Category: Slovenia

ODI Law has advised German Katera Beteiligungs-Verwaltungsgesellschaft P11 mbH on its acquisition of an 87,58% shareholding in Nama from Zavarovalnica Triglav and Generali. Senica & Partners advised Zavarovalnica Triglav on the deal.

According to ODI, Nama manages more than 25,000 square meters of real estate in six locations, including the Nama department store in Ljubljana. The company’s shares are listed on the Ljubljana Stock Exchange. Katera has already published an intention to initiate the mandatory takeover bid for the remaining shares.

The ODI team was led by Partner Primoz Mikolic and included Partner Tine Misic and Associates Milan Stankovic and Eva Hafnar. 

The Senica team included Partner Ales Lunder, Senior Associate Marko Ojstersek, and Associate Tilen Kosec.

Editor’s Note: After this article was published, Fatur Menard informed CEE Legal Matters that it advised Katera as well, including on the subsequent takeover bid (reported by CEE Legal Matters on July 30, 2024). The firm’s team included Partners Maja Menard and Lovro Jurgec and Attorneys at Law Helena Belina Djalil and Martin Carni.

On 22 February 2024, the government adopted a proposal for a new Act on Judicial Protection Procedure for Former Holders of Qualified Liabilities of Banks (“ZPSVIKOB-1 Proposal”),the purpose of which is to eliminate the identified unconstitutionality of the previous Act (“ZPSVIKOB”) and to finally appropriately regulate the procedure under which former holders could claim compensation for the controversial decisions of the Bank of Slovenia on the cancellation of their qualified liabilities in 2013.

The adoption of the ZPSVIKOB-1 Proposal represents a new chapter in the long-standing process of resolving the above-mentioned issue, which follows the finding of the unconstitutionality of the previous legal bases for seeking compensation by former holders, first in the Constitutional Court’s decision No. U-I-295-13 of 19 October 2016, and then in decision No. U-I-4/20-66 of 16 February 2023. In the latter decision, the Constitutional Court annulled the ZPSVIKOB for imposing the burden of payment of compensation on the Bank of Slovenia, which constituted, inter alia, unconstitutional interference with the funds of its general reserves and (in part) a violation of the prohibition of monetary financing. In this decision, the Constitutional Court expressed the principled view that the economic burden of compensation should be borne by the state.

The ZPSVIKOB-1 Proposal takes into account the guidance of the Constitutional Court and regulates in a specific way the liability for damages, the possibility of reimbursement from a special compensation scheme and introduces a number of procedural solutions in court proceedings with the aim of relieving the burden on the courts. Overall, we consider the new provisions to be beneficial for former holders of qualified liabilities, who will be better able to obtain (at least partial) compensation for damages under the proposed new law. However, we also draw attention below to certain controversial provisions that could potentially lead to a new assessment of the constitutionality of the law before the Constitutional Court.

1. LIABILITY FOR DAMAGES UNDER THE ZPSVIKOB-1 PROPOSAL

The ZPSVIKOB-1 Proposal explicitly provides that compensation under the law is to be paid by the Republic of Slovenia, which in turn has a recourse claim against the Bank of Slovenia for any part of the damage attributable to the Bank of Slovenia’s breach of due diligence in enacting the disputed extraordinary measure.  Despite the State’s liability to pay damages, the ZPSVIKOB-1 Proposal maintains the Bank of Slovenia as the defendant in the actions for damages, thus asserting a bifurcation of the actual and legal liability to pay damages, which the Constitutional Court found potentially problematic.

Although this is not explicitly stated in the ZPSVIKOB-1 Proposal, there is no doubt that it establishes (or maintains) the principle of strict liability for the payment of damages, in accordance with the positions expressed by the Constitutional Court in its decisions. The main principle that will be taken into account in assessing whether an individual former holder is entitled to compensation is the “no creditor worse off” principle, according to which no creditor should have suffered a greater loss as a result of the extraordinary measures than it would have suffered in the event of the bank’s failure. Due to the strict (objective) nature of the liability for damages, the former holders will only have to prove the existence and the amount of the damage (in light of the above principle), and the causal link between the action of the Bank of Slovenia and the damage.

