Q & A

1. What legislation governs commercial arbitration in Bulgaria?

The main source of legal regulation of arbitration in Bulgaria is the International Commercial Arbitration Act (ICAA). In addition, the following legislative acts are also applicable to arbitration in Bulgaria:

  • Civil Procedure Code (CPC)
  • Private International Law Code
  • Commercial Act
  • The 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”)
  • European Convention for International Commercial Arbitration.

In addition, the rules of the different arbitral institutions also contain provisions relevant to the arbitration proceedings.

2. What is the form of an arbitration agreement?

The arbitration agreement should be concluded in writing. Oral arbitration agreements are not valid under Bulgarian law. The agreement is considered to be in writing if it is contained in a document signed by the parties or in the distribution of letters, telexes, telegrams or other means of communication. The arbitration agreement may also be materialized in a separate document or included in the underlying contract (as an arbitration clause). An arbitration agreement shall also be considered to exist if the respondent actively participates in the arbitral proceedings and does not object to the jurisdiction of the tribunal.

3. Is it possible to conclude an arbitration agreement via email?

There is no explicit rule in the ICAA on that matter, but the electronic mail exchanges could be considered equivalent to a written agreement between the parties. In such cases, presenting the email communication on paper and/or making the emails in their original electronic form available for assessing their authorship, integrity, etc., may be necessary.

4. What types of disputes are arbitrable?

The general principle under Bulgarian law is that all types of disputes concerning rights capable of valuation in monetary terms are arbitrable, apart from those that are expressly excluded either by law or through the application of general principles of Bulgarian law. Thus, the following types of disputes are not arbitrable:

  • Disputes in respect of absolute rights over immovable property or possession of immovable property (e.g., disputes in relation to ownership rights)
  • Disputes in respect of alimony
  • Labor disputes (concerning rights under an employment relationship)
  • Consumer disputes
  • Disputes related to non-transferable personal rights, and disputes regarding personal or marital status and origin (paternity disputes, dissolution or annulment of a marriage, termination of adoption etc.), as well as other disputes related to rights which cannot be evaluated in money
  • Disputes related to a concession agreement whose value (of the concession agreement) is below the “European threshold” which is currently set by the European Commission at EUR 5,350,000 (amount valid as per September 2021)
  • Disputes related to bankruptcy/insolvency.

5. Can a valid arbitration agreement be concluded with public authorities?

Yes. The state or a state agency can generally be a party to both international commercial arbitration and domestic arbitration, subject to the limitations of arbitrability above.

6. Are there any limitations when agreeing on the seat of the arbitration?

Yes. When at least one of the parties has (i) its habitual residence outside Bulgaria, or (ii) seat according to its statutory acts outside Bulgaria, or (iii) place of actual management outside Bulgaria, the parties are free to agree on the seat of arbitration, which can be in Bulgaria, or abroad (Art. 19, Para 2 of the CPC). The prevailing case law stance is that if all parties have registered addresses and place of actual management in Bulgaria, the seat of arbitration must always be in Bulgaria. In these cases, an arbitration agreement providing a seat of arbitration outside Bulgaria is invalid. However, in a recent case the Bulgarian Supreme Court held that even entirely Bulgarian parties may deviate from Art. 19, Para. 2 of the CPC, and in certain cases this would not invalidate the arbitration agreement. To be on the safe side, this matter should be carefully considered at the time of drafting the arbitration agreement. If faced with an arbitration agreement that has already been executed, a careful assessment is needed to determine which is the applicable law to the arbitration agreement and where the arbitration was (or will be) seated, as these factors may have implications on the validity of the arbitration agreement and the enforceability of the award.

7. Is the arbitration agreement an obstacle to file a claim before a state court?

No. The state court will terminate the court proceedings only if the respondent objects to the jurisdiction of the court and relies on an arbitration agreement concerning the dispute in the response to the statement of claim. If the party fails to do so, it shall not be entitled to raise this objection at a later stage in the court proceedings, the arbitration agreement shall be considered invalidated (ineffective), and the proceedings will continue before the state courts. However, proceeding to court when there is an arbitration agreement, and the other party can reasonably be expected to object, would most likely lead to liability for costs and loss of the court fees which in Bulgaria are paid upfront.

8. Should parties be represented mandatorily by lawyers in arbitration proceedings?

A party may be represented by any natural person who possesses a full legal capacity. There is no requirement for the representative to be an attorney-at-law (i.e., a lawyer registered with the local Bar). However, it is possible that the rules of a particular arbitral institution provide for special rules on representation.

