“The Czech business market seems to be affected by a series of changes in the legal sector that are expected in the near future,” reports Zdenek Tomicek, Partner at CEE Attorneys in Prague. First, he says, the legal system is now preparing to provide for joint legal actions. In addition, a new amendment to the country’s Insolvency Act is creating waves on the market.
“Joint legal actions are common in many European countries, but so far they have not been incorporated into the Czech legal system,” Tomicek explains. “The government has recently approved a proposal for a new act that will make these joint legal actions part of our system,” he adds, saying that the act contemplates criminal proceedings as well. “Although we don’t have the legislation ready yet, some cases have already started in criminal proceedings. Our firm has also filed a joint criminal report against a company, Telefonni Seznam Ceske Republiky a Slovenska s.r.o., for alleged fraud in case of unfair business treatment. Initially we started the case on the behalf of four clients, but since the end of March, other companies have been joining the proceedings on an almost daily basis.”
Tomicek claims that the circumstances of the case are unique. “We will see what will happen, because several companies submitted similar claims before, but the police said that they don’t consider unfair business treatment of the said company as fraud and dismissed the charges. But whereas previously there could be only one claim, now there can be 15 and more, so authorities should take them more seriously due to social harmfulness, one of the main aspect of the criminal proceedings to be taken into account by the police." He reports that he and Iveta Koubkova, the Head of Criminal Desk at CEE Attorneys, are still waiting for the first confirmation from the police and the state prosecutor.
Turning to the new amendment to the country's Insolvency Act, Tomicek says that it was proposed by the Ministry of Justice to settle the debts of the Czech residents. “The amendment generated huge debates in the Czech legal and business markets, for it basically says that if a physical person is not capable of paying his or her debts, he or she should not be held responsible for paying them back. According to the Ministry of Justice, we have 863,000 people who are under enforcement proceedings. This represents almost ten percent of the population, so it is quite a good reason to introduce the amendment, but from a business perspective, for many companies, this amendment may cause serious problems.”
Ultimately, Tomicek says, courts will decide on the matter. “Probably a lot of people will try to take advantage of the act, and courts will be overloaded,” he says. He also thinks that the act could affect negatively investors, including foreign companies, who provide significant customer loans and other B2C services, and now may find themselves unable to demand repayment.
In general terms, Tomicek says things are going well. “This is indeed a busy period for us,” he says. But there’s pressure on the industry as well, he says. “We have to keep up with many things at once, and we are also dealing with a serious shortage of law professionals. The economy is in good shape, and law firms are very busy, but it is really hard to find good lawyers. Now if we want to hire a new associate, it can take up to few months to find someone.” The reason of this shortage, he believes, is changing demands from new law school graduates. “Young people are not looking just for big salaries anymore. They also want to feel comfortable in their offices, so we have to change not only our internal regulations, but the office environments as well. We have to support them in feeling good, so they are motivated to stay.”
