National arbitration laws
What legislation applies to arbitration in your jurisdiction?
Both international and domestic arbitration is regulated by the International Commercial Arbitration Act.
The Private International Law Code and the New York Convention apply to the recognition and enforcement of foreign arbitral awards.
The Civil Procedure Code defines arbitrability and regulates arbitration-related proceedings before courts.
Are there any mandatory laws?
Certain provisions of the International Commercial Arbitration Act are mandatory (eg, those related to due process and challenges to arbitrators or awards). Most of the other provisions are non-mandatory.
Certain laws are mandatory for all arbitrators sitting in Bulgaria (eg, the Measures Against the Financing of Terrorism Act).
New York Convention
Is your country a signatory to the New York Convention? If so, what is the date of entry into force?
The New York Convention has been in force in Bulgaria since 1965.
Are there any reservations to the general obligations of the convention?
Bulgaria adheres to the New York Convention, under the reservations that:
- it applies the convention to awards made in the territory of other contracting states; and
- regarding awards made in the territory of non-contracting states, Bulgaria applies the convention subject to strict reciprocity.
Treaties and conventions
What other treaties and conventions in relation to arbitration is your jurisdiction party to?
Bulgaria is a party to:
- the European Convention on International Commercial Arbitration 1961;
- the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States; and
- more than 70 bilateral investment treaties.
Has your jurisdiction adopted the UNCITRAL Model Law?
Bulgaria has adopted the 1985 revision of the UNCITRAL Model Law. It has not yet implemented the 2006 revision.
Are there any impending plans to reform the arbitration laws in your jurisdiction?
A recent legislative change made disputes involving consumers non-arbitrable. Further, state control over the arbitral institutions was implemented and courts were granted powers to exercise incidental control for validity of awards in the process of issuing writs of execution.
The 2017 reform also excluded the challenge of public policy as a ground for setting aside of domestic awards (this ground still applies in exequatur proceedings of foreign awards).
There are no further impending plans to reform the arbitration laws.
What are the validity requirements for an arbitration agreement?
An arbitration agreement must refer to one or more defined legal relationships, regardless of whether contractual.
It must be in writing. An agreement is ‘in writing’ if it is contained in signed documents or exchanged letters, telexes, telegrams or other means of communication. An implied agreement exists if the respondent – either in writing or by statement recorded in the transcript of a hearing – accepts for the dispute to be resolved through arbitration or participates in arbitral proceedings without objecting to the competence of the tribunal. The law recently defined the forms of participation in arbitral proceedings that amount to implied acceptance. However, it is unclear if the list is exhaustive.
Several types of non-arbitrable dispute (discussed below) further limit the enforceability of arbitration agreements.
Another requirement for validity which is not included in the Arbitration Act, but follows from case law, is that arbitration agreements cannot be unilateral. The Supreme Court of Cassation considers clauses that allow only one party to choose between arbitration and recourse before the state courts to be unilateral (Supreme Court of Cassation Decision 71 of 2 September 2011, Commercial Case 1193/2010, Second Commercial Chamber). However, few reported awards take the view that if an arbitration clause grants equal choice to both parties, the clause is not unilateral and consequently valid (eg, Procedural Order in International Chamber of Commerce Case 3/2016).
Two more issues deriving from case law merit attention. For many years, commercial or civil contracts incorporating arbitration clauses were concluded by agents acting on general or specific powers of attorney. However, in a 2017 judgment the Supreme Court, relying on the separability doctrine, opined that a power of attorney for conclusion of a given commercial or civil contract does not per se incorporate the powers to agree to an arbitration clause contained therein (Supreme Court of Cassation Judgment 8 of 8 February 2017, Case 1706/2016, Second Commercial Division); instead, an explicit power of attorney for conclusion of an arbitration agreement is needed.
Second, in the Supreme Court of Cassation’s abovementioned 2017 judgment and a number of other relevant decisions (Supreme Court of Cassation Judgment 157 of 11 January 2013, Case 611/2012, First Commercial Division; Supreme Court of Cassation Judgment 66 of 7 July 2014, Case 4036/2013, First Commercial Division), the court again relied on the separability doctrine and opined that the implicit confirmation of the validity of a commercial contract concluded by an ostensible agent does not extend to an arbitration clause contained in the same contract.
Enforcement of agreements
How are arbitration agreements enforced in your jurisdiction? What is the attitude of the national courts towards arbitration agreements?
Arbitration agreements are enforced indirectly – the court, on an objection of a party for the existence of an arbitration agreement, dismisses the proceedings and refers the parties to arbitration unless it finds the arbitration agreement to be “null and void, inoperative or incapable of being performed”. Under penalty of implied waiver, the objection must be made with the statement of defence.
