Legal profession gets crowded, needs to expand its reach
By Beata Balogová
Every year around 1,000 young lawyers graduate from the country’s five law schools. The market is getting tougher and more competitive, which puts pressure on law offices to provide even more complex legal services. Ján Čarnogurský, managing partner of law firm ULC Čarnogurský says his team is ready to meet the challenges. In an interview with The Slovak Spectator, Čarnogurský shares his views on the swelling mergers and acquisitions market, new rules for providing investment incentives to foreign investors and the competition on the market.
The Slovak Spectator: Slovakia is introducing unified rules for providing investment incentives to foreign investors. What were the biggest risks in not having such rules? Could these rules potentially narrow the manoeuvring space for the state in negotiations for strategic investments?
Ján Čarnogurský: These new rules will do nothing but specify in greater detail the already existing rules and regulations. These will indeed bring more legal security and certainty for investors but no major changes are expected. The legal framework is sufficiently detailed. The state will still have to judge each investment and its impact individually.
The Slovak Spectator:The era of large privatization deals is almost over. The market is gradually opening up for mergers and acquisitions. What are the legal challenges of this market? What are the weaknesses of Slovak legislation in this area?
Ján Čarnogurský: The market is certainly opening up for mergers and acquisitions and that has been the case for some time. If the business environment is good it inspires the investors to enter the market and the promptest way of entering the market is through mergers or acquisitions. The better the business environment becomes the more mergers and acquisitions will happen on the Slovak market.We basically have no legislative barriers here.After all, the basic legal framework for mergers and acquisitions comes from EU legislation, in particular in respect of concentration and antitrust legislation.
The Slovak Spectator: The EU antitrust legislation has had an impact on Slovak laws pertaining to competition. The country has already adopted new rules on assessing agreements between firms that restrict competition and also on concentration notification. Do you think that Slovakia has adopted laws that are effective enough to regulate competition on the market?
Ján Čarnogurský: The European legislation, though it is already being taught at universities, is still an unexplored area for Slovak businesspeople but often also for the lawyers. On the other hand, the EU legislation has regulations that are directly enforceable, which means that Slovakia does not have to adopt separate legal measures. Two of the probably most important regulations are Regulation No 805 of 2004 and Regulation No 44 of 2001, governing enforceability of judgements of a particular member state’s courts in other member states. Mainly Regulation No 805 of 2004 enables the courts of member states to issue a so-called title of execution which serves as a document supporting the enforcement of a ruling or execution in any member state without the need to get further approval for enforcement of a judgement by the courts or other authorities in the country where the enforcement proceedings should take place. However, in case of enforcement of judgements the intervention with the direct economic life became much tougher, since, for example, EU Regulation governs the delivery of a summons to court proceedings taking place in another European country, to which so far Slovak businessmen have not been accustomed, so it may happen that by ignoring such a summons they lose a lawsuit by default and their property may be seized without their being notified of this in advance, not even mentioning the possibility of any defence. An antitrust law existed in Slovakia even before the country joined the EU. EU membership increased the parameters for market assessment and part of the relevant competencies have been transferred from the Slovak authorities to the EU authorities, so as a result the criteria for mergers have rather loosened up.
The Slovak Spectator: Does the Slovak Anti-Trust Office have enough authority to efficiently fulfil its mission?
Ján Čarnogurský: The legal framework that regulates the operation of the antitrust authority is certainly efficient. It is up to individual officers at the office how they will exercise their powers.
The Slovak Spectator: Slovakia now has a new law on bankruptcy and reorganization that took effect on January 1, 2005. The previous legislation pertaining to the bankruptcy proceedings and the property of the debtor was not efficient. In what aspect is the new legislation more effective?
Ján Čarnogurský: Only time will show whether the new legislation is more effective. The new regulation also tries to prevent abuse. It is no longer possible to file a bankruptcy petition solely on the grounds that debt exists.You need to be further along in the proceedings and have either a valid execution order from the court or an acknowledgement of debt from the debtor. So the debt, which serves as the basis for the bankruptcy petition needs to be backed up by more than just the plaintiff’s claim.
The Slovak Spectator: In respect with the investment of Korean carmaker KIA in Slovakia several complications emerged. The state had difficulty securing the land necessary for the construction of the road for the KIA site. What in your opinion is the source of the complications?
Ján Čarnogurský: Slovak laws make it possible to expropriate the land when it is in the public interest and all requirements have been satisfied. In the case of the KIA investment the companies that were in charge of buying the land did not have permission to start expropriation procedures. In fact, they were forced to negotiate with the landowners and thus reach an agreement, which would not have been that complicated if the case had not received so much publicity. I see the process of buying land as a standard procedure and no one should be surprised that the landowners are looking to get the best possible price. While in this particular case the state could not resort to expropriation due to time restraints and other complications, the agreement they reached depended on the negotiation skills of the team. However, this is not a legal issue. If in the future we want to prevent cases like KIA, if the arrival of the investment is in the public interest, it is necessary to give the entities that are supposed to get the land or property the right to expropriate it.
The Slovak Spectator: Is there tough competition on the Slovak legal market?
Ján Čarnogurský: The competition is tougher each year with more than 1,000 lawyers graduating from five law schools. Besides corporate lawyers and attorneys, all the other lawyer jobs have their limitations in numbers, which means that there is a limit to how many people can perform in these jobs: be it the number of judges, prosecutors, notaries or investigators. The number of these jobs is very limited and staff rotation is very low.Again, it means that every year 1,000 new lawyers are seeking jobs on the market and it naturally has an impact on the business, especially among attorneys. In the same way that Slovakia is becoming part of larger trans-national units, there is a need for Slovak law firms to become associated with larger international operations so that they are able to provide comprehensive legal services. Even Slovak companies do not run their businesses only in Slovakia but they also need services that exceed the bounds of Slovakia’s legal system. This tendency existed in the past and logically large law firm networks are coming to Slovakia to run their businesses here. It all means more pressure on lawyers to stand up to the competition.
The Slovak Spectator: International organizations keep pointing at the interconnection of business and politics in Slovakia. Do you consider it a serious problem?
Ján Čarnogurský: Slovakia is a small country and there will always be people in politics and business who know each other. The problem starts only when these connections lead to illegal advantages on one or the other side.