Authors: Štěpán Štarha, Patrícia Jamrišková, Natália Tomčíková
Following a legislative change[1], the statutory bodies of companies as well as liquidators of companies in liquidation registered in the Commercial Register of the Slovak Republic (the “CR SR”) are obliged to register precisely specified additional identification data in the CR SR. The specific data to be registered are set out in the table below. The deadline for complying with this obligation is set to be no later than 30 September 2022.
| What person? | What data must be registered? |
| For natural persons in the capacity of, e.g. statutory body (executive director, member of the board of directors), member of the supervisory board, proxy holder, liquidator, head of the branch of the business of a foreign legal person, head of the business of a foreign legal person, statutory body of the founder of the branch of the business of a foreign legal person | Other identification data, if a birth identification number in Slovakia has not been assigned to the person, the passport or ID card number will also be considered as such other identification data |
| For natural persons in the capacity of a shareholder or sole shareholder in case of a joint stock company or simple company for shares | Date of birth Birth identification number or other identification data, if a birth identification number has not been assigned to the person in Slovakia, the passport or ID card number will also be considered as such other identification data |
| For legal persons in the capacity of a shareholder, a sole shareholder (in case of a joint stock company or simple company for shares) or the statutory body of the founder of the branch of the business of a foreign legal person | Identification number, if assigned to the person |
It is possible to register the missing identification data to the necessary extent either (i) with the next application to register a change of the registered data in the CR SR in another matter or (ii) with a separate application to register a change of the registered data in the CR SR, the subject matter of which will be exclusively the registration of the missing identification data.
The application for registration must be supported with official documents containing the additional data to be registered or with an affidavit with an officially certified signature. In the case of registering additional identification data only, no court fee is paid.
Failure to comply with this obligation within the set deadline may result in a penalty in the form of a fine. In such a case, the registry court may impose a fine of up to EUR 3,310 on the statutory body of the company, as well as on the liquidator of the company in liquidation, who fails to register or ensure the registration of additional identification data.
If you are interested, our team is ready to assist you in complying with this obligation.
[1] Act No. 390/2019 Coll., amending Act No. 513/1991 Coll., the Commercial Code, as amended, and amending certain acts.
Authors: Josef Žaloudek, Kateřina Havlínová in cooperation with Mgr. Martin Blaha, an attorney of the Slovak Bar Association
At the end of 2021, the European Commission presented a proposal for a Directive laying down rules to prevent the misuse of entities that lack sufficient for tax purposes economic substance (so-called “shell entities”). The Directive should be implemented by 30 June 2023 with effect from 1 January 2024. However, given the very fundamental nature of the change, it is essential to prepare now, if only by conducting an indicative initial assessment of which companies in your group may be exposed to the new rules.
The proposed Directive lays down a system of indicators to determine whether or not an entity has sufficient economic substance. Typical indicators that will raise a problem in this respect are (i) the type of income (if more than 75% of it in the last 2 years is from passive sources such as dividends, interest, royalties, lease, insurance, etc.), (ii) paid out or received cross-border, and (iii) “outsourced” management of the company.
If these indicators are met simultaneously, the entity will have to provide additional information (regarding the premises used, the statutory body, etc.) to the tax authority in the tax return. If the additional information shows that the economic substance of the entity is not met, the practical consequence will be, in particular:
Under the proposed Directive, the fine for failure to comply with the reporting obligation or for providing false additional information should be at least 5% of the entity’s turnover.
The whole system proposed by the Directive is very comprehensive, includes numerous exemptions, etc. and can be subject to change. However, it is clear that the “baseline tests” described above may capture a substantial part of e.g., offshore companies.
If you believe that any of your, for example, foreign group companies could become an entity without sufficient economic substance (and thus trigger additional tax obligations in the Czech Republic or Slovakia), please do not hesitate to contact us for further assessment.