Bulgarian courts generally tend to enforce arbitration agreements, even imperfect ones.
Unlike in other jurisdictions, a Bulgarian court would refuse to enforce a unilateral arbitration clause that grants only one of the parties a choice between arbitration and state courts.
Can an arbitral tribunal with its seat in your jurisdiction consolidate separate arbitral proceedings under one or more contracts, and, if so, in what circumstances?
Arbitration law is silent on consolidation, but the parties may include appropriate language in an arbitration agreement or refer to institutional rules that include such provisions. With one exception, the rules of the local institutions do not include consolidation provisions. However, cases have been reported where arbitrators, faced with a request for consolidation, have resolved the issue by applying their powers to determine an appropriate procedure. The conditions under which consolidation may be allowed are as follows:
- Both claims are brought under the same arbitration agreement, between the same parties and there is a sufficient connection between the claims.
- Even if the arbitration clauses are different, the claims are between the same parties, the clauses are compatible (referring to identical rules and number of arbitrators) and there is sufficient connection to warrant the consolidation.
Consolidation is not possible if different panels have already been appointed for the different proceedings, unless the parties agree otherwise.
Choice of law
How is the substantive law of the dispute determined? Where the substantive law is unclear, how will a tribunal determine what it should be?
The tribunal will resolve the dispute under the law chosen by the parties. Unless agreed otherwise, the choice of law will be construed to refer to the substantive law, not the rules on conflict of laws.
In the absence of an explicit choice of law, the tribunal will apply the law determined by the conflict of laws rules that it considers applicable. Thus, the tribunal may determine the applicable conflict of laws rules and apply the law in accordance with them.
The tribunal will always apply the terms of the contract and consider the trade usages.
Are there any provisions on the separability of arbitration agreements?
The independence of an arbitration agreement from the other terms of a contract is explicitly proclaimed in Article 19(2) of the International Commercial Arbitration Act.
Are multiparty agreements recognised?
Although the International Commercial Arbitration Act is silent on this issue, multiparty arbitration is compatible with its principles.
The rules of some local arbitral institutions contain basic provisions on multiparty arbitration. For example, the Bulgarian Chamber of Commerce and Industry (BCCI) Rules regulate the constitution of tribunals in multiparty situations. The rules of the Bulgarian Industrial Association (the second most widely used arbitration institution) do not contain these regulations, but provide for the production of a set of documents “in accordance with the number of respondents”, thus indirectly recognising multiparty arbitration.
The International Commercial Arbitration Act does not provide for third-party joinder or intervention. The BCCI Rules provides that a joinder or intervention is admissible only with the consent of the parties (and in case of a joinder, the consent of the third party).
Criteria for arbitrators
Are there any restrictions?
In January 2017 the law explicitly provided eligibility criteria for arbitrators sitting in Bulgaria. Arbitrators must:
- be of full age and capacity;
- have no criminal convictions;
- hold a university degree;
- have at least eight years’ professional experience; and
- be of high morals.
Foreign citizens may act as arbitrators in arbitrations with a seat in Bulgaria if the arbitration is international.
Only Bulgarian citizens may sit as arbitrators in domestic arbitration, unless the predominant part of the capital of one of the parties is held by foreign person or entity, in which case, it is permissible for foreigners to sit as arbitrators .
Certain arbitral institutions impose further restrictions – for example, some institutions restrict the choice of arbitrators to their lists and permit the choice of unlisted arbitrators to international cases only.
What can be stipulated about the tribunal in the agreement?
The parties may agree on the number of arbitrators and the required qualifications, knowledge or experience. They may further agree on the procedure for constituting the tribunal and the challenge to arbitrators; however, they may not exclude the jurisdiction of the court to rule against the tribunal’s decision on appeal.
Are there any default legal requirements as to the selection of a tribunal - for example, concerning the number of arbitrators or their characteristics?
Unless otherwise agreed, the tribunal consists of three arbitrators: each party appoints one, then the party-appointed arbitrators choose the chairperson.
If the respondent fails to nominate an arbitrator within 30 days of receiving the claimant’s notice, or if the two party-appointed arbitrators fail to choose the chairperson within 30 days, the chairperson of the Bulgarian Chamber of Commerce and Industry (BCCI), on request of one of the parties, will act as an appointing authority. The chairperson of the BCCI will consider the qualification requirements contained in the arbitration agreement (and all other relevant circumstances) with a view to appointing an independent and impartial arbitrator.
For disputes that do not arise from commercial relations, the Sofia City Court will act as the appointing authority.
Some of the institutional rules defer from the above default procedure. For example, the BCCI Rules provide that the chairperson of the BCCI Court of Arbitration (not the chairperson of the BCCI) will act as appointing authority.
