BULGARIA 2006 INVESTMENT CLIMATE STATEMENT.

UNCLAS SOFIA 000090

SIPDIS

SIPDIS

STATE FOR EB/IFD/OIA AND USTR
TREASURY FOR OASIA
USDOC FOR 4232/ITA/MAC/EUR/OEERIS/SSAVICH

E.O. 12958: N/A
TAGS: EINV EFIN ELAB ETRD KTDB OPIC USTR BU
SUBJECT: BULGARIA 2006 INVESTMENT CLIMATE STATEMENT.
PART 1 OF 2

Ref: 05 STATE 202943


1. Bulgaria - 2006 Investment Climate Statement.


A. OPENNESS TO FOREIGN INVESTMENT

Bulgaria has a liberal foreign investment regime and
attracting foreign investment, especially American, is
one of the new administration's top priorities. The
government is focused on developing promising sectors
of the economy for foreign investment, including
energy, tourism, information technology,
transportation, telecommunications, agriculture and
consumer goods (food & beverage and healthcare).
Bulgaria provides considerable incentives for job
creation. Many municipalities are prepared to grant
concessions or other favorable treatment for
significant investments. Bulgaria has a well-educated
workforce, low labor costs, and its geographic position
places it at the crossroads of Europe, the Middle East,
and the CIS. Bulgaria joined NATO in April 2004 and
completed EU accession negotiations in June 2004. The
EU Accession Treaty was signed on April 25, 2005,
allowing Bulgaria to join in 2007, but a "safeguard
clause" could allow the EU to delay Bulgaria's entry by
a year.

Investment Trends and Policies
--------------

Despite the many problems that remain in Bulgaria, the
country is heading in the right direction -- in large
part due to the EU Accession process, which is the
government's number one priority. The pace of EU
reforms suffered during the summer due to protracted
negotiations over forming a new government, but the
coalition has been working overtime to pass EU-related
legislation.

The new Socialist-led government recognizes that
foreign investment is essential to the future of
Bulgaria and has sought ways to reassure investors of
its prudent economic policies. Prime Minister
Stanishev, who could not deliver on many of his party's
generous election promises, has placed a special
emphasis on maintaining the key elements of the
previous government's economic policy, which hinge on
adhering to the Currency Board Arrangement and
conservative fiscal policy.

Bulgaria's relations with the International Monetary
Fund (IMF) are good, and are often described as a
success story. The precautionary Stand-by Arrangement,
which was negotiated in July 2004, expires in September
2006 and is designed to be phased out shortly before
Bulgaria joins the EU.

Continuing economic progress and political stability
have enhanced Bulgaria's ability to attract respected
international investors. The Bulgaria Investment
Agency (BIA) estimates FDI of USD 2.6 billion for 2005
thanks to the expansion of existing foreign investment
as well as the higher number of green-field investment
projects. New foreign direct investment (FDI) in the
period of January through October 2005 increased by
five percent--to USD 1.730 billion--despite the
election related halt in the privatization process.

With more than 10 first class investment certificates
under the investment promotion framework, BIA
recognizes 2005 as "the year of green-field investment
projects." It is a positive sign that the new
Socialist government finalized on December 7, 2005, the
agreement with the U.S. company AES to construct the
Maritsa East 1 (ME1) project, a new 670 MW lignite
based power plant. With a total value of USD 1.4
billion, the project represents the biggest ever green-
field investment in Bulgaria and largest green-field
investment in Southeast Europe for 2005.

The Investment Promotion Act stipulates equal treatment
of foreign and domestic investors. Bulgaria's
investment promotion framework creates conditions for
improved administrative services and includes an
investment incentive package. The law encourages
implementation of investment projects over a period of

up to three years. The law explicitly recognizes
intellectual property and securities as a foreign
investment.

Two leading international rating agencies assigned
first ever investment grade to Bulgaria in 2004,
reflecting the country's positive economic prospects
and prudent fiscal policies. In 2005, the two rating
agencies upgraded Bulgaria's rating due to falling
public debt, continued fiscal prudence and the upcoming
EU accession.

