The Role of the European Public Prosecutor’s Office and the Magnitsky Sanctions
The US Department of Treasury’s Office of Foreign Asset Control (OFAC) imposed a series of sanctions on three Bulgarian individuals and sixty-four companies for their extensive role in endemic grand corruption in Bulgaria on 2 June 2021. This is the largest corruption-related targeting to date under the Global Magnitsky Human Rights Accountability Act. The sanctions were designated under E.O 13818 which enlarges the scope of the Magnitsky Act to target perpetrators of serious human rights abuses and corruption around the world. As Bulgaria is an EU Member State and member of NATO, this constitutes the largest individual sanctioning against EU citizens or companies incorporated in the EU.
The three targeted individuals exemplify the endemic
corruption in Bulgaria through the years. OFAC designated an oligarch along
with his 58 entities bribing or planning to bribe former and current Bulgarian
government officials and politicians in order to “create a channel for Russian
political leaders to influence Bulgarian government officials.” A former
Bulgarian MP and media mogul was sanctioned for regular engagement in
corruption, “using influence peddling and bribes to protect himself from public
scrutiny and exert control over key institutions” while the former Deputy Chief
of the Bulgarian State Agency for Technical Operations, former Bulgarian State
Agency for National Security (DANS) officer and the National Bureau for Control
on Special Intelligence-Gathering Devices official was sanctioned for
“conduct[ing] a bribery scheme involving Bulgarian residency documents for
foreign persons” as well as “blackmail[ing] a potential Bulgarian government
minister with criminal charges from Bulgaria’s Prosecutor General’s office”. It
is beyond reasonable doubt that the acts described in the sanction regime
constitute serious crimes.
The Magnitsky sanctions against Bulgarian oligarchs and
former politicians and top intelligence officials might be seen as writing on
the wall for the EU to engage more proactively with the rule of law crisis and
corruption problems in Bulgaria. This is particularly urgent as there are
allegations that EU funds may be found to be linked to the oligarchs and their
corporate structures. Moreover, fraudulent activities with residence documents
commodify EU citizenship, creating “a fast-track entrance for criminals” along
with access to classified intelligence.
In September 2020, the European Commission launched the
first Rule of Law Reports for each EU Member State. The annual Rule of Law
reports is “a synthesis of both the rule of law situation in the EU and an
assessment of the situation in each Member State.” Bulgaria along with Romania
has also been under a specific Cooperation and Verification Mechanism since
their accession to the EU as the two countries still have to make progress in
the fields of judicial reforms and corruption. The CVM was designed as a
transitional, remedial measure.
The latest EU Rule of Law Report by the Commission clearly
indicates that Bulgaria still needs significant reforms in the judiciary and
anti-corruption fields. As the primary task of investigating in an effective
and genuine manner the acts or omissions, including the Magnitsky sanctions,
would fall on Bulgaria’s Prosecutor’s Office, it is relevant to note that the
EU Commission begins its Rule of Law report with a reminder that there are
still issues concerning the accountability of the Prosecutor General as “the
Prosecutor General exerts considerable influence, as [he] may annul or amend
any decision taken by any prosecutor which has not been reviewed by a judge.”
With respect to the anti-corruption framework, the Commission notes that
challenges remain as “the complex and formalistic Bulgarian system of criminal
procedural law has been highlighted ….as an obstacle to the effective
investigation and prosecution of high-level corruption” despite the creation of
a Specialized Criminal Court. Moreover, the track of final convictions in
high-level corruption cases such as the acts described above remains “to be
established.” Various reports on the
phenomenon of state capture also point in the direction that Bulgaria has
experienced recent regression, illustrated in the ineffectiveness of
anti-corruption policies, lacking reforms in the judiciary and prosecution
sectors, and media capture as well as inefficiencies in tax and audit
institutions and tender procurement bodies among others. All of these negative
symptoms are reflected in the imposed sanctions under the Magnitsky Act.
What Can the EU Do? In light of the ongoing political
uncertainty in Sofia due to the second-in-a-row in less than four months’
upcoming general elections in July 2021, the spotlight is inherently on what
the EU can do by actively engaging in the worrisome situation in Bulgaria. As
seen, the Commission has been active since 2007 in the evaluation and providing
guidance on the necessary reforms on the ground. Moreover, the EU legal framework includes corruption as
a euro-crime under Article 83(1) of the Treaty on the Functioning of the
European Union: acts of corruption constitute particularly “serious crimes with
a cross-border dimension resulting from the nature or impact of such offenses
or from a special need to combat them on a common basis”.
