International conventions applicable in the Czech Republic are similar to those applicable in other states in the European Union. The primary international conventions result from the Czech Republic’s membership of the United Nations, the OECD, the Council of Europe and the European Union (EU). The main multinational conventions are as follows:
The EU battles corruption in co-operation with the above or with other international organisations, and by co-ordinating member states and influencing their legislation and co-operation between each other.
The most significant conventions are the convention drawn up on the basis of Article K.3 (2) (c) of the Treaty on European Union on the fight against corruption involving officials of the European Communities or officials of Member States of the European Union from 26 May 1997, and the Council Framework Decision 2003/568/JHA of 22 July 2003 on combating corruption in the private sector.
Bribery crimes-related provisions are included in the Criminal Code and the Corporate Criminal Liability Act:
Criminal investigations and prosecution are governed primarily by the Act on Criminal Procedure, with distinctions set out in the Corporate Criminal Liability Act. International investigations are governed by the Act on International Judicial Cooperation in Criminal Matters. Lastly, specific measures and obligations in respect of anti-money laundering are set out in the Act on Selected Measures Against Legitimisation of Proceeds of Crime and Financing of Terrorism.
There are no official binding guidelines on the interpretation and enforcement of the anti-corruption legislation. The Supreme State Prosecutor's Office issued non-binding guidelines to unify the approach of various levels of state prosecution in terms of how they assess the accused company's compliance management system and the effectiveness of the company's compliance defence. These guidelines are being regularly updated (the next updated version will be published in a few weeks from the time of writing) and are publicly available. The Supreme State Prosecutor's Office also organises regular roundtables, to which legal experts, judges, state prosecutors, police and representatives from companies are invited to talk about the application of certain provisions of the corporate criminal liability law, including the compliance defence provisions.
Companies accused of certain crimes (including bribery) can release themselves from criminal liability if they prove that they have implemented an effective compliance management system that could have prevented the crime (compliance defence).
Since 2012, companies can be held criminally liable for almost all of the crimes in the Criminal Code. Because of the strictness of this criminal liability (prosecution authorities in the Czech Republic have a duty to investigate and prosecute all crimes), a major amendment was enacted in 2016, enabling companies to be released from corporate criminal liability if they had implemented a compliance management system capable of preventing the criminal behaviour in question.
Since 2020, companies sanctioned with a ban on commercial activity, a ban on participation or work in public tenders, or a ban on subsidies can, after half of the sentence has been served, ask the court to put them on probation and drop the rest of their sentence, provided that the company proves that it implemented effective measures which can prevent criminal activity
What is Bribery and a Bribe?
Usually, bribery (or corruption) is broadly discussed in the context of ongoing or systemic activity. However (apart from influence-peddling, as discussed below), the Criminal Code focuses on individual acts (accepting a bribe, giving a bribe, requesting a bribe). When the term "bribery" is used, it will refer to either of these crimes regardless of whether the activity was continuous or on one occasion only.
A bribe is defined broadly as an unjustified advantage to which there is no legal entitlement. Although it is often asserted, incorrectly, that transactions under a certain value cannot constitute bribery, the law offers no guidelines as to what form a bribe should take or its necessary or minimum value, leaving this definition to the courts, which must assess bribes on a case-by-case basis.
Consequently, neither Czech law nor case law contains a clear delimitation between bribery and lawful acts of hospitality, gifts, travel expenses or meals. Whether or not bribery has been committed always depends on all circumstances of each individual case.
Shallow Distinction between Public and Private Bribery
The Czech Criminal Code does not particularly distinguish between private and public bribery. The fundamental condition for bribery is that it must take place either in connection with the procurement of things of general interest, or in connection with a commercial activity, which covers quite an extensive area. Bribing a public official is an aggravating circumstance.
Procurement of things of general interest
This category contains all activities that are usually understood as public bribery, such as bribery of the courts, state authorities or state clerks. However, the concept is actually much broader and does not require any link to the state, public institutions or public officials. Generally speaking, it covers activities that are considered to have some level of social significance, including private universities, sport, and social services such as retirement homes.
Ultimately, courts decide whether an activity falls within the general interest or not. The courts look at the activity influenced in terms of its qualitative aspect (ie, the importance of the activity for the society) or its quantitative aspect (ie, the number of persons affected by the activity influenced).
The exact wording of the Criminal Code does not distinguish between bribes given in connection with the commercial activity of the perpetrator and with the commercial activity of other persons. This effectively covers bribery committed by the employees of one company who bribe a representative of the company's business partners. The connection between the bribery and the commercial activity must be clear.
Perpetrators face the same sanctions regardless of whether the bribery was conducted in connection with the procurement of things of general interest, or in connection with a commercial activity. The distinction between these two areas has significance later when the court considers the seriousness of the crime.
The law sets out three main crimes:
All these crimes can be committed either by direct contact between the perpetrators, or indirectly through one or more intermediaries.
It should be noted that they are independent of each other. Therefore, the police would investigate the briber for giving a bribe and the bribed person for accepting/requesting the bribe, but could also investigate only one perpetrator (eg, the briber).
Lastly, all the crimes require intentional conduct. Bribery cannot be committed by negligence. Under Czech law, intentional conduct encompasses both intent with a desire to commit a crime, and the conscious understanding that an activity might meet the necessary conditions of a crime.
Giving a bribe
The perpetrator gives, offers or promises a bribe to another person. Giving a bribe means direct/indirect and immediate transfer of the bribe. Offering a bribe is an act whereby the perpetrator shows a willingness to give a bribe, which can be formulated in such a way that it can be paid immediately or in the future. Promising a bribe constitutes an undertaking to give a bribe if the recipient of the bribe complies with the perpetrator's request.
Accepting a bribe
The perpetrator accepts the bribe or accepts the promise of a bribe. A bribe can be accepted without a prior offer or promise. It is irrelevant whether the bribe is accepted before or after the perpetrator carries out the desired activity. Accepting a bribe is more serious than giving a bribe.
