Author: Michal Kandráč, Matyáš Tauber
Take-Two Interactive’s Rockstar Games studio had to deal with a major cyberattack in September, which resulted in the disclosure of a large amount of information about the development of GTA VI. As similar cybernetic attacks on the world’s top video game companies are on the rise, we have decided to summarise the situation in the post below.
Virtually everyone who has ever owned a PC or console has come across the “Grand Theft Auto”, or “GTA”, video game franchise. Rockstar Games releases new games in the franchise at intervals of about three to five years (the latest GTA V was even released in 2013), and they usually keep all information about the development strictly protected until the first trailers are released. This is one of the reasons why a new GTA is always one of the hottest topics in the gaming world. Unfortunately, cyberattacks are becoming more and more effective, as the September leak regarding GTA VI illustrates.
What happened?
A hacker going by the nickname “teapotuberhacker” hacked Rockstar Games servers and posted approximately 3 GB of GTA VI development data on the internet. The data included mainly information regarding the main protagonists, and also screenshots and gameplays from the then-current state of the game.
Initially, the whole situation seemed like one of the many fake “leaks” that had been countless in the past (such as reports of a complete remake of GTA: The Trilogy). Unfortunately, once the leak of the data was officially confirmed by Rockstar Games, things took a completely different turn and Take-Two Interactive’s stock value dropped by 3 %.
How did it end?
Rockstar Games faced the situation head on and took basically all the steps possible – communicating well with the public, reporting GTA VI-related content published on all servers (Reddit, YouTube, etc.) as illegal, etc. In general, Rockstar Games created a narrative that inspired sympathy rather than ridicule (although there were a few individuals who pointlessly criticised the state of GTA VI). In the meantime, the police in the United Kingdom have detained a 17-year-old youth whom they suspect of the attack.
It was precisely this transparency on Rockstar Games’ part that strongly resonated within the global gaming community, and other game studios, in solidarity, began sharing unreleased footage from the development of successful titles such as The Last of Us, Uncharted, and Horizon Zero Dawn.
What does that imply?
Game developers should not underestimate the possibility of a cyberattack, as its potential consequences may have a critical impact on the future of the game as a whole and, by extension, the company itself. The hacker group Lapsus$, which has already launched attacks on gaming giants such as Microsoft, Samsung and Nvidia, can serve as a notorious example.
In practice, effective prevention of and response to cyberattacks entails a combination of multiple factors, which we summarise in our practical recommendation. If you encounter the above problems in your business, do not hesitate to contact us – we will be happy to discuss your questions with you at any time and help you find an effective solution.
Autor: Michal Kandráč; Pavel Amler
Published: 22. 2. 2021
The media has recently reported about a ransomware attack on the Polish developer CD PROJEKT, the company behind the successful game series The Witcher or the brand-new Cyberpunk 2077. After the difficulties associated with the release of Cyberpunk 2077, this is another major controversy in the gaming world relating to CD PROJEKT.
The main points of the case are summarised below, including our practical recommendations regarding cyberattacks.
In recent months, CD PROJEKT has been undergoing every developer’s nightmare. December’s release of the most anticipated game of 2020 – Cyberpunk 2077 – did not go as the developers planned. Despite record sales, the game contained a large number of bugs and was virtually unplayable on the ‘old’ console generation (PS4 and XboxOne) due to poor optimisation. The initial enthusiasm among gamers was replaced by disappointment, with customers demanding refunds and some online stores even pulling CyberPunk 2077 from sale altogether (such as PlayStation Store).[1] For an ‘AAA’ title, this was an unprecedented controversy.
To make matters worse, CD PROJEKT announced in early February that its servers had been attacked by hackers.[2] Along with this announcement, CD PROJEKT published a message from the hackers, in which the attackers claimed that they (i) had obtained copies of the source code of the games (including Cyberpunk 2077 or The Witcher 3 and CD PROJEKT’s business documents, (ii) had removed the information from the company’s servers before encrypting them, and (ii) demanded a ransom from CD PROJEKT to be paid within 48 hours or else they would sell or provide the information to gaming journalists.
Given that CD PROJEKT refused to negotiate with the hackers, the stolen source code was (allegedly) sold on the dark web for several million US dollars to an anonymous buyer after the expiry of the deadline. The amount was reportedly so high that the hackers agreed not to disclose the information in question.[3] This conclusion, of course, fuels various speculations as to the failure/success of the auction as well as the fact that the anonymous buyer could have been CD PROJEKT itself. However, this is something we will probably never know (unless someone publishes the data concerned).
What does the above imply then? First and foremost, this is another blow to CD PROJEKT’s reputation, which, combined with the failed release of Cyberpunk 2077 and related investor lawsuits, will likely result in another impairment of the company’s value. Among other things, it also turns out that if a ransomware attack is carried out by professionals, the stolen data and hence the valuable intellectual property or trade secrets/know-how, can very quickly end up in the hands of third parties.
