Act No. 31/2019 Coll.
Effective from: 1 June 2019

This amendment reflects the debt situation in the Czech Republic, where a significant number of debtors are in a so-called debt trap. The existing regulation requests that a debtor pays off at least 30 % of his debts within 5 years to be completely relieved of debts.  

The aim of the amendment is to increase motivation of individuals for the return to a proper and lawful economic life. The conditions for debt relief will be softer, the threshold will be an income equal at least to the unseizable minimum and the monthly remuneration of the insolvency administrator and the creditor. The debt relief will be confirmed by the court, even in the case of its conviction that the debtor has taken his best effort to pay off his debts.  

The amendment will introduce debt relief in three variations:

• the debtor has paid off the claims of unsecured creditors in full; or
• the debtor has paid off at least 60 % of the claims of unsecured creditors within 3 years; or
• the debtor has paid off at least 30 % of the claims of unsecured creditors within 5 years, or the debtor has taken his best effort to satisfy his creditors.

Therefore, the courts’ ruling and the individual circumstances assessment in individual cases will be decisive after this amendment.

Regulation (EU) 2018/1807 of the European Parliament and of the Council on a framework for the free flow of non-personal data in the European Union
'Effective from: 18 June 2019

Non-personal data means data other than personal data (which are governed by GDPR). The creating of the legal framework for the electronic data processing has been necessary due to recent digitalisation of the economics and emerging IT technologies. Existing national legislation represent a clear barrier to the data mobility and to the free provision of data processing services across the Union.

This new regulation shall eliminate the national obstacles and restrict member states’ requirements of the data localisation. This localisation has obstructed the data processing and relevant services to be provided in the other member states. Under the new regulation, the data localisation requirements will be justified only on grounds of public security. Further, the codes of conduct binding the service providers shall be adopted.

This regulation will enhance the flexibility and will help to develop data providing services in the internal market. The individual users will be able to choose more convenient and less expensive cloud services.

Act No. 110/2019 Coll., on Personal Data Processing
Effective from: 24 April 2019

As largely anticipated, the national legislation relevant to the GDPR was finally adopted. The existing Act No. 101/2000 Coll., on the personal data protection, was abolished and the area of the personal data protection is now regulated by the directly applicable regulation and its new national adaptation act.

The national adaptation act sets out the exemptions and the deviations from the GDPR provisions. The national legislator has decreased the age limit of a child to give consent to the processing of personal data in relation to information technologies to 15 years of age (the GDPR requires 16 years of age). Further, the adaptation Act specifies the conditions of the personal data processing for the purposes of scientific or historical research, the statistical purposes and for the journalistic purposes and the purposes of academic, artistic or literary expression. The Office for Personal Data Protection has the power to impose sanctions and penalties up to CZK 5 000 000, resp. CZK 10 000 000 in case of a breach relevant to the detection of crimes.

The GDPR and the new adaptation act are the essential elements of further expected changes regarding the personal data protection, especially in the area of the labour law and the IT law.

(Judgement of the Supreme Court of the CR, No. 25 Cdo 856/2018, from 30 October 2018)

The plaintiff claimed damages of CZK 55 600 caused by termination of contractual negotiations for the lease agreement without a just cause. These damages correspond with the two months’ lost rent. The defendant claimed that she had the just cause for the termination of negotiations (she had decided to buy the flat instead of rent it).

The Court of First Instance dismissed the action and held that the defendant had the just cause for the termination, and her conduct was not unfair. The Court of Appeal upheld its decision and emphasized that the parties had not concluded the booking agreement, which should affirm their serious intention. Moreover, the offered flat had not been withdrawn from the real estate agency advertisement. The plaintiff filed an extraordinary appeal to the Supreme Court.

The Supreme Court dismissed this extraordinary appeal.

The Supreme Court stressed that the assessment of a just cause and of fairness or unfairness of the conduct, shall not be too strict. A just cause represents any rational consideration of the conducting party involving the objective facts as well as the tenable subjective belief depending on the individual circumstances of the case. And at the same time, if the party does not explain its considerations to the other party, this cannot be interpreted as an unfair conduct. 

This decision of the Supreme Court has been a first case-law piece regarding the assessment of the pre-contractual liability under the new Civil Code. Nevertheless, the Supreme Court has followed its precedent decision-making practice in this decision.

The agreement on the recall from a job position with a senior employee can be concluded also with other senior employees than those explicitly mentioned in the Labour Code

(Judgement of the Supreme Court of the CR, No. 21 Cdo 1073/2017 from 10 May 2018)

On 21 November 2014, the plaintiff was recalled from a job position “Senior Control Manager, Business Manager”. On the same day, the defendant sent him also the notice of termination on the ground of the unavailability of any different job appropriate to plaintiff’s health condition and his professional qualification. The plaintiff has filed a suit to declare the recall and termination notice invalid.

The Court of First Instance held that the termination notice was invalid. The Court explained that the defendant had intended to announce an available job position of business manager for Ostrava region at the time of giving termination notice to the plaintiff. The defendant published the advertisement on 3 December 2014. In the Court’s view, there was an available job position, but the defendant did not offer it to the plaintiff.

The Court of Appeal dismissed this decision because of the lack of evidence. The Court held that it was not possible to consider the above-mentioned advertisement as the only proof for the availability of a job. Further, the recall from the senior employee position was valid, because the provision of Sec. 73 of the Labour Code allowing to recall the senior employee from the positions over which direct (immediate) control is exercised by the statutory body, the employer, or the member of the (top) management, was found dispositive. The parties can thus agree otherwise. The plaintiff filed an extraordinary appeal to the Supreme Court, because this question constitutes the so far unresolved legal issue in the courts’ practice.

The Supreme Court dismissed this extraordinary appeal.

The Supreme Court declared that the plaintiff’s position of “Senior Control Manager, Business Manager” corresponds with the legal definition of senior employee. In compliance with this presumption, the recall agreement concluded between the parties was valid. The Supreme Court admitted that the provision of Sec. 73 of the Labour Code was dispositive and the parties could agree otherwise in extensive manner. However, the purpose of the senior employee should be always respected. The senior employee is authorized to determine and give tasks to subordinate employees, to organize, manage and supervise their work and to give them binding instructions (orders) for this purpose (Sec. 11 of the Labour Code). The Supreme Court held that the recall of the plaintiff is valid, because the recall agreement in the labour contract is valid as well.  

Act No. 286/2018 Coll.
Effective from: 1 January 2019

Trademarks are important commercial and marketing tools which help entrepreneurs to distinguish goods and services offered to customers. Until now, only the conventional trademarks (i.e. those consisting of letters, numerals, words or symbols) used to be protected and the Czech Industrial Property Office should dismiss an application, if an earlier identical trademark exists.

This amendment implements the European directive No. 2015/2436, which harmonizes trademark protection across the EU member states. The amendment is a significant breakthrough as it enables non-conventional trademark protection. Such trademarks can be based on sound, smell, lights or motion. However, every and each trademark shall have distinctive character. Further, the earlier registered trademarks owners are newly required to object to an identical trademark registration within 3 months from the date of application release. If no objection is filed, the Industrial Property Office will register such trademark despite its identity.  

Therefore, we recommend you to carry out regular released applications monitoring to apply required objections in time. 

Act No. 458/2016 Coll.
Effective from: 14 January 2017

Following the AK-PS.eu news of February 2017, the Business Corporations Act amendment changes regulation of the joint-stock companies with more than 500 employees. In such joint-stock companies it is newly necessary to determine the number of the Supervisory Board members so that it is divisible by three. Two thirds of the Supervisory Board members should be elected by the General Meeting whereas the remaining third should be elected by the company’s employees. The Bylaws may specify a higher number of the Supervisory Board members elected by employees, however such number may not be higher than the number of members elected by the General Meeting.

The amendment sets out a transitional period of 2 years from its effective date to comply with these changes in concerned joint-stock companies. This transitional period ended on 14 January 2019.

The Supreme Court agreed with lower courts’ ruling and emphasized that the inheritance inventory could be replaced by a joint declaration of heirs only in cases, if a joint declaration of heirs is duly made in required procedural form during probate proceedings. In addition, the heirs shall jointly submit such declaration to court and suggest that such declaration shall be considered as the replacement of an inventory. And such replacement is possible only in cases, where the heirs are not in conflict. Further, the Supreme Court stressed that individuals are obliged to tolerate and allow access to their dwelling in case of inheritance inventory execution (carrying out inspection and making the inventory). These duties cannot be compared to search warrant execution in criminal proceedings. The Supreme Court summed up that the individuals, whose rights are interfered during making the inventory (e.g. they are owners of the particular real estate), have to be informally notified and called for appropriate cooperation.

(Judgement of the Supreme Court of the Czech Republic, file no. 21 Cdo 3604/2017 from 25 June 2018)

During probate proceedings, the heirs concluded “a siblings’ agreement on the excluded assets from probate proceedings”. The agreement stipulates that the heirs (two siblings) will not complicate each other the probate proceedings. Despite the agreement, one of the heirs enforced his right to inventory reservation (under such reservation, an heir pays testator’s debts only to the value of acquired inheritance). The District Court ordered to compile an inheritance inventory upon this filing. According to the Court’s resolution, the inventory had to be made in the house exclusively owned by the other heir.

The other heir unsuccessfully appealed against the resolution. However, one question remained: “Could be the siblings’ agreement considered as a joint declaration of heirs replacing the inheritance inventory?”

Both of the lower courts held that if the heir enforces his right to inventory reservation, the court has to order compilation of an inheritance inventory. This inventory could be replaced by a joint declaration of heirs which is made during probate proceedings. According to lower courts’ ruling, the abovementioned siblings’ agreement could not be considered as a joint declaration of heirs. Moreover, the Court of Appeal held that the appeal against the Court’s resolution specifying a place and time of inventory execution is not acceptable, because such resolution is arranging conduct of proceedings. The heir filed an extraordinary appeal to the Supreme Court. In his opinion, the inheritance inventory was unreasonable and purposeless and its execution would represent interference in his property right.

(Plenary Opinion of the Constitutional Court of the Czech Republic, file no. Pl. ÚS-st. 48/18 from 16 October 2018)

In this case, one of the joint owners used to use the real estate in joint ownership exclusively with his own family. According to the other joint owners’ opinion, such using was exceeding the scope of his ideal share and was interfering with their ideal shares. For this reason, the other joint owners demanded compensation payment of usual value for using such premises corresponding to their ideal shares.

The lower courts assessed differently the character of such exceeding use of joint assets without a legal title and related applicable limitation period. On the one hand, if such exceeding use corresponded to an unjust enrichment claim, the limitation period would have been 2 years. On the other hand, if the exceeding use was assessed as a property claim arising from statutory provisions (pecuniary compensation for using exceeding the ideal share), the limitation period would have been 3 years.

The Constitutional Court held that such joint ownership assets use exceeding the scope corresponding to a particular ideal share without a legal title constitutes unjust enrichment of the joint owner. Therefore, the 2 years’ limitation period shall apply (3 years under the new Civil Code). Further, the Constitutional Court emphasized that assets in joint ownership can be used by co-owners jointly or the scope of the use can be determined by co-owners’ agreement. However, in these cases a legal title for using joint ownership assets exists.

Act No. 181/2018 Coll.
Effective from: 1 October 2018

The employer shall be responsible for the loss of earnings in the case of the termination of temporary incapacity for work or qualification for retirement on grounds of invalidity caused to the employee by an accident at work or an occupational disease. The aim of this amendment is to unify the employers' practice in enumerating damages with respect to former employees registered by the Labour Office after the termination of their temporary incapacity for work.

