Category: Slovenia

In October 2018 the European Court of Human Rights (ECHR) granted Produkcija Plus doo (Pro Plus) €52,500 in compensation after its right to be heard was violated in the proceedings relating to the fine imposed for obstructing the dawn raid.

Facts

Suspecting that Pro Plus was abusing its dominant position, the Competition Protection Agency conducted a dawn raid, which the company allegedly made physically impossible. In particular:

• the director was not present and none of the employees allowed the dawn raid to be carried out;
• the deputy finance executive asked the agency’s officers to leave; and
• none of the employees wanted to accept the orders.

In response, the agency issued a fining decision stipulating that Pro Plus had violated its duty to cooperate and imposed a fine of 0.2% of Pro Plus’s annual net turnover in the preceding year.

Pro Plus brought an action against this decision and requested an oral hearing. It stressed that a direct examination of evidence was required to properly establish the facts of the case – in particular, witnesses needed to be examined to prove that the company had not obstructed the dawn raid or refused to cooperate with the officers.

The Supreme Court dismissed Pro Plus’s action, noting that the company could not introduce new facts and evidence, as these would not be taken into consideration.

Violation of Article 6

In its decision, the ECHR emphasised that the right to an oral and public hearing is a fundamental principle enshrined in Article 6 of the Convention for the Protection of Human Rights and Fundamental Freedoms.

The ECHR pointed out that Pro Plus’s obstruction of the dawn raid had been observed solely by the agency’s officers and that those observations had been the only basis for the fine imposed on the company. In such cases, the ECHR noted that an oral hearing may be essential to protect the accused person’s interests, as it can question the credibility of the officers’ findings.

The ECHR went on to state that even though the Supreme Court had been required to review the facts on which the Pro Plus fine were based, the court had not heard the evidence requested by Pro Plus. Moreover, despite Pro Plus expressly requesting a hearing, the court had neither acknowledged the request nor given any reason for not granting it.

Comment

In view of the above, the ECHR found that Pro Plus had been deprived of its right to have the factual aspects of the agency’s decision reviewed by a court with full jurisdiction. Article 6 of the convention had therefore been violated.

By Ursa Kranjc, Associate Schoenherr

The well-formed regulation of competition is a precondition for a healthy and effective market. Thus, countries have to not only adopt appropriate legislation, but also ensure that the relevant authorities will enforce that legislation in a way that allows all participants in the market to carry out their activities in a fair environment.

Protection of fair competition in Slovenia is ensured by the Slovenian Competition Protection Agency (the “Agency”). The Agency is responsible for implementing the Slovenian Prevention of Restriction of Competition Act (ZPomK-1) and Article 101-102 of the Treaty on the Functioning of the European Union. The Agency may carry out two types of procedures – one concerning restrictive practices and one in respect of concentrations – and it may impose sanctions on those undertakings which violate the rules of fair competition.

In this article, we will consider some issues which may arise in the procedure concerning restrictive practices, and focus especially on the procedural rights of an intervener. 

The procedure for restrictive practices starts when the Agency learns about circumstances that could constitute a restrictive agreement between undertakings or the abuse of a dominant position by one or more undertakings. Upon the discovery of such circumstances, the Agency will issue an order that an investigation is commencing.

The company targeted by the procedure (the “Infringer”), has the status of a party in the procedure. The Agency may also allow another person to participate in the procedure (the “Intervener”) if that other person can prove that the participation is necessary to protect his or her interests. Thus, an Infringer’s competitors will usually participate in the procedure as Interveners, especially if the Infringer’s restrictive acts resulted in damages for which the Interveners plan to seek compensation. Such Interveners usually have great deal of interest in the outcome of the procedure in front of the Agency, since Article 62.g of ZPOmK-1 provides that the civil courts which will hear these lawsuits are bound by the final decision of the Agency regarding the infringement. 

Despite the fact that both Infringer and the Intervener may participate in the procedure, their procedural rights substantively differ. Both have the right to review documentation relevant to the case (under Article 18 of ZPOmK-1), but when it comes to basic procedural rights such as the right to an adversarial procedure, the status of the Infringer and the Intervener is not the same. The Slovenian Supreme Court has explicitly stated that the Agency has to ensure the full right to an adversarial procedure only to the Infringer, whereas the Intervener enjoys this right only in exceptional cases: i.e., if ZPOmK-1 explicitly grants it or if it is necessary for the protection of the Intervener’s interests. 

The Agency thus has a certain margin of discretion as to if and to what extent it will allow the Intervener to exercise its right to an adversarial procedure. With this regard, the Supreme Court has stated that the Agency has to review any Intervener’s claims and evidence that is essential for the outcome of the procedure. However, the Agency is still the entity empowered to determine the significance of those claims and that evidence.