The above only underscores the fact that cybersecurity compliance is becoming increasingly important in the context of today’s digital age. In practice, however, effective prevention and response to cyberattacks is a combination of many factors. We can only hope that CD PROJEKT will manage to handle all the unfortunate setbacks and we will be able to enjoy the games themselves rather than the scandals in the future. Losing the studio that allowed us to play as Geralt of Rivia to a ransomware attack would be a shame.
In conclusion and for completeness, we summarise the ten commandments of cybersecurity that everyone should keep in mind in connection with cyberattacks:
[1] See for example https://www.playstation.com/en-us/cyberpunk-2077-refunds/
[2] https://twitter.com/CDPROJEKTRED/status/1359048125403590660.
[3] The price for the stolen data started at USD 1 million, the price for immediate purchase was set at USD 7 million. https://www.theverge.com/2021/2/10/22276664/cyberpunk-witcher-hackers-auction-source-code-ransomware-attack
Author: Tomáš Havelka; Michal Kandráč
Published: 10. 11. 2022
The use of real buildings in video games is a common practice. However, it is not always welcomed by the owners or architects of the building. One of the most recent cases is the famous Conservatorium Hotel in Amsterdam, which is featured in the Call of Duty reboot: Modern Warfare II. In this post, we are considering the limits of architectural work copyright protection and impacts the case will have on the future of the video game design.
Amsterdam’s luxurious Conservatorium Hotel[1] is featured in the latest edition of the hit game Call of Duty: Modern Warfare II. It is one of the locations where the Task Force 141 combat missions led by the legendary Capt. Price take place, not only in its environs, but also in its interior.[2] The Conservatorium Hotel is one of the most famous buildings in the centre of Amsterdam. Although the creators of the game have changed its name, it is quite clear which building it is.
Unlike the gamers, the hotel management is not happy about this visualisation. They claim they do not want to be associated with activities that promote or present violence. Needless to say, the interior gets “redecorated” during the in-game mission by bullets and explosions, which significantly damage the outer shell of the hotel. According to reports, the hotel management is also considering legal action against the game developers.
It may be interesting to see what steps the hotel management eventually decides to take. Globally, disputes between owners of significant objects and game developers are not rare. Just like in the case of Sony, which released Resistance: the Fall of Man in 2007, a game featuring battles with alien invaders inside the Manchester Cathedral. The Church of England demanded a formal apology and a financial donation (“indulgence”) for associating their sanctuary with violence. In the end, Sony apologised, explaining that their sci-fi game was not intended to offend the believers.
However, featuring buildings in video games has its advantages. This is evidenced by Ubisoft’s Assassins Creed series, which faithfully portrays historic locations (Rome, Paris, London, etc.), making them attractive for many gamer-tourists. The virtual model of Notre-Dame, to which Ubisoft developers devoted an incredible five thousand hours, could even help to restore the burnt-out wonder of medieval architecture.
Since the game realistically depicts the Conservatorium Hotel building as an architectural work, what can be challenged is the protection against copyright infringements, especially personal copyright, which allows the author to prevent third parties from altering or modifying the work, etc., which is probably what is happening in the case of the walls demolished or destroyed with bullets. The developers would likely invoke a statutory exception (the freedom of panorama), claiming they could have used the image of the hotel that is on permanent public display, but this exception does not cover the interiors of buildings or alterations to existing structures, so this defence might not stand in a potential litigation.[3]
However, if the architect of the hotel building was Daniël Knuttel, it needs to be emphasised that his copyright already expired upon his death. In the Czech Republic, the use of the building in question could be challenged by Knuttel’s descendants or other persons close to him, or an association of architects[4] that could argue that riddling the building with bullets leads to the use of the copyrighted work in a way that diminishes its value.[5] These rights could only be exercised directly by the owner or the management of the hotel if it had obtained the necessary authorisations from these rights holders (i.e. not by themselves but e.g. on the basis of a power of attorney).
According to information available, the hotel allegedly underwent refurbishing and modernisation, so its authors may still be ‘in the game’ if the refurbished parts were affected by this game in any way. Again, however, the hotel would have to acquire the necessary rights from the authors of the refurbishing works or agree on a joint procedure with them, e.g., the architects would have to directly take part in the dispute with the creators of the game.
Protection against unfair competition may also be at stake. It could be argued that the game developers deliberately set the game’s story and multiplayer missions in the hotel scene in order to increase the attractiveness of their production to gamers, who can race through real objects and possibly even devastate them. However, proving unfair competition with all the requirements imposed by the law and the established case law of the courts would be very difficult and costly, especially in the case of a fictitious video game.
This case may thus be another step to help game developers within the EU to set boundaries for in-game portrayal of real-world locations. It will be interesting to see how the whole situation is evolving, also taking into account the fact that the Dutch legislation is very close to the Czech one. We will be happy to follow this case for you since legal protection of architectural works is our dedicated legal expertise.
[1] The Conservatorium Hotel website are located at: https://www.conservatoriumhotel.com/ .
[2] Some of the footage can be viewed at: https://www.youtube.com/watch?v=2TZ-W_XkDiw.
[3] According to Section 33 of the Copyright Act.
[4] Pursuant to Section 11(5) of the Copyright Act.
[5] Pursuant to Section 11(5) of the Copyright Act.