Challenging the appointment of an arbitrator
Can the appointment of an arbitrator be challenged? Can an arbitrator be disqualified? What is the procedure for this?
An arbitrator may be challenged if:
- the circumstances raise reasonable doubts regarding his or her impartiality or independence; or
- he or she is not eligible or does not possess the qualifications required by the arbitration agreement.
A party may challenge its own appointed arbitrator only on account of circumstances of which it was not aware at the time of making the appointment.
Further, the appointment may be terminated if the arbitrator becomes incapable of performing his or her functions or fails to act without a reasonable excuse (however, the Sofia City Court has ruled that delayed issuance of an award does not constitute grounds for termination).
Unless the parties agree otherwise, the challenge must be made within 15 days of the challenging party becoming aware of the formation of the tribunal or the circumstances giving rise of the challenge. Notably, some institutional rules provide for shorter terms for challenge.
Where the tribunal refuses to accept the challenge, the refusal may be appealed to the Sofia City Court. This provision is mandatory and cannot be derogated from by an agreement between the parties. The tribunal may continue the proceedings and render an award while the challenge and appeal are pending. The decision of the Sofia City Court is final.
In practice, the Sofia City Court has applied a strict interpretation of the ‘reasonable doubt’ test, granting the challenge only where the circumstances objectively lead to partiality or lack of independence.
How should an objection to jurisdiction be raised?
The jurisdictional challenge must be made on or before filing the response to the claim. Failure to challenge within this timeframe precludes the possibility of doing it later, unless the grounds for jurisdictional challenge is non-waivable (eg, non-arbitrability of the claim). Participation in the constitution of the tribunal does not constitute a waiver of jurisdictional objections and the parties may raise them before the said deadline.
If a question is raised during the proceedings that falls outside the jurisdiction of the tribunal, the party concerned must object immediately. However, the tribunal may consider a late objection if the party making it can prove a reasonable excuse for its delay.
Replacement of an arbitrator
Why and how can an arbitrator be replaced?
An arbitrator can be replaced following:
- a successful challenge;
- his or her resignation; or
- his or her removal from office for incapability or unjustified failure to perform.
Parties may also replace an arbitrator by common consent. If replaced, the new appointment follows the initial procedure for the appointment of arbitrators.
The International Commercial Arbitration Act is silent on whether, following the replacement of an arbitrator, the proceedings starts afresh with the new arbitrator participating or continue from where they were left off. It is therefore up to the tribunal to decide which approach to apply, always observing the principles of due process. The matter is addressed in some institutional rules. For example, the Bulgarian Chamber of Commerce and Industry Rules provide that the tribunal may decide to repeat the hearings already conducted, thus endorsing the view that the proceedings may just as well continue without doing so.
Bulgarian law does not recognise truncated tribunals. Therefore, the proceedings may continue only after the replacement; otherwise, the award may be set aside.
Powers and obligations
What powers and obligations do arbitrators have?
The primary duty of the arbitrator is to resolve the dispute. The relationships between the parties and the arbitrator are contractual in nature and this duty is the main reason for the arbitrator’s appointment.
A second duty is to complete the mandate. This follows from the duty to resolve the dispute and can also be indirectly deduced from the grounds for replacement of an arbitrator if he or she is incapable of performing his or her functions.
A third duty is to remain independent and impartial. This duty is reflected in the obligation to disclose all the grounds that may cause reasonable doubt as to his or her independence or impartiality and in the grounds for challenging the nomination of arbitrators.
Another fundamental duty is to conduct the arbitration fairly and without undue delay. This is reflected in the tribunal’s obligation to provide each party with equal treatment and opportunities to defend its case.
The International Commercial Arbitration Act lays down several explicit powers for arbitrators.
They have the power to rule on their own jurisdiction. They also have powers that correspond to the duty to complete the mandate, including the power to:
- issue procedural orders and determine the appropriate procedure;
- appoint expert witnesses;
- order the parties to assist the expert witness; and
- order the parties to provide access to documents or other goods for inspection.
Institutional rules further detail the powers of arbitrators – including, for example, the power to:
- order documentary disclosure (limited to the parties);
- request production of other evidence and gather certain evidence ex officio; and
- draw adverse inferences from the obstructive conduct of a party.
Liability of arbitrators
Are arbitrators immune from liability?
The International Commercial Arbitration Act is silent on arbitrator liability, but Bulgarian jurisprudence considers them to be liable for wilful misconduct, gross negligence and crimes committed in connection with the delivery of the award. Such liability is based on the law on torts.
Arbitrators do not benefit from judicial immunity. However, it is commonly accepted that they should not be held liable for a wrong decision that is not a result of a wilful misconduct, gross negligence or crime.