A team of specialists from HAVEL & PARTNERS helped Roche, a leading multinational manufacturer of specialised medicinal products, win a dispute over a Czech domain name having the name of one of those medicinal products. Based on the award of the Arbitration Court attached to the Economic Chamber of the Czech Republic and Agricultural Chamber of the Czech Republic in ADR proceedings, the domain name was subsequently transferred to Roche for no consideration.
When registering a new medicinal product, Roche discovered that the required Czech domain name had already been registered by someone else. That registration took place on the day Roche publicly announced the name of the new medicinal product. This was therefore an example of so-called cybersquatting, which is the deliberate registration of a domain name at the expense of another brand. The domain name holder demanded several million Czech crowns from Roche for the domain name transfer.
Our technology law experts – partner Ivan Rámeš, associate Tomáš Chmelka and associate Matěj Kurtin – successfully resolved the entire dispute for Roche, including sending a call to transfer the domain name for no consideration, conducting negotiations with the domain name holder, and preparing and conducting ADR proceedings that were closed with the transfer of the domain name to Roche for no consideration.
Roche is a global pioneer in the field of pharmaceuticals and diagnostics, focusing on the production of specialised medicinal products in the areas of oncology, immunology, infectious diseases, ophthalmology and central nervous system diseases. Headquartered in Basel, Switzerland, the Roche Group operates in more than 100 countries worldwide.
A specialised team of HAVEL & PARTNERS lawyers led by partner Josef Hlavička and managing associate Kamila Kulhánková successfully arranged the organisation of an architectural competition for the design of the new Vltava Philharmonic Hall in Prague. The winner was the Danish studio Bjarke Ingels Group. According to the plans of the city administration, the unique building, which will be built on the Bubenské nábřeží embankment near the Vltavská metro station, should be completed in 2032.
For HAVEL & PARTNERS this is another successfully completed architectural competition with international participation. A total of 115 teams from 25 countries entered the competition, and 5 renowned architectural studios were also invited to participate in advance.
The subject of the competition, announced by the City of Prague and the Prague Institute of Planning and Development, was to design a contemporary music centre that would meet global standards (in terms of acoustics, capacity, layout, technical facilities, architecture, and urbanism) and at the same time underline Prague’s reputation as a world cultural metropolis and a symbol of the Czech musical tradition. The Vltava Philharmonic Hall will be home to two orchestras – the Prague Symphony Orchestra FOK and the Czech Philharmonic Orchestra.
“The Vltava Philharmonic Hall, in the design presented by the Danish studio Bjarke Ingels Group, will become a vibrant centre of life on Vltavská. A new urban park will stretch to the east, the south side will open up access to the water, a square will be created on the west side, and the new urban district of Bubny-Zátory will be visible to the north. The building itself will be accessible from all directions and levels,” said Michal Sedláček, chairman of the jury.
“I am convinced that the new Philharmonic Hall building will immediately become a symbol of Prague. The authors have perfectly understood the place where they are putting the building, and in the context of Prague they came up with a completely new approach to public space,” added Petr Hlaváček, 1st Deputy Mayor, about the winning design. The Vltava Philharmonic Hall building will have a total of three halls: the main concert hall for about 1,800 spectators, a small hall for chamber music with a capacity of about 700 seats, and a multifunctional hall for other genres and types of events with a capacity of up to 500 seats. According to the announced estimates, it should be completed within ten years.
As part of its pro bono activities, HAVEL & PARTNERS organized an architectural workshop for the Vlček Family Foundation, in which an expert jury selected the winning design for the reconstruction of the Cibulka estate in Prague. The Foundation plans to build a children’s hospice with a palliative centre there. The winning architectural studio, Petr Hájek Architekti, will design the new look of this historic complex in Prague’s Košíře district.
The expert team of HAVEL & PARTNERS, which specialises in architectural competitions, headed by managing associate Kamila Kulhánková, was responsible for the complete organization and administration of the architectural competition workshop, which brought together a total of 48 designs. The eight-member jury, consisting of representatives of the Vlček Family Foundation and experts in architecture, health and social care, selected five finalists, from which the winning design by Petr Hájek Architekti was subsequently selected by the jury.
