The National Council of the Slovak Republic has adopted a very controversial bill on the special levy on retail chains proposed by the coalition deputy members, even despite the President’s previous veto. The Act will come into effect on 1 January 2019.

Under the Act, certain retail chains, part of the turnover of which comes from the sale of food, shall be obliged to pay a tax (levy) of 2.5% of their net turnover in Slovakia.

Who will be obliged to pay the special levy?

The special levy is to apply only to certain retail chains, while the Act defines them according to certain criteria. 

In the light of the Act, a retail chain is a grouping of commercial establishments with the same or interchangeable business name, operated by one undertaking or more related undertakings, which must meet all four of the following conditions: 

•  It is a food business operator (with any stage of production, processing or distribution of food);
• It has operations at least in 19 districts of the Slovak Republic;
• At least 25% of its net turnover comes from selling food to the final consumer; and
• The operations have a unified design, joint communication and joint marketing activities. 

Business alliances have been finally excluded from the scope of the bill, and thus the definition of a retail chain, and hence the levy obligation, will not apply to them.

At the same time, however, the Act introduces exceptions to which entities the levy obligation shall not apply:

• mass catering facilities;
• small and medium-sized enterprises1 ;
• retail chains that are food producers and sell food to the final consumer, with at least 80% of their net turnover coming from the sale of the food they produce, as well as the retail chains that are proprietary related to such chains; or
• retail chains with at least 80% of net turnover coming from the sale of one class food. 

What is the basis and amount of the levy? 

The levy rate is set at 2.5%, the basis of the levy being the net turnover (not the profit) of a retail chain for the relevant levy period which is the three consecutive calendar months of a respective accounting period.

The levy applies to the total net turnover of the retail chain, and hence also to the one that mostly does not have to come from the sale of food. For example, even if only 25% of the net turnover comes from the sale of food to the final consumer, under the Act the levy is to be applied to the total net turnover. In such a case, the levy may also actually burden goods or services other than the sale of food to consumers – this appears to be rather a legislative error than the legislator’s intention, unfortunately the text of the Act is unambiguous in this respect.

Finally, the legislator removed from the bill the obligation to pay levies by operations in the least developed districts2 , namely operations with less than 10 employees in such a district, and municipalities with a maximum of 3 operations selling food to the final consumer.

Risk of discrimination

The introduced “sectorial” levy on net turnover is in fact an additional selective tax, which will affect only some undertakings within the given sector, mostly the largest foreign retail chains operating in Slovakia.

At first sight the measure appears to be discriminatory, as it puts some undertakings within a single market at a disadvantage – and in practice it will affect, in particular, foreign undertakings operating in Slovakia. Therefore, the compliance of the adopted Act with EU law is highly questionable. The possible actions of the European Union authorities, or also the affected business entities, aimed at repealing or changing the Act can be expected.

Effectiveness of the Act

The Act is to come into effect as early as 1 January 2019. Retail chains will thus have an obligation to pay the special levy already starting with the first three-month levy period beginning after 31 December 2018.

To view all formatting for this article (eg, tables, footnotes), please access the original here.

Authors: Ondřej Majer, Štepán Štarha
Source: Lexology

The amendment to the Trademark Act (the “Amendment”) is to come into effect on 1 January 2019 and 14 January 2019 in the Czech Republic and Slovakia, respectively. The EU-Directive-based Amendment is rather extensive and introduces a number of crucial changes to trademark owners. One of the most important ones, in our view, is that the Industrial Property Office in the Czech Republic and Slovakia, will stop, ex officio, refusing new applications for trademarks that are the same as earlier trademarks. As a result, the competent authority may register an identical trademark without the owner knowing. We explain how to prevent this issue below.

Current situation

Currently, on receiving a new application for registration of the same trademark as an earlier one in respect of the same products or services (a “conflicting sign”), the industrial property offices in the Czech Republic and Slovakia refuse such application. The authorities do so automatically. The application for a conflicting sign is refused, and the new trademark is not registered without the owner of the already registered trademark knowing that the same sign is being registered. This procedure is implied in Section 6 of the still effective Trademark Act.

Future situation

Section 6 mentioned above will be abolished as a result of the amendment in both countries. Pursuant to Directive (EU) 2015/2436 of the European Parliament and of the Council, the reason for the refusal will be shifted to relative grounds for refusal laid down in Section 7(1)(a). That means that authorities will cease refusing conflicting signs ex officio as of January 2019.

What this means, in practice, is that the authorities will automatically publish new applications for conflicting signs in the trademark registers, and unless the owners of identical trademarks registered earlier oppose such applications within 3 months, the conflicting signs will be registered

This will concern not only applications filed after the Amendment comes into effect but also to unpublished applications filed before the amendment became effective. 

