What changes in the procedural law issues and enforcement implementations are brought by Lex Covid? Posted on 5. května 2020 by Gabriela Fuchsová This new Act allows, under defined conditions, relief from the effects of expiry of a time limit, even in cases where it would not otherwise be possible under the law. Lex Covid also sets out that until 30 June 2020, with exceptions, the courts will not undertake enforcements by selling movable assets and buildings in which the debtor has permanent residence. As we have informed, the President of the Czech Republic signed an Act known as Lex Covid on 20 April 2020. The Act is intended to address practical problems arising in connection with the Covid-19 pandemic in judicial proceedings and bankruptcies, and it also deals with the functioning of legal entities. The purpose of this newsletter is to present the content of Lex Covid concerning the procedural law issues and implementation of enforcements. Relief from the effects of expiry of procedural time limits As a result of the adopted extraordinary measures, the courts have scaled down their activity and in particular they have significantly reduced access to the court buildings for the public whereby, among other things, they have limited access to case files. That, however, made it impossible or excessively difficult for some parties to proceedings to carry out the necessary procedural steps within the set time limits, e.g. submission of a response. In some cases, such situation could be addressed by filing a request for extension of the time limit to perform an act but the courts did not manage to deal with the requests within a reasonable time. Lex Covid therefore enables relief from the effects of expiry of a time limit under set conditions, even in cases where this would be otherwise impossible by law. A condition for the relief is submission of a request/application by the party concerned within a set time limit, to which the omitted act must be attached. The time limit for filing the application will start to run upon terminating or cancelling the extraordinary measure against the epidemic, which made it impossible or substantially difficult to carry out the act. The time limit will not end before a certain number of days after the emergency ends. The time limits for which it is possible to file an application or request for relief vary in different areas of the procedural law. In civil justice, the application for relief must be filed within 15 days of the termination or cancellation of extraordinary measures. If the party has missed the time limit for submission of a response, as a result of which a judgement for recognition was issued, the court will decide based on the application of the party concerned on relief from the effects of expiry of the time limit for response and on an annulment of the judgement for recognition. In administrative justice, the application for relief from the effects of expiry of a time limit must be filed within 14 days of terminating or cancelling the extraordinary measure that hindered or rendered it excessively difficult to carry out the omitted act. In enforcement proceedings, the application for relief can be filed within 7 days of the termination or cancellation of the extraordinary measure. However, it is not possible to condone non-compliance with the time limit for filing an appeal against a decision in which the ownership of an asset was transferred to the purchaser at auction (an example can be a forced sale of immovable assets, or sanctioning of a business establishment by its sale). It is newly possible under this extraordinary situation to launch proceedings for a stay of enforcement also after the enforcement has already been performed, provided that the performance took place during the extraordinary measures and the party could not file the application before the enforcement was performed due to the extraordinary measures. The party can launch proceedings for a stay of enforcement, if it was ordered based on an unenforceable decision, the enforcement decision is annulled or rendered ineffective, or if the enforcement was inadmissible because there is another reason why the decision cannot be enforced. The same applies for enforcement proceedings. If, moreover, the party against whom enforcement is sought permits the time limit for fulfilling the enforced obligation to elapse, it can apply for relief from the effects of the expiry of that period. However, such party must pay the enforced claim and an advance payment for the reduced execution costs within 15 days of the termination or cancellation of the extraordinary measure, which will eventually mean lower execution costs for the party. In insolvency proceedings, the person who permitted the time limit set for completing acts in this type of proceedings to elapse due to extraordinary measures can file an application for relief, with the omitted act attached, within 7 days of the termination or cancellation of the extraordinary measure. That does not apply if the case in question has already been decided or if the judgment against which the party failed to lodge an objection within the set period has become final and the party would like to file the objection presently. In proceedings before the Constitutional Court, the application cannot be rejected solely on the grounds of being filed after the expiry of the set period, if the appellant filed it out of time due to restrictions arising from extraordinary measures against the epidemic. But the application must be filed no later than 15 days following the termination or cancellation of the extraordinary measure. That period will not end earlier than 15 days after the termination or cancellation the state of emergency. If a person in criminal proceedings has allowed a period set for performing an act to expire, the person can apply to have his position restored to the status quo ante. That way, it is possible to restore also the period for lodging an appeal. It is necessary to apply for restoration of the status quo ante within 3 days of the termination or cancellation of the extraordinary measure in question, however, that period will not end earlier than 3 days after the termination or cancellation of the emergency. Such application must be accompanied by the act in question if it still has not been performed. Lex Covid also deals with relief from the effects of expiry of a time limit in proceedings for satisfaction of property claims pursuant to the Act on the use of funds from material criminal sanctions imposed in criminal proceedings, and also with relief in procedures relating to applications for financial assistance pursuant to the Act on victims – in both cases, the entitled person can file an application for relief within 15 days of the termination or cancellation of extraordinary measures against the epidemic. The application must be accompanied by the submission which was to be made within the missed period. Court decisions granting the relief, except for decisions of the Constitutional Court, do not have to be justified. Enforcement and execution proceedings Lex Covid has also laid down that until 30 June 2020, the courts will not implement enforcement and execution by forced sales of movable assets and buildings in which the debtors are registered as permanently resident. That does not apply if the person against whom the enforcement is brought makes a written notification to the court that the court should continue the enforcement or execution in the above manner, or if the subject of the proceedings is recovery of maintenance claims, personal injury claims or claims of compensation for damage caused by intentional criminal offences. Should you have any questions concerning procedural law, not only related to the state of emergency, please contact Ladislav Peterka at ladislav.peterka@randalegal.com.
