200 applicants to obtain Bulgarian citizenship by investment

Bulgaria’s citizenship by investment programme was introduced in its current form in late 2013. In domestic terms, the key innovation was to permit permanent residence leading to citizenship based on an investment of BGN 1,000,000 (approx €512,000) and expedited processing of 2 years where an investment of BGN 2,000,000 (approx €1.02m) was made.

While highly competitive compared to other EU citizenship routes, Bulgarian citizenship by investment has not been promoted by the Government of Bulgaria.

This slowed take-up but there is now evidence of organic and likely sustained demand growth and of an adequate administrative capacity to process applications.

As of September 2018, the cumulated total of applications for citizenship by investment in Bulgaria stood at 193. 95 of these were Standard Track and 98 – Fast Track.

Since the Standard Track requires applicants to hold a residence permit for at least 5 years, most standard applications are only beginning to be eligible.

An average of 18 applications were submitted via Fast Track annually between 2013-2017. In 2018 the annual application rate doubled to 35 on an annualised basis.

Applicants from the Middle East and the ex-USSR make 77% of the Fast Track applications, with most applicants being from Russia. This may be connected to the close cultural connection between the two countries and Bulgaria’s familiarity to Russians.

Around 64% of all Fast Track applications made have been approved by the Ministry of Justice so far.  The majority of the remaining Fast Track applications were filed in 2018 and cannot be expected to have reached approval.

The final checkpoint in the process, the Vice Presidential decree, has been passed by 50% of the applications approved by the Ministry of Justice. In another positive sign about improved administrative capacity and procedural familiarity, the data shows that so far in 2018, the Vice President’s office has granted as many citizenships as in the previous 4 years combined.

This information tends to demonstrate that the Bulgarian citizenship by investment is highly competitive compared to other EU countries.

Comparing to Malta, EU citizenship can be obtained within roughly the same timeframe, but with a significantly lower cost. This also applies to Cyprus, where the typical outlay is on an investment in real estate. While the Bulgarian route is not as rapid as the Cypriot one, avoiding the volatility of real estate and the bias accompanying the selection of qualifying real estate by investing in government bonds is highly attractive.

Our team has already successfully assisted a large number of ultra high-net worth, high net worth and affluent applicants, and our clients have so far had a 100% success rate.

If you would like more information, please feel free to contact us at cbi@newbalkanslawoffice.com.

Related publications:

EU Citizenship and Residence by Investment in Bulgaria

FAQs about Bulgaria’s Citizenship by Investment Program

The partial claim device in Bulgarian court proceedings

Court fees in Bulgarian proceedings: general principles

The starting point in Bulgarian civil proceedings is that in claims with an identifiable monetary value, the court fees for the issue of a claim are calculated as a percentage of the value of the claim, namely 4 %. Certain categories of claim (which we list below) are excluded from the operation of the rule, but it applies in the majority of cases.

To take an example, a contractual claim for €100,000 brought to a Bulgarian court would attract a court fee of €4,000 (payable in the Bulgarian currency), while a tort claim for $10,000,000 would involve a fee of $400,000, once again payable in Bulgarian lev.

The court fee is a single fee and is payable entirely by the claimant(s).

Such a court fee is payable at the commencement of a claim or within a short period (typically 7 days from the date of a court order requiring a non-paying claimant to conform with the requirement), on penalty of a stay of the claim and a resumption of accrual of limitation.

Of course, the approach has a potential effect of putting at a disadvantage claimants who cannot afford fees which are high in absolute terms, and may be unfair to claimants in situations where the chances of success are difficult to gauge before the proceedings are fully developed.

Once a claim fee is paid, Bulgarian civil proceedings do not generally involve the payment of further court fees.  E.g. there are no fees specific to the conduct of hearings or to the passing of certain stages in such proceedings.  However, appeals involve the payment of further court fees, typically set at half of the court fee due for the origination of a claim and in addition, all parties should be prepared for the possibilities of being required to pay experts’ fees (via a payment into court) or to deposit further sums into court on the order of the court (e.g., as a potential compensatory fund for the addressee of a freezing order).

What is a partial claim?

As a response to the potential issues of access to justice and management of litigation risk we outline above, Bulgarian proceedings commonly feature the making of a claim for a part of the total potential value in dispute, termed partial claims.

