For a considerably long period of time (1952–1988) arbitration in Bulgaria was largely unregulated, and domestic arbitration was even forbidden.

The International Commercial Arbitration Act (“ICAA”) of 1988, which adopted in large part the provisions of the UNCITRAL Model Law, regulated in detail international arbitration in Bulgaria. In 1989, the State Council issued Decree No. 56 on Economic Activity allowing – for the first time since 1952 – the arbitration of domestic disputes, although only between commercial entities. In 1992–1993 arbitration became an option for almost all civil disputes (see the section on Arbitrability below) and the rules applicable to domestic arbitration were amended so as to bring them more closely into line with the rules ­applicable to international arbitration.

Despite its title, the ICAA allows and regulates both international and domestic arbitration.

Other relevant national legal instruments relating to arbitration include the Bulgarian Civil Procedural Code, published in State Gazette No. 59, dated 20 July 2007, in force since 1 March 2008 (“CPC”), and the Private International Law Code, published in State Gazette No. 42, dated 17 May 2005 (“PILC”).

The above national legal instruments are complemented, inter alia, by two important international legislative instruments: the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, dated 10 June 1958, which was ratified by Bulgaria in 1961 (“New York Convention”) and the European Convention on International Commercial Arbitration, dated 21 April 1961, which was ratified by Bulgaria in 1964 (“European Convention”).

Currently, the most important and well-established arbitration institutions in Bulgaria are the Arbitration Court at the Bulgarian Chamber of Commerce and Industry (the “AC at CCI”) and the Arbitration Court at the Bulgarian Industrial Association (the “AC at IA”), both of which have jurisdiction to hear a wide range of arbitration disputes. The AC at CCI has also published rules that can be used by parties in ad hoc arbitration proceedings. Institutions enjoying more limited jurisdiction include the Arbitration Court at the Association of Commercial Banks (banking disputes); the Arbitration Court at the Bulgarian Stock Exchange (finance and regulatory disputes); and the Marine Arbitration Court at the Bulgarian Chamber of Shipping (maritime disputes).

The ICAA is a general legal instrument applicable to all types of arbitration where the ‘seat’ of the arbitration is in Bulgaria, including:

• institutional and ad hoc arbitration;
• international and domestic arbitration (the ICAA defines domestic arbitration as arbitration between parties who both have their place of residence or registered seat in Bulgaria, unless, in some cases, one party is predominantly owned by a foreign person or entity);
• arbitration at law and arbitration ex aequo et bono (“in accordance with what is fair and equitable”), although the ICAA only permits the latter in the context of contractual disputes where there is no express contractual provision dealing with the issue in dispute or where there is a need to adjust the terms of a contract to take into account new facts that have arisen since signature.

The ICAA does not apply to disputes solely concerning proof of the existence or non-existence of certain facts (for example, the quality of goods, of completed construction works, existence and causation of damage, etc.).

The ICAA expressly provides that a State or a State institution or agency may be party to international commercial arbitration proceedings (Article 3 ICAA). In contrast to the law governing national court proceedings (contained in the CPC), the ICAA contains predominantly non-mandatory provisions from which the parties are free to derogate by agreement. The arbitral institutions adopt a similar approach, allowing the parties to derogate from their rules of procedure. It is also important to note that the arbitral institutions’ rules of procedure are entitled to deviate from the non-mandatory provisions in the ICAA. The current structure of the ICAA does not provide for the automatic application of the CPC in the event of gaps in the ICAA. Thus, the provisions of the CPC only apply to the extent that they are expressly stated to apply in the ICAA.

The ICAA does not expressly list the principles governing the regulation and organisation of arbitration proceedings. However, the following general principles can be inferred from legal sources and day-to-day practice:

Equality and due process
The principles of equality between the parties and due process are the cornerstones of arbitral practice in Bulgaria. Pursuant to these principles, the parties must be given an opportunity to participate in the proceedings and be granted an equal opportunity to present their case. The principle of equality is embodied expressly in Articles 22 and 24 ICAA (Article 24 is discussed below in the Section on 'Applicable procedural rules). These two principles are of a mandatory nature and cannot be derogated from by agreement between the parties. Any agreement violating these principles is invalid and constitutes a ground for setting aside the arbitral award (Article 47, Items 4 and 6 ICAA).

