Category: Slovakia

Dentons’ Litigation and Dispute Resolution team in Bratislava has helped petitioners obtain three favorable rulings from the Constitutional Court of the Slovak Republic. 

Peter Kubina, Dentons Slovakia Managing Partner, represented the President of the Slovak Republic in a petition for a constitutional compliance review and suspension of effectiveness of the newly passed law that excluded liability of the state for damage caused by wrongful exercise of anti-COVID-19 measures. The court admitted the case and suspended the effectiveness of the law.

Partners Peter Kubina and Daniel Lipsic represented a group of 66 members of the National Council of the Slovak Republic on a petition for a constitutional compliance review of a law discriminating against participants in both public and private retirement pension schemes as opposed to participants in only the public scheme. The law awards the former a lower minimum pension entitlement than the latter. The court upheld the petition.

Finally, Partners Peter Kubina and Daniel Lipsic and Senior Associate Miroslava Jesíkova represented a group of 30 members of the National Council of the Slovak Republic in a petition for a constitutional compliance review of legislation that deprived landowners of legal protection of their ownership rights in the process of highway construction. The case relates to the constitutionality of a law passed by the Parliament on emergency measures allowing motorway construction works to be carried out on private property before the property is expropriated. The court upheld the key part of the petition.

“Winning a case before the grand chamber of the Constitutional Court is one of the most valuable court victories that a litigator can achieve,” commented Peter Kubina. “So we are extremely gratified that at this week’s session, the Constitutional Court ruled in our favor on three separate petitions represented by members of Dentons’ Litigation and Dispute Resolution team in Bratislava.”

The second coronavirus wave is spreading across the globe and its negative economic implications are felt – once again – in the business environment. Although we all hoped that the end of 2020 would bring some relief in terms of the pandemic situation, the opposite is true.

Customer and supplier relationships, financial arrangements and the real estate sector are again affected by the pandemic. Employers are now frequently using home-office arrangements and try to decrease the area of leased or owned premises. Some businesses experience decrease in their revenues, by which supplier relationships are also affected. Constraints in the cross-border movement of goods and people affect business as well.  

What should we do now?

If you have not already done so, then now is the time to review your contractual arrangements. Assess your possibilities together with your trusted attorney at law. Contact your contractual partner and potentially start negotiations.

The effects of the first wave of the Covid-19 pandemic were already significant. These will be even worsened by the second wave. For some businesses it might be cumbersome or almost impossible to perform their contractual obligations, whether financial or other ones. 

Other businesses might use the second wave in order to implement cost-cutting measures (e.g. decrease of lease costs). Therefore, it is of utmost importance to understand your entitlements under the contracts.

Can we use the second wave and the introduced public measures as an excuse for not performing?

Before assessing the possibility to use a force majeure event as an excuse for the non-performance of contractual obligations, it is necessary to review the existing contract in detail in order to establish if it includes a so-called force majeure event clause. If so, the consequences for invoking such clause should be checked. 

Usually, when negotiating contracts, not much attention is paid to this clause, but in these difficult times, these are becoming increasingly important. 

Even if the contract does not include a force majeure event clause, the Slovak Commercial Code regulates the exemption of liability in case of unforeseeable, unavoidable and insurmountable obstacles that occurred independently of the will of the respective contractual party, i.e. an event of force majeure. If the party can prove that its non-performance was caused by a force majeure event, it will not be obliged to compensate damages of the other party. 

Can our contractual obligations be cancelled as a result of the Covid-19 pandemic?

The occurrence of a force majeure event does not mean that the defaulting party’s obligation to perform is cancelled. The above mentioned exemption from the defaulting party’s liability lasts for the duration of the force majeure event. After this event no longer lasts, the defaulting party needs to perform. 

However, if the force majeure event has more of a permanent nature (which currently is not the case, as the measures imposed in Slovakia are time-limited), the defaulting party’s non-performance could be considered as a so-called impossibility to perform and, in such case, the obligation of the defaulting party to perform is cancelled. It is not impossible to perform if the performance is possible under harder conditions, with increased costs or after the agreed time.  