Common Forms of Investment
--------------
The most common type of organization for foreign
investors is a limited liability company. Other
typical forms are joint stock companies, joint
enterprises, business associations, general and limited
partnerships, and sole proprietorships.

The main controlling bodies of law are: the 1991
Commercial Code, which regulates commercial and company
law, including the creation and rights of legal
entities, and the 1951 Law on Obligations and
Contracts, which regulates civil transactions. These
laws are deemed generally adequate and neither limits
foreign participation in legal entities.

The 2003 Law on Special Purpose Investment Companies
allows for public investment companies (SPIC) in real
estate and receivables. Since a SPIC is considered a
pass-through structure, at least 90 percent of its net
income must be distributed to shareholders, who are
taxed on the dividends received. Prospective U.S.
investors should consult appropriate legal counsel for
up-to-date legal information and conduct due diligence
before making any obligations.

Investment Barriers
--------------

Among the problems encountered by foreign investors in
Bulgaria are: government bureaucracy; poor
infrastructure; frequent changes in the legal
framework; low domestic purchasing power; a protracted
privatization process; poor health care and
corruption. In addition, a weak judicial system limits
investor confidence in the courts' ability to enforce
ownership and shareholders rights, contracts, and
intellectual property rights.

The constitutional prohibition against direct ownership
of land by foreign persons remains in force, however,
there are no restrictions against acquisition of land
by locally registered companies with majority foreign
participation, and creation of such a company is a
relatively simple process. Once Bulgaria joins the EU,
all EU citizens and entities will be allowed to acquire
property; all other foreigners must continue to form a
local corporation.

Privatization
--------------
The Privatization Agency (PA) administers the
privatization of all state-owned companies. Foreign
companies, including state-owned ones, may purchase
Bulgarian state-owned firms. The government's stated
privatization goals are to have transparent, quick, and
effective privatization procedures, providing for equal
treatment of all investors. The program is intended to
make the economy more efficient by divesting state-
owned enterprises and to cover the current account
deficit with privatization revenues.

The failure to complete a single major privatization
transaction in 2005, however, underscores the
government's inability to attract respected foreign
investors though privatization and to finalize already
negotiated deals. The ambitious 2005 privatization
program envisioned the sale of the remaining 46 state-
owned enterprises (SOEs) for the equivalent of USD 300
million, including the Navigation Maritime Bulgare, the
national carrier (Bulgaria Air),Boyana Film Studio,
the three thermal power-plants, the tobacco monopoly
and some arm dealers.
The Post-privatization Control Agency, which oversees
the implementation of privatization contracts, attempts
to ensure that non-price privatization commitments
(employee retention, technology transfer, environmental
liability and investment).

Concessions
--------------
Under the 1995 Law on Concessions, the state is
authorized, on the basis of a concession agreement, to
grant private investors a partial monopoly in
activities in thirteen sectors normally reserved for
the central and/or local governments. These include
the construction of roads, ports and airports, power
generation and transmission, mining, petroleum
exploration/drilling, telecommunications, forests and
parks, beaches, and nuclear installations. In order to
streamline the concession procedure, the government
launched a National Concessions Register at the end of

2005. The register is in line with the EU
requirements, and provides detailed information about
the projects, including concessionaire's duties and
responsibilities in implementing the contract.

Concessions are awarded on the basis of a tender and
are issued for up to 35 years. They can be extended,
but shall not exceed 50 years in total. In a new
tender, however, the original concession holder can
again be granted the concession under certain
circumstances. The Concessions Law permits "build-
operate-transfer" deals, giving priority for mineral
exploitation to the holders of exploration licenses,
and reconciles conflicting procedures for privatization
and concession. Since 1998, Parliament has passed
legislation granting concessions in telecommunications,
energy, mining, waters, ports, airports, roads, and
railways.