Party autonomy
This principle is embodied in many provisions of the ICAA (e.g. Articles 12, 15, 24–26, 30, 33, Para. 1). The parties’ autonomy is revealed in their right to determine the constitution and composition of the arbitral tribunal, the challenge and substitution of arbitrators, the number of arbitrators, and the procedure to be followed during the arbitration (see in this respect the Sections on The arbitration agreement; Composition of the arbitral tribunal and Conduct of the arbitral proceedings).

The tribunal must not exceed its authority
This principle derives from and also preconditions the effective application of the principle of party autonomy. In essence, the principle that the tribunal must not exceed its authority dictates that an arbitral tribunal must only rule on the issues submitted to it by the parties, and should not decide on issues beyond the scope of the submission to arbitration or beyond the scope of the arbitration agreement. A related principle is that the arbitral tribunal should ensure that it rules on all issues submitted to arbitration by the parties.

This principle is of particular importance in the context of arbitration as opposed to national court proceedings. The arbitral tribunal derives its jurisdiction, and its very existence, from the agreement of the parties as stipulated in their arbitration agreement. To allow the arbitral tribunal to go beyond the bounds agreed by the parties would be to undermine the principle of ‘consensus’, which lies at the heart of the arbitral process. For this reason, the violation of this principle can lead to the setting aside of the arbitral award (Article 47, Item 5 ICAA).

Right of defence
The right of defence is a basic principle of Bulgarian procedural law. The parties must be given an opportunity to participate in the proceedings, to present and prove their cases by advancing facts and arguments to defend their substantive rights and interests. If a party has not been given an opportunity to participate in the proceedings, the arbitral award may be set aside (Article 47, Item 4 ICAA).

The right to an oral hearing
Whilst commonly respected in practice, the right to an oral hearing is not absolute in arbitration proceedings in Bulgaria. The arbitral tribunal may, provided the parties agree, determine a case solely on the basis of written evidence without convening an oral hearing. This can lead to a considerable saving in terms of time and cost. It should be noted that this principle is not defined in the ICAA. Therefore, if the parties have not determined the procedure to be followed, the arbitral tribunal shall determine for itself whether or not it considers an oral hearing to be necessary, provided, however, that the right of defence of the parties is not breached or impeded. Nevertheless, oral hearings are held in most arbitration proceedings.

The parties’ unrestricted right to choose a representative
In national court proceedings, parties must be represented by a lawyer. Conversely, in arbitration proceedings, the parties can be represented by any natural person. Representatives may therefore include economists, technical or IT specialists and other professionals. In addition, a party may be represented by a non-Bulgarian lawyer in arbitration proceedings.

Formal requirements
Article 7 (1) ICAA defines the term-of-art ‘arbitration agreement’ as the parties’ agreement to submit to arbitration all, or some, of the parties’ disputes that may arise, or have arisen, in respect of a particular contractual or non-contractual legal relationship between them. This definition sets out the minimum requirements for an arbitration agreement to be valid. The parties may not stipulate that all their potential future disputes arising out of any undetermined relationship shall be settled through arbitration. The arbitration agreement should specify either the dispute, or at least the legal relationship, out of which a dispute may arise. The arbitration agreement may also include – subject to certain restrictions imposed by mandatory provisions of Bulgarian legislation or the chosen arbitral institution’s procedural rules – provisions relating to the composition of the, arbitral tribunal; the appointment, challenge and replacement of arbitrators, the time and place of the arbitration proceedings; the procedural norms to be followed by the arbitral tribunal (including a possible preliminary recourse to conciliation); the allocation of costs between the parties; the form and content of the award; and the language of the arbitration.

An arbitration agreement may take the form of a discrete contract or be included as a clause in a larger contract entered into between the parties. It may be entered into either in the form of a submission agreement (i.e. in relation to a specific dispute that has already arisen) or an arbitration clause in a larger agreement (i.e. in relation to future disputes arising out of a defined relationship).

The arbitration agreement should be in writing. This requirement is deemed to have been satisfied if the arbitration agreement is contained in a document signed by the parties, for example a letter, telex, telegram or any other means of communication (Article 7 (2) ICAA). The parties should have full legal capacity in order for the arbitration agreement to be binding.

Article 7 (3) ICAA recognises that there is also a valid arbitration agreement if the defendant consents to the dispute being settled by arbitration after the commencement of the arbitration proceedings, or if he participates in the proceedings without contesting the jurisdiction of the arbitral tribunal. The declaration of consent should be made in writing or pronounced before the arbitral tribunal and evidenced in the minutes of the hearing.

