E-signatures in finance and NPL transactions in Bulgaria

An agreement is considered to comply with the written form requirement if: (a) the legal statement is provided in a paper format and signed with a handwritten signature; or (b) if it is in electronic form and signed with a qualified electronic signature (“QES”), which is deemed equivalent to a handwritten signature.

Where Bulgarian law requires a qualified form for validity or proof of the statement (notary certification of the signature, notarised deed, participation of witnesses or officials, etc.), the written form, paper format and wet-ink signatures are mandatory and the documents cannot be signed with an e-signature. 

Mortgage agreements must be in a qualified form for their validity, a form of notarial deed executed in person before a notary public. Documents to be submitted to the land registry are also in qualified form of a notarised deed or bearing a notary certification of the signature. Powers of attorney related to transactions regarding which the law requires a qualified form must also follow the paper format with notarised wet-ink signatures. 

Certain registered pledges, such as going concern pledge agreements and share pledge agreements, must comply with the qualified form for validity: notarial certification of the signatures.  

E-signatures can only be used where Bulgarian legislation requires simple written form for the conclusion and validity of a contract. In all cases where the legislation requires a qualified form for validity or proof of statement (notary certification of the signature, notarised deed, participation of witnesses or officials, etc.), an electronic form and signature cannot be used. 

As a general rule, the written form is required for all loan and credit agreements. Consumer credit agreements and consumer immovable property credit agreements are subject to a special regulation, and must be concluded in the written form on paper or another durable medium, defined as any instrument which enables the consumer to store information addressed personally to him/her in a way accessible for future reference for a period of time adequate for the purpose of information and which allows the unchanged reproduction of the stored information. Consumer credit agreements and consumer immovable property credit agreements can be executed in the written form using QES. 

Both agreements can be concluded by means of distance communication. The Distance Marketing of Financial Services Act regulates distance contracts for financial services entered into by a supplier and a consumer as part of a system of distance marketing of financial services, organised by the supplier, where the parties make exclusive use of one or more means of distance communication, from the time of making the offer to the conclusion of the contract. 

Consumer credit agreements and consumer immovable property credit agreements can be executed in the written form using QES. However, case law has not adopted a unanimous stance regarding the use of AES in the execution of consumer credit agreements. 

Depending on the factual circumstances, where uncertainty about verifying the identity of the signer exist, a court may find there is a lack of e-signature and hence lack of statement for the conclusion of the consumer credit agreement, rendering the agreement invalid. The main challenge is proving the authenticity of the consumer’s statement and consumer’s agreement to conclude the consumer credit contract.

Signing electronic documents through an electronic signature is regulated in Bulgaria by the Electronic Document and Electronic Trust Services Act (EDETSA) and Regulation (EU) No. 910/2014 of the European Parliament and of the Council of 23 July 2014 on electronic identification and trust services for electronic transactions in the internal market, and repealing Directive 1999/93/EC (eIDAS Regulation).

An agreement is considered to comply with the written form requirement if: (a) the legal statement is provided in a paper format and signed with a handwritten signature; or (b) if it is in electronic form and signed by a qualified electronic signature, which is deemed equivalent to a handwritten signature.

The QES is considered as having equivalent legal effect as of a handwritten signature and will be sufficient in banking and finance transactions where electronic signatures are allowed. The simple electronic signature (“SES”) and the Advanced electronic signature (“AES”) have the equivalent legal effect of a handwritten signature only where the parties have agreed this.

An SES is not be considered sufficient for executing consumer credit agreements, while the acceptability of AES in these cases is assessed in the context of proving the authenticity of the consumer’s statement to conclude the consumer credit contract.

E-signatures are acceptable in transactions where the simple written form for the conclusion and validity of a contract is required. Case-law and in particular a decision of the Bulgarian Supreme Court, which has a binding power on lower courts, stipulates that an electronic document signed with a QES and an electronic document that is signed with an SES (where the parties have agreed that the respective signature will be equivalent to a handwritten signature) will both be considered and assessed as equivalent to the signed written document for evidential purposes.

An AES is often considered to provide an acceptable level of security and control. An AES uses a signature method that creates data over which the signatory has sole control with a high level of confidence.  

To qualify as an AES, it must generally meet the following requirements:

• it must be uniquely linked to the signer
• it must be capable of identifying the signer;
• it must be created using electronic signature creation data that the signer can, with a high level of confidence, use under his/her sole control;
• it must be linked to the data in the signed document in such a way that any subsequent change in the data will be detectable.