These employees were in legal uncertainty regarding the amount of the minimum wage used for the calculation of their claimed damages. Used practice has recognized two different approaches for the assessment of the minimum wage: i) the amount of the minimum wage valid as of the day of employee's registration by the Labour Office; ii) the amount of the minimum wage depending on its increase at any time. This caused decrease of the amount of damages for the loss of earnings. The usage of higher amount of the minimum wage was more favourable for the employer as it decreased the amount of damages. The employers were allowed to choose which assessment of the minimum wage would be used because of the ambiguous legislation.

Newly amended provision s. 271b par. 3 of the Labour Code now explicitly defines that earnings after the accident at work or after detection of the occupational disease shall be considered as earnings in the amount of the minimum wage valid as of the day of the employee's registration to the job-seekers' evidence. The assessment of the minimum wage is determined with certainty now.

Decree No. 127/2018 Coll.
Effective from: 1 January 2019

The Decree No. 127/2018 Coll. published on 28 June 2018 amends the implementing legislation on the Real Estate Acquisition Tax. The amendment updates the basic prices and changes guidelines and calculations of the guidance values of real estates. The guidance values represent the value of real estates according to the tables which are used as a simplified comparative model for valuation.  

Existing calculation of guidance values is based on the method of the indirect comparison, therefore it uses particular coefficients to fix basic prices in order to compare standard and assessed real estates. Newly, this calculation will be set on surcharges and deductions, which make the differences better assessed. The amendment thus removes the deviations between the comparative tax value for the real estate based on the guidance values and on the expert opinion.

(Decision of the Constitutional Court of the Czech Republic No. II. ÚS 658/18, from 22 May 2018)

The Municipal Court in Brno and the Regional Court in Brno had questioned the validity of the lease agreement which specified the total amount of money which the tenant shall pay to the landlord. According to these courts, the lease agreement shall include a separate amount for rent and a separate amount for payments for services. Therefore, the courts held that the arrangement of payment to landlord, in which the amounts of rent and payment for services had not been separately given, is invalid for its vagueness. It was impossible to define for which purposes the total amount was used.

A performance made on the basis of an invalid legal act (i.e. the use of flat without the legal title) shall be considered as unjust enrichment. Its amount should be considered as the same as the amounts of payments which are considered as the usual rent. Afterwards the Supreme Court upheld the ruling of the Municipal and the Regional Courts. The tenant as an unsuccessful plaintiff filed then a constitutional complaint to overrule these decisions of the lower courts.

The Constitutional Court annulled the judgements of the lower courts.

The Constitutional Court prefers the interpretation of contracts which establishes their validity as a fundamental principle of legal interpretation over the interpretation causing invalidity of contracts. In the opinion of the Constitutional Court, the invalidity of a contract should be a rarity, not the policy. Moreover, the principle of the contractual autonomy, the nature of the private law and the preference of the real will of the parties over the formal expression need to be supported. The Constitutional Court held that the lower courts' decisions preferring the interpretation leading to invalidity of the legal acts do not comply with the Czech Constitution.

(Judgement of the Supreme Court of the Czech Republic file No. 25 Cdo 5007/2016, from 28 June 2018)

The plaintiff (an applicant for purchase of a flat) entered into a real estate booking agreement with defendant (a real estate agency) and he paid the deposit. After that, the real estate agency prepared a draft of a purchase contract, which the parties of the purchase concluded. However, the Land Registry Office dismissed the entry proposal to the Real Estate Register because of the vagueness of the purchase contract. Meanwhile a writ of execution against the seller was issued and the auction of the flat in question was announced. Because of that, the plaintiff did not file the entry proposal again.

The Municipal Court held that the damages were caused to the plaintiff by the defendant because the defendant did not secure that the purchase contract had been perfect and had been successfully registered with the Land Registry Office. By its conduct, the real estate agency violated its preventive duty under the Civil Code.

However, the Court of Appeal did not agree with the Court of First Instance. The Court of Appeal concluded that the deficiencies of the purchase contract were not the reason for unsuccessful filing of the entry proposal to the Real Estate Register. The reason was the fact that no other proposal was filed. According to the court, even if the contract had been perfect, the entry proposal would have been dismissed by the Land Registry Office because a writ of execution against the seller had been issued before the conclusion of this purchase contract.

The Supreme Court held that the real estate agency is liable for damages.

The Supreme Court decided on the ground of the fact that the defendant was committed to provide the seller and the buyer with legal services (to prepare contractual documents and the entry proposal). It is the defendant who is liable for the damages even if the defendant entrusted the drafting of these legal acts to an attorney. Precisely, the formal deficiencies of the purchase contract were the reason why the entry proposal was dismissed. The writ of execution mentioned in the reasoning of the Court of Appeal became effective later. Therefore, the Supreme Court annulled the judgement of the Court of Appeal and referred the case back for a new decision.

Decree No. 82/2018
Effective from: 21 May 2018

The aim of the Act No. 181/2014 Coll., on Cyber Security and the amendment of related acts (Cyber Security Act) is to put into practice a set of rights and obligations to increase the safety of cyberspace and to set up an active cooperation mechanism in-between the private sector and public administration. For entities which are affected by the regulation of the Cyber Security Act, specific obligations are provided, such as the form and requirements for reporting of the cyber-security incidents. By fulfilment of these obligations, there should occur an increase in the protection of information or communication systems of these entities as well as the networks which they operate.

The new Decree transposes the European Directive on measures to ensure a high social standard of the security networks and information systems in the Union, and as of the day it comes into legal effect it also repeals the Cyber Security Decree No. 316/2014 Coll.

The bill which repeals the Act No. 36/1967 Coll., on Experts and Interpreters, and the Bill on Court Interpreters and Court Translators
Legislature status: 2nd reading

In January the Government approved new bills on experts and interpreters which should replace the obsolete legislation of Act No. 36/1967 Coll.  The experts' activities should be regulated in the future in two separate laws, not together as now. Compared to the today's legislation, the new regulations will be more sophisticated in the matters of conditions for performance, control and remuneration. As an example, we could mention a mandatory insurance of experts and new specification of their liability for damage.

First of all, the bill envisages an implementation of a new register and electronic activity records. Under the new law, after fulfilling the qualification requirements, the applicant will have a legal right to be enrolled in the register of experts and interpreters. It also comes up with an increase of remunerations, stricter obligations towards the expert institutes, extension of the inspection rights and review of the expert opinions.

(Decision of the Grand Chamber of the European Court of Human Rights in the case of Barbulescu v. Romania, Complaint No. 61496/08, from 5 September 2017)

In this case, the European Court of Human Rights considered a termination notice given to an employee who was working for a private company. The reason for the notice was the fact of using the program for communication with the clients for private purposes during the working hours. The employee took legal action against that notice and demanded its cancellation. However, the legal action was dismissed arguing that the employer acted in compliance with the Labour Code and the claimant was properly informed about the rules of the company.

The claimant filed the legal action with the European Court of Human Rights, claiming that his emails were protected under Article 8 of the Convention and that the national courts did not allow him to summon witnesses to prove that no damage was occurred on the employer’s side by his actions.

The European Court of Human Rights did not comply with the claim. It decided that in this case it was a limited and reasonable interference in the claimant's privacy, and it is reasonable for the employer to monitor whether employees are actually working in their working hours.

(Decision of the Supreme Court of the Czech Republic No. 20 Cdo 4788/2017, from 14 February 2018)

In this case the courts considered a contract containing the following maturity arrangements on individual monthly instalments of the owed amount: "the monthly instalment of CZK 3,000 is payable every fifteenth day of a given month." The courts of lower instances considered the concerned clause as a time-limit. As a result of that, according to them, if the last day of the time-limit fell on Sunday, the debtor was entitled to pay the instalment also on the following day. In view of the fact that the debtor paid this amount exactly this next day, this conclusion of the courts of lower instances led to the cessation of the execution ordered by the creditor for the non-enforceability of the executory title, as according to these courts, the debtor fulfilled its obligations in accordance with the instalment schedule.

The Supreme Court disagreed with this legal assessment of the lower-level courts. It decided that if the due date is specified on a particular day, it is not a time-limit in the sense of the law, which means that it does not extend to the next working day if the due date falls on a Saturday, a Sunday or a holiday. The wording used in the above given clause provides for a specific moment, as to which a certain legal action has to be performed.

According to this clause, the debtor's obligation to pay the instalment is thus firmly determined by the maturity date of the receivable, i.e. on the fifteenth day of each month, and is not extended to the next working day if the due date falls on a Saturday, Sunday or a holiday. A default as to the due date results in the debtor's delay.

Act no. 310/2017 Coll.
With effect from: 1 June 2018

The entitlement to long-term care-giver’s allowance will be provided to an insured person who carries out the care of a person who needs a long-term care in the home environment and is not employed nor self-employed. A prerequisite for obtaining the allowance will be a serious deterioration in the health condition of the treated person, which requires at least 7 days of hospitalization and on the day of release it will be confirmed that the need for all-day care will last for at least another 30 days. A written consent from the treated person is also required.

A concurrence of the allowance and any wage compensation will not be possible. In the context of the allowance, a ban on termination notices in the protection period shall apply. The period for which the long-term care is provided will not be calculated for the purposes of the reduction of leave for absence with leave under Article 223 of the Labor Code. The vacation will be interrupted as well as in the case of providing care of a family member. However, the interruption will not occur if the leave is intended for the period of the long-term care at the request of that family member.

A proposal to Act by which Act no. 182/2006 Coll. is to be modified
Status of discussion: 1st reading

The Minister of Justice had presented the proposal of the amendment to the Insolvency Act, which was submitted on 20 March 2018 at the session of the Czech Parliament. This proposal was presented in connection with the solution of practical issues (excessive indebtedness of natural persons, debtors are in debt traps, in a state where claims are impossible to be paid in practice).

By the proposal, it is to be remedied the currently unfavorable situation in terms of the number of persons affected by the execution. There are 863 thousand of persons held in execution, almost half a million citizens have three or more execution proceedings in progress against them, a total of 4.67 million executions are ongoing, 75 executions are started every hour, and CZK 239 billion is now being enforced in execution.

The aim of the proposal is to make the debt relief institute available to a wider scope of debtors. The basic points of the proposal are:

• removal of the 30% repayment threshold in 5 years and rationalization of conditions for providing of consumer’s credits,
• modification of the debtor's obligations in debt relief, with an emphasis on the legitimacy of access to debt relief and payment relief,
• conditions for higher satisfaction of creditors in debt relief by filling of the repayment schedule and strengthening the educational effect of debt relief,
• optimization of the debt-relief legislation in relation to spouses' property and in the case of coordinated debt relief of spouses,
• extension of discretionary powers of the insolvency court when assessing the proposal for authorization of debt relief.

The new arrangement should be especially suitable for honest debtors, which is a debtor who provides all the eligible assets to cover the debts and spends all efforts for repayment of his or her debt during 7 years. A faster debt relief would then be possible for debtors who have repaid at least 50% of their receivables within 3 years. To such debtors, it will be available a combination of their asset sales and repayment schedule.

(Decision of the Supreme Court, file no. 31 Cdo 1042/2017, from 13 December 2017)

In this case, the plaintiff sought compensation for the damage suffered by the Czech Republic as a result of the forced restraint of ownership due to unconstitutional rent regulation. The amount requested corresponded to the difference between market and regulated rent in the period from 1 September 2003 to 31 August 2006. However, the State on the defendant's side objected to the limitation of the right to compensation.

