Authors: Robert Nešpůrek, Michal Kandráč
In the first half of 2022, the Czech film industry has continued to build on its strong momentum from 2021.
The Czech Republic has continued to provide its filming facilities to the world’s most renowned film and TV studios such as Warner Bros., Netflix, Amazon, Lionsgate, Apple TV, ZDF and Sky. The works recently produced here include, among others, Extraction 2, a sequel to Netflix’ record-breaking movie, Peacock’s thriller series Last Light and season 2 of Apple TV’s Foundation series based on Isaac Asimov’s sci-fi novels.
The first half of 2022 has seen a large increase in registrations for the Czech film incentives scheme, which provides a cash rebate to foreign filmmakers of up to 20% of their Czech expenses (details on the Czech incentive scheme are available HERE). Due to this high demand and consequent strain on the existing subsidies budget (originally EUR 32.3 million for 2022), the Czech Film Fund has had to temporarily suspend new film project registrations from April 1, 2022 until September 30, 2022.
Nevertheless, it appears that the incentive scheme should re-open for new registrations after 1 October 2022.
Having recognized the importance of the film industry for the Czech economy, the Czech government has decided to increase the film incentives budget for 2022 by a further EUR 23 million to cater to the increased demand (similarly, budget increases are expected also for 2023 and 2024). This decision is still subject to approval by the Parliament, but no major pushback is expected.
The Czech government has recently presented a new strategy that should streamline the government’s support for the audio-visual industry and utilize available funding from the Recovery and Resilience Facility.
Firstly, the Parliament is scheduled to discuss a bill capping the cash rebates under the film incentive scheme at CZK 150 million (approx. EUR 6 million) per project. Pursuant to the current proposal, the cap should apply only to projects that will be registered in the Czech incentive scheme following the effective date of this legislation (probably the end of 2022). As it currently stands, the bill does not provide for any exception in relation to expensive series consisting of multiple episodes.
Secondly, the government has decided to speed up the transformation of the Czech Film Fund into a new “Audiovisual Fund”, which should also financially support other areas, such as development and production of small screen series and gaming projects. These changes are anticipated to take effect in 2024 and many details still need to be hammered out.
We will continue monitoring the situation regarding available film incentives and effects that the legislative proposals may have on the industry and the government’s support for it.
If you wish to discuss any of these developments or other legal or tax aspects of film-making in the Czech Republic, feel free to get in touch with any one of us or your usual contact.
HAVEL & PARTNERS provided comprehensive legal assistance to IF Invest EAST in connection with the acquisition of 100% shares in Ostrava Airport Multimodal Park, which is currently completing the construction of a combined transport terminal at Ostrava Mošnov.
The legal services were delivered on behalf of HAVEL & PARTNERS by Petr Dohnal (partner) and Josef Bouchal (associate), who advised the client on M&A matters and coordinated the entire transaction. The firm’s other professionals, Štěpán Černý (managing associate) and Jakub Jireš (legal expert), were responsible for negotiating the bank financing, while Adam Karban (senior associate) and Patrik Chrást (junior associate) handled the real estate-related advice.
The new combined transport terminal will significantly contribute to the shift of freight transport from road to rail. In addition, in conjunction with the storage and production capacity in the Mošnov industrial zone, it will make logistics processes more efficient, reduce environmental impact and enable further development of activities in the Moravian-Silesian region. The construction project was completed at a time when e-commerce and the global importance of the interconnection of logistics and industrial parks are growing.
“The multimodal transport project on a former military brownfield is being implemented after twelve years of negotiations and preparations. I expect the newly built terminal combining rail, road and air transport to be an important artery of our region’s economy, and at the same time it will contribute significantly to the use and subsequent development of the Ostrava airport,” said Tomáš Macura, Mayor of Ostrava.
Authors: Josef Žaloudek, Kateřina Havlínová
On 11 July 2022, the General Financial Directorate of the Czech Republic published a press release informing the public that targeted inspections had been carried out to examine the taxation of income from cryptocurrencies. Currently, the differences between the information on income received by the tax authorities from third parties and the income declared to tax authorities in 2019 and 2020 by the taxpayers themselves are being investigated.
