The Legal 500

The amendments to the Ordinance on the Terms and Procedure for Registration of the Price of Locally Produced and Imported Tobacco Products, Trade in Tobacco Products and Control on Trade (the Ordinance) effective from late 2005 and early 2006 introduced some radical changes in the rules and procedure for registration of tobacco products available on the Bulgarian market

1. First, the rules for registration of the prices of these excise goods were changed from registration to notification requirements. It is important to note that the Ordinance clearly identified the persons authorized to notify the Ministry of Finance of prices or price adjustments for tobacco products – these are the holders of the right for the respective trade mark (or their explicitly authorized representatives) – and allows them to set freely the prices of the said products. At the same time the procedure for registration of prices was simplified and the Ministry of Finance was named as the registration authority. This new regulation is commendable considering the fact that it concerns the price of excise goods and the necessary procedure for ordering, printing out and selling excise duty bands, as well as providing and paying the due excise duty. The Ordinance sets a 14-day deadline for the Ministry of Finance to review the applicant’s notification and the documents enclosed thereof, and to issue a certificate of registered purchase price or price adjustment respectively.

2. This puts an end to a long period of having the prices of tobacco products set under a complex and long procedure involving proving their components, evaluation by the competent state authorities and promulgation in the State Gazette. The above changes have given as much space as possible to liberalization of prices, encouragement of free competition and application of the rules of supply and demand on the market for tobacco products within the framework of the otherwise strict rules for trade in excise goods set by the Tobacco and Tobacco Products Act and the Excise Duty and Tax Warehouses Act. In this respect, the changes under review herein gained the positive attitude of the tobacco industry.

3. Nevertheless, in the context of bona fide intentions, some critical remarks could be made in respect of elements of the procedure set out in the Ordinance. What we mean can be presented as follows:

3.1. The Ordinance stipulates that for imported tobacco products the trade mark holder may authorize only one person to submit purchase price notifications to the Ministry of Finance on the trade mark holder's behalf. The trade mark holder informs the Ministry of Finance in writing of the authorized person or of the withdrawal of authorization thereof. Considering the insignificant number of foreign companies importing tobacco products in Bulgaria, which presupposes an equally insignificant number of authorized persons, the above administrative restriction can hardly be justified with practical or business arguments. The said restriction seems to be more aimed at ensuring the comfort of the administrative body. At the same time, business interests could be harmed in simple situations such as the representative being away or sick, or any other circumstance objectively resulting in inability of the only authorized person to submit a notification of a purchase price or price adjustment at a certain point of time .

3.2. Another procedural proposal provided for in the Ordinance which deserves criticism has to do with the principle – or the distortion thereof – of tacit agreement. As mentioned above, the Ministry of Finance has 14 days from the submission of notification to complete the procedure of registration. Within this period the registration authority is entitled to request in writing additional information and documents from the applicant, as this fact is recorded in the Register of Tobacco Product Prices. As we are dealing with notification and not permit requirements, if the documents of the applicant are complete and perfect, the issue of price registration certificate may not be refused. Under Article 4 (d) of the Ordinance, if no additional information has been requested and no price registration certificate has been issued within the 14-day period, the price shall be considered registered. The same applies to cases where additional information has been requested – and provided accordingly– but for some reason the registration certificate has not been issued within 14 days.

4. These provisions are among the rare cases in the Bulgarian statutory practice of introducing the principle of tacit agreement instead of the traditionally common – and much convenient for the administration – principle of tacit refusal. This fact alone deserves admiration because it is a step towards scrapping cumbersome licensing regimes and minimizing government interference in economic activity – which the business community has long been hoping to see.

Unfortunately, some provisions of the Ordinance put to question such praise. The above-mentioned Article 4 (d) requires of the applicant to advise the Ministry of Finance of the non-issue of a price registration certificate and thereafter the Ministry is obligated to register the price. What we have in practice is the applicant being required to notify the registration authority of its own inaction within a deadline imperatively set by the Ordinance, after which the Ministry of Finance is obligated to do something it was obligated to do before the expiration of the said deadline. In other words, to achieve its business interests – having the registration of a price done – the applicant shall inform the registration authority that the latter is required to fulfill its obligations, and, until that happens, suffer losses from being unable to order excise duty bands and sell its tobacco products. This absurd procedural administrative approach doubtlessly renders the otherwise admirable principle of tacit agreement meaningless. It is interesting to speculate on what else the applicant could do if the registration authority fails to act even after the notification of the non-issue of a price registration certificate.

5. Considering the above, it would be fair to require of the registration authority damages for any loss and lost profit from the possible delay in the sale of tobacco products. Furthermore, a reliable mechanism needs to be set in place to ensure the observation of the principle of tacit agreement. Such a legislative solution which we propose de lege ferenda would be in line with both the principles of market economy and the aspirations of the Bulgarian state administration to achieve the European levels of performance.

Luchezar Raichev

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