2. PRELIMINARY OPINION AND COMPENSATION SCHEME

The possibility of setting up a compensation scheme through which former holders could obtain reimbursement of up to 60% of the established damage has attracted the most public attention in relation to the new law. The compensation scheme would be subsequently established by a government decree, subject to a preliminary opinion by a group of independent experts concluding that (at least some) former holders would have received payment as a result of their holdings of the cancelled financial instruments, if the measure had not been imposed. The court may only appoint a group of experts based on a proposal from the Republic of Slovenia, the Bank of Slovenia or a non-profit representative interest association acting in the interests of the former holders.

On the basis of such a preliminary opinion, the government will specify in the decree that an individual former holder may be entitled to a maximum of 60% of the value of the damage and will also specify the method of payment. We note here that even in the context of a compensation scheme, “damages” would denote the amount that the holders would receive in the absence of the extraordinary measure and not (necessarily) the face value of the instrument itself at the time of cancellation. Repayment under the compensation scheme is voluntary, and an individual will be able to refuse payment under the scheme and seek full compensation through the courts. It will also be possible to seek redress through the courts for those former holders for whom the preliminary opinion will be negative – they will however be at a disadvantage in the court proceedings, due to the rule that the court takes into account the preliminary ruling (more on this below).

3. PROCEDURAL SOLUTIONS FOR JUDICIAL PROCEEDINGS

In addition to the procedural solutions already contained in the previous law (mandatory joinder of lawsuits and a common judgment on the merits), the ZPSVIKOB-1 Proposal also introduces the possibility of collective actions for the purpose of more efficient litigation and prescribes the use of sample proceeding rules for the conduct of joined lawsuits. The court will issue a call for collective actions, which may be filed by an eligible plaintiff (with exemption from court fees) within a further two months, for all claims arising from the same decision of the Bank of Slovenia. The plaintiffs for the collective action are representative associations of former holders, and the law provides for the mandatory application of the “exclusion system” – all relevant former holders who do not declare in writing to the court their opposition to being included in the collective action within 30 days from the date of the court’s order approving the collective action will be included in the collective action. All former holders who are included in the collective action will lose their right to bring an individual action for damages.

In the event that collective actions for damages are not filed or approved, the ZPSVIKOB-1 Proposal maintains the solution from ZPSVIKOB on the consolidation of lawsuits according to the individual decision of the Bank of Slovenia, whereby the action of one plaintiff also has an effect on all other plaintiffs, if such action is to their benefit. The court will first issue a consolidated judgment on the merits, in which it will determine the extent to which there is an obligation to compensate damages under the individual orders of qualified liabilities, and then it may bifurcate the lawsuits, whereafter the plaintiffs must specify the amount of their claim no later than one month from the date of service of the final judgment on the merits, if this was not specified earlier. A plaintiff shall be entitled to damages up to the amount of the value at which he acquired each qualified liability or, in the case of shares, up to the amount of the book value of the shares before cancellation. The amount of compensation will bear interest from the date of the Bank of Slovenia’s decision until payment, but at a lower rate than the default interest rate.

With regard to establishing the existence and amount of damage, the proposal takes into account the views of the Constitutional Court in its decision U-I-295-13, i.e. the burden of proof will be reversed, which requires, inter alia, that the Bank of Slovenia proves that, when adopting the contested measure, it ensured that the individual creditors did not suffer greater losses as a result of the termination or conversion of the bank’s qualified liabilities than they would have suffered in the event of the bank’s bankruptcy. If the Bank of Slovenia fails to meet this burden of proof for an individual claimant, the application of the “no creditor worse off” principle will also indirectly result in proof of damage. As regards defining the amount of the claim, in addition to the possibility of determining the amount of damages at a later stage, the ZPSVIKOB-1 Proposal includes extensive provisions on access to information. 

