Slovak motion

Having a single government in power combined with EU and domestic pressure means Slovakia’s lawyers are anticipating brighter things to come


Martin Magal
Martin Magal

When listing countries with booming legal markets, it is not often that the conversation drifts towards Slovakia. Despite being Europe’s fastest engine of growth – GDP grew by around 34 per cent between 2005 and 2010, hence its nickname the ’Tatra Tiger’ – it is also a country plagued by ­double-digit unemployment, non-transparent tenders and low consumer demand. The enforcement of corruption laws in Slovak politics, a topic brought to the table after last year’s ’Gorilla’ scandal (the allegations were that multimillion-euro bribes were being paid to officials in order to win privatisation contracts), also resulted in one of Bratislava’s biggest mass protests since the 1990s.

Interesting times

It is an interesting time for a newly elected government to step in and one that lawyers in the region seem generally upbeat about.

“Although the new government will include many of the individuals who were in power from 2006-10, the scope for corruption and less transparent behaviour is much ­narrower,” says Martin Magal, a ­partner at Allen & Overy’s Bratislava office. ”There are three reasons: ­public pressure following the Gorilla scandal; the pressure from EU institutions – investment projects are co-financed from the EU structural funds; and the increased reputational risk from running a one-party government – a first in Slovakia’s 20-year history.”

But the single-party win has not been the only first for Slovakia in the past year. As with the Czech ­Republic, 2011 brought a wave of legislative changes aimed at corruption and attracting foreign investment – including an amendment to the Act on Public Procurement, the introduction of freedom of information (FOI) and the amendment to the Act on Bankruptcy and Restructuring.

“The past year’s seen Slovakia make great effort to become more attractive to foreign investors,” says Ladislav Storek, managing partner at Salans’ Bratislava office. “Although there’s some scepticism over how ­effectively the new laws will be implemented, the legal market expects the changes to increase transparency and therefore lead to more transactions in the long run.”

If the market is anticipating more transactions, local lawyers are ­hopeful they will become easier and cheaper after last year’s shake- up of the country’s Commercial Code.

“In the area of corporate law, the amendments incorporating EU rules will make the process of mergers and divisions less complicated and costly,” confirms Jan Azud, a partner at Bratislava-based Ružicka Csekes. “M&A and competition will be ­positively affected, partly as foreign-to-foreign acquisitions will no longer be subject to notification when their effects on the Slovak market is minor.”

Goings and comings

All positive steps forward for the ­Slovakian business environment, but many remain cynical about how far the changes will go. While an under-pressure government and new legislation might be steps in the right ­direction, lawyers in Slovakia point to a trend that has already hit home – law graduates, and lots of them.

‘’There’s been a boom in legal education since the early noughties, resulting in much fiercer competition on a domestic level,” observes Magal, pointing to the fact that local universities are producing four times the amount of law graduates than during the 1990s – from about 250 to more than 1,000. ”This has led to more students being motivated to continue their postgraduate studies abroad in order to succeed in the labour market. Some of these Slovaks choose to stay and practise law in the country of the postgraduate studies, but many return to Slovakia.”

The bump up in competition has big consequences for such a small market.

“There’ve been few large transactions in the past few years, except in the area of real estate,” says Sona Hankova, counsel at Salans’ Slovakia office. “There aren’t a huge amount of new entrants – in comparison with other countries in the region, Slovakia seems to be a calm market.”

Home advantages

As a consequence many are choosing to work on smaller, local deals at ­boutiques rather than big deals at large, international firms. Last year, for example, Squire Sanders lost corporate partners Adrian Barger and Roman Prekop when they decided to establish niche practice Barger Prekop Attorneys in Bratislava.

“We just realised that we were at a point in our careers where it didn’t make much sense to stay in a big ­international law firm in a market like Bratislava,” explained Barger when questioned by The Lawyer in April 2011. “We felt that the way the firm was heading wasn’t the way we wanted it to go.”

Nevertheless, homegrown firms have pointed to the globalisation of Slovakia’s legal market as undoubtedly positive. Jaroslav Ružicka, the managing partner at Ružicka Csekes, says Slovakia’s competitive environment has encouraged local firms to compete with the standards of international firms in the fees stakes for Slovak clients.

‘’As the influence of Slovak law firms has increased, the differences between international and local legal practices have disappeared,” adds Ružicka. ”Many of the leading local firms operate as part of various international alliances and have the standards, knowledge and customer service of their foreign competitors.

“The future of our profession rests on our ability to focus on specific ­industry sectors.”

Monkey business

No doubt Slovakia will have to redouble its anti-corruption efforts after the saga of last year’s ’Gorilla’ scandal. The alleged leaked file, codenamed ’Gorilla’ and published in December 2011, raised new questions about the enforcement of corruption laws in Slovakian politics.

The question now is whether the newly elected government can rise to the challenge.

Key figures

GDP (2010)
$87.3bn

Annual inflation (2010)
1%

Population (2010)
5.4m

Life expectancy at birth
75

Unemployment rate
(2012)
13.3%

Source: World Bank, Index Mundi, Eurostat