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New Balkans Law Office: Bulgarian Lawyers

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.

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."

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.

Child abduction under the Hague Convention of 1980 - procedure and official bodies

Rapid globalisation over the past four decades has strengthened the need for international regulation of the movement of children. Bulgaria has experienced this internationalisation and has also been committed to the international efforts to protect vulnerable children.

The Hague Convention on the Civil Aspects of International Child Abduction 1980 (“Hague Convention”) provides a unified mechanism for states’ authorities aimed at supporting the safe and speedy return of an abducted child. The Convention applies to children removed from one contracting state and taken and kept in another contracting state.

The Convention has a mechanism for coping with complicated international cases of wrongful removal and retention of children under the age of 16.

Each of the of state signatories has to designate a central authority responsible for accurate compliance with the Convention. In Bulgaria the designated body under the Convention is the Ministry of Justice.

What qualifies as child abduction?

According to the Hague Convention the removal or retention of a child is considered wrongful (and an abduction) if:

- it is in breach of custodial rights of a particular person, institution or body, exercising those rights either jointly or alone, under the law of the State in which the child was habitually resident immediately before the removal or retention; and

- at the time of removal or retention those rights were actually exercised, either jointly or alone, or would have been so exercised but for the removal or retention.

Consequently, to have standing, a party must have had custody rights before the alleged abduction which they have actually exercised or would have exercised but for the abduction.

Return of the abducted child to the country of habitual residence

The Hague Convention does not  add to the substantive rights of custody rights holders or those hoping to have custodial rights in respect of children and therefore cannot be used to resolve disputes about such rights. Therefore disputes about custody should be dealt with under the applicable national laws in the first instance (and in cases where the Brussels II Revised regulation (Regulation 2201/2003) applies, the proper jurisdiction may be governed by that legislation). The principal aim of the Convention is instead to support the return of the abducted child to its country of habitual residence. The definition of habitual residence is a technical issue under the convention and there is some considerable strength to the view that  it is an identical meaning under the Convention, the Brussels II Revised regulation and under Bulgarian domestic law. Generally, the definition coincides with what would be understood to be such a residence as a matter of common sense, but it is in some cases particularly important to examine the factual background in detail and we are happy to advise.

The Convention provides that if a period of less than one year has elapsed from the date of removal to the date of the application, the authority seized must order the return of the child forthwith (with certain limited exceptions, such as for instance where all parties in the proceedings have acquiesced to the child’s removal). However, if proceedings purporting to be under the Convention commence more than one year after the wrongful removal, circumstances from the current status of the child and its adaptation to a new environment must be taken into account before a decision to return can be issued. An order for the return of the child would not be issued if “there is a grave risk that his or her return would expose the child to physical or psychological harm or otherwise place the child in an intolerable situation.”

Commencement of the procedure for retrieving an abducted child

It would be borne in mind that immediate reaction is imperative in situations of child abduction, in order to gather and preserve the supporting evidence.

The party with standing should first file an application at the designated body.  The application may be submitted either to the Central Authority in the child’s habitual place of residence or at the Central Authority of any other Contracting State for assistance in securing the return of the child.

Grounds for application and evidence

The application must clearly state the grounds on which the applicant is relying. Each application should be supported with clear evidence in support of the particular grounds relied upon. Importantly, the Convention provides special evidential rules different from any national evidential standards that might otherwise apply, which should be complied with   when preparing the application.

Costs and process

The Convention expressly provides that no fee or charge is payable for proceedings falling under its scope. Each Central Authority bears its own costs in proceedings before it or before the courts. However, payment may be expected in cases where funds are required for the return of the child and costs incurred from the participation of a legal counsel or advisers.

The judicial and administrative authorities of the Contracting States under the Convention are required to act expeditiously in proceedings for the return of children and to coordinate their efforts.

Once an application is lodged at the Ministry of Justice in Bulgaria, its representatives are required to engage the Sofia City Court, which has special jurisdiction in cases under the Convention. The Ministry of Justice itself is a party to the proceedings on behalf of the applying person with custody rights. The Sofia City Court has to decide the case within one month of the application. Appeals can be made to the Sofia Appeals Court, which has a further one month to issue a judgment. The decision of the Appeals Court is final in proceedings under the Convention and no further appeal or cassation is permitted in child return proceedings.

