Category: Slovakia

Parliamentary problems, governmental grievances, and ebbing economic sectors – aside from the consequences of the current state of global affairs – have been the talk of the town in Slovakia, according to AKMCL Partner Martin Jurecko.

“When we speak to clients, we see some nervousness – the war has brought in a lot of uncertainties,” Jurecko begins. “In general, the market is fairly busy and transactions are happening, with perhaps a slightly higher than average rate of litigations taking place,” he continues, citing “usual business reasons” as the cause of the uptick in disputes. “People are becoming a bit nervous about their investments, which is normal when you consider everything that has taken place in recent times!”

However, there are issues that stall matters as well. “The government has made attempts to help out those industry sectors that were affected the most with subsidies, mainly seeking to help out with the prices of gas, electricity, and energy overall,” Jurecko explains. These efforts have reached a grinding halt, however, on account of “a true blunder. The parliament has been out of session for a few weeks due to a technical error – apparently, an MP has mistakenly unplugged, and then plugged back in, a computer in the parliament which led to a system reset that erased a good portion of all the parliamentary work of late,” Jurecko shares. “What was initially thought to have been a cyber-attack was, really, just an incredibly silly mishap.”

Still, all blunders aside, the Slovakian government has been active recently. “The government has been attempting to put certain EU fund resources to good use and to mitigate some of the COVID-19 pandemic fallout,” he says. Furthermore, a new “system of courts has been created and was set to take effect as of January 1, 2023, but problems occurred – the party that made this proposal has since left the government, leaving in control a party that was previously a minority,” Jurecko explains. “Similarly, the budget – which was presented recently – is also being criticized as not being effective enough in tackling all of the problems. Economic experts are pointing to there not being any spending limits and no cuts made, which means that there might be some loss of funds down the road,” he reports. 

Reporting on the overall status of the Slovak economy, Jurecko states that there has been some turmoil as of late. “Real estate – which was booming in the first half of the year – has been heavily affected by the rising interest rates. Entire sectors are not performing as well as they were, including logistics, shopping malls, office construction, and residential,” he reports. Also, the construction industry seems to be struggling, with “some SME businesses potentially having problems,” he says.

Finally, Jurecko shares that “there has been a wave of eCommerce businesses filing for bankruptcy or restructuring (Dedoles). What was quite profitable during the onslaught of the pandemic has since lost its business allure, and adjusting to the current state of affairs has not been easy for some.” In conclusion, however, Jurecko remains an optimist, saying that he hopes “the overall tensions should decrease soon,” which could “have a positive impact on all aspects of business and life.”

On 4 October 2022, the Slovak parliament adopted an amendment to the Labour Code (the “Amendment“) that enters into effect on 1 November 2022. The aim of the Amendment is mainly to implement two EU directives (No. 2019/1152 on transparent and predictable working conditions in the EU and No. 2019/1158 on work-life balance for parents and carers) and to respond to certain requirements resulting from application practice. In this article, we present an overview of the most important changes.

1. Content of employment contracts

Essential elements of an employment contract

The essential elements of an employment contract have not changed, but the definition of the place of work has been clarified. The contract must contain either (i) the place of work (i.e., municipality, part of a municipality or another place designated by the parties), (ii) the places of work (if there are multiple), or (iii) a provision that the place of work is determined by the employee.

Extended information duty

It is possible to agree on other various conditions in the employment contract, if the employer and the employee wish so. However, compared to the previous legislation, the Amendment defines a wider range of working conditions that must be demonstrably notified to the employee, if these are not part of the employment contract:

(i) the method for determining the place of work or the main place of work (if there are multiple places of work agreed in the employment contract);

(ii) the weekly work schedule, the method and rules for organising the work schedule, the scope of providing a break at work and its duration, the continuous daily and weekly rest times, and the rules for overtime work, including the wage surcharge for overtime;

(iii) the duration of annual leave or the method for its determination;

(iv) the payment of wages and its payment date;

(v) the rules on the termination of employment, the length of the notice period or method for its determination (if it is unknown at the time of providing this information), the deadline for claiming the invalidity of employment termination; and

(vi) the right to receive training (if provided by the employer) and its scope.

