LEGAL NEWS. CONTENTS SEPTEMBER NEWS: New Civil Code and Corporations Act in the Czech Republic

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1 PRAGUE BRNO OSTRAVA BRATISLAVA Czech-Slovak Law Firm with International Approach LEGAL NEWS SEPTEMBER 2013 TAXES PUBLIC SECTOR AND REGULATION CONTENTS HUMAN RESOURCES AND OTHER selected recent TAx amendments PROCEDURAL Differences between Czech and Slovak Public Procurement (Public Cotracts) Legislation CONTACTS NEWS: New Civil Code and Corporations Act in the Czech Republic Early this August, the Chamber of Deputies of the Parliament of the Czech Republic approved, in the third reading, a package of accompanying Acts that will sign the new Civil Code and the Corporations Act into law. The remaining recodification Acts will be discussed in the near future. This is a very important step because the accompanying Acts will finally breathe life to the new Codes. It means that in the Czech Republic the three main recodification pillars will come into effect, i.e. the new Civil Code, the Corporations Act, and the Act on International Private Law, as of As a result of the recodification, the terminology used will change and new legal concepts will be introduced. Both individuals and society will have more freedom to regulate relationships; however, more freedom will also mean more responsibility. In particular, real estate law will be significantly changed. It is almost certain that the entire Commercial Code, the Act on Lease of Non-Residential Premises, the Act on Ownership of Apartments, the Act on Insurance Contracts and a number of other regulations will be revoked. We will be also glad to discuss what preparations you are planning or have already made, in order to find out how we could best assist you to get ready for this change. No. 1 legal advisor according to the number of M&A deals in the Slovak Republic and Czech Republic ( ) No. 1 legal advisor according to the number of M&A deals in the Slovak Republic ( ) and Czech Republic ( ) Ranked by clients as the best law firm in the Czech Republic Czech law firm of the year (2012) No. 1 legal advisor according to the number of M&A deals in the Slovak Republic (2013) CONNECTED THROUGH SUCCESS Strategic thinking Individual approach Top-notch legal team Long-term partnership

2 HUMAN RESOURCES AND OTHER NEW PEOPLE Significant addition to the recodification team František Korbel has become a new legal expert and the 22nd partner of Havel, Holásek & Partners František Korbel (37), until now a Deputy Czech Justice Minister, a Vice-Chairman of the Czech Government s Legislative Council, and a co-author of the new Civil Code, is returning to the private sector after six years in the public sector. Starting this October, he will lead a special team focus-ing on the new Civil Code implementation. In the past, František Korbel worked at the Constitutional Court. From 2002, he started to practice law as an attorney, and from 2007 he worked as a Deputy of the Justice Minister and then as a Deputy of Environment Minister. He became widely known when working as a Deputy of Justice Ministers Jiří Pospíšil and Pavel Blažek and was responsible for legislation and information technology matters. For more than six years at the Justice Ministry he managed projects involving e-justice, the new Civil Code, and the new Penal Code, as well as dozens of other significant changes in Czech law. From 2006, he served as a Vice-Chairman of the Government s Legislative Council. He also served as an official and a town councillor in his home town of Tábor. Along with Ján Topinka, he will be responsible for the management and overall coordination of activities relating to the new Civil Code, as well as communication, public administration, and risk management. He will be involved in our strategic and business development activities, in creating a team, both from among the current staff or external sources, and in the development and training of team members. He will be a significant addition to legal practice groups specialising primarily in consumer protection, public sector and regulatory matters, and judicial, administrative and arbitration proceedings. Other persons responsible for the new Civil Code project include Dušan Sedláček, a firm s partner and a co-author of the prepared commentary to the new regulations, and Jana Buršíková, a counsel responsible for the coordination of internal training and know-how on recodification. On an external cooperation basis, the recodification team also includes Milan Hulmák, a member of the recodification committee of the Justice Ministry and of the private law committee of the Government s Legislative Council. He has been directly involved in drafting the new regulations. František Korbel, Partner Juraj Steinecker We are pleased to inform you about another significant addition to our team of experienced lawyers in the Czech Republic and Slovakia, this time at the Slovak office of Havel, Holásek & Partners. Counsel Juraj Steinecker has joined the office in Bratislava. Prior to joining Havel, Holásek & Partners, he worked at international law firm Schoenherr, where he advised clients primarily on competition law, mergers and acquisitions, and commercial law. He will also specialise in these areas at Havel, Holásek & Partners. Juraj Steinecker, Counsel Juraj Steinecker is third lawyer to join the Bratislava legal team this year, besides Matej Firický, who became the managing associate responsible for advising private clients and legal and tax optimization aspects of businesses, and Martin Jurečko, who became a partner responsible for real estate, mergers and acquisitions, and cor- porate law. Both Matej and Martin have long-term experience in working at international law firm White & Case. Manager of the Year Law firm Havel, Holásek & Partners has become a partner of the Manager of the Year competition in Slovakia. The aim of the project is to award significant managers, present their achievements to the public, and showcase their role in the development of the Slovak economy. The manager of the year will be selected based on the votes of top managers and significant personalities in the Slovak business sector, and the votes of TREND readers. Havel, Holásek & Partners supports and admires gifted managers, who are the real leaders in their areas of practice and a source of inspiration for many others. legal news 2

