Z/C/H Legal has advised ZDR Investments on its acquisition from an undisclosed seller of a Tesco hypermarket and a logistics park in the Slovak cities of Presov and Senec, respectively.
The total value of the assets is reported to exceed EUR 20 million.
According to the firm, ZDR owns a total of 42 commercial real estate sites worth EUR 240 million and is currently focusing on expansion into Western Europe.
Z/C/H Legal announced it is not allowed to disclose the seller or its advisor.
Dentons has advised the shareholders of Slovak facility management company BK on the sale of their shares to Zapadoslovenska Energetika, Slovakia’s largest electricity distributor. Allen & Overy advised the buyer.
Financial details were not disclosed.
According to Dentons, “BK employs more than 150 employees and its annual turnover exceeds EUR 20 million. It provides comprehensive services in the field of building technology and facility management to major companies such as Slovak Telekom, UniCredit Bank, Slovnaft, CSOB, SLSP, Tesco, and Billa.”
Dentons’ team included Partner Juraj Gyarfas and Senior Associate Tatiana Jevcakova.
Allen & Overy’s team consisted of Counsel Tomas Bury, Associate Michaela Nemethova, and Junior Associate Darius Balasko.
Dentons has advised SPP – Distribucia, a.s. on its EUR 500 million Regulation S bond issuance due 2031 with 1% annual yield. Clifford Chance reportedly advised joint lead managers Commerzbank Aktiengesellschaft, Erste Group Bank AG, ING Bank N.V., and Societe Generale.
SPP – Distribucia is a Slovak distributor of natural gas. According to Dentons, SPP – Distribucia distributes approximately 98% of the total distributed volume of natural gas in the Slovak Republic to more than 1.5 million supply points.
The Dentons team in Prague was led by Partner Petr Zakoucky; in Bratislava by Counsel Patricia Gossanyiova with the support of Senior Associate Radoslav Palka; and in London by Partner Nick Hayday, who was assisted by Associate Niharika Khimji and trainee Ed Varney.
DLA Piper has successfully represented U.S. Steel Kosice before the Constitutional Court of Slovakia in a case regarding employment termination notice under the Slovak Commercial Code. The Constitutional Court reversed the earlier verdict delivered by the Supreme Court.
According to DLA Piper, “the Constitutional Court of the Slovak Republic . . . declared that the provision of Art. 134 of the Slovak Commercial Code . . . shall not apply to the decision on organizational changes and hence shall not have impact on the validity of the termination notice from the employment relationship.”
U.S. Steel Kosice, a subsidiary of the United States Steel Corporation, is a Slovakia-based steel producer with an annual raw steel production capacity of 4.5 million metric tons for the automotive, packaging, electrotechnical, consumer goods, and construction industries.
DLA Piper’s team in Slovakia consisted of Partner Michaela Stessl, Associate Andrej Liska, and Junior Associate Martina Gondova.
A new competition act will come into force in Slovakia on 1 June 2021, replacing the former competition act applicable since 2001. The completely new act was adopted because the Slovak competition authority wanted a fresh start for the Slovak competition legislation and not just adopt its 11 amendments due to the need to implement the ECN+ directive.
Although the new act does not revolutionise competition law in Slovakia, it still introduces a few interesting developments.
Definition of an undertaking
The former Slovak competition act defined an undertaking as a person with separate legal personality. This was followed by other provisions, according to which the party to the sanction proceedings was always the person that committed the unlawful conduct, which also incurred a fine calculated from its turnover.
However, this did not comply with EU case-law developments, which are based on a more economic approach to the term “undertaking”. Therefore, the new act defined an undertaking to also include a group of companies that can be treated as a single undertaking, while fines can be calculated based on the global turnover of the entire group. Members of the group on which a sanction will be imposed can be jointly and severally liable.
In addition, the new act introduces the concept of economic succession, under which the liability for infringement will pass to the economic successor that continues the economic activity of its predecessor (if the respective entity has ceased to legally or factually perform its economic activity).
Merger clearance thresholds
The new act introduces a major change in relation to joint ventures. Under the former act, joint ventures without any link to Slovakia (so-called extraterritorial joint ventures) could fall under merger control notification requirements in Slovakia also if only one of its parent companies had turnover in Slovakia. This requirement led to many merger control proceedings of concentrations without any real impact on the Slovak market (e.g. creation of a joint venture to be active only in Asia). This will now change and extraterritorial joint ventures will no longer be subject to the merger notification.
The notification thresholds and general procedure of merger clearance proceedings have not been changed substantially. However, the original wording of the new competition act contained a proposal to introduce a new de facto alternative threshold (a transaction where the domestic turnover of the two parties is at least EUR 4m and the horizontally or vertically overlapping market share of at least 40 % was supposed to be subject to a specific screening mechanism), but this proposal was dropped during the legislative process.
