CEE Legal Matters

Category: Czech Republic

  • Dvorak Hager & Partners Supports Caritas Czech Republic

    Dvorak Hager & Partners Supports Caritas Czech Republic

    Dvorak Hager & Partners has announced that it contributed CZK 100,000 to the Caritas confederation of Catholic relief, development, and social service organizations, which will be used to provide aid to the elderly in the form of homes, stationary, home care, assistance, and so on.

    According to the Caritas Czech Republic website, the organization “has become the biggest nongovernmental provider of social and health services in the Czech Republic and has expanded its projects abroad to include humanitarian aid and development in countries such as Indonesia, Mongolia, Cambodia, Moldova, Serbia, Kosovo, Ethiopia and Zambia.” According to the site, “Caritas Czech Republic engages in over 300 social projects and has become a fixed part of humanitarian aid projects around the world. Domestically, they opened hundreds of social and health services to foreigners in distress and established the first hospice to attend to the terminally ill. Its grassroots approach to raise charitable donations includes the largest volunteer project in the Czech Republic called the ‘Three-Kings Collection’ which is a collection of 14,727 cashboxes that generate millions of Euros every year to support local charities, diocesan projects, and provides relief to humanitarian aid projects such as the devastating South East Asia tsunami in 2004.”

    Caritas Czech Republic’s main office in Prague employs a staff of approximately 6,900 employees, 5,220 long-term volunteers, and more than 50,000 volunteers for the Three Kings Collection. Caritas Czech consists of 8 dioceses and about 350 parishes that all sit within the auspices of the Czech Bishops Conference.

    In addition, as part of its pro bono activities, Dvorak Hager & Partners will provide legal services to Caritas.

     

  • Dvorak Hager & Partners Advises on Sale of Prague Racecourse

    Dvorak Hager & Partners Advises on Sale of Prague Racecourse

    Dvorak Hager & Partners has represented the shareholders of Turf Holding, a.s., which operates Prague’s Velka Chuchle racecourse, on the sale of the company to an unnamed “strategic investor.”

    The 2180 meter Velka Chuchle Racecourse hosts canter and harness horse racing from April to mid-November each year. It is located on the southern outskirts of Prague, in the administrational district of Velka Chuchle. 

    According to DHP, the firm’s services “included preparation of transaction documentation and support in the negotiation phase.”

    The team was led by Partner Stanislav Dvorak and included Attorney Jiri Macat.

     

  • Holasek Dropped from Havel, Holasek & Partners Brand

    Holasek Dropped from Havel, Holasek & Partners Brand

    The former Havel, Holasek & Partners has changed its name to Havel & Partners.

    According to a firm press release, “our company is now listed in the Czech Commercial Register under the corporate name of Havel & Partners s.r.o., advokatni kancelar, and under the name of Havel & Partners s.r.o., advokatska kancelaria, in the Slovak Commercial Register. The change has been instituted to reflect the fact that Jan Holasek, whose surname was shown in the company name since establishment, ceased to be our firm’s partner in 2014 and has since been engaged in his own, mainly investment activities. In addition, the license to use his surname in the firm’s name expired on December 31, 2017 and we agreed not to extend it.”

    The firm reports that “this change will in no way break the continuity in our work and the standard of service you have been used to for many years.”

     

  • Clifford Chance Advises EIB on Equity Investment into Inven Capital

    Clifford Chance Advises EIB on Equity Investment into Inven Capital

    Lawyers from Clifford Chance’s Prague office have advised the European Investment Bank on its up to EUR 50 million equity investment into Inven Capital, an internally managed, qualified-investor Czech SICAV fund, fully-owned by the regional energy group CEZ, to support the growth of clean energy and smart technology SMEs and midcaps. DBK Partners advised Inven Capital.

    According to Clifford Chance, EIB agreed to co-invest into Inven Capital on a 50:50 basis with CEZ under a Joint-Co-Investment Program. This is EIB’s first equity investment in the Czech Republic, and the transaction is backed by a guarantee from the European Fund for Strategic Investments, which is the central pillar of the Investment Plan for Europe.

