Agricultural land in Bulgaria is declared a chief national asset as per the Constitution. As such, it benefits from the special protection of the State and the society, and the provisions designated to preserve it must comply with the Constitution, the international treaties to which Bulgaria is a party, as well as with EU law. However, it can be argued that the existing legislative safeguards go beyond their purpose and end up creating undue constraints on the acquisition of agricultural land.
Such undue constraints are contained in the provision of Article 3v of the Agricultural Land Ownership and Use Act ("ALOUA"). Paragraph 1 of Article 3v, ALOUA stipulates the general rule that the right of ownership over agricultural land may be acquired by natural or legal persons who have been resident or established in the Republic of Bulgaria for more than five years. The same rule does not apply when agricultural land is acquired through inheritance.
On the contrary, natural persons who have not been resident nor established in Bulgaria for at least five years are not entitled to acquire Bulgarian agricultural land by any kind of transaction. This requirement applies to all physical persons, regardless of whether they are Bulgarian citizens or foreigners. ALOUA does not make exceptions in connection with the condition of residence. It considers the following irrelevant:
► the citizenship of the buyers of land or the persons to whom it has been donated;
► whether the buyers of land or the persons to whom it has been donated are related to the disposer of land.
Furthermore, ALOUA does not make exceptions with regard to the condition of establishment in the country.
In essence, Article 3v, para. 1, ALOUA takes into account the physical presence of the person in the country as a guarantee that the land they acquire will be taken care of, and not acquired through a transaction and then abandoned. The term "resides" refers to foreign citizens, and the condition applicable to Bulgarian citizens is that they are established in the country.
Legal entities acquiring agricultural land in Bulgaria should have had a registration under Bulgarian law for at least five years prior to the acquisition transaction. As an exception, paragraph 2 of Article 3v, ALOUA prescribes that legal entities that have had registration under Bulgarian law for less than five years may acquire ownership of agricultural land only when the shareholders in the company, the members of the association or the founders of the joint stock company meet the requirements for residence or establishment (under Article 3v, para 1, ALOUA). For the sake of completeness, constraints on the acquisition of agricultural land by legal entities are also contained in the provision of Article 3, para. 7, ALOUA.
The aforementioned conditions for the acquisition of agricultural land under Article 3v ALOUA do not correspond to the values established in the Bulgarian Constitution and in European Union law, as evidenced by the actions and acts of the Bulgarian authorities and the European Commission.
The first step towards creating constraints was made on 22 October 2013 with a Decision adopted by the National Assembly on imposing a moratorium on the acquisition of land ownership on the territory of the Republic of Bulgaria by foreigners and foreign legal entities until 1 January 2020. Pursuant to this Decision, the Council of Ministers was instructed to adopt all necessary acts and take actions for the implementation of the moratorium. The moratorium was almost instantly appealed before the Constitutional Court and logically, it was declared unconstitutional with Decision No 1 of 28 January 2014.
Meanwhile, 1 January 2014 marked the expiration of the term set in the Treaty of Accession of the Republic of Bulgaria to the European Union, preventing citizens and legal entities from EU Member States and the countries which are parties to the Agreement on the European Economic Area, to acquire ownership of Bulgarian agricultural land (see Article 3, paragraphs 5 and 6 ALOUA).
Notwithstanding, a few months later, on 7 May 2014, the provision of Article 3v ALOUA was promulgated in the State Gazette (issue 38) as a continuation of Bulgaria's policy to restrict the acquisition of agricultural land by foreign physical and legal persons. The adoption of the provision did not pass without a veto imposed by the then Bulgarian President by Decree No 73 of 11 April 2014, which was subsequently overcome by the National Assembly. In his veto, the Head of State drew attention to the fact that "if the requirements of the Bulgarian law on normative acts were complied with and compliance analysis of the proposed provisions with regard to the Constitution of the Republic of Bulgaria and EU law was carried out, these legislative changes would probably not be accepted ".
Ultimately, Article 3v ALOUA is in direct conflict with EU law. The provision represents a constraint on the free movement of capital and the freedom of establishment within the meaning of Articles 63 and 49 of the Treaty on the Functioning of the European Union (TFEU), hence the European Commission’s reaction is eloquent. First, the Commission launched an infringement procedure against Bulgaria INFR(2015)2018. Then, on 26 March 2015, the Commission sent the Bulgarian State a letter of formal notice under Article 258 of the TFEU with a two-month response period. Unsatisfied with the answer, on 26 May 2016, the Commission addressed the country with a reasoned opinion (a formal request to comply with EU law), warning the Bulgarian State that the proceedings will continue in their judicial phase before the Court of Justice of the European Union (CJEU) if national legislation is not brought into line with EU law within the two months following the opinion.
On 18 October 2017, the Commission Interpretative Communication on the Acquisition of Farmland and European Union Law (2017/C 350/05) was published. It outlines the benefits and challenges of foreign investment in agricultural land, the applicable EU law, the relevant case law of the CJEU, as well as general conclusions on how to protect legitimate public interests in line with EU law. In item 4, letter (f) of the Communication, the Commission examines residence requirements by explicitly stating that "any residence requirement amounts to an indirect discrimination on grounds of nationality". It supports this statement with the consistency of the judgments of the CJEU in this regard.
From the publicly available documents with regard to the acquisition of agricultural land by foreigners and foreign legal entities in Bulgaria, it can be concluded that preparation of a Draft Act amending the ALOUA which would repeal the provision of Article 3v is foreseen by the government. These documents are Decision No 397 of the Council of Ministers of 20 July 2017 on the adoption of a Report on the implementation of the Action Plan for 2017 with the measures arising from the membership of the Republic of Bulgaria in the European Union as of 30 June 2017 and an Annex to Decision No 17 of the Council of Ministers of 2019. Moreover, the Annex states that on 18 July 2018, a letter was received from V. Dombrovskis – Executive Vice-President of the European Commission, inviting Bulgaria to inform the Commission of its plans in connection with the infringement procedure.
At present, Article 3v of the ALOUA has not been amended nor repealed and continues to be part of the applicable Bulgarian legislation, which is observed and applied by the Bulgarian institutions. Accordingly, the conditions it sets out, apply to anyone wishing to acquire agricultural land in the country.
The above raises the following reasonable topic for discussion: 14 years after the accession of Bulgaria to the European Union and 7 years after the adoption of an unconstitutional and anti-European provision, due to which at any time the infringement procedure against Bulgaria initiated by the European Commission may proceed to its judicial phase, the provision of Article 3v continues to exist in its original form and is applied with all its peculiarities, as explained above.