Background
A Romanian insurer, Euroins Romania, entered into a reinsurance contract with EIG Re, later Phoenix Re, on 9 February 2023. Euroins’ insolvency side later alleged that this was not a genuine reinsurance arrangement, but a mechanism for transferring Euroins Romania’s liquid assets within the Eurohold group. The alleged transfers were said to have occurred on 13-15 February 2023.
On 17 March 2023, Romania’s financial regulator, ASF, withdrew Euroins Romania’s licence, found the company insolvent, appointed the Policyholder Guarantee Fund as interim administrator, and applied for bankruptcy proceedings. ASF’s earlier Permanent Capital Report had identified a capital shortfall of more than EUR 400 million. On 9 June 2023, the Bucharest Tribunal opened bankruptcy proceedings against Euroins Romania, and CITR became the court-appointed liquidator.
Phoenix Re commenced arbitration before the International Arbitration Court at the Institute of Private International Law in Sofia after the licence withdrawal but before the Romanian bankruptcy proceedings were opened. In the arbitration, Phoenix Re sought confirmation that the reinsurance contract was valid, had been lawfully terminated, and entitled Phoenix Re to retain the minimum deposit premium.
After the bankruptcy proceedings opened, Euroins Romania’s liquidator appeared in the arbitration and asked for the proceedings to be suspended or terminated, relying on Bulgarian Commerce Act Article 637. The request was not granted. The arbitration continued, and on 2 July 2024 the tribunal upheld the validity and enforceability of the reinsurance contract, found that it had been lawfully terminated, and accepted Phoenix Re’s right to retain the minimum deposit premium.
Euroins did not nominate an arbitrator within the nomination period, so the arbitral institution appointed one under its rules. Euroins later challenged the arbitrators’ independence and impartiality, but those challenges were rejected in the arbitration and then finally rejected by Sofia City Court on three occasions (1, 2, 3).
Euroins Romania, acting through CITR, then applied to the Bulgarian Supreme Court of Cassation to set aside the award. It argued that:
- the arbitration agreement was invalid;
- Euroins had not been properly notified of the appointment of an arbitrator;
- the tribunal had not been constituted in accordance with the parties’ agreement;
- the arbitral procedure had not complied with the parties’ agreement or Bulgarian arbitration law.
Court’s Conclusions
The VKS rejected all grounds. On the alleged invalidity of the arbitration agreement, it applied separability: even if the reinsurance contract itself were attacked as simulated or invalid, that did not automatically invalidate the arbitration clause. The question was whether the arbitration agreement itself was defective. The court held that Euroins’ asset-draining theory mainly attacked the merits of the reinsurance contract and the tribunal’s conclusions about that contract. Those issues could not be reheard through a set-aside application.
This argument also appeared to be, in substance, a public-policy argument. Euroins said the reinsurance contract was "simulated" and "designed to strip assets" before regulators involvement. But the VKS held that public policy was not available as an Article 47 set-aside ground in this proceeding, because the case was governed by the pre-2025 version of the Bulgarian Arbitration Act. The 2025 amendment restored public policy as a set-aside ground, but the VKS treated that amendment as inapplicable to this already pending set-aside case. The court therefore did not conduct a full public-policy review of whether the contract was an asset-draining scheme.
On arbitrator independence, the VKS held that the same challenge grounds had already been finally dealt with by Sofia City Court. The appellant failed to establish bias by relying on the arbitrators’ joint publications and academic work, because it did not show how those connections affected the outcome of the case or created dependence, personal interest, or financial interest.