Category: Slovakia

Interview with Jaroslav Krupec, Country Legal Director at Veolia Slovakia about his background and best practices.

CEELM: Can you walk us through your career leading you up to your current role?

Jaroslav: The path to my current position was relatively straightforward, with only two employers. During my penultimate year at the University in Bratislava I found a position as a paralegal at Peterka & Partners. After finishing my studies I continued working for the law firm. This firm provided general legal services and developed young associates by having them work under the supervision of more experienced colleagues. This enabled me in a relatively short period to work on a diverse range of legal matters and gain experience in and good habits for providing legal services. Two or three years after passing the bar exam I started to feel the need for a change. It was not a crisis or anything serious – I was very happy working as an attorney for this firm. So they agreed to let me work fewer hours and during this new free time I tried to pursue side activities and projects.

During this period, I came across an advertisement for a position at Veolia. It was for a lawyer with less experience than I had –  but I applied nevertheless. The energy sector – as a heavily regulated field – was very intriguing to me. I also wanted to try an interview, as the only job interview I had experienced was the one for the paralegal position at the law firm. The interview was very pleasant and I had a good feeling about the people conducting it, but as the position was for a more junior lawyer I did not pursue it further. After a couple months the interviewer, who at the time headed the legal department of the Veolia Slovakia Energy business line, contacted me and asked whether I was interested in replacing her, as she was planning to retire. After a couple of meetings, I agreed, and in January 2019 I started working for Veolia.

CEELM: What does Veolia do, and how large is the company, both in Slovakia and around the world?

Jaroslav: Veolia is a global leader in optimized resource management, and it designs and provides water, waste, and energy management solutions. In 2019 the Veolia group had 178,000 employees, supplied 98 million people with drinking water and 67 million people with wastewater service, produced 45 million megawatt hours of energy, and converted 50 million metric tons of waste into new materials and energy. The consolidated revenue in 2019 was over EUR 27 billion.

Veolia in Slovakia is a leading provider of water management and energy services. Our Water business line provides drinking water, sewer service, and water infrastructure management to 162,000 customers and to nearly a million residents of Slovakia‘s cities and towns. The Energy business line is among the largest generators and suppliers of heat in Slovakia. For more than 25 years, the Energy business line has provided household heat to more than 89,000 households in 25 cities. Since 2018, it has also been a major generator of electricity. It also provides services for industrial clients and offers solutions for energy efficiency for buildings and their complete management. Veolia Slovakia in 2019 employed 2,445 people and its consolidated revenue was over EUR 276 million.

CEELM: Why did you decide to join Veolia?

Jaroslav: As I mentioned earlier, the decision to go to a job interview in Veolia was largely by chance. However, as Veolia is active in a highly-regulated field of business, I was eager to work as a lawyer here and gain experience in a specific heavily regulated domain. In addition, I presumed that working as an in-house lawyer would enable me to see the commercial and technical aspects of the field. Fortunately, I was right. I have met very skilled and experienced people in Veolia and the best part is that they are never tired from answering my never-ending questions.

CEELM: Tell us about Veolia’s legal department. How big is your team, and how is it structured?

Jaroslav: The provision of legal services within the Veolia Slovakia group is divided between the Energy and Water business lines. I work closely with the Energy business line legal department, which is seated in Bratislava. This department consists of six lawyers and one paralegal. The Water business line legal department consists of ten lawyers and is dispersed in more than one location in Slovakia.

During my first year at the company, a reorganization of Veolia Slovakia started. The reorganization was aimed at both the Energy and Water business lines and all respective support functions for each business line (including the legal departments). The process slowed down because of the COVID-19 pandemic, so it was not completed last year and still continues.

CEELM: Was it always your plan to go in-house? If so, why? If not, how did it happen?

Jaroslav: No, for the first couple of years after university I thought that I would work for a law firm for the rest of my career. A couple of years after the bar exam, when I started considering a change, I was thinking about the advantages of being an in- house lawyer. How you can prevent the legal problems and also see the long-term outcomes of your legal advice, unlike in a law firm, where lawyers deal with already-created problems and don’t usually have information about how the legal advice and proposed solutions they provided influenced the further activities of the client. I also liked the idea of seeing the bigger picture of the company’s business and being in better contact with the “customers” of your legal services.

CEELM: What was your biggest single success or greatest achievement with Veolia in terms of particular projects or challenges? What one thing are you proudest of?

