In issue No. 267 of our Legal Digest, we analyzed the initial draft of the Act Amending and Supplementing the Law on International Commercial Arbitration. On 1st August 2025, after extensive discussion and some deviations from the original draft, the amendments officially entered into force and became applicable law, aimed at improving the regulation of arbitration proceedings.

The title of the act has also been changed - it will be now called the “Law on Arbitration” instead of the previous and often misleading “Law on International Arbitration.” The reason is that the law regulates arbitration proceedings based on arbitration agreements where the seat of arbitration is within the territory of the Republic of Bulgaria, regardless of whether the dispute has an international element.

Beyond the formal change of title, of particular importance for the public is the introduction of new grounds on which the Supreme Court of Cassation (SCC) may revoke an arbitral award. The first new ground is a finding that the arbitral award is contrary to public policy in the Republic of Bulgaria - i.e. a violation of imperative norms of fundamental significance to Bulgarian law.

As an additional safeguard for the parties, the court may also revoke an award if false evidence (a document, witness testimony, or expert opinion) on which the arbitral tribunal relied is established, or in the case of a criminal act by a party, its representative, an arbitrator, or arbitral staff member in connection with the resolution of the dispute.

The rationale is clear - judicial review of arbitral awards was and remains limited, since appeals are only possible before the SCC on a narrow set of rather formal/procedural grounds. The SCC does not examine the merits of the case, which in practice had allowed the adoption of awards by arbitral tribunals of dubious reputation, or even ad hoc arbitrations, leaving the losing party with virtually no effective means of redress. The new grounds broaden protection while preserving the principle that the SCC does not reassess the merits of the case, but only ensures that the arbitration procedure was lawfully conducted, including in the evidentiary phase.

Another significant issue addressed is the form of the arbitration agreement - given its autonomous nature, even when incorporated as a clause in a separate contract, practical questions about its validity often arose.

The new framework resolves some of the uncertainties, including by expressly addressing the so-called “tacit acceptance” of an arbitration agreement. First, an arbitration agreement is deemed in writing if contained in a document signed by the parties, or in an exchange of letters, telexes, telegrams, electronic messages, or other means of communication. A valid agreement is also present when the defendant explicitly accepts arbitration in writing or through a statement entered into the records of the proceedings, or when he files a counterclaim, exercises right to set off claims, or otherwise participates in proceedings (by filing a response, submitting evidence, or appearing at a hearing) without disputing jurisdiction.

In practice, the new rules are highly flexible - strict formality is not required, and the agreement may be evidenced through separate declarations (e.g. email correspondence) or through the parties’ conduct. It is only logical that if a party does not contest jurisdiction but actively engages in the proceedings, that party is considered to have accepted arbitration before the chosen tribunal. The provision is intended to end the practice of the SCC annulling awards solely for the formal “absence” of an arbitration clause, despite lawful proceedings with active participation from both parties.

It is important, however, that this “tacit acceptance” of arbitral jurisdiction (i.e. cases without a written arbitration clause but with party conduct implying consent) does not apply to natural persons, unless they are sole traders, entrepreneurs, shareholders, managers, board members, procurators, or individuals who have assumed or guaranteed obligations of a trader/entrepreneur subject to the dispute. This balance was deliberately introduced by the legislator to protect non-professionals, who generally cannot be expected to be as well-informed of their rights as businesses.

In line with modernization and digitalization efforts, the reform also introduces new possibilities, such as:

● The parties may agree that the dispute will be resolved solely on the basis of written evidence and submissions, without any hearing - a suitable option when only legal issues are in question and no factual disputes require witnesses or expert evidence.

● If a hearing is still necessary, it may be conducted via video conference - a convenient option when parties are based in different locations.

● Service of documents will follow stricter rules - through a notary, bailiff, or licensed postal/courier operator, in order to prevent abuse. Service of subpoenas by email will only be possible upon the party’s express request.

● For tribunals of three arbitrators, each party appoints one, and the two arbitrators jointly appoint the third. If a party fails to appoint within 30 days of the request by the other party, or if the two arbitrators cannot agree within 30 days, appointment is done by the head of the arbitration institution - a practice already followed by reputable institutions such as the Arbitration Court at BCCI.

● If permitted by institutional rules, arbitrators may also be appointed from outside the official list - particularly relevant in specialized disputes requiring expertise beyond legal knowledge.

Cases of abuse of arbitration and the limited scope of judicial oversight also motivated the creation of a Unified Register of Arbitrations, maintained by the Ministry of Justice (“Register”). This regime will take effect with deferred application - from 3 December 2025 - to allow institutions time to prepare for registration or decide whether to continue operations. It is expected that many arbitral bodies of questionable reputation will not “survive” this requirement.

The Register will contain information about permanent arbitral institutions based in Bulgaria, as well as cases before ad hoc tribunals or foreign arbitral institutions. Registration will be a mandatory condition for the lawful exercise of arbitral activity. Each arbitral institution must:

●Adopt rules of organization, a fee and cost tariffs, and maintain a list of arbitrators;

● Maintain an office, registry, archive, and website linked to an electronic case management system;

● Ensure that its governing body members and listed arbitrators meet statutory requirements for independence, clean criminal record, education, professional experience, morality, and integrity.

The Minister of Justice may order deletion from the Register in cases of systemic serious violations by arbitrators, or where the institution fails to meet statutory requirements.

An arbitrator who renders an award on a dispute non-arbitrable by law (e.g. consumer disputes or real estate rights) and whose award is annulled on that ground by the SCC will be subject to a fine of BGN 1,000 to 5,000 (EUR 500 to EUR 2,500). The arbitral tribunal or its establishing legal entity will face a financial sanction of BGN 5,000 to 25,000 (EUR 2,500 to EUR 12,500).

From 3rd March 2026, arbitral awards issued by arbitrators or institutions not registered in the Register will be deemed null and void.

The reform also introduces more flexible rules on suspension of enforcement of arbitral awards. Previously, a party challenging an award before the SCC was required to provide security equal to the value of the claim to suspend enforcement - often a prohibitive burden in high-value cases. Now, suspension will also be possible upon submission of persuasive written evidence for the existence of grounds for annulment. This change undoubtedly benefits the challenging party, as it removes the need for substantial financial outlays to stop enforcement.

With the adoption of these new rules, arbitration in Bulgaria is positioned as an even more attractive alternative to state courts - faster, more flexible, and now more secure. While judicial control remains limited to the SCC, the additional safeguards for legality, clear requirements for institutions, and the modernization of procedures all send a strong message that arbitration in Bulgaria is entering a new phase of development - one that promises greater predictability and protection for businesses and market participants.

It is therefore important for businesses to review their existing contracts containing arbitration clauses and, if necessary, adapt them to the new legal framework.