Category: Czech Republic

The most notable recent political event in the Czech Republic was the October 2020 regional election, says Jaroslav Havel, Managing Partner at Havel & Partners. However, Havel is quick to point out that, no matter who has been in office in the last ten years, politicians have not had a major impact on business in the Czech Republic. A more tangible effect of the election, he says, is that his former partner, Jan Holasek, who left the former Havel & Holasek law firm six years ago, has become a member of the Czech Senate.

Still, there’s at least one important thing politicians can do – legislate. Havel explains that one of the most important policy changes in the country came in the form of the new Act on Bank Identity. According to him, Havel & Partners worked in cooperation with several other organizations and firms on drafting the piece of legislation designed to amend the Czech Banking Act and introduce reform in the area of personal identification.  

Havel reports that the concept of bank identity will allow Czech banks to offer identification services to their clients, who in turn can use this service to authenticate their identity and provide e-signatures when obtaining services from both governmental bodies and private companies. According to Havel, the system contemplated by the act, which entered into effect at the beginning of January 2021, should become more widely implemented in the first half of the year.

“Another significant change,” Havel continues, “is the FDI Act.” According to him, the act, which is to enter into force in April 2021, will bring more stringent rules on investments of companies from outside of the EU. In particular, he says, “foreign investments aimed at obtaining control over Czech companies operating in critical industries such as military materials and energy, among others, will be subject to prior approval by the Czech Ministry of Industry and Trade.”

Moving on to the topic of economy, Havel says that “some industries, like tourism, retail, hotels, have been going through a depression since May or June.” According to him, in the retail and fashion industry some large companies, such as Blazek, Pietro Filipi, and Kara, fell into insolvency. Not all is grim, however, and he points to some larger transactions in the country – among them the merger between the KKCG Group’s IT companies and the Aricoma Group, and the sale of ARETE’s industrial parks portfolio to Cromwell European REIT (as reported by CEE Legal Matters on December 23, 2020). In addition, he says, “venture capital funds and start-ups are also on the upward trajectory.”

A new regulation sets up a system for controlling investments from outside the EU in strategic assets relevant to the security and internal order of the Czech Republic. From 1 April 2021, certain foreign investments in Czech assets (including private) will thus be subject to prior approval by the Ministry of Industry and Trade. The ministry will also be entitled to review any foreign investment up to five years after its completion. The Act defines a wide variety of entries into the target as foreign investment (not only asset ownership but also, for example, membership of a body). There is no experience with investment approval procedures yet, but failure to notify can lead to enormous fines (up to 1% of turnover). Comprehensive preparation of the required documents and information and legal representation in negotiations with the Ministry of Industry and Trade are therefore highly recommended.

Edit: Due to unexpected delays with publishing of the FDI Act, it will enter into force on 1 May 2021, contrary to what is stated in the article. Apologies for inconvenience.

The Act on Foreign Investment Screening (the “FDI Act“) will enter into effect on 1 April 2021. It establishes a regime for screening foreign investment in undertakigns relevant from the perspective of protecting the security or public order of the Czech Republic. By the way of the FDI Act, the Czech Republic will join other countries with a foreign investment screening regime. In principle, the FDI Act is based on EU regulation. However, the regulation only lays down a basic framework for foreign investment screening and for cooperation between Member States. As a result, the regimes for reviewing foreign investments, including the types of investment subject to approval, differ (sometimes substantially) from one Member State to another. Due attention should be paid to individual national legislations, including the new regulation in the Czech Republic.

Foreign investments which meet the conditions laid down by the FDI Act must be approved by the Ministry of Industry and Trade (the “MPO”). As is the case with notifications of concentrations to competition authorities, investors are prohibited from implementing the investment before the MPO’s approval (the so-called standstill obligation). We recommend foreign investors from third countries to take the new obligations into account in investments involving Czech assets and evaluate in a timely manner whether their entry into the target is subject to approval under the FDI Act.

The next pages will provide you with a basic overview of the rules laid down by the FDI Act.  

FOREIGN INVESTMENT WITHIN THE MEANING OF THE FDI ACT

The FDI Act will only apply to foreign investments. Who is considered a foreign investor and what level of control must be gained in the target (Czech) person is defined directly by the FDI Act.

1. Foreign investor

Under the FDI Act, a foreign investor is any person who:

• is not a national of the Czech Republic or another EU Member State;
• does not have a seat in the Czech Republic or another EU member state; or
• is indirectly controlled by a person meeting conditions under the points above.

In contrast to the FDI regulation in some other EU Member States (i.e. Germany or France), the scope of the FDI Act is broader, as it also applies to investors from countries belonging to the European Economic Area, including Norway and Liechtenstein. After Brexit, natural and legal persons from the United Kingdom will also have to be considered foreign investors within the meaning of the FDI Act.