The considerations above are based on the applicable law and do not take into account the contractual agreements between the parties. These need to be reviewed on a case-by-case basis in order to assess the rights and obligations of the parties.

By Adam Pichler, Associate, Noerr

The Slovak Competition Act (No. 136/2001 Coll. as amended) has been the cornerstone of Slovak competition law for almost two decades and has seen its share of major amendments. The Slovak Competition Authority has now decided to table a new Competition Act and has submitted a draft for preliminary consultation. The draft transposes the ECN+ Directive (Directive (EU) 2019/1) and addresses a number of competition law issues that have been debated for years in Slovakia.

If approved, the new Act will introduce several significant changes, the most important of which are summarized in this article.

EU-Aligned Definition of Undertaking

The current definition of “undertaking” is derived from the legal personality of a company. The new Act aligns the definition with EU case law and may thus treat a group of companies as a single undertaking. In practice, this means that fines can be calculated based on the global turnover of the entire group, and they can be imposed on a number of affiliated entities that would be jointly and severally liable.

Moreover, the new Competition Act introduces the responsibility of economic successors for competition law infringements. This is also in line with EU case law and it will underscore the need of thorough competition due diligence in corporate transactions.

No Clearance Requirement for Foreign Joint Venturaes

Under the current Competition Act, joint ventures have to be cleared in Slovakia even if only one of the parents has relevant domestic turnover and even if the joint venture will not have any impact on the local market. This will change under the new Competition Act, as the specific notification threshold for joint ventures will be repealed and purely foreign joint ventures are thus less likely to be caught.

This change will significantly reduce the administrative burden of transactions that are very unlikely to give rise to any competition concerns in Slovakia.

New Notification Threshold

The new Competition Act introduces a new de facto notification threshold. Even if a transaction falls below the existing turnover thresholds, the parties will have to request an opinion of the Competition Authority if the domestic turnover of the two parties is at least EUR 4 million and the horizontally or vertically overlapping market share would be at least 40%. The Competition Authority will decide whether the concentration needs to be formally cleared.

In practice, this means that a significant number of transactions that previously were safely outside the notification requirement will now have to be examined and will require an analysis of relevant markets and the parties’ respective share of those markets. This will increase the administrative burden in relation to numerous transactions.

Institutional Changes

The new Competition Act introduces a number of institutional changes to the Competition Authority. Most importantly, it introduces a transparent procedure for selecting the Chairman and the Vice-Chairmen of the Competition Authority. It also introduces a cooling-off period that would prevent former Chairmen and Vice-Chairmen from acting in competition matters for one year after they leave office.

The draft also clarifies and widens some powers of the Competition Authority. Most importantly, the Competition Authority will have the power to order interim measures as well as behavioral and structural measures.

Extended Limitation Period

Last but not least, the draft Competition Act extends the existing limitation period for competition law infringements from eight years to ten years. Again, this reinforces the need for thorough due diligence before corporate acquisitions.

* * *

Overall, the draft new Competition Act is a comprehensive and well-drafted piece of legislation. It demonstrates that the Slovak Competition Authority intends to make use of the window of opportunity created by the transposition of the ECN+ Directive to remedy a number of shortcomings that have come to light over the years. For instance, the draft puts an end to the argument that the review of documents seized during a dawn raid is still part of the raid and thus illegal if conducted after the expiry of the authorization. At the same time, if the law is passed, some provisions will give rise to new administrative costs, in particular in relation to smaller mergers and acquisitions that have historically been safely below the notification thresholds and will now have to be analyzed in more detail.

It remains to be seen how the draft will progress through the legislative process and which parts of it will eventually become law. The draft is intended to come into force on February 1, 2021. The timeframe for transposition of the ECN+ Directive is set until February 4, 2021.

By Juraj Gyarfas, Partner, Dentons

This Article was originally published in Issue 7.8 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Dentons has advised Vseobecna Uverova Banka and UniCredit Bank on a EUR 105 million loan to J&T Real Estate for the construction of the Eurovea Tower in Slovakia. Relevans reportedly advised the unidentified borrower on the deal. 

