Economic Policy Review ISSN 1313 - 0544

Of course, the private enforcement of law works

Author: Veliko Dimitrov / 28.02.2007
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Last week, certain facts became apparent, which the IME predicted more than two years ago, namely that the private enforcement agentswill be working more effectively and will be preferred over their colleagues in public service. All of this happened in a rather surprising, to many observers, fashion – for a while now, the state also has preferred to have its receivables collected by private enforcement agents. This is, at first sight, even paradoxical, keeping in mind that along with the private enforcement agents are still working their colleagues in public service, and it is most logical that the latter group should be performing these functions at least when their work seeks to look after the interests of the public institutions.

At the beginning of 2005, the IME developed an argumented assessment regarding the potential benefits and expenses of the planned system of the sole public enforcement of law. The results with regard to the incumbent situation were clear – the number of outstanding receivables grew each year, more and more creditors were inclined to turn to legally unsettled or illegal methods for collection of their receivables, and the system as a whole was completely ineffective.

The prognoses regarding the effects of the creation of the institution of private enforcement of law and its work were very optimistic. In other words, the passing of the Law on Private Enforcement Agents was justified, as the anticipated benefits far outweighed the expenses associated with the reform[1]. Fortunately, the law was passed and it became effective on September 1, 2005, while the first private enforcement agents began working in April 2006.

During this period, a number of people (mostly government officials) expressed doubts regarding the future quality of the work, the correctness, etc. of the private enforcement agents. But less than a year later, it is already apparent that their claims were completely groundless (which has been the IME’s stance all along). With this in mind, it is perhaps time to think about finishing what has been left unfinished (some reform has taken place, but it has been, as it is in most cases, incomplete and uncertain).

It can happen with the realization of the following proposals, which we support and which were dismissed as too radical:

  • Complete abolition of the public enforcement of law

This would result in savings from the budget funds, an inflow of funds from the larger number of private enforcement agents, additional employment in the private sector (incl. subpoena deliverers, filing clerks, and others), etc. On the other hand, as practice shows, the number of collected receivables will increase; enforcement agents will no longer have to work in primitive conditions, etc.

  • Providing of national competence to each private enforcement agent [2]

The institution of private enforcement of law is created in order to boost the collecting of receivables nationally and to result in increased effectiveness in enforcement. The faster satisfaction of creditors may be achieved, as the practice in other countries shows, when the market for enforcement services is functioning on the basis of competition. Inevitably, this means that each private enforcement agent should be allowed to collect receivables nationally. In this sense, competition provides not only an incentive for the faster offering of a particular service (as the one provided by the enforcement agent), but also serves as a natural distributor of work. The restricted national competence is a major disadvantage. Indeed, the existing legislation provides for the possibility of hiring aides, which would perform the functions of the private enforcement agent, and this could help the overcoming of some temporary climaxes. However, as a whole, the current regulations restrict competition nationally and lead to the formation of regional monopolies.

  • Abolition of the State’s Receivables Collection Agency (SRCA)

Just several days ago, the SRCA entrusted private enforcement agents to collect debts owed to the State Fund Agriculture. This raises the question of why were the services of public enforcement agents not used (perhaps, because private enforcement agents work faster), and why is a state agency, trying to collect the receivables of other administrative divisions, needed at all – when those divisions could perform the function themselves.



[1] The full text of this analysis can be accessed at the following address: http://ria-studies.net/wp-content/uploads/File/Cost_and_Benefit-last.pdf (in Bulgarian)

[2] At the moment, the private enforcement agent can exercise their work only within the district of the respective county court