Commercial Law Reform Project

DEVELOPMENT CHALLENGES Bulgaria has made impressive progress in commercial and financial law reforms. After recovering from a financial crisis in 1996-97, the investment climate has steadily improved with substantial USAID assistance. Investor confidence is on the rise and as of January 1, 2007 Bulgaria is a member of the European Union. Several legal obstacles to continued economic growth remain, however. Enforceability of court decisions is low, judicial capacity to handle an increasing load of commercial disputes is under question, and an opaque business registration process taxes both the court system and the owner-investor market. These inefficiencies contribute to a prevailing public perception that the court system is ineffective in protecting and enforcing commercial rights. With Bulgaria’s accession to the EU, second-generation reforms, largely related to implementation and enforcement problems, must be carried out for the economy to compete in European and global markets.

USAID INVOLVEMENT USAID’s efforts to improve the Bulgarian business environment are based on a commercial law assessment conducted by USAID and external experts. This study found that while the substantive commercial law framework was generally adequate, implementation and enforcement processes were weak, particularly in handling commercial disputes. USAID’s Commercial Law Reform Project (CLRP) was launched in 2003 to alleviate these deficiencies through promoting reforms, providing implementation training, raising public awareness, and integrating stakeholder institutions in reforms.

GOAL CLRP’s overarching goal is to establish a more stable and predictable business environment through:
• Enhancing enforcement of contracts and other legal rights in the court system.
• Promoting alternative dispute resolution in commercial matters.
• Streamlining business registration.
• Providing commercial law training to judges and lawyers.

PROJECT DESCRIPTION CLRP activities include assessments, recommendations, policy reform, legislative drafting, professional training, and public information campaigns.

• Enhanced Judgment Enforcement: To improve the efficiency of judgment enforcement, CLRP helped draft legislation creating a private enforcement system. The legislation was passed in May 2005. CLRP also helped draft key implementation regulations and now works with the Ministry of Justice and the newly-formed Chamber of Private Enforcement Agents to develop effective supervision practices, provide training programs, and promote the sustainability of the Chamber.

• Alternative Dispute Resolution in Commercial Matters: CLRP introduces commercial mediation through training and awareness building. The activity has helped establish four commercial mediation centers – two in Sofia, one in Stara Zagora, and one in Veliko Turnovo. Currently, CLRP is developing a fully self-sustaining course on commercial mediation. Training and popularization efforts are aided by a 40-minute film, portraying a complete commercial mediation scenario. The program builds upon successful efforts of USAID’s Attorneys Professional Development Initiative in developing mediation in non-commercial cases and in helping the passage of a Law on Mediation.

• Commercial Law Training: CLRP works with local experts to design and deliver commercial law courses for judges through the National Institute of Justice (NIJ) in cooperation with USAID’s Judicial Strengthening Initiative. The trainings cover company law, collateral law, corporate governance and alternative dispute resolution. They are also delivered to lawyers through the Attorney Training Center (ATC) of the Supreme Bar Council, established with the assistance of USAID’s Attorneys Professional Development Initiative. The courses will be integrated into the NIJ and ATC curriculums.

• Business Registration Reform: Together with the business sector, CLRP is helping the Ministry of Justice reform Bulgaria’s outdated business registration system. This reform removes registration from the court system and sets up a simplified and speedy registration procedure under the executive branch of government. Parliament adopted the draft law in March 2006.

SUCCESS STORY CLRP inspired and helped create a private judgment enforcement system to take over the functions of a moribund state-based enforcement system. Starting with a study tour in 2004 to Western Europe for key Members of Parliament, organized jointly by CLRP and World Learning Bulgaria, CLRP helped law makers draft legislation creating a private judgement enforcement system. This legislation passed in mid-2005 with significant advocacy efforts by CLRP. After the law passed, CLRP worked intensively with the Ministry of Justice to draft and promulgate implementation regulations. CLRP helped set up a Chamber of Private Enforcement Agents which, together with the Ministry of Justice, supervise the new profession. CLRP now focusses on developing effective accountability mechanisms, promoting transparency in management, and creating a tradition of professionalism. As a sign of the need for and success of this reform, in just the first few months of operation the new profession received more than 10,000 cases for enforcement.