In the context of international disputes, the parties may agree on the applicable law governing the arbitration agreement (which would apply, for example, in the event of a dispute as to the validity or scope of the arbitration agreement). However, for domestic arbitration a choice of applicable law is not permitted and the agreement is governed automatically by the ICAA (Article 47, Item 2 and § 3 ICAA). The arbitration clause is considered as a separate agreement, independent from the main agreement and therefore the validity of the arbitration agreement shall be determined by the law governing this arbitration agreement.

Arbitrability
According to Articles 19 (1) CPC and 1 (2) ICAA, only civil ‘property’ disputes may be the subject of arbitration proceedings. Therefore, no public law disputes may be referred to arbitral tribunals even if they concern civil persons. The term ‘property dispute’ is defined as any dispute relating to a material interest capable of valuation in monetary terms. However, Article 19 (1) CPC expressly renders some civil ‘property’ disputes non-arbitrable; these are disputes relating to rights in and in possession of real estate property, maintenance obligations and employment relationships. This rule applies only if the arbitration agreement derogates the jurisdiction of the Bulgarian courts under the CPC.

Separability
The arbitration clause in a contract is considered to be ‘separate’ from the main contract of which it forms a part and, as such, survives the termination of that contract. This is known as the principle of separability. This principle also dictates that any assignment of rights under the main contract does not automatically assign the rights under the arbitration clause (Article 19 (2) ICAA).

Legal consequences of a binding arbitration agreement
The most obvious consequence of a binding arbitration agreement will be to allow the parties to resolve their dispute by way of arbitration rather than litigation before a national court. In the event that a national court is asked to rule on a dispute that is subject to an arbitration agreement, it is obliged to stop its proceedings if the defendant invokes the existence of such an agreement within the time designated for submission of the defence to the claim. However, the national court may continue its proceedings if it finds the arbitration agreement to be invalid or unenforceable.

Secondly, since the arbitration agreement is contractual in nature and therefore only binding on the parties to that contract, in principle no third party may join the arbitration proceedings without the consent of the parties.

Finally, the arbitration agreement has contractual force between the parties and therefore obliges the parties to adhere to its terms and conditions. In the event of any breach of the arbitration agreement, the party in breach may be liable in damages to the other party in accordance with normal contract law principles.

Constitution of the arbitral tribunal
The parties may determine the number of arbitrators and may even appoint an even number of arbitrators if they wish. If the parties do not agree upon the number of arbitrators, Articles 11 and 12 ICAA provide that the number of arbitrators shall be three.

According to Article 12 ICAA, the parties may stipulate a procedure for appointing the arbitrators. If they fail to do so, Article 12 provides that each party shall appoint an arbitrator and these assigned arbitrators shall appoint the third one. If a party fails to appoint an arbitrator within 30 days from the receipt of the other party’s request to do so, or the two appointed arbitrators fail to appoint a third one within 30 days from the date of their appointment, the president of the Bulgarian Chamber of Commerce and Industry, upon the request of either party, shall appoint the missing arbitrator(s). This decision of the president is final. This rule shall apply to ad hoc arbitration and to institutional arbitration unless the rules of the particular institution provide otherwise.

If a dispute is to be determined by a sole arbitrator – but the parties cannot agree upon the identity of such arbitrator – then, unless otherwise agreed by the parties, the arbitrator shall be appointed by the president of the Bulgarian Chamber of Commerce and Industry upon request of either party. This rule shall apply to ad hoc arbitration and to institutional arbitration unless the rules of the particular institution provide otherwise.

According to Article 11 (2) ICAA, the parties may appoint a non-Bulgarian arbitrator. However, for domestic arbitration they may not appoint a foreign arbitrator. The procedural rules of the arbitration institutions include lists of arbitrators but parties are allowed to appoint arbitrators whose names do not appear on such lists if the arbitration is international.

There are no formal requirements in respect of who may be an arbitrator. Minors are not able to be arbitrators because they do not have full legal capacity.

Costs
The ICAA does not provide any general rules regarding the fixing, quantum or payment of arbitrators’ fees and expenses. These should be negotiated between the parties and the arbitrators prior to the appointment of the latter in accordance with the procedural rules of any arbitral institution agreed by the parties.

The procedural rules of the arbitral institutions usually follow the principle that costs “follow the event”, which means that the losing party shall pay the reasonable costs of the arbitration.

