Substantial Amendments to the Arbitration Act 1988: Institutionalisation of Arbitration Proceedings in Bulgaria
21 October 2025Over recent years, arbitration in Bulgaria has faced a marked decline, largely due to growing concerns that it has been misused to facilitate fraudulent practices, a suspicion confirmed by the authorities on multiple occasions. In response, a significant reform was implemented in 2017, which excluded consumer disputes from the scope of arbitration. Nevertheless, public trust has remained low. Following renewed media attention on abuses of the arbitral process, the Ministry of Justice initiated further reform of the International Commercial Arbitration Act 1988, most of which entered into force on 1 August 2025.
This reform can best be characterised as the institutionalisation of arbitration in Bulgaria—a shift from a liberal, party-autonomy-based framework to a more regulated, supervised regime.
Change of Title
The amendments rename the act from the International Commercial Arbitration Act to the Arbitration Act (AA). This clarification is welcome, as the previous title misleadingly suggested that the Act applied only to international or commercial arbitrations. In fact, since 1993, it has also governed domestic arbitrations involving non-commercial parties. The scope of the AA therefore remains unchanged.
The 2025 amendments also preserve the long-standing exclusions from arbitral jurisdiction—namely, disputes concerning immovable property, employment, maintenance (alimony), and consumer claims.
Institutionalisation
The reform introduces a fundamental structural change. Henceforth, arbitration tribunals seated in Bulgaria may operate only as “permanent arbitration institutions”, registered in a newly established Registry of Arbitrations. Each such institution must be part of a legal entity registered in the Company Registry or another statutory registry.
To promote transparency, these institutions must maintain a registered office, an electronic archive and case filing system, and a public website containing their rules, fee schedules, and lists of arbitrators.
Ad hoc arbitration, once a hallmark of party autonomy, is now permitted only in international commercial arbitrations; i.e., where at least one party is established or resides outside Bulgaria. Consequently, domestic arbitration must be institutional, a significant departure from the prior regime. While this restriction limits party autonomy, it arguably enhances procedural safeguards and protects individuals from potential abuse.
The Registry of Arbitrations
The Registry of Arbitrations (‘Registry’), to be established electronically under the supervision of the Ministry of Justice by 1 December 2025, represents one of the most notable innovations. The Registry will contain comprehensive data on permanent arbitration institutions, ad hoc and international proceedings conducted in Bulgaria, as well as details concerning arbitrators, parties, and awards.
Registration is now a prerequisite for the lawful exercise of arbitral powers: awards rendered by unregistered arbitrators or institutions will be null and void.
The Ministry of Justice is vested with supervisory and sanctioning powers, including the authority to delete an institution from the Registry if it commits systemic or serious infringements—defined as three or more breaches within one year that constitute grounds for nullity or annulment of an award (except for the two grounds concerning the award resolving a dispute not foreseen in the arbitration clause or the formation of the arbitral tribunal or the arbitration procedure not being in accordance with the agreement of the parties or the law).
Eligibility and Procedural Rules for Arbitrators and Institutions
The amendments introduce stricter eligibility criteria for domestic arbitrators. In addition to the previous requirements (full legal capacity, majority, higher education, eight years of professional experience, and high moral standing), arbitrators must now:
- not be subject to professional bans or disqualifications;
- not be bankrupt or insolvent; and
- possess high professional competence.
Generally, per s 11(5) AA, the requirements above do not apply to arbitrators from international arbitration institutions sitting a case in Bulgaria. Worded this way, it would appear that they would nevertheless need to satisfy the criteria in the case of an ad hoc international arbitration. Furthermore, the provision of s 11(5) AA must be interpreted correctively as otherwise it would be contrary to Article V(1)(a) of the New York Convention for arbitrators to not be of full legal capacity and majority, among other obvious reasons.
Procedural reforms also include a restriction on the language of proceedings: if both parties are Bulgarian (except where one is an enterprise with predominant foreign participation), the arbitration must be conducted in Bulgarian. This provision unnecessarily limits party autonomy and raises interpretive uncertainties, as the term “enterprise with predominant foreign participation” is undefined. Would, for example, a company with Bulgarian shareholders and a foreign director be such a company and, if not, how would it justify the exclusion of the company’s legal representative who is also responsible for its day-do-day operations from the language of the arbitration? Also, would a company with a Bulgarian company as a sole shareholder, which in turn is a 100% subsidiary of a foreign company, constitute such an enterprise with predominant foreign participation? Either way, it is unclear what the objective of this restriction is.
Conversely, the Act makes notable strides in modernisation. It explicitly allows video-conferenced hearings, promoting accessibility and efficiency. The Act also requires that all procedural actions and statements be “registered” in a form allowing for storage and reproduction, though It would have been even better if the AA used “recorded” and so, in line with the novelty of video conferencing, required and normalised beyond any doubt video and audio recordings as a source of information and evidence.
The rules on service of documents are now more precise: documents must be served via registered mail, courier, notary, or bailiff. A claimant may now safeguard its rights by seising the courts if service of the claim fails despite the presence of an arbitration clause. Electronic service is permitted only by parties’ consent, after initial service has been validly effected.
Finally, arbitration institutions must maintain electronic filing systems to which parties have continuous access, another commendable step toward transparency.
Annulment and Enforcement of Awards
A welcome change is the reinstatement of public policy (ordre public) as a ground for the setting aside of arbitration awards, which aligns the AA more closely with the New York Convention, in particular Article V(2)(b) thereof. The omission of this traditional ground with the prior major amendments to the AA in 2017 was heavily criticised by legal practitioners and was never satisfactorily justified by the law maker.
Another welcome change is the introduction of explicit grounds for annulment where an award is based on falsified documents, perjured testimony, or criminal conduct by a party, arbitrator, or institutional employee. The Supreme Court of Cassation (SCC) now has the power to review awards ex officio on these and other general grounds, enhancing legal certainty and procedural fairness.
Awards rendered by unregistered arbitrators or institutions are expressly null and void, reinforcing the link between registration and legitimacy. Moreover, claims for nullity may now be filed without a time limit, a clarification that promotes stability and trust in the system.
Finally, the SCC may now stay enforcement of an award where credible written evidence of annulment grounds exists, without necessarily requiring security, correcting an unduly restrictive feature of the previous regime.
Conclusion
The 2025 amendments to Bulgaria’s Arbitration Act mark a decisive shift toward the institutionalisation and state oversight of arbitration. By imposing registration, transparency, and professional standards, the legislature aims to restore credibility to a system that had suffered reputational damage.
While these reforms undeniably strengthen procedural safeguards and promote accountability, they also curtail traditional principles of party autonomy and flexibility, particularly by limiting ad hoc domestic arbitration and imposing language restrictions.
In balance, the reforms represent a pragmatic compromise between autonomy and integrity, reflecting Bulgaria’s broader effort to align its arbitration framework with international best practices while addressing domestic concerns about abuse. Their ultimate success, however, will depend on the Ministry of Justice’s ability to administer the Registry impartially and on the courts’ consistent and measured application of the new provisions.
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