slovenia: ethics and good governance

Journal of Financial Crime — Vol. 7 No. 2 — International

Slovenia: Ethics and Good Governance Klaudijo Stroligo

INTRODUCTION In any state at all regulated, by accepting a term of office, a government also undertakes to respect those basic principles on which the legal and social order of the state is founded. So, for example, in Slovenia, the president of the government and ministers, on election to the National Assembly, swear that they will respect the Constitution and the law and that they will behave in accordance with the well-being of all citizens of Slovenia. With this apparently symbolic statement, a minister binds not only himself but the state administration as a whole.

In assessing the ethical and unethical behaviour of any government, it is thus necessary to consider all those standards which it has succeeded in remoulding during the period of its term of office, and then, with the aid of the state apparatus, implementing them in practice. In this connection, it is also important that the state administration does not respect the law only in relation to citizens, but in all its internal operations, where its officials and employees are bound by specific ethical and other standards.

In this paper, the author will attempt to show how the enforcement of such ethical principles and standards is developing in Slovenia, where numerous changes have taken place in the last eight years which have also influenced the construction of the system of social values. Prior to independence, the political system in Slovenia had been replaced, and instead of a one-party, a multi-party system was introduced. It was further necessary after independence in 1991 to set up numerous ministries completely from scratch, which before this had only operated as smaller units of former Yugoslav ministries. It therefore became necessary to employ thousands of new state employees. All this had to be done at a time when the state was gripped by a real economic crisis and high inflation, and the transition to a market system and privatisation of former social assets had been instigated. It is probably not necessary to emphasise that during such revolutionary changes, which had for the most part taken several decades in other countries, the principles of good governance suffered in many ways.

In this analysis of ethical principles, only those rules

which are inscribed in legislative and other statutory acts and some codes of ethics are examined, and in citing concrete cases the author has tried to describe their realisation in practice. He is, however, unable to avoid the fact that as an official in the Ministry of Finance, in the Office for the Prevention of Money Laundering, he is bound above all to rules which apply to this state ministry, and his primary interest lies in their examination.

CRIMINAL LAW REGULATIONS By determining the behaviour which is defined as a criminal offence, the state simultaneously defines the values which it is prepared to protect by threat of the most serious sanctions and with the commitment of its repressive organs. A list of criminal offences in any state thus represents some kind of mirror image of its highest moral and ethical principles.

In the Penal Code of the Republic of Slovenia," criminal offences against official duties and public authority are determined in a special section, so that even with this apparently unimportant form, the legislature has made it known that it gives precedence to the lawful operation of state administration. In this section are found all the so-called classical criminal offences of official persons, such as, for example, the betrayal of official secrets, the forging of official documents, the illegal appropriation of property on the part of official persons, and various other forms of abuse. In addition, criminal offences such as the giving and receiving of bribes and insider dealing, examples of criminal offences of corruption, are found here.

In general, it is true that the criminal law regulations already satisfactorily cover all illegal behaviour of domestic official persons and that there is no major loophole in this field. Because of harmonisation with regulations of the European Community and the Council of Europe, Slovenia will shortly extend the criminality of corruption offences to official persons of other countries, international organisations and international courts. The proposed amendments and supplements to the Penal Code which will regulate this field are in their second reading in Parliament

Journal of Financial Crime Vol. 7 No. 2, 1999, pp. 186-190 © Henry Stewart Publications ISSN 0969-6458

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and they are expected to be finally adopted this year. Similarly, a proposed law on the responsibility of legal persons for criminal offences has been before Parliament since 1997. Among other things, it determines serious penalties for legal persons who give, attempt to give or promise bribes to official persons.

What about the implementation of the regulations in practice? From the criminal charges arising from corruption offences laid against official persons by the police, the following may be established:

— that for the criminal offence of bribery, 31 charges were laid in 1995, 26 charges in 1996 and 17 charges in 1997; for the criminal offence of taking bribes, two charges were laid in 1995, one charge in 1996 and two charges in 1997; for the criminal offence of insider dealing, one charge was laid in 1995, two charges in 1996 and no charges in 1997;

— that from 1990 to 1993, there were some ministers and other high state or public officials among those charged in relation to corruption;

— that corruption in the state administration is only rarely connected with organised crime and that even in relation to the number of discovered illegal acts, this does not to date represent a major problem;

— that the police and other bodies for the investigation of criminal offences and for prosecution are sufficiently competent and that they enjoy a sufficient level of independence in dealing with this kind of criminal offence.