Where it is possible, reference to the relevant provisions of the law or collective agreement (in such case also its description and parties) is sufficient.

The employer must inform employees hired prior to 1 November 2022 within one month from receiving a request for such information by an employee. Therefore, employers do not need to rush and proactively prepare information packages for their existing employees.

With regards to employees hired after 1 November 2022, the employer will have to notify them within:

(a) seven days from the establishing of employment about the conditions listed in points (i), (ii) and (iv) above; and

(b) four weeks from the establishing of employment about the other listed conditions.

The information duty must be fulfilled with a written notice delivered to the employees. The notice may now be provided also in electronic form if (i) the employees have access to the information in electronic form, (ii) they can save and print it, and (iii) the employer archives proof of delivery or sending thereof.

If the notified conditions change, the employee must be provided with an updated written notice no later than on the effective day of the change.

If the work is to be performed abroad or the employee is to be posted within the EU, a specific information duty also applies (it relates to the working conditions applicable in the respective country). This obligation must be fulfilled before the work abroad starts.

2. Duration of employment

• Interpretation of the term “duration of employment” has been added by the Amendment. The duration of previous employment continuously followed by employment with the same employer will be included in the total duration of employment with the same employer.
• The Amendment adjusts the duration of the probationary period in cases of fixed-term employment, where it should be proportionate to the expected employment term. The probationary period may not be agreed for a period longer than half of the agreed employment term (e.g., for employment with a term of four months, the probationary period may not be longer than two months).
• The Amendment introduced a new obligation for employers: to respond in writing to an employee’s request to change their employment from fixed-term to indefinite-term, or from shorter working time to regular weekly working time. The employer must respond within one month from receiving the employee’s request. For an employer with more than 50 employees, the deadline is three months. This does not mean that the employer must answer positively, but the employee´s request must be properly considered. Employees can submit such a request if their employment lasts for more than six months, they are not in a probationary period, and have not submitted such a request within the last 12 months.

3. Protection of employees

• Under the Amendment, the burden of proof in some cases of invalid employment termination has been transferred to the employer. If the employee believes that the termination of their employment occurred because the employee exercised their rights and interests protected by law, the employer will have to clearly demonstrate that the termination occurred for other reasons. However, the manner in which employees will be required to support their assumption that their employment was unlawfully terminated is currently unclear.
• The Amendment adds a provision regarding parallel employment, based on which employers cannot prohibit their employees from working for another employer if this happens outside of the working time schedule, and employees cannot be disadvantaged in any way by the employer in this regard. Nevertheless, restriction of competitive activity applies to employees as before.
• The Amendment also clarifies the controversial issue related to the death of an employee before expiration of the notice period or the agreed date and their right to severance pay. For these purposes, the day of employee’s death is considered as the employment termination date.

4. Delivery of documents

In response to the current absence of regulation concerning the delivery of written labour-related documents (e.g., when employment relationship is terminated) by postal services, a minimum collection period of 10 days at the post office has been implemented.

5. Meal deductions

The employer can now make deductions from an employee’s wage for advance payments for meal allowances without a specific agreement on wage deductions (i.e., directly by virtue of law).

6. Paternity leave

• The Amendment introduces the so-called paternity leave in relation to the care of a new-born child, which conceptually replaces the previously existing male parental leave. Paternity leave is granted to a father for 28 weeks from the day of childbirth. In specific cases, the length of paternity leave is extended to 31 weeks (for single men) or 37 weeks (for men caring for two or more children born at once).
• During the paternity leave the father is entitled to paternity pay, which is paid by the Social Security Agency. Fathers can take two weeks of their paternity leave entitlement within the period of first six weeks after the childbirth and receive paternity pay simultaneously with the child’s mother (who at the same time receives maternity leave for the same child).
• Fathers in connection with paternity will enjoy the same protection as mothers in connection with maternity (e.g., before termination of employment, when returning to work from paternity leave, when adjusting working conditions, etc.).

