NEWSLETTERC Z E C H R E P U B L I C & S LO VA K I A

1Newsletter 2/June 2017

Giese & Partner celebrates its

20th anniversary

2Newsletter 2/June 2017

n Czech National Regulatory Office – Real Future or Mere Chimaera?, Jan Valíček, p. 2

General Interest

General Interest

Czech Legal News

Giese & Partner News

Slovak Legal News

Czech National Regulatory Office Real Future or Mere Chimaera?...by Jan Valíček

unify and simplify administration and increase efficiency. On the other hand, there are also doubts regarding the ability to unify such different fields on a sufficient professional level. Moreover, a negative impact on final consumer prices is expected.

Whether the National Regulatory Office will be really established remains open. In any case, its establishment has to be reflected in the respective Czech legal acts. Such amendments might also bring many other unexpected changes to the respective sectors, which should be thoroughly monitored.

For additional information contact Jan Valíček at: valicek@giese.cz

The Czech Government is currently preparing an essen-tial change of the supervision

of the most important network industries – energy, communication, transportation and water supply. In this connection, a centralized body, the National Regulatory Office should be established. This should replace the already existing regulatory offices, i.e. the Energy Regulatory Office, the Czech Telecommunication Office as well as the Office for Access to Transport Infrastructure.

According to the government, the National Regulatory Office shall be established within 5-6 years. It shall be lead by a board consisting of 5 members, one chairperson and one member for each regulated sector. Thus, the regulatory power in all concerned sectors shall be concentrated in the hands of a small group of people. Their independence from the respective government might be controversial.

The position of the respective state authorities as well as commercial organizations is not uniform. On one hand, this centralization could

n Recent Activities and Team News

n When a Personal Bankruptcy Is Meant to Feel “Fresh”, Zuzana Francúzová, p. 6

n Slovak Legal Newsflash, Valter Pieger, p. 7

n Major Changes to Insolvency Law, Radek Lopata, p. 3

n Supervisory Boards of Joint Stock Companies - “Employees Report Their Arrival”, Jaroslava Trojanová, p. 4

n Unfair Arbitration Clauses, Lenka Charvátová, p. 4

n Urgent! - Appeals in the Preliminary Injunction Matters Must Be Decided without Undue Delay, Ondřej Rathouský, p. 5

n When the Journey is the Destination, Marie Zámečníková, p. 5

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iese & Partner, s.r.o.

Czech Legal News

3Newsletter 2/June 2017

Major Changes to Insolvency Lawby Radek Lopata

AAs of July 1, 2017 an amend-ment to the Czech Insolvency Act introduces a number of

fundamental changes. Some will have a substantial impact on the positions of both debtors and creditors. A brief outline of the most important ones:

PRESUMPTION OF SOLVENCyThis measure provides debtors with

an initial statutory defence against insolvency filings. Also, directors of distressed companies may use it to exculpate themselves from a potential breach of an insolvent debtor’s duty to file for insolvency. Under this new concept a business is presumed solvent, if the difference between its due liabilities and disposable funds represents less than 10 %. Decisive is the liquidity statement prepared by an authorized expert. The comparison is referred to as “coverage gap” by the new law.

JURISDICTIONThe jurisdiction of an insolvency

court shall be determined based on the registered office of the debtor in the last 6 months before commencement of the insolvency proceeding. This measure has been introduced as limitation of “forum shopping” by debtors.

DEDICATED INSOLVENCy TRUSTEEA trustee who rejected recognition of

a registered claim and was subsequently recalled by the creditors meeting may be appointed by the insolvency court as “dedicated trustee”. This position solely relates to the rejected claim and the resulting incidental disputes. The aim is to mitigate effects of recall of a potentially inconvenient trustee by majority creditors.

LIMITATION OF VOTING RIGhTS IN CONCERNCreditors belonging to the same

concern as the debtor or otherwise affiliated with the debtor shall in general not be entitled to vote at the creditors meeting. Moreover, the law introduces a specific catalogue of prohibitions of voting rights due to a conflict of interest of a creditor.

