Czech Republic: International Arbitration Comparative Guide

Last Updated: 16 October 2019
Article by Vladimír Čížek
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1 Legal framework

1.1 What is the relevant legislation on arbitration in your jurisdiction? Are there any significant limitations on the scope of the statutory regime – for example, does it govern oral arbitration agreements?

Arbitration is governed by national law and international conventions. However, the standard rules of three permanent institutions and the UNCITRAL Model Law on International Commercial Arbitration also have a decisive role.

The Czech legislation on arbitration is Act 216/1994 Coll, on Arbitration Proceedings and on Enforcement of Arbitration Awards, which regulates issues relating to the arbitration agreement and the arbitrators, and distinguishes between ad hoc arbitration and institutional arbitration.

Unless the law stipulates otherwise, the provisions of Act 99/1963 Coll, Civil Procedure Code, shall also apply to the arbitration proceedings.

Oral arbitration agreements are inadmissible. The arbitration agreement must be concluded in writing; otherwise, it is invalid.

1.2 Does this legislation differentiate between domestic arbitration and international arbitration? If so, how is each defined?

No. Some states do not distinguish between domestic and international arbitration; the Czech Republic is one such state. However, for special issues with an international element, special applicable regulations are incorporated directly into the Arbitration Act.

1.3 Is the arbitration legislation in your jurisdiction based on the UNCITRAL Model Law on International Commercial Arbitration?

The Arbitration Act is not based on the UNCITRAL Model Law, but it is strongly influenced by the Model Law insofar as is compatible with the current legal and economic situation in the Czech Republic.

1.4 Are all provisions of the legislation in your jurisdiction mandatory?

Although most provisions of the legislation have mandatory application, a small percentage are left at the disposal of the parties to the arbitration agreement. For example, "Unless the parties agree otherwise, the proceedings shall be conducted orally".

1.5 Are there any current plans to amend the arbitration legislation in your jurisdiction?

The Arbitration Act was significantly amended in 2016. Among other things, the revisions excluded consumer disputes from arbitration; these are now subject to resolution solely by a competent court. The most recent amendment of the Arbitration Act was in 2017, which assigned subject-matter jurisdiction for decisions on the invalidity of arbitration agreements to the regional courts.

There are no known plans to further amend the arbitration legislation in the near future.

1.6 Is your jurisdiction a signatory to the New York Convention? If so, have any reservations been made?

Yes – the Czech Republic ratified the New York Convention on 27 April 1959.

The Czech Republic has reserved the principle of reciprocity (Article I(3) of the New York Convention). Therefore, the convention applies only to the recognition and enforcement of awards made in the territory of another contracting state.

1.7 Is your jurisdiction a signatory to any other treaties relevant to arbitration?

Yes – the Czech Republic is a signatory to the following multilateral treaties regarding arbitration:

  • the European Convention on International Commercial arbitration
  • the Convention on the Settlement of Investment Disputes between States and Nationals of Other States; and
  • the Geneva Convention on the Execution of Foreign Arbitral Awards.

Additionally, the Czech Republic is a party to many bilateral treaties which provide for mutual assistance in the recognition and enforcement of arbitral awards.

2 Arbitrability and restrictions on arbitration

2.1 How is it determined whether a dispute is arbitrable in your jurisdiction?

According to the Arbitration Act, only property disputes are arbitrable, except for disputes arising from consumer contracts, disputes relating to enforcement of a decision and disputes that arise from bankruptcy.

In addition, an arbitration agreement may be validly concluded only if the dispute between the parties can be resolved by concluding a judicial settlement.

Disputes relating to personal status, marital status, family law matters and administrative matters are not arbitrable.

2.2 Are there any restrictions on the choice of seat of arbitration for certain disputes?

No – the seat of arbitration is increasingly specified in the arbitration agreement.

If the seat is not determined by the parties, the proceedings shall take place at a location determined by the arbitrators, having regard to the lawful interests of the parties.

3 Arbitration agreement

3.1 What are the validity requirements for an arbitration agreement in your jurisdiction?

Pursuant to the Arbitration Act, the arbitration agreement must be concluded in writing. An arbitration agreement concluded by telegraph, fax or other electronic means is also considered to have been made in writing if the contents and the parties to the agreement can be identified.

3.2 Are there any provisions of legislation or any other legal sources in your jurisdiction concerning the separability of arbitration agreements?

Yes – pursuant to Czech case law, the invalidity of the main contract will not automatically invalidate the arbitral agreement and vice versa.

3.3 Are there provisions on the seat and/or language of the arbitration if there is no agreement between the parties?

The arbitration proceedings shall take place at the location agreed by the parties. If the parties have not agreed on the seat, the proceedings shall take place at a location determined by the arbitrators, having regard to the lawful interests of the parties.

If the parties have not agreed on the language of the proceedings, the arbitrators shall conduct the proceedings in the language they consider most suitable, so that the factual basis to decide on the case may be determined without unnecessary formalities and the parties are given equal opportunities to assert their rights.

4 Objections to jurisdiction

4.1 When must a party raise an objection to the jurisdiction of the tribunal and how can this objection be raised?

An objection of lack of jurisdiction due to the nonexistence, invalidity or expiry of the arbitration agreement may be raised no later than at the point of the objecting party's first procedural act concerning the merits.

4.2 Can a tribunal rule on its own jurisdiction?

Pursuant to the Arbitration Act, the arbitrators are entitled to decide on their jurisdiction. Should they find that they have no jurisdiction to decide the case, they shall issue a decree to this effect.