Lex Covid Act – Impact on Bodies of Legal Entities Posted on 27. dubna 2020 by Gabriela Fuchsová The Czech Parliament adopted an Act which is also known as „Lex Covid“. This Act is intended to solve the practical problems arising out of pandemic disease Covid-19 in the area of court proceedings, insolvency as well as functioning of legal entities. The purpose of this newsletter is to present the content of the Act relating to the functioning of legal entities. Decision-making of legal entities‘ bodies outside the physical meetingThe essential change being brought by Lex Covid is the extension of the regulation for decision-making bodies of legal entities outside their personal meeting – either in written form (per rollam) or by using technical means. The body of a legal entity may now decide even if the foundation legal act (particularly the Articles of Association or Memorandum of Association) does not permit such procedure. This option applies not only to the General Meetings, but also, for example, to the meetings of the Board of Directors or the Supervisory Board. Therefore, Lex Covid in fact temporarily supplements (for the duration of the emergency measure) the Articles of Association or Memorandums of Association by allowing flexible actions to be taken by the bodies of legal entities in case this option has not been allowed in these documents yet. This should be very beneficial e. g. for joint-stock companies which are not obligated to hold general meetings with large number of people under difficult conditions, but instead the general meeting’s decisions may be taken in the form of per rollam. Extension of the term of office of a body memberThe extension of the term of office brought by Lex Covid relates to those members of elected bodies whose term of office would expire during the effectiveness of the emergency measure or within 1 month from the day following the date of its expiration. In that case, the term of office shall be extended until the lapse of three months following the end of the emergency measure. Automatic extension can be prevented by a member of the elected body delivering his disagreement to the legal entity before the expiry of the term of office. Lex Covid also lays down the conditions for the resumption of the office if such term of office has expired between the adoption of the emergency measure and the date on which Lex Covid comes into force. The resumption of the function of a member of the body shall take place only if the member delivers his consent and if no other member has been elected in the meantime. The term of office shall expire 3 months after the day following the date of termination of the emergency measure. Lex Covid allows, under specified conditions, the co-optation of members of the legal entity’s body, even if this possibility is not allowed within the foundation legal act. The co-optation represents a way in which the missing members of a particular body are elected by that body itself, with the effect until the next meeting of the body which is otherwise authorised to elect those members. Deadlines for discussion the ordinary financial statementsLex Covid also solves the practical problem residing in the obligation of general meetings of most companies to discuss the financial statements by the end of June. In this context, Lex Covid extends the deadline for discussing the ordinary financial statements of a private limited liability company, a joint-stock company or a cooperative – so that in case this deadline should expire earlier than 3 months after the date of termination of the emergency measure, it will expire up to 3 months after the termination of the emergency measure, but no later than on 31 December 2020. In fact, the companies are given more time to discuss the financial statements. The above options are, of course, temporary and last during the emergency measures related to the Covid-19 epidemic. In case of any questions regarding the functioning of legal entities, and not only during the state of emergency, please contact Mgr. Michal Pálinkás at Michal.Palinkas@randalegal.com.
Beware of Significant Provision in the Agreement on Providing Contribution from the Antivirus Programme Posted on 16. dubna 202016. dubna 2020 by Gabriela Fuchsová We would like to draw your attention to the relatively significant, albeit hidden, provision contained in the agreement („the Agreement„) concluded between the Labor Office of the Czech Republic and an employer that applies for provision of a state contribution as compensation of wages paid to its employees under the Antivirus Programme (see our newsletter „Compensation Package for Employers Adopted by the Government of the Czech Republic“). In Article IX. of the Agreement entitled “Settlement”, it is set out that by concluding the Agreement, all claims of the employer against the state for damages caused by the relevant emergency measures of the government are settled when it comes to damages arising from the employer’s statutory obligation to pay wage compensation to employees due to obstacles to work incurred during the period for which the employer is entitled to the contribution. For employers, this is to exclude the possibility of simultaneously drawing money for wage compensation from the Antivirus Programme and to claim damages from the state in the future caused by adopted emergency measures regarding wage compensation paid by the employer using its own money. If employers receive a state contribution of 80% of wage compensation paid to employees under regime A, then by entering into the Agreement, they undertake to waive the claim towards the state for reimbursement of the remaining 20% of the wage compensation. This applies equally to regime B employees, i.e. their employers receive a contribution of 60% of the wage compensation paid out and for the remaining 40%, the state requests a waiver of the right to reimbursement to which the employer might otherwise be entitled from the state. The aforementioned approach by the state and the ‚settlement‘ appear logical in relation to the amount of the state contribution granted. On the other hand, we consider the waiver of any compensation from the state in relation to the part of the compensation paid by the employer using its own money to be really pushed here by the state. In addition, the application for the contribution itself is silent as to any exclusion of future claims for damages in connection with the Agreement entered into and the payment of the contribution to wage compensation. Employers fill out this application through a web application that automatically generates the application after filling in, together with the Agreement to be concluded with the Labor Office of the Czech Republic. Thus, in an automatically generated Agreement, employers may not even notice a provision limiting their right to compensation from the state. Also, employers do not have a real opportunity to change the wording of the Agreement in any way and must accept the agreement if they wish to draw money from the Anvitirus Programme. It is also important to note that the state has not yet informed employers of this restrictive provision. This requirement is also neither reflected in any way in the conditions for receiving contributions in the announced Antivirus Programme, nor in the Employer Manual that was published afterwards. The Agreement concluded by the employer with the Labor Office of the Czech Republic is a so-called adhesion contract as the draft Agreement is unchangeable and the employer has no possibility to change its content in any way if they want to receive the state contribution. In addition, employers can be considered to be the weaker party in relation to the state, among other things because the employer usually applies for a state contribution in an acutely critical economic situation. The Civil Code stipulates that a provision of an adhesion contract which is particularly disadvantageous for the weaker party (without a reasonable reason) is invalid. We believe that the conclusion regarding invalidity should also apply to the aforementioned ‚settlement‘ clause in the Agreements. In this respect, however, the courts will have the final say in the event of a dispute with the state. Perhaps a positive factor is that the state acknowledges its liability for the damage caused by the measures adopted, otherwise the authorities would not insert the provision on ‚settlement‘ and ‚waiver‘ into the draft Agreements. Please do not hesitate to contact us if you have any questions regarding the right to compensation from the state arising from the adopted measures in crisis or otherwise.