Participation in the procedure before the Agency is of great importance for the Intervener, since the Agency’s decision could have significant impact on the participant’s market position and profitability. Moreover, as explained above, the outcome of the procedure before the Agency will also effect the Intervener’s position in its case in court to obtain compensation of damages. 

Therefore, it is important that the Agency not use its discretion arbitrarily, and, when deciding on whether to grant the right to an adversarial procedure to the Intervener or not, it should consider the consequences of the outcome of its decision for the Intervener. Furthermore, if the Agency declines to provide an adversarial procedure to the Intervener, it should provide a thorough explanation as to why a specific claim or evidence was insufficient so that the Intervener is able to understand its decision and (if necessary) to challenge it to the Administrative Court.  

By Katja Sumah, Partner, and Luka Rzek, Legal Clerk, Law Firm Miro Senica and Attorneys

This Article was originally published in Issue 5.9 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

A “qualifying shareholder” is any person intending to acquire or increase his or her bank shares in order to achieve or exceed a qualifying holding. The qualifying shareholder must be authorized by the European banking supervisor, the European Central Bank. Such authorization is first needed upon the acquisition of ten percent or more of the shares and/or voting rights in a bank. Subsequent authorizations are required when acquisitions of twenty, thirty, and/or fifty percent of the shares and/or voting rights in the bank are made. Importantly, the authorization procedure is activated not only upon the crossing of the relevant thresholds but also when the acquirer obtains the right to appoint the majority of the management board or any other means of exerting a significant influence on the bank’s management.

Since the establishment of the European Economic Community, the participating Member States have wanted to connect and integrate their internal financial markets into a single large European financial market. Such a market had to entail the same rules for everyone so as to prevent any disturbance to the banking system and environment. In order to achieve the desired stability and predictability, there had to be a suitable framework specifying which shareholders could become qualifying shareholders in a bank. An essential element to this was, as mentioned above, a unified system of rules for everyone involved, which led to a harmonization of the rules among all participating states. As a result, the Capital Requirements Directive (CRD IV) was adopted, establishing the criteria that must be met by the acquirer of a qualifying holding in a bank.

The acquiring procedure must be initiated before the appropriate national regulator (Banka Slovenije in Slovenia), which then makes the initial assessment and prepares a draft proposal for the ECB. After receiving the draft assessment from the national regulator, the ECB makes its own assessment. It is very important that this second assessment is made hand in hand with the national regulator, which, because it was included in the procedure much earlier, has therefore already obtained the information vital for the ECB’s assessment. The assessment must be adopted within sixty working days, although this period can be extended for another twenty or in special cases thirty working days if additional information is needed.

As the European banking supervisor, the ECB assesses: (i) whether the proposed acquirer is of good reputation; (ii) whether the new bank managers suggested by the acquirer are fit and proper; (iii) the necessary financial soundness of the acquirer; (iv) the expected impact of the acquisition of the qualifying holding on the bank; and (v) whether there is a risk of money laundering or terrorist financing.

Deriving from these criteria set out under Article 23 of the CRD IV, the acquirer must have the necessary integrity and trustworthiness, which means that the acquirer must prove to the ECB that it has no criminal background and that no criminal procedure is underway against him. Also, the acquirer must prove that it has experience in investing in the financial sector and that it has enough management skills to manage a bank. Furthermore, it is very important that its financial soundness is impeccable and that the impact of the acquisition will not impair the bank’s ability to comply with the prudential requirements. In this respect, the financing of the acquisition is very important and must not have any impact on the bank (i.e., financing by debt can put the bank under stress). Last but not least, it is crucial that the ECB can verify the origin of the acquirer’s funds for anti-money laundering (AML) purposes. The ECB will look thoroughly into the financing scheme of the acquisition with the aim of verifying whether the involved funds are the proceeds of a criminal activity or are linked to terrorism. The AML verification is relevant not only for the acquiring process but also for the ECB’s assessment of whether the acquirer’s further involvement in the bank’s structure could in any way be linked to money laundering or terrorist financing and would as such compromise the bank.

After the ECB performs its own assessment, it notifies the acquirer and the national supervisor about the outcome of the assessment. If the assessment produces a negative result, the acquirer can first challenge the decision before the ECB’s Administrative Board of Review and may subsequently also refer the matter to the Court of Justice of the EU.

By Uros Cop, Managing Partner, Law Firm Miro Senica and Attorneys, Ltd.

This Article was originally published in Issue 5.8 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

In July 2017 the Slovenian Competition Protection Agency initiated proceedings against Renault (which operates as RENAULT NISSAN SLOVENIJA doo). The company was suspected of treating authorised mechanics and independent mechanics differently, which gave the agency grounds to believe that Renault had abused its dominant position (for further details please see “Automotive industry again under scrutiny by Competition Protection Agency”). In response, Renault proposed remedies in an attempt to address the agency’s concerns and eliminate the alleged anti-competitive effects on the market. In November 2017 the agency published Renault’s proposed commitments online and invited third parties to comment and make suggestions.