“We selected the result because it best combines two main priorities: the best possible future use of the site for seriously ill children and their loved ones and the preservation of the entire existing part of the estate with the utmost respect for history,” said architect František Brychta of the Vlček Family Foundation, the head of the Cibulka project, about the winning design.
Second place went to the design by OV Architekti and third place to the design by Atelier KAVA. The other two finalists – the designs by the architectural studios ORA KUTNÁ HORA and A1 Architects in collaboration with AED project – were also evaluated as exceptionally good by the jury. Discussions with the architectural studios on the specific terms of cooperation will now follow. The investor will approach the winning team of architects first.
“We are delighted that we were able to participate as legal advisors in this project, which will not only save an amazing historical complex, but above all will serve an exceptionally meaningful purpose in its new phase, which is children’s palliative care,” said partner Adéla Havlová, who is in charge of CSR and pro bono activities at HAVEL & PARTNERS.
As part of the reconstruction, the Vlček Family Foundation plans not only to repair the historic buildings of the Cibulka estate, but also to expand the existing estate to include a hospice section. “The demands are placed on it as a state-of-the-art medical facility of the 21st century, and at the same time we want the children and their loved ones to feel at home there and have nature literally at their fingertips right from their room,” said Ivana Plechatá, director of the Vlček Family Foundation.
After the reconstruction, the buildings will also house the offices of the Vlček Family Foundation and the Zlatá rybka organization, which has been fulfilling the dreams of seriously ill children for seven years. There will also be rooms for parents, therapy rooms, a bistro and a hall that will also be used for the training of experts caring for seriously ill children and their loved ones. The entire renovated Cibulka estate, including the children’s inpatient hospice, is scheduled to open in autumn 2026.
HAVEL & PARTNERS’ venture capital specialists provided comprehensive legal services to Credo Ventures in its investment in the start-up EquiLibre Technologies. Legal advice was provided by partner Václav Audes and senior associate Tomáš Navrátil, tax aspects were handled by partner Josef Žaloudek, and corporate, contractual and employment law services were provided by senior associate Irena Munzarová and senior associates Radek Riedl and Vojtěch Katzer.
Credo Ventures specialises in investments in fast-growing projects across a range of major technologies in the CEE region. In EquiLibre Technologies, this involved an investment in a very early stage of the project.
The start-up was founded by a trio of mathematics and computer science experts who previously worked as top developers for Google. They have set up their own company, EquiLibre Technologies, with an objective to develop a unique algorithm and AI system to buy and sell assets on stock exchanges to pick out suitable investments, particularly in stocks and cryptocurrencies, before they increase in value.
One of the common types of distribution agreements are selective distribution agreements. In a system of selective distribution, the supplier undertakes to sell the contract goods or services, either directly or indirectly, only to distributors selected on the basis of specified criteria and these distributors undertake not to sell such goods or services to unauthorised distributors within the territory reserved by the supplier to operate that system.
By way of selective distribution, a supplier thus creates a network of authorised distributors. The admission to the network can be subject to purely qualitative criteria only, or additionally to quantitative criteria, which limit the potential number of distributors more directly by, for instance, requiring minimum or maximum sales or fixing the number of distributors.
Both purely qualitative selective distribution and quantitative selective distribution are covered by the Vertical Block Exemption Regulation (“VBER”), regardless of the nature of the products and the nature of the selection criteria.
For purely qualitative selective distribution, relying on the VBER may not even be required: if the selective distribution system complies with the so-called Metro criteria laid down by the European Court of Justice, it is generally considered to fall outside Article 101(1) TFEU. For this to be the case, the distributors must be selected only on the basis of objective criteria, required by the nature of the product, which do not put a direct limit on the number of distributors. Only then will the selective distribution system be considered to be purely qualitative of nature.
