WT/TPR/S/89 Trade Policy Review
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IV. OTHER POLICIES AFFECTING TRADE IN GOODS
(1) EXPORT  MEASURES AT THE BORDER
(i) Export licensing and control
Export prohibitions
1. The Czech Republic maintains export prohibitions in the context of U.N. Security Council
Resolutions (Chapter III(3)(i)).  No other export prohibition measures are currently in force.
Export licensing
2. As a result of the enactment of Act No. 62/2000, Coll. (on Some Measures in the Export or
Import of Products and on the Licensing Procedures), some items were removed from the list of
automatic licensing.  These items are electric energy, certain common metals, iron, steel products and
waste.
3. Licences are required for products on the negative lists (as given in Government
Regulation No. 185/2000 Coll., as  amended).  Automatic licensing requirements exist for exports of
goods such as raw materials and products, raw le athers, wood and wooden products, precious metals,
common metals, poisons, auxiliary chemical substances and precursors, and pharmaceutical products.
Licences also apply, for monitoring purposes, to certain common metals, iron and steel productsexported to the EU and the United States.  Non-au tomatic export licensing requirements (with volume
limits) apply to live animals and other animal products, and certain plant products.  These licences are
in place to address shortages on the domestic market. Within the framework of the WTO Agreement
on Textiles and Clothing, non-automatic export licences also apply to some textiles and clothing
products exported to the United States and Canada.  Furthermore, non-automatic licences (without
volume limits) are required for the exportation of propellant powders, prepared explosives, safety
fuses, detonating fuses, percussion, other telescopic sights, revolvers and pistols, other firearms, arms,parts and accessories.  These latter restrictions are motivated by security reasons.  The procedures for
granting non-automatic export licences are the same as those applied for non-automatic import
licensing (Chapter III(3)(ii)).
4. Other export restrictions reflect the Czech Republic's international commitments.
Act No. 21/1997 (on the Control of Export a nd Import of Goods and Technological Products
Subjected to International Control) stipulates the terms for exports of items such as nuclear, chemical,
and biological weapons, and toxic substances.
Voluntary restraints, surveillance, and similar measures
5. According to the authorities, the Czech Repub lic does not participate in any arrangements
designed to limit or control exports to third countries at the request of foreign governments.  Theauthorities are not aware of any such arrangements between private Czech firms and foreign
countries.
(ii) Duties and taxes, and minimum export prices
6. During the period under review, the Czech Republic has not imposed any duties, taxes or
other charges on exported goods; nor has it maintained any official minimum or reference exportprices.Czech Republic WT/TPR/S/89
Page 45
(2) EXPORT ASSISTANCE
7. The Czech Republic has enacted a new export policy during the period under review.1  The
policy, which was enacted in 1999, is aimed at enhancing the competitiveness of Czech products.  It
also entails a more pro-active stance with the aim of removing tariffs and non-tariff barriers affecting
Czech exports.  According to the authorities, the objective was primarily to create export conditions
for Czech exporters similar to those enjoyed by their foreign competitors.  So far, the policy has not
affected the State's outlays for exporters.
Agricultural export subsidies
8. As in 1996, explicit export subsidies remain limited to some agricultural products.  The
annual amount of export subsidies was just abov e US$40 million, or less than 0.1% of GDP, during
the period 1995-98, dropping to US$25 million in 2000.  In 2000, export subsides were extended tomilk powder, butter, cheeses, other dairy products, potato starch, pork, and malt.
2  The outlays are
below the Czech Republic's export subsidy commitments made under the WTO Agreement on
Agriculture.
Export finance, insurance and guarantees
9. During the period under review, Act. No. 58/1995 on Insuring and Financing Export with
State Support has been amended and Governme nt Decision No. 747 of 18 November 1998 has been
adopted in an effort to harmonize the existing rules and regulations on export assistance to those of
the EU.  As a result, the rules related to the Arrangement on Guidelines for Officially Supported
Export Credits (OECD-Consensus) were implemented in 1999.  Opportunities have been created to
provide several new services, including the provisi on of insurance of export-contract-related bonds,
insurance of credits to finance production for export, and the insurance and financing of Czech
investments abroad.3  The amendment also enabled the provision of active reinsurance in relation to
partner export credit agencies.4  The requirements for receiving State-supported insurance or
financing was liberalized as the minimum level of domestic supplies in total export value of 60% was
deleted from Act No. 58/1995.
10. Export credit insurance is provided by the Export Guarantee and Insurance Corporation
(EGAP).  The EGAP insures export credits against political risk and against a combination of politicaland non-marketable commercial risk.  In this area, EGAP provides 11 basic types of insurance based
on the risk classification of the country and length of the credit (Table AIV.1).
5  All Czech-based
enterprises are eligible, regardless of ownership.  Th e insurance is realized with major state support in
the form of a state guarantee for EGAP's obligati ons arising from insurance of those risks.  During
1992-99, an amount of CZK 4.3 billion was paid to the EGAP in the form of state budgetappropriations to support the insurance reserve funds.
6  According to the authorities, the long-term
objective of the insurance scheme is to secure its overall financial balance.  A second area of EGAP's
activities is insurance against short-term marketable  risks, commercial risks, and short-term political
risks in selected countries.  This insurance is offered on a commercial basis with reinsurance arranged
with major international reinsurance companies and,  thus, exempt from any state support.  The share
                                                     
1 Government of the Czech Republic (2000a).
2 WTO document G/AG/N/CZE/31, 25 June 2001.
3 Government of the Czech Republic (2000a).
4 EGAP (2000).
5 EGAP (2000).
6 EGAP (2000).WT/TPR/S/89 Trade Policy Review
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of all credits insured against commercial and political risks by the EGAP as a portion of total Czech
merchandise exports grew from 2.2% in 1996 to 6.3% in 2000.
11. Officially supported financing – conditional on export credit risk insurance provided by
EGAP – is carried out by the Czech Export Bank ( ČEB), which provides credits on terms more
favourable than market conditions.  In case of suppliers' credits above two years, an exporter can
receive compensation for up to 50% of the interest rate differential resulting from interest expensesand interest income in relation to a particular export transaction.
7  Short-term (below two years)
financing, introduced in 1999, is on a purely commercial basis.  The Government pays to ČEB only
the difference between its costs of funds and the actual interest rates applied when providing officially
supported export credits.
12. In addition to export loans, the ČEB provides related non-payment export guarantees (bonds).
Usually, guarantees are granted only for a certain portion of the export contract (mostly for 5-10%,
based on the type of guarantee).
Export promotion and marketing assistance
13. The Czech Trade Promotion Agency (CzechTrade), a government agency established in 1997,
promotes and assists in the development of mutual  trade and industrial cooperation between the Czech
Republic and other countries.  At the time of its establishment, CzechTrade assumed its predecessor's
(Infocentrum) responsibilities.  Its activities incl ude support to Czech enterprises operating abroad,
through its 16 foreign offices, as well as the provision of export information, export consulting
services, and export education to companies operating in the Czech Republic.  For small and medium-
sized enterprises, CzechTrade contributes to foreign-trade-related marketing costs in a number of
areas.  Other activities include the provision of information and consulting services on the EU;  and
development, promotion, and distribution of sectoral directories.  In 2001, the total budgeted amountfor export promotion and marketing assistance was CZK 230 million.
Customs-free zones
14. Czech law (the Customs Act) provides for the establishment of customs-free zones and
customs-free warehouses into which goods may be imported and later exported without payment of
customs duties and other taxes. According to the authorities, there are currently nine customs-freezones.
(3) S
TATE AID
15. The cost of the Czech Republic's state aid system has continued to be substantial during the
period under review.  The direct cost of the sy stem has been hovering around 2% of GDP, except in
1998 when producer subsidies as well as loan guarantees peaked (Table IV.1).   In addition to the
direct cost, there are substantial indirect costs as a result of forgone revenues (associated with, for
example, duty and tax exemptions).  However, except for the investment incentive package, no
estimates are available on the indirect costs.  For the investment incentive package, the estimated
                                                     
