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This publication is available at https://www.gov.uk/government/publications/overseas-business-risk-slovakia/overseas-business-risk-slovakia
Information on key security and political risks which UK businesses may face when operating in Slovakia.
1. General Overview
As quoted by the official UKTI site, over 100 UK owned companies operate in Slovakia. Tesco is Slovakia’s top retailer and one of the main employers in the country. Other major UK investors include Shell, CP Holdings, Amec, Tate and Lyle, BAE Systems, GlaxoSmithKline and Allen, Ernst & Young, and Overy.
In December 2015, Jaguar Land Rover has confirmed that it will be the first British carmaker to open a manufacturing facility in Slovakia. The announcement follows an agreement between the company and the Government of the Slovak Republic to build a new plant in the city of Nitra, western Slovakia. The new world-class £1 billion premium manufacturing facility will eventually employ around 2,800 people.
Slovakia, which adopted the Euro currency on 1 January 2009, is an attractive country for foreign investors mainly because of its low tax rates and cheap and well educated labour force. In recent years, Slovakia has been pursuing a policy of encouraging foreign investment.
The pros and cons of investing in Slovakia are outlined on the UKTI official website: https://www.gov.uk/government/publications/exporting-to-slovakia/exporting-to-slovakia
UKTI team in Slovakia is there to help UK-based companies to enter the Slovak market and to support the development of trade between the UK and Slovakia.
From March 2014 UKTI is assisting companies also through our partner organisation - The British Slovak Business Centre (BSBC) to provide the best possible advice and assistance.
Following the dissolution of Czechoslovakia, Slovakia became an independent state on the 1st of January 1993. Slovakia has a parliamentary system of governance. The government acts as the central body of executive power and the unicameral 150- member National Council (Parliament), elected by universal adult suffrage for a four-year term, acts as the sole body of legislative powers. The Prime Minister is designated by the Constitution as the head of the Government. He is usually the leader of the winning party. His executive power is shared with the President who is the Head of State and his role is largely ceremonial. The President is elected in direct elections for a five-year term, restricted to two consecutive terms of office. The President appoints the Prime Minister and, on the latter’s recommendation, the other members of the Government. The Cabinet has to receive a vote of confidence in the Parliament.
In the March 2016 general elections, PM Fico’s centre-left SMER - SD (Direction-Social Democracy) government stood for re-election, but gained just over 28% of the vote, 49 seats. SMER therefore formed a coalition with reformed nationalist SNS (8,6%), Hungarian - Slovak Most-Hid (6,5%) and centre-right Siet (5,6 %) to secure a working majority in the Parliament.
The political composition of the Parliament changed significantly after the 2016 general elections. Two centre-right Christian democratic parties KDH and SDKU-DS, which had been in the Parliament for decades, did not reach the necessary threshold to gain a single seat in the legislative branch. On the other hand, the reformed nationalist SNS, under the new leadership, managed to boost its popularity and re-enter the parliament and the government. A significant number of seats were gained by far-right LS NS and centre-right party Sme Rodina (We Are Family) of a billionaire Boris Kollar.
Current President Andrej Kiska, with no previous political experience assumed his role in June 2014, replacing Ivan Gašparovič. President Kiska is very interested and active in support of the start-up agenda of the country in order to boost the economy.
More information on political risk, including political demonstrations is available in FCO Travel Advice.
Slovakia’s recovery from the economic crisis was one of the fastest in the EU. The real GDP have increased by 3.5 % in 2015 mainly due to solid household spending and surging investment activity and is expected to exceed 3 % in 2016 and 2017 mainly due to accelerating private consumption buttressed by steady gains in employment, real wage growth, low credit costs and the continued fall in energy prices. In 2015, the inflation remained positive at - 0.2 percent and it is forecast to remain close to zero in 2016.
The new government’s manifesto was approved by the Parliament in April 2016. While the key task of the second Fico government (2012-2016) was to balance state budget by 2018, the new government postponed this goal to 2020. Another change is planned in law on the debt break to allow the government to spend more, especially on projects of ‘strategic’ importance such as highways.
The manifesto contains several measures increasing its expenditures, for example higher pensions, and reducing its revenues. The coalition parties promise to reduce the corporate income tax, currently at 22 percent, to 21 percent with an annual consideration of further reduction. The government also plans to scrap the tax licenses (minimum corporate income tax), as of 2018, increase the portion of expenditures that self-employed people can deduct from their tax base without a need to keep accounting books, increase of minimum wage, reduce taxes for farmers and create a new scheme for taxation of real estate based on value.