Requesting a bribe
The perpetrator actively asks for a bribe, regardless of whether the request is made explicitly or ensues from the situation which was created by the perpetrator. Where an explicit request has not been made, it is sufficient that the perpetrator has not refused the bribe. Requesting a bribe is the most serious of these crimes.
Bribing Public Officials – Aggravating Circumstance
When the bribed person is a public official, this is an aggravating circumstance for both the briber and the bribed person. More severe sanctions can be expected in such cases.
The Criminal Code defines public officials based on the list of public functions. The list contains typical functions such as judge, public prosecutor, and members of the government or Parliament. State employees can be regarded as public officials if they hold public authority and a decision-making power within this authority (bribery then needs to be connected with this authority). This definition is extended to foreign officials if an international treaty provides for it.
For bribery, the definition of public officials is extended to persons with a function:
Crimes Derived from Bribery
Apart from the bribed person and the briber, other persons may also be held criminally liable, especially for participating in bribery or failing to report/stop the crime. However, their criminal liability will depend on the main act of bribery, without which they cannot be criminally liable.
Participating in bribery
Especially in more complex and profitable activities (most often large public tenders), it is usual for several persons to be involved in the crime, most of whom will not fall within the definition of briber or bribed person. However, they can be held criminally liable for aiding/instigating or organising the bribery, which can be an even more serious crime (eg, a managing director of a company who organises bribery involving his or her employees and can therefore face significantly more severe sanctions).
Participating in bribery requires an intention both to participate in committing the bribery and to commit bribery. It is not necessary for the participant to know every detail of the crime.
This crime is committed when one person helps another to avoid criminal prosecution. Typically (in relation to bribery), the perpetrator is a spouse, friend or colleague of the briber/bribed person who provides means of escape or hides evidence. The perpetrator must at least know that he or she is helping someone to avoid criminal prosecution, but does not necessarily need to know which crime was committed.
Failure to prevent/report bribery
Individuals and companies have a legal obligation to report crimes listed in the Criminal Code, including bribery. Any person who credibly acquires knowledge that such a crime has been committed and fails to report it without delay is committing a crime (as discussed below).
The Czech Criminal Code sets out the crime of indirect bribery. Indirect bribery is committed when the perpetrator requests or accepts a bribe to influence (alone or via an intermediary) a public official within their authority, or when they have already influenced the public official.
Intentional conduct is required for indirect bribery to be committed. It is not required for the perpetrator to actually influence the public official. Doing so would, however, increase the seriousness of the crime.
Indirect bribery can also be committed when the public official that is to be influenced is a foreign public official. Foreign public official carries the same definition as in the case of bribery in 2.1 Bribery.
The Czech Criminal Code provides for the crime of Misrepresentation of Data on the State of Economy and Assets, which also covers the conduct known as "cooking the books". However, this conduct is actually much broader, and results from having an incomplete set of company documents compared to those required by law.
Every entrepreneur or company is required by law (eg, acts on accounting, auditing, financial markets) to properly record or keep a given set of documents and information. This requirement varies based on the company, its size and its scope of business operations (a one-man company has an entirely different legal obligation as regards the documents it must keep than a global publicly traded corporation). Due to this expansive scope, only the three most important aspects that need to be considered will be described.
The Misrepresentation of Data on the State of Economy and Assets Act punishes the mere improper handling of company documents (or their submission to public registries). However, intentional use of untrue documents or information might be considered fraud or another crime depending on the circumstances.
The majority of crimes set out in the Czech Criminal Code apply to all persons and do not differentiate between regular persons and public officials. For many of these crimes, it is an aggravating circumstance for the perpetrator to act from the position of a public official, or co-act against the public official.
Misuse of Public Authority
In addition, the Czech Criminal Code contains the crime of misuse of public authority. This crime targets all criminal activity of public officials – it is usual for a public official facing bribery charges to also be charged for misuse of public authority of if they acted upon the bribe.
To commit the crime of misuse of public authority, the perpetrator must intentionally:
These crimes are further compounded if carried out in order to gain an undue advantage or cause damage or other serious harm. Other serious harm covers any potential harm done, such as to personality rights, goodwill and life.
Criminal liability for bribery cannot be avoided by using intermediaries because the statutes on bribery expressly cover this and the perpetrator will still be criminally liable for bribery regardless of the number of intermediaries used. However, the crimes of intermediaries cannot be directly attributable to the company. A clear link must be established between the intermediaries and a person whose criminal conduct can be attributable to the company. This makes it harder to prosecute and investigate companies for bribery where the prosecuting authorities lack a perpetrator whose conduct can be attributable to the company.
In addition, the general statutes of the Criminal Code also set out conditions for criminal liability when participating in a crime as an organiser, instigator or aider. If the bribery is committed through an intermediary who intentionally participates in committing the crime, then this intermediary will be criminally liable for participating in bribery (see 2.1 Bribery).
Finally, the perpetrator will still be criminally liable for the crime if he or she uses another person who cannot be held criminally liable in such a case (eg, if they did not intentionally participate in the crime, did not know that they were committing a crime, were underage, or were acting under threat or distress).
The Czech Criminal Code sets out rules on limitation periods. These do not contain a specific limitation period for each individual crime, but rather explain how the limitation period should be calculated. Generally, the limitation period depends on the seriousness of the crime and begins from the moment the crime was "completed".
Determination of Seriousness of the Crime
The seriousness of the crime is determined based on the maximum prison sentence the perpetrator could be handed down on a case-by-case basis. However, there are many variables that could change the upper limit significantly, depending on the specific case (most importantly, the damage caused/potential profit from the crime and possible aggravating circumstances – eg, bribing a public official). In practice, the limitation period for bribery and derived crimes can range from three to 15 years.