Pursuant to the explanatory memorandum, the abolition of the provision eliminated the discrepancy in the position of trademark owners in proceedings before the Czech or Slovak Industrial Property Office as opposed to those before the European Union Intellectual Property Office.

Solution for owners

As a result of the amendment, the office will no longer monitor and oppose the conflicting sign applications ex officio. On the contrary, the trademark owners themselves will have to actively keep track of new trademark applications and lodge oppositions against conflicting sign applications within three months from their publication.

Conflicting signs will otherwise be registered as trademarks, which could turn out to be unpleasant for earlier trademark owners, but something could still be done about it. Registered trademarks can, needless to say, be revoked or invalidated, although this is a more costly and time-consuming procedure.

The most convenient way to avoid registration of a conflicting sign is to regularly monitor new applications. Our law firm has been providing this service to its clients for a number of years. The automated monitoring is carried out, as a rule, on a monthly basis. We employ it for timely detection of not only conflicting signs, but also applications that may be similar to earlier trademarks. We regularly inform clients of these applications, and then we typically launch opposition proceedings or initiate talks with the applicant to withdraw applications for conflicting signs.

Further changes brought about by the Amendment

The Amendment brings about a number of other key changes, such as new types of trademarks (e.g. sound marks, motion marks), a certificate introduced in opposition proceedings proving that the opposed trademark older than five years has been duly used, abolition of opposition grounds in the event of filing a trademark application in bad faith, the possibility to register a certification mark, a change in the trademark registration procedure, the possibility to ban the use of a trademark in the registered name of another person and others.

Authors: Robert Nešpůrek, Ivan Rámeš
Source: Lexology

Authors: Václav Audes (Partner), František Neuwirth (Associate)

On 1 January 2019, the amendment to the General Health Insurance Act[1] came into effect, introducing a new system of reimbursements for medical devices used during outpatient care, i.e. consumer medical devices. The amendment covers consumer medical devices that are prescribed on a prescription and that patients pick up in pharmacies or at dispensing sites, e.g. glucose meters or other diabetic aids, orthoses, wheelchairs, crutches, hearing aids, glasses, contact lenses or incontinence pads.

The amendment was drafted in response to the 2017 judgement of the Constitutional Court, which declared the hitherto reimbursement regulation of consumer medical devices – which was based on code listings issued by health insurance companies – unconstitutional and repealed it as of 31 December 2018[2]. The lawmakers were thus under pressure to quickly adopt a new regulation complying with the Constitution.

The elementary principles underlying the new reimbursement regulation are as follows:

• The new regulation only applies to medical devices prescribed as part of outpatient care.
• It does not apply to thereimbursement of medical devices provided for inpatient care[3], i.e. hospital medical devices – so-called separately billed material (e.g. implants, cardio stimulators, valves, cannulas, catheters, probes, staplers, devices for laparoscopy or stents).
• The State Institute for Drug Control (“SUKL”) will act as the regulating body while the Ministry of Health will act as the appellate body.
• Individual types of medical devices are divided into reimbursement categories, listed in Appendix 3 to the General Health Insurance Act (the so-called categorization tree). The Act itself lays down a reimbursement limit as well as other reimbursement conditions (prescription and indication restrictions) for each category. The reimbursement limit for the category of glucose meters, for instance, is set at CZK 435 per piece (excl. VAT), and this category is also subject to prescription, indication and volume restrictions.
• The reimbursement category is the cornerstone of the new reimbursement regulation. In principle, each specific medical device should be classified under one of the reimbursement categories.
• The new reimbursement regulation is based on the notification principle. Individual medical devices will not be classified by administrative decisions issued in formal proceedings. Instead, the manufacturers themselves will notify SUKL of the classification of their medical device in a given reimbursement category.
• Only in the event SUKL discovers – either on its own or as a result of a complaint lodged by a health insurance company or a competitor – that the manufacturer classified the device incorrectly will it open formal administrative proceedings for the failure to place the medical device in the appropriate reimbursement category. If SUKL fails to open proceedings within the statutory deadline, the medical device will be automatically classified in the reimbursement category as notified by the manufacturer. Even then SUKL can still decide, based on statutory grounds, to declassify the device from the reimbursement category.
• Manufacturers will be able to file their notifications only starting from 1 June 2019. However, unless the manufacturers manage to fulfil the notification duty as regards the currently reimbursed medical devices by 30 June 2019, these “historically” reimbursed medical devices will no longer be reimbursed as of 1 August 2019.
• The “historically” reimbursed medical devices notified in a timely manner will start to be reimbursed pursuant to the new legal regulation as of 1 December 2019.
• Medical devices that will be entered in the reimbursement system for the first time and duly notified already in June 2019 will be reimbursed from 1 October 2019.
• Unclassified medical devices that cannot be placed in any reimbursement category will be reimbursed only if approved by the Ministry of Health; the reimbursement limit will amount to 50% of the final price. If, however, the manufacturer enters into risk-sharing agreements with all health insurance companies, the reimbursement limit will amount to 100%, so the medical device will be fully reimbursed.
• Custom-made medical devices are governed by a special regime and do not have to be notified.[4] No transitional period applies to these devices and the new reimbursement regulation is, as opposed to serially manufactured medical devices, applicable already from 1 January 2019.
• The Act expressly regulates highest price agreements made between the manufacturer and insurance companies and price competitions.
• Detailed rules are set out with regards to the so-called circulation regime, under which a health insurance company remains the owner of the medical device that is provided to the patient for use.
• The types of medical devices that may be distributed by contractual dispensing sites are specified in detail. According to the explanatory memorandum, the aim of the lawmakers was to eliminate the risk that the dispensing site would be supplying an entire range of medical devices[5]. The other types of medical devices may be dispensed only in standard pharmacies.

