This country-specific Q&A provides an overview of the legal framework and key issues surrounding international arbitration law in Czech Republic.
This Q&A is part of the global guide to International Arbitration.
For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/index.php/practice-areas/international-arbitration-4th-edition/
What legislation applies to arbitration in your country? Are there any mandatory laws?
The main law regulating arbitration in the Czech Republic is Act No. 216/1994 Coll., on Arbitral Proceedings and the Enforcement of Arbitral Awards (the Arbitration Act), whereas complementary to this law is Act No. 99/1963 Coll., the Civil Procedure Code. Furthermore, the Czech Republic is a signatory to the New York Convention and a party to several bilateral treaties.
As these are procedural law provisions, the vast majority of them are mandatory. However, some of the provisions enable the parties or the arbitrator to decide several crucial facets of proceedings, such as the composition of the arbitrators, the substantive law and pre-arbitration proceedings. By contrast, mandatory regulated aspects typically include arbitrability, arbitrator requirements and reasons for repealing arbitration awards.
Is your country a signatory to the New York Convention? Are there any reservations to the general obligations of the Convention?
Yes, the Czech Republic is a signatory to the New York Convention.
A reservation applies to the Czech Republic regarding the recognition and enforcement of awards from non-contracting states, as the Czech Republic applies the Convention only to the extent to which these states grant reciprocal treatment.
What other arbitration-related treaties and conventions is your country a party to?
Aside from bilateral treaties concerning legal aid, protection of foreign investments and so on, the Czech Republic is a party to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States and the European Convention on International Commercial Arbitration.
Is the law governing international arbitration in your country based on the UNCITRAL Model Law? Are there significant differences between the two?
Czech law governing arbitration is influenced by the UNCITRAL Model Law. However, there are differences between the two systems. For instance, arbitrability is more narrowly defined under Czech law and the arbitrators do not have some of the powers foreseen in the UNCITRAL Model Law. Arbitrators cannot, for instance, issue interim measures.
Are there any impending plans to reform the arbitration laws in your country?
There are currently no significant initiatives that could result in the reform of the rules governing arbitration.
What arbitral institutions (if any) exist in your country? When were their rules last amended? Are any amendments being considered?
Three permanent arbitration tribunals exist 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, and The International Arbitration Court attached to the Czech and Moravian Commodity Exchange.
However, only the first of these may decide on disputes falling within a general scope. The latter two tribunals may decide only on matters falling within the scope of activity of the Stock Exchange or the Commodity Exchange.
Each of these tribunals is established by law and adopts its own set of rules for arbitration proceedings. These rules were last amended across all tribunals in 2012, following complex amendments to the law governing arbitration in the Czech Republic. There are currently no indications that any of the rules will be substantially amended.
What are the validity requirements for an arbitration agreement under the laws of your country?
The special requirements for an arbitration agreement are that it must be in writing and there must be an explicit undertaking to transfer the dispute resolution to the arbitrator. Arbitration agreements may also be concluded by electronic means of communication. The scope of the disputes to be resolved in the arbitration proceedings must be specified (i.e. it is impossible to include all potential future disputes in an arbitration agreement).
Furthermore, as the arbitration agreement is a contract, it must meet the general requirements for contracts and legal acts under Czech law. Among other things, the arbitration arrangements must be definite and comprehensible.
Are arbitration clauses considered separable from the main contract?
Yes, the separability doctrine also applies under Czech law.
The arbitration clause is considered separable. In other words, If the underlying agreement becomes unenforceable, this does not automatically render the arbitration clause contained in the underlying agreement unenforceable.
Is there anything particular to note in your jurisdiction with regard to multi-party or multi-contract arbitration?
The law is silent regarding multi-party or multi-contract arbitration.
The permanent arbitration tribunals reflect this situation (e.g. with regards to the nomination of arbitrators).
In what instances can third parties or non-signatories be bound by an arbitration agreement?
Czech law states that arbitration agreements also bind the legal successor of the parties unless the parties expressly exclude this in their agreement.
How is the law applicable to the substance determined? Is there a specific set of choice of law rules in your country?
Unless the parties elect the applicable law, the governing law will be decided by the arbitrator on the basis of the Czech rules governing the conflicting laws.
Also, if authorized by the parties, the arbitrators may render their determination based on the principle of equity.
Are any types of dispute considered non-arbitrable? Has there been any evolution in this regard in recent years?
Under Czech law, property disputes are arbitrable if the parties are allowed to settle on the subject of the dispute, i.e. basically where is no public interest present. This is typical for property rights.
However, non-arbitrable disputes include those arising out of contracts concluded between a consumer and an entrepreneur (since 2016), enforcement disputes and incidental disputes (disputes within insolvency proceedings).
In your country, are there any restrictions in the appointment of arbitrators?
The arbitrators must be of full legal age, have full legal capacity and have no prior criminal conviction.
Arbitrators must be excluded from proceedings where there is reason to doubt their impartiality.
