New anti-shell law is a priority

Justice Minister Žitňanská pledges adoption within 100 days.

Lucia ŽitňanskáLucia Žitňanská (Source: Sme)

Prime Minister Robert Fico's third government promises a more effective anti-shell law pertaining to all public resources and though watch dog groups welcome this plan, they warn  that while the previous two Fico governments have already adopted ineffective reforms of their own.

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Lucia Žitňanská (Most-Híd), the Justice Minister in the coalition cabinet, promises preparation of the law within 100 days and that it will be smoothly integrated with existing laws.

“The anti-shell law should in any case pertain to all public resources, which means all the situations when the state enters a relation with the private sector, for example via a transfer of assets or usage of public resources,” Žitňanská told the public broadcaster RTVS.

An effective anti-shell law is a high priority for the right-leaning parties in the four-party coalition - Most-Híd and Sieť.

Earlier in April, Radoslav Procházka, the head of Sieť, conditioned further operation of the coalition cabinet on the exclusion of shell companies from public procurement contracts.

“If the cabinet includes any commitment in its cabinet manifesto, it will vote for meeting this commitment,” Procházka said during a radio discussion programme of the public RTVS on April 9. “Otherwise, the cabinet will be deprived of the right to exist.”

The promise to adopt an effective anti-shell law has made it also into the government’s programme statement within its policies for combating corruption, but without any specification when it would be adopted.

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New legislation

The new law against shell companies should pertain to all public resources and prevent possibility to provide undue advantages to bearers of public power. The law to be adopted should be based on the bill drafted by Miroslav Beblavý, formerly a member of Sieť but now an independent MP, and Žitňanská.

“My idea of the anti-shell law is the same as I have when I was in opposition,” Žitňanská said in an interview with the Sme daily. “In order the law pertains to usage of all public resources; in order the principle of public control is employed, i.e. a public register; in order there is a bigger standard of supervision of the private sector.”

This means also an effective and working system of sanctions for cases when companies would list incorrect data into the register of final beneficiaries, i.e. real owners of companies.

“What we can do is offer the maximum possible transparency in relations between the private sector and the state,” said Žitňanská. “Today maybe no state body cannot guarantee at 100 percent that each final beneficiary written down in the register is really a final beneficiary.”

Current sanctions are between €10,000 and €1 million and a ban of participation in tenders for three years.

Beblavý noted that the anti-shell law is included into the programme statement in a 75-percent form as originally pushed through by Sieť.

“The key question of enforceability is approached only generally and simultaneously there is nothing said about excluding shell companies from fields related to bankruptcy and restructuring proceedings or bank regulation as Sieť had proposed in its [pre-election] programme based on cases of Váhostav and J&T,” said Beblavý as cited by the SITA newswire.

Organisations united in the initiative Štrngáme za zmenu (Jingling for Change) welcome promises to adopt a new anti-shell law and ban provision of inappropriate benefits to holders of the public power.

“But a long path leads to a 100 percent satisfaction [in terms will meeting of government’s promises],” said Pavel Sibyla from the Stop Corruption Foundation as cited in the initiative’s press release. “And it goes via adoption of the best possible laws and via real operation of institutions whose task will be to enforce their observance.”

The Transparency International Slovensko (TIS) also views the proposed wordings of the two measures positively while it also notes that what will be important is the implementation.

“If tax officers or the police had have free hands to go after shell companies, they would already be retreating today,” TIS representatives told Sme.

Current legislation

Slovakia already has an anti-shell law, but most see it as not effective enough. Based on the amended law on public procurement parliament adopted last September a register of final beneficiaries, real owners of companies participating in public procurement, was launched.

The register itself, managed by the Public Procurement Office (ÚVO), was launched last November and within it all companies enrolling into public procurement should explain their ownership backgrounds. The aim was to exclude  shell companies, but critics point out that ÚVO does not check whether the data provided by companies are correct.

Already during November 1,500 companies enrolled into the register while lawyers have pointed out that ÚVO wrote down the companies without any detail check of their backgrounds or request of additional information, Peter Pašek, a tax advisor wrote for Pravda daily.

The then-opposition criticised the bill as imperfect and required that the register pertains also to companies linked to spending of any public money.

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