The Eurovea Tower is designed to be 168 meters tall, with 389 apartments and 45 luxury residences on 45 floors. The tower will also offer around 1000 square meters of retail space. 

J&T Real Estate is a Slovakian real estate developer with a portfolio of 50 projects valued at EUR 1.6 billion. The company was founded in Bratislava in 1996.

Dentons’ team consisted of Partner Stanislava Valientova, Managing Counsel Jozef Buday, and Associates Bianca Bohmova, Richard Marcincin, Peter Panek, and Alen Gondek.

If a company has fulfilled its purpose, its further existence is unprofitable, or if there are other justifying reasons, it is usually best to dissolve such a company and have it deregistered from the commercial register. Where the company has no legal successors to which its assets could be transferred, it must, however, first go into liquidation.

What provisions on liquidation should a company’s articles of association contain?

It is advantageous for a company to include in its articles of association provisions on distribution of liquidation proceeds, selection of liquidator, the liquidator’s remuneration and reimbursement of expenses, as these may diverge from the statutory regulation. However, care should be taken that the protection of creditors is guaranteed and that the law is not abused. 

What is the step plan of liquidation?

There are usually seven stages of liquidation: (1) dissolution of company and appointment of liquidator; (2) transitional phase with specific restrictions; (3) entry into liquidation; (4) notification and registration of creditors’ claims; (5) satisfaction of claims; (6) completion including final distribution of liquidation proceeds; and (7) deregistration. Furthermore, specific provisions apply in the event of overlapping of liquidation and insolvency. Where over-indebtedness is identified, the liquidator is obliged to immediately file for insolvency proceedings, for the duration of which the liquidation process is interrupted.

What are the consequences of entering into liquidation?

From the moment of the entry of the liquidator in the commercial register, the liquidator assumes the competences of the company’s statutory body. The only exception is the right to convene a meeting of the company’s supreme body. In addition, unilateral legal acts of the company, such as granted powers of attorney (save for representation in court proceedings) and proxy representation, are no longer valid. The liquidator takes only such measures on behalf of the company that are aimed at the company’s liquidation.

What is the average duration of liquidation?

Liquidation cannot be completed before the lapse of six months since the notification of its beginning. If, under the financial statements and the final report, the liquidator finds out that the company has tax debts or that tax inspection is in progress, the liquidation is extended for another six months. Experience shows that liquidation, including preparatory steps and deletion of the company from the commercial register, take approximately 30 months. 

What factors can stall a liquidation process?

Several factual elements weigh in when it comes to the actual duration of liquidation. Firstly, internal circumstances, such as duration of decision-making, volume and composition of assets, and number of creditors and claims, play a major part. Secondly, there are external factors, such as the exceptional adoption of an injunction, which may result in the deregistration of the company to be suspended, or the necessity to obtain a confirmation on the non-existence of tax arrears or an ongoing tax inspection.

What liquidation-related costs are to be expected?

In most cases, liquidation can be very costly. When calculating the costs, one should include at least costs of proceedings, notarial expenses, asset liquidation costs, and signature verification fees which altogether exceed EUR 100. Another item on the list of liquidation expenses is the statutory liquidation advance payment amounting to EUR 1,500. It is also important to include the costs of legal and economic services, the amount of which varies from case to case. The liquidator is entitled to the statutory remuneration and reimbursement of expenses, unless contractually stipulated.

What responsibilities does a liquidator have?

The liquidator is obliged to act with professional diligence and observe fiduciary duties. Furthermore, the liquidator is subject to the same accountability rules as are the members of the company’s statutory body.

How to fully benefit from the hidden potential of supplementary liquidation?

If distributable assets are discovered only after a company has been deregistered, the supplementary liquidation comes into play. By means of supplementary liquidation, creditors can assert their unsatisfied claims and other rights which existed at the moment of the company’s deregistration. The hidden potential, however, lies in the group of persons who are eligible to submit an application for supplementary liquidation, i.e. any person that justifies its legal interest can file the application. Consequently, co-owners of a real estate can now initiate the liquidation of a deregistered co-owner. In any case, the statutory application deadline must be observed.

