Czechia

By Daniel Morris | 20. December 2017

Criminal liability of legal persons in the field of human rights [page 11-12]

“Implements Principles 1 and 3a

Modern business is inconceivable without companies and cooperatives. They facilitate the concentration of funds, limit risk, and create opportunities for professional management. They are a means of implementing major business projects. However, like any other such means, companies may be open to abuse. Those who engage in crime can divide up responsibility for decisions and hide behind convoluted management structures. At large corporations, it can often be difficult to find a specific liable person. The Act on the Criminal Liability of Legal Persons resolves this by making it possible to infer that a legal person as a whole is liable.

The most serious human rights abuses can be punished as crimes. According to the case-law of the European Court of Human Rights, too, the state duty to efficiently investigate and ultimately punish infringements is central to human rights protection. However, criminal prosecution is the strongest instrument of power the state can wield, and has repercussions for employees, shareholders, creditors, business partners and others who have nothing to do with criminal activity. In this light, legislation needs to be monitored and evaluated.

While the state carries primary responsibility for human rights protection in its territory, in today’s interconnected age the stringent application of the principle of territoriality is impossible. The Czech Republic has decided that – whether unilaterally or on the strength of an international treaty – it will prosecute certain unlawful conduct by Czech nationals irrespective of where this conduct occurs. As such, it is assuming responsibility for the conduct of its nationals (including businesses) abroad, thus making it possible to fill in the regulatory gap to some extent in those cases where such conduct is not punishable under another country’s law.

Current state of play:

The criminal liability of legal persons was introduced into Czech law in 2011 and covered and exhaustive set of criminal acts. In 2016, the concept underlying the definition of the criminal liability of legal persons was revised so that a legal person can now be liable for all crimes other than a narrow group of acts expressly precluded by law.
Czech law allows a Czech citizen or a legal person established in the Czech Republic to be prosecuted even if they committed their crime abroad.
Foreign nationals and legal persons perpetrating a crime to the benefit of a Czech legal person may also be prosecuted.
Under Czech law, the most serious human rights violations can be prosecuted regardless of the perpetrator’s nationality or where such violations occurred. [The criminal acts listed in Section 7(1) of Act No 40/2009, the Criminal Code]
The Czech Republic is party to a number of international treaties on legal assistance and on the prosecution of various types of international criminal activity, including the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

Task:

Evaluate the impacts and practical application of the new text of the Act on the Criminal Liability of Legal Persons. If it transpires that the legislation still has loopholes impeding or preventing the prosecution of serious violations of human rights, propose amendments to the law.
Coordinator: Ministry of Justice
Deadline: 31 December 2018”

Disqualification of a member of a body [page 13-14]

“Implements Principles 1 and 3b

If a company executive orders or, due to negligence or connivance, allows the company he or she manages to encroach on human rights, that executive must be found to be liable. It is always more advisable to prosecute specific culprits rather than a whole company. However, a criminal penalty is not always appropriate. Indeed, criminal prosecution appears to be too strict a response to minor or negligent breaches of the law.

One possible solution is disqualification – banning someone from holding corporate directorships. Professionals recommend disqualification as a lighter form of punishment for a number of acts directly associated with business activity. Disqualification is a punishment that is suitably harsh for the perpetrator without carrying the stigma of criminal prosecution, and does not harm the company as a whole. Furthermore, judicial proceedings in such a case are simpler and more economical.

Although current Czech law does accommodate disqualification, this is restricted to a narrow set of offences and the maximum duration is limited. In this respect, we need to explore whether the present wording of constituent elements is sufficient, i.e. whether it is broad enough for the courts to have sufficient opportunity to apply this instrument, while being definitive enough so that members of company bodies know what acts are prohibited. We should also consider what the maximum duration of disqualification ought to be for the various acts.