3 selected recent tax amendments TAXES PUBLIC SECTOR AND REGULATION Termination of Punishability in Certain Tax Crimes On 1 January 2013, amendment No. 334/2012 Coll. (the Amendment to Criminal Code ) came into effect. The Amendment to Criminal Code changes the legal regulation of effective remorse stipulated in Act No. 300/2005 Coll., the Criminal Code (the Criminal Code ). The Amendment to Criminal Code regulates the conditions for the termination of punishability in the form of effective remorse, with respect to the following tax offences: (i) tax and insurance non-remittance (Section 276 of the Criminal Code); (ii) tax and insurance evasion (Section 277 of the Criminal Code); (iii) failure to pay tax and insurance (Section 278 of the Criminal Code). The significance of the amendment consists in the fact that an offender will additionally pay a tax due and interest thereon or will pay due insurance premium, no later than the day following the day when the offender could have learned about the results of a criminal investigation. Unlike under the previous Criminal Code, the Amendment to Criminal Code allows effective remorse to be applied to the offence of tax and insurance evasion and to the offence of failing to pay tax and insurance, irrespective of the amount of damage caused by the offender s conduct. This means that the Amendment also allows effective remorse to be applied to large-scale value tax evasions. However, such a right can be exercised only within the limitation period. With respect to tax crimes mentioned above, offenders will not be able to apply effective remorse if (i) they have been convicted of a similar offence in the last 24 months, or (ii) in the last 24 months, they have applied for effective remorse to discontinue criminal prosecution for similar offences. New Tax Offences Act No. 246/2012 Coll., as amended, and effective from 1 October 2012, introduced a new provision on the offence of tax fraud (Section 277a of the Criminal Code) and the offence of obstructing the performance of tax administration (Section 278a of the Criminal Code). Offenders commit the offence of tax fraud to a larger extent if they unlawfully claim a refund of value added tax or excise tax (of at least EUR 2,660) with the intention to procure an illegal benefit for themselves or another person. Offenders may face a prison sentence of 1 to 12 years for such an offence. Since the administrative authorities are dealing with an increased number of tax entities attempts to avoid fulfilling their tax liabilities, the legislator has introduced new criteria establishing the offence of obstructing tax administration. Such an offence is committed by an entity who: (i) states false or grossly misleading data or conceals obligatory data with regard to facts decisive for a correct tax assessment, in documents submitted for tax administration; (ii) alters, invalidates or destroys documents decisive for a correct tax assessment; (iii) fails to fulfil the notification obligation imposed on them bylaw; or (iv) fails to fulfil an obligation imposed on them by law during a tax inspection. Offenders may face a prison sentence of 1 to 8 years for such an offence, depending on the amount of damage caused or other circumstances conditioning the application of such a sentence. However, effective remorse cannot yet be applied with respect to such offences. Not sure how to proceed? Ask for Issuing a Binding Opinion In order to enhance and make the business environment more attractive, the prepared amendment to Act No. 563/2009 Coll., on Tax Administration (Tax Procedure Code) and on Amendment and Supplement to Certain Laws, as amended (the Amendment to Tax LEGAL NEWS 3

4 Administration Act ) proposes introducing a new concept, a binding opinion. The provisions of the Amendment to Tax Administration Act concerning the binding opinion will come into effect on 1 September Tax entities will be able to request the Financial Administration Office to issue a binding opinion on the application of tax regulations to an extent to be specified in a generally binding legal regulation that will be issued by the Slovak Ministry of Finance. It is expected that these binding opinions will primarily relate to the legal regulations providing for income tax, VAT, and excise tax. The period for issuing a binding opinion will be 60 days from the delivery of the request or a supplement thereto. If, considering the complexity of a case, the Financial Administration Office cannot issue the binding position within the 60-day period, it will inform the tax entity and ask it for its approval of extension of the period for issuing the binding position. If the binding position does not address all the facts specified in the request, protests against it may be lodged within 8 days of its delivery date. Subsequently, the Financial Administration Office will assess the protests and, if there are reasons for doing so, supplement the position. The position will be binding on the tax administrator and a second-instance authority, provided that the tax entity has acted in accordance with the issued binding position and if the facts, based on which the binding position was issued, have not changed. The request for issuing the binding position will be charged; the fee amount will depend on the amount of a business case for which the binding position is requested. The prepared Amendment to Tax Administration Act sets the minimum fee amount at EUR 4,000 and the maximum fee amount at EUR 30,000. If the Financial Administration Office does not issue the binding position, the tax entity will be refunded the fee it paid when it filed the request. If the tax entity withdraws its request because the extended period for issuing the binding position is not convenient for it, the Financial Administration Office will also pay the tax entity interest on the paid fee. If, however, the actual amount of a business case exceeds by at least 10%, the amount of the business case specified in the request, the tax payer will be required to pay the difference between such amounts including interest thereon as an additional fee within 30 days from the day when the Financial Administration Office ascertains such a difference. We believe that the fee amounts for issuing binding positions will be revised and adjusted in order to be applied more widely in practice. Financial Statements and Auditor s Reports Published Already on the Internet By Act No. 547/2011 Coll., amending and supplementing Act No. 431/2002 Coll., on Accounting, as amended (the Amendment to Accounting Act ) and on Amendment and Supplement to Certain Laws, dated 1 December 2011, the legislator has established a register of financial statements (the Register ) as a public administration information system. LEGAL NEWS 4

