Criminal Offence under Competition Law No. 21 / 1996

Bogdan Chiritoiu, the president of the Competition Council has recently issued a press statement advocating for the application of criminal sanctions in cases of antitrust infringements. Article 60 of Competition Law No. 21 / 1996 qualifies as criminal offence the participation of a natural person, with a fraudulent intention and in a decisive manner to the conception, organisation or achievement of prohibited anti-competitive practices or agreements. The afore-said criminal offense shall be punished by imprisonment from six months to three years or by fine.

This public message issued by the president of the Competition Council may signal a change in the policy of the Competition Council and may prove to be a warning that the Competition Council and the public prosecutors will be looking to apply the provisions of Article 60 of Competition Law No. 21 / 1996, which so far have not been enforced.

Unfair Competition Act Draft

On 23 December 2011, the Competition Council launched a public consultation on the draft of law on unfair competition which aims to replace Law No. 11 / 1991 on unfair competition currently in force.

An important development relates to the authority of the Competition Council to investigate and sanction unfair competition acts of interest for the proper functioning of the economy or a part thereof. For this purpose, the Competition Council will have the right to use the dawn raid and the other procedures provided by the Competition Law No. 21 / 1996.

Under the current draft, the Competition Council will have the right to sanction acts of unfair competition with fines up to 3% of the total turnover achieved during the year previous to the sanctioning decision.

Amendments of the Regulation on Economic Concentrations

On 11 January 2012, the Competition Council’s Order No. 941 / 2011, amending and supplementing the Competition Council’s Order No. 385 / 2010 for the application of the Regulation regarding economic concentrations, has been published in Official Gazette No. 23. The most important amendment introduced by Order No. 941 / 2011 is related to the procedure regarding economic concentrations that are likely to generate national security risks and the referral of notifications to the Supreme Council of National Defence (the “CSAT”).

Pursuant to Order No. 941 / 2011, when an economic notification is filed with the Competition Council, the latter has the obligation to inform CSAT and, where national security risks are identified, a separate analysis of the economic concentration will be carried out in parallel by CSAT.

If CSAT identifies any risks resulting from the proposed economic concentration for the national security, the Government will issue a decision through which the operation is prohibited. 

Order No. 941 / 2011 also specifies that in case a concentration is not subject to a notification to the Competition Council due to the thresholds not being met or if the operation is not a notifiable concentration, the parties have the duty to directly inform CSAT in order for the transactions to be assessed in terms of national security risks.

Oder No. 941 / 2011 raises several important practical questions that investors will have to consider in the future, such as: can the parties implement the transaction if the clearance of the Competition Council is obtained prior to that of CSAT or will the parties have to wait also for that of the CSAT? What qualifies as a national security risk and on what grounds can the parties contest a decision of CSAT? Last but not least, will every transaction of acquisition of control has to be notified to CSAT and what are the sanctions for failure to notify?

For more details and questions related to the above, please contact Stefan Botezatu (stefan.botezatu@kinstellar.com) or Iustinian Captariu (iustinian.captariu@kinstellar.com) at your convenience.

An amendment to the Slovak Insolvency Code has been recently approved by the Parliament (the “Amendment“). The Amendment, which is considered to be the most significant amendment to the current Slovak Insolvency Code since its introduction back in 2006, seeks to revise those provisions of the Insolvency Code that have proven to be problematic in their application, or less effective than originally intended.

The most important legislative changes introduced by the Amendment concern the test of over-indebtedness and the liability of the directors of insolvent companies.

Although the Amendment will enter into force on 1 January 2012, the key changes relating to the test of over-indebtedness, filing obligation and directors’ liability that are described below in this article will enter into force only as of 1 January 2013, so as to enable the business community to get acquainted with the newly adopted rules and also to take the appropriate measures.

Insolvency Tests

There are two insolvency tests under the Slovak Insolvency Code: financial liquidity test (in brief, the ability of the company to serve its due debts) and test of over-indebtedness (the ratio of the company’s total assets and – until the Amendment – overdue debts).

The Amendment (inspired by Czech law and other EU insolvency codes) introduces a substantial change to the over-indebtedness test. Under the Amendment, a debtor’s financial situation will be assessed taking into account its total debts, i.e. not just its overdue debts. The reason behind this change was that the Slovak Insolvency Code, as effective prior to Amendment, allowed those debtors who recorded a loss in the long term to continue their business activities.

As a novel change, the Amendment also expressly provides how the over-indebtedness test should be run under the newly defined over-indebtedness criteria, as the rigorous application of the ‘total assets vs total debts’ rule could cause (perhaps undesired) business distortions. Accordingly, the test will be run taking into account certain additional matters such as the debtor’s future (expected) economic results relating to its assets and operations. In addition,subordinated and similar debts shall be excluded from the assessment of a debtor’s financial situation.

Filing for insolvency proceedings

The legislation effective prior to the Amendment obliged directors (or liquidators, as applicable) of insolvent companies to file for insolvency proceedings within 30 days after they have determined or, acting with due care, should have determined that the company is insolvent (i.e. either failing to meet the liquidity test or over-indebted).

As a novelty, the Amendment grants to creditors more rights to commence insolvency proceedings against a debtor if the debtor fails the financial liquidity test.

Since the Amendment grants to creditors the right to commence insolvency proceedings more actively and efficiently against a debtor in the case of illiquidity (i.e. it leaves up to creditors as to how long they will tolerate a debtor that is not financially liquid), the filing obligation of the directors will be limited to over-indebtedness only.

Liability of directors

Under the newly amended Insolvency Code, directors of an over-indebted company are liable for a breach of their statutory obligation to file for insolvency proceedings in time.

The new provision implemented by the Amendment introduces straightforward calculation of the amount of directors’ liability (although, according to some critics such sanctions operate as aliability cap). Accordingly, directors could be held liable (and such liability is likely to be frequently recognised by courts) for the amount equal to the amount of debtor’s registered capital - capped however at EUR 10,000 in the case of directors of limited liability companies and EUR 50,000 in the case of directors of joint-stock companies. It remains to be seen whether in the case of a breach of their duty to file in time, directors can also be held liable for damages exceeding these capped amounts.  

For further information please contact Viliam Myšička (viliam.mysicka@kinstellar.com).

A recent second instance judgment by the Metropolitan Court of Appeal (“Court of Appeal”) provides some interesting insight into the court’s approach in cartel matters. The case before the Court of Appeal concerned the second instance review of a first instance judgment that annulled certain parts of the decision of the Hungarian Competition Office (the “HCO”).