There has been only one court decision dealing with arbitrator liability for rendering an unenforceable award. A tribunal sitting with the Bulgarian Chamber of Commerce and Industry (BCCI) rendered an award that was subsequently refused enforcement by Italian courts. In this case the claimant filed a claim for damages against the BCCI, not the arbitrators. The Supreme Court of Cassation eventually dismissed the claim with the argument that the institutional court of arbitration merely administers cases and is not liable for the alleged misconduct of the arbitrators. However, the Supreme Court of Cassation mentioned in passing that arbitrators would not be liable for rendering an unenforceable award only as far as it was not a result of wilful misconduct.
An important exception concerning non-arbitrable cases involving consumers was created in January 2017. An arbitrator who renders an award in a dispute involving a consumer is personally liable and the Minister of Justice may impose a fine of between Lev500 and Lev2,500; or a fine of up to Lev5,000for a second offence.
Communicating with the tribunal
How do the parties communicate with the tribunal?
The International Commercial Arbitration Act is silent on this issue. In institutional arbitration, communication with the tribunal goes through the secretariat. In practice, direct communication with the tribunal is considered inappropriate. The international practice of interviewing potential arbitrators before nomination is virtually unknown in domestic arbitration and rarely applied in international cases.
In ad hoc arbitration, communication with the tribunal necessarily goes through the chairperson or the secretary of the tribunal (where appointed). As a matter of good practice, the parties should copy the counterparty in all correspondence with the tribunal.
Is unanimous agreement of the tribunal required? If there is disagreement, does the will of the majority suffice? What are the implications of this?
Unless the parties agree otherwise, the tribunal takes decisions by majority. If the tribunal cannot form a majority, the award will be rendered by the chairperson.
Unless the parties agree otherwise or it is on agreed terms, the award must contain reasons.
An award rendered by a majority or by the chairperson (ie, if a majority cannot be formed) is valid and binding.
Are there any disputes incapable of being referred to arbitration?
Under Article 19(1) of the Civil Procedure Code, only disputes involving pecuniary rights are arbitrable. This excludes disputes concerning non-disposable rights (eg, family disputes). Antitrust and competition matters are also considered non-arbitrable; however, where the existence of unfair competition is established, the parties concerned may conclude an arbitration agreement to deal with compensation issues (although there have been no reported cases of this type). The same applies to IP rights, including patents.
The Civil Procedure Code further excludes the following types of dispute from arbitration:
- disputes concerning rights in rem or possession of immovable assets;
- disputes concerning alimony; and
- employment disputes.
Since January 2017 disputes involving consumers are also non-arbitrable. All cases pending at the time of the legislative change shall be terminated forthwith.
Arbitrability is further limited in cases of insolvency. According to Article 637(6) of the Commerce Act, after initiation of insolvency proceedings, new arbitration proceedings cannot be initiated; regardless of the existence of an arbitration agreement, all claims against the debtor must be filed before the insolvency court.
All arbitral proceedings pending at the time of the initiation of insolvency proceedings must be suspended. If the respective claim is subsequently included in the list of accepted claims, the arbitration will be terminated; if the claim is not accepted, the suspended proceedings will continue with the participation of the insolvency trustee.
Can the arbitrability of a dispute be challenged?
The respondent may challenge the arbitrability of the dispute as a part of its jurisdictional defence.
As the non-arbitrability of a dispute is non-waivable, the objection may be made later on in the proceedings or used as grounds for challenging the award; failure to challenge the arbitrability in good time does not deprive the respondent of the opportunity to do so later.
The legislative changes in 2017 have extended the state courts’ power to control the arbitrability and now where a request to issue a writ of execution is brought before the court, it may reject the request if it finds that the dispute was non-arbitrable.
Jurisdiction and competence-competence
Is the principle of competence-competence recognised in your jurisdiction? Can a party to an arbitration ask the courts to determine an issue relating to the tribunal’s jurisdiction and competence?
Article 19(1) of the International Commercial Arbitration Act explicitly confirms the competence-competence principle.
The state court may control the jurisdiction of the tribunal either directly or indirectly.
The court exercises indirect control when a dispute covered by an arbitration agreement has been brought before it. However, such control is exercised only on an objection by the respondent and the court must terminate the proceedings unless it finds the agreement to be null and void, inoperative or incapable of being performed.
Some authorities suggested that a party may request a state court to determine the validity of an arbitration clause, thus directly bringing the matter of the tribunal’s jurisdiction to state courts. The Sofia City Court and the Sofia Court of Appeal (on appeal) took opposite views when ruling on this issue. The Supreme Court of Cassation is expected to decide on the issue soon.
The Supreme Court of Cassation exercises direct control over a tribunal’s jurisdiction and competence when deciding on challenges against an award.
Starting an arbitration proceeding
What is needed to commence arbitration?
