The legal regulation of the security measures of a future claim is set forth in Part IV “Security Procedure” (Articles 390-396) of the Bulgarian Civil Procedure Code.

Just one party participates at the court procedure: only the creditor takes part and the debtor does not get notified. Based on the application submitted by the creditor, the Bulgarian court rules its injunction after considering the evidence presented only by one of the parties, which creates the danger for the court to be misled by a dishonest behavior from the applicant as far as the written evidence, presented by him, and does not always reflect the reality of the matters. The application for securing of a future claim is a separate claim with its own existence and should clearly point out the major characteristics of the future claim - its grounds and remedy amount sought, also by pointing out all requirements which are necessary according to Art.127 of the Bulgarian Civil Procedure Code and they shall apply to the requirements of the future claim (“Guidance in Civil Court Procedures for Judge Applicants”).

The purpose of the securing of a future claim is to give the creditor a chance to secure the satisfaction for his claim against the debtor. Such procedure for securing of a future claim obstructs the debtor from disposing of his property or creating some obstacles for the creditor, which will make the satisfaction of his claim difficult during the litigation process or before that. This is a very important feature in Bulgaria. This is the reason for the implementation of the so-called security measures, which could be:

• imposition of an interdict on a real estate
• a distraint on a movable property and/or debtor’s receivables (for example on the debtor’s bank accounts)
• other appropriate measures, defined by the Bulgarian court, including suspension of a motor vehicle from motion and termination of the enforcement (for example imposition of distraint on shares and stocks from the share capital of a company, termination of the construction, termination of the enforcement of a divorce court decision in its part concerning the parental rights, etc.

Whether the property, subject to security measures, is owned by the defendant, is not a prerequisite for enforcing the security measure by imposition of an interdict or distrainment, because in the security procedure the court does not analyze the property rights on the objects, subject of the case.

The Bulgarian court has the right to accept several security measures simultaneously which are limited to the price of the future claim.

                                       Conditions for starting the procedure

In Bulgaria, the securing of a future claim can be requested from the court for all kinds of claims. The application for imposing a security measure must be in a written form and should be submitted before the claim is submitted in front of the court which is competent in this matter (Art.390 Par.1 of the Bulgarian Civil Procedure Code). In this application the person who applies for an imposition of security measures regarding his future claim has to point out the required security measure and the price of the claim. The Bulgarian court does not have the right to deviate from the requested security measure. There is no hindrance for other security measures to be implemented if some of them are declined by the court; this means that if one of the measures is not accepted, the court can issue a security order with which the other security measure, pointed out by the applicant, is imposed. However, according to the judicial practice, it is unacceptable to point out security measures alternatively -the court has the right to choose which security measure will be imposed, this is regarded as an undefined request by the applicant.

The application is submitted to the competent court in Bulgaria as per the residence address of the claimant or the location of the real estate, which will serve as securitization (Art.396 Par. 1 of the Bulgarian Civil Procedure Code). In claims, in which the competence of the court is defined by the amount of the tax evaluation of a real estate, the county court in the location of the real estate is competent, regardless of the claim’s price. When the applicant is a foreign person, Art.107 Par. 3 of the Bulgarian Civil Procedure Code is applicable - the application for securing a future claim is submitted before the competent court in Sofia, Bulgaria, or before the competent court in the location of the real estate, which will serve as securitization. In the case of an arbitration clause the application is submitted not before the arbitration court but before the civil court under the rules of Art.390 of the Bulgarian Civil Procedure Code.

The applicant must determine the particular security measure and the value of the object in the court dispute (Art.395 Par.1 of the Bulgarian Civil Procedure Code). The court is not allowed to implement measures different from those, which are requested by the applicant.

The application is not sent to the other party (debtor and subsequent defendant; Art.395 Par.1 point 2 of the Bulgarian Civil Procedure Code). At this stage of the proceedings, the opponent cannot raise objections - no legal remedies are at his disposal. This also corresponds to the main purpose of the process, namely, surprise and speed, which is of the essence not only in Bulgaria, but anywhere. The Bulgarian court should issue an injunction regarding the application on the day on which the application is submitted or the next day the latest which is an indicative period and is not always upheld by the court since the court’s decision may be more time-consuming.

