Briefly about mandatory judicial mediation in Bulgaria

Published on: 04.05.2023 г.
Last change: 04.05.2023 г.

With the amendments to the Mediation Act and the Civil Procedure Code adopted in February 2023 (State Gazette No. 11 of 2023), with effect from July 1, 2024, mandatory mediation in pending court cases (hereafter in the text referred to as "mandatory judicial mediation") has been introduced for the first time in Bulgaria.
The present article briefly and without pretensions to exhaustiveness discusses the main features of the regulation of mandatory judicial mediation in Bulgaria and their significance for the parties to the dispute.

I. SCOPE OF MANDATORY JUDICIAL MEDIATION

The provisions introducing mandatory mediation do not affect all disputes but only those listed in Article 140 "a" of the Civil Procedure Code /in force from July 1, 2024/. The cases to which mandatory mediation applies are divided into two main groups:
1.In the first group /Art. 140 "a", para. 1 of the Civil Procedure Code/ fall the disputes for:

distribution of the use of jointly owned property under Article 32 (2) of the Ownership Act;
monetary receivables arising from co-ownership under Art. 30, para. 3 and Art. 31, para. 2 of the Ownership Act;
partition under Article 34 of the Ownership Act: in the partition proceeding;
fulfilment of obligations of the owners, users or occupants of self-contained works in a building under condominium ownership arrangements under Article 6 of the Condominium Ownership Management Act, for the reimbursement of costs incurred by an individual owner for the repair of common parts of the building under Article 48 (7) of the Condominium Ownership Management Act, as well as for the revocation of a legally non-conforming resolution of the general meeting or of a legally non-conforming act of the management board (the manager) of the condominium under Article 40 (1) and Article 43 (1) of the Condominium Ownership Management Act;
payment of the value of a company share upon termination of participation in a limited liability company under Art. 125, para. 3 of the Commercial Law;
liability of a managing director or controller of a limited liability company for damages caused to the company under Art. 142, para. 3 and Art. 145 of the Commerce Act.

For the disputes in this group, after July 1, 2024, mediation shall be mandatory by virtue of the law, and where a claim or demand is made in such a dispute, the court shall oblige the parties to participate in a first mediation meeting without discretion. The exceptions to this rule are exhaustively enumerated in paragraph 4 of Article 140 "a" CCP, commented on below in the text.

2. The second group of disputes is subject to the provision of Article 140 "a," paragraph 2, of the Civil Procedure Code, and unlike the previous group, in these disputes the obligation to participate in mediation does not arise automatically by virtue of the law, but is left to the discretion of the court, i.e., the court may but is not obliged to bind the parties to participate in a mediation procedure. This group comprises:

•The family disputes, including those for:

divorce under Art. 49 of the Family Code;
the exercise of parental rights, the place of residence of the child, parental access to the child and the child’s maintenance obligations under Art. 127, para. 2 of the Family Code;
modification of the measures related to the exercise of parental rights, the place of residence of the child, parental access to the child and the child’s maintenance obligations under Art. 51, para. 4 and Art. 59, para. 9 of the Family Code;
resolution of disagreements regarding the exercise of parental rights and obligations under Art. 123, para. 2 of the Family Code;
determination of measures for grandparents access under Art. 128 of the Family Code;
maintenance obligations.

•disputes about pecuniary or non-pecuniary receivables arising from a contract, a unilateral transaction, a tort or delict, unjust enrichment or managing the affairs of another person without due authority where the cost of action does not exceed BGN 25,000;

•disputes about existence, termination, annulment or rescission of a contract or of a unilateral transaction or for the conclusion of a final contract where the cost of action does not exceed BGN 25,000;

•disputes over ownership and other rights in rem to an immovable or for disturbed possession;

•labor disputes for: remuneration or benefits arising from employment relationships, as well as for pronouncing a dismissal wrongful and for revoking such dismissal and for reinstatement to the previous work;

•disputes for the protection of membership rights in a commercial company under Art. 71 of the Commercial Law or for revocation of a resolution of the general meeting of the company under Art. 74 of the Commerce Act, as well as claims under Art. 58, para. 1 of the Cooperatives Act and under Art. 25, para. 4 of the Non-Profit Legal Entities Act;

•disputes relating to the protection of intellectual property rights under the Copyright and Neighbouring Rights Act, the Patents and Utility Models Registration Act, the Marks and Geographical Indications Act, the Industrial Designs Act, the Topographies of Integrated Circuits Act, and the Protection of New Plant Varieties and Animal Breeds Act.