Current state of play:

The disqualification of members of governing bodies from holding such office was introduced into Czech law in 2014 by the Business Corporations Act. This makes it possible to punish those who have bankrupted their company or have repeatedly and seriously breached the tenet of due diligence. They may be disqualified for up to 3 years.
Members of governing bodies, influential persons and controlling entities may be disqualified. [Section 76(2) of Act No 90/2012 on companies and cooperatives]

Task:

Assess the use and applicability of this concept and consider whether it needs to be revised. In particular, evaluate the breadth of constituent elements, how sufficient the definiteness and precision of the law is, as well as the maximum disqualification period and variations depending on the seriousness of the act, and consider extending this concept to other persons effectively exercising influence over the running of a company. Also consider revising this concept so that it is not limited to companies, but can also be applied to other types of organisation with a different legal form. In these assessments, focus on the punishability of acts where a member of a governing body enables human rights standards to be breached either wilfully or out of gross negligence. If the concept of disqualification proves to be hard to apply in these situations, consider revisiting the constituent elements so that disqualification is easier to impose in such circumstances.
Coordinator: Ministry of Justice
Deadline: 31 December 2020”

Pillar III [page 41-42]

“It is incumbent on states to protect human rights. This duty includes the provision of efficient and effective means of remedy for those whose rights have been infringed. Article 36 of the Charter of Fundamental Rights and Freedoms provides that: “Anyone may claim, in the prescribed manner, their rights in an independent and impartial court and, where so provided, before another authority. “The third pillar of the National Action Plan is designed to ensure that, in the field of business and human rights, this right is genuinely available to everyone without unnecessary obstruction, and that it results in efficient remedies.

That is not to say that the third pillar is simply a framework for the improved functioning of the courts. Extrajudicial remedies are also attainable. The third pillar also includes quasi-judicial tribunals, dispute resolution authorities, informal ombudsman-type institutions and mediation institutions (such as the National Contact Point, a Government-devised neutral platform to hear complaints about infringements of the OECD Guidelines for Multinational Enterprises). Ultimately, the ideal dispute is one that never arises in the first place. The third pillar also includes the means to prevent disputes at the businesses themselves.

The primary aim of the third is to find remedies. Remedies may take various forms – an apology, the restoration of what has been damaged to its previous condition, financial or non-financial compensation, or the punishment of the guilty party. The aim is not just to remedy loss or damage, but also to prevent a recurrence by means of enforceable judicial rulings or other less formal guarantees.

Judicial resources: Although there are no fundamental legal obstacles in access to the courts in the Czech Republic, numerous de facto obstructions do exist here. The World Bank’s Doing Business project rates the organisation of the courts and the quality of decision-making in the Czech Republic very highly, but criticises the duration and costs of proceedings for businesses. It takes an average of 611 days to enforce payment under a model contract, and the recovery costs can amount to as much as a third of the claim value. Of that period, enforcement of the judgment per se takes an average of 113 days, with enforcement costs accounting for almost half of costs occasioned by the proceedings as a whole. Overall, the Czech Republic ranked 68th out of the 190 countries assessed. The Government of the Czech Republic systematically analyses the functioning of the judicial system and attempts to reduce the length of judicial proceedings and relieve the courts of unnecessary paperwork in order to streamline the entire judicial architecture. However, this must not be to the detriment of the quality of decision-making and the rights of parties to proceedings. Improvements in law enforcement are addressed by other government strategies, including the International Competitiveness Strategy and the Consumer Policy Priorities 2015-2020.

The following factors have been pinpointed as the main barriers to the prompt and efficient enforcement of the law:

The courts are overloaded and the administrative work is excessive.
There is little awareness of the forms and means of alternative dispute resolution.
Professional legal assistance is very costly.

The Czech Republic views the courts as a fundamental means of redress for those who believe that their rights have been infringed. However, it must not be the only source of recourse. …”

Representation in court, legal assistance [page 44-45]

“Judicial proceedings assessing matters of business and human rights can often be very complex and convoluted. Furthermore, the victims in these disputes tend to be the economically or de facto weaker party (consumers, employees members of minorities, etc.) unable to afford decent legal assistance. The European Court of Human Rights takes the view that effective access to a court, including affordable legal systems, is part and parcel of the protection of human rights. [Judgment of the European Court of Human Rights No 6289/73 of 9 October 1979 in Airey v Ireland] The state, then, should take action to ensure that everyone, without fail, has the opportunity to seek judicial protection efficiently and effectively.