Generally the court in Bulgaria reaches a decision within a period of seven days from the date of the request in a non-public hearing. If the application is accepted, an interim injunction is issued.

In order to require an interim injunction, the applicant must also have the right of a material claim which entitles him to initiate the procedure. The Bulgarian court issues the interim injunction if it is established that the future claim is:

1) Admissible

2) Probably justified, meaning:

• it is supported by convincing written evidence (in the case of the admission of the measure the probable justification of the future claim is only generally assessed as the court discusses in detail the aspects of the claim’s justification only on the basis of the submitted claim and supporting evidence), or
• a guarantee in the amount, determined by the court according to the rules of Art.180 and 181 of the Obligations and Contracts Act is provided. According to the Bulgarian Civil Procedure Code a security guarantee is compulsory if there is no evidence or the submitted evidence cannot convince the court in the justification of the claim. The amount of the guarantee is related to the direct damage that could be incurred by the defendant if the application for the interim injunction proves to be unjustified (Art.391 Par.3 of the Bulgarian Civil Procedure Code). Generally the judicial practice demands consistently a guarantee of 10-15 % of the value of the dispute even in cases where convincing evidence is available.

3) The necessity for security measures in Bulgaria: this is the case when the enforcement of the claim is endangered or even impossible without an interim injunction. The judgment of the court regarding this need is given separately for each individual case and is a complex matter, since the court may also consider the status of the opposing party; this includes their economic relations and the adequacy between the amount of the creditor’s claim and the debtor’s assets for which a securitization is requested. In the case of monetary claims, a need for a security measure is assumed since the debtor can at any time dispose of his assets. From this point of view, it is assumed that an interim injunction and imposing a distraint on the property are adequate measures.

In cases for alimony the court in Bulgaria may also issue an interim injunction without taking into consideration the above conditions or even ex officio. In the case of monetary claims against state institutions, municipalities or hospitals, a security measure via interim injunctions is not permitted. It is also inadmissible to secure enforcement from monetary claims by distraint of objects or receivables as excluded by the list under Art.444 of the Bulgarian Civil Procedure Code (Objects, which shall not be subject to sequestration).

According to the Art.394 of the Bulgarian Civil Procedure Code an interim injunction is only possible for this part of the claim which is supported by sufficient evidence. The interim injunction is issued according to Article 395 Paragraph 2 of the Bulgarian Civil Procedure Code in a non-public hearing on the day of the application’s submission in court. The injunction will be issued according to Art.395 on the basis of the requested measure. If a guarantee is required before issuing the interim injunction, it will be issued after the guarantee is given (Article 395 Par.3 point 2 of the Bulgarian Civil Procedure Code). If the application is accepted, the court shall also set a time period for bringing of the future claim to court, which is cannot exceed than one month and cannot be extended even due to important reasons. If no evidence for submitting the claim is provided within the time period, the court shall officially suspend the interim injunction (Art.390 Par.3 of the Bulgarian Civil Procedure Code).

                                        Legal Remedies (Art.396 of the Bulgarian Civil Procedure Code)

If the court in Bulgaria rejects the application or accepts it under conditions different from those mentioned above, the applicant may submit a complaint to the Court of Appeal, whereby the defendant is still not informed about procedure.

The debtor and any other person, whose legal state is threatened by the security measure, can submit a complaint against the court injunction that authorizes the imposing of security measures.

The debtor learns about the enforced security measure only upon the first actions by the private or public enforcement agent, who carries out the securitization of of the subjects, from the Bulgarian Real Estate Registry or from the court in the cases, prescribed by law. The 7-day appeal period for the debtor begins from the first moment when he knew about the securitization or the receipt of the notification. The submission of the complaint has no suspensive effect with regard to the securitization procedure.

                                                 Replacement of the security

Art.398 Par.1 of the Bulgarian Civil Procedure Code grants the possibility for a replacement of a security measure with another measure at the request of one party. The opponent is notified of this request, after which he can submit his objections to the court within a period of three days after the notification, which will be taken into account when the request for the replacement is deliberated.