To use an SES or AES, the bank or financial services provider will have to first pre-agree with each relevant counterparty at least that:

1. the parties will use an SES/AES as a legal equivalent to a handwritten signature and agree to conclude and sign the contracts by SES/AES;
2. the parties agree to be addressees (recipients) of electronic documents and to receive documents in electronic form to identified email addresses.

It is recommended that financial services providers also include warranties and representations in the pre-agreement on the fact that the agreed email addresses are used, administered and controlled solely by the authorised representative of the party who has the right to bind the party with the obligations set out in the contracts, and no other persons have access to/control over the email.

Where the written form is not mandatory and the law does not require the statement to be made on a durable medium, financial agreements can be signed electronically with an AES or SES. Electronic signing platforms such as DocuSign and AdobeSign can be used. As a general rule, PDF copies of wet-ink signatures are not considered as a signature under Bulgarian law. 

Bulgarian attorneys-at-law and European Union lawyers accepted by a Bulgarian bar association to practice as EU lawyers can certify copies of documents that have been submitted to them as part of their mandate to defend the rights and legal interests of their clients. These certified documents have the effect of officially certified documents (i.e. documents certified by notaries) before the courts and pre-trial bodies, as well as before all other authorities, including public registries and local authorities.

Thus, if an attorney certifies a document with a QES, it will have the same effect as the handwritten certification of a document.

Based on current Bulgarian legislation, there are no electronic notary public procedures available in Bulgaria. The Notary Chamber of Bulgaria has an internal system which is a closed circuit and used by members of the Notary Chamber (notaries and their authorised employees) to verify notarised powers of attorney and other consents executed before other notaries.

Bulgaria is a signatory to the Hague Convention of 5 October 1961 Abolishing the Requirement of Legalisation for Foreign Public Documents (Apostille Convention). The electronic Apostille has the same legal force and effect as paper ones. All countries that are parties to the Convention of 5 October 1961 Abolishing the Requirement of Legalisation for Foreign Public Documents in Hague undertake to accept е-Apostilles. Thus, e-Apostilles are accepted in electronic form in Bulgaria and Bulgaria already operates e-Registers under the Ministry of Justice, the regional administrations, and the Ministry of Foreign Affairs. Bulgaria has not implemented the Electronic Apostille Program (e-APP) and currently issues e-Apostilles of educational and certification documents issued by institutions in the pre-school, school and vocational education and training system, by higher schools and scientific organisations, and by the Ministry of Education and Science and its units.

Pursuant to the Bulgarian Anti-Money Laundering Measures Act (the “AMLMA”), electronic identification, as defined in Regulation (EU) 910/2014, can be applied in the context of AML onboarding regarding the identification and verification of the identity of customers, including legal entities, their representatives and private persons, via an electronic signature, electronic message or electronic document, or through a recognised trust services provider, as defined under Regulation (EU) 910/2014.

Although the AMLA does not set a particular statutory guideline to for AML customer electronic authentication methods and procedures, it does in practice allow both indirect electronic (non-real time) and direct electronic (real-time) customer identification:

Indirect (not real-time) customer verification can be processed by applying traditional methods of non-person communication, such as: (i) sending a letter to the address specified in the ID document; (ii) a telephone call; (iii) an exchange of emails at the email address specified by the customer; (iv) taking a photo of the official ID document and sending it to the financial institution; and (v) taking and sending a selfie photo.

Direct (real-time) customer verification can be carried out through a conversation by: (i) an appropriately trained employee of a bank or its external provider; (ii) an identification conversation conducted in a separate room; (iii) the verification of the client’s identification in real time; and (iv) the lightning is appropriate for identification.

Аccording to Regulation (EU) No. 910/2014, a QES has the same legal effect as a handwritten signature, thus Bulgarian authorities (including public registries and other authorities) and private persons are obliged to accept beneficiary owner declarations and PEP declarations signed with a QES. The Bulgarian EDETSA further provides that an SES and AES have the equivalent legal effect of a handwritten signature where this has been agreed between the parties under a prior handwritten agreement.

Electronic documents are unacceptable only in cases where there is a legal requirement for a qualified form of the document (e.g. form for validity or proof of a statement, where the law requires notary certification of the signature, a notarised deed, participation of witnesses or officials in the creation of the statement), which has implications in cases where a notarised declaration is required as part of obtaining a UBO/PEP declaration.