To adapt the first of our examples above, the claimant may choose to bring in the first place only a claim for €25,000 out of the total potential claim value of €100,000. This reduces the court fee fourfold to €1,000 expressed in Bulgarian levs.

The claimant remains able to expand the claimed amount either within the same proceedings or to bring a separate claim for the previously unclaimed part subject to the constraints and otherwise as we describe below.

Categories of claims to which the partial claim is inapplicable

Certain claims deemed to have no monetary value and are therefore not relevant to a discussion of partial claims, or are otherwise expressly excluded from the partial claim rule.

The following categories of claim are examples:

- Claims for state and municipal liability under the State and Municipal Liability Act;
- Collective claims;
Applications for the division of title.

How to choose the amount to claim in a partial claim?

A claimant may bring any part of its potential claim at any stage, subject to the time limits and considerations we describe below.

While the choice of level of claim is always very specific to the facts of a case, our general recommendation to clients considering partial claims is to bring claims initially at or slightly above the value threshold required for the claim to be justiciable to the District Courts (okruzhen or gradski sud), rather than the lower-level Local Courts (rayonen sud).

Currently, the threshold for allocation to the District Court as a first instance court is BGN 25,000 (approximately €12,500), implying a court fee of approximately €500.

A procedural advantage of starting a claim in the District Court is that if the claimant wished to increase the amount of their claim, there would be no need for transfer between courts after increasing the claim amount, which saves time and expense.

How does a partial claim help manage risk?

Partial claims allow claimants to test the prospects of success in complex cases. During the disclosure stage of the proceedings the claimant will be able to evaluate the strength of the defendant’s case, their evidence and the attitude of the court towards allowing expert witnesses. 

A further possible advantage is the minimisation of possible instances of appeal by the defendant.

Depending on the amount of the partial claim (if below BGN 5,000 in civil cases and BGN 10,000 in what are technically termed commercial cases), there may be only a single instance of appeal. A partial claim of below these thresholds would tend to thus save time and costs in comparison to the three-stage proceedings involved with a claim for the full possible amount or at any rate one brought above the threshold.

Additionally, after an effective judgment, the claimant may wish to proceed to enforcement. Successful enforcement of a part of the claim might help the applicant fund the pursuit of the balance of the claim.

Disadvantages of the partial claim

The partial claim device is not without its downsides. Two of these are the need to consider limitation and the way in which a partial claim may interact with the availability of freezing orders.

Interaction with limitation

To prevent limitation from accruing to any part of a claim, it needs to be commenced. Bringing a partial claim has this effect in respect of the part of the total value of the potential claim that is brought, but does nothing in respect of the part which is not.

Reduced or no availability of freezing orders and other forms of defendant asset protection

Bulgarian courts are generally more likely than those in other jurisdictions (e.g., England) to grant freezing orders either before proceedings are issued or after issue. Freezing a defendant’s assets is a very effective and powerful means of securing a claim and one that claimants generally find appealing.

By bringing a partial claim only, a claimant reduces his or her chances of obtaining a freezing order over an asset (e.g., land) of a higher value, since the disproportionality between the claim size and the asset value widens.

At the same time, until an asset is charged, an unscrupulous defendant remains free to dispose of it.

Losing a partial claim is a bar to a separate claim on the balance

Once a partial claim has been decided and an effective judgment is entered against the claimant, the reminder cannot be pursued.

Increasing the claim up to its maximum potential size

It is generally possible for a claimant to raise the claim size and pay any shortfall in the adjusted fee, calculated as 4% of the new claim value.

This may be done until the first open hearing in the proceedings and in rare cases, later on.

Once a set of proceedings is past the end of the first hearing in the case, bringing the remainder of the claim can be done only by way of a separate claim.

Do you have any further questions about pursuing a claim in Bulgaria and how to minimise your risks in civil litigation?

The litigation team at New Balkans Law Office is available to respond to your questions. Please feel free to contact us at any time.

FAQs about Bulgaria’s Citizenship by Investment Program

We wish to provide all interested investors with the relevant information so that they can rest assured that choosing Bulgaria’s Citizenship by Investment Program will be the best option.