Needless to say, the above overview of the main features of the new reimbursement regulation is not exhaustive. Since this is a complex area posing numerous questions, we are organising a training session on this topic, and we will keep you posted on when it will take place.

The Ministry of Health, SUKL and the health insurance companies are cooperating in order to respond to questions regarding the reimbursement regulation and post their answers on the website of the Medical Device National Information System[6].

To conclude, we want to point out that the lawmakers have rather surprisingly not made any changes to the reimbursement regulation of hospital medical devices. In fact, the Constitutional Court has ruled that the reimbursement regulation of hospital medical devices – which is also based on code listings issued by health insurance companies – suffers from the same defects as the reimbursement regulation of consumer medical devices[7]. However, the Constitutional Court has not repealed it as it had not been proposed by the petitioners. It appears, therefore, that the rules governing reimbursement of hospital medical devices are awaiting their potential repeal by the Constitutional Court at a later time. Manufacturers and other stakeholders will have to get used to the fact that there is a dual system of medical devices reimbursement in the Czech Republic as there are completely different rules governing consumer versus hospital medical devices.

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[1] Act No. 282/2018 Sb., amending Act No. 48/1997 Sb., on General Health Insurance and amendments to and supplementation of certain related acts, as amended.

[2] See Judgement of the Constitutional Court Ref. No. Pl. ÚS 3/15 of 30 May 2017.

[3] See Section 15(5) of the General Health Insurance Act, which is not affected by the amendment.

[4] See Table 2 in Appendix 3 of the General Health Insurance Act.

[5] See Document of the Chamber No. 199, Chamber of Deputies, 8^th term, since 2017, available at: http://www.psp.cz/sqw/historie.sqw?o=8&T=199

[6] See https://www.niszp.cz/cs

[7] See points 143 and 150 of the cited judgement.

(Ministerstvo průmyslu a obchodu připravuje zásadní změny v podpoře obnovitelných zdrojů energie)

(Czech Brexit law will help British nationals legalise their stay in the Czech Republic and access Czech labour market) 

Authors: Ondřej Florián (Partner), Alexandra Parnaiová (Junior Associate)

As we covered in one of the earlier issues, on January 1, 2018, the last (for now) part of the amendment to Act No.253/2008 Sb., on Certain Measures against the Legitimisation of Proceeds of Crime and Financing of Terrorism, as amended (“AML Act”), came into force, on the basis of which a register of ultimate beneficial owners (the “Register”) was established in the Czech Republic. As a result, a new duty arose for the executive bodies of all legal entities in the Czech Republic – to ensure the registration of the ultimate beneficial owner in the Register; at the same time, the right arose for particular third persons to look into the Register. Included in the list of these persons are also all contracting authorities. The Register has thus gradually become an important element for all legal entities competing in public procurement. Therefore, we do recommend becoming familiar with these new duties and with the functioning of the Register, especially since the deadline for registration of all corporations was 1 January 2019. This duty applies not only to joint-stock companies but also to limited liability companies whose members registered in the Commercial Register are individuals.

Tightening of the legislation

The reason for making the AML legislation stricter is to prevent the abuse of the financial system and to uncover unclear ownership structures, as well as to keep track of ownership transfers leading to particular persons owning or handling the property. The primary purpose in the area of public procurement is to verify and/or avoid a conflict of interest of persons having, in particular procurement proceedings, connections to contracting authorities and to the contractor. The tendency towards tightening the AML rules is a worldwide phenomenon, not unique to the Czech Republic.

A beneficial owner is always a specific individual (individuals); for a more detailed definition of the beneficial owner, please refer to our article in the Právní rádce monthly (issue 4/2017) available (only in Czech) here.

