ACF: the “Golden Puddle” contract is in violation of the law and the Minister of Agriculture should declare it null and void

At the beginning of July, the Anti-Corruption Fund (ACF) once again posed questions to the Bulgarian Food Safety Agency (BFSA) regarding the prophylactic disinfection of vehicles entering the Republic of Bulgaria and BFSA’s contract with the private company P.F.C., responsible for the disinfection at all checkpoints along the border with Turkey. BFSA’s responses point to the conclusion that the said contract violates the law and should be declared null and void.

The case, which became popular as the “Golden Puddle,” has been investigated by ACF since 2019. In short, the BFSA has transferred its legal obligations to perform disinfection along the border with Turkey to a private company — P.F.C. EOOD — as a result of which this company has profited more than BGN 33 million from 2013 to date. In June 2021, upon a surprise inspection, the National Revenue Agency found BGN 32 million in the cash-desks of the company and ascertained that half of its receipt printers did not account for the revenue from the collected fees.

The BFSA’s responses to ACF’s questions reveal that the prophylactic disinfection performed by P.F.C. EOOD at the border checkpoints with Turkey is paid for by the vehicle drivers entering the country, whereas this service is free of charge at all other border checkpoints. The BFSA’s explanation is that in the latter case the prophylactic activities are financed with funds from the state budget. “The question is why is the prophylactic disinfection at certain border checkpoints financed by the state, while at others it is not?” the ACF experts ask.

The BFSA claims that the contract with P.F.C. EOOD was signed “following a public procurement order” conducted “in accordance with Art. 9 of the Obligations and Contracts Act (OCA), as the contract’s performance does not require the expenditure of public funds.”

The BFSA refuses to disclose the contract signed with P.F.C. EOOD but summarizes its substantive clauses in its response to ACF.

According to ACF’s legal experts, the contract between the BFSA and P.F.C. EOOD is null and void, as its subject is in violation of the law.

A number of primary and secondary legislative acts, including the Veterinary Practice Act, the Ordinance on border veterinary inspection checkpoints (OBVIC), and the Ordinance on border checkpoints, stipulate that prophylactic disinfection should be performed by employees of the BFSA who are veterinarians working at the border veterinary inspection checkpoints.

“The BFSA cannot independently engage in contract negotiations for the performance of an activity, when the law has explicitly provided how and by whom that activity is to be carried out; moreover, the performance in this case requires specific education and qualifications. Furthermore, there is no evidence of conducting a public procurement order, which has also been established by the Sofia Prosecutor’s Office of Appeal following ACF’s referral of the case,” comments Daniela Peneva of ACF’s legal team.

The contract between the BFSA and P.F.C. EOOD is null and void because paragraph 2 of its subject — “collection and payment of the due state fees” — also contravenes the law, as according to the State Fees Act, fees can only be collected by legally specified public institutions.

“According to the State Fees Act, it is not possible to confer, by means of a contract, the collection of state fees on any entity, different from the public authority that provides the service for which the fee is owed,” adds Daniela Peneva.

The BFSA refuses to explain how the disinfection fees are spent, having in mind that it does not incur any expenses for the performance of this service, as it has been transferred to a private company. “The fees are not spent,” the BFSA’s response reads, “they form the revenue part of the BFSA’s budget.” This also contravenes the legal principle of spending state fee funds, according to which a public authority is not allowed to profit from the collection of state fees, i.e., the amount of the fee should be proportionate to the expenses for the provision of the particular service.

Furthermore, the information provided by the BFSA reveals that the specific provisions of the invalid contract are also detrimental to both the passing vehicles and the BFSA, as a party to the contract.

The contractor, P.F.C., has been given the freedom to independently determine the size of the disinfection fee, with the sole obligation to pay the BFSA the amount specified in the law. Therefore, P.F.C. can unlawfully collect fees that are much higher than what has been prescribed by law.

In addition, P.F.C. are free to build any facilities and make any improvements they deem necessary for the fulfillment of the disinfection, without being subjected to any sanctions or oversight by the BFSA. Crucially, if the BFSA decides to terminate the contract, it will have to pay damages amounting to twice the value of these facilities and improvements.

The existence of contract clauses that clearly harm the public interest is an additional reason for taking immediate action to terminate the invalid contract.

ACF urges the Minister of Agriculture, Food and Forests to exercise control over the contract signed by the BFSA and to take steps to declare it null and void.

“If the contract is declared invalid, the sanctions provided in the contract will not apply and the Agency will not owe damages amounting to twice the value of all improvements, repairs, built facilities, systems, and other property,” the ACF experts explain. “The “Golden Puddle” case is centered on a contract that is in blatant violation of the law. The competent institutions need to act quickly in order to protect the interests of the Bulgarian citizens,” said Boyko Stankushev, Director of the Anti-Corruption Fund.