26th June 2015

Czech Legislation Update June 2015 (updated)

President Zeman signed the act preventing new clients from entering the second pillar of the pension system.

At its session on 25 June, the Legislative Council of the Government passed the draft amendment to the Act on Association in Political Parties and Political Movements that includes the issue of political party financing. The stated intent of the draft act is to introduce more transparent control of financing of political parties and political movements. This includes using transparent bank accounts, setting limits for donations from physical and legal entities, providing detailed overview of incomes and expenditures within annual reports, including elections-related expenditures, and publishing annual reports on the internet. The draft act also gives political parties and movements the opportunity to set up research-oriented political institutes or think-tanks that would be eligible for state contributions. The draft act also provides for the foundation of an independent authority for controlling financing of political parties, based on GRECO (Group of States against Corruption under Council of Europe) recommendations. The draft amendment will be debated by the Government. The Legislative Council of the Government also passed draft act introducing changes to election-related acts and other related acts. Read more.

The interministrerial review of the draft amendment to the Insolvency (Bankruptcy) Act ended on 12 June. The stated intent of the draft amendment is to increase the control over insolvency administrators, courts and transparency of insolvency proceedings, including  better protection against bullying behavior in insolvency and strengthening of delivery of documents into data boxes. Click here to view the draft amendment.

The interministerial review of the draft amendment to the Act on Employment ended on 9 June. The purpose of the amendment is to regulate temporary employment, including chaining of fixed-term contracts, quotas for temporary employees and protection of temporary employees against insolvency of their employer. Click here to read the draft amendment.

The interministerial review of the draft amendment to the Act on the Residence of Foreigners in the Czech Republic ended on 6 June. The stated intent of the draft amendment is to make the Act simple, compact and user-friendly. For example, the proponents of the bill suggest separation of the EU agenda (entry, residence) from the agenda related to third countries' nationals. The new system should pass more responsibility on foreigners/applicants and/or entities that need these foreigners to enter and reside in the Czech Republic. Click here to read the draft amendment.

At its session on 3 June, the Government rejected the Bill no. 478, a draft amendment to the Act on Significant Market Power for the Sale of Agricultural and Food Products and Abuse thereof. Proponents (a group of MPs) suggest termination, as, among other reasons, it only addresses the issue of dominance on the part of buyers without mentioning the dominant position of suppliers in buyer-supplier relationships. This is a discriminatory approach. In their words, the best regulation would be no regulation in the case of the Czech retail market. The Government already approved on 9 March 2015 a draft amendment to the Act on Significant Market Power. The Bill extends the list of banned practices of retail chains, such as charging of listing fees, for example. Newly, according to the draft act, sanctions for violation of the law by retail chains could be as high as 10% of their net turnover or 10 million CZK. The Bill will have its first reading in the Chamber of Deputies at its session starting on 16 June.

The draft amendment to the Act on Free Access to Information, Bill no. 395, had its second reading and was debated in the Chamber of Deputies on 17 June. The bill was passed to the third reading. The stated intent of the Bill is to harmonize Czech legislation with the EU’s Public Sector Information Directive (2013/37/EU) on re-use of public sector information. The PSI Directive focuses on the economic aspects of re-use of information rather than on the access of citizens to information. The re-use of public sector information covers commercial and non-commercial use by users outside the public sector (businesses, NGOs, academic research). The public sector information could be accessible also via remote access, for example.

The draft amendment to the Insurance Act, Bill no. 414, was debated by the Chamber of Deputies on 16 June. Changing proposals were submitted to MPs and further debate will be possible after 1 July. As of 1 January 2016 EU Directives 64/225/EHS, 73/239/EHS, 73/240/EHS, 76/580/EHS, 78/473/EHS, 84/641/EHS, 87/344/EHS, 88/357/EHS, 92/49/EHS, 98/78/ES, 2001/17/ES, 2002/83/ES and 2005/68/ES will be abolished and replaced by the Solvency II Directive, the aim of which is harmonization of the rules for the insurance and reinsurance businesses within the EU. The Solvency II Directive establishes the so-called EU Passport, which is a single licence for insurers to operate in all EU member states, given that they fulfill conditions set by the EU. The issuance of the passport-licence in the Czech Republic will fall under the competence of the Czech National Bank. The conditions for application and the process of licence issuance for entities with residence in the Czech Republic will stay more or less unchanged and the administrative burden related to the application for licence will be lower, the proponents of the draft amendment suggest. The licence will apply either to insurance or reinsurance business activities, i.e. it won’t cover both. The aim of the Directive is to minimize insolvency risks, too.

The chamber of Deputies approved draft amendment to the Labor Code, Bill no. 376, on 19 June. The bill is heading to the Senate, the Upper Chamber of the Czech Parliament. The amendment suggests that provisions governing liability of an employer for damage caused as a result of work-related accidents and occupational disease, which are currently placed among transitional provisions of the Labor Code, should become an integral part of the Labor Code (in force from 1 January 2009). Originally, the administration of the employee accident insurance should have been transferred from employers to the social security system, based on the separate Act on Employee Accident Insurance. The Act should have come into force on 1 January 2010, but the actual date has been postponed several times - recently until January 2017. The Bill is heading to the second reading in the Chamber of Deputies.

Another draft amendment to the Labor Code, Bill no. 393 is having its first reading in the Chamber of Deputies. The intent of the Bill is to eliminate the institute of the so-called „karencni lhuta“. The employee, who has been recognized to be temporarily unfit for work (i.e. whose temporary incapacity for work has been recognized) or whose quarantine has been ordered, is entitled during the first 14 calendar days (or during the first 21 calendar days when it is from 1 January 2012 to 31 December 2013) of his temporary incapacity for work or quarantine to compensatory wage or salary. However, the employee is not entitled to compensation of wage or salary for the first three days of his/her temporary incapacity for work (the so-called karencni lhuta). The Czech Constitutiomal Court rejected the institute of “karencni lhuta“as unconstitutional in 2008, but it was re-introduced later.

The Government passed a draft amendment to the Act on Universities, at its session on 15 April 2015. The draft amendment is currently in the Chamber of Deputies as Bill no. 464 and is being debated by the Chamber Committees. Its intent is, among others, to regulate accreditation activities and ensure high quality of tertiary education in the Czech Republic, as well as regulate activities of branches of foreign universities operating in the Czech Republic. The Czech Republic experienced a surge in the number of university students between 2000 and 2014. In 2000, there were 8 private universities, compared with 44 private universities in 2014. The number of public universities increased by 2 (from 24 to 26) and the number of state universities decreased from 4 to 2 (3 army schools merged into 1) in the last 14 years. The number of new students entering Czech universities rised by 86 percentage points in that period and the share of those having tertiary education in the Czech population aged 25 to 64 grew from 10,96% to 19,28%. The diversity of study fields is high, with around 8829 study study fields in 2700 study programs (as of 30 June 2014).

At its session on 25 May 2015 the Government allocated 28,591 mil. CZK for 2016, 29 mil. CZK for 2017 and 29,166 mil. CZK for 2018 from the state budget for reasearch, experimental development and innovation. Clicke here to view the document. The Government also resolved that the Minster of Education submits an updated Czech Road Map of Large Infrastructural Projects of research, experimental development and innovation for 2016-2022 period by 30 September 2015.

Members of the American Chamber of Commerce in the Czech Republic