How to Employ Foreigners During the State of Emergency? Posted on 9. dubna 20209. dubna 2020 by Gabriela Fuchsová In connection with the COVID-19 pandemic, the government adopted a series of crisis measures which have an immediate impact on the employment of foreigners and their work in the Czech Republic. These include:(i) a ban on entry for foreigners to the Czech Republic and a ban on leaving the Czech Republic; and(ii) suspension of the reception of new visa applications and applications for temporary and permanent stays in the Czech Republic, as well as the suspension or discontinuation of proceedings regarding previously submitted visa applications or applications for stays in the country. The above crisis measures have a major impact on employers who employ foreigners from third countries (i.e. countries outside the EU/EEA and Switzerland). However, the projects and supplies of entrepreneurs who do not directly employ any foreigners but who use the services or supplies from foreign subcontractors can be also significantly influenced by these measures. In order to minimize the negative consequences of the above-mentioned prohibitions, we have prepared a brief overview for you of selected specifics related to the employment of foreigners at the time of the state of emergency. Specifics of Entry of Foreign Workers into the Czech Republic During the State of Emergency There are several exceptions to the general ban on entering the Czech Republic and the ban on traveling out of the country during the state of emergency which can be applied in the case of arrival of foreign workers. One of them is an exception for workers who regularly cross the borders of the Czech Republic for the purpose of work (so-called cross-border workers). This exception is most often mentioned in relation to Czech employees commuting to work to Germany and Austria, but it can also be used the other way round (i.e. in relation to foreign workers coming from neighboring countries to work in the Czech Republic). Although this exception applies in particular to workers who normally commute to work in a neighboring state daily or at regular intervals, it can also be used for the arrival of employees of foreign suppliers or subcontractors for the implementation of an international project (e.g. in the construction industry). However, it should be mentioned that these workers must be workers from neighboring countries of the Czech Republic. Moreover, these cross-border workers (commuters) must meet several prerequisites which differ according to the state from which they enter the Czech Republic. Therefore, it is always necessary to consider carefully whether this exemption is applicable in a particular case, all the more so since the rules for applying this exemption have changed several times in the state of emergency. Another exception to the ban on entry for foreigners in the Czech Republic is the exception for employees of critical infrastructure services. This is an exception for foreigners who are to carry out urgent or emergency servicing of critical Czech infrastructure – i.e. infrastructure that is so important that any disruption of its functioning would have a serious impact on the security of the state, security of basic living needs of the population, human health or state economy. It follows from the above that only a limited group of entities will be able to benefit from this exemption (in addition to critical infrastructure operators, also certain major suppliers to such operators). The advantage of this exemption is that, unlike some of the exceptions for cross-border workers, it neither provides for a minimum period of stay nor for a maximum distance of the place of work from the borders. In this context, it should be emphasized that the possibility of using any exemption from the ban of entry at the time of the state of emergency must always be assessed individually. For the application of individual exceptions, it may be decisive e.g. the worker’s domicile, the content of the employment contract or the activity to be performed by the worker in the Czech Republic. Specifics of Employment of Foreigners from Third Countries During the State of Emergency Currently, receipt of applications for residence permits is suspended at embassies of the Czech Republic. As a result of this measure, foreigners from third countries wishing to work in the Czech Republic can obtain a work permit, but they cannot receive a residence permit that is absolutely necessary for employment in the Czech Republic. If foreigners are already working in the Czech Republic, then they can continue to work here during the state of emergency. This applies even if their work permit expires before the state of emergency ends. The validity of a work permit is automatically extended after certain conditions have been met, up to a period of 60 days from the date of expiry of the state of emergency. Also, foreigners whose residence permit expires during the state of emergency are entitled to remain in the Czech Republic for the duration of the state of emergency. Foreigners working in the Czech Republic can change their employer during the state of emergency at any time. However, the change can only be made if (i) the new job is registered in one of the relevant central records of vacancies for foreigners maintained by the Labor Office of the Czech Republic or (ii) a new work permit is obtained. In view of the above, it is recommended to employers who are currently interested in employing foreigners to focus primarily on recruiting foreigners already residing in the Czech Republic. If an employer is forced to terminate or not prolong their employment relationship with a foreigner due to the economic impact of the pandemic, they are asked by the Ministry of Labor and Social Affairs to assist such employees with registration of the status of a job seeker on the website of the Ministry of Labor and Social Affairs, or to provide them with assistance in dealing with the situation (e.g. assistance to return to their country of origin). If the employer fails to comply with this obligation, the employer is at risk of limiting participation in or exclusion from government migration programs. We have extensive experience with the issue of employment of foreigners (including the application of individual exceptions to the ban on foreigners entering the Czech Republic during the state of emergency). We regularly monitor all restrictions and obligations arising from the crisis measures issued in connection with the state of emergency. We will be happy to provide you with legal assistance in this matter. If you have any questions regarding the employment of foreigners, not necessarily only during the state of emergency, please contact Lenka Droscová lenka.droscova@randalegal.com or Jakub Adámek jakub.adamek@randalegal.com.