2. Foreign investment

FDI Act defines as foreign investment any entry of a foreign investor into a target person which enables the investor to exercise an effective degree of control over the economic activity of the target. An effective degree of control over the economic activity of the target is considered to be:

• the possibility for the investor to control at least 10% of the voting rights and/or the possibility to exert a corresponding influence in the target;
• appointment of the investor to the target’s body (i.e. board of directors, supervisory board);
• the ability of the investor to dispose of property rights to an object through which the target persons carry out an economic activity; or
• another level of control that allows the investor access to information, systems or technology, important from the point of view of the security of the Czech Republic or internal and public order.

It is evident that the FDI Act does not only focus on the acquisition of equity interests in the target, but on a wide range of other types of investor involvement, including membership in a target’s body or access to information or technology important for the security of the Czech Republic. As a result, a significantly wider portfolio of investors’ entries will be subject to notification under the FDI Act than in the case of notifications to competition authorities. Meanwhile, for some types of “investments,” investors’ legal uncertainty may considerably increase – after the FDI Act comes into effect, it will not be possible, for example, to appoint a foreign investor as an executive director until the MPO issues its approval. If there are delays in the MPO’s approval proceedings and it will not be possible to retain an existing director in the company, this can lead to the company’s decision-making being temporary paralysed.

PROTECTED ACTIVITIES UNDER THE FDI ACT

Under the FDI Act, it is mandatory to notify investments in case the target person engages in specified activities relevant to the security of the Czech Republic or its internal order. These activities include the following:

1. Production, research, development, innovation or life cycle of military material (within the meaning of the Act on Foreign Trade with Military Material).
2. Operation of critical infrastructure elements (under the Crisis Act). Such elements include all energy distribution systems, as well as animal or plant production which meets certain parameters, or areas of data centres, certain networks and stations. Critical infrastructure elements may be operated by the state (typically the Fire Rescue Service), but also by private persons. More than a thousand of these elements are currently defined.
3. Operation of an information or communication system of critical information infrastructure or an essential service (as defined by the Act on Cyber Security);
4. Development or manufacture of dual-use items (listed in Regulation No. 428/2009), i.e. items that can be used for both civilian and military purposes.

Additionally, it is also mandatory to consult an investment with the MPO in case the target:

1. holds a license for nationwide radio or television broadcasting;
2. publishes periodicals with an aggregate minimum average print run of 100,000 copies per day for the last calendar year.

The consultation can be considered as a preliminary step before the FDI screening procedure – the consultation may either lead to initiation of approval proceedings, or to a notice to the investor that the investment does not pose a threat to the Czech Republic and thus does not require approval.

In addition, if the target’s activities do not fall under the categories above, the investment may be consulted with the MPO on a voluntary basis. Such consultation might be useful to increase investor’s legal certainty, because the FDI Act enables the MPO to initiate proceedings on approval of any foreign investment within 5 years after its completion in case it has concerns it could pose a risk to security or internal or public order (even in cases in which the target’s activities do not concern any of the activities set out in points a. – f. above). This subsequent review might be avoided by engaging in the voluntary consultation of the investment and obtaining a confirmation from the MPO that the investment cannot endanger the security or internal order of the Czech Republic.

FDI SCREENING PROCEDURE

If the foreign investment meets the criteria described above, the investor is obliged to file a notification and obtain the MPO’s approval. The notification of the investment includes the investor’s obligation to provide a wide range of information, including information about the investor’s and target’s ownership structure, its business activities or source of financing of the foreign investment. Notifications will be filed on a unified form, the details of which will be set by government regulation [note: as of the publication date, the details about the form are unknown].    

It does not follow from the text of the FDI Act or the explanatory memorandum to the act whether the notification will be subject to an administrative fee. However, it is questionable whether there will be a change in this respect in the future, as most similar filings (e.g. merger clearance by the competition authority or foreign person authorisation under the Act on Management Companies and Investment Funds) are subject to a filing fee.  

In the event of failing to comply with the notification obligation, the MPO will initiate the approval procedure ex-officio and will be entitled to impose a fine on the investor, which could reach up to 1% of its total turnover for the last accounting period.

Once the investment screening procedure under the FDI Act is initiated, the MPO reaches out to other ministries and state agencies, including the intelligence services, with a request for an opinion. The details on exactly how the review will be conducted and what parameters will be assessed are not clear yet. However, the outcome of the screening procedure can in principle be as follows:

• If the investment does not raise concerns, the MPO will issue an approval decision within 90 days from the initiation of the proceedings (the period might be extended by 30 days in particularly complex cases).
• In case the investment is likely to threaten security, internal or public order, the MPO may negotiate on conditional approval with the investor. The conditions may consist, for example, of the obligation to enter into consultations with the MPO in cases of an increase in shareholding in the target. The MPO then submits the matter to the Czech Government, which issues a resolution within 45 days. The resolution may either approve the MPO’s proposal of conditions or reject it in case the investment does not pose a risk (which should lead to unconditional approval of the investment). The MPO will then issue an administrative decision in line with the Governmental Resolution.
• In case the investment could threaten security or internal/public order and that risk could not be eliminated by conditional approval, the government may, on the basis of a proposal by the MPO and within 45 days after the proposal being submitted, issue a resolution prohibiting the investment. The MPO will subsequently issue an administrative decision on the prohibition.