PRELIMINARy REVIEW OF INSOLVENCy FILINGSo far the court was obliged to

commence insolvency proceedings by publication in the Insolvency Register within 2 hours from receipt of a filing. Under the new law, the court has been granted much wider discretion. If the

court has reasonable doubts about the substance of a filing, it may decide not to publish it and delay the commencement of the proceedings accordingly. This was implemented in response to the infamous practice of frivolous filings with the main goal of discrediting its target.

EVIDENCE OF CLAIMThe new law has substantially

tightened the requirements for evidencing a due claim in an insolvency petition. A creditor now must prove the existence of the claim by a public deed such as a court decision, a notary or bailiff record, or by notarized recognition of a debt by the debtor or by confirmation of an auditor or a similar expert that the claim is duly registered in the creditor’s books.

SECURED CREDITORSThe law strengthens the position of

secured lenders with future or conditional claims against the debtor. This is in particular important for banks which had issued guarantees for fulfilment of the debtor’s obligations. The banks may be required to provide payment under such guarantees even after the commencement of insolvency proceedings. Provided that the respective guarantee is secured by assets of the debtor (e.g. mortgages and similar liens) the bank will be regarded a secured lender. The new statute thus provides remedy to the detrimental legal impact of a decision by the Supreme Court which caused certain panic among institutional lenders.

For additional information contact Radek Lopata at: lopata@giese.cz

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iese & Partner, s.r.o.

4Newsletter 2/June 2017

In comparison to regular court proceedings, arbitration proceedings

have many advantages. Usually, they are faster, less expensive and there are no public hearings, so that dispute and decision can be kept confidential.

An arbitration clause is needed to ensure that a dispute arising from a contract can be decided by an arbitrator. however, in case the arbitration clause is not precise enough or invalid, the dispute will be decided by a regular court. Therefore the exact wording of an arbitration clause is very important.

The Supreme Court of the Czech Republic issued a new decision concerning an arbitration clause under which the dispute should have been decided before one arbitrator appointed by the plaintiff. This caused an unequal position of the contractual parties, which lead to the invalidity of the whole arbitration clause. The Supreme Court stated that the equality of parties has to be ensured, regardless if the parties of the dispute are consumers or entrepreneurs. The equality of the parties is one of the basic procedural principles, on which both, court and arbitration proceedings are based. Therefore it is not acceptable, if arbitrators are appointed only or predominantly by one party.

This decision applies only to cases

Unfair Arbitration Clausesby Lenka Charvátová

Supervisory Boards of Joint Stock Companies“Employees Report Their Arrival”by Jaroslava Trojanová

The very first amendment to the Business Corporations Act after its introduction

three years ago is here. It brings a significant change to the bodies of joint stock companies with more than 500 employees.

Now one third of the members of the supervisory board of such large joint stock companies are to be elected by the employees. The other two thirds are elected by the general meeting. As a consequence, the number of members of the supervisory board has to be divisible by three. The articles of association (stanovy) can determine that a higher number of members of the supervisory board shall be elected by the employees. however, it cannot be higher than the number of members elected by the general meeting. Further, the articles of association may regulate that employees elect members of the supervisory board even if the company has less than 500 employees.

This composition of supervisory boards (codetermination) resembles the regulation that was effective before

the recodification of private law in the Czech Republic in the year 2014. Nevertheless, the codetermination used to apply to joint stock companies with more than 50 employees. The fact that the initial wording of the new Business Corporations Act did not originally adopt the codetermination was a broadly discussed topic in the Czech Republic.

Joint stock companies now have until January 14, 2019 to bring their articles of association and the composition of their supervisory board into compliance with this.

