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.