Novinite is publishing the full text of a statement by Bromak, the majority shareholder of Corporate Commercial Bank (Corpbank or KTB), on proposed changes of Bulgaria's Bank Insolvency Act currently subject to a reading in Parliament.

The motive cited by Bromak to raise its objection is "contravention with the Constitution, EU law, and rule of law in the Republic of Bulgaria of the so-called bill on temporary assignees at KTB.

Dear Ms Tsacheva,

Considering the high public interest in the intention  lately resounded by the Prime Minister, Minister of Finance, representatives of political parties in Parliament, the Chairman of the Budget Committee in the National Assembly and other representatives of the legislature and executive, and also in the preliminarily achieved parliamentary agreement on legislative changes in the Bank Insolvency Act (BIA), respectively in the Credit Institutions Act, in our quality of majority shareholder in Corporate Commercial Bank AD (KTB and/or THE BANK), defending THE BANK's interests, those of its asset holders, shareholders, bondholders, business partners, as well as defending public interest in unveiling the whole truth about KTB, we state the opinion that the legal amendments envisaged are UNCONSTITUTIONAL, CONTRAVENE SOCIAL AND LEGAL ORDER IN THE REPUBLIC OF BULGARIA, AND VIOLATE THE LAW OF THE EUROPEAN UNION.

Our arguments, to summarize, are as follows:

1. The elaboration and discussion of the Draft Law on a Temporary Assignee in KTB should be carried out in line with the imperative prescriptions of articles 26-29 in the Enactments Act, according to which:
a) The elaboration of an enactment project is conducted whilst taking into account the principles of validity, stability, openness and consistency.

b) Before submitting a draft law for the issuance or acceptance by the competent authority the compiler of project must publish it on the website of the institution together with the reasoning and the respective report, with interested parties being provided at least 14 days for proposals and opinions on the project.

c) the Minister importing a draft enactment that is subject to the Council of Ministers sends it for coordination to the authorities whose powers are related to the subject of regulation of the proposed act or who are obliged to apply it. The opinions of these bodies shall be prepared in 14 days.

d) A draft enactment, together with the reasoning report according to it, shall be submitted for discussion and approval by the competent authority, with the Reasoning, and the Report respectively, including:

1. the reasons making the adoption necessary;
2. the objectives placed;
3. the financial and other resources necessary for the implementation of the new regulations;
4. the expected results of the implementation, including financial, if any;
5. an analysis of compliance with EU law.

e) a draft enactment to which motifs, or a report respectively, have not been applied, shall not be considered by the competent authority, under the abovementioned requirements.

If the National Assembly fails to comply with the Enactments Act in the drafting of this bill, it will cannot require of citizens of the Republic of Bulgaria to comply with the laws in force in the country.

2. The preparation, discussion and adoption of the Draft Law on a Temporary Assignee at KTB is in contravention of the Constitution of the Republic of Bulgaria on at least three grounds:

2.1. With the adoption of the Law on a Temporary Assignee at KTB, provided that KTB has not been declared bankrupt by the court and it currently has a case pending in the Supreme Administrative Court (SAC) in contesting revocation of the license of KTB with a Decision № 138/2014 on the Governing Council of the Bulgarian National Bank, i.e. according to the European and Bulgarian legislation KTB is "a credit institution", a direct and illegal impact is being applied  by the executive and by the legislature on the judiciary, by forcing it on how to deliver its final judgment in the case of decertification of KTB- and quickly benefit the Bulgarian State that has to collect money from KTB. And if the SAC declares illegal and thereby repeals Decision )138/2014 of the Governing Council of the Bulgarian National Bank, what will happen then, will it be able to revoke the acts and actions of the temporary assignee, to whom will he be responsible for their action and to what extent and scope will his responsibility be?

2.2. Why is the "insertion" of a temporary assignee in KTB necessary, provided that, as under the current legislation, conservators have explicitly stipulated statutory powers on storage of property of the Bank in the interest of all creditors of KTB? In this case, if the temporary assignee is appointed by the court at the proposal of the Bank Deposits Insurance Fund (DIF), what will be then the guarantee of its independence, objectivity and impartiality, and how will the defense of interests of other creditors of the bank be ensured?

2.3. Why is it necessary, for the particular case of KTB, in the course of a pending administrative proceedings in  the SAC over disputing of the Bank's shareholders decision of the BNB's Governing Council to withdraw its license, to adopt EXTRAORDINARY LEGISLATION ON KTB, including TEMPORARY ASSIGNEES, which are provided extraordinary powers - led only in their uncontrolled discretion, to declare or sue for invalidation of cessions and transactions in favor of bona fide third parties carried out by conservators, given that even in the current legislation the Assignee has such competence under the Bank Insolvency Act?

3.1. Appointing a temporary assignee in the process of a judicial appeal of an administrative measures of "license withdrawal" of a joint-stock company, a lending institution, imposed by the regulatory authority, is in contravention of the general provisions of the Commercial Code, which states that the 'temporary assignee' has its place in the management of the company only after the opening of insolvency proceedings, which in respect of KTB have not been opened.