On 30 May 2018 the agency issued a decision closing the proceedings and accepting the commitments.

Commitments

In short, Renault has agreed to accept certain commitments based on which authorised and independent mechanics will be treated equally (ie, have access to technical information and training under the same conditions).

Renault has agreed to adopt, amend and publish internal acts, including information on how to provide mechanics with access to technical information, teaching materials, technical training and pre-training.

Further, Renault will provide independent mechanics with all of the technical information which they need in order to perform a quality repair and maintenance of Renault vehicles. Access to this technical information must not be conditional on participation in the technical training. In addition, Renault must prepare free training and education on the use of Renault InfoTech portal (2) annually.

In connection with the pre-education and training, Renault has committed itself to inform mechanics on envisaged dates and content of pre-training and training. Renault will also publish instructions on how to apply to individual training, whereby the price for training must be the same for all mechanics (ie, authorised and independent) and should not depend on the number of participants. Further, Renault will organise technical training under the same conditions for all mechanics. The independent mechanics must have a chance to participate in free pre-training as well.

Further, Renault must enable access to teaching materials to all mechanics under the same conditions.

The addressee must comply with the decision and implement the commitments within two months of receipt. The commitments will remain in force for three years from the date on which the decision was issued.

Comment

As in the case of Hyundai Auto Trade (for details please see “Competition Protection Agency adopts commitments for Hyundai Auto Trade”), it seems that the agency has taken the position that the adopted commitments will suffice in order to enhance competition between authorised and independent mechanics.

The commitments will also help the agency to monitor Renault’s behaviour by obliging Renault to report on its compliance annually and provide information on the training it has performed on the agency’s request. Moreover, during the commitments period, documents such as internal acts and price lists for technical training should be sent to the agency for review.

The adoption of a commitments decision means that no violation of competition rules has been established. However, the proceeding may be re-opened if Renault does not comply with its commitments. In this case, the company may be fined up to 10% of its annual worldwide turnover for non-compliance.

By Ursa Kranjc, Associate Schoenherr

The continued rise in the number of sales in 2017 confirmed the revival of the Slovenian real estate market that began in 2014 (after the end of the economic crisis). While the prices of residential real estate in Slovenia hit bottom in 2015, last year they increased more than ten percent over the previous year. Real estate prices have continued to rise in the first few months of this year as well.

The positive economic environment continues to stimulate growth in the demand for real estate. This applies mainly to residential real property and undeveloped land for construction of residential properties. The main factors influencing the growth in demand for residential real property include low interest rates for loans, a decrease in the unemployment rate, a rise of salaries, and a fall in the prices of flats during the crisis. The demand for land has increased because of the greater interest of potential investors in constructing new residential units. As a result of the relatively positive economic conditions, low interest rates, and increased interest of investors in real estate in Slovenia, there has also been an increase in sales of commercial real estate. 

The years 2017 and 2018 also represent the beginning of a new construction cycle in Slovenia, as supply will try to keep up with the increase in demand. The stock of new apartments built during the crisis has emptied, and almost no new large buildings, whether residential or commercial, are on the market. 

In 2018, the real estate sector in Slovenia is also expected to face some changes due to the entry into force of the new Construction Act (Gradbeni zakon – GZ) and new Spatial Management Act (Zakon o urejanju prostora – ZUreP-2) that were adopted on October 24, 2017 and became applicable on June 1, 2018. 

Pursuant to this new legislation, building permits are no longer required for the demolition of buildings or for temporary structures. With respect to structures with environmental impact, the procedures for obtaining building permits and environmental approval have now been merged into one unified procedure. Under the new Construction Act use permits are required for all buildings except simple structures, whereas under the previous Construction Act a use permit was not required for one-dwelling residential buildings or simple and non-complex constructions. 

Now, before applying for a building permit, investors can obtain a preliminary decision on the compliance of the planned construction with applicable spatial planning acts, which will help them decide if building on the subject land is feasible or not. The new Construction Act also contains the new requirement that investors notify the Administrative Unit responsible for the area on which the construction will take place and the Slovenian Inspectorate for Construction about the start of construction eight days before it begins. The new Construction Act also provides different methods of legalizing non-problematic illegal constructions. 

The new Spatial Management Act has replaced previous several different laws related to spatial legislation, and it represents a comprehensive suite of different mechanisms for effective spatial management. It also provides for a new level of spatial management – a regional spatial planning act — that will be applicable on a regional level. The new construction and spatial management legislation is expected to ensure more rational and shorter procedures for obtaining building and use permits, reduce investment risks, ensure easier conciliation of different (public and private) interests, and provide greater legal safety for investors, more effective supervision of construction sites, and sustainable spatial development. The future will show whether and to what extent these objectives will be achieved. 