When Is the Crime Completed
Also, the time when the crime is completed may vary depending on the specific situation. For a simple one-time handover of a bribe of USD500, the limitation period would begin to run the day after the handover. In more complex cases with systemic bribery, such limitation period might start years after the first bribe.
For example, the manager of a company who accepts a USD50,000 bribe in exchange for prolonging a contract with one of the company’s suppliers faces a 12-year prison sentence. The limitation period for this crime would be 15 years. In the case of a USD5,000 bribe, the manager could face a four-year prison sentence with a limitation period of five years.
The limitation period of a crime committed by a company is calculated based on the limitation period of the relevant person that committed the crime.
The geographical reach of the Criminal Code is quite broad. There are several different ways of telling whether the jurisdiction of the Criminal Code can be assumed.
Crimes committed by Czech citizens and persons with permanent residency in the Czech Republic always fall under the jurisdiction of the Czech Criminal Code.
With foreign citizens, jurisdiction can be assumed if the crime was, at least partly, committed in the territory of the Czech Republic. This will apply:
Additionally, jurisdiction of the Criminal Code can be assumed in several specific cases set out in the Criminal Code, such as when an international treaty provides for this, for the most serious crimes (eg, terrorism), or for planes/ships registered under the Czech flag.
Whether the court finds merit for assuming jurisdiction will always be determined on a case-by-case basis.
Corporate criminal liability was introduced into Czech law only in 2012, with a major change in 2016, which enables companies to release themselves from criminal liability. Apart from the Czech Republic and local self-governments within their public authority, all legal entities can be held criminally liable.
Criminal liability primarily falls on the natural person who has committed the crime. Under certain conditions, the crime can also be considered as having been committed by the company. A company is liable for such a crime if the crime was committed in the company’s interest or in the course of the company’s commercial operation, and if the crime is attributable to the company (please note that some crimes cannot be attributable to the company; eg, stalking or drunkenness).
Company’s Interest or Commercial Operation
The crime must have been committed for the benefit of the company or in the course of its commercial operations. If the crime has caused damage to the company (typically, the company is defrauded in some way), then the company should not be held criminally liable.
Attributability of a Crime to the Company
A crime is attributable to the company if it is committed by:
Companies are also liable for offences committed by their employees or persons in a similar position if those persons acted on the instructions of the persons stated in the bullet points above, or if those persons did not incorporate measures that could have been reasonably required of them (eg, if they did not implement an effective compliance management system that could have prevented or mitigated the effects of a crime).
Independent and Concurrent Criminal Liability of the Company
The company and the perpetrator are prosecuted independently of each other. If it is otherwise proven that a crime was committed and can be attributable to the company, the company might even be sentenced without a perpetrator being found (this might be the case when it cannot be sufficiently proven which of the company's employees committed the crime). Because the criminal liability of the company is independent of the criminal liability of the perpetrator, the company might be prosecuted (however rarely) even if the perpetrator is acquitted.
The criminal liability of the company passes to any potential successor or successors. The court should take into account the extent to which the criminal liability is passed to the successor.
Compliance Defence – Guidelines from the Supreme State Prosecutor's Office
Since 2016, a company can release itself from criminal liability if it has implemented adequate measures (the guidelines defined those measures as a compliance management system) which could have prevented a crime from being committed. The Czech Supreme State Prosecutor's Office has published a methodology (officially: Application of Section 8 subsection 5 of the Act on Criminal Liability of Legal Persons and Proceedings Against Them) for prosecution authorities which explains, among other things, how companies’ compliance efforts – compliance management system – should be evaluated.
This methodology is practical as it not only provides the Czech-law perspective but also takes inspiration from more advanced international approaches and guidelines (eg, the USA and FCPA or the UK Bribery Act, or the ISO37001 Anti-Bribery Management System). The methodology is at the moment being reviewed and updated and a new version was published in November 2020.
Evaluation of a Compliance Management System
In particular, the following must be considered:
A compliance management system should be evaluated in the light of the proportionality principle: “a properly configured CMS is proportionate to the organisational size, the regulatory density, the internationality and nature of business activities, the risk profile and the market environment of any given legal person".
The methodology provides the main benchmark perspectives which should help to assess a company's compliance management system. Describing these benchmark criteria would go beyond the scope of this article; however, the guidelines emphasise primarily the risk-based approach. The company should first assess all the possible risks it faces and implement a compliance management system that addresses all these risks with targeted and effective measures. Moreover, the measures should be functional, "self-sustaining" and continually improved, which means that they should:
Czech law does not provide any specific defence against bribery-related crimes except for the corporate compliance defence. Moreover, the Corporate Criminal Liability Act precludes companies from using effective remorse for crimes relating to bribery or public tenders (usually, perpetrators can try to claim effective remorse if they voluntarily prevent consequences of the crime, remedy them or report the crime to prosecuting authorities).
One issue remains open in relation to the reporting duty. If a company discovers that a crime has been committed by one of its employees, the company must report this crime to the prosecuting authorities (See 6.1 National Legislation and Duties to Prevent Corruption). However, by reporting the crime, the company could be exposing itself to criminal prosecution for the same crime. Therefore, it should be able to claim that it is not subject to the reporting duty because it would be incriminating itself.
Additionally, individuals who can represent the company (ie, members of its executive body) should not be forced to report or testify against the company as this would represent a circumvention of the right against self-incrimination.
As there are no specific defences, there are no specific exceptions to these defences.
There is no statutory de minimis exception for crimes relating to bribery.
No sectors or industries are exempt from bribery offences. However, investigating and prosecuting companies conducting business in some of the regulated industries (eg, banks) are subject to exceptions.
Apart from the possibility to be recognised as a co-operating suspect (see 7.3 Process of Application for Documentation), Czech law does not provide for any safe harbour or amnesty programmes for bribery, nor is there any special treatment for reporting/co-operating perpetrators.
To mitigate the risk, a company can claim the compliance defence (see 3.3 Corporate Liability). However, there are no automatic benefits for cooperating/self-reporting or remediation efforts. These would depend on the consideration of the judge.