New Insolvency Rules Resulting from the COVID-19 Pandemic Posted on 6. dubna 20206. dubna 2020 by Gabriela Fuchsová The current unusual situation caused by the COVID-19 pandemic will undoubtedly have substantial consequences for the economy of the Czech Republic. It can be expected that the amount of debts will rise sharply not only on the side of the state, but also on the side of citizens and business entities. Subsequently, many of these debts are not going to be repaid. Therefore, such debts will be claimed before the courts and other competent authorities sooner or later and subsequently enforced (either individually through enforcement proceedings or collectively through insolvency proceedings). The current emergency may thus lead to the bankruptcy of many entrepreneurs, both in the form of insolvency and in the form of over-indebtedness. In spite of the current extraordinary situation, entrepreneurs are still obliged to file an insolvency petition without undue delay after they have learned of their insolvency or should have learned about it exercising due care. This obligation is also not affected by the fact that the insolvency could have been caused by the current emergency and it could be expected that the debtor will be able to recover from the inability to pay its debts in the near future (the so-called temporary insolvency). This puts many entrepreneurs at considerable risk, as their personal property may also be at stake. Failure to file the insolvency petition creates the liability of these persons (including members of the statutory body) for damages. On March 31, 2020, the Government of the Czech Republic tried to mitigate the negative consequences of the COVID-19 pandemic on the economic situation of citizens and entrepreneurs by passing a bill (adopting draft legislation) to amend, inter alia, the Insolvency Act and the Act on Private Enforcement Procedure (hereinafter referred to as the „Amendment“). The Czech Republic thus follows the countries such as Germany or Spain which have already adopted certain changes to their enforcement or insolvency regulations. The most important proposed changes to the Czech insolvency law can be summarized as follows: 1.Limitation of the obligation of entrepreneurs to file debtor insolvency petitions: A new rule is introduced for entrepreneurs not being obliged to file a debtor insolvency petition within the period from the effective date of the Amendment until 6 months from the termination or cancellation of an emergency anti-epidemic measures (but no later than by December 31, 2020). An exception to this rule exists when (i) the insolvency occurred even before an emergency anti-epidemic measure was adopted, or (ii) the insolvency was not mostly caused by the emergency anti-epidemic measure that would make it impossible or substantially difficult for the debtor to fulfil its payment obligations. 2. Limitation of creditor insolvency petitions: Creditor insolvency petitions filed from the effective date of the Amendment till August 31, 2020 will not be taken into account. Thus, there is a legal fiction that no such insolvency petition will have been filed. Therefore, such filing will not even be published in the insolvency register. The purpose of this measure is, inter alia, to prevent the debtor from spending money to defend against a creditor’s insolvency petition. However, the creditors will still be entitled to exercise their civil-law rights (e.g. by offsetting or enforcing a collateral), in court proceedings or out of court. [1] This measure – unlike the limitation of the obligation of entrepreneurs to file debtor’s insolvency petitions – affects all debtors (i.e. not only entrepreneurs) and regardless of why and when the insolvency occurred. 3. Introducing an extraordinary moratorium: The Amendment establishes the rule that a debtor who is an entrepreneur and who has not been in bankruptcy at the date of March 12, 2020 can file a request for a so-called extraordinary moratorium by August 31, 2020. The effect of the moratorium is that: (i) the debtor cannot be declared insolvent for the duration of the moratorium, (ii) the debts required to maintain the debtor’s enterprise that arise after the extraordinary moratorium is introduced can be paid by the debtor during the moratorium preferentially, before previously due liabilities are met and (iii) the time limits for exercising rights against the debtor for the duration of the extraordinary moratorium neither commence nor continue to run. The debtor may file a motion for a moratorium order even before the filing of an insolvency petition and the commencement of the insolvency proceedings. In addition, unlike the current „normal“ moratorium, the proposal for an extraordinary moratorium does not need to be approved by the majority of the debtor’s creditors. 4. Suspension of performance of a reorganization plan: A debtor whose reorganization plan has been legitimately (finally) approved as of March 12, 2020 at the latest is entitled to propose to the insolvency court to state that the debtor is entitled to temporarily suspend performance of the reorganization plan (provided that the plan has not yet been fully fulfilled). The performance of the reorganization plan may be interrupted for the period of time during which the obligation of entrepreneurs to file debtor’s insolvency petitions is to be limited (see section 2 above). During the said period, it will not be possible to convert reorganization into bankruptcy (i.e. the liquidating way of the bankruptcy solution). However, the insolvency trustee and the creditor committee must comment on the debtor’s proposal to suspend the reorganization plan. 5. Discontinuation of time limits for relative ineffectiveness of legal acts: During the period of limitation of the obligation of entrepreneurs to file debtor’s insolvency petitions (see section 2 above), time limits for objections to relative ineffectiveness of legal acts should be suspended. By claiming ineffectiveness of a legal act, creditors can defend themselves within the statutory time limit against legal acts of the debtor that jeopardize the payment of their enforceable claim. When the measures described above provide special protection to the debtor, it is equally fair, during the period of such emergency measures, to discontinue the time limits for creditors within which they can defend themselves against the debtor’s prejudicing acts. Nevertheless, it is recommended that creditors should, even during the state of emergency, carefully monitor changes in the structure of their debtors‘ assets (e.g. in the land registry) so that they can effectively defend themselves against any prejudicing disposal of the debtor’s assets. The Government proposes that the Amendment is to be discussed by both chambers of the Parliament of the Czech Republic in an abbreviated procedure. Therefore, it can be expected