Institutional Insulation of the Judiciary as an Obstacle in the

Fight Against Corruption: Evidence from

Maria Popova

McGill University

October 18, 2008

Countries differ dramatically when it comes to corruption levels. The reasons for this variation are multiple and complex. But, given that most countries have anticorruption laws on the books, it seems that the judiciary’s effectiveness at implementing these laws should be an important factor in any country’s fight against corruption. However, judicial anticorruption campaigns are an exceedingly rare occurrence. Why are so few judiciaries actively involved in curbing corruption?

Many judiciaries in authoritarian and semi-authoritarian regimes probably lack the power and independence to stand up to politicians and bureaucrats and their economic actor cronies, who are often the main perpetrators of corruption. Judiciaries in some democracies may function within a legal tradition that frowns upon judicial activism and emphasizes the judiciary’s subservience to the democratically elected branches of government. Those judiciaries may simply be unwilling to take on the majority of corruption cases out of a belief that they are a fundamentally political problem. This paper, however, tries to explain why judiciaries that have both the means and the guts to challenge perpetrators of political and bureaucratic corruption would refrain from taking on the task.

This paper advances an institutional argument, which posits that high insulation from the executive makes a judiciary reluctant to tackle corruption. When the other branches of government have minimized access to the judiciary, the judiciary focuses on maximizing its institutional self-interest at the expense of the public interest project of curbing corruption. Specifically, I advance two hypotheses about the detrimental effects of judicial insulation on anticorruption campaigns: 1) judicial insulation fosters judicial passivity vis-à-vis corruption, because it increases the costs of pursuing corruption cases for individual magistrates; and 2) judicial insulation reduces the need for the judiciary to solicit public support and thus it erases the main institutional benefit of a comprehensive anticorruption campaign.

I generate the hypotheses on the basis of the structure and behavior of the

Bulgarian judiciary, which, by all accounts, has failed miserably in the task of controlling political and bureaucratic corruption. The paper proceeds as follows. Section I discusses the level of corruption in Bulgaria and the judiciary’s ineffectiveness in addressing the problem. Sections II and III discount two potential explanations for the Bulgarian judiciary’s failure—an institutionally weak judiciary which cannot standup to powerful actors and a legal culture that emphasizes judges’ subservience to incumbent politicians.

Section IV presents the theoretical contribution of the paper, namely the hypothesis that externally-insulated judiciaries do not fight corruption. Section V concludes and offers suggestions for future research, as well as discusses the policy implications of the theoretical proposal.

I: Corruption in Bulgaria and the failure of the judiciary to curb it

Bulgaria is not a terribly corrupt country on a world scale. Since the mid-1990s, both Transparency International’s Corruption Perception Index (CPI) and the World

Bank’s Worldwide Governance Indicators (WGI) index have consistently placed Bulgaria towards the middle of worldwide corruption rankings. Bulgarian political discourse, however, identifies systemic corruption as, perhaps, the most serious challenge facing the country. Bulgarian media routinely uncover and discuss corruption scandals, the public routinely professes a conviction that most politicians and bureaucrats are thoroughly corrupt, and the politicians routinely promise to tackle the problem.

The focus on corruption likely stems from Bulgaria’s enduring position as one of the most corrupt polities in Europe. Both the CPI and the WGI indices suggest that

Bulgaria is at the bottom of the EU pack (Tables 1-2 in Appendix). The country is joined by other fellow post-Communist states, which are on average significantly more corrupt than their Western European neighbors and fellow EU members (Figures 1-2 in

Appendix).

More worrisome, however, is growing evidence that Bulgaria is unable (or unwilling) to curb the spread of corruption, while most of its fellow post-Communist EU members are slowly cleaning up their act. The CPI trend indicates that since joining the

EU in 2004, all Central European and Baltic countries, except Lithuania, have made gains in their fight against corruption. The average CPI score for the countries from the first post-Communist accession wave has risen from 4.3 to 5.3 between 2004 and 2008.

Romania, who joined the EU in January 2007 together with Bulgaria, has also registered a significant improvement in its CPI score from 3.1 to 3.8. By contrast, Bulgaria’s CPI score has dropped from 4.1 to 3.6. The WGI index also registers a downward trend in

Bulgaria’s “control of corruption” score (Fig. 3-4 in Appendix).

One does not need to believe in the reliability of reputational indices, such as the

CPI and the WGI, in order to conclude that Bulgaria’s corruption problem is, at best, unchecked, and, and worst, deepening. Investigations by the European Anti-Fraud Office

(OLAF) into Bulgaria’s management of EU funds have uncovered, in the words of

OLAF, multiple “serious allegations of irregularities” and “suspicions of fraud and conflicts of interest in the award of contracts.” Problems plagued each of the main financial assistance programmes that Bulgaria can benefit from as a new EU member:

PHARE (the pre-accession support programme), SAPARD (the agriculture program) and

ISPA (the infrastructure development programme). As a result, in July 2008, the

European Commission decided to revoke the accreditation of two government agencies in charge of managing funds, temporarily suspend the appropriation of the PHARE funds, and freeze payments under SAPARD and ISPA

(http://ec.europa.eu/dgs/secretariat_general/cvm/docs/bulgaria_report_funds_20080723_e n.pdf). In less euphemistic terms, the evidence of political and bureaucratic corruption was strong enough to convince the EU to punish Bulgaria by cutting off hundreds of millions of euros in aid (estimates vary between 365mln and 1bln)1.

Moreover, the European Commission specifically and explicitly singled out the

Bulgarian judiciary for criticism. With unprecedented candor, the European Commission accused the Bulgarian judiciary of failing to prosecute corruption in earnest. According to Commission spokesman, Johannes Laitenberger, “while there has been movement on a few cases, many alleged cases go unpunished.” The Commission’s official report bluntly states that: “there is a lack of commitment to act decisively, swiftly […] when fraud is identified.” OLAF is cited as complaining that its investigations have been frustrated by

“instances of judicial proceedings which had been opened but, subsequently closed without justification.” The report even mentions a “strong suspicion of the involvement of organized crime” (Commission of the European Communities, 2008).