There are a variety of possible sanctions for both individuals and companies. These sanctions are, with some specific exemptions, applicable to all crimes.
Common sanctions for individuals:
Common sanctions for companies:
Czech criminal law highlights the role of an independent judge in the proceedings; therefore, any guidelines on criminal sanctions which are not enacted/expected by the Criminal Code are considered to be unconstitutional. The court is only limited by the minimum and maximum sanctions that can be imposed for a given crime. Under special circumstances, the court may decrease or increase the sanctions beyond these thresholds. In practice, this happens only exceptionally.
The Criminal Code sets out a wide range of aspects that the court needs to consider (seriousness of the crime, damage caused to property or society, circumstances, individual aspects of the crime, personality of the perpetrator...), as well as a variety of aggravating/mitigating circumstances.
Perpetrators who commit several crimes can expect more severe sanctions. Relapse is also sanctioned more severely. However, the Czech Criminal Law does not accumulate sanctions for several crimes. In the case of multiple crimes, the sanctions for the most serious crime are imposed (the prison sentence can then exceed the upper limit by one third) and this multiplicity is also considered to be an aggravating circumstance.
In principle, there is a compliance programme in place. Executive bodies or managing directors must set up the CMS (see 3.3 Corporate Liability) because it is considered to fall under duty of care. It is also a necessary requirement if the company strives to be released from criminal liability should a crime be committed and attributable to the company. Not setting up such a CMS would violate civil legal obligations and potentially even be criminal – breach of fiduciary duties – but there is no case law on this yet.
Unlike French law, for example, Czech law does not set out what a CMS should look like and the company has to decide for itself. However, a company should always be able to clearly and credibly explain why it chose the CMS that it has implemented.
The Czech Criminal Code provides for the crime of failing to report a crime (reporting duty) and the crime of failing to stop a crime. All individuals and companies have a legal obligation to report (or stop from happening) several crimes listed in the Czech Criminal Code without delay. Any person who credibly acquires knowledge that such a crime has been committed or is being committed and fails to report/stop it without delay is committing a crime. "Stopping the crime" may also be done by reporting it immediately.
The knowledge must be acquired in a credible manner. This depends on the situation: credibility of the source, the circumstances and conditions under which it was provided, and the form and content of the information. The sanction for committing these crimes is a prison sentence of up to three years.
Czech law does not contain any specific provisions on reporting bribery. The only legal requirement is the reporting duty and a duty to stop the crime as described above. The law does not specify the form or the content of this criminal report. It might be made orally, in writing or electronically. The addressee must be a representative of the prosecution authorities (the police or the state prosecutor).
Should a company file a criminal report, this should be sufficiently specific, detailed and supported by enough evidence. Prosecuting authorities are obliged to independently investigate and prosecute all crimes that they become aware of and are not bound or limited by the content of a criminal report. Therefore, any criminal report that is not sufficiently supported by evidence could lead to a police dawn raid and the securing of information and documents; see 7.3 Process of Application for Documentation.
There is currently no comprehensive whistle-blowing regulation in the Czech Republic. The EU Directive on the protection of persons who report breaches of Union law requires member states to implement protection for whistle-blowers by 2021. A bill on the protection of whistle-blowers is being prepared by the Czech government, with a plan for it to be effective from December 2021. Although there is currently a heated debate about its specific wording, the authors do not expect the bill to go above or beyond the Directive's requirements.
The bill expects protection of whistle-blowers of all criminal offences or other illegal acts in areas that relate to work. The act introduces an obligation for named entities to set up an internal whistle-blowing notification system.
The role of the so-called external (ie, central) reporting body should be fulfilled by the newly established body, which is planned to be a department of the Ministry of Justice. The credibility of each report should be assessed on a case-by-case basis based on the circumstances, and false reports should be sanctioned via civil law as the Directive envisages penalties for false reports.
There are no incentives for whistle-blowers to report bribery, nor does the EU Directive provide for any incentives. Therefore, none are expected to be implemented into Czech law.
Czech law does not currently contain any explicit provisions on whistle-blowing. Most often, whistle-blowers are protected by Czech Labour law because employees can only be terminated on grounds laid out in the Labour Code. If proved that the employer terminated the whistle-blower because of the whistle-blowing report, a court would invalidate such a termination.
Primarily, Czech law provides for criminal enforcement of anti-bribery laws. Civil law provides for the possibility to claim damages in relation to bribery. Bribery also falls within statutes on unfair competition.
There is no specific body for the enforcement of anti-bribery legislation. Generally, the police investigate bribery crimes whereas the public prosecutor supervises and instructs the police investigation. Other units can be engaged to investigate crimes in specific situations; for example, the General Inspection of Security Forces investigates criminal activity by members of the police force. However, the steps in investigations are always similar.
The Czech Criminal Code provides for several ways in which the prosecution authorities can gather documentation/evidence. The most important and frequent are the Request for Information and the "securing" of items of importance to criminal procedure.
The Request for Information
The Request for Information is a formal request issued by the prosecuting authorities to anyone who might have documentation or information relevant to the investigation. The request must be specific enough so that the recipient of the request is able to precisely determine what the prosecuting authorities want. Any person can refuse to satisfy the request on the grounds provided for in the Criminal Procedure Act – mainly confidentiality or prohibition of self-incrimination – otherwise, refusal to satisfy this request can be punished by a fine.
The Request for Information is mainly used in the early phases of the investigation to gather information from persons not necessarily involved in the crime (eg, public authorities and banks). Sometimes, the recipient of the request is involved in the crime, but the police do not yet have enough information for a dawn raid or do not know that the person is involved.
Securing Items of Importance to a Criminal Procedure
Securing items of importance to a criminal procedure is the main tool used by the police to gather evidence, where the police seize the relevant thing into their custody for analysis. It is often connected with a search warrant or a dawn raid. There are very few exceptions where the police cannot use this tool (primarily confidentiality/legal privilege).
