As a part of its anti-corruption agenda, the Slovak government introduced a contracts publication duty as from 1 January 2011. Various practical difficulties have emerged since then.
Publication duty
The contracts publication duty was made a part of Slovak law by amendment to the Civil Code and to the Freedom of Information Act. The amendment identified the obliged entities: the state bodies, municipalities, self-governing regions, and legal and natural persons empowered by law to decide on rights and obligations within the sphere of public administration; legal persons incorporated by legal acts or founded by a state body, self-governing region, or a municipality; and legal persons founded by any of the above (Obliged Entities).
The amendment stipulates the duty to publish all contracts concluded with Obliged Entity if they: contain information obtained for public funds; or relate to the use of Slovak public funds or EU funds, or to the disposing of publicly owned property or property belonging to entities incorporated under legal acts.
Such contracts become effective only if properly published. Contracts concluded by ministries, central state administration bodies, public institutions, or entities incorporated by them or under their control must be published in the Central Register of Contracts. Other Obliged Entities must publish their contracts on their websites or in the Commercial Bulletin.
Difficulties in practice
Although contributing to greater transparency, the amendment has raised many questions. In particular, due to the vague definition of Obliged Entities, it is not clear whether it applies only to entities under majority state control or to all entities with any state ownership interest, regardless how small. An independent survey showed inconsistent fulfilment of the publication duty, in particular by big businesses like the gas and electricity distributors that have been partially privatised.
Such entities, controlled by private shareholders but also having some state participation, simply refuse to publish their contracts. They argue that the contracts do not relate to public funds or public property, or they rely on the imprecise definition of Obliged Entities and claim they do not fall within its scope. Another argument used by such entities is that the contracts contain business secrets, meaning publication would endanger their business and benefit their competitors, who are privately owned and have no publication duty.
Such a vaguely drafted publication duty also creates a risk for entities wishing to enter into business with an Obliged Entity, since the contracts they conclude become effective only upon publication. In the short life of the amendment, no legal action has been filed disputing compliance with the publication duty. It is therefore hard to predict how the courts would deal with these issues. It has nevertheless become apparent that clear publication standards and a centralised location to publish contracts should be established as soon as possible. Otherwise the amendment will not achieve its purpose.
Upcoming changes
In response to the above difficulties, a new amendment to the Freedom of Information Act was proposed by the Ministry of Justice and submitted to the parliament in September 2011. If passed, it will take effect on 1 January 2012. The most significant changes are:
(i) only entities with 100% participation of state or self-governing regions will have to publish their contracts;
(ii) contracts concluded with natural persons relating to non-business activities will not be published;
(iii) the types of contracts exempted from the publication duty will be extended;
(iv) the administrative burden will be decreased by waiving the requirement to publish the technical and other annexes to the contracts.
Conclusion
If the new amendment is approved, it will have a positive impact on the publication duty, especially by exempting entities in which the state has only a minority participation. The proposed amendment does not, however, address the key problem of specifying what information should be considered a business secret exempt from the publishing requirement. Furthermore, uncertainty persists for companies who have concluded contracts with Obliged Entities: the new amendment does not address contracts concluded in 2011 and, in its interim provisions, states that the new regulation would only apply to contracts from 1 January 2012. It is hoped that the legislator will improve the wording of the new amendment to achieve the effective functioning of the publication duty in Slovakia.
This article was originally published in the schoenherr roadmap`12 - if you would like to receive a complimentary copy of this publication, please visit: http://www.schoenherr.eu/roadmap.
