This country-specific Q&A provides an overview of the legal framework and key issues surrounding arbitration law in Czech Republic.
This Q&A is part of the global guide to Arbitration.
For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/index.php/practice-areas/arbitration/
What legislation applies to arbitration in your country? Are there any mandatory laws?
Czech arbitration law mainly consists of the Act No. 216/1994 Coll., on Arbitral Proceedings and the Enforcement of Arbitral Awards (Arbitration Act). It applies to arbitrations based on arbitration agreements concluded after 1st January 1995.
Most provisions of the Arbitration Act are modifiable and give the parties an option to influence the arbitral proceedings, nevertheless some provisions are mandatory. In particular, Section 18 of the Arbitration Act ensuring the parties an equal standing in arbitral proceedings and the opportunity to fully assert their rights.
The Czech Code of Civil Procedure has a supplemental role in arbitral proceedings on issues the Arbitration Act does not regulate. In such cases, provisions of the Civil Procedure Code shall apply accordingly (Section 30 of the Arbitration Act). Based on this principle of subsidiarity, state courts have ruled that some procedural rules originally designed to apply only to court proceedings should apply to arbitral proceedings as well, e.g. the duty to instruct parties that they have not outlined all decisive facts yet.
The recognition and enforcement of foreign arbitral awards is governed by the New York Convention, if an award was issued in a contracting state to the said convention. In other cases, the Act No. 91/2012 Coll., on Private International Law (the PIL Act), which entered into force on 1st January 2014, applies.
Is your country a signatory to the New York Convention? Are there any reservations to the general obligations of the Convention?
The Czech Republic itself has been a signatory to the New York Convention since 30th September 1993. Nevertheless, the Czech Republic is also a successor state to Czechoslovakia which has signed and ratified the Convention on 10th October 1959.
Upon signing of the Convention, Czechoslovakia made a reservation under article I(3) of the Convention, stating the following : ‘Czechoslovakia will apply the convention to recognition and enforcement of awards made in the territory of another contracting state. With regards to award made in the territory of non-contrating States it will apply the Convention only to the extent to which these states grant reciprocal treatment.’ This reservation applies as well to the Czech Republic.
What other arbitration-related treaties and conventions is your country a party to?
The Czech Republic is a party to the Geneva Convention on the Execution of Foreign Arbitral Awards (1927), the European Convention on International Commercial Arbitration (1961) and the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (1965).
Beside that, the Czech Republic is also a party to approximately 18 bilateral treaties on legal aid and 93 bilateral investment treaties.
Is the law governing international arbitration in your country based on the UNCITRAL Model Law? Are there significant differences between the two?
The UNCITRAL Model Law has not been officially adopted by the Czech Republic, but Czech arbitration law is largely in line with it. Differences relate for example to the following: arbitrators cannot issue interim measures (but state courts can) or the number of arbitrators must be odd.
Are there any impending plans to reform the arbitration laws in your country?
As the last amendments to the legislation came into force during 2017, there are currently no impending plans to reform the arbitration laws.
What arbitral institutions (if any) exist in your country? Have there been any amendments to their rules or are there any being considered?
There are currently three permanent arbitral institutions in the Czech Republic:
- The Arbitration Court attached to the Economic Chamber of the Czech Republic and the Agricultural Chamber of the Czech Republic
- The Exchange Court of Arbitration attached to the Prague Stock Exchange
- The International Arbitration Court attached to the Czech and Moravian Commodity Exchange
All these permanent arbitral institutions have their own set of rules and currently there are no indications about any amendments in the near future.
The most prominent arbitral institution is the the Arbitration Court attached to the Economic Chamber of the Czech Republic and the Agricultural Chamber of the Czech Republic; ad hoc arbitration is as well possible under Czech arbitral legislation.
What are the validity requirements for an arbitration agreement under the laws of your country?
In principle, the only formal requirement set by the Czech legislation is that the arbitration agreement must be in writing, otherwise it is invalid. However it is also possible to conclude the agreement by electronic means, if those enable to determine the content of the agreement and the identification of the respective parties to the agreement.
Are arbitration clauses considered separable from the main contract?
Yes, arbitration clauses are considered separable; this was as well confirmed by various rulings of the Supreme Court of the Czech Republic.
Is there anything particular to note in your jurisdiction with regard to multi-party or multi-contract arbitration?
The Arbitration Act is silent on this matter. However, the rules of the Arbitration Court attached to the Economic Chamber of the Czech Republic and the Agricultural Chamber of the Czech Republic regulate the topic of intervention and multi-party arbitration.
How is the law applicable to the substance determined? Is there a specific set of choice of law rules in your country?
Section 25 (3) of the Arbitration Act states the arbitrators shall decide based on the substantive law applicable to the particular case.