The information above provides only a brief overview of liquidation process and the amended legal concept of supplementary liquidation. The statutory regulation is much more complex and its application requires detailed examination of each case. 

By Martin Tupek, Senior Associate, and Martin Stelcl, Legal Advisor, Noerr

Oliver Werner has made Partner at and become Managing Partner of CMS Bratislava, and new Partner Sona Hankova has joined the firm from EY Law.

Werner takes over as Managing Partner from Peter Simo, who is stepping down from the role to focus on client work as Of Counsel.

CMS describes Werner as a “recognized expert in the fields of compliance and corporate/M&A.” According to the firm, “during his time at CMS he has gained a lot of experience in cross-border transactions as well as internal investigations and money laundering prevention.” He began his career in 2008 with DLA Piper, before joining CMS in 2014. He moved to the firm’s Bratislava office in June of this year. He obtained his Bachelor’s degree at the University of Vienna in 2003.

Hankova has over 17 years of experience, primarily in real estate, including acquisitions, development, construction, asset management, litigation, and leasing. CMS describes her as being, in addition, “vastly experienced in M&A transactions including corporate reorganizations, operational matters, and related employment law issues.”

“We are honored to lead the Bratislava office,” said Werner and Hankova in a joint statement released by the firm. “We appreciate this unique opportunity to enhance our CMS Reich-Rohrwig Hainz brand on the Slovak market with a diverse and driven team.” In addition, Hankova added that “the clients are facing unprecedented challenges and need innovative and forward-thinking advice. With both, our local and international expertise, CMS is ready to navigate them promptly through their business and legal uncertainty.”

Kinstellar’s Bratislava office has advised E.ON on its acquisition of a 49% stake in electric utility Vychodoslovenska Energetika Holding from the German electric utilities provider RWE. Freshfields Bruckhaus Deringer advised the seller on the deal. 

Financial details of the acquisition were not disclosed. 

The Slovakian state retains ownership of the majority stake in Vychodoslovenska Energetika.

According to Kinstellar, “Vychodoslovenska Energetika provides electricity to approximately 500,000 customers in the Kosice and Presov regions in Eastern Slovakia.” 

Kinstellar’s team in Bratislava consisted of Partners Viliam Mysicka, Adam Hodon, and Roman Oleksik, Senior Associate Michal Hrusovsky, Associate Lukas Mrazik, and Junior Associates Livia Miklencicova and Matus Kocisek. 

Freshfields Germany-based team included Partners Ralph Kogge, Counsel Mirko Masek, and Associate Henri Contze.

Due to the current unfavourable economic situation, many businesses are in arrears of their financial obligations. If a company is at risk of becoming bankrupt, it is obliged to take immediate steps to avert it (see the article “A Company in Crisis”). However, where a company is unsuccessful in staving off the crisis, bankruptcy proceedings are imminent. 

When are bankruptcy proceedings unavertable? What are the managing directors’ responsibilities? And how can a company obtain temporary statutory protection?

When are bankruptcy proceedings unavertable?

Bankruptcy serves as an instrument used by debtors unable to pay their obligations. Its main purpose is to satisfy creditors from managed monetisation of the debtor’s assets. Bankruptcy proceedings are the result of a company being either insolvent or over-indebted.

When is a company insolvent?

A company is considered to be insolvent when it has at least two creditors, and is in arrears with the payment of at least two financial obligations for a minimum of 30 days. A company’s financial assets to be potentially used for covering its obligations include, inter alia, financial means, account receivables, deposits held in banks, and, in certain circumstances, financial receivables and debt securities. The actual movable and immovable assets of a company are, therefore, irrelevant as regards their potential to satisfy the company’s financial debts. 

When is a company over-indebted? 

A company is over-indebted if it has at least one creditor and the value of its financial obligations exceeds the value of its assets. Following a so-called “balance sheet test”, where the company’s assets are weighed against its obligations, over-indebtedness (if any) becomes clear. The value of a company’s assets is determined from the company’s accounting records or on the basis of an expert opinion.