This has revealed differences worth hundreds of millions of Czech crowns both for individuals and legal entities. The tax administration obtains information not only through foreign tax administrations, but also from findings obtained during audits of other taxpayers, such as those concerning forms of collective investment where individual investors/taxpayers receive income later when it is transferred to their bank accounts.
The tax administration has also announced that it will continue to focus on transactions involving cryptocurrencies and the taxation of income from cryptocurrencies as part of its inspection activities, not only in the case of cryptocurrency traders, but will also focus on crypto exchanges, miners and other entities whose services may be linked to the use of cryptocurrencies.
If you have any questions or doubts regarding the taxation of cryptocurrencies in your situation or are interested in verifying the correctness of the taxation of your cryptocurrency income from previous years, where late payment interest can reach substantial sums due to the significant increase in the Czech National Bank repo rate, please do not hesitate to contact us for a detailed assessment.
Authors: Václav Audes, Michal Blahovec, Martina Rievajová
A few days ago, the President of the Slovak Republic signed the long-awaited amendment to the Act on the Conditions of Reimbursement of Medicinal Products from Public Health Insurance[1]. In addition to the main objective of the amendment, facilitating the arrival of innovative medicinal products, the amendment also introduces a number of fundamental changes for pharmaceutical companies that produce and distribute categorised medicinal products or so-called medicinal products subject to exemption. These fundamental changes concern, in particular, the conditions for the reimbursement of medicinal products from public insurance. As this is a complex and wide-ranging issue, we have prepared a series of articles on the reforms entailed by the amendment. We are currently preparing articles on the changes in the process of concluding MEA contracts, the content of the contracts themselves, the demonstration of reimbursement efficiency and many others to make it as easy as possible for you to orientate in the changes in the legislation.
Earlier this year, the Ministry of Health of the Slovak Republic (the “MoH SR”) declared the need to address the current problem of (un)availability of innovative medicinal products for patients with rare diagnoses. Currently, innovative medicinal products are reimbursed to these patients in the so-called exemption regime, in which the health insurance company individually assesses the patient’s application for such a medicinal product and decides according to its capabilities and set priorities. As a result, the decisions of the insurance companies and, therefore, the patient’s access to innovative medicinal product vary, as the legislation does not lay down clear and, above all, uniform rules for the decision-making of health insurance companies.
The amendment introduces two main changes to address this situation.
The first change is a change in the method of concluding contracts on the inclusion of a medicinal product in the list of categorised medicinal products,i.e., medicinal products reimbursed from public health insurance.
The second change is to increase the transparency of the process of decision-making by health insurance companies on the reimbursement of medicinal products that have not been included in this list.
Despite the fact that this is a major amendment that requires preparation on the part of pharmaceutical companies, the legislators have stipulated that the amendment will become effective as early as from 1 August 2022.
As already mentioned, one of the main changes is the change in the method of concluding contracts on the terms and conditions of reimbursement of a medicinal product, the so-called MEA contracts. According to the current legislation, in order for a specific medicinal product to be reimbursed from public insurance, the marketing authorisation holder in respect of a medicinal product (pharmaceutical company) must conclude a contract on the conditions of reimbursement of the medicinal product with all health insurance companies. Such a contract may also include special arrangements for discounts or back payments.
After the amendment comes into effect, in order for a specific medicinal product to be reimbursed from public insurance, the marketing authorisation holder must conclude a contract on the conditions of reimbursement of the medicinal product directly with the MoH SR. It should be added that it remains possible for the marketing authorisation holder to negotiate special discounts or other conditions with individual health insurance companies.
In any case, however, the essential conditions, such as the maximum amount of reimbursement of all insurance companies for the medicinal product, indication and prescription limitations or the settlement difference, will be negotiated directly between the marketing authorisation holder and the MoH SR.