B. CONVERSION AND TRANSFER POLICIES

Bulgaria replaced much of its outdated and fragmented
foreign currency legislation in 1999 and liberalized
current international transactions in accordance with
IMF Article VIII obligations. Under 2003 amendments to
the 1999 Foreign Currency Act anyone may take up to BGN
25,000 or its foreign exchange equivalent out of the
country without documentation. However, the export of
between BGN 8,000 and BGN 25,000 or its foreign
exchange equivalent must be declared at customs.
Export of amounts larger than BGN 25,000 must be
accompanied by a declaration about the source of these
funds and supported by documents certifying that the
person does not owe taxes. No tax certificate is
required for foreigners exporting the cash equivalent
of BGN 25,000 or greater provided the amount is equal
to the amount declared (or less) when imported. The
import of more than BGN 8,000 or its foreign exchange
equivalent must be declared at customs.

The law also stipulates that payments abroad may be
executed only through bank transfers. Transfers over
BGN 25,000 for current international payments (imports
of goods and services, transportation, interest and
principal payments, insurance, training, medical
treatment, and other purposes defined in Bulgarian
regulations) must be supported by documentation showing
the need and purpose of such payments.


C. EXPROPRIATION AND COMPENSATION

According to Article 17 of the Bulgarian Constitution,
private real property is protected by law. Depending
upon the purpose, expropriation actions may be
undertaken by the Council of Ministers or the regional
Governor, provided that the owner is adequately
compensated. Owners must be compensated in kind with
nearby property of equal value at current prices.
Monetary compensation is also permitted with the
consent of the property's owner. Expropriation actions
can be appealed directly to the Supreme Court on the
basis of the expropriation action, the property
appraisal, or the method of compensation. In its
Bilateral Investment Treaty (BIT) with the U.S.,
Bulgaria committed itself to international arbitration
in the event of expropriation and other investment
disputes.


D. DISPUTE SETTLEMENT

The Judicial System
--------------
Bulgaria's 1991 Constitution serves as the foundation
of the legal system and creates an independent judicial
branch. In 2002, the Bulgarian Parliament passed a
series of amendments to the Judicial Systems Act aimed
at improving the quality of the judiciary, increasing
the efficacy of the court system, and preventing
corruption in the justice system. The Constitutional
Court declared most of the amendments unconstitutional
in December 2002. As a result, judicial reform in
Bulgaria has been delayed and many key issues remain
unaddressed.

Further constitutional changes, passed in 2003, limited
the immunity of the magistrates, extended the period
for getting tenure, and introduced a 5-year term in
office for judicial heads. The March 2004 amendments
to the Judicial Systems Act were intended to increase
further the efficiency of the court system and help
prevent judicial corruption. Nonetheless, corruption
remains a serious problem. Other problems include lack
of transparent and neutral standards for assigning
cases, poor coordination between magistrates,
corruption, and cumbersome procedures.

There are three levels of courts. 117 regional courts
exercise jurisdiction over administrative, civil, and
criminal cases. Above them, 29 district courts
(including the Sofia City Court) have original
jurisdiction in civil cases where claims exceed 10,000
leva, in serious criminal cases, and in other cases as
provided by law. The district courts are also courts
of appellate review for regional court decisions. The
five appellate courts may review the decisions of the
district courts. On the highest level are the Supreme
Court of Cassation and the Supreme Administrative
Court. On issues of law, the Supreme Court of
Cassation has appellate jurisdiction over all civil
cases involving claims over 5,000 leva and criminal
cases. The Supreme Administrative Court rules on the
legality of acts by the state administration including
Council of Ministers and the ministries. The Supreme
Courts hear cases in three-judge panels, whose
decisions may be appealed to a five-judge panel of the
same court. Decisions by the five-judge panels are
final and binding.

The Constitutional Court is not integrated into the
rest of the judiciary. It issues final interpretations
of the constitution, rules on constitutional challenges
to laws and acts, rules on international agreements
prior to Parliamentary ratification, and reviews
domestic laws to determine their consistency with
international legal norms. While the Constitutional
court does not rule ex officio, 1/5 of the MPs (48),
the President, the Government, the Chief Prosecutor and
the two Supreme courts can refer matters to it for
review.

