Arbitration law in Bulgaria
Arbitration serves as a vital mechanism for resolving commercial disputes efficiently, privately, and often more expeditiously than traditional litigation. Bulgaria has established a solid legal and institutional framework that supports both domestic and international arbitration, making it an attractive jurisdiction for businesses seeking dispute resolution. The fisrt arbitration was established back in 1896 within the Chamber of Commerce and Industry, functioning until World War II. During the planned economy period between 1950 and 1990 operated the so-called State Arbitration resolving disputes between local socialist organisations/ enterprises. Despite its name such body was a state authoirity having more resemblance with the courts, so it cannot be characterised as an institute for alternative dispute resolution. At the same time in 1952 a new classic arbitration court was created within the Bulgarian Chamber of Commerce and Industry (BCCI), still existing and world known as the most reputable arbitration institution in Bulgaria. At the time it was designated to resolving disputes only between local enterprises and internationa legal entities, thus acted only as international commercial arbitration.
Current Legal Framework
The core legal statute governing arbitration in Bulgaria is the Law on International Commercial Arbitration (1988), as subsequently amended, which aligns closely with the UNCITRAL Model Law. This harmonization facilitates the recognition of Bulgaria’s arbitration procedures on an international level, ensuring consistency, fairness, and predictability. Among the key features and advantages are:
- Confidentiality: Arbitration proceedings are generally confidential, making them especially appealing for sensitive commercial disputes.
- Flexibility: Parties have freedom to tailor the arbitration process—such as selecting arbitrators, procedural rules, and language.
- Enforcement Efficiency: Bulgaria’s adherence to the New York Convention (1958) ensures that arbitral awards are recognized and enforceable abroad, and similarly, foreign awards can be enforced within Bulgaria.
- Neutrality and Neutral Venue: Bulgaria offers a neutral judicial environment for international parties.
Taking into consideration also the amount of the arbitration fees (that may be less than the fixed 4% state fee of the interest in state litigation) in the past thirty years over 40 arbitration institutions were established and currently function in Bulgaria.
Recent Development
As evident by the name of the law, it was initially designed to provide framework for resolving out-of-court disputes with international element, most often between legal entities parties to commercial transactions. However, just recently a disturbing trend has emerged: real estate fraud cases using arbitration in bad faith. Bulgarian citizens, often seniors, were deprived of their properties on the grounds of enforceable arbitration awards made after false process (without the participation and even knowing of the owners) using invalid arbitration clauses and forged documents.
To prevent such frauds and sustain legal stability the Ministry of Justice started actions towards the property mafia, including by proposing amendments to the current arbitration law, now subject to public discussion before a draft law is submitted to the Parliament for voting.
Most Important Proposed Changes
- New name of the law: Law on Arbitration – to point out its applicability for both domestic and international disputes;
- Existing arbitration agreements established to resolve a specific dispute as of the date of the new law’s entry into force shall be terminated, except in cases of international arbitration. Pending arbitration cases will be completed in compliance with the new rules;
- New register of the arbitration courts shall be kept by the Ministry of Justice. Decisions of arbitrations or arbitrators not entered in it will be null and void;
- New requirements for arbitrators – not to have been convicted, to have a university degree, at least 8 years of professional experience, not to be deprived of the right to exercise a certain profession or activity, or to hold a certain position, not to be in bankruptcy proceedings, not reinstated in their rights, insolvent or convicted of bankruptcy, as well as to possess high moral qualities;
- Nullity of arbitration awards will be declared by the Supreme Court of Cassation upon a claim by one of the parties or their legal successors, without any time limit. In addition, the Supreme Court of Cassation will have the right to declare nullity ex officio when it is referred to a claim for annulment of the arbitration award on other grounds.
Noteworthy, the draft also provides that the arbitration award may be annulled if it contradicts the public order in the Republic of Bulgaria – a ground for annulment that existed in the law until being “removed” in 2017. The draft contains a legal definition of when there will be a “contradiction with the public order” – when imperative norms of fundamental importance that are fundamental to Bulgarian law are violated. Moreover, there will be a new ground for annulment of an arbitration award by analogy with the Civil Procedure Code – if, in accordance with due process of law, it is established that a document, a witness’s testimony, an expert’s conclusion on which the award is based, or a criminal act of the party, its representative, a member of the arbitration panel or its employee in connection with the resolution of the case is untrue.
Currently, the law provides for the suspension of the enforcement of an arbitration award only against the submission of a security in the amount of the interest from the annulment of the award. The amendments provide that the Supreme Court of Cassation will be able to suspend the enforcement even without a security, “when there is convincing written evidence of the existence of grounds for annulment”.
In addition, the fees for annulment of arbitration awards are expected to be significantly reduced as the current state fee of 4% of the interest is a substantial obstacle to protecting the rights of the parties in arbitration proceedings. The idea is that, since the Supreme Court of Cassation does not consider the case on the merits, a lower fee should be set – e.g. 1% of the interest, but not more than a certain upper threshold.
New rules for service of arbitration papers are provided – through notaries and private enforcement agents in case the papers could not be actually served on the first attempt made through registered mail or courier. The server will certify with his signature the date and manner of service, the capacity of the person to whom it was served, as well as all actions in connection with an attempted service. The provisions on the fictions of service have also been revised, providing that they do not apply to individuals who are not traders or entrepreneurs, have not assumed or secured an obligation as a trader, and the dispute is not related to their capacity as a partner or shareholder. Since with this approach it is possible that the arbitration proceedings cannot develop, it is provided that at the request of the plaintiff, the attempts at service may continue or the case may be terminated. In the latter case, he has the right to file his claim before the state court.
Check for nullity shall be conducted by the court before issuing a writ of execution. That is, the court will check whether the award was issued by an arbitration or an arbitrator who is not entered in the register and whether it was issued on a dispute, the subject of which is not subject to arbitration.
Finally, the draft provides for an increase in the sanctions for the arbitrations-violators and they will reach approx. EUR 13 000. In addition, it is regulated that the Inspectorate of the Ministry of Justice will be able to carry out random checks of the arbitrations and have access to the electronic files on each of their cases.
Conclusion
The proposed amendments to Bulgaria’s arbitration framework should bring back the trust and strengthen the reliability of arbitration as a forum for resolving domestic and international disputes. As arbitration continues to evolve in Bulgaria, it remains a strategic choice for businesses seeking efficient, private, and enforceable dispute resolution methods.
