Interview of Penkov, Markov & Partners’ Managing Partner Mr. Vladimir P. Penkov for the Utilities Magazine, October 2007
1. Your firm was established in 1990. What were the business needs in terms of legal services then, and what is the situation now?
When we started in 1990, the legislation has just begun to change in the direction of the market economy and there was neither information nor expertise regarding the establishment and management of business enterprises and the different conditions for entering into contracts under the new environment. Therefore, our first assignments mainly consisted of providing information with regard to the investment climate, the procedures for coordination with the authorities, and the opportunities for legally organized presence in the country.
Even at this early stage we were striving to meet the requirements for providing comprehensive services to our clients and establishing a higher degree of trust at the market. Gradually, our business started to diversify and it became necessary to provide services related not only to the establishment of commercial enterprises, but also more complex legal services connected to privatization procedures, various financing options, banking, extension of credits, securitization and intellectual property.
In recent years the needs of the business required us to concentrate our efforts in the fields of telecommunications and the IT sector as a whole, the energy sector, construction of major industrial and commercial projects, and the stock exchange. To achieve this we establish specialized working groups and thus, combining the experience of larger number of experts in the various fields, we are able to provide an even higher quality of legal services in the energy and infrastructure sectors as well.
Naturally, we are continuing to render comprehensive legal services to all businesses, including commercial, corporate, financial, credit, banking, labor related, etc.
2. You have many years of experience in the telecommunications. In your opinion, what is the current state of this sector in Bulgaria?
In order to understand the current state of the telecommunications sector, we need to look what was the situation in this sector about a decade ago. The market then was grossly underdeveloped, with the Bulgarian Telecommunications Company having a complete monopoly on the market and the few other telecommunications operators were directly connected to BTC. The adoption of the Telecommunications Act in 1998 not only laid out the conditions for rendering modern telecommunications services under regulated, uniform rules, but the road was paved for the gradual breakdown of the monopoly. With the appearance of many new operators providing an ever-increasing variety of services, and the natural drive toward harmonization with the EU requirements for the development of these markets, the legislation has been further fine-tuned and the alternative operators were encouraged to set foot. In the last two years the market’s development has been especially rapid, where the monopoly of fixed telecommunications services has been completely eliminated. Also, the first contracts to interconnect the networks of most of the operators have become operational. This rapid development has been evidenced by the surge in the number of licenses, which contributed for the introduction of new technologies such as TETRA and WiMAX, as well as the Internet services.
The current Electronic Communications Act, promulgated in May 2007, is by itself a significantly new step in this direction. It provides for the electronic communications network and services, it regulates in a new way the rights and obligations of the Communications Regulation Commission, which can now research and analyze the markets, assess the level of competition, and oversee the regulated markets accordingly. The Commission has also been entrusted, after approval by the Competition Protection Commission, with the regulation of the competition in the sector through assigning specific duties to companies with considerable impact on the respective market.
The changes at the global telecommunications markets have led to the introduction of the principle of liberalized electronic communications without interference by the regulatory state bodies. This has encouraged the competition and the free entry of operators with a focus on market self-regulation with minimum state intervention, mainly through the establishment of unified conditions. Of course, the licensing regime is still in place, however with more limited restrictive functions.
The present state of the sector is characterized with the formation of a secondary market of the already licensed frequencies, which means development of new consumer services. The current legislation now very clearly defines the principle for transferability of phone numbers under equal conditions. It should be noted, however, that the implementation of this principle is still stalled by some actions or inactions of certain operators having significant impact on the market.
The new legislative base for construction and maintenance of electronic telecommunications infrastructure where it explicitly defines the rights and obligations of the operators, including easements and the right of passage during construction is also of key importance because.