The procedure only has one instance, it is not possible to file an appeal against the MPO’s decision. The decision can be challenged by an action filed before an administrative court; the action does not have a suspensory effect.

ENTRY INTO EFFECT OF THE FDI ACT

The FDI Act will come into effect on the first day of the third calendar month following its publication. Therefore, the FDI Act will apply from 1 April 2021.

The FDI Act will also apply to investments that have not been completed before the FDI Act comes into effect. Under the FDI Act the date of completion is the date:

1. of conclusion of the last contract;
2. the investor gains control in the target; or
3. of commencement of business;

depending on whichever of these events occurred later.

Under the definition of the date of completion, the notification obligation arising from the FDI Act must also be taken into account in transactions and investments that are currently being negotiated. In case the notification criteria laid down by the FDI Act are met and the investment is not completed before 1 April 2021, the foreign investor will be obliged to file a notification to the MPO.

Key takeaways:

• Some foreign investments will be subject to the MPO’s approval starting from April 2021.
• Mandatory for investments in strategic sectors such as military material or critical infrastructure elements (e.g. energy).
• The MPO is entitled to review any foreign investment up to 5 years retrospectively (not applicable to investments completed before the FDI Act becomes effective).
• The prior approval obligation applies to all investors (natural/legal persons) from outside the EU.
• “Investments” include the purchase of shares in target persons, but also the appointment of the investor to statutory or other bodies or access to information and technology.
• The MPO can impose a fine for the implementation of an investment without approval (up to 1% of turnover).

OUR COMMENTS

The FDI Act brings another regulation that non-EU investors must take into account when structuring their investments involving businesses active on the domestic market. According to the explanatory memorandum to the FDI Act, the Ministry expects dozens of applications for screening procedures, consultation proposals and ex officio proceedings every year. However, given the wide definitions in the FDI Act, we expect that an assessment of the notification obligation and also consultation with the MPO may be relevant in hundreds of transactions each year.

Investors will face certain uncertainty as to whether their investment will be approved for foreign investments subject to mandatory approval. The FDI Act does not provide any specific criteria the MPO should evaluate in order to identify whether the investment may threaten security, internal or public order. The MPO and the Government will be granted wide discretionary power whether to approve or prohibit the investment. Investors should take into account that the government decisions can also be influenced by the political environment, which makes the outcome of the procedure harder to predict. In addition, investors’ uncertainty will also be higher due to the MPO’s power to review investments that were not subject to mandatory notification within 5 years after their completion. Such reviews may also occur following changes in the political environment. Foreign investors should therefore consider the possibility of prior consultation with the MPO in order to avoid the risk of a subsequent review of their investment.

By Robert Neruda, Partner, Roman Svetnicky, Senior Associate, and Martin Rott, Junior Associate, Havel & Partners

On January 1, 2021, Act No. 49/2020 Coll. – commonly known as the BankID Act – will enter into force. This new legislation has the potential to bring a significant change to the way Czechs operate on the Internet and to promote further digitalization in both the public and private sectors.

But what exactly is going to be different after the act comes into force in 2021? What services will banks be able to provide and who will benefit from them? Before answering these questions, let’s have a quick look at the origins of the BankID Act.

The BankID Act is a result of an initiative of the Czech Banking Association that began in November 2018. The primary goal of the initiative was to allow banks to provide electronic identification services pursuant to the EU’s eIDAS regulation, and thus to provide (not only) Czech citizens with an easy and trustworthy way of ensuring their online identification.

In short, the idea was to give banks’ clients an opportunity to use the same methods of identity authentication they use when logging onto Internet banking websites to prove their identities to third parties as well. This process of identification is not only user-friendly (as customers are already familiar with their login methods (e.g.  login and SMS OTP)), but also trustworthy, since banks are subject to strict regulations, including PSD2 requirements for strong (two-factor) customer authentication.

It may be added that the idea was not something entirely new. In some other countries, banks may already act as identity services providers. However, prior to the BankID Act, Czech law did not allow banks to provide this type of service commercially, as Act No. 21/1992 Coll., on Banks does not include electronic identification services in its stipulated list of business activities that banks may lawfully conduct. Therefore, the first main change introduced by the BankID Act is to allow banks to provide electronic identification services on a commercial basis.