In the Supreme Court's view, the State's statute of limitations objection should not be accepted by the general courts at all because it is in conflict with good morals. It is based on the Constitutional Court's finding of a State’s failure, in which the State was not providing for a long time adequate protection for landlords, in this case by virtue of its unconstitutional inaction consisting of not adopting a special regulation, which would allow the landlords to increase rent in some cases.

Regarding the amount of compensation, the Supreme Court follows from the conclusions of the European Court of Human Rights, according to which it should be essentially identical to the difference between market and regulated rents.

(Decision of the Supreme Court file no. 21 Cdo 4659/2016, from 1 June 2017)

The defendant was working for the plaintiff since 2011 as a truck driver, but on 25 June 2012 an agreement on termination of his employment was concluded with him. On the same day, the defendant issued a promissory note to the plaintiff’s order in the amount of CZK 200,000. The reason for issuing this promissory note was to secure the employer's claim for damages, in this case the lost semitrailer. From the point of view of the facts, it was found that there was no pressure on the defendant.

According to the Supreme Court, the core of labor law is the protection of the weaker party in labor-law relations. Although it is not expressly forbidden to secure the employer's claim against the employee from the employment relationship by virtue of a bill of exchange, that prohibition must be inferred from the basic principles of employment law. The relationship arising from issuing of a bill of exchange is based on inequality of the participants, as the debtor is at a considerable disadvantage and the bill of exchange thus fundamentally aggravates his position as an employee. The employer may engage a third person in the legal relationship who will become the owner of the bill of exchange instead. However, according to the provision of Article 338 of the Labor Code, the transfer of rights and obligations from labor relations can occur only in the cases stipulated by the Labor Code. Although the bill does not become invalid, it constitutes an objection of the inadmissible reason for the bill of exchange due to the invalidity of the agreement on the bill of exchange.

(Decision of the Supreme Court file no. 22 Cdo 4580/2017, from 31 October 2017)

In this case, the plaintiff sought the removal of a lock and a hasp from the door of her lodge, which were placed on the door leading to the defendants' land. The defendants placed the lock there in order to prevent the plaintiff from accessing their land. The Court of First Instance upheld the plaintiff’s action on the ground that the defendants unlawfully restricted the plaintiff's property rights. The Court of Appeal changed the judgment of the Court of First Instance and dismissed the action, arguing that the plaintiff entered the premises, even though the defendants did not agree. At the same time, in the view of the Court of Appeal, no damage was caused to the plaintiff. It was an allowed self-help by the defendants.

The Supreme Court upheld the plaintiff's appeal. The condition of self-help is, according to the Supreme Court, a threat to the law, an immediate threat of occurrence of a serious harm, as well as the fact that the intervention of public authorities would come too late. However, it is necessary to take into account the fact that it is possible to defend against an interference with the possession right by means of a pecuniary action, which is dealt with in a special, shortened proceedings (Art. 176 et seq. of the Civil Procedure Code). When assessing whether self-help is allowed, it is also necessary to take into account the nature and importance of the right to be defended, the intensity of interference, the consequences of the breach of the law and the use of self-help.

In this case, the Court of Appeal did not sufficiently address these conditions for exercising the right of self-help, so the Supreme Court canceled it and referred the case back to the Court of Appeal for further proceedings.

As of 1 January 2018, new methods how to divide a land have been established. This is a consequence of the Amendment to the Cadastral Act made in connection with the major amendment to the Building Act, about which we have already informed you on the AK-PS Legal News site.

The main news is that it is now possible to register the land division according to the geometric plan without changing its owner, i.e. only on the basis of the notification from the Building Authority that it agrees with the land division. Until now, it has been necessary for the land division to change the legal relationship to it at the same time (ownership, lien, etc.). Any change of land borders was therefore reflected in the Real Estate Register only when the new owner’s ownership right to the separated land, deletion of the lien on part of the land, etc., was registered in the Real Estate Register. Although the already mentioned Building Authority's notification was a mandatory attachment to a motion to the Real Estate Register, you were not able to use it as a motion itself. Now, it will be enough by itself.

Thus, from now on it will be much easier for the owner to divide his land in advance and then to deal with the already divided land.

Act no. 225/2017 Coll.
With effect from: 1 January 2018

The Amendment replaces the "institution of a protected workspace" by recognizing the employer fulfilling the specified conditions and by undertaking to report on its activities on an annual basis. The result will be, among other things, a publicly available list of recognized employers, to be used e.g. for authorization to provide a substitutive performance.

From 2018, the annual limit of the substitutive performance for authorized suppliers is reduced from 36 times to 28 times.

An electronic registration system will be in place to monitor the limits of the substitutive performance. The aim is to reduce the abuse of the system in the form of so-called re-invoicing of products and services. In this respect, the law imposes an obligation on the authorized providers to enter data on the provided supplies in this system operated by the Ministry of Labour and Social Affairs.

There remains a possibility of obtaining support for the establishment and the operating costs of the work place for people with disabilities, and this support is no longer conditional to conclusion of an agreement on establishment of a sheltered employment. Further changes are in the structure and amount of the contribution, which is also simplified.

The Amendment further extends the period of validity of the aid for the socially efficient employment from 12 to 24 months.

Act no. 327/2017 Coll.
With effect from: 1 January 2018

In this case, the parties entered into a purchase contract on sale of a passenger car. In the purchase agreement the parties agreed that "the seller is not responsible for any inconsistency between the mileage shown on the speedometer and the actual mileage". The mileage specified in the contract did not match the reality and therefore the buyer later wanted to withdraw from the contract.

The Supreme Court confirmed that the buyer was entitled to withdraw from the contract.

According to the Supreme Court, in the case of consumer goods guarantees, it is necessary to distinguish between liability for defects in the legal sense and liability for the fact that the subject-matter of the purchase is in accordance with the purchase contract when the buyer accepts it. The mileage is one of the essential legal factors in the sale of a motor vehicle, and according to the Court the seller could not be freed from the liability.

 (Decision of the Supreme Court of the Czech Republic from 15.9.2017, file no. 32 Cdo 5153/2016)

In this case, the claimant filed a lawsuit against a resolution by which the assembly of Association of Unit Owners (in Czech: “SVJ”) decided to enter into a service agreement on a change of lifts in the house. The courts had to assess whether, in such a case, there was an "important reason" by which the law conditions the review of the SVJ’s decision.

The Supreme Court stated that the change of lifts is so significant that the decision on this subject-matter is reviewable by the courts.

The Supreme Court concluded that the change of lifts was, in the light of Sec. 1209 (1) of the Civil Code, a sufficiently fundamental issue to give "an important reason" for reviewing the resolution of SVJ which had decided it. In addition, the Supreme Court expressly stated that the subject of the review is not only the decision to change of lifts as such but also the decision on its specific implementation, that is the decision approving the service agreement for the change.

As a result of this decision, in the event of SVJ's decision to change of lifts, the claimant who voted against may demand to have this SVJ’s decision reviewed by the court. The court may, on the basis of that review, decide on the matter itself.

According to the Supreme Court, as to the seriousness, the decision to change of lifts can be compared to a decision on change of windows in the house. On the contrary, as mentioned in the August issue of AK-PS Legal News, a decision on an increase of contributions to the repair fund is not considered as such serious decision by the Supreme Court. Here, on the other hand, the Supreme Court ruled that such decision is not reviewable by the courts (except for a situation where the increase in contributions would be really extreme).

(Decision of the Supreme Court of the Czech Republic from 27.6.2017, file no. 26 Cdo 2657/2016)

On 27 April 2016 the new legal regulation aiming to unification of European legal framework of personal data protection was adopted on the European level. The reason of its adoption was in particular intensification of free movement of personal data within the EU, as well as the reaction to technological innovation (internet of things, cloud source repository, etc.) representing new platforms for sharing and processing of personal data. The regulation follows preceding European legal legislation based on directive 95/46/EC of the European Parliament and of the Council.

A new supervisory authority will be established on the European level: European Data Protection Board. The Council will act also as an appellate authority against decisions of particular national supervisory authorities (e.g. Czech Office for personal data protection - OPDP (in Czech “Úřad pro ochranu osobních údajů – ÚOOÚ”). It will be possible to appeal to this authority in the case of doubts regarding a decision of ÚOOÚ. If ÚOOÚ decides on the imposition of penalty on the processor, such processor should be entitled to appeal to the European Data Protection Board. Moreover, the data subjects will be entitled to make complaints regarding GDPR before ÚOOÚ about persons residing anywhere in the EU. If a Czech citizen finds out that his or her personal data were treated unlawfully while the processor resides outside the Czech Republic, such citizen will be entitled to make a motion to ÚOOÚ. ÚOOÚ will carry out a supervision in the area of GDPR, either on the basis on its initiative or on the basis of such motions.

One of the most significant innovation among the legal institutes is the right to transfer of personal data. Data subject may obtain his or her personal data free of charge from the processor or controller and transfer them to the new controller without limitation. The only condition is that the personal data have to be processed automatically. The controller shall be obliged to inform the data subject on such right in the course of obtaining the consent with processing of personal data.

The regulation stipulates also stricter requirements for a wording of the consent of the data subject with a data processing. The data subject should obtain information on processing of his or her personal data briefly, transparently, clearly and easily (simple language is necessary), including information on his or her rights guaranteed by the legal regulation. The consent should be granted separately (e.g. on specific separate document) and its granting can’t be condition for concluding the agreement. In practice (in particular practice of e-shops and providers of online services), it will be recommended a duplication of the consent, i.e. the procedure that the data subject will grant consent with processing of his or her personal data firstly in the course of concluding the respective purchase or other agreement and subsequently, the data subject will be asked to confirm his or her consent regardless the before said transaction (e.g. by using a specific generated code sent to the cell phone, etc.). It could be deduced that consents granted under the current legislation will no longer meet requirements stipulated by the law after the effectiveness of the regulation.

The controller or processor should, beside using these new consents, carry out comprehensive setting of their internal processing mechanisms. The controller or processor should carry out the risk analysis and subsequently implement technical and organization measures so that it could be proved that a data processing is in compliance with the regulation. The controller or processor will be obliged to keep records of all data processing. Exception from this obligation to keep records will be applicable to entities with less than 250 employees, provided that data processing is not their main field of activity, there is no risk of limitation of data subjects’ rights and freedoms and no sensitive data are processed. The obligation to keep records will supplement current obligation to register with the OPDP (as such obligation will cease to exist). The records will be submitted to OPDP for inspection upon request.

Further, the regulation introduces the obligation to appoint a commissioner for personal data protection, i.e. Data Protection Officer (DPO). Despite the fact that such obligation will be applicable only to certain groups of processors, such as public authorities or public entities or those controllers whose main field of activity is “extensive processing” of specific categories of data or criminal cases, the term “extensive processing” is not defined. In practice, it could be deduced that such obligation will be applicable to more categories of processors. The Data Protection Officers could be (and in case of any doubts it will be appropriate) appointed also voluntarily.

There are also new obligations regarding breach (e.g. leakage, misuse, etc.) of data security introduced by the regulation. Potential breach has to be notified to OPDP (no later than 72 hours (if feasible) as soon as the controller becomes aware of such breach. The notification should contain at least information on a kind of security risk, number and type of affected data, person who could provide more information, expected impacts of the breach, and measures adopted. In certain cases, also data subjects, affected by the security breach, will need to be informed.