Definition of the relevant market

Until now, in response to applicants’ criticism of the HCO’s casual approach to market definitions, the HCO often argued that the definition of the relevant market in matters concerning hard-core (i.e. price fixing or market sharing) cartels is of secondary importance. The HCO took the view that pursuant to the Competition Act, based on the low market share of the cartel participants the exemption of anti-competitive agreements from the general prohibition does not apply to hard core cartels.

The Court of Appeal has now revealed that the conduct of the investigated companies cannot be lawfully assessed from a competition law perspective in the absence of a market definition. The HCO must consider all relevant circumstances in the given case (including the product, the geographical area, the time factor and the market players) to determine whether there is competition. Only if this is established can the HCO assess whether a conduct had any impact on competition, which is a precondition of establishing an infringement. In this particular case, the HCO’s failure to investigate the facts relating to the establishment of the relevant market led to incorrect conclusions and was sufficient per se for the annulment of the HCO decision.

Single and continuous infringement

The Hungarian Competition Act does not define the concept of single and continuous infringement and does not provide the conditions for establishing such infringement. Based on EU judicial practice, if a set of individual agreements are interlinked in terms of pursuing the same objects or as part of a common plan, those can be characterised as constituting a single and continuous infringement. A party participating in an agreement that is deemed to be part of a single and continuous infringement can be held liable for agreements of others in pursuit to the same end that forms part of the same single and continuous infringement.

The Court of Appeal ruled that in the absence of a statutory prohibition, the HCO is authorised to introduce the concept of a single and continuous infringement into its proceedings, and define those conditions pursuant to which such infringement can be established. Thus, the Court of Appeal did not challenge the criteria set by the HCO to establish a single and continuous infringement, i.e. the proof of (a) a single objective; (b) an overall plan; and (c) a continuous conduct.

In addition, the Court of Appeal did not overturn the first instance judgment’s ruling that in the event the HCO seeks to establish a single and continuous infringement, it is necessary (i) to precisely set the market on which such infringement took place, and (ii) to provide sufficient evidence on the basis of which it can be established without a doubt and without logical errors that the anti-competitive agreement covered the entire relevant market. Only if these conditions are met can the HCO prove that certain agreements regarding which there is no direct evidence of the participation of an investigated party belonged to the same set of agreements that formed the single and continuous infringement. Only in this case can such party be held liable for an agreement in respect of which there is no direct proof of its participation.

Limited scope of representatives

The Hungarian Competition Act provides a list of persons who are entitled to represent an undertaking before the HCO, including making statements on behalf of that undertaking. In the particular case, the HCO used as evidence statements from a person who did not qualify as a representative based on such list. However, the HCO did not define in what capacity this person was heard, and it was clear that this person was not heard as a witness (in which case certain procedural guarantees should have been applied).

The Court of Appeal ruled that such omission of the HCO made these statements unfit to be assessed as evidence until in the repeated proceedings the HCO finds proper legal grounds to include them into the proceedings as evidence.

Procedural requirements to qualify as evidence

On a more general note, the Court of Appeal ruled that a piece of information cannot be used as evidence by the HCO to prove the facts of the case if the HCO fails to establish what type of evidence (document, witness statement, statement of the undertaking, expert opinion etc.) such information represents. Otherwise, it cannot be determined whether procedural rules and guarantees relating to such evidence were observed by the HCO. The Court of Appeal ruled that the HCO’s failure to establish that the information used qualified as evidence constituted an infringement of procedural law affecting the merits of the decision, which was sufficient to annul the HCO decision.

Broad discretion of the HCO to set fines

The first instance court’s rulings (left unchanged by the Court of Appeal) confirmed that the HCO has a very broad discretion when imposing fines. For example, the HCO can deviate from its previous fining practice as long as the imposition of the fine is lawful based on the circumstances of the specific case. Furthermore, although the Hungarian Competition Act obliges the HCO to establish the maximum amount of the fine imposed on the basis of turnover information that “can be regarded as authentic”, the HCO was allowed to lawfully deem that only an audited annual report is authentic for such purpose. In addition, the HCO has no obligation to delay the adoption of its decision until the audited annual report of the undertaking for the preceding business year preceding the imposition of fines is available. It follows that the HCO may use previous audited annual reports for establishing the maximum amount of fines (even if the relevant turnover figure had significantly decreased in the meantime). Finally, it has been ruled that the HCO is entitled to adjust the maximum level of the fine to the turnover of the group of undertakings to which the offender belongs.

Limited court’s authority to provide guidelines to the HCO for repeated proceedings

The Court of Appeal confirmed that during the judicial review of HCO decisions, the court is authorised to amend or annul the HCO decisions and if necessary, provide compulsory guidelines for the repeated HCO proceedings. However, such authority may not result in the court taking over the role of the HCO to collect evidence, establish new facts of the case and establish a different type of infringement as compared to the reviewed HCO decision. Therefore, in its guidelines, the court must leave sufficient room for the HCO to exercise its discretionary power as an authority.

No right to dispute leniency decisions concerning other undertakings

The first instance court ruled (and the Court of Appeal did not overturn such ruling) that the parties to the proceedings had no right to dispute the lawfulness of the HCO decision to grant leniency to another undertaking, as they are not considered to be “interested parties” in the relationship between the HCO and the leniency applicant.

For further information please contact Ádám Máttyus (adam.mattyus@kinstellar.com) or Eszter Ritter (eszter.ritter@kinstellar.com).

In May 2011, the Serbian parliament adopted a new company law, which is scheduled to take effect on 1 February 2012 (hereinafter: the “New Company Law”). The new legislation will replace the current company law that has been in force since 2004 (hereinafter: the “Old Company Law”).

According to the New Company Law, all Serbian companies are obliged to harmonise their activities with its provisions by 1 February 2012. However, on 13 December 2011, the Serbian government proposed a number of amendments to the New Company Law. If adopted, one of the main changes will be the postponement of the aforementioned deadline for harmonisation until 30 June 2012.

The adoption of the New Company Law is part of a wider legislative initiative aimed at further harmonising the Serbian legal system with EU standards. As a part of this effort, a new Capital Markets Act was introduced also in May 2011 and took effect already on 17 November 2011. There are plans to adopt a new law on the registration of companies and amendments to the Takeover Act in the near future, in order to further implement the new concepts introduced by the New Company Law and new Capital Markets Act.

This article provides a brief overview of the relevant changes to be introduced by the New Company Law.