According to Section 119 of the PIL Act and also according to the Rome I Regulation, the applicable law is determined by the parties to the arbitral agreement. Absent such choice, the law applicable to a legal relationship is determined on the basis of the relevant conflict of laws rules.
There is also the possibility for the arbitrators to decide a case according to the principles of equity, if the parties expressly authorize such approach.
However, the admissibility of an arbitration agreement must be always decided under Czech law (Section 117 of the PIL Act).
Are any types of dispute considered non-arbitrable? Has there been any evolution in this regard in recent years?
According to Section 2 (1) of the Arbitration Act, any claim under property law is arbitrable, with the exception of disputes arising from consumer contracts, disputes connected to the enforcement of decisions and incidental disputes. A condition is also, that an arbitration agreement may be concluded only in cases where a settlement is possible (section 2 (2) of the Arbitration Act).
Legislation does not define expressively the term “property law dispute”, but according to Czech legal theory, these disputes are any disputes, where the value of the subject of the dispute is expressible.
The latest important evolution happened in 2016 - since 1st December 2016, disputes arising from consumer contracts are completely non-arbitrable and it is not possible to conclude an arbitration agreement for such cases.
In your country, are there any restrictions in the appointment of arbitrators?
Arbitrators have to be over the age of 18, have a full legal capacity and no prior criminal conviction, as set in Section 4 of the Arbitration Act. The parties are generally not limited in their choice of arbitrators, only in case of a court-appointment the court shall take into account the aspect of independence and impartial decision making of the arbitrators. Additionally, the arbitrator must consent to the appointment and the consent must be in writing (Section 5 of the Arbitration Act).
Naturally, an arbitrator is excluded from any proceedings and decision making, if there is reason to doubt his unbiasedness with regard to his relation to the subject of the dispute, the parties, or their legal representatives (Section 8 of the Arbitration Act).
Are there any default requirements as to the selection of a tribunal?
Based on section 7 (1) of the Arbitration Act the arbitration agreement should determine the number of arbitrators and the arbitrators themselves or at least set a method to determine these facts. In case the arbitration agreement is silent in this respect, each party shall appoint one arbitrator and the appointed arbitrators then appoint a third presiding arbitrator (section 7 (2) of the Arbitration Act). Another condition is, that the final number of arbitrators must be odd.
If one of the parties fails to appoint an arbitrator or if the party-appointed arbitrators fail to appoint the presiding arbitrator within 30 days from receiving notice from the other party, a state court shall appoint the remaining arbitrator upon a motion submitted by either party or by any of the already appointed arbitrators, as stated in section 9 (1) of the Arbitration Act.
Can the local courts intervene in the selection of arbitrators? If so, how?
As aforementioned (see above question 13), the state courts play a key role in appointing the arbitrators in case one of the parties fails to appoint an arbitrator or if the appointed arbitrators fail to appoint a presiding arbitrator.
Can the appointment of an arbitrator be challenged? What are the grounds for such challenge? What is the procedure for such challenge? Has there been an increase in number of challenges in your jurisdiction?
According to Section 12 of the Arbitration Act, the appointment can be challenged by either party under the circumstances of Section 8 (see above question 12), which means that the arbitrator is possibly biased and did not resign himself. The parties may agree on a procedure regarding the preclusion of an arbitrator. Any party can submit a motion to a state court to challenge/preclude an arbitrator.
However, according to rules Rules of the The Arbitration Court attached to the Economic Chamber of the Czech Republic and Agricultural Chamber of the Czech Republic, challenges must be brought prior to the commencement of the oral hearing. Later challenges will be taken into account only if there was a serious cause for the delay. The challenges are decided by the remaining members of the tribunal. If the remaining arbitrators do not agree, or if the challenge concerns two arbitrators or a sole arbitrator, it is decided by the Board of this permanent arbitral institution. If the challenge of the arbitrator is upheld, a new arbitrator shall be elected or appointed in accordance with the Rules.
There has been no increase in the number of challenges in the Czech Republic in recent years.
What happens in the case of a truncated tribunal? Is the tribunal able to continue with the proceedings?
The Arbitration Act is silent on this matter. In theory, the tribunal could continue, if the arbitration agreement concluded by the parties provides for appropriate provisions. But given the supplemental role of the Code of Civil Procedure arbitral proceedings, a substitute arbitrator should be appointed before continuing with the proceedings.
Are arbitrators immune from liability?
The Czech Arbitration Act does not contain any provisions on liability of arbitrators. Since the Civil Code applies subsequently in such cases, standard civil liability applies, even though there are certain specifics set by Czech Supreme Court case law, i.e. liability applies only if an arbitrator violates his duties and this leads directly to setting aside an award.
