Covid-19 impact on civil and insolvency matters

1 Covid-19 impact on civil proceedings

1.1 Time limits in civil proceedings

Legal deadlines, enforcement proceedings, statutory interest rates:

Act No 62/2020 on certain extraordinary measures in connection with the COVID-19 outbreak and on measures in the area of justice (hereinafter ‘the COVID Act’) was amended on 19 January 2021. The Act introduced restrictive measures and other measures requiring a statutory legal basis.

Under the amended Section 8 of the COVID Act, the running of the time-limits and deadlines prescribed by law in matters governed by private law was temporarily suspended (until 28 February 2021) or such time-limits were waived in specified cases.

Under Section 2 of the COVID Act, the same applies to procedural time-limits to be observed by parties to proceedings. If the time-limit cannot be extended due to a threat to human life, health, security, freedom or due to a risk of substantial damage, the court may decide not to apply this provision and uphold the applicable time-limit.

The provisions on statutory interest rates have not been amended.

The restrictive provisions of the COVID Act will only apply for a limited time (until 28 February 2021).

1.2 Judicial organization and Judiciary

Section 3 of the COVID Act has limited the number of instances where it is necessary to hold hearings in court, and has restricted public participation, during exceptional circumstances or emergencies. Where a court hearing is held in camera, there is a statutory obligation to make an audio recording of the hearing available; the recording should be accessible as soon as possible after the hearing.

The amended Act contains new guidelines for courts issued by the Ministry of Justice (updated on 3 November 2020) that require the courts to:

• hold hearings to the extent necessary in accordance with Section 3(1)(a) of the COVID Act, i.e. hold hearings in accordance with the appropriate procedure (in all cases);
• comply with the implementing decrees of the Public Health Authority/regional public health authorities when holding hearings;
• ensure compliance with the sanitary rules, such as the use of hand sanitiser and masks;
• endeavour to use videoconferencing equipment or other means of remote communication in accordance with Section 3 of the COVID Act.

1.3 EU Judicial Cooperation

The COVID Act has not introduced any specific restrictions in the area of cross-border judicial cooperation in civil matters; however, general restrictions apply in such cases.

Central authorities may introduce working from home, but their normal functioning must be ensured and applications must be dealt with in a timely manner.

In the absence of a secure electronic method for serving correspondence, the use of e-mails is legally permissible only in certain cases. Moreover, using e-mails entails a security risk and a risk of sensitive personal data being leaked. Obtaining a proof of delivery / service of documents is also problematic. Slovakia would welcome a uniform approach at EU level meeting the criteria required for cross-border judicial cooperation.

General requests / questions may be sent to central authorities via e-mail:

• the central authority for Regulation (EC) No 1393/2007 and Council Regulation (EC) No 1206/2001 (Ministry of Justice):civil.inter.coop@justice.sk
• the central authority for Council Regulation (EC) No 2201/2003 and Council Regulation (EC) No 4/2009 (Centre for International Legal Protection of Children and Youth): info@cipc.gov.sk

2 Insolvency related measures adopted or planned for adoption in member states after the outbreak of the pandemic

2.1 Substantive insolvency measures and related contracts affecting measure

2.1.1 Insolvency suspension

2.1.1.1 Suspension of duty to file for insolvency (debtors)

Act No 62/2020 on certain extraordinary measures in connection with the COVID-19 outbreak and on measures in the area of justice (hereinafter ‘the COVID Act’) took effect on 27 March. Under Section 4 of the COVID Act, the time-limit for a debtor to file for bankruptcy has been extended from 30 days to 60 days. This applies only to the balance sheet test, as debtors are obliged to file for bankruptcy solely on this basis.

The restrictive provisions of the COVID Act apply only for a limited time ([until] 30 April 2020), but they might be extended in the future (consent of the Government and the Parliament will be required to amend the Act).

The COVID Act was amended and supplemented with the instrument of temporary protection for entrepreneurs (Section 8 et seq. of the COVID Act), with effect from 12 May 2020.

The purpose of the temporary protection is to create a time-limited framework of measures to support the effective management of the negative consequences of the spread of Covid-19, a dangerous and contagious disease, on enterprises.

Entrepreneurs who are debtors are not obliged to file for bankruptcy only if they have applied for temporary protection and if temporary protection has been granted by a court. In accordance with Section 17(2) of the COVID Act, entrepreneurs enjoying temporary protection are not required to file for bankruptcy with respect to their assets for as long as they enjoy the temporary protection; the same applies to persons required to file for bankruptcy on behalf of entrepreneurs. However, debtors may apply for temporary protection only if they were not insolvent on 12 March 2020 and if, on the date of the application, there are no grounds for dissolution and the debtor is not affected by a declaration of bankruptcy or a restructuring permit.

Originally, temporary protection was to be granted until 1 October 2020 (Section 18 of the COVID Act), but it was extended until 31 December 2020 under a government decree.

The draft act will contain similar provisions, and, if approved by the National Council of the Slovak Republic, it will take effect on 1 January 2021.