Under the VBER, the supplier must, in the territory where it operates selective distribution, prohibit its authorised distributors from selling to unauthorised dealers. This belongs to the essence of selective distribution and is not considered to be a hardcore restriction. Besides this, however, the authorised distributors operating at the retail level must be entitled to sell, actively and passively, to all end users in the “selective territory” and also to other members of the network. The latter cross-supplies between the members of the network must be allowed at all times, even between members operating at different levels of trade. Like in other distribution systems, the supplier is entitled to prohibit authorised wholesalers from selling, actively or passively, to end users, and the supplier can impose a location clause on the members of its network, thus making sure that they operate from a given place of establishment. Finally, the Commission imposes an overall equivalence requirement on the criteria that apply to online and offline sales: compared to the latter criteria, the former may not dissuade distributors from using the internet.
The supplier is allowed to impose an active sales restriction on the members of its network outside the selective territory, to territories in which the supplier has appointed an exclusive distributor (Vertical Guidelines, no. 56). Inversely, selective distributors are not protected against active or passive sales by (exclusive) distributors located outside the selective territory into the selective territory.
The draft VBER and draft Vertical Guidelines contain some important developments in respect of selective distribution.
The draft VBER expressly distinguishes between hardcore restrictions in three types of distribution systems: exclusive distribution (Article 4(b)), selective distribution (Article (4(c)) and distribution which is neither exclusive or selective (Article 4(d)).
In order to analyse the impact of the list of hardcore restrictions on selective distribution, account must be also be taken of the list of hardcore restrictions for the non-selective distribution. This shows that the draft VBER grants the authorised distributors, which often invest in the supplier’s brand, enhanced protection against sales by unauthorised distributors.
The draft VBER does so in two ways. Firstly, the supplier will be allowed to prohibit sales to unauthorised distributors in the selective territory not only by the authorised distributors themselves, but also by their customers (Article 4(c)(i), second indent). Secondly, the supplier will be allowed to impose a restriction on (exclusive) distributors and/or their customers outside the selective territory to sell actively or passively to unauthorized distributors located inside the selective territory (Article 4(b)(ii) and 4(d)(ii)). This “reverse protection” is separately dealt with in the next DLC countdown 20.
The draft Vertical Guidelines, in their turn, provide more flexibility in defining the online criteria. The Commission indeed no longer imposes an overall equivalence requirement on the criteria that apply to online and offline sales. A supplier will be allowed to have different online criteria, provided that these do not have as their object to prevent the authorised distributors or their customers from effectively having online sales.
Practitioners have long struggled with the creation of or the transition to a system of selective distribution in the EU, particularly because they have to apply an all or nothing approach. If selective distribution is not immediately applied throughout the EU, which frequently is the case for SMEs, the supplier is currently not allowed to protect its authorised distributors against sales by distributors located outside the selective territory to unauthorised distributors in the selective territory. Imposing a prohibition on such sales currently amount to imposing an illegal customer/territorial restriction on the latter distributors. The draft VBER remedies this and allows the gradual rollout of selective distribution in the EU.
The upcoming changes of the draft VBER and the Vertical Guidelines are to be welcomed. They incorporate the developments of the case-law since the entry into force of the VBER and, in so doing, they bring selective distribution into the new millennium, where online sales have come to occupy a much more important role. Suppliers will have more flexibility to draft the selective criteria applicable to online sales by authorised distributors, without having to worry about the currently applicable equivalence requirement between online and offline selective criteria.
In addition, the increased protection of authorised distributors against sales of the contract products by unauthorized distributors is to be welcomed. Authorised distributors often invest in a supplier’s brand and are discouraged by sales by authorised distributors, leading to a potential unwillingness to keep up such investments. Moreover, the gradual rollout of selective distribution in the EU benefits SMEs.