The arbitrators must consent to being appointed. This consent must be stated in writing.
Are there any default requirements as to the selection of a tribunal?
Unless decided otherwise, each party selects one arbitrator and each selected arbitrator select the final, chairing, arbitrator.
Regardless of the selection process, an odd number of arbitrators must be selected.
Can the local courts intervene in the selection of arbitrators? If so, how?
In case of ad hoc arbitration, the courts may be asked to appoint an arbitrator where any party or the arbitrators fail to select an arbitrator as provided for in the arbitration agreement or the relevant legal provisions. Moreover, the court may exclude an arbitrator upon the petition of one of the parties where reason to doubt his or her impartiality exists or becomes clear.
Disputes being resolved by a permanent arbitration tribunal shall be subject to the internal rules of that tribunal. For example, for disputes in the Arbitration Court attached to the Economic Chamber of the Czech Republic and the Agricultural Chamber of the Czech Republic, the panel or chair of the arbitration tribunal may intervene if one of the arbitrators has not been nominated.
Can the appointment of an arbitrator be challenged? What are the grounds for such challenge? What is the procedure for such challenge?
As stated in the previous point, a court may challenge the appointment of an arbitrator if there is reason to doubt his or her impartiality.
Moreover, where an arbitrator has participated in the arbitration proceedings despite not having been competent to do so, this will constitute grounds for the repeal of the arbitration award by the court.
The permanent arbitration tribunals also adopt their own additional rules for challenging arbitrator appointments. For instance, the Arbitration Court attached to the Economic Chamber of the Czech Republic and the Agricultural Chamber of the Czech Republic outlines a procedure whereby the other arbitrators in the tribunal decide on the impartiality or otherwise of the contested arbitrator.
What happens in the case of a truncated tribunal? Is the tribunal able to continue with the proceedings?
Truncated tribunals may be continued if so provided under the arbitration agreement. Otherwise, a substitute arbitrator must be appointed.
Are arbitrators immune from liability?
Basic civil liability may apply to the arbitrators if they are in violation of their duties and this leads to damages. Case law holds that arbitrators are especially liable where the arbitration award gets repealed by the court. Their liability is of a contractual nature.
Is the principle of competence-competence recognised in your country?
Yes, the arbitrators are entitled to consider and decide disputes that fall within their own jurisdiction. The parties may also contest the jurisdiction of the arbitrators, which may be performed no later than in the first action of arbitration proceedings.
What is the approach of local courts towards a party commencing litigation in apparent breach of an arbitration agreement?
The court proceedings may be terminated if the other party objects on the grounds that there is an arbitration clause. This objection must be raised no later than in the first action of court proceedings., otherwise the court proceeds with the civil litigation.
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?
Arbitration proceedings commence upon the delivery of an action to the arbitrator.
No special limitation periods are stipulated for arbitration, so the limitation periods laid down in substantive Czech civil law apply, which is three years in most cases.
In what circumstances is it possible for a state or state entity to invoke state immunity in connection with the commencement of arbitration proceedings?
There is no case-law or majority opinion on this subject. On the one hand, if a state or state entity concludes an arbitration agreement, it should be held by this agreement, but on the other hand, the Czech courts have no jurisdiction over foreign states as regards the performance of their public powers, including as regards their property which is used or intended for such performance and some authors argue this should apply also for commencement of arbitration proceedings.
What happens when a respondent fails to participate in the arbitration? Can the local courts compel participation?
Parties cannot be compelled to participate in arbitration proceedings. However, arbitration may be performed even if any of its parties does not take part.
Can local courts order third parties to participate in arbitration proceedings in your country?
No. Neither the parties themselves nor any third parties may be ordered to participate in the arbitration proceedings.
What interim measures are available? Will local courts issue interim measures pending the constitution of the tribunal?
Arbitration tribunals cannot issue interim measures; however, the courts may do so during the arbitration proceedings or before they commence.
Are there particular rules governing evidentiary matters in arbitration? Will the local courts in your jurisdiction play any role in the obtaining of evidence? Can local courts compel witnesses to participate in arbitration proceedings?
The arbitrators may perform every such actions only with the consent of participating persons. No other rules are set forth. On the other hand, some of the permanent arbitration tribunals adopt their own rules concerning evidentially matters.
The courts may perform procedural actions on the basis of a special demand from the arbitrator, including the obtaining of evidence, which cannot then be performed by the arbitrator himself. The courts perform all actions except those explicitly inadmissible under Czech law.
What ethical codes and other professional standards, if any, apply to counsel and arbitrators conducting proceedings in your country?
There are no well-known ethical codes for arbitrators. Nevertheless, they are bound by the rules of the permanent arbitration tribunals if they are functioning within the tribunal structure.
The counsels representing the parties in arbitration do not adopt any such self-regulation measures- Nevertheless, they must comply with extensive Czech Bar Association regulations, including ethical standards.
In your country, are there any rules with respect to the confidentiality of arbitration proceedings?
