Decision No 5 of 4 May 2011 on Constitutional Case no 1/2011
Proceedings were instituted on the grounds of Article 149(1)(2) of the Constitution on 24 January 2011 on a petition from 54 members of the 41st General Assembly. The petitioners request that Articles 12, 13, 14, 20, 46, 47, 50 and 60 and paragraph 3 of the National Audit office Act (ZSmP) (promulgated in the State Gazette (SG) No 98/2010) be declared anti-constitutional along with the entire law due to the cited provisions being of key significance.
The petitioners argue that the contested provisions contravene Articles 4(1) and 9(1) of the Constitution, which postulate the principle of a State based on the rule of law and refer to the National Audit Office as a collegiate body responsible for the control of public finance and the disbursement of the government budget whose members are elected by Parliament. It is argued that the provisions laid down in Articles 12, 13, 14, 20, 46, 47 and 60 ZSmP effectively transform the National Audit Office from a collegiate body into one that resembles institutions of the “Auditor and Comptroller General” type, which is not in line with the tradition and the manner in which the NAO has been structured and operates. The petitioners argue that the restructuring concerned entails replacing the 11 current board members of the NAO by a Head and two deputies to be appointed by the National Assembly, the latter two on a proposal from the Head of the institution, thereby vesting significantly greater powers in the office of the Head of the institution who is to conduct its affairs single-handedly. According to the petitioners this constitutes a violation of Article 91(2) of the Constitution.
It is also maintained that paragraph 3(1) of the Transitional and Final Provisions (PZR) of ZSmP is contrary to the principle of a State based on the rule of law enshrined in Article 4(1) of the Constitution. The petitioners set forth arguments according to which the NAO is Constitutional body composed of 11 board members (under the repealed law) elected for 9 years whose mandate has been terminated early in contravention of Article 12 ZSmP (revoked).
The petitioners further contest Article 50 ZSmP maintaining that it violates Article 4(1) of the Constitution, and in particular the powers vested in the Head of the NAO to call for the dismissal of senior government officials by including a special reference in final audit reports on the grounds of the officials concerned acting or failing to act on matters within their remit of competence resulting in violations of the law or, alternatively, a failure on their part to implement recommendations set out in reports of the National Audit Office. According to the petitioners this exceeds the remit of competence of the Head of the NAO and of the institution in principle and creates conditions for the abuse of power as audited institutions are essentially public bodies (in some cases Constitutional ones), which means that the rules and requirements for the dismissal of their Heads are laid down by law whilst Article 50 ZSmP creates a new set of rules on the grounds of which dismissal proceedings may be instituted in contravention of the Constitution.
On these grounds the petitioners request that the Constitutional Court declares Articles 12, 13, 14, 20, 46, 47, 50 and 60 and paragraph 3 of the Transitional and Final Provisions of the ZSmP along with the entire law anti-constitutional.
The Constitutional Court, having appraised the arguments set forth in the opinions received from the interested parties and with a view to ruling in the case, considered the following:
1. The petitioners argue that the following provisions contravene Article 91(2) of the Constitution:
А. Article 12 ZSmP according to which the National Audit Office has a Head and two deputies with a term of 6 and 7 years, respectively, instead of a board of 11 members comprising a Head (Chairperson) and 10 board members each of whom is appointed for 9 years (Articles 10(2) and 11(1) ZSmP – revoked).
B. Articles 13 and 14 ZSmP according to which the Head of the NAO governs the affairs of the institution and nominates his/her deputies whose appointment is subject to confirmation by Parliament in line with a set of rules governing their eligibility and remuneration and subject to certain restrictions to concurrently hold other offices. Unlike his/her deputies, the Head of the NAO may not be re-elected. Identical provisions on the eligibility and appointment of the chairperson and board members of the NAO and restrictions whereby they may not concurrently hold other offices are set out in Articles 11 and 13 of the revoked law. As regards the requirements for a certain level of education and professional experience, the new law introduces a change according to which the incumbents may be educated to an MA degree level only and must have at least 15 years’ professional experience in the area of audit, financial control, finance and accounting.
C. Article 20 ZSmP, which stipulates the powers vested in the Head of the institution to govern, make organisational arrangements and supervise the activities of the NAO; represent it in Bulgaria and internationally; determine the powers and functions relating to the management, organisation and supervision of the audit work carried out by his/her deputies; appoint a deputy to discharge the functions of the Head in his/her absence; disburse public funds granted to the institution from the government budget; conclude, modify and terminate employment contracts with the auditors and employees of the NAO in accordance with the rules laid down in the law; participate in the meetings of the Consultative Council of the NAO; and publish the internationally recognised audit standards on the website of the institution.