After its success in the domestic Law Firm of the Year competition, in which the firm received four awards, HAVEL & PARTNERS also won one of the main categories of the international poll organised by the global rating agency Who’s Who Legal and became the best law firm in the Czech Republic. The awards ceremony took place on 16 November in London.
The Who’s Who Legal Awards annually recognise the best legal experts and law firms in more than 35 practice area categories in 75 jurisdictions. The law firm wins the award for the best Czech law firm for the fifth year in a row. HAVEL & PARTNERS’ specialists are also regularly ranked at the top of the rankings of leaders in individual areas of law.
“At the beginning of November, we won the award for the best local and most popular law firm in the Law Firm of the Year competition. Immediately afterwards, we follow up with a very important international trophy for the top law firm in our country, and thus symbolically strengthen our position as a leader on the domestic legal market,” says Jaroslav Havel, managing partner of the firm, on winning the prestigious award.
The global rating agency Who’s Who Legal has been mapping leading law firms, consultancies and individual professionals in its analyses and publications since 1996. Their surveys are based primarily on feedback from and detailed interviews with clients, experts and consultants who work closely with the subjects under review.
27 October 2022
Authors: Štěpán Štarha, Milan Černaj, Khrystyna Koleshchuk
From 1 November 2022, an amendment to the Labour Code is to come into force, which may provide a greater degree of flexibility to entrepreneurs and employers in determining and changing the working conditions of employees. As the amendment transposes as many as 2 Directives of the European Parliament and of the Council, its practical impact and importance for employers is slightly overshadowed by the most widely communicated changes to paternity leave. Therefore, we bring you a brief overview of the most important changes from the perspective of practice and employers’ needs.
Under the existing regulation, the employment contract had to contain, in principle, the following elements:
(a) the type of work of the employee and its brief characteristics; (b) the place of performance of work, (c) the date of commencement of work; (d) the wage conditions, if not agreed in the collective agreement (amount of wage, details of other benefits for work such as bonuses, remuneration, etc.).
The contract had to also explicitly provide for (i) pay dates, (ii) working time, (iii) the scope of paid vacation, and (iv) the length of the notice period.
However, the amendment reduces the scope of the essential elements for employment contracts from 1 November 2022 to only the essential elements under (a) to (d). Pay dates, working time, the scope of paid vacation, and the length of the notice period no longer have to be specified directly in the employment contract.
However, the employer must notify the employee of them separately, in the form of written information, within the statutory time limits after commencement of the employment. This will be a specific document from the employer informing the employee of the individual working conditions and the terms of employment, for example
How will this make a difference in practice?
The amendment allows that the conditions specified in the written information may be changed unilaterally by the employer, but the scope of these conditions is limited. However, changes will need to be communicated to the employee no later than the effective date of the change.
A change for example, of the pay date or of the number of working days should not thus require the employee’s consent or an amendment to the employment contract. On the other hand, the amount of wage or type of work must still be specified directly in the employment contract. Their change will therefore depend on an agreement with the employee in the form of an amendment to the contract.
Of course, the employer may continue to specify the working conditions under (i) to (iv) to any extent in the employment contract. However, this will restrict it from changing them at a later date, as an amendment to the employment contract will be required.
Although the amendment to the Labour Code formally contains the prerequisites for the introduction of the long-awaited flexibility, their actual use will probably be proven only in the practice of labour inspectorates. The explanatory memorandum is typically laconic in this respect.
No, the legislator has missed an opportunity to modernize communication in employment law, even though the need for change has increased manifold in recent pandemic years.
The amendment only formally introduces the possibility of digital communication between the employer and the employee. However, this is limited to the provision of written information by the employer, not to the conclusion of employment contracts or amendments to them. The above-mentioned information on the change in working conditions may thus be made electronically.
However, this does not apply absolutely, the employer may only communicate with the employee electronically if the employee has access to the electronic form of the information, can save and print it. It is not yet clear how strictly compliance with and verification of these requirements by the employer will be assessed.
The most communicated part of the amendment to the Labour Code is paternity leave. This is not the introduction of an entirely new institute, but rather the renaming of the existing parental leave of father under Section 166(1) of the Labour Code and the change of related rules in accordance with the requirements of the Directive of the European Parliament and of the Council on the work-life balance of parents and carers. In general, it is still the case that during paternity leave, the employee is not entitled to wages and wage compensation. This will continue to be, in principle, unpaid time off from work, which, if the statutory conditions are met, will entitle the father to 2 weeks’ maternity allowance as a benefit from the Social Insurance Agency.
The employer will also be obliged to grant paternity leave to an employee who is expecting the birth of a child if the employee requests it at least one month in advance of the expected due date of birth, as determined by a doctor. The establishment of a minimum 10-day period for the deposit of a consignment sent by the employer to the employee at the post office will certainly also be reflected in practice.It will no longer be possible to serve notice in writing on the employee within a shortened period of time, e.g., 3 days or more.
The new limit on the length of probationary period in fixed-term employment is also a restriction for the employer, but also a protection for the employee. The probationary period of a fixed-term employee may not be longer than half of the total term of the employment. Due to many partial changes introduced by the amendment to the Labour Code, it is not the purpose to include them in this document.