4. CONTENTIOUS PROVISIONS and CONCLUSION

At a general level, the exclusion of the possibility of using other grounds for liability for damages is controversial from the point of view of the right to compensation (Article 26 of the Constitution of the Republic of Slovenia). Additionally, the search for a representative organisation that could initiate the preliminary opinion procedure and/or bring a collective action on behalf of the former holders is also expected to be complicated. In the area of qualified holders, there is arguably currently no such organisation, and the pool of former holders is markedly heterogeneous, ranging from natural persons to Qualified Financial Organisations.

In relation to the compensation scheme, we highlight the broad nature of the provisions and the limitation of the compensation paid to all categories of former holders in the relatively low amount of no more than 60% of the damage suffered. The highly favourable procedural provisions in court proceedings also raise the question of the advisability of accepting compensation from the scheme. The ZPSVIKOB-1 Proposal provides that in court proceedings the court shall take into account the preliminary opinion and may only appoint “its own” expert if the factual situation is not clarified, even after supplementing and questioning the experts already appointed. Consequently, if the preliminary opinion establishes that the former holder has suffered damages, such holder would, due to the strict (objective) nature of the liability, very likely be successful in the court proceedings as well, since the main presumption of damages under the law will thus be proven, and in the court proceedings he could be compensated for the entire amount of the damage, instead of only 60%. In practice however, it is to be expected that former holders will nevertheless opt for payments from the compensation scheme for reasons of speed and certainty of payment.

As regards the collective actions, a dispute may arise as to the acceptability of the mandatory application of the “exclusion principle” in contravention of the general rules of collective action under the ZKolT, which is potentially controversial from the perspective of the right to judicial protection. In individual litigation, the compulsory consolidation of lawsuits and the applicability of the judgment on merits to all plaintiffs of the same order may prove controversial. This raises questions about possibly going against the rule that res iudicata extends only to the parties to the litigation, and about practical difficulties for the court, which will have to assess for each individual action of a one claimant, whether or not it benefits other claimants. The limitation of the amount of compensation and the fixing of the interest rate as provided for in the Proposal may also be controversial in view of the Constitutional Court’s emphasis that former holders are entitled to full compensation.

If adopted, the ZPSVIKOB-1 Proposal may be a way for former holders to finally, after 11 years, obtain the possibility to (partially) recover their investments. However, additional patience will be required to resolve their claims; despite a number of new procedural institutes, the adjudication of the defined claims must be individually resolved for each former holder, which, given the expected multiplicity of claims (there are more than 100,000 former holders), may lead to court congestion and backlogs. Former holders can opt instead for payout from the compensation scheme. However, given the disagreement of some former holders with the proposed limitation of the amount of compensation from the scheme to 60% of the damages, there is a real possibility that the law will be challenged again before the Constitutional Court. We will therefore likely still have to wait for an epilogue to the story.

By Luka Hribernik, Associate, Jadek & Pensa

Jadek & Pensa Senior Partner and Head of the Transaction Unit Ozbej Merc talks about the evolution of the banking sector and their role as legal advisors in Slovenia over the last 10 years.

CEELM: Over the last ten years, what types of banking/finance deals and projects have kept your team the busiest in the banking and finance sector? How has that focus evolved over the past decade?

Merc: If I look at the past ten years, there were two significantly challenging periods in Slovenia. The first stemmed from the lingering aftermath of the 2009 financial crisis, marked by ongoing refinancing concerns. Subsequently, there was a resurgence of refinancings of some of those same deals, that coincided with the wave of COVID-19, similar to the challenges faced from 2011 to 2015.

Additionally, in the banking sector, there was a wave of consolidation in the past five to ten years, with many banks streamlining their operations and selling off non-performing loan portfolios. Among the notable transactions, Nova KBM acquired Abanka, which was subsequently acquired by OTP to form a joint entity. Additionally, local bank Sberbank, a subsidiary of Sberbank Austria, underwent forced disposal and was acquired by NLB over the course of a weekend, following the developments with EU sanctions on Sberbank of Russia.

Another highlight of the last few years has been an ongoing dispute regarding the wipeout of subordinate noteholders and shareholders of Slovenia’s largest banks in 2013. This led to legal challenges from affected parties, legislative interventions, and disputes between the Slovenian Government and the Bank of Slovenia on who should bear the ultimate responsibility arising from these disputes, adding complexity to the process. Although these events caused some turbulence, they did not significantly stress the banking sector.