that the Amendment may be passed in a few days. However, before the described changes to insolvency law become effective, entrepreneurs still have the obligation (i) to perform the so-called insolvency test and (ii) to file a debtor’s insolvency petition without delay after the defined prerequisites of insolvency are met. Failure to comply with this obligation may have far-reaching consequences not only for the legal entity, but also for the members of its statutory body, consisting mainly in incurring liability for damage caused thereby. We would like to assure you that we have extensive practical experience with insolvency law, from the point of creditors and debtors (and their statutory bodies). We also continuously monitor the current changes in Czech insolvency law. Please feel free to contact us if you have any questions regarding the above. At the same time, we are ready to provide you with comprehensive legal advice on imminent or already existing bankruptcy situation (if any) and solutions thereto under insolvency law, including protection against personal liability of members of statutory bodies of legal entities. Such advice can be provided in connection with your (imminent) bankruptcy situation, but also in the case of bankruptcy of your contractual partners (either suppliers or customers). Should you decide to enforce your receivables in a different manner than by insolvency, we will be happy to propose the best solution for you and to provide you with comprehensive legal representation. If you are in danger of bankruptcy as a result of the crisis-related measures of the Government of the Czech Republic, we are ready to provide you with comprehensive legal advice regarding claiming damages towards the state. [2] At the same time, insolvency can be an opportunity to expand your business activities, for example by buying a debtor’s enterprise. We also have considerable experience with insolvency acquisitions and, therefore, we can provide you with the necessary assistance in this regard. [1] For out-of-court dispute resolution options at the time of the coronavirus epidemic, see the ŘANDA HAVEL LEGAL newsletter called „Impact of the COVID-19 Epidemic on Dispute Resolution“ that is available here: https://www.randalegal.com/download/files/newsletter_newsletter_praktickprvninformace_vii._engid244236.pdf. [2] For the possibility of claiming compensation from the State for crisis measures, see the ŘANDA HAVEL LEGAL newsletter on „Recent Developments in the Matter of State Liability for Damage in Connection with Measures in Crisis“ that is available here: https://www.randalegal.com/download/files/newsletter_newseletter_praktickprvninformace_viii.engid244494.pdf.
Compensation Package for Employers adopted by the Government of the Czech Republic Posted on 3. dubna 20203. dubna 2020 by Gabriela Fuchsová Government of the Czech Republic yesterday (i.e. on 31 March 2020) adopted the new modified Compensation package for employers (“Antivirus Programme”) which we have previously reported. For the sake of clarity, the Government has combined the previously published compensatory measures into two (2) compensatory measures, i.e. regimes A and B listed below. Under the A regime the state will provide employers with a contribution in the amount of 80% of the wage compensation provided to an employee, including social and health insurance contributions, if the reason for the obstacle to work is • on the employee’s side “Quarantine ordered to an employee” (an obstacle under Section 191 of the Labour Code), whereas the amount of wage compensation provided by the employer is 60% of the employee’s average assessment base; or• on the employer’s side “Inability to assign work due to enterprise closure as a result of adopted emergency measures” (an obstacle under Section 208 of the Labour Code), whereas the amount of wage compensation provided by the employer to is 100% of the employee’s average earnings. The maximum amount of the contribution is derived from the current average supergross wage including social and health insurance contributions, and in this case amounts to approximately CZK 39,000. Under the B regime the state will provide employers with a contribution in the amount of 60% of the wage compensation provided to an employee, including social and health insurance contributions, if the reason for the obstacle to work is on the employer’s side • “Childcare or Quarantine Ordered to a significant part of employees, i.e. at least to 30% of employees” (an obstacle under Section 208 of the Labour Code), whereas the amount of wage compensation provided by the employer is 100% of the employee’s average earnings; or• “Limitation of the availability of inputs, i.e. material, products and services which are necessary for its activities” (an obstacle under Section 207 of the Labour Code), whereof the amount of wage compensation provided by the employer is 80% of the employee’s average earnings; or• “Reduced demand for services, articles and other products of the company” (an obstacle under Section 209 of the Labour Code), whereas the amount of wage compensation provided by the employer is at least 60% of the employee’s average earnings. The maximum amount of the contribution in this case is approximately CZK 29,000. The conditions for obtaining the above contributions are as follows: • the employer operates in the business sphere;• the employer strictly complies with the Labour Code;• the employees are in an employment relationship and participate in sickness and pension insurance;• the employees have not been served with a termination notice and are not in the notice period as of the accounting date (with the exception of termination pursuant to Section 52 (g) and (h) of the Labour Code); and• the employer pays the wages and social and health insurance contributions. For the sake of completeness, we add that the contributions will also apply to agency workers, provided that the employment relationship with the employment agency was entered into before the day of the declaration of a state of emergency (i.e. 12 March 2020) and lasts for the entire duration of the Antivirus Programme. The above contributions shall be provided to employers on the basis of an agreement concluded with the respective Labour Office of the Czech Republic retroactively. Employers shall be entitled to submit their applications for the contributions for March from 6 April 2020 (the expected launch date of the web application). All necessary operations between the employer and the labour office will be carried out remotely in electronic form. If you have any questions regarding the state compensation in the area of employment or regarding other measures that an employer can use in the current difficult situation, please do not hesitate to contact us. More specifically, please contact our attorney-at-law, Lenka Droscová, who specialises in labour law.
