On 21 February 2024, the General Assembly of the Commercial Chamber of the Bulgarian Supreme Court of Cassation (“SCC”) rendered Interpretative Decision No. 1/21.02.2024 under interpretative case No. 1/2023 (the “Interpretative Decision”) on two matters related to arbitration agreements which were previously resolved in a conflicting manner by the Bulgarian courts.

Issue 1: Enforcement of an arbitration clause following assignment

The first issue considered in the Interpretative Decision is whether in case of an assignment of a receivable, the arbitration agreement executed by the original creditor and debtor automatically inures to the benefit of the assignee of such receivable.

Prior to the delivery of the Interpretative Decision, part of the SCC panels held that in the case of an assignment of a receivable, the arbitral tribunal is not competent to hear and resolve disputes between the assignee and the debtor under an arbitration agreement included in the contract giving rise to the assigned receivable and originally executed among the assignor and the debtor. The main reasoning for this view was that the arbitration agreement has a relatively independent character from the contract in which it is incorporated and is therefore subject to a separate legal regime. Thus, the assignment of a receivable under a contract does not automatically assign the creditor’s rights in relation to the arbitration agreement incorporated in such a contract.  

Conversely, another group of SCC decisions held that upon assignment, the assignee acquires not only the receivable (i.e. the substantive claim against the debtor) but also any procedural rights related to the protection of the assigned receivable, including any rights stemming from arbitration clauses included in the contract giving rise to the assigned receivable. This position is founded on Article 99, para 2 of the Bulgarian Law on Obligations and Contract according to which in case of assignment of a receivable, the assignee acquires not only the receivable itself but also any privileges, security interests and auxiliary rights attaching to such a receivable. The SCC viewed an arbitration clause as an auxiliary right, which automatically attaches to a receivable and is thus transferred alongside with the receivable itself.

The Interpretative Decision upholds this second line of thinking. This view aligns with international arbitration practice, which accepts that an arbitration clause retains its validity and enforceability vis-à-vis the assignee of receivables stemming from a contract containing an arbitration clause. The SCC further held that acknowledging the automatic transfer of the dispute resolution arrangements made between the original parties to the contract upon assignment, ensures predictability and reflects the intentions of both the assignee and the debtor that disputes arising from the original contract should be resolved through arbitration.

Issue 2: Formalities regarding powers of attorney for the execution of arbitration agreements

The second issue addressed in the Interpretative Decision is whether an explicit authorization is required for the execution of an arbitration agreement via a proxy, or the valid authorization of the proxy to enter into a contract should be deemed to include authority for the execution of arbitration agreements in respect of such a contract.

Prior to the delivery of the Interpretative Decision, one group of SCC decisions held that since the arbitration agreement is an independent procedural contract, an explicit power of attorney is required for its execution via a proxy. Conversely, another group of SCC decisions argued that in the absence of limitations on the representative’s powers, a written power of attorney for the execution of a contract inherently includes authority for the negotiation of all elements regarding the contract, including an arbitration clause to be incorporated in this contract.

The Interpretative Decision endorsed the legal opinion expressed in the second group of SCC decisions. The SCC held that Bulgarian law specifically regulates the instances where an explicit power of attorney is needed for the execution of certain agreements or carrying out certain acts via a proxy. Since the execution of an arbitration agreement does not fall within these instances, a power of attorney prepared in writing for the execution of a contract should be considered to incorporate authority for the execution of an arbitration agreement in relation to such a contract, unless of course the power of attorney explicitly states otherwise.