1 BBC, “EU suspends funding for Bulgaria,” July 23, 2008, http://newsvote.bbc.co.uk/mpapps/pagetools/print/news.bbc.co.uk/2/hi/europe/7520736.stm In the area of political corruption, the judiciary has opened many investigations against high-ranking Bulgarian politicians, both opposition and incumbent. However, few have gotten to trial, even fewer have resulted in conviction, and none have led to a serious sentence, even though the alleged crimes have been serious, namely abuse of office, illegal party financing, and fraudulent privatization deals. For example, former

Prime Ministers and Simeon Saks-Coburg-Gotha, as well as former Deputy

Prime Minister Milen Velchev, and half-a-dozen ministers from all both the Kostov and

Saks-Coburg-Gotha government have been investigated, both while in office and while in opposition, for abuse of office. All have been interrogated by the prosecution numerous times, in Kostov’s case over the course of a decade, but have not been indicted.

The few indictments that have made it to trial most often result in acquittal.

Stefan Sofiyanski, caretaker Prime Minister in 1997, mayor of from 1995 to 2004, leader of the National Union party, and a current Euro-MP has been a defendant in five criminal cases. In all cases he was charged with abuse of office and the charges carried 3 to 10 year prison terms in case of conviction. The cases were filed by the Sofia City

Prosecution Office between 2001 and 2004 and all alleged that the incumbent mayor had contracted real estate deals on behalf of Sofia municipality that he was not authorized to execute personally and that were clearly against the municipality’s financial interests. In one case, the mayor was alleged to have sold municipal property at a price 400 times lower than the market price at the time!2 Sofiyanski has been acquitted in one case and has invoked his immunity as a Euro MP to stop the other trials. One more case against him was dropped by the prosecution, coincidentally or not, after the appointment of the

2 Bulgarian National Radio, 9 August 2007 current prosecutor general. Former ministers Boyko Noev and Atanas Atanasov have also been acquitted by the courts.

Only Aleksandur Bozhkov, the former deputy Prime Minister and Minister of

Industry between 1997 and 1999 and the government’s point main in negotiations with the European Union, has been convicted, but he has not seen the inside of a prison cell either. Bozhkov was dubbed “Mister 10%” by the media in reference to rumors that he personally pocketed 10% of every privatization deal that his ministry oversaw. In May

2004, over five years after his dismissal as Deputy Prime Minister and after he had effectively left politics, he received a two-year suspended sentence, three years of probation, and was ordered to pay some 1000 euros in legal fees for abuse of office for the mismanagement of a small state-owned factory, managed by his ministry3. By 2008, however, even this sentence was overturned by the Supreme Cassation Court and

Bozhkov was also acquitted in several other privatization-related corruption cases4.

In short, the Bulgarian judiciary either cannot or will not control corruption. The question that both the EU and the Bulgarian public want answered is why.

II: Where NOT to look for blame: Low judicial capacity and independence

If a judiciary is not constraining the executive and making it abide by the law, the first thing to check is whether the judiciary has the institutional capacity to stand up to incumbents. Numerous studies have indentified institutional safeguards that aim to protect the judiciary from potential interference by the executive and make it more

3 “Aleksandur Bozhkov Osuden na 2 godini Uslovno”, Investor, 12 May 2004 4 “Aleksandur Bozhkov be Opravdan I po Poslednoto Delo”, Netinfo.bg, 30 July 2007, http://www.netinfo.bg/index.phtml?tid=40&oid=1221384 powerful and independent (Rosenn 1987, Fiss 1993, Tate and Valinder 1995, Guarnieri and Pederzoli 2001, Feld and Voigt 2003, etc.). The explicit (or often implicit) argument is that for judges to be able to act independently to hold the executive accountable for its actions, the judiciary as an institution has to be insulated from the executive (Shetreet,

1984, Russell 2001).

First, an insulated judiciary is one that has control over judicial careers. This control refers to the judiciary’s ability to hire, promote, discipline, and, if need be, demote and fire individual judges. The most obvious institutional guarantee against executive interference in judicial careers is life tenure (i.e. judges do not have set terms, but can expect to serve for life, unless there are serious grounds for dismissal). More subtly, the fewer institutionalized opportunities there are for the other branches to influence judicial careers, the greater the degree of judicial insulation. Some manifestations of high judicial insulation include: 1) a nomination process controlled entirely by judicial institutions; and 2) exclusive control over promotions, disciplinary measures, and dismissals granted to a judicial body.

Second, an insulated judiciary is one that has secure control over its own budget and administration. Budgetary control implies that the judiciary drafts its own budget request year to year and enjoys guarantees (often constitutionally-enshrined) that the other branches cannot alter the budget request significantly and at their will. Control over the financial administration of the courts means that a judicial organ, rather than the

Ministry of Justice governs spending of the judiciary’s budget.

Usually, both elements of judicial insulation are reflected in the existence of a judicial council (often called Supreme Council of Justice (SJC), whose main functions are to draft and administer the judiciary’s budget and to manage judicial careers. Judicial insulation is higher when the SJC is dominated by judicial appointees, and lower when political appointees make up the majority of SJC members.

A quick assessment of the institutional setup of the Bulgarian judiciary on the basis of these widely-accepted criteria demonstrates a high level of judicial insulation in

Bulgaria. Firstly, Bulgaria’s Constitution follows the standard continental European model (Kelsenian model), which relegates constitutional review exclusively to a separate

Constitutional Court. In addition, following the German model (rather than the French), the Bulgarian constitution creates two separate judicial hierarchies: one for criminal and civil cases, headed by a Supreme Court of Cassation, and one for administrative cases, headed by a Supreme Administrative Court. Article 117, par. 2 of the Constitution explicitly grants autonomy to the ordinary judiciary from the other two branches of government5.

In a rather unique decision, which happens to be highly relevant to the task of controlling corruption, the framers of Bulgaria’s post-communist regime, defined the judicial branch as containing not only the courts, but also the prosecution, and the pre- trial investigation. Chapter Six of the Constitution includes all three institutions together and refers to them as constituting “judicial power” in the country6. Among European countries, only Italy and Croatia display a similar unified institutional setup of the judiciary.