CEELM: Can you pinpoint the most intense periods your team has faced in the banking and finance sector over the last ten years? What factors do you believe led to these particularly challenging times?

Merc: Despite the challenges described above, noteworthy developments emerged in the bond market. Notably, real estate bonds and public bonds, particularly those issued by states for retail investors, gained prominence. This shift was highlighted by the emergence of individuals investing in state-issued retail bonds (people’s bonds), marking a recent but relatively modest development, totaling only EUR 250 million, as the state cautiously tested the waters.

Similarly, the COVID-19 pandemic coincided with a surge in refinancing activities, particularly for deals structured over five to seven years. Although the pandemic created significant economic disruptions, it did not escalate into another full-blown crisis, largely due to substantial government intervention, often referred to as helicopter money. Despite the challenges posed by both the previous financial crisis and COVID-19, the economy navigated through without succumbing to another crisis and recovered quite quickly following the initial shocks produced by lockdowns and the restrictions associated with them.

CEELM: How have the profiles of clients in the banking and finance sector evolved over the last decade?

Merc: Clients in the banking and finance sector have become more sophisticated, handling more tasks in-house. There’s been a noticeable increase in demand for tax advice, indicating a rise in sophistication and the intertwining of banking, finance, and tax considerations – something that was not a market characteristic ten years ago.

Moreover, despite Slovenia’s small market, there has always been a significant pour-in of foreign-origin clientele, with external players continuing to look into the market. This is evident from actions like the OTP’s purchase of one of the two largest domestic banking institutions as well as massive foreign involvement in bond issuances – NLB had its IPO in 2018 and is now listed on the London and Ljubljana Stock Exchanges, following the largest-ever Slovenian public offering at the time.

CEELM: Regarding client expectations, what new demands do you see emerging in the banking and finance sector? Conversely, which aspects do you think have diminished in significance over time?

Merc: Client expectations in the banking sector have not seen significant changes. I believe that banking still remains quite a conservative sector in Slovenia. Banks in Slovenia act with prudence and are additionally subject to at times difficult to manage regulatory restrictions. In addition, they are not, in the broader EU/world market, among the largest players. A larger movement in banking practices is more likely to come from market leaders in a larger EU market.

Even with banks becoming more sophisticated and doing much of the work in-house, the essence of banking has stayed consistent, with a focus on traditional services despite the internal shifts towards more advanced operations. AI, despite seemingly pervasive everywhere, has (in my opinion correctly) not found its way into banking in Slovenia just yet.

CEELM: From a legislative and regulatory standpoint, what recurring challenges has your team encountered in facilitating deals and projects? How have these challenges evolved over the past decade?

Merc: The banking sector has faced a more conservative approach in regulatory measures, with banks being subject to growing restrictions on retail lending for example, and capital maintenance rules becoming stricter. Capital maintenance has been a persistent legal theme in financing arrangements, with courts restricting more and more what is considered permitted, and even some criminal penalties being on the table now for violations of capital maintenance rules.

There is a saying over here that “we change our laws a lot,” meaning that there is a constant wave of updates – be it to laws or overall compliance regulations. For instance, there’s been an increase in licensing requirements and restrictions in areas like consumer loans and NPLs, which form a significant portion of the market.

CEELM: Looking ahead, what do you anticipate being on the horizon for the banking and finance sector? What might be the focal points in a similar interview a decade from now, and how do you foresee the industry evolving?

Merc: If I had been looking ahead ten years in 2014, I don’t think that I could have anticipated any of the changes that have transpired since then. Looking ahead, I expect that the banking and finance sector will become more regulated, with potential developments in digital currencies gaining a more significant role, though predicting this is challenging.

Interestingly, there are discussions underway about enshrining the right to cash in the constitution. While there’s a clear push towards digitization, there’s also a strong opposing sentiment advocating for the preservation of physical cash and the right to privacy, resisting constant surveillance and complete transparency.