The act goes on to lay down further rules as well. First, if a bank wants to issue electronic identification means pursuant to eIDAS (i.e.  “BankIDs”). and provide electronic identification services, it needs to make such BankIDs accessible through the state-operated National Point for Identification and Authentication. As a result, clients will have the option of using their BankIDs to identify themselves to state and municipal bodies free of charge. Thus, clients will be able to prove their identity online and thereby, for example, submit tax declarations, make requests for various authorizations (e.g.,  building permits) or obtain extracts from public records (e.g.,  criminal records). There will be no need to visit any agencies or offices in person.

Second, BankIDs may be used by private sector entities such as utility providers and telecommunications services providers, especially for client identification during online onboarding. BankIDs may also be used for identification required by AML regulations. For example, a client of bank A may use its BankID to identify itself towards bank B when opening a new bank account. However, the selected BankID needs to comply with additional criteria laid down by the act to further enhance the trustworthiness of the whole “BankID environment.” Not only must it fulfil the requirements laid down by eIDAS (and associated regulations) for a substantial level of assurance, but it must have been issued only to clients who were previously identified by the bank face-to-face.

Conclusion

To sum up, starting January 1, 2020, banks will be able to provide their clients with a new high value-added service. Clients, for their part – potentially millions of people in Czechia – will gain access to a user-friendly, trustworthy, and cost-free means of online identification for communication with both the public and private sector. And because of this, both the public and private sector will have the opportunity to further digitalize their services and products.

By Josef Donat, Partner, and David Orsulik, Junior Lawyer, Rowan Legal

This Article was originally published in Issue 7.11 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Interview with Alex Cook of Clifford Chance Prague.

CEELM: Can you run us through your background, and how you ended up in your current role with Clifford Chance in Prague?

Alex: A long story. I am half English, half German – born in a place called Rinteln, in Germany, to an English father and German mother. My father was a career soldier stationed in Germany at the end of the 60s and into the 70s and – which was not uncommon for British soldiers in Germany – married a German woman. We moved to England in 1977 so most of my formative years were spent in the UK. I was a bit of a swot at school, especially at languages – first Latin and French, then in later years German and Russian. I was not brought up bi-lingual in German, but when I started German at secondary school in my third year I insisted on speaking only German at home. I am quite annoying like that. Luckily my German teacher also taught Russian, which was quite rare for a school like mine in a provincial backwater (Lincolnshire – sorry anyone else from that part of the world!).

I loved Russian, worked really hard at it and within 15 months of starting the language from scratch was sitting the entrance exams to read Russian and German at Oxford University. I told you I was a swot! I was the first of my immediate family to go to university, but it just goes to show that if you are interested in something you are likely to go far. A life lesson which still holds very true.

In any case, studying Russian at university (including a year in Moscow) was the first step on a circuitous route to the Czech Republic.  Nearing the end of my studies the inevitable question arose about what to do next. Someone mentioned City law firms and so I did some research. It seemed to me that getting a professional qualification would be a good idea, and law seemed to be particularly attractive. I only applied to one firm, in the end, as that firm seemed to have a stronger focus on Russia and CEE at the time (even though I was tempted by another firm’s swimming pool at Aldersgate).

So I joined Allen & Overy (rather than Clifford Chance) with the ambition to work in their Moscow office one day. Fast forward a few years to 1998 when I was one week from a secondment to Moscow. I bumped into the then-managing partner in a corridor in One New Change – to be told that going to Moscow in the middle of a financial crisis in Russia was perhaps not the best idea. Plan thwarted. Soon after, however, I was offered a secondment to the Budapest office, which I duly accepted. I ended up spending six fantastic years in Budapest, married a Hungarian woman (sound familiar?), until an opportunity came up towards the end of 2004 to develop and lead the corporate practice at Clifford Chance in Prague. Almost 16 years later I am still here, managing partner of the office and leading the corporate team in CEE.

CEELM: Was it always your goal to work outside of the UK?

Alex: Yes it was! Given my background it was always clear to me that I would spend at least part of my career outside the UK. Little did I know when I first agreed to the Budapest secondment that I would become part of the CEE furniture. 

CEELM: Tell us briefly about your practice, and how you built it up over the years.

Alex: I am an M&A lawyer – more of a generalist rather than focusing on one particular sector or product. Working in a small office naturally requires a bit more flexibility, so we tend to have broader practices than our colleagues might have in the larger offices. As I allude to above, I came to CC Prague attracted by the idea of helping to develop the corporate practice, not exactly from scratch but from a fairly low base. The office had been known more as a finance practice and had decided to become full service and to build out its practices to be more in line with the offering of the firm as a whole. So when I first arrived it was all about getting to know the market, meeting people, lots of lunches, dinners, events, etc. and also getting to know people within the firm. Gaining the trust of my new colleagues in CC, especially in London and the larger European offices, was just as important for developing the practice as making new local contacts.