The inclusion of pre-trial investigation and the prosecution in the judiciary signals the particularly high degree of insulation of the Bulgarian judiciary from the other

5 http://www.online.bg/law/const/const6.htm 6 http://www.online.bg/law/const/const6.htm branches of government. The functions and day-to-day activity of the courts are closely intertwined with both the prosecution and the pre-trial investigation, so judges everywhere interact and develop close working relationships with prosecutors and investigators. If the latter two professional groups are part of the executive (as is the case in Germany, and many other European countries) the opportunities for executive interference and influence of judicial decision-making undoubtedly increase. Whether the executive takes advantage of these opportunities or whether there exists an informal tradition of non-interference by politicians in the activities of the prosecution and the investigation is irrelevant. From an institutional standpoint, the insulation of the judiciary from the other branches of government is lower if the prosecution/pre-trial investigation are part of the executive and higher if the prosecution/pre-trial investigation are part of the same corporate body as the courts.

All three institutions that make up the judicial branch are represented in the

Supreme Judicial Council (SJC), which is an instrument of self-governance for the judiciary. According to Art. 129, par. 1 of the Constitution, the SJC has full control over judicial careers: it elects, promotes, demotes, reassigns, and dismisses all magistrates7.

Moreover, the high degree of insulation is reflected in the fact that the judiciary dominates the nominating process of SJC members. Parliament appoints 11 of the 25 members of the SJC, the magistrates appoint another 11 members. However, in close decisions, the judicial appointees always win the vote, because the chairs of the two high courts and the chief prosecutor are ex officio members of the council (Art. 130), so the judiciary holds a 14-11 majority8.

7 http://www.online.bg/law/const/const6.htm 8 http://www.online.bg/law/const/const6.htm In addition to the standard life tenure that is available in most civil law countries,

Bulgarian magistrates have constitutionally-enshrined immunity from prosecution (Art.

132, par 1.), which further enhances their security of tenure. Par. 2 of the same article

132 states that the immunity of an individual magistrate (judge, prosecutor, or investigator) can be lifted only after a decision of the SJC9. This provision further enhances the institutional insulation of the judiciary as it makes magistrates virtually impermeable to attacks from incumbent politicians. Politicians simply have no institutional recourse, which to use if they wanted to punish or discipline individual magistrates, as the judiciary has exclusive control over judicial careers, even in cases when a magistrate may have violated the law.

Finally, after some conflicts with the executive during the mid-1990s, the judiciary has emerged as fully in control of its budget. The SJC drafts and administers the judiciary’s budget without any input by the Ministry of Justice. The eventual budgetary allocation granted to the judiciary is usually lower than the SJC proposal, but the reduction is usually fairly consistent at around 15-20%, so it does not seem to reflect any significant budgetary leverage on the part of the executive. In fact, during the 2000s, the judiciary has been very assertive in demanding an ever-increasing share of the state budget. Table 3 shows the dynamics of the judiciary’s budget during the 2000s. The financing of the judiciary has quadrupled between 2002 and 2008 from 80 mln leva to over 330 mln. leva. More importantly, the judiciary’s share of the national budget has increased by 56% from 3.4 to 5.3%. As a share of GDP, the increase in the judiciary’s budget is even more dramatic—it has doubled from 0.25% in 2002 to a projected 0.57% in 2008. These significant gains have not only led to capital investments such as building

9 http://www.online.bg/law/const/const6.htm renovations, but also to a sizable increase in judicial salaries by around 16% every year to an average of 1,042 leva (500 Euro), which is around four times the average wage for state employees10.

The high degree of insulation from the other branches of government suggests that we cannot attribute the failure of the Bulgarian judiciary to tackle systemic corruption to lack of institutional capacity. Bulgarian magistrates enjoy the full panoply of institutional safeguards, which should empower them to investigate and prosecute corruption vigorously, even if this requires standing up to powerful incumbents or their associates and supporters. The judiciary as a whole is in full control of its financing and administration and individual judges do not have to fear demotion, dismissal, or any other punitive measures by politically powerful defendants. In short, as the European

Commission succinctly put it in its last lament over the ineffectiveness of the Bulgarian judiciary: “institutions and procedures look good on paper, but do not produce good results in practice” (Commission of the European Communities, 2008). Why might that be?

III: Where NOT to look for blame: Legal culture

The European Commission’s befuddlement as to why “good” formal institutions have not produced “good” results in Bulgaria describes a familiar situation. Similar institutions, present in different countries often produce different outcomes. Why? One explanation to this apparent paradox argues that cultural norms, informal institutions, or practices can always trump formal rules through reinterpretation or outright

10 Vincenzo Report circumvention until vastly different outcomes result. In this context, the blame for the impotence of the Bulgarian judiciary can be attributed to a deeply entrenched, either

Communist, or Eastern Orthodox, or Balkan legal culture of legal nihilism or judicial passiveness. Legal culture explanations are indeed periodically offered to explain the failure of post-Communist judiciaries to constrain powerful state actors and uphold the rule of law (Sharlet 1998, Hendley 1999, Aslund 1999). Lingering attitudes of submissiveness to the executive and perceptions of judicial decision-making as mechanistic and technocratic may preclude the judiciary from being assertive, regardless of its formal institutional structure. Judicial independence may be more about judges’ own mental freedom, rather than about institutions guaranteeing them insulation from the other branches (Bobek 2008).

This section presents evidence that legal culture cannot account for the failure of the Bulgarian judiciary to curb corruption. Throughout the post-Communist period, the ordinary courts, with consistent backing of the Constitutional Court, have unequivocally demonstrated their readiness to constrain incumbent politicians. The high degree of institutional insulation that the Bulgarian ordinary judiciary currently enjoys was not a gift: the ordinary judiciary has been fighting tooth and nail with the executive to consolidate its independence. Recurring battles with executives of all political stripes over laws that regulate judicial budgeting, administration, and careers showcase the emancipation of the ordinary Bulgarian judiciary from any purportedly lingering

Communist-era docility. The judiciary has repeatedly struck back at hostile incumbents by opening or re-opening criminal probes against them and torpedoing their legislative programs in issue areas outside judicial reform. The following timeline of judicial- executive confrontation highlights several examples of the judiciary’s assertiveness.

During mid-1990s, the ordinary judiciary consolidated its structural independence vis-à-vis the executive with the important backing of the Constitutional Court and Zhelyu

Zhelev, the anti-Communist UDF-backed president. In 1995, the Prosecutor General,

Ivan Tatarchev, argued that draft bills, designed to give the Ministry of Justice the power control the administration of the SJC and to keep and control its budgetary accounts violate the constitution. The Constitutional Court agreed. In early 1994, a BSP (former

Communist)-led legislative majority adopted a Law on the Judiciary as required by the

Constitution. The law would effectively purge the higher echelons of the judiciary, which since the 1991-1992 UDF government were dominated by UDF appointees.