The regulation stipulates much stricter sanctions for infringement of controller’s or processor’s obligations. Fines could be imposed up to the amount of EUR 20 million or up to 4 % of the total worldwide annual turnover of the preceding financial year of the company breaching its obligations, whichever is higher.

Impacts of the regulation on the labour law:

Each employer shall be obliged to obtain a consent with processing of an employee’s personal data (the only exception is the situation where processing of the personal data is necessary for the employer due to fulfilment of his legal obligations). Such consent needs to be informed, i.e. it has to contain an instruction to the employee regarding his or her rights arising of the regulation. The employer shall be obliged to prove that the consent was granted at any time. The employee shall have an option to withdraw such consent at any time. Further, the employer shall be granted a consent on the processing of employees’ sensitive personal data.

The employer shall be obliged, in the course of obtaining the personal data, to provide the employee with an information, in particular regarding its identity, contact details, purpose and time period of processing of personal data. Further, the employer shall be obliged to enable the employee the access to the personal data (making copies) and to correct or supplement personal data without undue delay after becoming familiar with their changes.

ertain cases (such as unnecessity for the respective purpose, withdrawal of the consent with processing of the personal data, etc.), the employer shall be obliged to delete personal data regarding the employee. Further, the employer shall be obliged to protect personal data of the employees by using proper technical and organisational measures (without further specification of such measures).

The Czech Republic

Due to the fact that the Czech national implementing legislation (i.e. the amendment to Act no. 101/2000 Coll., on the Personal Data Protection) has not been adopted yet and the regulation itself leaves quite extensive space for adaptation of certain rules on the national level, it will be necessary for complete assessment of impacts of the regulation on the particular processors to wait for such Czech implementing legislation. We recommend approaching a solution of this issue reasonably and without a panic, which may be raised by some information in media and in statements of the subjects offering guaranteed solutions. We will provide you with further development in this area in the AK-PS legal news.

Slovakia

Slovakia is dealing with similar situation regarding implementation of the regulation. Currently, a new Act on personal data protection is discussed in National Council of the Slovak Republic (in Slovak “Národná rada Slovenskej republiky”). Current proposal of the respective Act is divided into several parts. Part I to III (except for some distinctions) correspond to the wording of the GDPR regulation. Part IV of the Act proposal deals with the personal data protection for the purposes of prevention and detection of criminal offenses. Part V deals with specific situations in the course of personal data processing (e.g. birth number or genetic or biometric data processing). The last two parts of the Act proposal regulate in particular procedural aspects and transitional provisions. In practice, the last three parts of the Act will be the most relevant for the controller and processor of personal data in Slovakia.

(Regulation (EU) 2016/679 of the European Parliament and of the Council dated 27 April 2016, effective from 25 May 2018)

Under the current situation, the unit owners who duly fulfil their obligations are forced to be liable for the obligations of those unit owners who owe quite often a significant amount of money for the house and land management. The Amendment therefore introduces a principle under which receivables towards the unit owner relating to the house and land management will be satisfied preferentially. The above-mentioned receivables will be satisfied from the assets after satisfaction of the costs incurred by the State in the enforcement proceedings, up to one tenth of the proceeds from the sale of the unit.

The person responsible for the house and land management will have the right to file the receivable until the opening of the auction session at the latest, provided that such receivable is claimed before the court.

Act no. 291/2017 Coll.
With effect from: 1 December 2017

The New Civil Code provides for the public benefit status in five Sections, i.e. Sections 146 to 150. Under these Sections, such status of a publicly beneficial legal entity belongs to an entity which, through its mission, founding actions and activities, contributes to achievement of the common good. Provided that the respective conditions are met, such entities are entitled to be registered in the public register. Revocation of the status is decided by the court.

These Sections of the Civil Code presumed that they would be supplemented with a special Act on the Public Benefit Status. This subsequent legal regulation hasn’t been adopted (the reasons usually mentioned are: the risk of overloaded courts, lack of necessity of a special act, e.g. no tax benefits connected to the act etc.). Instead, respective Sections are now to be removed from the Civil Code. However, removal of these Sections doesn’t result in cancellation of the public benefit, it results only in removal of the public benefit status. On the other hand, the public benefit status should be supplemented with the Act on Social Business which is currently being prepared.

Act no. 303/2017 Coll., amending several Acts in connection with public benefit status
With effect from: 1 January 2018

The propounded Amendment to the Trade Act removes the limitation for entrepreneurs, to whom the trade licence was cancelled, to run a business in the related field, or to participate on such related business. The Amendment also removes such limitation for persons being members of statutory body participating on the business of legal entities the trade licence of which was cancelled. Further, the Amendment cancels these persons’ impossibility to run a licensed business in the related field for the period of one year (or to participate on such related business in the position of a member of the legal entity’s statutory body). The above-mentioned limitation regarding the business in the related field is cancelled also with respect to the natural persons in the position of authorized representative.

Further, duration of the obstacle for running a business shall be unified for category of persons to whom such obstacle relates (currently, there is an obstacle for the period of three years from effectiveness of the decision on cancellation of the trade licence, and for an unlimited period).

Another change relates to information obligation of entrepreneurs. The Amendment cancels the entrepreneurs’ obligation to provide the trade authority with identifiable information of members of the legal entity’s statutory body and heads of organizational body of the business branch of the foreign legal entity registered with the commercial register. In the course of notifying the business or applying for a licensed business, legal entities shall not be obliged to provide the trade authority with identifiable information of members of its statutory body or head of organizational body of the business branch of the foreign legal entity. The trade authority will ensure such information by itself. Data registered in the trade register shall correspond to those filed in the respective public register the legal entity is registered with.

On the other hand, the Amendment will enable to use data from the trade register only for personal use as publication of such data shall be prohibited. The explanatory report to the Amendment provides more details, i.e. the applicant may use the respective data only for personal use (e.g. gaining a contact details of an entrepreneur for the purpose of concluding a business agreement) and is not allowed to make them publicly available (e.g. in media, websites etc.) or to provide them to the third persons. 

Act no. 289/2017 Coll., amending the Act on Trade (Trade Act)
With effect from: 30 September 2017

The Financial Authority for the South Bohemian Region in Strakonice charged the plaintiff with the Tax on Acquisition of Immovable Property (TAIP). The Financial Authority found that for the purpose of assessment of the TAIP, the stipulated price (i.e. the basis of assessment) corresponds with the payment for acquisition of the real estate property including VAT. The plaintiff appealed to this decision. However, the Financial Authority rejected it. Then the plaintiff contested the decision by filing a legal action before the Regional Court. This Court also rejected the action. Against the Regional Court’s decision, the plaintiff subsequently filed a cassation appeal.

The Supreme Administrative Court accepted such appeal and satisfied it. At the same time it cancelled the decision of the Regional Court and returned it to the administrative authority. According to the Supreme Administrative Court, under Senate legal measurement no. 340/2013 Coll., on TAIP (in the wording effective until 31 October 2016), the VAT paid by the transferor being the VAT payer, was not part of the basis for assessment of the TAIP.

In this decision, the Supreme Administrative Court diverges from the explanatory report to the Senate legal measurement. Those VAT payers who included VAT into the basis for assessment of the TAIP can file an additional tax return now and thus get back a part of this tax.

(Decision of the Supreme Administrative Court from 28 June 2017, file no. 4 Afs 88/2017)

The action regarding protection against unlawful use of the company name was filed against the plaintiff by another company. Such another company was registered in the commercial register under the same company name before the plaintiff was. The plaintiff changed its company name upon the court decision. Subsequently, it claimed damages due to the registration of the respective company name. The Court of the First Instance rejected the action as it considered the claim as statute-barred. The Appellate Court cancelled the decision as the limitation of time objection was considered incorrectly in its view.

Decision of the Appellate Court was contested by the defendant through filing an appeal which the Supreme Court considered as unreasonable. The Supreme Court referred to the current practice, according to which an objective statute-barred period begins on the date of delivery of the decision which was found to be unlawful and which caused the damage. In some cases, a situation might occur, when the right is subject to a statute-barred period prior to occurrence of damage and sooner that the right to damages arises. Under the civil law, for the right to be statute-barred, it has to exist firstly, i.e. the statute-barred period cannot run if the right doesn’t exist.

The objective statute-barred period, in the course of which the right to damages caused by unlawful decision becomes statute-barred, begins in the event from which the damage arises; such event contains not only the unlawful act or any event stated by the law which resulted in occurrence of the damage, but also occurrence of the damage itself.

(Decision of the Supreme Court from 12 April 2017, file no. 31 Cdo 4835/2014)

In this case the agreement labelled as the "settlement agreement" was concluded. Under the agreement, a son undertook to pay to his parents the amount of CZK 1,850,000 following to the transfer of the real estate property to him for a lower purchase price than was the market price (his parents intended to spend the rest of their life there). Due to mutual disputes, the parents left the real estate property and moved to a leased property. Subsequently concluded agreement didn’t meet requirements for the settlement agreement as it was not clear what was disputable between the parties and it looked more like acknowledgement of a debt. However, as an acknowledgement of a debt, the agreement was not sufficiently certain (it only generally stated the acknowledgement of a debt to the extent of its reason and the amount; however, such reason was not specified).

The Court of the First Instance accepted the action of the parents regarding payment of the amount stated in the agreement, whilst the Appellate Court decided otherwise due to the fact that it considered the agreement invalid. The Constitutional Court changed its decision and inclined to the validity of the agreement due to the fact that from the circumstances of the case it was unquestionably derivable what the parties wanted to achieve by the agreement and for which reason. The Constitutional Court admonished the Appellate Court as the Appellate Court did not stick to the principle of agreements validity priority and it only formalistically decided on the invalidity.

(Decision of the Constitutional Court from 11 July 2017, file no. IV. ÚS 3168/16)

Any person who commits an offence shall obtain detailed reasoning of the seriousness of the offence committed and the penalty imposed. These detailed rules for imposition of administrative penalties together with a list of deteriorating and mitigating circumstances should cause that the person on whom the penalty is imposed shall be sufficiently informed from the reasoning on the seriousness of the committed offence.

New institutes are established, such as abandonment or conditional abandonment of imposition of the penalty or extraordinary decrease in the penalty. In this respect, the law stipulates a list of mitigating circumstances, such as young age of the offender, committing an offence under pressure, voluntary damages or cooperation with authorities.

A new institute called settlement provides the offender with a possibility to compensate a victim without necessity of taking part in usually time-consuming offence proceeding to which other costs could be connected.

Changes relate also to the mechanism of assessment of offences. The new Act does not stipulate new offences or reduce the current list of offences. New legislation should fill the gap in the area of administrative punishment of legal or natural persons. The new Act unifies conditions of liability of natural persons, legal persons and natural persons – entrepreneurs for offences, of which a unified definition has been established. New definition of offence includes not only offences but also other administrative delicts.

Act no. 250/2016 Coll.
With effect from: 1 July 2017

The Amendment shortens the process of modification and update of zoning and planning documentation such as zoning plan. Newly, a municipal assembly’s decision on report on application of zoning plan during preceding period or on other similar documents will not be necessary. The condition for effectiveness of each update and change of zoning and planning documentation shall be its publication on the website.

The Amendment introduces a co-ordinated proceeding. Such proceeding is a connection of zoning and building proceedings and it can be used in case of particular constructions as well as complex of buildings. An applicant may choose whether to proceed by a way of two separate proceedings or to require an issuance of the co-ordinated permit. A proceedings regarding an assessment of impacts on environment (EIA process) shall be integrated part of the co-ordinated proceeding as well.

