Several professional teams of the largest Czech and Slovak law firm HAVEL & PARTNERS headed by Václav Audes, the firm’s partner, provided comprehensive legal advice to Genesis Capital Growth on the acquisition of a 100 per cent stake in Home Care Promedica, a provider of home healthcare and social services in the Czech Republic.
Established in 2009, Home Care Promedica (HCP) is a provider of professional home healthcare, encompassing standard procedures as well as highly specialised medical interventions (such as parenteral nutrition and peritoneal dialysis) in the clients’ own social environment. HCP provides its services mainly in Prague and its vicinity via a dedicated team of nurses having many years of practice. HCP’s new owner, Genesis Capital Growth, is a development capital fund specialising in investments in fast-growing SMEs in the Czech Republic and Slovakia and neighbouring countries. The parties decided not to disclose the value of the transaction.
Besides Václav Audes, M&A advice on the acquisition of Home Care Promedica was provided by senior associate Veronika Filipová. The banking and financial aspects of the transaction were dealt with by the firm’s partner Filip Čabart together with senior associate Štepán Černý. The life sciences team working on the transaction was comprised of senior associate Lenka Teska Arnoštová and attorney-at-law Kateřina Slavíková. The application of the firm’s extensive know-how in M&A and health law ensured the smooth and efficient closing of the complex transaction.
HAVEL PARTNERS’ transaction team, which is the largest and most experienced in Central Europe with almost 80 lawyers, has been expanded by the inclusion of Róbert Petrán as senior associate. In the advisory group, thanks to which the firm has long been at the forefront in the number of completed transactions in the Czech, Slovak and Central European legal markets, Róbert will specialise primarily in acquisitions, group reorganizations and the arrangement of relations between partners and shareholders.
“Transaction advising has been our flagship since the establishment of our firm in 2001. Since then, we have been offering our clients services at the highest level thanks to the systematic development of professional know-how and a team of top lawyers. I am pleased that it will now be joined by Róbert Petrán, who gained almost ten years of experience in major law firms, including an international firm from the Big4 network,” comments Jaroslav Havel, the firm’s founder and managing partner.
Last year was very important for HAVEL & PARTNERS in terms of mergers and acquisitions. “We completed a record number of transactions, and in addition to our continued success in international rankings, we also became the best law firm in the M&A category in the prestigious Law Firm of the Year competition, both in the Czech Republic and Slovakia. I believe that we will build on these successes in the future,” Havel adds.
Róbert Petrán earned his master’s degree in law at the Faculty of Law of Comenius University in Bratislava and subsequently successfully passed the bar exam in Slovakia. Prior to joining HAVEL & PARTNERS, Róbert worked as a lawyer specialising in corporate law, mergers and acquisitions, real estate law, and contract law. He has advised several major national and foreign companies from various industries and been involved in a number of group reorganizations, mergers and demergers, including legal due diligence of companies, as well as the completion of transactions themselves, whether on the part of sellers or buyers.
Michal Smrček has expanded the insurance advisory group of the largest Czech-Slovak law firm HAVEL & PARTNERS in the position of counsel. In a team led by the firm’s partners Pavel Němeček and Jan Topinka, which provides legal advice to major Czech and multinational insurance companies and banks, Michal will provide comprehensive legal advice, including addressing complex damage claims, representing clients in court, as well as compliance and internal investigations.
Our team has extensive experience in providing legal services to clients in the field of insurance, whether insurance companies or insurance and reinsurance intermediaries, and we are one of the preferred legal counsels to, among others, the Czech Insurance Association and the Czech Insurers’ Bureau. Strengthening the insurance advisory group is part of our firm’s strategic development plan. Therefore, I am very pleased to welcome Michal Smrček, who has more than ten years of experience in this field, as part of our staff expansion,” comments Jaroslav Havel, the firm’s founder and managing partner.