Unlike Article 15 of the revoked law which states that the Head of the NAO discharges functions relating to the governance of the affairs of the institution, representing it before third parties, appointing deputies and Heads of Departments and concluding, modifying and terminating contracts with the auditors and employees of the NAO, the contested Article 20 of the recently enacted law expands the scope of the powers vested in the Head of the institution by way of incorporating some of the powers previously vested in the institution as a collegiate body under Article 14(1)(2) ZSmP. In connection to this, it should be noted that in line with the new provisions the National Audit Office, acting unanimously in its capacity as a collegiate body, may adopt internal rules and regulations setting out the procedure and methodology for audit work (Articles 19(2) ZSmP).
D. Articles 46, 47 and 60 ZSmP, which stipulate the powers vested in the head of the NAO to draw up final audit reports based on a comprehensive appraisal of gathered evidence and the information, clarifications and objections received from the heads of auditees; submit final audit reports to the auditees and to Parliament along with opinions on the disbursement of the government budget and the budgets of the National Social Insurance Institute and National Health Insurance Fund for the previous year, including opinions on audits conducted to verify the functioning of budgetary systems or other events with major implications for the public budget and other public funds and activities. Under Articles 40, 41 and 46 of the revoked ZSmP these powers of the Head of the NAO, which in the main relate to the operational aspects of work were previously vested in the National Audit Office as a collegiate body.
A comparison between the contested provisions of the enacted ZSmP with the counterpart provisions of the revoked law show that the institutional model for auditing public finances has been changed. The new model entails a stronger centralisation in the governance of the affairs of the institution, which is within the remit of competence of the Head of the NAO who is assisted by two deputies and is ultimately responsible for decisions in relation to conducted audits. According to the motives set out in the justification accompanying the enacted law this places an emphasis on professional skills in the area of audit – a requirement that applies in equal measure to the heads of directorates at the head office of the institution. This is so because it is based on relevant professional skills, experience and qualification and not on the party-political considerations exemplified by the composition of the board of directors.
The petitioners allege that the enacted change is anti-constitutional. The MPs ask the Constitutional Court to ascertain whether the new governance model to be implemented contravenes Article 91(1) of the Constitution or represents the concept of the government, which as a matter of political feasibility is beyond the purview of constitutional review.
The National Audit Office is a public institution established in accordance with the Constitution and its structure, functions and responsibilities are to be stipulated in a dedicated law enacted by the National Assembly. More specifically, its principal function is to audit public finance. That capacity determines its institutional significance and the need to include an express reference to it in the Constitution. On the other hand, its importance is not on a par with that of other public institutions envisaged in the fundamental law, which play an essential role within the structure of public power, inter alia the national Parliament, the Council of Ministers, the President of the Republic, the Constitutional Court and the Supreme Judicial Council. This is the reason why the provisions laid down in Article 91(1) are inexhaustive and refer to paragraph 2, which stipulates that the rules on its organisation, powers and proceedings are to be determined by law.
In other words, the Constitution lays down only general provisions, which provide for the establishment of a National Audit Office as the public institution responsible for the disbursement of public funds whose members are appointed by the National Assembly. Henceforth the fundamental law refers to Article 91(2), which leaves a wide margin of legislative discretion when choosing between alternative solutions and governance models with regard to the setup of the institution. This is further supported by the fact that since it was established in 1995 the NAO has operated under three distinct laws that lay down different rules on its structure and activities. The scope of the actions to be taken by the legislature are limited by Article 91(1) of the Constitution solely with regard to the National Audit Office, in its capacity as a collegiate body, to be composed of more than one official appointed by Parliament and to its powers and responsibilities to audit public finance to be stipulated in a dedicated law. However, this framework neither expressly excludes enacting alternative hierarchical arrangements in terms of its structure and composition nor does it mean that it is unlawful to redistribute the powers vested in the institution as a collegiate body and those vested in its Head.
This is so because unlike other public institutions established in accordance with the Constitution Article 91(1) of the fundamental law does not lay down express provisions on the composition of the NAO, the number of members of its managing board, length of the mandate of its Head and board members etc. On the contrary, the only express requirement stipulated in the Constitution is that the Head and members of the board of the NAO be appointed by Parliament, with any legislative decisions concerning its powers, structure and organisation to be decided by law (Article 91(2) of the Constitution). There is indeed a wide margin of discretion as regards the choice of a legislative concept as compared to that which applies to the Constitutional Court or the Supreme Judicial Council by way of example. To wit: the Constitution lays down exhaustive rules on their composition, the rules for the appointment of their members, the term for which they are elected and sets out a detailed list of the powers vested in them. The dedicated laws enacted in respect of the latter type of institution set out detailed provisions relevant to their structure and activities, which are exhaustively stipulated and firmly fixed in the Constitution. By contrast the provisions on the NAO laid down in the fundamental law are sparse at best. This means that they must be specified in detail in an enacted law. This is the reason why the primary rules governing the composition, mandate, term of office of the Head of the institution and its members and their powers beyond the remit of those that fall within the scope of a structural law (i.e. one that stipulates the rules on the structure and organisation of public institutions established pursuant to the Constitution) were set out in three dedicated laws enacted since 1995.