For additional information contact Jaroslava Trojanová at: trojanova@giese.cz

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5Newsletter 2/June 2017

where an arbitrator is appointed ad hoc (as an individual). It does not apply when an arbitrator is appointed from the list of arbitrators held by a permanent arbitration court established by law.

When the Journey is the Destination

When considering an acquisition of land, people check various criteria

in their chase for the perfect plot – surroundings, neighbours and of course price. But there is one more important fact that needs to be checked. Buyers should pay close attention to the access to the respective land. Even when there is a path or a road which leads to the land, it might be owned by a neighbour and is not designated for public access. It is a common misconception to think that a buyer can use this path without restrictions or solve the lack of access after acquisition of the land.

The usual way to deal with this is the

by Marie Zámečníková

For additional information contact Lenka Charvátová at charvatova@giese.cz

For additional information contact Ondřej Rathouský at rathousky@giese.cz

One recent decision of the Constitutional Court of the Czech Republic1 is dedicated to a topic which belongs to our most significant specializations – the preliminary injunctions.

In the Czech civil procedure the preliminary injunction is an interim measure. It provides the applicant with protection of its rights before the court considers the applicants claim in full detail and delivers a final judgment. On this basis preliminary injunctions are important if there is a threat of continued illegal conduct or the defendant might transfer assets. The negative impact in such situations is eminent and can be avoided only through effective procedural measures. however, no procedural measure would be effective if it came too late. Therefore the courts of the first instance injunction have to deliver their decision without delay, in any case no later than within seven days. According to our experience this time limit is respected by the courts. Nevertheless, the situation is different if an appeal is filed – either by the applicant

1 Ruling of the Constitutional Court dated May 10, 2017, file no. IV. ÚS 736/17.

Urgent! - Appeals in the Preliminary Injunction Matters Must Be Decided without Undue Delayby Ondřej Rathouský

because the court refused to issue the requested preliminary injunction, or by the defendant against whom it was issued. As the Civil Procedure Code does not provide for an explicit time limit within which the appellate courts must decide on the appeals, the principle of effectiveness is not maintained. In some cases such proceeding took several weeks or even months.

The Constitutional Court correctly ruled that the Civil Procedure Code must be interpreted so that also the appellate courts are obliged to proceed as quickly as possible and decide without undue delay. hopefully, the appellate courts will respect this and make their decisions on preliminary injunctions much quicker and thus more effective.

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iese & Partner, s.r.o.

6Newsletter 2/June 2017

Slovak Legal News

When a Personal Bankruptcy Is Meant to Feel “Fresh”by Zuzana Francúzová

A recent amendment to the Act on Bankruptcy and Restructuring brings the long

awaited package of changes in the so-called personal bankruptcy (konkurz na fyzickú osobu). Its main goal is to facilitate commencement and successful completion of personal bankruptcy proceedings.

In order to achieve a debt relief (oddlženie) under the old regulation, the debtor was obliged to pass through two stages of the proceedings. As for the first stage, the debtor’s assets were sold. Thereafter, during a 3-year period the debtor was obliged to regularly transfer

part of his/her income to creditors. Only after fulfilment of all statutory conditions, the debt relief was finally approved. Debt relief was only possible after a relatively long and cumbersome procedure. Moreover, each debtor was obliged to pay an advance payment of EUR 664 (remuneration of the preliminary trustee) as of the onset of the proceedings and his/her assets had to exceed the value of EUR 1,660 in order to qualify for the debt relief procedure. The practice clearly showed that a fulfilment of both conditions was virtually impossible for the most of those who were otherwise eligible for a bankruptcy.

The new debt relief procedure introduces:

(i) total liquidation of debtor’s assets followed by a quick debt relief (“fresh start”, tailored for debtors with virtually zero assets and income) or

(ii) restructuring of debtor’s liabilities according to a repayment schedule (“no fresh start” sui-table especially for debtors with more substantial income or assets).

