Law on the Measures and Actions during the State of Emergency

Due to the COVID-19 pandemic, Bulgaria has declared state of emergency as of 13 March 2020. Consequently, a Law on the Measures and Actions during the State of Emergency (the “Law”) in force retrospectively as of 13 March 2020 has been promulgated on 24 March 2020.

I.    EMPLOYMENT RELATIONSHIPS

The Law introduces amendments to the Labour Code, which provide for special measures that employers and certain categories of employees may take during the state of emergency.

1.    Opportunities for the employers

a)    To assign work from home and/or remote work to their employees unilaterally – if possible, the employers, depending on the specifics and the capabilities of the respective business, may introduce remote work for their employees without the employees’ consent. 
In this case, only the place of work is changed without changing the other conditions of the employment agreement. 

b)    To cease work in the enterprise for the period of the state of emergency 

•    by an order of the employer - employers may suspend the work of the whole enterprise, part of it, or of certain employees for the whole period of the state of emergency or for part of it. Such suspension is done by an order of the employer. 

•    by an order of the government/health authorities - if the suspension of work of the whole enterprise or part of it has been done by an order of a government body, the employer is obliged to deny access to its employees to their workplaces for the period stated in the government order. 

‑  In both cases, the employees are entitled to their full gross salary. An employer which, based on an order of a government body, has terminated the work of the enterprise, part of the enterprise or of certain employees, may be entitled to part compensations in order to cover the employees’ salaries. New set of rules envisage that compensations will be paid when the work in the enterprise is suspended for the entire or part of the period of state of emergency, but for no more than 3 months. The compensation is in the amount of 60% of the gross remuneration for January 2020 for each employee who is affected. The employer is obliged to cover the other 40% of the gross remuneration of the employee as well as to keep the employee at work for at least three (3) months after the period for which the compensations are paid. The employers, which may be entitled to apply for compensations are retailers in malls; various types of passenger transportation companies; hotels, restaurants and bars; travel agencies; places organizing artistic and creative activities, cultural activities, sports activities¹.

c)    To establish part-time work in the enterprise - employers can introduce part-time work for the whole or part of the period of a state of emergency in the entire enterprise or part of it for the full-time employees. The duration of the working day shall not be less than four (4) hours. The employees’ salaries could be reduced in accordance with the new working time.

d)    To provide unilaterally the use of paid annual leave - if the work of the whole enterprise, part of it or of certain employees has been suspended by an order of the employer or a government body, the employer may send the affected employees on paid leave without their consent, including employees who have not acquired eight (8) months work experience. The employers are further entitled to compel the employees to use up to one-half of his/her paid annual leave without the employees' consent in all other cases.

2.    Opportunities for the employees

Certain categories of employees will have the possibility to use paid or unpaid leave during the declared state of emergency, and the employer will be obliged to allow it. Such categories are: pregnant employees or employees in an advanced stage of in vitro treatment; mothers of children younger than 12 years old or children with special needs; employees who are single fathers of children younger than 12 years old or children with special needs; employees younger than 18 years old; employees with continuously reduced working capacity of 50% and more; employees who enjoy protection against dismissal as occupational rehabilitees or suffering from ischemic heart disease, active form of tuberculosis, cancer, occupational disease, mental illness or diabetes.

II.    DELIVERIES AND OTHER SERVICE AGREEMENTS

Since the parties in a delivery agreement are generally parties in a commercial agreement, it is possible for the party (the debtor) to invoke force majeure even in situations where no explicit rule is provided in the agreement. In that case, the statutory provisions of the Commerce Act shall apply. If there are any specific force majeure clauses in the agreement, they should be taken into account.
Invocation of force majeure by a debtor should generally release the debtor from liability for breach, i.e. for non-delivery in a specific term. However, the debtor must: 1) notify its counterparty in a timely manner of the force majeure situation; and 2) imply that the force majeure is the main reason for the contractual non-compliance. As for the first step (the notification), it can be considered that COVID-19 and the state of emergency in Bulgaria are “well known” facts, as they are widely publicly discussed. The debtor, however, must still prove to the creditor that the force majeure is the main reason for the contractual non-compliance. The main result is that the delivery shall be postponed for the duration of the force majeure.
Usually, the statutory provisions for force majeure establish the right for either party to terminate the agreement in case it loses interest in the continuation of the agreement (i.e. the need for the delivery expires). 
Best scenario for both contracting parties would be to renegotiate the terms and conditions of delivery, if possible.