Proceedings regarding constructions where a notification is sufficient shall be shortened from 30 to 15 days. An administrative load shall be limited regarding small builders. Regarding the construction of family houses, a mere notification shall be sufficient and the building authority should subsequently issue the permit within one month.

The Amendment further enables a self-help construction regarding any type of family houses without limitation of the built-up area. A construction of pools or greenhouse on the plot of land for family house or a plot of land for family recreation shall be possible on the basis of their mere placement without the permitting process.

In the event that an application relates to an immovable divided to flat units, the builder will newly submit only the consent of administrator or association of unit owners, whereas consents of other owners won’t be necessary.

Amendment to Act no. 183/2006 Coll.

current status: subject to signature of the president of the Czech Republic

Under the provision of Sec. 1209 of the Civil Code, an outvoted owner may file a motion to the Court based on which the Court decides in the respective issue „if there is an important reason for it“. By this „important reason“ the Civil Code means what the Act on Flats Ownership previously specified as the „important issue“. This is a situation when the decision in question interferes directly with either the legal position alone of the unit owners or with the nature of the subject matter of their ownership from the perspective of its purpose of use. 

The Supreme Court considers the practical question whether an increase of the contribution to the Maintenance Fund is or is not important enough so that the Court may review it. The answer is no. It means that if there is a decision on increase of the contributions to the Maintenance Fund, the outvoted owner can’t refer to the Court. However, an extreme increase would be an exception to this rule.

(Decision of the Supreme Court, file no. 26 Cdo 4567/2016 from 15 March 2017)

The Supreme Court considers the question of employer’s liability for the damage caused to the employee’s car which is used by such employee for his or her transport to the workplace and back.  In accordance with the Labour Code, the employer is obliged to pay for the damages caused to the employee on things which are normally carried into the workplace and which the employee puts aside during performance of working duties or in connection with it in a place intended for such purpose or in a usual place. However, according to the Supreme Court, it’s not possible to consider that such thing may be represented by any means of transport, i.e. not only cars but also bikes, motorcycles etc.

In case of a motor vehicle, which employee placed in the premises of employer in an unguarded car park, the employer’s liability is thus limited to CZK 10,000 only, unless the damage to this motor vehicle was caused by another employee. However, if the employer accepts the car into a special form of custody (such as e.g. a guarded car park), the employer would be obliged to pay the damages in the full extent.

(Decision of the Supreme Court, file no. 21 Cdo 2345/2015 from 23 January 2017)

The Constitutional Court dealt with a question of compensation of damage caused to a crashed vehicle. The parties to the dispute were the owner of the vehicle, the wrecker and his insurance company. The owner claimed damages to the extent of the amount of the vehicle’s repair costs and the amount by which the vehicle’s value was decreased on the market with pre-owned vehicles due to the crash itself. The insurance company compensated only the amount corresponding to the price of the repair.

In the course of proceedings before the general courts it was stated that the compensation for real damage includes costs of the repair and it cannot take into account specifics of creation of the prices on the market with pre-owned vehicles. According to the general courts, including the Supreme Court, the difference between general price of the claimant’s vehicle before the damage and the price for which the vehicle could be sold after the repair does not constitute a real damage of the vehicle.

The Constitutional Court took a different approach on such case and cancelled previous decisions of the general courts. According to the Constitutional Court, in the event that only costs of the repair of the thing are reimbursed and not the difference in its market value, the thing does not provide the owner with the same benefit and the damage caused by unlawful act is not compensated to the full extent.

(Decision of the Constitutional court file no. II. ÚS 795/16 from 27 April 2017)

An extensive amendment to the Insolvency Act deals with conditional receivables (including bank guarantees), assessment of companies‘ payment incapacity and insolvency petitions, debt relief and other aspects of insolvency proceeding.

Act no. 64/2017 Sb.

Effectiveness: 1 July 2017

The amendment introduces a preliminary assessment of an insolvency petition and limits a possibility of filing mischievous proposals

An insolvency petition filed by a creditor will be newly, before publishing of such petition in the insolvency register, subject to a preliminary assessment. In the event of any doubt about the legitimacy of the insolvency petition, a court may decide that for a limited period of time such petition will not be published in the insolvency register. A court has to assess as to whether the insolvency petition is obviously groundless or not within seven days of filing of the insolvency petition.

In the event of the creditor’s insolvency petition, a creditor shall always be obliged to put down a deposit for cost of the insolvency proceeding in the amount of CZK 50,000 in the event of legal entity being an entrepreneur, and CZK 10,000 in the event of a petition against a legal entity which is not entrepreneur or an individual.

If the insolvency petition filed by a creditor is refused due to its obvious groundlessness, an insolvency court may impose a penalty on the petitioner for filing of such groundless petition up to the amount of CZK 500,000. Moreover, an insolvency petitioner will be entitled to file a new petition against a same debtor no sooner than after six months.

The amendment stipulates a different concept of a bankruptcy.

The amendment supplements current concept of the bankruptcy in a form of the payment incapacity for entrepreneurs keeping the books by introducing the “coverage gap”. The coverage gap means a difference between the amount of debtor’s due monetary obligations and debtor’s disposable incomes. Thus, the entrepreneur is not bankrupt provided that the coverage gap is lower than 10 % of the amount of the entrepreneur’s due receivables in the course of the relevant period according to the liquidity statement.

However, in the event that the coverage gap is not lower than 10 % of debtor’s due receivables, a debtor still does not have to be considered as payment incapable. This could be a case when it could be expected that the coverage gap will lower below 10 % of debtor’s due receivables prospectively.

A new principle is introduced in the event of the assignment of receivable

A creditor - legal entity, which has acquired a receivable within six months before the initiation of the insolvency proceeding or after such initiation, shall be obliged to provide information on its beneficial owner under the Money Laundering Act. Unless the creditor fulfils such obligation, it is not entitled to exercise its voting rights connected with respective receivable.

A creditor does not have the above-mentioned obligation in the event that the respective transaction from which the receivable arose is not subject to an inspection under the Money Laundering Act (in the event of transaction between the “obliged person” and the creditor). The creditor does not have such obligation also if the consideration from the transaction (between the creditor and other person than the obliged person), from which the receivable arose, is lower than EUR 10,000.

If the creditor is an entity without a beneficial owner in line with the Money Laundering Act, it is sufficient that the creditor provides an affidavit stating that it does not have a beneficial owner.

The amendment introduces innovations regarding a discharge

The amendment stipulates an obligation for a debtor that his/her petition for discharge permit has to be drafted and submitted on behalf of a debtor by attorney-at-law, notary, bailiff or insolvency administrator. Such person is entitled to a reward in the maximum amount of CZK 4,000 (CZK 6,000 in the event of a discharge of spouses respectively). The petition may also be drafted and submitted on behalf of a debtor by an accredited person, which is not entitled to any reward. Such accredited person may be only a legal entity. The accreditation is granted by Ministry of Justice upon submitting respective application to the Ministry. The applicant has to prove, inter alia, its public beneficial status and also impeccability in the course of providing services concerning a discharge.

A debtor is entitled to submit a petition on his own provided that he has a legal or economic education or passes an exam of insolvency administrator. In the event that a debtor is a legal entity, such conditions have to be fulfilled by its representative.

The amendment further stipulates an obligation to submit the petition on the prescribed form.

Moreover, the amendment introduces a new mechanism of allocation of particular cases concerning discharge so that the principle of district courts is substituted by the principle of regional courts so that such mechanism corresponds to that used with respect to bankruptcy.

As a reaction to persisting lack of interest on the part of creditors regarding attendance on the convened creditors meeting, in the event of discharge, creditors meeting shall be convened upon a proposal of majority of all creditors owning receivables representing simultaneously a majority of registered receivables or an insolvency administrator or creditors committee. Further, the amendment stipulates a right of courts to convene creditors meeting ex officio.

Unsuccessful discharge does not have to result in bankruptcy

In line with the current legislation a court is obliged to decide on a bankruptcy as a method for resolving debtor’s insolvency in the event that the petition for discharge permit is refused, taken into account or dismissed by a court. As of the effectiveness of the amendment a court may decide whether to undertake such step or not. A choice of a method for resolving insolvency is in the sole discretion of a court. In the event that a court does not decide on a bankruptcy as a method for resolving insolvency, a court shall strike out the proceeding.

A court is not entitled to decide on a bankruptcy as a method for resolving insolvency in the event that the insolvency petition is not submitted by a debtor (or on his behalf). Further, the bankruptcy cannot be ordered in the event that a court finds out that a debtor’s property is completely insufficient for satisfying creditors.

On the other hand, a court shall decide on a bankruptcy as a method for resolving insolvency in the event that a debtor is in default with fulfilment of his obligations arising from the approved discharge or it becomes apparent that substantial part of a payment calendar cannot be fulfilled. In such a case, a court shall simultaneously decide on a cancellation of the method of discharge originally ordered.

The amendment makes conditions for voting of related parties and close persons more strict

As opposed to the current wording of the insolvency Act, the amendment forbids to creditor to vote in matters of a person close to the creditor or a person which forms a concern with the creditor (unless stipulated otherwise by the law). Moreover, such ban shall also apply to a situation where the creditor is a person close to the debtor or forms a concern with the debtor. On the contrary, such ban shall not apply in the event of voting on the restructuring plan submitted by a person other than the debtor or above-mentioned creditor. In justified cases an insolvency court may allow voting of such close persons or related persons.

The amendment introduces an obligation to prove a claimed receivable

In the event of creditor’s insolvency petitions, the insolvency petitioner, who is keeping the books, is obliged to prove its claimed receivable against a debtor – legal entity.

Claimed receivable could be proven by acknowledgement of a debt with verified signatures, enforceable decision, notarial deed or bailiff’s deed with permission to enforceability or confirmation of auditor, judicial expert or tax advisor stating that the petitioner is keeping books regarding the respective receivable.

In the event of the insolvency petitioner being a foreign entity, either legal entity or individual, the receivable may be proven by a certificate verified or issued by a foreign state, which corresponds to the above-mentioned documents in line with the law of such state.

Effective from: 1 April 2017

The amendment changes the regulation of the discharge of debts (in Slovak: oddlženie) for individuals. The aim of the amendment is to make individual bankrupt more available and to motivate the debtors to earn a living for themselves.

The regulation of the discharge of debts for individuals comes from foreign legal systems. It particularly concerns the so-called Fresh Start concept, which means that all of the debtor’s assets are liquidated and his debts are discharged. This concept corresponds to discharge of debts in a bankruptcy. In practice the amendment makes the existing regulation more precise.

No Fresh Start is the other concept. It works with a restructuring of debts according to a repayment schedule ordered by a court. It is an alternative for debtors with sufficient funds to satisfy creditors. This concept corresponds to discharge of debts by a repayment schedule.

Both of the procedures can be initiated only by an individual debtor (no matter if the individual is an entrepreneur). The debtor has to be insolvent and the debt collection or similar procedure has to be conducted against them.

The amendment modifies the selection of the restructuring administrator. Newly the selection of the administrator is secured randomly by technical means (such as the selection of a judge). The restructuring of a debtor will not be conducted by an administrator chosen by a debtor, but by a restructuring administrator randomly selected by a court.        

Debtor has a right to appoint an administrator at their discretion to compile a restructuring plan. 

The duty for legal entities to have an electronic mailbox activated becomes effective on 1 July 2017.