7. Trade unions

• The Amendment introduces new trade union rights. The first is the right to contact employees in an appropriate manner (agreed with the employer) for the purposes of offering a union membership to them. In the absence of an agreement, the employer must provide employees with written information about the trade union (i.e., basic data such as name, headquarters and website, telephone number, etc.) within seven days:

(i) from the day of receiving the request from the trade union (if it does not concern a change of data, which may be requested only once a year);

(ii) from the day when the trade union started operation at the employer; or

(iii) from the day of commencement of employment, if the trade union already operates at the employer.

• The second is the right to inform employees about trade union activities in an appropriate way (agreed with the employer). In the absence of an agreement, the employer must allow the trade union to publish information in a place accessible to employees.
• If there is a dispute over the presence of the trade union at the employer, the Amendment introduces a new mechanism for the repayment of the arbitrator’s remuneration. The new mechanism obliges the party that started the dispute to pay the remuneration. If the arbitrator rules that the employees are not members of the given trade union, the party that started the dispute has the right to be refunded by the trade union.

8. Agreements on work performed outside the employment relationship

• The extended information duty (point 1 above) also applies to agreements on work performed outside the employment relationship, if the average weekly working time exceeds three hours in a period of four consecutive weeks.
• The Amendment also introduces new rules on the minimum predictability of work, according to which the employer may not require the employee to work outside the announced schedule (which must be notified to the employee no less than 24 hours before the start of work), and the employee does not have to work outside such a schedule. If the employer cancels the performance of work sooner than 24 hours before the start of work, it must provide the employee with compensation in the amount of at least 30% of the compensation the employee would have earned for the given day.

By Adam Hodon, Partner, and Matus Kocisek, Junior Associate, Kinstellar

Former Aldertree Legal Partners Zoran Draskovic and Peter Hodal have joined Hillbridges as Partners together with their team.

Draskovic and Hodal had previously worked at White & Case – which announced it was leaving the Slovakian market on March 31, 2022 – with the firm’s Bratislava team set to continue as Aldertree Legal (as reported by CEE Legal Matters on March 8, 2022).

Specializing in M&A, energy, infrastructure, and real estate, Draskovic was a Partner with Aldertree Legal from April to November, in 2022, and previously spent over 13 years with White & Case, first as an associate between 2009 and 2018 and, later, as a Partner from 2018 to 2022. Before that, he was a Junior Associate with Kinstellar in 2008, and, earlier still, he worked at Linklaters as a Student Associate from 2004 to 2006, and as a Junior Associate from 2006 to 2008.

Hodal specializes in litigation and public procurement. He was a Partner with Aldertree Legal from April to November 2022. Before the switch, he spent over 14 years with the White & Case team, as an Associate from 2008 to 2019, and later as a Counsel from 2019 to 2022.

The two are followed by Managing Associates Barbora Malik and Lukas Kralovic and Associate Alex Medek.

“We are excited to further consolidate Hillbridges’ market-leading position by hiring a superb team of lawyers with an impressive track record and market recognition,” the firm announced. “By combining the experience of the two teams with all partners originating from Linklaters or White & Case, we are creating not only a very attractive proposition for clients but a strong team that shares common culture and values.”

“We are very pleased to be joining Hillbridges and look forward to contributing together with our team to further growth and development of the firm,” Draskovic commented.

“I personally look forward to new challenges and have full confidence that together we offer comprehensive transactional experience and unique expertise on the market,” Hodal added.

Kinstellar has advised a syndicate of banks led by VUB Banka on their EUR 100 million loan facility for refinancing and investment in Bratislava’s Bory Mall. Skubla & Partneri advised Penta Real Estate on receiving the loan.