Update on state liability for damages in connection with emergency measures Posted on 3. dubna 20203. dubna 2020 by Gabriela Fuchsová In attempt to slow down the spread of a disease COVID-19 the legislative activity of the government and respective ministries has become quite hasty and even confusing. Significant changes in emergency measures are being adopted on daily basis and every day brings new bans, precautions and exceptions from already existing exemptions. On 23 March the government adopted resolutions Nos 279 and 280 to repeal certain measures adopted in order to slow down the spread of COVID-19, which were in effect since 6 March. The repealed measures include restrictions on the free movement in the Czech Republic, closing most of retail stores, services and catering facilities and closing of gambling ventures, casinos and other facilities, including indoor and outdoor sporting facilities. With effect from 24 March the above-mentioned government measures were replaced with almost identical emergency measures adopted by the Ministry of Health under the Public Health Protection Act (previous government measures were adopted under the Crisis Management Act). The public statements of government officials suggest that the different legislative procedure was chosen in order to avoid the state’s obligation to compensate entrepreneurs for damages occurred in connection with the prohibitions and restrictive measures that have been imposed. Are the injured persons entitled to claim compensation from the state? We believe that they clearly are, regardless of the legislative framework of adopted emergency measures. There are several arguments supporting this conclusion. The main argument arises out of one of the key constitutional principles of a democratic rule of law: • The right to own property can be limited only for compensation. We would like to mention the previous court decisions regarding the state of emergency. In connection with the measures adopted after the 2002 floods, Czech courts declared that: • If the measures are adopted during and related to the state of emergency, the state liability for damages remains unaffected, notwithstanding which authority adopted such measures. Concerning the state’s liability for the damages caused under the Crisis Act, the courts have concluded that the state is liable for the damages in case that the following conditions are met: mergency measure was adopted and executed;damage occurred; andthere is a causal link between adopted emergency measure and the occurrence of damage. Which entities are directly affected? Mainly the entities which – due to the emergency measures – cannot fully operate and suffer significant losses, such as: • Organizers of sport, cultural and similar events;• Operators of fitness and wellness facilities;• Operators of indoor and outdoor sporting facilities;• Store owners;• Providers of catering and dining services. Scope of compensations In general, damage includes both actual damage (damnum emergens) and lost profit (lucrum cessans). The actual damage comprises not only of a loss or damage to a property (e.g. expired food or unusable goods), but also the costs incurred as a result of the emergency measures or the costs of avoiding damage, costs of damages calculation or remedying them. This applies providing that the expenses incurred necessarily and effectively. The state can only be exempted from its responsibility if it is proved, that the damage was inflected by the injured party itself. In order to claim damages incurred in connection with the emergency measures the casual link has to be proved by the injured party as well as the amount of suffered damage. In our opinion an efficient solution of state liability for damages should include compensation for loss of income suffered by the entrepreneurs as a result of the measures adopted. What to do next? We advise to gather and maintain detailed evidence and documentation to support possible future claims against the state. At the moment government officials are declaring that the state is not supposed to pay any compensation for damages resulting from the adopted emergency measures. Regardless whether the government policy remains unchanged, the claim for damages against the state has to be raised within 6 months after becoming aware of the damages. Should the state fail to pay the damages, the claim must be brought before the court. It is quite possible that the issue of state liability for the damages will by ultimately decided by the Constitutional Court. We believe that the compensatory measures recently adopted by the government are not sufficient. More often than not they don’t aid the subjects who suffered the most from the adopted measures. And if these subjects will be forced to cease their business activities, it will constitute a major economic burden for the entire society recovering of which will last considerably longer than the consequences of COVID-19 epidemic itself. Our law firm keeps monitoring newly adopted measures connected to the COVID-19 epidemic and continuously evaluates their impact on rights and obligations of the clients. We are available to provide details about the current situation and answer any questions you may have.
