Category: Bulgaria

After a few years of political struggle, Bulgaria seems to be on a good path, with interesting legislative updates on the horizon and promising M&A activity levels, spurred primarily by strong activity in the energy and IT sectors, according to KDBM Law Founding Partner Dimitar Kaldamukov.

“It’s been a challenging period,” Kaldamukov begins, alluding to the political turmoil Bulgaria experienced in the past several years. “However, the formation of a coalition between the two biggest parties, both pro-liberal and pro-EU, has brought much-needed stability – this political and legal reinforcement has significantly boosted investor confidence.”

Building on these confidence levels, Kaldamukov reports a surge in foreign investments. “Last year was pivotal,” he says. “The influx of investments coincided with the EU Resilience and Recovery Plan, injecting billions of euros into our economy.” According to him, this is also partly because of Bulgaria’s transition from a coal-based to a renewable energy economy. “We hit record levels in renewable energy, with a significant portion of our energy now coming from renewable sources.” Consequently, he reports that Bulgaria is “rapidly advancing towards a renewable energy market.”

Focusing on IT, Kaldamukov says that Bulgaria has “long been a regional IT hub, but the market has recently become oversaturated. The influx of Ukrainian specialists has introduced more competition, leading to a cooling down of the software labor market,” he explains.

Having these two sectors in mind, Kaldamukov reports this is precisely where most M&A activity has taken place. “We anticipate more M&A in software, particularly in outsourcing, and further development in renewable energy installations.”

Turning his attention to recent legislative matters of note, Kaldamukov focuses on the recent entry of the country into the Schengen area. “This is a significant milestone yet still a complex issue,” he says. “While it’s a political and legal success, it has sparked debate. The majority of Bulgarians travel by car, and Schengen checks will primarily affect road travel,” he explains. “Regardless, it’s a step forward for Bulgaria.”

Additionally, Kaldamukov reports that he expects an imminent “implementation of the EU FDI regulations. This will introduce a new regime for investments above a certain threshold, significantly impacting the market.” He also adds that “anti-money laundering laws are becoming stricter, getting fully in line with EU rules, complicating foreign investment and company registration processes.”

Cryptocurrency has been gaining momentum in the recent decade all over the world, including Bulgaria. On one hand, the development of block chain technology and the wide spreading digitalisation in almost every sphere of human life reasonably produced new revolutionary payment means along with the traditional good old money. On the other hand, cryptocurrency rapidly became a symbol of freedom as not being issued and accepted by any central bank or credit institution as well as being easily accessible via Internet literally by every person.

All EU members are expecting the entry into force in December 2024 of the Markets in Crypto-Assets Regulation (MiCA) – the first major jurisdiction worldwide to provide a comprehensive framework for the crypto sector and facilitate legal certainty for businesses and individual users of the alternative to fiat money. 

Even not regulated so far cryptocurrency may be used upon mutual consent of the parties in various transactions including for acquisition of real estate and other assets and even as renumeration for work done and delivered services.  Although virtual and not intangible, as cryptocurrency is an asset with value measured in money, it shall be part of the property of its owner and subject to foreclosure in case of absence of voluntary payment by the debtor together with real estate, movables, and receivables from third parties including bank account with a positive balance.

The Bulgarian legislation does not provide for specific rules regarding foreclosure over cryptocurrency, however, the general rules of the Code on Civil Procedures may apply accordingly. 

The major issue in potential execution proceedings appears be how to find and access the debtor’s crypto assets because their nature excludes the existence of an ownership registry. The transfers of Bitcoins, the most popular cryptocurrency, are untraceable and the identities of wallet holders are always confidential. However, the creditor may know for sure that the debtor has purchased Bitcoins and request from the bailiff to seize them. 

The Bitcoins seizure may be accomplished through a ban of the access to the digital wallet keeping them: the attachment is placed by the bailiff through official notifications, specifying the attached assets, to the debtor and the third party keeping the Bitcoins (the exchange company offering the wallet services). Once notified on the attachment, the debtor shall not be entitled to dispose of the Bitcoins and amend, change, or destroy them as otherwise may even be criminally charged. On the other side, the company providing the wallet services shall ban the access of the debtor to the wallet and prevent trading as the private key of the wallet in which the Bitcoins are kept is known only to the exchange.

Like the case when the creditor does not know the banks where the debtor has accounts and а positive balance and thus, notifies through the bailiff all banks operating on the territory of Bulgaria, in case of Bitcoins seizure the creditor will request the notification of various exchange companies with the hope of hitting the company the debtor operated with.  Information on such companies can be found in the public register pursuant to the AML Law of persons providing services for exchange of digital currencies and wallet services. Once the notification has been finalised, the exchange company shall block the operation of the attached user and keep the Bitcoins in favour of the executing creditor.  The exchange company is obliged by law to cooperate with the bailiff and comply with its orders providing the requested information and imposing restrictions.  Otherwise, it may be fined and even criminally charged.

