Transparency of Regulatory System
Accounting, legal, and regulatory procedures are transparent and consistent with international norms.
Financial statements should be prepared in accordance with the Slovenian Accounting Standards, prepared by the Slovenian Institute of Auditors, in accordance with the International Financial Reporting Standards (IFRS), as adopted by the EU.
There are three levels of regulatory authority: supra-national (Slovenia is a member of the EU), national, and sub-national (municipalities have limited regulatory power over local affairs, regulations have to comply with state regulation). Laws can be proposed by the government, member(s) of the parliament, or by at least five thousand voters.
Slovenia adopted a comprehensive regulatory policy in 2013, focusing on measures aimed at raising the quality of the regulatory environment, in order to improve the business environment and increase competitiveness.
Slovenia’s Ministry of Public Administration is bound to include public stakeholder engagement in decision-making processes by several legal and policy documents. Public authorities must endeavor to inform the public about their work to the greatest extent possible and enable stakeholder engagement.
The proposer of a regulation invites experts and the general public to participate in drawing up a regulation by publishing a general invitation, together with a draft regulation, on its website. The experts and general public must respond by the deadline, ranging from 30 to 60 days from the day of its publication. In addition to the relevant ministry, the proposals are also published on the website of the government and on the eDemocracy portal of the Ministry of Public Administration.
Through the eDemocracy web portal, citizens can actively cooperate in the decision-making process by expressing opinions and sending proposals and comments on regulation drafts. Proposals and opinions of expert circles and the general public are examined and, where possible, taken into consideration. If such opinions and proposals are not taken into consideration, the proposer has to inform stakeholders in writing and explain the reasons.
The public, however, is not invited to participate in cases where the nature of the issue precludes such consideration, such as in emergency situations and in the following areas: matters relating to the national budget, the annual financial statement, the rules of procedure of the Government, an ordinance, a resolution, development and planning documents, development policies, a declaration, acts ratifying international treaties, and an official decision.
A regulatory impact assessment (RIA) is obligatory for all primary legislation; however, the quality varies (analysis is often only qualitative or incomplete) as there is no external body to carry out quality control.
The General Secretariat of the Republic of Slovenia is responsible for administrative oversight in order to ensure the government follows administrative procedures. In Slovenia, there are no informal regulatory processes managed by non-governmental organizations or private sector associations.
In Slovenia, the executive branch initiates approximately 92 percent of primary laws. After the adoption of new legislation, the text is published in the Official Gazette of the Republic of Slovenia and online at https://www.uradni-list.si/glasilo-uradni-list-rs . A more in-depth ex post facto review of regulations is still lacking.
Slovenia adopted the Standard Cost Model to measure the administrative burden on businesses imposed by its regulations, which has led to a significant reduction of the burden on businesses. Slovenia’s system of one-stop shops (the so-called “VEM points”) for business received the UN Public Service Award. Introduction of e-government has simplified administrative procedures.
International Regulatory Considerations
Slovenia has been a signatory of the WTO since its inception and to date there have been no cases of WTO rules violations. Legally, all investors, domestic and foreign, are treated equally. The government does not impose performance requirements or any condition for establishing, maintaining, or expanding an investment. As a member country of the WTO, Slovenia is required under the Agreement on Technical Barriers to Trade (TBT Agreement) to report to the WTO all proposed technical regulations that could affect trade with other member countries.
Slovenia is a member of the EU. Two principles rule the relationship between the Slovenian and EU regulatory systems: the supremacy of EU laws and the principle of direct effect. EU laws in areas under EU responsibility override any conflicting laws of the member state. Direct effect enables people to use EU laws in national courts against the government or private parties.
Legal System and Judicial Independence
Slovenia has a well-developed, independent legal system. The structure is based on a five-tier (district, regional, appeals, supreme, and administrative) court system. These courts deal with a wide array of legal cases including criminal, probate, domestic relations, land disputes, contracts, and other business-related issues. A separate social and labor court system, comprised of regional, appeals, and supreme courts, deals strictly with labor disputes, pensions, and other social welfare claims. As with most other European countries, Slovenia has a Constitutional Court, which hears complaints alleging violations of human rights and personal freedoms. The court also issues opinions on the constitutionality of international agreements and state statutes, and deals with other high profile political issues. In 1997 Slovenia’s Parliament established an administrative court to handle disputes among local authorities, between state and local authorities, and between local authorities and executors of public authority.