5 of financial statements (the Register ) as a public administration information system. The Slovak Finance Ministry will be the administrator of the Register. Overall, four new Sections have been added to Part Four of the Accounting Act, each coming into effect on a different date. The provisions regulating the Register stipulate, among other things, the conditions for depositing the relevant documents in the Register, particularly, how this should be done and the form (hard copy or electronic) and within what period an accounting entity must deposit such documents. However, accounting entities are required to deposit the financial statements prepared as at 31 December 2013 in the Register. In general, the Register is divided into two parts, a public part and a non-public part. The public part of the Register includes documents stipulated by the Amendment to Accounting Act (the Documents ), which must be deposited in the Register by (i) an accounting entity preparing financial statements; (ii) a company; (iii) a cooperative; (iv) a state enterprise; (v) a public administration accounting entity; and (vi) another accounting entity if stipulated by a special regulation. Documents primarily mean financial statements, statements of selected data from financial statements, auditor s reports, and annual reports of municipalities and of higher territorial units. Delivery of the Documents is provided for differently, depending on whether it is an electronic delivery or a delivery in hard copy. The Documents are delivered in hard copy to the tax authority with local jurisdiction, which subsequently forwards the Documents to the Slovak Finance Ministry as the Register s administrator. The Documents of public administration accounting entities are delivered in a different way, specifically to the Register s administrator via the State Treasury system. The Documents prepared in electronic form are delivered via electronic registry. Delivery is subject to the Tax Procedure Code provisions on delivery of documents. The Documents delivered electronically are sent to the Collection of Deeds of the relevant Commercial Register. The Documents deposited in the public part are available to all persons without having to pay any charge. If you are interested in inspecting such Documents, the Slovak Finance Ministry has launched a testing operation through the www. registeruz.sk website, even though one may argue about the legitimacy of such a step. Changes in Taxation of Bonds Act No. 135/2013 Coll., amending, among other things, Act No. 595/2003 Coll., on Income Tax, as amended (the Amendment to Income Tax Act ) changes the legal regulation of taxation of bonds. Effective from 1 July 2013, the Amendment no longer distinguishes between government bonds and other bonds. Under the new legislation, investors individuals who will generate bond yields, will be required to levy tax on such yields in a form of a tax return. Under the previous legislation, the tax on such bond yields was levied by an issuer paying the 19% withholding tax, and the net yields after such taxation were subsequently paid to investors. Under the new legislation, bond yields of foreign entities, i.e. tax non-residents, are not generally considered as yields from the source in Slovakia, and thus are not subject to withholding tax in Slovakia. The above may be applied in financial structuring of debt transactions. In certain cases, considerable savings may be made by an appropriate choice of a debt instrument. Matej Firický, Managing Associate Ondrej Urban, Senior Associate LEGAL NEWS 5

6 PROCEDURAL Differences between Czech and Slovak Public Procurement (Public Cotracts) Legislation TAXES PUBLIC SECTOR AND REGULATION In Slovakia, public procurement review procedures are provided for in Section 135 et seq. of Act No. 25/2006 Coll., on Public Procurement and on the Amendment and Supplement to Certain Laws, as amended, including the latest Amendment, No. 95/2013 Coll., effective from 1 July Some of its provisions already came into effect on its promulgation date in the Collection of Laws, i.e. on 23 April 2013, and the provisions relating to obligatory certification of electronic auction devices will come into effect as late as on 1 January 2014 (the PPA ). In the Czech Republic, protection remedies against a contracting entity s incorrect action 1 are provided for in Section 110 et seq. of Act No. 137/2006 Coll., on Public Contracts, as amended (the PCA ). Slovakia The review procedures are defined by the law as remedies taken if participants in the public procurement process or affected persons believe that a contracting authority, contracting entity or person under Section 7 of the PPA (the contracting authority ) violated the public procurement principles stipulated in the PPA, or did not act in accordance with the PPA. The procedures are classified in the PPA in terms of an entity that is competent to address a respective review procedure and are therefore split into the following two categories: (i) a request for remedy (which is directly decided by the contracting authority concerned); and (ii) supervision over public procurement (which is carried out by the Office for Public Procurement (the Slovak Office ) as an independent central state administration authority for public procurement. Supervision over public procurement means deciding on protests, conducting audits, imposing fines for administrative delicts in the area of public procurement and carrying out other activities under Part Six, Title IV of the PPA. Filing the request for remedy by an affected entity (i.e., the claimant) is a precondition for lodging protests to assert the protection of rights and legally protected interests of the affected entity (i.e., filing the request for remedy precedes the protest proceedings), except for protests lodged under Section 138 (2) (d) to (g) 2, as well as protests lodged by a state administration authority 3, when the affected entity may lodge protests directly with the Slovak Office without previously filing the request for remedy with the contracting authority. Unlike protests, the request for remedy may be filed only against the following exhaustively enumerated matters: (i) an intention to conclude a contract or a works concession contract and against the conditions set out in individual notices obligatorily published by the contracting authority; (ii) conditions set out in tender documents, other documents or in tender conditions set out in a design contest provided within the design/ tender submission period; (iii) conditions set out in a call for the submission of tenders or designs. The PPA stipulates a 10-day substantive limitation period for the delivery of the abovementioned request for remedy, the lapse of which depends on the facts against which the request is filed. The above proceedings on the request for remedy are followed by the protest proceedings, and the matters that may be challenged by protests are not, unlike those with respect to the request for remedy, exhaustively enumerated. In the protest proceedings, the Slovak Office decides on protests and both the contracting authority as the supervised entity and the proponent are the only participants in the proceedings. An amendment to the PPA, No. 28/2013 Coll., effective from 18 February 2013, 1 The contracting entity means (i) the contracting authority under Section 2 (2) of the PCA; (ii) a subsidized contracting entity under Section 2 (3) of the PCA; and a sector contracting entity under Section 2 (6) of the PCA. 2 Section 138 (2) (a) to (d) PPA: A tenderer, candidate, participant or person whose rights or legally protected interests have been or may have been affected by an action of the supervised entity or of a state administration authority pursuant to Section 137 (2) (b) (hereinafter referred to as the proponent ) may lodge, prior to the conclusion of a contract, concession contract or framework agreement, protests against (d) selection of candidates in a restricted procedure pursuant to Section 52 (1) and Section 82 (1), in a negotiated procedure with a publication pursuant to Section 56 (1) and Section 85 (1), in a competitive dialogue under Section 60 (3), in a design contest pursuant to Section 105(2), or the selection of candidates in awarding a contract in the area of defence and security under Section 108i (1), (e) exclusion of a tenderer, candidate or participant, (f) evaluation of tenders or designs, (g) the supervised entity s actions other than those set out in items (a) to (f) above. 