Representation in court is mainly the domain of lawyers, whose activities are regulated and guarantee a certain standard of quality, courtesy (to some degree) of checks conducted by the competent professional organisation, i.e. the bar association. However, for some types of proceedings it is advisable to permit representation by persons who, for example, possess specialised knowledge in a narrowly defined area of law or are willing to systematically provide representation free of charge. Even today, a trade union organisation may represent its members and associations may, in the course of their activities, represent victims of discrimination or foreign nationals in labour cases. It is worth considering expanding opportunities for representation by those organisations in the future. A trade union organisation could also represent other employees at the same employer; consumer protection associations could represent consumers; and associations that have long pushed for environmental protection in a particular place could represent plaintiffs in environmental cases. Other options could also be weighed up. Although these organisations can already provide representation, this is only as general agents (i.e. not systematically across a range of cases). Legislative enshrinement will enable them not only to pursue this activity systematically, but also make it possible to establish their liability more precisely, including, say, compulsory insurance.

Current state of play:

If a party to judicial proceedings cannot afford a lawyer, the court may waive the court fees and appoint a representative if this is necessary to protect the party’s interests.
In August 2017, a law entered into force that ensures that low-income groups can receive free legal assistance.
The law allows certain legal persons (trade unions and associations) to represent parties to certain types of proceedings. [Section 26 of Act No 99/1963, the Code of Civil Procedure]
Environmental protection associations may enter into certain types of proceedings. [Section 70 of Act No 114/1992 on the protection of nature and the landscape]
Associations whose members come from a certain place and whose activities depend on the state of the environment are treated as holders of the right to a favourable environment. Consequently, they have the full rights of a party to environmental proceedings and may even claim those rights in court. [Finding of the Constitutional Court I. ÚS 59/14 of 30 May 2014]
The bar association may assign a low-income applicant a lawyer for the provision of free legal assistance or legal services.

Tasks:

Analyse issues surrounding an extension to the set of situations where legal persons may represent parties to proceedings.
Coordinator: Ministry of Justice
Deadline: 31 December 2020
Evaluate the way the system of free legal assistance for the poor and needy works, especially the cost to the state, the bar association and applicants, the speed at which lawyers are assigned, and how much paperwork is involved. Evaluate the possibility of adding to the group of those who provide legal assistance.
Coordinator: Ministry of Justice
Co-coordinators: Ministry for Human Rights
Deadline: 31 December 2020”

Access to evidence [page 45-46]

“Disputes deriving from the protection of human rights are complex in terms of their legal classification and from the aspect of precisely defining the action and the claim. Quantifying loss or damage in relation to non-economic rights is difficult, as is determining the extent to which a specific culprit is guilty.

Some of the evidence necessary tends to be in the complete control of the counterparty (e.g. minutes of the meetings of company bodies, internal instructions, and the working correspondence of employees). The Code of Civil Procedure recognises the “duty of release”, where the court, on a motion from the plaintiff, may indicate specific evidence (documentation) in the possession of the counterparty and order it to be released. However, such procedure is possible only after proceedings have been opened (i.e. the action must already have been brought), even though this evidence may be required to formulate the action, its statement of grounds, and the precise definition of the relief sought. The documentation solicited must also be very clearly specified.

Current state of play:

The bill on compensation in competition includes the new concept of “proceedings to unlock evidence”, making it possible to petition the court for the parties to disclose certain materials necessary to specify a claim before the proceedings have been opened. The bill encompasses not only the disclosure of such evidence (including a fine to penalise non-compliance), but also means of protecting business secrets (the redacting of certain information or the occupation of the impartial person examining the evidence).

Task:

Conduct a comprehensive analysis of how the existing provisions on the “proceedings to unlock evidence” under the said law function. In this respect, continuously monitor their use and effect by reference to data collected from the courts, with the possibility of drawing on expert assistance from the Office for the Protection of Competition and any experience it might have of this issue, while respecting the business secrets of the entities concerned (especially competitors).
Coordinator: Ministry of Justice
Co-coordinator: Office for the Protection of Competition
Deadline: 31 December 2022
On the strength of a comprehensive analysis, consider introducing the concept of “proceedings to unlock evidence” in other areas of law, or introducing general provisions in this respect.
Coordinator: Ministry of Justice
Deadline: 31 December 2022”

Collective actions [page 46-47]

“Historically (bar the odd specific exception), Czech law has not accommodated collective means for the protection of rights. In disputes where there are a large number of victims, they must all bring their own action and lodge their own claim separately. Actions may be joined, but even so each plaintiff has the status of a separate party. This is particularly problematic in disputes where the overall loss or damage is large, but is fragmented among a large number of people. The costs of judicial proceedings (and the risk of having to pay the counterparty’s costs if the action fails) are disproportionate to the scale of the loss or damage, which deters people from lodging numerous claims that would otherwise be legitimate. This procedure is also expensive for the counterparty, which has to deal with scores – even hundreds – of actions, and even pushes up the cost to the courts in terms of the paperwork, the service of documents, the ruling per se, and the enforcement thereof.

