Legal and Tax News ‣ March 2024

Personal data

🟢New methodology for CCTV systems

The Office for Personal Data Protection (OPPD) has published a new methodology for the design and operation of camera systems in terms of processing and protection of personal data.

While the methodology is not legally binding, it should provide assurance to administrators that they are operating CCTV systems in accordance with the General Data Protection Regulation (GDPR).

It mainly targets small administrators operating CCTV systems in common cases.

The methodology categorises camera systems into four classes and proposes minimum technical and organisational measures for each.

It summarizes in detail what should be included in the complete documentation for a camera system, i.e., a record of processing activities, a record of a so-called balance test, design documentation for the camera system, information on the processing of personal data, etc.

Templates of individual documents that need to be prepared in connection with the operation of the CCTV system are useful for practice. As well as balance tests, which are also part of it.

The methodology can be found under the following link: https://uoou.gov.cz/media/clanky/dokumenty/metodika-kamerove-systemy-webpdf.pdf

🟢European Artificial Intelligence Act

Representatives of the European Union (EU) member states agreed in early February on the final text of the EU Artificial Intelligence (AI) Act.

The proposal still needs to be formally approved by the European Parliament. The vote is expected to take place in April this year.

The AI Act should provide a list of prohibited AI systems. This should include, for example, so-called social scoring or biometric identification systems operating remotely in real time or AI systems in workplaces or schools.

Providers of other, so-called generative AI systems, subdivided according to the degree of risk and use, will have to meet a number of requirements. This is before they put the system into operation and make it available. For example, producing technical documentation, registering the system in a European database, demonstrating that they have mitigated reasonably foreseeable risks to security, democracy, fundamental rights or health.

It also provides for rules for the actual operation of AI systems, such as the obligation to inform the user that it is an AI system, whether there is human supervision and who is responsible for the decision-making process.

The Act would create the Union Office for Artificial Intelligence (AI Office). This should not apply to some AI systems at all - in particular some systems provided under free and open source licences.

Breaches of the obligations set out in the AI Act will entail relatively severe sanctions, which should be enforced by Member States' national authorities.

🟢Notification of violation of GDPR by OpenAI

The Italian data protection watchdog has notified the violation of the GDPR by OpenAI, which operates the online platform ChatGPT.

It temporarily banned the company from processing personal data and began investigating the company following a leak of data relating to ChatGPT users' conversations and information about subscribers' payments for services.

The Italian authority justified its decision on the grounds that OpenAI does not provide any information about the processing of personal data to users of its services and that it has no legal title for the massive collection and processing of personal data for the purpose of allegedly "improving the algorithms" underlying the ChatGPT platform.

Among other things, the Italian authority was bothered by the lack of any mechanism to verify the age of users.

Although OpenAI may object to the temporary ban, it must also notify the Italian authority of the measures it has implemented to comply with its decision. Otherwise, it faces a high fine.

The results of the Italian investigation may have implications for the future of the ChatGPT platform in the rest of the EU.

Taxes

🟢Concurrent technical improvement and repair of the property

The Supreme Administrative Court (SAC) stated in its judgment of 13 December 2023, No. 6 Afs 273/2022-43, that certain repairs carried out by the taxpayer in connection with the reconstruction of a hotel cannot, in certain circumstances, be regarded as technical improvement of fixed assets.

In this case, the situation was one in which both repairs and major works were carried out in the hotel during one accounting period. According to the SAC, as a general rule, where construction works are carried out as part of a single construction project and are aimed at changing the technical parameters and use of the property, it is not necessary to analyse in detail the nature of each partial alteration, e.g. whether it is a repair.

According to the SAC, this conclusion cannot be taken as a blanket and the facts of the case must always be carefully weighed. Thus, it cannot be based solely on the uniform intention of the work carried out on the property or the change of use of the property.

According to the NSS, it is necessary to assess the interdependence and chronological sequence of the work, including the possible impossibility of separating them. The NSS also added that the tax administrator should have questioned the witnesses proposed by the taxpayer to determine the nature of the performance—whether it was a repair or a technical improvement. Even an emergency condition of the property is not, by itself, decisive for classifying a repair as a technical improvement.

Civil law

🟢Loss of profit due to termination of contract negotiations

§ Section 1729 of the Civil Code establishes the right to compensation.

This was a case where one of the parties terminates negotiations on a contract in a situation where it has reached a point where its conclusion seemed highly probable. This was even if she had a just reason for terminating the negotiations.

The interpretation of the provision has now been dealt with by the Supreme Court (SC), which in its judgment of 31 October 2023, Case No. 23 Cdo 3191/2022, concluded that the lost profit from a contract not concluded is not causally related to the termination of negotiations on the conclusion of such a contract.

According to the Supreme Court, the provision in question cannot be understood as an award of the right to compensation for "loss from a contract not concluded" because there is no causal link between the breach of duty and this type of damage.

According to the Supreme Court, the section in question provides for a limitation of the amount of compensation for the injury suffered, but not a specific ground for the right to compensation.

Insolvency

🟢Decision-making by the insolvency court in its supervisory activity

In its resolution of 28 February 2023, No. 29 NSČR 134/2022-211, the Supreme Court dealt with the nature of a resolution granting the insolvency administrator's consent to the release of the proceeds from the realisation of the collateral.

In the present case, it has subsequently come to light that the advantageous position of the creditor arising from the security may have been based on a fictitious contract. In such a case, the release of the proceeds of the realisation of the collateral could be contrary to the fundamental principles of insolvency proceedings.

The insolvency court therefore issued an order ordering the insolvency administrator not to distribute the proceeds to the creditor and to write them into the estate. And also to consider bringing an action against the creditor.

The creditor challenged the order on appeal, which the High Court allowed. This was on the ground that the court had no support in law for passing such an order. The insolvency practitioner appealed against the order, which was allowed. The SC admitted the order prohibiting the release of the proceeds of the realisation of the collateral, and also the legal opinion of the insolvency administrator that no appeal was admissible against such an order.