New powers for the competition authority
Under the new act, the Slovak Antimonopoly Office (Protimonopolný úrad Slovenskej republiky) will have new powers that are partially based on the ECN+ directive. These powers include:
the possibility to adopt interim measures, especially if there is a reasonable presumption that there has been a cartel or an abuse of dominant position and that there is a risk of serious or irreparable distortion of competition; and
special remedies (either structural or behavioural, and even for an indefinite period) in case of cartels or an abuse of dominant position.
The new act also clarifies the position of the authority and its representatives, its internal governance as well as the selection process.
Procedural changes
The new competition act will also introduce various procedural changes, which should provide clearer rules for proceedings. These changes include calculation of the period for Phase II merger proceedings or rules applicable in specific situations (such as the current COVID-19 pandemic).
However, the new competition act also provides for procedural changes which all undertakings active in Slovakia should bear in mind. For instance, the authority can impose a fine of up to 10 % of the undertaking’s worldwide turnover for every breach of competition rules, which can lead to cumulative fines for several infringements. Another important change is that the limitation period for the imposition of sanctions will be extended from the current eight years to 10 years counting from the end of the infringement.
An interesting procedural novelty will also be introduced to merger control proceedings. The notifying party will be obliged to inform the authority without delay of changes to the facts provided in the notification of the concentration and of any material facts that arise during the proceedings relating to the notification. Until such a change is duly notified, the deadline for the authority to adopt the decision will automatically stop running without need for a specific decision on this.
Outlook
Slovakia’s new competition act indeed introduces various practical changes to competition law and its enforcement. It remains to be seen how the Antimonopoly Office will apply the new measures in practice and whether the enforcement of competition law will change.
By Michal Lucivjansky, Counsel, Schoenherr
The Bratislava office of Dentons has advised a syndicate of Tatra, Slovenska Sporitena, and UniCredit Bank Czech Republic and Slovakia on a EUR 116 million loan to Eurovea 2, s.r.o.
According to Dentons, the loan will be used to construct the extension of the Eurovea shopping center and the Pribinova X office building in Bratislava. According to the firm, developer JTRE began construction on the extension in December 2019, with phased completion expected in 2022 and 2023.
The Dentons team included Partner Stanislava Valientova, Managing Counsel Jozef Buday, and Associates Richard Marcincin and Peter Panek. The firm did not reply to an inquiry about the deal.
As of January 1, 2022, a deposit system for disposable beverage packaging will be introduced in Slovakia. Some disposable beverage packaging manufacturers and distributors will therefore have new obligations.
On December 1, 2019, Act No. 302/2019 Coll. on the deposit for non-refillable beverage containers (the “Deposit System Act”) partially entered into force. So far, only the provisions on establishing the deposit system are effective. Provisions on materially introducing the deposit system come into force on January 1, 2022.
Which Disposable Beverage Containers are Subject to the Deposit?
The deposit system will apply to single-use beverage containers placed on the market in the Slovak Republic. The following single-use beverage containers will be subject to the new deposit system rules: plastic packaging (bottles) with a filling volume between 0.1 and 3 liters; and metal packaging (cans) with a filling volume of between 0.1 and 3 liters.
Administrator of the Deposit System
In December 2020, the Slovak Ministry of Environment appointed a deposit system administrator to coordinate the functioning and financing of the system. Prior to implementing the deposit system, the deposit system administrator will enter into a performance contract with single-use beverage packaging manufacturers and distributors. The Deposit System Act regulates which single-use beverage packaging distributors are required to enter into performance contracts with the deposit system administrator (i.e., not every such distributor has to enter into a contract). Disposable beverage packaging distributors who do not have this obligation can voluntarily register with the deposit system (see below).
Obligations of Single-Use Beverage Packaging Manufacturers and Distributors
The deposit system entails new obligations for single-use beverage packaging producers and distributors. Each non-refillable beverage packaging manufacturer and distributor must, in principle, add the deposit to the beverage packaging and retain the deposit amount determined by the administrator. Further, they should keep separate accounting records of the price of the goods (the sales price) and the amount of the deposit, as well as of the beverage packaging. This recorded data must then be reported to the administrator. In addition, each single-use beverage packaging producer must register the beverage containers with the administrator and reimburse the administrator for the deposit and costs associated with participation in the deposit system.
Single-use beverage packaging distributors selling beverages subject to the deposit system on a sales area of at least 300 square meters have additional obligations. For example, they must register with the administrator as a packaging collection point, collect packaging waste at their premises or within 150 meters of their premises, and repay the deposit to end users when they return the pledged beverage packaging. However, distributors who sell beverages in addition to their main products (e.g., drugstores) are not subject to these obligations. Such distributors and distributors with a smaller sales area can, however, voluntarily join the deposit system.
