The Private Enforcement Reform

1. The Private Enforcement Reform A Look Back

2. Original Reform Team • Commercial Law Reform Program – funded by USAID • Project of local and foreign professionals supporting Bulgaria’s business environment to support economic growth and jobs. • Worked to improve regulatory system to support more business • Reformed business register, enforcement system, commercial mediation, judge and lawyer training • Law on Private Enforcement Agents passed in 2005; project support continued through 2007

3. Where was Bulgaria 12 years ago (before the reform)? • Very little enforcement happening – stopping up courts • Was assessed by USAID as a slow, non-transparent, unpredictable process • Enforcement system was harshly assessed by the EU and CoE • Economic Assessment: “Costs of the existing system of state executive judges incurred by lack of efficiency amount to BGN 850 million.” Effect of failed judgment enforcement was significant drag on the economic and investment environments in Bulgaria

4. What did we do? • Provided expert assistance and access to information on best European practices in judgment enforcement. • Study tours to Poland and Netherlands • Supported working group to draft legislation • Incorporated business community • Supported legislation to create PEA profession • Supported Chamber and MOJ supervision; professional training for PEAs

5. What were our motivations? • Removing poor judgment enforcement as obstacle to access to justice • Shortening the time to enforce judgments • Creating incentives for better performance. Remuneration tied to results. • Establish competition forces so that enforcement agents must perform well in order to preserve business reputation. • Supporting accountability, transparency, and professionalism through effective training and supervision systems (MOJ and Chamber). • General efficiency and reduction of risk. Setting conditions for lower costs in business and attracting investments. Risks for the banking system to decrease. Tax income to increase. • The minimum projected benefit (increase in collections) for the first year after the reform was BGN 460 million. Over a three-year period, the analysis projected a potential benefit of 1.9 billion leva.

6. What was our core goal? • “Assist the private enforcement profession to earn the public’s trust that the profession serves in the public’s interest.” • Key to this was to create effective: • Supervision system • Ongoing Training Capacity • Effective reporting • Effective outreach for performance feedback • Wanted to create a profession that was accountable, transparent, and professional

7. Who supported it? • MOJ • Government • All major business and employer associations • Banking Association and Insurance Association **Law passed with unanimous support in Parliament

8. Who supported implementation? • USAID supported foreign and local expertise; support to MOJ for supervision, support to Chamber for organization, supervision, ethics, training, public outreach • Dutch Social Transformation Program—MATRA—continued institutional support of implementation through Chamber for several more years

9. What is the mission/vision of the Chamber? “To promote the profession of private enforcement and improve the enforcement procedure in Bulgaria by protecting the public’s interest and supporting its members.”

10. What are the results? • Dramatic improvement in judgment enforcement • For 10 years – collected BGN 5.4 billion • Private enforcement agents by far out perform state enforcement agents in terms of numbers of cases, amounts collected, and cases closed.

11. How Does Bulgaria’s Experience Compare? • Bulgaria – reform in 2005/2006 – Dual System • Currently around 160 Agents – should be over200 • Macedonia – reform in 2005 – Strictly private system • 98 agents – Should be over 140

12. How Does Bulgaria’s Experience Compare? (continued) • Serbia – reform in 2011 years ago - dual system • 130 agents – should be over 300 • Emergency reform – Chamber now assigns cases to agents – Why? • Strong concentration of cases in small number of agents (notorious utilities case)

13. How Does Bulgaria’s Experience Compare? (continued) • Kosovo – reform in 2012/13 – private system • Only 25 Agents – should be more than 70 • Very new system– just establishing supervision system (at Chamber and MOJ) • Too soon to evaluate

14. How Does Bulgaria’s Experience Compare? (continued) • Poland reform – Competition issue • Created fully private system in 1997 • But experienced notoriously long times for case resolution • Was viewed as competition issue • Reformed in 2007 to allow increase number of bailiffs • Result: Substantially reduced time to collect (more effective)

15. Where are we today? • Bulgaria had peak number of cases in 2012 • 220,00 (today it is around 173,000) • Peak amount of collections in 2013 • BGN 1.135 billion (today it is around BGN 1 billion) • More cases are closing out now. 2014, closed cases were 72,000 versus 66,000 in 2013, and 60,000 in 2012 • Conclusion? – Competitive pressure / possibly shrinking market

16. Where are we today? (continued) • Economic difficulties in the country • Persistently high unemployment • Follows general economic difficulties in southern Europe • Media highlights discontent with enforcement profession • Suggestions to remove or greatly limit private enforcement profession

17. Where do we want to go? • Improve the profession? • How? – Depends what the real problems are • Need to understand those problems before we can address them. • Our goal as reformers remains to: Assist the private enforcement profession to earn the public’s trust that the profession serves in the public’s interest. Transparency Accountability Professionalism