The police can secure items on their own if it is urgent (eg, if there is a risk of losing the evidence). Otherwise, they need a consent of the public prosecutor or the court. Nevertheless, a search warrant must always be issued by the court.
Firstly, it should be highlighted that Czech law does not contain any provision which would automatically benefit the suspect or the perpetrator upon fulfilling any conditions (eg, self-reporting).
The Czech prosecution authorities have broad discretion over enforcement and investigation, and can make a variety of decisions that significantly affect the investigation or prosecution. These can be divided into unilateral decisions and agreements.
The public prosecutor can decide to stop criminal proceedings against the perpetrator. This mainly happens because the prosecutor had decided that the crime did not happen or was not committed by the perpetrator. However, it may also be found that the act can no longer be considered as a crime. This happens when the company has released itself from criminal liability; see 3.3 Corporate Liability.
The public prosecutor can decide to reach a variety of agreements with the perpetrator. Most of these are only possible for minor offences carrying a maximum prison sentence of five years, and they require admission of guilt by the perpetrator and the payment of damages.
A plea bargain (agreement on guilt and sanctions) can be made between the perpetrator and the public prosecutor, where the perpetrator admits their guilt and agrees to sanctions. Plea bargains can be used for more serious crimes (carrying a maximum sentence of ten years) and must be authorised by a court.
The public prosecutor can decide to grant the perpetrator the status of "co-operating suspect". This requires the perpetrator to admit their full guilt and to significantly contribute to unveiling the criminal activity of an organised criminal group. The co-operating suspect can then be granted an exceptional reduction of their sanction.
Generally, the jurisdiction of the Czech prosecution authorities is limited to the territory of the Czech Republic (unlike the jurisdictional reach of the Czech Criminal Code; see 3.2 Geographical Reach of Applicable Legislation).
However, if prosecuting authorities decide to prosecute a crime with an international aspect, or to prosecute a perpetrator abroad, they can request co-operation from the relevant authority or participate in the investigation if the international treaty enables this. Co-operation between Czech prosecuting authorities and the United States or EU prosecuting authorities is frequent and more standardised nowadays.
There are many major ongoing investigations involving bribery. As many of these cases involve subsidiaries of larger or global companies, they have the potential to become landmark decisions. This is because, since companies were given the opportunity to claim the compliance defence and to release themselves from criminal liability in 2016, few relevant decisions have been made, as the concept of the "compliance management system" remains quite new for both Czech courts and Czech prosecuting authorities.
In January 2020, one of the largest cases was decided by the first-instance court involving 17 sentenced persons or companies, in which the company's compliance defence was considered in more detail. Metrostav, one of the biggest construction companies in the Czech Republic and which primarily works for the state, was banned from public tenders for three years for influencing public tenders with a value of tens of millions of US dollars. The judge rejected Metrostav's compliance defence because it was proven that, in order for the public contract to be awarded to Metrostav, the company's key employees participated in the crime and the company’s management was aware of the conduct.
This decision was also one of the few recent decisions to impose strong sanctions against a company. Until recently, the majority of corporate criminal liability cases involved small or shelf companies and carousel or tax frauds. The primary sanction for these companies was their dissolution, whereas "real" companies involved in crimes were sanctioned with fines. Indeed, according to some commentaries, imposing a three-year ban on a company with thousands of employees and 70-90% of their turnover from public tenders could be tantamount to a death penalty.
The case involving Metrostav can serve as an example of common current sanctions in major bribery cases:
Usually, the sanction for personnel in one-off cases is probation plus fines. In larger cases, especially when the prosecuting authorities seize from the public official involved property with a value several times higher than what they could have legally made, the penalty usually imposed is the forfeiture of property, which usually affects all of the perpetrator's property apart from items necessary to meet his or her basic needs.
Internationally, the enforcement of applicable legislation and international treaties is primarily monitored by the OECD, GRECO or the European Union. According to reports on corruption by the European Union, the Czech Republic is viewed as a state highly affected by corruption and nepotism.
In 2016, GRECO issued a report entitled "Corruption prevention in respect of members of parliament, judges and prosecutors". This report summarised that "... corruption and weak anti-corruption measures in the Czech Republic have been among the more serious problems of public policy, especially in connection with EU funds, public procurement and interactions between the private and public sectors." The report primarily criticised non-transparent lobbying in Parliament, insufficient legislation on conflicts of interests of members of Parliament, and insufficient legislation on the careers of judges and public prosecutors.
On 5 March 2020, GRECO issued an interim compliance report which raised public discussion, stating that the "Czech Republic has implemented satisfactorily or dealt with in a satisfactory manner one of the fourteen recommendations... Seven recommendations have been partly implemented and the remaining six recommendations have not been implemented". GRECO also urged the Czech Republic to work on the recommendations.
In 2017, the OECD issued a phase-4 report on Implementing the OECD Anti-Bribery Convention. This report describes that "Czech exports include high-risk sectors for bribery..." while "17 years after ratifying the Convention, the Czech Republic has still not prosecuted a case of foreign bribery". The report highlighted that the corporate criminal liability that was enacted not long ago and the increasing prosecution of companies were showing promising results, and that increasing international co-operation and joint investigation teams were signs of good practices. The OECD's recommendation primarily focused on the improvement of analytical sources to battle corruption and the improved detection of money laundering.
On July 2019, the OECD issued a follow-up report on the recommendation that "the Czech Republic has fully implemented 4 recommendations, partially implemented 10 recommendations, and not implemented 3 recommendations."
According to EU reports, corruption and weak anti-corruption measures have been among the more serious public policy problems in the Czech Republic for years, according to several observers; in particular, in relation to the management of EU funds, public procurement and other interactions between business and the public sector. Also, perception surveys show that corruption is widely believed to represent an obstacle to doing business. These challenges were addressed in recent years. However, attempts to put in place legislation covering conflicts of interest in the civil service have been unsuccessful so far, according to the European Commission.