Moreover, the advance payment for remuneration of the preliminary trustee was decreased to EUR 500 and the Centre

For additional information contact Marie Zámečníková at zamecnikova@giese.cz

establishment of an “Access Easement”, e. g. the right to use the neighbour’s land for access. Owners of land plots, which may not be duly managed or otherwise properly used due to insufficient access, can file an application and ask the court for an easement right to cross the neighbour’s land.

Unlike the former Czech Civil Code, the current one stipulates some restrictions which could hinder the establishment of the Access Easement. The court shall not grant the Access Easement if (1) the damage to the neighbour’s land would apparently exceed the advantages of the Access Easement, (2) the Access Easement is only applied for in order to obtain a more convenient connection, or (3) the lack of access has been caused due to gross negligence or intentionally by the person applying for the Access Easement.

Even though these restrictions were explicitly implemented only by the current Czech Civil Code, they were already discussed in the former jurisprudence. The Czech Supreme Court concluded in its former decisions that the above mentioned first and second restrictions had to be applied. As for the third restriction, the opinion of the Czech Supreme Court was quite different. The Supreme Court stated that it was possible to grant an Access Easement even if the lack of access was caused by the person applying for the Access Easement. These decisions, however, have been recently overruled. The Supreme Court decided that there is a gross negligence of the buyer if he/she does not care about the existence of sufficient access or recklessly relies on the neighbour letting him cross his/her land.

Usually, a land plot without proper

access would be sold for a lower price. Some buyers might have speculated with this fact, bought such land plots, applied for the Access Easement and tried to increase the value of the land this way. According to recent decisions of the Supreme Court this is not possible. Therefore it is essential to double-check the legal title to the access path prior to buying any land.

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7Newsletter 2/June 2017

for Legal Aid can grant the debtor a loan covering such expenses. Furthermore, from now on each debtor in personal bankruptcy (save for those holding a law degree) must be mandatorily represented by an attorney or by the aforesaid Centre for Legal Aid.

Another major change is the implementation of the so-called

non-seizable value of dwelling (nepostihnuteľná hodnota obydlia). The debtor who undergoes personal bankruptcy will now be entitled to retain part of his/her assets (especially a housing structure or any habitable space with value amounting up to EUR 10,000) in order to be able to safeguard for him/herself a place to live. Nevertheless, this

shall not apply if the assets in question are encumbered by a security right of a creditor.

The number of petitions for the personal bankruptcy proceedings increased significantly as of the effectiveness of the amendment. Consumers as well as their creditors are now very keen to learn whether (and how) the benefits of the new regulation will be put into the practice.

Warning! Not arranging for a regular check and review of mail in

electronic mail boxes of your Slovak subsidiary as of this summer may have significant implications for your business, e.g. missing out on important communications or requests from governmental authorities; lapse of statutory periods in ongoing litigations, tax, regulatory or appeal proceedings.

In our previous article on electronic mail boxes published in our Newsletter 3/2016 we told you that they would get automatically activated

on January 1, 2017. however, as only a limited number of managing directors had been able to arrange for an electronic ID card (eID) by the end of 2016, the government decided to postpone the original deadline. But now, the time is running out for companies who have not done so yet. Irrespective of whether the mail box was activated by the user, as of July 1, 2017, the authorities will start delivering documents to companies’ mail boxes.

Good news for foreign managing directors: The government has come up with a solution for foreign

by Valter Pieger

Slovak Legal Newsflash

Forget the laundry or milk!DO PICK UP YOUR MAIL! Electronic Mail Boxes Go “live” in Slovakia

For additional information contact Zuzana Francúzová at francuzova@giese.sk

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8Newsletter 2/June 2017

managing directors with no permanent or temporary residence in Slovakia. They could not access their companies’ electronic mail boxes, because they don´t hold the required eID. As of March 2017, a foreign managing director may apply

for a so-called alternative electronic identificator. This e-card similar to an eID will enable the person to have full access to the company’s electronic mail box.