3 Section 137 (2) (b) PPA: In carrying out supervision, the Slovak Office shall decide on protests of a state administration authority, which will prove its legal interest in the given case, where the supervised entity has been provided funds by the European Union for the supply of goods, carrying out building works, or providing services. 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7 concentrated the protest proceedings into two proceedings (i.e., before the opening of parts of tenders marked Criteria and after the opening of parts of tenders marked Criteria ), each with one decision, and the protest proceedings are subject to Act No. 71/1967 Coll., on Administrative Proceedings (Administrative Procedure Code), as amended (the Slovak Administrative Procedure Code ) with an emphasis on the adversary character of proceedings. In a single decision, the Office will decide on all protests lodged and, if the PPA has been violated, may return the public procurement to the point where the initial violation of the PPA, which affected the result of the public procurement, occurred. By means of a decision in the first protest proceedings, the Slovak Office will deal with all protests delivered before the opening of parts of tenders marked Criteria. By a decision in the second protest proceedings, the Slovak Office will only deal with those protests that were lodged after such an opening, i.e. the protests against the evaluation of meeting the criteria for evaluation of tenders and a possible exclusion of a tenderer or candidate due to a considerably low price, or due to a failure to prove that it had met the conditions for participation, in the form of an affidavit, before signing a contract. Protests must be delivered to the Slovak Office and the supervised entity no later than within 10 days, depending on the matters set out in Section 138 (5) PPA, specified in the table below. Unlike filing the request for remedy, when lodging protests, the proponent must make a deposit to the Office s account, the amount of which depends on the type of a contract against which a protest is lodged, as well as on whether the protest is lodged before or after the opening of parts of tenders marked Criteria, and the deposit paid in full is considered a state budget income in cases where the proponent s protests have been dismissed. Thirty-five percent of the paid deposit becomes a state budget income on the valid and effective date of the Slovak Office s decision discontinuing the protest proceedings if the proponent withdraws the protests lodged before a decision on the merits of the case is issued. In other cases, the Slovak Office will refund the deposit or part of it within 30 days of the valid and effective date of the Office s decision on protests. If, in the protest proceedings, the Office discovers that the supervised entity s action, when awarding a contract or part of it, has violated the PPA and there is a direct causal connection between the violation of the PPA and the evaluation of tenders or the selection of tenderers or candidates, the Office will issue a decision, in relation to the contract or part of it. The decision will (i) cancel the award procedure applied with respect to a contract or part of it or a design contest, if the contracting authority had already acted contrary to the PPA in connection with a contract notice, a notice used as a call for competition, a design contest notice, tender documents or tender conditions, or (ii) order the removal of an unlawful status and that public procurement be continued, by repeating the supervised entity s action that was contrary to the PPA. In addition, the Slovak Office may also decide to discontinue the protest proceedings, to dismiss the protests, or to order the removal of an unlawful status and that public procurement be continued, if a violation of the PPA could not have affected the result of public procurement. The Slovak Office must decide on protests within 30 days of the delivery date of complete LEGAL NEWS 7

8 documentation and a supervised entity s written statement on the protests lodged, specifying the estimated contract value. If the Slovak Office does not issue a decision within the specified period, the Office will be deemed to have issued a decision dismissing the protests. A participant in the protest proceedings may lodge an appeal against the decision on the protests. This does not apply to a decision to discontinue the protest proceedings. The participant must deliver the appeal to the Slovak Office within 10 days of the delivery date of the decision on the protests. The appeal will be decided by the Council, a newly-created agency of the Slovak Office. If a participant in the proceedings lodges the appeal, it must again make a deposit to the Slovak Office s account except for the cases where, in the protest proceedings, the Slovak Office has not issued a decision within the statutory 30-day period. With respect to above the limit contracts, the deposit amount is double the deposit made by the proponent when lodging protests, and with respect to below the limit contracts, the deposit amount is EUR 3,000. The Council will decide on the appeal within 45 days of the delivery date of the complete appeal. The Council will (i) uphold the appeal and change the decision (if there are reasons for doing so), or (ii) dismiss the appeal and uphold the decision. The Council will always review the appealed decision in full. With respect to above the limit contracts, the appeal has a suspensive effect for no more than 45 days. With respect to below the limit contracts, the appeal will have a suspensive effect only if the Council decides so. No application for remedial measure may be filed against the Council s decision on the appeal and the Council s decision on the suspensive effect. The Council s decision on the appeal may be reviewed by a court. A petition must be filed within 30 days of the delivery date of the Council s decision on the appeal. The