7 The settlement of the interest rate differential is carried out by the Ministry of Finance through the
ČEB.  The last payment for this purpose was made in 2000 for losses arising from an interest rate differential
incurred in 1998.Czech Republic WT/TPR/S/89
Page 47
amount of forgone revenue in 2000 was about 1% of GDP.  The already large number of programmes
providing for state aid has increased.8
Table IV.1
Classification of subsidies from the State Budget, 1994-2000
1994 1995 1996 1997 1998 1999 2000
Total subsidies (CZK billion) 27.5 28.6 27.3 34.3 49.1 33.9 38.3
Producer 27.5 28.6 27.3 34.3 43.9 30.7 35.3
Agriculture and foodstuffs 5.1 6.2 6.9 7.2 10.3 8.9 13.7
Forestry and water 0.3 0.4 0.5 0.3 0.7 0.9 0.7
Mining 4.8 4.8 5.1 4.3 4.4 3.8 3.9
Residential heating 6.6 7.3 7.0 5.2 0.1 0.0 0.0
Transportation 7.2 6.7 5.4 5.5 5.9 6.2 6.9
Railways 5.8 5.2 5.2 5.3 5.8 6.1 6.8
Export promotion 1.0 0.9 0.9 0.9 1.3 0.1 0.9
Called loan guarantees 0.5 0.8 0.1 1.6 6.7 1.0 1.9
Small business development 1.2 1.5 1.2 0.9 0.8 1.3 1.9
Other non-investment 0.8 0.5 0.7 13.6 20.6 11.7 8.9
Total subsidies/GDP (per cent) 3.5 2.1 1.7 2.1 2.7 1.8 2.0
Source : IMF (2000), IMF Staff Country Report No. 00/119 ;  and information provided by the Czech Government.
16. A positive development during the period under review is the establishment of an independent
system for monitoring state aid.  The state aid monitoring role (except with respect to agriculture andfishery) has been transferred from the Ministry of Finance to the Office for the Protection of
Economic Competition (Act No. 59/2000 Coll. on State Aid).  The Office has been given additional
power regarding assessment and withdrawal of state aid.
9  In this regard, it has published guidance
notes, setting out the criteria applicable for state aid notifications in certain areas.  Preparations for a
state aid inventory have also been carried out.10  Another development during the period under review
is the enactment of a law laying down the conditions for support to regional development
(Act No. 248/2000 Coll. on Support to Regional  Development).  Under the law, which became
effective on 1 January 2001, all regional support will be provided under an umbrella programme – the
State Regional Development Programme – providing subsidies, credits on advantageous conditions,
and returnable financial assistance.
Assistance to agriculture
17. Agriculture is a large beneficiary of state aid.  Some CZK 13.7 billion was allocated in 2000
from the State Budget for producer support to agriculture and food producers (Table IV.1).  A more
complete picture of the degree of support is provided in Table IV.2.  The most recent OECD estimates
on transfers to the agriculture sector in the Czech Republic indicate a declining trend since 1998.Total transfers associated with agricultural po licies exceeded CZK 25 billi on, or the equivalent of
1.3% of GDP, in 2000.  The Producer Support Estimate (PSE), which captures the value of transfers
to agriculture resulting from agricultural policies in a given year, stood at CZK 21.5 billion in 2000.
The implicit tax on consumers as measured by th e Consumer Support Estimat e (CSE), capturing the
value of money transfers to consumers resulting from agricultural policies in a given year, was around
                                                     
8 There are around twelve different programmes, and within each group there are up to13 different
types of incentives.
9 Prohibited state aid, subject to certain exemptions, is aid provided in a manner that distorts, or may
distort, economic competition by placing a certain busines s or industrial sector at an advantage (OECD, 2001).
10 European Commission (2000).WT/TPR/S/89 Trade Policy Review
Page 48
CZK 11 billion.11  Assistance to agriculture is provided mainly through market price support and
payments based on input.12
Table IV.2
Transfers associated with agricultural policies, 1996-2000
1996 1997 1998 1999 2000a
PSE CZK billion 22.3 5.7 27.0 25.1 21.5
(US$ billion) 0.8 0.2 0.8 0.7 0.6
CSEbCZK billion -11.5 -1.9 -15.8 -15.3 -11.1
(US$ billion) -0.4 -0.1 -0.5 -0.4 -0.3
Total transferscCZK billion 25.7 9.2 30.5 28.7 25.3
(US$ billion) 0.9 0.3 0.9 0.8 0.7
Memo:  Total transfers/GDP (%) 1.6 0.5 1.7 1.6 1.3
a Provisional.
b The CSE, when negative, measures the implicit tax imposed on consumers by agricultural policy.
c Total transfers are not the sum of PSE and CSE; they cover the total value of production and include not only transfers to
agriculture, as measured by PSE and CSE, but also other transfers associated with agricultural policies.
Source : WTO Secretariat, based on information provided by the Czech Government (for 1996 and 1997);  OECD (2001c),
"Agricultural Policies in OECD Countries", document AGR/CA/APM(2001)2/PART3 ;  and OECD (2000c),
Agricultural Policies in OECD Countries – Monitoring and Evaluation 2000.
18. Act No. 256/2000 on the State Agriculture Intervention Fund, which entered into force in
August 2000, established the basis for a new system of market regulation for agricultural and food
products.  As a result of the new law, the State Fund for Market Regulation (SFMR) was replaced by
the State Agricultural Intervention Fund (SAIF). A lthough the SAIF has been provided with enhanced
powers to regulate the market (including production quotas, set-aside schemes, and providing direct
payments to farmers), these new instruments were not used in 2000.13  The domestic support system is
maintained under several categories (Table AIV.1 provides details):
− Direct market intervention  (notably price regulation) by the SFMR or SAIF respectively is
currently the main instrument of intervention, covering bread-wheat, milk, and potato starch.
In the case of bread-wheat, until 1998 farmers were provided with advance payments by the
SFMR before the sowing period and intervention purchases at guaranteed prices after
harvest.14  Since 1999, they receive advance payments only after the delivery of harvested
grain.  In the case of milk, all the processors are required to pay farmers a minimum price for
all milk deliveries.  To a lesser extent, potato starch exports are also subsidized: the subsidies
are paid directly to the exporters provided that farmers have been paid the set minimum price.
In 2000, the SFMR/SAIF spent in total around CZK 2.4 billion (up from CZK 1.6 billion in
1999) for market regulation.
− Subsidized credits and guarantees on loans  from commercial banks, administered by the
Support and Guarantee Fund for Farmers and Forestry (SGFFF), are provided to agriculture
under six different programmes.15  In 2000, a total amount of CZK 1.6 billion (down from
                                                     
