In line with the already demonstrated efforts by the legislator to encourage out-of-court dispute resolution, a Draft Act to Amend and Supplement the Civil Procedure Code (“Draft Act”) has been published on the Public Consultation Portal, introducing corresponding changes to the Mediation Act.

This is not the first attempt to regulate mediation - back in 2023, a number of legislative changes were introduced, establishing mandatory mediation for certain categories of cases. However, in July 2024, the Constitutional Court (“CC”) declared these provisions unconstitutional (a topic we covered in Issues No 256 of 28.06.2024 and No 257 of 31.07.2024).

CC's main argument was that under the previous wording of the law, the allocation of the mediation expenses was tied to the parties’ participation, or lack thereof, in the mediation procedure. In other words, it was possible to reach the absurd situation, where the winning party should bear the burden and pay the costs of mediation only because it did not participate in the mediation procedure. This solution, which in practice makes mediation compulsory, was correctly assessed by the CC as contrary to fundamental legal principles.

The newly proposed legislation seeks to continue promoting mediation as a means for resolving civil and commercial disputes, while carefully taking into account the Constitutional Court’s reasoning.

Under the new Draft Act, mediation remains entirely voluntary - parties can engage in the process only by mutual consent and are free to withdraw at any point without facing penalties.

However, before the first hearing in civil and commercial cases - and, by exception, up until the end of the proceedings before the first instance court - the parties may be required to attend an “information session on mediation”. During this session, they will be informed about the nature, principles, and potential outcomes of mediation.

For certain categories of civil and commercial cases, courts will have the authority to require the parties to attend an information session, if the court finds the dispute suitable for mediation.

According to the Draft Act, the following types of cases may be referred to information sessions:

• Disputes involving monetary or non-monetary obligations arising from commercial transactions, regardless of claim value, as well as civil monetary or non-monetary claims up to BGN 25,000;

• Claims related to remuneration or compensation arising from employment relationships, including claims for unlawful dismissal, its annulment, and reinstatement;

• Family law disputes and disputes between co-owners, including partition and related matters.

Beyond merely verifying whether a case falls within one of the above categories, the court will also assess the specific legal-factual circumstances to determine if the dispute is appropriate for mediation, considering factors such as: existing long-term relationships between the parties, parallel or pending related proceedings, multiple claims or counterclaims, the likelihood that litigation costs could significantly exceed the material interest of the case, etc.

The Draft Act also sets out (non-exhaustively) situations where courts are not entitled to oblige parties to attend an information session — for example, if mediation is legally excluded for the respective dispute category; if the defendant admits the claim; if conducting the information session would delay the case unreasonably, etc.

Importantly, holding an information session will not automatically suspend court proceedings unless both parties jointly request it. The goal is clear - to avoid slowing down cases, while still offering a parallel opportunity for faster resolution through out-of-court settlement.

The Draft Act introduces financial incentives to encourage mediation. If the parties reach a court-approved settlement through mediation, 75% of the paid state fee will be refunded to the claimant.

By comparison, if a court settlement is reached without mediation during the main proceedings, only 50% of the fee is reimbursed. This 25% difference could be significant, especially in high-value commercial disputes, since the state fee is calculated as a percentage of the claimed amounts.

On the flip side, parties may also face penalties - for instance, if they fail to attend the information session without a reasonable reason.

The Draft Act undoubtedly represents a positive development for Bulgaria’s legal system, reflecting the legislator’s ambition to establish mechanisms for faster resolution of civil and commercial disputes, boost business turnover, and ease the workload of courts - particularly in cases that otherwise could drag on for three to four years. Ultimately, the success of the reform will depend on the attitude of the participants in the process and the growing trust in mediation, which is still yet to be fully embedded in Bulgaria’s legal culture.