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Bureaucracy in the Czech Republic: A Brief History and General Advice for the Neophyte

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Nobody should undertake a business venture in a foreign country without first seeking legal advice. The plaintiff cry, “But we do it that way at home” will fall on unsympathetic ears in Czech courts. However, the advice of a Czech lawyer might seem very strange, especially if you are from a Common Law environment.  

It is well beyond the scope of this modest article to discuss differences in substantive law between different jurisdictions. I would like to concentrate on one aspect of doing business in the Czech Republic which many foreigners may find different, extraordinary, and bizarre. This is bureaucracy.

Every country has bureaucracy. In the Czech Republic, our bureaucracy traces its roots to the reign of Empress Maria Theresa (1740 – 1780), who was the Queen of Bohemia. (The Kingdom of Bohemia during her reign consisted roughly of the same territory as today’s Czech Republic.) She improved the land registry system by creating cadastral maps, and she established numerous government offices, many of which had hitherto been private enterprises, such as the post office, notaries, and transport. With all these innovations came the centralization of government in Vienna. This required a large and intricate bureaucracy. 

Maria Theresa’s son, Josef II, fine-tuned and amplified the system his mother had put in place. In his ten-year reign (1780-1790), he penned several thousand decrees and laws. 

The end of First World War brought about the end of the monarchy, but the First Czechoslovak Republic retained the laws and the bureaucracy of the old empire.

In 1939, The Third Reich invaded what was left of the Czech lands and created the Protectorate of Bohemia and Moravia. German precision entailed accurate record keeping … and even more bureaucracy. 

In 1948, a political putsch brought the Communist Party to power, which they held until 1989. Although no friends of the imperial and bourgeois traditions of the empire and the First Republic, the Communists guaranteed work for everyone. Therefore, instead of reducing bureaucracy they further increased it … and the number of bureaucrats. 

The return of democracy in November 1989 did not bring about a decrease in the number of bureaucrats nor in the complexity of the Czech bureaucracy.

The reason for this foray into history is simple; if you know the background of the system within which you will be working, trading, investing… you are more likely to understand and accept it. 

Bureaucracy pervades every aspect of life here, from civil service to banks, from the suppliers of utilities to purveyors of services. 

Your Czech advocate, unlike his British or North American counterpart, will probably ask you to sign a contract for the supply of his services and the payment of his fees. 

Do not expect to get anything done anywhere unless you have your passport with you (unless you have a citizen or resident identification card). Some commercial buildings and all government offices will check your identity before letting you in. Banks will not serve you, even if you have an account at that branch, unless you are able to identify yourself with a valid passport or identity card. Your driver’s license will not suffice.

Do not be surprised if your advocate tells you that you must accompany him to a notary’s office to establish your new company. Many aspects of the legal and commercial system are within the exclusive realm of notaries, who – like advocates and judges  – are legal professionals with law degrees.

Signatures must be certified on many types of contracts. Most advocates are authorized to certify your signature. However, if you are signing on the basis of a power of attorney and you do not want to give up the original of your POA, the copy of the POA must be certified. This certification falls within the bailiwick of a notary or an authorized civil servant; your lawyer cannot certify it for you. 

Once you have bought a piece of land, do not be surprised if it takes six, twelve, twenty-four or even more months before you are able to break ground and start building. The numbers of offices whose approvals are required is staggering. If you need a zoning change, years can fly by. 

If you sell immovable (real) property, do not expect payment immediately. The sale price is normally held in escrow until the transfer of title is registered. This usually takes five, seven, or even more weeks.

In many cases, whatever you are trying to do may be more complicated than it is “back home.” In some cases, you may be surprised by the simplicity of the process. However, in most cases things are just “done differently” because of the way bureaucracy has developed here over more than a quarter of a millennium. If you accept this and have capable assistance to guide you through our version of bureaucracy, you will be able to concentrate on the “business aspects” of your business venture or investment.      

By Thomas Hruby and Jiri Buchvaldek, Partners, Law Offices of Hruby & Buchvaldek

This Article was originally published in Issue 4 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

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