EU Regulations Imposing Financial Corrections
by Bulgarian Public Authorities
(EU)'s main investment policy established
with the goal of maintaining sustainable
and diverse development and economic
growth stimulation in all EU states.
Targeting all regions and cities in the
EU, it is delivered during different
programming periods through funding
operations or operational programs
adopted by the European Commission
and financed under the European Funds.
Financial corrections are measures
taken by European Member states in
connection with irregularities that result
in financial loss, unjustified expenditures
or non-target spending of the funds of
or part of the public contribution, or in
other words, cancelling payments to the
contractors initially granted by the state.
The implementation of EU
regulations in the field of imposing
financial corrections requires that the
Bulgarian public authorities lay down
procedures governing these issues so
that any unjust cancelation of such
payments is avoided. Nonetheless, the
contemporary state rules and regulations
are not comprehensive enough, which
of course raises many legal issues.
Until recently only a few legal acts
that concern the nature of financial
corrections have been in force. This is
the reason why the Supreme Court has
been struggling to fill that gap in the
Bulgarian national legislation through its
practice.
The main legal issue is whether the
financial correction is considered an
individual administrative act imposed by
a public authority OR if they are penalty
payments as a result of a breach of
contract between a public authority and
the respective beneficiary of the funds.
The answer to that question directly
influences the beneficiaries' access to
justice and effective legal protection
upon unilateral cancelation of the
payments agreed under a contract with
a public authority. If the imposition of
financial corrections is considered a
contractual right of a public body, then
the legal claim of the other party is to
be filed in a civil court. If, however,
as an administrative act, the case
shall be under the jurisdiction of the
administrative courts. Such a difference
in court competence defines the amount
of court taxes the claimants shall pay.
The civil courts' fee is 4 percent of
the claim amount while the fee of an
administrative court amounts to BGN 50
(approx. 30 USD).
Considering the aforementioned lack
of specific regulations, the Supreme
Administrative Court (SAC) has issued
many awards encompassing legal
analyses and interpretations on that
matter. For many years it has asserted
that the financial corrections are indeed
a contractual right, a penalty payment as
a result of breach of contract, of public
bodies. It was not long before that made
a radical change of SAC's opinion in
several awards:
on administrative case No 8672/2014
by SAC provides that "the Supreme
Administrative Court has abandoned
its understanding of the civil nature of
these actions and understood that they
are individual administrative acts."
administrative case No 13877/2014
by SAC: "Considering the nature of
a sanction, the act inevitably affects
the interests of a party. The Managing
Authority is a third non-contractual
party that is empowered to impose
sanctions unilaterally, thus the
relationship between them is not of
law, European Union law and administrative law.
corporate law, commercial law and labor law.
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