The obligations arising from the deposit system also apply to foreign companies that place beverages in non-refillable packaging on the Slovak market or transport them – or have them transported – across the state border of the Slovak Republic in order to place the beverages on the market or distribute them in the Slovak Republic. These foreign companies have the same obligations as Slovak companies if they place beverage products on the Slovak market.
Related Costs
Disposable beverage packaging manufacturers and distributors face new costs, including the following:
Labelling Beverage Packaging: Since only properly labelled beverage packaging can be registered with the deposit system administrator and placed on the market, single-use beverage packaging manufacturers must adapt production to the new legal requirements.
Construction Changes: Disposable beverage packaging distributors must provide a special place for beverage packaging to be collected in accordance with hygiene requirements as well as occupational health and safety requirements. Conversion work will be necessary in many business premises, which represents an additional financial burden.
Collecting Machines and Their Maintenance: The obligations of single-use beverage packaging distributors do not end with securing a place for packaging collection. Another burden will be purchasing and maintaining collection machines.
Further Administrative Work: In addition, single-use beverage packaging distributors will also face new administrative costs related to the new registration and record-keeping requirements.
As mentioned in the introduction, the new obligations will come into force on January 1, 2022. The Deposit System Act sets forth a range of fines for violations of individual obligations, with amounts depending on the specific violation. We therefore recommend preparing for these obligations in good time.
By Natalia Janoskova, Head of Waste Management Practice Group, CMS Slovakia
This Article was originally published in Issue 8.2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.
Only a handful of recent legislative initiatives have sparked as much interest in Slovakia’s business community as the draft of the country’s new Competition Act. What at first seemed to be a routine implementation of the EU ECN+ Directive resulted in a flood of comments and proposals. More than 350 suggestions from the public and various authorities were submitted after the original draft of the new Competition Act was published. Now the bill, having been approved by the cabinet, is entering deliberations in Parliament. The act, which will regulate the daily course of business of every entrepreneur under threat of exorbitant sanctions, certainly deserves a brief summary.
Competition law in Slovakia – an EU Member State – has already been largely harmonized with Union law. The rare exception was the definition of “undertaking,” which is central to competition law. Until now, the definition of the subject of competition rules was linked to legal personality. The new Competition Act will harmonize the definition of “undertaking” with the EU law concept of “an entity engaged in economic activity,” regardless of its specific legal form or the existence of legal personality. The repercussions of this change are far from academic. First and foremost, fines for competition law infringements will no longer be calculated as a percentage of the turnover of the legal entity acting as a party to the proceedings, but from the turnover of all entities found liable for the infringement. Instead of imposing separate sanctions on various entities from the same economic group engaged in anti-competitive conduct, the competition authority will be able to make multiple entities forming the undertaking jointly and severally liable for the fine. Last but not least, the redefinition of an undertaking will open the door to embracing the principle of economic continuity, whereby liability for breaches of the Competition Act passes to the economic successor continuing the commercial activity of its predecessor.
The imposition of fines on anti-competitive decisions of associations of undertakings will be reformed. The competition authority will be able to impose fines up to 10% of the turnover not of the association itself, but of its member companies active on the market concerned by the infringement. Should the trade association prove unable to pay the fine, it will be obliged to require contributions from its members. If they fail to comply, the competition authority will be able to claim the fine from any member company with employees who served on decision-making bodies of the association, or any member company active on the concerned market. Enforcement of decisions of the competition authority will be secured by imposition of periodic penalties.
The new Competition Act is introducing several new procedural instruments, such as interim measures in cases of prima facie infringements of the prohibition of anti-competitive agreements and abuse of dominant position, and a similar possibility in merger control, designed to preserve effective competition in cases of premature implementation of concentrations. Decisions in the antitrust area may now be accompanied by temporary structural or behavioral measures, imposing additional obligations on the undertakings on top of fines.
Merger control regulation should become more efficient with the abolishment of the notification threshold for creating full functioning joint ventures, which has in the past caught numerous foreign-to-foreign transactions due to the joint venture founders having sufficient turnover in Slovakia. The competition authority has previously expressed concern about some concentrations escaping notification due to temporary decreases of turnovers as a result of the COVID-19 pandemic, which does not impact the relative market power of the undertakings. As a result, the merging parties will be obliged to assess both the latest and the pre-pandemic turnovers to establish whether the transaction meets the notification thresholds.
The new Competition Act is expected to enter into force on May 1, 2021. What the May Day will bring to business is yet to be seen. A strict, yet more efficient and targeted enforcement of competition law, is in sight.
By Tomas Maretta, Partner, and Marek Holka, Senior Associate, Cechova & Partners
This Article was originally published in Issue 8.2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.
Dentons, working pro bono, has successfully obtained a favorable ruling from the Constitutional Court of the Slovak Republic on behalf of Jozef Andrej, who had been previously convicted of the manslaughter of his severely disabled son. The decision of the Constitutional Court sends his case back to the SlovakSupreme Court.