The criteria by which the court will assess whether to oblige the parties to the disputes in this group to participate in mediation are non-exhaustively listed in Art. 140, para. 3 of the Civil Procedure Code. Among them are the existence of lasting relations between the parties or of multiple interlinked cases between them; multiple claims and counterclaims brought in the case; whether the main circumstances of the case are undisputed; as well as other factors, e.g., if the costs of the proceedings may significantly exceed the material interest in the case or if a speedy voluntary resolution of the dispute is in the interest of the parties or the child. With each of these factors present, mediation would be useful and necessary.

Еxceptions:
For both groups of disputes described above, the court does not oblige the parties to participate in mediation where: the mediation procedure is precluded by a law for the type of dispute concerned; the first notice in the case was not served on the defendant; upon recognition of the claim, as well as if the party to the case is the State or a state institution or consumer /except for claims for receivables arising from a contract for bank loan or legal relationships associated therewith, as well as from a property insurance contract/, and also where convincing evidence has been presented in the case of a party to the case having been subjected to violence by the opposing party, or the child’s life or health or the child’s best interest is at risk /art. 140 "a", paragraph 4 of the Civil Procedure Code/.

Outside the scope of mandatory mediation are all disputes that do not fall within the scope of Article 140 "a" of the CPC or the cost of the claim exceeds the thresholds specified in Article 140 "a," paragraph 2, items 7 and 8 of the CPC, as well as all disputes, regardless of their subject matter, that are not the subject of pending court proceedings. Such disputes may be the subject of voluntary mediation at the initiative of the parties, and the limitations provided for mandatory court mediation shall not apply to the mediation procedure in such cases.

II. SPECIFICITIES OF THE MANDATORY JUDICIAL MEDIATION PROCEDURE

There are also several specifics of the procedure in the case of mandatory court mediation:
1. Mandatory participation in a mediation procedure (regardless of whether in the case of Article 140 "a," paragraph 1, or paragraph 2) may be ordered only once during the proceedings in the case, and this can be done at any time after the exchange of documents in the case until the conclusion of the court proceedings in the relevant instance. It is expressly regulated that the proceedings in the case are not suspended while the mediation procedure is in progress.
2. The obligation of the parties is limited to mandatory participation in a first meeting in a mediation procedure lasting between 1 and 3 hours. (From a practical point of view, this time would, in most cases, be extremely insufficient to reach an agreement on the dispute.) After the expiration of this time, the parties themselves decide whether to continue the procedure or withdraw from participation in it.
3. The mediation procedure itself shall be conducted within a time limit set by the court, which may not be longer than two months after communication of the ruling by which the parties have been obliged to participate in the mediation. By common agreement of the parties, this term can be extended.
4. Another specific feature is that when the parties are obliged to participate in judicial mediation (regardless of whether in the case of Article 140 "a," paragraph 1, or paragraph 2), the mediation procedure can only be conducted in a judicial center (such centers will be available to each district court) by a mediator from the list of mediators at the judicial center. An additional restriction was introduced immediately prior to the vote on the bill's second reading by imposing the requirement that mediators at the judicial centers have a legal education. For the moment, there is no possibility to choose a mediator outside the lists of the judicial centers or to conduct the mediation outside these centers1 (these restrictions affect only mandatory judicial mediation in the hypotheses of Article 140 "a" paragraphs 1 and 2).
5. A written form is required for the settlement agreement reached in the mandatory judicial mediation procedure. The law also defines the jurisdiction for the approval of that agreement as a court settlement agreement. According to Art. 24, Paragraphs 3 and 4, of the Mediation Act, it shall be approved by the court before which the case where the mediation procedure was initiated is pending. When the agreement covers the subject of several pending cases, it is approved by the court before which the first initiated case was filed. Afterwards, the parties present the approved agreement to the other courts, which, depending on the content of the agreement, terminate in whole or in part the proceedings pending before them.