3. How will the adoption of the new Electronic Communications Act impact the telecommunications business?
The clear framework, the complete liberalization, the unification of rules, as well as the number transferability will undoubtedly lead to an increase of competition among the market players and to the very important predictability of the rulings of the Communications Regulation Commission. The removal of licenses and the introduction of permits only in cases of limited resources under the implemented clear regulatory requirements will result in elimination of bureaucracy and bad practices. A direct consequence of the new act is the improved protection of consumers’ rights with the introduction of the option for contract termination, the requirement for clear rules, and personal information protection. An important effect is the option for the disputes resolution between operators and consumers to be resolved by the CRC under a speedier procedure, with of course the next step of litigation remaining. Also, the job of the alternative operators is be made easier with the regulation of interconnectivity and special access to the infrastructure of BTC.
4. Number transferability, together with other telecommunications commitments undertaken before the EU are lagging behind. What could the negative effects be for Bulgaria?
For the first time, clearly, categorically, and correctly from the point of view of European law, the principle for number transferability has been proclaimed for all, without any exceptions. In terms of the European requirements the state has done what was necessary with the adoption of this law. If it is being violated or not implementes, this will, at the very least, have a negative effect on Bulgaria’s image. However, the state should strive to find the necessary instruments to ensure compliance with this principle. The two decisions of the CRC which impose obligations on the operators to this effect represent a solid step towards this end.
Other sanctioning mechanisms could also be considered, including imposing personal responsibility on the executives of businesses which do not ensure the full implementation of this principle. Another negative effect from the non-compliance will be the deterioration of the competition in this sector.
5. Is the judicial system fast enough in resolving commercial disputes? How does the speed of litigation affect your clients’ business?
For the last several years the registration regime for commercial companies has been improved significantly and now when it is expected to be transferred from the court to the state administration, the conditions, speed, and transparency will be even further enhanced. However, as far as the judicial system is concerned, it continues to apply non-uniform criteria, it is still clumsy, and not bound by deadlines. The insufficient specialization of the courts leads to disharmonious practices and unpredictable rulings. The lack of a unified information system and the delayed introduction of electronic documents and electronic signatures within the judicial system, as well as the lack of specialization of the judges themselves due to the frequent rotations in taking over on cases in various legal fields, lead to work overload, lack of motivation and difficulties in administering the cases.
The huge delays (in litigation involving three court instances they are often many years) could virtually drive to insolvency both parties in the litigation, if they are small or medium-sized enterprises (SMEs are over 95% of all enterprises in the country), making us to question the reasons behind the judicial system itself. Therefore, we should consider establishing specialized commercial courts where judges qualified in the subject matter would administer justice efficiently and quickly, in compliance with clear and equal criteria. The time needed to research cases would be shortened considerably, and the decisions would be better reasoned and justified. As there is no such specialized commercial court, entrepreneurs can make use of the courts of arbitration which are specialized and follow clear rules, and where due to the one-instance nature of the disputes, the cases are usually concluded within one year. Also, the utilization of mediation for resolution of commercial disputes is a recommended approach, especially if the dispute has been caused by initial misunderstandings or difficulties in enforcing the contract, which makes agreement reachable only through mutual compromise.
6. If the ombudsmen on national, district, and municipal levels become responsible for a part of the disputes between the business and the end consumers, how will this affect the business environment?
Generally, my opinion is that disputes should be settled by the specialized institutions, with the ombudsmen only helping to clarify the problem and its origins. Usually problems arise from unclear rules, lack of respect for mutual rights and obligations, violation of legal provisions and abuse of dominant positions. For this reason, the creation of a competitive environment and a clear legislative framework, as well as the proper functioning of the various institutional and civic mechanisms for consumer rights protection will be the best solution to this issue. However, we should not underestimate the input of the sector organizations and the chambers of commerce and industry which also monitor ethical rules compliance.
7. How does Penkov, Markov & Partners participate in the drafting of the legislative framework in the field of telecommunications?
Penkov, Markov & Partners participates regularly in discussions about the future development of the regulatory framework where the analysis of the European framework and good European practices is particularly valuable for the settlement of disputes between consumers and operators, and between the operators themselves. The amendments we proposed, which were incorporated in Article 32 of the Telecommunications Act from 2003, have created conditions for equality, clear-cut criteria, and transparency of the decisions of the CRC. The head of our working group Svetoslav Dimitrov participated actively in the drafting of the new Electronic Communications Act.