As the public sector conducts business with private-sector entities, certain corruption risks are generated, particularly in cases when any individuals with a private interest regarding the engagement in the business activity are involved. Public funds must be protected from being spent in ways motivated by private interest, and restrictions on business activities and prohibitions thereof represent one of the measures provided by the legislator as a possible means of protecting said funds. This measure is primarily intended for preventing corruption but it also ties in with the due avoidance of the conflict of interest. Pursuant to the Integrity and Prevention of Corruption Act (IPCA), the legal institution of the restriction on business activities and prohibition thereof is applicable solely to the business activities on the part of public-sector bodies and organisations in which an official holds an office, and the entity in which the said official or their family member is involved. In other words, only those public-sector bodies and organisations in which officials hold an office may be subject to restrictions on business activities.
The IPCA differentiates between two categories of business activities:
Paragraph 1 of Article 35 of the IPCA stipulates that a contracting authority (any public-sector body or organisation) required by law to conduct a public procurement procedure may not conduct business (order goods, services, or construction works) with any entity in which the official who holds an office in the contracting authority, or a member of their family serves as a manager, member of management, or legal representative, or holds a 5% or greater share in the founders’ rights, management, or capital either directly or through other entities. This prohibition is also applicable to procedures granting concessions or other forms of public-private partnership, as well as to procedures granting special or exclusive rights. Pursuant to Paragraph 2 of Article 35 of the IPCA, the prohibition also applies to conducting business between the contracting authority and the official or a member of their family as a natural person, while Paragraph 4 of Article 35 extends the prohibition also to smaller parts of a municipality, i.e. village-, local- and quarter communities with own legal personality inasmuch the municipal official holds a membership in the relevant smaller part of the municipality or if the business activity in question may only be entered into with their consent.
If the criteria laid out in Paragraphs 1, 2 and 4 of Article 35 of the IPCA, the prohibition on business activities applies to conducting business between the contracting authority and all entities regardless of their status and organisation, and of contract value. The law does not provide any exceptions, which makes the prohibition on business activities absolute. Not even the Commission may approve or allow the engagement in the business activity, even if this constrains the contracting authority to ordering the service from an entity not located in the municipality or from a less cost-effective provider.
Written statement
Paragraph 5 of Article 35 in the modified IPCA-C introduces the obligation of a natural person or business entity to provide a written statement in any procedure granting concessions or other forms of public-private partnership or any public procurement procedure, or, in cases when the public procurement procedure was not used, prior to the conclusion of the contract with a public-sector body or organisation, confirming that the natural person or business entity is not associated with the official nor with a member of their family to the best of their or its knowledge in any manner laid out in Paragraph 1 of Article 35.
The Ministry of Justice of the Republic of Slovenia states that a written statement is not required to be demanded or given in cash transactions, transactions with commercial papers, company (credit) cards, or conducting business by means of web sites if no public procurement procedure pursuant to Public Procurement Act (Official Gazette of the Republic of Slovenia Nos. 91/15 in 14/18) took place, or no written contract signed by representatives of both parties was concluded.
Pursuant to Paragraph 3 of Article 35 of the IPCA, the prohibition of business activities does not apply to procedures and other manners of obtaining means which do not constitute the ordering of goods, services, or construction works, or any form of public-private partnership provided that all provisions of the IPCA or other applicable law on the obligation of avoidance of the conflict of interest are duly observed, or provided that the official is excluded from all stages of decision-making on the entering in a business activity or the handling of a procedure (otherwise, the consequences applicable in cases of the prohibition of business activities will ensue).
Business activities and the granting of funds which are permitted provided the provisions on due avoidance of the conflict of interest are strictly observed include:
- public tenders for funding or co-funding public institutes, holders of public authority, societies, and other non-profit organisations;
- public tenders for funding and investments in agriculture;
- various forms of state and municipal aid (childbirth allowance, young-family allowance, natural-disaster relief, public-utility charge exemption, etc.)
- granting scholarships;
Legal consequences of breaching the rules on the restrictions on business activities and prohibitions thereof
Paragraph 9 of Article 35 of the IPCA clearly states that a contract as well as any other manner of obtaining means in breach of the provisions of Article 35 are null and void. Nullity therefore applies:
- when a business activity is engaged in despite the applicability of the absolute prohibition (absolute prohibition on business activities);
- when a business activity is engaged in or means are obtained in another manner in which an official with an obligation of excluding themselves due to a conflict of interest formally or informally took part or exercised influence (conditionally permitted business activities).
Restrictions on business activities after the termination of office
Paragraph 1 of Article 36 of the IPCA stipulates that a former official may not act as a representative of a business entity that has established or is about to establish business contacts with a public-sector body or organisation in which they held their office until two years have elapsed from the termination of the said office. This is not a case of a restriction on business activities but a restriction on representation, a prohibition of the so-called revolving-door practice, which is increasingly regulated also by legislations of other states and is required by the practice of the Council of Europe and the OECD.
According to Paragraph 2 of Article 36 of the IPCA, the public-sector body in which the holder of the office discharged their office may not engage in business activities with an entity in which the former public office holder holds more than a 5% share in the founders’ rights, the management or capital, either by direct participation or through the participation of other legal persons, until one year has elapsed from the termination of office.
Notification of the restrictions of business activities by the official
Paragraph 6 of Article 35 of the IPCA requires officials to notify the public-sector body in which they discharge their function of the entities in which themselves participate or a member of their family participates as a manager, member of management or legal representative, or themselves hold or a member of their family holds more than a 5% share in the founders’ rights, the management or capital, either by direct participation or through the participation of other legal persons within one month after taking office (and thereafter no later than within eight days of any change occurring).