In 1999, the Parliament passed a law on legal proceedings to speed up court administrative processes. The law stipulates a stricter and more efficient procedure for serving court documents and providing evidence. In commercial cases, defendants are required to file their defense within 15 days of receiving a notice of a claim. As a result, the efficiency of Slovenian courts has increased, reducing case backlogs. However, as of September 2016, there were still 100,760 open cases.
Laws and Regulations on Foreign Direct Investment
Slovenia’s Promotion of Foreign Direct Investment and Internationalization of Enterprises Act covers the main goals and measures for promotion of FDI. Measures for promotion of FDI include free of charge consultation services for foreign investors, promotion of Slovenia as an investment destination, improvement of Slovenia’s competitiveness, and financial incentives. The Invest Slovenia website serves as a resource for investors to obtain relevant information.
Competition and Anti-Trust Laws
Slovenia’s Competition Protection Agency (CPA) supervises the application of the Restriction of Competition Act and monitors and analyzes market dynamics, assessing alleged restrictive agreements and abuses of a dominant or monopoly position.
In Slovenia, highly concentrated market structures are not illegal; however, the abuse of market power is forbidden. The Protection of Competition Act prohibits activities that restrict competition in the market, conflict with good business practices relating to market access, or involve prohibited speculation. The law is applicable to corporate bodies and natural persons engaged in economic activities regardless of their legal form, organization, or ownership. The law also applies to the actions of public companies. The law complies with EU legislation.
The law prohibits restriction of competition through cartel agreements, unfair competition (i.e., false advertising, promises/gifts in exchange for business, trade secrets, etc.), illicit speculation during times of irregular market situations, and dumping and subsidized imports. However, the government may prescribe market restrictions in the following instances: in cases of natural disasters, epidemics, or in a state of emergency; in cases of appreciable market disturbances due to the shortage of goods; or when necessary to satisfy product requirements, raw materials, and semi-finished goods of special or strategic importance to the defense of the nation.
The CPA is responsible for ensuring fair competition in the marketplace. The CPA can initiate or conduct investigations at the request of private companies. The CPA can also issue a decree against any company found to be violating the Law on the Protection of Competition, although the power to levy fines rests solely in the hands of the courts. Any party trading in goods or services in the marketplace may initiate legal proceedings in cases of unfair competition. Injured parties are entitled to compensation and cessation of non-competitive activities.
The designated court may issue a penalty of EUR 125,000 (USD 132,909) to EUR 1,000,000 (USD 1,063,292) against companies found to have engaged in cartel agreements, abused a dominant market position, committed an act of unfair competition, or engaged in illicit speculation. The managers and directors of the sanctioned company may be liable for a minimum fine of EUR 4,000 (USD 4,251). Self-employed persons found to have committed any legally prohibited actions are liable to pay a fine of no less than EUR 40,000 (USD 42,508). There are also fines for noncompliance with the CPA in the range of EUR 2,000 to EUR 4,000 (USD 2,125 to USD 4,250) for every week that requested documentation is not submitted. The same range of fines also applies in the event the sanctioned entity does not comply.
Expropriation and Compensation
According to Article 69 of Slovenia’s Constitution, the right to possess real property can be taken away or limited by the government for public purpose in exchange for compensation in kind or financial compensation under conditions determined by law on the basis of public interest.
The current government is not involved in any expropriation-related investment disputes. National law gives adequate protection to all investments. However, there is an ongoing dispute over private property expropriated by the Socialist Yugoslav government for state purposes. After the fall of Yugoslavia, the 1991 Denationalization Act established a basis for the process of denationalization of these properties, returning them to the rightful owners or to their heirs, or paying some sort of compensation if it was not possible to return the property “in nature.”