In scrutinising the judicial operations in this field, it can be seen that everything is not as rosy as it appears and as is desirable. The courts, in particular, for various objective as well as subjective reasons, are only rarely able to bring this kind of case to a conclusion. Even in the more important cases, proceedings against official persons have in the end been halted because of the statute of limitations.

If such events are understandable because of overburdened courts and because of too few specialised judges in the field, it is rather more difficult to accept the fact that some state officials, even when criminal proceedings have been commenced against them because of corrupt practices, continue undisturbed to perform specific tasks in the state administration. In the not so distant past there have been individuals who, despite criminal charges being laid and police hearings already completed, have later

even been appointed to higher positions either in the state administration or in state-owned companies. It is probably unnecessary to explain that such circumstances do not have the best influence on the working commitment and firmness of moral and ethical principles of other public employees.

OTHER STATUTORY REGULATIONS Among other regulations which are intended to prevent abuse in state administration, and also encroach more importantly on the field of ethical standards, it is worth mentioning the following.

The Government of the Republic of Slovenia Act This Act5 determines in Article 16 that the president of the government and ministers may not simultaneously perform functions in other state departments, and other activities which are not compatible in law with the function of a member of the government. This provision, which has existed in Slovenia since the beginning of 1993, is very important, since the highest representatives of the state administration are explicitly forbidden from performing, during the period of their term of office, any other function outside the government. This means, of course, that they may not sit on the supervisory councils (boards) of banks and other large companies and that they cannot anticipate additional earnings under this heading. These provisions, which representatives of the present Slovene government hold to in practice, prevent in advance situations in which the mixing of functions could give rise to conflicts of interest.

Incompatibility of Performing Public Functions with Activities for Profit Act This is one of the fundamental regulations in the field under discussion and, as distinct from the Government Act, it applies to a much wider circle. The provisions of this law refer to all persons who perform representative or executive functions in state organs and organs of local communities in Slovenia. It therefore binds the President of the Republic, the president of the government and ministers, as well as state secretaries and all other officials in the state administration, and delegates to both houses of the Slovene Parliament. In addition, it applies to the mayors of Slovene municipalities and to other officials at a local or regional level.

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The law forbids all these officials from accepting gifts or obtaining advantages which could affect their behaviour in performing their duties, and this ban also extends to spouses of officials and to other relatives or persons who live with them in the same household. A professional official, for the duration of his appointment, may not perform profitable activities for private gain, with the exception of those which relate to administering his own assets and to scientific research and artistic, cultural or advertising promotions. The ban applies to a non-professional functionary only if performing activities for profit could affect the exercise of his duties. The law further determines that companies in which an official or his relatives have more than a 25 per cent share may not do business with the state or public companies and institutes.

Supervision of the implementation of the cited provisions is entrusted to a special Commission which operates within the framework of the National Assembly. This collects and analyses above all data on the state of assets of officials and their spouses, who must declare these to the Commission every two years. The data, with the exception of salaries which are paid from the budget, are in the public domain.

It is clear from the above that in the part which relates to the ban and specific obligations of officials, the law is up to date and corresponds to generally accepted standards in this field. Unfortunately, that cannot also be claimed for that part of the law which refers to the effectiveness of supervision and to the possibility of sanctions against those who do not respect the provisions of the law. Thus, in a case in which, in conflict with the law, an official fails to communicate all the required data on the state of his assets, he will be obliged to deliver the data within three months, and the organisation to which the official belongs will be informed. If, even after the expiry of the additional time limit, the official does not comply, in view of the lack of statutory provisions, the Commission can do nothing, since the law does not envisage sanctions in such a case. That this is not simply a theoretical problem is also testified to by the fact that during the previous term of Parliament, three members of the National Council, even after renewed appeals from the Commission, did not hand over the required data. Despite this, and despite public promulgation of their failure to cooperate with the Commission, all three awaited the completion of their term of office without major

debate, and the data on their assets, which they are clearly concealing, are still unknown today. The Commission also has very limited possibilities for verifying the data communicated, since it can only check through official records which are kept by the tax office, not with the aid of other sources. Because of the deficiencies, the Commission and various parliamentary parties have already several times proposed amendments to the law, but even in the new session of Parliament the proposals have to date fallen on deaf ears.

