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Law Program 1995: Developing the Legal Framework for Registered Pledges and Not-for-Profit Organizations
I. Objectives
II. Legislative Reform
III. Training Workshops

I. Objectives

The main objectives of the Law Program in 1995 were to:

  • Diversify its resources for drafting and developing legislation, so that the legislature could rely on these resources for information and for substantial support in meeting the challenge of legal reform. The philosophy of this approach is that most substantive legislation should be planned and developed in a grass-roots effort and then, at a later stage, the government should participate in the process. The efforts of the program for diversification were targeted at the following specific areas:
      • general legal framework for non-profit organizations;
      • tax legal framework for non-profit organizations;
      • banking system reform related law (secured transactions, bankruptcy of banks);
      • approximation of Bulgarian law to EU legislation.
  • Work with the Central and East European Law initiative of the American Bar Association (ABA CEELI), which continued to provide expert assistance to Members of Parliament and legal experts in drafting reformed commercial laws;
  • Work with other indigenous non-governmental organizations that contribute to Bulgaria's economic and legal development and reform;
  • Hold seminars and workshops on relevant commercial law topics in order to educate the legal community and/or aid in the drafting and implementation of laws on franchising, private sector development, and the protection of intellectual property.

Taking into consideration that the approximation of Bulgaria's existing and future legislation to that of the European Union is a key condition for the country's accession to the Union, the CSD Law Program placed great attention on the approximation aspect of its work.

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II. Legislative Reform

Draft Law on Non-Profit Organizations

During 1995, the Law Program made efforts towards the promotion and enactment of the Draft Law on Non-Profit Organizations. The Draft Law was developed by the Bulgarian non-profit sector under the leadership of, and with the expert resources of, CSD. The program worked with the Ministry of Justice on starting an official legislative process for the draft. On standard terms, such a process would require the development and endorsement of a draft by the Ministry of Justice, and then approval of the Ministry of Justice draft by the Council of Ministers. The approved draft would then be introduced by the Council of Ministers into Parliament for legislative action.

To make use of the international and indigenous expertise embodied in the CSD Draft, the Ministry of Justice decided to form a working group, under the auspices of the Ministry. The group included a few representatives of the government and members of the CSD who helped develop the Draft. The Ministry's working group based its final product on the CSD Draft.

Joint work with the Ministry of Justice continued throughout 1995. Finally, the working group produced an improved version of the CSD Draft which is ready for submission to the Council of Ministers for approval. As a result, there exists a Draft Law on Non-Profit Organizations which enjoys the support of a broad spectrum of non-governmental organizations, the government, and legal experts from the international community and Bulgaria. This Draft is now moving ahead through the legislative process and its enactment may be realistically expected within 1996.

Throughout 1995, the CSD Draft was presented at a number of local and international seminars, including:

  • The second annual international conference: Regulation of the Civil Society held in Tallinn, Estonia, May 24-28 and organized by the International Center for Not-for-Profit Law, Washington, DC;

  • National seminar: Financial and Tax Environment for the Third Sector in Bulgaria held in Velingrad on May 18-19, organized by the CSD and the International Law Development Institute, Rome;

  • Session 330 of the Salzburg Seminar: Building and Sustaining Democracies: The Role of Non-Governmental Organizations, held October 6-13 in Salzburg, Austria.

The Draft has been pointed out by international experts as a potential model for legislating by newly emerging democracies. Albania has based a draft for a non-profit organizations law on the CSD Draft.

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Draft Law on Registered Pledges

The program started its planned joint project with the Institutional Reform and the Informal Sector (IRIS) Project of the University of Maryland to develop a modern Law on Registered Pledges for Bulgaria. A working group of experts has been formed with the CSD and since May 1995 has been working on drafting the provisions of a Registered Pledges Law. The joint CSD-IRIS Project is coordinated with the Ministry of Justice of Bulgaria. The project has become an integral part of the Government's Program for Improving the Banking Sector. The Draft Law on Registered Pledges Law will attempt to resolve the problems of commercial lending in Bulgaria by:

  • Creating the possibility for pledging as collateral: inventory, commercial enterprises, future goods and crops, and generically described property, in addition to the traditional opportunity for pledging only specifically described present items of chattel;

  • Creating the possibility for pledging property while leaving possession of the pledged property with the debtor. This would allow the debtor to use collateral, mostly equipment, for genera tion of income to repay the debt;

  • Creating a Registry Institution for pledges which will guarantee clarity and security in determining priority of pledge rights in the same property. This would eliminate the possibility for fraud by offering the same property as collateral numerous times to different creditors acting in good faith;

  • Creating the possibility for an out-of-court "private" fast foreclosure procedure which would allow creditors to satisfy their claims quickly and efficiently.