Once an effective order for the return of a child is issued, the applicant must send a written invitation to the other parent informing him of the decision, and inviting him to return the child voluntarily. The parent who had removed the child has three working days to respond.  In case the parent refuses to return the abducted child, the court can be applied to (or it can cease itself) to enforce the return order. The court can engage the assistance of the police and the local authorities if necessary. The Ministry of Justice is required to provide its support to all parties with view of the voluntary return of the child.

Scope of the Convention

The Convention applies to children who are habitually resident in state parties (as above). If a court is seised under the Convention but its seising does not result in a return order, there is still scope for an application under Brussels II Revised, and any order for return under Brussels II Revised will be enforceable under art. 11(8) of Brussels II Revised. The Brussels II Revised regulation applies to cases where the child is habitually resident in an EU member state.

Single Arbitrator panels at the Bulgarian Chamber of Commerce and Industry Arbitration Court

New Balkans Law Office often advises its clients to include an Arbitration Clause in their contracts, as when it comes to dispute resolution, the arbitration proceedings generally provide more flexibility, save time and could save additional costs. In contexts where one of the parties is  We often rely on the services provided by the Arbitration Court of the Bulgarian Chamber of Commerce and Industry (the “BCCI AC”) under their Arbitration Rules (and using a Bulgarian-based arbitration tribunal is often the main possibility when it comes to relationships involving a Bulgarian party).

The default in the Rules is that BCCI AC arbitration panels will consist of 3 arbitrators. However, Section IV of the Rules provides the option of nominating a single arbitrator to resolve the dispute.

Using one Arbitrator only is usually faster as matter of the time required for the dispute to be decided, compared to three-arbitrator panels, due to the coordination problems that the latter experience which do not affect the single arbitrator panels.

Using a single Arbitrator is also cheaper, as under the Rules, in such cases only 50% of the arbitration fee is payable.

Nominating a single Arbitrator under the Rules requires the consent of the both parties. This consent can be negotiated upfront.

This can occur either at the time of agreeing the arbitration clause and then can be included in it, or agreed ad hoc between the parties before proceedings start or shortly after. The Chairman of the BCCI AC could also propose this to the parties of his own initiative, but the latter rarely occurs in practice.

Alternatively, when filing its claim, the Claimant can apply to the BCCI AC to nominate a single arbitrator. If this had not been previously agreed between the Claimant and the Respondent, the AC secretariat would notify the Respondent and request it to confirm or reject the proposal. Where the Respondent agrees, it must agree with the nominated Arbitrator or suggest another and ultimately an Arbitrator must either be agreed or appointed by the AC.

Since on filing its claim, the Claimant would have been required to pre-pay the full fee due as if three Arbitrators would have been empanelled in order for the claim to be processed, the fee is reduced to 50% and the overpayment refunded at this point.

We generally recommend a single arbitrator for any relatively low in size potential disputes. Where your potential disputes are likely to be very complex or the size of the claim is likely to be significant, clients typically prefer to keep to the usual three-arbitrators adjudication panels.

Liability for professional negligence and professional malpractice in Bulgaria

Disputes invoking the liability of lawyers for professional negligence in Bulgaria are rarely reported.  The small numbers make it difficult to derive robust conclusions about the long-term trends in the associated jurisprudence.

Without the benefit of statistical power, there is received wisdom. This is that Bulgarian courts’ first instinct is to reject claims for damages issued against lawyers, and that they do so whenever the alleged loss cannot be shown to be either solely or overwhelmingly related to the conduct of the lawyer. In this way, lawyers avoid liability in Bulgarian law except in the most blatant and egregious of situations of misfeasance.

Recent case law

In connection with a high-value claim against a well-known regional legal practice on behalf of an international client, NBLO’s dispute-resolution team conducted a survey of recent cases in which claimants had sought to allege fault or negligence on the part of an advocate, and found that the following devices served to either limit or negate fully an advocate’s liability:

- The claimants could not show the closest causal connection between the lawyer’s alleged act or omission and the loss

- The scope of the lawyer’s duty was found by the court to be limited – for instance, by a finding that the lawyer had not expressly agreed or otherwise been placed under a duty in advance to undertake a specific action

- By findings that the alleged loss was ultimately connected to the Court’s discretion rather than that of the lawyer

- Where the allegation was that the lawyer had not performed a specific procedural step but he or she could credibly counter that he or she had, at the relevant time, considered the step as contrary to the client’s interests, at that particular time (at the same time, the court tends to give a very wide margin of appreciation as to what qualifies as in a client’s interests).

