Category: Slovenia

Recent developments in the ongoing investigation into money transactions coming from Iran through one of the largest Slovenian banks have raised awareness about anti-money laundering and financing of terrorism rules in Slovenia. 

On November 19, 2016 the Slovenian Parliament passed the Prevention of Money Laundering and Terrorist Financing Act (ZPPDFT-1) which implements EU Directive (EU) no. 2015/849 of May 20, 2015 on the prevention of the use of the financial system for purposes of money laundering or terrorist financing (the “Directive”). Since measures adopted solely at the national or even at the EU level made without taking into account international coordination and cooperation would have very limited effect, the objective of ZPPDFT-1 is also to conform Slovenian legislation with international standards, especially with the Financial Action Task Force recommendations. 

The most important changes in ZPPDFT-1 include the strengthening of the risk-based-approach to increasing the effectiveness of measures, broadening the definition of politically exposed persons, lowering the threshold for reporting of cash transactions from 30,000 EUR to 15,000 EUR, and introducing the possibility of electronic identification means for Know Your Customer (KYC) procedures. 

An important innovation is also the establishment of a Register of Beneficial Owners to ensure transparency of ownership structures of business subjects and thus prevent the use of business entities for money laundering and terrorist financing. Obliged entities will have to determine their beneficial owner(s) and provide that information to the register, which is going to be established and maintained by the Agency of the Republic of Slovenia for Public Legal Records and Related Services (AJPES). According to ZPPDFT-1, information to be provided should include, inter alia, the name, address, and ownership interest or other way of control of the beneficial owner. The register, which is expected to become publicly available in January 2018, will provide this information free of charge. Further guidance will be provided by the Rules on Implementation of Prevention of Money Laundering and Terrorist Financing Act, which have not yet been adopted.

According to the Directive, EU member states can use a proportionate approach, under which the obliged entities are able to adapt the stringency of their procedures to the risk of money laundering and financing of terrorism. The risk-based-approach affects the politics, controls, and procedures for risk management and therefore enables entities to mitigate the length of the KYC procedure in low risk areas. Since according to a national risk assessment the current risk of money laundering and financing of terrorism in Slovenia is still low to medium, simplified KYC procedures can be used by the obliged entities. 

In June, 2017 a committee of experts (the “Moneyval Committee”) conducting an evaluation of anti-money laundering measures and the financing of terrorism published the Fifth Round Mutual Evaluation Report on anti-money laundering and counter-terrorist financing measures in Slovenia. According to the Moneyval report, Slovenia is not a major international financial center and has a low domestic crime rate. Crime offences that pose the highest money laundering threat in the country are abuse of position, tax evasion, business fraud and offences related to illicit drugs. Within the financial services industry in Slovenia, the banking sector accounts for the largest part of the industry and is deemed most vulnerable to money laundering. 

The Moneyval Committee showed that Slovenia has undertaken certain measures to increase transparency and its authorities have partially succeeded in identifying, assessing, and understanding money laundering risks. Further steps to improve the knowledge of supervisors and other relevant authorities regarding money laundering and terrorism-financing risks and to improve proactivity in investigating and prosecuting money laundering and terrorism-financing related crimes will however still have to be taken. 

In the dynamic area of money laundering and financing of terrorism regular changes in legislation are inevitable. Slovenia will have to assess its progress based on the Moneyval 2017 recommendations and present a report at the 57th plenary meeting of the Moneyval Committee in September 2018.

By Lea Pecek, Head of Corporate Practice Group, and Primoz Mikolic, Associate, ODI Law Firm

This Article was originally published in Issue 4.9 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

The most recent amendment to the Slovenian Civil Procedure Act (Zakon o pravdnem postopku, or “ZPP”) was issued in February 2017, with the amendments set to apply from September 14, 2017. 

The main amendments of the ZPP are designed to accelerate civil procedure by, inter alia: (i) limiting the number of preparatory statements (up to the initial pre-trial hearing); (ii) establishing a new pre-trial hearing where the primary legal and factual aspects of the case are discussed to focus the proceeding on relevant issues of the case; (iii) introducing a management program (the judge shall prepare a program containing the legal basis for the dispute and the number of and dates for expected court hearings, enabling a better and more flexible step-by-step plan of the procedure); (iv) providing for additional sanctions for inactive parties (i.e., those who do not attend the pre-trial hearing cannot seek repayment of costs later on); (v) requiring that the judgment be delivered immediately or within eight days from the conclusion of the first-instance proceedings; (vi) obliging the Court to prepare a full-length judgment only where a party files an appeal within eight days of the receipt of the short version of the judgment; and (vi) creates a new stage of the procedure where parties summarize their statements (a stage that already exists in criminal procedure). 

