When considering the property legislation framework, it is
necessary to start by examining the past and present constitutional
norms regulating the carrying out of economic activity in
Bulgaria.
The first Bulgarian constitution - the Turnovo Constitution, was
adopted in 1879. It proclaimed the country a constitutional
monarchy with popular representation and introduced a number of
democratic principles for the creation and development of
parliamentary institutions in the country. Most significant to the
development of market relations was no doubt the principle of the
inviolability of private property upheld by the Constitution (Art.
67 "Property rights shall be inviolable").
Following the 1944 socialist revolution, the supreme law of the
country became the first socialist Constitution of 1947. It
provided the basis for turning Bulgaria into a country with
one-party government - that of the Communist Party, and a
centralized planned economy. Public property was accorded a central
place and significance, with guarantees for its protection and
development, while private property was relegated to the background
and subject to considerable restrictions. The subsequently adopted
laws limited private property to "personal property", which term
covered real estate for personal use - i.e. housing and country
houses at the most, as well as personal effects - objects of daily
personal use, small-scale farm equipment, and private automobiles.
The nationalization of industrial enterprises, mines and quarries
carried out in 1947, and the subsequent collectivization of farm
land in the 1950s, finalized the transition to a centrally planned
economy, regulated by administrative acts.
The second socialist Constitution adopted in 1971 - the
so-called "constitution of mature socialism" - conclusively
established the leading role of the Communist Party in society and
the state, i.e. the dictatorship of the proletariat. Bulgaria's
economic system was defined as a socialist one, excluding the
exploitation of man by man. The state controlled the national
economy on the basis of unified five-year plans for social and
economic development.
The forms of property were defined as state-owned (public),
cooperative, property of public organizations, and personal
property. Art. 15 of the Constitution defined public property as
the highest form of socialist property, enjoying special
protection. It covered industrial plants and factories, banks,
mineral resources, natural energy sources, nuclear energy, waters,
forests, pastures, roads, railway, water and air transport, posts,
telegraphs, telephones, radio and television. The state exercised
its property rights by creating economic organizations or
state-cooperative enterprises which were to run, maintain and
administer the property. Art. 29 of the Constitution included a
provision whereby the state could establish by law exclusive right
to engage in certain types of business activity, and the second
paragraph stipulated that foreign trade was an exclusive right of
the state.
The provision in Art. 19 of the Constitution defined cooperative
property as owned by collectives of workers united voluntarily for
the purpose of carrying out joint business activity. The
cooperatives could only own means of production in certain cases
provided by law. There was more detailed provision for cooperatives
in the Cooperatives Act, defining them as socioeconomic socialist
organizations, and intrinsic part of the country's socialist
economic organization. The fact that it was the Council of
Ministers that exercised general supervision over their activity
confirms the conclusion that cooperatives were not in a position to
compensate for the absence of a private sector in Bulgaria and in
fact constituted a disguised form of state-owned enterprises.
According to Art. 21 of the Constitution, citizens were entitled
to personal ownership of real estate and personal effects to meet
their own needs as well as the needs of their families. This
category of personal property was also extended to cover the
small-scale means of production and the agricultural output of
cooperative member households and others cultivating land that had
been granted for their personal use or other supporting activities.
In fact, the private sector consisted in supply of services and
retail by private persons on a contractual basis, or craft practice
- supplying services or production of small wares for mass
consumption or folk art and handicraft articles. In those cases
citizens could be granted the use of workshops or small retail
shops or outlets (public food-and-drink establishments, stalls,
kiosks, etc.). This more or less exhausted the allowed business
activities by persons other than the state-owned enterprises and
cooperatives.
The now acting Constitution was adopted in 1991 and is the
fundamental law for the development of a democratic society and
market economy in the country. It provides the necessary legal
protection and safeguards for private property and the economic
rights of citizens.
Art. 17, Paragraph 3 of the Constitution asserts the principle
of the inviolability of private property. The forcible
expropriation of property can only be carried out on account of
state and municipal needs and solely on the basis of an act of
parliament provided those needs cannot be met by any other means
and subject to equivalent preliminary compensation.
Another particularly important provision is that of art. 19,
proclaiming free economic initiative as the fundament of the
economy in Bulgaria. The principle has been established for
investments and economic activities of foreign and Bulgarian
citizens and legal persons to be granted protection by the law. The
constitutional norms further guarantee equal legal conditions for
economic activity to all citizens and legal persons, and provides
for protection of consumers. The abuse of monopoly positions and
unfair competition are prohibited by law.
The legal regulation of property rights issues is central to
every economic system. After the Liberation those matters were
provided for in Bulgaria by the Property Act. The approach of other
European countries, where a single civil code regulates both
property and contractual relations, was not adopted in
Bulgaria.
As mentioned above, the first socialist constitution upheld the
dominant role of public property. The Property Act passed in 1951,
while adhering to the fundamental civil and legal principles
regulating property relations, also introduced a number of
principles of a socialist character, which emphasized public
property and placed personal property in a subordinate position.
Public property included all trade and industrial enterprises and
the mineral resources, and its administration was in fact carried
out by the Council of Ministers by government decrees and
regulations. And since, according to the Constitution, that type of
property was not tradeable, it was not subject to the provisions of
the Property Act.
The other types of property were the cooperative and personal
property. According to the regulations contained in the
Cooperatives Act and the standard statutes of the Collective Farms,
cooperative property consisted largely of farm land and other real
estate or movable property deposited as a contribution to share
capital by the individual cooperative members.