President Zhelev, vetoed the bill, but the legislature overrode the veto. The bill ended up in the Constitutional Court and the ordinary judiciary won yet again (Melone, 1996,

Ganev 2003).

One may attribute the battles of the mid-1990s to the intense ideological confrontation between the former Communist BSP and the anti-Communist UDF.

However, executive-judicial relations did not improve significantly after the formation of a majority UDF government in April 1997. Within months, the Interior Ministry (which oversees the police) and the Prosecution were accusing each other of dropping the ball in the fight against Bulgaria’s deepening organized crime problem. The Minister of the

Interior Bogomil Bonev and the Prosecutor General Ivan Tatarchev (both of them nominated by the UDF for their positions) were trading insults in the media and the Prime Minister questioned rhetorically whether the judiciary is doing its job at all11. Rhetoric aside, the UDF majority in parliament set up an “Antimafia” parliamentary commission, which proposed judicial reform measures that in effect would curtail the power of the judiciary. Ironically, many of the proposals to streamline the judicial process, such as amending Art 128 of the Constitution to allow moving some cases from the jurisdiction of the investigating magistrates to the police, were lifted almost word for word from the

Judicial Reform Programme that the BSP cabinet had drafted in 199512.

The judiciary’s response to the UDF-sponsored judicial reform proposals was just as fiercely independent as its reaction to BSP attempts to encroach on its independence, which signals that by the end of the 1990s the judiciary had developed a strongly independent self-image. Soon after the Antimafia parliamentary commission’s proposals became public, Prosecutor General Ivan Tatarchev announced that the prosecution would reopen a four-year-old criminal investigation into duty-evasion by a foundation called

Sapio. Back in 1993, the prosecution had concluded that Ivan Kostov had not violated any laws when he signed a temporary authorization allowing Sapio to import goods duty- free in his capacity as Finance Minister. Talking about re-opening of the investigation in late 1997, in the absence of any new evidence or testimony was widely interpreted as a clear sign of the prosecution going on the offensive against the prime minister13.

The next cabinet led by Prime Minister Saxe-Coburg-Gotha (Bulgaria’s former child king whose NDSV party defeated Kostov’s UDF in the 2001 parliamentary elections) suffered even greater political damage when it attempted to implement judicial

11 Iovo Nikolov, “Tatarchev Sreshtu Vsichki: Samo Masovi Shestviya Sreshtu Glavniya Prokuror Oshte ne sa Izpolzvani v Bitkata Mezhdu Vlasitite,” Kapital, December 13, 1997 12 Iovo Nikolov, “Ideite na Komisiyata “Antimafiya” sa Razraboteni ot Ministur na Videnov,” Kapital, No. 47, November 22, 1997. 13 Iovo Nikolov, “Tatarchev…” reforms required for EU accession. In March 2002, the Saxe-Coburg-Gotha cabinet introduced amendments to the Judicial Powers Act, which would do away with the magistrates’ absolute immunity from prosecution and reduce it to immunity pertaining to their professional actions and would create an Inspectorate at the Ministry of Justice, which would draft and submit to parliament analyses of the functioning of the judiciary1415.

Predictably, the judiciary did not like this infringement upon their institutional insulation from the executive and it responded forcefully. First, leading figures in the prosecution and the courts started declaring their dissatisfaction with the amendments.

Ivan Grigorov, the chair of the Supreme Court of Cassation (SCC) argued at a meeting of the Supreme Judicial Council (SJC) that the proposal envisions too much executive interference in judicial matters and blurs the mandates of the Ministry of Justice and the

SJC. Neli Kutskova, a judge in Sofia City Court and the spokeswoman of the SJC, also blasted the bill as unconstitutional. Nikola Filchev, the prosecutor general, vehemently opposed the bill in an open letter to the premier16. In early June, the Union of District

Court Judges adopted a resolution calling on the executive and parliament to stop interfering in internal judicial affairs such as promotion, and instead to guarantee the stability of the judiciary’s budget by fixing financing to a certain percentage of the

GDP17.

14 Pavlina Zheleva, “Stankov Gotvi Iztsialo Nov Sudeben Zakon”, Dnevnik Online, April 7, 2002 15 Bill # 16 “Ministur Stankov—pod Pritsel”, Dnevnik Online, April 7, 2002 17 “SRS Izleze Sus Stanovishte za Zakona za Sudebnata Vlast”, Dnevnik Online, June 7, 2002 On May 31, 2002 parliament passed the bill at first reading with an overwhelming majority18. Shortly after this unequivocal sign that the bill would most probably become law, the judiciary went on an all-out offensive not just in words, but also in action.

Within weeks the General Prosecutor’s office opened criminal investigations against two deputy justice ministers, Mario Dimitrov and Miglena Tacheva for alleged abuse of office during their tenures as district court judges in 199919. Prosecutors questioned deputy

Prime Minister Nikolai Vassilev in connection with an allegation that his close friend

Georgi Popov, the CEO of Bulgaria’s state-owned tobacco monopoly, had demanded a

500,000 USD bribe from a potential buyer. Notably, none of these corruption investigations got very far. Miglena Tacheva is currently the Minister of Justice and

Nikolai Vassilev is the Minister of State Administration and Administrative Reform.

The war only escalated after the adoption of the JPA law on July 17, 200220 and by the end of the year the executive was all but paralyzed. First, the judiciary invalidated all major privatization deals pursued by the government. In October, the Supreme

Administrative Court (SAC) cancelled the decision of the state Privatization Agency to sell the state tobacco monopoly Bulgartabac to a Deutche-Bank-backed investor on the grounds that the price was too low. The ruling opened the door to a possible victory in the tender by a company backed by Michael Chorny, a shady Russian businessman whom the last Bulgarian government had declared persona non grata and a threat to national security. In December, the Supreme Cassation Prosecution Office ordered the

Privatization Agency to stop the sale of the telecommunications monopoly, BTC, to the

18 http://www.parliament.bg/?page=app&lng=bg&aid=4&action=show&lid=243 19 “Stankov I Filchev Veche sa v Otkrita Voina”, Dnevnik Online, June 29, 2002 20 Pavlina Zheleva, “Trinadesetata Popravka v Sudebniya Zakon”, Dnevnik, July 18, 2002 first choice buyer, Viva Ventures, alleging irregularities in the concern’s incorporation21.