However, the HAVEL & PARTNERS employment law team will be happy to guide you through the amendment to the Labour Code and provide you with legal advice.
The results of the 15th annual Law Firm of the Year competition in the Czech Republic, organised by EPRAVO.CZ, once again confirmed the exceptional position of HAVEL & PARTNERS on the Czech legal market. For the third time in a row, the firm received the top award for local law firm as well as the award for best client service. It also won in two practice area categories – Mergers & Acquisitions, and Development & Real Estate Projects. The gala evening, held under the auspices of the Ministry of Justice and the Czech Bar Association, took place on Monday, 7 November at Žofín in Prague.
The outstanding results of HAVEL & PARTNERS in the domestic Law Firm of the Year competition follow after the award of the most prestigious prize in Chambers Europe Awards, which it also received for the third time in a row in 2022. This year, the firm also achieved excellent results in the Slovak Law Firm of the Year competition, where it won the top prize in the international law firm category and, as in the previous two years, once again became the most popular law firm for clients in Slovakia.
“This year so far has been full of unexpected challenges and events. Therefore, we have tried to be a reliable support for our clients during this time and to help them as much as possible to survive in these challenging conditions. We are thus very pleased that they have once again appreciated our commitment and approach to solving their business and private matters. We highly value this and are thankful for our client’s trust,” says Jaroslav Havel, managing partner, adding: “Thanks also go to all my colleagues at HAVEL & PARTNERS. Once again, we have proven together that we prioritise professional background as well as perfect service for our clients. In addition to the top expertise and superior work commitment of all colleagues, I especially appreciate their teamwork, thanks to which we continue to push the boundaries of our potential further.”
In addition to the domestic law firm award and the client service award, the firm won the M&A category for the fourth consecutive year. “The area of M&A, corporate restructurings and, in recent years, private equity and venture capital investments is key to our service portfolio,” says partner Jan Koval. The team of 80 lawyers has completed more than 800 transactions worth CZK 800 billion over the past 16 years. “Thanks to long-term partnerships and cooperation with our clients, we have the opportunity to participate as M&A lawyers in the development of their business. We perceive the award as a further impetus to innovate and improve our services, as we want to continue to be a top strategic partner for our clients in fulfilling their business ambitions,”he adds.
The Development & Real Estate Projects category, inwhichHAVEL & PARTNERS also won, is one of the firm’s core legal specialisations. HAVEL & PARTNERS has been focusing on real estate law since its formation in 2001; today, more than 30 lawyers including 8 partners are involved in this practice area, and the firm is involved in 20 to 30 large real estate transactions per year. “The further development and strengthening of our market position in this area is crucial for us and we are devoting our maximum efforts to it. We assist our clients in all phases of real estate projects and will continue to strategically expand our team in the coming years to meet the growing demand for services in this area,” suggests partner Václav Audes.
In 17 professional categories, the firm was ranked among highly recommended firms (top tier). In terms of the results of this year’s and all previous years of the Law Firm of the Year competition, HAVEL & PARTNERS remains the most successful and most comprehensive domestic law firm in terms of total nominations and awards.
HAVEL & PARTNERS has launched a large-scale project called NextŽeny (NextWomen) focusing on the transfer of wealth to women. The law firm has published a study summarising the socio-economic, demographic, and legislative factors and circumstances that contribute to the increase in wealth held and managed by women in the Czech Republic and Slovakia. According to an analysis of the family and financial situation of a group of the richest Czechs and Slovaks that are the owners of the largest family businesses in the Czech Republic and Slovakia, between 48% and 70% of their property could be inherited by women in the coming years.
Women control one-third of the world’s wealth and have been increasing the value of their assets at a significantly faster rate in recent years than before. This trend is becoming more and more apparent globally, but no study or analysis has addressed it in the Czech or Slovak environment in a comprehensive manner so far. “We therefore decided to analyse this phenomenon for the Czech Republic and Slovakia. The aim of the project is to bring the issue of women’s ownership and succession to the advisory market, to open a discussion among the lay and professional public and to answer a number of related questions in the following stages of the project,” said Jaroslav Havel, the managing partner of the law firm.
It is the first study that addresses the topic in the context of the local market and offers a more comprehensive view of the trend of the transfer of wealth to women visible abroad, supported by multiple research, statistics and data analyses from foreign and local sources, taking into account the history, local specifics, social and economic conditions, and Czech and Slovak legislation.
HAVEL & PARTNERS, in cooperation with the research agency SC&C, presented a comprehensive summary of the socio-economic and demographic influences and conditions contributing to this trend in the Czech Republic. These are in particular:
According to the NextŽeny analysis, women can be expected to become increasingly successful in the coming years and increase their wealth as a result.
The study also includes an analysis of the impact of intergenerational transfer of wealth, as precisely in these situations there has been a fundamental relocation of property ownership. A model of inheritance among a group of owners of the largest family firms and the richest Czechs and Slovaks in compliance with the law analyses whether the transfer of property to women will be a relevant topic in the Czech and Slovak environment in the case of changes in ownership through succession in the coming years.