Is your business in the Czech Republic adversely affected by coronavirus or respective preventive measures? Posted on 1. dubna 20201. dubna 2020 by Gabriela Fuchsová Then, the Czech support loan program “COVID II” is just for you. The acceptance of applications for the program commences already tomorrow, on 2 April 2020. We will be happy to assist you with their express processing! The Ministry of Industry and Trade of the Czech Republic has announced another supporting loan program “COVID II”. It is designed to support small and medium enterprises and self-employed persons operating within the Czech Republic. Its purpose is to eliminate the impact of the coronavirus on the entrepreneurs in the Czech Republic. The program will enable access to operational financing. It is intended for those whose economic activities are restricted due to the coronavirus or related preventive measures. The program has several advantages. The Czech-Moravian Guarantee and Development Bank will provide guarantee for commercial loans up to 80 % of the principal. It will also provide financial contributions to cover interests up to CZK 1 million. The guarantee period will be up to 3 years, free of charge. The maximum amount of the loan can be up to CZK 15 million. Entrepreneurs can finance the costs of wages and energy, payments of rent, payments of supplier-customer invoices, pre-financing of receivables, or acquisition of material, inventory and other small assets. The program is financed from the EU structural funds within the Operational Program Enterprise and Innovation for Competitiveness. Therefore, it is not intended for the implementation of projects in the capital city of Prague. However, applicants based in Prague may also apply if the funded establishment is located outside the capital city. The program starts already on 2 April 2020. It can be expected that the funds from the program will run out rapidly. Therefore, we recommend to entrepreneurs to take fast action. We offer you a legal assistance and representation in the express processing of documents and applications for receiving a guarantee for commercial loans. We offer our services for a special price of EUR 800 plus 0.25% from the amount of actually provided facility line (excluding VAT). We will be also pleased to provide you with legal assistance and representation in arranging commercial loans with the relevant banks. The price of these services is negotiated individually depending on the specific circumstances of the credit case. If case of any questions regarding COVID II loan program, please do not hesitate to contact us. We will be happy to assist you.
Impact of the COVID-19 Epidemic on Dispute Resolution Posted on 31. března 202031. března 2020 by Gabriela Fuchsová The epidemic of COVID-19 disease and the government emergency measures are already affecting the functioning of courts in the Czech Republic. In recent weeks, the courts have adjourned most of the hearings that did not have to be scheduled without delay. [1] An adjournment is likely in particular in proceedings involving a large number of participants or witnesses. In practice, this means that under the current conditions, it is not possible to expect an early ruling, especially of those disputes before courts that require an oral hearing being scheduled. Current restrictions on the functioning of courts. In addition, courts have reduced physical contacts with members of the public, which is manifested, for example, by limitations to the possibility to inspect the court file or the complete closure of the court building. Inspection of the file can only be carried out at most courts in urgent cases and urgency must be demonstrated in each case. The buildings of the Constitutional Court and of the Supreme Court are completely closed to visitors. In addition, some courts have introduced special makeshift mailboxes to minimize contact with visitors and have stopped accepting cash at the court cash register. No rapid improvement in scheduling hearings in individual proceedings can be expected after the state of emergency is over. The courts are preparing for a sudden increase in the bailiff and insolvency agenda. It is also likely that there will be an increase in claims (in particular against the state for compensation of damages caused by the emergency measures, as described in another newsletter issued by our law firm). The expected outcome will be an increased caseload of Czech courts and ensuing extension of the duration of court proceedings in the Czech Republic. However, this can be a serious problem in a situation where at least one of the parties to the dispute has an interest in a quick decision of the matter. Be careful, all deadlines apply regardless of emergency! Nevertheless, the chairmen of regional courts have asked the Ministry of Justice to set rules governing the suspension and discontinuation of time limits during the period of the state of emergency (possibly even retroactively as of the date of the declaration of the state of emergency).[2] The chairmen of regional courts propose the suspension and discontinuation of time limits in all areas of law, namely the following time limits: substantive time limits (e.g. statutes of limitation);procedural time limits (e.g. time limits for replying to a motion);time limits for issuing a decision or another measure. The Czech Bar Association also supported the request of the chairmen of regional courts.[3] However, the standpoint of the Ministry of Justice to this request is not yet known. What is the alternative to court proceedings during the state of emergency? Also under state of emergency, there is an alternative to the standard legal process, namely online dispute resolution (also referred to as „ODR“). Generally, the advantage of online dispute resolution is the speed of such proceedings [4] and lower costs associated with raising a claim.[5] Currently, an undisputed advantage is that online dispute resolution does not require parties to the dispute to meet in person. Thus, unlike usual court proceedings, online dispute resolution can also take place under the current extraordinary conditions. What are the forms of online dispute resolution? On the Internet, disputes can be resolved both in arbitration and by mediation. Procedures for online dispute resolution may be determined by the parties to a certain extent, in an arbitration agreement or in a mediation contract. In the case of proceedings before the Arbitration Court attached to the Economic Chamber of the Czech Republic and the Agricultural Chamber of the Czech Republic, the Rules for Online Arbitration issued by the Arbitration Court shall apply. [6] When it is suitable to choose online dispute resolution? Online dispute resolution can be recommended especially for disputes between entrepreneurs. As mentioned above, online dispute resolution is particularly useful in cases where the dispute needs to be decided quickly and it is not suitable to wait for an end to the state of emergency. Additionally, online dispute resolution is also possible in disputes among entrepreneurs and consumers, which can however only be initiated by the consumer in certain cases. [7] How can we help you? Our law firm has extensive experience in representing clients in