According to Kinstellar, the banking syndicate included Slovenska Sporitelna, CSOB, and Hypo-Bank Burgenland.

The Bory Mall is a shopping and entertainment center in Bratislava, with a total area of 54,000 square meters. The mall opened in 2014 and is being expanded and further developed by Penta Real Estate.

“Successful refinancing is a reflection of the excellent economic condition of our company as well as a result of the fundamental growth potential of the Bory Mall shopping center and the entire Bory zone,” Penta Real Estate Slovakia Executive Director Juraj Nevolnik commented. “The preplanned expansion and further development of the shopping and entertainment center will be made possible also thanks to this financial operation. I am therefore very happy that the banks share our belief in the project and its future development. Since its opening in 2014, the number of Bory Mall visitors has been growing steadily and it has become the first choice for visitors from western Bratislava and the surrounding area.”

The Kinstellar team was led by Counsel Tomas Melisek and included Managing Associate Dominika Bajzathova, Senior Associate Dasa Labasova, and Junior Associate Michaela Strakova.

Editor’s Note: After this article was published, Skubla & Partneri announced that its team working on the deal was led by Partner Marian Sulik.

Kinstellar has advised Powerful Medical on its EUR 6.2 million seed funding round from investors including Arieli Capital, Venture To Future Fund, CB ESPRI Impact One, BPD partners, and several angel investors. Wise3 advised CB ESPRI Impact One.

Powerful Medical is a Slovak artificial intelligence and machine-learning med-tech company. According to Kinstellar, “Powerful Medical has developed a software medical device that automates ECG analysis using artificial intelligence and machine-learning modules, which enables timely and cost-effective arterial fibrillation diagnosis and enhanced quality of treatment.”

Kinstellar’s team included Senior Associate Lukas Mrazik and Junior Associate Michaela Strakova.

Wise3’s team was led by Partner Branislav Brocko.

Dentons has successfully represented Mariano Ruiz and his husband Jakub Sanko, on a pro bono basis, before the Regional Court in Zilina in residential proceedings.

According to Dentons, on Monday, October 31, 2022, the Regional Court in Zilina ruled in favor of Ruiz and Sanko in their “struggle to obtain permanent residence in Slovakia so that they can live together as a family. The Regional Court in Zilina, as the court of the first instance, confirmed that the rejection of the application for permanent residence on the basis of family grounds was unjustified discrimination based on sexual orientation and violated the right to respect for private and family life and freedom of residence.”

According to the firm, “the case was remanded back to the immigration authorities for re-examination, in which they will be bound to take into account the court ruling based on the 2006 ECHR case Tadeucci and McCall vs Italy. Once this judgment becomes final and non-appealable, it will form an important precedent for other couples in similar situations and may serve as a basis for acknowledgment of further rights that LGBT+ citizens are currently being denied.”

Dentons’ team included Slovakia Managing Partner Peter Kubina and Associates Sona Kurillova and Nina Drgalova.

Majernik & Mihalikova, working with BVK Partners, has advised KME on the financing of its acquisition of Aurubis’ flat-rolled products business. Linklaters and Kinstellar reportedly advised the lenders.

KME is a copper and copper alloy products manufacturer. The company has plants in Germany, France, Italy, China, and the US.

Aurubis is a Hamburg-headquartered multimetal supplier. The company processes metal concentrates, scrap metals, organic and inorganic metal-bearing recycling materials, and industrial residues into metals.

Dentons has advised a club of banks led by Tatra Banka and including UniCredit Bank Czech Republic and Slovakia, Slovenska Sporitelna, and Ceskoslovenska Obchodni Banka on a EUR 160 million ESG-linked syndicated loan to MH Teplarensky Holding. BBH reportedly advised the borrower.

According to Dentons, “the loan represents the first ESG-linked syndicated financing of a state-owned company on the Slovak market” and “will replace and significantly optimize the existing financings of MH Teplarensky Holding, which was created by a merger of six state heating companies in Bratislava, Trnava, Zvolen, Martin, Zilina, and Kosice in May 2022. At the same time, it will contribute to the transformation of state heating plants towards more ecological production.”