General Changes

The following are some of the changes that are introduced by the New Company Law that relate to all company types (including limited liability and joint-stock companies):

-       Representation of a company – in addition to natural persons, the New Company Law provides a general possibility for a company to also be represented by another legal person registered in Serbia. However, each company must have at least one representative that is a natural person;

-       Denomination of basic capital – the company’s basic capital must be denominated in Serbian dinars instead of euros, which has been the requirement under the Old Company Law;

-       Corporate governance – limited liability and joint-stock companies will now have either a one-tier or two-tier corporate governance structure. Under the one-tier system, the necessary corporate bodies are the shareholders’ assembly and one or more directors. In the two-tier system, the corporate bodies are the shareholders’ assembly, the supervisory board and one or more directors (including the executive board, in the case of joint-stock companies);

-       Criminal liability – the New Company Law introduces the criminal liability of company representatives and certain other persons connected with the company for fraudulent and certain other actions/omissions that result in damage to the company or its creditors. Prescribed penalties include imprisonment (in the most serious cases up to 10 years), monetary fines and prohibition on performing specific functions and professions.

Changes Concerning Limited Liability Companies

Some of the most important changes pertaining to limited liability companies, which are the most common company type in Serbia, are as follows:

-       Minimum amount of basic capital – the New Company Law decreases the minimum amount of basic capital for limited liability companies from 500 euros to 100 Serbian dinars (which is currently equivalent to approximately 1 euro);

-       Foundation act amendments – after each change to a company’s foundation act (establishment memorandum), the relevant representative of a limited liability company is obliged to adopt and register with the competent company register a clean/consolidated version of such an amended foundation act. This appears to be a requirement that will contribute to the general transparency of corporate statutory documents vis-a-vis third parties, but which will also represented a new formality for company management;

-       Transfer of ownership interests – the New Company Law explicitly provides that the right of first refusal regarding the sale of an ownership interest in a limited liability company can be entirely excluded by the company’s foundation act. Also, the right of first refusal in favour of the company itself, which exists under the Old Company Law, is no longer even mentioned by the New Company Law (although company shareholders are free to envisage in the company’s foundation act procedural requirements that are different from those set out in the New Company Law);

-       Additional payments – this formalises an already existing corporate practice in Serbia, according to which shareholders of a limited liability company may contribute funds to the company in the form of “additional payments” that are not treated as an increase of the company’s basic capital and that can be repaid by the company at a later stage (provided that certain conditions have been met). This represents a relatively quick and simple method of providing short- and mid-term liquidity to limited liability companies. However, the New Company Law is not entirely clear regarding the extent to which the procedure for repayment of additional payments will have to emulate a capital decrease procedure, which may cause some uncertainties in practice;

-       Book of ownership interests – a limited liability company is no longer obliged to have and manage a book of ownership interests, which is a requirement set out in the Old Company Law that was often not observed by Serbian companies.

Changes Concerning Joint Stock Companies

The following are some of the most important changes applicable to joint-stock companies:

-       (Public) joint-stock company – the distinction between “closed” and “open” joint-stock companies, which exists under the Old Company Law, has been abolished. The New Company Law distinguishes only between joint-stock companies in the general sense of this term and “public joint-stock companies”, whose shares are listed and which are subject to a more demanding legal regime (e.g., they must have an executive board comprising of at least three executive directors);

-       Minimum amount of basic capital – the minimum amount of basic capital for joint-stock companies is 3 million Serbian dinars (which is currently equivalent to approximately 30,000 euros);

-       Foundation act and articles of association – the foundation act of a joint-stock company is now to be adopted only at the time of the company’s foundation and cannot be amended subsequently. Therefore, all subsequent adjustments to the organisation and functioning of a joint-stock company must be regulated through amendments to the company’s articles of association, which under the New Company Law is a statutory document that all joint-stock companies are now obliged to have from the moment of their incorporation.

For further information please contact Branislav Marić (branislav.maric@kinstellar.com) or Marko Vujetić (marko.vujetic@kinstellar.com).

The Amendment has redefined the thresholds for notification of concentrations. The Competition Act as now in effect provides that a concentration is subject to notification if (a) the total worldwide turnover of the undertakings concerned in the financial year preceding the concentration is at least EUR 46 million and, at the same time, each of at least two undertakings concerned had in the Slovak Republic a total turnover of at least EUR 14 million in the financial year preceding the concentration, OR (b) at least one undertaking concerned had in the Slovak Republic in the financial year preceding the concentration a total turnover of at least EUR 19 million and, at the same time, at least one other undertaking concerned had a total worldwide turnover in the financial year preceding the concentration of at least EUR 46 million.

The Amendment redefines the thresholds so as to require ‘local effects’ in each case. Under the new rules, the concentration will be subject to notification

(a) if the total turnover of the undertakings concerned in the financial year preceding the concentration in the Slovak Republic is at least EUR 46 million and, at the same time, each of at least two undertakings concerned had in the Slovak Republic in the financial year preceding the concentration a total turnover of at least EUR 14 million, OR

(b) as regards the total turnover in the Slovak Republic in the financial year preceding the concentration

1. if the concentration is a merger or amalgamation of two or more independent undertakings, at least one undertaking concerned had a turnover of at least EUR 14 million and, at the same time, another undertaking concerned had a worldwide turnover of at least EUR 46 million; or

2. if the concentration is an acquisition of sole or joint control, the undertaking concerned over which control is being acquired, had a turnover of at least EUR 14 million and, at the same time, the total worldwide turnover of another undertaking concerned was at least EUR 46 million; or

3. if the concentration is the creation of a joint venture, at least one undertaking concerned had a turnover of at least EUR 14 million and, at the same time, another undertaking concerned had a worldwide turnover of at least EUR 46 million.

Abandonment of the ‘dominance test’

Since its enactment in 2001, the Competition Act has applied the ‘dominance test’ as a criterion for the Antimonopoly Office to assess the concentration. In other words, the Antimonopoly Office cleared the concentration provided that it did not create or strengthen dominance, which would significantly impede effective competition on the relevant market. The Amendment now switches the test to an ‘effective competition test’, in line with Article 2(2) of the Merger Regulation[3], i.e. under the new rules, the Antimonopoly Office will clear a concentration provided that it does not significantly impede effective competition on the relevant market, in particular as a result of the creation or strengthening of a dominant position.

Multiple phase review

Pursuant to the Competition Act now in effect, the Antimonopoly Office reviews the notified concentration in a single review and decides on the concentration within 60 business days and, if the case is complicated, the deadline can be extended at the discretion of the president of Antimonopoly Office, by a further 90 business days.

The Amendment introduces a Phase I and Phase II review process. In Phase I, the Antimonopoly Office will decide on the concentration in 25 business days and will typically deliver a simplified reasoning for its decision. To accelerate the proceedings, the Antimonopoly Office will no longer, prior to delivery of the decision, ask the parties to submit their observations before the final decision, as it is required to do under the Competition Act now in effect.