alternative dispute resolution. Our team of attorneys-at-law also includes (i) mediators registered in the list of mediators maintained by the Ministry of Justice and (ii) arbitrators registered in the list of arbitrators maintained by the Arbitration Court attached to the Economic Chamber of the Czech Republic and the Agricultural Chamber of the Czech Republic. If you wish, we will be pleased to assist you in the above alternative ways of online dispute resolution. _____________________________________________________________________________ [1] Courts postpone hearings to May, measure temperature of visitors or don’t allow members of the public to enter their buildings [online]. Česká justice [cit. March 25, 2020]. Available at: https://www.ceska-justice.cz/2020/03/soudy-odrocuji-jednani-na-kveten-meri-lidem-teplotu-nebo-do-budov-nepousti-verejnost/ [2] Procedural deadlines need to be urgently addressed, the chairmen agree. They are also preparing for quarantine [online]. Česká justice [cit. March 25, 2020]. Available at: https://www.ceska-justice.cz/2020/03/lhuty-rizeni-se-musi-urychlene-resit-shodli-se-predsedove-pripravuji-se-i-karantenu/ [3] The Czech Bar Association supports the suggestion of the chairmen of the courts for a speedy resolution regarding the time limits [online]. Česká justice [cit. March 27, 2020]. Available at: https://www.ceska-justice.cz/2020/03/cak-podporila-vyzvu-predsedu-soudu-k-urychlenemu-reseni-lhut-rizeni/[4] For on-line arbitration, the whole procedure usually takes a maximum of 35 days – see JANKŮ, Martin. Rozhodčí řízení před Rozhodčím soudem při HK ČR a AK ČR [online]. Bulletin advokacie [cit. March 25, 2020]. Available at: http://www.bulletin-advokacie.cz/rozhodci-rizeni-pred-rozhodcim-soudem-pri-hk-cr-a-ak-cr?browser=mobi [5] Eg. the fee for on-line arbitration before the Arbitration Court attached to the Economic Chamber of the Czech Republic and the Agricultural Chamber of the Czech Republic is 3% of value of the object of the dispute. – cf. https://www.soud.cz/sazebniky#online-spory[6] Available here: https://www.soud.cz/rady/zvlastni-dodatek-radu-pro-rozhodci-rizeni-online-2017 [7] cf. Regulation (EU) No 524/2013 of the European Parliament and of the Council of 21 May 2013 on online consumer dispute resolution. Available here: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32013R0524
Personal data processing during the COVID-19 outbreak Posted on 30. března 2020 by Gabriela Fuchsová The European Data Protection Board (the “Board”) has issued a statement on personal data processing in association with the outbreak of the COVID-19 infection (the “statement”). In its statement, the Board has stated that the fight against the infection is most certainly in the interests of all humankind, but that administrators and processors must still adhere to the fundamental data processing principles set out in the General Data Protection Regulation (the “GDPR”) and secure adequate protection of all the personal data of the data subjects even in these exceptional times. The Board’s statement also deals with the processing of personal data associated with the infection on the part of the public health authorities and employers, amongst other things. According to the Board, GDPR also covers exceptional situations and it enables processing which is in line with national law. In the case of employers, the Board has stated that the processing of any such data may be necessary for compliance with employer’s legal obligations associated with securing health and safety in the workplace. The statement also draws attention to the possibility of processing so-called sensitive personal data (which includes data on an individual’s state of health) in cases where the processing is necessary for reasons of public interest in the area of public health or for the protection of the vital interests of the data subject. However, the Board calls upon employers to exercise restraint when processing sensitive personal data. It has especially emphasised the principles of proportionality and data minimisation. According to the Board, the employer may only process any sensitive personal data, if it is obliged to do so according to national law or if the national law enables it to do so. The Board has also appealed to the principle of integrity and confidentiality, whereby employers should not provide more information than is actually necessary in a specific case (for example, not providing the identity of any infected employees to the other employees when adopting protective measures, unless it is absolutely necessary to do so). The Office for Personal Data Protection (the “Office”) has also issued statements on the processing of the health data of employees by employers in association with COVID-19 infections on its website. It has essentially permitted said personal health data processing with reference to the legal obligation of employers to provide a safe working environment and working conditions which are conducive to good health by means of the suitable organisation of occupational health and safety practices and measures aimed at preventing any risks. It is because GDPR enables the processing of sensitive personal data, if it is necessary for the purposes of carrying out the obligations of the controller in the field of employment. At the same time, however, the Office recommends proceeding in cooperation with the public health authorities. Like the Board, the Office has also stated that, if an employer informs the other employees of a potential risk (for example, that there is an infected person in the workplace) within the framework of the performance of its obligations, said employer should only provide this information about a specific individual at the extent which is necessary for the protection of health and always so that the dignity and integrity of the person in question is not impugned. The Board’s statement further resolves the use of mobile location data to determine the positions of individuals by the governments of the member states for the purpose of monitoring, controlling or mitigating the spread of the infection. According to the Board, the public authorities should attempt to process any location data anonymously (i.e. process data aggregated in a way that individuals cannot be re identified). Each member state should adopt the appropriate legislation to process any non anonymised data. In this regard, we hereby state that so-called tracing has been made possible in the Czech Republic by Government Resolution no. 250 dated 18th March 2020 in association with the subsequent exceptional measures of the Ministry of Health dated 19th March 2020. Based on these decisions, the Ministry of Health or the authorised regional hygiene stations can request mobile telephone operators to provide data on the movements of infected individuals based on the location data acquired from their mobile phones. The individual in question must give explicit consent for this to happen. If you have any questions pertaining to personal data processing connected with the COVID-19 infection in your company, please do not hesitate to contact our specialists Matyáš Kužela or Tomáš Zwinger. They will be happy to help you set-up the data processing so that it is fully in line with GDPR.
