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With EU harmonisation almost completed, Bulgarian legislation is moving very quickly. The financial system in the country is regulated to a healthy extent....

With EU harmonisation almost completed, Bulgarian legislation is moving very quickly. The financial system in the country is regulated to a healthy extent. "We have strict financial and banking regulations, more than other parts of the world, especially the US," says one partner.

The banks in Bulgaria are stable and the trend continues where market players find it odd that it has taken so conservative a stance to lending. "Banks are stable and not lending. It gives no impetus for normal business to increase," says one partner. "The policy is restrictive. The directives and policy of banks are orientated toward the market of distressed deals and restructuring," says another partner.

Nevertheless, there have been reports of some improvement. "Banks were much more cautious because they lost money. Real estate projects are now much more strict in rules. There are more restrictions for borrowers but they're looking for opportunities; last year, they were not looking at all," one partner comments.

One of the areas where banks are exploring new opportunities is in project finance, most notably in renewable energy. "Renewable energy is developing projects for sale," says one partner. With an attractive feed-in tariff in place, there has been increasing keenness to have this sector developed and wind and solar power have been the order of the day. "There's a large volume of projects. We have an open regulatory market. It's an open market, there's a lot of trans-border energy. I'm proud to have a good legislative process," one partner says. Looking ahead, there has even been a proposal for an energy stock exchange. Another dynamic sector is telecommunications. "It's picking up and promising," says one partner.

There has also been speculation of a fresh drive toward privatisation, although there are only a few companies left to privatise. Nevertheless, there have been some announcements to boost public revenues and earlier in the year Bulgaria's government looked at offering a package of small state companies or stakes in such firms through the Sofia stock exchange.

The rate of foreign investment is stable with some noting a slight pickup in activity and interest. "There has been a general pickup and a lot of interest. Embassies are doing due diligence and investments come from the UK, Australia and Switzerland," says one partner.

In contrast to the previous year, M&A has seen an increase in activity. "M&A has started to pickup because of distressed funds. This is a general trend," says one partner. Lawyers note a slight increase in transactional work and also an upturn in requests for different types of projects from foreign and domestic clients. "We reached the bottom and so now we move upwards," another partner states. The capital markets are quiet and have been described as "a go with the flow process" in Bulgaria.

The major news on the legal market was the closure of last year's tier three firm, DLA Piper. Austrian firm, Wolf Theiss has bolstered its practice by taking over its team.