Pursuant to Section 2(1)(c) of Act No. 315/2016 Coll. on the Register of Public Sector Partners and on amendments to certain acts (hereinafter referred to as the “RPVS Act”), an authorized person may be a lawyer, a notary, a bank, an auditor, or a tax advisor who has a place of business or registered office in the territory of the Slovak Republic and who, on the basis of a written agreement, has undertaken to fulfill the obligations of an authorized person for a public sector partner, as well as a foreign entity authorized to conduct the same business activities in the territory of the Slovak Republic as the authorized person referred to above, which has its business or organizational unit located within the territory of the Slovak Republic and which, on the basis of a written agreement, has undertaken to fulfill the obligations of an authorized person for a public sector partner (hereinafter referred to as “PVS”).
Each PVS may have only one authorized person listed in the Public Sector Partner Registry (hereinafter “RPVS”). The authorized person acts on behalf of the PVS. Submissions not made by the authorized person on behalf of the PVS are rejected by the registration authority.
The authorized person has a contractual relationship with the PVS based on a written agreement setting forth the authorized person’s obligations to the PVS. The provisions of Act No. 513/1991 Coll., the Commercial Code (hereinafter the “Commercial Code”), apply mutatis mutandis to the agreement on the performance of the authorized person’s obligations to PVS. The authorized person may not be restricted by instructions from PVS. The agreement between PVS and the authorized person is a mandatory part of the annexes when submitting an application for the registration of PVS in the RPVS.
The exclusion of an authorized person is directly regulated by the RPVS Act, where the specific grounds for excluding an authorized person are defined in Section 19 of this Act:
- an authorized person may not simultaneously be both a PVS and the ultimate beneficiary (hereinafter “KUV”) of the PVS for which the authorized person is to perform their activities,
- the BEU of the authorized person and the PVS are the same natural person,
- any relationship of the authorized person to the PVS or to members of the PVS’s governing bodies that could call into question their impartiality, particularly if they are financially or personally connected to the PVS.
It is precisely these personnel and financial ties between the authorized person and the PVS that are the most frequent grounds for the registry court to examine issues of conflict of interest.
A personnel connection is understood to mean a relationship between “close” persons (the definition of close persons is set forth in Section 116 of the Civil Code: “A close person is a relative in the direct line, a sibling, and a spouse; other persons in a family or similar relationship are considered to be close to one another if the harm suffered by one of them would reasonably be felt by the other as harm to themselves.”). A personal connection also includes the participation of an authorized person in the supervisory, control, and other bodies of PVS. In practice, we have frequently encountered cases where the statutory body (managing director) of an authorized person (who may be an attorney conducting business through a commercial company) is also, for example, a member of the supervisory body (supervisory board) of the PVS, which in such a case may be considered a violation of the exclusion under Section 19 of the Act on the RPVS.
A financial connection consists of a relationship in which the authorized person is “dependent” on PVS for their income (e.g., an employment relationship between an employee and an employer), as well as any participation in the business or profits of the PVS (e.g., participation in the business through a silent partner, participation in the business in the form of share ownership, etc.)
In addition to the reasons mentioned above, the impartiality of an authorized person may also be called into question by other relationships that could jeopardize the professionalism, quality, and, above all, the objectivity of the authorized person’s performance of their duties. Legal theory and court case law have repeatedly held that impartiality manifests itself in two aspects: the subjective criterion, which ultimately means that the authorized person must subjectively consider themselves to be impartial, unbiased, and capable of acting independently. And the objective criterion, which requires that there be an objective belief among other persons as well that there are no doubts regarding the impartiality of the authorized person in relation to the PVS. In other words, subjective impartiality must always be accompanied by objective impartiality, i.e., there must be an objective belief that there are no circumstances that could give rise to doubts that there are grounds for a breach of the authorized person’s impartiality between the PVS and the authorized person.
A violation of the prohibition on the authorized person’s activities under Section 19 of the RPVS Act results in the following sanctions:
- it leads to the imposition of a fine by the registering authority pursuant to Section 13(1) and (4) of the RPVS Act, namely
a. a fine in the amount of the economic benefit obtained by the authorized person; if the economic benefit cannot be determined, the registering authority shall impose a fine ranging from 10,000 euros to 1,000,000 euros (see § 13(1) of the RPVS Act for details)
b. a fine ranging from EUR 10,000 to EUR 100,000 on a person who is a statutory body or any member of the statutory body of the PVS at the time of the breach of duty referred to in the introductory sentence (for further details, see the commentary on Section 13(2) of the RPVS Act)
- results in the Partner’s removal from the Register (for further details, see the commentary on Section 12(1) of the RPVS Act)
- results in the disqualification of the statutory representative of the PVS, which is a legal entity
- results in the entity with which the PVS has concluded a contract being entitled to withdraw from such a contract or suspend its performance, or not to commence performance of the contract at all, without such entity facing consequences such as the accrual of interest on late payment.
The above has already been reflected in practice, where the registration authority, namely the District Court in Žilina, ruled on a conflict of interest between the authorized person and PVS pursuant to Section 19(c) of the RPVS Act, in which a fine was imposed on both the authorized person and the PVS due to the confirmation of a conflict of interest.
From the case law of the registration authority:
Resolution of the District Court in Žilina, file no. 5PPok 3/2018-172:
“the relationship between a partner of a public sector partner and the managing director of the authorized person, based on their joint participation as partners in a third commercial company (even if through other legal entities in which they hold a majority stake), is objectively capable of raising doubts as to the impartiality of the authorized person in performing acts under the RPVS Act in relation to the public sector partner, and the authorized person is thus, pursuant to Section 19(c) of the RPVS Act, excluded from performing acts under the RPVS Act in relation to the public sector partner.”
Resolution of the District Court in Žilina, file no. 43PPok/2/2018-172-391:
“the relationship between a member of the supervisory board of a public sector partner and the managing director of the authorized person, based on their joint participation as partners in a third commercial company (even if through other legal entities controlled by them) is objectively capable of raising doubts about the impartiality of the authorized person when performing acts under the Act on the Register of Public Sector Partners in relation to the public sector partner, and the authorized person is thus, pursuant to Section 19(c) of the Act on the Register of Public Sector Partners, excluded from performing acts under the Act on the Register of Public Sector Partners in relation to a public sector partner.”