The firm’s team specialising in services to private clients prepared a detailed analysis of their family and financial situation and then modelled what a sudden transfer of assets from one generation to the next would look like if the statutory rules were applied. Currently, the majority of wealth is nominally owned by men, but the inheritance transfer model showed that in the future, between 48% and 70% of wealth could shift to women in the target groups in the research.
Although these figures only concern specific limited groups and only take into account the transfer of property in line with the law, the results suggest that women should be considered as potential successors to the current owners.
“According to our analysis, the trend of transferring property into the hands of women, which has long been observed abroad, is also beginning to manifest itself in the Czech and Slovak environments and we expect it to continue in the coming years. For many women, the management and efficient use of their own assets is currently, or will be in the near future, a major issue or challenge. Therefore, we already see the issue of female ownership and succession as crucial for the years to come,” said David Neveselý, a partner at HAVEL & PARTNERS, who leads a specialised private client services team.
International studies point out that women and men approach financial and wealth management differently. Women are not inclined towards risky investments, prefer more conservative capital protection, and manage their assets through passive investment strategies. They make long-term investments in line with their goals and beliefs. In their investments, they take into account environmental, social and governance aspects, for example. In the Czech Republic and Slovakia, however, no research has looked into the specific approach of women and men to property ownership and management in a comprehensive manner so far.
“If we want to be successful as advisors and provide services that comprehensively cover the requirements of our male and female clients in business and private matters, we need to understand and map their specific needs. We will therefore follow up on the initial NextŽeny study in 2023 with a survey in the Czech Republic and Slovakia that will focus on the tendencies and decision-making processes of women and men directly related to the management of their assets. We will also involve other important partners in the survey, thanks to which the survey will have an overlap into other relevant areas,” added Veronika Dvořáková, a Partner and the Marketing Director at HAVEL & PARTNERS.
Specialists from HAVEL & PARTNERS, led by partner František Korbel, counsel Jan Fikar, and associate Tomáš Kalenský, represented the City of Prague in the successful negotiation of the first cooperation agreement in accordance with the Prague Methodology of Investor Participation. On the basis of the Methodology, developers financially contribute to the development of the area in which their development project is implemented.
At its June meeting, the Prague City Assembly approved the first negotiated cooperation agreement according to the Prague contribution methodology, thanks to which PASSERINVEST GROUP will invest almost CZK 184 million in the area near the Roztyly metro station. The developer will contribute nearly CZK 46 million to the development of the area, and will build a traffic feeder, an extensive park, several elements of blue-green infrastructure and part of a cycle path in the same location for a further CZK 138 million.
“Our Investor Participation Methodology, which we have been working on for more than two years together with HAVEL & PARTNERS and Frank Bold, has already produced tangible results. I appreciate the work of the entire municipal team and colleagues from the legal teams who managed to draft the first contract with the investor. The agreed participation of developers in the development of Prague is a major step forward in the area of land use planning and financing the construction of much-needed primary schools and kindergartens, parks and other necessary public infrastructure,” said Petr Hlaváček, 1st Deputy Mayor for Development of the Capital City Prague.
“I believe that we have managed to project our experience from the drafting of the Prague Contribution Methodology into the successful negotiation of the contract with the developer. We appreciate the fact that we could participate in such a project, which will bring to the capital city and the respective city district mainly a three-hectare park, a cycle path, abundance of blue-green infrastructure, and several tens of millions of crowns,” added František Korbel, partner of HAVEL & PARTNERS.
For HAVEL & PARTNERS, this is another successfully closed deal in the field of urban planning. Specialists from the Public Sector team have long worked with municipalities to develop cities and towns through investor participation. Together with other activities, such as the preparation of a new building law, they also seek to improve the current situation in the construction and zoning sector.
Authors: Lívia Djukić, František Kousal
In collaboration with: Kateřina Nešpůrková
The Directive (EU) 2019/1937 of the European Parliament and of the Council of 23 October 2019 on the protection of persons who report breaches of Union law (the “Whistleblowing Directive”) is undergoing the transposition process in most European countries, including the Czech Republic, where companies and the public sector have to deal with the direct effects of the Directive in the absence of a law transposing it. A number of our clients have already introduced an ethics hotline, also because they are required to have whistleblowing in place in other countries where they have branches. In which European countries are whistleblowers already legally protected? Look at our overview of how successful or unsuccessful the other 26 Member States are in transposing the Whistleblowing Directive into their legal systems.
Although the deadline to transpose the Whistleblowing Directive expired on 17 December 2021, the Czech Republic is by far not the only Member State that has not yet transposed the Directive into national law. To date, only 10 Member States have adopted a transposing law, namely Denmark, France, Croatia, Ireland, Cyprus, Latvia, Lithuania, Malta, Portugal and Sweden. A total of 16 Member States have not adopted any whistleblower protection law, with the respective bills facing various stages of the legislative process. And the only country that has not started drafting a bill is Hungary, with no prospect of adopting whistleblower protection any time soon.