The same office also challenged the Ministry of Energy’s choice of BNP-Paribas as the consultant on the forthcoming privatization of the electric utility monopoly22. The judiciary also overturned administrative acts, which the cabinet saw as indispensable steps in Bulgaria’s Euro-Atlantic integration. For example, SAC blocked the creation of a State Commission on Information Security, an institution Bulgaria needed to establish in order to join NATO23. In January 2003, the same court overturned the cabinet’s decision to comply with EU demands and close down two blocks of the Kozludui nuclear power plant24. In short, the judiciary effectively torpedoed the cabinet’s main governing priorities.

Finally, there is ample evidence that the judiciary’s esprit de corpse is so strong that once appointed to leadership positions within the judiciary, straight up political appointees quickly abandon their loyalty to their political sponsors and pledge primary allegiance to the judiciary. Three of the highest profile examples are Prosecutors General

Ivan Tatarchev and Nikola Filchev, and Supreme Administrative Court Chairman

Konstantin Penchev. As I already mentioned, Prosecutor Ivan Tatarchev was a UDF’s nominee in 1991, but fought bitterly with the UDF cabinet in the late 1990s. When

Tatarchev’s mandate expired in 1999, the Kostov government pushed through what seemed like a politically reliable choice-- deputy Justice Minister from the UDF, Nikola

Filchev. The relationship soured almost immediately and the executive-judicial wars continued unabated. In July 2000, Prosecutor General Filchev accused the cabinet of

21 “Privatizatsiyata na BTC Otnovo Dava “Zaeto””, Kapital, No. 50, December 2002 22 Galina Aleksandrova, “Prokuraturata Podkhvana I Sdelkata za Elektrorazpredeleniyata”, Kapital, No. 51, December 2002 23 “Privatizatsiyata na BTC Otnovo Dava “Zaeto””, Kapital, No. 50, December 2002 24 “Sudut Vkara Kabineta v Omagiosan Krug za AETs”, mediapool.bg, January 10, 2003 bugging his apartment and throughout the rest of Filchev’s term the prosecution opened numerous criminal investigations against Ivan Kostov and his closest political associates.

By the end of its mandate, the UDF was calling for a constitutional amendment to take away the prosecution’s institutional independence completely and bring the institution under direct executive subordination.

In March 2004, a new legislative majority, the NDSV, got a chance to appoint 11 members to the Supreme Judicial Council (SJC). Moreover, through a series of procedural maneuvers the incumbents managed to secure the election of an NDSV MP to the post of Supreme Administrative Court chair25. Kostantin Penchev was not only a member of the NDSV parliamentary faction, but also a lawyer, rather than a career judge, so he was clearly an outsider for the judiciary and undoubtedly a political appointee.

While the executive sought to downplay its victory though assurances by Penchev that he would not start any “revolutions” within SAC26, the ordinary judiciary felt defeated. The leadership of the judiciary saw the Penchev appointment as a serious threat not simply because the Supreme Administrative Court is one of the two most powerful courts in the country, but also because its chair holds an ex officio seat on the SJC. Since the new SJC now also had an NDSV-appointed political quota (11 out of 25 members), the appointment of a political figure to a position that normally belongs to the judiciary’s quota could tip the balance of power within the judiciary’s self-government organ in favor of the incumbents. In the words of Supreme Cassation Court chair Ivan Grigorov, the judiciary perceived the appointment as “a direct, unceremonious political intrusion in

25“Presidentut Purvanov izdade ukaz za naznachavaneto na Konstantin Penchev za predsedatel na Vqrhovniya Administrativen Sud”, Bulgarian Telegraph Agency, March 16, 2004 26 Tanya Krasimirova, “Penchev: niama da pravia revolyutsii vuv VAS”, Standart, March 17, 2004 the Bulgarian judiciary, which did not take place even during ’s time”27.

It appeared that the executive had for once managed to circumvent the institutional safeguards and limit the insulation of the judiciary.

It soon became clear, however, that while the executive had won one battle, the war would continue raging on even with the new, supposedly “friendlier” SAC chair. In

April 2004, the new SJC unanimously (!) adopted a declaration that blasted the government’s plans to reform the investigation according to EU demands28. In other words, all NDSV-appointed members of the SJC voted together with the judiciary’s appointees against a central cabinet initiative. In addition, within a couple of months,

Konstantin Penchev, and his previous arch-enemy, Supreme Cassation Court chair Ivan

Grigorov, appeared to be on excellent terms29. In May, the two began working together to lobby for increased structural insulation of the judiciary from the executive. At a meeting of the Temporary Parliamentary Commission for Constitutional Amendments,

Penchev and Grigorov submitted a joint proposal to create separate promotion commissions within the SJC for judges, prosecutors and investigators. This consensus between the two main court leaders suggested that solidarity within the courts was as strong as ever. Moreover, contrary to the expectations that he would subordinate SAC to the government that he used to represent in parliament, Justice Penchev advocated a constitutional increase in the power of SAC vis-à-vis the executive. He formally proposed that the Constitution allow SAC to review all executive decisions30.

27 Momchil Milev, “Pregrupirane na lagerite v tretata vlast”, Kapital, March 16, 2004 28 Momchil Milev, “I noviyat VSS uvurta za radikalni sudebni reformi”, Kapital, April 13, 2004 29 Author’s interview with Ivan Grigorov, September 20, 2004 30 “Protocol No. 20 from the meeting of the Temporary Commission for the Preparation of Constitutional Amendment Proposals”, May 11, 2004, available at: http://www1.parliament.bg/Komisii/vkpk/zas11-05- 04.htm

IV: Judicial insulation as the culprit for the judiciary’s failure to tackle corruption

As I discussed in section II, judicial insulation is commonly perceived as at least a facilitating, if not a necessary, and possibly even a sufficient condition for judges to hold the executive accountable for its actions. When magistrates have security of tenure and the judiciary itself controls the process of appointing, remunerating, promoting, disciplining and removing individual magistrates, the argument goes, politicians simply do not have leverage over the sitting magistrates and thus cannot influence the decisions they take (Shetreet 1984, Fiss 1993, Tate & Vallinder 1995, Helmke 2002, Domingo

2000, Russell & O’Brien 2001).