Bulgarian law provides for jurors only in criminal
cases. Under Bulgarian procedural law, first-instance
civil cases are brought before one judge in the
regional or the district court, depending on the case.
Administrative sanctions may be appealed to the
regional courts and one judge reviews such appeals.
Administrative acts are subject to administrative and
court appeal.

Execution of Judgments
--------------
To execute judgments, a final ruling must be obtained
so that the court can order money damages (which then
requires further complicated procedures by the payee)
or an equitable remedy. The court of first instance
must be petitioned for a writ of execution (based on
the judgment),which enables seizure of assets. If the
party is seeking a remedy in equity, the final judgment
must be brought before an executive judge. In 2002, a
number of amendments were made to the Code of Civil
Procedure to close loopholes, shorten deadlines, and
clarify certain provisions. In practice, Bulgarian and
foreign observers caution that the execution of

judgments remained slow and unpredictable and was prone
to corruption and inefficiency in the judicial system.

In a continuing effort to address the execution
problems, the Bulgarian Parliament passed the Private
Enforcement Agents Act in 2005. The new law introduces
the profession of private enforcement agents to whom
the state delegates the collection of enforceable
claims. The law also provides a series of guarantees
that the private enforcement agents' performance will
be closely supervised. This important development was
also recognized by the European Commission's 2005
Comprehensive Monitoring Report, which noted that the
new law "should help improving the functioning of the
judicial system and in particular the conditions for
contract enforcement."

Foreign judgments can be executed in Bulgaria.
Execution depends on reciprocity, as well as bilateral
or multilateral agreements, as determined by an
official list maintained by the Ministry of Justice.
The U.S. does not currently have reciprocity with
Bulgaria, so Bulgarian courts are not obliged to honor
decisions of U.S. courts. All foreign judgments are
handled by the Sofia City Court, which must determine
that the judgment does not violate public decrees,
standards, or morals before it can be executed. There
are also cases defined by the Civil Procedure Code
(certain real estate issues and Bulgarian precedents),
in which judgments cannot be executed even if they
conform to Bulgarian laws and morals.

Bankruptcy
--------------
The 1994 Law on Bankruptcy provides for reorganization
or rehabilitation of a legal entity, attempts to
maximize asset recovery, and provides for fair and
equal distribution among all creditors. The law
applies to all commercial entities, except public
monopolies or state-owned companies established by a
special law. Bank bankruptcies are regulated under the
Bank Bankruptcy Act, while insurance company failures
are regulated by the 1996 Insurance Act.

Under Part IV of the Commercial Code, the debtor or
creditors can initiate bankruptcy proceedings. The
debtor must declare bankruptcy within 15 days of
becoming insolvent. Once insolvency is determined, the
court appoints an interim trustee to represent and
manage the company, take inventory of property and
assets, identify and convene the creditors, and develop
a recovery plan. At the first meeting of the creditors
a trustee is nominated; usually this is just a
reaffirmation of the court appointed trustee.

Non-performance of a money obligation must be
adjudicated (res judicata) before the bankruptcy court
can determine whether the debtor is insolvent.
Additionally, amendments passed in 2003 add a
presumption of insolvency when the debtor has not
performed an obligation within 60 days of maturity or
when the debtor can only pay the claims of certain
creditors.

Creditors must declare all debts owed to them within
one month of the start of bankruptcy proceedings. The
trustee then has seven days to compile a list of
debts. A rehabilitation plan or a scheme of
distribution (in cases of liquidation) must be proposed
no later than the date on which the court approves the
list of debts. The court must rule on approval of the
plan within seven days.

The lack of trained trustees has been a problem in the
past. The 2003 amendments provided for examinations
for individuals applying to become trustees, but
implementation of this requirement is contingent on the
adoption by several ministries of a special
regulation. The amendments also provide for annual
training courses for trustees.