Furthermore, the Czech Republic is experiencing difficulties with implementing measures aiming at corruption prevention in respect of members of Parliament, judges and prosecutors. As regards the institutional framework for dealing with corruption, a government committee is in place to co-ordinate the fight against corruption and a special unit within the Czech police (NCOZ) investigates corruption and financial crime, and deals with the increasing number of cases.
Major changes to the applicable legislation are not expected. In relation to corporate criminal liability, more stable case law and landmark decisions can be expected to develop within the next three to five years.
It is being debated in the government and Parliament that non-prosecution agreements should be implemented in law because the current regulation of Guilt and Punishment Agreements proved to be non-functional and impractical for companies. However, such implementation is not likely to be made in the coming three to five years.
This article is based on expertise and experience with bribery-related internal investigations and criminal defence of global or multinational companies.
There are three distinct parts, which should provide an understanding of the social environment and an overview of the current enforcement of anti-bribery legislation, in particular in the context of companies involved in complex bribery cases.
The Starting Point for Anti-corruption
Before presenting an overview of where anti-corruption enforcement is heading, it is of great importance to first briefly describe the origins, establish the hurdles, and mark out the road ahead.
The legacy of the communist regime
Until 1989, The Czech Republic was ruled by a communist dictatorship. The politicians boasted of abundancy and state-of-the art services, which was at odds with the reality of a lack of goods and professional labour, and public services that were either insufficient or absent. Bribery (in cash or in valuables) became widespread and even generally acceptable in society, reaching the point where it could be considered correct behaviour. Similarly, whether or not a company could succeed often depended on whether its managing director had "the right friends" in the Communist Party and was obedient.
One of the best-known proverbs from this time was "he who does not steal is stealing from his own family". Although this changed with the fall of communism, the perception of bribery and a distrust towards government and the police are a legacy that has lived within Czech society.
The establishment of democracy and a legal framework
With the fall of communism, one of the biggest challenges was to restructure State property and institutions; ie, properly establishing democratic institutions and the division of power. Legislation that had not been thought through was being over-hastily implemented to cover the legal void. This period became known as the "Wild Nineties" and lasted until approximately 2004, when the Czech Republic joined the European Union (EU).
Until 2014, enforcement efforts aimed at tackling (systemic) bribery were almost non-existent, as the political willingness to fight bribery had been a side issue, and the police had no methodology or guidelines available to it and little experience with larger investigations of complex bribery cases. In an EU report from 2014, the Czech Republic was still perceived as, among all the EU states, having one the greatest problems with widespread corruption, nepotism and patronage.
International pressure and bribery as a political priority
One of the fastest-moving aspects in anti-corruption policy has been the legislation framework (in particular, in conflicts of interests in government bodies and administration, anti-money laundering and public tenders). Not only did the Czech Republic have to converge its legislation with the EU’s (eg, the use and protection of European funds and subsidies), but the Czech Republic was also a member of the OECD and GRECO, which regularly assessed anti-corruption legislation and its implementation in practice. Parliament, and subsequently government, tried to implement as many anti-corruption recommendations into its legislation as possible and in 2006 the government started to work on a national anti-corruption action plan which would map corruption nationwide and set targeted strategies in each area.
In 2014, the Government Council for Coordination of the Fight against Corruption was established. One of the main problems facing anti-bribery enforcement was that the Czech police lacked best practices and were learning as they went. Since 2016, major corruption cases and organised crime have been investigated by the National Anti-Organised Crime Unit, a dedicated police unit with nationwide authority, and best practices for investigating bribery are steadily improving with the help of elite detectives from the United States and the European Union, who provide training and consultation. This, together with a new leadership in the Czech Supreme Public Prosecutor’s Office who declared war on corruption, pushed the anti-bribery enforcement ahead.
Current Trends in Criminal Investigations into Corruption
This section describes the usual police strategies and key tools used in investigations into complex bribery cases and the legal instruments that the police and state prosecution use in a majority of complex bribery cases. It is divided into three parts:
Ascertaining information about suspicious activity
Bribery involving organised crime is one of the most complex crimes that the police investigate, and the Czech courts require a considerable volume of evidence to be able to sentence the perpetrators. In one annual report, the police noted that its current practice makes it extremely difficult to prosecute in complex bribery cases if the investigation begins too late (police usually cannot gather enough direct evidence). The report also described the most important aspects of a successful bribery prosecution: to begin the investigation as early as possible; and to conduct surveillance with wiretaps.
In the majority of cases, police investigations are initiated by whistle-blowing reports, which enable the police to start monitoring/wiretapping the suspects early. The police can also initiate an investigation based on information they have learned during their own activity. Often, police gain indications of other criminal activity when wiretapping or monitoring suspects of a different crime.
In the case of systemic bribery, the police tend to monitor suspects for a prolonged period and are thus able to gather a considerable amount of information that can often lead to other investigations and more wiretaps being opened.
Monitoring suspicious activity
The Czech Criminal Procedure Act makes instruments available that the police can use to investigate criminal activity and gather evidence. The most important tools at this stage of criminal investigations are surveillance (as described below) and recording of electronic communication. Nowadays, electronic communication is recorded more as a subsidiary tool to surveillance because, in administrative terms, it is a more complicated instrument which needs to be approved by a judge and, additionally, more and more perpetrators are using encrypted communication (eg, Threema, Cryptocult, Telegram) as the main tool for communication.
The most important surveillance instrument is wiretaps. In surveillance, wiretaps fall under the legal category of operational and investigative instruments. Operational and investigative instruments are the main instruments used in the earliest stages of investigations and prosecution. Some of these instruments can be used by the police at any time (eg, simple surveillance), while others need to be approved by the public prosecutor (eg, wiretaps) or even a judge (eg, home wiretaps).
