambiguous. Namely, that the repeal of Article 14a of the BCL violates the justified legal expectations of those who have already fulfilled all the legal requirements and are waiting for their decree on obtaining Bulgarian citizenship to be signed by the President. To be precise, there would be no violation of rights if the President did not issue a decree for whatever other reason. But with the termination of the administrative proceedings due to the repealed provision of the BCL, the violation of the applicant’s legitimate expectation of Bulgarian citizenship is obvious.
In an action for damages under the LLSMD, the Bulgarian court must comply with the principle of legal certainty, which is enshrined in both Bulgarian and European law.
… it is for the national courts and tribunals and for the Court of Justice to ensure the full application of European Union law in all Member States and to ensure judicial protection of an individual’s rights under that law
OPINION 1/09 OF THE COURT / 08.03.2021 – EU:C:2011:123
Supreme Court of Cassation
The case law of the Supreme Court of Bulgaria unequivocally shows that Bulgarian national courts must comply with the principle of legal certainty and legitimate expectations. These principles are part of both European and Bulgarian law.
With regard to the principle of proportionality, as one of the general principles of European Union law, along with the principles of non-discrimination, protection of legitimate expectations, good administration, avoidance of unjust enrichment, etc. (all of which are undoubtedly part of primary law), it is aimed at granting rights to private law subjects and, accordingly, at having a direct effect, i.e. it constitutes a criterion for assessing the lawfulness of the conduct of the Community authorities (Judgment of 11.03.1987, Vandemoortele v Commission, 27/85, EU:C:1987:120), as well as of the Member States, which obliges the Court to assess whether the restrictive measures taken by the public authority are capable of securing the legitimate aim pursued by them without going beyond what is necessary to attain it (judgment of 24.09.2008, M v Ombudsman, T-412/05, EU:T:2008:397).
Supreme Court of Cassation – DECISION No. 16 / 02.03.2021.
The Constitutional Court
The Constitutional Court has also ruled in line with established practices on legitimate expectations and the principle of legal certainty.
In its jurisprudence, the Constitutional Court has consistently developed the content of the concept of the rule of law with regard to the formal element – legal certainty, as well as the resulting substantive requirements. All of these are united by the idea of the rule of law – the universal and equal binding force of law on all legal subjects. Article 4(1) of the Constitution explicitly proclaims the rule of law as a fundamental principle of the constitutional and legal order.
DECISION No. 12, Constitutional Case No. 13/2015
All in all, we believe it’s all clear. It is yet to be seen though, what the Bulgarian courts will have to say in the years to come.