The methods of liquidating assets were also revised by
the June 2003 amendments. The main objective was to
establish a legal framework for selling assets that
accounts for the character of bankruptcy proceedings,
thus avoiding the need to apply the Civil Procedure
Code. The new regime includes rules requiring a
greater degree of publicity for asset sales. The
amendments limited the rights to appeal judicial
decisions made during bankruptcy proceedings.

International Arbitration
--------------

Pursuant to its Bilateral Investment Treaty (BIT) with
the United States, Bulgaria has committed to a range of
dispute settlement procedures starting with
notification and consultations. Bulgaria accepts
binding international arbitration in disputes with
foreign investors.

There are opportunities for international arbitration
in Bulgaria. The Code of Civil Procedure mandates that
a foreign court of arbitration is possible only if at
least one of the parties has its seat or residence
abroad. As a result, foreign-owned, Bulgarian-
registered companies having a dispute with a Bulgarian
entity can only have arbitration in Bulgaria. However,
under the Law on International Commercial Arbitration,
the arbitrator himself could be a foreign person. Under
the same act, the parties can agree on the language to
be used in the arbitration proceedings. The major and
most experienced arbitration institution is the
Arbitration Court of the Bulgarian Chamber of Commerce
and Industry (BCCI).

Not all disputes, however, may be resolved through
arbitration. Disputes regarding rights over real estate
properties in the country or labor disputes can only be
heard by the courts. Additionally, Bulgarian courts
have exclusive competence over industrial property
disputes regarding patents issued in Bulgaria.

Bulgaria is a party to the Convention on the
Recognition and Enforcement of Foreign Arbitral Awards
(the New York Convention),which facilitates
enforcement of foreign arbitral awards, and is a member
of the 1961 European Convention on International
Commercial Arbitration. However, having gone through
the enforcement proceedings before the Bulgarian
courts, the creditor needs then to execute the award
using the general framework for execution of judgments
in the country, which is inefficient. Bulgaria is also
a signatory of the International Center for Settlement
of Investment Disputes (ICSID) convention and the
Convention on the Settlement of Investment Disputes
Between States and Nationals of Other States.

Mediation
--------------

Businesses wishing to use mediation to solve their
disputes in Bulgaria may find it hard to select
experienced mediators. This service has just started to
develop in the country following the adoption at the
end of 2004 of the Mediation Act. BCCI and the American
Chamber of Commerce (AmCham) responded promptly by
opening commercial mediation centers. The mediators at
these centers have been trained with US assistance but
at this point lack sufficient experience to be able to
provide high quality mediation services.


E. PERFORMANCE REQUIREMENTS/INCENTIVES

Bulgaria does not impose export performance or local
content requirements as a condition for establishing,
maintaining, or increasing an investment. The law does
not specifically restrict hiring of expatriate
personnel, but residence permits are often difficult to
obtain. A June 1999 law regulating gambling imposes
license requirements on foreigners organizing games of
chance.

The Bulgaria Investment Agency (BIA)
(www.investbg.government.bg),the government's
coordinating body for investment, provides information
services, individual administrative services and
assessment of qualification to receive investment
incentives. First-class investments (investments over
70 million BGN, about USD 44 million) are deemed to be
priority investment projects. At the request of
investors receiving first-class investment

certificates, BIA can recommend that the competent
authorities grant them free real estate (either state
or municipal property). For first-class investments,
the Council of Ministers may provide state financing
for critical infrastructure deemed necessary for the
investment plan's implementation. Additionally, BIA
represents first and second-class investors
(investments of USD 25-44 million) before all central
and territorial executive authorities and the local
self-government authorities, and processes all
administrative documents. Third-class investors
(investments of USD 6-25 million) receive customized
information services.

The government policy for promotion of investment is
not applicable to banks and other financial
institutions, insurance companies, investment
companies, companies with special investment purpose,
pension and health insurance companies, gambling
companies, or investments made pursuant to the
Privatization Law.

The GOB introduced in 2003 tax incentives for
investments in regions with high unemployment. VAT
exemption on imports for investment projects over 10
million BGN (about USD 6.25 million),to be implemented
over a two-year period, was introduced in 2004.