Particulars of reimbursement contracts
In practice, contracts with the MoH SR should not differ substantially from those that marketing authorisation holders are used to conclude with health insurance companies. However, the settlement difference, which is the difference between the amount of reimbursements incurred by health insurance companies for a specific medicinal product over a 12-month period and the agreed maximum amount of reimbursement for the medicinal product for that period, is regulated in more detail in the amendment.
The contract with the MoH SR must explicitly stipulate the obligation of the marketing authorisation holder to pay the health insurance companies for the difference between the sum of reimbursements actually incurred by the health insurance companies for the medicinal product and the agreed maximum sum of reimbursements by the health insurance companies. In cases where the marketing authorisation holder fails to pay such a difference, the contract must contain a provision on the amount of the contractual penalty.
Apart from the changes to the contracting regime, from a pharmaceutical company’s point of view, not so much has changed for the so-called contracts subject to exemption. These are contracts concluded pursuant to Section 88 of the Act on the Conditions of Reimbursement of Medicinal Products from Public Health Insurance, under which the conditions of reimbursement for medicinal products that do not meet the conditions for general reimbursement from public insurance are determined. After the amendment comes into effect, marketing authorisation holders will be entitled to conclude contracts on reimbursement of medicinal products in the so-called exemption regime directly with health insurance companies.
In this respect, the amendment sets out precise conditions and procedures for health insurance companies when dealing with requests from medical doctors for reimbursement of a medicinal product that is not generally reimbursed from public insurance. Another novelty is the change in the maximum amounts of reimbursement by health insurance companies for a medicinal product under this regime.
As we have already mentioned, despite the complexity of the amendment, the legislators have left pharmaceutical companies approximately one month to adapt to the changes. It should be noted, however, that the entry into effect of the amendment, i.e., on 1 August 2022, will not automatically terminate the validity of the contracts on the conditions of reimbursement of a medicinal product already concluded. The amendment stipulates that the MoH SR is obliged to conclude new contracts with the affected marketing authorisation holders who have concluded contracts on the conditions of reimbursement under the legislation in force until 31 July 2022 by 28 February 2023.
Only by concluding a new contract on the conditions of reimbursement of medicinal products with the MoH SR will the validity of the existing contracts concluded between the marketing authorisation holders and health insurance companies be automatically terminated. In the meantime, the original contracts between marketing authorisation holders and health insurance companies will remain in force without change. For completeness, however, we would like to add that the amendment does not address the situation if a new contract has not been concluded between the MoH SR and the marketing authorisation holder by 28 February 2023.
The above sections of the amendment are only a basic introduction to the amendment and the changes it entails. We will discuss the selected changes in more detail in further articles that we are preparing for you.
[1] Act No. 363/2011 Coll. on the Conditions of Reimbursement of Medicinal Products, Medical Devices and Dietetic Foods from Public Health Insurance, as amended
HAVEL & PARTNERS builds on its many ESG activities and is the first law firm on the Czech market to join the United Nations Global Compact initiative. The initiative brings together a total of 15,000 companies and another 4,000 non-business entities from more than 160 countries committed to building a sustainable future.
The United Nations Global Compact is one of the most important international platforms promoting the principles of sustainability and equality in the areas of human rights, labour, environment and anti-corruption. In doing so, it relies on ten principles that it sees as the cornerstones of its mission to achieve global change towards better economic and social conditions, more effective international cooperation, peace and development.
HAVEL & PARTNERS, as the leader on the Czech-Slovak legal market, also endorses these principles and sees sustainability as one of the key issues of the present day and as a challenge and opportunity for its clients, whom it advises in this regard.
“We address these topics intensively not only with our clients, but also within the firm. At HAVEL & PARTNERS we are fully aware of the need to actively contribute to sustainable operations, equality and the fight against corruption. That is why we have also joined the UN project, which is committed to upholding the principles that are part of our corporate values and have long been an integral part of our corporate culture,” says Veronika Dvořáková, partner at the firm.