Michal earned a Master’s degree in law from the Faculty of Law of the University of West Bohemia in Pilsen, and after graduating he gained experience as a lawyer in several major insurance companies, a pension company, and as an attorney-at-law. Michal also worked in the legislative section of the Czech Insurance Association and was, among other things, chairman of the Corporate Governance Commission and a member of several other commissions in insurance companies. Prior to joining HAVEL & PARTNERS, as a senior manager of the legal department, he advised companies’ boards of directors both on common issues and major international projects. Michal was responsible for implementing key legal changes into companies’ internal processes. Furthermore he acted as the main contact person with the Czech National Bank (CNB) and was responsible for the coordination and implementation of corrective measures within the CNB’s inspections. Michal Smrček and his team also achieved the highest protected value in the history of Allianz pojišťovna within the management of the Insurance Fraud Investigation and Prevention Department, and taking into account the market share, it was also the highest protected value in the entire insurance market.
HAVEL & PARTNERS, the largest and the most successful Czech and Slovak law firm, builds on its last year’s financial results when its turnover on net legal services saw a year-on-year increase of 11.5% in the first half of 2020. The high pace was achieved mainly by HAVEL & PARTNERS offices in Prague and Brno.
Last year, HAVEL & PARTNERS registered a year-on-year increase in its revenue by more than 11% and the sales generated by the entire group exceed one billion Czech crowns for the first time. In the first half of 2020, revenue for net legal services reached CZK 388 million, with the group’s total sales amounting to approx. CZK 500 million. “The firm’s financial results, with a growth of more than 11% again, suggest that so far we have managed to maintain the positive trend of double-figure growth achieved last year. Nevertheless, we expect some slowdown in connection with the impacts of the coronavirus pandemic and related measures in the next months; however, even our pessimistic scenario assumes a slight growth in turnover and profits for the whole of 2020,” says Jaroslav Havel, the firm’s managing partner.
HAVEL & PARTNERS’ revenues have grown continuously since the firm’s establishment in 2001. This is mainly due to the provision of legal services to leading Czech, Slovak as well as international companies and Czech and Slovak entrepreneurs, including approx. one third of the richest Czechs and Slovaks. The key areas of advice are still mergers and acquisitions, legal and tax structuring of personal property and real estate projects. Also, the practice groups advising on restructuring and insolvency, and arbitration and litigation have recorded growth.
“With our many years of experience and with the knowledge of macroeconomic data, we have expected the income of a crisis, having a major impact on the economy, for a long time, and made intense preparations for it for more than 18 months, in terms of the scope of our services, consistent financial management and digitisation. Although we were affected by the crisis in a form different from what we expected, we were able to respond immediately. Since day one, we have provided intense advice to top managers, business owners and investors, banks, and insurance companies. We support our clients’ in-house lawyers in assessing emergency situations and measures in all business sectors and branches of law and taxes, including state aid. I believe that our commitment and the high level of experience of all our teams, in combination with an individual client approach and the development of strategic partnership with clients, is our main competitive advantage both in these trying times and for the next period,” adds Jaroslav Havel.
The excellent financial results have also been enabled by the international renown of HAVEL & PARTNERS and related collaboration with international law firms that engage HAVEL & PARTNERS in major comprehensive international projects and cross-border transactions more and more often.
Dear Clients and Business Friends,
In our continuous efforts to enhance the communication and mutual connection between you and our law firm, we continue to adopt new communication tools, modern formats and the digital environment. We also replaced the Legal News, our traditional newsletter, with the H&P Magazine.
The H&P Magazine, issued biannually, covers current topics that are both relevant to the entire society and related to our legal and tax services. Each issue includes various topic-specific articles, interviews and analyses, presentation of our key services, an overview of the most significant transactions we’ve been involved in, current awards and our law firm’s other activities, such as a summary of our pro bono activities and courses offered by our ACADEMY.
Most of the topics of the first issue are affected by the repercussions of the coronavirus pandemic and trends triggered by this uneasy period of time. For instance, our technology and IT experts will navigate you through the exceptionally relevant and discussed topic of digitalization. Our Slovak colleagues’ article looks at the same topic in relation to a spike in e-shops and e-commerce. In interviews with our partners specialising in real estate as well as insolvency and restructuring experts, we analyse the impacts of the crisis on these areas, which will, in our view, become ever more important. In this respect, we are at our clients’ full disposal to respond to their new needs. Since the Magazine also features some timeless topics, you will learn, for instance, about why Czech and Slovak entrepreneurs should get inspired – as far as the administration of their property is concerned – by the Porsche or Tomáš Baťa families.
