Category: Czech Republic

Due to Germany’s economic importance and its strategic position at the heart of Europe, it certainly rings true to many Czech motor carriers that (almost) “all roads lead to Germany.” The dependence on the vagaries of German toll policy, however, have forced Czech motor carriers to swallow two bitter pills in the past four years. First, back in July 2018, the German government extended tolls to all federal roads, which led to some 40,000 kilometres of roads now being part of the toll system.

This was met with some resentment from motor carriers across Europe, as using federal roads instead of motorways presented a way to save a non-negligible part of transportation costs. Then, in 2019, German authorities decided to increase the toll itself. Motor carriers thus saw tolls on German roads increase by between 20% and 60%. This development put an additional financial burden on those competing in this already highly competitive area of transportation, where every operational cost adds up.

Many of those running a transportation business therefore became very interested in recent legal developments across the Czech Republic’s western border.

On October 28, 2020, the European Court of Justice decided that the truck toll levied by the Federal Republic of Germany violated European law. The reason for this decision was that German authorities included the costs of traffic police in the toll, although European law only allows the costs of infrastructure to be taken into account in calculating tolls. Consequently, the ECJ ruled that the calculation of the toll, at least to the extent it was based on the costs of traffic police, was contrary to European law, and that, at least to this extent, motor carriers were being charged in excess of the amount allowed by European law. According to initial estimates, this cost overrun meant that approximately 4% of the toll paid was being charged unlawfully. The ECJ ruled that the German authorities were not only obliged not to include the costs of traffic police in the toll amount, but that all those who paid the German HGV toll, which had been inflated as a result, were entitled to a refund.

To many motor carriers, it therefore appeared as if Christmas had come early. According to calculations, if every eligible motor carrier pursued a toll refund for 2017, the total amount of refunds would amount to almost EUR 1.3 billion. According to the Czech Association of Road Transport Operators, the refund claims by Czech motor carriers could amount to up to EUR 30 million for 2017, 2018, 2019, and 2020, combined.

Pursuant to German law, however, claims for toll refunds are barred if they are not asserted by the end of the third calendar year following the creation of the claim. As a result, those motor carriers who neither submitted a toll refund request with the German authorities for 2017 nor initiated any further measures to prevent the statute of limitations for the toll refund claim of 2017 from running out are therefore eligible to request a toll refund only for 2018, 2019, and 2020. Motor carriers may request toll refunds for truck tolls paid for trucks of a minimum gross weight of 7.5 tons.

The case now rests with the Supreme Administrative Court in Muenster. The court now has to decide how the toll is to be correctly calculated according to the requirements set out by the ECJ. It is thus possible that the final amount of unlawfully charged toll may lie somewhere north of 4%, as the breakdown of costs which made up the unlawfully charged toll may reveal additional irregularities. This decision is, however, unlikely to be made before the summer of 2021 – and probably not until autumn. It is unclear now whether and to what extent this decision will then become final and whether the Federal Republic of Germany will abide by it or appeal against it.

It remains to be seen how the events currently unfolding in Germany will affect motor carriers’ bottom lines. Depending on the wording of each of the individual contracts of carriage concluded for the purpose of transportation of goods, there may arise disputes between the motor carriers and their customers as to which ought to actually benefit from the refund.

By Barbora Urbancova, Partner, Stepan Gresak, Associate, Peterka & Partners, and Hagen Albus, Lawyer, Roos Nelskamp Schumacher & Partner

This Article was originally published in Issue 8.3 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

A new amendment to the Czech Corporations Act (Amendment), which came to force as of 1 January 2021, requires companies to implement important changes in their founding documents and file new information in the Commercial Register. We highlight the most important changes below.

1. Changes in regulation of monistic system of joint stock companies

Since the Amendment cancels the institute of the statutory director at joint stock companies and henceforth the board of directors will be the only statutory body, the corporate governance structure of monistic joint stock companies has to adopted. Accordingly, the articles need to be updated and published in the Collection of Deeds and respective changes filed in the Commercial Register.

2. New shareholders’ rights

The Amendment explicitly enables the association of the right to appoint one or more members of the statutory body with a particular share. An institute which used to be included in shareholders’ agreements may now be introduced in the articles or memorandum of association respectively. The Amendment also enables limiting the shareholder’s voting right for important reasons stated in the memorandum of association or creating shares without voting rights (on condition there is at least one share with a voting right). To be able to benefit from these new possibilities, the founding documents need to be updated accordingly.

3. Scope of prohibited activities of the statutory body

From now on, the founding documents may extend or narrow the scope of prohibited activities of the statutory body and it is also possible to exclude all restriction entirely or specify conditions under which their performance is prohibited. Should the companies wish to use such new institutes such as modification of competition of the member of the statutory body or shareholders’ rights, they are also obliged to update their memorandums of association or articles accordingly and publish them in the Collection of Deeds.

4. Exclusion of dispositive provisions

Companies may also exclude some of the innovations introduced by the Amendment. To do so, respective dispositive provisions need to be explicitly excluded in their founding documents. For example, the Amendment enables shareholders to bring another person to the general meeting. The companies may consider excluding such right or limiting it, for example, only to legal counsels or other professional advisors.

