Real Estate

Bulgaria: Expropriation Revisited

The unlikely victory of private owners over the big infrastructure projects in Bulgaria’s Constitutional Court

For the sake of better infrastructure: the preferential expropriation regime of 2010

Big infrastructure projects, such as highways and transmission gas pipelines, by definition affect the rights of many private owners whose land happens to be located on the project track. Owner-investor negotiations for acquisition of the necessary land are not economically feasible on such scale and the expropriation is often the alternative, which make these projects possible. On the other hand, having promulgated the right of ownership as an absolute constitutional right, the Bulgarian Constitution allows expropriation only as an exception. It can be applied if there is an overriding public interest that commands such material infringement of the private ownership right, and becomes effective after adequate compensation has been paid.

Preferential status 

The complicated expropriation procedure has been a challenge for big infrastructure projects, due to the large number of private owners involved in it. In attempt to speed up the completion of strategic projects (particularly highways) in 2010 the Parliament approved an amendment of the State Property Act and the Municipal Property Act so that a strategic project could obtain a preferential status of a ‘site of national significance’, which entitles it to a preferential expropriation regime.

The preferential regime

The preferential regime enhances the procedure for the investor in several aspects.

  • The expropriation decision is announced in the State Gazette, instead of with a notice to each affected owner, and can be appealed within 14 days; otherwise, it becomes effective.
  • If the affected owners appeal the expropriation only with respect to the compensation amount, the expropriation is enforceable and the appeal cannot stop its effect.
  • The investor can enter into possession of the land before the expropriation decision becomes effective if the detailed zoning plan and the construction permit for the project are in place and the investor has deposited the compensation amount as set out in the expropriation decision.

As a result, the Lulin and Trakiya highways, notoriously delayed until then, were commissioned in 2011 and 2013.

Private property upheld: the revocation of the preferential regime of 2013

The 2010 regime sanctions the infringement of private ownership rights to the benefit of the public interest in building infrastructure faster and at less cost. Owners have rarely had the chance to appeal in time because they missed the announcement in the State Gazette. Often, one will learn about the expropriation when the possession is handed over to the investor, at which time the options to react against the expropriation or the compensation approved are limited.

The July 2013 decision of the Constitutional Court

In 2013, however, one expropriated owner, who had missed the relevant State Gazette publication and had his land taken for minimal compensation, addressed the national ombudsman, who in turn brought the issue before the Constitutional Court. In July the court revoked the preferential regime as unconstitutional.

The State Gazette announcement, reasoned the court, does not allow for proper protection of the rights of the expropriated owners against unlawful infringement since the citizens are not required to follow the State Gazette. Also, under the Constitution, the expropriation should be enforced only after payment of appropriate compensation, while the challenged regime allowed for preliminary enforcement if the compensation is disputed before the courts, and that the owner can be deprived of possession to the benefit of the investor as soon as the latter obtains an approved and effective detailed zoning plan and construction permit and deposits the compensation in its disputed amount.

The draft amendment of the public property laws

After the revocation of the 2010 preferential regime, the Parliament is to revise the rules, limiting the preferential treatment of strategic infrastructure projects to a reasonable extent, according to the instructions of the Constitutional Court.

In the amendment currently under consideration:

  • Announcements in State Gazette will remain an option only if the notice cannot be delivered to the affected owner (eg, the address is unknown).
  • The expropriation will be enforceable only after the investor has paid adequate compensation or after the completion of the court proceedings in case of a dispute with the affected owner.
  • There will be no preliminary enforcement of the expropriation, but the competent authorities will be required to administer claims faster.

In brief, the amendment rules seem to greatly benefit private owners. With the South Stream launch looming, the efficiency of the new approach will be tested soon.

To speed up the completion of strategic projects in 2010, the Parliament approved an amendment to the law so that a strategic project could obtain a preferential expropriation regime, which considerably infringes the private property rights. After a recent Constitutional Court decision, the Parliament will revise the rules, limiting the preferential treatment of strategic infrastructure projects.