9. Are there any specific requirements for the arbitrators in Bulgaria?

Yes. Arbitrators can only be (i) natural persons (ii) of legal age and full legal capacity (iii) never convicted of a crime of general nature (iv) with university education and at least eight years of professional activity, and (v) with high moral qualities. Persons who are not citizens of the Republic of Bulgaria may be appointed as arbitrators in international arbitration cases. Judges may not be appointed as arbitrators. It is possible that some specific rules of a particular arbitral institution provide for special requirements regarding the arbitrators and some institutions maintain mandatory rosters of arbitrators.

10. How much does arbitration cost?

In general, the costs of the arbitration include: arbitrator’s fees and expenses (which are usually proportionate to the value of the claim); registration and other fees of the arbitral institution; costs for legal representation; fees and expenses of experts appointed by the tribunal; expenses for collection of evidence, and carrying out of hearings. The costs depend on the particular arbitral institution, whether the dispute is domestic or international, and the number of arbitrators. Each arbitral institution adopts its own tariffs and some of them have online calculators regarding the fees and expenses.

11. Can an arbitrator be removed and on what grounds? If the challenge is not granted, are there any remedies?

An arbitrator may be challenged if there are justifiable doubts as to his/her impartiality or independence, or if he/she does not possess the necessary qualifications agreed to by the parties. A party may challenge an arbitrator appointed by it or in whose appointment it has participated only for reasons of which the party becomes aware after the appointment. The procedure for challenging arbitrators may be stipulated in the arbitration agreement, but the parties cannot exclude the right of appeal to the court against the decision rejecting the challenge. If the parties have not agreed the procedure for challenging, a party may challenge an arbitrator no later than 15 days from the date of the constitution of the arbitral tribunal or from the date on which the circumstances justifying the challenge become known to the party. The arbitral tribunal adopts a decision on the challenge with the participation of the challenged arbitrator. If the arbitral tribunal dismisses the challenge, the challenging party may request the Sofia City Court to decide on the challenge. The decision of the court is final and binding on the parties.

12. Can an arbitral tribunal order interim measures?

The arbitral tribunal, at the request of a party, may order the other party to the proceedings to take suitable interim measures for the protection of the rights of the requesting party. The arbitral tribunal has the power to grant those provisional measures that it finds appropriate. However, the tribunal has no power to order a third person to take any interim measures. Therefore, if interim measures are needed, it is strongly recommended to turn to the state court and request appropriate interim measures, as these would be enforceable towards third parties – banks, official authorities maintaining public registers, such as the Property Register, etc.

The procedure for granting interim measures by the state courts is regulated by the Bulgarian CPC. It is possible to request interim measures for future claims (i.e. before filing the claim) and for already filed claims. The interim measures are granted if without their imposition the enforcement of the claimant’s rights under the decision (resolving the dispute) would be impossible or hindered and (i) the claim is supported by convincing written evidence, or (ii) the claimant provides a monetary guarantee in an amount, specified by the state court. It is common practice that courts require a monetary guarantee when granting interim measures, even if the claim is supported by convincing written evidence.

13. Is there a time limit for filing counterclaims in arbitration?

This may be tricky. The respondent would be on the safe side if they bring the counterclaim no later than the submission of the statement of defense.

14. Are there any special rules for conducting the proceedings?

In general, the parties are free to agree on the procedure to be followed in the arbitration. In the absence of an agreement, the arbitral tribunal shall follow the rules of the respective arbitral institution, or, in case of an ad-hoc arbitration, the tribunal shall hear the case in a manner it deems appropriate.

In all domestic arbitrations, the language of the proceedings must be Bulgarian. In international arbitrations, the parties are free to choose the language(s) of the arbitration. If they have failed to do so, the tribunal shall decide this issue.

The usual practice in Bulgaria is to have a hearing on the case. However, the parties may agree that the dispute will be decided solely based on the documents submitted, with no hearing and no examination of witnesses or experts. Yet, the arbitral tribunal may still order a hearing to be conducted if it finds it necessary.

The arbitral tribunal may appoint one or more experts to give an opinion on the clarification of certain matters for which special knowledge is required.