Some of those rightful owners and heirs are now U.S. citizens. Since the 1993 deadline for filing a claim, roughly 99.6 percent of all cases have been resolved. The percentage of resolved claims involving American owners is lower (approx. 88 percent). Cases regarding expropriation of property belonging to U.S. citizens take longer for several reasons, most of which are tied to the fact that the claimants usually do not live in Slovenia. First, the Ministry of Justice must determine the nationality of the former owner at the time of property seizure – a simple question for Slovenians who never acquired another citizenship that becomes more complicated in cases involving naturalized American citizens. Second, many nonresident claimants fail to engage local attorneys, or only did so at the start of the process and have since let those retainers lapse. Third, communication and postal delays mean nonresident claimants take longer to respond to paperwork and other needs relating to their cases. In addition, there are concerns that some claims involve property currently controlled or owned by prominent members of Slovenian society, thereby creating an additional and often unseen obstacle to restitution.
Slovenia is a contracting state to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID) and a signatory to the New York Convention on Recognition of Foreign Arbitral Awards, meaning local courts must enforce international arbitration awards that meet certain criteria.
Slovenia is a signatory to the 1961 European Convention on International Commercial Arbitration. The Slovenian Arbitration Act is modeled after the UNCITRAL model law.
There have been no major investment disputes in Slovenia over the past five years. Authorities handle investment disputes in the same manner as all other business disputes.
International Commercial Arbitration and Foreign Courts
The regional court specializing in economic issues has jurisdiction over business disputes. However, parties may agree in writing to settle disputes in another court or jurisdiction. Parties can also agree to court-annexed mediation. Local courts recognize and enforce foreign arbitral awards and judgements of foreign courts.
Parties may also exclude the court as the adjudicator of a dispute if they agree in writing to arbitration, whether ad hoc or institutional. In the former case, the applicable procedure and law must be determined. In the case of institutional arbitration, the law requires a clear definition of the type of arbitration that is to be implemented.
The Ljubljana Arbitration Center within the Chamber of Commerce is an independent institution that solves domestic and international disputes arising out of business transactions among companies. Arbitration rulings are final, and decisions are binding.
Competition is lively in Slovenia, and bankruptcies are an established and reliable means of working out firms’ financial difficulties. By law, there are three procedural methods for dealing with bankrupt debtors. The first procedure, compulsory settlement, allows the insolvent debtor to submit a plan for financial reorganization to the court. Creditors whose claims represent more than 60 percent of the total cast a vote on the proposed compulsory settlement plan. If the settlement is accepted, the debtor is not obligated to pay the creditor an amount that exceeds the payment set forth in the confirmed settlement. The procedure calls for new repayment terms to creditors, extended in accordance with the conditions of forced settlement. Confirmed compulsory settlement affects creditors who have voted against compulsory settlement and creditors who have not reported their claims in the settlement procedure.
The creditor or debtor may also initiate bankruptcy procedures. The court names a bankruptcy administrator who sells the debtor’s property according to the bankruptcy senate, the president’s instructions, and court-sponsored supervision. As a rule, the debtor’s property is sold at public auction. Otherwise, the creditors’ committee may prescribe a different mode of sale such as collecting offers or placing conditions for potential buyers. The legal effect of the completed bankruptcy is the termination of the debtor’s legal status to conduct business, and funds from the sale of assets are distributed to creditors according to their share of total debt.
The third method, bankruptcy as a forced liquidation, is distinguished from voluntary liquidation (without court intervention) as set forth in the Law on Commercial Companies. Forced liquidation is imposed on a debtor for whom the law determines the liquidation procedure and the legal conditions for ending its existence as a business entity. This would occur, for example, in cases where the management has not operated for more than twelve months, if the court finds the registration void, or by court order.
In 2013, the Parliament adopted an amendment to the Financial Operations, Insolvency Procedures, and Compulsory Dissolution Act, with a view to simplify and speed up the bankruptcy procedures and deleveraging of companies. For example, Parliament established new criteria for declaring companies insolvent in cases when their bank accounts were continuously blocked for 60 out of the past 90 days.