Some of the arbitration institutions differentiate their fees according to whether the arbitration is international or domestic (e.g. the AC at CCI). The costs shall normally include:

• the arbitration fee, which is proportionate to the value of the claim and covers the remuneration of the arbitrators and the general expenses of the institution;
• other expenses (sometimes paid as a deposit), which cover costs incurred for the delivery of documents and notifications, translators, stenographers, issuance of certificates, collection of evidence; and
• the parties’ legal costs and disbursements.

The general principles of independence and impartiality apply in the context of arbitration proceedings and, according to Articles 13 and 14 ICAA, arbitrators can be challenged if they fail to respect these principles. Article 13 ICAA imposes on each arbitrator an obligation to disclose any facts which may raise reasonable doubts as to his or her independence and impartiality. This obligation applies at the time of the arbitrator’s appointment and continues to apply throughout the duration of the arbitration.

An arbitrator can only be challenged if there is reasonable doubt as to his independence and impartiality or if he fails to meet the qualification requirements stipulated in the arbitration agreement. A party who has participated in the appointment of an arbitrator may only challenge that appointment on grounds that have come to its knowledge after the date of such appointment (Article 14 ICAA).

The procedure for challenging arbitrators may be stipulated in the arbitration agreement. If such procedure is not agreed by the parties, Article 15 ICAA shall apply, according to which a party may challenge an arbitrator no later than 15 days of the date of constitution of the arbitral tribunal or of the date on which the party becomes aware of the facts justifying the challenge. Any challenge should be reasoned and in writing. The challenge should be submitted to the arbitral tribunal. The tribunal must rule on the challenge, unless the challenged arbitrator withdraws voluntarily or the parties all consent to the challenge.

Article 16 ICAA sets out certain mandatory rules concerning an appeal against the arbitral tribunal’s ruling on the challenge. The challenging party may, within seven (7) days from the notification of the arbitral tribunal’s ruling, submit an appeal against that ruling to the Sofia City Court. The proceedings before the Sofia City Court are governed by the CPC and the Court’s decision is final. The challenge and the appeal to the Sofia City Court do not have the effect of staying the arbitration proceedings and the arbitral tribunal may issue a final award despite the existence of the challenge and an appeal.

According to Article 17 ICAA, if an arbitrator is not able to perform, or unreasonably omits to perform, his duties, his powers may be terminated. If such an arbitrator does not withdraw voluntarily or the parties do not reach an agreement on the termination of his powers, each party may refer to the Sofia City Court to rule on this matter. The Court’s decision is final.

The appointment of replacement arbitrators
If an arbitrator’s powers have been terminated, the appointment of a new arbitrator must be made in accordance with the same procedure as that used to appoint the original arbitrator (Article 18 ICAA), unless the parties have stipulated a different procedure or agreed the names of possible replacement arbitrators in advance.

Competence to rule on its own jurisdiction
Article 19 (1) ICAA grants the arbitral tribunal competence to rule on its own jurisdiction even if the challenge to its jurisdiction is based on the alleged absence or invalidity of the arbitration agreement.

Any challenge to the tribunal’s jurisdiction should in principle be raised no later than in the defence to the claim. A party who has participated in the appointment of the arbitrator(s) may challenge the jurisdiction of the arbitral tribunal. A challenge to the arbitral tribunal’s jurisdiction in respect of a particular issue should be made immediately after such issue becomes apparent during the proceedings. Despite these rules, Para. 3 of Article 20 ICAA allows the tribunal to accept a challenge out of time if there are justifiable reasons for the delay.

The tribunal may rule on the challenge to its jurisdiction in a preliminary ruling or in the final award. This ruling is not subject to appeal before a national court.

Power to order interim measures
According to Article 21 ICAA, provided the parties have not agreed otherwise, the arbitral tribunal may, upon a request by one of the parties, order preliminary measures against the other party in order to protect the requesting party’s rights. The arbitral tribunal may require the requesting party to provide security in support of any such order.

In addition to these measures, Article 9 ICAA affords each of the parties to an arbitration agreement the right to seek a preliminary injunction or other interim measures from a national court during the course of the arbitration proceedings in order to preserve the claim or evidence.

Commencement of arbitration
According to Article 23 ICAA, the arbitration proceedings shall begin on the day when the defendant receives the claimant’s request to refer their dispute to arbitration. This rule is applicable to ad hoc arbitration. The procedural rules of the arbitral institutions usually provide that the proceedings commence on the date that the claim is filed at the offices of the relevant arbitral institution.