Since March, we have seen an unprecedented level of solidarity, strengthening our cooperation still further and working exceptionally hard to provide maximum support to our clients in these difficult times. I am very glad that all our colleagues have stayed both healthy and committed to further work. I believe the numerous awards that we received for our work over the past few weeks have played a role, most of them relying on our clients’ testimonials and the independent evaluation of acknowledged experts. To name a few, we received the most prestigious global Chambers Europe Awards for being the best law firm in the Czech Republic, excellent ratings and many awards in the Law Firm of the Year competition in Slovakia and previously also in the Czech Republic, winning, among other things, the title of the most popular law firm among clients in both countries, the prestigious Czech Business Superbrands award, which is granted to the best brands on the market, for the fifth time, and we won the title of the most sought-after employer in the Czech Republic in our field of business for the sixth time.
We would not have achieved these outstanding results without your trust. I strongly believe that our cooperation will continue in the future and that we all will come out of this difficult time even stronger.
I also believe that you will find much practical information, interesting insight and inspiration in our new H&P Magazine.
On behalf of all my colleagues, let me wish you nice summer days. I look forward to our further cooperation!
Jaroslav Havel
Managing Partner
A team of HAVEL PARTNERS’ professionals lead by firm partner Ondřej Florián has advised the unique global project Plant-for-the-Planet on the establishment of its presence in the Czech Republic as part of the firm’s pro bono programme. The Plant-for-the-Planet organisation has already planted 13 billion trees worldwide and is now introducing in the Czech Republic its global target of planting 1 trillion trees.
This remarkable initiative started with a modest school presentation by nine-year-old Felix Finkbeiner from Munich, Germany. He came up with an idea that children in every country in the world could plant one million trees, which would constitute a really significant decrease in CO2 emissions on the entire planet. The movement currently has nearly 90,000 child ambassadors and has gained support across all age groups and social strata. Its objective is to initiate the planting of one trillion trees. This number could offset up to two thirds of all existing CO2 emissions and hence delay the predicted rise in temperature on our planet by up to 15 years. The organisation is planning to achieve this objective by educating youth, working closely with firms across all sectors and crowdfunding reforestation in developing countries via the Plant-for-the-Planet mobile application. The project can also currently be supported on the non-profit platform DARUJME.cz.
“We are really proud that we could take part in this interesting project by providing free legal advice. I wish to thank all my colleagues who have participated in the project, not only in connection with providing legal advice. A number of them have joined to plant trees throughout the Czech Republic”, says Ondřej Florián, a partner of HAVEL & PARTNERS who has assumed patronage over the project.
Several professional teams at HAVEL & PARTNERS have been providing comprehensive legal advice to the E.ON group on the sale of innogy Česká republika a.s., the Czech Republic’s largest distributor of natural gas with 1.2 million customers, and a fast-growing distributor of electricity. The company will be acquired by Hungary’s MVM Group. The closing of the transaction is subject to clearance by the European Commission. The Commission made the divestiture of innogy’s assets in the Czech Republic one of the conditions for last year’s pan-European transaction between the RWE and E.ON energy groups.
The innogy group company, innogy Česká republika a.s., engages in the sale of electricity and gas, generation and distribution of heat, CNG sales, and electronic communications in the Czech Republic. At the end of 2019, the company had approximately 1,800 employees. The parties have decided not to disclose the value of the transaction.
The HAVEL & PARTNERS team, led by Jan Frey (Partner), is comprised of Ivo Skolil (Associate, M&A/Energy), Josef Žaloudek (Counsel) and his team (Tax), David Šmída (Senior Associate, Corporate), Albert Tatra (Managing Associate, Real Estate), Dalibor Kovář (Managing Associate, IP/IT), Lukáš Jakoubek (Associate, IP/IT), Štěpán Černý (Senior Associate, Banking & Finance), Petra Sochorová (Counsel, Employment), Vojtěch Katzer (Senior Associate, Employment), Pavla Kaufmannová (Associate, Employment & Compliance), and Richard Otevřel (Counsel, Data Protection).