Jaroslav: The first thing that comes to my mind is the relationship that I manged to build with my colleagues in a relatively short period. My first day in Veolia was 15 days after they had signed an SPA and only two months before closing an acquisition of five new companies, including a large CCGT Power plant. This environment helped me to get to know a lot of colleagues in a really short time. But I think that you want to hear a different answer – not such a clichéd answer.

During my relatively brief work for Veolia I have seen many major and minor achievements and victories. Sometimes the finalization of small projects brought greater satisfaction than the successful closing of a bigger project. I think it depends on the level of despair and struggle that one experiences during the project.  With this in mind, I was really proud of a divestment of a small agricultural company that had been for sale by Veolia for several years. The Veolia team consisted only of myself and our Commercial Director, and we also did all the legwork (as usually during an M&A project there are several people working on it). This fact also helped raise my level of satisfaction. 

CEELM: How would you describe your management style?

Jaroslav: I don’t know if a have a specific management style. I try to be consistent and clearly readable in my actions and take into account the specifics of each colleague. As my colleagues in the legal department are very skilled and experienced, I give them freedom to act and provide legal services independently. I intervene only when necessary – for example when setting a goal or task or when things go awry, when I sense an interdepartmental conflict, or when I work directly with them on a project, and so on. I believe that a freedom system will always outcompete an authoritarian system across time.

There are some disadvantages or drawbacks to this, though. When your team works independently, you often lack information about the day-to-day operations of your department, and they lack information from you. There are, of course, ways how to overcome this. I always try to be honest to myself and my colleagues and maintain a balanced ratio between managerial and legal work so that I don’t lose touch with the operations of the legal department.

CEELM: Do you have any personal habits or strategies you employ that may not be common but that really help you succeed in your role?

Jaroslav: I don’t think that I can give your readers any ground-breaking or revelatory guidance. I try to do things the simple way and not to overthink problems or tasks. Nevertheless, the general rules and practices that help me are: (i) know your colleagues, (ii) be transparent and clearly communicate information, (iii) always remember that in-house lawyers are a support function (i.e., we are here for others and not the other way around); (iv) organize your team so that it is focused on the same path as the company (of course, I don’t mean that this should be done by eliminating diversity of opinion or anything like that); and (v) don’t lie.

The last may seem old-fashioned, but it helps stabilize everything. A false statement or intentional innuendo can start a fire that gets out of control and causes unforeseen damages to relationships and the smooth operation of any department.

CEELM: What one person would you identify as being most important in mentoring you in your career – and what in particular did you learn from that person?

Jaroslav: I have to mention two of my bosses from each phases of my career. Each one of them showed me things from a different perspectives specific for their business position.

At the law firm it was my boss at the time, Jan Makara, the director of the local office, who found time to patiently show me how a lawyer provides legal services in an international law firm, organizes his work, and communicates the results to clients.

The second one is my current boss, Peter Dobry, the CEO of the Energy business line, who, with clearly defined vision, has made an impact in my everyday activities. His confidence in me, as well as the fact that he showed it and communicated it to me, helped me to acclimate to the new managerial position of an in-house lawyer heading an in-house legal department, which was very new to me when I started working for Veolia.

CEELM: On the lighter side, what is your favorite book or movie about lawyers or lawyering?

Jaroslav: I have never specifically sought after the lawyering thematic in books or movies. I have always found corny the usual dramatization of the legal environment with “zealous” objections during the hearings and “eureka” moments when the protagonist solves the case at the very last moment. But maybe I have just never seen a good movie or read a good book from the legal world. I have never read anything from John Grisham, for example. However, several good movies come to mind that were related to the legal profession. They are the usual suspects – no pun intended –and I am sure that everybody knows them – Michael Clayton, The Devil’s Advocate, 12 Angry Men, Presumed Innocent, and …And Justice for All, to name a few.

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.

MCL has advised Marek Vaclavik and Petit Press directors Alexej Fulmek and Peter Macinga on their acquisition of a 5.5% stake in Petit Press from Slovakian finance group Penta. Skubla & Partners advised Penta on the deal, which also included the sale of Penta’s remaining 34% stake in Petit Press to the Media Development and Investment Fund. Cernejova & Hrbek reportedly advised MDIF on the deal.

According to MCL, Petit Press is “a famous publishing house in Slovakia, which issues, among others, a well-known SME daily.” According to the firm, “Penta’s exit from Petit Press sparked a lot of interest among the general public, which considered Penta’s shareholding very controversial.”

MCL’s team consisted of Partner Vojtech Palinkas, Senior Associate Simona Rapava, and Associate Martin Micak.