To end on a note of caution, what is worrying is that the draft Vertical Guidelines, like they do in respect of non-selective distribution, foreshadow that the Commission intends to have more recourse to its possibility to withdraw the benefit of the VBER. For selective distribution, for example, the Commission mentions that the VBER is likely to be withdrawn where the products do not require selective distribution or the applied criteria, such as the requirement to have one or more brick-and-mortar shops. This is a worrying development in view of the safe harbour (and legal certainty) which a block exemption is supposed to offer the market participants.
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If you need more information or our assistance with setting up the distribution system, please contact Robert Neruda or Štěpán Štarha, who are the firm’s partners responsible for this area.
WANT TO KNOW MORE? STAY TUNED…
Counting down towards 1 June 2022, we aim to provide you with regular updates and the necessary legal knowhow in order to fully prepare your business for the future. Please also check out the Distribution Law Center platform (www.distributionlawcenter.com) and our LinkedIn page for much more information on the laws governing vertical agreements, covering both competition and commercial law. 27 specialized teams from all over the EEA are working hard to turn the platform into your favourite source of guidance and information.
In the 10th annual Law Firm of the Year 2022 competition, the largest Czech-Slovak law firm HAVEL & PARTNERS won the main award in the International Law Firm category, and also won the Best Client Service category for the third time in a row. In addition, it also defended its first place in the Competition category and ranked among the top-ranked law firms in 12 other categories. The official announcement of the results took place on 26 April at a gala evening organised by the publishing house EPRAVO Group, s. r. o., in cooperation with TREND weekly.
The firm has thus reconfirmed its exceptional position on the Slovak and Czech legal market, which is unique in Europe, and remains the most successful and comprehensive law firm in both countries. “This is our best result so far in the history of this competition in Slovakia – winning both the main and client service awards, including winning the competition award and 12 positions in the practice area categories among the top-ranked law firms confirms our versatility and the excellence of all our specialised teams,” commented the firm’s managing partner Jaroslav Havel on the success.
“The biggest reward for an attorney is a satisfied client. Winning the Best Client Service category for the third time in a row, which was decided by the satisfaction level of our clients, is the most important award for us and a message that our clients are extremely satisfied with our legal and tax services as well as our client care. We are proud that our clients include some of the most successful companies across all industries. Their trust motivates us to continuously work on ourselves, to improve and innovate our services, and to bring them added value,” said Štěpán Štarha, a firm partner co-responsible for managing the Slovak office of HAVEL & PARTNERS.
“Our firm operates in Slovakia and the Czech Republic, but our achievements and capabilities go far beyond the borders of these two countries. The main award in the International Law Firm category therefore confirms that we are able to complete and manage cross-border transactions and projects anywhere in the world thanks to our unique network of contacts, both in the CEE region and outside Europe, and our unique knowledge of the legal and business environment. We offer legal and tax advice in 12 global languages and have assisted our clients in nearly 110 countries. Up to 70% of our cases have an international element,” added partner Ondřej Majer.
The firm also won in the area of competition law. “We very much appreciate the success in Slovakia. We started systematically building our competition law advisory services here eleven years ago, since then we have worked on large projects and have gained the trust of many major Slovak clients. We would like to thank them for that. The award is a confirmation that we are on the right track and an encouragement to keep improving,” said Lenka Štiková Gachová.Robert Neruda added, “We are the only ones on the market who effectively combine legal and economic competition advice. This enables us to offer our clients unique know-how for solving complex competition and regulatory issues.” In 2021, the firm’s Slovak office also won the competition law category in the TOP 10 largest law firms in Slovakia ranking, compiled by the SME daily and The Slovak Spectator, and thus became the most successful law firm in this practice area in Slovakia.
Law Firm of the Year is a prestigious practice area competition evaluating the legal services of firms operating in the Czech and Slovak Republics, organized by the publishing house EPRAVO Group, s.r.o. It was first announced in the Czech Republic in 2008, and since 2013 it has also been organised in Slovakia in cooperation with TREND weekly. More information on the competition can be found here.
