Bulgaria
1. Are freezing orders (or their equivalent referred to below) available in civil legal proceedings in this jurisdiction and what is their effect?
Yes. The respondent is prohibited from dealing with the assets referred to in the freezing order until the freezing order is revoked by the Court.
2. Are other interim orders commonly made in conjunction with a freezing (or equivalent) order?
No. The Court is limited to granting/denying the freezing of assets requested by the applicant.
3. Briefly what is the relevant legal test?
(i) The action in the underlying claim is supported by convincing evidence or the applicant has provided a guarantee in the amount requested by the Court (the Court may request the provision of a guarantee even if the action is supported by convincing evidence);
(ii) the requested interim measure is appropriate for the securing of the underlying claim; and
(iii) the applicant proves the necessity for interim measures, i.e. that without the measures, it will be impossible or difficult for the applicant to enforce the judgment. Usually this means the applicant would have to prove that the respondent has financial difficulties or is transferring its assets to third parties.
4. Briefly what is the process for obtaining a freezing (or equivalent) order?
The applicant makes an application to the Court describing the underlying claim, the risk for enforcement of a potential judgment and the requested interim measures. The respondent is never notified of the application and the Court then rules on the application.
If the Court grants the freezing order, the applicant (after payment of the guarantee if such is requested) brings the freezing order to an enforcement agent of his choice who enforces the freezing order. The respondent is then notified of the freezing order and is entitled to appeal it before the appellate Court.
If the Court rejects the applicant’s application, the applicant is entitled to appeal the ruling before the appellate Court. The respondent would still not be notified at this point. If the appellate Court grants the application, the applicant conducts the procedure before the enforcement agent described above, who then notifies the respondent. In such circumstances, the respondent would be entitled to appeal before the Supreme Court of Cassation.
5. Does the applicant have to provide any form of security or commit to compensation if its claim is ultimately unsuccessful and any freezing (or equivalent) order granted causes loss and damage to the respondent?
This depends on the ruling of the Court reviewing the application. The Court may request the applicant to pay a guarantee which varies at the discretion of the Court, but usually amounts to approximately 10% of the amount of the underlying claim.
6. Can it be sought against third parties?
No. Freezing orders may only be sought against the respondent, who is the defendant in the underlying claim. However, when the freezing order is directed against receivables of the respondent, the third party owing sums to the respondent will be notified of the freezing order and will be prohibited from paying its due debt to the respondent. Instead, payment shall be directed to the enforcement agent who enforced the freezing order.
7. What assets are covered by a freezing (or equivalent) order?
Any tangible or intangible assets of the respondent within Bulgaria, except receivables of the respondent which are not subject to enforcement and which includes salaries and pensions below a certain financial threshold. The only exception to this position is the European Account Preservation Orders under Regulation (EU) № 655/2014 pursuant to which Bulgarian Courts may freeze bank accounts opened in another member country of the EU.
8. Can a freezing (or equivalent) order be made in support of substantive proceedings abroad?
Yes.
9. Can a freezing (or equivalent) order be made in support of arbitration proceedings or awards?
Yes.
10. At what stage of proceedings can a freezing (or equivalent) order be sought?
At any stage of the claim until the end of the investigational phase of the proceeding before the appellate Court, including prior to commencing the claim (although the Court will require the applicant to bring its claim within one month of the granting of the freezing order by the Court).
11. Are there typically any exceptions to the general prohibition on the respondent’s use of assets subject to a freezing (or equivalent) order?
No. The respondent cannot use the frozen assets in any way. If the freezing of such assets causes great difficulties to the respondent, they can request replacement of the interim measures with an alternative.
12. What happens after a freezing (or equivalent) order is granted?
The applicant must submit the freezing order to a public or private enforcement agent of their choice. The enforcement agent enforces the freezing order in various ways depending on the type of assets frozen. Thereafter, the enforcement agent notifies the respondent of the freezing order. Within seven days of the notification, the respondent is entitled to appeal the freezing order before the higher instance Court (i.e. if the order is granted by a first instance Court – before the appellate Court and if the order is granted by an appellate Court – before the Supreme Court of Cassation).
13. Who pays the costs of the application for a freezing (or equivalent) order?
Costs are paid by the applicant. However, when the Court gives judgment on the underlying claim, the Court can order the respondent to reimburse the applicant for the costs incurred from submitting the freezing order application.
14. What protections are there typically in a freezing (or equivalent) order for third parties to such orders?
(i) A third party is prevented from exercising any rights of set-off arising prior to its notification of the freezing order.
(ii) A third party does not need to enquire as to the application of any money withdrawn by the respondent if the withdrawal appears to be permitted by the freezing order.
(iii) A freezing order only affects third parties outside of the jurisdiction in the case of European Account Preservation Orders.
(iv) Costs incurred by a third party are not subject to reimbursement by the applicant or the respondent.
15. What are the consequences of breach of a freezing (or equivalent) order?
There are civil and criminal consequences. Disposal of frozen assets is a crime under the Bulgarian Criminal Code which is punishable by imprisonment or a fine. From a civil law point of view:
(i) disposal of frozen assets has no effect vis-à-vis the applicant. If the applicant is successful with the underlying claim, they can, with the assistance of an enforcement agent, seize the assets from the third party and put them on public sale;
(ii) a third party who has been notified that respondent’s receivable towards it has been frozen and nevertheless pays its debt to the respondent is not relieved from its obligation to pay the exact same amount to the enforcement agent handling the case; and
(iii) the Bulgarian Registry Agency denies the registration of transfers of frozen company shares if there is no evidence that the freezing order has been lifted.
16. Does a third party notified of (but not a party to) a freezing (or equivalent) order owe a duty of care to the applicant (meaning it can be liable to the applicant for non-compliance)?
Yes.
17. Can a freezing (or equivalent) order be enforced abroad?
Freezing orders granted by the Bulgarian Courts are not enforceable abroad since they only target assets of the respondent located in Bulgaria. The only exception is the European Account Preservation Orders under Regulation (EU) № 655/2014 granted by the Bulgarian Courts which may be enforced in the member country of the EU where the bank account has been opened.
18. Can freezing (or equivalent) orders from overseas jurisdictions be enforced in this jurisdiction?
In general, no, except for European Account Preservation Orders under Regulation (EU) № 655/2014 as stated above.
Contact
Philip Kiossev Principal Associate Eversheds Sutherland Bulgaria Sofia, Bulgaria philip.kiossev@eversheds-sutherland.bg www.eversheds-sutherland.bg
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