Transparency of the Regulatory System
Slovakia still struggles with a lack of transparency in the regulatory processes in several industries. The business community has registered concerns that a number of regulatory bodies are not fully impartial and that their decisions can be unpredictable. A frequently changing and complex legislative environment is often cited as a business obstacle for both local and global companies, and the long-term predictability of regulations affecting the business and legal environment is uncertain.
The Legislative and Information Portal of the Ministry of Justice, Slov-Lex, is a publicly accessible centralized online portal for laws and regulations, including information about inter-agency and public review processes. Draft bills proposed by ministries through a standard legislative procedure are available for public comment through the portal; however, the public is often granted little time to comment on draft legislature, and there is no obligation to react to comments prior to final submission to the cabinet. Additionally, MPs or parliamentary groups can propose draft bills outside the standard participatory legislative procedure, which has no rules guaranteeing opportunities for public comment, thus rendering the legislative process less predictable and less transparent. Recent examples of MP proposals becoming laws without due stakeholder consultations include: an obligation for employers in companies with more than 49 employees to pay up to EUR 275 per year for holiday vouchers for domestic vacations, and a special levy on retail stores (2.5 percent of net turnover) selectively targeting large chains selling foodstuffs (which has been blocked by the European Commission since its introduction in January 2019). Parliament also passed a Constitutional law introducing a retirement age ceiling – the original law linked retirement age to life expectancy – of 64 years for men and around 62 years (with the exact age based on the number of children) for women. Businesses and economic think tanks have criticized these measures for hindering the predictability of legislative and regulatory frameworks.
The Economy Ministry’s Better Regulation Strategy – Regulatory Impact Assessment 2020 (RIA) aims to further improve the business environment, reduce bureaucratic burdens, and improve the quality of laws and regulations by providing a more transparent and open legislative process. Slight improvements have been noted by the Economy Ministry in terms of decreasing the volume of legislation with negative impacts on the business climate, but the goal is to expand interagency cooperation and coordination. One of the ways to improve the certainty of the legislative framework is the Prime Minister’s initiative for laws and regulations affecting the business climate to come into effect on the first day of either January or July of a given year.
Regulations are not reviewed on the basis of scientific data assessments. At their discretion, analytical institutes at some ministries (mostly under the value-for-money umbrella) produce data-driven assessments of state policies or big investment projects. However, projects for assessment are selected by the institutes or by the ministries and they are not publicly available for comment. Assessments are often published once completed.
The Commercial Code (98/1991 Coll.) and the Act on Protection of Economic Competition (136/2001 Coll.) govern competition policy in Slovakia. A 2018 amendment of the Commercial Code introduced stronger provisions to prevent speculative mergers. As an EU member state, Slovakia has transposed numerous pieces of relevant EU legislation. The Anti-Monopoly Office, a part of the EU’s European Competition Network (ECN), is an independent state administrative body responsible for ensuring competition, including in state aid.
The Office for Public Procurement supervises and administers public procurement. Public procurement legislation is frequently amended, and challenges remain to fair competition and eradicating corruption. The October 2018 amendment to the Act on Public Procurement (343/2015 Coll.) has significantly increased the threshold for low-value tenders, thus eliminating some previous obligations to procure through public competition (public procurement for below-limit contracts is governed by a different regime than the one applicable to above-limit contracts). The business community has expressed concerns that this measure could reduce transparency. On the other hand, under new leadership, the Public Procurement Office has made efforts to increase transparency in communication with stakeholders, as well as in its own supervisory activities. The European Commission noted some progress in modernizing, simplifying, and increasing efficiency in public procurement procedures in the 2019 Slovakia Country Report.
Slovakia’s fiscal transparency is generally good. Budget proposals, enacted budgets, and closing statements are substantially complete and publicly available. The Ministry of Finance publishes monthly reviews of budget execution, which provide a clear overview of public revenues and expenditures broken down by source and type. Public debt management information is an integral part of the Public Administration budget, including volume, total cost, debt service, structure, financing, forecast, risk assessments, etc. Annex 6 of the Public Administration budget is dedicated to describing the Debt Management Strategy.
