Opinion of the European Central Bank of 21 December 2022 on the implementation of the recommendations of the ECB convergence report concerning central bank independence (CON/2022/45)

OPINION OF THE EUROPEAN CENTRAL BANK of 21 December 2022 on the implementation of the recommendations of the ECB convergence report concerning central bank independence (CON/2022/45) Introduction and legal basis

On 24 November 2022 the European Central Bank (ECB) received a request from Българска народна банка (Bulgarian National Bank (BNB)), acting on behalf of the Bulgarian Minister for Finance, for an opinion on a draft law amending the Law on BNB and the Law on counter-corruption and unlawfully acquired assets forfeiture (hereinafter the ‘draft law’). The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union and the third indent of Article 2(1) of Council Decision 98/415/EC , as the draft law relates to BNB. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.

1. Purpose of the draft law

As explained in the consultation letter, the draft law aims to address certain issues identified in the 2022 Convergence Report of the ECB with regard to the independence of BNB. In this respect, the draft law proposes to amend the Law on BNB and the Law on counter-corruption and unlawfully acquired assets forfeiture (hereinafter the ‘Law on counter-corruption’) in respect of, inter alia, the matters set out below. 1.1 Grounds for removal from office in case of a conflict of interest The draft law proposes to amend Article 80(1) of the Law on counter-corruption in order to provide that the ascertainment of a conflict of interest in accordance with that Law will be a ground for removal from office of a senior public office holder, unless otherwise provided for in the Constitution, in the Statute of the European System of Central Banks and of the European Central Bank (hereinafter the ‘Statute of the ESCB’) or in special legislation. 1.2 The right of national courts to review a decision to dismiss any member, other than the Governor,

of the decision-making bodies of BNB

The draft law aims to ensure the right of access to effective legal remedies for any member of the

Governing Council of BNB, other than the Governor, in cases concerning their dismissal. To this end the draft law proposes to introduce a new provision in Article 14 of the Law on BNB in accordance with which the grounds for relieving a Deputy Governor or another member of the BNB Governing Council, except for the Governor, from office must be established by decision of the BNB Governing Council. That decision is adopted according to a procedure determined by the Governing Council of BNB. The decision has the immediate effect of suspending the respective member from the exercise of their duties. The decision is subject to appeal before Върховния административен съд (the Supreme Administrative Court) within 7 days and that court has 14 days to issue a final ruling on the appeal. The final ruling of the Supreme Administrative Court on the appeal is sent to the national authority which has the competence to relieve from office the members of the BNB Governing Council.

2. General observations

2.1 The ECB welcomes the draft law’s efforts to achieve the required level of legal convergence as set out in the recommendations for Bulgaria contained in the 2022 Convergence Report of the ECB. 2.2 The ECB notes that the compatibility of Bulgarian legislation – including the Law on BNB and the Law on counter-corruption – with the Treaties and the Statute of the ESCB will be assessed in the ECB’s next convergence report, as required by Article 131 of the Treaty.

3. Specific observations

3.1 Grounds for removal from office in case of a conflict of interest 3.1.1. In accordance with Article 12 of the Law on BNB, the Governor and the three Deputy Governors are appointed by the National Assembly, while the other three members of BNB’s Governing Council are appointed by the President of the Republic. Article 14(1) of the Law on BNB provides that the appointing authority may remove a member of the Governing Council from office if one of the grounds it lists for removal from office is established. The ECB therefore understands that the competence to take a decision to remove a member of BNB’s Governing Council from office is vested solely in the appointing authority: either the National Assembly or the President of the Republic. In accordance with Article 14(1) of the Law on BNB the grounds for removal are met where: (i) the member no longer fulfils the conditions required for the performance of their duties or (ii) the member has been found guilty of serious misconduct . 3.1.2. However, the Law on counter-corruption also applies to the Governor, the Deputy Governors and the other members of the Governing Council of BNB as senior public office holders . The Law on counter-corruption provides that Комисията за противодействие на корупцията и за отнемане на незаконно придобитото имущество (the Counter Corruption and Unlawfully Acquired Assets Forfeiture Commission) may establish by means of a decision the existence of a conflict of interest 6 7 with regard to senior public office holders . As a consequence of such a decision , the respective