In ad hoc arbitration, unless otherwise agreed, the proceeding is considered commenced for all purposes when the respondent receives a request to refer a dispute to arbitration. The aim of this provision was for a simple notice of intention to arbitrate to suffice for the institution of proceedings. This is consistent with Article 33 of the International Commercial Arbitration Act, which provides for the termination of proceedings if the claimant fails to submit a statement of claim in the timeframe agreed by the parties or determined by the tribunal.
In practice, even in ad hoc arbitration it is relatively rare for the claimant to send a simple request for arbitration; in most cases, the claimant sends a detailed statement of claim containing its grounds and request for relief. This approach is recommended, as the potential insufficiencies of a simple request (most often, insufficient individualisation of the cause of action) may cause uncertainty regarding whether and when the arbitration was properly commenced (with ensuing uncertainty regarding the legal effects of proper commencement – the most important of which being the termination of the limitation period).
The institutional rules provide that the arbitration is considered commenced for all purposes when the statement of claim is received by the secretariat. The institutional rules also provide specific requirements for the contents of the statement of claim. Among other things, it must include:
- individualisation of the parties;
- the circumstances giving rise to the claim; and
- a request for relief.
A procedure exists for the correction of insufficiencies in the statement of claim. If corrected, the date of commencement is considered to be the date of the initial submission of the statement; if not corrected, the statement of claim is returned and the proceedings are terminated.
Are there any limitation periods for the commencement of arbitration?
The limitation is a matter of substantive law. It follows that on objection of a party, the tribunal will apply the statutory limitation defined in the applicable substantive law.
The International Commercial Arbitration Act does not specify a particular procedural limitation period for the commencement of arbitration.
The parties are free to agree on a specific procedure; therefore, they may agree on specific time limits for the commencement of arbitration. However, it is questionable what the effect of the expiration of such an agreed period would be – that is, whether it would:
- extinguish the arbitration clause only (meaning that parties may still resort to state courts); or
- prevent the exercise of the claim (leaving the parties with no further recourse).
The above has yet to be tested in practice.
Are there any procedural rules that arbitrators must follow?
Arbitrators must ensure equal treatment of the parties and provide them with equal opportunities to present their cases.
The parties are free to agree on the procedure for the arbitrators to follow. In the absence of such agreement, the arbitrators will apply the procedure that they consider appropriate, subject always to the duty to ensure equal opportunities for the parties to present their cases. The law also provides basic procedural rules aimed at ensuring the successful completion of the procedure, including a rule for exchange of written statements of claim and defence; and rules on counterclaims, the open-hearing principle and documents-only arbitration by exception.
The relevant institutional rules contain more detailed procedural rules.
Are dissenting opinions permitted under the law of your jurisdiction?
Yes, dissention opinions are permitted; they must be presented in writing.
Can local courts intervene in proceedings?
The courts may intervene only in the instances and to the extent permitted by the International Commercial Arbitration Act. They may intervene in arbitral proceedings by taking the following actions:
- issuing interim or conservatory measures;
- collecting evidence that cannot be collected by the tribunal (usually because of a lack of coercive powers); and
- maintaining the integrity of the process (eg, challenging arbitrators, setting aside awards and controlling the enforcement stage).
Can the local courts assist in choosing arbitrators?
The Sofia City Court acts as appointing authority in non-commercial disputes, unless the institutional rules provide otherwise. As all institutional rules provide otherwise, the above rule is applicable only to ad hoc arbitrations. For commercial ad hoc cases the Bulgarian Chamber of Commerce and Industry acts as an appointing authority.
What is the applicable law (and prevailing practice) where a respondent fails to participate in an arbitration? Can the courts compel parties to arbitrate? Can they issue subpoenas to third parties?
Where one of the parties fails to appear, the tribunal may continue the proceedings and deliver an enforceable award on the basis of the evidence put before it. As a result of this rule, there is no need to request the courts to compel the defaulting party to arbitrate (in fact, it is never done). However, failure by the respondent to file a reply to the statement of claim does not constitute acknowledgement of the claim.
The tribunal cannot request the courts to issue subpoenas; however, it may request courts to collect certain evidence, including summoning and questioning witnesses of fact. The courts must collect the evidence pursuant to the rules contained in the Civil Procedure Code.
In what instances can third parties be bound by an arbitration agreement or award?
As a general rule, an arbitration agreement binds only the signatories to it. It also binds the universal legal successor of the parties (eg, in case of a merger of companies).
The assignment of rights raises specific issues in the context of Bulgarian law. The position in arbitration is that the assignment of contractual rights automatically makes the assignee a party to the arbitration agreement that covers the assigned rights. The arbitrators listed with the Bulgarian Chamber of Commerce and Industry (BCCI) have rendered a mandatory decision confirming this practice (binding only on arbitrations administered by the BCCI).