At that time a significant portion of corporate/M&A work was acting for some of the firm’s major clients – financial investors (PE and infra) and strategic corporates – looking at deals in the Czech Republic, Slovakia, and wider CEE region. Over time we built out our domestic practice, especially with the arrival of my Czech Corporate Partner, David Kolacek, in 2008.

Unique to CEE, the Czech Republic and Slovakia have a number of strong financial investor groups who increasingly look across Europe and indeed globally for deal making. Developing relationships at some of these groups has been an important aspect of developing our practice and moreover has allowed us to export a significant amount of work to the wider firm. As an English-qualified lawyer my role is also very much regional, so I work a lot with our other CEE offices in Warsaw and Bucharest and also with Moscow and Istanbul. I also maintain ties with local firms in other CEE and SEE jurisdictions where we do not have our own office. In my career to date in this part of the world I have worked on deals in probably every jurisdiction of the CEE/SEE region.

CEELM: How would clients describe your style? 

Alex: If the legal directories are to be believed clients call me a “heavyweight,” which I think is a bit rude! I can be a bit tough in negotiations but I believe also pragmatic. I would hope therefore that clients view my style as being assertive and commercial.

CEELM: There are obviously many differences between the English and Czech judicial systems and legal markets. What idiosyncrasies or differences stand out the most? 

Alex: I have clearly been here for too long as nothing springs to mind immediately – other than the obvious differences between common and civil law and the quirks in the court systems of each. What I would say though (and I know that this does not answer the question) is that when I first started working in Budapest the typical civil lawyer would tend to be quite focused on telling clients what the law prohibited them from doing, whereas now – at least as far as my colleagues are concerned – the advice is very much solution-oriented and commercial. Moreover, the level at which many of colleagues can draft and negotiate in English is truly astounding.

CEELM: How about the cultures? What differences strike you as most resonant and significant?    

Alex: Ditto really, everything has merged into one. I am probably more struck by the differences when I visit the UK, and as I have not been for almost a year now, those differences might be more pronounced when I do go. The usual stereotypes: the too polite, tea drinking, apologetic English who love to queue, talk about the weather, and secretly judge you behind your back. All true, of course.

CEELM: What particular value do you think a senior expatriate lawyer in your role adds – both to a firm and to its clients?

Alex: I hardly regard myself as “expatriate,” to be honest. Nonetheless I see an important aspect of my role as ensuring that we remain connected to the global firm and the global practice areas. We are not just a local office but part of a network which works together to deliver the best to our clients. Naturally, this manifests itself best when we work on multi-jurisdictional deals with colleagues from many different offices.  Also, I am English-law qualified and quite a large number of our matters are governed by English law – so that helps!

CEELM: Do you have any plans to move back to the UK?    

Alex: Never say never, but not really! I have spent most of my life outside the UK now, I am half-German, married to a Hungarian, living in the Czech Republic, and my kids are the very definition of “European.” Who knows what might happen in the next few years or where we might be, as things can change very quickly. But for now we are enjoying living in the wonderful city of Prague. There are probably very few better places to live than Prague (and Budapest, of course).

CEELM: Outside of the Czech Republic, which CEE country do you enjoy visiting the most, and why?

Alex: Obvious answer – Hungary! But we are spoiled in this region with so many great countries to visit – Slovenia and Croatia being right up there, but plenty of others.

This Article was originally published in Issue 7.11 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

The M&A market in 2020 has been significantly affected by the coronavirus pandemic. According to the latest quarterly M&A overview prepared by CzechInvest, the leading agency supporting business and investments in the Czech Republic, “in a very short period of time and on a large scale, many companies have had to close down or limit their operations, dismiss stuff members, and disrupt supply chains.” Although there has been some recovery since May, the situation remains unpredictable. The second and next presumed waves will likely bring even more uncertainty.

Although this is hardly the first time the M&A market has been hit by an economic crisis, and although it has always recovered before (most recently, the post-2008 crisis period proved to be a great time to go shopping for cheap assets), this time the situation seems different. The impact of the pandemic will likely divide the market more than it has before. We will see winners (e-commerce, fintech, etc.) who profit from the various restrictions, and losers (automotive, tourism, etc.) who suffer from them. This ultimately will result in changes to deal terms and new issues with respect to due diligence and how it is conducted, pricing/valuations and other terms of deal financing, and the time required to obtain regulatory and other third-party approvals. Investors will be interested in the economic resilience of potential targets. Others (who are sitting on plenty of cash) will speculate on prices falling and on distressed assets.