III. WHAT DO THESE CHANGES MEAN FOR THE PARTIES AND WHAT WILL CHANGE FOR THEM WHEN THEY ENTER INTO FORCE ON JULY 1, 2024?

• Regarding participation in the judicial mediation procedure:
In fact, regardless of the popular name "compulsory judicial mediation," even when the court has obliged the parties to participate in a mediation procedure, their non-participation in the procedure does not entail any adverse consequences for them. The financial sanctions proposed in the draft law for the parties in case of their noncompliance with the order to participate in a mediation procedure (namely, bearing the costs of the case) were dropped from the final text of the law as adopted by the National Assembly. Thus, in practice, only the court remained obligated under the hypotheses of Article 140 "a," paragraph 1, to order the parties to participate in mediation.

More significant, however, are the benefits that the parties can obtain from the mediation procedure.
First, mediation gives them a chance to voluntarily find a mutually beneficial solution to the dispute.2
If an agreement is reached within the framework of the mediation procedure, depending on the content of the agreement, it may be approved as a court settlement and thus be subject to enforcement and/or the proceedings in the case may be terminated.
Additional incentives have also been introduced for the parties to reach an agreement within the judicial mediation procedure, namely:
• a refund of 75% of the state fee if a settlement agreement is reached in the mediation or the court proceedings in the case are terminated due to withdrawal or abandonment of the claim as a result of this agreement.
• a mandatory 7-day period for the court to approve the agreement reached in the mediation procedure or to terminate the proceedings in the case if the claim is withdrawn due to an agreement reached in the mediation procedure.

• Regarding the selection of a mediator in the judicial mediation procedure:

Currently, it is only possible to choose a mediator from the lists of the relevant court centers. The parties may, by mutual agreement, designate a specific mediator from this list, or if they have not reached an agreement on the selection of a mediator, one will be designated by the administration of the judicial center.
In practice, this means that the choice of mediator in compulsory court mediation is limited. In case the parties to a dispute falling within the scope of the compulsory judicial mediation want to turn to a mediator outside the lists, including one with education other than legal and with specific expertise (as may be necessary in many cases due to the specificity of the dispute), they could only do so before filing the claim. In such events, if the dispute has been resolved in the mediation procedure, there will be no court case on it or mandatory referral to mediation at all. However, if the dispute is not settled in this procedure and a claim is filed, no mechanism is provided for the parties' participation in the mediation conducted before its filing to be taken into consideration. The same applies if, during the course of the case, the parties voluntarily refer their dispute to a mediator outside the court's lists. In my opinion, these are serious flaws in the law.

• Regarding the costs of the court mediation:

Within the stipulated minimum duration of the mandatory court mediation procedure (between 1 and 3 hours), the costs of the mediation are covered by the court's budget (art. 78 "a," para. 1 CPC). If one of the parties refuses to participate in the procedure, these costs are assigned to it, but only if it loses the case. If both parties did not participate, the mediation costs are owed by them equally (Art. 78 "a," para. 2 CPC).

If the mediation is continued beyond the specified minimum duration, the costs of this additional time shall be paid by the parties.

It is envisaged that the amount of fees payable by the parties to the judicial center and the costs of the judicial mediation procedure will be determined in an ordinance to be adopted by the Supreme Judicial Council. At the moment, there is no such ordinance.

CONCLUSION: Despite its deficiencies and unclear points, the law represents a significant step forward in building a culture of voluntary and amicable dispute resolution.
It should also be noted that the existence of mandatory judicial mediation does not preclude the parties from seeking resolution of their disputes through voluntary out-of-court mediation (outside the court centers). This is valid not only for disputes that are outside the scope of compulsory judicial mediation but also for disputes for which it is provided. In many cases, out-of-court mediation would be the most appropriate choice, as it is not subject to the limitations prescribed for judicial mediation, and the parties are free to choose both the center and individual mediator to approach for the mediation procedure as well as to match the qualifications of the mediator with the specifics of their dispute, thus overcoming the disadvantages and limitations of judicial mediation and increasing their chances of reaching a settlement of the dispute. There also remains the option for the court to guide, without obliging, the parties to participate in mediation on disputes that are outside the scope of mandatory court mediation under Article 140 "a" of the Code of Civil Procedure.