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.
Dr. Stoyan Panov is a Lecturer at the University College Freiburg, University of Freiburg, Germany.
Suggested Citation: Dr. Stoyan Panov, The Role of the European Public Prosecutor’s Office and the Magnitsky Sanctions, JURIST – Academic Commentary, June 12, 2021, https://www.jurist.org/commentary/2021/06/stoyan-panov-eppo-and-magnitsky-sanctions/.
This article was prepared for publication by Vishwajeet Deshmukh, a JURIST Staff Editor. Please direct any questions or comments to him at commentary@jurist.org