Wiretaps are various technical solutions that can secretly record audio or video almost anywhere – rooms, cars, restaurant, offices or public transport. Because investigations into complex bribery can last for years, it is common for the police to monitor or wiretap several suspects for a year or two, gathering a considerable amount of evidence for the case investigated and often also for other crimes, as the perpetrators usually form an organised criminal group with various forms of ongoing criminal activity.
Admissibility as evidence
However, the most significant issue concerning these instruments is their admissibility as evidence in court proceedings. Any evidence which is not gathered by the police by a means compliant with the Criminal Procedure Act will be declared inadmissible by the court. Wiretaps are currently the most controversial instrument because, on the one hand, police and public prosecutors rely on them and use them on a massive scale and, on the other, courts and academics consider them to be poorly regulated (with some even stating that they go against the principles of criminal law).
The main issue is that operational and investigative instruments comprise different tools which interfere with the rights of the surveilled persons to various degrees. The most invasive tools (wiretaps are considered to be moderately/highly invasive) should be used only when other tools would not be sufficient, and their use must be justified in reasonable detail with reference to at least some evidence of a specific crime. Sometimes, however, police use them as "fishing expeditions", where all of the above requirements are lacking (eg, in one recorded conversation, the police might hear mention of another person who is allegedly helping the perpetrators, and also wiretap this person). Evidence from these wiretaps is then declared inadmissible in all of the criminal proceedings in which they are used as evidence.
Securing evidence - document requests and dawn raids
Apart from monitoring, the police gather a vast amount of electronic or paper documentation during an investigation. This is analysed and forms an important part of the evidence. In complex bribery investigations, the police have thousands of pages of relevant documentation gathered, which is used as evidence.
There are several legal instruments which the police use to gather documents. These can be grouped into requests and seizures. Usually, the police "strike" simultaneously against all of the suspects on whom they have gathered enough evidence during surveillance, and attempt to seize all relevant documents at the same time. However, the police often conduct several other dawn raids over several months or even years following the initial raid, because the initial raid is more focused on individuals, and because new information usually emerges after the primary suspects are arrested and interrogated. It is therefore common for additional dawn raids to focus more on companies, either because the police are planning to charge them or because the police are searching for additional evidence.
Requests to provide documents
All persons, with few exceptions, must co-operate with the police and respond to their requests. The police may request documents either through a request for information or through a request to submit documents. Requests for information are a less formal regime and are not usually used against persons who might be subject to criminal investigation (the police usually request information from various subjects that are not necessarily involved in the crime but could give evidence; typically banks are asked to provide lists of transactions).
Requests to submit documents are typically more specific in setting out the documentation requested, and they indicate that the police generally have a good understanding of the role of the person to whom the request is made in the matter investigated.
If the police do not have sufficient evidence that could justify a dawn raid, then, instead of raiding a company, they will ask the company to submit documents. This is useful in enabling the company to know about the police investigation. Requests to submit documents offer a strong indication of an imminent dawn raid, which is usually conducted once the police have processed the documents received and decided that a dawn raid is necessary to secure all available evidence (this can take weeks or months).
Document seizures – dawn raids
When the police conclude that elements important for the criminal procedure might be located somewhere on the premises of a company (regardless of whether or not the company is a suspect), the police can conduct a dawn raid. Usually, the police monitor the relevant premises before the dawn raid, to see how the company operates. A search warrant for a dawn raid must be approved by a judge and must be reasonably justified. The police must specifically define the premises that will be searched and the things that the police want to find. The police cannot search premises that are not included in the search warrant and mistakes in specifically defining the premises are common. However, the police can (with few exceptions) seize any items that are located in the premises provided there is a valid explanation as to why these items are relevant for the criminal investigation.
In practice, the police tend to examine and gather as much evidence as possible, even if this could lead them to overstep the scope of the search warrant. Therefore, each company that perceives a risk of a dawn raid should always have an expert attorney on call for emergency situations, to be present during the dawn raid. If the company asks for an attorney to be present at a raid, the police are required to wait a reasonable time for the attorney of the company to arrive (they will usually wait two to four hours, depending on the urgency and police patience).
Another important thing is for employees to be properly trained for dawn raids and to know exactly what to do and how to behave. This is crucial because untrained employees are often either too fearful of the police or overly polite with them, in both situations co-operating too extensively and voluntarily handing over evidence against the company even if this evidence would not otherwise be attainable by the police. Naturally, the police can accept and use all evidence that is voluntarily handed over by employees. Nowadays, this is particularly important because more and more companies are using online clouds or virtual workspaces for employees, who, via their computer, can access not only most of the local company's electronic files, but also files shared intra-group, which would mostly be out of the scope of a regular search warrant. Indeed, it is not uncommon for untrained employees to offer to download all the files which the police want, and even to give them to the police on a company flash-drive.
Corporate Criminal Liability – Compliance Defence
Corporate criminal liability was introduced into Czech law in 2012. Its implementation was primarily driven by international obligation deadlines. Therefore, the act was enacted somewhat hastily and lacked thoroughness and interconnection with other legal codes, resulting in dozens of amendments within a month of it taking effect.
The act introduced the strict criminal liability of companies, which was nevertheless independent from and concurrent with that of the perpetrator. This means that corporate criminal liability depended solely on the actions and intention of the perpetrator. This was criticised as being too harsh and the act was subsequently amended in 2016, adding the possibility for companies to release themselves from criminal liability – so-called compliance defence.
The modification consisted of one sentence in Section 8 subsection 5 of the Act on Criminal Liability of Legal Persons and Proceedings Against Them: "A legal person can release itself from liability if it shows that it made every reasonable effort that could be justifiably required of it to stop the crime from being committed" (note that the term "compliance management system" here refers to criminal compliance as introduced in this section). Since then, numerous legal articles have been written, which mainly criticise the vague wording and unclear meaning.
