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Discomfort between local and foreign firms in Sofia has led to appeals for justice from both sides.
By Miles Lang

There has been a storm rolling across the Bulgarian legal market since spring of last year. It may roll all the way to Luxembourg.

A spat between local and foreign firms in Bulgaria has reached the Supreme Administrative Court (SAC) in Brussels, which is due to decide within the next few weeks whether to take the matter to the European Court of Justice (ECJ) in Luxembourg.

The dispute is heading down the path towards the European Court of Justice (Photo: Cédric Puisney/Flickr)

The feud began in July 2008, when four international firms were issued with fines totalling 150,000 Lev (€76,700) following complaints from 11 local firms to the Bulgarian Commission for the Protection of Competition (CPC).

Local firms accuse foreign practices of breaching the Bulgarian Bar Act, which requires firms to be registered explicitly as law firms, not simply as commercial enterprises. The Act also states that all firms’ names can only be composed of the names of partners registered with one of the Bulgarian Bar associations. This is something the international firms are particularly opposed to, as they depend upon the widespread recognition of their brand, which they have developed over a number of years.

In November 2008, five international firms complained to the European Commission (EC) that the Bulgarian Bar Act was stopping them from practising law on a level footing with local firms. The foreign firms argued that the Act does not comply with the EC Treaty, and that that it violates the rights of EU lawyers to practise and run branches in Bulgaria.

Hidden motives

There are clear feelings on both sides about what is going on. The local firms maintain that their national laws are there for a reason and must be respected regardless of the complaints of newcomers. The international firms feel they have been victims of protectionism, and of an attempt to chase them out of the Bulgarian market.

For some of the international firms, there is a sense of the absurd in the local firms’ complaints. One partner at a foreign firm pointed out that two of the 11 firms that lodged the complaint with the CPC were themselves in the process of registering their practices to become compliant with local legislation. This means that the firms being complained about could equally have been complaining about the two plaintiffs.

The partner says that it was difficult to understand why the Bulgarian authorities went on to levy fines against some of the defendants, beyond the sense that the decision may have been coloured by local opinion.

David Butts, managing partner of CMS Cameron McKenna in Sofia, was also confused by the move. “The real irony is that they went to the competition commission at all. They used it as a sword rather than a shield,” he says.

Clarity and harmony

Georgi Spasov of Spasov & Bratanov, one of the 11 plaintiffs in the CPC action, says it is not a case of local firms fighting against foreign competition; rather, it’s an issue of transparency. “We in Bulgaria have stricter rules about these things than are perhaps usual, and the initiation of this process is really to aid understanding,” says Spasov. “It’s not a fight for business – it’s a fight for clarity and equal treatment for everyone.”

One managing partner at a local firm would not comment on the situation, beyond saying that the group of firms who raised the complaint against the internationals had no intention of causing any trouble for their competitors, that they were simply concerned that competition was kept fair, in accordance with the Bar regulations.

Svetlin Adrianov of Penkov Markov & Partners agrees, and says he has spent years working in co-operation with international firms. “This is not conflict; it is really a common striving to create harmony in the legal market by equal application of the laws concerning law firms to all participants,” says Adrianov.

On the other hand, international firms claim that their appeal to the SAC and the EC was in self-defence, and that that local lawyers were trying to force them out of the market.

EU compliance

This sort of action is not new, says David Butts of CMS Cameron McKenna. He believes that what has been happening in the Bulgarian market is a simple case of a business community reacting to new competition. “This isn’t particularly unusual. It has happened, one way or another, in every CEE jurisdiction we’ve moved into,” he says.

“In this part of the world, you learn pretty quickly that where there’s smoke, there’s a smokescreen,” he adds.

Other international firms in Bulgaria have been more vocal in their criticism of the Bulgarian Bar. “It’s high time for full EU compliance, and the Bulgarians are in denial that their rules are out of sync with EU law,” says Peter Hoffmann, CEE managing partner for Cerha Hempel Spiegelfeld Hlawati.

But until Brussels decides whether to take the case to the European Court of Justice, it’s hard to tell if this is a full-blown storm or just part of a natural movement towards harmonisation.

Tags: CEE, Bulgaria, CMS Cameron McKenna, Features, Cerha Hempel Spiegelfeld Hlawati, Spasov & Bratanov