NewsReconstruction of the State: The lower house of Parliament made the first step to avert the threat of blanket opt-outs from the Contract Register Act

The lower house of Parliament made the first step to avert the threat of blanket opt-outs from the Contract Register Act for all municipal and state-owned companies (emerging due to the previous voting in that House). A compromise wording of legal amendment was passed. But blanket opt-outs are still a threat. MPs interrupted the debate and will see what the Senate can do about the compromise draft amendment.

Opt-outs for subjects Blanket opt-out for state and municipal companies Revealed by all (specific contracts exempted)
Clear legal definitions Undefined legal expressions Clearly defined (under applicable law)

The Compromise Amendment was drawn up by a group of MPs, who worked on it while there was not enough support in the Lower House either for the original draft text in the form the House had passed (including a blanket opt-out from publication, which would have concealed contracts amounting to CZK 150bn p.a.) or the version returned by the Senate (no blanket opt-outs but with provision of furnishing the legislation with the power to publish contracts discussed by the House, Senate, the President’s Office etc.). Government passed the amendment and recommended that it be discussed in an accelerated mode (in the first House reading). This was endorsed today by 128 votes of the 145 MPs present. The amendment was backed by MPs from all parliamentary parties but for TOP 09 (whose MPs voted against as the party rejects opt-outs). The Senate should discuss the amendment in        July.

Rekonstrukce státu spokesman Václav Zeman said about the compromise amendment passed: “Generally we don’t support any opt-outs from the Contract Register Act unless their urgency is clearly substantiated. Although we do have doubts about some aspects of this particular amendment, we nevertheless deem it as an acceptable compromise. Unlike the previous amendment, passed by MPs, this one does not exempt from the publication duty all contracts entered into by state and municipal companies, which we would otherwise consider a rape of the Contract Register Act.”

We are talking about the MPs’ first step to amend the situation that arose from the first reading vote, during which some MP’s from the ČSSD and KDU-ČSL supported a motion to exempt all state and municipal firms (CZK 150mn p.a. worth of contracts would have slipped from the register). Due to considerable pressure from the general public, NGOs and media, for which we thank all those concerned, Senators were ultimately forced to amend the text and forward it back to the House. Despite the lack of sufficient support from the House, several MPs had tabled a compromise motion that won broader support. Our thanks therefore must go to the heads of most MP clubs, as they ultimately agreed a joint solution, and namely MP R. Vondráček (ANO), who helped to coordinate the consensus. In spite of certain obviously unnecessary interventions, the law remains virtually intact and its purpose of rendering the management of public assets more transparent will not lose its content.

For the sake of illustration, the following is a summary of new opt-outs added by the above-said amendment to the Contract Register Act with a brief statement of our Platform’s position:

1) Opt-out for state-owned companies (state and municipal enterprises) that do not place public orders (as per Public Procurement Act) and “State Certifiers”

Not complete entities, but only some of their contracts (!) are exempted. Opt-out applies only to contracts entered into within normal business conduct in accordance to their object of business or enterprise (normally requiring knowhow protection).

The Contract Register will thus not be rid of these firms’ contract on promotion, equipment purchases, deeds of donation and other services.

Many judicial statements have been served in this field, including ones on Lesy ČR, Transport Companies and Česká Pošta, which are deemed public principals, but Budvar and Thermal are not; the cases of several firms that had not consider themselves to be public principals should possibly be considered and ruled on by courts in case of litigation proceedings.

In this reading, an opt-out might be considered an acceptable compromise.

2) Opt-out from certain contracts entered into with the Administration of State Material Reserves This affects contracts on the provision and management of material reserves of the State. Very many contracts need not have been published due to an opt-out on the protection of information that might affect the security of the State.

No impact on contracts ensuring the normal operation of the entity (e.g. management car fleet).
The Administration of State Reserves contracts not exceeding the confines of a smaller-scale contract shall continue to be made public in accordance with the Public Procurement Act. The contract sanctions in this case are not as severe as in case of the Contract Register, being only surveyed by the UOHS, without prejudice to the law, which might be implied by the said opt-out.

According to the rationale of the interpretation, but it is not clear if this opt-out is all that central to Czech national security.

3) Opt-out extended to ČT and ČRo adhesion contracts

This opt-out is enjoyed by many entities entering into adhesion contracts.

Extension to ČT and ČRo might be considered substantiated.

4) Opt-outs on ČT and ČRo programme use or production

This has no prejudice to the contracts under which ČT or ČRo sell their airtime for business communications, lend/lease contracts and property management, contracts on communicating media outputs, trademark licensing, and any and all contracts subject to tender procedures in accordance with the Public Procurement Act.

We think the opt-out is needlessly broad while most contracts might be concealed in fact.

5) Opt-out on selected contracts of public higher education and research institutions

Only applies to supplementary higher-education activities or other public research activities, amounting to only a small percentage of the overall volume.

Proposal rationale is subject to debate, but this is not a serious opt-out.

6) Opt-out on the handling of explosives

Affects contracts on the handling of explosives or facilities or sites designed for their production or storage

State company Explosia a.s. will avoid the need to publish most of its contracts.

This particular opt-out is not deemed essential.

7) Opt-out on banking secret protection

This opt-out exempts from the list of contracts that must be included in the Contract Register those protected by the Banking Secret, except for those between the bank and a “DAOV” entity.
We deem this opt-out essential, but it is a minimal incursion on the law.

8) Opt-out on collective agreements
We deem this opt-out essential, but it is a minimal incursion on the law.

9) Special treatment of contracts on medicines and healthcare aids

An extension of the special regime whereupon a contract takes effect even without publication to cover contracts on medicines and healthcare aids.

Even such contracts must be published within three months, otherwise they are deemed voided from inception.

We deem this fully acceptable.

10) Special publication of contracts made in dire need

An extension of the special regime whereupon a contract takes effect in dire need.

Even such contracts must be published within three months, otherwise they are deemed voided from inception.

We deem this fully acceptable.