Building law and regulation in Bulgaria during Covid-19

No construction-specific regulation has been adopted to address the COVID-19 pandemic, but there are other regulations that are construction-relevant.

The Bulgarian Parliament announced a state of emergency for the period 13 March–13 May and adopted the so-called Emergency Measures Act, which provided for certain anti-pandemic measures

With the end of the state of emergency on 13 May, the Bulgarian Parliament implemented new measures with amendments to the Health Act and the Emergency Measures Act. The Parliament gave to the Council of Ministers the power to announce an "emergency epidemic situation" when there is imminent danger to the life and health of citizens due to the spread of a contagious disease, including COVID-19. 

After receiving a proposal from the Minister of Health, based on an assessment of the existing epidemic risk performed by the Chief State Health Inspector, the Council of Ministers declared an "emergency epidemic situation" on 14 May, which will extend until 14 June. During the emergency epidemic situation, the Health Minister is entitled to determine anti-epidemic measures (either for specific regions or for the entire country) and impose each measure via an order.

Some of the effective measures include: 

• Employers are urged to implement working-from-home policies, if possible. This can be done without the consent of employees. 

If working from home is not possible, employers must ensure that adequate hygiene measures are implemented. Some of these measures include: 

1. admission control, aimed at preventing access to the work site by infected employees; 
2. workers must keep a distance of at least 1.5 m both indoors and outdoors;
3. work sites, lavatories and relaxation areas must be disinfected regularly – at least wide per day/shift;
4. employees must be equipped with personal protection equipment such as masks and gloves.

The Bulgarian Construction Chamber also issued guidance on the anti-epidemic measures to be applied in the working premises, warehouses, office buildings, logistics centres and construction sites, which measures have non-binding effect on the industry.

• There is a general restriction barring people to cross the Bulgarian border, except for transit (i.e. travelers passing through Bulgaria on their way to another destination). Some of the exceptions to this restriction include: Bulgarian citizens and their families, EU-citizens (and citizens of countries, which are parties to the Schengen Agreement), citizens of the UK and Northern Ireland, citizens of Serbia, Bosnia and Herzegovina and Montenegro, or individuals  who permanently, long term or continuously reside in Bulgaria with their families, people engaged in transporting goods, or people engaged in the construction, maintenance, operation and security of Bulgaria's strategic and critical infrastructure.
• All individuals who enter come from  Sweden, UK and Northern Ireland, Belgium, the Republic of Ireland, Portugal, Spain, Malta and Italy, and from non-EU countries (apart from Serbia, Bosna and Herzegovina and Montenegro) are put under mandatory 14-day quarantine. Exceptions to this rule include Bulgarian citizens and citizens of EU countries (as well as countries, which are parties to the Schengen Agreement), who are traveling for humanitarian reasons or are engaged in the construction of strategic and critical infrastructure. Regardless of their citizenship, quarantine measures will not apply to foreign officials, to people responsible for the delivery of medical supplies and equipment, to medical specialists, to border workers, or to truck/bus drivers that perform international deliveries/passenger transportation. 

On a sperate note, the parliament resolved that the annual ban on construction works in the national resorts on the Black sea coast shall begin on 15 June due to the late start of the holiday season this year. Usually, the ban is effective during the period 15 May to 1 October.

There are no specific subsidies for the parties, involved in the construction industry. The Council of Ministers adopted a Decree to pay compensation to businesses that have been affected by the state of emergency aimed to encourage them to retain their employees. Employers from the construction sector are eligible for these compensation payments (i) if they have suspended wholly or partially their business on the territory of certain settlements, where a competent authority has imposed restrictions, or (ii) if they have wholly or partially suspended their business, or the work of employees or if they have introduced part-time work at their own discretion in response to the state of emergency and their sales revenue decreases of 20% or more as compared to the same month of the previous year.

To qualify for the compensation, the employer must fulfil also other criteria, including having no outstanding obligations to the state or the municipalities for social security or taxes; retaining the employment of people for whom it has been granted compensation for at least the term for which they have been granted compensation and also others. There is no deadline to apply for the compensation payments.

The compensation is 60% of the January 2020 insurable earnings of their employees and of the social insurance due on behalf of employers. The compensation will be granted for (part of) the period 13 March until 30 June 2020 In the case of part-time work, the compensation shall be paid in proportion to the hours worked, but for no more than four hours per day. The employers are obliged to pay the full amount of salaries and social security contributions for the respective months of business suspension.