Authors: David Neveselý, Ondřej Florián, Alexandra Parnaiová
In 2017, an amendment to the Act on Public Registers [1] came into effect, transposing Directive [3] AML IV [2], which laid down the duty of every person registered in a public register pursuant to the Act to enter its beneficial owner (which, simply put, is the individual that has the real or legal possibility to exert influence over the legal entity) into the newly established register of beneficial owners of legal entities (the “BOR”).
Legal entities were obliged to register their beneficial owners by the end of 2017. Those who have not, have been acting in conflict with the law since 1 January 2018.
The Act on Public Registers, the Anti-Money Laundering Act [4], the Act on Business Corporations [5] or any other acts do not stipulate any direct sanctions for the breach of this duty. Hence, no fine or other sanction may be imposed upon a company. An indirect sanction can be seen in a more demanding (in administrative terms) procedure of an inspection of the client [6] – there the company must identify its beneficial owner ad hoc, which is certainly more complicated than a simple reference to an already completed registration in the BOR.
In 2018, shortly after the AMLD IV was transposed into the Czech system of laws, the European Parliament adopted AMLD V [7]. The new directive introduced several changes, namely regarding the national registers / lists / records of beneficial owners.
The most crucial changes that the directive has introduced are
EU Member States were obliged to transpose the AMLD V into their national systems of laws by 10 January 2020.
Since the beneficial owner records are not public registers and will not be, even after the transposition of the AMLD V, the lawmakers are quite logically transferring the relevant provisions from the Act on Public Registers to the Bill on the Registration of Beneficial Owners. The definition of the beneficial owner should also be transferred to the provisions under the latter act [8].
On 1 June 2020, the new Bill on the Registration of Beneficial Owners was approved by the government and passed on to the Chamber of Deputies. Below, please find an overview of the key changes brought about by the bill; its individual points may still be subject to alterations during the law-making process.
The bill introduces a slightly altered definition of the beneficial owner – a beneficial owner is each individual who is the ultimate beneficiary or a person with ultimate influence (at the same time, the limit of 25% share in the distributed benefit and 25% share in voting rights is preserved – both direct or indirect share). Apart from that, the government proposal lays down that if a share of a corporation is administered in a legal arrangement [9], the beneficial owner of such business corporation will be determined pursuant to the rules for determining the beneficial owner of the corporation, not pursuant to the legal arrangement (in other words: if a share in a business corporation is placed into a trust, the beneficial owner of such corporation will not be every individual who is the beneficial owner of such trust but instead the person who is the ultimate beneficiary of the corporation or the person with ultimate influence).
Moreover, the act exhaustively lists legal entities that do not have a beneficial owner.
Certain data entered in the register of beneficial owners will be available to the public (name, surname, country of residence, year and month of birth, citizenship, information on the grounds behind the position of the beneficial owner).
In some cases, minors can be designated as beneficial owners, therefore the act allows for not disclosing data on the beneficial owner regarding certain persons. It is necessary to apply for non-disclosure, as it does not occur automatically upon the registration of a minor beneficial owner.
What is new is the proceedings on the registration of beneficial owners to the register; business corporations and legal arrangements must file the application for registration electronically. In certain cases (e.g. limited liability companies where members-individuals have greater than a 25% share, or a one-member joint-stock company with the sole shareholder entered in the Commercial Register), the court will automatically copy the data to the BOR.
Where a public authority or an obligated party pursuant to the Anti-Money Laundering Act become convinced that the entry in the BOR does not reflect reality, they will notify the competent register court. The register court will then make an inconsistency note in the BOR and call upon the registered person to remove the inconsistency within a reasonable timeframe. If the inconsistency is not removed by the set deadline, the register court will open inconsistency proceedings. There the inconsistency may be either confirmed, in which case this fact is entered in the BOR and the court will consequently correct the incorrect data, or – if the court concludes that the beneficial owner has been recorded correctly – the court will delete the inconsistency note.
Since pursuant to the AMLD V, the penalties for the failure to make an entry to the BOR or for an incorrect entry should be serious, lawmakers have also imposed private law penalties apart from the public law penalties (for the failure to make an entry or for not filling in correct data after the deletion of the incorrect data upon the proceedings on inconsistency – a fine of up to CZK 500,000 for the registering person and up to CZK 500,000 for the beneficial owner, the ultimate beneficiary and the persons with ultimate influence for the failure to render assistance during the registration into the BOR). The private law penalties include the invalidation of voting rights and the entitlement to the payment for the beneficial owner not registered in the BOR or for the partners – legal entities whose beneficial owners have not been registered.