Dentons’ team included Partner Patricia Gossanyiova, Counsel Petra Strbova, and Associate David Stanek.

In April 2022 deputies of the Slovak parliament, approved two long-awaited laws: Act No 200/2022 on zoning (‘the Zoning Act’); and Act No 201/2022 on construction (‘the Construction Act’). These two laws are about to replace the 1976 Building Act. Although they do not take effect until 1 April 2024, they bring such fundamental changes that need to be considered right away, in particular by the developers and real estate investment funds. The most significant of these changes are summarised below.

Transfer of competences:

One of the main changes is the transfer of competences in the zoning and construction process from the municipalities to the state. This change brings along the establishment of a new central body of the state administration: Úrad pre územné plánovanie a výstavbu Slovenskej republiky (the Zoning and Construction Office of the Slovak Republic, hereinafter referred to as the ‘Zoning and Construction Office’). The powers of the current building authorities (municipalities) will therefore be transferred to the regional offices of the newly established Zoning and Construction Office (the “respective “Building Office”).

Digitalisation:

The new legislation is intended to establish the digitalisation of zoning and construction process through a single zoning and construction information system called Urbion. Urbion will be accessible to all persons involved in zoning and construction procees. All proceedings under the Construction Act will be conducted electronically in Urbion. Builders will be able to go through the entire permit process digitally via their mobile device or computer.

Another benefit that is to be introduced is so-called Once-Only Principle, which means that if the state has already acquired some information, that individual will not be required to resubmit this information.

The Zoning Act:

Zoning plans

The role of the newly established Zoning and Construction Office in the zoning area will be to procure a Zoning Development Strategy of Slovakia and to act as the coordinator of uniform zoning procedure and processes by issuing methodological guidelines.

The aim of the legislation is to unify zoning methodologies and principles and to establish a uniform structure of zoning plans for the whole territory of Slovakia. The new law also responds to practical problems. The concept of current zoning documentation, where every minor modification requires complex procedure isabout to change. .

The law also introduces a new type of zoning documentation: micro-region zoning plans. These will be adopted at the self-governing region level and will take into account the particular needs of specific regions in Slovakia. The explanatory memorandum mentions, by way of example, the territories of the High Tatras and Žitný ostrov (‘Rye Island’). For major urban conglomerations, Bratislava and Košice, there will be a special regime in the form of a metropolitan zoning plan with a specific methodology.

The Construction Act:

Simplification of the building permit process:

The new legislation is intended to significantly speed up the whole process for granting building permits, which at present lasts for up to 300 days on average. The building permit process is expected to be simplified and accelerated by implementing Urbion and by increasing the importance of architects who will be able to apply for a building permit on the builder’s behalf and arrange the entire procedural aspect of the issuance of the building permit.

The current multi-stage building proceedings will be abolished when the zoning and building permits, and possibly also the environmental impact assessment proceedings, are to be replaced by a single proceeding and subsequent decision: the building plan decision. The building plan decision will allow the builder to start the construction process immediately. Hence, there will no longer be two-stage administrative proceedings for the assessment of building plans (i.e. zoning proceedings and building permit), which in many cases resulted in the duplicity of statements from the authorities and the parties to the proceedings.

Unauthorised buildings:

Unauthorised buildings are to be penalised far more strictly under the new legislation. Builders of unauthorised buildings will no longer be able to apply for an additional building permit. If a building is found to be unauthorised, the competent state authority will order its removal. If the owner or operator of the building does not remove it within the time limit set by the competent state authority, that authority will itself enforce the decision. If construction work is found to be unauthorised, the competent state authority will, in addition to imposing a fine, order the owner of the technical infrastructure to disconnect the structure from the water and electricity supplies. The enforcement of the competent state authority’s order will be carried out on the basis of a contract with the respective Building Office by an entity authorised to perform construction work. The costs of removing the structure and removing the building waste will be borne by the respective Building Office, which will then recover these costs from the owner of the removed structure.