Without prejudice to the legal arrangements set out in the latest two laws preceding the enacted ZSmP, the chosen model underlying the structure and organisation of the National Audit Office as a collegiate body does not mean that the model concerned is either obligatory or the only one that complies with Article 91(1) of the Constitution as regards the audit of public finances. By Constitution the lawmaker has powers to determine the composition, term of office and number of the members of the NAO, including its structure and powers. It therefore follows that the choice of a model that is different from the ones set out in the revoked laws is within the proper prerogatives of the lawmaker acting to implement the concept developed at central government level. That concept has been translated into reality by the lawmaker acting within the remit of its competence, which per se is beyond the purview of constitutional review.
According to the petitioners by discarding the concept of the National Audit Office as a collegiate body the lawmaker effectively destroys it by placing the powers formerly vested in the institution into the hands of a Head who is unaccountable and exercises powers similar to those vested in the office of the Auditor and Comptroller General. However, the arguments put forth do not warrant a conclusion that the contested provisions are anti-constitutional because the action taken by the lawmaker is fully within the remit of its competence. In other words, arguments to the contrary can be evoked that are of an equally conceptual nature and are irrelevant to the constitutionality of the contested law. By the same token, the centralisation of the powers vested in the National Audit Office into the hands of the Head of the institution in line with the concept underlying the enacted ZSmP does not mean that he/she is unaccountable. On the contrary, it means that their appointment is dependent on stronger requirements for professional competence. This is the rationale underlying the new provisions laid down in the law, inter alia the lower number of board members, the length of their mandate, the arrangements for Head to be assisted by two deputies nominated by him/her (the principle of teamwork was a strong element of the revoked laws), the functions vested in the institution, which will henceforth act as a Consultative Council in matters with implications for the professional aspects of its work and the obligation of the Head to report to Parliament on the findings from and quality of conducted audits.
The above arguments, which are extraneous to the constitutional discourse and demonstrate that it is possible to base the model of the National Audit Office on different concepts, warrant the conclusion that the contested provisions laid down in Articles 12, 13, 14, 20, 46, 47 and 60 ZSmP are not contrary to Article 91(1) of the Constitution.
2. The contested provision of paragraph 3 of the Transitional and Final Provisions of the ZSmP stipulates:
paragraph 1 – “Not later than one month following the entry into force of the law the Parliament shall appoint a Head of the two deputy heads of the National Audit Office.”
paragraph 2 – “Until the appointment of a Head and Deputy Heads of the National Audit Office in accordance with the procedure laid down in paragraph 1 the former Head and board members of the NAO shall remain in office and continue to discharge their statutory functions.”
The stipulated timeframe for the appointment of a new Head and Deputy Heads of the NAO following the entry into force of the law means an early termination of the mandate of the current head and members of the board of the NAO under the revoked act. The petitioners request that the provisions providing for the early termination of the mandate of the officials concerned in contravention of the revoked law be declared anti-constitutional because they are in breach of the principle of a State based on the rule of law stipulated in Article 4(1) of the Constitution. The principal argument set out in the petition is based on the interpretation set out in Judgment No 13 in Case No 12/2010 on the record of the Constitutional Court (the first sentence of point 2 of the operative part of the judgment) according to which the early termination of a mandate envisaged in the Constitution is warranted solely when effected on the grounds expressly stipulated therein. The petitioners argue that where the Constitution does not set out specific grounds for early termination as in the case at hand Article 12 of the revoked National Audit Office Act should be applied.
The interpretation set out in a judgment of the Constitutional Court cited as an argument supporting the position of the petitioners is irrelevant to the situation that paragraph 3 of the Transitional and Final Provisions of the ZSmP applies. In other words, it has been quoted arbitrarily and outside the context of the judgment concerned. The provisions governing the mandate of the body referred to in Article 91(1) of the Constitution are to be stipulated in a dedicated law (according to paragraph 2 of the same article). Hence it follows that both the mandate and the possibility for its early termination are also subject to rules to be enacted in the form of a law conditional upon a distinction being made between the mandate of the collegiate body, ad hoc the National Audit Office, and the personal mandate of its members to whom Article 12 of the revoked ZSmP applies. Under the previous law the mandate of both the members of the NAO Board and or the collegiate body was nine years, which indicates that where the personal mandate of a member of the board is terminated early on the grounds of Article 12(1) ZSmP (revoked) a new member must be appointed to sit on the board until the expiry of the mandate of the member whom they replaced (Article 12(5) of the revoked ZSmP).