However, on strict interpretation of an arbitration clause as an independent agreement, the Supreme Court of Cassation has endorsed the opposite view. It now consistently rules that the assignment of contractual rights does not make the assignee a party to the arbitration clause. Consequently, any consignee that seeks redress in arbitration risks annulment of an eventual favourable award by the Supreme Court of Cassation.
No other grounds exist for the extension of arbitration agreements to non-signatories. Bulgarian law does not recognise veil-piercing or alter ego doctrines, nor the group of companies doctrine. Incorporation by reference, which in other legal systems may be considered as a ground for the extension of an arbitration agreement, is permissible in Bulgaria as an ordinary method for concluding an arbitration agreement.
Similarly to court judgments, the award is binding on the universal and private successors of the partiers; however, it must under no circumstances have an erga omnes effect.
Default language and seat
Unless agreed by the parties, what is the default language and location for arbitrations?
Unless otherwise agreed, in international arbitration the tribunal determines the language of the proceedings. This rule does not apply in domestic arbitration, where the default language of the proceedings is Bulgarian.
The International Commercial Arbitration Act applies only to arbitration with the seat in Bulgaria. The seat can be abroad only if at least one of the parties has its domicile, seat or place of actual management outside of Bulgaria.
How is evidence obtained by the tribunal?
Each party bears the burden of proving the facts on which it relies. The International Commercial Arbitration Act does not consider the tribunal to be a passive observer, but rather allocates it a more proactive role. Thus, the tribunal on its own initiative may appoint expert witnesses or order the parties to grant access or produce goods or documents for examination. Further, it may on its own initiative (as well as on request of a party) request state courts to gather specific evidence (eg, to take the statement of a witness who is unwilling to appear). However, the tribunal must always give the parties equal opportunities to participate in the proceedings.
The International Commercial Arbitration Act does not contain further rules on the admissibility, relevance and weight of evidence, leaving it to the parties to tailor their own arbitration procedure. If the parties do not agree on the procedure, the tribunal will determine it. As a matter of practice, tribunals often apply rules similar to those on evidence contained in the Civil Procedure Code (ie, because they are reasonable and close to most parties’ legitimate expectations).
What kinds of evidence are acceptable?
The tribunal may:
- collect documentary evidence, witness statements of fact and expert witness statements;
- conduct site or object examination; and
- consider the explanation of the parties in the context of the circumstances of the case.
Is confidentiality ensured?
The International Commercial Arbitration Act does not contain specific provisions on confidentiality. The doctrine highlights the confidentiality and privacy of the proceedings as distinguishing features of arbitration, as is also reflected in certain institutional rules. However, unless the arbitration clause refers to institutional rules that contain explicit confidentiality provisions, the parties should incorporate specific provisions on confidentiality in their arbitration agreement.
Can information in arbitral proceedings be disclosed in subsequent proceedings?
The International Commercial Arbitration Act is silent on this question. The answer depends on how the information is obtained and the type of subsequent proceedings.
If the information is obtained in proceedings under arbitration rules that do not contain explicit confidentiality provisions, the disclosing party can seldom prevent disclosure in subsequent proceedings.
If the information is obtained under an obligation of confidentiality, the receiving party most probably cannot use it in subsequent proceedings before the same institution or another that observes similar rules.
If the information is used before state courts, the judges will determine the matter by reference to the rules of evidence contained in the Civil Procedure Code. As the litigants have a duty to submit to the courts only the truth, a judge would most probably admit a relevant document on record regardless of the fact that it was produced in breach of confidentiality provisions contained in arbitration rules.
A new 2019 act on the protection of commercial secrets provides certain protective measures for trade secrets that are disclosed during adversarial court proceedings. The act is applicable only to proceedings before the state courts; however, arbitral tribunals that deal with disputes involving trade secrets or that receive evidence constituting a trade secret should consider the new law and implement appropriate protective measures. It remains to be seen how arbitral tribunals will deal with this matter.
What ethical codes and other professional standards, if any, apply to counsel and arbitrators conducting proceedings in your jurisdiction?
There are no universally applicable rules, as the International Commercial Arbitration Act is silent on this issue.
Some institutions have developed their own ethical code for arbitrators; others have included certain provisions in their constitutive documents.
None of the arbitration institutions has developed ethical codes applicable to counsel. Lawyers admitted to the Bulgarian Bar (including foreign lawyers) must observe the Lawyers’ Code of Ethics. Foreign lawyers must observe the rules of the bar to which they are admitted.
Estimation & allocation
How are the costs of arbitration proceedings estimated and allocated?