    According to Clifford Chance, “this EUR 100 million co-investment initiative will provide additional liquidity to leading European venture capital-dependent SMEs and midcaps in the energy sector. These companies are typically in a growth stage and need early-stage investments to innovate and expand their product and service offering, increase their productivity and manufacturing capacity and expand internationally.”

    The Clifford Chance team in Prague advising on the transaction was led by Managing Partner Alex Cook, with Senior Associate Michal Jasek as executive lawyer. The team also included Associate Ludvik Ruzicka and Junior Associate Zuzana Moravkova.

  • Allen & Overy Helps Sanofi Register Ibalgin Trademark in Czech Republic

    Allen & Overy Helps Sanofi Register Ibalgin Trademark in Czech Republic

    Allen & Overy has assisted Sanofi in registering its trademark for its Ibalgin pill in the Czech Republic. Sanofi was also represented in proceedings before the Czech Industrial Property Office by Czech firm Cermak a spol. 

    This marks the Sanofi group’s first trademark registration involving the protection of the shape of a product in the Czech Republic.

    According to Allen & Overy, “obtaining this trademark will allow the Sanofi group (the local producer of Ibalgin) to protect the goodwill of its best-selling ibuprofen-based painkiller on the market. As part of the registration, the Czech Industrial Property Office accepted A&O’s argument that although the shape of Ibalgin pill is generic, its simplicity, pink color and long-term use makes it immediately recognizable to consumers, and thus, truly distinctive.”

    The legal advice from Allen & Overy was provided by Prague-based Associate Jakub Cech,.

  • Czech Public Register to Draw in UBOs

    The Czech Commercial Register collects and records information on a broad range of incorporated entities in the Czech Republic, including the most common forms of companies that carry on businesses. Much of this information is publicly available via a free to use website.

    At present, the public can use the Commercial Register to identify the direct shareholders of a Czech limited liability company, as well as the direct shareholder of a Czech solely-owned joint stock company. From January 1, 2018, an amendment to the Czech Public Registers Act (the “Act”) will require the ultimate beneficial owners (UBOs) of Czech companies to be identified to the Commercial Register. 

    What’s a UBO?

    UBOs are defined in terms of “influence,” which is really just an application of well-known concepts of control. Passionate corporate lawyers may wish to study the next paragraph in detail, but mere mortals are free to skip it.

    The UBO of a company is a natural person who, legally or in fact, is capable of exercising decisive influence over a Czech legal entity. A rebuttable presumption provides that decisive influence applies where a person: (a) individually or acting in concert with others exercises more than 25% of the voting rights in the legal entity, or whose stake in such legal entity’s share capital exceeds 25%; (b) individually or acting in concert with others controls a legal person under point (a) above; (c) has the right to receive at least 25% of the legal entity’s profits; or (d) if there is no UBO (for instance, in the case of listed companies) or if the UBO cannot be determined under points (a) to (c) above, is a member of the legal entity’s Board of Directors (or a representative of another legal entity that is a member of the first legal entity’s Board of Directors), or is in a position similar to that of a member of the Board of Directors.

    So we know what a UBO is under Czech law, but how can we demonstrate that a particular person is the UBO of a particular Czech company? The question becomes trickier the longer the chain of ownership and the more exotic the jurisdiction of the UBO. Relief is at hand. Official materials accompanying the amendment to the Act state that an affidavit will suffice. There is no guidance, however, on the form that this should take or whether the affidavit should be issued by the UBO or the Czech company whose ultimate beneficial ownership is at issue.

    When Should I Start To Worry About This?

    As stated above, the amendment to the Act comes into force on January 1, 2018. Thankfully, immediate compliance is not required. The Commercial Register need not be notified of the UBOs of Czech companies until December 31, 2018. As a sweetener — if one were needed — the Commercial Register will not charge its usual fees for registering information on UBOs.

    Also contrary to the usual rules, no consent is required from a UBO as to his or her entry into the Commercial Register’s database of ultimate beneficial owners.

    Starting on January 1, 2019, notifying the Commercial Register of UBOs without undue delay will be required after any change. “Undue delay” is a vague term that, according to common practice, could mean anything from several days to several weeks.

    So Who Gets to See This?

    Information about UBOs will not be accessible to the public via the Internet. Access will, however, be possible to anyone who demonstrates a legal interest in avoiding money laundering. This could arguably include a party undertaking due diligence prior to transacting with a Czech company or a party engaged in a dispute with one. 