Council s decision on the suspensive effect of the appeal cannot be reviewed by a court. The Slovak Office s final decision to discontinue the protest proceedings or to dismiss the protests may also be reviewed by the Council, on its own initiative, outside the appellate proceedings. The Council will not review (i) the Council s decision on the prosecutor s appeal, and (ii) the Council s decision on the prosecutor s protest, outside the appellate proceedings. When addressing requests for remedy and in protest proceedings, the Office conducts an audit, as another of its review procedures, of contract award procedures. Unlike requests for remedy and protests, which may be lodged only before concluding a contract, concession contract or framework agreement, the Slovak Office may conduct an audit, as part of the audit of contract award procedure both before concluding a contract, concession contract or framework agreement and before closing a design contest, as well as after concluding a contract, concession contract or framework agreement, and after closing a design contest. An audit may also be conducted after the cancellation of a contract award procedure and a design contest, and such an audit is a more complex procedure than, for example, the protest proceedings, because when conducting such an audit, the Slovak Office reviews complete documentation accompanying the public procurement and the entire award procedure of a contract or of a design contest from the very beginning to the time of the audit. When conducting the audit, the Slovak Office does not resolve a dispute between the proponent and the supervised entity, but it reviews whether the supervised entity s action in awarding a contract or design contest was in accordance with the PPA. In accordance with Section 147a of the PPA If the contracting authority, the contracting entity or person referred to in Section 7 concludes, contrary to this Act, a contract, concession contract or framework agreement or an amendment to the contract, concession contract or framework agreement, the Slovak Office or a prosecutor files with a court a motion to declare the same invalid within one year of the conclusion thereof. In addition to the Slovak Office and the prosecutor, the motion to declare a contract, concession contract or framework agreement invalid may also be filed, after the conclusion thereof, by a tenderer, candidate, participant or person who could have been interested in having been awarded a particular above the limit contract and whose rights or legally protected interests have been or may have been affected by an action of the contracting authority or of the contracting entity, within 30 days or six months, depending on the conditions set out in Section 148a (9) PPA. Under Section 153 (1) to (3) PPA General regulations on administrative proceedings (the Slovak Administrative Procedure Code) shall not apply to the proceedings pursuant to this Act except proceedings pursuant to Section 130, Section 132 (3), Section 134 (2), Section 146d, and Section 149. The proceedings under Sections 138 to 145 (the protest proceedings) shall be subject to the general regulation on administrative proceedings, unless this Act stipulates otherwise, whereas Section 19, Section 23, Sections 28 to 30, Section 32 (1), Section 49, Section 50, Section 60, and Sections 71 to 80 of the general regulation on administrative proceedings LEGAL NEWS 8

9 shall not apply. The proceedings to prohibit participation in public procurement under Section 149 (3) (a) to (c) shall not be subject to the provisions on suspending the proceedings due to the commencement of the proceedings on a preliminary question, and Section 29 (2) of the general regulation on administrative proceedings. Based on the above, the Slovak Administrative Procedure Code does not apply to proceedings under the PPA except for the following proceedings conducted under the PPA, specifically: (i) proceedings in the matters of registering in the list of entrepreneurs (Section 130 PPA); (ii) proceedings in the matters of extension of the validity of registration in the list of entrepreneurs (Section 132 (3) PPA); (iii) proceedings in the matters of deletions from the list of entrepreneurs (Section 134 (2) PPA); (iv) proceedings in the matters of imposition of a procedural fine in the audit of a contract award procedure after concluding the contract (Section 146d PPA); and (v) proceedings on imposing a fine for administrative delicts (Section 149 PPA). By an amendment to the PPA No. 28/2013 Coll. and No. 95/2013 Coll., the protest proceedings have been subjected to the Slovak Administrative Procedure Code except for Section 19, Section 23, Sections 28 to 30, Section 32 (1), Section 49, Section 50, Section 60, and Sections 71 to 80 of the Slovak Administrative Procedure Code. Czech Republic If participants in a public procurement process or affected persons believe that the contracting entity has violated the principles stipulated in the PCA or has not acted in accordance with the PCA, the remedial mechanisms under the Czech PCA, as in the Slovak PPA, are divided, in terms of an entity that is authorised to address a particular procedure, into the following two categories: (i) protests (that are directly decided by the contracting entity); and (ii) supervision over compliance with the PCA (that is exercised by the Office for the Protection of Competition (the Czech Office ) as an independent authority). Supervision over compliance with the Act means the exercise of supervision over public contract awarding (i.e., issuing preliminary measures under Section 117 of the PCA; decision-making on whether the contracting entity acted in accordance with the PCA when awarding a contract or a design contest; imposing corrective measures under Section 118 of the PCA; inspecting the contracting entity s actions in contract awarding under special laws; and addressing administrative delicts and imposing penalties for them). In the Czech Republic, when awarding above the limit contracts and below the limit contracts or in a design contest, any supplier, who is interested or was interested in being awarded a certain contract and who is at risk of or has incurred damage to its rights (the complainant ), may lodge justified protests with the contracting entity. The protests may be lodged against all actions of the contracting entity, and the complainant must deliver the same to the contracting entity within the general substantive period of 15 days (or 10 days in the case of a simplified below the limit procedure) from the day when the complainant became aware of an alleged violation of the PCA by the contracting entity s action (a subjective period ), however, no later than within the time of concluding the contract (an objective period ). Section 110 (3) to (5) of the PCA stipulates other special periods for submitting protests by the complainant in individual special