The parties could agree on specific procedures and powers of the arbitrators in respect of the evidence production. In the absence of such agreement, the tribunal may conduct the arbitration in such manner as it considers appropriate, ensuring equal opportunities to each party to defend its rights. The arbitral tribunal or an interested party, with the approval of the tribunal, may request any state court to collect certain evidence. The ICAA does not provide for any time limit for the producing evidence. However, it is possible that the rules of a particular arbitral institution provide for special time limits for the production of evidence.

15. Can an arbitral award be appealed?

No. An arbitral award is not subject to appeal before the state courts or any other body. It is final and binding on the parties and puts an end to the dispute. With its entry into force, the award has a res judicata effect in Bulgaria in relation to the dispute resolved by it, i.e., a party cannot relitigate the same claim against the other party based on the same cause of action. The options of a party to defend against an arbitral award are discussed in Q17 and Q18 below.

16. When does the arbitral award become enforceable?

The arbitral award may be enforced against any party to which the award has been duly delivered.

17. Are there any other options to defend against an arbitral award?

Yes. Firstly, arbitrable awards issued in non-arbitrable disputes are null and void and have no legal effect. For arbitrable and non-arbitrable disputes see Q4 above. The nullity of the arbitral award may be invoked at any time, without the need to carry out setting aside proceedings.

Secondly, a party may file a claim for setting aside the award. The claim should be filed with the Supreme Court of Cassation. The grounds for setting aside an arbitral award are the following:

  • Incapacity of the party at the time of conclusion of the arbitration agreement
  • The arbitration agreement was not concluded, or it is not valid under the law chosen by the parties or failing any indication thereon – under the ICAA
  • The party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings, or was unable to participate in the proceedings due to reasons beyond its control
  • The award resolves a dispute not contemplated by the arbitration agreement or contains decisions on issues beyond the subject matter of the dispute
  • The composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a mandatory provision of the ICAA, or, failing such agreement – when the provisions of the ICAA have not been applied.

The contradiction of the arbitral award with the public order of the Republic of Bulgaria used to be a ground for setting aside a Bulgarian arbitral award but that ground was repealed in 2017.

18. Are there any time limits to file the claim for setting aside the arbitral award?

Yes. The claim must be filed within 3 months from the day on which the claimant has received the award. After expiry of this mandatory limitation period, the award may not be set aside on any grounds.

19. The arbitration case is won. Is the arbitral award enforceable like a court decision? is won. Is the arbitral award enforceable like a court decision?

Yes, the arbitral awards and settlement agreements issued in arbitration proceedings in Bulgaria are subject to coercive enforcement. Thus, the arbitral award is binding and directly enforceable in the same way as a Bulgarian court judgment that has entered into force.

20. How to enforce a foreign arbitral award in Bulgaria?

A foreign arbitral award should first be subject to recognition and enforcement in Bulgaria. For that purpose, a claim has to be filed before the Sofia City Court (unless otherwise is provided in an international agreement to which Bulgaria is a party).

If the court upholds the claim for recognition of the foreign arbitral award, it will issue a declaratory decision for its recognition which is subject to appeal before appellate and cassation instance. With the entry into force of the respective court decision granting the enforcement, the award will have a res judicata effect and will be enforceable in the same way as a Bulgarian court judgment or a Bulgarian arbitral award.

21. Is Bulgaria a party to the New York Convention?

Yes, Bulgaria is a party to the New York Convention since 8 January 1962.

22. Are there any special rules for domestic arbitration in comparison to international arbitration?

Yes. In domestic arbitrations some special rules apply, such as (i) an arbitrator may only be a person who is a citizen of the Republic of Bulgaria, unless a party to the dispute is a party with foreign majority shareholders; (ii) the language of the proceedings must be Bulgarian; (iii) the application of the ICAA to the arbitration agreement for assessing the fact of its conclusion and validity in the setting aside procedures may not be excluded, etc.

23. What determines whether the arbitration is regarded as “domestic” or “international”?

If the seat or the domicile of at least one of the parties is not in Bulgaria – the arbitration is regarded as “international”. An arbitration is regarded as “domestic” if the seat or the domicile of all the parties to the arbitration is in Bulgaria. This criterion is decisive for the application of the rules of the ICAA (see Q22 above). All awards rendered under arbitrations having their seat in Bulgaria (regardless of the seat/domicile/nationality/shareholders origin or other link of the parties with a foreign country) are considered Bulgarian arbitration awards and are subject to enforcement like local court decisions that have entered into force (see Q15 and Q19 above), whereas awards rendered in arbitrations having their seat abroad are considered foreign and are subject to recognition and enforcement (see Q20 above).