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Rule of law needs improvement

Twenty-five years after the fall of the communist regime, the state of courts and law enforcement still needs major reform to improve the quality of democracy as well as the business environment. “Together with corruption, [the rule of law] is usually rated among the worst indicators for doing business in Slovakia,” Markus Halt, spokesman for the German-Slovak Chamber of Commerce (SNOPK), told The Slovak Spectator, referring to regular surveys among German investors. “The concerns are mainly connected with poor law enforcement.”

Jana Bajánková(Source: SITA)

Twenty-five years after the fall of the communist regime, the state of courts and law enforcement still needs major reform to improve the quality of democracy as well as the business environment.

“Together with corruption, [the rule of law] is usually rated among the worst indicators for doing business in Slovakia,” Markus Halt, spokesman for the German-Slovak Chamber of Commerce (SNOPK), told The Slovak Spectator, referring to regular surveys among German investors. “The concerns are mainly connected with poor law enforcement.”

Lengthy court proceedings, doubts about the quality of some judgments, unpredictability, frequent amendments to legislation, acts passed outside of standard procedures, as well as the lack of public debate over crucial legislation are among the main woes cited by observers, watchdogs, law professionals ands businesses.

Back in 2012, as much as 67 percent of the respondents of a poll conducted for the Institute for Public Affairs (IVO) did not trust the general courts while the Constitutional Court was trusted only by 43 percent and the Supreme Court by even fewer: 37 percent of the respondents. While observers do not note any considerable change in the public’s trust towards the courts, they note that recent changes at top judiciary posts might create an atmosphere better suited for an open public debate about the courts.

The changes

Critics of Štefan Harabin, who for the past five years held Slovakia’s most powerful judiciary seat, the dual post of the Supreme Court presidency and the chairmanship at the Judicial Council, were possibly relieved after a closely watched vote on September 16 elevated two women, Daniela Švecová and Jana Bajánková, to these posts. After Harabin failed in his attempt to get re-elected as Supreme Court president, the Judicial Council elected Bajánková, a Supreme Court justice, as its head, while Švecová, a former deputy chairwoman of the Supreme Court, was picked to lead the Supreme Court.

While the departure of Harabin, who has been showered with criticism from political ethics watchdogs, activists and a number of judges for the way he ran the top court and his negative influence on the country’s judiciary, is believed to have created an atmosphere more favourable for judicial reforms, political ethics watchdogs suggest that only the actual performance of Švecová and Bajánková will show whether this expectation is fulfilled.

As for the expectations, judicial watchdog Via Iuris put key importance on the “good-quality and transparent selection of judges, the adoption of a new code of ethics for judges as well as changes to the disciplinary judiciary”. Via Iuris also expressed hope that under Švecová’s management of the court, there will be no “arbitrary changes to the working schedule, intimidating disciplinary proceedings against judges and rough accusations of colleagues, the public and media”.

Revisions to the constitution

A peculiar union between the ruling Smer and the opposition Christian Democratic Movement (KDH) gave birth to a constitutional amendment introducing changes to the judiciary, including the widely debated across-the-board security clearances for judges.

The amendment separated the post of Supreme Court president and that of Judicial Council chairman and it stipulated that the council’s 18 members will be selected by parliament, the government and the president (three members each), while judges will select the remaining nine members. Judges were stripped of their immunity from criminal prosecution, as the Constitutional Court (CC) will no longer decide on allowing the prosecution of a judge. Approval from the Constitutional Court will still be required when remanding a judge in custody. Judges remain exempt from prosecution over their court rulings.

The CC has meanwhile suspended the provisions of the law pertaining to security clearances for judges at its September 17 session and will examine whether these are in line with the constitution. The provisions stipulated that the Judicial Council, will have a say over whether judges meet the conditions for performing their job based on documents provided by the National Security Office (NBÚ), Slovakia’s vetting authority. The NBÚ, which is controlled by the ruling Smer, will look into the judges’ property and check for corrupt behaviour, links with the underworld and abuse of narcotics. The decisions of the Judicial Council can be appealed at the CC.

Busting the myths

The Transparency International Slovensko (TIS) has made its contribution to the judiciary debate through its attempt to bust some persisting myths about the operation of Slovakia’s courts.

Slovakia’s courts fall behind the EU and its neighbours, TIS suggests, in response to the myth that the country’s courts are actually better performers than its critics claim. Of the 28 EU countries, Slovaks consider their judiciary to be the least trustworthy, and even when considering the fact that post-communist countries generally have lower trust in their courts, Slovakia considerably falls behind them, the TIS suggests, referring to the Global Competitiveness Report by the World Economic Forum from 2014.

When looking at objective indicators, in 2012 Slovak courts belonged to the worst in Europe in terms of the speed of proceeding as well as their ability to handle issues that arrive in the courts. The number of resolved cases reached only 91 percent of those filed with the courts, a trend which also contributes to longer proceedings. While in Hungary civil and commercial disputes last 97 days on average, 174 days in the Czech Republic and 195 days in Poland, in Slovakia this is more than twice as long: 426 days. TIS referred to the European Commission for the Efficiency of Justice data.

“The perceived negative quality of the courts corresponds with the objectively poor effectiveness,” TIS wrote on its blog.

The second myth is that problems of the courts are due to Slovaks frequently turning to the courts, thus pushing the number of complaints up, especially in civil courts. While it is true that over the past two years the number of cases reaching the courts has increased by nearly a fifth, the other Visegrad group countries too have seen a growing number of complaints, TIS said, adding that Slovakia’s courts aren’t even the busiest in Europe. While TIS finds it true that the agendas of courts have been growing, the problems are caused mainly by the fact that these were not able to conclude older cases.

