Anti-Corruption 2021 Comparisons

Last Updated December 08, 2020

Contributed By Wolf Theiss

Law and Practice

Authors



Wolf Theiss is one of the leading European law firms in Central, Eastern and South-Eastern Europe with a focus on international business law. With 340 lawyers in 13 countries, over 80% of the firm's work involves cross-border representation of international clients. Combining expertise in law and business, Wolf Theiss develops innovative solutions that integrate legal, financial and business know-how. The firm advises clients in relation to allegations of fraud, bribery and corruption, breach of financial or trade sanctions, insider trading, money laundering and other matters, and can structure a corporate investigation in such a way that legal privilege is preserved and no reporting duty triggered. The firm is familiar with the use of e-discovery technology, and helps with crisis communication and on the best approach to enforcement authorities. The team also assists with the implementation of an effective compliance management system.

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 United Nations Convention against Corruption, adopted on 31 October 2003 by the UN General Assembly by resolution 58/4;
  • the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions of 17 December 1997;
  • the Criminal Law Convention on Corruption of 27 January 1999, which introduced GRECO (established to monitor states' compliance with its anti-corruption treaties; the Czech Republic became a member in 2002); and
  • the Civil Law Convention on Corruption of 4 November 1999.

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:

  • the Criminal Code lays down the conditions for criminal liability arising and all punishable crimes including any potential derivative crimes (participating in bribery, provisions on anti-money laundering or reporting duties); and
  • the Corporate Criminal Liability Act sets out the conditions under which crimes committed by persons are attributable to companies, and the condition under which a company can release itself from criminal liability.

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).

Commercial activity

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.

Establishing Bribery

The law sets out three main crimes:

  • giving a bribe;
  • accepting a bribe; and
  • requesting a bribe.

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:

  • within international bodies and organisations;
  • in a foreign executive/judicial or legislative body; and
  • in a company controlled by the Czech Republic or a foreign state.

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).

  • An organiser is a person initiating the commission of a crime, formulating and drawing up a plan for it to be committed, finding persons to participate in it, ensuring they are mutually contactable and dividing tasks among them, securing the secrecy of both the criminal activity and the persons involved. This person usually faces more severe sanctions than the perpetrators.
  • An instigator is a person who persuades the perpetrator to commit the crime. The law does not set out any specific forms by which a crime must be instigated. It can be committed by an order, instruction, persuasion or by hiring the perpetrator.
  • An aider provides various forms of psychological or physical assistance. In particular, the aider participates in the crime by providing the tools or means for the crime, removing barriers, standing guard while a crime is being committed, or giving advice. Psychological assistance is given by encouraging the offender or promising the offender to help him or her after the crime is committed, to legalise the proceeds of the crime, and so on.

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.

Favouritism

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.

  • First, it needs to be assessed what is the relevant set of company documents. These are all documents that a company is required to keep by law and which serve to provide a credible overview of the state of the company. Most often, these are accounting books, balance sheets, annual reports, stock-taking reports and audit reports, but also including supporting documentation (eg, for bookkeeping).
  • Second, the crime must result from intentional conduct, whereas the perpetrator intentionally:
    1. does not keep the documents at all;
    2. records untrue or grossly inaccurate information; or
    3. destroys, modifies or hides the documents.
  • Third, the above conduct must jeopardise proper tax collection or another person's property rights (eg, the company's creditors).

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:

  • exercise their authority against the law;
  • overstep his or her authority; or
  • fail to perform their duties as per the level of their authority.

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.

Personal Jurisdiction

Crimes committed by Czech citizens and persons with permanent residency in the Czech Republic always fall under the jurisdiction of the Czech Criminal Code.

Territorial Jurisdiction

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:

  • whenever the perpetrator acts, at least partly, in the territory of the Czech Republic:
    1. whenever they are physically present in the territory; or
    2. whenever part of the act takes place in the territory (eg, a foreign citizen outside of Czech Republic uses a phone call/the internet to bribe someone physically present on the Czech territory); and/or
  • whenever the effect of the crime is intended to take place, at least partly, in Czech territory (eg, in the case of indirect bribery, if a foreign citizen outside of the Czech Republic bribes another foreign citizen outside of the Czech Republic to influence a Czech public official.

Special Jurisdictions

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:

  • a member of its executive bodies or another person in a position of leadership who is entitled to act on behalf of the company;
  • a member of its supervisory bodies or another person who can exercise managing or controlling authority over the company; or
  • a person with decisive influence over the company.

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:

  • the size of the company and internal environment;
  • the company's commercial activities;
  • the markets in which the company operates; and
  • the risks which the company is exposed to.

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:

  • be preventative (being able to dissuade and impede misconduct);
  • be able to detect any such misconduct; and
  • react to the misconduct (disciplinary reactions, legal actions or learning from the misconduct and improve the compliance management system.

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:

  • a prison sentence (0 - 20 years);
  • a fine (USD100 – 1.5 million);
  • probation (less serious crimes);
  • forfeiture of property (more serious crimes); and/or
  • a ban on activity (eg, a three-year ban on serving as managing director of a company).

Common sanctions for companies:

  • a fine (USD800 – 65 million);
  • publication of the judgment;
  • a ban on activity;
  • a ban on public tenders or receiving public subsidies; and/or
  • the dissolution of the company (if its activities wholly or mainly consisted in criminal activities).

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.

Unilateral Decision

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.

Agreements

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.

Co-operating Suspect

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:

  • Metrostav – three-year ban from public tenders, publication of the judgment and a USD500,000 fine;
  • involved "real" companies – bans from public tenders for two to five years, publication of the judgments and USD100,000 fines;
  • companies' set-up for involvement in the crime – dissolution;
  • involved managers of the companies or their key personnel – five-year prison sentences, or three years’ probation, plus fines of USD100,000; and
  • involved public officials – eight-year prison sentences and USD1 million fines.

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.

GRECO

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.

OECD

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."

European Union

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.

Wolf Theiss

Pobřežní 394/12
186 00 Prague 8
Karlín
Czech Republic

+420 234 765 111

+420 234 765 110

praha@wolftheiss.com www.wolftheiss.com
Author Business Card

Law and Practice in Czech Republic

Authors



Wolf Theiss is one of the leading European law firms in Central, Eastern and South-Eastern Europe with a focus on international business law. With 340 lawyers in 13 countries, over 80% of the firm's work involves cross-border representation of international clients. Combining expertise in law and business, Wolf Theiss develops innovative solutions that integrate legal, financial and business know-how. The firm advises clients in relation to allegations of fraud, bribery and corruption, breach of financial or trade sanctions, insider trading, money laundering and other matters, and can structure a corporate investigation in such a way that legal privilege is preserved and no reporting duty triggered. The firm is familiar with the use of e-discovery technology, and helps with crisis communication and on the best approach to enforcement authorities. The team also assists with the implementation of an effective compliance management system.