If the cryptocurrency is kept by the debtor, who is the only person knowing the private key and, therefore, is the owner of the wallet, then the creditor will ask the bailiff to seize the assets located at the debtor’s home and in other places belonging to him, with the hope of finding the private key of the wallet if not voluntarily disclosed by the debtor.

In this situation, the debtor may not cooperate to avoid seeing his Bitcoins confiscated. However, the bailiff should have warned the debtor of the criminal consequences of such eventual behaviour, so the debtor should better deliver the private key of the wallet without delays.

Once the bailiff acquires the private key of the cryptocurrency, a public auction shall be organised in accordance with the rules regarding real estate assets as the most stringent type of auction guaranteeing higher prices reached.  The highest bidder shall receive the private key and the creditor will be satisfied with the collected amount of money.

Although respectively applicable to cryptocurrency foreclosure, the current Bulgarian legislation shall be amended to properly address the specifics especially the issues related to the discovery and seizure of the private key and the wallet considering the international experience in the matter.

By Maria Hristova, Partner, Mikov Attorneys

CMS has advised Rezolv Energy on the licensing of its 229-megawatt St. George photovoltaic project before the Bulgarian Energy and Water Regulatory Commission.

Rezolv Energy is a subsidiary of Actis, a sustainable infrastructure investor. 

According to CMS, “the project, which is planned to start full production by May 31, 2025, is the largest foreign investment in the Bulgarian renewable energy sector to date. Following the thorough assessment of the Bulgarian Energy and Water Regulatory Commission, the St. George project is considered ‘financially viable and economically feasible and the owner has the necessary financing capabilities to complete it.’ St. George will comprise nearly 400,000 solar panels and, with an average annual power generation of 313 gigawatt-hours, it will produce the equivalent of 13% of Bulgaria’s currently installed solar power.”

Back in 2023, CMS advised on YGY Industries’ sale of the 229-megawatt solar plant to Rezolv Energy (as reported by CEE Legal Matters on July 28, 2023).

The CMS team included Sofia Managing Partner Kostadin Sirleshtov, Counsel Borislava Piperkova, Senior Associate Elena Yotova-Yordanova, and Trainee Lyubomira Tanchovska.

Simeon Hinkov has been appointed as an Associated Partner with Sofia-based law firm Stankov Todorov Hinkov & Spasov.

According to the firm, Hinkov has “established himself as one of the firm’s leading lawyers with his experience in contract law, commercial law, and litigation.” He has been with the firm since 2016, when he joined as a Trainee.

“We believe that any perseverance, dedication, and professional development should be encouraged and supported. Well deserved, Simeon! Congratulations!” the firm announced in a statement.

KDP has advised the Bulgarian Geothermal Energy Association (BAGE) on the preparation of new geothermal energy legislation in Bulgaria.

According to KDP, most of the legislative amendments proposed by the team of BAGE were adopted by the Parliament and have “become the basis for the new legal framework of the geothermal energy sector in Bulgaria.”

The KDP team included Senior Associate Aleksandar Aleksandrov.

Schoenherr has advised Borealis AG on the agreement to purchase Bulgarian polyethylene and polypropylene recycler Integra Plastics. Boyanov & Co and CMS reportedly advised on the deal as well.

Headquartered in Vienna, Borealis AG is a provider of advanced and circular polyolefin solutions and a provider of base chemicals, fertilizers, and the mechanical recycling of plastics. The company employs around 6,000 people and operates in over 120 countries. It generated a net profit of EUR 2.1 billion in 2022.

According to Schoenherr, “Integra Plastics JSC is one of the most advanced plastics recycling companies in Europe, producing high-quality PCR resins. It specializes in the production of top-quality low-density polyethylene, high-density polyethylene, and polypropylene granules, with color variation and an annual capacity of 30,000 metric tons.”

The Schoenherr team was led by Partner Alexandra Doytchinova and Attorney at Law Katerina Kaloyanova-Toshkova.

CMS has advised Astronergy on the acquisition of the Karlovo and Novi Pazar greenfield solar projects in Bulgaria, with a combined capacity of 120 megawatts. Schoenherr reportedly advised the sellers.

Astronergy is a producer of solar PV modules and transformers.

According to CMS, “the acquisition of the Karlovo and Novi Pazar projects marks another major milestone for Astronergy in Bulgaria, having 50 megawatts of operational PV plants under the feed-in tariff support scheme.”

The CMS team included Managing Partner Kostadin Sirleshtov, Counsels Borislava Piperkova and Veliko Savov, Senior Associates Alexander Rangelov and Vaska Solakova, Associate Diyan Georgiev, and Legal Trainees Lyubomira Tanchovska and Niya Ivanova.