Jadek & Pensa is CEE Legal Matters’ Practice Leader for Banking & Finance in Slovenia for 2024 – learn more here.

Former ODI Law Partner and Head of Transactions Suzana Boncina Jamsek has launched BJK Law, a specialist boutique law firm in Ljubljana.

BJK Law focuses on the Banking & Finance, Corporate & M&A, Restructuring & Insolvency, and Real Estate practice areas. Before establishing her new firm, Boncina Jamsek spent almost nine years with ODI Law, joining as a Senior Associate in 2015, becoming the Head of Banking and Finance in 2016, making Partner in 2019, and finally being appointed Head of Transactions in 2023. Earlier, she spent six years with the Bank of Slovenia, as an Analyst and then as a Legal Counsel.

“We specialize in providing legal services for complex business transactions, in particular banking & finance, and corporate transactions, including M&A, restructuring, capital markets, EU law, and competition law,” Boncina Jamsek commented. “The firm is committed to sustainable development and takes a problem-solving approach: we strive to provide legal expertise, commercial insight, and business foresight.”

Cerha Hempel has announced it is expanding into Slovenia through a new cooperation with Ulcar & Partnerji as of March 1, 2024.

Specializing in M&A, corporate law, banking and finance, employment, antitrust and competition, and dispute resolution, the Slovenian team will operate under the Cerha Hempel Ulcar & Partnerji brand going forward.

“This strategic partnership with one of the most renowned corporate law firms in the CEE region marks a significant milestone for us and is proof of the quality, dedication, and hard work our team has consistently demonstrated over the years,” Ulcar & Partnerji Managing Partner Matjaz Ulcar commented. “For our clients, the collaboration with Cerha Hempel means access to an even broader spectrum of legal expertise, resources, and solutions that are tailored to meet their diverse needs. It will also open new avenues to serve an expanded client base, particularly in the Adriatic region.”

Partners Jan Sibincic, Matic Novak, and Nina Cuden have recently announced the launch of their new firm: Sibincic Novak & Partners has opened its doors in Ljubljana.

According to the announcement, Sibincic Novak & Partners was “founded by a split-off from the law firm Sibincic Krizanec Novak, with which we shared a wealth of experience and expertise during the past decade, and now Partners Jan Sibincic, Matic Novak, and Nina Cuden are embarking on a new journey.”

The practice of Sibincic Novak & Partners will continue to focus on the challenges of commercial law, “from all forms of business acquisitions and disposals, status transformations to take-overs, international transactions, and corporate finance,” as well as judicial and administrative proceedings and alternative dispute resolution procedures.

Sibincic, the new firm’s Managing Partner, has previously been at the helm of Sibincic Krizanec Novak, where he spent more than 11 years. Before that, he spent two years with Strazar Sibincic and Carotta, and two more with Simic & Partners.

Novak, a Senior Partner, previously spent almost three years with Sibincic Krizanec Novak, starting in 2021. Earlier, he spent 12 years with Rojs Peljhan Prelesnik & Partners, starting as an Attorney Trainee in 2008 and making Partner in 2015.

Cuden, a Partner, spent almost six years with Sibincic Krizanec Novak, joining in 2018 and making Partner in 2020. Before that, she spent a year as a Senior Lawyer with UniCredit Banka Slovenija, and almost four with Ulcar & Partnerji. Between 2013 and 2014 she spent a year as a Judicial Intern with the Higher Court of Ljubljana.

In a recent update to the VAT Act in Slovenia, notable amendments have been introduced, particularly focusing on services in the public interest. Article 42(1)(5) of the VAT Act has changed, emphasizing VAT exemptions exclusively for services provided within activities deemed in the public interest.

The amendment concerns exempt services in the public interest, as Article 42(1)(5) of the VAT Act has been amended.

The provision of Article 42(5)(1) of the VAT Act has been supplemented by adding that VAT is exempted on services supplied by independent groups of persons to their members whose activities are exempt from VAT or are non-taxable and which are directly intended for the pursuit of their activities, provided that such groups only require their members to pay their share of the total costs and that such exemption is not likely to lead to distortions of competition. Under the new provision, only services provided in the context of an activity in the public interest will be exempt.