As has been mentioned above, the bill is currently heading to the Chamber of Deputies where the individual provisions may undergo significant changes. We will keep monitoring the law-making process and will keep you updated on its further developments.
The Act on the Registration of Beneficial Owners is expected to come into effect on the first day of the fourth calendar month after its promulgation; in the event of a smooth law-making process, the act could become effective in early spring next year.
[1] Act No. 304/2013 Sb., on Public Registers of Legal Entities and Individuals and on Registers of Trusts, as amended
[2] AML is an abbreviation for anti-money laundering used world-wide
[3] Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the Prevention of the Use of the Financial System for the Purposes of Money Laundering or Terrorist Financing, amending Regulation (EU) No. 648/2012 of the European Parliament and of the Council, and repealing Directive 2005/60/EC of the European Parliament and of the Council and Commission Directive 2006/70/EC
[4] Act No. 253/2008 Sb., on Certain Measures against Money Laundering and Financing of Terrorism, as amended
[5] Act No. 90/2012 Sb., on Business Corporations and Cooperatives (the Business Corporations Act), as amended
[6] Pursuant to Section 9 of the Anti-Money Laundering Act
[7] Directive (EU) 2018/843 of the European Parliament and the of the Council of 30 May 2018 amending Directive (EU) 2015/849 on the Prevention of the Use of the Financial System for the Purposes of Money Laundering or Terrorist Financing, and amending Directives 2009/138/EC and 2013/36/EU,
[8] Currently laid down in Section 4(4) of the Anti-Money Laundering Act
[9] Trusts and foreign trusts pursuant to Section 2(b) of the bill on the registration of beneficial owners
HAVEL & PARTNERS, the most successful law firm offering the most comprehensive services on the Czech-Slovak market, has promoted 10 of its lawyers to three professional levels – partner, managing associate and senior associate, respectively. In the long term, the law firm is based on the exceptional stability of the team of its senior lawyers, who enjoy unique opportunities for rapid career growth. The vast majority of the law firm’s 28 partners and 14 counsels were promoted in-house to these top-level positions.
Effective from 1 July 2020, Vladek Krámek was promoted to the position of partner. He specializes in advising private clients, structuring the protection of private property, corporate law as well as finance and capital markets law, including the regulation of financial products. Before he joined the law firm in 2019, Vladek worked as the main lawyer at Fincentrum a.s. for the Czech and Slovak Republics for around 10 years, and was also a member of its board of directors for several years. Before that, he had worked at two leading law firms.
Specialising particularly in competition law, state aid and public contracts, Romana Derková becomes managing associate. Other lawyers who have been promoted to the position of managing associate include Juraj Dubovský, who specialises in representing clients in comprehensive disputes, litigation and arbitration proceedings, and Robert Porubský, who focuses, among other things, on energy law and corporate law, including international and domestic acquisitions and asset deals.
Last but not least, Vladimír Ivanov, Jiří Kunášek, Martin Šlampa, Petr Vohnický, Vojtěch Katzer and Roman Světnický are the new six senior associates, constituting the most numerous group of lawyers who have seen their careers advance.
“The first half of 2020 is over. A significant part of this period was affected by the impacts of the coronavirus pandemic, which only confirmed in us our belief that employees are the most valuable asset in every successful company. This is particularly true in the field of advocacy; it is only a strong and stable team of top-level fellow lawyers that builds, in the long run, the brand, credibility and exceptional quality which our clients expect of our services. I very much appreciate that all of the newly promoted lawyers are long-term support for individual legal teams and that we successfully continue to implement our strategy of raising the next generation of top-level senior colleagues in our law firm,” says Jaroslav Havel, co-founder and managing partner of the law firm, on the internal advancements.
According to the TOP Employers survey, HAVEL & PARTNERS has been the most sought-after employer among law firms in the Czech Republic for the sixth straight year.
Source: BUILDING WORLD magazine (June 2020)
Authors: Lukáš Syrový, Josef Adam
The first cases of COVID-19 infection were confirmed in the Czech Republic on 1 March 2020. This fact started a series of restrictive measures the impact of which has manifested itself in virtually every sphere of society, including the real estate market. How can the situation associated with the SARS-CoV-2 coronavirus pandemic be reflected in obligation relations having a real estate element?