The biggest caveat of the conventional wisdom approach is that it is based on the implicit assumption that magistrates who are insulated from the other branches of government and thus cannot be subject to any external pressure will necessarily “do the right thing”. By extension, in the concrete case of the fight against corruption, the assumption suggests that if judges are separated well enough from politicians and bureaucrats, they will necessarily work to expose corrupt practices. This is a big, unsubstantiated assumption, which puts too much faith in the moral rectitude of judges.

On the face of it, the assumption seems naïve and unwarranted. It is unclear why magistrates should be any different from politicians or bureaucrats and we certainly do not expect them to do their jobs properly without any sort of supervision. Thus, I propose the following hypothesis about the relationship between judicial insulation and judicial behavior in corruption cases:

Hypothesis 1: Judicial insulation fosters judicial passivity vis-à-vis corruption, because it increases the costs of pursuing corruption cases for individual magistrates

A hypothesis that appears more reasonable, given what we already about know how humans behave when they are unconstrained by supervision, is that a high degree of judicial insulation should lead to a decrease in magistrates’ accountability and hence to an increase in private rent-seeking practices. In other words, we should expect that among judges who do not fear punishment by the other branches of government a significant portion would start shirking their responsibilities and engage in corruption themselves, rather than attempt to tackle corruption among politicians and bureaucrats. The observable manifestation of this rational strategy could be lower work ethic, speedy disposition of cases with less regard for procedure, obvious violations of the rules of incompatibility (e.g. having a member of the family argue for one of the parties to a case), and bribe-taking from litigants.

In the area of corruption prosecutions, the problem of corrupt behavior by magistrates should be particularly acute. Investigators, prosecutors and judges can all collect bribes or reap non-monetary benefits from corruption defendants in exchange for delaying, derailing, or dismissing corruption cases. While litigants in any type of case can seek to influence the magistrate, it seems that both bribe-offering and bribe-taking rates should be higher than average in corruption cases. Corruption defendants are by definition among the richest defendants, so they have significant resources at their disposal to be used for bribes. This should increase the bribe-offering rate.

Corruption defendants generally belong to the same socio-economic group as the magistrates— they are civil servants and other white collar workers. Moreover, corruption defendants and magistrates often belong to the same network of professional contacts, acquaintances, or even friends. One result is easier communication between defendant and magistrate, which may facilitate the process of bribe-offering and thus increase the rate at which it takes place. Another result is that corruption defendants may be able to offer attractive non-monetary benefits to magistrates, such as attractive jobs, contacts, or contracts for magistrates’ family and relatives. For example, a drug dealer or a burglar cannot offer an investigator much else besides cash. The head of an electric utility company, on the other hand, can offer the investigator to hire his cousin’s daughter for a position that she is unlikely to be competitive for in a fair competition. A public university administrator can offer to arrange that the investigator’s brother’s construction company wins a bid to a wing of the university. A politician can offer to increase the budgetary allocation to a museum, whose director is married to the investigator.

In addition, corruption cases are costly to individual magistrates because they increase the workload without bringing an increase in the magistrates’ official remuneration. Investigators and prosecutors need to work extra hard to collect evidence.

Corruption crimes are notoriously hard to prove, because the acts themselves are complex and the perpetrators are usually intelligent, knowledgeable, politically and socially well- connected. Yet investigators and prosecutors do not receive any financial bonuses for taking on these complicated cases. Thus, given that pre-trial magistrates (and even to some extent judges) can choose what cases to push forward, taking on a corruption case is costlier than sticking to more routine and straightforward crimes with less sophisticated perpetrators. And if judicial insulation allows judges to shirk their responsibilities easier, then more judges are likely to consider the costs of a corruption case prohibitively high.

Reports of internal corruption within the Bulgarian judiciary are ubiquitous.

While there is no reliable objective measure of the internal corruption rate, corruption perception surveys suggest that the Bulgarian public perceives the judiciary to be thoroughly corrupt. One corruption monitoring survey, produced by CSD (Bulgaria’s leading anticorruption NGO), asked respondents to estimate the degree to which corruption has permeated different Bulgarian institutions31. Figure 5 compares the share of respondents who estimated that “everyone” in a given institution is corrupt. Strikingly, over a third of Bulgarian citizens believe that every single magistrate is corrupt! Even more strikingly, the Bulgarian public thinks that magistrates are even more corrupt than politicians!

31 “Koruptzionen Monitoring na Koalitziya 2000,” Vitosha Research, March 2004, http://www.vitosha- research.com/fileSrc.php?id=481 Figure 5: Percentage of respondents who think ALL magistrates or politicians are corrupt, 2003-2004 50 39.8 Magistrates 40 37.6 33.5

30 26.3 23.1 24.7 26.1 24 22.8 MPs 20 Cabinet 10 ministers 0 Jan-03 Oct-03 Mar-04

Furthermore, even the majority of magistrates seem to concur that corruption is indeed a problem within their institution. A survey of 454 magistrates reveals that only

7.7% claim that there is no corruption in within the judiciary and 14.8% refuse or cannot answer the question. This leaves over three quarters of respondents (77.5%), who admit that internal corruption within the judiciary is a problem32.

Clearly, the bribe-taking rate for magistrates depends greatly on the likelihood that they would be caught and punished for taking bribes. If magistrates expect to be caught and punished, then they would forego the bribe. If, however, they feel they can take bribes with impunity, then turning down bribes from corruption defendants indeed becomes costly. While judicial insulation precludes that the source of punishment for corrupt magistrates would be the other branches of government or the public, punishment can originate from within the judiciary. It seems plausible that a self-governing judiciary can effectively self-police corrupt behavior by individual magistrates and thus increase

32 “Koruptzionen Monitoring na Koalitziya 2000: Glednata Tochka na Magistratite,” Vitosha Research, May-June 2003, http://www.vitosha-research.com/fileSrc.php?id=1104 bureaucratic rectitude within the judiciary. Why do we not observe such practice in

Bulgaria, but rather we observe a high level of internal corruption among magistrates?