The EU has various mechanisms to respond to backsliding in
the rule of law and corruption. The focus of this entry is the criminal law
response. One logical option would be to engage the newly created European
Public Prosecutor’s Office (EPPO). EPPO was established in October 2017 under
Article 86(1) of the TFEU. It is the first EU body with powers to adopt
decisions against individuals within the field of criminal law. 22 EU Member
States, including Bulgaria, participate in the EPPO at the current moment. The
material competence of the EPPO is limited to criminal offenses affecting the
financial interests of the Union (Preamble (11) of the EPPO Regulation) and the
EPPO’s task is to “investigate, prosecute and bring to the judgment the
perpetrators of offenses against the Union’s financial interests” in pursuance
of Directive 2017/1371 (PIF Directive). The EPPO can investigate and prosecute
crimes affecting the EU’s financial interests, committed after 20 November
2017. The EPPO has the competence to
investigate, prosecute and bring to judgment crimes against the EU budget, such
as fraud, corruption, or serious cross-border VAT fraud according to the PIF
Directive. The PIF offenses include active and passive corruption. In this
manner, the acts under the Magnitsky sanctions against the Bulgarian
individuals and associated entities would squarely fit within the mandate of
the EPPO.
Moreover, the EPPO has an extension of the material
competence scope per Article 22(3) of the EPPO Regulation because the EPPO has
competence for “any other criminal offense” that is “inextricably linked” to
the PIF criminal conduct. The efficient investigation of the PIF offenses may
require “an extension of the investigation to other offenses under national
law”, inextricably linked to the PIF offense (s). The PIF offense must carry a
higher maximum sanction than the ancillary offense as well as the ancillary
nature of the offense which is instrumental to the PIF offense where the main
purpose of the ancillary crime is to create the conditions to commit the PIF
offense. In this manner, the ancillary offense can encompass other criminal
acts.
The complex structure of the EPPO is noticeable at the
decentralized level around at least two European Delegated Prosecutors in each
Member State. The appointment of some
EDPs for Bulgaria has faced certain difficulties at the EPPO level. The EDPs
act on behalf of the EPPO in their respective Member States and have the same
powers as national prosecutors as regards investigations, prosecutions, and
bringing cases to judgment along with their specific powers in pursuance of the
EPPO Regulation. The EDPs have a “dual
hat” function as they act as national prosecutors as long as the two functions
do not conflict with their obligations under the EPPO Regulation. The EDPs can investigate and prosecute cases
that they have initiated or have been allocated to them or they have taken
under the right of evocation.
The crucial element in the EPPO competence with respect to
the specific problems outlined by the Commission in the Rule of Law report for
Bulgaria as well as the Magnitsky sanctions is found in the ability of the
national judicial and law enforcement to notify without undue delay the EPPO
about investigations of offenses within the competence of the EPPO in order for
the EPPO to determine whether to exercise the evocation privilege. The
evocation per Article 27 of the EPPO Regulation requires the competent
authorities of the Member States to transfer the file to the EPPO and to
refrain from carrying out further acts of investigation in respect of the same
offense. This is the so-called European moment in the competence and function
of the EPPO. When the national investigative or prosecutorial services do not
fulfill their obligations to investigate and/or submit for the purpose of
prosecution serious crimes such as corruption and fraud, the EPPO is able to
investigate, prosecute and bring to judgment cases falling within the EPPO’s
competence.
The Magnitsky Act sanctions target individuals and entities
that materially assist, sponsor, or provide financial, material or
technological support for corruption, including state assets misappropriation,
private corruption, fraudulent activities in procurement procedures, or
bribery. The EPPO’s competence covers the described liabilities and acts.
Hence, the ability of the EPPO to investigate the largest sanctions so far
under the Magnitsky Act against EU citizens and EU-registered companies
presents an opportunity for the EPPO to start its function on a high note.
Moreover, it is a chance to establish a solid record on transatlantic
cooperation on serious transnational and international crimes with US
authorities that may provide valuable evidence and information. Finally, the
EPPO may use this situation to respond to criticism from other EU institutions
that the EU is not doing enough when it comes to protecting EU funds and the
rule of law in the EU. It shall be seen
how the EU will read the message.
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