Category: Czech Republic

A&O Shearman has advised sole global coordinator, settlement agent, and joint bookrunner Wood & Company Financial Services and joint bookrunner Erste Group Bank on the placement of newly issued shares of Colt CZ Group SE through an accelerated book-building process targeted at selected investors. Havel & Partners advised Colt.

Colt CZ Group SE is a firearms manufacturer listed on the Prague Stock Exchange.

According to A&O Shearman, the accelerated book-building allowed Colt CZ Group to increase its share capital by issuing 3.9 million new shares, representing 6.91% of the company’s total shares. The shares were sold at CZK 575 per share, raising total gross proceeds of slightly over CZK 2.24 billion.

The A&O Shearman team included Prague-based Partner Petr Vybiral, Associate Denisa Jonasova, and Junior Lawyer Jan Vlcek as well as further team members in London.

The Havel & Partners team included Partner Jiri Kunasek and Senior Associate Katerina Kabatova.

A creditor has forgiven part of a debtor’s debt on the condition that the debtor will make every effort to avoid insolvency and repay at least the remaining, unforgiven part. However, the creditor also set a resolutive condition: if the debtor were to become insolvent (i.e. the court declared it bankrupt), the debt forgiveness agreement was to be void from the outset and the debtor would be obliged to repay the debt in full.

The inevitable happened – the debtor could not withstand the situation and the court declared it bankrupt. The creditor therefore filed its claims in full, as though the debt forgiveness had never occurred. However, this was contested by another creditor of the same debtor, who argued that, in principle, a debt once validly forgiven cannot be “revived”.

The dispute reached the Supreme Court, which, in agreement with the lower courts, did not find the resolutive condition unlawful. The Supreme Court literally stated, “If it was the true intention of the parties to forgive the debt with the understanding that the effects consisting in the extinction of the creditor’s right to demand payment of the debt would go away upon the fulfilment of the agreed resolutive condition (the extinguished right would be “revived”), the Supreme Court finds no reason why such an arrangement is not possible (and valid).” It also added that the debt “revives”, so to speak, ex nunc (i.e. only from the fulfilment of the resolutive condition), which implies that no interest on late payment accrues during the period when the debt forgiveness was in effect.

(The Czech Supreme Court judgment of 30 July 2024 was on Case No. 29 ICdo 59/2023)

By Tomas Kral, Associate, and Alina Starodubova, Paralegal, JSK, PONTES

Kinstellar has advised Wienerberger on its acquisition of Betonarna Lesonice. Prochazka & Co reportedly advised the seller.

Betonarna Lesonice is a Czech manufacturer of concrete paving solutions.

According to Kinstellar, the acquisition strengthens Wienerberger’s position in the construction and infrastructure sectors in the Czech Republic, addressing the growing demand for concrete paving and advanced sound insulation solutions in the market.

The Kinstellar team included Partner Barbara Kusak, Counsel Michal Janicek, Senior Associate Matej Bolek, Associates Tereza Marek, Stepan Gresak, and Matej Korduliak, and Junior Associate Pavel Hrdy.

Karel Petrzela has been promoted to Partner at White & Case in a promotion round that saw a total of 37 partnership appointments throughout the Americas, EMEA, and Asia-Pacific regions.

Prague-based Petrzela has been named a partner in the firm’s Mergers & Acquisitions Practice. He has been with the firm since 2013 and was promoted to Local Partner in 2019 (as reported by CEE Legal Matters on December 5, 2019). Earlier, he was a Lawyer with CMS between 2008 and 2013.

“We are incredibly proud to announce the promotion of these 37 outstanding lawyers to the partnership,” said White & Case Chair Heather McDevitt. “Each of these new Partners has demonstrated superior achievement in their field and a true commitment to our clients. We look forward to their many contributions as partners, and to continuing our development of talented lawyers across our global platform.”

Clifford Chance has advised Ceskoslovenska Obchodni Banka on the financing of OAMP Infrastructure and OAMP Distribution.