Still, there are, albeit rarely, cases where Bulgarian judges find advocates liable. This will come as a relief to claimants who feel very strongly that the relative immunity from delict of professionals in Bulgaria and specifically, that enjoyed by allegedly wrongdoing lawyers, is unfair and counterproductive.

Cases with findings of liability

Case 227 of 23 August 2013 of the Supreme Court of Cassation was a case of a positive finding of liability. In it, the Supreme Court took the opportunity to describe the boundaries of an advocate’s liability. Firstly, in describing the attorney’s standard of care, the Supreme Court stated this to be greater than that required of a careful owner and even greater than of a careful business person since, according to the Court, the Advocacy Act imposed an especially exigent requirement on advocates to act lawfully in the interest of the client in the best possible manner (the first part of this would resemble the fiduciary nature of lawyers’ duties familiar to English and American lawyers).

Secondly, in the Supreme Court’s analysis, an advocate had to protect all (key?) items of a client’s legal position. If the defence of a claim against the client fails because of the absence of a minimum level of care, the lawyer can be held liable for all damages flowing from the omission or act.

A case on its own extreme facts?

Perhaps however, it was the egregiousness of the failures of the advocate in the case that were the most significant element behind the finding.

The advocate had repeatedly made statements to his client which were subsequently shown as false. These were to the effect that an important court document had been filed, where it had in fact not. The misleading statements were in writing (even if the writing was in the form of text messages, a relatively unorthodox form of writing in the eyes of Bulgarian courts) and therefore more likely to meet the high evidential requirements. This falsity had resuled in the client losing the opportunity to engage in the proceedings properly before its actions had become time-limited and the consequent financial loss had inexorably followed.

It is difficult to be sure whether slight variations in the facts (or indeed – even identical facts) would result in an identical finding in future.

Range and types of duties

Notably, most cases reported as reaching the courts concern advocacy in court. Advocates’ professional duties in other contexts or the duties of lawyers who are not admitted to practise as advocates may be even more protected from liability.

For instance, in the context of the advisory role of lawyers in transactions or in other non-contentious situations,which are potentially either equally or even more error-prone than court trials, the alleged harm and the amounts at stake may potentially be even higher while the establishment of the role of the advocate, and consequently, of his or hercausal connection to any loss – even remoter.

The importance of prevention and planning

It is perhaps common sense that clients who want to encourage their professional advisors to exercise the utmost care should take precautions to document all correspondence and clearly consider and express their wishes and instruction. Such formality and deliberateness may seem excessive but they would serve to minimise risk and to ensure greate chances of success should a dispute arise.

Such planning is especially important given that the professional indemnity insurance cover of Bulgarian professionals is often non-existent or minimal.

Our assistance

New Balkans Law Office regularly advises on issues of professional negligence liability in both the contentious and non-contentious contexts and both preventively, and after the occurrence of loss. As well as on the duties of advocatesoperating under Bulgarian law, we are asked to advise on the delictual (tortious) and contractual responsibilities of other professionals including medics, civil engineers, architects, business and financial advisors.

Do not hesitate to contact us if you require advice on how to minimise your own risk of liability for professional negligence or those for whom you are responsible, the risks of error and carelessness in a venture or operation, or if you are involved in a dispute in which you feel the malpractice liability in Bulgarian legal or other professional is engaged.

English Court of Appeal decides on a Bulgarian TMT dispute

The judgment of the English Court of Appeal in the case of Barbudev -v- Eurocom Cable Management Bulgaria EOOD (reported at [2012] 2 All ER (Comm) 963) has recently revisited the legal treatment of the contractual concept of "agreement to agree" in English law and to that extent has been responsible for making English legal history.

The case pitted the Warburg Pincus private equity group ("WPG") (represented by Freshfields Bruckhaus Deringer and an up-and-coming commercial barrister, Conall Patton of One Essex Court against Mr Georgi Barbudev, who in the words of the Court had "built up a successful cable television and internet business in the Plovdiv area of south central Bulgaria in the years 1995-2004", called Eurocom Plovdiv EOOD ("EP"), which became Bulgaria's second largest cable television business. In November 2005, Mr Barbudev concluded two Term Sheets with WPG which gave the latter approximately 6 months of exclusivity of negotiation for the acquisition of Mr Barbudev's stake in EP. The Term Sheets were said to be governed by English law and other than for the exclusivity clause, were not intended as binding.

