Building law and regulation in Slovenia during Covid-19

Updated on 14.04.2020

There is currently no COVID-19 law or regulation in Slovenia which exclusively applies to the construction industry. However, the Government of the Republic of Slovenia adopted the Law on the intervention measures to mitigate the consequences of the communicable disease SARS-CoV-2 (COVID-19) for citizens and the economy (hereinafter: “COVID-19 Act”), which amends and repeals certain measures already in force and applies from 11 April 2020. The specific goals of the COVID-19 Act are to preserve jobs and keep businesses in operation, to improve the social position of people, particularly those most at risk due to the SARS-CoV-2 (COVID-19) virus, to provide emergency assistance to the self-employed and to improve the liquidity of businesses. 

COVID-19 Act contains also a provision related to agreements concluded for a public procurement of goods, services or execution of construction works and which stipulates that with respect to such agreements the provisions on contractual penalty shall in case of delay not apply for the duration of epidemic and that contractually agreed deadlines are prolonged for the duration of COVID-19 epidemic.  

Further, as the performance of construction works is in Slovenia not prohibited during COVID-19 epidemic (with the exception of construction works by which the contacts with the consumers cannot be avoided), the Ministry of Economic Development and Technology and the Construction Chamber by the Slovenian Chamber of Commerce issued certain guidelines and instructions for a safe performance of construction works during epidemic: 

• construction workers are allowed to continue with construction works only if they are at least 2 m away from one another or if they use proper personal protection equipment (masks, protective gloves);
• meetings on the construction site should take place only outside and by respecting proper safety distance; 
• employers must provide construction workers with sufficient volume of drinking water and with hot water and soap for implementation of hygiene measures;
• If there is no running water on the construction site, sufficient quantities of disinfectants should be available to workers;
• construction containers, machines, tools and other working equipment must be regularly disinfected.

So far, no specific measures have been adopted to help the construction industry.

Nevertheless, newly adopted intervention legislation brings financial assistance for companies affected by the epidemic as well as for their employees and self-employed persons (except if they have not fulfilled their tax or social contribution obligations). 

Key measures are: 

• financial assistance to employers in the form of reimbursement of salaries which they will pay to their temporarily laid-off employees and employees absent from work due to force majeure between 13 March 2020 and 31 May 2020 (or 30 June, if the measures are extended), whereby the reimbursement for each employee cannot exceed the amount of the average salary for 2019 (i.e. EUR 1,753.84 gross), calculated per month and reduced by the amount of contributions, and in the form of exemption from contribution payments for such employees for the above-mentioned period (please note that employer is entitled to these measures only if he estimates that his revenue in the first half of year 2020 will be decreased by more than 20% compared to the same period in the year 2019 and that in the second half of the year 2020 he will not achieve more than 50% revenue growth compared to the same period in the year 2019);
• for the duration of epidemic the contributions for pension and disability insurance of the insured (in the amount of 15,50 %) and the employer (in the amount of 8,85 %) will be fully paid by the Republic of Slovenia for the employees from private sector working during the time of COVID-19 epidemic;
• for the duration of epidemic, a compensation during the temporary lay-off of employees as a result of illness or injury is covered by compulsory health insurance fund from the first day onwards, even though the employer would have to normally cover it for the first 30 days of illness;
• companies will be able to defer loan payments by 12 months, but only loan payments which were not due on March 12 when epidemic in Slovenia has been declared;
• deferral of deadline for submission of corporate tax return for 2 months (until 31 May 2020).

With regard to the financial support for employers it is worth mentioning that companies will have to repay all funds received based on COVID-19 Act, with statutory default interest, if the profits will be shared or the business performance bonus/awards paid out to the management in the course of 2020.