The Skubla & Partners team advising Penta on the sale of its 39.5% stake in Petit Press was led by Partner Marian Sulik and included Partner Martin Fabry.

Former BNT Associated Partner Martin Provaznik has joined BPV Braun Partners in Bratislava.

“Martin Provaznik is an excellent attorney and I am delighted to welcome him as one of us,” commented BPV Braun Partners Managing Partner Arthur Braun. “Expanding our circle of partners shows our continued growth and the respected position our firm occupies.”

Martin Provaznik specializes in dispute resolution, insolvency, corporate law, contract law, and IP/IT. According to the firm, Provaznik will “continue to focus primarily on dispute resolution, with a secondary focus on insolvency, given the situation on the market and growing demand.”

Before joining BPV Braun Partners in April 2021, Provaznik spent 16 years at the BNT law firm, first as Attorney-at-Law and from 2018 to 2021 as Associated Partner. He obtained his Juris Doctor at the University of Trnava in 2007.

“We are very glad to have a new partner on our team,” said BNT Slovakia Partner Igor Augustinic. “Martin’s appointment represents another important step in expanding our engagement on the market in Slovakia and Central Europe.”

Counsel Tomas Melisek has been appointed Head of Banking & Finance at Kinstellar in Bratislava.

Melisek focuses on project and acquisition financing, as well as on financial regulations, real estate transactions, energy, infrastructure, automotive, media, and technologies. He began his career as a lawyer at Slovenska Sporitelna in 2008. Melisek moved to Clifford Chance in 2010, where he stayed until joining Kinstellar in October 2011.

Dentons Counsel Patricia Gossanyiova has been appointed as the new Co-Head of the firm’s Banking and Finance practice in Bratislava, taking the role over from Slovakia Managing Partner Peter Kubina, who has become Head of the Litigation and Dispute Resolution practice.

Gossanyiova will lead the Banking and Finance team in collaboration with Partner Stanislava Valientova.

Gossanyiova has over 20 years of experience in advising on financing issues. According to Dentons, “she focuses on syndicated lending transactions, debt instruments (including covered bonds), debt restructuring (both court and out-of-court), private equity (funds) and derivatives/treasury transactions. She also has a strong track record in financial market regulatory matters, including advising on mergers of financial institutions (first in 1998) and the first-ever EU-passported Slovak branch of an EU bank (2005).”

Before joining Dentons in 2017, Gossanyiova spent three years with Bank Austria Creditanstalt Slovakia, over six years with Allen & Overy, and almost five years with Komercni Banka.

“I feel grateful for the trust and opportunity to co-lead our Banking and Finance group in Bratislava alongside Stanislava,” said Gossanyiova. “Despite challenging pandemic times, our practice has a very solid standing on the market, with unique and complex transactions and a talented team on board. I am delighted to be part of our success story.”

“I would like to take this opportunity to thank Peter for his hard work in helping to build our Banking and Finance group into a thriving practice which is recognized in many international directories,” added Valientova. “I am very pleased to welcome Patricia as the new co-head of our practice with her wealth of knowledge and experience. I have no doubt that we will build on the team’s significant success together and that we will keep delivering innovation and added value to our clients from the banking and finance sector.”

Allen & Overy has advised Epic Games on the acquisition of Capturing Reality from its founders.

According to Allen & Overy, “Capturing Reality is developing a photogrammetry software tool – RealityCapture, currently the fastest solution on the market, enabling automatic creation of virtual reality scenes, textured 3D meshes, orthographic projections, geo-referenced maps and much more from images and/or laser scans.”

Epic is an interactive entertainment company and provider of 3D engine technology. Epic operates Fortnite, one of the world’s largest games with over 350 million accounts and 2.5 billion friend connections. Epic also develops Unreal Engine. 

Allen & Overy’s team in Bratislava was led by Senior Associate Tomas Bury and included Managing Partner Martin Magal, Counsel Katarina Matulnikova, Senior Associate Zuzana Cich Hecko, and Lawyers Lukas Lomencik and Michaela Nemethova.

Allen & Overy did not reply to our inquiry on the deal.

On November 18, 2020, CEE Legal Matters reported that Hamala Kluch Viglasky had advised Slovakia’s Budamar Logistics on the formation of a joint venture with Austria’s Innofreight Consulting & Logistics. CEEIHM spoke with Lubomir Loy, Director for Sales and Marketing and Member of the Board of Directors at Budamar Logistics, to learn more about the deal.