However, if a review of the notification requires a more detailed analysis of affected markets and competition concerns, the Antimonopoly Office will launch a Phase II review, and the deadline for deciding on the concentration can be extended by up to 90 business days. Also, on a reasoned request by a party or with such party’s consent, the Antimonopoly Office may further extend the deadline by up to 30 business days.

Certain additional amendments

In addition to the above conceptual changes, the Amendment introduces a number of ‘technical amendments’, arguably aiming at simplifying the notification procedure and moderating the sanctions. These changes include abandoning the requirement to notarize (and, if applicable, apostille or legalize) signatures on the power of attorney if an undertaking concerned is represented by an agent. (Under the Competition Act now in effect, the signatures of both the principal and the agent must be notarized). Also, the statutory default interest of 0.1% per day on unpaid fines imposed by the Antimonopoly Office has been repealed. The default interest covers fines imposed for both abuse of dominant position and agreements restricting competition and, according to the legislator, represents an unjustifiably severe punishment which is in addition to the fine already imposed.

Amendment Decree

Parallel to the Amendment, the Amendment Decree has been passed on 24 October 2011, published in the Collection of Laws on 17 November 2011 under No. 402/2011 Coll. and will become effective on 1 January 2012. If certain information and documents are not necessary for the assessment of the concentration, the Amendment Decree will make it possible for the notifying undertaking concerned to request the Antimonopoly Office in a reasoned written submission to waive the requirement for such information and documents. This change goes hand in hand with the differentiation between the Phase I and Phase II review processes introduced by the Amendment. In addition, the Amendment Decree redefines the information on affected markets that is required and introduces thresholds for the market shares of the undertakings concerned.

For further information please contact Zuzana Hodonova (zuzana.hodonova@kinstellar.com).

Published in e-Competitions, N° 40186, www.concurrences.com.

I. Managerial employees

The Amendment introduces a number of changes relating to managerial employees.

Definition

It is important to note that in some instances, the Amendment introduces and uses the terms ‘managerial employee’ (“Manager”), ‘managerial employee directly responsible to the executive body’ (“First Line Manager”) or ‘such (latter) managerial employee’s directly subordinated managerial employee’ (“Second Line Manager”) as distinct types of positions. Although the Amendment does not explain the difference between these positions, in particular the difference between ‘Manager’ and ‘First Line Manager’, in our view, it is reasonable to interpret Manager as a more general term and First Line Manager as a specific position directly responsible to director(s) of the Company.

Probationary period

The Amendment introduces the possibility to agree with a First Line Manager in his/her employment contract that his/her probationary period will be up to six months (as opposed to the standard three months under the current Labour Code and which remains applicable to all other types of employees even after the Amendment).

Also, the Amendment will make it possible to agree in the collective agreement that the probationary period of a First Line Manager is up to nine months.

Weekly hours

At present, the maximum average weekly working hours over any four month period must not be longer than 48 hours. One exception applies to medical staff, where the weekly hours can be as long as 56 hours over a four month period. 

The Amendment will extend the above exception (i.e. the 56 hours in a week) also to First Line Managers and Second Line Managers. Such extension of weekly working hours will be subject to the First Line Manager’s or Second Line Manager’s (as the case may be) consent which can be withdrawn by giving one month’s notice.

Overtime

Maximum overtime

In connection with the change of weekly hours (see  above), the Amendment extends the maximum overtime which can be requested in total from a First Line Manager or Second Line Manager in a given year to 550 (as opposed to the 400 hours currently provided by the Labour Code). The maximum overtime may be requested where the respective First Line Manager and/or Second Line Manager has consented to it, which consent can be withdrawn by giving one’s month notice.

The Amendment does not deal with the consequences of the withdrawal of consent by the First Line Manager and/or Second Line Manager, or with the extension of weekly working hours, i.e. how much yearly overtime  such an employee can work if he/she initially agreed to extended weekly hours and subsequently withdraws his/her consent (see above). Therefore, we recommend this issue be examined on a case-by-case basis.

Additional time off

The employer and the employee can agree that instead of payment for overtime, the employee will receive additional time off in the amount of the overtime hours. Such additional time off must be provided within three (3) months from the month when the overtime work was performed, otherwise the employee has the right to receive payment for the overtime. The Amendment will extend this three month period to 12 months.

II. Termination of employment

Notice period

The Amendment will modify the rules on notice periods. The notice period, which is at least two months at present, will no longer need to be identical for both the employer and the employee. Also, dismissal and immediate dismissal by the employer will no longer need to be consulted with employee representatives in order to be valid. Pursuant to the current Labour Code,  the notice period for all dismissal grounds[1] is two (2) months or three (3) months, in the event the employee has been with the company for at least five years. The Amendment will now differentiate between various dismissal grounds and this will also determine the applicable notice period, as follows:

• As one month notice period will apply in cases where the employee has been with the company for less than one year, while two months notice will apply in situations where the employee has been with the company for more than one year.
• As an exception to the above general rule, a three months’ notice period will apply only in situations where the employee is being dismissed by the employer on the grounds of (i) redundancy due to organisational changes (Section 63(1)(b) of the Labour Code) if the employee worked with the company for more than five (5) years, (ii) the winding-up of the employer or (iii) the employer’s relocation (Section 63(1)(a) of the Labour Code).

Also, the Labour Code at present provides that if the employer dismisses an employee for organizational changes (Section 63(1)(b) of the Labour Code), the employer must not recreate the redundant position within three months from the dismissal. The Amendment will shorten this period to two months.

Termination by employee

If the employment is terminated by the employee and if the employee has been with the company for at least one year, the notice period will be two months. Otherwise, if the employee has been with the company for less than one year, both the employer and the employee can terminate the employment with one month’s notice (which does not apply to the probationary period, during which it is generally possible to terminate the employment immediately and without giving any grounds). 

Limitation of rights arising from termination

If the employment is terminated unlawfully by the employer, the employee has the right to compensation for his or her wage equal to his or her average monthly salary. If such compensation should be provided for more than 12 months, the employer can petition the court to lower the compensation to the level of 12 months’ salary or to lower the amount of compensation which exceeds such 12 months’ salary. The Amendment will change this concept and provides that the maximum compensation will be for nine months’ salary (without any need by the employer to petition the court in this respect).

The present situation

Pursuant to the Labour Code now in effect, an employee whose employment is terminated on the grounds of the winding-up of the employer or its relocation (Section 63(1)(a) of the Labour Code) or on the grounds of redundancy due to organisational changes (Section 63(1)(b) of the Labour Code) or on the grounds that the employee lost his/her medical ability to carry out work, such employee is entitled to a severance payment ranging from between two and ten times the employee’s average monthly salary (depending on how long the employee has been with the company and whether his/her medical condition was a result of the work he/she has been doing). The severance payment applies in addition to the wage that is being paid during the termination period (e.g. if an employee is dismissed for organizational changes, the notice period is two months during which time the employee works and is being paid a salary and in addition, he/she is entitled to a severance payment equal to two times his/her average monthly salary).