Applicable procedural rules
The parties may agree on the procedure which the arbitral tribunal shall follow. Normally, arbitral institutions allow the parties to deviate from their procedural rules by consent. Under Article 24 ICAA, unless the parties agree otherwise, the arbitral tribunal shall proceed with the case expediently in accordance with whatever procedural rules it considers applicable. In any event, the arbitral tribunal must grant each of the parties the opportunity to defend its rights based on the principle of equality of the parties (Article 24 ICAA).

Place of arbitration and language of proceedings
The place of arbitration may be agreed between the parties. In the absence of agreement, the place shall be determined by the arbitral tribunal taking into consideration the circumstances of the case and convenience for the parties. The procedural rules of the arbitral institutions usually allow the parties to choose a place of arbitration that is different from the city in which the arbitral institution is situated.

The parties may agree on the language or the languages that will be used in the arbitration proceedings. In the absence of agreement, the language or languages shall be determined by the arbitral tribunal or in any other manner provided for under any relevant procedural rules. The arbitral tribunal may require all written evidence to be accompanied by a translation into the language to be used in the arbitration proceedings.

Applicable law
The arbitral tribunal must settle the dispute according to the parties’ choice of applicable law. Unless otherwise provided, the parties’ choice of law relates to the substantive law and does not oblige the arbitral tribunal to apply the conflict of law rules of the country whose applicable law is chosen. According to the practice of the Bulgarian courts, foreign substantive law may only be applied to a domestic arbitration dispute if the legal relationship between the parties has an international element.

If the parties have not stated their choice of applicable law, the arbitral tribunal shall apply the law indicated by whatever conflict of law rules it deems applicable. In any event, the arbitral tribunal shall honour the agreement of the parties as reflected in the terms of the contract and take into account any relevant commercial customs (Article 38 ICAA).

Confidentiality
There is no requirement for the arbitration proceedings to be held in public as in the case of national court proceedings. The parties can therefore ensure that the arbitration proceedings are conducted in private, although there is no obligation for the tribunal to conduct the proceedings in private.

Submission of the written statements of case
The arbitral institutions usually determine the form and content of the claim in their rules of procedure. As regards ad hoc arbitration proceedings, according to Article 27 (1) ICAA, the written claim should be made in writing and should state: 1) the names and addresses of the parties; 2) the facts on which the claim is based; and 3) the essence of the claim. The written response (the “defence”) of the defendant must set out the defendant’s position with respect to the facts and claims submitted by the claimant.

The claim and the defence should be submitted within a time period agreed by the parties or determined by the arbitral tribunal. Together with the claim and the defence, the parties must submit their written evidence and enclose any other evidence that they intend to present. However, unless otherwise provided for in the applicable arbitration rules, the parties may submit new evidence at any time up until the end of the oral hearing.

The defendant may submit a counterclaim, at the latest in its defence to the claimant’s claim (Article 28 ICAA). The arbitrability of the issues raised in the counterclaim shall be determined according to the same principles as for the claim. The defendant may seek a set-off of sums due under an ‘objection for set-off’ against any sums ultimately found to be due to the claimant under the claim, provided the rights raised in the objection are arbitrable, admitted by the claimant or settled by a court decision which has entered into force. According to Article 34 ICAA, the arbitral tribunal must examine the case even if the defendant fails to submit a defence to the claim. Article 29 ICAA provides that the claim and/or the defence may be amended or supplemented during the arbitration proceedings. The arbitral tribunal may only disregard the requested changes if it considers that the other party is unduly prejudiced by such changes.

Notice of hearings and inspections
The tribunal must notify the parties of any hearings and any scheduled inspection by the arbitral tribunal of documents, goods or other objects. The tribunal has the obligation to distribute to the parties copies of all evidence, statements and expert reports submitted for the purposes of the arbitration (Article 31 ICAA). If the seat, domicile, residence or address of any of the parties cannot be found after a thorough search, the notice will be considered to have been received if the arbitral tribunal sent it to the previous seat, domicile, residence or address of the party, by registered letter, or any other means demonstrating an attempt to deliver the notice to the party. The same shall apply if the party does not, or refuses to, attend the post office to receive the notice and the post office confirms such act.

The failure to notify a party of hearings is a ground for setting aside the final award. The procedural rules of arbitral institutions include detailed provisions governing the summonsing of parties in order to avoid such an eventuality.

