Dentons successfully represented Sev.en EC, a.s., an operator of the Czech power plant Chvaletice and a member of the Czech Coal group, before the Supreme Administrative Court of the Czech Republic. This extraordinary litigation was related to the reimbursement of gift tax from the Czech state, imposed onto the free carbon dioxide emission allowances in 2011 and 2012 in breach of EU law.
The Supreme Administrative Court decided the case in favor of Sev.en EC, and orderedthe tax authority to return the illegal tax and pay almost 15% in interest on the due amount. The ruling sets an important precedent, which will affect many operators throughout the Czech Republic.
The case was strongly driven by EU law, as the illicit tax was a result of a wrongly transposed Directive. The Court ruled the that the tax authority is obliged to know all legal norms on which the tax is based, including EU law, and in case of discrepancies, it is obliged to disregard national tax regulation in favor of directly applicable EU law. Therefore the conduct of the tax authority was indeed illegal and it has to be remedied through the award of interest.
Partner Petr Zákoucký, Head of the Dentons' Energy group in Prague, led the team handling the case, supported by associates Barbora Obračajová and Michal Pelikán.
Luboš Pavlas, CEO of Sev.en EC: “We deeply appreciate the professional approach of the entire Dentons team, their depth of knowledge, and their ability to successfully handle this complex and sensitive issue.”
Petr Zákoucký said: “The litigation included several unique aspects, never before litigated before the Czech courts. The Court’s ruling sets a significant precedent, which will hopefully influence the operations and conduct of Czech tax authority. This applies not only with respect to emission allowances, but also for the entire tax system in the Czech Republic.”