Please be aware that the Act on Register of Partners of the Public Sector is already effective and may have a significant impact on your business! The newly introduced register contains persons concluding transactions with the state, its government bodies, institutions,

Introduction of the so-called reminder proceedings in Slovakia represents a big step towards a more efficient and smoother debt recovery. The aim of the Act on Reminder Proceedings, in force as of February 2017, is to make the enforcement of monetary claims simpler and faster compared to the regular payment order procedure governed by the Code of Civil Procedure.

Within the reminder proceedings, the petitions for the delivery of payment order may only be filed electronically using a prescribed form. They must be signed by an authorized electronic signature and delivered to the court electronically. The only court competent to issue payment orders within reminder proceedings is the District Court of Banská Bystrica.

organisations, municipalities or companies incorporated by them including e.g. the National Post Office, the National Rail, public or municipal utility & infrastructure companies, Public TV & Radio, etc. Not only those who will cooperate with the state in the future are affected by the

Compared to the regular payment order procedure according to the Code of Civil Procedure the court fee in the creditors friendlier reminder proceedings is 50% lower (i.e. 3% of the claimed amount). Provided that all formal requirements have been met, the court shall issue the payment order within ‘light-speed’ 10 days and shall bind the defendant to pay the debt within 15 days. The payment orders shall be delivered to electronic mail boxes of both parties. In case the defendant is a natural person and has no electronic mail box, the payment order shall be delivered by regular post. Expectations of professionals and business are high! Will they materialize?

Act - all persons having concluded a transaction with the state before the Act entered into force (February 2017) have to comply with the registration obligation by 31 July, 2017 at the latest.

The Act introduces several sanctions for non-compliance with this duty. The State is entitled not to perform its obligations arising from the relevant contracts as well as to withdraw from such contracts. For a more detailed information in this respect see our article in the Newsletter 1/2017.

ATTENTION: Your business is (possibly) going “Public” in Slovakia! Or what on Earth is the Register of Public Sector Partners?!

Remind me again: Reminder Proceedings? Debt Recovery in Slovakia on LTE or 5G speeds … Can it Be?

For additional information contact Valter Pieger at pieger@giese.sk

Slovak Republic

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Czech Republic

Giese & Partner, s.r.o.Palác MyslbekOvocný trh 8CZ - 117 19 PrahaTel.: +420 221 411 511 Fax: +420 222 244 469E-mail: office@giese.cz www.giese.cz

Identification No.: 26156920 VAT No.: CZ26156920 registered with the Commercial Register held by the Municipal Court in Prague, Section C, Insert 212170

Graphic design by Kateřina Nováková, Giese & Partner, June 2017

Further activities of Giese & Partner lawyers Read more a

General statement regarding this publication:The content of this Newsletter is provided for information purposes only and does not constitute or substitute legal advice provided by Giese & Partner.

Giese & Partner News

9Newsletter 2/June 2017

u INSOL International / INSOL Europe Seminar: “Just Over the Horizon” session Tel Aviv, Israel, June 26 - 27, 2017

Dr. Ernst Giese as speaker

On June 27, 2017 Dr. Ernst Giese participated as speaker at the INSOL International/INSOL Europe seminar in Tel Aviv lecturing on a proposal of the European Commission for a directive on preventive restructuring frameworks.

Recent activities

u PROMOTION

Mgr. Bc. Jaroslava Trojanová

Giese & Partner is pleased to announce that our colleague Jaroslava Trojanová has been promoted to senior associate at our firm.

Jaroslava joined our Prague team in 2011 as junior lawyer and became associate in 2014. She specializes in corporate law, banking law and financing, real estate projects and employment law.

u NEWLY MINTED LAWYER

Mgr. Marie Zámečníková

After a three year training period as junior lawyer at Giese & Partner and after having passed the Czech Bar examen with excellent results our

colleague Marie Zámečníková became associate at our firm.She specializes in corporate law, employment law, and

insolvency and restructuring.

Team News