cases (special periods are specified in the table below). Lodging protests in a due and timely manner is a condition for filing a motion to review a contracting entity s action by the Czech Office in the same case, except a motion to prohibit the performance of a contract under Section 114 (2) of the PCA, which the complainant may file without prior lodging protests. A complainant who will not make use of lodging protests is not entitled, under Section 110 (9) of the PCA, to file a motion in the same case with the Czech Office. If the contracting entity, which decides on protests, does not acknowledge such protests, it will then inform the complainant, in a written decision, about the possibility of filing a motion for initiating proceedings to review the contracting entity s actions directly with the Czech Office (the Motion ). Proceedings to review the contracting entity s actions will commence before the Czech Office either upon the written Motion of the complainant (proponent) or on the Czech Office s own initiative (ex officio), and, as with lodging protests in Slovakia, the Motion is not limited only to the specific matters (exhaustively enumerated) set out in the PCA. After concluding a contract, the Motion may be filed only against (i) concluding the contract without prior publication of public procurement, (ii) the violation of prohibition on concluding the contract, stipulated in the PCA, or (iii) in the case of the contracting entity s action under Section 82 (3) of the PCA, and the complainant may demand only that the performance of the contract be prohibited. The Motion must be delivered both to the Czech Office and the affected contracting entity (i) within the substantive period of 10 calendar days of the receipt date of the decision in which the contracting entity did not acknowledge protests, or (ii) within a period of 25 calendar days of the dispatch date of the protests by the complainant if the contracting entity did not address LEGAL NEWS 9

10 the protests as referred to in Section 111 (1) of the PCA, or (iii) within a period of 30 calendar days of the publication date of the contracting entity s notice of concluding the contract in the case of a motion to prohibit concluding the contract (it is delivered only to the Czech Office). When filing the Motion, the complainant must also make a deposit to the Czech Office s account of 1% of the price offered by the complainant for the entire performance period of a public contract; however, the amount should be no less than CZK 50,000 but no more than CZK 2,000,000. If the price offered by the complainant cannot be determined or if the price offered is determined, in awarding a framework agreement, solely as the price for a unit of performance or in the case of a motion to prohibit performance of the contract, the complainant must make a deposit of CZK 100,000. The deposit is a state budget income if the complainant s motion has been dismissed under Section 118 (5) (a) of the PCA (because reasons to impose a corrective measure have not been found) or the Czech Office decides to discontinue proceedings if the complainant withdraws its motion after, in the same administrative proceedings, a decision to dismiss the motion under Section 118 (5) (a) of the PCA has been issued but such a decision is not final yet; otherwise, the Czech Office will refund the deposit within 30 days of the valid and effective date of the Czech Office s decision on the Motion. In the proceedings to review the contracting entity s actions, the Czech Office may, upon a motion of a participant in the proceedings or on its own initiative, order the contracting entity to take one of the following preliminary measures: (i) prohibition to conclude a public procurement contract, or (ii) to discontinue public procurement or a design contest. In the proceedings to review the contracting entity s actions, the Czech Office may (i) discontinue the proceedings under Section 117a of the PCA, (ii) decide to cancel public procurement or a design contest or to cancel only an individual action of the contracting entity if the contracting entity has not followed the procedure set for awarding a public contract or a design contest, and such a procedure has significantly affected or could have affected the selection of the most appropriate tender or design and the contract has not yet been concluded, (iii) prohibit performance of the contract under Section 118 (2) of the PCA, (iv) decide that an administrative delict has been committed under Section 120 et seq. of the PCA and impose a fine for it, or (v) dismiss the motion. Czech Act No. 500/2004 Coll., the Administrative Procedure Code (the Czech Administrative Procedure Code ), as a general legal regulation providing for the actions of administrative authorities, also applies to the proceedings to review the actions of contracting entities under the PCA, as a subsidiary legal regulation to the special legal regulation of the PCA. It means that as the proceedings to review the actions of contracting entities are administrative proceedings, such proceedings are subject to the Czech Administrative Procedure Code, unless the PCA provides otherwise. A corrective measure imposed by the Czech Office may be appealed by a remonstrance as a remedial measure with the Chairman of the Czech Office under Section 152 of the Czech Administrative Procedure Code. If all legal remedial measures have been exhausted, an administrative petition may be filed, within administrative judiciary, under Act No. 150/2002 Coll., the Code of Administrative Justice. Ondrej Urban, Senior Associate Ján Kapec, Associate LEGAL NEWS 10

11 Brief Summary of Measures that Can Be Taken Subjekt oprávnený podať žiadosť o nápravu Slovakia Czech Republic REQUEST FOR REMEDY PROTESTS Entity authorised to file the request for remedy Entity authorised to decide Matters against which a review procedure may be applied (i) a tenderer; (ii) a candidate; (iii) a participant; or (iv) a person whose rights or legally protected interests have been or may have been affected by an action of the contracting authority, the contracting entity or the person referred to in Section 7 of the PPA (the contracting authority ) Transakce Affected contracting authority Exhaustively enumerated: a) against an intention to conclude a contract or a works concession contract and against the conditions set out in the notice under Section 50 (4), Section 67 (2), Section 77, Section 105 (5) or Section 108b (4) PPA; Any supplier, who is interested or was interested in being awarded a certain contract and who is at risk of or has incurred damage to its rights due to an alleged violation of the PCA (the complainant ); only with respect to above the limit public contracts and below the limit public contracts or in design contests. Affected contracting entity Against all actions of the contracting entity b) against conditions set out in tender documents