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).
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.
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.
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.
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.
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.
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.
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.
The litigation team at New Balkans Law Office is available to respond to your questions. Please feel free to contact us at any time.
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 email@example.com or by our Contact Form.
For more information, please contact us at firstname.lastname@example.org or by our Contact Form.
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
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):
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:
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:
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:
For further information, please contact us. We will explore your individual case in detail and provide you with tailored legal advice.
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.
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.
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.”
This article appeared in the 2016 edition of The International Comparative Legal Guide to: Litigation & Dispute Resolution published by Global Legal Group Ltd, London."
The International Comparative Legal Guides (ICLG) series by Global Legal Group provides “current and practical comparative legal
information on a range of practice areas.”
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.
This article appeared in the 2016 edition of The International Comparative Legal Guide to Real Estate, published by Global Legal Group Ltd, London.
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.
Bulgaria's citizenship programme is an accessible, transparent and respectable gateway into the European economy, society and way of life.
The minimum investment needed to qualify for citizenship is low, at BGN 1,000,000 (~ €512,000, or USD $ 630,000).
Applicants may finance this by borrowing. (Lower sums yet are required if the objective is long-term residence only. We cover this in a separate note dealing with Bulgarian residence by investment).
Unlike other programmes, applicants are required to invest rather than pay into a government fund or make a donation, allowing the future citizen the possibility of profit, as well as of a contribution to the Bulgarian economy.
A further advantage of the Bulgarian citizenship by investment programme is the wide range of qualifying investment classes. This approach is progressive as it avoids potential economic distortion. Unlike the Golden Visa programmes of Spain and Portugal for example, investment is not limited to real estate. Nor is the programme prescriptive as to the number of jobs to be created, as the U.S.’s EB 5 is.
A fast-track process allows acquiring citizenship within approximately 18 months from investing.
Under the Fast Track, the investment made must be maintained for two years following the date on which the applicant takes citizenship, as well as throughout the qualifying period.
An investor on the Bulgarian programme may make a wide range of investments, including:
In practice, the multiple eligible investment classes accommodate many investment styles and objectives. We will be pleased to discuss with you (and/or your financial advisors) your plans, and their eligibility under the programme.
Most of our existing clients have chosen government bonds, which are seen as low-risk but we are able to support our clients with their own preferred investment strategy or strategies.
On the Standard Track, an applicant would become a permanent resident on completing the qualifying investment. After holding a qualifying investment for 5 years, on further application, such a resident would qualify for naturalization.
On the Fast Track, if an investor (broadly) doubled their investment at any time after the first year from investing, they become eligible for citizenship within a further 6 months, rather than having to wait for the 5-year period to run out.
The most significant of these are:
New Balkans Law Office regularly advises on the requirements of the Bulgarian citizenship by investment programme and acts for applicants in all aspects of the process. See below for our experience and how to contact us.
Close family members of the investor are eligible to acquire permanent residence and obtain Bulgarian citizenship in several ways. The main applicant’s spouse and unmarried children under 18 are eligible to become permanent residents after the main applicant is granted resident status. A main applicant’s spouse is only eligible if the spouses have been married for no less than five years at the time of application. Adult children of an investor are eligible in their own right immediately after the investor themselves obtains citizenship.
NBLO is in a position to advise on the eligibility of an investor’s investment plans (although we cannot provide investment advice as such), to assist in the sourcing, clarification and preparation of supporting documents, to liaise with the relevant government bodies, to assist at each step, including by completing many of the steps on behalf of the applicant, to put together the applications and submit and represent, among others.
As a law firm with a strong and rich practice in immigration and nationality law, NBLO deals extensively with applications for citizenship both involving investment, and not.
Since our members are regulated lawyers, we adhere to the highest standards of professionalism and probity. This includes our duties under the European Union's anti-money laundering and counter-terrorism financing legislation. This serves to assure our clients that our other clients have passed suitable checks and are worthy associates.
Our work with both private clients and businesses in other areas of law helps us provide a high-quality and seamless service: we are able to draw on our extensive knowledge and experience from other areas ranging from personal taxation to company law (relevant to the realization of investment plans and the assessment of their eligibility under the programme), from family law (relevant to the citizenship applications by family members of the main applicant) to real estate and fund management law (relevant where an applicant has chosen to invest in either of these classes).
For more information about the program and to start the process of obtaining citizenship, please Contact Us
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.
In this note, we provide an overview of the requirements an overseas-incorporated business must generally meet to open a bank account in Bulgaria. We restrict our analysis to those organisations or businesses which are structured as companies or corporations in their home jurisdiction. Bulgarian law recognises legal forms originating in other jurisdictions without discriminating in principle, but since non-corporate structures tend to be less similar across borders they call for separate treatment.
As of June 2015, there are 22 standalone banking corporations or subsidiaries and 6 branches of overseas banking institutions, which are licensed in Bulgaria. For an up-to-date list, see the Bulgarian National Bank's list of credit institutions.
All these 28 licensed banks (“Bulgarian banks”) as a rule provide current account facilities to businesses, including businesses established overseas, though they vary in the business for which they have appetite.
Regulation 3 of 16 July 2009 of the Bulgarian National Bank (“the Regulation”) sets a general framework of requirements for the opening of bank accounts. The Regulation appears to have been drafted with Bulgarian corporate law and administrative practice at the tops of the draftsmen’s minds, but is generally painlessly applied by analogy when Bulgarian banks open accounts to international businesses or organisations.
Each licensed bank has its own policy on the documents that must be supplied by an applicant and on their substance and form (and indeed this appears to be envisaged by art 5(5) of the Regulation insofar as such requirements can be additional to the list provided in the Regulation).
All banks require a specific set of information about the applicant organisation to be disclosed in the application for an account opening. First and foremost applicant companies need to produce a document proving that the company is properly registered and active at the time of the application. This document is usually in the form of a Certificate of Good Standing issued and certified by the relevant Companies Registrar but there may be other acceptable alternatives (for instance, a recent Certificate of Incorporation or similar document).
Further, corporate applicants must show who are the officers authorised to represent and bind the company and how are they authorised to act according to its Articles of the Association (or other “constitutional” documents, e.g. Charters, Bye-laws, and others). Again, this information can be contained in one of several documents and there is no strict requirement as to its layout. Thirdly, companies must declare the identity of the ultimate beneficial owners who or which control the business (typically, control is defined as a holding of shares above a 10% threshold share in the company’s capital). Each bank requires a Declaration to that effect to be signed by either an officer of the company or an authorised representative.
Finally, banks require the usual know-your-client/customer-due-diligence information about the person(s) authorised to run the proposed account.
Some banks may require that the applicant company is registered for tax purposes in its country of origin. Other institutions ask for certified incorporation documents and a list of shareholders. Importantly, if an applicant company wishes to instruct a local representative to open and/or manage the account, the applicant should present to the bank a Power of Attorney (PoA). Each bank has its own requirements as to the content of the PoA and usually requires that the PoA is as tailored to that particular bank as possible.
Given the international element, banks tend to adapt complex international customer identification and verification methods that aim to comply with evolving national and European laws. Accordingly, banks have stringent requirements on the authentication and legalisation of each document supplied in connection with the application. Applicants are well advised to choose one institution and tailor their documents accordingly.
In general, the physical presence of an international business' directors is not required at the time of application or account opening as long as certain identification requirements are met.
For further information, please contact us and we will be happy to assist you.
Acquisition of former Rover factory by Equest
NBLO advised the commercial property investment fund Equest on the acquisition of Rodacar AD (the former Rover factory in Bulgaria), from an Austrian Group.
© New Balkans Law Office 2018