The Arbitration Clause Applies Also to Disputes Between the Assignee and the Debtor After the Assignment of the Receivable

By Interpretative Judgment No. 1 of 21.02.2024 on interpretative case No. 1/2023 of the General Assembly of the Commercial Chamber of the Supreme Court of Cassation of Bulgaria, it was acknowledged that the arbitration court is competent, in the event of assignment of a receivable, to consider and resolve disputes between the assignee and the debtor by virtue of an arbitration agreement/clause concluded between the assignor and the debtor.

The Supreme Court also ruled that for the conclusion of an arbitration agreement, which is part of the substantive contract, the authorization for the conclusion of the contract itself is sufficient, without the need for explicit authorization for the conclusion of the arbitration agreement.

In their reasoning, the Supreme Court judges point out that, despite its independent nature and specific content, an arbitration agreement is always concluded in connection with a possible or already existing dispute over a specific legal relationship. There is no legal norm which requires, for the validity and for the legal effects of an arbitration clause concluded by an authorized person and incorporated into the substantive contract, that the authorized person is expressly authorized to negotiate an arbitration agreement. The provisions of Art. 19 of the Civil Procedure Code and Art. 7 of the International Commercial Arbitration Act /ICAA/, which regulate the arbitration agreement as a prerequisite for the jurisdiction of the dispute to the arbitration courts, for the competence of the arbitration body, and for the stability of the arbitration judgement, as well as the other provisions of the ICAA, do not require the necessity of an express authorization for the conclusion of an arbitration agreement by an authorized person.

In the absence of any challenge to the representative authority of the authorized person for the conclusion of the substantive contract and in the absence of a statutory requirement that the establishment of a representative authority for the conclusion of an arbitration agreement shall be carried out with an express authorization, relating the validity of the arbitration agreement to the existence of an express authorization would be in contradiction to the law (extra legem). It follows from the above that the establishment of a representative authority in connection with the substantive contract, i.e., the substantive legal relationship, inevitably also includes the establishment of a representative authority for the negotiation of an arbitration agreement for the purpose of resolving disputes arising from this legal relationship.