The answer seems to go back again to the detrimental effects of judicial insulation. I posit that judicial insulation reduces the main benefit that the judiciary as a whole can reap from an earnest fight against both internal corruption and corruption within the political establishment and the bureaucracy. This benefit is increased public support.

Hypothesis 2: Judicial insulation reduces the need for the judiciary to solicit public support and thus it erases the main institutional benefit of a comprehensive anticorruption campaign

The main benefit of any anticorruption campaign to the judiciary is the increase in the public support that is likely to result from the successful prosecution of bureaucrats or politicians involved in corrupt activities. Public support is, in turn, highly beneficial to the judiciary because it is widely believed to be the basis of judicial power and independence. It has long become part of conventional wisdom that politicians and individual citizens alike choose to respect the independence of the courts and comply with their decisions, despite the judiciary’s lack of coercive powers, only when the judiciary enjoys public legitimacy (McCloskey 1960, Shapiro 1978, Baum 1981, Tyler

1994). When the public supports the judiciary politicians are afraid to attack it or ignore its decisions for fear of a public backlash (Vanberg 2001). The other side of the coin is that judicial inaction in an environment saturated with evidence of systemic corruption will cost the judiciary a fraction of its public support. If the public can clearly assign blame to the judiciary for failing to curb corruption, we should expect the public legitimacy of the judiciary to decrease as popular disapproval of corrupt practices is virtually ubiquitous. Thus, judicial behavior vis-à-vis corruption should affect the judiciary’s standing with the public.

Institutional insulation, however, seems to reduce the judiciary’s need to solicit public support. If the judiciary is guaranteed a stable budget, self-government, and immunity from outside punishment, then it does not need public legitimacy in order to increase its leverage vis-à-vis the executive branch and protect itself. In other words, the public no longer needs to be the arbiter in the judicial-executive relationship, but rather the relationship is formalized and the balance of power is tipped in the judiciary’s favor.

In the case of corruption prosecutions, the less the judiciary worries about its public legitimacy, the less likely it will be to incur any costs in order to defend the public interest of curbing corruption.

Indeed, the development of executive-judicial relations over the past decade suggests that it is completely rational for the Bulgarian judiciary to ignore public opinion about its performance. Trends in public approval ratings over the past decade seem completely unrelated to the power and institutional capacity of the judiciary. As Figure 5 shows, judiciary has dismally low levels of popular legitimacy. It ranks consistently among the most mistrusted state institutions. Only between 12-20% of the population hold a positive view of the courts and two-thirds of the population expresses a general sense of dissatisfaction with functioning of the judicial system33.

Figure 6: Dynamics of popular trust in the courts, 2001- 2004

100 80 60 40 20 0

1 2 3 0 '02 '02 02 '02 '0 '03 '03 '03 '0 04 '04 '04 04 r '02 r '03 c ' pr n ' v a v y u ep o ec ay '03Jul ep a ep ' De Ma A J S Oct '02N D Feb M M S No Jan ' Mar '04Apr '04M Jun S Dec '04 Approval Disapproval

At the same time, as Table 3 shows, the judiciary has only solidified its institutional capacity over the last decade as it has managed to force successive cabinets to increase its budget both in absolute, real (% of GDP), and relative (% of state budget) terms.

Table 3: Judicial budgets, 2002-2008

2002 2003 2004 2005 2006 2007 2008 Judicial budget 80.9 95.9 152.0 185.1 225.5 262.5 333.3 (mln. leva)1 ƒ As % of budget 3.4 4.6 5.1 5.6 5.3 5.2 5.3 expenditures2 • As % of GDP3 0.25 0.28 0.39 0.43 0.46 0.46 0.57*

33 NCIOM surveys, http://www.parliament.bg/nciom/ Sources: 1 & 2 “Danni po Republikanskiyat Byudzhet”, Ministry of Finance, http://www.minfin.bg/bg/statistics/1/&cat=-1&from=0&fyear=0&to=0&tyear=0&dq=&pokaz=7 3 Calculated by author using GDP data from National Statistics Institute, http://www.nsi.bg/Gdp/Gdp.htm * estimate of GDP for 2008 is calculated by doubling the recorded GDP for the first half of 2008.

In addition, as section II illustrated, the judiciary routinely challenges and constrains the executive in other sensitive issue areas besides corruption. Executives of different political stripes have duly complied with numerous court decisions against them, which is another indication that low public support is not hurting the Bulgarian judiciary’s power or independence.

V: Conclusion

The main goal of this paper was to demonstrate that insulation, which conventional wisdom takes to be a highly desirable characteristic of the institutional setup of judiciaries, may in fact have some detrimental effects. Specifically, I argued that it might be responsible for the passivity of the Bulgarian judiciary in the face of a serious corruption problem. Obviously, the evidence from the Bulgarian case that I have brought in support of my theoretical position does not constitute an empirical test of the hypothesis. Not only is this a single case, but I have generated the hypothesis with this specific case in mind.

However, the hypothesis does generate observable predictions and thus can easily be tested on other cases. It predicts that countries which have organized their judiciaries differently, leaving more formal institutional channels through which the other branches of government can keep the judiciary accountable, would have a better record of judicial effectiveness in curbing corruption through judicial prosecutions. A quick look at other cases reveals some potential examples that confirm this prediction. The Israeli, the UK and the US judiciaries, which seem to have good records of prosecuting political corruption (much better than Bulgaria’s anyway) are purportedly not well insulated from the executive. Salzberger (1993) specifically addresses the puzzle of the willingness of these three judiciaries to constrain the executive despite their low institutional insulation from the executives.

If further research confirms my hypothesis about the detrimental effects of insulation on judicial performance, the policy implications of such findings are enormous.

The conclusion would be that all the money that the international community has poured into development programs aimed at fostering the insulation of the judiciary from the other branches of government has not just gone to waste, but has harmed the development of the rule of law in fledgling democracies. Instead of buttressing the rule of law through the creation of a judiciary that has the capacity to stand up to incumbents and hold them accountable, these programs have just opened a different can of worms. They have created unaccountable judiciaries, which shirk their responsibilities, engage in corruption, and leave political and bureaucratic corruption unpunished.