The Public Procurement Act Among the provisions of this law which relate to the subject under discussion, it is worth mentioning in particular the so-called anti-corruption clause. This is expressed in two forms. First, in specified business financed from budget funds, the client shall reject an offer if the tendering firm gives, attempts to give or promises any kind of benefit (material or non-material) with the intention of influencing the decision in the procedure of public procurement. Secondly, if in the tendering procedure or if in the implementation of an already concluded contract it is found that anyone has demanded on behalf of the client, from the tendering firm, gifts or any other kind of benefit, or the client was promised or given gifts or any other benefit, the contract will be withdrawn.

These provisions are important since, for a whole range of business which takes place on the basis of public calls for tenders, they determine the rules of behaviour of state and public employees where they are confronted against their will with attempts at bribery. Similarly important is the ability to cancel contracts in cases in which state or public servants themselves are those who ask for or accept bribes in connection with the business.

To the author's knowledge, the clauses have not to date been used in practice, partly because the law only came into force just over a year ago, and partly because the regulations are not themselves enough for uncovering and taking sanctions against corrupt behaviour. It is still necessary to establish suitable mechanisms of internal and external control. At the moment, there are not enough of these in Slovenia.

CODES OF ETHICS There is not currently in Slovenia a single code of ethics which would apply to the entire state

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administration. Similarly, in this field, ministries and other state organs are left more or less to themselves, or more precisely, it depends on the willingness of principals that in spite of the abundance of other work, they also devote the necessary attention to such questions. However, some steps have already been taken in this field in state administration, and there already exist in individual ministries some internal rules which, irrespective of their various titles, can be classified as codes of ethics. Such codes already exist in the Ministries of Finance, Justice and Internal Affairs. In addition to these, special codes have been adopted for the State Prosecutor's Office, for the Bar and in a number of other institutions which are outside the state or public administration.

Looking more closely at the code of ethics that has been used in the Ministry of Finance since 1993, it can be established that even in its title it is more reminiscent of rules other than a code of ethics. It carries, namely, the somewhat complicated title 'Rules on special obligations of employees in work in the Ministry of Finance'. Despite this, the rules are well composed and represent precisely the boundary between the permissible and impermissible in certain situations and are thus a support to all who are employed in the ministry. The rules regulate the following fields:

— they determine work which employees of the ministry may not perform outside the ministry and work which they may perform only with the permission of the principal;

— they determine the special obligations of employees of the ministry in relation to legal and physical persons outside the ministry;

— they determine the obligations of employees who deal with stocks and shares.

Among the tasks which employees may not perform outside the ministry are all those which are determined in the abovementioned law on the incompatibility of performing public functions with activities for profit. The rules still allow employees of the ministry to take part in seminars and to publish professional articles in their field of work for payment with the written permission of the principal.

The accepting of gifts or services from persons outside the ministry who are in any kind of relation with the ministry is also forbidden. Exceptionally,

employees of the ministry may receive gifts from such persons of a promotional nature, but the value of an individual gift may not exceed a specified amount and a restriction on the value of all such gifts is determined annually. Additionally, employees of the ministry may not accept hospitality which is laid on by outside persons, unless this is hospitality in connection with official visits or meetings. Similarly, they may travel to official discussions only at the expense of the ministry.

With the obligations of employees who administer stocks and shares, the abuse of insider information is also explicitly forbidden in the rules and, at the same time, the declaration of stocks and shares owned by such employees is also envisaged.