In its international Chambers Europe Awards ranking, Chambers and Partners, a British ranking agency, awarded HAVEL & PARTNERS the best law firm in the Czech Republic in 2022. Our law firm received this most prestigious foreign award in the legal industry for the third time in a row. “HAVEL & PARTNERS’ streak of winning Czech law firm of the year for its 3rd consecutive year is unmatched by any firm in any award category, and a testament to the firm’s remarkable success in the Czech Republic,” said Chambers and Partners. According to the agency, clients appreciate that the law firm is a reliable partner offering services from A to Z with a practical approach and excellent quality, and the team is able to deal with their matters worldwide thanks to the firm’s network of contacts.
“The repeated success confirms our position of a long-term leader in the legal field, continuously offering our clients maximum support and top legal and tax advisory of highest international standards, even amid the unforeseen events, emergencies and economic turmoil that we saw last year,” said managing partner Jaroslav Havel.
“We appreciate the award very much, because it is not only fellow lawyers in the field and other law firms, but most importantly, client testimonials that determine who receives the award. I would like to thank our clients for their trust and long-term cooperation. I believe that we will successfully build on it in the next period. A big thank-you also goes to all our colleagues at HAVEL & PARTNERS who work every day to maintain the trust of our clients in the long term. The award is, above all, an appreciation of their top expertise and the maximum effort that they demonstrate in working with their clients,” said Havel.
The results of this year’s prestigious Chambers Europe Awards, presented by Chambers and Partners, a London-based publisher, were announced in the Madrid Intercontinental Hotel on 22 April 2022. Accepting the award in person, Václav Audes, a partner of the firm, delivered a speech based on what Jaroslav Havel said: “I am proud of our team, without whom I could not be standing here now. I am accepting the award for the excellent work done, which has positively affected the evaluation of our firm and the reputation of the Czech legal field abroad in general.”
Based on independent assessment and comments from clients and law firms as well as research by more than 130 analysts, Chambers and Partners annually issues rating publications that have been mapping law firms of the highest quality worldwide since 1990. The Chambers Europe Awards acknowledge the top law firms in individual European jurisdictions, rating their work, service quality, strategic growth and successes over the past 12 months.
In the 13th year of the Act of the Year poll, the new Building Act won, which is expected to bring about a major simplification and acceleration of building permitting procedures in the Czech Republic. The legislative team of HAVEL & PARTNERS, led by partner František Korbel, was involved in the preparation of the Act. The best Act of the Year 2021 was decided by public vote. This is the fourth time in a row that our firm was involved in drafting the winning Act of the Year.
“The aim of the new Building Act was mainly to reform the performance of state administration and to remove the huge level of complexity in the permitting of structures. We are convinced that in this respect the new Building Act will clearly benefit the Czech construction sector,” commented František Korbel on the success of the regulation in the poll.
“We want to be the ones who help shape the legal order and contribute to improving the quality of life and business conditions, which is why we are involved in the preparation of necessary legislation as well as assistance to the State, cities, chambers and associations, and we are pleased that our efforts are regularly appreciated by the professional public and entrepreneurs with their votes in the Act of the Year poll,” he added.
In the previous three years, the Acts drafted by HAVEL & PARTNERS were also successful. Last year, the Bank Identity Act won the poll, the year before that it was the Act on the Right to Digital Services, and the Act of the Year 2018 was the amendment to the Act on Accelerating the Construction of Linear Infrastructure.
Since 2010, the Act of the Year poll has announced the best and most inspiring business regulation legislation for the preceding year. Nominations are proposed by a broad panel of experts and the poll is then voted on by thousands of entrepreneurs and the general public each year. The poll is a joint project of companies, associations and other entities involved in the quality of Czech business regulation. It is organised by Deloitte Legal and regularly under the auspices of the Czech Bar Association, the Czech Chamber of Commerce, and the Chamber of Tax Advisors of the Czech Republic.