11 The OECD's PSE estimate includes both transfers from consumers of agricultural products (through
domestic market price support) and transfers from taxpayers (through budgetary or tax expenditures).
12 OECD (2001c), PART2 . Total per capita transfers related to agricultural policies are estimated to be
higher in EU countries than in the Czech Republic.
13 OECD (2001c), PART2 .
14 OECD (2000c).
15 Act No. 576/1990 Coll. on Budgetary Regulations, Decision by the Government Establishing the
Farming and Forestry Support and Guarantee Fund (PGRLF), Principles of State Support in the Agriculture.Czech Republic WT/TPR/S/89
Page 49
CZK 2.2 billion in 1999) was spent on interest subsidies, and the average interest rate paid by
farmers for credits granted through the fund was 1.98%;
− Assistance and subsidy programmes : in 1999, support was provided for the use of
environmentally sound fuels, and other activities such as maintenance and improvement of
livestock and seed genetic potential, sale of diesel for farmers, production of potato starch,
vineyards, maintenance of agriculture land, beef cattle farming, and ecological agriculture.
The total cost for these programmes in 1999 was CZK 6.5 billion.
Assistance to other activities
19. In addition to schemes targeting agriculture, the state aid system covers a broad number of
other programmes as listed in Table AIV.1.  The conditions for export promotion programmes are,
according to the authorities, in accordance with th e OECD Arrangements on Guidelines for Officially
Supported Export Credits and Berne Union rules.  Moreover, all incentives are available equally to
foreign and domestic investors.
(4) GOVERNMENT PROCUREMENT
20. During the period under review, the Czech procurement law (Act No. 199/1994 Coll. on
Public Procurement), which entered into force on 1 January 1995, has been subject to three majoramendments.  The amendment in 2000 has introduced two important improvements: first, it enhanced
transparency by requiring all public tenders and awards to be published on the Internet, and secondly
it extended its coverage to include utilities (water, energy, transport, and telecommunication).  It
appears that under the amended law, regulations continue to discriminate against foreign firms; a
contractor may restrict a tender only to domestic tenderers.  According to the authorities, this is
mainly limited to public works.  A preference clause for domestic tenderers is included in the Act.
The contracting authority may stipulate a price advantage for domestic tenderers; the advantage mayamount to a maximum of 10%.
16 According to the authorities, this provision benefits domestic entities
and foreign companies registered in the Czech Republic.  A new draft law on public procurement,
transposing the EU public procurement directives, was approved by the Government on
3 January 2001 and submitted to Parliament.  It is expected to be in force as of 1 January 2002.  The
Czech Republic became an observer to the WTO Agreement on Government Procurement inAugust 2000.
21. According to the existing law, a public procurement contract is awarded on the basis of a
public tender in which an unlimited number of parties can participate.  The law also provides for other
methods of procurement, depending on the situati on.  The key features of the procurement methods
are provided in Table IV.3.  The law applies to purchases made by central government bodies, local-governments (at all levels), the Supreme Control Office (the independent authority responsible for the
supervision of state property and funds), courts, and other public organizations.   
                                                     
16 A price advantage of 20% is applicable to all bidders if more than half of the employees have an
impaired work ability.WT/TPR/S/89 Trade Policy Review
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Table IV.3
Key features of the Czech Republic's procedures on government procurement
Method Instances when the method is applied Advertisement
requirement
Public tender
(open procedure)Contracts above CZK 20 million (equivalent to US$0.5 million
in April 2001) for real estate (except lease) or machinery and
equipment forming a separate unit and CZK 5 million in other
cases.Commercial Bulletin
Invitation to several parties
(no less than five parties)Contracts CZK 2.5 million up to CZK 20 million for real estate
(except lease) or machinery and equipment forming a separateunit and contracts above CZK 1 million up to CZK 5 million in
other cases.No requirement
Simplified award of contract
(no less than three parties)Contracts above CZK 0.5 million up to CZK 2.5 million for real
estate or machinery and equipment forming a separate unit, andcontracts above CZK 0.5 million up to CZK 1 million in other
cases.No requirement
Small-scale public procurement
(one party)Contracts up to CZK 0.5 million. No requirement
Invitation to a single candidate
(one party)Method applied if: (i) urgent need (such as when human lives or
health are threatened); (ii) only one party can execute the
procurement; (iii) supplementary or repeat procurement,
provided it does not exceed 50% of the price of the originalprocurement and provided the invitation is effected within
12 months of the execution of the procurement; (iv) partial
renovation of the object of the original public procurement, if achange of applicant would result in difficulties; (v) state secret;
(vi) a winner of an architectural competition pertaining to the
procurement; or (vii) execution for the State Material Reserves
(body acting in emergency situations).No requirement
Source: WTO Secretariat, based on WTO document WT/WGTGP/W/12, 16 January 1998; and Act No. 199/1994 on
Public Procurement.
22. The terms of a public tender have to be published in the Commercial Bulletin . The period for
introducing bids must not be shorter than 36 days (counting from the day of publication in the
Commercial Bulletin ).  The tendering process may be of one or two rounds. Two-round tendering
takes place in the event of an extensive, complicated, technically sophisticated and challenging publicorder requiring a step-by-step clarification of technological aspects.  Complaints against the
contracting authority's decision may be brought to the Office for the Protection of Economic
Competition.  An appeal can be filed against the decision of the office, its Chairman decides on such
appeals.  In the last instance, a decision of the of fice may be challenged by the relevant High Courts.
23. It has been noted that while the revised law has helped standardize government tenders, there
is still a lack of executing regulations to guide the tender process.
17  Problems of transparency,
accountability, and shortages of experienced pers onnel have been noted.  A proposed new law is
aimed at addressing these shortcomings.
(5) PRIVATIZATION  AND  PUBLIC ENTERPRISE RESTRUCTURING
Transfer of funds
24. The privatization programme was initiated in 1991 as one of the cornerstones of the economic
reform programme of 1990.18  Following the restitution of some property to the original owners, and
the privatization of some 24,000 "small enterprises" through public auctions19, the authorities
                                                     