The Civil Code, effective since 2014, regulates the so-called “hardship”, i.e. a change of circumstances justifying a fair amendment to an existing contract. If each contract is generally characterized by its binding nature and impossibility to amend it without the consent of the other party, then the change of circumstances may constitute an exception to this rule. A change of circumstances may result in an excusable delay, an amendment to the content of the contract and, in some cases, its termination.
The literature also classifies epidemics and quarantines as significant changes of circumstances. We therefore believe that the current situation in connection with coronavirus can also be considered a significant change of circumstances, on which the parties relied before concluding the individual contracts. However, it will always depend on the specific circumstances, the definition of the purpose of the contract, and other provisions in the contract in question.
By law, a change of circumstances must be substantial enough to create a particularly gross disproportion in the rights and obligations of the parties. On the contrary, the mere fact that performance under the contract has become more difficult does not relieve the party of the obligation to pay the debt. At the same time, a reservation of this type does not cover such a change in conditions which was caused by the simple development in the economy and the market, or which conceptually falls within the scope of so-called ‘ordinary business risk’. In specific cases, the question will therefore be whether the impact on the contractual relationship is caused directly by measures against coronavirus or only by a general decline in economic activity, where the application of provisions concerning a substantial change of circumstances may be questionable. In this regard, it is also important to point out the difficulty of proving the specific cause of the imbalance that has occurred between the parties.
The trend in recent years has been the general exclusion of provisions relating to a change of circumstances. The limits of such contractual provisions can be seen in the provisions that are to the detriment of the weaker party (especially the consumer), which can be considered null and void. There are also views that question whether the general exclusion of the change of circumstances clause can be considered a proper assumption of the risk of a change of circumstances and thus produce the desired effects – i.e. the inability of the party(ies) to demand an amendment to contractual provisions for a substantial change of circumstances.
The lease market, especially in the area of commercial retail space, was hit hard right at the beginning of the pandemic. It is therefore not surprising that in lease relations (especially in relation to the amount of rent) a substantial change of circumstances clause has become a frequently mentioned phrase.
With reference to the principle of clausula rebus sic stantibus (things standing thus), it can be concluded that a change of circumstances is implicitly agreed in each contract – the provisions of the current Civil Code concerning a substantial change of circumstances can also be applied to lease agreements concluded before its effective date.
The impact of the coronavirus pandemic on lease relations was clear, especially in light of government measures banning retail sale and sale of services in establishments. However, the government measures have also affected those tenants whose establishments were not closed by law, but nevertheless experienced a significant economic decline with regard to restrictions on the free movement of persons.
The situation raises questions as to who ultimately bears the risk of loss of income resulting from this extraordinary event. Not every lease contract constitutes an entire agreement of the parties, which excludes the application of the general regulation contained in the Civil Code. The content of the contract can thus be modified under the regulation that allows the renegotiation of the content of the contract due to a substantial change of circumstances, demanding a discount on rent, or even terminating the lease agreement.
The extraordinary period has also brought about a fundamentally different view of the interpretation of the law. In the area of rent, discussions have taken place, among other things, on whether the impossibility of properly using the subject matter of lease due to a crisis measure of the government can be considered as a disturbance in the use of the thing by a third party. The consequence of such a consideration would be the tenant’s entitlement to a reasonable discount on rent. Although the provision in question is inspired by the General Civil Code (ABGB), under which the discount or forgiveness of rent was expressly enshrined for the impossibility of use due to infection, it is difficult to predict how such an interpretation of the law would be assessed by a court in the case of a civil dispute.
In order to protect tenants, as the weaker parties to lease relations, the Act on Certain Measures to Mitigate the Effects of the SARS CoV-2 Coronavirus Epidemic on Tenants of Business Premises has been passed. Although various forms of this Act were originally discussed (including deferral of rent payments), in the end the only manifestation of this Act is the fact that the landlord is not entitled to serve a termination notice on the tenant for non-payment of rent which was delayed in the period between 12 March 2020 and 30 June 2020. However, this can certainly not be considered a deferral, when the landlord’s other rights arising out of the tenant’s delay remain unchanged, including the right to terminate the lease agreement for other reasons, the right to draw funds from security / bank guarantee, and the landlord’s right to claim a contractual penalty or default interest.
