US sanctions against Russia’s two largest oil companies, Open Joint Stock Company Rosneft Oil Company (Rosneft) and Public Joint-Stock Company Oil Company Lukoil (Lukoil) were announced in October 2025. Shortly after, the US Treasury issued a license allowing transactions with certain Lukoil entities in Bulgaria until 29th April 2026, i.e. the “derogation”. On the international level, a derogation was granted to complete the sale of Lukoil’s international portfolio by 28th February 2026, which was then extended to 1st April 2026.

At the outset of these events, Bulgaria appointed a Special Commercial Manager (“SCM”), responsible for the management of 4 Lukoil subsidiaries in the country, one of which is the owner of the Neftochim plant, the largest oil refinery in the Balkans. Key questions encompass the SCM's potential impact on the sale of Lukoil’s international portfolio and the legal mechanisms required to terminate the mandate upon successful closing of the transaction, including in relation to the notice of dispute recently announced by Litasco SA.

The possibility for appointment of SCM was introduced in Bulgaria in 2023 through amendments in the Act on Administrative Regulation of Economic Activities Associated with Oil and Petroleum Products (the “Act”), which follow closely the fiduciary system set up in the German Energy Security of Supply Act. These amendments are designed to ensure the survival of essential supply chains and national security, including in relation to international sanctions.

The normative framework surrounding the SCM was amended effectively as of 14th November 2025. These changes included, among others, removal of the 6-month mandate of the SCM, with the possibility of a single renewal, as well as introduction of the non-appealability of the administrative acts, contracts and entry of circumstances in the respective registries in relation to the company to whom the SCM was appointed.

 

1. Appointment

Under the Bulgarian legal framework, the appointment of the SCM is triggered by a perceived threat to critical infrastructure or the security of fuel supplies, including in relation to international sanctions. The process develops on the government level, requiring a formal decision by the Council of Ministers following a proposal from the Minister of Economy and Industry, and an opinion from the Security Council to the Council of Ministers.

  

2. Role

The mandate is built upon a six-month Mandatory Action Plan, which, once approved by the Security Council to the Council of Ministers, becomes an inseparable part of the SCM’s management contract. Upon appointment, the SCM assumes full operational control over the activities of the companies to whom it was appointed. The legal consequences of this power are immediate - from the date of appointment, the original owners/shareholders lose voting rights and their ability to dispose of shares. Instead, the SCM assumes full voting rights, the power to sell shares, and the authority to restructure management in the company. Any attempt by the original owners/shareholders to dispose of shares or assets after the SCM’s appointment would be considered legally void.

For the sale of shares by the SCM to be effective, a Council of Ministers’ decision approving the buyer and the essential terms of the transaction is required, only after which the SCM can conclude the contract. Generally, disposal or alienation of any property of the company, or assumption of financial obligations outside the scope of ordinary management and normal commercial activity, shall be carried out only after prior approval by the Council of Ministers. Transactions concluded in violation of this provision shall be null and void.

If the SCM carries out a disposition transaction with the shares, the price received as a result of this transaction shall be deposited in a special account at the disposal of the Minister of Finance in the Bulgarian Development Bank. The Minister of Finance, if there is no regulatory obstacle to this and after approval by the Council of Ministers, shall „distribute“ the received price according to the type and amount of the transferred rights, within a period of six months from the receipt of the price in the special account.

Notably, the Act excludes judicial and administrative review for all administrative acts, contracts, and registrations in relation to the SCM.

However, should a transaction involve Lukoil’s international assets, the role of the SCM is expected to be limited. That would be the case if such a deal would be structured not as a direct disposal of Bulgarian assets, but as an indirect change of control in the ultimate parent company of the four subsidiaries.

 

3. Term of the SCM’s appointment

One of the key amendments introduced in the normative framework in November 2025 is the removal of the term of appointment of the SCM – initially the term of appointment was set to 6 months with a possibility for another 6-month renewal by order of the Minister of Economy and Industry. The reasoning behind this specific amendment cannot be derived from the motives of the bill or the discussions in the plenary hall of the National Assembly.

In this regard, the termination of the SCM’s mandate now is not contingent upon the status of international sanctions. Although the original rationale for the appointment may have been related to the introduction of sanctions by the US, the SCM's tenure remains legally decoupled from the derogation or lifting of such measures. Consequently, the absence of a statutory trigger means that the mandate may persist despite a shift in the underlying sanctions landscape. Theoretically, the SCM could remain in power as long as the state deems the infrastructure “at risk”. The Act lacks explicit provisions regarding the grounds and procedure for termination of the SCM’s mandate. It can be assumed that the procedure for removal would mirror the procedure for appointment, i.e. a decision by the Council of Ministers would be required, potentially following a determination that the reason for appointment is no longer in place, or reasoned request for the removal of the SCM.

 

4. Latest developments

Considering the appointment of an SCM to the 4 Lukoil subsidiaries in Bulgaria, Litasco SA - the Swiss-incorporated direct owner – announced that it submitted a notice of dispute(s) to the Republic of Bulgaria. Litasco SA alleges that the imposition of external management over these companies, alongside subsequent actions undertaken by such management, have materially affected its local investments and have resulted in significant losses. Specifically, Litasco SA considers that these measures amount to unlawful expropriation without adequate compensation and constitute breaches of Bulgaria's obligations under the Bulgaria-Swiss bilateral investment treaty and the Energy Charter Treaty.

5. Conclusion

Without a clear statutory trigger, the "exit" remains a discretionary act of the state, adding a layer of political risk to an already complex legal landscape. The lack of explicit legal framework regarding the removal of SCM, coupled with the provisions stating that the administrative acts related to the SCM are not subject to judicial review, create significant uncertainty for stakeholders and could lead to arbitration cases against Bulgaria, as is the potential case with Litasco SA.

 

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