17 Bureau of National Affairs (2000a).
18 For details on the privatization programme, see, for example, Schütte (2000 ).
19 Conducted under Act No. 427/1990 on Small-scale Privatization.Czech Republic WT/TPR/S/89
Page 51
launched an ambitious privatization programme for its medium and large enterprises.20   T h e
innovative programme allowed a wide range of privatization methods, including auction, public
tender, direct sale, and distribution of "vouchers" to Czech nationals (Box IV.1).  The voucher system,
which was carried out in two stages, resulted in the privatization of part or all the shares of about
1,800 enterprises, with a market value estimated at about 30% of GDP in 1997.21  As a result, the non-
state sector increased dramatically during the 1990s, accounting for more than three quarters of GDPat the end of 1999 (Chart IV.1).  The bulk of the privatization took place between 1992 and 1995,
when privatization proceeds accounted for some 2.5 to 3% of GDP.
22
Box IV.1:  The voucher privatization programme
The "voucher" privatization was one of the main pillars of the Government's privatization programme
launched in 1991.  The scheme was carried out in two waves.  In both waves, the number of shares for salein each enterprise was set so that all shares were of eq ual value.  Three per cent of the shares were set aside
for potential restitution claims and a pre-determined am ount of equity shares remained with the National
Property Fund (NPF), responsible for the implementation of the privatization policy.  Most enterprises were
not restructured before they were privatized.
Under the voucher scheme, shares of the enterprises were auctioned for vouchers, which were distributed to
the public at a low price.  All permanently resident citizens over the age of 18 were entitled to buy a bookletof 1,000 voucher points, for a fee of CZK 1,035 (or US$34) in the first wave, and CZK 1,050 in the secondwave.  Individuals could either bid di rectly for enterprise shares in the auctions or place their vouchers in
investment funds (Investment Privatization Funds, IPF), which then used the vouchers to bid for enterprises.
The first voucher wave (in 1991-92) covered 988 enterprises in the former Czechoslovakia.  The auction's
shares represented half of the book value of the companies.  About 60% of the population (6 millioncitizens) became shareholders: approximately 4.2 million placed their vouchers in IPFs and the remaining1.8 million bid directly for shares.  The second voucher wave was implemented in 1993-94 and involved thesale of 861 enterprises, using a similar method.  A pproximately 6.2 million citizens participated in the
second wave, of which 64% placed their vouchers in IPFs  and unit trusts and 36% bid directly for shares.  In
total, the two waves resulted in the privatization of all or part of the shares of some 1,800 companies, with amarket value estimated at around 30% of GDP in 1997.
The main intention of the scheme was to move enterprises quickly away from the State into the privatesector.  The authorities also saw the scheme as a tool to prevent managers from exercising too much powerand to ensure that the new owners would play an active ro le in the needed restructuring of enterprises.  Also,
by involving a large share of the population in the privatization process, the authorities were hoping to avoid
the opposition to privatization observed in some other transition countries.
Source: WTO (1996), Trade Policy Review – Czech Republic ;  IMF (1999), IMF Staff Country Report
No.99/90 ;  and World Bank (1999b), Czech Republic – Capital Market Review .
                                                     
20 The privatization of large-scale enterprises has been conducted according to Act No. 92/1991 on
Large-scale Privatization.  The law covers all state enterprises not explicitly excluded (the property of the StateAdministration, natural resources, some cultural institutions, certain health care and social institutions, post, andrailways).
21 World Bank (1999b).
22 Privatization revenues have not been used to retire debt.  Instead, the revenues have been used to
finance government expenditures, such as re-capitalization of troubled banks, writing-off bad debts, providingloans and guarantees to the "transformation" companies, and improvement in infrastructure (World Bank,1999a, Vol. 2).WT/TPR/S/89 Trade Policy Review
Page 52
Chart IV.1
Privatization and evolution of ownership structure, 1990-2000
0.00.51.01.52.02.53.03.5
1991 92 93 94 95 96 97 98 99 000102030405060708090
1990 91 92 93 94 95 96 97 98 99Per cent of GDP
Privatization receipts from large-scale privatization.
Data provided by the Czech authorities; and the Czech Statistical Office online information. Available at: 
http://www.czso.cz/en g/figures/5/50/5001002 q/data/tab5.xls.(a) Privatization proceeds
Per cent(b) Share of non-state sector in GDP
a
Source: a
Shortcomings
25. The Czech Republic's privatization programme enabled an unprecedented large-scale transfer
of enterprises to the private sector within a sh ort period.  Although it has been shown that the
programme improved the firms' management and profitability23, the needed restructuring of
enterprises has not been forthcoming.  The normal entry and exit of firms seen in a functioning marketeconomy was not taking place to the same extent in the Czech Republic.  In fact, the underlying
factors behind the currency crisis of May 1997 were the lack of restructuring of Czech companies.
Major impediments to a more rapid restructuring included
24:
− many large industrial enterprises with State involvement survived through lending from state-
owned banks.  The banks were a source of access to easy credit, enabling firms to postpone
the needed restructuring.  Since the beginning of the transition, banks have tended to roll overthe outstanding loans of troubled companies rather than take legal action, such as bankruptcy,
in order to force repayments;
− a diffuse corporate governance structure.  The majority of the vouchers for the privatization
programme were placed with investment funds, which then bought up the shares.  As a result,
the role of the investment funds in firms' management was extensive.  Since the investment
funds were largely owned by state-owned banks, there were potential conflicts of interest asbanks were both owners and creditors;
− an inadequate legal framework for bankruptcy (section (6) below); and
                                                     
23 Claessens, et al. (1996).
24 See for example OECD (1998a); World Bank (1999a ), Vol. 2; IMF (1999); and Nellis (undated).Czech Republic WT/TPR/S/89
Page 53
− access of healthy firms to new capital was limited by weaknesses in the capital market.
Recent reforms and outstanding agenda
26. Privatization of large banks has recently gained momentum.  Until the privatization process
began for the large state-owned bank, IPB, in 1996, Government control over the four largest banks
was seen by officials as a means for maintaining financing of the enterprise sector and for ensuring
that the transition to a market economy would be irreversible.25 With the involvement of international
strategic investors, privatization of three large state-owned banks was concluded during 1998-2000(Investiční a Poštovní Banka in 1998, Československá obchodní Banka in 1999, and Česka spořitelna
in 2000).  According to the authorities, the privatization process of the last state-controlled bank (the
Komerční banka) should be finalized in the summer of 2001.
27. Although privatization is by and large complete, the State still retains a significant holding in
a number of entities.
26  In this regard, the Government approved a restructuring programme in
May 1999 with the creation of the Revitalization Agency.  The main objectives of the agency were
recapitalization and restructuring of selected state enterprises, cleaning-up of loan portfolios of
commercial banks and preparing them for privatization, and creation of an enabling environment for
efficient enterprise performance.  A limited number of heavily indebted companies were to be
prepared for privatization by the agency.  However, in March 2001, the agency ceased to exist, wellbefore the date when its operations were to be wound up (end-2002).
27  No company was privatized
during the period of the agency's existence.
28. Also, in addressing enterprise restructuring, the authorities are separating non-competitive
from competitive activities and will subsequently  privatize the companies created (Table IV.4).  Non-
competitive activities are to continue to be owned by the State; and,  for the time being, a number of
competitive activities are also to be controlled by the State.  In parallel with privatization, prices are to
be liberalized (Box IV.2).   The privatization of a number of state-owned assets is being held back bydelays in the creation of an appropriate regulatory framework, including a framework for so-called
natural monopolies.
Table IV.4
Competitive and non-competitive activities
Sector Non-competitive activities Competitive activities
Railway No competition in the operation of the infrastructure and
transport.  The infrastructure and the rolling stock arepartially owned by the State.
Road transportation Communications and infrastructure are fully owned by
the State.Freight and bus transport are fully open to competition.
Postal services No competition in the delivery of consignments below
350 grammes, for a price lower than five times the publictariff for a postal item in the first weight step.Other activities are fully open to competition.
Table IV.4 (cont'd)
                                                     