5. Publication in the Commercial Register

Companies are newly required to publish some information in the Commercial Register even though such change does affect the memorandum of association or articles. In particular, if a member of a statutory body is a legal entity, it is necessary to register a person authorized to act on its behalf in the Commercial Register. The authorized person must be a natural person who meets the legal preconditions for performing a function of a statutory body. If this information is not published in the Commercial Register, the function expires. Therefore, companies with such elected bodies must ensure their records in the Commercial Register are updated.

6. Deadline for changes and publications

In conclusion, the changes made by the Amendment may require attention not only regarding adapting founding documents and new filings in the Commercial Register, but also to changes in structure and functioning of companies. The deadline for changes in memorandum of association and articles is 1 January 2022. However, legal persons who are members of a statutory body are required to authorize and publish the person in the Commercial Register before 1 April 2021. Other changes which require publishing in the Commercial Register have to be published before 1 July 2022.

However, please note that the provisions of founding documents, which are in conflict with the mandatory provisions of the Amendment, ceased to be binding as of 1 January 2021. Also, the Amendment includes several other changes which, although they do not require a change in the founding documents directly, may be essential for the functioning of the company.

By Miroslav Dubovsky, Country Managing Partner, and Marcel Janicek, Associate, DLA Piper

Dentons Partner Marketa Tvrda has been appointed Co-Head of the firm’s Real Estate practice in Prague. She focuses on real estate, corporate M&A, and commercial law.

Tvrda, who will work with Real Estate Co-Head Jiri Strzinek, became a Partner at Dentons in 2018 (as reported by CEE Legal Matters on April 9, 2018), after joining the firm in 2014. She also serves as the firm’s Diversity Ambassador and Green Ambassador in the Czech Republic.

Prior to joining Dentons, Tvrda spent four years at Glatzova & Co and three years at Hogan Lovells, both in Prague.

Dentons has helped Crestyl secure a EUR 130 million loan from German banks PBB Deutsche Pfandbriefbank and Helaba for refinancing the Dock in Office Park in Prague. Giese & Partner reportedly advised the banks.

Crestyl is a Czech developer of multipurpose residential, retail, and commercial properties.

According to Dentons, the Dock in Office Park is part of the Dock project in Prague’s Palmovka area. The complex consists of four Class-A, multi-tenant office buildings, with 85,000 square meters of office space and 8,700 square meters of retail space. The fifth building of the complex, which is currently under construction, is expected to be completed next year

Dentons’ Prague-based team consisted of Global Vice Chair Evan Lazar, Partner Daniel Hurych, and Associates Ondrej Vales and Eva Klimova.

Giese & Partner’s team included Partner Jitka Sytarova, Managing Associate Denisa Molnar, and Senior Associate Karolina Szturc.

Dentons has advised a syndicate of four banks headquartered in Prague – Komercni Banka, Ceska Sporitelna, Ceskoslovenska Obchodni Banka, and UniCredit Bank Czech Republic and Slovakia – on the financing of DEK’s acquisition of Best, including the refinancing of the Best group. Financial details were not disclosed.

Best is a Czech manufacturer of concrete outdoor and garden architecture elements with seven production plants that was sold by its founder, Tomas Brezina, thirty years after it was established. DEK holding is a Czech producer and supplier of building materials and related services.

Dentons’ team in Prague consisted of Partner Daniel Hurych, Senior Associate Jan Hrivnak, and Associates Radek Novak and Eva Klimova.

Kocian Solc Balastik has advised US software company Jamf on its USD 400 million acquisition of software developer Wandera. 

Wandera’s software provides protection against security threats on mobile devices to businesses. Jamf is the developer of the Jamf Pro application used to configure and automate IT-management tasks for macOS, iOS, iPadOS, and tvOS devices.

KSB’s team included Partner Drahomir Tomasuk and Attorneys Jan Beres, Michal Hanus, Jaroslav Zahradnicek, and Ondrej Siska.

KSB did not reply to our request for more information.

JSK has advised the shareholders of the North Moravian investment company Cresco&Finance on the sale of its Silnice Morava subsidiary to Imos Brno.

Cresco&Finance, based in the Czech town of Krnov, specializes in asset management, projects, acquisitions, receivables trading, and financing. Silnice Morava, founded in 1996, operates in the fields of construction, maintenance, and reconstruction of roads. 

JSK’s team included Partner Tomas Dolezil, Senior Associate Helena Hailichova, and Junior Lawyer Jan Koprnicky.

The Prague office of Clifford Chance has advised sole lead manager J&T Banka and arranger J&T IB Capital Markets on Czech legal aspects of Energo-Pro Green Finance’s increase of its CZK 530 million bonds issue to CZK 1.06 billion.

According to Clifford Chance, the bonds, which are admitted to trading on the Prague Stock Exchange, are secured by a guarantee provided by DK Holding Investments and a pledge of a minority of shares in Energo-Pro a.s.