The mandate of the collegiate body under the revoked law has been terminated early, which constitutes grounds for the early termination of the personal mandates of the board members on the grounds of the contested paragraph 3 of the enacted Transitional and Final Provisions of the new law and not on those set out in Article 12 ZSmP (revoked) – the fourth sentence of point 2 of the operative part of the cited judgment. This is allowed when the early termination has implications for mandates established by law such as in the case at hand where the enacted ZSmP introduces changes to the organisation, powers, rules and procedure for the activities carried out by the National Audit Office (the second sentence of point 2 of the cited judgment). As noted above, the change concerned entails the restructuring of the National Audit Office and its constituent bodies and a redistribution of the powers vested in them.
In the case at hand the lawmaker is fully within the remit of its prerogatives to enact the change concerned acting in line with Article 91(2) of the Constitution, including provisions that govern the mandate of the institution. This is a matter of legislative feasibility and achieving a desired goal by making changes to the rules governing the mandate. Those changes include the early termination of the mandate of the institution. The underlying rationale is linked to the ongoing reform of public institutions, ad hoc the body responsible for the audit of public spending. Given the incompatibility at conceptual level between the former and current set of rules on the mandate of the NAO and the powers vested in the institution and the members of its board, it is not possible to avoid the early termination of the mandate of its Head and board members who were appointed under the repealed law. Should the status quo fail to be altered the organisation will not be able to function and discharge its functions in line with the provisions set out in the newly enacted ZSmP, which has already entered into force. In effect this means that only the composition of the current board of the NAO will fail to be altered prior to the expiry of its term but that the government concept relating to the manner in which it should be reformed will effectively fail to be implemented.
In light of this interpretation, the early termination of the mandate of the NAO is not an arbitrary act because it essentially aims to change the functions of the institution and make the audit of public finance more efficient. In this context, the early termination of the mandate of the National Audit office on the grounds of the contested paragraph 3 of the Transitional and Final Provisions of the ZSmP is fully in line with the principle of a State based on the rule of law.
3. The contested provision laid down in Article 50 ZSmP stipulates:
“By the audit report the Head may request the dismissal of a senior official who by virtue of acting or failing to act has violated the law or failed to ensure the implementation of recommendations set out in previous reports drawn up by the National Audit Office”.
The power concerned was not envisaged in the preceding statutes. It is closely linked and enhances the efficiency of the competence of the National Audit Office to control the disbursement of the State budget envisaged in Article 91(1) of the Constitution. It allows the NAO to propose the dismissal of officials responsible for infringements or violations of the law detected during audits on the initiative of the Head of the institution.
The power vested in the Head of the NAO does not exceed their remit of competence under the Constitution because it is directly related to the core activity carried out by the institution, which is to audit public finance. On the other hand, he/she may only provide information about officials who have failed to discharge their duties and propose their dismissal without having the power to actually do so. This may only be undertaken by the institution concerned within the framework of dismissal proceedings unless special arrangements are set forth in a dedicated law. Even in the latter case the institution is not required to act upon the proposal of the Head of the NAO. In other words, it must review the information but is not obligated to act upon it.
With regard to the public institutions established in accordance with express provisions laid down in the Constitution whose senior officials are elected or appointed by the National Assembly and operate in line with certain political mandates, including those of the judiciary, there is no possibility for dismissal either by Constitution or by virtue of the sectoral laws that govern their structure and activities. Hence, the power vested in the Head of the NAO would be unenforceable against such institutions. The power concerned may only be enforced against senior public officials carrying out professional and expert functions with implications for the sound management of public finance within the meaning of the Public Sector Financial Management and Control Act. However, the officials concerned are not bodies whose powers and functions are stipulated in the Constitution regardless of the fact that they are responsible for the management of the funds necessary to ensure the functioning of the selfsame bodies. Hence it follows that the contested provision laid down in Article 50 ZSmP does not contravene the principle of a State based on the rule of law because it does not create grounds for dismissal that are not provided for elsewhere in national law. For this reason the Constitutional Court dismisses the petition to declare the cited article anti-constitutional on the grounds of being unmeritorious.
In light of the above and on the basis of an appraisal of the facts relevant to the constitutional dispute, the petition to declare the entire law anti-constitutional is hereby dismissed because the petitioners have failed to set forth independent arguments in support of the requested revocation of the law but have instead relied solely upon the arguments alleging the anti-constitutionality of the contested provisions, which the Court has dismissed.
Председател: Евгени Танчев