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International Regulatory Considerations
Slovakia is an EU Member State, thus, EU legislation and standards fully apply in Slovakia. The national regulatory system is enforced in areas not governed by EU regulatory mechanisms. Slovakia is a WTO member, and the government notifies technical regulations to the WTO Committee on Technical Barriers to Trade. The Trade Facilitation Agreement (TFA) is an EU competence; the EU approved in 2015 a Protocol of Amendment to insert the WTO TFA into Annex 1A of the WTO Agreement.
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Legal System and Judicial Independence
Slovakia is a civil law country. The Slovak judicial system is comprised of the Constitutional Court and general courts, including the Specialized Criminal Court and the Supreme Court. General courts decide civil, commercial, and criminal matters, and review the legality of decisions by administrative bodies. The Specialized Criminal Court focuses on cases involving corruption, organized crime, serious crimes like premeditated murder, crimes committed by senior public officials, and crimes related to extremism, such as hate crimes. Enforcement actions are appealable, and are adjudicated in the national court system. The right to appeal against regulations is limited to some state institutions and selected public officials.
The Slovak Constitution and the European Convention of Human Rights guarantee property rights. Slovakia has a written Commercial Code including contract law in the civil and commercial sectors. The basic framework for investment protection and dispute resolution between Slovakia and the U.S. is outlined in the 1992 U.S.-Slovakia Bilateral Investment Treaty.
Court judgments by EU member states are recognized and enforced in compliance with existing EU Regulations. Third country judgments are governed by bilateral treaties or by the Act on International Private Law. Contracts are enforced through litigation or arbitration – a largely applied form of alternative dispute resolution.
Laws guarantee judicial independence, however, in practice, public perception of judicial independence is among the lowest in the EU. Some judicial nominations and personnel selections appear to be strongly influenced by political considerations. Despite recent improvements, the justice system remains relatively slow and inefficient, and judges remain divided on the need for reform. Some judges have been suspected of manipulating the case assignment system, and critics suggest verdicts lack predictability and are often poorly justified. As a result, investors generally prefer international arbitration to resolution in the national court system.
Laws and Regulations on Foreign Direct Investment
The Economy Ministry’s Slovak Investment and Trade Development Agency (SARIO) is a specialized government agency in charge of attracting foreign investments to Slovakia, and serves as a multifaceted resource for foreign investors. The Slovak Business Agency (SBA) runs a National Business Center (NBC) in Bratislava and several other cities; it provides a one-stop shop with information and services for starting and establishing businesses. Startups can use a simplified procedure to register their company in order to facilitate entry of potential investors. The Interior Ministry operates Client Centers around the country where many formal procedures for both natural persons (to distinguish from legal entities) and companies can be done under one roof.
The Act Against Bureaucracy, valid as of September 2018, aims to reduce the bureaucratic burden for companies and private individuals as a part of continuing e-Government efforts. The act is based on the “once is enough” philosophy, obliging state agencies to share information and use digital communication rather than requiring multiple filings of the same information with different government entities.
In February 2019, the government approved a third anti-bureaucracy package drafted by the Ministry of Economy. This resolution resulted from a stakeholder discussion and contained 36 concrete measures, including sector-specific, as well as generally applicable tools. These measures aim at further simplifying business registration, streamlining processes through e-Government, and improving the overall business climate.
Slovakia ranked 42nd out of 190 countries in the World Bank’s Doing Business 2019 ranking, and 41st out of 140 in the 2018 World Economic Forum’s Global Competitiveness Index.
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Competition and Anti-Trust Laws
The Anti-Monopoly Office of the Slovak Republic is an independent body charged with the protection of economic competition. The Office intervenes in cases of cartels, abuse of a dominant position, vertical agreements, and controls compliance of mergers with antitrust law. The key antitrust legislation regarding fair competition is the Competition Law (136/2001 Coll.).
