Slovak high court makes controversial 2021 prokura/proxy ruling binding

In August 2023, the Slovak Supreme Court added Decision No. 6Cdo/120/2019 to the official Collection of Opinion and Decisions, making its previous October 2021 ruling that prokura or proxy holders cannot act in employment law matters its official interpretation and making the decision binding for lower courts.

The prokura is a broad form of commercial representation (i.e. a proxy or power of attorney) under Slovak law, which has similarities to Czech and German law. A prokura is often used in Slovakia as an official and convenient way for both local and multinational companies to run a business. The “prokurist” (i.e. the holder of the prokura), is authorised to perform every legal act associated with the operation of a commercial enterprise (sec. 14 of Slovak Commercial Code). Prokura holders, however, are not authorised to sell or encumber real property unless they are expressly authorised to do so.

The prokura holder is registered in the Commercial Register and the holder’s powers cannot be restricted in relation to third parties. Based on legal theory, a prokura is considered the broadest form of representation that a company can grant to a person for running a business.

Although a prokura should give a person the authority to execute every act related to the operation of a commercial enterprise (except in the selling or encumbering of real property as stated above), the Supreme Court established in its Decision that this authorisation does not include employment law matters.

The Decision relates to a case of a dismissed employe who claimed that his dismissal was invalid. One of the claimed reasons for this claim of invalidity was that the prokurist had signed the termination notice. Both the first instance and court of appeal rejected the case and confirmed that this dismissal was valid. The Supreme Court, however, ruled otherwise in a decision criticised for being brief and lacking sufficient argument. The Court stated that the prokura authorises the prokurist to act only with “third parties” without providing any real justification. Because the Supreme Court argued that employment law matters (including dismissals) are acts done “inside the enterprise” (i.e. not towards third parties), the holder of the prokura lacks the authority to act in employment law matters.

The Supreme Court did not provide reasoning for this conclusion nor did the justices explain why the prokura – as the broadest form of authorisation to act on behalf of a company – should exclude the hiring and dismissing of employees from its legal mandate.

The real-life consequences of the Decision will create uncertainty between employers and employees since previously the prokurist signed all employment-law related documents as a matter of course. Moreover, the Decision opens questions about the validity of contracts, salary raises, promotions, collective agreements and similar documents executed by the prokurist. The ramifications of this decision make it even more surprising that the Supreme Court added this contradictory ruling to its Official Opinions and Decisions.

Until the Decision is overruled, our recommendation is to issue a separate Power of Attorney for prokurists pertaining to HR matters, which will exist alongside the existing prokura and insulate the prokura holder from the legal risk of acting without valid authorisation.

For more information on this ruling and how it might affect your Slovakia-based business, contact your CMS client partner or these local CMS experts.