Who can file an application for initiation of bankruptcy proceedings?

The application can be filed by any of the creditors or the debtor itself. Creditors should always consider filing the application, as, by doing so, they increase the likelihood of their receivables being satisfied. At the same time, creditors can file the application only on the grounds of insolvency, and not of over-indebtedness, since they do not have any information on the company’s assets and liabilities. The prerequisites for a creditor to file the application include its founded assumption of insolvency and a previous written call for payment against the debtor issued by any of its creditors.

When is a company required to file an application for bankruptcy proceedings?

When insolvent, a company is entitled to file an application. On the other hand, with over-indebtedness, it is obliged to file an application within 30 days of becoming aware or from that date when it should have become aware, when acting with professional care, of the over-indebtedness. Businesses must also keep track of the development of their financial situation, assets, and liabilities. 

What responsibilities do statutory bodies have?

If a company’s statutory body fails to timely file the application for initiation of bankruptcy proceedings, it is obliged to pay a statutory penalty to the company in the amount of EUR 12,500. Since 2018, statutory bodies are also held liable for damage incurred by creditors for the statutory body’s failure to file a timely application. Situations may thus occur when the managing director may have to pay damages to all creditors equal to the sum of their receivables, which can eventually lead to the managing director being forced to file for bankruptcy protection. 

How can businesses protect themselves from becoming bankrupt?

In connection with the economic aftermaths of the current pandemic, a new legal concept has been introduced into Slovak legislation: temporary legal protection. Businesses in Slovakia having accumulated a large number of overdue receivables, or experiencing a significant drop in revenue can now apply at their respective court to be temporarily protected. The temporary legal protection will lapse, by law, on 1 October 2020, unless prolonged by the Slovak government, but not later than 31 December 2020. The government is currently also drafting measures, with effect from 2021, to introduce the possibility of informal restructuring with the creditors’ consent.

The information above provides only a brief overview of the conditions for declaration of insolvency and initiation of bankruptcy proceedings. The statutory regulation is much more complex and its application requires detailed examination of each case.

By Martin Tupek, Senior Associate, and Adam Pichler, Senior Associate, Noerr

From 30 July 2020, all Member States are required to apply stricter rules on posting of workers to other Member States. In order to transpose the Directive 2018/957 into domestic legislation, the Slovak Republic has adopted an amendment to its Labour Code introducing new tighter requirements for posting of workers. These changes will affect employers from other Member States (non-domestic employers) who send their own workers temporarily to Slovakia. Employers in Slovakia (domestic employers) who intend to post their workers abroad should, however, also pay attention to the new rules, as similar changes will be adopted across the EU.

Duration of posting

Varying employment conditions, depending on the duration of posting, are just one of many changes that the new legislation introduces. There are still no limitations on the duration of posting itself. Employers posting their workers abroad have specific responsibilities from the first day on which the characteristics of posting are satisfied. The posting employer is, first of all, obliged to ensure that the terms and conditions of foreign employment correspond to those applicable in the host country. However, the scope of these terms and conditions is statutorily limited to, inter alia, minimum wage, minimum paid annual leave, maximum work periods, health and safety conditions (“hard core”). To put it simply, posted workers and domestic workers in the country to which the posted worker is sent should be treated equally. 

For long-term postings lasting longer than 12 months, in addition to the “hard core” requirements as described above, foreign posted workers are subject to the full extent of the domestic labour law. There are certain exemptions such as the conclusion and termination of employment contract and non-competition clauses which continue to be governed by the provisions of the foreign Member State law from which the employee is posted. 

When certain conditions are met, the limitation period described above can be extended to 18 months. Such an extension occurs when the non-domestic employer submits a motivated notification to the domestic labour inspectorate (in Slovakia, Národný inšpektorát práce) before the expiry of the 12-month period. The notification can be submitted using a form prescribed by the labour inspectorate or via the registration portal available on the inspectorate’s website. Employers in Slovakia posting their workers to other Member States have the same notification obligations towards authorities in the host country. 

