On 1 July 2017, significant anti-corruption laws in the Czech Republic’s legal environment, Act No. 340/2015 Coll., concerning the registration of public contracts, will enter into full force. Although contracts with public entities with a monetary value over CZK 50,000 (EUR 1,900) have had to be published in the register of contracts since 1 July 2016, no specific sanction has been imposed for failure to do so. As of 1 July 2017, any contract subject to mandatory publication will only become effective if it is published within three months of its signing. In addition, any contract not published within this statutory period will be automatically terminated.
What is the register of public contracts?
The register of public contracts is an online database of published contracts run by the Czech Ministry of Interior. The register has been up and running since 1 July 2016, to give the affected entities a full year to prepare for the upcoming 1 July 2017 activation date. Anyone can access, view and search the database (available in Czech here) and contracts must be provided in a machine readable format to facilitate transparency.
Who will be affected?
The publication requirement applies to all contracts concluded by the state, regions, municipalities, state-owned enterprises and government-funded organisations, including hospitals, schools and research institutions. Private companies concluding contracts with such entities, such as when supplying goods and services, have to expect the publication of the entire contract. Although the law allows for the redaction of personal data and, to some extent, business secrets, some private entities still fear the exposure of confidential information. Moreover, as the law does not specify which contractual party should submit the contract for publication, private companies leaving the publication to their public business partners should be vigilant as to whether and when the contract was indeed published and became effective and whether and how it was redacted.
Are existing contracts affected?
Although all contracts concluded after 1 July 2016 should have been published, their validity would not be affected by failure to do so. However, if contracts concluded before 1 July 2017, or indeed before 1 July 2016, will be amended after 1 July 2017, the original contract must be published along with the amendment. Going forward, any contract concluded after 1 July 2017 will not become effective unless duly published in the register.
Will there be an exception for state-owned enterprises?
The law currently includes a carve-out for state-owned utility company ČEZ (which is the only floated company under the decisive influence of the Czech state). Several bills currently pending in the legislative process would like to extend the exception to other state-owned enterprises as well. The Chamber of Deputies (Czech Parliament’s lower chamber) previously voted to exempt all state-owned enterprises, but the motion was blocked by the Senate (upper chamber), which suggested exempting only several specific companies, such as the State-owned Budweiser Budvar Brewery. The Chamber of Deputies is currently debating a compromise recently approved by the government, which would exempt contracts concerning the transactions of state-owned enterprises within the scope of their primary business activities, whilst publishing their contracts concerning the purchase of overhead goods and services, such as marketing services or office equipment.