Updated last 26.03.2021
In this section you can find the following information:
- What is mediation and what are its advantages?
- What is arbitration and what are its advantages?
- What are the advantages of dispute resolution in court?
When carrying out commercial activity various disputes may arise. Commercial are those disputes, where at least one of the parties is a trader. Commercial disputes may have a negative impact on the business of traders, and that is why it is important to resolve any such disputes promptly and adequately. This can be achieved both through court and out-of-court measures, as the most common are mediation, arbitration and dispute resolution in court.
What is mediation and what are its advantages?
Mediation is an out-of-court dispute resolution mechanism and is a voluntary procedure, where a third party – mediator, supports the disputing parties in achieving a mutual agreement. Mediation may be used to resolve civil, commercial, employment, family and administrative disputes, as well as disputes, related to consumers’ rights and other disputes between natural persons and/or legal entities, including and cross-border ones (art. 3 of the Mediation Act). Mediation is an increasingly popular method for dispute resolution, due to its numerous advantages – promptness, efficiency, confidentiality, low price.
It is important to note that the mediator is an unbiased person. He cannot judge and does not issue an award or decision for the dispute. Mediator’s functions may only be performed by a person, who meets certain legal requirements, including who has never been sentenced for public offences and crimes of general nature, who has passed successfully a mediation training course and is registered with the Single Register of Mediators. In the mediation procedure, any and all matters and issues are settled by mutual consent of the parties. Mediation is an appropriate solution, also if both parties to the dispute are in permanent relations, and remain to preserve them. Тhe participation in the mediation procedure is entirely voluntary – each party may leave the procedure, at any time.
| Important to know | |
 | The mediation procedure may also be led by lawyers or other specialists, at the discretion of the parties. |
| Fee | Each mediator or mediation centre is free to determine their own tariff, applicable to the provision of their services. Тhe payment for the mediation in most cases is charged by time or “per session” basis. |
| For more information | |
 | For more information on mediation, please refer to the websites of the: |
What is arbitration and what are its advantages?
Arbitration is an alternative to regular justice, provided by state courts of law. Тhe arbitration court may be composed by one or more arbiters, whose number is selected by the parties. Arbitration may be a permanent institution or one, formed for resolving a specific dispute. It is important to note that the dispute resolution by arbitration may only be used, if the parties have expressly specified their consent to that regard in written form (including through exchange of letters, telexes, telegrams or other communication tools). Usually, the consent of the parties is specified in a separate clause in the agreements, signed between them (the so-called arbitration clause) [1]. Even if the parties have failed to insert an arbitration clause in the disputed contract, they can refer to an arbitration court, in case they reach an agreement to use this method.
Even if the parties have reached an agreement, however, the arbitration courts cannot rule on:
- Disputes, related to rights in rem (e.g., property right, right of use, construction right, etc.) or possession of real estate properties;
- Disputes, related to allowances or rights, under employment legal relations;
- Disputes, where one of the parties is a consumer (natural person, acquiring goods or using services, not intended for the performance of commercial or professional activity and every natural person, acting outside its commercial or professional activity).
Some of the advantages of arbitration include:
- Timeline – the arbitration awards are issued much quicker than the decisions, issued by the state courts;
- Stability of the award – the arbitration award is final and puts an end to the dispute; this means that the parties do not need to go to several courts, in order to reach a final resolution of their dispute;
- Freedom of negotiations – in the arbitration clause the parties may appoint the arbitration court, applicable law for the dispute resolution, the venue of the arbitration procedure, the number of arbiters and the qualities these must possess, the languages of the arbitration procedure, etc.;
- Confidentiality – the arbitration case is not public, and therefore the arbitration may avoid the impairment of the relationship between the parties.
It should be noted that each party to the arbitration case may be represented by a lawyer.
It should also be also noted that the arbiters may be persons, without education in law.
Тhe arbitration award is final and is not subject to a review by another court of a higher instance, contrary to the decisions, issued by the state courts of law.
It is only possible for the Supreme Cassation Court, at the request of one of the parties, to repeal the award in the presence of one or more of the circumstances, specified in art. 47 of the International Commercial Arbitration Act (ICAA).
| Important to know | |
| There are numerous arbitration courts, as not all of them are well trusted or have good reputation among traders. Тherefore, when incorporating an arbitration clause in an agreement, the trader must carefully check the arbitration court, that will be assigned with the commercial disputes. Once a valid arbitration clause is concluded, the trader cannot refer to a state court for dispute resolution, unless the other party agrees to that. The arbitration awards, similarly to the decisions of the state courts of law, are subject to enforcement. |
| Fee | Arbitration courts determine their own fees, payable for the dispute resolution. |
| Term | Usually the arbitration cases are settled within 12 months after the commencement of the procedure. |
| For more information | |
| For more information on mediation, please refer to the websites of the: |
What are the advantages of dispute resolution in court?
The parties to a dispute may refer it to a state court of law. Some of the advantages of the decisions, issued by the state courts of law include:
- Institutionality – The decision on the dispute, issued by the court, may be appealed before a court of superior instance, on grounds, specified in the Civil Procedure Code.;
- There are no limitations, regarding the subject matter of the dispute, like those in case of arbitration;
- The judges, passing justice, are qualified jurists;
- Judges’ impartiality is guaranteed better than that of the arbiters.
| Fee | The payable state fee is based on the Tariff of state fees, collected by the courts of law as per the Civil Procedure Code. |
| Term | A shortcoming of the court resolution of disputes may be the prolonged duration of the court proceedings – it may even take years. |
| For more information | |
| For more information regarding the legislation in this area, please visit the website of the Ministry of Justice. |
[1] An example arbitration clause, recommended by the Bulgarian Chamber of Commerce and Industry: “Any and all disputes, arising from this Agreement or related to it, including disputes, arising from or related to its interpretation, invalidity, performance or termination, as well as disputes for the filling of gaps in the Agreement or its adjustment to newly occurring circumstances, shall be resolved by the Arbitration Court at the BCCI in accordance with its Rules on cases, based on arbitration agreements.”