On the other hand, the laws on tax evasion, money laundering and electronic registration cashiers should be stricter to limit the possibilities to cut the accepted revenues of entrepreneurs. Fico’s government will try to find revenues by further reverting Slovakia’s flat tax system of 19 percent and taxing the rich. A special tax now paid by banks will be possibly extended to insurance companies.
A very interesting area of focus in 2016 for the country’s economics remains the Digital Agenda and Start-ups which is thought of as the future of investment and trade in the country. The government is trying to create a good ecosystem for the growth of both agendas.
4. Business and Human Rights
Slovakia has ratified 75 ILO conventions and there has been no criticism from the ILO on the State’s involvement in labour issues, nor cited violations of worker’s rights. Bonded labour, indentured labour or slavery is not practised and child labour is prohibited. Trade unions are legal and workers can strike, without being subject to intimidation or reprisals.
Human rights issues are raised mostly in relation to the Roma communities. There were cases when individuals and/or NGOs claimed that members of Roma communities were discriminated in seeking employment. There is no information about any court decision on this type of discrimination though.
Women are not directly discriminated against in the labour market. Farmers can own land, and have access to banks. There is no open discrimination against migrant workers or minority groups.
The latest issue in 2015 and 2016 constituted the discussion on migration quotas, as presented by the European Commission. Slovakia, along with other V4 countries, has expressed a strong disagreement with the quotas and the country took legal action at the Court of Justice of the EU against the decision of the Council of the EU to distribute asylum seekers among the EU member states. Slovakia stays firm in its commitment to distinguish between refugees and economical migrants.
5. Bribery and Corruption
Bribery is illegal. It is an offence for British nationals or someone who is ordinarily resident in the UK, a body incorporated in the UK or a Scottish partnership, to bribe anywhere in the world.
In addition, a commercial organisation carrying on a business in the UK can be liable for the conduct of a person who is neither a UK national or resident in the UK or a body incorporated or formed in the UK. In this case it does not matter whether the acts or omissions which form part of the offence take place in the UK or elsewhere. In 2015, Slovakia was ranked 50 out of 168 countries surveyed in Transparency International’s corruption perception index and 23rd of EU member states.
Although the level of corruption in the country is decreasing it still exists. The most vulnerable sectors are public procurement, healthcare, education, law enforcement and EU Funds.
The fight against corruption is one of the priorities of the new coalition government, which incorporated the Rule of Law initiative to the government’s manifesto. Transparency and predictability of the legislative processes, as well as transparent and effective judiciary has been emphasized. One of the proposed measures to curb corruption is to pass a more effective law on shell companies and exclude them from public procurement contracts.
The amended law on public procurement from September 2015 launched a register of final beneficiaries, real owners of companies participating in public procurement. Other companies linked to spending of public finances, however, do not have to be registered. The new government also plans to pass a law on personal liability of people managing public resources to ensure effective use of public finances and limit potential for corruption.
The changes are slow but they have started to come. The ministries have been using e-tenders in the public procurement. All public contracts are made public on websites. The measures of the new Government include publication of the online register of all the state contracts (those of the previous government as well as the newly signed contracts).
Read the information provided on our Bribery and corruption page.
6. Terrorism and Security
There is a low threat of terrorism. Attacks, although unlikely, could be indiscriminate, including in places frequented by expatriates and foreign travellers.
Read the information provided on our Terrorism threat page.
There is a requirement to provide proof of your identity if requested by the police. The only legally acceptable documents by the Slovak Police are a passport or a national ID card. All persons physically present in the Slovak Republic, are required by law to carry a passport or a national ID card at all times. It is not sufficient to carry a photocopy of the passport, although it is recommended that you keep a photocopy of your passport in a safe place.
In Bratislava especially, there remains a risk of petty theft. Pickpockets operate around the main tourist areas, and foreigners are easily identified and targeted. You should take sensible precautions against bag snatching and mugging. Do not leave valuables unattended. When jackets are placed on the backs of restaurant chairs, wallets should be kept securely elsewhere. When putting bags down, place one foot through the arm straps to prevent theft.
There have been a few occurrences in Bratislava of visitors being given “spiked” drinks and waking several hours later to find all their valuables gone. Be wary of drinks offered by persons unknown to you.