The changes by the Amendment

The Amendment provides that the employer will be bound to pay the employee a severance payment only in the event that the employment terminates by agreement. This will mean that if the employer serves a termination notice on an employee, the employee will have the right to request that employment be terminated by agreement, upon which the employee will receive a severance payment for the duration of notice period (except for employees dismissed for medical reasons, who will be entitled to a severance payment equal to ten (10) months’ salary). If the employee elects to stay with the employer during the notice period, he or she will not be entitled to any severance payment at all.

The employer and the employee will also be entitled to a combination of the above, i.e. that the employee works partially through the termination period and thus will be entitled to some wage for work performed during the termination period and to some severance payment for the time he/she has not worked.

IV. Non-compete

The Amendment extends the scope of the non-compete undertaking for the term of the employment relationship and introduces the possibility to agree on a non-compete undertaking going beyond the termination of employment.

Non-compete during employment

At present, employees are prohibited from carrying out any gainful activity outside their employment if the activity is identical with the employer’s scope of business, unless the employer consents in writing. The Amendment extends the non-compete provision in a way that the employee will be required to notify the employer of his/her intention to carry out a gainful activity which has a character that could compete with the employer’s scope of business. The employer is entitled to require that the employee refrains from carrying out such gainful activity by giving the employee written notice within 10 business days from receipt of the employee’s notification.

Non-compete after employment

The Amendment introduces an entirely new possibility for the employee and the employer to agree on a post-employment non-compete undertaking by the employee.

The employer and employee will be able to agree on such non-compete undertaking for a period of up to one year after the termination of the employment. This option will be open only to  employees who, in the course of their employment, had the chance to obtain information or knowledge which is not publicly available or the use of which could cause harm to the employer.

The non-compete undertaking will have to be proportionate to what is necessary to protect the employer and the court will have a right to amend excessive non-compete clauses.

Employers will be bound to provide their employees with consideration for the non-compete undertaking in the amount of at least 50% of the employee’s average salary for each month of the non-compete undertaking. The parties will be able to agree on a fair compensation to be paid to the employer in the event the employee breaches the non-compete clause. However, such compensation must not exceed the agreed consideration and, if the non-compete clause is partially fulfilled by the employee, then the compensation will be decreased accordingly. 

V. Renewal of employment for a fixed term

With a view to the protection of employees, the Labour Code now allows that employment for a fixed term may have a maximum duration of two years and within such two years, it may be extended and/or renegotiated twice at the most (e.g. the employment may be initially agreed for a definite term of six months, then prolonged for another fixed term of six months, then again prolonged by a fixed term of one year and after such time, it can only be further agreed for an indefinite term).

Pursuant to the Amendment it will be possible to agree the employment for a fixed term of a maximum of three years during which it can be prolonged or renegotiated three times at the most. A further renewal of employment for a fixed term beyond three years or more than three times within three years will be also possible, among other things, for certain types of work agreed in a collective agreement.

VI. Limitation of weekly days off

The Labour Code generally requires that an employee has two consecutive days off work in a week, but it allows in exceptional circumstances that the two days be limited to 35 hours. The Amendment is going to enable that the employee has only one day off in two weeks (which, in principle, should be a Sunday according to the Amendment), while he/she will have a right to additional time off within four months from the week when he/she was supposed to have the two consecutive days off work.

VII. Working time account

A new form of irregular working hours will be introduced, called ‘working time account’. The working time account will make it possible, subject to employer’s needs, for an employee to work different hours every week, provided that the average weekly hours do not exceed the statutory weekly hours (40) over the period of 12 months. The employee will be receiving a wage for the statutory weekly hours. The employer will have to keep detailed and separate records (separate ‘accounts’) of the employee’s working time, paid wage and the (i) difference between statutory weekly hours and the hours actually worked by employee in a given week and (ii) difference between the actually paid wage and the wage to which the employee would be entitled for the actual hours of work. If the employee received a wage which is less than he or she would have been entitled to according to the records of actual working hours of such employee, such employee will be paid the difference at the end of his or her employment. Similarly, if the employee is paid more than he or she would have been entitled to, the employer can claim such amount within two months from the termination of employment; however, only of the employment has been terminated for specific reasons (e.g. such as immediate dismissal for breach of work discipline). Introduction of the working time account at an employer will be subject to a written agreement with employee representatives.

For further information please contact Viliam Mysicka (viliam.mysicka@kinstellar.com) or Zuzana Hodonova (zuzana.hodonova@kinstellar.com).

An amendment to the Slovak Act No. 231/1999 Coll. on State Aid, as amended (the “Act on State Aid”) and to Slovak Act No. 233/1995 Coll. the Code of Enforcement of Judicial Decisions, as amended (the “Enforcement Code”), was passed on 23 March 2011, enabling that decisions of the Commission on the recovery of state aid are directly enforceable against the beneficiary, which, prior to the amendment, was not possible under Slovak law. The amendment will take effect on 1 June 2011 and as at the date of this article has not been published in the Collection of Laws. The amendment is a part of an interesting story, the beginning of which dates back to 2004.

The unlawful state aid

In 2004, Frucona, a producer of alcoholic and non-alcoholic beverages, incurred a tax debt of EUR 21.2 million. In the course of proceedings on arrangement with creditors, the Tax Authority of Košice wrote-off the debt in the amount of EUR 13.8 million.

The European Commission (the “Commission”) launched proceedings against the Slovak Republic under Regulation 659/1999 and on 7 June 2006 the Commission ruled in its decision 2007/254 that the write-off of EUR 13.8 million qualified as unlawful state aid and that the Slovak Republic was required to take all necessary measures to recover from Frucona the unlawfully granted aid. Frucona sought annulment of the Commission’s decision before the General Court in proceedings T-11/07. However, the General Court dismissed the action on 7 December 2010.