The following is a recopilation of our clients’ frequently asked questions.

For more information, please contact us at sofia@newbalkanslawoffice.com or by our Contact Form.

Frequently Asked Questions:


General Questions

  • Who can apply for the Immigrant Investor Programme in Bulgaria?
    Any foreign citizen of legal age and with a clean criminal record who is not considered a threat to national security and can invest a minimum of 1,000,000 BGN, thus making him or her eligible to apply for Bulgarian citizenship.
    As of September 2018, almost 200 people applied to obtain Bulgarian citizenship on the basis of an investment.
  • Am I required to be able to speak Bulgarian?
    No. Speaking Bulgarian is not required.
  • What’s the difference between the Standard Track Application and the Fast Track Application?
    On the Standard Track, the applicant can acquire permanent residence after making the investment, and would hold the investment for a period of 5 years. At the end of the 5 years the applicant can apply for citizenship. On the Fast Track, the applicant can make an additional investment of 1,000,000 BGN (approximately 513,000 EUR) one year after the initial investment and he/she is immediately eligible to apply for citizenship.
  • Can my spouse and children obtain citizenship as well?
    Spouses and children of the applicant are eligible to acquire permanent residence. Though, they will not be granted citizenship at the same time as the applicant.
  • Do I ever have to travel to Bulgaria?
    Yes, but only for 2 times.
    The applicant will have to travel only to apply for his Permanent Residence Permit, and later to apply and obtain his ID card, which can be done in a short trip of 4 business days to apply and obtain it 3 days later.
    The applicant can apply for citizenship at a consulate abroad.
  • Am I required to have previous business management experience?
    No. No previous business management experience is required.
  • Are there any minimum educational requirements?
    No. There is no minimum educational requirement.
  • Are any job creation requirements like for the US EB-5 Investment Programme?
    No. There is no requirement for job creation, like the US EB-5 Investment Programme.

About the Investment

  • What’s the minimum investment amount?
    The minimum investment size is relatively low - 1,000,000 BGN (approximately 513,000 EUR).
  • What kind of investment profiles are there?
    There are a number of different qualifying investments, including but not limited to: government bonds, shares of a corporation admitted to trading on the Sofia stock exchange, investments in the capital of unquoted companies (a higher threshold applies).
  • What is the safest investment profile?
    Government bonds are usually seen as a low-risk safe investment.
  • Can the investment be financed by borrowing?
    Yes. The investment can be financed by borrowing. However, evidence of source of funds might be required.
  • How long do I have to wait for the investment verification?
    The investment verification usually takes 14 working days.

About the Process

  • How long will it take me to obtain Bulgarian citizenship?
    Depending on the track chosen the time varies. The Standard Track qualifies an applicant for naturalization after 5 years of holding a permanent residence permit. Citizenship under the Standard Track can be obtained after appoximately 6 years. The Fast Track qualifies an applicant for citizenship immediately after making a second eligibile investment provided that the applicant has held the permanent residence permit for at least one year. Citizenship under the Fast Track can be obtained in as fast as 2 years.
  • What's the difference between the Standard Track Application and the Fast Track Application?
    On the Standard Track, the applicant can acquire permanent residence after making the investment, and would hold the investment for a period of 5 years. At the end of the 5 years the applicant can apply for citizenship. On the Fast Track, the applicant can make an additional investment of 1,000,000 BGN (approximately 513,000 EUR) one year after the initial investment and he/she is immediately eligible to apply for citizenship.
  • When do I have to enter the country after obtaining the visa?
    The validity of the visa is 6 months after the date of issue. The applicant can enter the country when he or she wishes within this 6 months.
  • How long is the permanent residence permit ID card valid for?
    The permanent residence permit ID card is valid for 5 years. In case the validity of the applicant's passport is less than 5 years then the ID card has the same validity as the passport.
  • Should I apply for a permanent residence permit, ID card and citizenship in Bulgaria or at a Bulgarian diplomatic mission abroad?
    The applicant must apply for a permanent residence permit and ID card in Bulgaria. If eligible, the investor can apply for citizenship in Bulgaria or at a Bulgarian consulate abroad.
  • After obtaining a permanent residence permit, do I have to reside in Bulgaria for the whole process?
    No. Applicants are not required to be in Bulgaria during the whole process. However, when applying for a permanent residence permit and ID card the investor is required to be present in Bulgaria.
  • What kind of documents do I have to prepare?
    There are a number of documents that have to be prepared and legalized including, but not limited to, criminal record certificate, marriage license, proof of funds, etc.
  • Are there any additional legal fees or application fees?
    Standard application fees include visa fees (approximately 130 EUR), residence permit and ID card application fees (approximately 650 EUR), legalisation fees, etc.
  • How long do I have to wait for my citizenship application to be approved?
    The citizenship application is usually approved within a period of 8 months, but additional background checks and due diligence can lengthen the process a bit.

