Legal Reform in Slovak Republic

The EBRD Legal Transition Team’s recent assessments of the commercial laws of the Slovak Republic show that the country has a relatively advanced set of commercial laws. The EU alignment mechanism has played a crucial role in this process.

 

Access to Finance

Act No. 40/1964, as amended (the “Civil Code”), Act No. 162/1995 on the real estate cadastre and the entries of ownership and other property rights to the real estates, as amended (the “Cadastral Act”), and Act No. 323/1992 on notaries and notaries’ activities, as amended (the “Notary Code”) are the key acts of the Slovak Republic governing the secured transactions sector.  A part of the Bank’s strategy for the Slovak Republic is fostering the availability of credit to SMEs, predominantly in areas of high unemployment, with equity capital and other financial instruments. Any limitations on taking security over movable assets can negatively influence the access to credit, which is particularly true for the SME sector.
 
EBRD Legal Reform Projects
 
Secured Transactions Legislative Reform and Implementation
 
This project has helped to develop a comprehensive legal regime for secured transactions over moveable and immovable assets (including self-help enforcement), and to create a computerised centralised registry for pledges over moveable. The law entered into force on 1st January 2003. The project included implementation
assistance, monitoring (in particular measurement of the reform economic impact) and public education components. A comprehensive review on the register has been completed.
 
In 2014 the EBRD conducted an assessment on secured transactions which examined the availability of collateralising different types of assets regardless of the underlying legal instruments used to achieve the establishment of secured creditor’s rights. In addition to the classic security interests (pledges and mortgages the assessment also covered usual types of quasi security, such as sale and lease back transactions. The assessment also covered related issues such as enforcement and syndicated lending. The links below take you to the assessment results for the Slovak Republic.
 
 
 

Capital Markets

Capital markets reform, related to both netting and collateral agreements in OTC derivatives, could be introduced. Both close-out netting and collateral agreements are enforceable in the country; however, scope of eligible counterparties is limited (i.e., it does not cover corporates). Such a limitation is contrary to practice in other European countries.
 
 

Contract Enforcement and Judicial Capacity

The judicial system faces a number of challenges affecting the efficiency of justice in civil and commercial proceedings. A major concern is the excessive length of judicial proceedings and the substantial backlog of unheard and undecided matters. This is so, despite the Slovak Republic having a relatively high number of judges per head of population. Another problem is the lack of public confidence in the impartiality of the judiciary. In particular, there is a perception that corruption is common, although hard evidence of such practices is difficult to identify. In recent times there has been a very public debate between government and the judiciary about these issues.
 
EBRD Legal Reform Projects
Slovak Republic: Secured transactions training for Slovak judges
In 2000 the EBRD provided technical assistance to the Slovak government to prepare the new transactions legislation and to create a computerised registry for collateral. In collaboration with ABA/CEELI, the bank supported a series of seminars for local commercial judges to promote understanding of the new concepts and proper application of the law. About 70 judges participated in the programme, which included presentations from local and international experts who were involved in drafting the law.
 
 

Corporate Governance

Overall, the corporate governance framework of the Slovak Republic is relatively sound and there are no particular issues affecting the Bank’s operations. Further, no investee companies’ corporate governance related suits have been reported. The latest EBRD Corporate Governance Sector Assessment (2007) has shown that corporate governance legislation in the Slovak Republic is in “high compliance” with international standards (the OECD Principles of Corporate Governance, with the basis for an effective corporate governance framework and role of stakeholders being the strongest and the responsibilities of the board and equitable treatment of shareholders the weakest aspects of the legislative framework.
 
 
 

Debt restructuring and bankruptcy

The Act on Bankruptcy and Restructuring, No. 7/2005 (as amended, the ABR) is the main law governing the insolvency of businesses, including sole traders, in the Slovak Republic. Based on the results of the 2014 assessment, a partially developed legal framework appears to exist for the IOH profession in the Slovak Republic, which on the face of it, plays certain strengths. Nevertheless, such framework would benefit from further improvements to address a few important areas of weaknesses and thereby strengthen the IOH profession.
 
 
 

Electronic Communications

The electronic communications sector in the Slovak Republic is governed by the Law on Electronic Communications of 2003, as amended (most notably, in 2011), and supplemented by implementing regulations. In the recent EBRD Telecommunications Regulatory Assessment, the telecommunications regulatory framework of the Slovak Republic achieved full compliance with international standards in respect to interconnection and special access, SMP and safeguards, radio market access and wired market access, with dispute resolution and appeal process and regulatory independence posing certain concerns
 
 
 

Energy and resource efficiency

Act No. 309/2009 Coll. of 19 June 2009 on the promotion of renewable energy sources and high-efficiency cogeneration (as amended) is the centrepiece of legislation of the Slovak Republic regarding renewable energy and energy efficiency.
The Slovak Republic has made impressive progress in promoting energy efficiency. However, even though energy intensity decreased by 33% between 2002 and 2008, it remains higher than the European average. Significant potential for energy savings exists in most sectors, especially in buildings and transport. Requirements for low-energy and passive buildings should be clearly defined and included in a future revision of the building code, and policy measures aimed at improving fuel efficiency in vehicles should be implemented.
 
 

Energy legal and regulatory reform

According to the recent EBRD Energy Law Reform Dimensions Assessment Project, network access, tariff structure and transparency are the strongest features of the electricity regulatory framework, being fully compliant with best international standards; with public service obligations being its weakest aspect. According to the Assessment, tariff structure and transparency are also the strongest features of the Slovak Republic’s gas regulatory framework of, with private sector participation being its weakest feature.
 
 
 

PPP/Concessions

Under Slovak law, concessions and PPP projects are the subject of a complex legal framework consisting of a number of different laws and government resolutions. Although such fragmentation is not an obstacle to the implementation of PPP projects, the logic of the legal framework is not always cohesive, which may well cause difficulties in its practical implementation. In the recent EBRD Concessions/PPP Sector Assessment, the Slovak Republic scored as being in “high compliance” with respect to compliance of the legal framework with international standards (see Chart 2) and “medium in effectiveness” with respect to how the laws work in practice
 
 
 

Public Procurement

Public procurement in the Slovak Republic is regulated by Public Procurement Act No. 25/2006 (the “PPL”), as amended. The latest amendment took place in 2011 and aimed to introduce electronic communication and e-auctions in the public procurement framework. In the recent EBRD Public Procurement Assessment, the Slovak Republic was in average compliance with international standards as compared with EBRD’s other countries of operations (see Chart 10). The Assessment has further shown that competition and uniformity are strongest, and efficiency of the public contract is the weakest feature of the Slovak Republic’s regulatory framework in the public procurement sector, while stability and flexibility, and proportionality, are the strongest and the weakest features of the Slovak Republic’s public procurement practice, respectively.