On 21 November 2019, the Bulgarian parliament adopted an amendment to the State and Municipalities Liability for Damages Act (SMLDA), which significantly expands the scope of state liability under Bulgarian law.

No liability for damages caused by pre-2019 secondary legislation

The SMLDA is the main set of provisions under Bulgarian law, which regulates the grounds and scope of state liability, including the liability of municipal bodies.

The SMLDA did not expressly enlist the types of legal acts, which fall within the applicability of the law. Hence, it was a matter of interpretation whether some legal acts of the state and municipalities could be exempted from liability. The Bulgarian Supreme Administrative Court addressed this more than once and issued an Interpretative Decision 2/27.06.2016, which clarified the liability limits of state and municipal bodies set to secondary legislation.

Such bodies, as per Bulgarian Law on Normative Acts, have the power to issue various types of secondary legislation, including ordinances, instructions, which were assumed to fall outside the applicability of the SMLDA. The Supreme Administrative Court reasoned that the state and municipalities cannot be held liable for legal acts, which are unlawful and repealed as such.

The main argument of the Supreme Administrative Court was: since a piece of secondary legislation enters into force until a court revokes it, the law is valid and its revocation has legal effect only for the future. In addition, the Bulgarian Administrative Procedural Code contains a specific provision requiring state and municipal bodies to take measures to compensate damages after repealing the unlawful secondary legislation.

This is why the Supreme Administrative Court reached the decision that no damages could be caused by a piece of secondary legislation since a legal act of such nature is presumed to be lawful for the entire period of its legal effect.

2019 amendment: secondary legislation included under SMLDA

Naturally, a significant number of judges voted against this reasoning and had separate opinions. This decision was also heavily criticised in legal doctrine. The interpretation given by the Supreme Administrative Court seemed strictly to follow the law as it stood, but drew a line of discrimination between those harmed by secondary legislation and any other damaged persons, which could lead to an unfair result.

This required a move from parliament. On 21 November 2019, lawmakers passed an amendment, which under Article 1 of the law now explicitly includes legal acts of secondary normative nature that have been repealed as unlawful or have been declared null and void. As a result, any party suffering harm from secondary legislation is entitled to bring action for compensation against the relevant state or municipal body, which adopted the respective piece of secondary legislation.

Further amendment: explicit regulation of claims for breaches of EU law

The SMLDA amendment contains one more key change to the legal framework of such claims. Claims for alleged breaches of EU law have been rising steadily in recent years. The SMLDA, however, did not specifically address this. As a result, courts had to apply the general provisions of the law, which lead to procedural confusion over the set of rules that should apply. Should claims caused by the administration's unlawful acts be subject to the Administrative Procedure Code while other claims fall within the scope of the Civil Procedure Code? Or should all claims be submitted under the Civil Procedure Code?

Article 2c of the newly adopted SMLDA expressly states that claims for damages caused by breaches of EU law by state and municipal bodies should be handled under the rules of the Administrative Procedure Code. A similar rule was recently implemented in the Administrative Procedure Code.

Parliament's new amendments of the State and Municipalities Liability for Damages Act bring much-need clarity and stability to the precise limits of liability and the proper procedures to be followed. For more information on this eAlert, contact your regular CMS source or the local CMS experts: Assen Georgiev and Deyan Draguiev.