Hearings
The ICAA allows the parties to agree that their dispute could be decided on a ‘documents only’ basis without the need for a hearing before the tribunal (Article 30 ICAA). Therefore (per argumentum a contrario), it may be inferred that the customary procedure is to hold an oral hearing, unless otherwise agreed by the parties. Despite the fact that the ICAA does not expressly require oral hearings, the rules of procedure of the AC at CCI and the AT at IA require an oral hearing to be held unless the parties have agreed to the contrary. However, pursuant to Article 35 ICAA, the arbitral tribunal shall continue to hear the case and render an award on the basis of the evidence presented, even if some or all of the summonsed parties have unreasonably failed to appear at the hearing. The arbitration reward may be set aside if any of the parties has not been given an opportunity to participate in the proceedings, including in the hearings. Even in the case where the parties have agreed to conduct the arbitration on a ‘documents only’ basis, the arbitral tribunal may schedule a hearing if it considers this necessary for the just and fair disposal of the case (Article 30 ICAA).

Evidence
All kinds of evidence can be admitted in arbitration proceedings. The ICAA itself does not impose any restrictions in this respect but simply requires the parties to submit their evidence and any requests for evidence promptly. Therefore, the parties may determine the rules and deadlines regarding the collection and presentation of evidence. In the absence of such an agreement, the tribunal shall proceed as it deems appropriate when deciding whether to hear witnesses, experts and parties’ representatives, whether to request any written evidence, or to inspect documents or goods.

The ICAA does not repeat the stringent rules of the CPC which restrict the parties’ ability to prove certain facts. This fact reflects the flexibility of arbitration as compared to national court litigation. However, the parties may stipulate restrictions on the types of evidence that can be adduced and the manner in which issues can be proven. In any event, the arbitrators shall be free to determine the weight to be given to the evidence in question.

Article 36 ICAA deviates slightly from the principle that the arbitral tribunal shall not intervene in the parties’ right to determine the arbitral procedure. The arbitral tribunal may of its own discretion, even without a request from the parties, precipitate the gathering of evidence relevant for the case. More specifically, it may appoint one or more experts to clarify certain issues for which special expertise is necessary. For this purpose, the tribunal may order the parties to submit relevant evidence to the experts or provide them with necessary access to examine documents, goods or other objects. If further clarification is required after submission of the expert’s opinion, the expert may be compelled to attend a hearing, either upon the parties’ request or of the arbitral tribunal’s own motion. Following a request from the parties, the arbitral tribunal may also appoint other experts to give their opinion on issues arising for consideration as part of the dispute.

The tribunal or any of the parties (subject to the arbitral tribunal’s approval) may request the competent national court to collect certain evidence necessary for the just disposal of the case. The competent national court – which is obliged to comply with the request (Article 37 ICAA) – is the regional court of the place in which the evidence is located.

Decisionmaking by the arbitral tribunal
Article 39 ICAA provides that if there is more than one arbitrator, the award must be signed (which means that it must be in writing) by a majority of the arbitrators unless the parties have agreed otherwise. If no majority exists, the presiding arbitrator shall approve the award. There are no time limits for the tribunal to render the award, neither in the ICAA, nor in the procedural rules of the main arbitration tribunals in Bulgaria.

According to Article 41 ICAA, the award must be reasoned unless the parties have agreed otherwise or unless the award is drafted in accordance with the conditions of a settlement agreement pursuant to Article 40 ICAA. The award must contain the date and the place of arbitration. After the arbitrators have signed the award (it is enough for the majority of the arbitrators to have signed it), it shall be sent to the parties. The arbitration award is final and terminates the dispute. Upon delivery to either of the parties it is considered declared (announced) and becomes effective and enforceable against the parties. Any defects of the award may be challenged or amended through the procedures for interpretation, correction and supplementation of the award, discussed below.

Termination of the proceedings
Under Article 40 ICAA, the case should be dismissed if the parties reach an agreement to settle the dispute. The parties may, however, request the tribunal to record such an agreement in the form of an award. Such award shall have the force of an award on the merits of the case.

Article 42 ICAA sets out three further grounds upon which the arbitral tribunal may decide to bring the proceedings to an end, namely:

• the claimant withdraws its claim (except when the defendant objects to the withdrawal and the tribunal finds that the defendant has a lawful interest in obtaining a final award);
• the parties agree that the proceedings should be brought to an end; or
• the arbitral tribunal finds that there is another obstacle to considering the dispute on its merits. Examples of such an obstacle would be the absence or invalidity of the arbitration agreement, when the claimant does not have the capacity or standing to bring the claim, or if there is an earlier court or arbitral decision on the same dispute between the same parties.

