Bulgaria: International Arbitration Comparative Guide

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1
Legal framework
1.1
What is the relevant legislation on arbitration in your jurisdiction? Are there any significant limitations on the scope of the statutory regime – for example, does it govern oral arbitration agreements?
 

Arbitration proceedings in Bulgaria are regulated mainly by the International Commercial Arbitration Act. In addition, the Civil Procedure Code and the International Private Law Code contain provisions on certain arbitration matters.

According to the International Commercial Arbitration Act, the arbitration agreement must be concluded in written form. An agreement is considered to be in written form if it is reflected in a document signed by the parties or in an exchange of letters, telexes, telegrams or other forms of communication. Further, an arbitration agreement is considered to have been concluded when the respondent agrees to arbitration in written form or through a statement included in the minutes of the arbitration proceedings, or participates in the arbitration proceedings by depositing a written response to a claim, presenting evidence, filing a counterclaim or appearing at an arbitration hearing without questioning the jurisdiction of the arbitration.

1.2
Does this legislation differentiate between domestic arbitration and international arbitration? If so, how is each defined?
 

The International Commercial Arbitration Act is applicable to international and domestic arbitration. If the seat or residence of one of the parties to the proceedings is outside of Bulgaria, the arbitration is defined as international.

Some provisions of the International Commercial Arbitration Act do not apply to domestic arbitration proceedings (eg, the possibility to choose the language of the arbitration).

1.3
Is the arbitration legislation in your jurisdiction based on the UNCITRAL Model Law on International Commercial Arbitration?
 

The provisions of International Commercial Arbitration Act follow for the most part the legal principles envisaged in the UNCITRAL Model Law 1985 on International Commercial Arbitration.

1.4
Are all provisions of the legislation in your jurisdiction mandatory?
 

Only some of the provisions in the legislation are mandatory. For example, the rules that govern the validity and the required form of the arbitration agreement may not be amended or derogated from, the parties may not determine which disputes are subject to arbitration, the parties must be treated equally and so on.

1.5
Are there any current plans to amend the arbitration legislation in your jurisdiction?
 

There are no publicly announced plans to amend the arbitration legislation in Bulgaria.

The last major amendment was in 2017, when a new provision was introduced to the Civil Procedure Code stating that disputes with consumers are no longer arbitrable (please see also question 8).

1.6
Is your jurisdiction a signatory to the New York Convention? If so, have any reservations been made?
 

Bulgaria is a signatory to the New York Convention since 1961.

Bulgaria has made a reciprocity reservation: that is, the New York Convention applies to arbitral awards made only in the territory of another contracting state. Regarding awards made in the territory of non-contracting states, the convention is applicable to the extent to which those states grant reciprocal treatment.

1.7
Is your jurisdiction a signatory to any other treaties relevant to arbitration?
 

Bulgaria is also a signatory to:

  • the European Convention for International Commercial Arbitration;
  • the Washington Convention on the Settlement of Investment Disputes Between States and Nationals of other States; and
  • various bilateral legal assistance treaties.
2
Arbitrability and restrictions on arbitration
2.1
How is it determined whether a dispute is arbitrable in your jurisdiction?
 

The Civil Procedure Code envisages that commercial or civil property disputes are arbitrable, except for disputes regarding:

  • rights in rem or possession of real estate;
  • child support obligations;
  • employment relationships; or
  • consumer issues (a ‘consumer' is any natural person who acquires products or uses services for purposes that do not fall within the scope of his or her commercial or professional activity).
2.2
Are there any restrictions on the choice of seat of arbitration for certain disputes?
 

The Civil Procedure Code allows the parties to select a seat of arbitration that is seated abroad (outside of Bulgaria), if one of the parties has its habitual residence, seat or place of actual management in a foreign country. There are no other restrictions on the seat of arbitration in relation to certain types of disputes.

3
Arbitration agreement
3.1
What are the validity requirements for an arbitration agreement in your jurisdiction?
 

The arbitration agreement must be in written form (see question 1). It may be included as a clause in a contract or it may be a separate agreement. The agreement must be concluded with regard to a dispute that is arbitrable (see question 8).

3.2
Are there any provisions of legislation or any other legal sources in your jurisdiction concerning the separability of arbitration agreements?
 

The International Commercial Arbitration Act provides that the arbitration agreement is separate from the other terms of the contract. The nullity of the contract does not lead to the invalidity of the arbitration clause.

3.3
Are there provisions on the seat and/or language of the arbitration if there is no agreement between the parties?
 

The parties may choose the language and the seat of the arbitration proceedings. If there is no agreement regarding the language and the place where the proceedings will be held, the arbitration court may determine the place in accordance with the circumstances under the case and select the language for the proceedings.