Where a posted worker replaces another posted worker performing the same task at the same place, the duration of the posting is the cumulative duration of the posting periods of the individual posted workers concerned. 

Remuneration

According to the pre-amended Labour Code, employers posting their workers to Slovakia were obliged to provide minimum wage, minimum wage conditions, and payment for overtime work pursuant to the Slovak Labour Code and related labour law legislation. Now, posting employers are obliged to provide all constituent elements of remuneration rendered mandatory by national law of the host Member State. Posted workers in Slovakia are, therefore, under the current provisions, also entitled to allowances for night, weekend, and holiday work, wage compensation for working under difficult conditions, and other mandatory components of wage. 

Conversely, undertakings in Slovakia posting their workers to another Member State are obliged to adhere to all statutory wage obligations in force in the respective host Member State. To that end, employers should seek to obtain information on employment regulations valid in the country where they intend to post their workers. Supervisory authorities in each Member State are obliged to publish an overview of such employment requirements on their respective websites. 

Reimbursement of travel, lodging and board expenses now part of “hard core”

Prior to the effectiveness of the Directive, each Member State regulated reimbursement rules for travel expenses. Under the Slovak Act on Travel Expenses, employees posted from Slovakia to another Member State are guaranteed full reimbursement for incurred travel expenses for the duration of the posting; as if they were on a foreign business trip.

This Slovak legislation offers stronger employee protections than is the norm in the EU under the Directive. However, Slovak employers must consider the applicable laws in the host country and provide posted workers with the benefits of that system most favourable to the employee. 

Collective agreements

In order to ensure minimum terms and conditions of employment for posted workers, employers are, under the Directive, obliged to monitor the regulations laid down by collective agreements or arbitration awards. This is, however, limited only to collective agreements which, in the respective host Member State, have been declared universally applicable or otherwise apply in the geographical area and in the profession or industry concerned, and/or collective agreements which have been concluded by the most representative employers’ and labour organizations at the national level and which are applied throughout national territory of the respective Member State. In the Slovak Republic, collective agreements within the meaning of Section 7 of the Act on Collective Bargaining are considered to be such representative collective agreements. 

Again, employers in Slovakia posting their workers to other Member States are obliged to examine the minimum terms and conditions of employment applicable under collective agreements which, in the respective Member State, have been declared universally applicable.

By Pavol Rak, Partner, Noerr

“The in-house advisory role enables a lawyer to go deeper into the mysteries of the banking business and experience the life of a transaction, not just observe it from a distance. I elected to pursue an in-house practice at the beginning of my career, and even though I was tempted to switch to private practice many times, I remain loyal to the in-house life.”

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

Stefan: As far as I can recall, I have always seen myself as a clerk in a commercial bank. This perception has not changed during my legal studies either.

I graduated from law school at the P.J Safarik University in Kosice, in the eastern part of Slovakia, in the city where I was born. Shortly after finishing my studies, I took my first job as a Contract Legal Specialist for the Slovak Air Force Academy. That appointment lasted a year and two months, from October 2002 to November 2003. Although working for the military was exciting, I did not give up on my dream to work in a bank. In January 2004, I seized the opportunity to take a position as Investment Services In-House Legal Advisor Junior at HVB Bank Slovakia and moved to the capital of Slovakia.

At that time, HVB Bank Slovakia, a subsidiary of Austrian BA-CA and German Bayerische Hypo- und Vereinsbank, was a modern, flexible, dynamic commercial bank leading the then-developing market of financial transactions. I acquired most of my knowledge in Corporate Financing, Structured Financing, Real Estate Financing, Treasury Business (including investment services), Custody Services, and various types of business with securities, bank guarantees, and letters of credit. In addition to supporting the bank´s business, I played an advisory role in transforming the Slovak Central Securities Depository to meet international standards for the booking of securities held in custody by intermediaries. During this appointment, I assisted with the March, 2007 merger of the bank´s custody and treasury business into UniCredit Bank Slovakia (which was part of the consolidation of the whole banking business), and I remained at UniCredit as an in-house counsel for the next few months. My appointment with HVB Bank Slovakia – including succeeding UniCredit Bank Slovakia – lasted for almost four years, from December 2003 to September 2007. I was an active member of various working groups and commissions helping the market to implement MiFID.