Eversheds Sutherland member Tsvetkova Bebov & Partners, working with Clifford Chance, has advised the Republic of Bulgaria on a dual-tranche EUR 2.3 billion sovereign bond issuance. Linklaters and DGKV reportedly advised joint lead managers BNP Paribas, Credit Agricole CIB, Deutsche Bank Aktiengesellschaft, and JP Morgan.

According to Tsvetkova Bebov & Partners, in November 2023, Bulgaria issued “two RegS-only tranches under its 2015 EUR 14 billion GMTN program – one for EUR 1.3 billion, maturing in 2031, and one for EUR 1 billion maturing in 2036. The tranches are listed on the Luxembourg Stoch Exchange.”

Earlier in 2023, Clifford Chance and Tsvetkova Bebov & Partners also advised on Bulgaria’s EUR 1.5 billion sovereign bond issuance (as reported by CEE Legal Matters on February 16, 2023) while, in 2022, they advised on another EUR 2.25 billion sovereign bond issuance (as reported by CEE Legal Matters on October 20, 2022).

The Clifford Chance team was led by Partner Deborah Zandstra and Senior Associate Eric Green.

The Tsvetkova Bebov & Partners team included Managing Partner Nikolay Bebov, Partner Damyan Leshev, and Senior Associate Petar Ivanov.

Editor’s Note: After this article was published, DGKV confirmed its involvement to CEE Legal Matters. The firm’s team included Partners Gergana Monovska and Georgi Tzvetkov.

We’re sending off 2023 with the news that by the beginning of next year at the latest we will finally have a new European regulation on artificial intelligence (AI) coming into force within two years (the EU AI Act). On 14 June 2023, the European Parliament approved its negotiating position on the EU AI Act and since then, the talks have begun with EU countries in the Council on the law’s final form. The EU AI Act is intended as a fundamental and harmonizing legislative text. But is it really so and what do we read between the lines in the new regulation?

To begin with, one cannot fail to note the fact that although everyone is commenting on the “swift” reaction of the EU in relation to the regulation of AI, this is not the case at all. AI is not only Chat GPT. AI has existed long before that and is developing in many different directions, as even the memorandum to the EU AI Act mentions that as early as 2017 the EU called for a “sense of urgency to address emerging trends” including “issues such as artificial intelligence“. If the emergency regulation needs a minimum of 6 years, not counting the period before entry into force and application, what would the normal legislative initiative be? With AI developing at breakneck speed even as you read these lines, its regulation in Europe is clearly overdue.

Next, it took months for the EU to even find an adequate legal definition of AI that should be neither too broad and encompass talking baby toys, nor too narrow so that it could leave room for unregulated risks. Of particular importance has turned out to be whether we treat AI as software or as a more comprehensive system of techniques and approaches. Lobbying circles in individual European countries are still arguing about the final description.

Furthermore, an attempt is made to create a legal framework that gravitates around the GDPR, giving the impression that it too aims to level and iron out disparities in law enforcement at the national level – something that the GDPR itself has failed to do, and what remains for the new regulation. In addition, the relationship between data protection legislation and AI regulation is unclear and based on core clauses of the GDPR, which, for example, require transparency and detailed information when using different algorithms and/or data subject profiling. With AI, this turns out to be strictly individual and often impossible because the information would affect trade secrets, source code intellectual property rights, etc.

It should also be noted that the regulation is complex, deals with fairly nebulous definitions of what types of AI fall into one of the risk-based protection categories, and can be difficult for individual businesses to implement. This is because the legal text covers a wide range of AI systems and technologies, and is not specifically divided by sectors. That characteristic, in turn, can stifle innovation, as the requirements of legislation can be perceived as too burdensome. To be sure, the new regulation could also increase red tape and costs for businesses, with some industries already warning of the dangers of over-regulation.

Last but not least, the EU AI Act may prove ineffective in preventing damage from AI systems. This is because it does not cover all the potential risks associated with AI. This is precisely why one of the original legislative ideas – to regulate AI with separate and business-specific laws – might have been more appropriate than the current blanket approach.

In the context of all of the above, a broad social discussion is highly needed on how different AI systems can and should be specifically regulated and assessed, and only then can we look with enthusiasm at the new legal framework. Until then… Merry Christmas and don’t expect any presents from the EU legislator.

By Irena Georgieva, Managing Partner, PPG Lawyers

Djingov Gouginski Kyutchukov & Velichkov has advised Sofia Airport operator SOF Connect on the expansion of the airport’s open parking area and refurbishment of the covered parking.

According to DGKV, “SOF Connect recently signed a contract with GBS-Infrastructural Construction for the renovation of the covered car parking at Terminal 2 of Sofia Airport. The BGN 24.5 million project is of strategic importance for the airport’s development. Upon completion of the open parking and covered parking projects, Terminal 2 will boast nearly 1,900 parking lots, contributing to a more efficient and modern airport infrastructure.”

The DGKV team included Partner Kaloyan Krumov, Senior Associate Nikolina Stefanova, and Associate Yavor Genchev.