For more information, please contact us at sofia@newbalkanslawoffice.com or by our Contact Form.

Restrictions on the acquisition of Bulgarian agricultural land


As Bulgarian agricultural land has been appreciating to approximate Europe-wide land values, and as Bulgaria is discovered as an investment destination more generally, and thus the demand for and implied price of land currently set aside or zoned as agricultural increase, international investors are increasingly interested in receiving advice on the restrictions that may apply to holding Bulgarian land, and specifically those applicable to non-EU investors acquiring currently agricultural land.

In this note, we begin by looking at the applicable law, before raising the issue of the practical implications of such restrictions for purchasers or those who acquire such assets as part of a transaction.

We suggest that the restrictions, properly interpreted, are in fact narrower than is commonly assumed. However, in practice (and this applies particularly to an acquirer), notaries have considerable freedom to express preference to as what they feel an acquisition structure should look like to be compliant. A risk-averse approach therefore makes it preferable to discuss with a notary in the area where land you intend to hold is situated, and we hope our note will be helpful to inform such discussions.


The Bulgarian Ownership and Use of Agricultural Land Act 1992 (the Act), substantively amended most recently in 2014, restricts the acquisition and holding of property rights in ‘agricultural land’, a phrase which is defined in the Act, by certain categories of entities and persons. Specifically the Act restricts ownership of agricultural land by non-EU and non-EEA individuals and companies.

Lesser rights in real estate are not within the Act’s scope.

The Act defines agricultural land as land which is not ‘purposed’ for agricultural use (it is unclear whether certain land may be deemed agricultural based purely on its administrative status for the purposes of the Land Zoning Act, or an objective measure like whether or not the land being capable of certain use or yet further, the use to which the land's owner puts it). In addition, such land must not be (among others):

  • zoned for development by way of a Detailed Zoning Plan, etc; or
  • afforested;

Subsection 3(4) of the Act expressly permits such agricultural land to be held by foreign nationals and companies pursuant to international treaties to which Bulgaria and the relevant foreign state are parties.

Subsections (5) and (6) of s 3, which was introduced in 2007, at the time of Bulgaria's accession to the EU, contain express reservations for EEA (including herein EU, unless specified otherwise) nationals (subs 4) and companies (subs 5): these are expressly allowed to acquire property interests in agricultural land.

In 2014, section 3 was amended further, introducing a number of express restrictions on who can acquire and hold agricultural land. The following were prohibited:

  • companies whose shareholders are directly or indirectly companies registered in low tax jurisdictions (a definition and list of these are given elsewhere in Bulgarian law);
  • companies whose shareholders are individuals, other than those in s 3(4) or 3(5), or companies, except those in s 3(4) or (5);
  • joint stock companies with bearer shares.

It follows from the wording of s 3 of the Act that where agricultural land is held by a company which is itself held by another company (whether registered in Bulgaria or another EEA member state), such land can be lawfully held by this structure as long as its shareholders are either:

  • individuals;
  • any company, as long as it is not registered in one of the proscribed low-tax jurisdictions.

While subsections 4 to 6 of s 3 appear to be a list of what is permitted, they should not be interpreted as a closed or exhaustive list: s 3 as a whole is a mixture of permissive and restrictive provisions.

A further amendment to the Act in 2014 introduced section 3C (3в in the Cyrillic alphabetical order). Subsection 1 of this sets out a further permissive provision: individuals who have resided in Bulgaria for 5 years or more are permitted to acquire agricultural land, as are legal persons established (in Bulgaria) for a period of 5 years or more.