The acquisition of EP was part of a strategy for the private equity acquirer of consolidating a number of cable TV assets, and Mr Barbudev became interested in remaining invested in the enlarged business to which EP would have played the role of a bolt-on. The parties discussed his investing some €1.65 million for what was mooted as a 10% stake of the enlarged company.   

In the period up to April 2006, Mr Barbudev and WPG exchanged draft Share Purchase Agreements (SPAs) but the problem for Mr Barbudev was that a clause had been inserted in the draft SPA, under which WPG was to be given the unconditional right to waive the execution of (in the language used between the parties, an Investment and Shareholders' Agreement (ISA)) as a condition precedent to a closing on the SPA.

As, several days before the intended closing date it became clear that an agreed draft of the intended ISA would not be produced by the intended date for signing, the idea emerged in discussions between Mr Barbudev, WPG's representative and WPG's Bulgarian lawyer of a "Side Letter" which would provide some comfort to Mr Barbudev in the intervening period between execution of the SPA and the possible execution of an ISA.

At the date of execution, WPG and Mr Barbudev executed also the Side Letter, which had been drafted at WPG's request by Freshfields. It appears that at the time Mr Barbudev was not represented by a lawyer versed in English law.

In the course of time, Mr Barbudev was disappointed in his expectation that he would be allowed to invest in the consolidated cable TV entity on the terms discussed in November 2005-May 2006 or indeed on any others.
Following an onward sale by WPG of the merged entity, of which Mr Barbudev heard in May 2009, and following also the settlement of various outstanding matters between Purchaser and Seller in a Final Protocol in 2008, which appeared to contain a comprehensive waiver of claims by Mr Barbudev against the WPG entities. It appears that Mr Barbudev was once again not assisted by anyone acquainted with English law, though the question of the effect of the release was not ultimately central to the Court of Appeal decision.

Once Mr Barbudev had found of the intended disposal by WPG of their Bulgarian asset, and that he was accordingly not likely to have the opportunity to treat further with the group and hope on a possible commercial advantage, he perhaps felt that he had nothing more to lose since he issued proceedings in the English High Court, alleging that the Side Letter had created a valid contractual agreement, and that its breach had resulted in compensable losses to him.   

Following a 7 day Commercial Court hearing before Mr Justice Blair at which Mr Barbudev testified and was found to be a mostly reliable witness, a judgment followed in favour of WPG.

On appeal, the Court of Appeal (in the speech of Lord Justice Aikens, at para [28], summarised the issues before it as follows:

Logically the first issue is whether the judge erred in concluding that Mr Feuer did not give Mr Barbudev an oral assurance before Mr Barbudev signed the Side Letter. The appellant's case was that this assurance was to the effect that the Side Letter was a solution to Mr Barbudev's concerns about clause 6.5 of the SPA terms and that the Side Letter was like a separate contract to protect his right to invest in the new merged business. If that issue succeeds, then it would amount to a collateral contract and could be relied on by Mr Barbudev. If it fails then the second issue is whether the parties intended to create legal relations by virtue of the Side Letter, set in its commercial surroundings. The third issue concerns the nature of the Side Letter, in its context: was it an "agreement to agree" or was it an enforceable contract giving Mr Barbudev rights to purchase a stake in the merged ECMB? Fourthly, if the Side Letter was, in principle, a binding contract giving Mr Barbudev such rights, was it nevertheless unenforceable because of uncertainty of terms?

Unfortunately for Mr Barbudev, he failed on the first issue. The Court of Appeal found that the question of whether there had been an oral assurance and therefore a collateral contract had been a matter of a primary finding of fact and that none of the possible grounds for overturning the finding of the trial judge had been established ("To overturn it the appellant has to demonstrate that the judge's conclusion resulted from a fundamental error concerning the evidence; that his conclusion was not possible on the evidence or that it was unreasonable." (paragraph [35]).

However, the Court also disagreed with Blair J. in part: the parties had intended to create legal relations through the Side Letter (this was an overall conclusion based on the existence of clauses both parties clearly intended as binding (eg, the confidentiality provisions); the hiring of a law firm to draft; the use of the language of legal relations and the dealing with specific legal questions which would be typical of a binding contract (rights of third parties and choice of law language) (para. [37]).