HAVEL & PARTNERS is also a founding member of a platform called Climate & Sustainable Leaders Czech Republic, which promotes the reduction of the carbon footprint in the Czech Republic and motivates Czech companies to launch activities that will contribute to their transition to sustainable operating models.
HAVEL & PARTNERS provided comprehensive competition law advice to refining and petrochemical company ORLEN Unipetrol in its representation before the AMO (the Slovak Antimonopoly Office). After a detailed analysis of local markets the Slovak Antimonopoly Office approved ORLEN Unipetrol’s acquisition of control over OLIVA petrol stations without further conditions. The company was represented by our competition law specialists, partner Lenka Gachová and legal expert Dušan Valent, who provided unique know-how in the field of competition, mergers and regulation, and contributed to the further success of our client.
Following this transaction, ORLEN Unipetrol will expand its activities in Slovakia, namely by a total of 39 petrol stations (both existing and under construction). The transaction will thus lead to increased competitive pressure on the Slovak fuel retail market.
ORLEN Unipetrol is directly solely controlled by POLSKI KONCERN NAFTOWY ORLEN SPÓŁKA AKCYJNA (PKN ORLEN S.A.), Republic of Poland. The main business of the ORLEN Unipetrol Group is crude oil extraction and processing, and petrochemical production. It focuses primarily on crude oil processing and wholesale; petrochemical production and sale; fuel retail sale; and electricity distribution and sale. In Slovakia, the ORLEN Unipetrol Group is active in fuel wholesale, retail sale of fuel and other goods at petrol stations as well as provision of other services. In Slovakia, the undertaking in question plans to acquire 41 petrol stations from the MOL Group, which the AMO has taken into account when assessing this concentration.
HAVEL & PARTNERS, in cooperation with the Brussels office of US law firm Jones Day, provided comprehensive legal advice to T-Mobile in the European Commission proceedings. The European Commission conducted an investigation into the suspicion of a possible restriction of competition due to T-Mobile’s agreement with CETIN and O2 to share mobile network infrastructure and has now adopted a decision approving the commitments proposed by T-Mobile Czech Republic, CETIN and O2 Czech Republic, thus finally closing the six-year long proceedings.
The European Commission initially considered that mobile network sharing in the Czech Republic could distort competition between mobile operators. The representation of T-Mobile, which was handled by HAVEL & PARTNERS competition law experts, namely partner Robert Neruda, counsel Ivo Šimeček and senior associate Jakub Kocmánek, required both comprehensive legal arguments in the proceedings and detailed knowledge of how mobile technologies work, including interpretation of the economic analysis of the impact of the cooperation on the market.
Thanks to sound legal and economic arguments and active communication with the Commission, many open issues were successfully clarified and potential concerns of the Commission about the preservation of effective competition were substantially removed.
The proceedings were closed by adopting commitments that lead to improved cooperation mechanisms between mobile operators, guaranteeing effective competition in the future and thus creating a stable legal basis for operators to operate a high-quality mobile network. This all for the benefit of end consumers, who can benefit from the implementation of new technologies that enable faster data speeds and better-quality connections.
“The proceedings are the first of their kind in which the European Commission has commented in detail on the competition law limits to mobile network sharing. This is of fundamental importance not only for this case, but also for future cooperation between operators across Europe. The clarification of cooperation rules in the case of Czech network sharing thus contributes to greater legal certainty regarding network sharing, which is crucial for the further development of telecommunications in Europe,” commented Robert Neruda on the outcome of the proceedings. The successful closing of the proceedings will thus enable T-Mobile to continue building a high-quality and reliable mobile network for its customers.
HAVEL & PARTNERS’ team of experts participated as a legal advisor to venture capital funds Atmos Ventures, Lighthouse Ventures, and Tera Ventures in an investment round in which the Czech logistics fintech company 4Trans raised EUR 18 million from investors. In this round, 4Trans also attracted private investors from Silicon Valley, and is thus aiming to become a leader in logistics companies financing.