There have been instances of drivers of foreign-licensed cars being targeted by criminals. If you have to fix a puncture, or any damage to your tyres, you should ensure that your vehicle is locked before you sort out the problem. There has been an increase in robberies from parked cars. We recommend that all valuables are removed from the car when parking, rather than just being placed out of sight.
Taxi drivers sometimes attempt to overcharge tourists, e.g. by adding unauthorised supplements or by not setting the meter at the start of a journey. Insist that you will pay only the fare shown on the meter. Taking a taxi from the street is generally much more expensive than calling one through a company’s widely advertised and easily accessible telephone numbers.
Read the information provided on our Protective security advice page.
More serious crime does happen in Slovakia but is not usually targeted at tourists or visitors. There are elements of organised crime in Slovakia as in many European countries. These often involve people trafficking (forced labour) and to a lesser extent drug and cigarette smuggling.
Read the information provided on our Organised crime page.
7. Cyber Security
The Conception on cyber security for 2016-2020 was approved by the government in June 2015 stating steps necessary to improve the legislative and institutional framework of cyber security in Slovakia. The development of the concept was aided by using the experience from the NATO Cyber Coalition 13 exercise. The National Security Authority (NBU) subsequently drafted an Action plan approved by the government in March 2016.
The NBU will prepare a new set of legislature on cyber security by September 2016 and create a new National Centre for Cyber Security within its structures by 2018. It will operate as a permanent working body for the coordination of measures of cyber security. From 2016, new Computer Security Incident Response Team(s) will be operational in various Ministries.
Slovakia is keen to support the need for a common cyber security approach without network fragmentation along national borders, which could eventually boost economy and enable business growth.
8. Commercial Disputes
The national law of Slovakia recognizes arbitration as a means of dispute resolution between private parties in commercial transactions.
International arbitration in the Slovak Republic is governed by the Act on Arbitration Proceedings. This adopts, with certain modifications, the UNCITRAL model law.
All disputes concerning civil and commercial matters which are eligible for a settlement agreement, including disputes on the existence of a legal relationship or legal title, can be resolved by arbitration. The resolution of disputes involving consumer contracts is carved out from the scope of the Act on Arbitration Proceedings into a separate Act on Consumer Arbitration Proceedings.
The Act on Arbitration Proceedings contains an exhaustive list of non-arbitrable disputes, namely (i) disputes regarding the creation, change or termination of ownership rights and other rights in respect of real property; (ii) disputes regarding personal status; (iii) disputes regarding compulsory enforcement of decisions; and (iv) disputes arising in the course of bankruptcy proceedings and restructuring proceedings.
According to Slovak law, a permanent arbitration court can only be established by predefined legal entities, which must follow certain statutory rules, for example they must issue their own rules of procedure.
The main arbitration institution dealing with international disputes is the Court of Arbitration of the Slovak Chamber of Commerce and Industry. Frequently used is also the Arbitration Court of the Slovak Association of Banks.
The New York Convention is applicable in the Slovak Republic to arbitral awards issued in other contracting states, but in relation to awards issued in non-contracting states it is only applied on the basis and to the extent of reciprocity.
The following types of disputes are arbitrable under Slovakia’s national law:
|Disputes involving rights over immoveable property located within your country||No|
|Any intra-company disputes (e.g., disputes over decisions made by the executive bodies of a corporation)||Yes|
|Disputes involving shareholder arrangements||Yes|
|Disputes involving patents/trade marks (excluding administrative actions)||Yes|
Any more information on commercial disputes can be found in the detailed documents in the useful links Section 11.
9. Intellectual Property
IP rights are territorial, that is they only give protection in the countries where they are granted or registered. If you are thinking about trading internationally, they you should consider registering your IP rights in your export markets.
For information on registering your Trademark or obtaining a patent in Slovakia, you should contact the Industrial Property Office of the Slovak Republic. The Industrial Property Office of the Slovak Republic is a central state administration body operating in the field of industrial property protection.
More information on intellectual property rights in Slovakia is available at the website of the World Intellectual Property Organisation (WIPO).
Read the information provided on our Intellectual Property page.
10. UK Trade & Investment Contact
Head of Trade & Investment
British Embassy Bratislava
811 01 Bratislava
Tel: +421 2 5998 2000
11. Useful Links
Commercial disputes arbitration links:
BSBC info: http://www.ceebusinessportal.eu/eu_page