Another set of amendments focuses on the appeal procedure. Appellate courts often annul the first-instance judgment and return the case for reconsideration, which prolongs the procedure significantly. Pursuant to the new regulations, this will no longer be possible. The appellate court will reach its own decision and may only in limited cases return the matter to the first-instance court. Other amendments include: (i) the Supreme Court shall only accept appeals where a decision on an important legal issue is necessary (irrespective of the amount in dispute); (ii) in commercial disputes, the appellate chamber will be able to inform the appellant of its preliminary assessment of the probability of success (and if the party then withdraws the appeal, part of the court fee will be returned). These amendments aim to help the Supreme Court issue its decisions faster and play a more effective role as the creator of a uniform case-law.

In addition, Slovenian civil procedure law now provides for: (i) a cascade lawsuit, where a plaintiff first requests the disclosure of information required for substantiating the claim, and second lodges an amended claim prepared on the basis of the information obtained as a result; and (ii) different approaches for the handling of business secrets (e.g., specific parts of documents, expert review of the documents, etc.).

Finally, the amendments modernize and speed up Slovenian civil procedure by introducing electronic service of process (in circumstances beyond the enforcement procedure, where it already exists). 

Obviously, Slovenian civil procedure will change significantly. The purpose of the legislator was to modernize and speed up the procedure, and although at first glance the amendment seems well written, experts believe its implementation may, in actual practice, be unsuccessful. In particular, they point out that: (i) the material conditions for the successful implementation of electronic service of process are not ensured; and (ii) the excessive focus on speeding-up the process can have counterproductive effects. The primary concern in this latter point is that the focus on the right to a trial without undue delay may result in a violation of a right to a fair and impartial hearing and of other procedural rights. For example, it is conceivable that parties would not state all facts and evidence in their two statements prior to the preparatory hearing thinking they will do so in additional statements later on. If the judge then decides to schedule the main court hearing directly after the preparatory hearing, the parties may be left without enough time to state other facts and evidence. 

Faster civil procedures are more than welcome in Slovenia, but only time will tell if the amendments have been drafted with enough care to speed up the procedure without compromising its quality.

By Dunja Jandl, Partner, and Katja Balazic, Associate, CMS Slovenia

This Article was originally published in Issue 4.8 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

The Slovenian National Assembly adopted the Class Action Law, which will implement an important institute to the Slovenian legal system, i.e. mechanism of class action.

This mechanism is already applied in the UK, Belgium, Netherlands and Sweden, but is yet to be implemented in numerous EU member states. The new mechanism of class action will provide for the injured parties, both natural and legal persons, to file a compensation claim in case of mass harm situations. Besides a collective action for compensation, the law also provides for the possibility to file a collective action for the cessation of illegal behaviour against the infringers, as well as the procedure of collective settlement in case of mass harm events. The law will come into force on the 21st of October, 2017, while it will apply with effect from the 21st of April, 2018.

The law regulates procedures for collective redress in cases when the infringer breached consumers’ or workers’ rights, as well as rights arising from the prohibition on the restriction of competition, or rights from the financial instruments market, and in cases of damage caused by environmental accidents. The law aims to offer solutions for numerous cases of harm mass situations, in which individuals, injured by the same infringer’s act, did not seek judicial protection mainly due to the high cost and low amount of individual claims for compensation. Apart from providing for easier access to the court protection, the law also aims to stop and prohibit infringers from carrying out illegal behaviour by providing the possibility to file a collective action for the cessation of illegal behaviour against the infringers.

