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The final revised VBER is planned to enter into force on 1 June 2022. Did you know that the Distribution Law Center is already counting down?


Read the DLC Countdown newsletters on the changes to be expected: HERE.


Translations are available in Czech, CroatianDanishPortuguese, RomanianSlovak, Spanish and Swedish on the pages of our national contributors.

Q&A on Distribution Agreements

Part 1: Legislative framework

Q1. Please specify the legislative framework generally applicable to the conclusion and execution of distribution agreements (a)? Please include a link to the official publication of the applicable rules (e.g., relevant link to the Official Gazette) (b) and, if available, to the English translation of the legislative framework (c).

a.  Legislative framework:

The Bulgarian Protection of Competition Act;

The Bulgarian Contracts and Obligations Act;

The Bulgarian Commercial Act.

b. Link(s) to official publication:

Not available. Bulgaria does not have a digital register for official publications.

c. Link(s) to English translation:

Not available.

Q2. Other than for agency agreements pursuant to Directive 86/653 (EEC) on the coordination of the laws of the Member States relating to self-employed commercial agents, are there specific rules depending on the distribution format (e.g. franchising, exclusive distribution)?

No

Q3. Other than general contract law and competition law, are there other rules which may generally restrict the parties when drafting and concluding distribution agreements (e.g., rules in relation to unfair contract terms in B2B contracts, specific requirements in the context of a prohibition of abuse of economic dependence)?

Yes

If yes, which general rules apply (a)? Where available, please also include a link to the official publication of the applicable rules (b) and to the English translation of the regulatory framework (c).

a. General rules:

On 26 February 2021 the Bulgarian legislator introduced amendments to the Bulgarian Protection of Competition Act thus transposing Directive (EU) 2019/633 of the European Parliament and the Council of 17 April 2019 on the unfair trading practices in the business-to-business relationships in the agricultural and food supply chain. Those amendments are provided for in Chapter Seven “б” Bulgarian Protection of Competition Act and enter into force as of 1 November 2021.

By introducing the above mentioned amendments the Bulgarian legislator repealed Chapter Seven “а” Bulgarian Protection of Competition Act which contained rules prohibiting the abuse of a superior bargaining position.

b. Link(s) to official publication:

The Bulgarian Protection of Competition Act is accessible via this link.

c. Link(s) to English translation:

Not available.

Part 2: Pre-contractual phase

Q4. Are there mandatory provisions in relation to the disclosure of pre-contractual information prior to concluding and/or executing distribution agreements?

Yes. 

If yes, which mandatory provisions apply (a) and which information must be disclosed (b)? Where available, please also include a link to the official publication of the applicable rules (c) and, if available, to the English translation of the regulatory framework (d).

a. Mandatory provisions:

Art. 12 Bulgarian Obligations and Contracts Act.

b. Information to be disclosed:

The parties have a general obligation to act in good faith in the conduct of negotiations and the conclusion of an agreement. Bulgarian case law maintains that the disclosure or declaration of false or inaccurate information or the non-disclosure of essential information in the pre-contractual phase may be considered a breach of the general obligation to act in good faith in the conduct of negotiations.

c. Link(s) to official publication:

Not available.

d. Link(s) to English translation:

Not available.

Q5. Is there a standstill obligation linked to the requirements imposed for the pre-contractual phase?

No. 

Q6. Does the relevant regulatory framework impose sanctions if the pre-contractual obligations are not (fully) respected?

Yes.

If yes, which sanctions apply (e.g., nullity of contract, penalty payment)?

Art. 12 Bulgarian Obligations and Contracts Act contains a very general rule that the party which fails to act in good faith shall owe damages (if any). Please see, Q8. 

Q7. Can a party be held liable if it terminates the pre-contractual negotiations?

Yes.

If yes, on what grounds (a); under what conditions (b); and what consequences are generally linked to such liability (c)?

a. Grounds for pre-contractual liability:

Art. 12 Bulgarian Obligations and Contracts Act.

b. Conditions for pre-contractual liability:

The parties have a general obligation to act in good faith in the conduct of negotiations and the conclusion of an agreement.  

c. Consequences of pre-contractual liability:

The law contains a very general rule that the party which fails to act in good faith shall owe damages.

Bulgarian case law and the predominant legal doctrine maintain that the damaged party may seek damages only related to its negative interest, i.e. the losses incurred (which is the actual decrease in the damaged party’s property), but not damages related to its positive interest, i.e. the loss of profit (which in contrast is the expected increase in the damaged party’s property that did not ensue).

Q8. Are there other relevant rules and/or restrictions that apply during pre-contractual negotiations between supplier and distributor?  

No.

Part 3: Contractual phase

A. Form of distribution agreements

Q9. Must a distribution agreement be executed in writing to be valid and enforceable?

No, never. 

Q10. Are there any (other) requirements as to the form of the distribution agreement for it to be valid and enforceable?

No.

B. Content of distribution agreements

Q.11 Other than restrictions imposed by EU competition law (including Regulation (EU) 330/2010), do specific rules and/or restrictions apply in distribution agreements with respect to

  • the territory in which or the customers to whom the goods/services will be sold;
  • an exclusivity granted to the distributor;
  • (exclusive) sourcing/purchasing obligations;
  • resale prices;
  • non-compete clauses

No specific rules apply. 