senior public office holder may be removed from office in accordance with Article 80(1) of the Law on counter-corruption. Against this background, the Law on counter-corruption establishes a ground for relieving from office that is in addition to the two grounds contained in Article 14.2 of the Statute of the ESCB . 3.1.3. Therefore, the ECB has noted in its Convergence Report that the Law on counter-corruption needs to be further adapted in view of the following . According to Article 14.2 of the Statute of the ESCB, a Governor may only be relieved from office on either of the two grounds contained in that Article . As regards the other members of the decision-making bodies of national central banks (NCBs), the same rules for the security of tenure and grounds for relieving Governors from office also apply, safeguarding the personal independence of those persons. The provisions of Article 14.2 of the Statute of the ESCB are not restricted to the security of tenure of Governors, and Article 130 of the Treaty and Article 7 of the Statute of the ESCB refer to ‘members of the decision-making bodies’ of NCBs rather than to Governors specifically. This is legally required, in particular, when a Governor is a ‘first among equals’ with colleagues with equivalent voting rights or where such other members are involved in the performance of tasks related to the European System of Central Banks (ESCB) . 3.1.4. Against this backdrop, the ECB understands that the intention of the proposed amendment to Article 80(1) of the Law on counter-corruption is to ensure that the ascertainment of a conflict of interest in accordance with that Law would not be a ground for removal from office of the Governor and the other members of the Governing Council of BNB, because this would be contrary to the Treaty, the Statute of the ESCB and the Law on BNB. In this regard the ECB understands that the proposed reference to ‘special legislation’ in Article 80(1) of the Law on counter-corruption is to be understood as referring, in particular, to Article 14(1) of the Law on BNB. The ECB further understands that this reference entails that Article 80(1) of the Law on counter-corruption cannot apply in relation to the Governor and the other members of the Governing Council of BNB because the proposed amendment to Article 80(1) of the Law on counter-corruption ensures that the ascertainment of a conflict of interest in accordance with that Law will not be a ground for removal from office of a senior public office holder where it is otherwise provided for in special legislation, such as the Law on BNB. 3.2 The right of national courts to review a decision to dismiss any member, other than the Governor,

of the decision-making bodies of BNB

3.2.1. As noted in the ECB’s Convergence Report 2022 the rationale of personal independence is to shield the members of the decision-making bodies of ESCB central banks from political interference when exercising the powers conferred upon them by the Treaty and the Statute of the ESCB . Therefore, Article 130 of the Treaty, which guarantees the independence of members of

the decision-making bodies of BNB, requires that they have access to effective legal remedies for cases concerning their dismissal, including – but not limited to – compensation. 3.2.2. The ECB understands that the draft amendment to Article 14 of the Law on BNB aims to ensure that within the administrative procedure for dismissal of any member, other than the Governor, of the decision-making bodies of BNB, it is possible to request a review by national courts of the decision of the BNB Governing Council establishing the grounds for relieving a Deputy Governor or another member of the BNB Governing Council, except for the Governor, from office. The judicial review of such a decision may lead to its annulment. 3.2.3. While in accordance with the draft law, this possibility to request judicial review does not pertain to the decision to dismiss the relevant member of the BNB Governing Council, which is adopted by the respective appointing authority , the ECB understands that the decision of the BNB Governing Council is nevertheless an indispensable step in the procedure for the adoption of a dismissal decision and the appointing authority may not act in its absence. Thus, the annulment of the decision of the BNB Governing Council establishing the grounds for relieving a Deputy Governor or another member of the BNB Governing Council, except for the Governor, from office precludes the adoption of a decision by the appointing authority to dismiss the relevant member of the BNB Governing Council. In addition, the ECB understands that when deciding on the dismissal, the appointing authority cannot consider and adopt additional grounds for dismissal that were not established in the decision of the BNB’s Governing Council. 3.2.4. The ECB further understands that in accordance with general administrative law, an appeal before the Supreme Administrative Court could suspend the application of the decision of the BNB Governing Council . 3.2.5. Based on the above understanding of the proposed amendment to Article 14 of the Law on BNB, the ECB has no further comments regarding this provision.

This opinion will be published on EUR-Lex.

Done at Frankfurt am Main, 21 December 2022.

[signed]

The President of the ECB

Christine LAGARDE