In 2016, the Czech Supreme Public Prosecutor’s Office introduced a "methodology" (Application of Section 8 subsection 5 of the Act on Criminal Liability of Legal Persons and Proceedings Against Them), which explains, among other things, how companies’ compliance management systems should be evaluated in criminal prosecutions. Although the methodology is an internal document intended to be used as a guide by public prosecutors and is non-binding, it is used by both public prosecutors and the courts (as there are no other guidelines in this respect). It refers to standard international guidelines such as the US/UK Anti-Bribery Guidelines, ISO37001 and ISO19600. In 2018, it was substantially amended and a new version was published in November 2020 (mainly featuring structural and technical amendments).
How should the compliance management system be set up?
Generally, each company should create, apply and enforce practical measures aimed at preventing (or at least minimising) risks ensuing from the company's commercial activities which cause, facilitate or support the commission of crimes that may be attributed to the company. The methodology considers proper risk analysis to be a key element of any functioning compliance management system. It should reflect the size of the company, the regulatory requirements, the international nature, the scope of business and the risk profile of the entity concerned and the industry in which it operates, as well as all other risks relevant to the company. The company should be able to explain to enforcement authorities the methods used to identify the risks prior to putting measures in place, as well as how the measures mitigate these risks.
Importantly, the compliance management system should not merely be established, but should be continually improved. In this respect, the methodology highlights the "three pillar" system of measurement: Preventative > Detective > Reactive. This means that the company should not only set up preventative measures aimed at minimising any of the misconduct identified in the risk analyses, but also measures designed to detect such misconduct if breaches take place (a whistle-blowing policy, four-eyes principles, audits).
Lastly, reactive measures should be in place which not only consist of disciplinary actions for breaches but are also able to subsequently improve the preventative measures that were originally breached. The measures should target both internal (employees) and external (suppliers, business partners) risks.
The clear prerequisite for achieving an effective compliance management system is the "conduct from the top", which involves true and clearly stated support being provided by management, with zero tolerance for any breach of this culture.
How should prosecution authorities evaluate the key elements of a compliance management system?
The methodology provides benchmark criteria which prosecution authorities should use to evaluate a company's compliance defence (these are questions which the enforcement authorities try to answer during the prosecution).
Was a risk analysis conducted? Did the measures target specific risks/issues revealed by the risk analysis? Were the measures capable of mitigating the risks?
What measures could be justifiably required of the company?
Measures that would be required of a global company could not justifiably be required from a small local company.
The measures must be evaluated from the perspective of the relevant time, and whether and how the company could have detected the infringement. How did the company react to similar detected infringements? Did the company conduct an internal investigation or audit in response to any breaches identified? How did the company learn from it?
Who committed the crime and what was their role in the company?
The higher in the hierarchy, the harder it is for the company to claim a compliance defence. This is especially difficult for crimes committed by members of executive bodies. This is a problematic aspect for global companies that have a small subsidiary in the Czech Republic with one registered managing director (even though, internally, the role of that managing director is often very limited).
Could the measures achieve their purpose or were they only down on paper?
Were they suitable for the company? Also the principle of proportionality is taken into account: organisation's size, the regulatory environment, the international nature of the company, the nature of its commercial activities, and other risks that the company may be exposed to.
How were the measures monitored by its statutory bodies or other persons in leading positions? Beyond its mere creation, was the compliance management system actually implemented, accepted by employees, monitored, enforced, evaluated and updated? Are the employees able to answer questions about specific measures (eg, "what would you do if...")
Prosecution of companies and the compliance defence in practice
Although corporate criminal liability is still quite a recent concept for the prosecuting authorities, the number of prosecuted companies is increasing – from 85 sentenced in 2013 to 439 in 2019, which is one of the speediest increases compared with all European countries that have adopted corporate criminal liability, suggesting that the police and state prosecution really focuses on prosecution of companies. However, the data itself shows that the police struggled (and are possibly still struggling) to prosecute complex bribery crimes. The vast majority of the companies sentenced had committed tax-related crimes.
Investigating tax-related crimes is easier, as the tax authorities in the Czech Republic tend to report companies that have improperly performed their tax obligations. However, changes have been noticed, particularly in areas involving public funds, suggesting a closer focus on public tenders, subsidies or state-owned companies.
In the not too distant past, prosecuting authorities lacked experience and struggled with investigations into and prosecutions of larger, or even international, companies, because they did not understand them, how they operated, how internal multilevel management worked or what the compliance officer did. This problem was more apparent among local police departments, which in some cases had never investigated any companies previously. These problems were mitigated by moving more complex investigations to a specialised unit, but were not solved entirely. Therefore, the company should not expect the prosecuting authorities to fully understand how the company works and should be active.
In short, the focus of prosecuting authorities on complex bribery cases is steadily increasing, not only in terms of the number of cases, but also in terms of the professionalism with which companies are being investigated and prosecuted. Yet, police are still primarily focusing on individuals, and companies are usually side-tracked because the prosecuting authorities must first prove that a crime was committed (which is much easier done by prosecuting individuals) and, if proven, assessing whether the offence can be attributed to the company is straightforward. It is much harder to understand the robust compliance management systems of large international companies and to document how they evolved over time and how they operated at the time of the crime. But this is the only way that a compliance management system can be assessed.
The social environment in the Czech Republic still suffers from the communist legacy and deep-seated perceptions that bribery is acceptable. However, this legacy is increasingly spirited away due to the new social and legal environment. This, together with the last decade's successful endeavours to more systematically tackle bribery, is helping to accelerate the development of anti-bribery enforcement in the Czech Republic, which is catching up with other OECD countries swiftly, although much progress must still be made compared to US enforcement of the FCPA.
Prosecution of companies still lacks professionalism and predictability, and there is still not enough case law to provide a relevant overview of courts' approach towards compliance defence of larger and international companies. However, one clear trend is emerging in the courts, which are assessing compliance defence in a similar way as that described in the methodology of the Czech Supreme Public Prosecutor’s Office. The courts want to see evidence that the compliance management systems have been truly implemented, enforced and regularly improved.