Court procedure under the new law can be commenced by the senior state attorney or by the private-law legal person, the activity of which is non-profit and is related to the breached right, wherein the court will assess in each case individually whether the above mentioned person is representative to start the procedure or not. An exception regarding the commencement of the court procedure applies to the consumer disputes, in which an the action for cessation of illegal behaviour of the breaching companies can be submitted only by the Slovenian Consumers’ Association, chamber, or association of companies of which the breaching company is a member. In case the company with its seat located in Slovenia breaches the rights of consumers, coming from any other European Union member state, an action against the Slovenian company can be also submitted by the organisation, established for the protection of consumers’ rights under that EU member state.

Even though the injured party will not be party to the court procedures, governed by the new law, the injured party will nevertheless have the possibility to submit comments during the procedure. After the court procedure is finished, the infringer will pay the notional amount, whether directly to the injured parties, or to the notary public, who will act as a fiduciary of the compensation in certain cases. The law also introduces a public registry of class actions, where everyone will be able to access certain documents within the individual procedures free of charge.

The aim of the new law is therefore to provide for the easier enforcement of the right to compensation to injured individuals and legal persons, while the breaching companies can also be prohibited from carrying out illegal behaviour in the future. On the other hand, the law also provides for the safeguards against abusing such court procedures by regulating the procedure, based on which the court will first – after preliminary assessing the admissibility and completeness of the action – assess whether the requirements for approval of the action exist, while only after that it will proceed with deciding on the claim. It is also important to note that it will be possible to commence a procedure under the new law in relation to the mass harm situations which occur before the new law comes into force, if the claim for compensation is not statute-barred.

By Marko Ketler, Partner / Attorney at Law in cooperation with Karanovic & Nikolic

The National Assembly of Slovenia has adopted the new Transnational Provision of Services Act regarding the posting of workers (the “Act”). The Act, which is scheduled to come into force on January 1, 2018, implements European Enforcement Directive 2014/67/EU and imposes new conditions for employers posting workers to and from Slovenia.

As defined in Article 26 of the Treaty on the Functioning of the European Union, the free movement of services is, along with the free movement of persons, goods, and capital, among the four basic freedoms necessary for the functioning of the European Union internal market. The free movement of services means that a company or a self-employed person that provides a certain service in its/his/her own country can provide that service anywhere within the EU and in any European Economic Area Member State. An employer can post an employee to another country so that he or she can, within the frame of providing that service, perform work for the employer there. If the legislation of the country of origin at the time of posting a worker to another Member State were to be used, and that legislation offered a lower level of the workers’ rights protection, this could provide a foreign service provider a competitive advantage over local service providers. Thus, the main objective of the Act is to avoid the multiplication of “letter-box” companies that use posting as a way to circumvent employment rules, and provide better protection to posted workers.

In accordance with the Act, the posting of workers from an employer registered in an EU Member State (a “Foreign Employer”) to work in Slovenia (and vice versa) is possible in one of the following ways: (1) the service is carried out on the account and under the supervision of the Foreign Employer under a contract concluded with the party for whom the service is intended; (2) the service is carried out on the basis of an act regulating the posting of workers to an institution or enterprise based in Slovenia which the Foreign Employer has a capital link with; or (3) the posting is carried out as a part of providing the work to a user with a seat or residence in Slovenia (so-called “Agency Workers”).

The Act sets the same basic conditions for Foreign Employers wanting to post workers in Slovenia and Slovenian employers who wish to post workers in other Member States. Both Foreign Employers and Slovenian employers must comply with the following conditions: (1) That employers usually do their business in the Member State of Employment; (2) that the worker being posted abroad usually does not provide services in the Member State in which the work will be carried out; (3) that employers do not violate the most important provisions of employment law regarding workers’ rights, and (4) that employers are duly registered for the services provided by the posted workers in their home States.

Employers fulfilling these conditions can obtain a so-called A1 certificate issued by the competent social security institution in the Member State of Employment. This certificate must be obtained for each individual worker by both foreign and Slovenian employers at least 30 days prior to the worker being posted abroad. It is also useful to prove in which Member State the social contributions for posted worker are being paid.

Before starting to provide services in Slovenia, foreign employers are required to register with the Employment Service of Slovenia and are required to guarantee rights to their workers for the duration of their posting in Slovenia. Such rights must be in line with Slovenian regulations and the provisions of the applicable branch collective agreements regulating working hours, breaks and rest, night work, minimum annual leave, salary, health and safety at work, special protection for workers, and equality guarantees, if Slovenian legislation is more favorable for the worker than the rights guaranteed by the Member State of Employment.