Furthermore, the arbitral tribunal may terminate the proceedings if it decides that it does not have the jurisdiction to decide on the dispute (see the section on Jurisdiction of the arbitral tribunal above).

Power to award interest and costs
The ICAA does not have any express provisions relating to the tribunal’s power to award interest or costs.

The arbitrators shall have the power to award interest if claimed by the plaintiff. As regards costs, the parties can agree in their arbitration agreement as to the rules to be applied by the tribunal. Normally, the procedural rules of the arbitral institutions provide that the arbitrators shall have the power to award costs and expenses. As for the amount of costs and expenses that can be awarded and the apportionment of such costs between the parties, please refer to the section on Costs above.

Correction and interpretation of the award; additional award
Article 43 ICAA confers on the arbitral tribunal a general power to rectify and interpret an award. The arbitral tribunal may, upon the request of any of the parties or of its own motion, introduce corrections to rectify any clerical, computational, typographical or other obvious error in the award. The other party shall be notified of any request for rectification. A party may likewise request interpretation of the award, provided it first notifies the other party.

The request for rectification or interpretation of an award must be made within 60 days after the parties received the award, unless they have agreed on a different timeframe. The same 60-day period for rectification of the award must be observed when the tribunal acts of its own motion. The arbitral tribunal must hear the parties on questions of rectification and interpretation of the award, or allow them to file written submissions within a time period to be determined by the arbitral tribunal. The arbitral tribunal must rule on the requested rectification or interpretation within 30 days of the submission of the request. The ruling on these issues shall be rendered on the basis of the general rules for making an award. The ruling on rectification and/or interpretation becomes an integral part of the award.

Pursuant to Article 44 ICAA, the arbitral tribunal may also, upon the request of the parties, render an additional award for claims which the arbitral tribunal failed to address in its award. The party who has requested the additional award must notify the other party within 30 days of receiving the award. If the request is well-grounded, the arbitral tribunal shall render the additional award within 60 days.

The arbitral tribunal may extend the time limits within which a party can apply for an additional award or for the rectification or interpretation of an award.

The powers of the arbitral tribunal cease at the end of the arbitration proceedings, except in circumstances where rectification, interpretation or an additional award is sought. The arbitration award is final and is not subject to appeal before national courts or any other body unless the parties have agreed otherwise.

Legal consequences of the award
The award has the same force and effect as a court judgment. As a result, the same dispute (i.e. arising out of the same facts and between the same parties) may not be re-tried before a national court. If the claim seeks to change the legal relationship between the parties (e.g. by annulling or terminating a contract) a favourable arbitral award will have the effect of changing that legal relationship.

The award is capable of recognition and enforcement, subject to certain limited exceptions (discussed in the section on Enforcement of the arbitration award below).

Setting aside of the arbitration award
The judgment of a national court in Bulgaria can be appealed to a court of appeal and subsequently to the Supreme Court of Cassation. Conversely, the arbitration award is final and cannot in principle be appealed unless otherwise provided by the parties in their arbitration agreement. The avoidance of lengthy appeal processes is one of the key advantages of arbitration over national court litigation.

There are, nevertheless, certain limited bases – laid out in Article 47 ICAA – upon which the Supreme Court of Cassation may set aside the arbitration award. In particular, the Supreme Court may set aside an award if the party filing the application to set aside can prove that:

1. the parties lacked legal capacity to conclude the arbitration agreement;
2. no arbitration agreement was concluded or the arbitration agreement is void pursuant to the applicable law chosen by the parties or, if the parties had not made such a choice, pursuant to the ICAA;
3. the subject matter of the dispute is not capable of settlement by arbitration or the award is contrary to Bulgarian public policy;
4. the party was not given proper notice of the appointment of an arbitrator or the arbitration proceedings, or for reasons beyond its control the party was unable to participate in the proceedings;
5. the award settles a dispute not contemplated by or not falling within the arbitration agreement, or contains decisions on issues beyond the scope of the submission to arbitration; or
6. the constitution of the tribunal or the arbitration procedure did not conform to the parties’ agreement, provided such agreement does not contradict the mandatory provisions of the ICAA.

