Arbitration in the Czech Republic is governed by Act No. 216/1994 Coll., on Arbitration Proceedings andthe Implementation of Arbitral Awards (Arbitration Act) and applies to both domestic and internationalarbitration proceedings.
Under the Arbitration Act, a permanent court of arbitration may only be established by an Act of Parliament(Article 13 Arbitration Act). A permanent arbitration court is empowered to enact its own statute and rulesof arbitration, which shall be published in the Commercial Bulletin.
Currently, three permanent arbitral institutions have been founded in the Czech Republic, the main one ofwhich is the Arbitration Court attached to the Economic Chamber of the Czech Republic and the AgriculturalChamber of the Czech Republic (the “Arbitration Court”), founded in 1949. The other two are the ExchangeCourt of Arbitration and the Arbitration Court of the Czech Moravian Commodity Exchange Kladno.
The Arbitration Court is the major permanent arbitral institution in the Czech Republic and administersboth domestic and international disputes. It adopted its Rules of the Arbitration Court effective as of 1 July2012 and also offers several rules for specific cases such as Additional Procedures for On-line ArbitrationRules for Domestic Healthcare Payments Disputes, Additional Procedures for Consumer Disputes orRules for .cz domain name dispute resolution. The Arbitration Court is the only arbitration court in theworld for .eu domain name dispute resolution. All currently effective Rules and Additional Procedures, withthe exemption of those applicable to consumer and healthcare payments disputes, are available in Englishon the Arbitration Court’s website (http://en.soud.cz/rules). The rules differ on various issues includingprocedure, fees charged and the language and place in which proceedings are heard.
Pursuant to the Arbitration Act, the parties may conclude an arbitration agreement that governs any or alldisputes between them arising from their contractual relationship. In the agreement, the parties may agreewhether the arbitration shall be decided by one or more arbitrators, or by an established arbitral institution.The parties may also specify in their agreement what procedural rules, or substantive law will apply to theresolution of the dispute.
The parties may agree to arbitrate disputes that have already arisen (compromise or submission agreement),or disputes that may arise in the future. However, in order for an arbitration agreement to be valid, it must beconcluded in writing between the parties. The written component is deemed to be met if the agreement iscontained in a telegram, a telex or another electronic means of communication. The agreement does nothave to be signed, but the will of both parties to enter into the agreement must be clear.
Since the Act No. 257/2016 Coll., on Consumer Credit ("Consumer Credit Act"), came into effect on 1December 2016, a total ban has been introduced on arbitration as a dispute resolution mechanismbetween credit providers and consumers. From this time onwards, all consumer credit disputes may beresolved by civil courts only.
In arbitration proceedings, decisions regarding property disputes can only be issued in: (a) disputes linkedto the enforcement of the decision; (b) disputes arising within the course of insolvency proceedings; and(c) competence disputes. Disputes relating to personal status, marital status, family law matters andadministrative matters are not arbitrable.
The parties are free to agree on the substantive law, the procedural rules, the seat and language ofarbitration. In addition, the parties are free to agree on the number of arbitrators and their method ofappointment. However, there must always be an odd number of arbitrators.
Arbitral tribunals do not have the authority to order interim measures of protection, or to grant injunctions insupport of the enforcement of arbitral awards. Article 22 of the Arbitration Act therefore provides the courtswith jurisdiction, upon application by any party, to order a preliminary measure or injunction if, during orprior to the commencement of arbitration proceedings, circumstances arise which are likely to jeopardizethe enforcement of the arbitral award.
Generally, arbitral awards are enforceable by the courts and private (self-employed) judicial executors inthe same manner as court judgments.
Arbitral awards may very rarely be challenged before the courts. The valid grounds for setting aside anarbitral award include the following:
-the award has been issued in a case in which no valid arbitration agreement has beenconcluded (lack of jurisdiction);
-the arbitration agreement is not valid for other reasons, has been terminated or does notconcern the subject matter in dispute (lack of competence);
-an arbitrator participated in the arbitration proceedings whose appointment was neither basedon the arbitration agreement nor on any agreement between the parties, or the individualappointed as the arbitrator did not possess the legal capacity to act as arbitrator;
-the award was not adopted by a majority of the arbitrators;
-a party was not given the opportunity to plead its case before the arbitral tribunal;
-the award obligated a party to an action that was not requested by the other party, or to anaction which is not permitted under domestic law; or
-it is determined that reasons exist, which provide a sufficient justification for reopening the case.
2. ENFORCEMENT OF FOREIGNARBITRAL AWARDS
Pursuant to the Czech Act on Arbitration, arbitral awards issued abroad shall be recognized and enforcedby Czech Courts in the Czech Republic if reciprocity is guaranteed. Recognition of a foreign arbitral awarddoes not require a special decision. The courts may only decline to recognize and enforce the foreignarbitral award under limited conditions based on the petition of the party obliged by the award.