The working group, which consists of legal experts from academia, the court system, the government, the banking sector and the Bar, has nearly finalized a first version of the draft. In doing so, the working group has used as examples similar laws of other countries, i.e. the United States, Norway, Canada, and Holland. These countries' laws have proved their efficiency through a long history of implementation. In addition, the work has been coordinated with other institutions or countries currently implementing or facilitating the implementation of similar reforms, such as the World Bank, the European Bank for Reconstruction and Development, and the Government of Poland.

Several conferences were held in relation to the Draft Law:

  • An International Conference on Bulgarian Collateral Law was held at the CSD on January 30 and 31, 1995. The Conference was sponsored by the CSD, CEELI, the Government of Canada and the Hanns Seidel Foundation, Germany. The Conference studied the current law, identified problems, reviewed the laws of other countries and determined that there is support to change the law here.

  • A conference: Introducing the Polish Draft Law on Registered Pledges and on the Pledges Registry, held in Warsaw in February 1995, was attended by members of the working group, a Vice-Chairman of the National Assembly, and representatives of the Minister of Justice and the Governor of the National Bank. Official contacts were established between the relevant Polish and Bulgarian reform institutions.

Support for the Project of the EBRD collateral law reform team was secured by the Chairman of the CSD-IRIS working group, Mr. Stephan Kyutchukov, during the Annual Meeting of the Board of Governors of the EBRD held in London.

A study visit to Norway was made by five members of the CSD-IRIS working group. Bulgarian experts participating in the drafting got hands-on experience with the Norwegian registry system and brought back useful ideas as to how to design a pledges registry for Bulgaria.

A conference on the importance of pledges registries, key registry problems and possible development was held in Sofia on October 16 and 17, 1995. It was organized by IRIS-Bulgaria and the CSD, with the support of the Ministry of Justice. Additional sponsors included the US Agency for International Development and the World Bank. The conference focused on the most developed pledges registry systems of present times, namely the American and the Norwegian systems. Experts from Norway, the United States, Bulgaria and other East European countries had the opportunity to exchange ideas and draw conclusions on the reform process.

Bankruptcy Law: Reform and Implementation

Bulgaria revised its bankruptcy laws in 1994, to introduce a modern system for the rehabilitation and liquidation of insolvent businesses. CEELI and the CSD continued their joint Bankruptcy Project, with two main focal points: developing procedures and mechanisms facilitating the implementation of the bankruptcy laws, and providing assistance in drafting a Law on Bankruptcy of Banks.

Implementing the project, a CEELI-CSD working group, in conjunction with judges from the Sofia District Court and with the Ministry of Justice, developed the drafts for standardized forms. The forms are to be used in bankruptcy pro ceedings in all the courts nationwide. The developed set of forms will contribute to a more expedient and uniform bankruptcy procedure in the courts.

CEELI and CSD developed a relationship with the Association of Bulgarian Trustees (ABT), for the purpose of helping them establish a system for selection and education of trustees/receivers. CSD, CEELI and ABT also began the development of a Trustees' Handbook.

CEELI Commercial Law Liaison Ms. Sandra Mitchell researched and drafted a comparative law paper discussing US and Bulgarian bankruptcy law. In her research she was supported by the legal staff at the CSD. The paper has been scheduled for publication in early 1996, as a brochure of the CSD's Issues in Bulgarian Law Series.

Taxation of Non-Profit Organizations

In November, the Law Program started a project on developing a modern taxation framework for non-profit organizations. The first steps were to collect comparative tax law information from EU countries and other modern legal systems. The program established formal contacts with the National Auditors' Chamber and with the Ministry of Finance, and has had preliminary discussions with them on the government's policy approach towards taxation of non-profit organizations. CSD has started composing a working group of experts, recognized by both the government and the non-profit sector, to begin the development of proposals to improve the taxation system. Implementation of New Intellectual Property Legislation

On December 21, the Law Program organized a roundtable discussion on intellectual property rights which was co-sponsored by USAID and CEELI. The discussion was aimed at identifying key challenges with regard to effective protection and enforcement of intellectual property rights in Bulgaria. Representatives of responsible Bulgarian governmental institutions and private businesses shared their thoughts and ideas on ways to cope with existing violations. Specific assistance methods were considered, such as drafting new legislation and amendments to the existing laws, training of professionals, education of the public, and technical assistance. The roundtable discussion set the beginning of a long term assistance relationship among participants. The next roundtable discussion was scheduled for February 1996.

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III. Training Workshops

Training for Trainers

This workshop was held on February 20-24, in Tzigov Chark. It was co-organized and jointly run by the CSD, IDLI and the Legal Initiative for Training and Development (PIOR), with the support of USAID. It was a replica of the previous Training for Trainers workshop organized by CSD and IDLI in 1994, which had great impact on developing indigenous capacity for continuing legal education in Bulgaria. The second workshop was held to meet the great demand for education in this very important field.

Participants in the workshop included judges from the Supreme Court, district and regional judges, prosecutors from the General Prosecution Office and district prosecution offices, investigators from the National Investigation Office, and representatives of the Ministry of Justice.