4
Objections to jurisdiction
4.1
When must a party raise an objection to the jurisdiction of the tribunal and how can this objection be raised?
 

Pursuant to Article 20, paragraph 1 of the International Commercial Arbitration Act, the objection to the jurisdiction of the arbitration court must be made at the latest with the response to the respective claim. If the objection is made at a later stage, the arbitration court may accept it only if there are reasonable grounds for the delay.

If a party raises an issue which is outside the scope of the arbitration agreement, the other party must raise an objection immediately.

4.2
Can a tribunal rule on its own jurisdiction?
 

The tribunal may rule on its own jurisdiction through a separate ruling or as part of the final decision.

4.3
Can a party apply to the courts of the seat for a ruling on the jurisdiction of the tribunal? In what circumstances?
 

As mentioned in question 14, the tribunal is entitled to rule on its jurisdiction.

However, certain grounds for setting aside arbitral awards concern the jurisdiction of the tribunal. Under the International Commercial Arbitration Act, awards in relation to non-arbitrable disputes are null and void. An award may also be set aside if it resolves a dispute which is not covered by the arbitration agreement. The Supreme Cassation Court (the highest court for civil disputes in Bulgaria) is the competent forum for challenging awards on these grounds.

State courts must terminate proceedings reviewing disputes which are subject to an arbitration agreement if the respondent makes an objection within the term for response to the claim.

5
The parties
5.1
Are there any restrictions on who can be a party to an arbitration agreement?
 

No specific restrictions apply to the parties to arbitration agreements. The parties must have legal capacity to enter into agreements in accordance with the general rules of Bulgarian law.

5.2
Are the parties under any duties in relation to the arbitration?
 

No specific duties, other than the general obligation to observe the statutory legal provisions and procedural rules, are provided for the parties in relation to the arbitration.

5.3
Are there any provisions of law which deal with multi-party disputes?
 

There are no explicit provisions in the International Commercial Arbitration Act which deal with multi-party disputes.

6
Applicable law issues
6.1
How is the law of the arbitration agreement determined in your jurisdiction?
 

If the parties have not explicitly chosen the law applicable to the arbitration agreement, the law of the seat of the arbitration tribunal will generally apply.

6.2
Will the tribunal uphold a party agreement as to the substantive law of the dispute? Where the substantive law is unclear, how will the tribunal determine what it should be?
 

Under the International Commercial Arbitration Act, the tribunal will resolve the dispute by applying the law chosen by the parties. The tribunal must also apply the conditions of the contract and consider customs

If the substantive law is unclear, the tribunal will apply the law in accordance with the conflict of laws rules which it deems applicable. With regard to contractual obligations, Regulation (EC) 593/2008 (Rome I) envisages which law will apply to a respective contract.

7
Consolidation and third parties
7.1
Does the law in your jurisdiction permit consolidation of separate arbitrations into a single arbitration proceeding? Are there any conditions which apply to consolidation?
 

There are no explicit provisions on consolidation of separate arbitrations. The internal rules of the arbitration courts may contain provisions on consolidation, which are usually similar to those in the Civil Procedure Code.

7.2
Does the law in your jurisdiction permit the joinder of additional parties to an arbitration which has already commenced?
 

The International Commercial Arbitration Act does not discuss the joinder of additional parties to an arbitration which has already been commenced. The joinder of additional parties will depend on the internal procedural rules of the respective arbitration and the consent of the original parties.

7.3
Does an arbitration agreement bind assignees or other third parties?
 

The arbitration agreement binds the parties that concluded it. The applicable legislation does not explicitly regulate the assignment of arbitration agreements. According to the prevailing practice of the Supreme Cassation Court, the arbitration agreement is separate from the main contract and assignment of the rights and obligations under the main contract does not lead to assignment of the arbitration agreement. The court has ruled that in the event of assignment of receivables, the third party (the debtor), in its relations with the assignee, is not bound by an arbitration agreement concluded with the assignor.

8
The tribunal
8.1
How is the tribunal appointed?
 

The parties may agree on the procedure for the establishment of the arbitration tribunal. In the absence of such agreement, the following rules apply:

  • If the arbitration tribunal consists of three arbitrators, each of the parties will appoint an arbitrator and the two arbitrators will then appoint the third arbitrator.
  • If a party does not appoint an arbitrator within 30 days of receiving a request from the other party to do so, or if the two arbitrators do not reach agreement on the appointment of the third arbitrator within 30 days of their appointment, the chairman of the Bulgarian Chamber of Commerce and Industry (BCCI) may appoint an arbitrator upon request by one of the parties.
  • If the arbitration tribunal consists of one arbitrator only and the parties cannot agree on the arbitrator, he or she will be appointed by the BCCI upon request by one of the parties.