Nevertheless, the Czech M&A market has remained relatively active, and according to information from various corporate finance advisors, the pipeline looks healthy. Interestingly, as the lockdown and various restrictions handcuffed advisors trying to make deals by preventing regular face to face meetings, we can see a kind of gap in the pipeline. Similarly, foreign investors, even if they remain acquisitive, find it difficult to travel to the Czech Republic for site-visits and management presentations. Not everything can be done virtually; building trust and verifying the facts on the ground remain important even in these times, and their absence can be an obstacle for some transactions. What remains relatively strong is the Czech mid-market, which is largely driven by the limited succession possibilities of the founders. According to some local private equity players with very good track records, the inflow of opportunities and potential projects is even stronger than before the pandemic.

Major Amendment to the Business Corporations Act

An extensive amendment to the Czech Business Corporations Act will enter into force on January 1, 2021, clarifying a number of unsettled issues and introducing some substantial changes. Besides technical amendments, it will bring changes to the distribution of profits and other capital funds, liberalize classes of shares, significantly modify the monistic management model of joint-stock companies, change per-rollam (by letter) decision-making process in limited liability companies, joint-stock companies, and cooperatives, and amend the liability and method of remuneration of members of statutory bodies. These changes will affect virtually all forms of companies.

In particular, companies should ask themselves whether the changes in the rules regarding the distribution of profits and other capital funds will work for them after January 1, 2021, and what impact that may have on their plans. The criteria for distributions will change to apply jointly to dividends and other equity payments. On the other hand, investors will have more clarity and legal certainty when it comes to structuring various rights by means of classes of shares. For example, it will be possible to issue shares only with economic rights and without voting rights. This is a great opportunity in the current situation.

By Tomas Dolezil, Partner, JSK

This Article was originally published in Issue 7.11 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Interview with Nadia Matusikova, General Counsel of RWS Moravia about her background and best practices.

CEELM: Can you walk us through your career leading up to your current role?

Nadia: After graduating from the Faculty of Law of the Masaryk University Brno, I started working as a lawyer & HR manager in a small company selling gears and bearings in Brno, in the Czech Republic. Two years and my second graduation later (from the Faculty of Economics of the Mendel University Brno), I joined the legal department of Delta Bakeries (the second-largest bakery business in the Czech Republic back then). In a team of three lawyers, I specialized in debt collection and corporate law. As I already loved technology, I created a database of our debtors in Microsoft Access (who else remembers this tool?) which helped me organize the agenda significantly. I also created a formula in Microsoft Excel for calculating the interests on late payments (such a tool is now a standard part of all legal software). Sometime later I began searching for new opportunities. I saw a very interesting job advertisement posted by Moravia IT. I really liked both the company and the job, but at the time I didn’t feel ready for a change. However, a year later I recognized the same text (an advantage of my photographic memory) in an ad from a recruitment agency. I didn’t hesitate and applied directly with the company. I was the first one interviewed and I got the job. So, since August 1, 2006, I have been working for Moravia IT (RWS Moravia) as an in-house lawyer. 

CEELM: What are the most significant changes you’ve seen in the Czech Republic’s legal market over your career?

Nadia: Specialization and technology. In the early years of the new millennium, there were still many lawyers who started their careers in the Communist time. They ran their small practices, providing a whole range of services for individual clients: Divorces, inheritance, neighbor disputes, torts, and crimes. Today’s law firms offer their services to companies as well, and they are much bigger, often having teams of lawyers who specialize in only one area of law: M&A, TMT, environment, PPP, privacy, public works, litigations, cybercrimes, etc.

Recently, the legal business, as other parts of our lives, has been impacted by new technologies. Every lawyer now works on a laptop, we use tablets, and we are available 24/7 on our mobile devices. Despite the remaining aversion of many lawyers to anything technical, we all use software designed for lawyers, such as databases of laws, precedent searches, machine translation tools, and the indispensable Google. The legal geeks (believe it or not, they do exist) even work with AI! 

CEELM: Why did you decide to join RWS Moravia?

Nadia: I always wanted to work as a lawyer in an international business. But I hadn’t ever imagined that I could find my dream job in my hometown.

In 2006, Moravia IT, now RWS Moravia, was one of few Czech companies headquartered in Brno. Moreover, it was (and still is) a true global company, in terms of locations, staff, and clients. In 2006, Moravia IT had offices in Ireland, Slovakia, Hungary, Poland, China, Japan, USA and Argentina, and RWS Moravia now has affiliates and branches in Canada, Colombia, UK, Germany, India, and Thailand as well. We closed our business in Slovakia in 2010. Our headquarters remain in Brno, but we are a part of the UK-based RWS group now.

Our company has 30 years of admirable history – Moravia Translations was founded in 1990 – and multinational teams. Our client portfolio is truly impressive, containing global technology leaders and other successful companies with famous brands.

So, all the above was such an amazing combination that I just couldn’t resist becoming a part of it.

CEELM: Tell us about your legal department. How big is your team, and how is it structured?