Other instruments supporting small and medium sized companies (SMEs) have been introduced as well. They aim to ensure that enough liquidity is available for SMEs to preserve the continuity of the economic activity and counter the effects of the COVID-19 outbreak. Aid is provided in the form of guarantees for individual SME loans and for SME loan portfolios channeled through credit institutions and other financial institutions. They include: 

• Portfolio guarantees by the Bulgarian Development Bank for SMEs 

The guarantees may be for both investment and working capital loans (for payment of wages, rents, overheads and other expenses directly related to the business activity of the undertaking). The loans could be both new and existing. Refinancing of loans is excluded.

• Guarantee instrument of the Fund of Funds in respect of SMEs  

The Fund of Funds (Fund) is responsible for the structuring and management of financial instruments co-financed by the European Structural and Investment Funds in the programming period 2014-2020. 

The Fund has announced a guarantee instrument in support of SMEs, which would include a portfolio guarantee with a loss cap for new loans granted to SMEs, as well as interest subsidy (15% of the budgeted amounts). This instrument is very similar with the one, provided by the Bulgarian Development Bank.

• Guarantee instrument of the Sofia Municipality’s Guarantee Fund

The Sofia Municipality’s Guarantee Fund has launched a guarantee instrument in support of SMEs and self-employed individuals, whose activity has been impacted by the COVID-19 epidemic. 

The guarantees may be issued in respect of bank loans for the financing of salaries, insurance contributions, public obligations and current expenses (payment to suppliers, rent payments, etc.).

A force majeure event under Bulgarian law is defined as unforeseen or unsurmountable event of an extraordinary nature, which occurs after the contract was signed. The party that cannot perform an obligation as a result of a force majeure event is not liable for its failure to perform. 

It is accepted both in legal theory and by the courts that legislative amendments or forms of government intervention that impede the performance of an obligation to qualify as a force majeure event. Therefore, both the pandemic and the legal measures that aim to limit its effects would likely qualify as force majeure events if they have a direct impact on the construction works or on other obligations under construction contracts. This should be assessed on a case-by-case basis. 

The performance of obligations affected by a force majeure event, and the related obligations of the counter party, would be suspended for the duration of the event. To be entitled to invoke the suspension of the works and an extension of time for completion, the contractor must evidence that the relevant works were impeded by the force majeure event and must not be in delay when the event occurred. Additionally, the contractor should notify the counterparty of the force majeure event and should take due care to mitigate the consequences and minimise the delay to the extent possible.
Bulgarian law does not provide for specific price consequences of a force majeure event and contractors are not entitled to claim additional costs, unless this has been specifically agreed in the construction contract.  

On a separate note, according to Art. 266, par. 2 of the Bulgarian Obligations and Contracts Act, which applies to manufacture and construction contracts, if, in the performance of a contract the duly determined prices for materials or labour change, the compensation will be adjusted accordingly, even if it was agreed on as a total sum. However, this provision would usually be derogated contractually and there are limited court precedents on its application.  

It is noteworthy that neither party may invoke force majeure in respect of its payment obligations and that the lack of funds would not relieve a party from liability for payment.

Each party may terminate the contract if due to the duration of the force majeure event it loses interest in its performance. If that duration is not defined in the construction contract, in the event of a dispute the party terminating the contract should be able to demonstrate that it is no longer interested in performing it, and the court assesses whether termination is justified on a case-by-case basis.

Bulgarian law does not provide a specific change-in-law institute. However, as discussed above, the measures undertaken for the pandemic would likely qualify as a force majeure event and have the consequences discussed in sections 3 and 4 above.

The situation is very dynamic and new measures and legislative amendments are adopted every other day.  Contractors are encouraged to monitor regularly these measures, as well as the measures that may affect performance by their subcontractors/suppliers and collect evidence that they have taken due care to avoid or mitigate potential delays, where this is possible.  

Both employers and contractors may delay payments under loan agreements or financial leasing agreements, as they are released from the adverse consequences of their delay for the period of the state of emergency; and, in respect of financial leasing agreements, this applies for two months after the end of the state of emergency (i.e. by 14 July 2020).  If they have or expect to have difficulties in relation to the  COVID-19 pandemic, the restrictions imposed by the Emergency Measures Act and their consequences and have paid their obligations regularly (delay up to 90 is permitted), they may apply to reschedule the repayment of principle and interest under the loan  agreements according to the rules of non-legislative moratorium, prepared by the banks and approved by the Bulgarian National Bank. 

No industry-specific measures have been adopted yet.  A re-start of the subsidized energy efficiency program, providing for renovation of residential blocks of houses has been discussed.  

Following discussions with the Bulgarian Construction Chamber, the government may consider amendments to the noise regulations and cancellation of the ban on construction activities in the 2-4 pm timeslot during working days, if the noise is within certain permissible levels. A re-start of the buildings’ renovation and energy efficiency programme is being discussed as well.