15th October 2015

Czech Legislation Update October 2015 (1/2)

From the sessions of the Government

On 5 October, the Government passed draft Act on Public Procurement. The bill is heading to the Chamber of Deputies. Read details.

From the session of the Senate

The Committee for Constitution of the Senate, the Upper Chamber of the Czech Parliament, passes draft Act on Central Registry of Contracts (bill no. 126/10). The plenary debate will be held at the session of the Senate starting on 22 October. Currently, the Government spend around CZK 690bn per year based on various contracts (i.e. anyone who concludes a contract with a public institution). Transparency measures proposed in the draft act by a group of Czech MPs would apply to around CZK 500bn out ot he CZK 690bn.

From the sessions of the Chamber of Deputies

The draft Act on Online Sales Reporting (EET) had its second reading in the Chamber of Deputies (Bill no. 513) on 18 September. The bill was debated on 7 October and is heading to the third reading. The stated intent of the Bill is to address tax evasion and increase the effectivity of tax collection (income tax, VAT). The new rules should be effective as of mid-2016.

The draft amendment to the Act on Business Activities on the Capital Market Business (Capital Market Undertakings Act) had its first reading on 7 October and will be reviewed by the Chamber Committees (Bill no. 571). The aim of the proposal is to harmonize the Czech law with EU legislation. The proponents suggest provision of more informatio about the ownership structure of a company; shareholdres of companies with basic capital exceeding 500 mil CZK should be obliged to report to issuer and the Czech National Bank it their share of the company exceeds 1%. There should also be changes of administrative fees connected with capital market.

At its session on 29 July the the Government passed draft amendment to the Act on Association in Political Parties and Political Movements that includes the issue of political party financing. The Bill no. 569 will be debated in the Chamber of Deputies at its session that started on 6 October. 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. According to the draft amendment, the limit for a donation of an individual to a political party is set at 3 million CZK. The proposed limits for election campaign financing are following: 90 million CZK for general elections, 40 million CZK for presidential elections, 7 million CZK for regional elections, No limits were set for municipal elections, including the Prague Magistrate. The limit for elections to the European Parliament remains at 50 million CZK. Also, the Government passed draft act introducing changes to election-related acts and other related acts.

The Government passed draft amendment to the Act on the Conflict of Interest. The Bill no. 564 will be debated by the Chamber of Deputies at its session that started on 6 October.The material proposes the introduction of an obligation to submit a declaration proving the origin of assets owned by public service officers/politicians on the very first day of his/her service in the new function. The current obligation requires submission of such declaration after one year in office.

Draft amendment to the Act on Criminal Liability of Legal Entities, Bill no. 304, is being reviewed by the Chamber Committees. It had its first reading in the Chamber of Deputies in November 2014 and its review at the level of standing committees of the Chamber was interrupted (in January and again in March 2015). The Act entered into force on 1 January 2012 and comprises a list of acts for which a legal entity bears criminial liability. The intent of the draft amendment is to replace this list (comprising a limited number of criminal acts) by a list of criminal acts with which legal persons cannot be charged. This approach should cover a much wider range of criminal breaches, the proponents suggest.

The draft Act on Proving the Origin of Assets is having its first reading in the Chamber of Deputies (Bill no. 235). The Government submitted its position (neutral) on the bill to the Chamber of Deputies on 15 July. Debate over the bill is planned for the session of the Chamber of Deputies starting on 6 October.

At its session on 6 May 2015 the Government passed a draft amendment to the Act on the Support of Research, Experimental Development and Innovation. The material had its first reading in the Chamber of Deputies (Bill no. 489) on 16 September and was reviewed by the Chamber Economic Committee. The debate was postponed. The aim of the bill is to harmonize the Czech law with the new EU legislation and thus increase clarity and applicability of the national legislation. The draft amendment comprises changes in terminology, definitions (industrial research, applied research, experimental development, research organizations), conditions for subsidies and cummulation thereof, etc.

The Act on Significant Market Power for the Sale of Agricultural and Food Products and Abuse thereof (bill no. 444) was reviewed by the Committees of of the Chamber of Deputies, change proposals were submitted and the bill could be debated at the session of the Chamber starting on 6 October.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. At its session on 3 June, the Government rejected another draft amendment to the Act (Bill no. 478). Proponents (a group of MPs) suggest termination of the Act, 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, and in their words, the best regulation would be no regulation in the case of the Czech retail market. The bill will be debated in the Chamber of Deputies.

The draft amendment to the Insurance Act, Bill no. 414, was debated in the Chamber of Deputies on 16 June and was heading to the third reading. On 18 September, the Chamber decided to repeat the second reading of the bill. 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 Government passed a draft amendment to the Act on Universities, at its session on 15 April 2015. The draft amendment is currently being reviewed by the Chamber of Deputies Committees (Bill no. 464); changing proposals are being submitted. The intent of the bill 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).

Legislation drafts:

The Legislative Council of the Government at its  session on 15 October dealt with draft amendments to acts related to fight against tax evasion (postponed debate) and more efficient international cooperation in tax administration (passed).

At its session on 1 October, the Legislative Council of the Government postponed debate on the draft amendment to the Insolvency (Bankruptcy) Act.. The stated intent of the draft amendment is to increase control over insolvency administrators, courts and transparency of insolvency proceedings, including better protection from bullying behavior and more effective submission of documents into data boxes. Read details. Find out more on technological progress in the insolvency area in a survey conducted by Právní prostor.

The Legislative Council of the Governmemt passed at its session on 1 October draft act on Collection of Acts and International Treaties. This includes electronic process of making and adopting new legislation and lower related corruption risks. The bill should come into effect on 1 January 2019.

The Ministry for Regional Development has been reviewing comments from the interministerial review of its draft amendment to the Construction Act. Click here to view the material.

The Criminal Code draft amendment has been prepared by the Ministry of Justice. Among other proposals, presence of defendants as judges read verdict will be obligatory. More details here.

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.

Members of the American Chamber of Commerce in the Czech Republic