25 World Bank (1999a), Vol. 2.
26 The National Property Fund (NPF) remains the single largest shareholder in the Czech Republic.
The Ministry for the Administration of National Property and its Privatisation – which was abolished on 30 June
1996 and whose policy responsibilities were transferred to the Ministry of Finance – was responsible for the
privatization policy.  The NPF, founded in 1991, implemented the decisions, temporarily managed theenterprises, and settled ecological obligations from privatization (National Property Fund online information.Available at: http://www.fnm.cz/fnm/web.nsf/ UvodAN?OpenPage [6 November 2000]).
27 Financial Times , 12 April 2001.WT/TPR/S/89 Trade Policy Review
Page 54
Sector Non-competitive activities Competitive activities
Telecommunications Competition is limited to a certain degree in the
provision of universal service.All other services are fully open to competition (starting
in 2003 there will be free access to fixed telephone
networks and transferability of numbers).
Broadcasting Transmission of TV and radio signal is concentrated
mainly in a single entity controlled by the State (fullprivatization intended for the end of 2001).  Competition
started to appear in this area.Provision of content services is fully open to
competition.
Electrical energy Transmission is performed by ČEPS, which is a separate
accounting unit but is interconnected with generation atČEZ; a separation is being prepared.  Regarding
distribution, third party access to networks is being
prepared.Generation is fully open to competition (but restricted by
the integration of generation and transmission).
Gas Transport of gas is separated from distribution and a
state-owned company transports gas.  Conditions and
rules for competition are set in the new Energy Act
(No. 458/2000).
Air service A state-owned company manages four international
airports.Airport airside and landside services are operated on
commercial basis and services opportunities are generallyopen for competition.
Water management Various infrastructure owners who enter into agreements
on its operations.  Potable water supply, collection andtreatment of waste water are local network monopolies,no competitors have access to networks.There is competition among operators in the conclusion
of agreements with individual infrastructure owners.
Waste management The operator for the collection of communal waste is
appointed by the municipality (local monopoly).Large scale collection of waste and refuse dump
management are fully open to competition.
Source: Information provided by the Czech authorities;  and  OECD (2000d), "Vertical Separation in Regulated Industries –
Czech Re public", document  DAFFE/CLP/WP2/WD(2000)41 .
Box IV.2:  Price regulation
The Price Act (Law No.526/1990) authorizes the Ministry of Finance and, in some cases, local
administrative bodies, to regulate prices when the functioning of the market is endangered by the effects of
registered economic competition or in the case of an extraordinary market situation.  Price controls are
applied equally to domestic and imported products.  Controlled prices take the form of fixing maximumprices or minimum prices or the setting of formulas for the calculation of prices.
The authorities have continued to liberalize domestic prices toward cost-recovery levels since 1996. The
items covered by price regulation account for about 5% of GDP.  Activities regulated by price-caps includetelecommunication and radiocommunication tariffs, rents in non-cooperative apartments, certain medically
related goods and pharmaceuticals, health services, electricity and natural gas supply, taxi, cab-stand
services, towing of cars, urban public transport, and funeral services.  Moreover, for central heating, waterfrom surface sources, railroad passenger tariffs, bus passenger tariffs, post tariffs, and certain medically
related goods and pharmaceuticals, the price must reflect justified costs and reasonable profit.  Sugar isregulated by a minimum price.  During the review pe riod, certain prices have been completely liberalized
(including chimney-sweepers' services and cartage of garbage), while prices for other goods and services
have been partly liberalized.
At their current level, administered prices do not fully reflect the costs of production.  For example, heat
supplies to households are subsidized from the State Budget.  Electricity prices  for industrial consumers
approximate costs, while prices for households are, for social reasons, set at  less than half the costs.  Somechanges were introduced (for households) on 1 July 2000, and new prices are expected to be applied as from1 January 2002.
Source : OECD (2000d), "Vertical Separation in Regulated Industries – Czech Republic", document
DAFFE/CLP/WP2/WD(2000)41 ;  and WTO (1996), Trade Policy Review – Czech Republic.Czech Republic WT/TPR/S/89
Page 55
(6) BANKRUPTCY LAW AND PRACTICE
29. The Czech bankruptcy law (Act No. 328/1991 Coll. on Bankruptcy and Settlement) has been
revised on average  almost once a year since it first entered into force in October 1991.28  During the
period under review, two major amendments have taken place, in April 1998 and in April 2000,
representing a shift towards stronger creditors rights, and aiming at speeding up the bankruptcy
process (Box IV.3).
30. Notwithstanding the recent improvement of the bankruptcy law, the present law suffers from
weaknesses in several areas.29  A major problem that has been identified is the slow and expensive
court-driven process.30  Bankruptcy statistics show, however, that courts were gaining experience with
the procedures and were disposing of cases more efficiently.  Nevertheless, it has been suggested that
to further improve the situation consideration should be given to the creation of special courts tohandle this type of business.
31  Training programmes for bankruptcy judges and court officials would
also improve the system.
31. Another problem identified with the current law is that creditors have little input in the
bankruptcy proceedings.  Thus, creditors-driven debt restructuring is made very difficult.  This type of
bankruptcy normally involves a restructuring agreed upon by a qualified majority of creditors whothen receive bankruptcy-court certification to ma ke the agreement binding on all unsecured creditors
and on the debtor.
32  The bankruptcy process in the Czech Republic is essentially a liquidation by
means of periodic auctions of assets.  Other problems related to the role of the creditor include the
vague definition of the circumstances under which a creditor can initiate bankruptcy proceedings, the
absence of the right of creditors to appoint a bankruptcy administrator, the power of the court to
dismiss the creditor's committee, and the limitation of the value that can be recovered by secured
creditors to 70% of realized assets.
Box IV.3:  Major amendments  to the bankruptcy law
The 1998 amendment to the Bankruptcy and Settlement Act No.328/1991, which entered into effect on
1 April 1998, was the ninth amendment since 1991.  It provides courts with enhanced powers to speed up thebankruptcy process.  It assists creditors in the liquidation of their debtors’ assets in light of the currentbacklog of pending bankruptcy cases.  The amendment introduced three important changes:
- Changed definition of when a company becomes bankrupt .  Prior to the amendment, a debtor was
considered bankrupt if (s)he could not meet the financial obligations within "a long period of time".
Under the amendment, an entity is considered bankr upt if (s)he is unable to meet the financial
obligations and there is a reasonable expectation that they will not be met in the future;
- Duty to file with the court .  The amendment requires any debtor (whether a legal entity or an individual
entrepreneur) who determines that (s)he is bankrupt to file immediately a petition with the court.  Thisobligation also applies to a company’s liquidator if (s)he discovers that the company’s liabilities exceed
its assets.  Civil law action may be initiated against a debtor who fails to file such a petition and the
company is then declared bankrupt;  and
Box IV.3 (cont'd)
                                                     
