February 2025 – Bulgaria aims to finalise the full implementation of its foreign direct investment (“FDI”) screening regime in early 2025. On 29 January 2025, the Council of Ministers approved the Rules on the Organisation and Operation of the Interinstitutional Council for Foreign Direct Investment Screening (“Rules of Procedure”) – one of the key legislative acts supporting the implementation of the Bulgarian FDI regime, which officially took effect in 2024 (see our publication here).
There is currently a transitional period during which FDI notifications are not required, as the necessary implementing regulations have yet to be enacted. The adoption of the Rules of Procedure is one of the remaining steps in the process. Once the Foreign Direct Investment Screening Council (the body responsible for FDI screening in Bulgaria, “FDI Council”) is appointed and the anticipated amendments to the Rules for Implementation of the Investment Promotion Act are introduced (later in 2025), the regulatory framework will be finalised.
Key takeaways for foreign investors
Operational procedures of the FDI Council
The Rules of Procedure detail the structure, composition, decision-making processes, and operational procedures of the FDI Council. The authority is comprised of 17 members: 13 voting members (including representatives from the Council of Ministers, various ministries, and national security agencies) and four advisory members (representing independent regulators—the Commission on Protection of Competition, the Financial Supervision Commission, the Energy and Water Regulatory Commission, and the Communications Regulation Commission).
Resolutions are adopted during closed sessions held regularly, with strict confidentiality protocols in place.
Role of the Secretariat and potential bottlenecks
Тhe Security Council at the Council of Ministers will act as the FDI Council’s Secretariat. Its responsibilities include facilitating the Council’s operations, organising meetings, maintaining records, coordinating with authorities, assisting the chairperson, monitoring compliance with restrictive measures, and legally representing the FDI Council in defending its decisions.
However, investors should be aware of potential coordination challenges implied by the provisions of the Rules of Procedure. Specifically, there is a risk of overlapping responsibilities between the FDI Council, its Secretariat, and the Bulgarian Investment Agency. Concerns arise regarding the processing of screening applications (the Bulgarian Investment Agency and the Secretariat share responsibility in this respect) and the monitoring of the restrictive measures (both the FDI Council and the Secretariat are tasked with verifying compliance with restrictive measures).
These overlapping functions may lead to delays or conflicting interpretations. It remains to be seen whether the anticipated amendments to the Rules for Implementation of the Investments Promotion Act or the practice of the authorities will provide for a clearer delineation of roles and stronger inter-agency coordination.
Investors’ involvement
The amendment to the Investments Promotion Act, which came into effect in 2024, indicates that the forthcoming Rules for the Implementation of the Investment Promotion Act are expected to elaborate on the screening procedure itself. However, the Rules of Procedure, approved on 29 January 2025 still outline certain provisions that imply the involvement of investors in this process.
Gathering additional information
In the process of FDI screening, the FDI Council relies primarily on the information provided by the investor in its application and the supporting documents, as well as information provided in response to follow-up requests. Additionally, the FDI Council has the authority to gather further data necessary to determine whether the proposed investment could impact national security and/or public order and to assess its implications concerning the factors outlined in Article 4 of the FDI Regulation. Such information requests may be directed not only to the investor, but also to other parties, including the target entity, relevant authorities, organisations, and third parties related to the investment. The deadline for providing the requested information is 15 days.
The Rules of Procedure indicate that when additional information is requested, the investor has the right to ask for a hearing before the FDI Council. In such cases, the chairman may assign a council member to conduct the hearing. However, ambiguities in the legal framework create uncertainty as to whether this hearing procedure applies only when information is obtained from third parties or in all cases where additional information is requested. Clarification on this matter would enhance legal certainty for investors navigating the screening process.
Negotiation of restrictive measures
The FDI Council is empowered to impose necessary restrictive measures on foreign investors to ensure security or public order, regardless of any financial penalties. These measures may include change in control, modifications and/or suspension of activities, termination of foreign direct investment, and other suitable actions. Such measures will be implemented following negotiations between the investor and an authorised representative of the FDI Council.
The Rules of Procedure make it clear that negotiations will be held in writing and, if successful, an agreement must be signed. The agreement will be an integral part of the foreign direct investment permit. If no agreement is reached, the FDI Council will determine whether to grant the permit with unilaterally imposed restrictive measures or to reject the application for the foreign direct investment permit.
Transparency concerns
Transparency remains a significant concern. The FDI Council conducts its meetings in a closed format, with access limited to council members, secretariat staff, and the designated experts involved in the process. Access to documents related to the FDI Council's activities, including decisions, opinions, meeting minutes, correspondence, and other information related to its operational activities, is restricted and not available to external parties. In the event of an appeal against the resolution denying the issuance of an FDI permit, relevant documents will be disclosed solely to the court and the parties involved in the legal proceedings. While safeguarding sensitive data is crucial, this approach may impede investor understanding of the criteria and timelines that govern decision making.
What’s next?
The Rules of Procedure became effective on 31 January 2025 – the date of publication in the Bulgarian State Gazette.
As Bulgaria advances in the implementation of its FDI regulatory framework, it is essential for foreign investors to stay informed about the evolving landscape. The recent approval of the Rules of Procedure represents a significant step forward, with further developments on the horizon.
The next milestone is the approval of the amendments to the Rules of Implementation of the Investments Promotion Act which will detail the procedures for FDI application submission and processing. It will further clarify the allocation of responsibilities among the Bulgarian Investment Agency, the FDI Council, and its Secretariat.
Another key milestone in finalising the Bulgarian FDI screening regime is the appointment of the members of the FDI Council. The criteria for member selection will be established in the amendments to the Rules of Implementation of the Investment Promotion Act expected later this year, allowing the prime minister to appoint the members of the FDI Council. Once the FDI Council is in place and the amendments to the Rules of Implementation of the Investments Promotion Act enacted, the submission and screening of FDI applications can begin. This development will offer investors much-needed clarity and predictability.
For tailored guidance on Bulgaria’s FDI screening procedures, please contact our legal team.