While at first sight s 3C(1) could be taken as introducing a further filter, an additional requirement, that this is not the correct interpretation becomes clear given that the provision does not distinguish between Bulgarian nationals and foreign nationals.

If s 3C(1) were intended to be read as a restriction, it would have prohibited Bulgarian individuals who have not been resident in Bulgaria for 5 years or more from acquiring land as much as it would prohibit foreign nationals (including the EEA foreign nationals who are otherwise permitted). Such a restriction would appear to be a violation of Bulgarian nationals’ constitutional right to property by imposing an unwarranted requirement of residence as a pre-condition to holding certain types of property and a violation of Bulgaria’s EU obligations by introducing a discriminatory provision and/or a provision impeding freedom of movement of labour, capital and of establishment (which are otherwise protected) which will generally be impermissible, except on very clear grounds and with a very express intent.

On the other hand, read as a provision that enables some otherwise restricted non-nationals to acquire agricultural land after a qualifying residence period, the provision makes good sense.


Therefore, excluding any assistance that non-nationals may derive under international treaties, the following are restricted from holding Bulgarian agricultural land under OUALA 1992:

  • Companies whose shareholders are directly or indirectly registered in “low tax” jurisdictions (s 3(7)(1));
  • Bulgarian-registered companies whose direct shareholders are nationals of non-EEA countries, unless they meet the proviso of having resided in Bulgaria for 5 years at the material time;
  • Non-EEA nationals holding or acquiring directly (unless they have resided in Bulgaria for more than 5 years);
  • Companies which have issued bearer shares.

For further information, please contact us. We will explore your individual case in detail and provide you with tailored legal advice.

Bulgaria as an online gambling services location

Bulgaria's online gambling industry

With over 15 years of history, Bulgaria is established in support services relating to online gambling, including software development at various levels of the value chain; technical and customer support and back office functions.

A range of mainly British, Gibraltarian and Israeli players run substantial Bulgarian operations (e.g., Ladbrokes, Playtech, Bwin.party, William Hill, SB Tech).

A strong outsourcing industry more generally provides the backdrop to online gambling support.

Bulgarian developers and support agents are generally seen as capable of high-quality output and possessing excellent intercultural skills.  The timezone (UTC +2), places Bulgaria close in its working day to several large global markets.

Bulgaria generally ranks in the top tier for Internet speed and accessibility. The average connection speed in Bulgaria is 15,815 kbps, with average peak connection speeds of 59,048 kbps according to data from Akamai’s State of the Internet report. 4 Mbps broadband penetration reaches 96.8% and 15 Mbps broadband penetration at 40.2%. The advantageous Internet infrastructure makes it ideal to base servers or staff that remotely support the online gambling operators.

On the risks side, due to the smaller labour market, it might be harder to scale beyond a certain size particularly over a short period of time.

Bulgaria as an online gaming licensing base

The Bulgarian Gambling Act (most recently updated in 2014) allows the licensing of online gaming operators.

Substantial policy efforts have been invested in modernising legislation. The government has focused on adopting best practices and sought to lower the barriers to licences and create a balanced regulatory environment in a favourable tax regime.

For example, exchange betting specialist Betfair was granted two online gambling licenses by Bulgaria‘s State Gambling Commission (SGC) in 2014. Betfair is authorized to offer sports betting (including exchange wagering) as well as wagers on horse and dog racing. Betfair was also separately licensed for online casinos and poker.

Operators are charged a one-off licensing fee of approximately US$ 56,000 plus 20% on the difference between the value of the bets received and the winnings paid out, except that games which involve the collection (by the operator) of a commission or a fee for participation are instead charged a fee of 20% on the value of such commissions or fees collected.

An online gaming licensee may be a corporation established elsewhere in the EU (e.g., Malta). Once licensed, it may operate anywhere in the world subject to local laws and

In conclusion, Bulgaria may be an appropriate destination for online gambling operators. 

Bulgaria’s gambling taxation regime together with the balanced regulations currently in place, makes the country attractive for local licensing and gambling operations based upon a low corporate tax and comparatively highly-qualified and low-priced technical specialists.