Enforcement of the Commission’s decision

As a result of the Commission’s decision on the tax debt write-off, the Slovak Republic sought recovery of the unlawful state aid from Frucona. At that time, the Tax Authority of Košice had no means of recovering it, other than to pursue Frucona in court by an action to pay the amount of EUR 13.8 million. The proceedings before the District Court of Košice II were initiated by an action lodged by the Tax Authority of Košice dated 21 July 2005 and on 1 June 2007 the District Court of Košice II dismissed the action. The grounds for dismissal were that the order of the Commission to recover the unlawful state aid from Frucona was binding only on the Slovak Republic (i.e. it imposed no direct duty on Frucona ) and that no duty was imposed on Frucona by the Commission’s decision. Also, the Slovak court reasoned that the tax claim ceased to exist by operation of law (Act No. 328/1991 Coll. on Insolvency and Arrangements with Creditors then in effect) and that no new claim against Frucona has been established by the Commission’s decision. In addition, the court, exercising its independent judicial power, drew its own conclusions about the state aid provided to Frucona with reference to an expert appraisal which concluded that, in the proceedings on arrangement with creditors, the sale of Frucona’s assets would have not provided its creditors with more compensation for its creditors than the write-off. In any event, in court’s opinion, the court was not allowed to review the proceedings on arrangement with creditors, as they were finally decided and were subject to res judicata, binding on everyone, including the court. The decision of the District Court of Košice II was upheld on appeal by the Regional Court of Košice on 21 April 2008 and the action of the Tax Authority of Košice was dismissed.

Infringement proceedings against Slovakia

Given that Slovakia failed to recover the unlawful state aid from Frucona, the Commission initiated infringement proceedings before the European Court of Justice (“ECJ”). By its judgment of 22 December 2010, the ECJ ruled that Slovakia failed to take all the measures necessary to recover the aid from Frucona and thus failed to fulfil its obligations under the fourth paragraph of Article 249 EC and Article 2 of the Commission’s decision.

Before the decision on infringement was delivered by the ECJ, the Slovak Parliament passed an amendment (effective from 15 October 2008) to Act No. 99/1963 Coll. Code of Civil Procedure to enable that judicial proceedings, once finally closed by a decision, be reopened in the event that such decision is in conflict with a decision of the ECJ or another body of the European Union. Advocate General Mr Pedro Cruz Villalón appreciated, in his opinion presented to the ECJ on 9 September 2010, this effort taken by the Slovak Republic to ensure enforcement of the Commission’s decision. Nevertheless, the final judgment of the ECJ was that Slovakia effectively failed to fulfil its obligations.

The reaction of the Slovak Government

In the aftermath of the ECJ’s decision, the Slovak Government prepared an amendment to the Act on State Aid and the Enforcement Code. The amendment expressly inserts a provision into the Act on State Aid that a decision of the Commission on unlawful state aid is directly enforceable against the beneficiary from the day it is delivered to the Slovak Republic, and provides for the procedure for recovery.

In the legislative procedure, the Government reasoned that the existing system of recovery under Slovak law requires that, in the event the beneficiary fails to voluntarily return the state aid provided, an action for pecuniary performance can be filed with a court against the beneficiary. Such system renders the Commission’s decisions on state aid difficult to enforce in Slovakia. Although the travaux préparatoires of the amendment do not expressly mention the Frucona case, it can be reasonably assumed that the amendment has been tailored to deal with the situation relating to Frucona. Also, the amendment amends the Enforcement Code in a way that makes the Commission’s decisions on state aid directly enforceable.

The amendment was submitted to the Parliament on 9 February 2011 and, when passed by the Parliament on 11 February 2011, was vetoed by the Slovak President. The reason for the presidential veto was that the amendment provides that recovery under the new rules would also apply to state aid that was not successfully recovered under any decision of the Commission  rendered before 28 February 2011. Among other objections to the amendment, the President saw retroactivity in the said provision and that was the major reason why he required that the Parliament pass the statute again without the retroactive provision. However, the Parliament overrode the presidential veto and passed the amendment on 23 March 2011. The amendment will take effect on 1 June 2011 and the new rules on recovery will also apply to the recovery of state aid under Commission’s decisions rendered prior to 31 May 2011.

For further information please contact Zuzana Hodonova (zuzana.hodonova@kinstellar.com).

Published in e-Competitions, N° 35307, www.concurrences.com.

The Act repeals all previous statutory and common law provisions concerning bribery and replaces them with general bribery offences i.e. (i) bribing, (ii) being bribed, (iii) bribery of foreign public officials and (iv) failure of commercial organisation to prevent bribery.

UK incorporated companies may be liable under all four offences set out in the Act, even where the conduct takes place outside the UK (as the company may be considered to have a "close connection" with the UK due to it being incorporated there).

The most controversial offence is the new offence which can be committed only by relevant commercial organisations. A ‘relevant commercial organisation’ is defined as a body or partnership incorporated or formed in the UK irrespective of where it carries on a business, or an incorporated body or partnership which carries on a business or part of a business in the UK irrespective of the place of incorporation or formation.

The offence of ‘failure of commercial organisation to prevent bribery’ will be committed if a person associated with the relevant commercial organisation (including employees, agents, subsidiaries or other third parties) bribes another person with the aim of obtaining or retaining a business advantage for the organisation.

It is an accepted defence for a relevant commercial organisation to prove that, despite a particular case of bribery, it nevertheless had adequate procedures in place to prevent persons associated with it from bribing. That effectively creates a burden on corporate entities to ensure that their anti-corruption procedures are sufficiently robust to stop any employees, agents or other third parties who are acting on their behalf from committing bribery.

The Act puts significant pressure on corporate entities doing business in the UK and corporate entities with a "close connection" to the UK to ensure that they have appropriate anti-corruption procedures in place. All affected companies should review their anti-bribery programmes and implement changes that will be sufficient to be considered ”adequate” under the new rules. In particular, it is suggested to consider implementing and/or updating a code of conduct, detailed principles including e.g. policies on gifts, hospitality, facilitation payments, vetting outside agents and advisers, lobbying, political contributions or whistle blowing procedures.

Furthermore, to the extent these rules may clash with the rules applicable in the Slovak Republic, an additional conformity check and/or adjustment with Slovak law should be performed if a Slovak subsidiary is concerned.

For further information please contact Viliam Mysicka (viliam.mysicka@kinstellar.com).

The draft Bill requires the banks and branches of foreign banks to pay the levy (avoiding the sensitive word “tax”) and regulates the amount and method of such payment and the administration of such levy. The levy will be mandatory for the banks and branches of foreign banks. At present, the draft Bill does not extend the levy to foreign banks doing business in Slovakia without a branch (based on a uniform passport) or other financial institutions, such as e.g. investment funds, collective investment companies or insurance companies.

The proposed rate of annual levy for the relevant calendar year is 0.2% calculated on the total of the bank’s liabilities recorded on its balance sheet reduced by the following items:

(i)         bank’s equity (provided such amount of equity is a positive number),

(ii)        funds on long term offer to a branch of a foreign bank,

(iii)       subordinated debt (determined under a Decree of the National Bank No. 4/2007),

(iv)        deposits accepted by the bank in Slovakia and protected by the Act on Protection of Deposits,

(v)         deposits accepted by the bank in Slovakia and protected in another EU or EEA Member State.