Nadia: Our legal department is really small. It is just me as the manager and my colleague. We are both working at the company’s headquarters in Brno, but we are responsible for all legal matters worldwide. Our services must cover every department’s needs – client acquisition, production, vendor management, HR, facility, finance, privacy, and so on. I’m also responsible for corporate agenda and compliance. And on top of that, I am an internal trainer. Just imagine how demanding and challenging such a job must be!

On the other hand, it is also the nice thing about this work. You start your morning by helping your Chinese colleagues review a contract with a recruitment agency, before noon you have a meeting about privacy setting in the new system, after lunch you prepare the shareholders’ meeting minutes, in the afternoon you discuss new lease conditions in Argentina, and in the evening. you finalize the revision of a multi-million contract with our client.

CEELM: Was it always your plan to go (and stay) in-house, instead of spending time in private practice? 

Nadia: When I was in my final year of law school, I’d been working in a small law office for three years – and I considered staying there. But back then, junior associates were paid the minimum wage and sometimes you even had to pay an “enrolling fee” to be able to work for the law firm. I was also in my third year of Finance studies and I couldn’t imagine continuing in my studies while working at the law firm. Last but not least, I always wanted to focus on commercial and international law. As I already explained, in 2001, the common practice of an attorney was general, so I would also need to provide services in the areas of criminal, administrative, or family law. And that was not so compelling for me. These were the reasons I started my career as an in-house lawyer, and I’ve been doing it ever since. 

CEELM: What was your biggest single success or greatest achievement with RWS in terms of particular projects or challenges? What one achievement are you proudest of?

Nadia: During my long tenure, I have achieved quite a lot. I built up the legal function in the company, increased general legal awareness, and significantly increased the percentage of contracts filed in an official storage place (from 12% to 93%), and later on I created databases of contracts, simplified the on-boarding of resources by creating click-wrap agreements, accomplished several corporate restructurings, and so on. But my biggest single achievement is the first acquisition of our company by Clarion Capital in 2015. The project was top secret then and I had to handle all legal issues which were related to due diligence, and later the transaction itself. It was the first time I worked with well-known law firms and M&A experts and I was proud that I was an equal partner for them.

CEELM: How would you describe your management style?

Nadia: I became a manager just a few years ago. For many years, I had been working as an independent lawyer, organizing all my work by myself. I also had to be very efficient and precise as I had nobody else who could do the job, and with the heavy workload, I had to count every minute. In the beginning, I was quite afraid about delegating my tasks to somebody else. But I was so relieved to get somebody to help me that the delegation itself was no issue at all in the end.

Now when I work with my colleague, Eva Luskova, I grant her a lot of independence. I trust her to deal with the matters by herself, providing her the necessary guidance and advice. I oversee her work from behind the scenes, but I don’t step in unless it is critical. She takes responsibility for her own actions, but she always has my support. I also treat her equally; I like to discuss the legal issues with her (which I enjoy because, for years, I didn’t have this opportunity) and I value her opinion. When I entrust her with some project, I clearly define the expected result, timing, and also the parameters which I require to be met. During the project’s time span I check the status with her occasionally or regularly, and, when required, I redirect her a bit to get her back on track. Otherwise, I leave the solution up to her to avoid any micromanagement.

CEELM: Is there anything unique or special you do that helps you in your job that you could recommend to others?

Nadia: I’ve got one very bit of wise advice – Keep It Simple! I also read somewhere that managers don’t read any email text which is longer than five sentences. So, I put those two together and I try to communicate efficiently in a simple manner, and I send short messages which cover the core of the issue. Nobody wants to read long legal texts; after a while it really gets boring.

During my years as a company lawyer, I realized that when managers seek legal advice, they hate to get those ambiguous memos which many attorneys like to produce with plenty of words in Latin. They want clear options and they love numbers. If you accompany your recommendations with percentages of probability or the amounts of fines or the potential savings, that will attract their attention. It is also easier for them to imagine the impact and your risk assessment is highly valued by them.

Being an in-house lawyer means being a trustworthy partner both to management and employees. You must be an objective legal professional who is honest and loyal. As the General Counsel, I need to be very flexible, able to offer out-of-the-box solutions, and serve as an independent judge. As I work for an international company, I have found that it is crucial to learn and respect cultural differences. That is why I regularly travel to our offices worldwide (at least, I did pre-COVID-19). Seeing your colleagues in person, visiting their work environment, and enjoying life outside the office – these are invaluable hands-on experiences which help you connect with your partners on a personal level and win their trust.

CEELM: What one person would you identify as being most important in mentoring you in your career – and what in particular did you learn from that person?