    The information is principally intended to be used by the police and other public authorities, such as anti-money-laundering authorities, tax authorities, public prosecutors, and the courts. An excerpt from the database of ultimate beneficial owners will also be provided to the company filing the UBO information.

    No Fine, But…

    The Act does not (as yet!) provide for fines for breaches of the new rules relating to UBOs. Affected persons should not, however, believe that these rules are toothless. A failure to comply could, for instance, cause problems under procurement rules requiring the full disclosure of ownership structures before a Czech company can enter into a public contract in this country. 

    By Christian Blatchford, Partner, and Jakub Porod, Associate, Kocian Solc Balastik

  • Dentons Wins Important Tax Case for Sev.en EC in Czech Supreme Administrative Court

    Dentons Wins Important Tax Case for Sev.en EC in Czech Supreme Administrative Court

    Dentons has successfully represented Sev.en EC, a.s., a member of the Czech Coal group, before the Supreme Administrative Court of the Czech Republic in what the firm calls “extraordinary litigation” related to the reimbursement of gift tax from the Czech state that was imposed on the free carbon dioxide emission allowances in 2011 and 2012 in breach of EU law.

    The Czech Coal group includes Severni Energeticka, Elektrarna Chvaletice and other companies, and is one of the largest producers of coal and coal-based electricity in the Czech Republic.

    According to Dentons, “the Supreme Administrative Court decided the case in favor of Sev.en EC, and ordered the tax authority to return the illegal tax and pay almost 15% in interest on the due amount. The ruling sets an important precedent, which will affect many operators throughout the Czech Republic. The case was strongly driven by EU law, as the illicit tax was a result of a wrongly transposed Directive. The Court ruled the that the tax authority is obliged to know all legal norms on which the tax is based, including EU law, and in case of discrepancies, it is obliged to disregard national tax regulation in favor of directly applicable EU law. Therefore the conduct of the tax authority was indeed illegal and it has to be remedied through the award of interest.”

    Dentons Partner Petr Zakoucky, Head of the the firm’s Energy group in Prague, led the team handling the case, supported by Associates Barbora Obracajova and Michal Pelikan. According to Zakoucky, “the litigation included several unique aspects, never before litigated before the Czech courts. The Court’s ruling sets a significant precedent, which will hopefully influence the operations and conduct of Czech tax authority. This applies not only with respect to emission allowances, but also for the entire tax system in the Czech Republic.”

  • Dentons Prague Participates in Advice to VGP NV on Follow-on Equity Offering

    Dentons Prague Participates in Advice to VGP NV on Follow-on Equity Offering

    Dentons has advised VGP NV, an international project developer of high-quality logistics and semi-industrial real estate and ancillary offices, on its EUR 284.8 million Rule 144A/Regulation S marketed secondary public offering.

    The offering consisted of shares sold by affiliates of a founding shareholder and the chief executive officer, and is one of the largest secondary share sales in Belgium in recent years. VGP is incorporated in Belgium and listed on Euronext Brussels and the Prague Stock Exchange. The offering included a public offering in Belgium, a placement to qualified institutional buyers in the United States in reliance on Rule 144A, and a placement to institutional investors in other jurisdictions. Following the offering, VGP’s free float has increased from 10.1% to 37.5%.

    VGP constructs and develops high-end logistic real estate and ancillary offices for its own account and for the account of its VGP European Logistics joint venture (with Allianz Real Estate). VGP’s business is focused on Spain, Germany, Czech Republic, and other Central European markets.

    The Dentons team was led by London-based US Securities Partner Cameron Half, who was supported by Associate Estrellita Ramirez and Trainee Carey Tang. Prague-based Partner Jiri Strzinek provided advice on Czech real estate matters; Berlin-based Partner Dirk-Reiner Voss advised on German real estate matters; and New York-based Partner Jon Hutchens advised on US tax matters. Argo BCVBA acted as Belgian counsel to VGP NV.

