Political upheaval has been shaking Slovakia, halting legislative efforts and endangering the country's readiness to face the energy and other crises, according to Havel & Partners Partner Stepan Starha.
“The political crisis in Slovakia fraughts everything,” Starha begins. This September, one of the coalition parties that formed the government quit, resulting in “the remaining three parties in power losing their parliamentary majority and halting all legislative efforts. It is not yet clear if the government will be able to hold out for the remainder of its term, until 2024, or if we’re going to go for extraordinary elections.”
Focusing on the legislative agenda, now halted, Starha reports a few items in the pipeline. “Even though legislative activity is endangered, there are still hopes that some of the proposed legislative updates might still occur – starting with amendments to the commercial code,” he says. “The government wanted to make it easier for LLCs to incorporate, and envisaged a fully digital process which would lower legal costs for entrepreneurs and introduce a smoother experience – however, instead of the beginning of 2023, we now don’t know if and when this will be effective,” Starha explains. Additionally, he reports that the “implementation of the whistleblowing directive has been halted too, with the proposal being stuck.”
Regardless, Starha reports some legislative updates did pass this year before the political crisis escalated. “The real estate sector has seen three new important acts, starting with a new Construction Act and a new Spatial Planning Act.” According to Starha, these were “really important” because they sought to shorten the period of time required to obtain a building license. “Currently, this period is 300 days on average, meaning that any reductions would do wonders.” Additionally, Starha says that a new act on “state support for rental housing has passed, which will make the construction of rent-controlled apartments easier. Still, these acts are yet to enter into force in 2024 – if the extraordinary elections take place, and a different government is elected, we could still see delays and potentially even retractions,” Starha cautions.
Moreover, the crisis might also be shaking up the efforts of the government to combat corruption. “A number of former high-ranking police commissioners, a number of judges, and even the former general prosecutor are under investigation on corruption charges. Hopefully, these procedures won’t be affected in any way in the wake of the crisis,” Starha reports.
Still, even with all of this in mind, Starha reports that the legal market in Slovakia has been doing better. “Following a big slowdown in 2020 and 2021, 2022 finally brought an uptick in terms of M&A transactions at the beginning of the year. However, the war in the neighboring country brought uncertainty to the market once again,” he says.
As examples of recent transactions, Starha points to the recent sale of a number of MOL petrol stations as part of a wider PKN Orlen – Lotos Group merger that took place in Poland, as well as the acquisition of the Blumental Offices. “Also, the government was able to introduce another car manufacturer to an already bustling car market – Volvo announced it will open a production plant near Kosice. On the one hand, this will lead to more jobs but, on the other hand, it will also increase an over-dependence of the economy on this specific industry,” Starha explains.
Finally, commenting on the upcoming winter in the face of a looming energy crisis in Europe, Starha reports that the Slovak “gas storages should be almost full, and there seems to be enough for the winter. However, the government has not yet (as of the penultimate week of September) introduced any price caps, though there are rumors of some being in the pipeline for households, small businesses, and public bodies,” he concludes.