III.    LOAN AGREEMENTS 

The Law envisages that until the cancelation of the state of emergency, the fact of delayed payment under agreements (the Law does not differentiate loan agreements and other commercial agreements) will not lead to any negative consequences: 
•    no default will be triggered;
•    no default interest will be accrued;
•    no mandatory prepayment could be requested;
•    the agreement may not be terminated based on the delayed payment; and
•    no enforcement over securities could be initiated.   
In each respective case, it should be analysed whether there are any force majeure clauses envisaged by the agreement. If yes, the application of such clauses shall be examined with reference to the applicable imperative provisions of the law.
The Law seems to be drafted as a mandatory provision, which overrules the respective provisions of loan agreements with Bulgarian impact governed by foreign laws.  

IV.    DISPUTE RESOLUTION / LITIGATION / DEBT COLLECTION  

From 13 March 2020 until the end of the declared state of emergency, all procedural court terms, arbitral and execution cases (penal cases and some specific criminal procedures are not included), statutory limitation periods (excluding on penal proceedings), terms for fulfilment of obligations given by an administrative bodies (except in relation to EU funding) shall be suspended.
All statutory terms (excluding the above) for exercising rights or fulfilment of obligations, which elapse during the state of emergency, and the validity of all administrative acts, which are limited by term, are prolonged with one month as of the date of the cancellation of the state of emergency.
All initiated public sales by state or private bailiffs are suspended as of 24 March 2020 until the end of the state of emergency. They shall be scheduled again after the end of the state of emergency and no new fees shall be charged.
As of 24 March 2020 until the end of the state of emergency, no bank accounts foreclosures, remuneration and pension foreclosures of natural person, as well as inventory of movable and immovable objects owned by natural persons, shall be imposed/undertaken except for collection of receivables from torts, remuneration and maintenance. 

V.    PUBLIC PROCUREMENT

For the period of the state of emergency, the provisions of the Public Procurement Law shall not apply for procurement of, among others, hygienic materials, medical materials, equipment, disinfections, including medical and laboratory equipment for treatment of affected patients, special treatment of pesticide and hospital garbage, etc.
Upon request of a contractor, the term for fulfilment of a contract could be prolonged, but for not longer than the duration of the state of emergency.
There is no prohibition for initiation of new public tenders in the other areas.

VI.    COMPETITION LAW

The Bulgarian Competition Protection Commission has suspended all its meetings until at least 13 April 2020. All hearings that were scheduled are postponed, whereas parties will be notified when a new date is set. The regulator is urging all parties to make use of its electronic services, and to submit documents electronically or via post. Please note that the application of the competition law has not been suspended in any way whatsoever.

VII.    REAL ESTATE

The notary procedures shall cease (including property sales) except for the emergency once. There will be an emergency public notary available for each 50,000 inhabitants in each region. 

VIII.    TAX

The deadline for filing the annual tax return is prolonged with three months. The new deadline is 30 June 2020 instead of 31 March 2020. The publishing of the annual financial statements is also postponed by three months – the new deadline is 30 September 2020.
There is no change in relation to VAT and social contributions. 

IX.    LEASE AGREEMENTS 

The Law does not provide specific regulations for the existing lease agreements. The Law provides a general rule, which will have effect during the state of emergency, that the consequences of default in payments, including interest and penalties, as well as non-monetary consequences such as premature repayment, contract cancellation and collection of assets, will not apply.
In terms of lease agreements and the introduced state of emergency in Bulgaria, the rules of force majeure would apply as lease agreements are generally commercial contracts. If there are any specific force majeure clauses in the agreement, they should be taken into account. 
In the event of force majeure, landlords, to the extent that they are prevented from fulfilment of their obligation under the lease agreement to provide the use of the respective premises to the lessees, are not entitled to claim payment of the lease for the period of prevention.  
Best scenario for both contracting parties would be to renegotiate the terms and conditions of the lease, if possible.

  ¹The government ordinance is expected to be published shortly.