In the case of a monetary claim, the defendant may at any time without the consent of the other party replace the measure granted by the court with a deposit in money or securities performed according to Article 180 and 181 of the Obligations and Contracts Act (Par.2).

                          Revocation of the security (Art.402 of the Bulgarian Civil Procedure Code)

The measure shall be terminated at the request of the interested party. A copy of the application shall be sent to the applicant who has the right to appeal within a period of three days from the receipt of the copy.

The court will remove the measure in a non-public hearing after examining the abolition of the enforceability or the replacement of the monetary claim by the deposit of money or securities within the meaning of Articles 180 and 181 of the Obligations and Contracts Act. The decision of the court cannot be appealed.

The revocation of the deposit, the cancellation of the interim injunction and the abolition of further security measures are carried out on the basis of a legally binding court ruling.

                             Return of the Security Measure and Damage Compensation

After the withdrawal of the guarantee, after the ruling in a decision by the court in the legal proceedings or with the termination of the proceedings, the security guarantee of the applicant should be returned. A copy of the application must be sent to the defendant, who is entitled within one week to submit a complaint against the release of the guarantee and within one month can submit a request for compensation of the damage caused to him, whereby he could use the guarantee to remedy such damages.  If the defendant does not submit a complaint within the aforementioned deadlines and does not claim damages, the security guarantee is returned.

                                                                       Summary

The procedure for the securitization  of the enforcement proceedings in Bulgaria has as a main trait the fact that the debtor cannot freely dispose of the assets on which there is a security measure imposed - for example in case of a distraint on bank accounts, the debtor cannot dispose of the money assets up to the amount of the creditor’s claim. The procedure does not end with the granting of an enforcement title giving the creditor the opportunity to satisfy his claim through the enforcement procedure.

In Bulgaria practice has shown that generally an interim injunction often results in the voluntary fulfillment of the payments by the solvent debtors, since in most cases they restrict their business activities.

A further advantage of this procedure is its quickness - an interim injunction is usually issued within the day (or the next day) of the application or the security guarantee. Thus, the disputed claim is pledged by the enforcement agent and the debtor can no longer dispose of it freely for the duration of the interim injunction and during the court proceedings regarding the future claim.

All creditors in whose favor the security measure or an interim injunction has been granted shall be deemed as joined enforcement creditors, provided that the object of enforcement is of the subject of another creditor’s claim.  It is irrelevant whether the distraint or the interim injunction has been issued within the procedure for preliminary securitization of rights or within the general enforcement procedure.

For this reason this procedure is considered to be cost-effective in the absence of detailed information on the debtor’s solvency. The state tax differs from the general tax for bringing a claim to court, whereby the latter is generally a percentage of the evaluation of the subject matter, whereby the state fee for application for the securing a future claim is set at a rate of 40 leva. Eventually the costs incurred by the parties in the preliminary proceedings will be awarded in the court decision on the main claim as per its outcome (point 5 of the Interpretation Decision Number 6 of the Bulgarian Supreme Court from 26.11.2013 in case Number 6/2012, Reporting Judges Eleonora Chanacheva and Albena Boneva), that is, in case of a regularly submitted claim and a decision in favor of the creditor, he can claim from the debtor the costs in the course of the proceedings for interim relief, legal expenses and fees for the enforcement agent.

A disadvantage of the security measure for enforcement is that in most cases the court in Bulgaria requires a guarantee in the amount of 10-15 % of the disputed claim. This should be paid to the court’s guarantee account. The security guarantee serves as a security for the compensation of future damages of the defendant in the event of an unjustified claim of the applicant. After the completion of the legal proceedings, or if the claim is not submitted within the time period and the enforcement measure is revoked or when the proceedings are terminated, the guarantee must be paid back to the applicant, although this usually takes place after a few months, whereby no interest is accrued. A further disadvantage of this procedure is that in the case of a non-performance by the debtor, the creditor is must submit a claim within the period granted by the court (within one month after issuing the interim injunction) and to pay the state fee of 4 % of the disputed claim if he wants to enforce his claim. If the court decision is in favor of the creditor, he can claim the corresponding costs from the debtor.

The author of this article, Ms. Irina Konstantinova is a lawyer in the Law Firm “Ruskov and Colleagues”.