Slovakia complies with EU competition policy.
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Expropriation and Compensation
The Slovak Constitution guarantees the right to property. There is an array of legal acts stipulating property rights. The right to the Act on Expropriation of Land and Buildings (282/2015 Coll.) mandates that expropriation must only occur to the extent necessary, be in the public interest, provide appropriate compensation, and shall only occur when the goal of expropriation cannot be achieved through agreement or other means.
In the past, significant expropriation efforts included the government’s plan – currently on hold – to revert to a single-payer healthcare system and to expropriate two private health insurance companies. Expropriation most often occurs in the construction of road or industrial infrastructure.
Dispute Settlement
ICSID Convention and New York Convention
Slovakia is a contracting state to the International Centre for Settling International Disputes (ICSID) and the World Bank’s Commercial Arbitration Tribunal (established under the 1966 Washington Convention). Slovakia is a member of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitrage Awards, which obligates Slovakia to accept binding international arbitration. The Finance Ministry leads on bilateral investment treaty matters, and manages and represents Slovakia in international arbitration. Investment contracts with foreign investors in Slovakia are covered by respective ministries depending on the sector, in most cases by the Ministry of Economy.
Investor-State Dispute Settlement
The basic framework for investment protection and dispute resolution between Slovakia and the United States is governed by the 1992 U.S. – Slovakia Bilateral Investment Treaty.
To date, nine known cases of international arbitration have concluded. There are currently two ongoing international arbitration cases.
The legal system generally enforces property and contractual rights, but decisions may take years, thus limiting the courts’ relevance in dispute resolution. According to the World Bank Doing Business 2019 report, Slovakia ranked 47th out of 190 countries in the “enforcing contracts” indicator, with a 775-day average for enforcing contracts (up from 538 days in 2016). The report notes that Slovakia made enforcing contracts easier by implementing electronic processing services. Slovak courts recognize and enforce foreign judgments, subject to the same delays. Although the commercial code generally appears to be applied consistently, the business community continues to cite a lack of legislation protecting creditor rights, corruption, political influence, lengthy procedures, and weak enforcement of court rulings as persisting problems. U.S. and other investors privately described instances of multi-million dollar losses that were settled out of court because of doubts about the court system’s ability to offer a credible legal remedy.
International Commercial Arbitration and Foreign Courts
There are two acts applicable to alternative dispute resolution in Slovakia – the Act on Mediation (420/2004 Coll.) and the Act on Arbitration (244/2002 Coll.). In addition, the Slovak Chamber of Commerce and Industry (SOPK) has a court of arbitration for alternative dispute resolution, and has a number of bilateral cooperation agreements with Chambers of Commerce or similar institutions abroad.
Local courts in Slovakia recognize and enforce foreign arbitral awards, subject to delays that limit the courts’ relevance in dispute resolution.
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Bankruptcy Regulations
The Law on Bankruptcy and Restructuring (377/2016 Coll.) governs bankruptcy issues. The law allows companies to undergo court-protected restructuring and both individuals and companies to discharge their debts through bankruptcy. The International Monetary Fund credited the Act for speeding up processing, strengthening creditor rights, reducing discretion by bankruptcy judges, and randomizing the allocation of cases to judges to reduce potential corruption. The Act contains provisions to prevent preferential treatment for creditors over company shareholders, measures limiting space for arbitrariness in bankruptcy administrators’ conduct, and stricter liability rules for those responsible for initiating bankruptcy proceedings, as well as new provisions on related parties valid as of January 2019. The Commercial Code also contains provisions on bankruptcy and restructuring, and its 2018 amendment introduced stronger provisions to prevent speculative mergers, including in cases of ongoing bankruptcy.
Slovakia ranked 42nd out of 190 in the World Bank’s Doing Business 2019 ranking of the ease of resolving insolvency, with an average of four years for resolving insolvency.
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