Authors: David Krch, Martina Sumerauerová, Kristýna Šlehoferová
1 April saw the publication of the conclusion of the Coordination Committee, that is the meeting of the Czech Chamber of Tax Advisors and representatives of the General Financial Directorate regarding VAT on sale and leaseback in the matter of interpretive unification of conclusions in the application of the judgments of the Court of Justice of the EU of 2018, specifically Case C-201/18 Mydibel, which dealt with the application of VAT on sale and leaseback.
The conclusions of the discussed paper confirm that from the VAT perspective, sale and financial lease back does not constitute two separate transactions of supply of goods for VAT purposes – i.e.:
The General Financial Directorate (the “GFD”) supported the interpretation that it is one transaction only. The GFD relies on the conclusions of the CJEU, which primarily consider sale and leaseback transactions in terms of whether, from a VAT perspective, there is a transfer of the right to deal with the goods as the owner, or whether the leasing company is in a position where it does not have the right to deal with the goods as the owner for VAT purposes, and merely causes a change in the financial situation of the lessee and a change in the structure of its assets. Therefore, if these principles and the conclusions of the CJEU are fulfilled, from the VAT perspective it is not the supply of goods by the lessee to the leasing company and the subsequent supply of the goods back by the leasing company to the lessee, but the supply of a financing service.
In practice, this means that the leasing company does not purchase the goods in terms of VAT and does not have the right to deduct VAT on the invoice from the lessee. At the same time, the leasing company must carefully assess what service it provides to the lessee and whether this service is a taxable transaction with an obligation to apply output VAT or rather a financial activity exempt from VAT.
This entails the need to assess the impact of the provision of such tax-exempt financial service on the overall VAT deductibility for the leasing company (such as in the form of a decrease in the reducing coefficient and the right to deduct VAT only in a reduced or zero amount).
Therefore, the lessee will very often be in a position where it is not entitled to deduct input VAT on the leaseback if the leasing company incorrectly treated the leaseback as an acquisition and re-supply of goods in accordance with this interpretation, in which it would claim output VAT in relation to the lessee.
Although in some cases, even after the publication of the Mydibel case, different practices prevailed both among companies and in the case of the inspection procedure applied by tax administrators, as of 1 April 2022, the GFD’s opinion on this issue is already clearly formulated and this interpretation applies to newly executed contracts. Leasing companies as well as lessees should thus include the financial impact of the impossibility of deducting VAT or the necessity to report any exempted transactions in their considerations when planning the acquisition mainly of larger capital equipment.
At the same time, it should be noted that the above conclusions cannot be applied across the board and that each sale and leaseback case must be assessed individually.
The full version of the Coordination Committee’s text is available in Czech at:
2022 | Zápisy z jednání | Příspěvky KV KDP | Daně | Finanční správa (financnisprava.cz)
Dual distribution occurs where a supplier sells goods or services both directly and through independent distributors, thereby competing with these independent distributors on the downstream market. A classic example would be that of a manufacturer of a clothing brand who sells these clothes in his own stores but also relies upon independent retailers to sell the clothes in their stores.
Dual distribution is hardly a new phenomenon. Already in 2010, it was applied by manufacturers for various reasons. To set an example for their independent distributors in so-called “flagship stores”, to offer more choice to the end-customers, etc. Over the past decade, however, dual distribution has become increasingly important due to the significant increase in online sales.
The increased use of dual distribution has led the European Commission to examine whether the existing legal framework is still adapted to the changed market conditions, but it has also prompted stakeholders to point out certain shortcomings of the legal framework. This countdown discusses information exchanges in the context of dual distribution.
The exchange of information between supplier and buyer is indispensable for the proper implementation of a vertical agreement and such exchange is covered by the VBER if the vertical agreement itself benefits from the safe harbour of the VBER.
Pursuant to Article 2(4), first sentence, VBER, vertical agreements between competitors do not benefit from the safe harbour. Only certain cases of dual distribution do. That is to say, pursuant to Article 2(4), second sentence, non-reciprocal vertical agreements benefit from the block exemption if the supplier is a manufacturer and a distributor of goods, or a provider of services at several levels of trade, whereas the buyer is a distributor, not a manufacturer, or provides its goods and services at the retail level and is not a competitor at the trade level where it purchases the contract services.