4Trans provides financing for small and mid-sized companies in the logistics industry, which often face a lack of access to funding due to long invoice payment terms. 4Trans solves this by factoring, i.e. immediate reimbursement of issued invoices, checking on the payment history of customers and offering other financial products. As a result, the firm provides an ecosystem of financial services based on real-time data. The volume of funded invoices has already exceeded CZK 800 million.
The round was led by Atmos Ventures, fund specialising in supporting the development of AI and DeepTech technologies for data use. Funding was also provided by Lighthouse Ventures – a Czech fund that focuses on venture capital and start-up acceleration, and Estonian fund Tera Ventures, which focuses on investing in global digital start-ups. All of these venture capital funds were assisted by HAVEL & PARTNERS venture capital experts – partner Václav Audes, senior associate Juraj Petro and associate Jan Krejčí.
4Trans has also received funding from private angel investors, both from the Czech Republic and Europe and from Silicon Valley. The debt investor in this investment round was Advance Global Capital. 4Trans intends to use the funds for further expansion into foreign markets, strengthening its teams, software development and expanding its range offer to include additional financial and insurance services. The start-up wants to finance CZK 1 billion in the SME logistics segment this year.
At the law firm HAVEL & PARTNERS, the beginning of the second half of the year is traditionally linked to a wave of promotions. As of 1 July 2022, Martin Ráž and Dalibor Kovář are to become new partners of the firm. Twelve other lawyers at three seniority levels will also be promoted.
“Only excellent lawyers can keep a leading law firm at the top. That is why we, at HAVEL & PARTNERS, develop our motivation system with a clear vision of career growth, which is often much faster than that of our competitors. Martin Ráž and Dalibor Kovář, who are expanding the law firm’s management, are significant pillars of our legal teams and their benefit to HAVEL & PARTNERS has been crucial for a long time,” Jaroslav Havel, the managing partner, commented on the personnel promotions.
Martin Ráž has worked in the law firm as a counsel until now. He specialises in the real estate and construction, law of contract, conflict of law (cross-border transactions and investments), comprehensive judicial and administrative proceedings and public sector and regulatory areas. He has engaged in hundreds of transactions, commercial cases and litigations, often involving a European or foreign element.
Dalibor Kovář is to move to the partner level from his position as managing associate. He specialises in electronic legal acts, digital transformation in law, IP law, IT, e-commerce, law-making and the law of contract. He has gained experience in over hundred transformation projects and he assists clients in more efficient commercial use of data and proper legal approach to innovative technologies. He has taken part in the drafting of the banking identity bill and the right to digital services bill.
Robert Porubský, Pavlína Krušinová, Jan Fikar, Šimon Hradilek and Kateřina Surková have been promoted to the position of counsel.
Petra Tomšů, Vladimir Ivanov, Martin Šimek and Roman Světnický are to become managing associates. Last but not least, the group of senior associates is to be expanded by Mária Kopecká, Róbert Gašparovič and Jiří Nečas.
At a non-legal position, Jasna Zejnilović has also been promoted and is to become the new Event Manager at HAVEL & PARTNERS as of the same date.
Source: Building World (2/2022)
Authors: Ondřej Majer, Oliver Benda
The real estate market in Slovakia has seen a constant rise in prices in the past years, recently reaching unprecedented levels. Just to illustrate, the average price of residential property rose by 22.1% year-on-year, while the prices of houses rose by 31.5% year-on-year in the last quarter of 2021.
The rising prices are often attributed to low mortgage interest rates and the rising prices of construction materials and energy. According to experts, however, the main cause can be seen in the insufficient supply of new real property, which is unable to match the demand.
In its latest report on economic and monetary development, the National Bank of Slovakia maintained that the prices of real estate had reached levels with a high risk of correction. Hence, the government is attempting to tackle this issue and has come up with ideas to boost the supply of new residential real estate.
Apart from the construction of rental apartments, one of the ways to address the insufficient offer of apartments in Slovakia is to adopt a new building bill. The bill is expected to bring about a major acceleration and streamlining of building proceedings and thus increase the number of new development projects and accelerate their supply on the market. The new building bill consisting of two independent bills on zoning and construction has already been passed by the Slovak Parliament and signed by the president, meaning that the new regulations will replace the 1976 Building Act as of 1 April 2024.