Furthermore, new financial products from SID bank (i.e. Slovene export and development bank) are expected to ease the current situation. SID Bank will change or amend some of the already existing financial products, for example:

• Loan fund for financing business and capital consolidation - will enable financing of tangible and intangible assets and/or working capital;
• Indirect financing (through a bank and savings bank) - changes will be made towards the elimination of some of the existing restrictions regarding the sources of the SID Bank, which will enable higher, up to 100% financing of project costs or the business activities. The credit can also be used for refinancing; 
• Financing program - will provide SMEs and large companies with short-term loans from the Bank's own funds for the purpose of liquidity financing. 

Yes, COVID-19 epidemic and subsequent government measures represent so-called “force majeure” event. However, this does not mean that in the current circumstances each delay in the execution of construction works or every increase of construction costs can be automatically attributable to the epidemic. Contractors will for each specific construction project have to prove a causal link between the breach of construction agreement and the epidemic or subsequent government measures. 

If the construction operator wishes to be relieved from his responsibility for a delay, unfulfillment of construction agreement or similar, he will have to prove that COVID-19 epidemic represents a circumstance he could not foresee at the time of conclusion of construction agreement and that he took all necessary steps for the construction works to continue despite the epidemic. Similar applies in the case of construction costs increase, where the contractor will, in addition to the proving a causal link between the cost increase and the epidemic, have to demonstrate that he did everything in his power to avoid the cost increase or to minimize it as much as possible. It is also important that the contractor immediately notifies his client about the individual unexpected circumstances affecting the construction and the contractual deadline.   

A range of claims that can be in the event of force majeure invoked by the contractor against the client (e.g. a claim for the change of construction price, a claim for prolongation of the contraction works deadline) is not the same for all construction agreements. Namely, it depends whether goes for usual or FIDIC construction agreement, if also Special construction national rules (slo.: Posebne gradbene uzance) apply to such agreement and if already construction agreement itself contains any provisions on force majeure. 

However, enforcement of above-mentioned claims in the event of force majeure is not automatic and the burden of proof with respect to the justification of such claims lies on the contractor. Exception to these rule applies only to construction agreements that were concluded by private companies with state and other public authorities and for which newly adopted intervention law explicitly stipulates that for the duration of epidemic the provisions on contractual penalty shall not apply in case of delay as well as that contractually agreed deadlines are prolonged for the duration of COVID-19 epidemic.  

Under the statutory law – generally not. However, in some cases the health crisis caused by COVID-19 and subsequent government measures as its result under Slovenian statutory law allow for the use of an institute referred to as “changed circumstances” (Article 112 of the Civil Code). Such are circumstances, which arose after the conclusion of a contract, and which render the performance of obligations by one party more difficult or owing to which the purpose of the contract cannot be achieved, and in both cases to such an extent that the contract clearly no longer complies with the expectations of the contracting parties and in the general opinion it would be unjust to retain it in force as it is. 

On this legal ground, the party whose obligations have been rendered more difficult to perform, or the party that owing to the changed circumstances cannot realise the purpose of the contract, may (only) request the termination of the contract. Such request is however not possible, if the party claiming the changed circumstances should have taken such circumstances into consideration when the contract was concluded or could have avoided them or could have averted the consequences thereof. Further, the contract shall not be terminated, if the other party offers to have the relevant contract conditions justly amended.

If a court terminates the contract owing to changed circumstances it shall at the request of the other party instruct the party that requested a termination to reimburse the other party for an appropriate part of the damage incurred due to the termination of the contract.
Please note that the construction contract can contain a different termination provisions than the statutory law. Therefore, each construction contract should always be reviewed on a case-by-case basis.

Since all the measures currently taken in relation to the COVID-19 are planned to be temporary (and in general do not directly apply to the construction industry), they should not be considered as a change in (construction) law. 

It may be advisable to include a specific force majeure clause tailored to regulatory measures/government restrictions in future construction contracts. 

Further, the situation with respect to COVID-19 is changing fast and new set of intervention legislation is expected to be adopted in Slovenia before the end of April 2020. However, we do not expect any significant measures to be taken or specific intervention legislation adopted with respect to construction industry.