The Sofia City Court (the district state court based in Sofia) is the appointing institution (instead of the BCCI) in disputes that are not related to commercial deals (ie, deals concluded by a merchant in relation to its business).

8.2
Are there any requirements as to the number or qualification of arbitrators in your jurisdiction?
 

The tribunal may consist of one or more arbitrators, as specified by the parties. If the parties have not specified the number of arbitrators, the tribunal will consist of three arbitrators.

An arbitrator must have at least eight years of professional experience, high moral qualities and a university degree.

8.3
Can an arbitrator be challenged in your jurisdiction? If so, on what basis? Are there any restrictions on the challenge of an arbitrator?
 

An arbitrator may be challenged if there are reasonable doubts about his or her impartiality, or if he or she does not have the necessary qualifications required by the parties. A party may challenge an arbitrator in whose appointment it has participated only if the grounds for the challenge become known after the appointment.

A party must challenge an arbitrator within 15 days of receiving notification of his or her appointment or of learning of the grounds for the challenge. The arbitration court will review and decide on the challenge. If the challenge is denied, the party may appeal this decision before the Sofia City Court. The decision of the Sofia City Court is final.

In addition, if an arbitrator cannot perform his or her obligations, his or her powers will be terminated. If the arbitrator does not withdraw from the proceedings on his or her own initiative, any party may request that the Sofia City Court terminate the arbitrator's powers.

8.4
If a challenge is successful, how is the arbitrator replaced?
 

If the challenge of an arbitrator is successful, a new arbitrator will be appointed in the same way as his or her predecessor was appointed.

8.5
What duties are imposed on arbitrators? Are these all imposed by legislation?
 

According to Article 13 of the International Commercial Arbitration Act, if a person is proposed to become an arbitrator for a certain dispute, he or she must disclose all circumstances that may raise reasonable doubts as to his or her impartiality or independence. This obligation must be followed throughout the arbitration proceedings.

8.6
What powers does an arbitrator have in relation to: (a) procedure, including evidence; (b) interim relief; (c) parties which do not comply with its orders; (d) issuing partial final awards; (e) the remedies it can grant in a final award and (f) interest?
 

(a) Procedure, including evidence?

If there is no agreement between the parties regarding the procedure, the arbitrator may choose the relevant procedural rules. Further, the arbitration court may request that the competent state court gather certain evidence necessary for the arbitration proceedings.

(b) Interim relief?

Interim relief measures in arbitration proceedings are granted by the state courts in accordance with the general rules of the Civil Procedure Code.

(c) Parties which do not comply with its orders?

The procedural rules of the respective arbitration court will apply.

(d) Issuing partial final awards?

Under the International Commercial Arbitration Act, the tribunal may terminate the proceedings with a ruling if:

  • the claimant withdraws its claim and the respondent does not object;
  • the parties agree to the termination of the proceedings; or
  • the tribunal finds another obstacle that prevents it from reviewing the case at hand and issuing a final award.

(e) The remedies it can grant in a final award?

The specifics regarding the available remedies will depend on the law applicable to the dispute.

(f) Interest?

Awarding interest is also subject to the law that applies to the dispute. Interest is generally awarded under Bulgarian law.

8.7
How may a tribunal seated in your jurisdiction proceed if a party does not participate in the arbitration?
 

The arbitration court will examine the case even if the respondent does not file a response to the claim. However, the absence of a response to the claim is not regarded as admission of the claim.

The arbitration court will render an award based on the evidence provided, even if none of the parties appear at the hearings.

8.8
Are arbitrators immune from liability?
 

Arbitrators are not immune from liability.

9
The role of the court during an arbitration
9.1
Will the court in your jurisdiction stay proceedings and refer parties to arbitration if there is an arbitration agreement?
 

If proceedings are initiated before the state courts, the interested party must point out the existence of the arbitration agreement within the term for responding to the claim. If an objection is made, the state court is obliged to terminate the proceedings if there is a valid and relevant arbitration agreement.

9.2
Does the court in your jurisdiction have any powers in relation to an arbitration seated in your jurisdiction and/or seated outside your jurisdiction? What are these powers? Under what conditions are these powers exercised?
 

The arbitration award may be set aside by the Supreme Court of Cassation (see question 41).

The courts may:

  • impose interim relief measures;
  • collect evidence for the arbitration proceedings;
  • review challenges to arbitrator appointments; and
  • issue decisions on the enforcement of foreign arbitral awards.
9.3
Can the parties exclude the court's powers by agreement?
 