Other changes concern payment service providers, who have to report to the Slovenian Tax authority from 1 January 2024 if a payee in Slovenia receives more than 25 payments from abroad in a calendar quarter. The purpose of this provision is to detect providers of distance sales of goods who do not pay VAT in the relevant country.

In Slovenia, payment service providers are obliged to report to the Slovenian Tax authority, which will be in electronic form, if sellers in Slovenia receive more than 25 payments from abroad in a calendar quarter. In this way, it will be possible to identify sellers based in Slovenia who receive payments from abroad related to the distance sales of goods. This information will be exchanged between our Tax authority and foreign institutions. After the exchange, the foreign tax administration will probably check whether the payments received in Slovenia relate to the distance sales of goods. If an entity from Slovenia is distance selling to an EU country and should have identified itself for VAT purposes, but did not, the new CESOP (the EU’s new Central Electronic System of Payment information) reporting will make it easier to detect it and collect the relevant VAT from it.

The information in this document does not constitute legal advice on any particular matter and is provided for general informational purposes only.

By Igor Angelovski, Partner, and Marusa Pozvek, Tax Law Expert, Ketler & Partners, member of Karanovic & Partners

Masa Kramar, Eva Rop, Matija Urankar, and Marusa Senica have all been promoted to Partner positions with the Senica law firm in Ljubljana.

Kramar has been with the firm since 2018, when she joined as an Associate. She became a Senior Associate in 2020. She is an expert in civil and commercial law.

Rop, a crimial law expert, has been with the firm since 2016, first joining as a Junior Associate. She became an Associate in 2019 and a Senior Associate in 2020.

Urankar is an expert in constitutional and public Law. He has been with the firm since 2015, initially joining as a Legal Clerk. He became a Junior Associate in 2016, an Associate in 2019, and a Senior Associate in 2020.

Marusa Senica serves as a Member of the Senica Board of Directors and as the firm’s Executive Director. She is also the CEO of Andersen in Slovenia. She has been with Senica since 2020.

“We are pleased to announce the addition of our new partners to the Senica team,” Founding and Managing Partner Miro Senica commented. “These exceptional lawyers have been instrumental in enhancing our firm’s reputation for excellence and have played a vital role in mentoring our team. Their unwavering commitment to excellence and upholding our core values is evident in everything they do. Congratulations to our new Partners, and we look forward to continuing our journey together towards greater heights and successes.”

Wolf Theiss has advised joint lead managers Barclays, BNP Paribas, Deutsche Bank, Erste Group, Goldman Sachs Bank Europe, and Nova KBM on the Republic of Slovenia’s EUR 1.5 billion Reg S note issuance.

The notes are due 2034. “Slovenia sets the pace by issuing the first sovereign EUR-denominated notes in 2024, making effective use of the liquidity in the market,” the firm announced.

The Wolf Theiss team included Partners Klemen Radosavljevic and Markus Bruckmueller and Associates Matej Kraner and Nina Gantar.

Kinstellar and Kavcic Bracun & Partners have advised Slovenia’s Nova Ljubljanska Banka banking group on the acquisition of SLS Holdco and its subsidiaries from funds managed by affiliates of Apollo Global Management and the European Bank for Reconstruction and Development. 

SLS Holdco is the parent company of Summit Leasing, a provider of car financing in Slovenia. The transaction remains contingent on regulatory approval.

According to Kinstellar, “the acquisition would make NLB the first and only financial institution in the region to cover all leasing markets of the former Yugoslavia. Summit Leasing has a vast network of over 750 dealers in Slovenia and Croatia, as well as over 550 points-of-sale in consumer finance in Slovenia. At the end of 2022, Summit Leasing managed approximately 140,000 outstanding financing contracts with over 110,000 customers.”

The Kinstellar team included Partner Emre Ozer and Associate Bianka Kovac.

The Kavcic Bracun & Partners team included Managing Partner Matej Kavcic and Partner Aleksandra Mitic.

The firms did not respond to our inquiry on the matter.