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New Contract Register Act

Czech Republic: Will mandatory disclosure of contracts, invoices, and orders improve management of public funds?

On 1 July 2016, the Contract Register Act will come into force. This has been designed to allow a broader circle of persons and institutions to participate – if only informally – in public oversight over whether public funds are managed and spent responsibly and transparently, by stipulating mandatory public disclosure of written contracts, invoices, and orders to which certain obligated entities are a party.

Under the new law, the state, regional and local governments, semi-budgetary organizations, and certain other organizations and legal entities in which the state (or a regional or local authority) directly or indirectly holds an equity participation as a majority stakeholder, must publish all private-law contracts and agreements on the provision of subsidies or of repayable financial aid to which they are a party. This must be done within the statutory deadline and in a central internet register administered by the ministry of the interior.

The Contract Register Act also anticipates that, after one year from its coming into force, a rule will take effect under which any contracts that should have been made public in the contract register but were not become invalid.

That said, the new law provides some exemptions from the disclosure obligation. For instance, contracts whose performance value does not exceed CZK 50 000 (net of VAT) are exempt from publication.

A similar duty to disclose contracts in a central register has been in place since 2011 in the neighbouring country of Slovakia. Available data suggest that the number of tender procedures with a single bidder has dropped by half since this legal requirement came into force, and that the public coffers have benefited from substantial savings. Only time will tell what effects the Contract Register Act will have in the Czech Republic.

Source: Act No. 340/2015 Coll., on special prerequisites for the effectiveness of certain contracts, the public disclosure of those contracts, and the contract register (Contract Register Act)