Contents:
I. News from the legislation process
II. Selected judicial decisions
I. News from the legislation process
Employment of Foreigners in the Czech Republic
Upon fulfillment of certain conditions, it is possible to employ foreigners in the Czech Republic. For the purpose of the relevant legislation a "foreigner" is deemed to be a person who is not a citizen of the Czech Republic, another EU country, Norway, Iceland, Liechtenstein or Switzerland or their family members. If foreigners wish to be employed in the Czech Republic, they have to obtain a residency permit and a work permit before commencing work.
On the other hand citizens of other EU countries, Norway, Iceland, Liechtenstein or Switzerland or their family members enjoy the same legal rights as citizens of the Czech Republic.
If a foreigner is intending to stay in the Czech Republic for the purpose of employment, such person is required to apply for a residency permit at the Czech embassy in their home country. They can apply for a short-term residency permit (fewer than 90 days) or for a long-term residency permit (more than 90 days).
If a foreigner fulfils requirements for obtaining a residency permit in another member state of the EU which is part of the Schengen area, then such citizen of a third country is deemed to have fulfilled all requirements for obtaining a residency permit in the Czech Republic.
A foreigner may apply for a work permit based on an employment or a similar type of contract. The law gives several exceptions where a work permit is not required (e.g. if the foreigner has a permanent residency permit in the Czech Republic or has been granted asylum in the Czech Republic, etc.).The employer is obliged to offer the foreigner as an employee working and salary conditions standard for a citizen of the Czech Republic in the same type of employment according to the valid legal regulations, and if applicable in accordance with the collective agreements or employment agreements.
Amendment to the Employment Act – a move towards a more flexible labor market
From January 1, 2009 the so-called "Green Card" project has been introduced as a new kind of longterm residency permit for foreigners to stay in the Czech Republic for the purpose of employment. The Green Card will serve both as a work permit and a residency permit at the same time. The purpose of this arrangement is to remove redundant administrative burdens preventing flexible access of foreigners to the labor market in such professions which are not taken by a Czech citizen, a citizen of another EU member state, or their family members within thirty days from notification to the Labor Authority of a job vacancy.
Together with widening the possibilities for obtaining a work permit, the Amendment also toughens the punishment for illegal work, where the work has been raised to CZK 5 million.
Amendment to the Real Estate Cadastre Act
The Amendment to the Real Estate Cadastre Act emphasizes the improved protection of personal data and makes it more difficult to obtain information from the Cadastral Register.
On March 1, 2009 the amendment to the law No. 344/1992 coll., the Real Estate Cadaster Act, took effect, according to which the cadastral offices will provide the following:
I. information from the Collection of Deeds (for example, copies of purchase contracts, judicial decisions, etc.), and
II. a summary of property ownership of a particular person in the whole Czech Republic
only to a person who presents proof of identity and also states the purpose for requesting such information. The cadastral office will then provide the information based on the request. The law does not provide for a possibility for the cadastral office to reject such a request. How the cadastral office will proceed in cases where the purpose given is clearly unsatisfactory or illegal, will obviously become known only as a result of practice.
Any misuse of such information received would then be deemed to be a violation of applicable law and handled by the Office for Personal Data Protection.
It is therefore no longer possible to conduct a direct and anonymous search in the archives. The proposed changes do not have an impact on the process of obtaining the usual extracts from the Real Estate Cadastre containing data relating to individual properties.
Another significant change to the Real Estate Cadastre Act is the introduction of a new method of dividing up land plots using borders delineating the scope of a mortgage right. By measuring areas using such borders, it is, for example, now possible to make a certain part of a land plot subject of a mortgage before such plot is officially divided into smaller plots, so it is possible to register such mortgage before such a sub-plot is sold.
The Real Estate Cadastre Act also resolves what has to date been inconsistent regulation of the ownership of newly registered structures. According to the Amendment of the Real Estate Cadastre Act the default position shall be that the owner of the land plot on which such new structure is constructed, shall be deemed to be the owner of the newly-registered structure, if not proven otherwise.
Property Tax shall apply to all – taxation of newly-built structures and apartments in the ownership of natural persons
The exemption from real estate tax for newly built structures and apartments, which served as one of the forms of support for the construction of residential properties, has been abolished with effect from January 1, 2009. Owners of properties completed in 2008 therefore already have the obligation to pay property tax this year. According to the state the significant tax exemption is no longer justified at the present time and hinders further use of financial resources by municipalities.
The property tax exemption based upon a change to heating systems from solid fuel to renewable energy sources such as solar, wind, geothermal and biomass energy, is still in effect in its original scope, i.e. five years from the year following the year of implementation of the change the property is exempt from tax.
Crimes of Conclusion of a Cartel Agreement and Unauthorized Employment of Foreigners now carry a Prison Sentence
The new Criminal Code has been published in the Collection of Laws under No. 40/2009. The conclusion of cartel agreements on prices shall now constitute a crime with a sentence of up to eight years of imprisonment. Furthermore, the Code recognizes a new crime of unauthorized employment of foreigners carrying a sentence of up to five years of imprisonment. The Code also increases the maximum sentence for crimes involving industrial rights (e.g. for breach of trademark rights and other designations from the current two years to up to eight years of imprisonment) and copyright from the current five years to up to eight years of imprisonment.