Nadia: I am extremely glad that I met my greatest mentor when I was still a law student. As I already mentioned, I worked in a small law office as a paralegal assistant. The entire team there was awesome, but I learnt the most from my friend and colleague, Petr Pospisil. He was always patient with me, and he showed me how the law truly worked in practice. He taught me how to draft a formal letter, how to create a smart naming convention, how to file documents logically, how to do legal research (in pre-Google times), and how to be assertive around clients. His advice and approach gave me a lot then and I will be forever in his debt. As a small repayment, I direct all acquaintances who seek legal advice to his own attorney office. If you read this, Petr, Thank you for everything!!!!

CEELM: On the lighter side, where do you take visitors to Brno? What’s the one place a visitor should make sure to visit?

Nadia: Brno is the second largest city in the Czech Republic and the capital of the Moravian region (yes, that’s where the name RWS Moravia comes from). It is often unjustly missed by tourists, but it has plenty to offer visitors. There is a lot of heritage, and you can take in a great deal of Gothic and Baroque sights on the cobblestone streets in the city center. But the place you must visit is Villa Tugendhat. This architectural jewel is a UNESCO-listed masterwork of functionalism designed by Ludwig Mies van der Rohe. The villa is famous for its unique open-plan structure and use of modern technology of the era and an exquisite choice of materials such as onyx, chrome, travertine, and ebony.

When you are tired of sightseeing, you can visit one of the many cafés, bistros, and pubs; their unique atmosphere will convince you that Brno is worth the title of the coolest place to live in the Czech Republic.

This Article was originally published in Issue 7.11 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Havel & Partners has helped Sprava Zeleznic organize an international architectural competition to design the first Czech high-speed railway terminal.

According to Havel & Partners, “the aim of the competition was to select an architectural and urbanistic design for the future construction of the new railway terminal Prague East, which will form a part of the first ever high-speed railway line in the Czech Republic and which is to become an important transfer hub on the line between Prague and Brno and Prague and Hradec Kralove.” 

Havel & Partners reported that the winning design — one of 21 submitted — was selected by a professional jury of architects and representatives of Sprava Zeleznic and the municipality of Nehvizdy, where the project will be implemented. According to the firm, “the winning design was submitted jointly by MP + ov Nehvizdy 2020 … [and] the authors of the winning design are high-profile architects Jiri Opocensky and Stepan Valouch from the ov-a studio (holders of the 2020 Czech Architecture Award) and Petr Malinovsky and Petr Vyskocil from METROPROJEKT Praha.”

The Havel & Partners team included Partner Josef Hlavicka and Senior Associate Kamila Kulhankova.

BBH has advised the Czech-Moravian Development Bank on the launch of its IPO Fund and signing of a cooperation agreement with the Prague Stock Exchange to support new entities wishing to list on its START market.

According to BBH, the fund’s purpose is to facilitate listing of small and medium-sized enterprises on the stock exchange and enhance their access to financing. The firm reported that the manager of the IPO Fund called for interested companies to apply for financing from the fund.

BBH’s team was led by Partner Zdenek Hustak.

White & Case has advised the banks on the establishment of a EUR 5 billion international mortgage-covered bonds program by Komercni Banka and the issue of EUR 500 million 0.01% fixed rate mortgage-covered bonds due 2026 under the program. Allen & Overy advised Komercni Banka throughout the process.

The banks which participated in the establishment of the program consisted of arranger Societe Generale and dealers Barclays Bank Ireland PLC, J.P. Morgan AG, Komercni Banka, and Societe Generale. For the issue of the mortgage-covered bonds, the syndicate consisted of global coordinator and joint book-runner Societe Generale, joint book-runners Barclays Bank Ireland PLC and J.P. Morgan AG, and co-managers Nord L/B and Helaba.

The White & Case team consisted of, in Prague, Local Partner Petr Hudec and Associates Petr Smerkl and Jan Vacula, and in London, Partner Richard Pogrel and Associates Neha Saran, Tejal Velambath, and Nikita Thakrar.

Allen & Overy’s team included, in Prague, Partner Petr Vybiral, Associate Tomas Kirner, Junior Lawyers Tomas Janousek, David Mikyska, and Jan Mourek, and in London, Partner Jamie Durham and Senior Associate Louise Hennessey.

PRK Partners has advised CD Cargo on a EUR 130 million loan from the European Investment Bank. Nauta Dutilh advised CD Cargo on Luxembourg elements of the transaction.

CD Cargo is the largest Czech railway transport provider and a subsidiary of Czech Railways, the national passenger rail carrier fully owned by the Czech Republic. 

According to PRK Partners, “under the loan agreement, CD Cargo has obtained funds for the purchase of up to 50 new electric interoperable locomotives and 140 freight intermodal wagons, as well as for the retrofitting of around 310 older locomotives with the European Railway Traffic Management System.” According to the firm, “the new EIB loan will support CD Cargo in its ambitious intermodal transport development plan, which aims at responding to the growing market and bringing its fleet in compliance with applicable European interoperability requirements.”

PRK Partners’ team included Partner Vaclav Bily and Attorney Tomas Bures.