Czech Republic

Capital: Prague
Largest city: Prague
Official Language: Czech
Government: Unitary parliamentary constitutional republic
Area: 78,866 km2
Population: 10.7 million
Currency: Czech Koruna (CZK)
GDP total: CZK9.056 trillion (USD432 billion)
GDP per capita: CZK850,825.97 (USD40,585)
Time zone: UTC+1/+2
Calling code: +420
Internet TLD: .cz
[Source: Wikipedia]

Q&A on Commercial Litigation

What is the court structure applicable to commercial disputes in the Czech Republic?
There is always a court of first instance and a court of appeal.
For minor disputes, the court of first instance is the District Court. The appellate court is then the Regional Court.
For more complex disputes (like those regarding intellectual property rights, competition, securities, trades on the commodity exchange, mergers and acquisitions (M&A), violation of due care and diligence, etc.), the court of first instance is the Regional Court and the appellate court is the High Court.
The court structure is supervised by the Supreme Court and the Constitutional Court.
Who decides questions of law and fact in the Czech courts?
In commercial litigation, questions of both law and fact are decided by judges. There is no jury in the Czech courts.
What is the nature of legal representation in the Czech Republic? Do foreign lawyers have a right of audience in the Czech courts?
First, one can represent him or herself in commercial litigation (although this is rarely done).
Second, there are legal professionals to represent claimants and defendants before the courts. Such professionals are called “advokát” (solicitor or advocate).
Being an “advokát” is a regulated business. Each “advokát” has to be registered at https://vyhledavac.cak.cz/ .
Representation before the Czech courts is generally restricted to Czech lawyers. Nevertheless, there are certain exceptions – especially for lawyers from other EU countries.
What types of legal fee arrangements are generally adopted by Czech lawyers? To what extent are legal fees fixed by law?
There are two ways in which legal fees are determined.
The first is an official tariff or “price list”, set out by regulation. Tariff is rarely used in commercial litigation.
The second is a contractual fee. There are various arrangements, depending on the nature of the case and solicitor-client agreement. Starting from hourly billing, through to fixed payments and “no win – no fee” arrangements.
What are the time limits applicable to commercial disputes in the Czech Republic?
The general period of limitation is set by the Civil Code at 3 years from the date the claim arose. However, in some cases (real estate, securities) the time limits may differ.
Are there any pre-action discovery procedures available to a party who wishes to initiate a claim?
Pre-action discovery procedures are not regulated in the Czech legal system. Thus, the courts cannot give orders for the claimant party to discover documents/information.
What role does mediation play in the litigation process? Is mediation imposed as a prerequisite to a commercial claim or is strongly encouraged by the Czech courts?
Mediation is not a prerequisite, but it is strongly encouraged for the parties to a claim to mediate. In some cases the court may suspend the proceedings for the period of three months and order the parties to a mandatory meeting with a mediator for up to three hours. If the parties do not come to a settlement within the three-month period, the proceedings will resume thereafter.
How is a commercial claim initiated in the Czech courts?
A commercial claim is initiated at the moment the court receives a lawsuit (on paper or in an electronic form) submitted by the plaintiff.
What happens if a defendant fails to respond to a claim?
Qualified inactivity or a failure to respond may lead to an automatic loss of the dispute.
Are there any summary procedures which can be applied for by the plaintiff or defendant in a commercial claim?
There are several ways to receive quick judgment in uncomplicated cases. Most notably, there is a special lawsuit called “payment order” that follows strict rules and simplifies the whole court process.
What interim reliefs can a party seek to maintain the status quo or prevent further loss or damage pending the final decision of the Court?
There are two legal instruments.
The first is “preliminary measures” which is decided in shorter proceedings – there are strict time limits within which the judge must decide on a petition usually filed by the plaintiff, however the motion for preliminary measures can be filed even without filing a lawsuit. As a preliminary measure the court may command that the defendant in particular pay maintenance to a necessary extent, deposit a sum of money or a specific item with the custody of the court, not dispose of certain things or rights, do, omit or suffer something, etc.
The second is the “conservation of evidence” which is ordered before the commencement of the proceedings if there is a danger that the production of evidence will later not be possible.
What sort of evidence is required to support a commercial claim? How do the Czech courts evaluate oral and documentary evidence?
All evidence that is able to support your claim is useful. In the Czech Republic, there is no exhaustive list of means of evidence. You can use whatever you can prove your claim by.
The court evaluates the evidence at its own discretion. To reach the answer to questions of fact, the court weighs each proof individually and all proofs in their mutual connection; in doing so, the court takes account of all that was revealed in the proceedings, including what was stated by the participants.
When will a court consider expert evidence and how are expert opinions treated?
The court appoints an expert if the decision depends on the consideration of facts requiring professional knowledge.
In practice, expert evidence is used very often. Formally, they are treated in the same way as any other evidence. The courts usually follow the evidence of the experts.
Will parties be able to recover the costs incurred in pursuing a claim in court?
Yes, the winning party will be awarded a reimbursement of costs necessary to a useful exercise or defense of his right against the losing party.
How long do commercial claims take to be resolved in the Czech courts?
It depends on many aspects of the case, for example the amount of supporting evidence, the complexity of the case, the expertise of the court, cross-border complications etc.
The court proceedings may take up to a couple of months or it can go on for years, even for a decade. Cross-border disputes can last years (often involving multi-jurisdictional issues).
How can a successful party enforce a court judgment?
The losing party has three days (after the court’s decision is final and conclusive) to “voluntarily” fulfill its obligation laid out in the judgement.
If the party fails to oblige, the successful party may start a new proceeding to enforce the court judgement through a public authority or regulated enforcement professional.
Can an unsuccessful party appeal against a court’s decision?
Yes, the right of appeal is available to an unsuccessful party.
How does the Czech Republic approach the choice of governing law in a contract in cross-border litigation?
In commercial litigation (B2B), the choice of law by the parties to a contract is broadly accepted. This does not apply to individual or consumer (B2C) conflicts.
Are foreign judgments recognised by the Czech courts?
This depends on which country the foreign judgment is from. The judgments from members of the EU are always recognized. Regarding other countries, it depends on the area of law and whether or not there is a concluded treaty between that country and the Czech Republic.
How have the Czech courts responded to the Covid-19 pandemic to ensure that the litigation process remains effective while ensuring the health and safety of those involved in the process?
In 2020, many of the planned court hearings were cancelled.
Alongside the mandatory wearing of masks during the hearings, health and safety was ensured by mandatory testing at least once a week at the place of employment.
Unfortunately the Czech judiciary is not yet ready for online hearings.