Although some of these regulations could be characterised as strict and impractical, on a daily basis they give an answer to many questions. As an example there is the acceptance of gifts at the New Year in the Office for Money Laundering Prevention. Generally, representatives of numerous financial organisations visit at that time, subjects under the law on the prevention of money laundering and whom the office is responsible for supervising, and they bring with them bottles of wine and various other gifts. Because of the restriction on the value of an individual gift, the officials cannot of course allow themselves to accept gifts from some visitors and not from others, or even worse, to ask those who wish to give a present how much they paid for a specific gift. There is only one solution to the quandary and in practice it means that all employees of the office consistently reject all such gifts, since only in this way can the provisions of the rules be satisfied. An apparently laughable and unimportant experience, it becomes serious when an individual employee in the office must decide whether to introduce proceedings for violation of regulations in the field of the prevention of money laundering against one of the New Year visitors. To accept a bottle of wine might seem unimportant, but it certainly means that a fairly bitter taste remains after tasting the wine in such cases.

CONCLUSION Professor Ernesto U. Savona, who as an expert of the Council of Europe in the framework of the Octopus programme gave an evaluation of conditions in the field of corruption and organised crime in Slovenia, said in his report this year: 'Slovenia is rapidly

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moving towards a market economy and seems to have all the necessary instruments for dealing with the problems that this transition produces in terms of organised crime and corruption.' Among concrete recommendations, he stated: 'The Government might still consider it important to extend the introduction of codes of conduct to other sectors of public administration and to private enterprises, devoting particular attention to the identification of conflicts of interest and to the establishment of clear guidelines for the prevention of (bad) management.'

This assessment realistically characterises conditions in the field of forming and respecting ethical standards in state administration and, to a large extent, agrees with the findings of this paper. Because of the haste in setting up the new legal order after independence, much was done superficially and did not bring to a conclusion all the ideas which the system of introducing rules of good governance requires. The general erosion of moral and ethical principles at the time of transition from the socialist to the capitalist system must also necessarily have been reflected in the operation of public administration. Phrases such as 'be resourceful' and 'everything is allowed that is not explicitly forbidden' also indisputably influenced the behaviour of individuals who, as representatives of state institutions, should have been an example to others, but unfortunately, in those quickly changing times, were not.

This can be seen from the results of a poll which was carried out in August 1998 by the Slovene newspaper Delo.11 In the poll, in which 677 randomly chosen telephone subscribers took part, in answer to the question whether they believe that holders of important public offices take material advantage, 61.9 per cent answered 'frequently', only 23.8 per

cent 'rarely', and a mere 2.1 per cent 'never'. And although the results were not obtained on a representative sample and do not necessarily reflect the actual conditions, it is nevertheless a good indication that a great deal of work still awaits Slovenia in this field.

REFERENCES (1) Thus, for example, in 1990, there were still fewer than 50

persons employed in the then Ministry of Finance of the Republic of Slovenia; similarly in the Ministry of Justice and some other ministries.

(2) Official Gazette RS, No . 63/94 of 13th October, 1994. (3) The Penal Code considers to be official all persons who

perform official duties or have official functions in state organs, as well as delegates to the National Assembly and members of the National Council and other persons who perform specific official duties on the basis of statutory authority.

(4) It is worth mentioning that Slovenia is one of the few-countries in which insider trading is already considered a criminal offence.

(5) Official Gazette RS, No . 4-124/93 of 16th January, 1993. (6) In this connection, in a Croatian newspaper a few months ago

it was reported that some ministers in the Croatian government earned even more monthly with attendance payments as members of the boards of various companies than they received from their ministerial salaries.

(7) Official Gazette RS, 49/1992 of 10th October, 1992. (8) Official Gazette RS, No . 24/97 of 5th May, 1997. (9) For example, codes of practice for physicians and for

journalists. (10) Council for Europe: Corruption and organised crime in states

in transition (Octopus), 'Final recommendations and guidelines for action' addressed to the Government of Slovenia, Strasbourg, 5th March, 1998.

(11) See Delo of 29th August, 1998, poll on pp. 1 and 2.

Klaudijo Stroligo is Director of the Office for Money Laundering Prevention at the Ministry of Finance, Lubljana, Slovenia.

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