F. RIGHT TO PRIVATE OWNERSHIP/ESTABLISHMENT

The Constitution states that the Bulgarian economy
"shall be based on free economic initiative." Private
entities can establish and own business enterprises
engaging in any profit-making activities, unless
expressly prohibited by law. Bulgaria's Commercial
Code guarantees and regulates the free establishment,
acquisition, and disposition of private business
enterprises. Competitive equality is the standard
applied to private enterprises in competition with
public enterprises with respect to access to markets,
credit, and other business operations, such as licenses
and supplies.


G. PROTECTION OF PROPERTY RIGHTS

Bulgarian law protects the acquisition and disposition
of property rights. In practice, the protection of
property rights is subject to difficulties of varying
degrees. Although Bulgarian IPR legislation is
generally adequate, with modern patent and copyright
laws and criminal penalties for copyright infringement,
industry representatives believe effective IPR
protection requires improvements to the legislation,
including to the Optical Disc Media (ODM) Legislation,
the Penal Code and the Penal Procedure Code.
Additionally, the government still lacks sufficient
institutional capacity, coordination, and the political
will to address effectively major enforcement problems,
especially in combating and prosecuting organized crime
groups. Many industrial groups currently have
intellectual property disputes before the government.

In May 2004, Bulgaria was placed on the Special 301
Watch List for the first time in five years. The 2005
US government inter-agency review retained Bulgaria on
the Watch List. There has been a steady resurgence of
piracy, mainly in the sale of pirated ODM and illegal
downloading of copyrighted material over the past few
years.

The US government has formulated an action plan, which
will assist in focusing attention on immediate and
effective implementation of the new Optical Disk Media
(ODM) Law and the amended Copyrights and Related Rights
legislation, enforcement actions and ministerial-level
coordination, designing training programs, and
improving efforts to address counterfeiting of U.S.
spirits and apparel.

Bulgaria is a member of the World Intellectual Property
Organization (WIPO) and a signatory to key
international agreements.

Copyrights
--------------
Parliament passed on November 25, 2005, amendments to
the 1993 Law on Copyrights and Related Rights, which
aligns Bulgaria's copyright legislation with the
European requirements. In particular, the amendments
implement two directives of the EU in the area of
copyrights: Directive 2001/84/EC of the European
Parliament and of the Council on the resale right for
the benefit of the author of an original work of art;
and Directive 2004/48/EC of the European Parliament and
of the Council on the enforcement of intellectual
property right ("the Enforcement Directive"). Also,
the amendments will establish the mechanism regulating
the administration of the newly-established database
and copyright information sharing system sponsored by
the EU.

The copyright term of protection was extended from 50
to 70 years after the author's death in 2000. The new
term of protection is retroactive, i.e., a term of
protection that expired at the moment of approval of
the amendments is revived within the framework of the
70-year term of protection. For films and other audio-
visual works, copyrights are protected during the lives
of director, screenplay-writer, cameraman, or the
author of dialogue or music, plus 70 years. Other
amendments to the law enable copyright owners to file
civil claims to suspend the activities of pirates;
provide for confiscation of equipment and pirated
materials; enhance border control over pirated
material; introduce a new neighboring right for film
producers.

Parliament approved in September 2005 the long awaited
Law on Administrative Control over the Manufacture and
Distribution of ODM, which now requires SID codes on
blank optical discs (OD) produced in Bulgaria and
strengthens the import/export regime for raw materials
and equipment involved in ODM production. However, the
new law does not allow industry representatives or
rights holders to participate in inspections and
excludes goods in transit from the registration regime.

The Copyright Office of the Ministry of Culture is
responsible for copyright matters in Bulgaria. While
civil law provides remedies for violations, under the
Penal Code, copyright infringement is only a
misdemeanor, subject to nominal fines.

Patents
--------------
The Bulgarian patent law has been harmonized with EU
law in the areas of application for European patents
and utility models. Bulgaria joined the Convention on
the Grant of European Patents (European Patent
Convention) on July 1, 2002 and has obtained observer
status in the Administrative Council of the European
Patent Organization.