An electronic mailbox allows the legal entity to communicate with public authorities electronically, especially to receive official documents.

To access the mailbox, the statutory representative or other authorized individual (a Slovak citizen) needs a personal identification card with an electronic chip and a personal security code. A foreigner will need a residence permit card with an electronic chip.

Electronic mailboxes are established by the Government Office of the Slovak Republic and are located at the Central Government Portal on the www.slovensko.sk website. They are free of charge.

(Resolution of the Constitutional Court of the SR from 21 June 2016)

The defendant bought an apartment from her and the plaintiff's parents for the purchase price of 1,00 SKK. The plaintiff asked the court to set-off the value of the apartment to the defendant’s share on heritage.

The court of first instance dismissed the action. The court did not find the purchase contract to be a simulated legal action (which was supposed to mask a donation). The court held that the symbolic purchase price is justified by the defendant’s long-time care of their parents. The plaintiff appealed.

The Constitutional Court dismissed the action, too. The Constitutional Court confirmed conclusions of the court of first instance, that the purchase contract was not a simulated legal action due to the symbolic purchase price.

Purchase contract consists of two essential elements (the object of the purchase and the purchase price), which differ a purchase contract from a donation.

Essential element of donation is a transfer of ownership rights free of charge. Moreover, the aspect of long-term care of parents is in compliance with good morals.

Amendment of the Insolvency Act fundamentally changes a numerous aspects of the insolvency proceedings, from securing of the conditional receivables (including bank guarantees), through considering of the insolvency of companies and insolvency motions, until the debt reliefs.

Among other things, the changes relate also to the system of assigning of particular cases related to debt relief where the district court principle will be replaced by the similar principle as in case of the bankruptcy proceedings, namely authorization under the regional courts principle.  In the view of the scope of changes of the Insolvency Act, we will pay more attention to this topic in the next special edition of the AK-PS Legal News.

_{Act no. 64/2017 Coll.}

_{With effect from: 1.7.2017}

Regulation of the European Account Preservation Order should facilitate the cross-border debt recovery in civil and commercial matters in the EU.

Under this regulation, the motion to impound financial means on an account has to be submitted to a court. It is possible to submit it even before the initiation of the proceedings in the very same matter (the legal action). The creditor has to establish the existence of an urgent need to be provided with the order. At the same time there would have to be a real risk of thwarting or fundamental decrease of chances for the subsequent successful receivables enforcement proceedings against the debtor in case that the order is not issued.

The important benefit for the creditors is that the debtor does not take part in the proceedings related to the issue of the order and he or she is only informed about it subsequently. Thus, the debtor has no chance to transfer the financial means, to hide them or spend.

The regulation further specifies the protective measures in favor of the debtor against possible misuse of the order by the creditor when it provides for the cases in which the creditor is obliged to provide an assurance. Apart from that, the creditor is also liable for the damage incurred to the debtor by issuance of the order due to creditor’s mistake.

_{Regulation (EU) of the European Parliament and of the Council a Rady no. 655/2014 from 15 May 2014}

_{With effect from: 18 January 2017}

The lessor (plaintiff) claimed that the lessee (defendant) had to vacate a part of the land which was rented to him under the lease agreement (dated 1 March 2011). The lease agreement was terminated by a written notice as of 31 January 2015. However, the defendant didn’t vacate the premises declaring that there was a tacit renewal of the lease according to the provision of Sec. 2230 (1) of the Civil Code (the plaintiff didn’t call upon him to return the premises). The Court of the First Instance allowed the legal action and the Appeal Court upheld the judgement.

The Supreme Court confirmed the previous decisions and thus accepted the plaintiff’s view, i.e. that there was no renewal of the lease agreement in question.

According to the Supreme Court, it is possible that the lease is renewed in accordance with the provision of Sec. 2230 (1) of the Civil Code only if it is a lease concluded for a definite period of time and such lease terminates by expiration of the lease term. In case that the lease is terminated in a different way (by an agreement, by a termination notice after expiration of the time of notice), the provision of Sec. 2230 (1) of the Civil Code shall not apply. Even in case that the lessor doesn’t call upon the return of the property within a time limit specified in Sec. 2230 (1) of the Civil Code, the renewal of the lease would not occur.

_{(Decision of the Supreme Court from 12 December 2016, file no. 26 Cdo 4354/2016)}

The plaintiff claimed a declaration that the defendant is obliged to pay CZK 1,823,434 as an unjust enrichment. The defendant firstly offered to the plaintiff her house as a gift in 2008 and subsequently she concluded an agreement on authorization to perform a reconstruction of this property with the plaintiff.  Then the defendant changed her mind and wrote a last will according to which the plaintiff should have inherited the property. However, she finally cancelled the last will and at the same time she also terminated the agreement on plaintiff’s authorization to perform the reconstruction.

According to the plaintiff, there occurs a breach of the precontractual liability. The Court of the First Instance allowed the legal action only in part – as to the amount of CZK 1,663,500 (difference in evaluation of the paid costs). The Appeal Court changed the judgement of the Court of the First Instance and refused the legal action as to the amount of CZK 1,012,500 and declared that the plaintiff should be paid CZK 650,000 (release of the unjust enrichment in the amount in which the plaintiff increased the property’s value in fact – not the costs the plaintiff really paid).

The Supreme Court revoked the decision of the Appeal Court and agreed with the plaintiff’s view or the Court of the First Instance respectively (there was a breach of the preventive obligation as provided by laws in which case the defendant is liable for damages).

According to the Supreme Court, the plaintiff reasonably presumed conclusion of the gift contract. Because of that, the costs invested by him on the property on the basis of the agreement on performance of the property’s reconstruction, represented a real damage (uselessly made costs) if no gift occurred. The other party changed her mind as to the gift without any justifiable reason, even though she knew that the plaintiff had performed the reconstruction of her property with her consent and having a good faith in the subsequent giving. The plaintiff thus has a right for damages in the amount of the paid costs.

_{(Decision of the Supreme Court from 26 October 2016, file no. 25 Cdo 337/2015)}

Act no. 297/2016 Coll.
With effect from: 19 September 2016

This act was enacted as a consequence of the EU regulation no. 910/2014 (so-called eIDAS). At the same time, this Act abolishes the previous Act no. 227/2000 Coll., on Electronic Signature.

The Act represents a fundamental release of the strict requirements laid upon the electronic signing of documents in civil law relations. For the purpose of a legal act it is newly possible to use any form of electronic signature, even a plain signature. Newly, even a simple scan of one’s own signature or just a designation of the sender in a text of e-mail fulfils the definition of the electronic signature.

The Act also indirectly acknowledges the written form of the documents which were not signed by a higher form of electronic signature.

The less strict regime laid upon the electronic signing of documents will, however, not be applied in case of labour-law relations, nor in relations with the public authorities. (open the official wording).  

Act no. 460/2016 Coll.

With effect from: 28 February 2017 (1 January 2018 in part)

The term linear construction is newly incorporated into the Civil Code. It is also provided that such linear construction does not form a part of the land. The owner of the land with a linear construction does not have a pre-emptive right to such construction. The other way round, neither the owner of the linear construction has a pre-emptive right to the land through which the linear construction leads.

Based on the amendment, legal pre-emptive right of the joint owners to the common property is reinstated. This particular regulation will come into effect on 1 January 2018.

The amendment further regulates the legislation of trust funds. Newly, the trust fund will be established by registration with a special trust fund register which will be newly founded. The register should be a parallel to the existing Commercial Register. The name of the beneficiary will also be filed with the register, however only to its non-public part. This regulation will come into effect on 1 January 2018, as well.

The amendment further clarifies the form of granting a power of attorney for legal actions which should be made in the form of a public deed. The Civil Code newly provides that it is sufficient that such power of attorney is granted with a certified signature (and not in the form of a pubic deed).

Last but not least, the amendment also relates to the lease of flats, in particular to the maximum amount of security which can be agreed between the tenant and the landlord. Originally this maximum amounted to six times of the monthly rent, newly it is limited to three times of the monthly rent. (open the official wording)

Act no. 458/2016 Coll.
With effect from: 14 January 2017

The amendment changes regulation of the joint-stock companies with more than 500 employees.

In such joint-stock companies it is newly necessary to determine the number of the Supervisory Board members so that it is divisible by three. Two thirds of the Supervisory Board members should be elected by the General Meeting whereas the remaining third should be elected by the company’s employees. The Bylaws may specify a higher number of the Supervisory Board members elected by employees, however such number may not be higher than the number of members elected by the General Meeting.

The Bylaws may also state that some of the Supervisory Board members shall be elected by employees even in companies with less than 500 employees.

The joint-stock companies have two years to amend their Bylaws to fully comply with the new legislation. (open the official wording).

(Decision of the Supreme Court from 31 August 2016, file no. 32 Cdo 4752/2014) 

In this case the plaintiff made a claim arising from the Bank Guarantee against the bank. The bank, however, did not proceed with the payment because of a technical error made by the plaintiff in the call for payment (in fact the plaintiff omitted to use one word as oppose to the wording of the Guarantee Deed, that is the word “due”). The case was finally settled by the Supreme Court.

The Supreme Court ruled that the bank had been right in refusing to accept the payment claim made by the plaintiff.

According to the Supreme Court, it is necessary to fulfil the requirements specified in the Guarantee Deed entirely because the bank is not obliged to examine all the aspects of the legal relations between the plaintiff and the Bank Guarantee issuer. The plaintiff’s technical declaration which should have been incorporated within the call for payment (that is the use of the word “due”) was important and its omission caused the call to be ineffective.        

(Decision of the Supreme Court from 23 August 2016, file no. 23 Cdo 4058/2015)

The subject matter of this case is the legitimacy of the insurance payment to the insured person to whom the damage has already been compensated by another person. The insurance company had provided the insurance payment to the insured person but subsequently requested a refund of the payment as it would otherwise represent unjust enrichment of the insured person. The insurance company argued that there was no damage to be compensated to the insured person by the insurance company at the moment of the insurance payment.

The Supreme Court decided that the insurance payment did not represent unjust enrichment of the insured person even if such insured person had already received compensation from another person.

According to the Supreme Court, it is not decisive whether the insured person incurred any damage. The right for insurance payment and the right for damages are two different rights. The insurance company may not refuse to provide the insurance payment due to the fact that the third party has already compensated the damage.      

(Decision of the Supreme Court from 6 September 2016, file no. 23 Cdo 240/2015)

In this case, two businessmen concluded a purchase contract. They agreed on a court competent to decide their potential disputes (so-called “prorogation agreement”). However, this agreement was only made by reference to the general terms and conditions (VOP). Moreover, these general terms and conditions were not attached to the contract itself but only mentioned on the purchaser’s publicly available website.

Subsequently, there was a dispute stemming from the purchase agreement in question, and the case was referred to the court. The court authorized in accordance with the prorogation agreement decided that it had no jurisdiction over the matter. The court reasoned this decision as follows: it is not possible to validly agree on a choice of court by reference to the general terms and conditions.  

The Supreme Court ruled that the prorogation agreement was concluded validly.

According to the Supreme Court the prorogation agreement may be concluded even within the general terms and conditions which are attached to the contract or which are known to the parties (as was the case in question). The more strict rules valid for consumers shall not apply for businessmen.

(Decision of the Supreme Court from 3 August 2016, file no. 22 Cdo 2208/2015)

In this case the court examined the legal action on termination and settlement of the joint ownership. Both parties demanded to become a sole owner of the immovable property which was the subject matter of the action. The court subsequently ordered an auction to be organized just between the joint owners. However, according to the plaintiffs the court did not consider the question to whom the immovable property should be ordered to sole ownership, at all.