28 OECD (1999).
29 See for example the World Bank (1999a), Vol. 2; and IMF (2000b).
30 IMF (2000b).
31 World Bank (1999a), Vol. 2; World Bank (1999b); and IMF (1999).
32 World Bank (1999a), Vol. 2.WT/TPR/S/89 Trade Policy Review
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- An 18-month time limit for appointed bankruptcy administrator.   The amendment requires a court-
appointed bankruptcy administrator to submit a report on the company’s debtors and creditors, and theassociated expenses and debt priorities, within a period of 18 months.  The court may extend this timelimit.  Prior to the amendment, bankruptcy administrators were not subject to time limits.
The 2000 amendment, which went into effect on 1 May 2000, is aimed at further speeding up the bankruptcyprocess as well as yielding greater proceed s.  Some of the changes to the law are:
- in the event of bankruptcy, the debtor need not file for bankruptcy provided that (s)he files a petition
for settlement , which ought to ensure wider use of the mechanism;
- a provision allowing creditors to dismiss court-appointed trustees ;
- institution of a preliminary trustee , whom the court may appoint immediately upon filing of the
bankruptcy petition for the purpose of securing and asserting the debtor's assets and reviewing the
debtors' accounting;
- banks are obliged to immediately notify the tr ustee of information about the debtors' accounts;
- in a liquidation, secured creditors will be paid at  least 70% of the proceeds from realization of the
security falling to their share;
- a provision enabling the court to permit a partial repartition even before approval of the final report,
which should enable creditors to gain quicker access at least to a part of their money;  and
- in the event of settlement, the threshold for satisf action of creditors has b een decreased from 45% to
30% (in the event of compulsory settlement from one third to 15%).
Source: Baker & McKenzie (1998), Central European and CIS Legal Update , Spring 1998;  IMF (2000b),
Staff Country Report No. 00/96;  and the Czech National Bank (undated), 1999 Banking
Supervision .
32. A related problem is the impediments to seeking an out-of-court settlement.  The Czech tax
law treats a debt write-down as a taxable receipt by the debtor.  Also, the threat of bankruptcy as an
alternative should be credible and enforceable.  This would require a strengthening of the legal
framework for bankruptcy and steps to improve the functioning of the court system.
(7) COMPETITION LAW
33. The Czech Republic's competition rules (as laid down in Act No. 63/1991 Coll. on the
Protection of Economic Competition) have been amended since its previous Trade Policy Review in
1996, to approximate the competition policy framework,  rules and enforcement capacities, with those
of the European Union.  A new Act on the Prot ection of Competition (Act No. 143/2001 Coll.)
entered into force on 1 July 2001.  According to the authorities, the Czech legislation is now fully
harmonized with EU competition legislation.  The Czech law contains the main principles of the EU
anti-trust rules as regards restrictive agreements, abuse of dominant position, and merger control.33
34. The key features of the law, which covers both goods and services, are provided in
Table IV.5.  It applies both to private and public undertakings and all sectors are treated equally under
the law.  The legislation applies not only to activities that have taken place in the Czech Republic, but
also to activities that have taken place in other countries but have effects on the market conditions in
the Czech Republic.34  Under the Act, misuse of a monopoly or a dominant position is prohibited.
According to Act No. 63/1991 Coll., a dominant positio n is held by an enterprise if that entity
                                                     
33 European Commission (2000).
34 OECD (2001a).Czech Republic WT/TPR/S/89
Page 57
provides 30% or more of a specific product or service to the Czech market.  In the new
Act No. 143/2001 Coll., a dominant position is defined on the basis of market power.  However, block
exemptions are allowed for certain categories of agreements.  The Office for the Protection of
Economic Competition is in charge of authorizing block exemptions in respect of certain categories of
vertical agreements, agreements on specialization, research and development, transfer of technology,
distribution and service of motor vehicles, and agreements on insurance and on transportation. Thecurrent competition law directs privatization authorit ies to submit to the competition authorities, for
their approval, proposals to transfer state property
 .35
35. The Office for the Protection of Economic Competition is empowered to supervise adherence
to competition regulation.  In addition to economic competition itself, the Office also has a role with
regard to public procurement (supervision of public tenders) and state aid (aid monitoring).  ItsChairman is appointed by the President, upon proposal by the Government.  In order to enhance its
capacity in disclosing cartel agreements, a separate cartel department was established in 2000.  The
office may request information, open investigations, and impose penalties.  It has published certain
communiqués, including guidelines for entrepreneurs on the control of concentration.  The office
publishes all its Collection of Decisions as well as relevant legislation in force on its website(www.compet.cz).   The Chairman's decisions may be reviewed by the High Court on the basis of a
suit, and the court decision is final.
36
36. The office has examined a large number of anti-trust cases.  Between November 1996 and
end-2000, there were 578 applications in total, of which 258 concerned mergers and acquisitions.  Of
the 258 merger and acquisition applications, 247 have been given permission, while there are 11 still
in the process of examination.  In the area of block exemptions, the office has granted such an
exemption for a franchise agreements (entered into force in March 2000).
Table IV.5
Main provisions of the Czech Republic's competition law
Prohibition Examples of prohibition
Agreements distorting
competition
(Art. 3 = Art. 85/1 of EECTreaty)Fixing prices or setting business terms
Making the conclusion of contracts subject to limiting or controlling sales or investments
Sharing the marketMaking the conclusion of contracts subject to limiting market access to competitors
Monopoly and dominant
market position(Art. 9=Art. 86 of EEC Treaty)A competitor is considered to have a dominant position if its share amounts to at least 30% of
deliveries of identical, comparable or mutually replaceable goods
Examples of prohibitions include:
- imposition of unfair terms and conditions in contracts
- making the conclusion of contracts subject to the acceptance of some unjust conditions
- applying dissimilar conditions to equivalent transactions
- limiting production of products for the purpose of attaining unjustified economic benefits
Table IV.5 (cont'd)
                                                     