In addition, sanctions for breaches of construction legislation have been expanded and increased, and state supervisory powers in the area of construction have been strengthened. Another new element is the possibility of a building’s forfeiture to the state. In the case of a breach of the Construction Act, it will be possible to sanction not only the builder or contractor, but also persons authorised to supervise construction or construction managers.

These rules, however, apply only to future unauthorised buildings, i.e. constructions carried out after the effective date of the Construction Act.

The problem of existing unauthorised buildings will be solved by a specific process – a review of whether the unauthorised building is fit for operation. During the process, the builder will have the opportunity to prove, that if the existing unauthorised building is not contrary to the public interest or private interests (if it is not built on a third party’s land) and meets other conditions specified by law, it may be authorised additionally.

By Lucia Kolenicova, Associate, PONTES 

Political upheaval has been shaking Slovakia, halting legislative efforts and endangering the country’s readiness to face the energy and other crises, according to Havel & Partners Partner Stepan Starha. 

“The political crisis in Slovakia fraughts everything,” Starha begins. This September, one of the coalition parties that formed the government quit, resulting in “the remaining three parties in power losing their parliamentary majority and halting all legislative efforts. It is not yet clear if the government will be able to hold out for the remainder of its term, until 2024, or if we’re going to go for extraordinary elections.” 

Focusing on the legislative agenda, now halted, Starha reports a few items in the pipeline. “Even though legislative activity is endangered, there are still hopes that some of the proposed legislative updates might still occur – starting with amendments to the commercial code,” he says. “The government wanted to make it easier for LLCs to incorporate, and envisaged a fully digital process which would lower legal costs for entrepreneurs and introduce a smoother experience – however, instead of the beginning of 2023, we now don’t know if and when this will be effective,” Starha explains. Additionally, he reports that the “implementation of the whistleblowing directive has been halted too, with the proposal being stuck.”

Regardless, Starha reports some legislative updates did pass this year before the political crisis escalated. “The real estate sector has seen three new important acts, starting with a new Construction Act and a new Spatial Planning Act.” According to Starha, these were “really important” because they sought to shorten the period of time required to obtain a building license. “Currently, this period is 300 days on average, meaning that any reductions would do wonders.” Additionally, Starha says that a new act on “state support for rental housing has passed, which will make the construction of rent-controlled apartments easier. Still, these acts are yet to enter into force in 2024 – if the extraordinary elections take place, and a different government is elected, we could still see delays and potentially even retractions,” Starha cautions.

Moreover, the crisis might also be shaking up the efforts of the government to combat corruption. “A number of former high-ranking police commissioners, a number of judges, and even the former general prosecutor are under investigation on corruption charges. Hopefully, these procedures won’t be affected in any way in the wake of the crisis,” Starha reports.

Still, even with all of this in mind, Starha reports that the legal market in Slovakia has been doing better. “Following a big slowdown in 2020 and 2021, 2022 finally brought an uptick in terms of M&A transactions at the beginning of the year. However, the war in the neighboring country brought uncertainty to the market once again,” he says.  

As examples of recent transactions, Starha points to the recent sale of a number of MOL petrol stations as part of a wider PKN Orlen – Lotos Group merger that took place in Poland, as well as the acquisition of the Blumental Offices. “Also, the government was able to introduce another car manufacturer to an already bustling car market – Volvo announced it will open a production plant near Kosice. On the one hand, this will lead to more jobs but, on the other hand, it will also increase an over-dependence of the economy on this specific industry,” Starha explains.

Finally, commenting on the upcoming winter in the face of a looming energy crisis in Europe, Starha reports that the Slovak “gas storages should be almost full, and there seems to be enough for the winter. However, the government has not yet (as of the penultimate week of September) introduced any price caps, though there are rumors of some being in the pipeline for households, small businesses, and public bodies,” he concludes.