According to a decision of the Czech Constitutional Court, in case the arbitrator issues an award on behalf of an arbitral institution, the arbitration court is liable and not the arbitrator.
However, arbitrators generally have no immunity under Czech law.
Is the principle of competence-competence recognised in your country?
Yes, the principle of competence-competence is recognized in the Czech Republic. Under section 15 (1) of the Arbitration Act, arbitrators are entitled to rule on their own jurisdiction.
An objection by the parties can be raised according to section 15 (2) until the commencement of the proceedings, i.e the first action in the proceedings.
What is the approach of local courts towards a party commencing litigation in apparent breach of an arbitration agreement?
This situation is regulated under Section 106 of the Civil Procedure Code, stating that if an objection concerning the existence of an arbitration agreement is raised at the latest together with the first action in the proceedings, the state court shall terminate the proceedings. However, if no objection is raised or if the parties agree for the matter to be subject to court proceedings, the state court shall continue with the proceedings in accordance with the Civil Procedure Code.
How are arbitral proceedings commenced in your country? Are there any key provisions under the arbitration laws relating to limitation periods or time bars of which the parties should be aware?
The arbitral proceedings commence with an action, more precisely, when the action is delivered to a permanent arbitral court or an arbitrator, as regulated by Section 14 (1) of the Arbitration Act. The recipient of the action also has the obligation to mark the day of delivery on the action itself.
The limitation periods are subject to the substantive law, as regulated in section 609 and following of the Czech Civil Code. Czech arbitration law does not provide for any special limitation periods or time bars.
What happens when a respondent fails to participate in the arbitration? Can the local courts compel parties to arbitrate?
Under Czech law, no one can be compelled to participate in an arbitration. The respondents’ participation is not required and the proceedings can continue without it.
In what circumstances is it possible for a state or state entity to invoke state immunity in connection with the commencement of arbitration proceedings?
According to section 7 (1) of the PIL Act the Czech courts have no jurisdiction over foreign states in respect of proceedings arising out of their actions taken in the performance of their state, government and other public powers and functions, including their property, which is used or intended for such performance (acta iure imperii). The same principle applies to arbitral proceedings.
However, in other circumstances these immunities do not apply.
In what instances can third parties or non-signatories be bound by an arbitration agreement or award? Can local courts order third parties to participate in arbitration proceedings in your country?
Thirds parties or non-signatories can be bound by an arbitration agreement only in case of legal succession, as stipulated under section 2 (5) of the Arbitration Act.
No one can be compelled to participate in arbitration proceedings without their consent.
What interim measures are available? Will local courts issue interim measures pending the constitution of the tribunal?
According to Section 22 of the Arbitration Act, interim measures cannot be issued by arbitral tribunals, but a court can issue interim measures when the enforcement of the award is threatened, based on a motion filed by either party.
Are there particular rules governing evidentiary matters in arbitration? Will the local courts in your jurisdiction play any role in the obtaining of evidence?
Obtaining evidence during arbitral proceedings is rather complicated, as according to Section 20 (1) of the Arbitration Act arbitrators may interview witnesses, experts and the parties only if they agree. Other evidence may be collected by arbitral tribunals only if it is provided to them.
To the extent that the arbitral tribunal is not able to collect the evidence itself, it may file an application with the competent state court for evidentiary assistance (Section 20 (2) of the Arbitration Act). The state court will comply with such request, unless such collecting of evidence is prohibited by law.
What ethical codes and other professional standards, if any, apply to counsel and arbitrators conducting proceedings in your country?
Under Czech arbitration law there is no specific code of ethics for counsels and arbitrators.
How are the costs of arbitration proceedings estimated and allocated?
The Arbitration Act does not itself set rules regarding the costs of arbitration proceedings. Nevertheless, according to Section 13 (2) of the Arbitration Act, permanent arbitration courts may issue their own rules, including the regulation of costs of arbitration proceedings. In cases where there are no special rules issued, the Civil Procedure Code may be applied accordingly.
Generally it is possible to say, that the principle “loser pays” applies - the party that was not successful in the proceedings has to compensate the other party.
Can pre- and post-award interest be included on the principal claim and costs incurred?
The topic of interest rates is subject to the substantive law, as set in Section 1802 and following of the Civil Code and can be awarded upon request of the parties. Interests on costs cannot be awarded. Interests start running from the first day after the day of default until the claim is fully repaid. The general default interest rate in the Czech Republic is 8% plus the amount of the two-week repo set by the Czech National Bank.
What legal requirements are there in your country for the recognition of an award?
A domestic award is enforceable in the same way as a state court decisions according to Section 28 of the Arbitration Act.