35 WTO document WT/WGTCP/W/67, 26 March 1998.
36 WTO document WT/WGTCP/W/71, 30 March 1998.WT/TPR/S/89 Trade Policy Review
Page 58
Prohibition Examples of prohibition
Dominant position and abuse
of dominance(Art. 10=Art. 82 of EEC Treaty)One or more undertakings jointly are deemed to have a dominant position, if their market power
enables them to behave (to a significant extent) independently of other undertakings or consumers
Examples of prohibitions include:
- same as above
Concentration
(Art. 12=EEC Reg. No. 4064/89)Operations that would be assumed as concentration:
- mergers of companies, co-operatives or other legal persons
- transfer of an undertaking- acquisitions by one or more persons or undertakings, already controlling at least one undertaking
- concentrative joint ventures
Exceptions include business whose activities include dealing in securities holding, or holding on a
temporary basis shares that they have acquired in another undertaking with a view to reselling
them, provided they do not exercise the voting rights in order to determine or influence the
competitive behaviour of such undertaking
Thresholds for "mergers": (i) if the aggregate worldwide net turnover of all the undertakings
concerned (for the last accounting period) exceeds CZK 5  billion;  or (ii) if the aggregate netturnover of all the undertakings concerned achieved in the Czech market (for the last accounting
period) exceeds CZK 550 million and each of at least two of the undertakings concerned achieved a
net turnover of a minimum of CZK 200 million
Source: WTO Secretariat, based on Act No. 63/1991 Coll. On the Protection of Economic Competition, as amended;  and
information provided by the Czech authorities.
(8) PROTECTION OF INTELLECTUAL PROPERTY
Overview
37. During the period under review, the Czech Republic has passed new laws or amended
existing laws in order to strengthen the protection of intellectual property rights.37  All areas of
intellectual property rights have been reformed (Table IV.6).  The Czech Republic has extended its
already extensive membership in the plurilateral agreements on intellectual property, by signingadditional international treaties: the Trademark Law Treaty, the Patent Law Treaty, the WIPO
Copyright Treaty, and the WIPO Performance and Phonograms Treaty.  In addition, the member
States of the European Patent Organisation (EPO) have invited the Czech Republic to accede to the
European Patent Convention (EPC), with the earliest date of accession of 1 July 2002.
38  The changes
to the legal framework have been implemented by the Czech Republic with a view to bringing itsintellectual property rights regime in line with the EU acquis communautaire.   In the WTO, the Czech
Republic did not seek the special transitional provisions available under the WTO Agreement on
Trade-Related Intellectual Property Rights (TRIPS).  Thus, according to the authorities, the provisions
of the TRIPS Agreement were applied from 1 January 1996.  The Czech Republic, together with some
other countries, is seeking increased protection of geographical indications to cover products otherthan wine and spirits.
39  While the authorities have brought laws for the protection of intellectual
property towards international standards, enforcement appears to have lagged.  A newly enacted law
                                                     
37 See WTO (1996) for a detailed description of the intellectual property rights legislation in place in
1996.
38 Bureau of National Affairs (1999).
39 The countries have argued that the issue is an integral part of the built-in agenda of the TRIPS
Agreement (WTO documents WT/GC/W/206, 14 June 1999, and IP/C/W/204/Rev.1, 2 October 2000).Czech Republic WT/TPR/S/89
Page 59
provides for tough criminal sanctions for infringement, but the Czech courts have not yet imposed
such sanctions in practice.
Table IV.6
Summary of intellectual property protection in the Czech Republic, June 2001
Form Main legislation CoverageSelected
exclusionsDuration Sanctions
Copyrights
and related
rightsAct No. 121/2000
Coll., onCopyright, Rights
Related to
Copyright and onthe Amendment of
Certain ActsLiterary, scientific and
artistic works (includingcomputer programs and
makers of databases)
Related rights include
performers', phonograms',
audiovisual fixations',broadcasters' and publishers'
rightsLife of author plus
70 years (50 years fromthe creation for
performers,
phonograms,audiovisual fixations,
broadcasters and
publishers; and15 years from the
making for databases)Fines
unlimited;imprisonment
of up to
five years;  andseizure and
destruction
under Civil and
Penal Code
Patents Act No. 527/1990
Coll., on
Inventions and
RationalizationsProposals as
amended by Act
No. 116/2000
Coll.Any invention that is new,
involves an inventive step
and susceptible of industrial
application.  Compulsorylicences may be decided by
the IPOPublic interest;
plant or animal
varieties;
biological
processes20 years from filing
date
Supplementary
protection certificate
up to five yearsFines up to
CZK 5 million;
imprisonment
of up to twoyears;  and
seizure and
destructionunder Civil and
Penal Code
Topographies
of integrated
circuitsAct No. 529/1991
Coll., as amendedby Act
No.116/2000 Coll.Compulsory licences may be
decided by the IPO10 years from filing
date (or, if earlier, from
first use)As above
Trade marks Act No. 137/1995
Coll., as amendedby Act
No.116/2000 Coll.Trade marks, service marks,
collective marks andwell-known marks.  Use
requirement of five years10 years from filing
date, with possibility tobe renewed indefinitely
for 10-year periodsAs above
Industrial
designsAct No.207/2000
Coll., on theProtection of
Industrial DesignsAn industrial design shall be
protected, if it is new and has
individual characterPublic interest;
principles of
morality5 years from the filing
date, this period can berepeatedly renewed up
to 25 yearsAs above
Geographical
indications
(includingappellations of
origin)Act No. 159/1973
on Protection ofAppellations of
OriginProtection for appellations of
origin of agriculture,industrial and handicraft
productsUnlimited As above
New plant
varietiesAct No. 408/2000
Coll., on New
Plant  Variety
ProtectionNew, distinct, homogenous
and stable.  Compulsory
licences may be decided by
the Ministry of AgricultureGenerally 25 years
from the date of the
filing (30 years for
varieties of hop,grapevine, potatoes,
ornamental and forest
wood species)Fine up to
CZK 5 million
BiologicalinventionsAct No. 206/2000
Coll., on the
Protection of
Biotechnological
InventionsAny biological material
derived through propagation
or multiplication in an
identical or divergent formand possessing those same
characteristics. Compulsory
licences may be decided by
the IPOInvention
whose
commercial
exploitationcould be
contrary to
public policy or
to moral20 years from filing Fines up to
CZK 5 million;
imprisonment
of up totwo years;
seizure and
destructionunder Civil and
Penal Code
Table IV.6 (cont'd)WT/TPR/S/89 Trade Policy Review
Page 60
Form Main legislation CoverageSelected
exclusionsDuration Sanctions
Utility models Act No. 478/1992
Coll., on Utility
Models as
amended by ActNo. 116/2000
Coll.Any technical solution that is
new, exceeds the framework
of mere professional skill,
and is industrially applicablePlant varieties,
animal breeds,
biological
reproductionmaterials;
production
processes or
work activities4 years from filing
date, with possibility of
two three-year
extensionsAs above
Border
measuresAct No. 191/1999
Coll., on measuresconcerning entry,
export and re-
export of goodsinfringing certain
IPRs and
amending some
other ActsMeasures to enforce IPRs on
the border of the Czech
RepublicSeizure and
destruction ofgoods; and fine
up to CZK
20 million
Source: WTO Secretariat, based on information provided by the Czech authorities; and WTO (1996), Trade Policy
Review – Czech Republic .
38. As in 1996, foreign right holders receive the same legal protection as Czech legal or natural
persons. Reflecting the active participation by fore igners in the Czech economy, foreigners constitute
an increasing share of industrial property rights ap plications.  In the area of inventions, the share of
applications filed to the Industrial Property Office (IPO) by foreign applicants increased to 89% in
2000.40  Foreigners also constitute a high share of granted patents on inventions.
Recent efforts to harmonize with the European Union39. According to the European Commission, the Czech Republic has achieved a high degree of
compatability of its legislation on intellectual property rights with the EU acquis communautaire .  In
the area of copyright, a law passed in 2000 brought the Czech copyright legislation into line with the
acquis  communautaire .
41  Towards this end, a number of EC Directives and Regulations have been
implemented during the review period, covering issues such as border measures; trade marks; thelegal protection of topographies of semiconductor pr oducts; and the protection of computer programs,
patents, biological inventions, and industrial designs.
Compulsory licensing
40. When no agreement can be reached on a licence contract between the right holder and
potential licencees for patents, topographies of integrated circuits, new plant varieties andbiotechnological inventions, compulsory licences may be granted by the IPO.  The IPO can only grant
a compulsory licence for a patent if the owner of the patent does not work the patent sufficiently or
when an important public interest is endangered.  The compulsory licence may not be granted within
the period specified in the Paris Conventions (i.e. four years from the date of filing or three years from
the date when the patent was granted, whichever period expires last).  Compulsory licences for
                                                     
