CZECH REPUBLIC

1. ARBITRATION

Arbitration in the Czech Republic is governed by Act No. 216/1994 Coll., on Arbitration Proceedings and the Implementation of Arbitral Awards (Arbitration Act) and applies to both domestic and international arbitration 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 rules of arbitration, which shall be published in the Commercial Bulletin.

Currently, three permanent arbitral institutions have been founded in the Czech Republic, the main one of which is the Arbitration Court attached to the Economic Chamber of the Czech Republic and the Agricultural Chamber of the Czech Republic (the “Arbitration Court”), founded in 1949. The other two are the Exchange Court 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 administers both domestic and international disputes. It adopted its Rules of the Arbitration Court effective as of 1 July 2012 and also offers several rules for specific cases such as Additional Procedures for On-line Arbitration Rules for Domestic Healthcare Payments Disputes, Additional Procedures for Consumer Disputes or Rules for .cz domain name dispute resolution. The Arbitration Court is the only arbitration court in the world for .eu domain name dispute resolution. All currently effective Rules and Additional Procedures, with the exemption of those applicable to consumer and healthcare payments disputes, are available in English on the Arbitration Court’s website (http://en.soud.cz/rules). The rules differ on various issues including procedure, 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 all disputes between them arising from their contractual relationship. In the agreement, the parties may agree whether 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 the resolution 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 be concluded in writing between the parties. The written component is deemed to be met if the agreement is contained in a telegram, a telex or another electronic means of communication. The agreement does not have 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 1 December 2016, a total ban has been introduced on arbitration as a dispute resolution mechanism between credit providers and consumers. From this time onwards, all consumer credit disputes may be resolved by civil courts only.

In arbitration proceedings, decisions regarding property disputes can only be issued in: (a) disputes linked to 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 and administrative matters are not arbitrable.

The parties are free to agree on the substantive law, the procedural rules, the seat and language of arbitration. In addition, the parties are free to agree on the number of arbitrators and their method of appointment. 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 in support of the enforcement of arbitral awards. Article 22 of the Arbitration Act therefore provides the courts with jurisdiction, upon application by any party, to order a preliminary measure or injunction if, during or prior to the commencement of arbitration proceedings, circumstances arise which are likely to jeopardize the enforcement of the arbitral award.

Generally, arbitral awards are enforceable by the courts and private (self-employed) judicial executors in the same manner as court judgments.

Arbitral awards may very rarely be challenged before the courts. The valid grounds for setting aside an arbitral award include the following:

-the award has been issued in a case in which no valid arbitration agreement has been concluded (lack of jurisdiction);

-the arbitration agreement is not valid for other reasons, has been terminated or does not concern the subject matter in dispute (lack of competence);

-an arbitrator participated in the arbitration proceedings whose appointment was neither based on the arbitration agreement nor on any agreement between the parties, or the individual appointed 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 an action 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 FOREIGN ARBITRAL AWARDS

Pursuant to the Czech Act on Arbitration, arbitral awards issued abroad shall be recognized and enforced by Czech Courts in the Czech Republic if reciprocity is guaranteed. Recognition of a foreign arbitral award does not require a special decision. The courts may only decline to recognize and enforce the foreign arbitral 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 of Foreign Arbitral Awards, with the reservations that the Convention will only be applied to the recognition and enforcement of awards made in the territory of another contracting state and with regard to awards made in the territory of non-contracting states, the Convention will only be applied to the extent to which those 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

PRACTICE TIPS

Document Production

The duration of arbitration proceedings can also be influenced by an agreement to have the arbitration award reviewed by a new arbitral tribunal.

The usual duration of arbitration proceedings is between 6 months and 2 years.

The arbitral tribunal evaluates all produced documents. The documents shall be submitted in the language in which the arbitration proceedings are conducted.

Approximate Costs

PROCEDURAL COSTS

Simple case

Complex case

ATTORNEYS’ FEES (NET)

Simple case

Complex case

Arbitration Proceedings

-The procedural costs depend on whether a sole arbitrator or an arbitral tribunal of three members is appointed, the complexity of the case, and the administrative charges.

-Arbitration costs are awarded against the losing party who must reimburse the winning party.

-Arbitration costs include fees, attorneys' fees and expenses for expert opinions and witnesses.

-The action shall not be tried until the fees are paid.

-In general, a special tariff for arbitration fees and administrative fees (lump-sum reimbursement of the costs of the arbitration court) applies to international disputes; in domestic disputes, the arbitration fees are 5% of the disputed amount, subject to a cap of CZK 1,000,000 (approx. EUR 40,000). The arbitration fee for domestic disputes in a foreign language is 50% higher.

-The fee for accelerated arbitration proceedings is 50% higher (accelerated proceedings take approx. 3 months in domestic disputes and 4 months in international disputes).

-If a sole arbitrator is appointed in an international dispute, the arbitration fee is reduced by 30% and the administrative fee is reduced by 20%.

Approximate Duration

Arbitration fees are based on the Rules for Costs of Arbitration Proceedings and depend on the amount in dispute.

The following two estimates are based on the Rules for Costs of Arbitration Proceedings at the Arbitration Court attached to the Economic Chamber of the Czech Republic and to the Agricultural Chamber of the Czech Republic:

Assumption: sole arbitrator appointed and an amount in a dispute of EUR 1,000,000:

domestic disputes: arbitration fee

EUR 30,000;

international disputes: arbitration fee (reduced by 30%) EUR 18,500 plus administrative fee (reduced by 20%)

EUR 15,000.

Assumption: sole arbitrator appointed and an amount in a dispute of EUR 10,000,000:

domestic disputes: arbitration fee EUR 40,000;

international disputes: arbitration fee (reduced by 30%) EUR 74,500 plus administrative fee (reduced by 20%)

EUR 26,500.

Assumptions based on an amount in dispute of EUR 1,000,000: preparation of the arbitration claim/responses, review of 100 pages of documents, nomination of the arbitral 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 in dispute of EUR 10,000,000: preparation of the arbitration claim/responses, review of 500 pages of documents, nomination of the arbitral tribunal, preparation and review of expert opinions, preparation of hearings and participation in meetings, meetings with the client, witnesses, and correspondence with client: 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. If the 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 claims up 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 exceeding CZK 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.

Approximate Costs

COURT FEES

ATTORNEYS’ FEES (NET)

Approximate Duration

6 to 12 months until a decision on recognition and enforcement is rendered in first instance. 5 to 10 months if the decision is appealed.

The duration of execution proceedings depends mainly on whether the debtor has executable assets and whether execution measures are opposed by the debtor.

For enforcement of awards under the New York Convention, the creditor must provide the court with the authenticated original award or a duly certified copy thereof and the original of the arbitration agreement 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

CONTACT

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+420 234 765 111

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www.wolftheiss.com/offices/czech-republic

PETR SYROVÁTKO

Counsel

Wolf Theiss, Czech Republic

+420 234 765 231

petr.syrovatko@wolftheiss.com