Category: Slovenia

Picture a situation where a company divests a part of its business to create a new company. Employees are transferred to the spin-off company too. Based on Article 75 of the Employment Relationship Act (ZDR-1), the provisions on the transfer of an undertaking (change of employer) then apply. The article governs the joint and several liability of both the transferor and transferee company; however, it limits liability solely to the claims of employees who were actually transferred.

So, what happens to those claims from employees whose employment with the transferor company terminated before the transfer, i.e. before the division was entered in the court register?

In September 2021, the Supreme Court addressed such a case. The lower courts decided that the transferee company is severally and jointly liable and ordered it to pay the amounts the employee had claimed. The decision hinged on the assessment that the spin-off contract saw all the parent company’s rights and obligations arising from the transferred assets transferred to the spin-off company – the employee’s employer.

However, the lower courts did not rely on Article 75 of the ZDR-1 when reaching this decision, but on Article 433 of the Obligations Code. The latter regulates the liability of the person to whom all or part of a property passes under a contract. It stipulates that such a person is jointly and severally liable together with the former property holder for the debts related to the whole or part, but only commensurate with the value of its assets.

The spin-off company contested this decision before the Supreme Court, questioning whether the lower courts had acted lawfully when applying Article 433.

The spin-off company argued that the ZDR-1 provisions are more specific (lex specialis) and thus that Article 433 is inapplicable. It further argued that if the court deemed that the ZDR-1 could not be applied either, then the Companies Act (CA) would apply.

While the Supreme Court agreed that the ZDR-1 provisions are more specific, it also stated that Article 75 of the ZDR-1 does not address the issue at hand and cannot, therefore, be applied.

But, according to the Supreme Court, Article 433 cannot be applied either. Even though the business was transferred contractually, the provisions in question cannot be applied because the contract is a spin-off of the company contract, which represents an instance of company law and is therefore regulated by the CA (again, the lex specialis).

Article 636 of the Companies Act stipulates that for all liabilities of the company incurred up until the division is entered in the court register, in addition to the spin-off company to which the division plan allocated the obligations, each other company participating in the spin-off is jointly and severally liable, commensurate to the asset value allocated to it in the spin-off plan, less the obligations assigned.

The spin-off company mistakenly thought that according to Article 636 it was only liable for the assets transferred to it in the spin-off plan and not also for the assets not assigned to it from which it hoped to be exonerated. The liability under Article 636 of the CA is broader, covering joint and several liabilities for all the obligations that occurred prior to the entry of the division in the registry, including the obligations not assigned to the spin-off company.

As the court rightfully established, the liability remains for the spin-off company, regardless of whether the CA or the Obligations Code is applied; the only difference is in the extent of the liability.

We pondered how the spin-off company could avoid liability for such claims. Considering that, pursuant to Article 636 of the CA, the spin-off company is only jointly and severally liable for the obligations incurred until the division is entered in the court register, we wondered what would transpire if the termination notice was given to the employee after such event. Unfortunately, this would not help when dealing with an employee involved in the spun-off business activity. If such an employee was not transferred and then later terminated by the mother company, it is very likely that the employee could make a successful claim for unlawful termination and would thus end up employed by the spin-off company. However, this particular option can be explored for an employee who is not part of the spun-off business and thus not part of the transfer.

By Amela Zrt, Head of Employment, CMS

This Article was originally published in Issue 8.12 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Ketler & Partners, a member of Karanovic, has advised KraftPal Group on its EUR 122.9 million equity investment from Pasaca Capital. Reportedly, UK-based Ignition Law, Austria-based Herbst Kinsky, and Finland-based Lexia advised KraftPal Group as well, with Novak Law Firm and Jerovsek Malis advising minority owners.

Primarily focused on equity investments, Pasaca targets innovative technologies and products and helps them with increasing commercial values. Pasaca currently has offices in the US, Hong Kong, Singapore, mainland China, and Europe.

KraftPal is a manufacturer of corrugated cardboard pallet units that meet industry standards of legacy wooden pallets.

Karanovic & Partners did not reply to our inquiry on the matter.

Jadek & Pensa has promoted Janja Zaplotnik to Equity Partner.