Foreign awards are recognized and enforced based on the rules set by the New York Convention and are therefore treated as domestic awards, unless there is a reason for setting aside the award.
What is the estimated timeframe for the recognition and enforcement of an award? May a party bring a motion for the recognition and enforcement of an award on an ex parte basis?
As every case is different, it is impossible to give a reliable estimation.
By law awards are generally effective and enforceable from the day of their delivery to the parties (Section 28 (2) of the Arbitration Act).
Does the arbitration law of your country provide a different standard of review for recognition and enforcement of a foreign award compared with a domestic award?
As aforementioned, domestic awards are in terms of recognition and enforcement equal to Czech court decisions, whereas the recognition and enforcement of foreign awards is subject to the rules of the New York Convention.
According to the latest decisions of the Czech Supreme Court, foreign awards can be only enforced by Czech courts through the procedure available under the Civil Procedure Code rather than by private bailiffs under the Act No. 120/2001 Coll., the Enforcement Code.
Does the law impose limits on the available remedies? Are some remedies not enforceable by the local courts?
The Arbitration Act does not provide any details regarding this topic. The standard limitation is considered to be ordre public; a contrario remedy must be requested by the other party and must be in accordance with the domestic law.
Can arbitration proceedings and awards be appealed or challenged in local courts? What are the grounds and procedure?
Awards cannot be appealed. However, parties can agree in an arbitration agreement that an award will be reviewed by a new tribunal based on a request submitted by either party, as regulated in section 27 of the Arbitration Act.
An award can also be challenged in local courts under section 31 and following of the Arbitration Act upon a motion submitted by either party. The reasons for setting aside an award are the following:
- it is not possible to conclude an arbitration agreement on the subject matter (e.g. disputes arising from consumer contracts);
- the arbitration agreement is not valid for other reasons, or was cancelled or does not apply to the subject matter;
- an arbitrator was not supposed to decide the matter based on the arbitration agreement nor otherwise or he was not qualified to be an arbitrator at all;
- the award was not backed by the majority of the arbitrators;
- a party was not provided the opportunity to present its case;
- the award sentences a party to a remedy that was not requested by the other party or to a remedy that is not possible or allowed under domestic law;
- reasons to reopen civil proceedings have been discovered.
Can the parties waive any rights of appeal or challenge to an award by agreement before the dispute arises (such as in the arbitration clause)?
The parties can waive the right for review by not including it in the arbitration agreement.
To what extent might a state or state entity successfully raise a defence of state or sovereign immunity at the enforcement stage?
See above - question No. 22.
To what extent might a third party challenge the recognition of an award?
According to the Arbitration Act only the parties to the arbitration can challenge an award.
Have there been any significant developments with regard to third party funding in your jurisdiction recently?
Third party funding is not regulated under the Czech arbitration law and is therefore allowed based on the principle of contractual freedom. There have been no significant developments in the recent years on third party funding in the Czech Republic.
Is emergency arbitrator relief available in your country? Is this frequently used?
The concept of emergency arbitrator relief is unknown to Czech arbitration law.
Are there arbitral laws or arbitration institutional rules in your country providing for simplified or expedited procedures for claims under a certain value? Are they often used?
According to the rules of the the Arbitration Court attached to the Economic Chamber of the Czech Republic and the Agricultural Chamber of the Czech Republic, simplified procedures (i.e. proceedings without an oral hearing) are available if the parties agree in writing. The tribunal will then decide the case based on written evidence only.
Under the same rules, expedited procedures are possible, if at least one of the parties is willing to bear the increased fees.
Have there been any mass (arbitration) claims in your jurisdiction?
No, since class actions are not foreseen under Czech law.
Have measures been taken by arbitral institutions in your country to promote transparency in arbitration?
In the past, some awards have been published in an anonymized form in order to increase transparency.
Is diversity in the choice of arbitrators and counsel (e.g. gender, age, origin) actively promoted in your country? If so, how?
We are unaware about any action to promote diversity in the field of Czech arbitration.
Have there been any developments regarding mediation in your jurisdiction?
Mediation is a regulated alternative dispute resolution under Czech law. Furthermore, state courts and arbitral tribunals are encouraged to promote out-of-court settlements.
State courts may order parties to participate in a mandatory mediation hearing before the start of the court proceedings.
Have there been any recent court decisions in your country considering the setting aside of an award that has been enforced in another jurisdiction or vice versa?
We are unaware of any such recent decision.
Is corruption an issue that is regularly raised in your jurisdiction? What standard do local courts apply for proving of corruption?
Fortunately, in the recent past, corruption within the judiciary is not a hot topic.
In general corruption falls under the scope of criminal law and is therefore tackled by measures regulated by the Czech Code of Criminal Procedure.