The situation is much the same in the administrative judiciary in cases requiring the judicial review of decisions involving large numbers of parties. Here, too, there may be situations where a large number of persons feel that their rights have been infringed by a particular decision of a public authority, but the Code of Procedure of Administrative Courts does not let them file their claims collectively. Even if cases are joined within the scope of single proceedings, each plaintiff effectively acts independently.

Current state of play:

The Consumer Protection Act allows consumer associations to seek injunctions. In practice, however, these provisions are not particularly effective and can really only be used in a narrow set of situations.
The Ministry of Justice is contemplating the introduction of collective actions, but no final decision on the concept of such provisions has been reached. The emphasis is on the efficiency of this scheme and its constitutionality. An explanatory memorandum for this law is to be prepared in 2017.

Tasks:

Prepare for the introduction of collective actions in civil proceedings before the courts.
Coordinator: Ministry of Justice
Deadline: 31 December 2020
Drawing on the experience of collective actions in civil proceedings before the courts, consider whether to introduce collective actions in the administrative judiciary.
Coordinator: Ministry of Justice
Deadline: 31 December 2022”

Accessibility of the courts [page 48-49]

“Judicial proceedings in the Czech Republic are still relatively protracted. Although a lot of headway has been made in reducing the average length of proceedings in recent years, there is still room for improvement. The courts’ main problem is that they are overloaded with a huge number of cases. Judicial proceedings are highly formalised, at great cost to both parties to the dispute and to the court itself. The paperwork associated with the running of the judiciary encumbers not only the judges, but also the courts’ administrative machinery.

Sensitively and coherently used technology could play a major role in freeing the hands of the courts. Just like any other area of human activity, the judiciary could benefit from the advantages delivered by advanced technology. Numerous countries around the world are conducting studies and drawing up strategies on how to use such technology efficiently in the work of the judiciary. These are tools that could be put to good use in the process of adjudication on the one hand (facilitating the taking of evidence, enabling hearings to be held without the physical presence of all persons) and in the paperwork and state administration of the courts on the other (file computerisation and automation). The technology must be used in such a way that it does not place an extra burden on the courts, and must be accompanied by the thorough induction training of court staff. Likewise, it must not reduce in any way the availability of or access to the courts and judicial protection.

Alongside the judges, an indispensable role in the smooth and problem-free functioning of the judiciary is played by judges’ assistants, trainee judges and other employees of the judiciary. These positions need to be filled by highly skilled specialists who are well versed in the law and able to apply it, and they should be rewarded accordingly. The judiciary must offer conditions capable of attracting and retaining top-class lawyers. The Ministry of Justice, aware of this need, is preparing to increase the number of such workers and their pay in 2018. This is a positive trend that should continue in the years to come.

Current state of play:

The computerisation of the judiciary and the introduction of electronic files has long been discussed in the Czech Republic and is mentioned in many strategies and action plans (e.g. the Strategy for the International Competitiveness of the Czech Republic, and the Ministerial Strategy for the Development of eJustice 2016-2020).

Tasks:

Continue introducing electronic court files.
Coordinator: Ministry of Justice
Deadline: Running, with an assessment as at 31 December 2020
In the periodic and ongoing evaluation of the state of play and functioning of the judiciary, pay more attention to how accessible the judiciary is for laypersons and to user-friendliness for clients. Where possible, when evaluating these criteria, draw on the guidelines devised for this purpose by the OECD and/or other generally acknowledged and respected international guidelines so that the data collected can be compared in an international context.
Coordinator: Ministry of Justice
Deadline: Running
Map out the latest trends and opportunities in the modernisation of the way the judiciary works, e.g. the use of modern technology in the judiciary and improvements in access to the judiciary, according to the observations and recommendations of the OECD. Evaluate whether these observations can be put to practical use and applied in the Czech Republic.
Coordinator: Ministry of Justice
Co-coordinator: Ministry for Human Rights
Deadline: 31 December 2020”