Instead, my hypothesis implies that a more effective strategy for curbing corruption and promoting the rule of law would be to create mechanisms for judicial accountability, while promoting respect for judicial independence among the political elites through other means. The judicial politics literature suggests that public support for the judiciary or intense electoral competition can motivate politicians to empower the courts and refrain from applying pressure on the judiciary (Landes and Posner 1975,

Salzberger 1993, Ramseyer 1997, Hirschl 2000, Vanberg 2001, Stephenson 2003, etc.). If either of these theoretical strands is correct, reducing the institutional insulation of the judiciary is not as dangerous as it might seem at first glance.

Table 1: CPI rankings of European countries (current EU members only) Rank 2000 2001 2002 2003 2004 2005 2006 2007 2008 1 Finland Finland Finland Finland Finland Finland Finland Denmark Denmark 2 Denmark Denmark Denmark Denmark Denmark Denmark Denmark Finland Sweden 3 Sweden Sweden Sweden Sweden Sweden Sweden Sweden Sweden Finland 4 Netherlands Netherlands Luxembourg Netherlands Netherlands Austria Netherlands Netherlands Netherlands 5 UK Luxembourg Netherlands Luxembourg UK Netherlands Austria Luxembourg Luxembourg 6 Luxembourg UK UK UK Austria UK Luxembourg UK Austria 7 Austria Austria Austria Austria Luxembourg Luxembourg UK Austria Germany 8 Germany Ireland Germany Germany Germany Germany Germany Germany Ireland 9 Ireland Germany Belgium Belgium Belgium France France Ireland UK 10 Spain Spain Spain Ireland Ireland Belgium Ireland France Belgium 11 France France Ireland France France Ireland Belgium Belgium France 12 Portugal Belgium France Spain Spain Spain Spain Spain Slovenia 13 Belgium Portugal Portugal Portugal Malta Malta Estonia Slovenia Estonia 14 Estonia Estonia Slovenia Cyprus Portugal Portugal Portugal Estonia Spain 15 Slovenia Italy Estonia Slovenia Estonia Estonia Malta Portugal Cyprus 16 Hungary Hungary Italy Estonia Slovenia Slovenia Slovenia Malta Portugal 17 Greece Slovenia Hungary Italy Cyprus Cyprus Cyprus Hungary Malta 18 Italy Lithuania Lithuania Hungary Hungary Hungary Hungary Cyprus Czech Rep 19 Czech Rep Greece Greece Lithuania Italy Italy Italy Czech Rep Hungary 20 Lithuania Poland Bulgaria Greece Lithuania Lithuania Czech Rep Italy Latvia 21 Poland Bulgaria Poland Bulgaria Greece Czech Rep Lithuania Slovakia Slovakia 22 Bulgaria Czech Rep Czech Rep Czech Rep Czech Rep Greece Latvia Latvia Italy 23 Slovakia Slovakia Latvia Latvia Bulgaria Slovakia Slovakia Lithuania Greece 24 Latvia Latvia Slovakia Slovakia Latvia Latvia Greece Greece Lithuania 25 Romania Romania Romania Poland Slovakia Bulgaria Bulgaria Poland Poland 26 Romania Poland Poland Poland Bulgaria Romania 27 Romania Romania Romania Romania Bulgaria

Table 2: WGI “Control of Corruption” Indicator rankings of European countries (current EU members and Western European states) Rank 2000 2002 2003 2004 2005 2006 2007 1 Finland Finland Finland Finland Iceland Finland Iceland 2 Sweden Denmark Iceland Denmark Finland Iceland Finland 3 Iceland Sweden Denmark Iceland Denmark Denmark Denmark 4 Denmark Iceland Sweden Sweden Switzerland Sweden Sweden 5 Netherlands Luxembourg Switzerland Switzerland Sweden Switzerland Switzerland 6 Norway Netherlands Norway Austria Norway Norway Luxembourg 7 Switzerland Norway Austria Norway Netherlands Netherlands Netherlands 8 UK Switzerland Netherlands Netherlands Austria Luxembourg Norway 9 Luxembourg UK UK Luxembourg UK Austria Austria 10 Germany Austria Germany UK Germany UK UK 11 Austria Germany Luxembourg Germany Luxembourg Germany Germany 12 Ireland Belgium Ireland Ireland Ireland Ireland Ireland 13 Belgium Ireland Belgium Belgium Belgium France Belgium 14 France Spain France France France Belgium France 15 Spain France Spain Spain Spain Malta Malta 16 Portugal Portugal Portugal Portugal Portugal Spain Spain 17 Italy Cyprus Malta Malta Malta Portugal Portugal 18 Malta Malta Cyprus Slovenia Estonia Slovenia Estonia 19 Cyprus Slovenia Slovenia Estonia Slovenia Estonia Slovenia 20 Slovenia Italy Estonia Cyprus Cyprus Cyprus Cyprus 21 Greece Estonia Italy Hungary Hungary Hungary Italy 22 Hungary Hungary Hungary Italy Slovakia Italy Hungary 23 Estonia Greece Greece Greece Czech Rep Greece Latvia 24 Poland Czech Rep Czech Rep Slovakia Greece Slovakia Greece 25 Lithuania Poland Poland Czech Rep Italy Latvia Slovakia 26 Czech Rep Lithuania Slovakia Lithuania Latvia Czech Rep Czech Rep 27 Slovakia Slovakia Lithuania Latvia Lithuania Poland Lithuania 28 Latvia Latvia Latvia Poland Poland Lithuania Poland 29 Romania Bulgaria Bulgaria Bulgaria Bulgaria Bulgaria Romania 30 Bulgaria Romania Romania Romania Romania Romania Bulgaria

Figure 1: CPI trends

10 9 8 7 6 5 4 3 2 1 0 2000 2001 2002 2003 2004 2005 2006 2007 2008

"Old Europe" "New Europe"

Figure 2: WGI trends

2.5 2 1.5 1 0.5 0 -0.5 -1 -1.5 -2 -2.5 2000 2002 2003 2004 2005 2006 2007

"Old Europe" "New Europe"

Figure 3: CPI trends in Bulgaria and the "New Europe"

5.5 5

4.5 4 3.5

3 2000 2001 2002 2003 2004 2005 2006 2007 2008

Bulgaria Post-Communist EU member average

Figure 4: WGI trends in Bulgaria and the 2004 EU Entrants

1 0.8 0.6 Bulgaria 0.4 0.2 2004 EU entrants' average 0 -0.2 -0.4 2003 2004 2005 2006 2007 2008