3.2. The implementation by the legislator of a TEMPORARY ASSIGNEE into the proceedings of an unfinished special supervision on KTB is also in a drastic contravention of the Law of the European Union, in particular Directive 2001/24/EC of the European Parliament and the Council of 04.04.2001 on the reorganization and winding up of credit institutions. This Directive does not provide for an insolvency authority to participate in proceedings before the opening of an insolvency proceedings. On the contrary, only the opposite is permissible: "The important role of the competent authorities of the Member State prior to the opening of a liquidation procedure may be performed during the liquidation, to ensure the proper course of these proceedings."

4. The adoption of the Draft Law on a Temporary Assignee at KTB contravenes the Directive 98/26/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 19 May 1998 on the settlement's finality in payment and settlement systems of securities /THE DIRECTIVE/.

4.1. Section III of the Directive is entitled PROVISIONS ON INSOLVENCY PROCEEDINGS. In Article 6th of this same section of THE DIRECTIVE explicitly states that the moment of the opening of insolvency proceedings is the moment when the relevant judicial or administrative authority hands down its decision. In the case of KTB there is no judgment on the opening of insolvency proceedings at the KTB, which is why the legal figure of a TEMPORARY ASSIGNEE without a court decision for opening bankruptcy proceedings at KTB is in GROSS VIOLATION AND INFRINGEMENT OF DIRECTIVE 98/26/EC OF THE EUROPEAN PARLIAMENT AND THE COUNCIL of 18 May 1998 on the settlement's finality in payment and settlement systems of securities /THE DIRECTIVE/.

4.2. Moreover, the seventh article of the Section III of THE DIRECTIVE imperatively provides that "Insolvency proceedings shall not have retroactive effect on the rights and obligations of the parties arising out of or related to their participation in the system before the moment of opening of such proceedings ..." i.e. the figure of a TEMPORARY ASSIGNEE and all his actions and acts, regardless that they will be written into the Law on Temporary Assignee at KTB, ARE IN A VIOLATION OF THE DIRECTIVE 98/26/EO OF THE EUROPEAN PARLIAMENT AND THE COUNCIL of 18 May 1998 on the settlement's finality in payment and settlement systems of securities, and not only will they fail in court, but yet another round of infringement proceedings might be launched against Bulgaria by the European Commission over non-compliance and violation of the Law of the European Union.

5. The legislative introduction of a TEMPORARY ASSIGNEE to conduct aside action on the recovery of bankruptcy estate, in a situation of a Decision №138/2014 of the Governing Council of the Bulgarian National Bank, on revoking the license of KTB  that has not entered into force, is contrary to the provisions of Directive 2001/24/EC the European Parliament and of the Council of 04.04.2001 on the reorganization and winding up of credit institutions.
The text explicitly states taht the rules for nullity, voidability or unenforceability of legal actions detrimental to all creditors are applied after the opening of insolvency proceedings, a decision that has not been enforced in the case of KTB.

The Directive provides for the appointment of an administrator in the conduct of reorganization measures and, separately, a liquidator - in liquidation proceedings, without mixing of the two judicial bodies. Such mixing will virtually be the result of the appointment of a temporary assignee in a credit institution that appeals the revocation of its license.

The legal status and outstanding judicial proceedings under the Credit Institutions Act and the Bank Insolvency Act in the case of KTB do not involve the appointment of a temporary assignee protecting the bankruptcy estate as this is intended only in  "liquidation proceedings", a term that under the Directive "is collective proceedings opened and monitored by the administrative or judicial authorities of a Member State for the realization of assets under the supervision of those authorities..."

6. With the addition of the figure of a TEMPORARY ASSIGNEE in case of lawfully halted insolvency proceedings in KTB under the current Bank Insolvency Act, not only the independence of the court is being compromised, but competence and independence of the regulatory and oversight authority BNB are seized. Something over which infringement proceedings are  very likely to be opened against Bulgaria and the latter could be subject to sanctions from the European Commission for violation the norms of the Law of the European Union, for another time.

7. To summarize, what is currently being done with the Draft Law on Temporary Assignee at KTB is tantamount to changing the rules of the game halfway through a football match, so that after the half-time the match has to be finished at a single goal. Is this the National Assembly's will?


All the abovementioned taken into consideration, we ask you:
1. To take this statement of ours while discussing the Draft Law on Temporary Assignee at KTB;
2. To launch a broad public debate on the Draft Law on Temporary Assignee in KTB by also keeping to the abovementioned mandatory provisions of the Bank Insolvency Act;
3. To ensure for the Bulgarian society that legislative activity of the Bulgarian National Assembly is consistent with and not contrary to the Constitution of the Republic of Bulgaria and European Union law.

This is how you will show to Bulgarian citizens, to countries of the European Union and the European Commission that the legislation and proceedings of the Republic of Bulgaria are based on strict adherence to the principles of rule of law, separation of powers and checks and balances, independence of courts and the BNB, and that the Republic of Bulgaria is indeed a Parliamentary Republic and a state led by the Rule of Law, and not one only on a formal basis, and also that the harmonization of the Bulgarian legislation with the Law of the European Union is not a chimera.

Bromak EOOD

We need your support so Novinite.com can keep delivering news and information about Bulgaria! Thank you!