Czech Republic ‘highly unlikely’ to meet CSRD transposition deadline, say lawyers

European Commission says incomplete transposition from member states ‘undermines an equal level playing field for the market within the EU’.

https://www.gettyimages.co.uk/detail/photo/flag-of-the-european-union-with-national-flag-of-royalty-free-image/1392824906?phrase=czech+republic+EU+flag&adppopup=true

The Czech Republic’s Ministry of Finance has produced plans to transpose the Corporate Sustainability Reporting Directive (CSRD) in two phases, the second of which is unlikely to meet the European Commission’s July 2024 deadline, several lawyers have told Responsible Investor.

It follows the announcement in September by France’s Ministry of Justice of plans to transpose the directive into law in early December, making it the first EU member state to set a deadline for the implementation of the directive.

A spokesperson for the Czech finance ministry told RI that the first phase, relating to compliance with the CSRD requirements for the accounting period starting 2024, is expected to take effect on 1 January.

This will be part of the Czech Republic’s consolidation package, which is with parliament for approval and due to be enforced from January.

The Ministry of Finance said the second phase will be implemented in 2024, “in order to meet the transposition deadline under the CSRD”.

It added that it is currently assumed the second phase will be transposed through the Accounting Act, a draft law that was put out for comment by the ministry in October 2022.

According to other sources, this legislation has been put on hold and is not expected to be passed before 2025.

In a document seen by RI, one lawyer wrote that the draft new law on accounting is currently in the legislative process, and “it is certain that its effectiveness will be postponed to 1 January 2025”.

And Karla Rundtová and Jan Lehký, lawyers at Kinstellar Prague, said it is “highly unlikely” the Ministry of Finance will succeed in meeting the Commission’s transposition deadline.

They added that the two-phase approach taken by the Czech government is “more a solution to an emergency situation than a planned approach”.

Another lawyer separately told RI that the logic of the phased proposal “escapes” him.

Rundtová and Lehký said that, while it is not inconceivable that the Czech government will meet the deadline, the country is often among the later movers in transposing EU directives.

A portal tracking the status of the draft Accounting Act shows that it was last modified on 10 December 2022.

However, a comment dated June 2023, from the Zlín regional government, proposes postponing the date the law comes into effect to 1 January 2025. “We do not consider the law’s effective date of 1 January 2024 to be realistic,” it said.

Commission response 

RI asked the European Commission whether there was any flexibility for member states to take a “phased approach” to transposing the CSRD directive into law, highlighting the potential for delays in the Czech Republic.

In response, a spokesperson said that lack of complete transposition by a member state “undermines the establishment of an equal level playing field for the market within the EU”.

They added that infringement procedures may be launched against member states that have not notified complete transposition by the deadline, “to ensure quick and complete transposition”.

All member states have the obligation to fully transpose EU directives and to notify the national transposing measures to the Commission by the deadlines set out in relevant EU directives.