The Supreme Court decided that it is not possible to order an auction between the joint owners.

According to the Supreme Court it is necessary to maintain a hierarchy specified by the law. Firstly, it has to be considered if the property can be divided or if it can be ordered to sole ownership of one of the parties. If both parties are interested to own the property as in this case, it is not possible to order an auction, even organized just between the joint owners.

Newly, the taxpayer has a right for compensation for detention of excessive VAT deduction (during the tax audit). The taxpayer can require this compensation if the excessive VAT deduction is not returned within 6 months from lapse of term for its return due to tax audit.

Compensation is set in the amount of double the prime rate of the European Central Bank, but not less than 1.5% p.a. If the taxpayer fails to repeatedly fulfil their duties during the tax audit or the compensation would be less than EUR 5.00, the compensation will not be granted.       

The amendment changes motor vehicle registration fees.

With effect from 1 February 2017 the amendment introduces a new calculation system of registration fee. When calculating the fee, the vehicle’s age and engine power (in kW) are taken into the account.

Until 31 January 2017 the increased registration fee is paid for the vehicle´s first registration and based on the vehicle’s engine power, only.

Minimum registration fee amounts to EUR 33.00 EUR (concerns among other the electric motor vehicles and hybrid engine vehicles), maximum registration fee is EUR 3 900.00.

Effective from: 1 January 2017

The amendment introduces assessing of the tax without the tax audit, the so- called assessment order (in Slovak: vyrubovací rozkaz).

The assessment order can be issued if the taxpayer does not respond to a notice to correct the discrepancies in the tax return (which affects the amount of tax). Additional tax return cannot be filed once the assessment order is issued.

The assessment order is an enforcement title and the tax enforcement proceedings can be started on its basis.  

(Decision of the Supreme Court of the SR from 31.3.2016)

The petitioner, co-owner of family house (co-ownership interest of ½), demanded the dissolution of the co-ownership and ordering the house to his ownership. The petitioner intended to use the house for his under-aged son. The petitioner was indebted and intended to borrow money from his relatives.

The court decided against the petitioner and ordered the house to one of the defendants, a minor co-owner (co-ownership interest of ¼). This minor co-owner had his own funds to compensate the other co-owners. Moreover, they intended to provide better access road to other real estate.

According to the court, the co-owner who will use the estate directly shall be favored when ordering the real estate. This precedes even the use of real estate by another co-owner´s close person (in this case the petitioner´s son). At the same time, the court takes into account real capability of the co-owner to compensate the other co-owners.

Act no. 300/2016 Coll.
With effect from: 6 October 2016

This Act establishes a central register of accounts maintained by the banks and foreign banks which operate in the territory of the Czech Republic though their branches, and savings banks and co-operative banks for their clients.

The Czech National Bank shall have the role of the administrator of the register. The following entries should be recorded in the register: account number, date of its establishment, name of the bank, identification of the client, inception and termination of the authorization to dispose with the account and the date of cancellation of the account.

Only the prosecuting authorities, financial and customs authorities and the intelligence service have the right to access into the register (open the official wording).  

Act no. 321/2016 Coll.
With effect from: 1 December 2016

As of the day of effectivity of this Act the Financial Authority of the Czech Republic shall get the authorization of verification of the amount of assets of tax payers in connection with the tax return.

In case of suspicion that there is a difference between an increase of assets of the tax payer and his or her reported income higher than 5 million CZK, the Financial Authority is entitled to ask this tax payer to prove the source of such assets or to tax such assets, respectively.

The tax payer is obliged to establish the due sources of his or her assets as required in the formal notice sent by the Financial Authority, unless he or she proves that these incomes were made after the term for determination of tax had already passed. Such term is generally 3 years since expiration of the period for filing of the due tax return (open the official wording).

Act no. 257/2016 Coll.
With effect from: 1 December 2016

The new Act provides for a much more stricter rules for consumer loans providers. Newly it is necessary to be granted with an approval by the Czech National Bank (for existing providers there is a temporary period specified on 18 months since this Act becomes effective, however these providers have to file the application to the Czech National Bank until the end of February 2017) and have an equity of at least 20 million CZK.

The provider has newly an obligation to verify that the loan applicant will be able to pay the loan from his or her income duly. If the provider does not verify this condition duly and before the conclusion of the loan agreement, such agreement would be void.

The law further provides for a requirement of a written form of the loan agreement. The agreement has to meet a number of other requirements. These, among others, include specific information on type and conditions of the loan. In case of breach of these requirements, the agreement would not be void, however the interest rate would be changed automatically to the repo rate of the Czech National Bank.

The law further prohibits the possibility of incorporating of the arbitration clauses into the loan agreements. The Act’s provisions also apply to the microloans up to CZK 5 000.

The possibility to pay off the loan prematurely can be considered as an important change. The creditor has generally a right to claim the costs effectively made in connection with the premature pay off. However, the creditor does not have such right in certain cases specified by the Act (e.g. in case of housing loan if 25% of the loan should be paid off within 1 month before the day of anniversary of the conclusion of the loan agreement) (open the official wording).

The Bill on amendment to the Act no. 253/2008 Coll., on selected measures against legitimisation of proceeds of crime which we mentioned in the previous AK-PS Bulletin, has been approved. As the Act no. 368/2016 Coll. it has been declared in the Collection of Law with effect from 1 January 2017. This amendment provided, among other things, also for obligatory register of actual owners of legal persons and trusts.

(Decision of the Supreme Court from 14 July 2016, file no. 21 Cdo 3712/2015) 

In this case the lessee – running a coffee shop – was served by a termination notice from the lease of the respective premises. He vacated the premises and handed them over to another coffee shop operator. Subsequently, an employee of the former lessee of the premises demanded against the former coffee shop operator a declaration that his employment relationship still lasted. However, the former coffee shop operator referred him to the new lessee of the premises claiming that the rights and obligations of the employer were transferred to the new lessee.

The Supreme Court decides that even in this case the transfer of employees according to Sec. 338 of the Labor Code was realized. The former and the new lessee were not anyhow connected in this case (personally, nor in property), nor there were any other agreement concluded between them. Still, according to the Supreme Court, in this case the termination notice served to the lessee (the former employer) and the subsequent conclusion of the new lease agreement to the very same premises with the new lessee who continuous in the similar business activity, establish together a legal act by which the transfer of the employer’s operation (role) occurs.

(Decision of the Constitutional Court from 13 September 2016, file no. I. ÚS 190/15)

The claimant had a position of chairman of the board of directors as well as chief executive officer in a joint-stock company. He was then recalled from both of these positions and subsequently he was dismissed from his employment because of redundancy. The claimant then demanded a compensation of salary.

The courts of first and second instances initially did not uphold the objection of concurrence of duties and they granted the compensation to the claimant. The Supreme Court, however, revoked these decisions and decided that the employment contract had been concluded invalidly because of the concurrence of duties. The courts of first and second instances, to which the case was then returned, subsequently decided that the claimant had no right for the compensation of salary.

However, the decision of the Constitutional Court thus did not support the negative stance as to the concurrence of duties held by the lower courts. The Constitutional Court rules that the interpretation of the Labour Code does not prevent a company to subordinate its relationship with a member of its statutory board to the Labour Code.       

(Decision of the High Court from 28 June 2016, file no. 8 Cmo 202/2016 )

The association of unit owners (SVJ) established in 2002 applied for a change of registration in the public register (modification of the statues). However, the protocol from the assembly meeting was not written in a form of a notarial deed. The court maintaining the public register therefore rejected the application.

On a collective meeting of judges of the high courts, there has been reached a unified opinion. According to this opinion, the decision on change of the statutes of the association of unit owners should be made in a form of notarial deed only if these associations were established after 1 January 2014, not before.   

In case of lease of flats it is necessary to strictly distinguish between the advance payments for services provided together with the lease of flat and the completion statement of these services (in Czech: vyúčtování služeb) made as at the end of the respective accounting period.

According to the decision of the Constitutional Court file no. I.ÚS 2708/12 from 11 September 2012, the advance payments cannot be claimed if the completion statement of services was duly provided to the lessee. Once the completion statement is made the lessee´s obligation to pay the advance payments ceases to exist. According to the Constitutional Court, after duly provided completion statement the existence of unpaid advance payments can only be reflected in the form of appurtenances to such advance payments.

Further, the Supreme Court has recently (decision file no. 25 Cdo 1977/2015 from 23 March 2016) stressed the requirement to provide only full and duly prepared completion statements. Only correct and complete completion statement can cause the maturity of the service payments arrears. In case of incorrect completion statement, the lessee cannot be in delay with payment of arrears. It can only be charged with a delay fee from due advance payments.

Please note that if the maturity date of the arrears is not agreed, it shall be determined in accordance with Sec. 7(3) of the Act no. 67/2013 Coll. as 4 months as of the delivery of the completion statement of services to the lessee.

(Decision of the Supreme Court from 24 May 2016, file no. 32 Cdo 1186/2016 )

In this case the Supreme Court granted a contractual penalty to the plaintiff because of a breach of contract for work on side of the defendant.

The defendant (a contractor) undertook to provide work (internet pages) for the plaintiff (an ordering party) based on the contract for work. The defendant did not fulfil its obligation in time. As a consequence of this breach the plaintiff withdrew from the contract and claimed the contractual penalty before the court.

The main point of this dispute was the fact that the plaintiff claimed the contractual penalty nearly more than 4 years as of the breach of the contractual obligation by the defendant; however, the claim had not been statute-barred at the time of filing the action.

The Supreme Court did not accept the resolution of the appellate court according to which after such a long time the contractual penalty could not perform its legal function (sanction and security) and thus its acceptance would mean misuse of justice. On the contrary, in accordance with the previous courtsꞌ decisions, the Supreme Court ruled that in order to duly claim the contractual penalty it is not necessary to urge the debtor to pay it, nor it is necessary to prove that by breach of an agreement the plaintiff has sustained damage. The claim, however, has to be made within a statutory limitation period. 

(Decision of the Supreme Court from 22 February 2016, file no. 20 Cdo 218/2016)

The Supreme Court rejected an appeal by which the plaintiff (in Czech: dovolatel) sought to declare ineffectiveness of the delivery of a debt recovery petition which had been issued against him. The plaintiff argued that due to his employment abroad he had not been present for a long time at the address which he had previously specified as his address for delivering in the information system of population evidence.

According to the Supreme Court, such reason (as well as hospitalization) would be justifiable only if the person is not present at the address of its permanent residence. However, if the plaintiff specified his address for delivering, it is then not possible to object that he was not present at this address. If such address is changed in fact, it is up to this person to change the entry in the information system accordingly.

(Decision of the Supreme Court from 23 May 2012, file no. 29 Cdo 3399/2010)

Members of association of unit owners (in Czech: společenství vlastníků jednotek, SVJ) removed members of the governing body of SVJ (committee), who were members of SVJ as well, and also plaintiffs in this case. This happened at the assembly of association of unit owners, when some of the members were represented based on proxy. Present members also elected new members of the committee at the same time.

In reaction to the removal, the plaintiffs filed a lawsuit in order to make the assembly’s resolution invalid. They contested the way of convening the assembly as well as the course of the assembly. Act no. 72/1994 Coll., on residential unit ownership (effective until 31 December 2013) applied to the case.