Q12. Do specific rules and/or restrictions apply in distribution agreements with respect to

  • obligations of the supplier vis-à-vis the distributor, including in relation to the remuneration of the distributor;
  • obligations of the distributor vis-à-vis the supplier or vice versa;
  • a non-solicitation clause during and/or after the term of the distribution agreement;
  • minimum sales quota imposed on the distributor;
  • specific sector rules?

No specific rules apply.

C. Term and termination

Q13. Are there particular rules and/or restrictions in relation to the term (incl. renewal) of distribution agreements?

No.

Q14. Are there any specific rules and/or restrictions with respect to the termination of distribution agreements (e.g. minimum notice period, statutory right to compensation (goodwill or other))?

No. 

There is no minimum notice period that must be complied with under Bulgarian law neither on the basis of the principle of good faith. For example, if parties to a distribution agreement have agreed to a termination (for no cause) with 1 months’ notice, a longer notice period may not be substantiated and held to prevail on the bases of good faith principles even if the distribution relationship has existed for 25 or more years. If the parties did not agree a notice period, it may be theorized that in such a case commercial customs (if any) may apply to determine a notice period in accordance thereof. If commercial customs differ, the customs as per the place of performance shall prevail. However, if no customs may be established, it is unclear how this situation will be resolved under Bulgarian law.  No case law exists on this question either.  

In 2015 the Bulgarian legislator adopted a prohibition of an abuse of a superior bargaining position in the Bulgarian Protection of Competition Act (thus as public law rather than as private (i.e. civil and commercial) law)). The prohibition generally allowed to consider a termination in bad faith of a long-lasting contractual relationship by a party in a superior bargaining position as an instance of an abuse of a superior bargaining position. However, the prohibition was abolished in February 2021 and no relevant case law was established during the period that it was in force.

As there are no mandatory rules on termination, there is no statutory right to compensation and no goodwill indemnity or other compensation shall be due. Bulgarian case law also does not provide for a compensation in this respect.

If parties to a distribution agreement agree to a notice period of termination without cause (e.g. 1 months’ notice) and the notice period is not respected by a party, the other party may generally claim damages (if any at all) under general contractual liability. However, it must be noted that under Bulgarian law such damages must be a direct result of the contractual breach (i.e. the non-respect of the notice in this case). Save for expressly agreed liquidated damages for failure to respect the notice period, it is uncertain how such damages will be determined at all. 

Even during the period that the prohibition of the abuse of a superior bargaining position was in force, if an abuse would have been established, that would not mean that a compensation would be automatically due. The damages would still have to be established under general civil/commercial law and thus before a civil court.

Q15. Is it possible to terminate the distribution agreement based on certain grounds for termination (breach or other) included in the distribution agreement?

Yes.

If yes, is prior judicial intervention required in order for the termination of the agreement to take effect?

No.

Part 4: Post-contractual phase

Q16. Is the supplier required to repurchase the stock that is still at the distributor’s disposal when the distribution agreement ends?

No. 

Q17. Are there other post-contractual obligations that generally apply to either of the parties in the context of the termination of the distribution agreement?

No.

Part 5: Dispute resolution

Q18. Do specific rules and/or restrictions apply as regards the choice of forum and/or jurisdiction?

No

Q19. Can the parties opt for arbitration?

Yes. 

If yes, are there any rules and/or restrictions as regards the enforceability of arbitration clauses in distribution agreements?

No

Q20. What is the statute of limitations applicable to claims regarding the performance of a distribution agreement?

The general statute of limitations applicable to claims regarding the performance of a distribution agreement is five years, unless otherwise provided by law (Art. 110 Bulgarian Obligations and Contracts Act).

The statute of limitations is 3 years with respect to claims for (i) indemnification and liquidated damages resulting from non-performance of contracts, and (ii) for rent, interest and other scheduled payments (Art. 111 Bulgarian Obligations and Contracts Act). Any agreement on a shorter or longer statute of limitations is void. Also, any waiver of the statute of limitations prior to its expiry is void (Art. 113 Bulgarian Obligations and Contracts Act).

In case of a sale of movable property, claims for hidden defects must be made within a six-month period as from the delivery. If the supplier knowingly failed to disclose the defect, the statute of limitations is 3 years. As an expressly provided exception the parties may agree on longer or shorter limitation periods (Art. 197 Bulgarian Obligations and Contracts Act). 

Part 6: Additional comments

Bulgarian competition law generally adheres to the principles established under EU competition law so that there are no specific deviations in the law or the case law to be reported. It is interesting to note, however, that Art. 16(3) Bulgarian Protection of Competition Act provides that the de minimis rule does not apply to agreements which have as their object or effect the direct or indirect price fixing, the sharing of markets and/or clients or the limitation of the production and sales. The Bulgarian Commission on Protection of Competition stated in its Decision 125/2009 that the de minimis rule does not apply only in the event of object restrictions, i.e. no reference is made to restrictions by effect. Formally, however, Decision 125/2009 may not contradict Art. 16(3), the latter being superior. We are not aware of any Bulgarian case law dealing with the application of Art. 16(3) to the above described restrictions by effect.

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