2.1.1.2 Protection of debtors about insolvency filing from creditors

Protection resulting from the suspension of bankruptcy proceedings initiated by creditors may be granted only to debtors (entrepreneurs) who enjoy temporary protection (introduced on 12 May 2020). In accordance with Section 17(1) of the COVID Act, proceedings concerning a creditor’s application for a declaration of bankruptcy in respect of the assets of an entrepreneur enjoying temporary protection filed after 12 March 2020 are suspended; this also applies to creditors’ claims brought during the period of temporary protection. Insolvency proceedings which were initiated on the basis of a creditor’s application filed after 12 March 2020 are also suspended.

The draft act provides that during the period of temporary protection it is not possible to issue a decision initiating bankruptcy proceedings against an entrepreneur enjoying temporary protection.

2.1.2 Claim enforcement suspension and contract termination suspension

2.1.2.1 General / specific moratoria on claims enforcement / certain types of claims enforcement

The enforcement of liens and mortgages and judicial sales are temporarily prohibited (until May 31) under Sections 6 and 7 of the COVID Act.

Slovak entrepreneurs whose businesses are jeopardised due to COVID-19 measures may apply for a court decision which has similar effects to a temporary moratorium in restructuring proceedings (for a detailed list of these effects see below). Entrepreneurs (natural or legal persons who reside or have their registered office in Slovakia) who are not insolvent, do not operate their businesses illegally and against whom no enforcement procedure was initiated before 12 March 2020 may apply for a temporary moratorium using the appropriate form (companies and partnerships are required to file the form electronically; this requirement does not apply to individuals). The moratorium takes effect when the court issues a decision granting the moratorium. Such decisions may be challenged in court (by anyone), which may lead to a moratorium being terminated. The moratorium period is limited – the maximum period is until 1 October 2020 (unless it is terminated earlier).

Temporary protection lasts until 31 December 2020.

This new type of moratorium has effects comparable to a moratorium in restructuring proceedings:

• it suspends the obligation of a debtor or its management to file for insolvency proceedings in the case of insolvency;
• creditors may not file for their debtor’s insolvency;
• enforcement proceedings that started after 13 March are suspended;
• liens placed against enterprises or parts of enterprises cannot be enforced;
• there are restrictions with regard to set-offs;
• the possibility to terminate contracts is suspended.

In accordance with Section 17(3) of the COVID Act, enforcement proceedings initiated after 12 March 2020 against entrepreneurs enjoying temporary protection in order to satisfy a claim from their business activity are suspended for the duration of the temporary protection.

The COVID Act also provides for an extraordinary postponement of enforcement at the request of the debtor (Section 3a), but only until 1 December 2020.

The draft act (effective from 1 January 2021) provides that even where enforcement is not suspended, during the period of temporary protection enforcement may not affect the enterprise, movable property, rights or other assets of the enterprise of the entrepreneur enjoying temporary protection, except where enforcement relates to the recovery of unlawful State aid.

2.1.2.2 Suspension of contract termination (general / specific contracts)

In accordance with Section 17(5) of the COVID Act, after temporary protection has been granted [to a party to a contract], the counterparty may not terminate the contract, withdraw from the contract or refuse performance under the contract due to a delay in performance on the part of the entrepreneur enjoying temporary protection where the delay occurred between 12 March 2020 and the date of entry into effect of this act and which was due to the infectious disease COVID-19; this does not apply if the counterparty directly jeopardises the enterprise's operation. This does not affect the right of the counterparty to terminate the contract, withdraw from the contract or refuse performance under the contract due to a delay in performance on the part of the entrepreneur enjoying temporary protection after the entry into effect of this act.

Under the draft act, the possibility to terminate contracts will also be suspended.

2.2 Civil, including insolvency courts suspension and procedural suspensions

Under Section 1 of the COVID Act, the running of the time-limits and deadlines prescribed by law in matters governed by private law was temporarily suspended or such time-limits were waived in specific cases.

Pursuant to Section 2 of the COVID Act, the same applies to procedural time-limits to be observed by parties to proceedings. If the time-limit cannot be extended due to a threat to human life, health, security, freedom or due to a risk of substantial damage, the court may decide not to apply this provision and uphold the applicable time-limit.

Both of these measures applied only until 30 April.

The COVID Act provides that, in a state of emergency, courts hold hearings, main hearings and public hearings only where necessary. The need to protect public health during this period justifies excluding the public from attending hearings, main hearings and public hearings (Section 3).

2.3 Other insolvency measures (those relating to avoidance actions, reorganization plans, informal agreements, and others if appropriate)

Where an entrepreneur enjoys temporary protection, the running of the time-limit for challenging legal acts is suspended for the duration of the temporary protection. This prevents discrimination in favour of debtors.

2.4 Related non-insolvency measures (payment deferrals, bank loans, social security, health insurance, business subsidies)

• financial help for entrepreneurs who are natural persons and for small and medium-sized enterprises (possible loan guarantees or payment of interest on loans), Act No 75/2020;
• deferral of mortgage loan payments for consumers (9 months) under Act No 75/2020;
• deferral of loan payments for small and medium-sized enterprises and entrepreneurs who are natural persons (9 months) under Act No 75/2020;
• deferral of payments of health, social insurance and old-age pension contributions for some employers and entrepreneurs who are natural persons (subject to a decrease in revenue due to COVID-19 measures) under Act No 68/2020;
• extension of the time-limit for filing a tax return under Act No 67/2020