CEEIHM: To start, please tell our readers a few words about Budamar Logistics.

Lubomir: Budamar Logistics is an established company in the CEE region with a long tradition. We operate mainly in the field of forwarding and international transport, but our scope is now so wide that it also extends to other areas, such as manufacturing, transshipment of bulk, and general cargo or river transport.

Despite the fact that we operate in a very competitive sector, Budamar Logistics has long maintained stable annual growth, substantial profitability, and strong penetration into less traditional industries in which we have not yet operated. One of them is also railway vehicle manufacturing, in which we are present, for example through the largest European manufacturer of freight wagons, Tatravagonka. It is in the segment of railway vehicles manufacturing, which is the subject of the establishment of the Budamar Innovations joint venture.

CEEIHM: What about Budamar Innovations – how did this joint venture come to be? And why did you pick Innofreight as your partner in it?

Lubomir: Trying to create an innovative project like Budamar Innovations was a natural step in the growth trajectory of Budamar Logistics and we are glad that we managed to reach an agreement with Innofreight.

As I mentioned, the business sector in which we operate is very competitive. On the other hand, it is a relatively rigid and conservative sector. From the point of view of Budamar Logistics, therefore, it makes sense to look for innovative solutions that will provide us with a competitive advantage and growth potential. The combination of great Innofreight technical solutions and the experience, know-how, and strength of Budamar Logistics is, therefore, a unique opportunity to create a joint venture partnership with the potential for strong growth and long-term existence.

CEEIHM: What will each of the two companies – Innofreight Consulting & Logistics and Budamar Logistics – be bringing to the table as part of this joint venture?

Lubomir: It is very easy to explain in few words – Innofreight is bringing hardware – cost-effective innovative solutions on the market of railway wagons. On the other hand, Budamar Logistics is bringing its software – over 20 years of experience in tailor-made solutions on the market of bulk transports. Both partners are among the top companies in Europe in their respective sectors and this is one of the reasons why it is a perfect fit for both companies and a win-win situation.

CEEIHM: What would you say was the most complex aspect in legal terms in structuring, negotiating, and implementing the joint venture?

Lubomir: I consider three legal aspects to be the most complex in this transaction.

First, setting up the joint-venture agreement itself was an extremely lengthy and legally difficult process. Both parties were aware of their strong position in the negotiations and, therefore, tried to translate as many of their ideas as possible into the joint venture agreement. As it is a long-term and perspective partnership, it was necessary to capture many details in the agreement so that this project would work smoothly also in its later stages.

Second, the size and scope of activities of the participating parties in each market, while a positive element towards the project stability and prosperity, is often the reason for the need to assess such a project from the point of view of competition law. This was also the case with this project, but thanks to the good work of our legal advisors, everything turned out well in the end.

Third, the essence of this project was largely to establish an innovative partnership that will be able to operate competitively in the field of technologically advanced rail vehicle systems. This was, of course, accompanied by a relatively comprehensive legal part concerning existing intellectual property rights, which became part of the joint venture.

CEEIHM: Why did you select HKV Law Firm for assistance in this matter?

Lubomir: HKV Law Firm is our long-standing legal advisor, with whom we have worked on many large projects and investments. Over the years of our partnership, a strong mutual trust has built up between us, which is essential in this business. In addition, Lukas Michalik, the responsible partner at HKV, is known for his excellent transactional practice, selection of the most suitable project structures, and high pace of work, which are all reasons for which we chose him for this project.

Originally reported by CEE In-House Matters.

Cerha Hempel has advised CA Immobilien Anlagen AG on the sale of the BBC1 and BBC1Plus office buildings in Bratislava to a fund managed by Wood & Co, which was advised by Bartosik Svaby.

The buildings have around 25,500 square meters of lettable floor space and are LEED Gold certified. 

Wood & Company is a CEE investment bank. Founded in 1991, it is headquartered in Prague and has branches in Bratislava, Warsaw, Milan, Bucharest, and London. 

Cerha Hempel’s team included Vienna-based Partner Mark Krenn and Attorney Filip Ballok and Bratislava-based Partner Jozef Bannert and Senior Associate Zuzana Bannert Mikulova.

Bartosik Svaby’s team was led by Partner Igor Svaby and included Managing Associate Anna Stancakova and Associate Andrej Kostros.

Former White & Case lawyer Simona Rapava has joined Slovakia’s MCL Law Firm as Co-Head of Banking and Finance.