The tightening of the regulation in this area, however, is not final. The V. AML Directive has already been adopted at the EU level, and the Czech Republic has to effectively transpose it to the national system of laws by 10 January 2020. Further tightening will consist of introducing the Register as public (at least to a certain extent), establishing effective (material) sanctions as well as monitoring compliance with the duty to register.

Register of beneficial owners

The valid amendment of the AML Act established the duty of legal entities registered in the Commercial Register to enter up-to-date information on their beneficial owners in the non-public part of the public registers (from 1 January 2018). The Register is administered by the registry courts.

Who identifies the beneficial owner?

The company itself or its executive body. The amendment to the AML Act places the new obligation on each company to keep an up-to-date record of its current beneficial owner – his/her identification data and the reason establishing his/her position as the beneficial owner.

In exceptional cases, when the beneficial owner cannot be identified using available means, a member of the executive body may register himself as the beneficial owner of the company. However, this person cannot in any way facilitate the identification of the beneficial owner and simply register himself as the beneficial owner. According to the judicial practice of the Czech courts, the member of the executive body has the duty to identify the ultimate beneficial owner, not only to look for him.

Legal entities registered in the public registers before 1 January 2018 have to register their beneficial owners in the Register by 1 January 2019, i.e. one year after the amendment became effective.

There are no direct sanctions for not registering the beneficial owner into the Register, neither under the AML Act nor under the Public Registers Act. The Register is not a public register in the meaning of the Public Registers Act, so the sanctions for not registering into public registers would not apply. Not registering can, however, have negative impacts. The legal entity risks being considered suspicious in customer due diligence (according to the AML Act) or expulsion from public procurement proceedings after failing to provide the information on its beneficial owner. At the same time, the company’s executive body that has failed to comply with the statutory duty may be acting in breach of due managerial care.

The application to register the beneficial owner into the Register can only be submitted on a given form. The particulars of the form are laid down in an amendment to the implementing decree issued under No. 459/2017 Sb. The registry court has to register the beneficial owner into the Register within 5 business days from receiving the application.

What information can be found in the Register and who has access to it?

The following information on the beneficial owner is entered in the Register: name and residence address, date of birth and birth no. (ID No.), citizenship, the grounds for beneficial ownership (i.e. information on the proportion of voting rights).

The extract from the Register is available for the registered entity and to a limited extent for those who prove an interest in preventing the crimes listed in the AML Act. Remote access is provided to courts, investigative, prosecuting and adjudicating bodies, the tax administrator and other bodies laid down by the law. The beneficiaries also include contracting authorities.

Our Corporate Law team is ready to assist you with identifying, documenting and registering the beneficial owner into the Register.

HAVEL & PARTNERS’ legal team, led by partner Vaclav Audes and associate Ivo Skolil, has provided comprehensive legal advice to Codasip, a technology company that is the leader in the development and manufacture of RISC-V processors.

The advice was related to the investment of international investors in the Brno-based start-up in the total amount of USD 10 million, i.e. about CZK 228 million.

The investors are France-based VENTECH CAPITAL, China-based Shenzhen Capital, Germany-based Paua Ventures, and the world’s leading data storage manufacturer, U.S. based Western Digital. These companies will thus join the Czech investor – the investment fund Credo Ventures – in the list of strategic investment partners.

The new investment will help Codasip not only to expand its development department in Brno, but also to develop sales in Asian markets and the USA.

More information on the strategic partnership with international investors and Codasip’s unique focus is available on the company’s website or here.       

HAVEL & PARTNERS has provided comprehensive legal advice to SpaceLab EU SE, an entity established by London-based investment fund, hDock42. SpaceLab EU SE entered into a partnership with the Czech Aerospace Research Centre (VZLU) for the development of a completely unique ion engine that will allow satellites to orbit the Earth at a lower altitude than today and with virtually no fuel.

The legal advice on this ambitious joint venture project included the establishment of a new entity SpaceLab EU for the purposes of the partnership and protection of the future product and IP rights, as well as a complete definition of rules for the joint development, use, valuation and treatment of IP rights.

The legal teams participating in the transaction were the M&A and the IP practice groups managed by Jan Koval (M&A partner) and Ivan Rámeš (IP partner), Tomáš Navrátil (M&A senior associate) and Radek Riedl (IP associate).

More information about the SpaceLab EU SE and VZLU joint venture is available here.

(CJEU judgment: Reimbursement of a medicinal product for off-label use is not contrary to EU law)

(Controversial Slovak Act on Special Levy on Retail Chains will come into effect on 1 January 2019) 

(Amendment to the Trademark Act in the Czech Republic and Slovakia – What Should Trademark Owners Fear from 1 January 2019?)