OAMP Infrastructure and OAMP Distribution are providing local distribution and water management services to the Ostrava Airport Multimodal Park. They are owned by Micronix Group, a family-owned enterprise headquartered in Prague with more than 50 companies in Central and Eastern Europe. Micronix provides renewable energy supply solutions.

Ostrava Airport Multimodal Park is a logistics center situated near the Leos Janacek International Ostrava Airport in the Mosnov Industrial Zone. According to Clifford Chance, the tenants of the park include ABB, Continental Barum, Ceska Posta, DHL Automotive, Geis, Hyundai Glovis, and Rhenus Logistics.

The Clifford Chance team included Managing Partner Milos Felgr, Counsel Dominik Vojta, Associate Tomas Kubala, and Junior Lawyer Radek Sikora.

BBH Managing Partner has moved in-house and joined Kaprain.

Kaprain is a Czech Republic-based investment group founded in 2013.

Mlejnek has been with BBH since 2002.

Originally reported by CEE In-House Matters.

Kocian Solc Balastik has advised Green Gas DPB on a set of long-term contracts for the supply and off-take of coal mine methane.

Green Gas DPB is a producer and processor of mine gas in the Czech Republic, specifically in the Ostrava-Karvina coal basin. It primarily processes coal mine methane to generate electricity in cogeneration units.

According to KSB, “coal mine methane is a mixture of gases released spontaneously in areas affected by coal mining which is extracted in a controlled manner from the underground areas of active and closed coal mines. The primary component of mine gas is methane, a greenhouse gas whose negative impact on the climate is more than 25 times greater than that of CO2.”

The KSB team included Partner Tomas Sequens.

KSB did not respond to our inquiry on the matter.

It will soon be twenty years since Regulation 261[1] came into force, which introduced an unprecedented level of protection for air passengers and was supposed to provide much greater protection in cases of denied boarding, cancellation, or long delays. So, has the (in)famous Regulation 261 served its purpose?

No doubt, Regulation 261 has become the “Air Passenger Protection Constitution”, which passengers travelling by other means can only envy. To be fair, the airlines deserved such a watchdog as flight cancellations in particular used to be standard business practice and the rights of passengers were not well respected. As time passed, the European Court of Justice (“ECJ”), tasked with unifying the interpretation of Regulation 261 and shielded by the policy of enhanced consumer protection, significantly enhanced the scope of the regulation. The question now is whether, and to what extent, an appropriate balance between the interests of passengers and air carriers is still being maintained and who is actually benefiting from the current situation. This calls for discussion particularly with regard to compensation for long delays or in the case of liability, namely whether it is the contractual carrier or the operating carrier that is liable.

Our experience in recent years shows that airlines have to face the harsh reality of a rise in the need to defend bulk claims in court, facing demanding collection of evidence, and fighting a gradually stricter interpretation of Regulation 261. This is topped off with an unprecedented activity of claim farmers, which appear to be the only ones benefiting from the situation.   

Claim farmers are businesses, including lawyers acting as claim agencies, that offer claim management services to the public for compensation under Regulation 261[2]. In recent years, these agencies have developed an entire industry around compensation under Regulation 261. As a result, both the airlines and local courts have been overburdened, which neither of them was prepared for. The amount of claims was (and still is) tremendous and many air carriers were caught off guard and ill-equipped as they were not used to collecting evidence on a daily basis, which has turned out to be essential for a successful defence. In addition, most of the relevant evidence comes from computer reservation systems and other internal systems operated by airlines, airport operators or air navigation service providers, which might be difficult to swallow for many courts, considering the complexity of the records, including the number of abbreviations used.

The situation has improved though, as airlines have over time become more experienced and better capable of defending themselves. This included various techniques of modifying conditions of carriage, for example, by prohibiting the assignment of claims. In case C-11/23, the ECJ, however, held that passengers should be allowed to transfer their claim to a third party given the difficulties and costs that might deter them from taking steps personally in relation to that carrier with the prospect of a limited financial return. Therefore, a clause in the general conditions of a contract of carriage prohibiting passengers from transferring their rights against the operating air carrier constitutes an inadmissible derogation.