The Supreme Court dealt with question whether a member of SVJ can be represented at the assembly by other person. According to its interpretation, the right to attend the assembly needs to be considered as a personal right, not as a legal act (e.g. exercise of voting right). Thus it is not possible to use general provisions of the Civil Code on representation. The right to be represented at the assembly has to be set in the articles of association of SVJ. The articles of association can also restrict this right (e.g. it is possible to be represented only by another member of SVJ). If this right is not set in the articles of association, it is not possible to grant a proxy to be represented at the assembly.

Amendment no. 254/2016 Coll.
With effect from: 1 November 2016

The amendment changes the real estate acquisition tax payer. Newly the tax payer will always be the acquirer of the real estate. This change will affect the acquisition of ownership right realized after 1 November 2016. The tax concerning acquisitions realized before 1 November 2016 will be still payed by the transferor (in principle). With regard to the change of the tax payer, the concept of guarantee will be removed. The tax rate will remain unaffected.

The amendment also modifies the conception of exemption from the obligation to pay the tax. The exemption will relate only to the first for payment acquisition of family house or residential unit in an apartment building, which are completed or being used. It does not apply to acquisition of incomplete buildings or units. The acquisition of the ownership right shall be carried out in 5 years after the completion of the house or unit or after the commencement of their use (depends on which day occurred earlier) (open the official wording).

Status of discussion: Senate

The bill transposes the Directive of the European Parliament and of the Council (EU) no. 2015/849 (so called AML directive). Within the scope of this implementation into Czech law, the bill suggests establishing of obligatory register of actual owners of legal persons and trusts.

For these purposes, a natural person, who has factual or legal possibility to exercise decisive influence (directly or indirectly), will be considered to be an actual owner. Particular rules for each type of legal person will be set. Regarding companies a person disposing of more than 25% of voting rights or of a share in the registered capital or receiving at least 25% of the companyꞌs profit will be considered to be its actual owner.

Actual owners shall be registered in current public registers, however the register of actual owners itself shall be non-public. Name, address, date of birth or national identification number (in Czech: rodné číslo), citizenship and information proving the position of actual owner will be registered.

This information shall be preserved for the whole period during which the particular person is in the position of actual owner and after that at least for 10 following years. The register is suggested to be introduced on 1 January 2018.

At the same time, an amendment to the AML directive is being prepared within the European Union. This amendment should make the AML directive more restrictive. According to the actual bill the aforesaid criterion of 25% should be lowered to 10%.

Guideline no. 2/2016

The Inspector General of the State Labour Inspection Office issued on 2 March 2016 a guideline which is intended primarily for labour inspectors, nevertheless in practice it might be used as a useful instrument also for employment agencies and employers / users.

According to the Guideline, the working conditions of an employee on secondment could not be worse than working condition of a comparable employee of a user in case that providing of such working conditions is specified by the labour laws and at the same time these are tax eligible costs in the sense of the Act on Income Taxes.

The Guideline, simultaneously, provides for an exemplary list of working and wages conditions whose providing is necessary to secure (e.g. shortening of working hours without reduction of wages). (open the official wording)

(Decision of the Supreme Court from 4 April 2016, file no. 23 Cdo 1749/2015)

The plaintiff as a contractor and the defendant as an ordering party concluded a contract on work where they, among other things, specified contractual penalty in case of non-compliance with the payment deadlines at the amount of 0,5 % from the invoiced amount per each day of the default. Indeed, the defendant was subsequently in default with the payments and thus the plaintiff claimed the contractual penalty.

As a consequence of the prolonged judicial dispute, the amount of contractual penalty subsequently exceeded the amount of principal of the receivable from the title of the contract on work (almost three times). Considering this, the appeal court concluded that while the contractual penalty itself is not disproportional, the plaintiff in this case exploits the provisions on the contractual penalty to the detriment of the defendant. Such action by the plaintiff is in conflict with a good commercial practice. Thus, the plaintiff´s claim should not be protected by laws.

According to the Supreme Court which overruled the previous court decisions, the contractual penalty could not be considered as disproportional only because of the duration of default by the defendant. Moreover, the contractual penalty has not only the security function but it is also used as a sanction. Claiming the contractual penalty whose amount has increased rapidly due to the debtor´s default, could not be considered as conflicting with the principle of good commercial practice.

(Decision of the Supreme Court from 24 March 2016, file no. 21 Cdo 2457/2015)

In this case the plaintiff was given a termination notice because of redundancy. She, however, did not agree with this termination notice. According to the plaintiff, there was no causal link between her redundancy and the change in organization which had been approved by her employer before. The respective decision of the employer did not specify the particular employee, it only mentioned the number of redundant employees and the name of the department which should be affected. The court of 1^st instance as well as the appeal court uphold the plaintiff´s claim and satisfied it.

According to the Supreme Court, however, the employer did not make a mistake as the decision on change in organization COULD possibly affect more employees as well. Specification of the particular employee made in consequence of such decision is then solely upon the employer. This redundant employee may be specified only in the termination notice itself according to the Supreme Court. The Court is then not authorized to consider such decision of the employer.

Amendment No. 183/2016 Coll.
With effect from: 1 December 2016

Under this amendment legal entities might be held liable for a much larger scope of criminal activities then they were in the past. As opposed to the current exhaustive list of crimes for which legal entity could be held liable, the new regulation provides for so-called negative list. All the crimes specified in the Special Section of the Criminal Code should be applicable also on legal entities provided that these crimes are not explicitly excluded as the crimes which cannot be committed by legal entity because of their very nature (e.g. manslaughter, participation in suicide, brawl etc.).

Thus, according to the new regulation, also a medical facility might be held liable for the crimes against life and health or a publishing house for the crime of defamation.

On the other side, the amendment extends the possibilities of exculpation (if the legal entity makes all the efforts which could be reasonably required in order to prevent its employees, managers or members of statutory bodies from committing the criminal offence).

Let us remind you that for the crimes committed by legal entities, legal entity could be sentenced, as regards the seriousness of the penalty, from publishing of the judgment up to liquidation of the legal entity. (open the official wording)   

With effect from: 1 December 2016

The most important intention behind the newly established electronic registration of sales (EET) is that there should be every single payment made in cash for the sale of goods or providing of services duly registered. Such registration shall be the basis of the communication between the traders and the Financial Administration of the Czech Republic. According to the Act there should be registered every payment which is not unique (i.e. in particular one-off or totally exceptional payment from the perspective of the respective income) and which is at the same time made in cash, via cheque, bill of exchange or another forms of transactions while these all constitute a business income of the income tax payer.

The mechanism of registration is to be introduced in a number of phases according to the respective business activity with start from 1 December 2016.

The final phase shall be introduced as of 1 June 2018 and since this date all the sales from all the business activities should be registered without any exception.

During payment for the goods or services at latest the traders shall have an obligation to send to the Financial Administration data related to the sale and issue the invoice for the consumer (invoice serial number, date and time of payment and the price are the examples of data which are to be registered). The data shall then be sent via internet.

The traders shall be entitled to use a one-off discount of up to CZK 5 000 for the expenditures related to the EET introduction. In case that the trader makes intentionally the registration of sales harder or even prevent it, the Act provides for the penalty of up to CZK 500 000 (open the official wording)

Amendment No. 163/2016 Coll.

With effect from: 1 July 2016

This amendment establishes criminality yet in the stage of preparation for the crime of curtailing a tax, fee or another mandatory payment (tax curtailment) (in Czech: krácení daně). It means that there does not have to be the crime of tax curtailment completed in order to commit the crime, it is sufficient that the perpetrator at least prepares for committing this crime.

The legislator tries to affect the practice of so-called carousel trade which is based on transactions made by purpose of avoiding the due VAT. For this kind of criminal activity a person can be sentenced for up to 10 years imprisonment. Another practical impact of the amendment should be enabling of prosecution of perpetrators while revealing an illegal facilities for production of particularly the tobacco products before they are further distributed.

The amendment should not interfere with the tax or legal counselling. Therefore the person who does not prevent someone other from committing this crime shall not be criminally responsible for this non-prevention alone. (open the official wording)

According to the Supreme Court, an employer cannot assign work to the employee if it aims to punish the employee for exercising the employee’s rights in court; such work assignment is considered as frivolous.

This applies also in cases when the work assignment is in accordance with the employment contract and legal regulation. In the mentioned dispute the employer (high school teacher) demanded declaration of invalidity of the dismissal from employment. The employer dismissed the employee because of unexcused absences on certain lessons.

However, these lessons were assigned to the employee even though he had no corresponding qualifications. In fact, the employee was assigned with these new lessons after he had already been successful in supporting his claim against the employer with the court by invalidating another dismissal.

The Supreme Court ruled that even though the teaching of “new” lessons (mechanical engineering, mechanical components and the like) might fall under the scope of work agreed in the employment contract (high school teacher), it is necessary to consider other circumstances. Such noticeable change of work assignment as in this case (from the original teaching of English language) requires a review in order to determine if the employer’s conduct in its entirety and logical consequence cannot be perceived as hidden punishing of the employee.

The Supreme Court concluded that assignment of work for which the employee has no corresponding qualification could represent such hidden punishing of the employee for exercising the employee’s rights against the employer in the past.

With effect from: 26 October 2015 In connection with the change of the Labour Code the Government has modified a point evaluation of pain and social impairment (in Czech: ztížení společenského uplatnění) caused by work injury or occupational disease.

Newly, one point corresponds to the amount of CZK 250 (in comparison with the former CZK 120). The order also increases the point evaluation itself of most of the injuries listed in the annex of the order. The number of points awarded can be further increased due to complications based on their seriousness (in case of the minor ones by 10% at maximum, the middle ones by 30% and the most serious ones by 50%) or necessity of a demanding treatment (up to 50% at maximum). The final amount of the point evaluation in particular case should be specified by the physician in the medical assessment.

The order also specifies the procedure of issuing of the medical assessment. Newly, there are uniform requirements of the medical assessments on evaluation of pain and social impairment. This aims to unify the structure of evaluation, enable its reviewability and make the medical assessment a reliable basis for determination of the amount of compensation and redress. The order further specifies in more detail what the pain and social impairment mean.

With effect from: 1 January 2016 In accordance with Sec. 2257 (2) of the Civil Code the tenant performs and pays only for ordinary maintenance and minor repairs related to the use of a flat.

This arrangement cannot be changed even by the agreement of the parties (Sec. 2235 (1) of the Civil Code). On 26 October 2015, the Government accepted the proposal of the order which substitutes the former and already cancelled Government Order no. 258/1995 Coll. which specified the terms “ordinary maintenance” and “minor repairs” related to the use of a flat until the effectiveness of the New Civil Code.

The main difference of the new legislation is the increase of the upper limit of an expense on one minor repair to CZK 1000 (from the former CZK 500) and the increase of the annual limit of the total sum of expenses on minor repairs to CZK 100 / m2 (from the former CZK 70 / m2) for a calendar year. The definition of minor repairs was modified, too. In particular, repairs connected to technologies (e.g. repairs of audio-visual devices used for opening of the entrance door to the building) were added to the list of minor repairs.

According to the new Government Order, the ordinary maintenance means “maintenance and cleaning of the flat including its furnishings and fixtures which is performed usually while using the flat” (under the order it means, in particular, wall painting, restoration of plastering, wallpapering and cleaning of floors including coverings, wall panelling and cleaning of the clogged water waste up to the vertical distribution system). The general definition of other terms is similar as in the cancelled Government Order no. 258/1995 Coll.