The new code will take legal force as of January 1, 2010.
Amendment to the Act on Banks
Responding to the current financial crisis, the Amendment to the Act on Banks was published in the Collections of Laws No. 433/2008 and has been in force since December 15, 2008. The Amendment raises the protection of bank deposits, increasing the deposit insurance limit to EUR 50,000. The previous insurance coverage limit was EUR 25,000. At the same time, the deductible coinsurance of depositors has been cancelled, under which compensation was received for only 90 % of deposits. Under the new legislation compensation will be granted for 100% of the deposit, up to EUR 50,000.
New Act on Ownership of Apartments and Nonresidential Space is under discussion by the Chamber of Deputies
The Chamber of Deputies is discussing the draft Act on Ownership of Apartments and Non-Residential Premises.
In addition to various technical changes, the new act should basically simplify and specify the decision-making of the so-called "Association of Owners" in buildings divided into units. According to the Local Development Ministry, this Act will affect 30% of all apartments in the Czech Republic. This Act applies also to numerous non-residential units used either by residents or entrepreneurs in the respective building, and furthermore applies to a great number of garages and other premises (units) in buildings created when such buildings were divided into units.
II. Selected Judicial Decisions
Acquiring an Ownership Interest from a Non- Owner?
Judgment of the Supreme Court, File No. 29 Cdo 2287/2008 dated September 23, 2008.
The possibility to obtain property from a non-owner under Section 446 of the Commercial Code represents an exception from the general legal principle under which no-one can transfer more rights to another person than he has himself. This provision states that the purchaser acquires ownership title even if the seller is not the owner of the sold goods, unless at the time when the purchaser was to acquire ownership title to the goods he knew or should have known or could have known that the seller was not the owner, and was not authorized to handle the goods for the purpose of its sale. The Supreme Court held that said provisions of the Commercial Code cannot be applied to the acquisition of an ownership interest in a company.
The Supreme Court held that extensive interpretation of the scope of Section 446 of the Commercial Code, or its analogous application to issues for which it was not intended, would be contrary to its nature and purpose. Therefore, this exception cannot be applied, not even by analogy, to the acquisition of an ownership interest in a limited liability company.
The fact that the purchaser of an ownership interest in a limited liability company enters into an agreement on transfer of such ownership interest with a person registered as owner in the Commercial Register cannot by itself result in the acquisition of the ownership interest if the person so registered in the Commercial Register is actually not the owner. The fact that the agreement on transfer of an ownership interest was concluded in good faith in the correctness of the registration in the Commercial Register may, however, have a legal significance, namely in acquiring the ownership interest by prescription (in Czech "vydrzení").
One person having the parallel functions of a member of a statutory body of a company and general director
Decision of the Special Tribunal of the Supreme Court File No. 31 Odo 11/2006 dated October 15, 2008.
In its decision File No. 31 Odo 11/2006 dated October 15, 2008, the Supreme Court dealt, inter alia, with a long-discussed issue of whether a person can perform the function of a member of a company's statutory body (the same applies to executive directors) and also at the same time be in an employment relationship with such company. The Supreme Court did not consider whether or not it is possible to have parallel functions in this manner, but expressed its opinion only on the issue of whether a person in this position of having two parallel functions is authorized to represent the company based on both the employment relationship and also its function as a member of the board of directors. Though the decision may be considered inconsistent in some respects, the Supreme Court has concluded that it is impossible for a person who, as a member of the statutory body of a company is authorized to act on behalf of the company only jointly with another member of the statutory body, to be concurrently a person authorized to act on behalf of the company independently based on its employment position (such as a managing director). The Supreme Court further stated that a person who is the company's statutory body or its member cannot concurrently serve as its lawful representative (as an employee).
It follows from the above that the question of whether it is at all possible to have parallel functions remains undecided. Now it is only evident that a person who is in such a situation should act only in accordance with his/her function as a member of the board of directors as otherwise the company.
Limits on Compensation for Damage Agreed between Parties to a contract
Decision of the Supreme Court, File No. 32 Odo 1651/2005 dated March 27, 2008.
In an Agreement on Provision of Legal Services, the parties agreed that the compensation for damage caused to a client by acts or omissions on the part of the attorney should be limited to one million Czech crowns. In accordance with Section 386 (1) of the Commercial Code, the right to damages may not be waived prior to the violation of an obligation from which damage may arise. Given the fact that it is impossible to exclude the application of the provision in question (i.e. it is a mandatory provision), the said arrangement of the parties limiting the compensation for damages is according to the Supreme Court invalid. It is necessary to point out that this invalidity is only partial, i.e. the remaining provisions of the agreement are not affected. It follows that according to the opinion of the Supreme Court it is not possible to limit the right to damages. This opinion is generally applicable, i.e., it applies also to contract other than that those between an attorney and his client.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