In October, 2007, my experience providing investment services advice brought me to Slovenska Sporitelna, a major Slovak bank, where I was active as the in-house legal advisor on the project of setting up a trading infrastructure on the Austrian Erste bank group level. During my short appointment there, I chaired a working group for the revision of the corporate client financing documentation templates and actively advised the bank on transitioning from the Slovak national currency to the euro. Here I learned a lot about Corporate Financing.

In August 2008, I took a position as the Deputy General Counsel of Volskbank Slovensko, a small subsidiary of the Austrian bank, which was very active in financing small and medium sized clients. In April 2011, I was appointed General Counsel of the bank. I led a small but ambitious legal department, through its acquisition by Sberbank of Russia, until the end of 2012. These were very exciting times from an organizational and cultural point of view. I learned a lot about the management of internal legal services, the management of legal risks, internal legal affairs, regulatory issues, risk management, and work-outs.

In spring of 2013 I became General Counsel of a small local bank, Prima Banka Slovensko, which was owned by local private equity group PENTA. The Prima Banka brand had only recently appeared on the market. Prima Banka is a mid-sized commercial bank providing banking services to retail, municipality, and SME clients. For the first time, I added management of Anti-Money-Laundering and Fraud Prevention to my duties. As of March 2020, I have been in this position for seven years. 

CEELM: You’ve never worked in private practice. Did you know, even in law school, you wanted to work in-house?

Stefan: Oh, yes. I always wanted to work in a bank. At the same time, I wanted to be a lawyer. Becoming an in-house counsel was the perfect combination of both my dreams. Practicing banking law in a law firm has, in comparison to in-house advisory, various benefits – but it has some limitations as well. The in-house advisory role enables a lawyer to go deeper into the mysteries of the banking business and experience the life of a transaction, not just observe it from a distance. I elected to pursue an in-house practice at the beginning of my career, and even though I was tempted to switch to private practice many times, I remain loyal to the in-house life.

CEELM: What are the most significant changes you’ve seen in Slovakian Banking law over your 17-18-year career?

Stefan: There have been a few – both positive and negative. Changes in the Banking laws always depend on the government of the country. Liberal governments have made a few very positive and constructive amendments to the laws. For example, the law of securing claims was completely redrafted, enabling creditors to effectively secure their claims for loan agreements. Various new public registers, especially those held by the Chamber of Notary Publics, were established. A brand-new Bankruptcy law, clearly based on the equality of claims of all creditors and prioritizing secured claims, was adopted. Close-out netting provisions have also been recognized by that law in Slovakia. Voluntary auction as an instrument was instituted, which enables secured creditors to foreclosure.

On the other hand, for the last couple years, lots of legislation aiming to protect consumers was adopted. Expressing my private opinion in general, no positive effect to consumers’ rights can be seen. Aside from mandatory provisions of EU consumer protection legislation (which have indisputably improved consumer protection), tremendously adverse effects on the clarity of general private law principles have resulted. This led to the inability of the courts to apply any reasonable legal explanatory rules or even to read the law at all. Emotional arguments of hurt consumers began to prevail in litigation. In addition, due to the inability of the courts to absorb robust consumer protection legislation, many new executive bodies have been established, usurping the judiciary of jurisdiction over disputes between banks and consumers.      

CEELM: Are there changes you would like to see in the country’s Banking law that would make things easier for Prima Banka Slovensko?

Stefan: As a result of the coronavirus outbreak, there are many things that can be done to make life easier for both banks and their customers. The majority of them are macro-economic, and I do not feel competent to comment on them.