However, at the same time, the Side Letter's core terms had been phrased in such a way that Mr Barbudev had obtained no more than a mere agreement to agree, which English law had long taken to be unenforceable. Its operative clauses, cited at para.[43] of the Court of Appeal judgment referred to "...terms to be agreed between us...", "...we agree to [...] negotiate in good faith with you..." and "...agree to invest an aggregate amount of not less than..." fatally undermined Mr Barbudev's position.

Although the Court of Appeal had no doubt that the commercial context and Mr Barbudev's aims were such that he had intended to extract from WPG a binding promise to be allowed to invest, he had failed to and had instead signed up to a document of no effective legal value. This was somewhat strange given the finding that the parties had intended contractual relations: it would seem to follow that they had intended contractual legal relations but not (or at least not both parties) ones which could take the form of a form of contract recognisable in English law (ie, an "agreement to negotiate in good faith" or an "agreement to agree"). It is difficult to conceive what other form of legal relations the parties might have intended and if they had intended no specific species recognisable by the law, what they had intended.

Nevertheless, it is clear that the Court of Appeal felt constrained by the House of Lords authority (in Walford -v- Miles [1992] 2 AC 128) and related cases, and by the need to maintain certainty in the relations between commercial parties.

It also seems clear that Mr Barbudev would have done well to draft in appropriate legal advice at the time of negotiation. The law in the area which was eventually litigated is well-established, and the Court of Appeal was merely confirming and restating the position. 

Had he been advised, Mr Barbudev (whose surname's Bulgarian etymology, as fate would have it, appears to derive from the name of a game of chance involving dice), probably would not have engaged in quite such a leap of faith. On the other hand, and even though one may feel sorry for Mr Barbudev who may have been outgunned, it seems that he had engaged in an exercise of wishful thinking to have attributed the force of a binding and meaningful agreement to a text which on its face merely promised negotiations (without, as the Court went on to find, fixing even some of the key goalposts, of which only the share Mr Barbudev was to hold and the minimum price he was to pay for it, were likely agreed).

The case did nothing to undermine the reputation which the English Court of Appeal has with commercial parties as a forum which gives a fair chance at having one's case heard and examined on its merits, but on the contrary - only strengthens it, including presumably with Bulgarian businesses. It does however underscore the importance of receiving appropriate professional advice which at its best can help commercial parties account properly for the implications of at least those - the majority - of legal issues which are well-settled in English commercial law.

The case is also reviewed for instance here and here.

Enforcement Client Note

NBLO’s Enforcement Client Note considers all aspects of enforcement in Bulgaria. It discusses the scope of enforcement; its execution (commencement, progress and termination) and its limits. The note examines the subject from the viewpoints of both creditor and debtor.
The second part of the note describes the treatment of awards and determinations by other bodies. This includes a discussion of how various regulatory, quasi-judicial and self-regulatory bodies and interact with court judgments, as well as considering how “Brussels regime” judgments are enforced.
To download our note, please click here:


NBLO also contributed a section on enforcement and civil remedies from a foreign investor perspective in the Invest Bulgaria Agency’s “Legal Guide to Bulgaria”.  This was published as a chapter in editions in 2010 and 2011. The contribution can be found here:

Enforcement Client Note

NBLO’s Enforcement Client Note considers all aspects of enforcement in Bulgaria. It discusses the scope of enforcement; its execution (commencement, progress and termination) and its limits. The note examines the subject from the viewpoints of both creditor and debtor.

The second part of the note describes the treatment of awards and determinations by other bodies. This includes a discussion of how various regulatory, quasi-judicial and self-regulatory bodies and interact with court judgments, as well as considering how “Brussels regime” judgments are enforced.
To download our note, please click here:


NBLO also contributed a section on enforcement and civil remedies from a foreign investor perspective in the Invest Bulgaria Agency’s “Legal Guide to Bulgaria”.  This was published as a chapter in editions in 2010 and 2011. The contribution can be found here:


Recent work:

Austrian telecommunications operator’ Bulgarian operations

Members of our team advised the largest Austrian mobile telecom operator on various aspects of their operations in Bulgaria:

  • assisting the client in an authorization procedure before the Bulgarian telecommunications regulator;
  • regulatory and commercial aspects of the group’s cash pooling system;
  • advising the client on a complex debt/equity swap transaction;
  • providing on-going legal advice and assistance with regard to corporate matters.

© New Balkans Law Office 2019