The new Building Act is the law-making body’s response to the long-term criticism of the inadequately long and non-transparent building proceedings in Slovakia. In the international Doing Business rating benchmarking particularly the duration and complexity of the building permit application proceedings, Slovakia ranked an unflattering 146th, faring worse than a number of developing countries.
The rigidity of building proceedings, however, is not merely an issue negatively impacting the availability of housing but also an obstacle to the development of the Slovak commercial real estate market. The unreasonably complicated and lengthy procedures at the construction authorities are the target of complaints among our clients operating in the office building and logistic park development fields.
Currently, before starting construction in Slovakia, it is necessary to obtain a zoning decision and then a building permit in two separate proceedings. For certain types of larger constructions, the zoning decision must be preceded by an environmental impact assessment in the EIA proceedings. Under the new Act, all the above proceedings will be merged into a single proceeding in which the building authority will issue a building permit decision once all pre-conditions have been met. The designer will then prepare a detailed construction project that will have to be verified by the building authority before the construction can begin. However, for simple structures, e.g. family houses, the verification of the construction project by the building authority will not be required and such constructions can start immediately once the building permit decision is issued.
Furthermore, the building proceedings in Slovakia will now be, to a large degree, choreographed by a designer who is required to discuss and resolve the comments from the self-governing units, the authorities concerned and the participants in the proceedings (e.g. neighbours). Based on the individual opinions discussed, the designer will then prepare a report, which will serve as the grounds for the decision of the building authority. The building authority will thus have rather a supervisory function and its role will primarily be to resolve potential disagreements between the submitted construction plan and the comments filed by persons concerned that have not been resolved by the designer.
Another crucial change is the stipulated fiction of consent of persons entitled to comment on the construction plan (i.e. the self-governing units, authorities concerned and neighbours) in the event the deadline for sending opinions expires. These persons will have to send their comments within the time limit stipulated by the Act (30 days, in general). Otherwise, they will be deemed to have no comments and it will be possible to approve the construction.
The new Act intends to modernise and accelerate building proceedings through extensive digitisation at all levels of proceedings. All building permit processes should take place electronically via a newly established information system.
In addition, the transfer of building authority powers from the self-governing units to the state will also constitute a major change. A new central Zone Planning and Construction Office will be established; the powers of existing building authorities will be transferred to the offices of the new state authority.
Another provision worth mentioning concerns the prevention of subsequent legalisation of unlawful constructions(i.e. buildings built without permission) that will not be granted an occupancy permit and will not be connected to utility networks. The new Act should also make it easier to issue an official order to remove unlawful constructions. The building authority’s claims regarding costs linked to the removal of a construction will be secured by a pledge over the property concerned. If the claim is not satisfied, it will not be possible to transfer the property to another person.
The approved changes are based on the same founding principles as the new Building Act in the Czech Republic that the authors of the Slovak Act were probably inspired by in many ways.
During the public discussion over the new Building Act, there was a general consensus that the intention of the law-making body to accelerate and simplify construction proceedings can be viewed positively and that the new provisions governing the construction proceedings should truly remove a number of unnecessary barriers and prerequisites that unreasonably protract the current construction approval process. Despite that, the new bill has faced extensive criticism from the professional public, NGOs, and self-governing units since its inception.
The original versions of the Act, its critics claim, seemed unfinished in many aspects and could lead to ambiguities during its future application or drastically interfere with the established principles underlying administrative proceedings in Slovakia. A potential problem was also seen e.g. in the delegation of powers of building authorities to entities that are not, for reasons of capacity and expertise, competent to do so, e.g. such as the heritage conservation and environmental protection authorities.
The strong position of the designer in the new construction proceeding was also subject to criticism. The designer, as the person paid by the developer, will always be expected to act, the critics claim, in the developer’s interest, which could lead to the violation of the principle of impartiality of public administration.