Currently the exchange of information in the context of the cases of dual distribution that benefit from the block exemption brings with it quite some legal uncertainty as it is not addressed in the VBER and the Vertical Guidelines. To the extent that it is part of the vertical agreement, it can be within the safe harbour. To the extent that it pertains to the downstream (competitive) level, the VBER does not apply but instead the stricter guidelines on the exchange of information between competitors, which can be found in the Horizontal Guidelines.
The draft new VBER states that the exchange of information in dual distribution shall not be exempt if the parties have an aggregate market share that exceeds 10 % in the relevant market at retail level. In this case, the exchange of information is assessed under the Horizontal Guidelines (Article 2(5) draft VBER).
This proposal was not supported by stakeholders. Subsequently the European Commission published a draft new section for the Vertical Guidelines (also available on the DLC website) dealing with information exchange in dual distribution. This draft section is no longer market share based but states that the block exemption applying to dual distribution shall apply to all aspects of the vertical agreement, including any exchange of information between the parties that is necessary to improve the production or distribution of the contract goods or services by the parties.
Concretely the draft section lists several examples of such exchanges, including the following:
Conversely, the following information generally shall not fall under the exemption:
If the draft VBER applies to the dual distribution scenario and the type of information is listed in the Vertical Guidelines or otherwise necessary to improve the production or distribution of the contract goods or services, the exchange of the information falls under the VBER.
Information exchanges in the context of dual distribution that do not benefit from the exemption must be assessed individually under Article 101 TFEU, taking into account the Horizontal Guidelines. The other provisions of the vertical agreement may nonetheless benefit from the exemption.
The parties to an exchange of information that does not benefit from the exemption may take precautions to minimize the risk that their information exchange will raise horizontal concerns. For example, they may exchange only aggregated sales information or ensure an appropriate delay between the generation of the information and the exchange. Another possible precaution is to use technical or administrative measures, such as information barrier protocols or firewalls, to ensure that buyer information is accessible only to the personnel responsible for the supplier’s upstream activities and not to the personnel responsible for the supplier’s downstream direct sales activity, where the supplier competes with the buyer.
The adjustment of the topic of exchanges of information in dual distribution is to be welcomed. Although the Distribution Law Center understands that the European Commission has a concern that a dual distribution scenario may lead to “false positives” (i.e. information exchanges that raise significant horizontal concerns, but are nevertheless block exempted), the introduction of an additional market share limit is not an appropriate way to address such concern.
The new test, where the draft VBER would cover exchanges of information necessary to dual distribution, is an improvement, also because examples are given in the draft revised Vertical Guidelines.
Unfortunate is that the European Commission did not publish its proposed wording for the new Article 2(5) draft VBER. It is also to be noted that the draft Vertical Guidelines only contain examples of exchanges of information that may or may not be necessary to dual distribution, but that they do not otherwise contain additional guidance on this condition.
Finally, the broad definition of ‘suppliers of online intermediation services’ may have the unwanted consequence that the distribution agreements between a supplier that opens up its platform to its buyers at the request of the latter (for example because some of them do not have the resources to start their own web shop) will no longer be covered by the block exemption.
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If you need more information or our assistance with setting up the distribution system, please contact Robert Neruda or Štěpán Štarha, who are the firm’s partners responsible for this area.
WANT TO KNOW MORE? STAY TUNED…
Counting down towards 1 June 2022, we aim to provide you with regular updates and the necessary legal knowhow in order to fully prepare your business for the future. Please also check out the Distribution Law Center platform (www.distributionlawcenter.com) and our LinkedIn page for much more information on the laws governing vertical agreements, covering both competition and commercial law. 27 specialized teams from all over the EEA are working hard to turn the platform into your favourite source of guidance and information.