Energo-Pro Green Finance is a member of the Energo-Pro Group, which produces and distributes energy from renewable resources. The group operates nearly 40 hydropower plants in Central and Eastern Europe, the Caucasus, and the Black Sea Region.

Clifford Chance also advised the underwriters on Energo-Pro Green Finance’s original issuance in 2020 (as reported by CEE Legal Matters on November 5, 2020).

Clifford Chance’s team included Partner Milos Felgr, Senior Associate Vladimir Rylich, Associate Pavel Bogusky, and Junior Lawyer Katerina Slapakova.

BPV Braun Partners has advised Czech tech start-up SentiSquare s.r.o., on its second round of financing, in which it acquired EUR 1 million for further development from new investors IXPERTA and Fazole Ventures, both from the Czech Republic.

SentiSquare focuses on automated customer communication without limitations to language, by using natural language processing, an artificial intelligence application. It was founded at the Faculty of Applied Sciences, University of West Bohemia, in 2014. 

The BPV Braun Partners team consisted of Managing Partner Arthur Braun and Managing Associate Ondrej Ponistiak.

BPV Braun Partners was unaware of any external counsel advising the investors.

The Constitutional Court of the Czech Republic published its finding Ref. No. PL ÚS 25/19 that rejects the proposal of the Supreme Administrative Court to repeal Section 80 par. 1 and 2 of the Rules of Administrative Court Procedure (RACP). The Court declared that the existence of a one-year limit for the filing of an action against the inaction of an administrative body is not itself contrary to the domestic constitutional order. Concurrently, another exchange of arguments has taken place in Joštova Street. Petr Zábranský and Martin Mezenský comment on the latest findings of the Constitutional Court.

The Supreme Administrative Court (SAC), in reaction to developments in a case in the course of which a cassation complaint was filed, put forward a proposal to the Constitutional Court to repeal a provision on a deadline for submitting an action against the inaction of an administrative body. To support this proposal, the SAC reasoned that after the expiry of the deadline to no effect “individuals will be completely excluded from access to judicial protection not only regarding the issue of inaction, but also regarding decisions on the merits,” which would “shift the liability for supervising the due process of the case from the public authority to the individual.” According to the SAC, it is primarily the “legal security of administrative bodies that their (in)action cannot be corrected by the court” that should be strengthened.

The plenum of the Constitutional Court did not agree with the SAC’s concerns and considered the proposal unreasonable. The Constitutional Court pointed out that Section 80 of RACP does not deny judicial protection from the inaction of administrative bodies, it only defines the conditions for obtaining protection. The administrative body’s obligation to make decisions does not itself change after expiry to no effect. The Constitutional Court also considers the time limit to be long enough for the party to administrative proceedings to acquaint itself with the fact that an administrative body is inactive and to undertake the steps needed to successfully bring an administrative action against inaction. The practice of the Constitutional Court also shows that a failure to act within the prescribed time is very rare.

One cannot help but notice in the text of the finding a couple of pointed remarks about the SAC’s proposal that go beyond the usual framework of judicial dialogue and that open up another round of argumentation between the courthouses on Brno’s Joštova Street. We think that these remarks can be read from a pedagogical (and highly positivist) interpretation of the meaning and purpose of time limits, as support of the defence against entropy in the process of exercising the rights of individuals, as a comparison of the SAC’s argument about the shift in responsibility for supervising the due progress of the administrative proceedings to a party to the proceedings, to the shift in responsibility for supervising that fundamental rights and freedoms are respected from a public authority to an individual by setting a time limit for filing a constitutional complaint, or as clear amazement at the SAC not having noticed the apparent indefiniteness, absurdity and unconstitutionality of Section 80 RACP for almost twenty years.

The finding also includes two dissenting positions that put forward very relevant remarks about the plenum’s decision. The dissenting positions point out that the plenum did not deal with the crux of the SAC’s argument – that the discussed time limit provides legal certainty only to the administrative body, and not to the parties. Neither did the plenum deal with the harshness of Section 80 par. 2 RACP, which does not pardon the failure to file an action against inaction within the prescribed time limit. In our view, the dissenting judges Šimáčková and Jirsa rightly point out that with respect to the time limit, “in a democratic constitutional state, we cannot reconcile ourselves to the fact that the longer injustice prevails, the less protection is afforded to the individual concerned.”

It is thus possible to agree with the conclusions of the dissenting judge David that finding PL. ÚS 25/19 presents a highly correct positive-law analysis of Section 80 of the RACP and proves that preserving this provision is essential. Nevertheless, it does not resolve the stated issue of evident imbalance between an administrative body’s option to remain inactive long enough and an individual’s option to protect itself quickly enough from long-term inaction (which is sometimes very hard to foresee).

That is also why we consider it a pity that the plenum did not discuss limiting the harshness of Section 80 par. 2 of the RACP in more detail. If the genuinely excusable expiry of the time limit is the subject matter of a couple of individual cases, introducing an option to pardon a failure to act within the prescribed time limit would be a suitable compromise that would comply with the constitution.

By Petr Zabransky, Senior Associate, and Martin Mezensky, Junior Lawyer,  Rowan Legal