International Comparative Legal Guide to Litigation & Dispute Resolution 2016

The International Comparative Legal Guides (ICLG) series by Global Legal Group provides “current and practical comparative legal information on a range of practice areas.”

This guide covers 49 jurisdictions and reviews different issues in litigation and dispute resolution laws including “ preliminaries, before commencing proceedings, commencing proceedings, defending a claim, joinder & consolidation and duties & powers of the court.”

Litigation chapter 2016


New Balkans Law Office’ Partner Kamen Shoylev and Associate Yordan Neshkov have contributed to the Bulgarian chapter of Litigation & Dispute Resolution 2016.

Click here to read the ICLG Bulgarian Litigation & Dispute Resolution Chapter 2016

This article appeared in the 2016 edition of The International Comparative Legal Guide to: Litigation & Dispute Resolution published by Global Legal Group Ltd, London."

International Comparative Legal Guide to Real Estate 2016

The International Comparative Legal Guides (ICLG) series by Global Legal Group provides “current and practical comparative legal
information on a range of practice areas.”

ICLG Real Estate 2016

The series covers 33 jurisdictions for real estate, and reviews different topics in real estate law, including ownership, real estate rights, system of registration, the registry or registries in a given jurisdiction, the real estate markets of such jurisdictions and the liabilities of buyers and sellers in real estate transactions.

New Balkans Law Office’ Partner Kamen Shoylev and Associate Irina Stoyanova were the authors of the Bulgarian chapter of ICLG Real Estate 2016.

Click here to read the ICLG Bulgarian Real Estate Chapter 2016.

This article appeared in the 2016 edition of The International Comparative Legal Guide to Real Estate, published by Global Legal Group Ltd, London.

Improvements to the procedure involved in applying under the Bulgarian citizenship

Further improvements to the transparency of the procedure involved in applying under the Bulgarian citizenship by investment programme.

The Bulgarian Ministry of Justice has published on its website lists of supporting documents, which in its view are expected from applicants for citizenship by investment under both the standard and fast tracks to citizenship by investing.

Each category of document in the list is broadly related to a requirement in the Bulgarian Citizenship Act(BCA) and the Decree-Law on the application of Chapter Five of the BCA: e.g., the requirement to provide a criminal record check is fleshed out by the need to demonstrate that the applicant has clear criminal past and is not a threat to public order and national security.

The MoJ advises that each supporting document should be listed in the application form, duly legalised and translated.

These official lists contribute to the transparency of the programme and the smooth completion of the process.

Read on this link more information about the Citizenship by investment programme.

EU Citizenship by Investment and Residence by Investment in Bulgaria


Bulgaria is one of several EU member states which offers a citizenship by investment (CBI) and a residence by investment (RBI) programmes.

To qualify for citizenship on the Fast Track, you need to:

  • Invest approx €1,000,000 (approx €500,000 on the Standard Track)
  • Invest in bonds issued in euros or one of another three investment classes
  • Travel to Bulgaria up to three times over the ~2-year application period

You do not need to:

  • Make Bulgaria your residence (though you could)
  • Learn to speak the national language
  • Meet other requirements which may apply in other EU CBI/RBI countries

Once a Bulgarian and therefore an EU citizen, you benefit from:

  • Visa-free travel to an estimated 169 countries
  • Freedom of movement rights within the EU and its 28 members, the EEA, and Switzerland
  • A range of economic and social rights

Your family

  • Your husband/wife can apply for citizenship, too. Your children and any child of your children in perpetuity can also apply at any time in the future - each of them without further investment. 

Next steps/Applying

Please review the information below – or call us on: +359 2 950 6239 or +44 20 7183 0262 for more information, to request advice or to apply. We are available Monday to Friday between 08:00 and 16:00 UTC/GMT and by e-mail cbi@nblo.net within 24 hours at all times. 


Our experience and advantages: why NBLO?

  • NBLO can advise if your investment is eligible (government bonds always are - but other investments are possible), help with documentation, liaise with government bodies, and assist at each step.
  • We are a law firm with a wealth of experience in nationality law and private clients generally. We deal with applications for citizenship both involving investment and not.
  • To date, we have a 100% success rate in our citizenship by investment work.