Notification by a public-sector body or organisation
The public-sector body is required to forward the information received by officials to the Commission within 15 days of having received it (this applies also to all notification of changes on the part of officials). The forwarding is to be done by means of electronic forms on the Commission’s website.
The public-sector body is also required to notify the Commission within 15 days of any entities to be struck off the list of entities to which restrictions on operation apply.
List of business entities subject to restrictions on operation
The list of entities prohibited from engaging in business activities or permitted to engage in business activities on condition that the officials strictly observe the provisions on the due avoidance of the conflict of interest is primarily important and useful to the public-sector body obliged to observe the restrictions on business activities or prohibition thereof. The list is maintained by the Commission on its website and in application ERAR, and may be used for reference only.
Article 35
(Restrictions on business activities and the consequences of violations)
(1) A public sector body or organisation which is committed to conducting a public procurement procedure in accordance with the regulations on public procurement or which carries out a procedure for granting concessions or other forms of public-private partnership may not order goods, services or construction works, enter into public-private partnerships, or grant special and exclusive rights to entities in which the holder of public office who holds office in the body or organisation concerned or their family member has the following role:
participating as a manager, member of management or legal representative or
having more than a five percent share in the founders’ rights, management or capital, either by direct participation or through the participation of other legal persons.
(2) The prohibition referred to in the preceding paragraph shall also apply to the public sector body or organisation’s business dealings with the holder of public office or their family member as a natural person.
(3) The prohibition of operation within the scope detailed in paragraphs one and two of this Article shall not apply to other procedures or ways of obtaining funds that are not set out in paragraph one of this Article, providing that the provisions of this or any other act relating to conflicts of interest and the obligation to avoid any conflicts of interest are complied with or that the holder of public office is excluded from all stages of decision-making on the performance and entering into of procedures or transactions. If the holder of public office or their family member violates the provisions on the avoidance of conflicts of interest or exclusion, the consequences shall be the same as those specified for the prohibition of operation.
(4) The prohibition of operation referred to in paragraph one of this Article and the prohibition referred to in the preceding paragraph shall also apply to smaller parts of a municipality (i.e. to village, local and quarter communities) which have their own legal personality if the municipal holder of public office is a member of the council of a smaller part of the municipality or if a particular transaction may be entered into only with the municipal holder of public office’s consent.
(5) The natural or responsible person of a business entity shall give a written statement to the effect that the natural person or business entity is not associated with the holder of public office and, to their knowledge, is not associated with a family member of the holder of public office in the manner prescribed in paragraph one of this Article. The statement shall be submitted in the procedure for granting concessions, upon entering a public-private partnership or in the public procurement procedure or, if the latter was not carried out, before concluding a contract with the public sector body or organisation referred to in paragraph one of this Article.
(6) If the circumstances from paragraph one of this Article occur, the holders of public office shall communicate to the public sector body or organisation in which they hold office within one month after taking office and thereafter no later than within eight days of any change occurring, the following:
- their personal name,
- their personal identification number (EMŠO),
- the address of their permanent residence,
- data on the body in which they hold office,
- the start and end dates of the restriction,
- the name, head office, registration number and tax identification number of the business entity,
- the manner of participation of the holder of public office or their family members in the business entity.
(7) The public sector body or organisation shall submit the data from the previous paragraph to the Commission using the electronic form available on the Commission’s website within no later than 15 days of receiving the data or of any change thereto. The Commission shall publish the list of business entities referred to in the preceding paragraph on its website every month. The business entity subject to restrictions on operation after the termination of office shall be on the list of operation restrictions kept by the Commission for one year after the termination of the holder’s office.
(8) The restrictions under the provisions of this Article shall not apply to operations based on contracts concluded prior to the holder of public office taking office.
(9) A contract or other forms of obtaining funds that are in conflict with the provisions of this Article shall be null and void.
Article 36
(Temporary prohibition of operation after the termination of office)
(1) A holder of public office may not act as a representative of a business entity that has established or is about to establish business contacts with a public sector body or organisation in which the holder of public office held office until two years have elapsed from the termination of their office.
(2) The public sector body or organisation in which the holder of public office held office may not do business with an entity in which the former public office holder has more than a five percent share in the founders’ rights, the management or capital and the public office holder as a natural person, either by direct participation or through the participation of other legal persons, until one year has elapsed from the termination of office.
(3) The public sector body or organisation in which the holder of public office held office shall without delay, and within 30 days at the latest, inform the Commission of the situation referred to in paragraph one of this Article.
REGISTER OF ENTITIES with restrictions on operation pursuant to the IPCA
PLEASE NOTE:
List of entities with restrictions on operation
The list of entities with restrictions on operation may be used for reference only. The list contains information received by the Commission for the Prevention of Corruption from public-sector bodies so obliged. Officials are obliged to submit the information on affiliated entities to the public-sector body in which they discharge their function within one month after taking office, and thereafter no later than within eight days of any change occurring. The public-sector body is obliged to forward this information to the Commission within 15 days of receiving it. As a result, up to 45 days may elapse until an entity is placed on the list, and it may take 23 days for a change to be recorded. The restrictions on business activities take legal effect immediately upon their having occurred, and independently of the inclusion of an entity in the list. Restrictions on business activities may therefore apply also to an entity not recorded on the list (due to the recording not yet having taken place or otherwise).