or other documents provided by the contracting authority within the tender submission period, and against conditions set out in tender conditions in a design contest, provided within the design submission period; Periods c) against conditions set out in a call for the submission of tenders or designs. Substantive: - 10 days; the lapse depends on the matters against which the request for remedy is filed under Section 136 (1) of the PPA. Subjective and objective periods / Substantive: - 15 days (or 10 days in the case of a simplified below the limit procedure) from the day when the complainant became aware of an alleged violation of the PCA by the contracting entity s action, however, no later than by the time of concluding the contract; - 5 days from the end of the period for submitting tenders, if protests against award conditions are lodged; - 15 days (or 10 days in the case of a simplified below the limit procedure) from the delivery date of the notice of selection of the most appropriate tender, if protests against the decision on selection of the most appropriate tender or against the contracting entity s decision on the exclusion from participation in public procurement are lodged; LEGAL NEWS 11

12 Is applying this measure a condition for applying other legal measures? Yes; Filing the request for remedy in a due and timely manner is a necessary condition for lodging protests under Section 138 (2) (a) to (c) of the PPA except lodging protests under Section 138 (2) (d) to (g) of the PPA (i.e., lodging protests against selection of candidates in a restricted procedure under Section 52 (1) and Section 82 (1); in a negotiated procedure with publication under Section 56 (1) and Section 85 (1); in a competitive dialogue under Section 60 (3); in a design contest under Section 105 (2); or against selection of candidates in awarding a contract in the area of defence and security under Section 108i (1); against exclusion of a tenderer, candidate or participant; against evaluation of tenders or designs; and against the supervised entity s actions other than those set out in Section 138 (2) (a) to (f) days from the publication date of the notice of the intention to conclude a contract, if protests are lodged against the intention to conclude a contract without publication of the notice of commen-cing public procurement if the contracting entity publishes a voluntary notice of the intention to conclude a contract. Yes; Lodging protests in a due and timely manner is a condition for filing a motion to review a contracting entity s action by the Czech Office in the same case if such a motion is filed before concluding a contract. PROTESTS PROCEEDINGS TO REVIEW CONTRACTING ENTITY S ACTION Entity authorised to file the request for remedy (i) a tenderer; (ii) a candidate; (iii) a participant; or (iv) a person whose rights or legally protected interests have been or may have been affected by an action of the supervised entity, or (v) a state administration authority; only with respect to above the limit contracts and below the limit contracts, as well as with respect to below the threshold contracts under Section 137 (2) (b) of the PPA (i) any supplier who is interested or was interested in being awarded a certain contract and who is at risk of or has incurred damage to its rights due to an alleged violation of the PCA by a contracting entity s action (a proponent ); or (ii) the Czech Office on its own initiative (ex officio); only with respect to above the limit public contracts and below the limit contracts or in a design contest Entity authorised to decide Matters against which a review procedure may be applied Office for Public Procurement (Slovak Office) Demonstratively enumerated: a) against the intention to conclude a contract or a works concession contract and against the conditionsset out in the notice under Section 50 (4), Section 67 (2), Section 77, Section 105 (5) or Section 108b (4) PPA; b) against conditions set out in tender documents or other documents provided within the tender submission period, or against conditions set out in tender conditions in a design contest, provided within the design submission period; Office for the Protection of Competition (Czech Office) Demonstratively enumerated: A motion for initiating proceedings to review the contracting entity s actions (the Motion ) may be filed against all ofthe contracting entity s actions that exclude or could exclude the principles set out in Section 6 of the PCA and that may result in a risk of damage or resulted in damage to the proponent s rights, primarily against (i) award conditions; (ii) the content of the notice of or call for the commencement of public procurement; (iii) exclusion of a tenderer from public procurement; (iv) a decision to select the most appropriate tender; (v) the application of a particular type of public procurement. c) against conditions set out in a call for the submission of tenders or designs; d) against selection of candidates in a restricted procedure, in a negotiated procedure with publication, in LEGAL NEWS 12

13 a competitive dialogue, in a design contest or against selection of candidates in awarding a contract in the area of defence and security; e) against exclusion of a tenderer, candidate or participant; f) against evaluation of tenders or designs; and g) against the supervised entity s actions other than those set out in items (a) to (f) above. Periods Protests cannot be lodged (i) in below the limit contracts for commonly available goods, services or works procured through an electronic marketplace; and (ii) in below the limit contracts procured without using electronic marketplace, if the estimated contract value equals or is lower than EUR 40,000 (goods and services) and EUR 200,000 (building works). Substantive: - 10 days from the date of dlivery of a written notice of the outcome the request for remedy or a written notice of rejection of the request for remedy, if the supervised entity has fulfilled the obligations under Section 136 (6) or (7); - expiry of the period for delivery of a written notice of the outcome the request for remedy or a written notice of rejection of the request for remedy, if the supervised entity has not fulfilled the obligations under Section 136 (6) or (7); - receipt of the notice of the result of selection of candidates in a restricted procedure under Section 52 (1) and Section 82 (1), in a negotiated procedure with publication under Section 56 (1) and Section 85 (1), in a competitive dialogue under Section 60 (3), in a design contest under Section 105 (2) or in awarding a contract in the area of defence and security under Section 108i (1), if protests are against selection of candidates in a restricted procedure, in a negotiated procedure with publication or in a competitive dialogue, against selection of participants in a design contest or against selection of candidates in awarding a contract in the