40 The IPO is in charge of the administration of industrial property (as governed by Act No. 14/1993
Coll.).  The IPO decides on applications and maintains re gisters of legal right holders.  Foreign right holders
must normally act through patent agents licensed by the IPO.  The IPO will not register protection for
intellectual property that is deemed to be contrary to the public interest (notably the principles of humanity andmorality) (IPO online information. Available at: http://www.upv.cz/english/index.html [23 November 2000];and WTO, 1996).
41 European Commission (2000).Czech Republic WT/TPR/S/89
Page 61
topographies of integrated circuits may only be granted provided an important public interest is in
jeopardy.  Regarding new plant varieties, compulsory licences may be granted by the Ministry of
Agriculture if the owner of the breeder's certificate  refuses to authorize the commercial exploitation of
the variety or the breed, or refuses to do so to the extent necessary.  For biotechnological inventions,
the IPO may grant a compulsory cross-licence if the plant or animal variety constitutes significant
technical progress of considerable economic interest compared with the invention.  To date, the IPOor the Ministry of Agriculture has not granted any such compulsory licences.  
Parallel imports
41. No provision in the existing legislation refers expressly to parallel imports.  Regarding
patents, the patentee is granted the right to exclude others importing the patented invention during the
term of the patent protection.  The patentee is not entitled to prohibit the use of the patented productby third persons, if the product has been put on the market in the Czech Republic by the patentee or
with his consent unless allowed by law.
42. No one is allowed to use a trade mark without the consent of its owner.  The trade mark does
not entitle the owner to prohibit its use in relation to goods that have been put on the market under
that trade mark by the owner or with his consent unless, after the goods have been put on the market,
there has been a substantial change or deterioration in the quality or properties of the goods (the
national exhaustion of trade mark rights).
43. A copyright holder enjoys exclusive right of reproduction, distribution, broadcast and
communication to the public.  The law also provides for a principle of national exhaustion of this
right.  The first sale or other transfer of the origin al property right or a copy of the work, by which the
work is distributed lawfully in the Czech Republic, exhausts the author's right to distribute such
original or a copy of the work in the Czech Republic.
Enforcement
44. The authorities have recently taken several measures to improve the enforcement of existing
legislation.  Measures include:
− Act No. 191/1999 Coll. (on Measures Concerning Entry, Export and Re-Export of Goods
Infringing Certain Intellectual Property Righ ts and Amending some Other Acts), which
became effective on 1 December 1999.  The law establishes the conditions under which
customs authorities can take measures against alleged infringing and counterfeit goods.
Under the law, customs authorities may withhol d goods violating intellectual property rights
upon the request of the owner of the trade mark or patent, or based on their own suspicionbased on the customs check.  If the court rules that the goods retained are fake or counterfeit,
customs authorities may prevent their release and, under specified conditions, are entitled to
destroy the goods
42;
− Government Resolution No. 330/1999 (Relating to  the Conception of the Fight Against Crime
in the Area of Intellectual Property).  Fulfilment of the resolution included, inter alia , a
seminar dedicated to combating product piracy, where experts on industrial property, police,customs administration, and trade inspection exchanged their experiences
43;
                                                     
42 Bureau of National Affairs (2000b).
43 Industrial Property Office (2000).WT/TPR/S/89 Trade Policy Review
Page 62
− a special Inter-ministerial Commission to co-ordinate all state administration activities
concerning intellectual property rights.  The Commission includes representatives of the
Ministry of Culture, the Ministry of Finance (the General Customs Directorate), the Ministry
of Interior, the Ministry of Justice, the Ministry of Industry and Trade, the Czech Police, the
Czech Trade Inspection Authority, the Patent Office, and representatives of the Supreme and
High Courts. The Commission's task is to initiate legislative changes and practical measures
to protect intellectual property rights, and secu re compliance with international obligations in
this area;
− regular preventive security operations to fight crime involving intellectual property rights;
− establishing a uniform information system interconnecting all individuals and organizations
involved in the issue;
− Government Resolution No. 190/2001 on conditions and rules for the regular control of use of
legal software within all ministries and government agencies; and
− seminars and lectures for the staff of the Czech Police, Czech Trade Inspectors, and for other
experts.44
Along with stronger enforcement regulations, the number of apprehensions leapt by more than 80% in
2000 while an even higher increase was recorded in the number of confiscated items (Table IV.7).
Table IV.7
Enforcement of Intellectual Property Rights, 1997-2000
1997 1998 1999 2000
Czech Trade Inspection, General Inspectorate
Number of apprehensions 160 230 522 952
Number of confiscated/seized items 1,000 1,100 8,565 96 ,996
Estimated value of confiscated goods (CZK million) 1.16 1.48 5.01 127.95
Income from penalties imposed (CZK million) 0.40 0.30 1.30 4.20
Czech police (IPR crimes)
Number of apprehensions 1,202 2,629 4,678 2,080
Estimated value of confiscated goods (CZK million) 1,447 2,035 7,014 1,344
Directorate General of Customs (cases of goods infringing copyright and trade marks)
Cases 42 45 56 67
Customs value (CZK million) 9,313 21,715 35,324 52,738
Source : Information provided by the Czech authorities.
                                                     
44 Government of the Czech Republic (undated (a)).