Category: Bulgaria

Does buying land make you the owner of the buildings on that land as well? In many situations, the answer is yes, but in the context of the public sale of property within enforcement proceedings, this is not always the case.

The general rule in the Bulgarian Ownership Act and general real estate law is that when buyers acquire ownership over a property (land), they also become owner of the buildings and plantations on it, as long as those buildings are not subject to separate ownership rights. The basis for this concept is that if the previous owner had ownership rights on both the land and the buildings on it, the buyer, as the new owner, shall also receive the full title right over both the property and the buildings on it. 

The essence of the ownership right transfer is the sale contract between the owner and the new proprietor. In the contract, the current owner expresses his will to transfer a specific property with a specific building on it for a certain price. In return, the proprietor expresses his will to acquire the property and pay that price. The contract is executed before a notary in the form of a notary deed for sale and purchase of property (this is the form required by Bulgarian law), and the proprietor pays the agreed-upon price. The executed notary deed has a transfer effect over the property, which from this moment on has a new owner. This is the most common scenario for transfer of property.

However, this is not exactly what happens when the acquisition of a property (land) is a result of a public sale carried out within enforcement proceedings pursuant to the Bulgarian Civil Procedure Code. The public sale is the legal procedure for enforcement upon the debtor’s property, transforming the debtor’s property into cash against the debtor’s will. It has a completely different nature than an ordinary property sale and excludes negotiations between the owner and the future proprietor. At the beginning, an enforcement agent imposes a restrain over the specific debtor’s property so the latter cannot dispose of it for reasons other than satisfying the creditor’s receivables. Then the enforcement agent announces the restrained property for public sale. Practically, any person or legal entity may decide and bid on the property. At the end of the public sale, the transfer effect of the ownership title over the property occurs with the payment of the purchase price by the buyer, on the one side, and with the entering into force of the award decree issued by the enforcement agent, on the other. The buyer in a public sale acquires all the rights that the debtor had on the property. The buyer cannot acquire ownership rights of the debtor which were not explicitly subject to the public sale and were not specifically in the enforcement agent’s announcement of the public sale and in the award decree. 

In light of this, the Bulgarian Supreme Court of Cassation ruled, in an Interpretative Judgment dated May 18, 2017 on interpretive case No. 5/2015, that as long as the building on the property subject to public sale (i) is not described in the enforcement agent’s award decree, (ii) is not object to imposed restrain in the enforcement proceedings, (iii) is not described and evaluated by the enforcement agent, (iv) is not the subject of a public sale, and, most importantly, (v) represents a separate object of a separate ownership right, the ownership title on that building shall not be included in the transfer of the ownership title on the property in the public sale. 

The Supreme Court of Cassation explicitly ruled, however, that serving buildings or edifices on the property subject to public sale that have no separate designation and are not separate subjects of ownership rights do represent part of that property and shall be transferred along with it, including when sold in a public sale. This applies especially for facility premises (e.g., garages, sheds, fens, outbuildings, etc.) that have been designated only to serve the property or the building on it.

By Antonia Kehayova, Head of Real Estate, CMS RRH Sofia

This Article was originally published in Issue 5.6 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

On 19 July, 2018 the Bulgarian Commission for the Protection of Competition (the “CPC”) prohibited two concentrations. The first being the sale of the second largest media conglomerate in Bulgaria, Nova Broadcasting Group AD (“Nova Broadcasting”), (owner of Nova TV), to PPF Bidco, (owned by Czech businessman Petr Kellner), and secondly the sale of CEZ’s assets in Bulgaria, which include its energy distribution business, trade business and some small renewable energy parks to a Bulgarian company, Inercom, which maintains three solar power stations in the country.

Both decisions concern politically sensitive sectors (media and energy) and are currently largely criticised for their lack of valid economic arguments.

Basically, in both decisions, the commission’s legal arguments are given in several paragraphs only and it remains unclear why the acquisition of companies which are not competitors (or at least not major competitors) is classified as potential strengthening of dominant positions of the united group, which may impede the competition.

In both prohibited concentrations the overlap on the horizontal and vertical market/s is none or almost non-existant. Also, both concentrations concern acquisitions of large undertakings in Bulgaria (with market share in certain relevant markets which is close to or exceed 40 %) while the market share of the acquirer is insignificant (up to 5%).

Thus, for instance, in the prohibited concentration of Nova TV, the parties activities overlap only in the market of e-commerce, where both the acquirer and the target hold a market share of up to 5 %. Indeed, the Nova Broadcasting Group holds a market share of approx. 40 % in the markets of TV distribution and TV advertising. In these two markets, however, the acquirer is not active in Bulgaria, and its market share is nil. Despite the lack of actual threatening horizontal or vertical overlapping, the CPC considers that the “significant amount of mass information means, which would be accumulated by the concentrated group, would lead to its significant advantage over the other participants in the media market. Thus, the participants in the concentration would have the incentive and actual possibility to change their trade policy (e.g. by limiting the access, price increases or changes in the terms of the concluded agreements).“

In the other decision prohibiting the sale of CEZ, the CPC found that there was a horizontal overlap between the participants’ activities in the concentration on the market for the production and wholesale supply of electricity from photovoltaic power plants. CPC also states that the concentration generates vertical effects on downstream markets, namely the markets for electricity distribution, and supply and trade with electricity.