area of defence and security; Substantive: - 10 calendar days from the day when the complainant received the contracting entity s decision dismissing the protests); - 30 calendar days from the day when the contracting entity published the contract award notice under Section 147 of the PCA, specifying a reason for awarding the public contract without publication of the notice of commencement of public procurement; however, no later than 6 months from concluding the contract, if it is the Motion to prohibit the performance of a contract); - 25 calendar days from the day when the complainant sent protests, if the contracting entity has not addressed the protests under Section 111 (1) of the PCA. - receipt of the notice of exclusion of a tenderer, candidate or participant, if protests are against exclusion of a tenderer, candidate or participant; - receipt of the notice of the result of evaluation of tenders or designs, if protests are against the result of evaluation of tenders or designs; - the earlier of: (1) taking an action by the su LEGAL NEWS 13

14 upervised entity, or (2) by the time of concluding a contract, concession contract or framework agreement, if protests are against a supervised entity s action other than that set out in paragraph 2 (a) to (f); this will not apply if protests are lodged by a state administration authority, under Section 137 (2) (b) of the PPA, which is authorised to lodge protests by the time a contract, concession contract or framework agreement is concluded. Does taking this measure have to be preceded by taking another measure? Yes; lodging protests must be preceded by delivery of the request for remedy to the contracting authority under Section 138 (2) (a) to (c) of the PPA except for lodging protests under Section 138 (2) (d) to (g) of the PPA and lodging protests by a state administration authority under Section 137 (2) (b) of the PPA. Yes; filing the Motion before concluding a contract must be preceded by lodging protests. Deposit Yes, except a state administration authority; the deposit amount depends on the type of a contract (Section 138 (19) of the PPA), as well as on the fact whether a protest is lodged before or after the opening of parts of tenders marked Criteria, and said deposit paid in full is considered as a state budget income in cases where the proponent s protests have been dismissed. Thiert-five percent of the paid deposit becomes a state budget income on the valid and effective date of the Slovak Office s decision discontinuing the protest proceedings if the proponent withdraws the protests lodged before a decision on the merits of the case is issued. In other cases, the Slovak Office will refund the deposit within 30 days of the valid and effective date of the Office s decision on the protests. Yes; 1% of the price offered by the complainant for the entire period of performance of a public contract, however, no less than CZK 50,000, but no more than CZK 2,000,000. If the price offered by the complainant cannot be determined or if the price offered is determined, in awarding a framework agreement, only as the price for a unit of performance or in the case of a motion to prohibit performance of the contract, the complainant must make a deposit of CZK 100,000. The deposit is a state budget income if the complainant s Motion has been dismissed or if the Czech Office decides to discontinue the proceedings if the complainant withdraws its motion after, in the same administrative proceedings, a decision to dismiss the motion has been issued but such a decision is not final yet, under Section 118 (5) (a) of the PCA; otherwise, the Czech Office will refund the deposit within 30 days of the valid and effective date of the Czech Office s decision on the Motion. Remedial measure A participant in the protest proceedings may lodge an appeal against the decision on the protests. This will not apply to a decision to discontinue the protest proceedings. The participant must deliver the appeal to the Slovak Office within 10 days of the delivery date of the decision on protests. No application for remedial measure may be filed against the Council s decision on the appeal and the Council s decision on the suspensive effect. The Council s decision on the appeal may be reviewed by a court within administrative judiciary. An administrative petition must be filed within 30 days of the delivery date of the Council s decision on the appeal. The Council s decision on the suspensive effect of the appeal cannot be reviewed by a court. The Czech Office s decision may be appealed in the form of a remonstrance that is filed to the Chairman of the Czech Office under Section 152 of Act No. 500/2004 Coll., the Administrative Procedure Code. If all legal remedial measures have been exhausted, an administrative petition may be filed, within administrative judiciary, under Act No. 150/2002 Coll., the Code of Administrative Justice. LEGAL NEWS 14

15 Brief Summary of Measures that Can Be Taken Slovakia If the contracting authority concludes, contrary to the PPA, a contract, concession contract or framework agreement or an amendment to the contract, concession contract or framework agreement, the Slovak Office or a prosecutor may file with a court a motion to declare the same invalid within one year of the conclusion thereof. A tenderer, candidate, participant or person who could have been interested in having been awarded a particular above the limit contract and whose rights or legally protected interests have been or may have been affected by an action of the contracting authority or of the contracting entity may file with a court the motion to declare a contract, works concession contract or framework agreement invalid, after the conclusion thereof, within 30 days or six months, depending on the conditions set out in Section 148a (9) of the PPA. After concluding a contract, concession contract or framework agreement, after closing a design contest and after cancelling a contract award procedure and a design contest, a motion to conduct an audit of the contract award procedure by the Slovak Office may be filed. Czech Republic After concluding a contract, the Motion may be filed only against (i) concluding the contract without prior publication of public procurement; (ii) the violation of prohibition on concluding the contract stipulated in the PCA or in a preliminary measure under Section 117 (1) of the PCA; or (iii) the contracting entity s action under Section 82 (3) of the PCA. The complainant may demand only that the performance of the contract be prohibited. The Czech Office s decision may be appealed in the form of a remonstrance filed with the Chairman of the Czech Office under Section 152 of Act No. 500/2004 Coll., the Administrative Procedure Code. A possibility of filing an administrative petition, within administrative judiciary, under Act No. 150/2002 Coll., the Code of Administrative Justice. LEGAL NEWS 15