Major infrastructure and industrial projects depend on careful government planning and resources. However, Bulgaria’s government has been in flux since 2021, with six general elections in the last four years. Nevertheless, there have been some legislative developments that could stimulate private investment in the fields of utilities, transport, postal services, energy, and industrial manufacturing.
Concessions Act – Untested Opportunities
Important amendments to the Bulgarian Concessions Act were enacted in 2021 but remain untested in practice and little publicized. According to the changes, concessions can be granted by so-called “contracting entities,” meaning entities carrying out specific sectoral activities and awarding a concession for any of those activities.
In addition to public authorities (state, regional, or local governments), contracting entities are also the bodies governed by public law, the public undertakings, and other entities that operate on the basis of special or exclusive rights granted for the exercise of one of the sectoral activities. The activities concerned include: operation of networks for providing a service to the public in connection with the production, transport, or distribution of gas, heat, or electricity; public services in the field of transport; postal services; and extraction of oil or gas, among others.
The concept of contracting entities (as opposed to contracting authorities) is not new – it was introduced in 2014 by Directive 2014/23/EU on the award of concession contracts. However, it was not transposed into Bulgarian law until the 2021 amendments to the Concessions Act. Concessions can therefore be awarded not only with regard to state- or municipality-owned property but also in cases concerning assets owned by entities (including commercial companies) that perform the specified sectoral activities.
Although introducing contracting entities is a good step, the Concessions Act remains ambiguous as to whether such entities may effectively award concessions. This appears to not yet be possible as the law only allows the powers of a concession grantor to be exercised by a minister or municipal mayor. This could be one of the main reasons why the concession options related to entities carrying out sectoral activities have not yet been tested in practice.
Forthcoming Amendments to the Industrial Parks Act
A legislative initiative for amending the Industrial Parks Act was brought forward in early 2024 and a draft bill is currently with the parliament. The amendments aim to improve the investment environment and encourage investors to engage in manufacturing activities in industrial parks. Three significant amendments can be singled out: the introduction of a new type of industrial park, the criteria for determining key industrial parks, and the enhancement of the development phase of industrial parks in terms of spatial planning.
The current minimum threshold for an industrial park is set at 300,000 square meters, with limited exceptions applicable to industrial parks for high-tech activities and services. The amendments envisage another exception – industrial parks specialized for a single or similar type of manufacturing activities with a threshold of 150,000 square meters. The proposal has been criticized by stakeholders for lacking justification. The approval of such an amendment would be a test of the government’s initial goal to stimulate the formation of clusters.
An industrial park may be declared as a key industrial park if approved by the Council of Ministers, but no specific statutory criteria for inclusion exist. Secondary legislation is therefore proposed to determine such criteria. Owners and investors of key industrial parks would benefit from preferential treatment when applying for support under the Investment Promotion Act and for financial support at the national and EU levels.
An industrial park is allowed to be created at an early stage of the spatial planning of the included land plots. If the draft bill is adopted, the park owner should proceed quickly with the development phase after registration, as pursuant to the amendments, the industrial park would be deregistered if a detailed development is not entered into force and submitted within two years of registration.
While we have not yet witnessed any concession granted by a contracting entity and cannot predict the timeline for the approval of the amendments to the Industrial Parks Act, both developments send an overall positive signal to investors.
By Boryana Boteva, Head of Projects and Infrastructure, and Simeon Vachev, Senior Associate, Kinstellar
This article was originally published in Issue 11.5 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.