Alternative and online dispute resolution [page 49-51]

“Judicial proceedings are inherently formalised and costly affairs. The calling of a judge is mainly to handle complex legal issues. Yet much of the agenda at the courts is filled with disputes that are legally and factually simple and could be dealt with by extrajudicial means. Ministry of Justice statistics indicate that half of the disputes that pass through the courts have a claim value of less than CZK 10,000. In other words, these are petty disputes. While it would be wrong to automatically dismiss petty disputes as simple in their facts, we can assume that this is the case in many instances. It may be more effective, in some cases, for these types of factually simpler disputes to be handled in certain special procedural regimes (e.g. by simplifying judicial hearings or restricting appeals), or a solution to them could be found out of court. If the courts no longer have to grapple with a surfeit of such disputes, they will have more capacity to address complex and fundamental legal issues.

However, it is difficult to estimate the actual number of such simplified disputes. Numerous low-value disputes do not even make it into court because the costs of proceedings would dwarf the claim value. Even plaintiffs who are sure of the legitimacy of their claim will not bring an action in a situation where the loss of the case and reimbursement of costs to the counterparty would make them destitute. Consequently, many such disputes are “latent”, though that is not to say that they are non-existent.

In this light, the state needs to offer a functioning, effective and efficient alternative running parallel to the judicial system. This alternative system could take over some of the agenda handled by the courts, thereby making it possible to speed up and streamline the judiciary. This system, in a way, can already be found, e.g. in the extrajudicial resolution of consumer disputes [See Parts Three and Four (Section 20d et seq.) of Act No 634/1992 on consumer protection]. However, it could also be developed in other areas (labour law and small claims).

Notwithstanding the above, any alternative dispute resolution system must be viewed genuinely as an alternative and must not hobble any party’s access to the courts. In this regard, when parties opt for alternative dispute resolution, this choice must primarily be based on their express, free and knowing consent, and also with consideration for the possible weaker position that either of them may be faced with (e.g. consumers). This should never hamstring judicial protection and the right to a fair trial.

The modernisation of the judiciary, the development of alternative dispute resolution methods and the adaptation of the existing system to the requirements of the modern age are topics being addressed by most countries around the world. The Czech Republic has a solid foundation on which to build, but the existing systems need to be carefully assessed and the best foreign examples need to serve as inspiration.

The Government of the Czech Republic recommends that businesses make use of vehicles for the alternative amicable resolution of disputes, support the formation and development of such vehicles, and offer them to their partners and customers as an option.

Current state of play:

The Czech Trade Inspection Authority, the Energy Regulatory Office, the Czech Telecommunication Office, the Financial Arbitrator and certain other authorised entities [Only two at the time this Plan was drawn up: the Czech Bar Association and the Czech Consumer Association] form a state-guaranteed system of extrajudicial consumer dispute resolution.
The Ministry of Industry and Trade may authorise further entities to engage in the extrajudicial resolution of consumer disputes should they so request and comply with statutory conditions.
By law, vendors are required to inform consumers of the possibility of making use of alternative dispute resolution for consumer disputes. [Section 14 of Act No 634/1992 on consumer protection]
Legislation on alternative and extrajudicial consumer dispute resolution, as coordinated by the Ministry of Industry and Trade, is monitored and will be evaluated within two years after it has taken effect (i.e. in 2018).
Czech law covers mediation [Act No 202/2012 on mediation and amending certain acts (the Mediation Act)], arbitration [Act No 216/1994 on arbitration and the enforcement of arbitral awards] and the possibility of the judicial resolution of disputes in certain specific areas.
Individual businesses may set up their own systems to settle disputes with customers.
The Code of Civil Procedure already requires courts to attempt to find an amicable solution to disputes, and lets them recommend or order mediation. However, these concepts remain little used and have not been that successful. In 2016, a mere 2.4% of disputes ended with conciliation, and mediation was ordered in just 0.15% of disputes.
The Ministry of Labour and Social Affairs is considering introducing vehicles for the extrajudicial and alternative resolution of disputes in labour-law cases.