Personal property was reduced to the right of each household to
own one flat/house and one country house. Individual property
rights and transactions involving them were regulated by the
Property Act. The Citizen Property Act adopted in 1971 included
additional measures of an administrative character meant to
introduce further restrictions on the right of citizens to own real
estate property under the proclaimed, seemingly "noble" intention
of providing possibilities to meet the housing needs of all
citizens. Thus, the Citizen Property Act represented a special law,
and the property related norms set by the supreme law were in fact
derogated.
All of these regulations substituted the freedom of contracting
among legal entities for administrative measures, including even
the possibility to determine the actual buyer and the selling
price. In practice, there existed no genuine real estate market in
the country, which meant that one of the crucial preconditions for
private sector development was actually missing.
Since 1990 the legal regulation of property relations in
Bulgaria has undergone rapid transformation. The hierarchy
established by the socialist legislation and the subordinate
position of cooperative and personal property with respect to
public property was abolished with the adoption of the new
Constitution. As stressed above, the constitutional provisions give
equal and full protection to all types of property. The Property
Act has been amended and all rudimentary socialist norms have been
repealed. With the repeal of Chapter II of the Property Act the
restrictions on the ownership of real estate by citizens have been
lifted. This created the necessary legal framework for the
regulation of property rights and provided the essential conditions
for the development of a real estate market.
A critical factor for the transition to market economy and
private sector development in Bulgaria is the withdrawal of state
ownership over the enterprises. It is made possible by the
mechanisms of restitution on the one hand, and through the process
of privatization, on the other.
The setting up of joint ventures between state-owned and private
enterprises first became possible with the adoption of Decree N 56
on Economic Activity and the amendments to the 1971 Constitution
which were passed in 1990. That was actually the first step in the
gradual denationalization of property.
Presently the setting up of joint ventures is subject to the
provisions of the Law on Commerce. However, since the state-owned
enterprises are not free to dispose of their property, and the
Council of Ministers exercises the rights of sole proprietor of
state capital, the creation of joint ventures is also subject to
the Rules and Regulations on the Manner and Procedure of Exercising
State Property Rights in the Enterprises (passed in 1994 by Decree
N 7 of the Council of Ministers). To a certain extent this tends to
delay the process, as it is not only the state-owned enterprises,
but likewise the respective state authorities - ministries and
institutions - which are involved in the setting up of joint
ventures with private investors.
On the other hand, with the adoption of the Law on Local
Self-Government and Local Administration, the municipalities have
been allowed the opportunity to dispose freely of the municipal
property. Municipalities are free to form partnerships with other
commercial entities and to participate in the carrying out of
economic activity through municipal enterprises. In practice, this
has actually placed municipal property in the market, which also
played a favorable role for private sector development.
The legislation related to the restitution of property proved to
be of great importance to private sector development.
In this respect, the foremost act in terms of the implications
for the entire economy has been the restoration of property rights
in farm land. In the time of socialism, this land, which used to be
privately owned until 1950 and in the subsequent collectivization
came to be part of the property of the Collective Farms, had been
subject to regulations which completely destroyed private
initiative and entrepreneurship. Ultimately that also brought about
the ruin of agriculture in this country. With the adoption of the
Law on the Ownership and Use of Farm Land, the property rights of
the former owners and their heirs were restored, thus allowing them
the opportunity for independent initiative concerning the use and
cultivation of their land.
The Law on the Restoration of Property Rights in Nationalized
Real Property was the second most significant restitution law. It
is the chief law on the restitution of real property within the
zoning map boundaries of built-up areas and of the nationalized
private industrial, mining, and other enterprises.
The Law on Restoration of Property Rights in certain Shops,
Workshops and Storehouses was the first restitution law. It
encompassed relatively small-scale objects, but returning them to
their owners has played an important role in encouraging private
initiative and above all, for the development of the retail trade.
It allowed the expansion of the retail outlet network, the setting
up of the first offices of the newly created private companies, and
the initial private accumulation of real estate capital.
The Law on Restoration in Property Rights in Some Expropriated
Real Property under the Law on Territorial and Town Zoning, the Law
on Planned Development of Built-Up Areas, the Law on Town
Development, the State Property Act and the Property Act, was aimed
at restoring the property rights of owners of expropriated real
property.
The adoption in 1992 of the Law on the Transformation and
Privatization of State-Owned and Municipal Enterprises (State
Gazette 38/05.08.92) created the possibility for rapid
denationalization and transfer of property to a wide circle of
owners. It will limit state participation in the economy and lead
to the emergence of a large number of independent commercial
entities in a position to establish competition as a fundamental
principle in the transition to market economy.
Industrial and intellectual property rights
In the context of socialist economy the industrial and
intellectual property rights were of limited importance. The legal
framework was outlined by the 1968 Law on Inventions and
Innovations, which only reinforced the socialist principles and was
exclusively oriented towards serving the interests of the state.
Protection was given to the inventions, whose authors were granted
the so-called "authorship certificates" and a minimal remuneration
determined on the basis of the "economic effect" of the invention.
The inadequate protection of intellectual property rights and the
perfunctory financial reward inhibited creative initiative, all the
more that there existed a number of restrictions on how the authors
could dispose of their inventions, which were considered state
property. With the adoption of the Patent Law in 1994, patents were
given adequate protection and this type of property was subject to
up-to-date legal regulation.
Trade marks and industrial model designs are provided for by the
Law on Trade Marks and Industrial Models of 1967, which is regarded
as rather important, as it also provides for the geographic names
of origin - an element of unquestionable significance to a number
of agricultural products and above all Bulgarian wines, which make
up a considerable share of the country's exports.
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