In principle, the annual levy is payable by the bank in four quarterly advance instalments, each in the amount of 25% of the annual rate multiplied by the base for the relevant calendar quarter. (The data for the relevant quarter should be taken from the preliminary financial statements of the previous quarter and from the final statements of the previous financial year). Each instalment should be due on the 20^th day of the relevant calendar quarter.

If the bank loses its banking licence and has paid the advance instalments of the levy, such instalments will not be refunded.

The levy should be paid to the Tax Office for Selected Taxpayers with its seat in Bratislava (this tax office already has jurisdiction over financial institutions and large taxpayers). The purpose of the levy should be to finance the measures against the financial crisis and the protection of the Slovak financial system.

It is planned that the Bill should enter into force on 1 January 2012. It is likely that the Bill will undergo substantial changes during the discussions in the Parliament (if it is approved at all). We will inform  readers of further developments in this area in the next issues of our bulletin.

For further information, please contact Adam Hodon (adam.hodon@kinstellar.com) or Martin Vojtko (martin.vojtko@kinstellar.com).

The Bribery Act creates the following offences:

      i.        the offence of active bribery, which prohibits giving, promising or offering a bribe (the active bribery offence);

     ii.        the offence of passive bribery, which prohibits requesting, agreeing to receive or accepting a bribe (the passive bribery offence);

    iii.        the offence of bribing a foreign public official; and

    iv.        the offence of failing to prevent bribery (a corporate offence).

All of the offences have significant extra-territorial scope and can be committed even where no relevant behaviour takes place in the UK.

Failing to Prevent Bribery

Czech companies, in particular, should pay attention to the offence of failing to prevent bribery. A company will be liable to prosecution if a person associated with it bribes another person with the aim of obtaining or retaining business or an advantage in the conduct of business for the company. An “associated person” is any person performing services for or on behalf of such company (e.g. an employee or agent). The Bribery Act defines “relevant commercial organisation” as:

      i.        a body which is incorporated under the law of any part of the UK and which carries on a business anywhere (whether there or elsewhere);

     ii.        any other corporate body (wherever incorporated) which carries on a business, or part of a business, in any part of the UK;

    iii.        a partnership which is formed under the law of any part of the UK and which carries on a business whether there or elsewhere; or

    iv.        any other partnership (wherever formed) which carries on a business, or part of a business, in any part of the UK.

The Serious Fraud Office (an independent Government department that investigates and prosecutes corruption and serious or complex fraud) anticipates that courts will interpret the meaning of “carrying on business” in the UK very broadly. Therefore, if your company is carrying on any business in the UK it has to comply with the respective provisions of the Bribery Act.

Defence

How can you protect your company and avoid criminal liability and even unlimited financial penalties? You have a full defence if you can show that your company had adequate procedures in place to prevent bribery. What falls within the definition of “adequate procedures” will depend on the bribery risk that your company faces and the nature, size and complexity of your company’s business. There are several procedures which you could introduce and implement in your company in order to mitigate the risk of being criminalised or sanctioned under the Bribery Act. Good examples of such procedures are various internal regulations (e.g. relating to tenders), ethical codes or special policies relating to the receiving of gifts. It might be also worth considering special training for employees and other co-operating parties. In any case, you should not underestimate the importance of the Bribery Act and the consequences of a breach thereof and you should take some time to review your internal procedures.

Penalties

The consequences for committing offences under the Bribery Act may be quite severe. The Bribery Act, among other fines, allows for unlimited fines. In addition, individuals committing offences can be held criminally liable and the companies can be excluded from public tenders in the UK as well as in other EU countries.

Conclusion

If your company is carrying on business in the UK, it would be prudent to review carefully your business practices and assess whether there is a space for any improvement. You can protect your company by introducing internal regulations, ethical codes or providing training for your employees and other cooperating parties. In addition, you should not forget to keep an eye on the anti-bribery steps your company has taken so that they are in line with any changes in the bribery risks you may face.

The Turkey chapter gives a high level review of the Turkish capital markets regulatory scheme, procedures for debt and equity capital markets offerings, publicity restrictions, private placements, offshore offerings, underwriting arrangements, issuers’ continuous disclosure obligations and other key issues of interest for capital markets participants. 

The Turkish chapter is accessible at this link.

For further information, please contact:

halide.cetinkaya@kinstellar.com

kemal.ertug@kinstellar.com    

Present situation

Current Czech law already contains provisions that regulate the advertising of medicinal products. One of the main reasons that they were adopted was the need to limit the opportunities for medical sales representatives to exercise undue influence over persons qualified to prescribe medicinal products. For that reason, current law regulates not only the advertising of medicinal products to the general public, but also the activities of persons who may seek to influence the sale of medicinal products (such as by advertising medicinal products to persons qualified to prescribe or supply them). There are even restrictions on the provision of inducements to prescribe or supply medicinal products and on the sponsorship of professionals attending promotional meetings or scientific congresses (e.g. paying such people’s travel and hotel expenses).

Proposed changes

The proposed new legislation goes even further, imposing restrictions on a fresh group of activities that are deemed to constitute “advertising”. These activities comprise (i) market research and (ii) non-intervention studies. However, studies which do not directly relate to the use of the product in question as a prescription drug but which have wider scientific benefits will be exempt from the proposed changes.

As regards the sponsorship of people attending scientific conferences, the Ministry proposes to broaden the scope of the restriction and apply it in future not only to persons qualified to prescribe or supply medicinal products (mainly physicians and pharmacists), but also to hospitals or employees of health insurance companies. Moreover, the sponsored person will have to provide evidence that he/she has actively participated in the congress (e.g. made a presentation on a specific topic); this should, in the view of the Ministry, further limit the possibility for pharmaceutical companies to influence relevant professionals.

In addition, the proposal calls for a significant increase in the maximum fines for any breach of the rules.

Well-meant, but mistaken

The proposed measures are now being considered within the relevant ministries and other central governmental bodies and are due to be presented to the Government by the end of June 2011. They could enter into force in January 2012. However, it remains to be seen whether and in what form the measures will become law.

The attempts of the Ministry to fight corruption and unethical behaviour in the pharma sector should be welcomed. The current proposal complements earlier measures taken by the Ministry with regard to apparent irregularities within the Ministry itself and in major hospitals established and managed by the state. It is also in line with planned amendments in other fields, such as public procurement.