Zaplotnik is a competition law, state aid, and business compliance specialist. She started her career in 2012 when she joined Jadek & Pensa as an Associate. In 2014, she was promoted to Attorney.

Zaplotnik obtained her LLM degree from King’s College London in 2012. She also has an LLB degree from the University of Ljubljana, Faculty of Law.

The same promotion round saw Daniela Sindicic and Aljaz Jadek promoted to Managing Associate.

Editor’s Note: This article originally erroneously reported that Zaplotnik was promoted to Partner rather than Equity Partner. It has been corrected to reflect her promotion accurately and we apologize for the error. 

Former CMS Partner Ales Lunder has joined Senica & Partners as Partner.

According to Senica & Partners, Lunder, a corporate and M&A expert, will be “active in M&A, Corporate, Restructuring and Insolvency, Banking and Finance, and Capital Markets” departments.  

Before joining Senica & Partners, Lunder spent over 14 years with CMS, the local office of which he co-founded in Slovenia. Earlier to that, he spent five years as a Partner with Schoenherr’s Slovenia office, which he helped co-found as well. Earlier still, he was a Partner with Thorn & Lunder between 1996 and 2001, an Associate with Scheele, Schwartz, Zielcke & Partner between 1994 and 1996, and an Associate with Zahorka & Partners between 1991 and 1994.

He studied law at Heidelberg University and the University of Tubingen.

Ketler & Partners, a member of Karanovic, has advised Invera Equity Partners on its acquisition of a 58.2% stake in Marles Hise Maribor. Rojs, Peljhan, Prelesnik and Partners reportedly advised Marles on the deal.

Invera Equity Partners is a private equity fund manager with offices in Croatia, Bosnia & Herzegovina, and Slovenia.

Marles is a Slovenian manufacturer of custom-made prefabricated houses.

Ketler & Partners’ team included Senior Partner Marko Ketler, Senior Associates Petra Lipovsek and Ziva Nucic, and Junior Associate Monika Jejcic.

RPPP’s team included Senior Partner Grega Peljhan and Senior Associate Urh Sustar.

Sanja Vujanovic has been promoted to Partner and Head of the Litigation and Dispute Resolution practice, while Teja Podrzaj has become Partner and Head of the Employment and Commercial Law practice at Sibincic Krizanec.

Vujanovic specializes in corporate and commercial dispute resolution, employment law, and real estate. She joined the firm in 2018 as a Senior Associate. Before that, she spent over three years with Ulcar & Partners as a Senior Associate, between 2015 and 2018. Vujanovic also worked for the Csipo and Kozamernik Law Office, having first joined as Junior Associate, in 2009, and being promoted to Associate, in 2010, and Senior Associate, in 2012. Prior to that, Vujanovic was a Junior Associate with the Markelj Cebular Law Firm, from 2006 to 2009.

Specializing in commercial and employment law and dispute resolution, Podrzaj joined the firm in 2020 as a Senior Associate. Prior to that, she worked at Selih & Partnerji as a Senior Associate, from 2016 to 2017, and as Attorney-at-Law, between 2017 and 2020.

“We consider this promotion as a great responsibility towards our clients and our team,” Vujanovic and Podrzaj commented. “We will aim towards continuous professional growth and an even more vibrant practice.”

Challenges to COVID-19-related regulations, needed tax, healthcare, and pension reforms, a busy M&A market, and questions related to future public spending are at the top of the agenda for lawyers in Slovenia, according to Selih & Partnerji Partner Jera Majzelj.

In terms of legislative updates, she points out that “like elsewhere, one of the most controversial topics in 2021 has been and continues to be COVID-19-related regulations. Many of these laws have been challenged in the Constitutional Court of Slovenia for violation of constitutional rights.” In addition, she says that “the parliament recently adopted a new Debureaucratization Act aiming to reduce bureaucratic procedures, while the government established a new office for digital transformation. Both topics are vital, however, the effect of these changes remains to be seen.”

According to her, “there is a high demand for more significant reforms in relation to taxes, the healthcare system, and pensions. Companies have long expressed their concerns on issues such as lowering the taxation on salaries and bonuses, while the general public is concerned with the long-term sustainability of and access to the healthcare and pension systems, but we have not seen any real change so far.”