In addition, in January 2018, the new Real Property Mass Valuation Act (Zakon o mnozicnem vrednotenju nepremicnin – ZMVN-1) entered into force. With the use of new evaluation models, the generalized market values that are currently attributed to real estate will be better approximated to actual value by taking into account the special circumstances of the particular piece of real estate. 

Considering the current economic situation in Slovenia and the demand on the real estate market, investments in real estate as well as real estate prices are expected to rise. There has also been a significant increase in the construction of residential and hotel buildings, particularly in the Ljubljana market. In the light of the foregoing, it can be concluded that 2018 will be another good year for the real estate sector.

By Dunja Jandl, Partner, Vesna Tisler, Attorney-at-Law, CMS Slovenia

This Article was originally published in Issue 5.6 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

With the tremendous increase in the price of cryptocurrencies in 2017 the world has witnessed an explosion of cryptocurrency-related enterprises, with initial coin offerings at the forefront. Several European countries have aligned their legislation to become appealing for such enterprises and Slovenia has been mentioned on several occasions as one of the most “crypto-friendly” countries. However, as Slovenian legislation offers a very high level of protection to personal data regarding identity documents, crypto business ventures within the Slovenian jurisdiction may be at a disadvantage against foreign competitors.

The standard approach to conducting the identification and verification process of a customer by cryptocurrency-related enterprises worldwide involves requesting a copy of a photo identity document, utility bills, and a recent photograph of the customer, in combination with other relevant data provided by the customer, followed by a subsequent review and verification of the data. The complete process is commonly performed online, without the need for the customer’s actual presence, allowing him or her to provide the data from a remote location. 

Until recently, Slovenian law contained a universal prohibition on storing digital copies of identity cards and passports. While the 2016 Prevention of Money Laundering and Terrorist Financing Act (ZPPDFT-1) – which implemented the 4th AML Directive (EU) 2015/849 (the “Directive”) – provided some exceptions for banks and financial institutions, the ZPPDFT-1 still prohibits the majority of persons  from storing digital copies of identity documents. This norms are peremptory, and even the customer’s consent does not render digital storage of identity documents legally valid.

Article 13 of the Directive requires that identification and verification of the customer be made on the basis of documents, data, or information obtained from a reliable and independent source. However, the Slovenian legislator has opted for a stricter approach and requires that identity documents be examined in the customer’s presence as the primary method of conducting due diligence measures. 

Pursuant to Article 4 of ZPPDFT-1, legal entities and natural persons “issuing and managing virtual currencies” are obliged to perform customer due diligence. Consequently, companies whose operations are related to cryptocurrencies have a statutory obligation to conduct due diligence upon establishing a business relationship with a customer. Apart from two very narrow exceptions involving means of electronic identification issued by the Republic of Slovenia or another Member State and video-based electronic identification, the due diligence and verification process must be done in-person.

Any enterprise dealing with cryptocurrency within Slovenian jurisdiction must therefore invite its customer to the enterprise’s premises and conduct an examination of the customer’s identity document in the customer’s presence to verify the customer’s identity prior to doing business with him/her if none of the relevant exceptions apply. As such enterprises usually address their products or services to customers worldwide, they are at a huge comparative disadvantage, because they have to comply with stricter regulations than their counterparts elsewhere. It is practically impossible to effectively conduct in-person customer verification with customers in remote jurisdictions, especially because performance by third parties is limited under ZPPDFT-1 and does not absolve the obliged person from the act’s requirements. 

Slovenia has seen several successful cryptocurrency-related enterprises begin their operations during the previous year. Almost exclusively, they conducted the identification and verification process through the “standard approach – that is, by gathering digital copies of identity documents. As this is now prohibited by Slovenian law, they have thus exposed themselves to fines by the competent regulatory authorities, as they are in breach of provisions regarding both due diligence measures and identity document storage. 

If Slovenia wants to fulfill its promise of becoming a “crypto-friendly” country, it has to reconsider its provisions regarding customer due diligence and storage of copies of identity documents to align itself with global standards and allow Slovenian enterprises and foreign enterprises operating in Slovenia to satisfy the national data protection and anti-money laundering provisions with at least the level of ease of enterprises operating outside of Slovenia. The simplest way would be by expanding the exception to the prohibition of storage of identity documents to a larger number of enterprises and amending the relevant provisions concerning customer due diligence to allow the possibility of remote identification through the “standard approach.”  

By Uros Cop, Managing Partner, Zan Klobasa, Legal Clerk, Law Firm Miro Senica & attorneys  

This Article was originally published in Issue 5.5 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.