The business of claim farmers is, therefore, unstoppable and the economy of scale still matters – the more claims they file the more likely a majority of them will be successful. Therefore, in practice, one may easily come across statute-barred claims, repetitive claims, unsubstantiated claims, or claims filed against the wrong entities.

Another pertinent matter that we have started to see in our practice, which is intrinsically linked to the mass filing of claims and notices by claim farmers, relates to the failure to notice that there is a difference between flights departing from the EU and those departing from the UK (and also the nationality of the carrier may matter). Claim farmers often fail to take into account that Regulation 261 was retained in the relevant Brexit-specific regulations and compensation for significant delays when departing from a UK airport or departing from an airport located in a country other than the UK to an airport situated in the UK if the operating air carrier of the flight concerned is a UK air carrier should be claimed under UK regulations[3] instead of Regulation 261.

While the airlines are not held liable for events caused by “extraordinary circumstances”, not surprisingly the interpretation of this term has developed over the years. The boundaries set by the ECJ are pretty narrow. In addition, the airlines carry the burden of proving that, even in the case of extraordinary circumstances, the circumstance could not have been avoided even if all reasonable measures had been taken and that it adopted measures appropriate to the situation to avoid the consequences (recently confirmed in C‑405/23).    

The most recent case law appears to be more airline-friendly. The ECJ has, for example, clarified that passengers are not entitled to compensation for a delay if they did not suffer a loss of time themselves, especially if they did not present themselves for check-in. In case C‑474/22, a passenger did not go to the airport upon learning about a delay and later assigned his rights to a claims agency, while in case C‑54/23 a passenger who had learned his flight would be delayed booked an alternative flight and reached his final destination with a delay of less than three hours after the originally scheduled arrival time of the first flight. In both cases, the passengers were not entitled to compensation given that they did not experience the same loss of time since they did not present themselves for check-in or reduced the delay through alternative bookings.

On numerous occasions (e.g., C‑549/07, C‑257/14, C‑832/18), the ECJ has confirmed that the resolution of a technical problem due to a breakdown, failure to maintain an aircraft, or the premature and unexpected failure of certain aircraft parts is inherent in the normal exercise of the air carrier’s activity and does not exempt the air carrier from paying compensation. However, in C‑385/23 the ECJ held that the occurrence of an unexpected and unprecedented technical failure that affects a new aircraft model that has recently been put into service and which results in the air carrier cancelling a flight falls under the umbrella of “extraordinary circumstances” in cases where the manufacturer of that aircraft recognises, after the cancellation, that the failure was caused by a hidden design defect which concerned all aircraft of the same type and impinged on flight safety.

No doubt, passenger rights in air transport have significantly improved over the last 20 years, whether inherently through Regulation 261 or through case law. However, whether some of these rights are justifiable, compared to other modes of transportation, brings many questions: What is the level of inconvenience in the case of a passenger left stranded at a bus stop or remote train station as compared to a passenger in an airport terminal enjoying meal vouchers and shopping? Why should a passenger get significantly higher compensation for a 3-hour delay than someone who was unlawfully put into custody for 24 hours? And is this ultimately for the benefit of passengers or does it rather feed the business of claim farmers, whose interest is far from protecting passengers’ rights? Shouldn’t claim farmers be regulated, such as by prohibiting claim assignments or limiting their commission? Let’s hope these questions don’t take another 20 years to be answered.

[1] Regulation (EC) No. 261/2004 establishing common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation or long delay of flights

[2] European Commission’s Information notice on relevant EU consumer protection, marketing and data protection law applicable to claim agencies’ activities in relation to Regulation 261/2004 on air passenger rights dated 9 March 2017. Available at: https://transport.ec.europa.eu/document/download/604d45f0-cc92-430e-935a-ef92bd3788cb_en

[3] The Air Passenger Rights and Air Travel Organisers’ Licensing (Amendment) (EU Exit) Regulations 2019. Available at: https://www.legislation.gov.uk/uksi/2019/278/introduction

By Jiri Hornik, Partner, Kocian Solc Balastik

The Czech Class Actions Act[1] became effective on 1 July 2024. Previous articles have provided an overview of key aspects of the new legislation and subjects of these proceedings. This part will focus on the challenges related to the publicity of class actions and explore ways in which companies, as defendants, can protect themselves from negative impacts.