The CPC does not quote the market shares of the participants on these markets. Still, none of the parties hold significant market share in these markets. The CPC, however, explains the potential threat for the competition by analysing the legislative changes in Bulgaria, which concern the buy-out of electric energy produced by small plants with a capacity exceeding 4 megawatts (under the new regime the sale is made on the energy exchange stock, while under the former regime the energy of small plants was purchased under preferential prices). The analysis of the CPC, however, fails to explain why the concentration would be detrimental for the concentration under the new legal regime (since no substantial actual change would not occur because of the concentration).

It also remains largely unclear as to why recent concentrations with almost identical factual backgrounds concerning markets as those under the prohibited decisions were approved without conditions, while these concentrations were directly prohibited by the CPC.

The decisions of the CPC can be appealed before the Supreme Administrative Court in the second instance. It remains to be seen as to what will happen.

By Galina Petkova, Attorney at Law Schoenherr

After years of anticipation, the EU General Data Protection Regulation (GDPR) entered into force and took effect on May 25, 2018, bringing about several changes to Europe’s current data protection regime.

Among others, these changes include: (a) New obligations for data processors and controllers  (such as Data Impact Assessments, Data Protection Officers, Data Breach Reporting, and so on); (b) enhanced rights for data subjects; (c) new accountability requirements (including keeping track of all data collection, storage, transfer, deletion, and other forms of data processing); (d) significant fines for noncompliance (up to 4% of annual worldwide turnover or EUR 20 million, whichever is higher); and (e) wider territorial scope (extending it outside the EU).

Although the GDPR was adopted almost two years ago, it only recently sneaked onto the agendas of Bulgarian businesses – and it has created mass hysteria. Indeed, the Regulation’s provisions would not seem so remarkable had the provisions of the repealed Directive 95/46/EC and the Personal Data Protection Act been effectively applied in Bulgaria in the past.

Nevertheless, the GDPR is here and Bulgarian businesses must cope with its challenges. The biggest challenge is for micro-enterprises, small and medium-sized enterprises, and those with limited financial resources. They should bring their activities in line with the Regulation, and the question which inevitably arises is how to do so as effectively as possible. The answer to this question lies precisely in the GDPR and the option of drafting and adhering to Codes of Conduct.

What are Codes of Conduct?

Codes of Conduct are drawn up by associations and other bodies representing categories of controllers or processors to facilitate the effective implementation of the GDPR, considering specific features of the various processing sectors and the specific needs of micro, small, and medium-sized enterprises (recruitment agencies, accounting enterprises, hospitals, etc.). The Codes of Conduct may set out the terms which must be applied by the controllers and personal data processors with respect to bona fide and transparent processing, the legitimate interests of controllers in specific aspects, the collection and pseudonymization, the exercise of the data subjects’ rights, data breach notifications, the transfer of personal data to third countries or international organizations, and so on.

How Could a Code of Conduct Help?

Codes of Conduct are approved by the competent regulatory authority – the Bulgarian Personal Data Protection Commission – which is a sufficient guarantee that the terms set out therein meet the numerous requirements of the GDPR.

By taking advantage of this option, companies from specific sectors can unite their efforts and avoid struggling alone to bring their internal policies for personal data processing in line with the Regulation.

Further, adherence to an approved Code of Conduct may also be used as proof of compliance with several obligations for both controllers and processors. A practical example is the obligation of a controller to only use personal data processors which provide sufficient guarantees for the application of appropriate technical and organizational measures to safeguard personal data. Making such an assessment for each of the processors engaged by a controller would significantly impede the process of selecting the right contractor. If, however, a processor adheres to an approved Code of Conduct, this can be used as evidence for providing sufficient guarantees. Thus, on the one hand, such a processor is more attractive to the controllers, and on the other hand, a controller who selects this processor can be more confident that he or she has made the right choice and complied with the obligation under the GDPR. In other words, “hit two rabbits with one shot.”

In addition, the adherence to an approved Code of Conduct is one of the mitigating factors considered for by the Commission for Personal Data Protection when imposing and determining sanctions – which, as indicated earlier, are quite substantial. It is important to emphasize that formal adherence to Codes of Conduct is not sufficient to avoid a sanction. The terms set in a Code of Conduct should be implemented effectively and applied in practice.

The advantages of Codes of Conduct are significant, and the controllers, the personal data processors, and their associations and partnerships should benefit from them.  

By Stefana Tsekova, Partner, Schoenherr    

This Article was originally published in Issue 5.5 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.