The Czech Republic is a party to the New York Convention of 1958 on the Recognition and Enforcement ofForeign Arbitral Awards, with the reservations that the Convention will only be applied to the recognitionand enforcement of awards made in the territory of another contracting state and with regard to awardsmade in the territory of non-contracting states, the Convention will only be applied to the extent to whichthose states grant reciprocal treatment.
The Czech Republic is also a party to the 1961 European Convention on International Commercial Arbitration.
PROCEDURE AND ASSUMPTIONS
TYPE OF PROCEEDINGS
The duration of arbitration proceedings canalso be influenced by an agreement to havethe arbitration award reviewed by a newarbitral tribunal.
The usual duration of arbitration proceedingsis between 6 months and 2 years.
The arbitral tribunal evaluates all produced documents. The documents shall be submitted inthe language in which the arbitration proceedings are conducted.
ATTORNEYS’ FEES (NET)
-The procedural costs depend onwhether a sole arbitrator or an arbitraltribunal of three members is appointed,the complexity of the case, and theadministrative charges.
-Arbitration costs are awarded againstthe losing party who must reimbursethe winning party.
-Arbitration costs include fees, attorneys'fees and expenses for expert opinionsand witnesses.
-The action shall not be tried until thefees are paid.
-In general, a special tariff for arbitrationfees and administrative fees (lump-sumreimbursement of the costs of thearbitration court) applies to internationaldisputes; in domestic disputes, thearbitration fees are 5% of the disputedamount, subject to a cap of CZK1,000,000 (approx. EUR 40,000). Thearbitration fee for domestic disputes ina foreign language is 50% higher.
-The fee for accelerated arbitrationproceedings is 50% higher (acceleratedproceedings take approx. 3 months indomestic disputes and 4 months ininternational disputes).
-If a sole arbitrator is appointed in aninternational dispute, the arbitration feeis reduced by 30% and theadministrative fee is reduced by 20%.
Arbitration fees are based on the Rules forCosts of Arbitration Proceedings anddepend on the amount in dispute.
The following two estimates are based on theRules for Costs of Arbitration Proceedings atthe Arbitration Court attached to theEconomic Chamber of the Czech Republicand to the Agricultural Chamber of the CzechRepublic:
Assumption: sole arbitrator appointedand an amount in a dispute of EUR1,000,000:
domestic disputes: arbitration fee
international disputes: arbitration fee(reduced by 30%) EUR 18,500 plusadministrative fee (reduced by 20%)
Assumption: sole arbitrator appointedand an amount in a dispute of EUR10,000,000:
domestic disputes: arbitration fee EUR40,000;
international disputes: arbitration fee(reduced by 30%) EUR 74,500 plusadministrative fee (reduced by 20%)
Assumptions based on an amount indispute of EUR 1,000,000: preparation ofthe arbitration claim/responses, review of100 pages of documents, nomination of thearbitral tribunal, preparation of the hearings(meetings with client, witnesses,correspondence with client): in total
EUR 28,000 to EUR 60,000.
Assumptions based on an amount indispute of EUR 10,000,000: preparation ofthe arbitration claim/responses, review of500 pages of documents, nomination of thearbitral tribunal, preparation and review ofexpert opinions, preparation of hearings andparticipation in meetings, meetings with theclient, witnesses, and correspondence withclient: in total EUR 50,000 to EUR 200,000.
Enforcement of Foreign Arbitral Awards
The court fees are based on the Court Fees Act.
In case of monetary performance, the fee is calculated based on the amount in dispute. Ifthe amount in dispute is:
-up to CZK 20,000, the court fee is CZK 1,000;
-from CZK 20,000 to CZK 40,000,000, the court fee is 5% of the total value of the claimsup to a maximum amount of CZK 2,000,000;
-above CZK 40,000,000, the court fee is CZK 2,000,000 and 1 % of the value exceedingCZK 40,000,000.
A value higher than CZK 250,000,000 is not taken into account.
Court fees in cases of non-monetary performance:
-clearance of real estate: CZK 5,000;
-other forms of enforcement: CZK 2,000
Application for recognition/enforcement of a foreign judgment:
Simple case: EUR 500 to EUR 1,000.
Complex case: EUR 1,000 to EUR 3,000.
ATTORNEYS’ FEES (NET)
6 to 12 months until a decision on recognitionand enforcement is rendered in first instance.5 to 10 months if the decision is appealed.
The duration of execution proceedingsdepends mainly on whether the debtor hasexecutable assets and whether executionmeasures are opposed by the debtor.
For enforcement of awards under the NewYork Convention, the creditor mustprovide the court with the authenticatedoriginal award or a duly certified copythereof and the original of the arbitrationagreement or a duly certified copy thereof.
The information in this chapter was correct as of 1 January 2018. If you have any questions about the content of this chapter,
or would like further information about arbitration in the Czech Republic, please contact