Who will publish information?

Czech law provides that two platforms will publish information on class actions: (i) the competent court and (ii) the non-profit organisations eligible to file class actions and act as the claimant[2] (the “NGO”).

After the a class action is certified[3], the court publishes the main information in the online register of class actions, accessible at (https://hromadnerizeni.justice.cz/rizeni-mezi-podnikateli-a-spotrebiteli/). As at the date of this article, no class action has been certified in the Czech Republic yet.

NGOs are generally required to inform consumers on their website about (i) class actions they intend to file, (ii) class actions they have filed, and (iii) the results of class actions that have been decided. The limits and rules on the manner, extent and form of communication are set in the court’s ruling once the class action is certified. Until then, NGOs are obliged to inform consumers, but the manner, extent and form are at their discretion. They may use their websites, online marketing tools, national newspapers or broadcasting to promote the class actions they intend to file to gather as many class members as possible.
 
Available defences

In addition to general remedies such as compensation for damages and remedies for unfair competition, the Czech Class Actions Act provides a special remedy for defendants whose rights are being infringed upon by the NGO due to publications made after the certification of a class action. If the NGO oversteps the limits or rules of publication set out by the court in the certification ruling, the defendant may ask the court to order the NGO to refrain from such actions and remedy the non-compliance. If the NGO does not comply with the order, it may be fined up to CZK 5m (approx. EUR 200,000).

However, Czech law does not provide any special regulation or remedies for publications made before a class action is certified. The risk of defamatory or otherwise negative effect is high. Although the defendant may successfully fight the certification of class action, the information on the potential existence of certain claims will already be publicly available. The only limits in this regard stem from the general regulations on marketing and unfair competition practices. The same applies to defence mechanisms. Defendants may use general remedies against defamation or unfair competition, seek general compensation for harm, or request the court to issue preliminary injunctions.

Any precautions to take?

To prevent any negative impact from the publicity of a class action, it is important to regularly monitor the websites of relevant NGOs. If a company suspects potential defamation or unfair competition practices, it should investigate potential remedies, such as seeking an injunction to stop these activities.

By Natalie Rosova and Kristyna Zmatlikova, Attorneys at Law, Schoenherr

The long-standing dispute between Illumina/GRAIL and the European Commission has now ended. The Court of Justice has set definitive limits on the broad interpretation of Article 22 of Council Regulation No. 139/2004 on the control of concentrations between undertakings.

What is this article about? A Member State may request the European Commission to review “any concentration that is capable of affecting trade between Member States and threatens to significantly impede effective competition” within the territory of that Member State.

The European Commission has increasingly interpreted this well-known article more broadly, arguing that in recent years, an increasing number of transactions, especially in the digital and pharmaceutical sectors, have evaded merger control by competition authorities.

A major turning point occurred in September 2024, when the Court of Justice addressed the interpretation of vague legal terms. The judges reiterated the fundamental legal principles for interpreting European law and, citing the principles of legal certainty, predictability, and the one-stop-shop principle, ruled that “it is not possible for the European Commission to review a transaction under Article 22 if that transaction does not meet the thresholds (turnover criteria) for review under the legal orders of the Member State.”

The Court of Justice pointed out that if the practice or the European Commission requires broader merger control, it should establish an appropriate legislative framework. Problematic concentrations between undertakings can be addressed by other means, for instance, Article 102 of the Treaty on the Functioning of the European Union, which prohibits the abuse of a dominant position in the internal market.

In conclusion, it is interesting to compare the Court’s current interpretation of Article 22 and the upcoming amendment to the Czech Competition Act, which we wrote about recently.

According to the upcoming amendment to the Czech Competition Act, the Office for the Protection of Competition is expected to gain the ability to assess concentrations between undertakings, even if they do not meet the required financial turnover thresholds, and this would apply even retroactively. Will the conclusions of the Court of Justice be reflected in the proposed amendment?

By Vladena Svobodova, Senior Associate, and Lenka Dvorakova, Junior Lawyer, JSK, PONTES