Furthermore, some stakeholders have voiced their concerns about whether the acceleration of proceedings will, in certain cases, take place to the detriment of the self-governing units, neighbours or environmental protection principles. The self-governing units, in particular, disapproved of the amendment taking away the powers of building authorities regulating construction in their territory.
According to media coverage, lawmakers have only partially resolved relevant comments regarding the approved wording of the legislation received by the authorities, self-governing units, and NGOs. The heritage conservation bodies, for instance, succeeded with their comments and will at last not be in charge of the approval of constructions. The environmental protection authorities, on the other hand, who have had no experience so far with these activities, will be responsible for permits and approvals of structures with an impact on the environment. The originally proposed vast powers of designers have also been preserved.
The approved wording of the Slovak Building Act thus fails to fully dispel doubts whether the approval procedures will always be decided by authorities lacking qualities and sufficient staff to ensure professional and quick assessment of the compliance of the structures with legal regulations, and whether the impartiality of the public administration will be sufficiently secured in the approval processes.
Despite the above shortcomings, we firmly believe that the new Building Act will at least to some part contribute to faster construction and will thus increase the supply of new residential (and commercial) property. Time will tell whether these beliefs will turn into reality. Regardless of the anticipated positive impact on the real estate market, however, the new Building Act will undoubtedly bring an element of uncertainty to the Slovak real estate market resulting from the radical change in the building approval processes, which have more or less been in place without any changes since the 1970s. There will be issues with the application of the new regulation especially right after it becomes effective that will be resolved in practice or, in the worst-case scenario, an additional amendment to the act.
Authors: Robert Nešpůrek, Richard Otevřel
Last summer, we informed you that the new Standard Contractual Clauses (“SCCs”) adopted by the European Commission in June 2021 were to be taken into account for the exchange of personal data with non-European foreign countries; a transition period of a year and a half seemed sufficient even for complex contractual relationships that may involve dozens of companies globally. Well, time has moved on, and if anyone has not already gotten to work, there are barely six months left to ensure that transfers of personal data outside the European Union are covered by the new contractual templates by December 28 at the latest. Perhaps as a small bonus for latecomers, the European Commission has in the meantime responded to current practice in concluding SCCs by issuing a set of questions and answers (Q&As) which it intends to continue to update regularly in the future. The most interesting observations are presented in the text below.
Pursuant to Article 46 of the GDPR, SCCs are an instrument for establishing appropriate safeguards for the protection of personal data for the transfer of personal data to third countries whose legal order does not guarantee a sufficient level of protection of personal data. Specifically, they are a model text of a contract between a controller or processor of personal data who intends to transfer personal data to a third country outside the European Union and/or outside the EEA (the so-called data exporter) and a recipient of personal data in that third country (the so-called data importer).
While there are also other instruments available for these purposes (such as binding corporate rules, or BCRs), SCCs are the most popular instrument according to a survey – up to 88% of the companies that participated in the survey in 2019 use it specifically for GDPR compliance when transferring personal data outside the EU.
Please see our previous post for a more detailed discussion of the characteristics of SCCs, but it remains true that while the designation “model clauses” may imply their ease of use, the content of the Q&As itself suggests otherwise.
The SCCs published by the European Commission do not constitute a ready-to-use document in which just the parties and signatures can be added. The very structure of docking, i.e. the preparation of clauses for future accession by other parties (particularly useful in global corporations whose structure changes over time), does not provide a practical solution to how contracting should take place. The Q&As therefore correctly point out that even the method of signing (e.g. whether it can be done electronically) depends on the applicable law chosen and the treatment of this issue typically in the civil codes of the countries concerned. And since docking anticipates that the existing parties to the contract must agree to the addition of, for example, an additional processor, it is advisable to agree on a mechanism for securing such consent.
The European Commission stresses that SCCs cannot be modified (except in expressly specified cases where, on the contrary, a modification is rather necessary); the above is most often solved by inserting SCCs as part of another contract, which will “wrap” the SCCs, so to speak.