Further financial assistance to entrepreneurs is to be provided by the State subsidy program “COVID – Rent”, representing the participation of the State and of landlords in the loss of tenants affected by the forced closure of establishments.
Today, the question of whether or not the existing coronavirus pandemic emergency can be considered as force majeure also requires special attention. Under Czech law, the purpose of the institute of force majeure is to protect the obliged party from the obligation to compensate the other party for damage in situations where it cannot fulfil its contractual obligation due to an unforeseeable and insurmountable obstacle that has occurred beyond its will and control. Although the contract may contain a broader definition of force majeure, the fulfilment of its conditions does not have to affect the obligation to pay contractual penalties or the possible right of the other party to terminate the contract by notice or withdrawal.
The institutes of force majeure and of a change of circumstances affect many obligation relations. Their aspect can be reflected in contracts for work, future purchase and lease agreements, as well as agreements on a joint purpose.
The coronavirus pandemic has had a significant immediate negative impact on the stability of lease relations. In the long run, its impact can also be expected on other obligation relations and areas of the real estate market. Only time will tell how and whether the real estate market will return to “pre-pandemic” ways.
Authors: Lukáš Syrový, Štěpán Štarha, Veronika Ždánská
On 19 June 2020, the Czech Ministry of Industry and Trade (MIT) published an invitation to apply for the ‘COVID – Rent’ Programme. The objective of the programme is to provide support in the form of the payment of part of the rent to those entrepreneurs who have been restricted in their activity by the emergency measures imposed by the government and have used their business premises under lease, sublease or usufructuary lease agreements. Applications for the support may be filed electronically via the MIT’s information system starting from 9:00 am on Friday 26 June 2020.
The objective of the programme is to distribute transparently and efficiently to entrepreneurs support worth CZK 5 billion that will be increased as necessary to cover applications filed by all entitled applicants.
The support is provided as a subsidy on rent relating to the applicant’s establishment for the period from 1 April 2020 to 30 June 2020 and amounts to 50% of the rent but no more than CZK 10 million per recipient (i.e. cumulatively for all establishments of one applicant). The subsidy is not granted on utility charges or VAT on rent.
An applicant entitled to receive the support is a legal entity or an individual that cumulatively fulfils all of the requirements listed below:
The following conditions must be fulfilled before the application for support is filed:
If the establishment is located in a state facility, the applicant is subject to the requirement that at least 80% of the rent was paid for the period from 1 April 2020 to 30 June 2020, providing that the support is provided in the same amount.
The support will be provided from the announcement of the invitation until 31 December 2020.
The application must comply with all formal elements, i.e. contain the applicant’s identification, a description of the purpose of the subsidy, the required amount of the subsidy and other information that will be entered by the applicant directly in the system in the online application.
The application must then be accompanied by the following mandatory enclosures:
An important part of the tenant’s affidavit is a waiver of any other compensation from the state in connection with rent for the March to June 2020 period. The support may not be applied for without the waiver.
Only one application for support may be filed with the MIT in respect of one establishment. The only exception is a situation where the same establishment is used by several tenants.
The applications may be filed electronically by means of the MIT’s information system from 26 June 2020 to 30 September 2020. Login is only possible using eidentita.cz. The application system will enable representation by an agent.
A successful applicant – the recipient of the support – is required to keep the documentation relating to the support received for a minimum period of 10 years and to enable supervisory authorities to carry out an audit of the documentation for this period. In addition, competent public administration bodies may also undertake audits to review the financial management of the subsidy.
The MIT’s invitation contains more details about the programme. The information presented above summaries the most important parameters of the programme.
We are ready to assist you in filing the application. If interested, please do not hesitate to contact us. We will send you documents regarding further steps immediately.
