Opinion regarding: Draft Act for Amendment and Supplementation of the Civil Procedure Code

TO

THE 51ST NATIONAL ASSEMBLY

WITH COPY TO:

The Committee on Constitutional and Legal Affairs (Lead Committee)

POSITION

from

Association "THE BULGARIAN ENTREPRENEURIAL ASSOCIATION," with UIC 177239971, represented by Executive Director Nedyalko Dervenkov

Regarding: Draft Law on Amendment and Supplement to the Civil Procedure Code, signature No. 51-502-01-19

Dear Members of Parliament,

BESCO — the Bulgarian Entrepreneurial Association unites over 1,000 companies from dozens of industries. We work to improve the business environment in Bulgaria through effective policies, the encouragement of innovation and the introduction of modern mechanisms for economic development.

In this regard, we express our position on the Law on Amendment and Supplement to the Civil Procedure Code and the Law on Mediation through the introduction of a mechanism for familiarising the disputing parties with the alternative method of mediation — a key instrument for the sustainable resolution of civil and commercial disputes.

Mediation represents a valuable instrument for resolving commercial disputes between companies, disagreements between partners and shareholders, as well as labour conflicts between employers and employees. In the business environment it:

• Saves time and administrative costs;
• Preserves good partnership and employment relations;
• Supports the rapid restoration of the normal rhythm of work;
• Provides flexibility, confidentiality and control by the parties over the process and outcome;
• Raises the legal and communication culture in a corporate environment.

We believe that:

• Agreements reached through mediation often have a higher degree of voluntary compliance compared to court judgments. This is because the parties actively participate in the process of crafting the solution and feel more bound by the outcome;
• Unlike open court proceedings, mediation is a confidential process. All discussions and documents presented during mediation remain confidential. This is key for companies that want to preserve trade secrets, prevent the public disclosure of sensitive information or protect their reputation;
• The judicial system is limited by the applicable legislation and often offers limited solution options (for example, the award of monetary compensation). Mediation, on the other hand, allows the parties to explore a wide range of creative and personalised solutions, which may include future business relations, specific payment terms, modification of contracts or other non-monetary compensation;
• Mediation, by focusing on the interests of the parties and their common goals, creates an environment for dialogue and negotiation that allows the preservation, and even the restoration, of business connections. This is an advantage, as it reduces the need to seek new partners, which entails additional costs and time, and maintains the stability of the business ecosystem;
• Participation in mediation and the reaching of an agreement not only resolves the current conflict, but also raises the communication skills and understanding between the parties. This can lead to better management of future disagreements and a reduction in the likelihood of new disputes arising.

We believe that mediation is not merely an alternative to judicial proceedings, but a strategic choice for business, offering not only an effective but also a legally grounded resolution of disputes that contributes to the sustainability and prosperity of companies. Therefore, BESCO supports every initiative that raises awareness and accessibility of mediation for business, including through mandatory information meetings where applicable.

We would like to emphasise the following positions on the draft law:

• We assess as exceptionally positive and as a key development for business the inclusion of commercial disputes within the scope of the draft law. We wish to note that we consider the potential introduction of a material interest threshold for such disputes to be inadvisable, since the success of an information meeting on commercial disputes and the mediation procedure itself does not depend on the value of the dispute, but on a multitude of other factors — such as the nature of the relations between the parties, their readiness for dialogue and the complexity of the case.
• We consider that during the discussions, the removal of categories of cases (including commercial disputes) from the scope of the mandatory information meetings must not be permitted. This will limit access to mediation precisely in the areas where it is most needed. Commercial disputes are often associated with significant material and time losses for companies. Mediation offers a faster and cheaper way to resolve them compared to court proceedings. This directly reduces the operational costs for business and frees up capital that can be invested in development and innovation. As already mentioned, mediation allows the preservation of good commercial relations. In a dynamic business environment, where partnerships are of key importance, the ability to resolve conflicts without destroying relationships is a strategic advantage. This leads to market stability and raises the competitiveness of Bulgarian companies. The possibility of quick and effective resolution of commercial disputes through mediation increases predictability and legal certainty for investors. When companies know that a functioning mechanism for out-of-court settlement of conflicts exists, this reduces the risk associated with legal disputes and stimulates foreign and domestic investment. This is a strong signal for a stable and reliable business environment.
• Of importance for business is the inclusion within the scope of mediation of types of disputes from the everyday practice of entrepreneurs that could be resolved through the means of mediation. These include corporate disputes, disputes connected to intellectual property and others, whose resolution through the courts often takes years, which is economically, temporally and administratively disadvantageous for business. The inclusion of these categories of disputes within the scope of mediation is a strategic step towards modernising the legal framework and adapting it to the real needs of modern business. It will provide entrepreneurs with an effective, swift and confidential way to resolve complex and sensitive conflicts, which will directly contribute to the sustainability, innovation and growth of the Bulgarian economy.
• We consider it important that the court retain its right to require the parties to participate in an information meeting regarding the mediation procedure, even in cases where the parties present a certificate/note from an out-of-court centre stating that they conducted a mediation procedure before filing the case, since this risks certifying that a mediation procedure was only formally conducted without a genuine one actually having taken place. The main risk is the formal rather than genuine conduct of mediation before filing a case. If the court is deprived of the right to assess the necessity of an information meeting, a possibility is created for: 1) The parties could participate in mediation only in order to obtain a certificate, without a genuine intention to resolve the dispute. This undermines the entire purpose of mediation as an instrument for out-of-court settlement of conflicts; 2) Rather than engaging in good faith with the procedure, the parties could use it as an obstacle that must be overcome in order to reach court, without appreciating its benefits. Preserving the court's power to require the parties to participate in an information meeting on mediation, regardless of prior certificates, is critical for ensuring the authenticity, effectiveness and credibility of the mediation process. This is a preventive measure against abuse and a guarantee that mediation will fulfil its role as an effective instrument for alternative dispute resolution.
• We consider that mediators in court centres must not be limited to lawyers only, as this contradicts good commercial practice and the needs of business, where disputes often have economic or human (HR) dimensions. The diversity in the professional training of mediators is an asset. Business disputes are rarely purely legal. They often have deep economic, financial, operational, technical or human (HR) dimensions. For example, a dispute between partners may be related to the distribution of profits, but the real cause may be a lack of communication or different visions for the development of the company. A dispute over product quality may require knowledge of engineering or manufacturing processes. A mediator with experience outside the law — for example, an economist, engineer, human resources expert, financial professional or entrepreneur — may better understand the nature of these non-legal aspects of the dispute. They can help the parties to identify and resolve the root causes of the conflict that are not directly connected to the legal aspect of the case. When the mediator has practical experience in the industry of the disputing parties, they can build trust more quickly. The parties will feel that the mediator understands their business context and challenges, which is of decisive importance for open communication. Different professions use different languages and ways of thinking. A non-lawyer mediator can translate complex legal or technical terms into language understandable to all parties, facilitating communication and mutual understanding. Knowledge of the specific terminology and challenges in a given sector allows the mediator to ask more precise questions and to guide the dialogue more effectively. In an informal format, the Bulgarian Entrepreneurial Association (BESCO) has on more than one occasion successfully played the role of mediator between association members for the resolution of commercial and other types of disputes between them.
• We support the determination of a mediator remaining within the powers of the coordinator of the court centre, who is familiar with the qualifications of the mediators and can make a more adequate choice according to the specifics of the dispute — in cases where the parties have not by common agreement designated one or more mediators. The coordinator in the court centre is the person who best knows the list of mediators, their specialisation, experience and strengths. They are aware of the professional training of each mediator (not only legal, but also economic, technical, HR, etc.), as well as their preferences for certain types of disputes. This information allows the coordinator to make an informed and adequate choice, tailored to the specific nature of the dispute. For example, for a commercial dispute requiring financial knowledge, the coordinator can select a mediator with an economics background and experience, which significantly increases the chances of a successful mediation.
• We consider that thought could be given to replacing the fine for failure to appear at an information meeting with liability to reimburse costs only for the mediator's remuneration for up to one hour at the rate provided for in the Supreme Judicial Council Ordinance. We believe that this proposal:
  ➔ Represents a more proportionate and fair measure; ➔ Will reduce the negative attitude towards participation in the procedure; ➔ Will preserve the institutional authority of the court and the mediator.

In conclusion, BESCO declares its full support for the broader introduction of mediation into practice in Bulgaria, initially through the judicial procedure — as has been happening for years in other European countries — in compliance with the principles of voluntariness, effectiveness and professionalism, which are not affected by the proposed draft law.

We thank you for the attention given and call for the business perspective to be taken into account in finalising the regulatory changes. We also declare our readiness to participate in discussions, working formats and consideration of the topic in the parliamentary committee.

Yours sincerely,

Nedyalko Dervenkov Executive Director BESCO — Bulgarian Entrepreneurial Association