According to MCL, Rapava, who joins as a Senior Associate, has advised banks and corporate debtors on all aspects of financing, including drafting and negotiating bilateral and syndicated facility agreements, security documents, legal opinions, loan restructuring, memoranda on various aspects of corporate lending, bankruptcy issues, security structure, and enforcement. She is also experienced in real estate transactions and M&A. 

Rapava has a Master’s degree in law from Comenius University in Bratislava and an LL.M. in International Business Law from the Central European University in Budapest. Before joining MCL, she spent over 12 years with White & Case, where she co-led the local banking and finance practice, and over a year as in-house counsel for Ceskoslovenska Obchodna Banka.

“Simona’s arrival in the firm is a great boost to our banking and finance practice and will complement our existing transactional, tax, and contentious teams,” commented MCL Co-Managing Partner Martin Jurecko. ”The MCL Law Firm continues to support the growth of its office based on confidence in the Slovak market. We believe that with Simona we will be able to grow in all relevant aspects of banking and finance market share including the number of served clients, the extension of coverage to work as a counsel to the banks, and positioning ourselves within the most prominent law firms in the country and throughout the region.”

One could argue that transparency and safeguard regulations in related-party transactions of companies should be well established and should not be an issue in M&As in the current environment. However, this is not the case with Section 59a of the Slovak Commercial Code, which found its way into the Code via the implementation of the Second Council Directive 77/91/EEC.

This Slovak implementation is an example of a narrow-minded approach, where formalistic requirements placed on related-party transactions carry serious and occasionally irreversible legal consequences, regardless of whether the transactions were made for a fair value.

The purpose of Section 59a is to introduce transparency to certain transactions between a company and its related parties. When a company acquires assets with a value exceeding 10% of its registered capital for a consideration based on an agreement (e.g., a purchase agreement or potentially even a contract for works) with its shareholder, founder, or a person directly or indirectly controlling or controlled by such persons, the company is obliged to have the value of such assets determined by means of an expert appraisal. The agreement will not become effective until it is filed in the publicly available Collection of Deeds along with the expert appraisal. Otherwise, the assets at stake and the price paid based on the agreement shall be considered unjust enrichment and must be returned. Furthermore, where registration in a special register (such as the Cadastral Register for real estate) is required for the transfer of the ownership title to become effective, the filing must occur prior to the registration.

The issue of Section 59a usually arises in real estate projects involving developers who acquire the real estate at the outset through an existing entity and then transfer it to their SPVs at a later stage (such as prior to initiation of the building permit process or when developed and ready for sale). The developers often fail to exhibit due care when carrying out such intragroup transfers and overlook the potential applicability of Section 59a. They also tend to believe that because they have executed the transaction at arm’s length and for a fair value, any formal deficiencies can be rectified. As a result, it is not uncommon to discover historic transfers in due diligence processes that do not fulfil the requirements imposed under Section 59a.

Unfortunately, the formal requirements tend to prevail over substance, and if they are not fulfilled before the transfer of real property is registered in the Cadastral Register, the deadline will have been missed. Unlike other jurisdictions which allow the remedying of such formal deficiencies by the subsequent producing of proof showing the fair value of the underlying transaction, there are judgments of Slovak courts rejecting late attempts to remedy and basically hold such transactions invalid. By neglecting this obligation in the Slovak corporate environment, a real estate SPV may thus not in fact be the owner in part or whole of its core assets. This may raise a serious red flag for further divestment that could jeopardize the entire transaction. There can be also severe side effects, particularly if numerous third party relations are attached to the property (e.g., through leases or secured financing). The issue is complex and often irreversible. In some cases, it may only be remedied by a reverse transfer of the defective property or by a merger between the affected entities. In other situations, where a realistic remedy would be achieved with difficulty, title insurance was procured. 

The situation with Section 59a was partially improved in 2016 when limited liability companies were no longer required to comply with the regulation, leaving it applicable only to joint stock companies. However, historical transactions with LLCs remain affected, and certain investment structures (such as real estate entities used by collective investment schemes) may still only be pursued via JSCs.

In light of the above, when assessing the title of an SPV in M&A transactions, attention should be paid to Section 59a during the legal due diligence process. We also advise taking a conservative approach in structuring transactions with exposure to related parties, as unjustified efforts to avoid the application of the regulation (e.g., by claiming the exemption of having the transaction executed in the ordinary course of business) may frustrate the future disposition with the property. 

By Juraj Fuska, Partner, and Alex Medek, Associate, White & Case Bratislava

This Article was originally published in Issue 7.12 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.