Many Member States are struggling with their processes of transposing the Whistleblowing Directive. The transposition bills have been heavily criticised and extensively commented on, and in some cases completely rewritten. For example, the Romanian Constitutional Court has already ruled on the constitutionality of the bill passed in Romania. Although the court did not find it in contravention to the constitutional system, the Romanian president decided to return the bill to the Parliament for reconsideration after all. As a result, the legislative process is taking longer in many countries than originally expected.
Before the Whistleblowing Directive was passed, some countries already provided whistleblowers with a certain (whether higher or lower) standard of protection, which helped them transpose the new EU Directive in a slightly easier way. For example, France has amended its existing anti-corruption law known as Sapin II, and countries such as Ireland, Romania, the Netherlands, and Slovakia have also availed themselves of their existing laws.
However, whistleblower protection has no tradition in most EU countries. It is therefore interesting to follow individual Member States introducing various whisteblowing and whistleblower protection rules, albeit based on a common European framework. Some countries are going beyond the Whistleblowing Directive. Spain, for example, plans to incentivise persons participating in a breach of laws to come forward by introducing a clemency programme (a less severe punishment for the perpetrator – whistleblower in the subsequent criminal proceedings). Germany wants to protect whistleblowers who report not only breaches of laws in the areas defined by the Whistleblowing Directive, but also any criminal offence and selected administrative transgressions under German law. Austria goes a step further by planning to protect whistleblowers reporting corrupt conduct, regardless of the area in which the corruption occurred.
During the transposition process, other jurisdictions find themselves in conflict with the Whistleblowing Directive. For example, the current Slovak Whistleblower Protection Act provides for a 90-day period to examine the received whistleblower report, with a possible extension of another 30 days. The draft amendment takes no account of the fact that the Whistleblowing Directive imposes a time limit of 3 months to investigate a report without the possibility of further extension.
The European Commission’s interpretation of the introduction of group reporting systems, according to which corporations with more than 249 employees cannot share reporting systems, also appears problematic. As opposed to this interpretation, large countries such as Germany, France or Spain allow group companies to share a reporting system regardless of their size. The same approach is taken by Denmark and Austria. We often advise our clients who are part of larger concerns based in these countries on how to deal with pressure from their parent companies to introduce a group system in the context of the upcoming Czech regulation, which does not provide for such a solution and requires each company with more than 249 employees to have its own reporting system.
Austria is tinkering with the data protection rules in proposing to provide for a retention period of up to 30 years (the period for which information on the reporting may be stored), which may contradict the principle of limiting the storage of personal data to the strictly necessary period.
What we also find interesting is the approach of individual countries to fines for breaches of legal obligations. Some countries such as Croatia, Slovenia or Latvia have introduced purely symbolic fines, with their maximum amount not exceeding several thousand euros. On the other hand, Portugal, Lithuania and Ireland have enacted fines of up to €250,000. The most severe punishment for offenders is planned in Belgium, where financial penalties can reach up to 5% of the total annual turnover, and Estonia, whose bill provides for fines of up to €400,000.
The process of transposing the Whistleblowing Directive will continue in Europe for some time. In the Czech Republic, we are already familiar with the text of the bill, and since we know that the implementation process can take several weeks (especially in larger companies), it is wise to start preparing for whistleblowing early enough. We recommend that when preparing your ethics hotline, you should check the current state of transposition both in the Czech Republic and all EU countries where you conduct your business. Only a suitable, tailored design of the ethics hotline can help you save the cost of running it, but also eliminate the risks resulting from non-compliance with the whistleblower protection requirements in foreign jurisdictions.
| Member State | Transposition | Legislative status |
| Belgium | NO | The bill is expected to be passed in autumn 2022. |
| Bulgaria | NO | The bill is being considered. |
| Czechia | NO | The bill is being considered. |
| Denmark | YES | The bill was passed on 4 June 2021. |
| Estonia | NO | The bill is considered. |
| Finland | NO | The bill is expected to be passed by the end of 2022. |
| France | YES | The bill was passed on 2 September 2022. |
| Croatia | YES | The bill was passed on 23 April 2022. |
| Ireland | YES | The bill was passed on 21 July 2022. |
| Italy | NO | The bill is drafted. |
| Cyprus | YES | The bill was passed on 20 January 2022. |
| Lithuania | YES | The bill was passed on 16 December 2021. |
| Latvia | YES | The bill was passed on 28 January 2022. |
| Luxembourg | NO | The bill is being considered. |
| Hungary | NO | The drafting of the bill has not yet started. |
| Malta | YES | The bill was passed on 16 November 2021. |
| Germany | NO | The bill is expected to be passed in autumn 2022. |
| Netherlands | NO | The bill is being considered. |
| Poland | NO | The bill is being considered. |
| Portugal | YES | The bill was passed on 26 November 2021. |
| Austria | NO | The bill is expected to be passed in autumn 2022. |
| Romania | NO | The bill is being considered. |
| Greece | NO | The bill is drafted. |
| Slovakia | NO | The bill is being considered. |
| Slovenia | NO | The bill is being considered. |
| Spain | NO | The bill is being considered. |
| Sweden | YES | The bill was passed on 28 October 2021. |
The Leges publishing house published a large commentary on the Charter of Fundamental Rights and Freedoms in mid-September, whose main authors, alongside Zdeněk Kühn, Jan Kratochvíl and David Kosař, also include Jiří Kmec, a counsel at the law firm HAVEL & PARTNERS. The publication was launched by Professor Jiří Malenovský in the presence of the authors at the HAVEL & PARTNERS headquarters in Florentinum in Prague on Wednesday, 5 October.