Majzelj says that “from an M&A perspective, Slovenia joins the global trend of a booming market in 2021, with a number of big transactions, as well as increased activity in small and mid-sized companies. For instance, consolidation on the banking market continued when Hungarian OTP Bank signed a deal to purchase one of Slovenia’s biggest banks – Nova KBM. OMV’s sale of service stations business to MOL is another major deal to mention.” According to her, other notable deals were acquisitions of private medical centers by insurance companies and funds, as well as acquisitions in the IT and digital sectors.

Majzelj notes that last year’s GDP growth was quite high: “According to the Bank of Slovenia estimates, GDP increased by 6.7% last year. In 2022, the bank forecasts a slower 4% growth.” According to her, “this growth fuels a record employment rate. In addition, people have accumulated savings during the onset of the pandemic. During this time, interest rates were low, enabling people to borrow money and invest, for instance, in the real estate market, where prices are soaring.” She highlights that “the state has also been generous with providing subsidies. Accordingly, we are seeing an increase in both private and public spending.”

In terms of public spending, one of the biggest challenges is the allocation of subsidies and funds received from EU sources. “There’s a general worry that the funding received through EU recovery plans will not be used for strategic investments, digitalization, and green sustainable and innovative projects, but rather go into traditional infrastructure projects and maintaining the status quo,” she says, concluding that the new government will have to address these challenges in the future.

Former Senior Associates Maja Subic and Katarina Mervic have been promoted to Partner at Senica & Partners, Andersen Global’s Slovenian member.

Subic works on corporate and commercial dispute resolution, M&A, competition & antitrust, and public procurement matters. She joined the firm in 2011, as a Junior Associate, and was later promoted to Associate and Senior Associate, in 2014 and 2016, respectively. Since 2020, she has also led one of the firm’s Commercial Law service lines.

Mervic focuses on criminal law. She joined Senica & Partners in 2014 as an Associate. In 2015, she was promoted to Senior Associate. Since 2020, she has led the Criminal Law service lines at Senica & Partners. Prior to joining the firm, she was a Judicial Clerk with the Ljubljana District Court, between 2013 and 2014, and a Junior Associate with Gregor Zupancic, between 2012 and 2013.

“I am honored to be promoted to partner at Senica & Partners,” Mervic commented. “I couldn’t have accomplished this without my colleagues and great mentors supporting and working alongside me.”

When in September 2020 the Slovenian government decided that price control measures in the fuel products market were no longer necessary and fully liberalized the market, one of the expected benefits was a positive impact on the price competition.

What Used to Be Transparent, No Longer Is

Fuel vendors immediately reacted by announcing that liberalization would lead to a rise in fuel prices due to an increase in margins. Although no in-depth analysis on the price movements of fuels on the Slovenian market is yet available, consumers observed a surprising decrease in price transparency. What used to be transparent and easily identifiable, with prices displayed on signs right next to the petrol stations, can now only be found on online price information sources.

Slovenian Competition Protection Agency Not the Right Address

The public outrage and press coverage even triggered a statement of the notoriously silent Slovenian Competition Protection Agency. I fully agree with the Agency’s statement that they are not a “security mechanism” for transparent pricing. In such a dynamic market, which is highly dependent on international fuel industry trends, price fluctuations on the Slovenian market do not in themselves directly generate competition law concerns. As long as the price of motor fuels is freely determined on the market and does not result from any restrictions, distortions, or hindrance to competition, there should be no reason for any raised eyebrows. However, the obvious question of whether this non-transparency fosters or hinders price competition remains open.

In general, the world of perfect competition is one in which the consumer has all the information necessary to make a decision. No doubt, consumers can use the internet to compare prices and other factors and make informed decisions based on them. But, in concentrated markets, information exchange and increased price transparency can also bring about anticompetitive effects. Information exchange can constitute a concerted practice if it reduces strategic uncertainty in the market and hence facilitates collusion – assuming the data exchanged is strategic. Competitors are better able to understand the dealings and tactics of rivals and adapt to each other’s behavior. Therefore, when assessing the competition risks of information exchanges, two points have to be considered: a) the information itself or rather the benefits of such information to the enterprise, the competitor, and consumers; and b) the likelihood that disseminating information facilitates tacit collusion.

Why Would Publishing Prices on Signs Next to Slovenian Gas Stations Ensure Fair Competition?