ABOUT THE AUTHORS

Veronika Civínová
Lawyer, KLB Legal

Veronika graduated from the Faculty of Law, Charles University and also took the opportunity to study for a year at Sutherland School of Law, University College Dublin. She started her law practice in an international investment bank in 2012 and joined KLB Legal in 2015. Veronika focuses on financial markets and both their Czech and European regulation. On a long-term basis, she cooperates with leading Czech financial institutions. Furthermore, she is active in the area of issuing securities, including working on IPOs or prospectus and matters related to investment funds. Last but not least, she acts as a mentor in the area of compliance and money laundering prevention and is focused on FinTech and innovations in financial services.

Ondřej Kučera
Junior Lawyer, KLB Legal

Ondřej graduated from the Faculty of Law, Charles University in 2020. During his university studies, Ondřej spent one year in Grenoble, France, where he got a Diploma in French Law. He also completed several internships, in particular at the Ministry of Finance of the Czech Republic and in an international law firm affiliated with a consulting company. He joined KLB Legal in September 2020. Ondřej focuses mainly on capital markets law, corporate law and European law. On a long-term basis, he is active in the field of issuing securities, including composing prospectus, setting up alternative investment funds, anti-money laundering policy or mergers and acquisitions.

ABOUT THE FIRM

Name: KLB Legal
Address: Letenská 121/8, Malá Strana, 110 00, Praha 1, Czech Republic
Telephone: +420 739 013 183
Email: info@klblegal.cz
Website address: www.klblegal.cz
Key contact: Veronika Civínová, Lawyer, civinova@klblegal.cz
Established: 2013
Number of lawyers: 11
Languages: Czech, English, German

Brief description:

KLB Legal was founded in 2013 by attorneys-at-law David Kuboň, Vojtěch Láska and Petr Budzinski. David and Vojtěch have gained many years of experience working for international law firms and leading Czech investment banks; Petr was a top litigation attorney with experience in restructuring troubled companies. Since then, KLB Legal has grown into a medium-sized law firm providing comprehensive legal advice in all areas of law. In terms of the law of capital markets, compliance, securities, structured financing, investment funds, damages and class dispute settlement, we undoubtedly rank among the few top lawyers with such specialization and unique know-how in the Czech Republic.

Key practice areas:

Financial law, Capital Markets law, Corporate law, Damages, Injury Compensation, Litigations, General Civil law, Class Dispute Settlement, Insolvency law.

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