On over 1,660 pages, the new commentary offers, in particular, a detailed analysis of several thousand decisions primarily issued by the Constitutional Court on individual fundamental rights and freedoms guaranteed by the Charter. However, it also contains detailed general discourse on, for example, the history of the adoption of the Charter, its structure and founding principles, the methods of its interpretation and application, and the possibilities of restricting individual rights and freedoms.
The event was attended by a number of personalities from all tiers of the Czech legal environment. Professor Jiří Malenovský, a former judge of the Czechoslovak and Czech Constitutional Court and the Court of Justice of the European Union, officiated at the ceremony.
Jiří Kmec, presented the commentary on behalf of all the authors, whose total number at the end of their work on the text had grown to 19 and introduced it to those present: “It took about nine years from the birth of the initial idea to the publication of the commentary, and it taught all those involved – the publishers, the individual authors and their close ones – a lesson in patience for which they all deserve acknowledgement and gratitude. Our main goal was to provide a straightforward analysis of the case law of the Constitutional Court as the primary interpreter of the Charter. We hope that the commentary will become a useful tool for all lawyers, and that it will spark critical discussion on a range of human rights issues.”
According to Professor Malenovský, the publication’s significance is extraordinary. He believes that the Charter of Fundamental Rights and Freedoms is of cardinal importance because it makes the state a state and democracy a democracy. The plurality of commentaries on the Charter leads to the search for the highest level of protection, and thus benefits fundamental human rights.
The first Child Advocacy Centre has opened in the Czech Republic and is to become a safe and neutral place for comprehensive and dedicated help for children at risk of domestic violence. LOCIKA Centre and the Sirius Foundation opened the centre with the assistance of the Ministry of Labour and Social Affairs. The law firm HAVEL & PARTNERS has been involved in the preparations by providing pro bono legal advice.
As part of the pro bono legal assistance, Adéla Havlová, a Partner, Tereza Patočková, a Legal Expert, and Soňa Stará, a Junior Associate, helped draft coordination agreements for cooperation between the LOCIKA Centre, the Ministry of Labour and Social Affairs, the Ministry of Justice, the Ministry of the Interior and subsequently other public administration bodies that will use the Child Advocacy Centre to address cases of violence against children.
“We are very pleased that as legal advisors, we were able to contribute to the establishment of the Child Advocacy Centre. Over the past two years, the police have recorded a sharp increase in violent crimes against children. The offenders often get off with only conditional sentences while many other cases are not even reported to the authorities. Child victims are particularly vulnerable, and we therefore consider it crucial to provide them with the necessary professional assistance in time. Thanks to the Child Advocacy Centre, the children can use this safe environment where they can get the help they need from experts at one location,” said Adéla Havlová, a Partner at HAVEL & PARTNERS.
In the last seven years, a total of 39 children have been tortured to death and another 700 have suffered lasting effects. Domestic violence affects 14% of Czech children, which statistically means 2 to 3 schoolchildren in each class. Assistance to these victims is now the responsibility of several ministries (the Ministry of Labour and Social Affairs, the Ministry of the Interior and the Ministry of Justice). Assistance to children at risk is not, however, provided in a systematic and coordinated manner by these authorities.
In practice, it takes months to a year for abused children to reach a specialist who can provide them with the specialised help they need. Moreover, during the process of investigation and subsequent assistance, the child gets into contact with 47 different people from 15 different institutions. The child has to undergo a forensic examination, an interview with social workers, and questioning by the police and the court, and therefore, ends up speaking to up to 29 different people during the investigation and the whole process of handling the case. The Child Advocacy Centre is expected to change the current system so that the child undergoes the entire challenging procedure at a single spot. To conclude, officials, police officers, law enforcement authorities, doctors and psychologists will come directly to the centre so that children can undergo the demanding investigation in an environment where they feel safe.
Source: Building World (september 2022)
Authors: Martin Ráž, Jan Šplíchal
There are many factors that significantly affect the costs of construction – steadily increasing inflation, shortage of building materials, rising energy prices, shortage of labour in the construction industry, and last but not least the war started by Russian aggression in Ukraine. In order to avoid the unpleasant surprise of finding that during the construction process you as a construction company will lose out on the contract due to the rising costs or, on the other hand, as a customer you will pay an exorbitant price, we recommend that you make adequate provisions for price increases in your contracts.
Construction usually takes many months to complete, or even years in more complicated cases, and it is very likely that price and cost increases will still continue during this time. The interests of the contracting parties as to the price at which the construction is to be carried out are different. The customer wants the construction to be carried out and completed at the price originally agreed in the contract, and that price to remain unaffected. Conversely, the contractor’s interest is to be able to demand a reasonable increase in the price of the work if the costs of the construction increase during the construction period. No contractor wants to subsidise the construction for its customer, but rather wants to carry out their work at a profit. So how should the price increases be reflected in contracts?