Download our brochure Citizenship by Investment in Bulgaria

Frequently Asked Questions about Bulgarian CBI

200 applicants to obtain Bulgarian citizenship by investment

For more information about the Bulgarian programme and to start the process of obtaining citizenship, please Contact Us

Insurance exclusion clauses in Bulgaria

We were instructed by a British client, who had after a number of years of working as an expatriate, invested her savings in a house on the Bulgarian Black Sea Coast in which she and her husband intended to spend the next years of their lives.  Sadly, her insured property was fully destroyed by a fire.

As required in certain cases of damage (generally, high-value ones), the local police force and prosecutor's office had initially investigated the fire, but had concluded that it had been caused by a storm and therefore had been no-one’s fault.

The insurer had refused to pay any compensation under the insurance policy which our client had taken out for the house.

The insurer based its refusal to pay out on its General Terms. These contained a provision which it alleged gave it the right to refuse compensation where the loss was caused by a construction defect and/or changes to the building's interior, which were in breach of construction regulations.

According to a report produced by the insurer, the cause of the fire was related to a fireplace and appurtenant chimney (neither of which were part of the planning permission for the house). The report found that the chimney had been built in violation of a construction regulation requiring that it should be at least 10 cm from any wooden elements in the roof.

Given that the official investigations (by the Police and the Public Prosecutor) had found that the fire had been caused by a storm and not a construction defect, we felt that our client was entitled to be compensated. Following a failure of the insurer to settle out of court, we eventually issued a claim against the insurer on behalf of our client.

Somewhat surprisingly, in the course of the proceedings, first a single court-appointed expert, then a panel of three such experts, confirmed the insurer's position that the cause of the fire had been a construction defect and not the “official” view of the Bulgarian police and Public Prosecutor. This required a complete reconsideration of our initial strategy on the fly.  This new, expert, evidence (which stood unrefuted) was that the fireplace and chimney had been improperly and unlawfully built.

We decided to submit that since:

neither the fireplace, nor the chimney had been built by our client or on her direct instructions; and
our client had bought the house with all necessary building permits, including a valid Use Permit; and the defect (that the chimney was actually touching the wooden roof) was latent and not visible, she could not be held liable and the risk should  still be covered by the insurance policy.
Both the first and the second instance courts found in favour of the insurer emphasising that there had been a specific liability exclusion term agreed by the parties which was incorporated in the insurance contract (from the General Terms).

We had solid grounds for our view, and our position was vindicated when the case reached the Supreme Court and the prior decisions were reversed. The Supreme Court accepted that as the insured had not built in breach (nor had instructed an breaching construction) of the fireplace and the chimney, the insurer had to compensate for the loss caused by the fire. Very soon after final judgment, the insurer voluntarily paid the insured amount.

The Supreme Court's judgment in this case has binding force for all Bulgarian courts in similar disputes.

It is not rare for insurers’ arguments for refusal of payment under an insurance policy to not stand up to scrutiny in court. This is so even where the insurance contract’s clauses might appear on their face binding for the insured and to preclude recovery.

In this case, the wording of the contractual clauses did not distinguish as to who had carried out the unlawful works - judging from these clauses, whether they had been carried out by the insured itself, her agents, or any third party, the result could be argued to be the same: the insurer did not have to pay.

Being able to demonstrate that a literal interpretation of this contract was inappropriate was decisive for the judgment in our client's favour.

From our experience in insurance law, we would recommend to clients to seek specialist legal help in interpreting an insurance contract's terms, where an insurer refuses to pay under a policy.

A consultation with a specialist should allow you to have a much more confident view of your chances of success, no matter how convincing (and therefore hopeless for you) is the wording used by the insurer in its standard policy documentation.

The case did not directly engage a discussion of consumer-specific principles of law (including European Union consumer protection directives), as our client had purchased the property through a wholly-owned Bulgarian company, but in other cases, these would provide an additional reason to read down overly wide or general exclusion clauses in insurance contracts.

Recent work:

Joint venture structuring advice for Gama Enerji

NBLO provided joint venture structuring advice to Gama Enerji A.S., the energy investment subsidiary of GE operating in Turkey, Ireland and the Middle East in connection with a contemplated solar photovoltaic investment in Bulgaria.

© New Balkans Law Office 2019