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The third myth is that Slovakia has too many judges, with TIS saying that the data shows that Slovakia has an above average number of judges compared to EU countries, but in comparison with other post-communist countries, including our neighbours, Slovakia lags behind. Thus, TIS suggests that there is still a room to moderately increase the number of judges but this should not happen without careful assessment of the management of courts and the effectiveness of the judges.

The TIS recommends merging smaller courts into larger more effective courts, while the number of judges should be determined on the basis of data which calls for an effective cooperation between the Ministry of Justice, the Judicial Council and the public.

What would help?

The lengthy process a company must go through to collect a debt is a particular threat to small and medium sized companies, according to Halt.

“Due to inefficiencies in Slovak jurisdiction, court trials often are unnecessarily prolonged to several years, making it hard for businesses to settle their claims,” Halt said, adding that in practice this means to write them off.

Businesses also complain about the frequently unpredictable outcomes while other major cases are unsettled ownership structures regarding real estate or non-transparent decisions by public authorities, for example granting construction permits or state aid, Halt said.

Nevertheless, when it comes to solutions, businesses seem to agree with judicial ethics and transparency watchdogs, as well as law professionals that a systemic change of the judiciary is necessary.

“A comprehensive judicial reform must ensure that courts can work more efficiently and that proceedings periods are reduced significantly,” Halt told The Slovak Spectator.

From a long-term perspective, a profound rearrangement of the procedure of selection of new judges is crucial, according to Andrej Leontiev, a partner with TaylorWessing e/n/w/c.

“The current selection procedures set-up does not provide for choosing of lawyers with best experience, reputation and professional excellence as judges – on the contrary, it favours candidates with no other professional experience than administrative court clerk work,” Leontiev told The Slovak Spectator, adding that the result is “a closed circle of judges with high occurrence of family and friendship ties”.

According to Leontiev, it is important to increase the transparency of the election process by public hearings and publishing the results of the examinations, implementing public control by returning non-lawyers to the election committees and centralising the election process in a separate entity instead of the respective courts.

“From the short term perspective, the planned introduction of the new Civil Procedure Code shall help to speed up the procedure and limit the possibilities of obstructions,” Leontiev said. “Even without this new legislation, the courts could immediately improve the enforceability of law, for example by not cancelling the payment orders on purely formalistic grounds or by shortening the proceedings by claiming the fees for filing appeals more efficiently, thereby eliminating obstructions by parties who are in fact already insolvent.”

According to Přemysl Marek, partner with Peterka & Partners, the confidence in Slovakia’s courts may be strengthened by what he calls eliminating the unequal application of law and ineffectiveness of law enforcement.

“The principle of protection of legitimate expectations as the fundamental principle of rule of law requires that court decisions made in similar cases according to legal rules are identical,” Marek told The Slovak Spectator.

Marek noted protracted court proceedings as yet another sore spot adding that “the shorter course of court proceedings would deprive debtors of the opportunity to dispose of their assets before the enforcement starts”.

Pavol Rak partner with the Noerr law firm notes that Slovak legal proceedings generally take several times longer than in other European states, suggesting that the adoption of measures to accelerate and improve the efficiency and economy of legal proceedings would surely strengthen the confidence of businesses in Slovakia’s courts.

“One of the primary legislative goals has to be to avoid and prevent delays in court proceedings, mainly through the statement of new proceeding and judicial periods, for example, period for decision on appeal is not stipulated, and shortening of some actually stipulated periods,” Rak told The Slovak Spectator.

According to Rak, the confidence of businesses in Slovakia’s courts could be also secured through strengthening of the Slovak case-law and its application in identical and analogous cases.

What can businesses do?

When asked about tools which might help companies balance the unfavourable situation in the area of rule of law and law enforceability in Slovakia, Leontiev points at commercial arbitration suggesting that it is an effective alternative to litigation before Slovak courts. He would advise his clients to use foreign arbitral tribunals such as the Vienna International Arbitration Centre also in pure domestic disputes with a substantial value of the dispute.

“It is currently less complicated to enforce foreign awards based on the New York Convention than awards issued by Slovak arbitral tribunals,” Leontiev said. “This imbalance between a foreign and a Slovak awards shall be finally abolished by the substantial reform of the Slovak arbitration which was prepared for a long time and is due to be passed by the parliament.”

According to Marek, a proper and thorough check of business partners, for example based on financial statements publicly available and electronically accessible, is crucial for correct business relationships and preventing future court proceedings and additional expenses.

“Better accessibility of relevant data is necessary,” Marek said.

Clearer and understandable clarifications of all duties and liabilities of companies will contribute to the increased competitiveness of the Slovak business environment, Marek told The Slovak Spectator, adding that “at present, duties and liabilities are specified in numerous acts and regulations, therefore the orientation is complicated”.

Progress?

The last significant improvement in terms of legislation to the rule of law has been the mandatory publishing of all court judgments on internet introduced in 2012, said Leontiev, adding that during the last year “we have not seen any significant improvements”.

Nevertheless, according to him, the introduction of the public collection of annual statements on the internet could help companies to better assess the risks of doing business with their counterparts and therefore avoid unnecessary litigation.

According to Rak, the implementation of electronic file rooms and electronic mailboxes for public authorities, entrepreneurs as well as citizens might contribute to accelerating legal proceedings.

The concept of the criminal liability of legal persons will improve the rule of law in Slovakia, said Marek, pointing at a special legislation currently under preparation which is to prevent “criminal offences from being concealed behind activities of companies and punish companies which committed criminal offences”.

Marek, among others, also lists the amendment to the Act on the Protection of Competition which introduces a financial reward to individuals who submit evidence of horizontal agreements restricting competition through which the Slovak Antimonopoly Office intends to motivate those who submit evidence of a cartel to receive significant information and evidence.

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