No, the powers of the court may not be excluded by agreement.

10
Costs
10.1
How will the tribunal approach the issue of costs?
 

The International Commercial Arbitration Act does not regulate who bears the cost of the arbitration proceedings. If the parties have not agreed on the costs, the procedural rules of the respective arbitration court will apply. Usually, the unsuccessful party bears the costs of the proceedings, including the arbitration fees, the expenses related to collecting evidence and attorneys' fees.

10.2
Are there any restrictions on what the parties can agree in terms of costs in an arbitration seated in your jurisdiction?
 

There are no statutory restrictions on what the parties can agree in terms of costs in arbitration seated in Bulgaria.

11
Funding
11.1
Is third-party funding permitted for arbitrations seated in your jurisdiction?
 

The applicable Bulgarian legislation does not forbid third-party funding of arbitration proceedings.

12
Award
12.1
What procedural and substantive requirements must be met by an award?
 

If there is more than one arbitrator, the award must be issued by a majority of the arbitrators, unless the parties have agreed otherwise. If an arbitrator does not agree with the award, he or she must prepare a dissenting opinion in writing. If a majority cannot be reached, the award will be issued by the presiding arbitrator.

The award must be reasoned, unless the parties have agreed otherwise or the award is issued under the conditions of a settlement. The award must also be dated and specify the place of the arbitration.

The award must be signed by the arbitrator or the arbitrators. If there is more than one arbitrator, the signatures of a majority of the tribunal are sufficient, if the signatories state the reason for the missing signatures.

The decision will enter into force upon delivery to the parties. The decision then becomes mandatory for the parties and is subject to enforcement proceedings.

12.2
Must the award be produced within a certain timeframe?
 

No, there are no timeframes for producing the award.

13
Enforcement of awards
13.1
Are awards enforced in your jurisdiction? Under what procedure?
 

Awards issued by tribunals with their seat in Bulgaria are directly enforceable. The interested party must file a request at the district court of the debtor's permanent address or seat. The request must contain the award and proof that it has been delivered to the debtor. The respective district court will issue a writ of execution which is presented to the local bailiff in order to start enforcement proceedings.

According to the International Commercial Arbitration Act, the international treaties to which Bulgaria is a party are applicable to the recognition and enforcement of foreign arbitral awards. Thus, the provisions of the New York Convention apply directly. Applications for recognition and enforcement of foreign arbitral awards are filed with the Sofia City Court, unless an international treaty provides otherwise. The provisions of the International Private Law Code on the recognition and enforcement of foreign court decisions apply accordingly, to the extent that these do not contradict the New York Convention.

Upon recognition of a foreign arbitral award, the party may request a writ of execution from the Sofia City Court. The writ is handed to the requesting party only once the decision on recognition and enforcement of the award enters into force.

14
Grounds for challenging an award
14.1
What are the grounds on which an award can be challenged, appealed or otherwise set aside in your jurisdiction?
 

An award may be challenged before the Supreme Cassation Court on the following grounds:

  • The party did not have legal capacity to enter into the arbitration agreement.
  • The arbitration agreement was not concluded or is invalid in accordance with the applicable law chosen by the parties or in the absence of such choice, in accordance with the International Commercial Arbitration Act.
  • The party was not properly notified of the appointment of an arbitrator or the commencement of arbitration proceedings, or for reasons beyond its control could not participate in the proceedings.
  • The award resolves a dispute that is not included in the arbitration agreement or contains resolutions outside the scope of the dispute.
  • The establishment of the arbitration court or the initiation of arbitration proceedings was not in accordance with the arbitration agreement, except where the agreement contradicts the mandatory provisions of the International Commercial Arbitration Act.

Further, an arbitral award is invalid if it relates to a non-arbitrable dispute.

14.2
Are there are any time limits and/or other requirements to bring a challenge?
 

A challenge must be brought within three months of receiving the decision. If a request is made for a correction, interpretation or addition to the award, the term for submitting a challenge begins from the date on which the tribunal issues the respective decision.

14.3
Are parties permitted to exclude any rights of challenge or appeal?
 

The parties may not exclude any rights of challenge, since the respective legal provisions are mandatory.

15
Confidentiality
15.1
Is arbitration seated in your jurisdiction confidential? Is a duty of confidentiality found in the arbitration legislation?
 

The International Commercial Arbitration Act does not include any rules on confidentiality. However, arbitration proceedings in Bulgaria are usually confidential. The specific confidentiality rules are envisaged in the internal rules of the respective arbitration courts.

15.2
Are there any exceptions to confidentiality?
 

Exceptions to confidentiality may be envisaged in the internal rules of the respective arbitration court.

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