The International Commercial Arbitration Act is silent on this issue. Each arbitration institution applies its own rules on costs; however, all institutions in Bulgaria structure the costs on an ad valorem basis (ie, in proportion to the estimated value of the transaction concerned).
The costs are allocated on the ‘costs follow the event’ principle; however, the parties may agree on a different allocation of costs.
Lawyers’ fees are negotiated with the client and are generally borne by the losing party. If the lawyers’ fees are exaggerated (based on the amount in dispute and complexity of the case), the arbitrators may reduce the proportion allocated to the losing party.
Security for costs
Can the national court or tribunal order security for costs under the law in your jurisdiction?
State courts do not order security for costs, as both the Civil Procedure Code and the International Commercial Arbitration Act contain no specific provision on this matter.
The institutional rules will empower the tribunal to order appropriate conservatory and provisional measures, which may also include security for costs. In practice, there has been no reported case of security for costs being ordered by arbitral tribunals; further, such orders would have very little practical effect, given the lack of coercive powers.
What legal requirements are there for recognition of an award? Must reasons be given for the award? Does the award need to be reviewed by any other body?
The award must be in writing and contain reasons. The arbitrators may dispose of the reasons if the parties agree or if the award is on agreed terms.
The award must state the date on which it was rendered and the place of arbitration.
The award must be signed by the arbitrators. If passed with majority, the award need be signed only by the majority of the members; however, in such case the award must state the reasons for the missing signature(s).
The award must be notified to the parties. It is considered notified on the date it is delivered to at least one of the parties. From this moment, the award becomes final, binding and enforceable.
The International Commercial Arbitration Act does not provide for scrutiny of awards, but the rules of certain arbitral institutions provide such procedures.
Awards are not subject to registration with the state courts. Awards are registered with the secretariats of the institutions under the rules of which they have been rendered. A recent legislative change obliged the institutions to keep the files for at least 10 years and the awards, their reasoning and approved settlements, for an indefinite period.
Timeframe for delivery
Are there any time limits on delivery of the award?
The International Commercial Arbitration Act does not set a time limit for rendering an award. However, the parties may agree on a time limit either for rendering the award or for the closure of proceedings. An award rendered after the expiration of the agreed time limit may be set aside on the grounds of Article 47, Item 6 of the International Commercial Arbitration Act (ie, becasue the proceedings are not complyiant with the agreement of the parties).
Some institutional rules contain a time limit for rendering the award, which can be extended by the tribunal.
Does the law impose limits on the available remedies? Are some remedies not enforceable by the court?
The arbitral tribunal may award the same remedies as state courts, including specific performance, liquidated damages, declaratory relief and refrain orders. On notification to the parties, domestic awards are enforceable as court judgments without limitations.
What interim measures are available? Will local courts issue interim measures pending constitution of the tribunal?
On request of a party, the tribunal may issue appropriate interim measures. However, the tribunal has no coercive powers and such measures are not enforceable through the courts; therefore, tribunal-ordered interim measures have little practical effect.
On request of a party, either before institution of the arbitration or while the proceedings are pending, the state courts may order interim measures to:
- protect a party’s rights that are the subject matter of the arbitration; or
- guarantee effective enforcement of an eventual favourable award.
The courts may issue identical measures to those issued in relation to pending litigation, including attachment of movable or immovable assets or receivables (including freezing bank accounts) or other appropriate measures. These are directly enforceable by bailiffs.
Can interest be awarded?
Bulgarian law distinguishes between interest as a charge for borrowing money and interest as compensation for a delay in payment. Tribunals sitting in Bulgaria may award both types of interest.
At what rate?
Interest is a concept of substantive law; therefore, tribunals may award interest as determined in the applicable law and the contract of the parties.
Regarding interest as a charge for borrowing money, the tribunal will award at the rate agreed between the parties.
Regarding interest as compensation (ie, late payment interest), where Bulgarian law applies and if the parties have not agreed on liquidated damages, the tribunal shall award statutory interest from the date of delay, at the annual rate of the basic interest rate of the Bulgarian National Bank plus 10 points.
Is the award final and binding?
On notification to at least one of the parties, the award becomes final and binding and produces a res judicata effect.
What if there are any mistakes?
On request of a party or on its own initiative, the tribunal may correct computational, spelling or any other factual mistakes. A party may also request interpretation of the award.
A request for correction or interpretation must be made within 60 days of the date of notification of the award. The tribunal will hear the other party and decide on the request in a 30-day period.
The correction or interpretation will become part of the initial award.
The tribunal may further issue additional awards on matters that were not dealt with in the award (ie, infra petita awards).
Can the parties exclude by agreement any right of appeal or other recourse that the law of your jurisdiction may provide?
The parties cannot exclude the power of the state court to review the award.
What is the procedure for challenging awards?