The legal theory view that open access to information promotes efficiency in the marketplace and is unlikely to facilitate tacit collusion promotes the notion that the public dissemination is pro-competitive. However, such a scenario is only possible in a market filled with competitors, low entry barriers, and other aspects that make tacit collusions unlikely – in other words, not the Slovenian fuel market. There is an inherent risk that in tight markets with fewer competitors the risk of common understanding and coordination between competitors is high and might easily result in simpler monitoring of deviations. That is, the increased transparency and exchange of information is more likely to cause restrictive effects on competition than in looser markets.

It is fair to say that publishing prices and thereby sharing and keeping information transparent is generally valuable to customers, but, while it may promote marketplace efficiencies, it may also facilitate tacit collusion.

The dissemination of information entails both pro- and anti-competitive elements. Keeping in mind that in the past the agency raised concerns about market activities, it is likely there will be future inquiries. However, what the benefit for the consumer will be is yet to be seen.

Regardless of what the theoretical prevailing opinion is, the fact that the agency was forced to react to the call of consumers should make the fuel vendors think about their next steps. Companies active in the field should take measures to ensure their internal procedures are in line with competition law and that their upcoming price decisions are based on competitiveness alone.

By Ales Lunder, Partner, and Robert Kordic, Associate, CMS

This Article was originally published in Issue 8.9 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

In view of the upcoming parliamentary elections competition among the political parties is intensifying, while the Slovenian economy struggles to recover, according to CMS Partner Ales Lunder.

“Slovenia’s president has recently announced the date for the next parliamentary elections, which will be held in April 2022,” Lunder reports. According to him, certain political tensions are characteristic of this process. “The recently leaked recordings involving Environment Minister Andrej Vizjak are the source of additional tensions. The recordings reportedly date back to 11 years ago and imply that Vizjak, a close ally to the Slovenian prime minister, was allegedly encouraging tax evasion and referring to his potential influence on judges,” he says. “While the legality and authenticity of the recordings can be challenged, they still raise doubts about respecting the rule of law by major influential politicians of the country.”

“In addition to that, last week, the prime minister’s party started an assault on the energy sector by dismissing, in an apparently coordinated action, three CEOs of state-owned energy companies,” Lunder notes. “These developments create an unpleasant political atmosphere, indicating that political parties are interfering in the economic sector out of predominantly political reasons. The notion of ‘corporate governance’ seems to be alien to both ruling and opposition parties in Slovenia,” he adds.

“In terms of legislative updates, the parliament has been busy addressing COVID-19 related issues. The Constitutional Court has declared several regulations unconstitutional, finding that the adopted measures lacked sufficient legal grounds,” Lunder reports. “In the meantime, the recent proposal on gaming law has resulted in public outrage,” he adds. “The proposed amendments would significantly liberalize the gaming sector, allowing foreign entities to obtain a license in this sphere. At this moment, it’s practically impossible for foreign entities to have a majority stake in the gaming business in Slovenia.” However, Lunder notes that the legislative proposal does not enjoy popular support, rendering it unlikely to be adopted by the government in light of the upcoming elections.

As for the economic sector, Lunder mentions that the transactions that were on hold due to the pandemic are eventually moving forward. “At the beginning of October, Slovenian company Jub was sold to Australian strategic investor Dulux (a Nippon Paint Holdings company). In addition, Sberbank Europe has been sold to Serbian bank Aik Banka.”

Lunder explains that “in the midst of economic recovery, it is difficult to pinpoint any specific industries that are particularly active. All sectors are busy at the moment, be it production, real estate, the financial industry (NPLs), or start-ups.” He adds that the tourism sector has been rather active due to the Slovenian government’s initiative to issue vouchers to Slovenian citizens and permanent residents, enabling them to spend money on domestic travel. “However, if COVID-19 measures are reintroduced without any new supporting measures, the tourism sector will suffer as well,” he states. According to Lunder, the automotive sector experienced significant hurdles as well, due to the shortage of semiconductors. “This has a very negative influence on Slovenia, which is an automotive industry country. Even recently, Revoz, a Renault subsidiary company in Slovenia, had to reduce its workforce by 350 employees. I wouldn’t say that we have a recovery in that sense,” he concludes.