Bulgaria grants the right to exclusive use of
inventions and utility models for 20 years and 10
years, respectively, from the dates of patent
application filings. Inventions eligible for patent
protection must be both new as a result of innovation
and have industrial applications. Article 6 lists
items not considered inventions and utility models are
specifically defined.

The independent Patent Office is the competent
authority with respect to patent matters. The patent
law describes the application procedures and the
examination process. Applications are submitted
directly to the Patent Office. Compulsory licensing
may be ordered under certain conditions: the patent has
not been used within four years of filing the patent
application or three years from the date of issue; the
patent holder is unable to offer justification for not
adequately supplying the national market; or,
declaration of a national emergency.

Patent infringement is punishable by fines of up to
1,000 BGN. Disputes are reviewed by specialized panels
convened by the President of the Patent Office and may
be appealed to the Sofia City Court within three months
of the panel's decision.

The 1996 Protection of New Types of Plants and Animal
Breeds Act allows for a term of protection of 25 years
for annual plants and 30 years for perennial plants and
animal breeds, which starts from its date of issuance
by the Patent Office. Parliament ratified in 1998 the
International Convention for the Protection of New
Varieties of Plants (UPOV).

Data Exclusivity
--------------
Responding to long-standing industry concerns, the GOB
included a provision to provide data exclusivity
(protection of confidential data submitted to the
government to obtain approval to market pharmaceutical
products) in its new Drug Law, which took effect in

2003. The law, however, links data protection to a
valid patent.

Trademarks
--------------

The 1999 Trademarks and Geographical Indications Act
regulates the establishment, use, cession, suspension,
renewal and protection of rights of trademarks,
collective and certificate marks, and geographic
indications in accordance with TRIPs requirements and
the government's EU Accession Agreement. The August
2005 amendments to the Law on Trademarks and
Geographical indications and the Law on Industrial
Design further incorporated TRIPs requirements.

Registration is refused, or an existing registered
trademark is cancelled, if a trademark constitutes a
reproduction or an imitation or if it creates confusion
with a well-known trademark, as stipulated by the Paris
Convention and the Trademarks and Geographical
Indications Act. Applications for registration must be
submitted to the Patent Office under specified
procedures.

Right of priority, with respect to trademarks that do
not differ substantially, is given to the application
that was filed in compliance with Article 32 first.
Right of priority is also established on the basis of a
request made in one of the member countries of the
Paris Convention or of the World Trade Organization.
To exercise the right of priority, the applicant must
file a request within six months of the date of
original filing.

A trademark is normally granted within 12 months of
filing a complete application. Refusals can be
appealed in the Sofia City Court within three months of
notification of the decision. The right of exclusive
use of a trademark is granted for ten years from the
date of submitting the application. Requests for
extension of protection must be filed during the final
year of validity, but not less than six months prior to
expiration. Protection is terminated if a mark is not
used for a five-year period.

Trademark infringement is a problem in Bulgaria for
many U.S. manufacturers. Its categorization as a
misdemeanor, subject to a nominal fine, is not a
sufficient deterrent to illegal activities. While more
draconian measures are available, such as confiscation
or fines of up to 500,000 BGN, they are rarely levied
or enforced.

U.S. businesses have noted significant difficulties in
obtaining relief against trademark infringement. Even
if courts understand the law and issue orders, the
entities charged with enforcement often cannot be
relied upon to carry out the court judgment. Under
Bulgarian law, legal entities cannot be held criminally
liable. Therefore, the criminal penalties for copyright
infringement and willful trademark infringement are
limited.

In Bulgaria, trademark and service-mark rights and
rights to geographic indications are only protected
pursuant to registration with the Bulgarian Patent
Office or an international registration mentioning
Bulgaria; they do not arise simply with "use in
commerce" of the mark or indication. Under Bulgarian
law, legal entities cannot be held criminally liable.
Similarly, criminal penalties for copyright


infringement and willful trademark infringement are
limited, compared to enforcement mechanisms available
under U.S. law.
BEYRLE