Subsequent work with the text of SCCs requires, while respecting the prohibition on changes to other parts (the sanction for violation of this prohibition would be the practical inadmissibility of SCCs as prima facie evidence of compliance with the GDPR for the purpose of transferring personal data outside the EU, and the need to prove the provision of safeguards for the protection of personal data by other means),
(i) selecting the right modules reflecting the position of the exporter and importer of personal data – in other words, deleting irrelevant clauses from the model contract;
(ii) adding optional data, such as. the governing law, supervisory authorities, etc.;
(iii) completing the annexes where, in addition to the basic parameters of the contract (e.g. categories of personal data to be transferred), a description of the technical and organisational measures to ensure the security of personal data should also be included; and finally
(iv) adding appropriate additional measures to enhance security safeguards, which we mention in more detail below.
The resulting wording of SCCs used in practice can thus be highly individualised and very different from the model. For example, the choice of the right module (one of four) may be complicated by the real characteristics of the contractual relations between the parties concerned, i.e. in the context of commercial cooperation the data importer (e.g. in India) may be partly in the role of controller and partly in the role of processor: these two functions need to be sufficiently distinguished in the contract, but at the same time this does not prevent having both modules covering both options agreed in the same contract.
Finally, the Q&As highlight the situation regarding the still unresolved consequences of the Schrems II decision – even if SCCs are used, the parties remain responsible for conducting an assessment of the compliance of the third country’s (to which the personal data is to be exported) legislation, the specific circumstances of the processing, and any and all technical and organisational safeguards. And while the importer in the third country concerned is more likely to be in a position to better or more easily evaluate those issues (it will be easier for a company based in California to consult with Californian lawyers), it is ultimately the data exporter who is primarily responsible under the GDPR for evaluating whether additional measures will need to be added to SCCs to ensure compliance with the requirements of European law (e.g., data encryption, pseudonymization, etc.). For these cases, it is advisable to have a suitable robust methodology in place to both evaluate the legal system of the country where you want to export personal data and what measures to take based on such evaluation.
With less than 6 months to go, anyone using the old SCCs today (or perhaps even still relying on the invalidated Privacy Shield) will have to negotiate new upgraded standard contract clauses with their business partners.
Our team at HAVEL & PARTNERS will help you to
Dear Clients and Business Friends,
Since we are facing new economic and geopolitical pressures in today’s turbulent times, with an unprecedented impact on people’s everyday lives and on business, we have dedicated the new issue of H&P Magazine to current challenges, opportunities, trends, and to certain risks. Get ready for a new reality with our H&P Magazine!
Soon, many a company is to face a new duty to publish a non-financial ESG report. In fact, sustainability is a broad issue within companies and so are the criteria and data an ESG report should cover. We will advise you on where to get started with reporting and what to focus on. In the magazine, you can also read an article about how best to prevent cyber attacks and what to do when your company actually becomes a target.
The new H&P Magazine also covers a wide range of other topics such as the trends in venture capital and cryptocurrency taxation, which appeal to many of our clients. You can also read about the benefits of a digital notary, about how architectural competitions can contribute to the construction of high-quality buildings, or about how to proceed in the public procurement of legal services.
We have been trying to be a truly reliable partner for you also in the context of the unexpected events and economic uncertainty brought about in the recent months and years. A partner you can rely on with absolute confidence under any circumstances, for business as well as private matters.
We are therefore very pleased by the long-term remarkably positive feedback we get from you – our clients and business partners – which keeps us highly motivated for the future. Moreover, it was also your references that made us win the Chambers Europe Awards, the most prestigious sectoral award for the best law firm in the Czech Republic, for the third time in a row in 2022. In addition, in the last Slovak Law Firm of the Year competition, we were rated the best international law firm and we also repeatedly won the award for the best client services.
Let me thank you, on behalf of all my colleagues, for your trust and long-term cooperation which we will hopefully continue to build upon in the coming period.
I hope you will find the magazine inspirational and pleasant to read.
Jaroslav Havel
Managing Partner
