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MPs pass anti-shell law

PARLIAMENT adopted the revision to the public procurement law, which is meant to ban shell companies from the public procurement process, by 85 votes, on December 3. While the law has been criticised by NGOs and the opposition, Justice Minister Tomáš Borec promised to tighten it in the coming months.

PARLIAMENT adopted the revision to the public procurement law, which is meant to ban shell companies from the public procurement process, by 85 votes, on December 3. While the law has been criticised by NGOs and the opposition, Justice Minister Tomáš Borec promised to tighten it in the coming months.

“I want to further improve the proposal,” Borec said during parliament session, as quoted by the Sme daily.

The new legislation was adopted in the wake of a series of public protests emanating from the scandal concerning an overpriced computer tomography (CT) scanner purchased by the Alexander Winter Hospital in Piešťany from the Medical Group. The fallout led to the resignation of Speaker of Parliament Pavol Paška, Health Minister Zuzana Zvolenská and Deputy Speaker Renáta Zmajkovičová, who also served on the hospital board.

According to the government’s draft law, any company wishing to take part in a public tender must disclose all its shareholders owning 10 percent or more of the firm. Companies registered in a country where legislation does not require they disclose all such owners are also unable to participate. Slovak or foreign firms which are not registered in such countries, but which have shareholders that own 10 percent or more of the firm who do hold residence in such countries are also excluded. Moreover, firms where public officials have more than a 10-percent share cannot bid in public procurements either, according to the draft.

The exception would be companies quoted at the stock market of EU member states or states in the Organisation for Economic Co-operation and Development (OECD), the European Economic Area (EEA) and their daughter companies as they need to already fulfil strict criteria, according to the SITA newswire. Smer MPs who have the majority in parliament did not accept any changes proposed by the opposition, SITA wrote.

Critics point out that the new legislation, effective as of January 1, 2015, could be easily avoided if a shell company hides behind a co-owner that is a Slovak firm and represents the company in a public procurement process. Another possibility is to win the procurement with a known owner and then sell the company to a shell firm, the Sme daily reported.

“I don’t say that the draft submitted by government in accelerated legislative process solves all problems,” Borec said, as quoted by Sme. “It solves some problems and it is definitely a step in the right direction.”

On the same day the legislation passed, parliament with 115 votes agreed on motion requesting government with cooperation of MPs and National Bank of Slovakia (NBS) prepare a draft of additional legislation creating a public register of the final beneficiaries from tenders, according to SITA.

NGOs critical

A few hours before the vote took place the Fair-Play Alliance (AFP) published a press release calling government and parliament to propose solutions which will truly uncover persons behind firms making profit on public procurements.

“The law amendment currently submitted to the parliament is just a trick which should create the impression that government deals with the problem,” reads the AFP press release. “This draft will affect just a few of all the cases.”

On the same day, Transparency International Slovakia (TIS) published its analysis of public procurements pointing out that parliament was voting on the change to public procurement policy without any analysis on the size of the problem. The report combines data from the Public Procurement Register, Commercial Register and additional publicly accessible sources published from 2009.

Up to 85 percent of money from public procurements goes to firm owners from five countries: Slovakia, the Czech Republic, Austria, France and Germany – not to owners residing in tax heavens, according to TIS.

Furthermore, in the past five years, firms with owners residing in tax havens won tenders valued at less than €500 million, which is just 1.5 percent of all tenders’ value.

Just 80 winners of public tenders reside in tax heavens, while half are branches of big international firms with well-known owners. More than one-third of the sum won by those firms went to Medical Group, the firm from the aforementioned CT scandal.

“There are just a few potential shell winners with connection to tax heavens – up to 10, according to Transparency’s estimates,” reads the TIS statement.

Protests will continue

Independent MP Miroslav Beblavý of Sieť and Most-Híd MP Lucia Žitňanská presented their own proposal introducing a register where firms would have to publish real owners who benefit from public procurements run by an independent institution such as National Bank of Slovakia (NBS). It should be constantly updated and those who present inaccurate or incomplete information should be punished, according to Sme.

“If there will be wider political agreement that real form [of proposal] will be prepared soon I would see it as success,” Beblavý said, as quoted by Sme, adding that opposition agreed with Smer that government will come up with a more complex solution in three months of co-operating with opposition.

Daniel Lipšic of NOVA, who is among organisers of protests against corruption in health care sector, does not believe that government will make legislation more strict in the near future. Another organiser and the leader of Ordinary People and Independent Personalities (OĽaNO) group, Igor Matovič said opposition MPs are willing to negotiate with the government much like striking workers. Organisers plan another protest in Bratislava on December 10, Sme reported.

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