Of course, we process the applications in all of our five offices throughout the Czech Republic. If you have any specific questions, you can contact the following key contact persons:
Authors: Adéla Havlová, Csaba Csorba, Tomáš Halfar
Dear Clients and Business Friends,
We would like to use this opportunity to inform you about a partial, albeit significant, section of the forthcoming amendment to Act No. 134/2016 Sb., the Public Procurement Act (the “PPA”). The bill aims to clarify ambiguous interpretations of the commencement of the blocking period when raising objections to the procurement terms and to steps taken by the contracting authority when awarding sector-specific below-the-threshold public contracts and minor contracts outside the PPA regime.
Currently, the comment procedure (for up-to-date status, click here) that is part of the bill-drafting process has just been terminated – the amendment to the PPA can now be passed on to the government’s Legislative Council for comments and to the government for approval before it can be passed on to the Chamber of Deputies.
One of the major achievements during the comment procedure contributing to the clarification of the law interpretation practice is that the current wording of the bill that is about to be published on the above mentioned website lays down in Section 241(1) PPA that “Objections may be raised by the supplier who has suffered damage or is facing impending damage (the “complainant”) as a result of the contracting authority’s actions when awarding a public contract or as a result of special procedures pursuant to Part Six. Objections may be raised against steps taken by the contracting authority when awarding minor contracts, small-scale concessions pursuant to Section 178 or sector-specific public contracts pursuant to Section 158(1); this does not apply when the contracting authority or another person initiate procurement procedure pursuant to Section 4(4) or (5).”
This confirms the opinion that when legitimately proceeding outside the PPA regime, e.g. when awarding contracts below set financial limits, the contracting authority is not bound by mandatory provisions, e.g. by the consequences of raising objections, among other things.
The amendment makes the rule more specific by inferring from case law, specifically from the decision of the Regional Court in Brno of 11 April 2019, case no. 62 Af 69/2017-193, in which the court ruled that “objections may be raised only against acts or omission of the contracting authority during the procurement procedure, the selection of the type of the procurement procedure, or steps taken by the contracting authority with the intention of awarding a public contract outside the procurement procedure […] The rule pursuant to Section 241(1) PPA, however, does not imply a comprehensive category of cases allowing objections (this is not a general clause governing the rules provided in Section 241(2) PPA) as the exhaustive list of cases allowing objections is implied from the same Section 241(2) PPA. Where the commencement of the blocking period pursuant to Section 246(1)(b) of the PPA is conditional upon the raising of objections, the objections raised must be justified, not excluded pursuant to Section 241 PPA.”
Furthermore, the bill appropriately reacts to concerns arising from a potential interpretation of conclusions drawn in the judgement of the Regional Court in Brno dated 7 August 2019, case no. 62 Af 90/2017-54, namely that any complaint filed to the contracting authority proceeding outside the PPA regime although the complainant was not challenging the legitimacy of such procedure but merely, for example, the set terms governing the selection of a supplier, should be considered an objection within the meaning of Section 241(1) PPA, thus commencing the blocking period pursuant to Section 246(1)(c) PPA.
In our opinion, however, such interpretation does not necessarily follow from the current PPA wording because if the contracting authority is legitimately proceeding outside the PPA regime, the contracting authority should not be required by law to handle any complaint by a supplier as an objection, i.e. be obliged to reject it in line with all the formal requirements under Section 245(3) PPA.
It should be noted that this does not leave suppliers defenceless vis-à-vis possible mistakes made by the contracting authorities; if there are any doubts about whether the contracting authority has correctly decided to proceed outside the PPA regime, suppliers always have the right to raise objections pursuant to Section 241(2)(c) PPA and, subsequently file a petition pursuant to Section 250(1)(f) PPA, on the basis of which the Office may prohibit the contracting authority from continuing to proceed with the challenged actions, or a petition to impose a ban on the performance of a contract that has already been executed outside the PPA regime.
The bill in no way makes a possible defence against an unlawful procedure by the contracting authority toothless. At the same time, it makes it more difficult to raise bullying objections as it removes ambiguities regarding the meaning of the term “objections”, thus confirming our interpretation.
This is another clause in the amendment to the PPA following up on case law (just like in the event of the judgement upholding the exclusion of a purchase of shares, interests and businesses from the applicability of the PPA, which we covered earlier, see here) which makes the existing wording of the act more clear and lucid. We sum up the key points of the amendment in our article in Veřejné zakázky, the public procurement magazine (No. 2/2020, pp. 50–51).