The Act also includes provisions on special subsidiary liability. If a foreign temporary employment agency does not pay wages or social contributions to its workers posted in Slovenia, then the Slovenian user is liable for these payments. Moreover, in the construction sector, if a Foreign Employer that is a direct subcontractor of a Slovenian construction company does not pay wages to its workers posted in Slovenia, then his Slovenian contractor becomes liable for the payment of the wages.

To conclude, the new Act will likely have an impact on many foreign and domestic companies which post workers to and from Slovenia. Such companies should take steps to ensure compliance with the new law.

By Branko Ilic, Partner, and Luka Jesenko, Associate, ODI Law Firm

This Article was originally published in Issue 4.6 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

On-site inspections conducted by the Market Inspectorate of Slovenia in the last decade have shown that approximately 9% of all software installed on company computers lack the necessary permission of the rightful copyright holders. At the same time, over 40% of inspected companies had at least one unlawful computer program installed when inspected. Results show that SMEs are especially prone to such practices.

Under Slovenian law merely the possession of unlawful software can constitute an infringement of copyright, provided that it is intended for commercial purposes and the holder knows or has a reason to believe that it is an unlawful copy (Article 116 (2) of Slovenian Copyright Act). 

According to case law, possession of software is deemed unlawful if the software was obtained without a legal basis (for example, a license agreement, a franchise agreement, etc.). However, if software was obtained lawfully but the legal basis has expired, the possession of the software constitutes an infringement only if the company was under the obligation to remove the software upon its expiration (e.g., if this was explicitly foreseen in the license agreement or requested by the copyright holder after expiry).

Where infringement exists, the copyright holder is entitled to request that future use be prohibited, that the software be removed from the computer, and that the judgment be published. 

Moreover, the copyright holder is also entitled to damages corresponding to the damage sustained or an appropriate license fee. If damages are claimed, general rules of damage liability apply: The copyright holder must prove all elements of damage liability, including the amount of damage sustained. 

Where the infringement was committed intentionally or by gross negligence, the copyright holder is entitled to a penalty payment amounting to up to three times the value of an appropriate license fee, even if no actual damage was sustained.

Under the Copyright Act possession of unlawful software is punishable as an offense as well. The infringing company can be fined by the Market Inspectorate. The minimum amount of this fine is EUR 1,700, and no maximum has been set. 

The Slovenian Market Inspectorate has developed a practice of carrying out inspections on random companies. Every year approximately 400 companies are informed about statutory provisions regulating the use of software and requested to provide a list of computers and installed or regularly used software. This is followed by an on-site inspection, conducted predominantly in those companies that do not respond to the Market Inspectorate’s request (27% in 2016).

In practice, however, fines are rarely imposed, as often the unlawful software is removed on-site or the infringement is remedied by acquisition of the required license following a warning or a decision issued by the Market Inspectorate. In 2015, for example, less than ten fines were imposed.

Furthermore, use of unlawful software with a value exceeding EUR 5,000 constitutes a criminal offense pursuant to Article 148 of the Slovenian Criminal Code. For legal persons this offense is punishable with a fine of up to EUR 500,000 or, if the value of the unlawful software used exceeds EUR 50,000, between EUR 50,000 and up to 200 times the value of the illegally obtained proceeds. It should be noted, however, that so far only acts of distribution of unlawful software have been prosecuted and punished, and no company in Slovenia has been convicted of the commercial use of unlawful software.

Another important aspect that should not be neglected, since it can have considerable financial consequences, concerns the security risks connected with the use of unlawful software. Users of unlawful software do not benefit from software updates, and out-of-date software is often seen as an invitation to unauthorized users (hackers) to gain access to a computer. Once access to one of the computers in a system is gained, the hacker may interfere with the operations and data of the whole system and, for example, lock and encrypt all files until a ransom is paid to recover and decrypt the files. This so-called “data highjack” is becoming more and more widespread in Slovenia. By keeping all software up-to-date, enterprises can considerably reduce the risk of such attacks, since software providers are constantly coming up with new patches, fixes, and updates to protect their software from malware breaches.

By Branko Ilic, Partner, and Neza Grasselli, Associate, ODI Law Slovenia

This Article was originally published in Issue 4.5 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.