An award may be challenged before the Supreme Court of Cassation on the following grounds:
- The party was under some incapacity at the time of concluding the arbitration agreement.
- The arbitration agreement was not concluded or is invalid under the law to which the parties have subjected it or, failing any indication thereon, under Bulgarian law.
- The party making the application was not given proper notice of the appointment of an arbitrator or the arbitral proceedings or was otherwise unable to present its case.
- The award:
- deals with a dispute not contemplated by the terms of the submission to arbitration; or
- contains decisions on matters beyond the scope of the submission to arbitration.
- The composition of the arbitral tribunal or arbitral procedure:
- did not conform with the agreement of the parties, unless such agreement was in conflict with a provision of the International Commercial Arbitration Act from which the parties cannot derogate; or
- was otherwise not in accordance with the International Commercial Arbitration Act.
Recently, ‘non-arbitrability’ and ‘contradiction to Bulgarian public policy’ as grounds for setting aside an award were abolished. The awards resolving non-arbitrable disputes are now considered null and void and the courts will dismiss requests to issue a writ of execution on the basis of such awards.
A request for setting aside must be made within three months of notification of the award. In case of correction, interpretation or supplementation of the award, this period runs from the day the tribunal issued the additional award.
An award is enforceable regardless of a pending challenge; the Supreme Court of Cassation may suspend the enforcement only if the challenging party provides a guarantee equal in value to the challenged award.
On what grounds can parties appeal an award?
Final awards are not subject to appeal.
What steps can be taken to enforce the award if there is a failure to comply?
The creditor may seek leave to enforce from the courts.
Can awards be enforced in local courts?
In order to enforce a domestic award, the creditor must apply to the Sofia City Court to issue leave for enforcement (writ of execution). The applicant must produce a copy of the award and evidence that it was served to the debtor. The procedure is ex parte. The court may consider only whether the award is valid on its face (ie, signed and in writing and whether the dispute was arbitrable) and contains enforceable orders against the debtor. The court collects a fee of 0.2% of the awarded amount (however, not less than Lev50).
How enforceable is the award internationally?
There are no statistics on the enforcement of Bulgarian awards abroad. However, considering that Bulgaria is a party to the New York Convention and has adopted the UNCITRAL Model Law (although in the 1985 version), Bulgarian awards should benefit from a facilitated enforcement abroad.
To what extent might a state or state entity successfully raise a defence of state or sovereign immunity at the enforcement stage?
Article 3 of the International Commercial Arbitration Act explicitly provides that a state or state entity may be a party to international commercial arbitration. It follows that it cannot raise an immunity from jurisdiction defence.
State entities, however, benefit from limited immunity from execution: Article 519(1) of the Civil Procedure Code prohibits enforcement of monetary obligations against state entities. However, other types of enforcement (eg, delivery of possession of movable or immovable assets) are generally possible, provided that the assets in question are not exclusive state property.
Are there any other bases on which an award may be challenged, and if so, by what?
There are no other bases on which an award may be challenged.
How enforceable are foreign arbitral awards in your jurisdiction?
In order to be enforceable in Bulgaria, a foreign award must receive recognition and its enforcement must be permitted by Bulgarian state courts. Enforcement is subject to the provisions of the New York Convention. The creditor must file a claim before the Sofia City Court, the decision of which is subject to appeal before the Sofia Court of Appeal, thence to appeal before the Supreme Court of Cassation. The state fee is Lev50.
The Bulgarian courts have a pro-enforcement attitude and foreign awards are generally recognised and enforced in Bulgaria.
Will an award that has been set aside by the courts in the seat of arbitration be enforced in your jurisdiction?
An award set aside by the courts in the country of origin would be refused recognition and enforcement on the grounds of Article V1(e) of the New York Convention; a Hilmarton or Chromalloy scenario does not appear possible in Bulgaria. Two recent decision confirm this interpretation.
Rules and restrictions
Are there rules or restrictions on third-party funders?
There are no rules nor restrictions on third-party funders. There are no reported cases either.
Class-action or group arbitration
Is there a concept in your jurisdiction providing for class-action arbitration or group arbitration? If so, are there any limitations to the arbitrability of such claims or requirements that must be met before such claims may be arbitrated?
The Bulgarian Civil Procedure Code recently introduced class action in civil proceedings. The notion does not exist under local arbitration law.
Are there any hot topics or trends emerging in arbitration in your jurisdiction?
Recent years have seen a rapid growth of the number of arbitral institutions (up to more than 20), some of which have adopted questionable practices and entered the spotlight in society andthe Supreme Court. Some of the legislative changes in 2017 aimed at disciplining activity has resulted in more state control over the arbitration process.
However, there is a positive trend of an increasing number of disputes resolved by arbitration and a consistent pro-arbitration policy followed by the state courts.