An application to set aside an award may be submitted within three months of the date on which the party received the award. Where a request for rectification or interpretation of the award, or for an additional award, has been made, the time period starts to run from the date on which the arbitral tribunal ruled on that request. These time limits cannot be extended or curtailed by agreement between the parties.

As per Article 48 (2) ICAA, the existence of an application to set aside an award does not automatically suspend enforcement proceedings. The Supreme Court of Cassation may allow suspension in the exercise of its discretion, but the applicant should first provide a guarantee in an amount equal to the monetary interest it has in the arbitration award to be revoked. “Interest” in this case is the interest that the debtor under the award will have if the award is revoked (i.e. the money that he will not have to pay if the award is revoked).

Pursuant to Article 49 ICAA, if the Supreme Court of Cassation sets aside an award on any of the grounds under Items 1, 2 and 3 above in a decision which has entered into force, a party may file a claim before a competent national court seeking a re-hearing of the same dispute. If the award was set aside on any of the grounds under Items 4, 5 and 6 above, the Supreme Court of Cassation must return the case to the arbitral tribunal for reconsideration. Any of the parties may request that the case be heard by arbitrators different from those that first heard the dispute.

Recognition and enforcement of the arbitration award
According to Article 51 ICAA, following a request from the party concerned, the Sofia City Court must issue a writ of execution of an arbitration award which has entered into force. The award, together with proof that it has been delivered to the debtor, should be enclosed with the request for enforcement.

The recognition and enforcement of foreign arbitration awards is regulated by the international agreements to which Bulgaria is party, principally the New York Convention 1958, which Bulgaria ratified on 10 October 1961. Bulgaria, however, entered certain reservations when signing the New York Convention with the consequence that the Bulgarian courts are only, in principle, obliged to recognise and enforce foreign arbitral awards rendered in states that are also party to the New York Convention. As regards awards rendered in the territory of a state that is not party to the New York Convention, Bulgarian courts will only apply the provisions of the Convention to the extent that the other state grants reciprocal treatment.

In circumstances in which the New York Convention does not apply – or if the enforcing party considers that Bulgarian law offers a more favourable recognition and enforcement regime than that provided in the New York Convention (see Article VII (1) of the Convention) – the enforcing party may invoke Articles 118/­120 PILC. Under these provisions, the court can only refuse enforcement of a foreign or domestic award if one of the following conditions has not been respected:

1. the foreign arbitral tribunal must have had jurisdiction to hear the dispute;
2. the defendant must have received a copy of the claim, the parties should have been duly summoned, and the basic principles of Bulgarian law in respect of the right of defence must have been respected;
3. the same dispute between the same parties must not have been determined by a judgment of a Bulgarian court which has entered into force;
4. the same dispute between the same parties should not be the subject of pending proceedings before a Bulgarian court which commenced before the initiation of the arbitration proceedings; or
5. the recognition or the enforcement of the award must not be contrary to Bulgarian public policy.

Unless otherwise provided in an international agreement, the application for recognition and enforcement of foreign arbitration awards and of any settlement agreement recorded in a foreign arbitral award should be brought before the Sofia City Court. The ICAA refers to Articles 117–122 of the PILC which are applicable in respect of the procedure and the powers of the Court in this respect.

Arbitration is the most successful and popular ADR procedure in Bulgaria. It is generally considered to be quicker and more cost-effective for the parties than litigation before local courts. The parties also benefit from the privacy of the arbitral process, the less formal rules of procedure, and the ability to agree for themselves upon the constitution of the arbitral tribunal, the procedural rules, and the timetable for the arbitration. The arbitrators recommended by the arbitral institutions in Bulgaria are, in the majority of cases, highly reputable and experienced lawyers (e.g. professors in the best Bulgarian universities qualified in the sphere of commercial law and with good industry knowledge). As a result, arbitral tribunals tend to be focused and accurate in their approach to the issues that they are asked to determine, and pursuing arbitration proceedings according to the procedural rules of the Bulgarian arbitral institutions is a good option for resolving commercial disputes.

Petkova & Sirleshtov Law Office
in cooperation with CMS Cameron McKenna LLP
Landmark Centre
14 Tzar Osvoboditel blvd.
Floor 1
1000 Sofia, Bulgaria


Kostadin Sirleshtov
T + 359 2 921 99 42
E kostadin.sirleshtov@cms-cmck.com


Pavlin Stoyanoff
T +359 2 923 43 61
E pavlin.stoyanoff@cms-cmck.com