The rules governing arbitration impose a confidentiality duty upon the arbitrator, and this is one of the main obligations adopted by the arbitrator in accepting the role of arbitrator.
The parties or the court (where serious grounds exist) may relieve the arbitrator of the confidentiality duty.
How are the costs of arbitration proceedings estimated and allocated?
There are no special rules on the costs of arbitration and, therefore, the complementary provisions of the Civil Procedure Code will apply. The permanent arbitration tribunals adopt their own rules on the costs of arbitration.
Regarding allocation, the parties bear their own costs during arbitration, whereas the obligation to pay the counterparty’s costs of proceedings is usually imposed upon the losing party of the arbitration (the “loser pays” principle).
Can pre- and post-award interest be included on the principal claim and costs incurred?
Interest may be included on the principle claim.
What legal requirements are there in your country for the recognition and enforcement of an award? Is there a requirement that the award be reasoned, i.e. substantiated and motivated?
The Czech Republic is a party to the NY Convention and, therefore, domestic and foreign awards shall both be treated as if they are domestic awards.
There are no special requirements on the reasoning of arbitration awards.
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?
The estimate timeframe is 3-6 months. An award based on ex parte award might be recognised and enforced as well if the absent party had the possibility to participate in the proceeding.
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?
Foreign awards cannot be enforced through a private bailiff, but only through the courts.
Does the law impose limits on the available remedies? Are some remedies not enforceable by the local courts?
There are no limits on the claimed and enforced remedies, and all monetary remedies are enforceable. Otherwise, standard rules concerning public policy, etc., apply.
Can arbitration awards be appealed or challenged in local courts? What are the grounds and procedure?
The court may decide on appeals following a motion filed by one of the parties. This motion must be filed no later than three months after the arbitration award was delivered.
The reasons/defects are as follows:
- the dispute in the arbitration proceedings is not arbitrable (e.g. disputes arising from contracts with consumers);
- the arbitration agreement is not valid or has been overturned cancelled;
- an arbitrator was not qualified to decide on the matter;
- the award was not issued by a majority of the arbitrators;
- one of the parties was not given the opportunity to discuss the matter before the arbitrators;
- the arbitration award orders a party to perform a remedy that was not requested by the beneficiary or that is impossible or illegal under domestic law;
- grounds for requesting a retrial in civil proceedings have been ascertained; i.e. when facts emerge which one of the parties was unable to present in the main proceedings, or if evidence can be taken that could not be taken in the main proceedings.
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)?
Due to the mandatory nature of the rules outlined above on the repeal of arbitration awards, any such waiver will be disregarded.
To what extent might a state or state entity successfully raise a defence of state or sovereign immunity at the enforcement stage?
This question is debatable.
For details, see answer 22.
In what instances can third parties or non-signatories be bound by an award? To what extent might a third party challenge the recognition of an award?
Awards govern legal relations inter partes. Third parties and non-signatories are not bound by arbitration awards and may not therefore challenge them.
Have courts in your jurisdiction considered third party funding in connection with arbitration proceedings recently?
No. This avenue has not been considered in the Czech Republic. There are no limitations on third-party funding.
Is emergency arbitrator relief available in your country? Is this frequently used?
No such relief is available in the Czech Republic.
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?
Yes. The permanent arbitration tribunals offer such proceedings, some of which are available regardless of the value of the claim. These are often used
Have measures been taken by arbitral institutions in your country to promote transparency in arbitration?
The permanent arbitration tribunals mainly promote transparency by publishing the, anonymized, arbitration awards.
Is diversity in the choice of arbitrators and counsel (e.g. gender, age, origin) actively promoted in your country? If so, how?
No. We are not aware of such tendencies.
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 decision.
Recently, the Czech courts confirmed that it is impossible to enforce foreign awards through a private bailiff.
Is corruption an issue that is regularly raised in your jurisdiction? What standard do local courts apply for proving of corruption?
Corruption in arbitration panels or the judiciary is not a significant issue in the Czech Republic.
The common criminal law standard is required to prove a criminal conviction for corruption.
Have there been any recent court decisions in your country considering the definition and application of “public policy” in the context of enforcing or setting aside an arbitral award?
We are not aware of any such recent decision. Recent court decisions have considered the topic of the enforcement of the arbitration awards.
Have there been any recent court decisions in your country considering the judgment of the Court of Justice of the European Union in Slovak Republic v Achmea BV (Case C-284/16) with respect to intra-European Union bilateral investment treaties or the Energy Charter Treaty? Are there any pending decisions?
Although this decision was naturally followed by intense discussion, this has not so far been reflected in the decisions of the courts. Developments may be expected once the period imposing upon states the obligation to terminate the investments treaties has expired.
Have there are been any recent decisions in your country considering the General Court of the European Union’s decision Micula & ors (Joined Cases T-624/15, T-694/15 and T-694.15), ECLI:EU:T:2019:423, dated 18 June 2019? Are there any pending decisions?
This decision has not been reflected in Czech case law.