From a purely legal perspective, there is a wide range of measures the government could take to simplify banking business and services for the sake of all parties – including clients. One long-lasting problem of doing business in Slovakia is delays in court procedures. Although every government for the last couple of years has taken some measures, the problem as a whole has not been solved yet. Recently, an express procedure has been established for issuing judicial awards where there is no dispute between litigating parties – and this procedure truly works well.

There is a need to improve the substantive law as well. Much could be done in terms of predictability and simplicity. All Slovak legal practitioners are expecting a new Civil Code within the next few years, replacing the Socialist Civil Code of 1964, which will finally to come to an end.

All Slovak legal practitioners are expecting work on a new Civil Code, designed to supplement the Socialist Civil Code of 1964, finally to come to a successful end within the next few years.

If I were able to give one simple bit of advice to legislators, I would recommend that they apply common sense and set all new laws as simple to be understood as possible. 

CEELM: Tell us about Prima Banka Slovensko, and about the company’s legal department. How big is your team, and how is it structured?

Stefan: Clients of Prima Banka are paramount to us. When the deal is done, they must be left with a sense of satisfaction. This applies to external as well as internal clients. This rule is very clear to my legal and compliance team and this is the basis for its establishment and functioning. My team is split into two functional and geographically distant parts. A total number of five lawyers provide legal advice to 23 head office departments, 8 regional business centers, and 121 branches. It is located in our head office in Bratislava. A compliance staff consisting of five people is located in Zilina, two hours away from the capital. I split my working hours evenly between both of them, so I travel a lot.

CEELM: What is your typical day at work like? How has that changed during the recent COVID-19 crisis?

Stefan: As my team is split into two locations, my days spent with lawyers differ from those I spend with the bank´s compliance staff. As a principle, we all work in open spaces as we believe information flow and prompt reactions are very valuable.

My life has not changed much during the coronavirus outbreak. There is still a lot of stuff that in-house lawyers have to handle, regardless of the external circumstances, although judicial proceedings have been postponed. Every single day I start by researching for new acts and measures of the government, public health services, and parliament. I also perform this same activity at the end of the day, before I leave my office. New laws and measures pop up so often that being vigilant in these days is more important than ever before.    

CEELM: What do you consider your biggest single personal success or greatest achievement with Prima Banka Slovensko?

Stefan: My greatest achievement as an in-house counsel is the way I helped Prima Banka, in 2017, handle the acquisition of a competing Slovak midsize wholesale bank and its merger into Prima Banka. Despite the general perception that a merger of two banks must be a painful, difficult, long lasting, and expensive project, in Prima Banka we took a different approach. Leaving all external advisors outside and instead vesting trust in the abilities of the internal staff allowed that staff to feel fully involved – and this strategy paid off, contributing heavily to what we call the fastest and best banking merger in Slovakia yet. Since that final decision was made, through all regulatory approval processes, we reached commercial register confirmation of the merger within nine months. Another advantage of the full internal solution was maintaining coherence between individual agendas. Movements in product unification were compatible with movements in changes in IT solutions, legal developments, and technical movements. Everything fit together. I am proud that I could be part of the core team and contribute.

Additionally, in 2019, Prima Banka came to the market with its inaugural issue of covered bonds. It was both the first ever bond issue with a negative yield in Slovakia and the first ever covered bond issue with a negative yield in CEE. Again, I am proud to have been part of the core team.

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?

Stefan: My biggest role model is Jan Rollo, the General Director of Prima Banka, who, with clearly-defined vision, made a big impact in my everyday activities as well as in much of my decision-making. His strict adherence to set goals proved a key strategy in providing the simplest and most easily-accessible products and services to clients, while still helping the bank develop and into the fastest-growing bank in Slovakia. It is very easy to understand why he was able to achieve this. Simplicity in products that are tailored for literally every category of clients are easier to develop – but at the same time clients are happier to pay a bit more them than they are for products and services that are very complicated to access.

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

Stefan: There is not much time left when I am off duty. On weekends I try to spend some time with my family outdoors. John Grisham’s books are probably my most favorite, especially the older ones. The Runaway Jury and The Firm fascinated me the most.

This Article was originally published in Issue 7.5 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.