A number of the trainees of the workshop acted as trainers at four subsequent seminars organized by PIOR for young judges and prosecutors.

A Course of Ten Seminars on GATT/World Trade Organization

This seminar course on the International Trade Policy, GATT and the World Trade Organization (WTO) was co-organized by the Ministry of Trade and Foreign Economic Cooperation (MTFEC), Bulgaria, the Commercial Law Development Program of the United States Department of Commerce, the Washington, DC firm of Powell, Goldstein, Frazer & Murphy, and the CSD.

The series of seminars were held from December 1994 through May 1995 in Sofia.

The seminar instructors were distinguished professionals from the United States and Western Europe, who were experienced in the implementation of the GATT regulations. The core group of participants consisted of experts from the MTFEC, the Customs Directorate, and other Bulgarian institutions responsible for the practical implementation of the respective GATT/WTO regulations.

The seminar topics were as follows:
    • Customs Law and Administration (effective administration of tariff and related laws, tariff nomenclatures, customs valuation, export promotion and tariff preferences);
    • Services and Investment (key provisions of the framework agreement, negotiated commitments, exceptions, including these to MFN treatment, TRIMs, etc.);
    • Antidumping, Subsidies and Countervailing Duties (theory and development, remedies, AD/CVD in general, US and EU AD procedures in detail, international dispute settlement under GATT and the WTO);
    • Safeguards and Textile Protection (Safeguard measures, including EC law and practice; textiles and apparel safeguards under the MFA and GATT 1994);
    • Agriculture, Sanitary and Phytosanitary Measures, and Technical Barriers to Trade (import and export restrictions, market access, dispute settlement, relationship to other WTO agreements);
    • Government Procurement and State Trading Enterprises (monetary thresholds, products, services and construction, country schedules, derogation from MFN treatment; obligations imposed by the GATT on the state trading enterprises);
    • Dispute Settlement (under and outside GATT/WTO; enforcement of foreign civil judgments);
    • Intellectual Property (under the Agreement on Trade-Related Aspects of Intellectual Property Rights).
    • Conclusion: summarizing session.

Friday Afternoon Seminars: a Series of Five Seminars on Bulgarian Commercial and Tax Law

The seminars were held from March through October in Sofia. They were aimed at discussing topical problems of the current Bulgarian commercial and tax law, especially with regard to its dynamic changes in a developing market economy. They continued the tradition of "Friday Afternoon seminars" set by the CSD in 1993. The seminars were attended by lawyers, financial managers, auditors, bankers and representatives of private businesses. The seminars offered excellent opportunities for professional discussion with distinguished Bulgarian experts in various fields. The series was made possible by the in-kind contribution of experts from the Sofia University Law School, Ministry of Finance, Ministry of Justice, Sofia City Court, Arthur Andersen & Co., and Deloitte & Touche.

The topics covered included:
    • Letters of Credit;
    • Value Added Tax (Law Provisions and Practice);
    • Courts' Practice on Tax Law Cases;
    • Financial Leasing;
    • Law on Securities, Stock Exchanges and Investment Companies.

Copyrights and Trademarks

This training course was organized on April 3-7 in Sofia and Plovdiv. It was presented by the CSD, CEELI, the Patent Office of the Republic of Bulgaria and the Legal Initiative for Training and Development (PIOR). The course was funded by USAID.

Over 80 patent attorneys, representatives of industrial property, legal experts and representatives of government offices attended.

The course was taught by a combination of foreign and Bulgarian experts. Special attention was given to ownership, licensing, infringement and enforcement, and international regulations on copyrights and trademarks.

Financial and Tax Environment for the Third Sector in Bulgaria

This seminar was held on May 18-19 in Velingrad. It was a second in the series of events aimed at addressing practical problems for the functioning of the third sector in Bulgaria. The seminar was organized by CSD with the collaboration of Bulgarian NGOs. The purpose of the seminar was to discuss the taxation of NGOs under the current legislation and to develop suggestions and motives for changes in the existing laws.

Management Control and Auditing of Non-Governmental Organizations

The financial managers of the major Bulgarian NGOs met in Velingrad on October 27-28. Participants were apprised of the basics of the auditing procedure for non-profit entities. Expertise in this area is very scarce in Bulgaria and the opportunity to learn the rules of this procedure was highly appreciated by the participants. Of equal importance was the outlining by the key lecturer, Mr. Pasquale Ferraro, Deputy Director of the International Development Law Institute in Rome and a leading expert on financial and management control, of the general principles of the management control of non-profit organizations. The participants also had the opportunity to ask questions, have discussions and make proposals on specific provisions with regard to the draft law on non-profit organizations, which was being prepared under the auspices of CSD. The experts from the working group who attended the seminar provided interpretations of specific provisions as well as of the reasoning behind these provisions.
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