  • Whistleblowing in the Czech Republic

    Despite recommendations by international organizations, Czech legislation on whistleblowers is fragmentary and does not offer a complex legal regulation of the phenomenon, or even a definition of the term. The current protection of whistleblowers – i.e., employees or former employees of an organization who inform competent institutions of illegal or unethical practices in that organization – is only dealt with in the Czech Act on Banks, Act on Savings and Credit Co-operatives, Capital Market Undertakings Act, and Civil Service Act (or, more precisely, in the Government Decree implementing the Civil Service Act). Some vague protection of whistleblowers is also provided by the general provisions of the Labor Code and other regulations, which, however, do not specifically address the protection of whistleblowers as such. Currently, two acts are being discussed in the Czech Parliament aimed at providing higher labor-law protection of whistleblowers in both the private and public sectors.

    The first draft, developed by the Minister for Human Rights on the basis of the Action Plan to Fight Corruption, was approved by the Government in February 2017 and has subsequently been forwarded to the Parliament. The basis for the new legal position, according to the draft, should be the amendment to the Civil Procedure Code, as the Minister for Human Rights does not deem it necessary to adopt a separate law on this matter. Pursuant to the draft, only those “whistleblowing” messages which are made in good faith and in respect of which the public interest in learning of the misconduct outweighs the harm suffered by the protected interests concerned (for example, the duties of loyalty or confidentiality) should be protected. The draft also transfers the burden of proof from the employee to the employer, which will in practice mean that an employer who dismisses an employee after the employee reports a misconduct must prove that the dismissal has been made lawfully.

    An “alternative” draft of an act protecting whistleblowers coming from the workshop of the Minister of Finance was submitted to the Government in April 2016. This act would apply to workers in employment relationships and in civil service, professional soldiers, and members of other security forces. However, protection would be granted only to whistleblowers who have disclosed specific offenses (e.g., corruption-related crimes, rape, fraud), while reports of other criminal acts, administrative torts, and other illegal misconduct would not be protected. This apparently contradicts international recommendations and unjustifiably discriminates between disclosures of equally serious crimes by granting protection to only some and denying protection to others (while the selection of crimes seems to be random). The draft suggests that whistleblowers should be protected from the moment they make their disclosure. Whistleblowers would be allowed to contact the Prosecutor’s Office on an anonymous basis, through a dedicated website. Once the disclosure is assessed, the state prosecutor may offer protection to the person making it – i.e., may give him or her the status of a protected whistleblower – and the employee may then safely step out of anonymity. Once the employee obtains protected whistleblower status, the employer may not end his/her employment or service relationship, either by notice of termination or immediately, nor may the employer transfer the whistleblower to another job or position without the consent of the regional branch of the Labor Office. 

    It should be noted that it is not clear at this point whether either of these two drafts will be given effect, nor what the final form of the adopted legislative measures will be.

    Apart from the planned legislation in this matter, the Czech Constitutional Court has recently provided guidance on how to grasp this issue in two cases, issuing verdicts establishing that the principle of proportionality needs to be applied and that it is necessary to compare the public interest with employee loyalty. In the first case, there was a public interest in protecting the environment; the second case concerned the requirement of non-discriminatory treatment in employment relationships. In both of these verdicts, the necessity of employee loyalty prevailed over the public interest, as employees provided information not only to the competent public institutions, but also to other private subjects, and even to potential business partners. Therefore, the Constitutional Court denied the provision of protection to the employees, and rejected both complaints outright. It is, however, probable that decisions of the Constitutional Court would be different if the employees had not disseminated the information in the private sphere.

    By Jaroslav Tajbr, Head of IP/IT, and Pavlina Hlavenkova, Associate, Noerr

    This Article was originally published in Issue 4.9 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

  • Konecna & Zacha Successful for City of Ostrava in Court of Appeals

    Konecna & Zacha Successful for City of Ostrava in Court of Appeals

    Konecna & Zacha has successfully represented the Statutory City of Ostrava in a dispute valued at over CZK 1.5 billion over its alleged frustration of the construction of a shopping center in that northeastern Czech city.

    K&Z reports that the Regional Court in Ostrava, as a court of appeal, reversed the lower court’s judgment and dismissed the action against the city in its entirety. According to K&Z, although the long-standing and closely monitored dispute will be terminated with final and binding effect, it remains possible that “the plaintiff will seek review of the proceedings before the Supreme Court, however the inhabitants of Ostrava can sleep more quietly now.”