From the customer’s perspective, it seems to be simple. Just having a total price fixed (preferably expressly declared as fixed or not to be exceeded), i.e. having a contract not containing formulations such as that the price of the material will only be determined based on real prices or without force majeure clauses. The contract should also contain a formulation that the contractor assumes the risk of a change in circumstances (see below). But the most important thing is to find a trustworthy contractor who cares about its reputation and will not breach the contract so easily. And this can be much harder.
The question is also whether or not a company can negotiate a force majeure clause in the contract for work as a safeguard against rising costs. As a rule, the client does not want the construction to be prolonged in any way or the price to increase during the course of the construction. Therefore, force majeure clauses usually work for the benefit of the contractor, as the contractor is usually the one who, based on a force majeure event, claims some relief, in particular an extension of the construction period or an increase in the price of the work.
Force majeure is usually understood as an “act of God”, as it is often referred to in older contracts in English. It is a situation beyond our control, typically a natural disaster. In the standard international understanding, force majeure releases from or suspends an obligation (e.g. to complete construction within a deadline). As long as the force majeure or its consequences continue, the obligation does not apply, so it cannot be breached and there are no adverse consequences (such as fines, damages, and the possibility of withdrawal).
However, the Czech Civil Code knows such force majeure; it contains only a very limited exemption from liability for damages in Section 2 913(2) (formerly called circumstances excluding liability). Nevertheless, this has no impact on other adverse consequences, especially contractual penalties or the possibility of withdrawal. It therefore depends almost 100% on the text of the specific contract whether and how force majeure applies.
However, according to the vast majority of common contractual arrangements, an increase in construction costs in the market is not in itself force majeure. That would require the contract to contain a provision that directly envisages the increase in construction costs.
This is why various inflation or indexation clauses are more likely to be used, which provide for automatic, regular price increases according to predetermined criteria derived from the current market situation. Companies use this method to protect themselves against unpredictable price developments. However, the application of inflation clauses is certainly not mandatory and depends on the agreement of the parties, so both the company and the customer must agree to it in the contract.
However, no law says what such an inflation clause should look like. It is always an agreement between the parties, in the sense that everything that is not forbidden is permitted. The important thing is to focus on the exact definition of inflation, i.e. under what circumstances the company may demand payment of higher cost prices. In practice, therefore, the construction price, construction work prices or construction production cost indices are used, which are regularly issued by the Czech Statistical Office. Alternatively, contracts work with sectoral or stock exchange indices for the most important items, such as steel or concrete. These are realistic and concrete parameters on the basis of which the parties can determine the exact procedure.
The inflation clause should also include the frequency with which prices will be increased, if necessary. Again, it is up to the parties how they set this parameter. If the contract deals with year-on-year price increases based on the average annual inflation rate, it should be borne in mind that the results of the average annual inflation rate are not known immediately after the end of the given year, but perhaps only in March. Thus, with the current dynamic price developments, it seems preferable to choose a shorter period of time for comparison. This could be a calendar quarter or even a month.
The inflation clause can also be defined in the contract so that it is activated automatically when a certain inflation rate is exceeded and can thus work as a safeguard against dynamic market events.
In a situation where a fixed price is agreed at the beginning for the construction and the construction costs increase significantly during the construction period, the question could also be asked whether or not this is a material change of circumstances.
The provisions of the Civil Code (Sections 1764-1766 and Section 2620(2) specifically for contracts for work) provide for situations where there is a material change in circumstances during the term of a contract. However, their application is quite challenging. The change must occur after the execution of the contract and, under Section 1765, must cause a particularly gross disproportion in the rights and obligations of the parties by disadvantaging one of them. Section 2620(2) then requires a wholly extraordinary unforeseeable circumstance that makes completion of the work materially more difficult.
If these conditions are met, the party adversely affected by such a change in circumstances may seek in court to “balance out” the relationship between the parties and modify the contract accordingly – or, alternatively, to terminate it. Section 2620(2) also provides, specifically for works contracts, an express right to increase the price of the work.
However, the contractor encounters several problems when referring to the above provisions. First of all, a large number of contracts exclude their application altogether, such as by stating that the contractor (or both parties) “assumes the risk of a change in circumstances”. If the provisions are not excluded, they can only be invoked in court immediately after the change has occurred; moreover, under Section 1766, it is deemed to be too late after 2 months.
Furthermore, a material change in circumstances does not justify postponement of performance – in other words, the contractor may not interrupt the work. Also, the deadlines, penalties, etc. are not suspended for the contractor. In practice, bringing an action means a bet for the contractor that in a few years’ time it will be able to recover an increase in the price of the work from the customer, or, even more uncertainly, that it will obtain some relief from the court in the form of a preliminary measure valid for the duration of the dispute. For these reasons, although a “material change in circumstances” is often used as a threat in letters or by the contractor as an argument for a “voluntary” price increase by an amendment to the contract, actual litigation rarely occurs.