Tasks:

Raise awareness among consumers of the possibility of resolving consumer disputes extrajudicially.
Coordinator: Ministry of Trade and Industry
Deadline: Running
Evaluate judicial and extrajudicial means of enforcing the law in the Czech Republic in cooperation with the representatives of businesses and other relevant stakeholders and, where appropriate, propose changes.
Coordinator: Ministry for Human Rights
Co-coordinators: Ministry of Justice, Ministry of Industry and Trade
Deadline: 31 December 2020”

Administrative courts and their opportunities to review and annul follow-up decisions [page 51-52]

“It is often the case that complex authorisation proceedings do not take place as a whole, but comprise a many sub-proceedings and decisions that follow up on each other and are intertwined. If one decision is annulled by a special remedy (review proceedings or an administrative action), the downstream decisions formally remain in force even though they have been robbed of their basis. One example is building permit proceedings, where the issuance of a building permit hinges on the existence of a valid zoning decision. If a court annuls the zoning decision (or even part of the land-use plan forming the basis for the issuance of the zoning decision), the building permit remains in force. This falls foul of the principle of procedural economy (the annulment must take place in a separate process, even though this is a pure formality in the overwhelming majority of cases). It is also contrary to the requirement of legal certainty (the decision remains in force and enjoys the presumption of correctness, even though it obviously needs to be annulled), and is at odds with the principle of legality (because a decision that is clearly not legal remains in force).

Task:

Analyse the finality and annulment of administrative decisions that are deprived of their legal basis in the form of the preceding decisions underlying their force. Evaluate how frequent such situations are and what the economic ramifications might be.
Coordinator: Ministry for Human Rights
Co-coordinators: Ministry of Regional Development, Ministry of Agriculture, Ministry of the Environment
Deadline: 31 December 2019
Depending on the result of the analysis, add provisions to the Code of Procedure of Administrative Courts so that when a court annuls an administrative decision, it also automatically annuls, with no need for any motion, downstream decisions that cannot stand on their own (without the underlying decision), or propose another solution to the problem.
Coordinator: Ministry of Justice
Deadline: 31 December 2021”

Integration of authorisation proceedings [page 53]

“The lack of uniformity of provisions in administrative law is reflected negatively in the issuance of permits and opinions in particular. An investor intending to implement a large-scale plan affecting multiple areas requires numerous individual permits and opinions from various bodies. In this respect, the Czech legal system is highly fragmented. Permits are issued in accordance with laws on building, the protection of nature and the landscape, water, clean air and others.

This fragmentation logically also has a bearing on rules for the participation of the relevant public in individual proceedings. Conditions for the participation of the relevant public are subject to special provisions set out in a separate law, and, at the same time, the relevant public abides by general rules in accordance with the Code of Administrative Procedure. In this respect, it can be difficult for the general public to navigate their way round individual processes, no matter how long the proceedings themselves are.

Integration should be aimed at faster proceedings, coordination, reduced red tape, and a uniform vision for the engagement of the relevant public. The integration of multiple proceedings into one, or the greater coherence of individual proceedings, will yield numerous benefits – the parties and the relevant public will find the proceedings clearer, the proceedings will be faster, and there will be less of an administrative burden. On the flip side, there will be risks, too. For example, the annulment of a decision by a court could have repercussions for those areas that are otherwise free of defects. These aspects need to be carefully balanced and the risks need to be mitigated, for instance by setting appropriate rules on judicial review.

Current state of play:

An amendment to the Building Act adopted in 2017 led to the partial interconnection of zoning proceedings, building permit proceedings, EIA procedure and several other necessary authorisation proceedings.

Task:

Chart the authorisation proceedings coordinated by a particular ministry and assess whether they can be merged with the authorisation processes of other ministries, or whether procedural rules can be unified.
Coordinators: Ministry of Regional Development, Ministry of the Environment, Ministry of Industry and Trade, Ministry of Transport, Ministry of Agriculture
Deadline: 31 December 2020
Actively cooperate with other authorities on the integration of authorisation proceedings coordinated by various different ministries.
Coordinators: Ministry of Regional Development, Ministry of the Environment, Ministry of Industry and Trade, Ministry of Transport, Ministry of Agriculture
Deadline: Running”