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A new mechanism for the conditional discontinuation of criminal prosecution has now been applied in Czech practice for the first time. In August 2026, just weeks after it entered into force on 1 July 2026, a public prosecutor conditionally discontinued the criminal prosecution of Ferrit, a mining machinery manufacturer based in Frýdlant nad Ostravicí. Investigators suspect the company of circumventing sanctions against Russia by supplying seven embargoed machines through intermediaries in third countries. The decision was made public in early October 2026 by the spokesperson of the High Public Prosecutor's Office in Olomouc.
According to published information, before the decision was issued, the company paid EUR 1,058,635 (approximately CZK 26m) in financial assistance to victims of crime, and the prosecutor set a probationary period of 12 months. In parallel, four of the company's managers, including its managing director, concluded plea agreements providing for fines of CZK 150,000 to CZK 500,000, subject to court approval, while the prosecution of two other individuals was discontinued. The case demonstrates that the new mechanism is not merely theoretical: a company that cooperates with the authorities and takes substantial remedial steps may avoid a conviction altogether. It also provides the first practical illustration of the growing role of compliance and post-offence remedial measures, which is described in more detail below.
With effect from 1 July 2026, a new procedural mechanism has been introduced in criminal proceedings against legal entities: conditional discontinuation of criminal prosecution. As the Ferrit case shows, it is already being applied in practice.
Unlike other alternative means of resolving criminal proceedings, this mechanism may be applied at any stage of the criminal proceedings. Importantly, it does not require the legal entity to declare that it committed the alleged offence. This distinguishes it from a plea agreement and may be advantageous not only from a legal perspective, but also for commercial and reputational reasons.
The basic conditions for conditional discontinuation of criminal prosecution are set out in Section 37b et seq. of Act No. 418/2011 Coll., on the Criminal Liability of Legal Entities and Proceedings Against Them. These include, for example, the consent of the legal entity and compensation for the damage caused. The applicable conditions may also include a requirement for the legal entity to prepare and implement preventive and remedial measures, where the authorities involved in the criminal proceedings consider such measures justified in light of the specific circumstances of the case. These may relate to the nature and seriousness of the criminal offence, the circumstances in which it was committed, or the circumstances of the legal entity concerned. The new mechanism therefore offers companies a genuine opportunity to avoid a criminal conviction by demonstrating a willingness to cooperate and remedy the situation.
As Czech criminal law already provides for a similar legal mechanism in relation to natural persons, its application should not, despite certain specific features arising from the nature of legal entities, present significant difficulties in practice.
Criminal liability of legal entities has been part of Czech law since 1 January 2012, and its significance has grown considerably in recent years. Companies face not only closer scrutiny by public authorities but also increasingly sophisticated investigations by the police and public prosecutors, both technically and methodologically. The risk of criminal prosecution is therefore a genuine concern for any company that underestimates the importance of preventing unlawful conduct by its employees and management. Against this backdrop, compliance (a system of internal rules and control mechanisms designed to ensure adherence to legal requirements and prevent unlawful conduct) is becoming increasingly important.
The new Act No. 270/2025 Coll. (the "Amendment") introduced substantial changes to the criminal liability of legal entities with effect from 1 January 2026, and in certain respects from 1 July 2026.
In addition to the conditional discontinuation of criminal prosecution, the Amendment also strengthens the role of compliance programmes, building on the existing possibility for a legal entity to avoid criminal liability. The court will now also take into account (a) whether the legal entity has effective preventive measures in place to ensure compliance with legal regulations and prevent criminal activity; and (b) the legal entity's conduct after the criminal offence was committed, particularly whether it made effective efforts to compensate for the damage or remedy other harmful consequences of the offence, and to introduce effective preventive and remedial measures aimed at preventing the recurrence of the same or similar criminal activity.
This means that, in addition to the so-called compliance management system ("CMS") that was already in place and functioning at the time of the criminal offence, the court will also assess the company's conduct following the offence, including whether it responded by taking appropriate ex post compliance measures. A legal entity therefore has a genuine opportunity to mitigate the consequences of a criminal offence it has committed, right up until the judgment is handed down. For companies, this means that even after misconduct has occurred, it is not necessarily too late to act and invest in remedial measures.
The changes introduced in 2026 clearly indicate the direction in which the Czech legal framework is moving: companies with effective compliance systems may benefit from more lenient sentences or even avoiding a conviction altogether. Conversely, companies that underestimate compliance face increasing risks. Investment in prevention is therefore becoming not only a matter of legal protection but also a sound business decision.
Importantly, the Amendment also applies to criminal proceedings that have already been initiated. Companies should therefore consider introducing or improving their CMS even where a violation has already occurred or they are already under investigation or prosecution.
A properly established CMS, incorporating an appropriate risk assessment, internal rules, control mechanisms and remedial measures, can help companies mitigate the risks of criminal liability for both the company itself and its management.
Authors: Rudolf Bicek, Radim Obert and Sára Barčáková