However, at least some of the measures have been criticised by the affected parties as inappropriate or ineffective. For example, categorising market research and post-registration studies as “advertising” does not seem to be entirely fair. The purpose of market research is completely different from that of advertising; and adjudicating on whether or not certain post-registration studies are of “scientific benefit” (and therefore qualify for exemption from the new regulations) is likely in practice to be an arbitrary and subjective process.

Likewise, the planned increase in the restriction of sponsorship of scientific congresses seems to have been ill-conceived. It appears that the Ministry has confused two separate topics: inducements (such as gifts) and hospitality. In the first place, the provision of inducements is already largely forbidden under current law, so there is no need to forbid it again. And although there is theoretical scope for increased restrictions on the provision of hospitality, they are not particularly practical as the maximum cash value of such hospitality is already very low.

Finally, it is questionable whether the proposed measures are compliant with EU law. The advertising of medicinal products has already been regulated by EU law, in particular by Directive 2001/83. Any additional regulation in this field adopted by the Czech Republic may have a negative impact on the internal market (i.e. pharma companies would face different rules – and so have to adopt different strategies – at home and abroad) and therefore be in breach of EU law.

Conclusion

The proposed amendments by the Ministry of the advertising of pharmaceuticals may have been prompted by the best of motives, but their appropriateness and compliance with EU law are questionable. The Ministry would do better to focus on the effective enforcement of current regulations than create new sets of complicated rules that may scarcely bring about any improvements.

The Pro Bono Advocacy programme links legal practitioners with non-profit organisations in Slovakia and provides the ‘NGO’ sector with access to free legal advice.  It is created with assistance of The Global Network for Public Interest Law (PILnet at www.pilnet.org), a global pro bono clearinghouse and is administered by Pontis Foundation (www.nadaciapontis.sk/en). The programme was developed and tutored by Kinstellar, together with other Slovak law firms.  Non-profit organisations in Slovakia that will benefit from this new pro bono broker platform can enjoy access to free legal assistance to help them further develop the good sought by civil society.  Pro bono work will now take on a new pair of wings in Slovakia.

Kinstellar in Bratislava made a very active contribution to the shaping of this new initiative. The enthusiastic work of Kinstellar lawyers, which was undertaken in addition to their other client duties, helped put this new initiative on its firm legs, marking the creation of the first ever nation-wide pro bono broker forum in Slovakia.

For further information, please contact Viliam Mysicka (viliam.mysicka@kinstellar.com) or Juraj Bobula (juraj.bobula@kinstellar.com).

http://www.nadaciapontis.sk/en/16231

However, recently courts’ decisions illustrate that creditors have been paying more attention to the obligation of the company’s director to file a petition for insolvency proceedings within due time. . Moreover, in actions of this kind filed against company directors’, the damages awarded by the court may be considerable.

In 29 Cdo 2683/2008 (30 June 2010) before the Czech Supreme Court the customer (the “Claimant”) and the contractor (the “Debtor”) concluded a contract for works in June 2001 with a value of approximately EUR 45,000 (the “Contract”). The shareholders of the Debtor approved the balance sheet for 2000 in June 2001 ignoring the fact that the Debtor had been insolvent since at least 31 December 2000, and intentionally resolved to set off the losses of the Debtor against future income. The Claimant, a creditor of the Debtor, filed a petition for insolvency against the Debtor in October 2001. In  the course of the insolvency proceedings of the Debtor the Claimant received almost no compensation for its claim (amounting to approximately EUR 35,000). Consequently, in February 2008,the Claimant  commenced proceedings for damages against the Debtor’s directors on the grounds that the directors had breached their duty to file a petition for insolvency proceedings within due time. In the case, the court concluded that the Claimant would not have suffered the above loss if the directors had complied with their obligation to file for insolvency as the Claimant would not have reasonably concluded the Contract if it had known that the company was insolvent (i.e. in bankruptcy proceedings). The court awarded damages to the Claimant.

For further information, please contact viliam.mysicka@kinstellar.com.

The Amendment was triggered by the Commission’s formal notification for incomplete and/or incorrect implementation of Directive 2002/73/EC in Slovakia. Accordingly, the Labour Code has been amended, in particular, the initial articles on fundamental principles of the Labour Code have been amended so as to cross-refer to the Slovak Anti-discrimination Act and to expressly provide for the prohibition against discrimination. Also, the Labour Code will now embody the principle of equal treatment of men and women in connection with the care of children and the protection of pregnant women and women taking care of small children.

In addition, the Amendment incorporates into the Labour Code the principle that an employee after returning from parental leave will have the right to be assigned to work on the same terms as at the time of leaving for the parental leave. Also, such employees will have the right to the benefits/improvements to their work position that they would have been entitled to had they not left for the parental leave (which  includes, for example, that the time on parental leave must be included in the calculation of the time required for reaching a certain level of ‘seniority’ within the firm). Finally, the Amendment fosters the right of the employee, after returning from parental leave (after three or even six years), to require that the employer assigns the employee back to his/her position held at the time of parental leave without prejudice to the rights which the employee had at the time of the parental leave.

The Amendment will take effect on 1 April 2011.

European Works Council and Right to Information

With respect to the Employee Works Council and the right to information, the Amendment implements the Directive. The Amendment incorporated into the Labour Code the definition of

(a)        Community-scale undertaking (which means any undertaking with at least 1000 employees within the Member States and at least 150 employees in each of at least two Member States); and

(b)        Community-scale group of undertakings (which means a group of undertakings employing, in the aggregate, at least 1000 employees within the Member States, with at least two group undertakings in different Member States and at least 150 employees in each of such two group undertakings in two different Member States)

and other definitions that are necessary to implement the Directive as set out in Article 2 of the Directive.

Community-scale undertakings and Community-scale groups of undertakings will be obliged to create European Works Councils or a procedure for informing/consulting employees of such undertakings. The management of each of the undertakings will have the duty to provide employees with information necessary to establish whether it is possible, within the respective undertaking, to create a European Works Council or to implement a procedure for informing/consulting employees.

Creation of European Works Council

The management of the Community-scale undertakings and Community-scale groups of undertakings will be under a duty to launch negotiations with the employees on the creation of European Works Council or the procedure for informing and consulting employees if at least 100 employees in at least two undertakings or establishments in at least two Member States require so in writing. The outcome of such negotiations should be an agreement on the creation of a European Works Council or procedure for informing and consulting employees. If the Community-scale undertakings or Community-scale groups of undertakings fail to initiate negotiations within six months from request or fail to conclude an agreement within three years, or if the parties so agree, the European Works Council or procedure for informing and consulting employees will be implemented by operation of law.

The Amendment (to the extent it relates to the European Works Council and right to Information) will take effect on 6 June 2011.

For further information, please contact viliam.mysicka@kinstellar.com.