According to Dentons, Andrej “diligently cared for his handicapped son Dominik, who was diagnosed with severe cerebral palsy and in need of 24-hour-a-day care for more than 20 years. Dominik died in September of 2015 in his parents’ apartment, when he suddenly stopped breathing and showed signs of a comatose state. [Andrej] immediately began resuscitating his son, but he could not revive him. According to the indictment, the cause of death was asphyxiation after disconnection of the breathing apparatus. According to the court, the intention to kill was not proven, as the defense was able to demonstrate the disconnection and reconnection of the device in the attempt to resuscitate. However, the courts saw negligent fault for [Andrej’s[ failure to call for an ambulance immediately.”
According to Dentons, “the charge carried a minimum sentence of 20 years and a possible sentence of life imprisonment. [Andrej] was acquitted of the murder charge, and the charge was reduced to negligence causing death. The first instance court and by the appeal court sentenced the defendant to time served. [Andrej] did not accept the verdict, so he appealed to the Supreme Court, which refused this appeal in November of 2019.”
Dentons’ team included Managing Partner Peter Kubina and Paralegal Nina Drgalova.
On January 1, 2021, Act No. 421/2020 Coll. – the “2021 Moratorium Act” – took effect in Slovakia, introducing a protective framework for businesses affected by the ongoing COVID-19 pandemic and temporarily shielding them from a run on assets by creditors. The 2021 Moratorium Act replaced the temporary moratorium scheme introduced in May 2020, which had been in effect until that point.
The 2020 Moratorium
Arguably, the most remarkable feature of what we will call the “2020 Moratorium” was the combination of its availability and effects, which protected the debtor from, among other things, creditor- and debtor-initiated insolvency, enforcement of adjudicated claims, and all enforcement of security such as pledges and mortgages. While the process to obtain a moratorium under the 2020 scheme was managed by courts, and, in theory, was subject to judicial review, in reality, the process was primarily administrative in nature and, as a general rule, applications meeting the formal requirements were granted. For that reason, the 2020 Moratorium framework became the subject of debate and some criticism among lenders and the legal community because of the borrower-friendly broad-brush approach the legislator took in response to the then-emerging pandemic.
Lenders adapted to the 2020 Moratorium largely through the use of negative covenants and the definition of event of default. However, given the emergency and mandatory nature of the framework, the primary answer was that the emergency framework would expire in time. In some cases, though, lenders’ concerns that the 2020 Moratorium would create an avenue for some borrowers to delay the inevitable insolvency and facilitate asset-siphoning proved legitimate. Also, the 2020 Moratorium generated interesting practical questions such as its cross-border effect on insolvency and security enforcement.
Some courts in other Member States have hinted that a COVID-19 moratorium issued by a Slovak court might have cross-border effects, including, potentially, granting a debtor with a center of main interest in another Member State protection from insolvency initiated by a creditor in that Member State, meaning that the assets provided as security by that debtor could not be liquidated in that Member State. However, no authoritative conclusion has been reached in this respect.
The 2021 Moratorium Act
The legitimate expectation was that the 2020 Moratorium framework would come to a natural end. However, because of the ongoing nature of the COVID-19 pandemic, the new 2021 Moratorium Act was adopted, allowing some of the concerns related to the 2020 Moratorium to remain. The key difference of the new 2021 Moratorium Act is that debtors’ applications for moratoria must be backed by the consent of a majority of their creditors, and an extension of a moratorium must be backed by a two-third majority of creditors. The 2021 Moratorium Act even includes provisions preventing debtors from using non-transparent intra-group debt to outvote third party creditors, which is certainly a commendable feature. While the legal effects of a moratorium under the 2021 Moratorium Act are largely the same as under the 2020 Moratorium framework, the key difference is that the 2021 moratorium framework is significantly less available.
The primary concern is that while the 2020 Moratorium framework was confined to the period between May 2020 and January 2021, the 2021 Moratorium Act allows debtors to apply for a moratorium of up to six months until December 31, 2022. In addition, some of the questions which were unanswered with respect to the 2020 Moratorium framework remain unanswered under the 2021 Moratorium framework, which extends some of the uncertainty among lenders during a time when the market is arguably more likely to see borrowers default. On the other hand, while we have already seen some moratoria granted under the 2021 Moratorium Act in the first weeks of 2021, because an application for the moratorium must be now backed by creditors, it is, in our view, likely that the 2021 Moratorium Act will not result in widespread applications for temporary protection. In turn, the market will likely see more cases of restructuring or insolvency than in 2020, and creditors will have more transparency in the process.
By Robert David, Partner, and Bruno Stefanik, Counsel, Wolf Theiss Slovakia
This Article was originally published in Issue 8.2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.