4.3 Can a party apply to the courts of the seat for a ruling on the jurisdiction of the tribunal? In what circumstances?

A court is not competent to rule on the jurisdiction of the tribunal. However, the court may annul an arbitration award upon the request of a party if any of the arbitrators who took part in the proceedings was not called to decide on the case based on the arbitration agreement or otherwise, or was incapable of serving an arbitrator.

If the arbitration award is annulled for one of these reasons, and unless the parties agree otherwise, the arbitrators who issued the annulled arbitration award shall be excluded from deciding on the case afresh.

5 The parties

5.1 Are there any restrictions on who can be a party to an arbitration agreement?

The procedural competence of a Czech citizen is determined according to the Czech legal order; the parties must have legal capacity to conclude the contract and must be at least 18 years old.

5.2 Are the parties under any duties in relation to the arbitration?

The parties to an arbitration agreement are under an obligation not to bring their dispute before the courts – the power to resolve the dispute rests with the arbitrator alone.

5.3 Are there any provisions of law which deal with multi-party disputes?

The Arbitration Act does not regulate multi-party arbitration.

The Arbitration Act provides that an arbitration agreement shall also bind the parties' legal successors, unless the parties have explicitly excluded this. Therefore, third parties may not participate in arbitration without the consent of the parties.

The Rules of the Czech Arbitration Court contain several provisions on multi-party disputes; any party with a legal interest in the result of the proceedings may participate in the proceedings as an intervening party.

6 Applicable law issues

6.1 How is the law of the arbitration agreement determined in your jurisdiction?

According to the Arbitration Act, arbitrators should apply the substantive law that is applicable to the dispute. They may decide on fair and equitable grounds only when expressly authorised to do so by the parties. In consumer-related matters, the arbitrators must always apply the legal regulations on consumer protection.

6.2 Will the tribunal uphold a party agreement as to the substantive law of the dispute? Where the substantive law is unclear, how will the tribunal determine what it should be?

According to the Private International Law Act and the Rome I Regulation, a contract shall be governed by the law chosen by the parties. The parties may select the law applicable to the whole contract or only part thereof. In the absence of such choice, pursuant to the Private International Law Act and the Rome I Regulation, a contract shall be governed by the substantive law of the state to which it has the closest connection. Under the Private International Law Act, the substantive law applicable to rights in rem is the law of the state where the property is located. Intellectual property rights shall be governed by the law of the state where such rights are recognised and protected.

7 Consolidation and third parties

7.1 Does the law in your jurisdiction permit consolidation of separate arbitrations into a single arbitration proceeding? Are there any conditions which apply to consolidation?

The Arbitration Act does not regulate this issue.

7.2 Does the law in your jurisdiction permit the joinder of additional parties to an arbitration which has already commenced?

The law includes no provisions in this regard. The expert view is that joinder of third parties would violate a fundamental principle of arbitration: the confidentiality of the arbitration proceedings. The case law permits only joinder of interveners, as this does not violate this principle too severely.

7.3 Does an arbitration agreement bind assignees or other third parties?

Pursuant to the Arbitration Act, the arbitration agreement shall also bind the legal successors of the parties, unless the parties have explicitly excluded this.

8 The tribunal

8.1 How is the tribunal appointed?

The arbitration agreement should usually specify the number of arbitrators and who will serve as arbitrators, or the way in which these issues will be determined. There must be an odd number of arbitrators.

Unless the arbitration agreement states otherwise, each party shall appoint one arbitrator and these arbitrators shall elect the presiding arbitrator.

If a party fails to appoint an arbitrator within 30 days of delivery of the other party's request to do so, or if the appointed arbitrators fail to agree on the presiding arbitrator, the arbitrators or presiding arbitrator shall be appointed by the court, unless the parties have agreed otherwise. The application to court may be filed by any party or by any of the appointed arbitrators.

8.2 Are there any requirements as to the number or qualification of arbitrators in your jurisdiction?

The Czech legislation includes no requirements as to the number of arbitrators; the arbitration agreement shall determine the number of arbitrators to be appointed. As regards other requirements, arbitrators must be over 18 years old, have full legal capacity and have no criminal convictions.

Arbitrators must accept their appointment in writing and may resign only for important reasons or with the consent of the parties.

Arbitrators must also be independent and impartial.

8.3 Can an arbitrator be challenged in your jurisdiction? If so, on what basis? Are there any restrictions on the challenge of an arbitrator?

An arbitrator may be challenged because of his or her relationship to the parties, to their representatives or to the matter in dispute. An arbitrator who has already been appointed must resign from the position if such circumstances are disclosed.

Unless the arbitrator resigns, the parties may agree on the procedure for his or her exclusion. Any party may ask the court for the exclusion of an arbitrator.

8.4 If a challenge is successful, how is the arbitrator replaced?

Where an arbitrator is excluded, a replacement must be appointed so that the tribunal has the full complement of arbitrators specified in the arbitration agreement. The new arbitrator is appointed in the same way as his or her predecessor (if the first arbitrator was appointed by one of the parties, that party has the right to appoint the new arbitrator).

8.5 What duties are imposed on arbitrators? Are these all imposed by legislation?

The Arbitration Act requires an arbitrator to keep the proceedings confidential and to inform the parties of any grounds to doubt his or her impartiality. Some duties arise from the Arbitration Act, such as the duty to proceed in compliance with the arbitration agreement.

An arbitrator is also bound by the Civil Procedure Code. According to the code, an arbitrator has a duty to inform the parties if the factual basis has not been fully established or if the parties have not yet presented relevant evidence, as well as the consequences of ignoring this call. The Civil Procedure Code also imposes a duty to release a predictable judgment in compliance with substantive law.

Other obligations may be imposed by the arbitration agreement.

8.6 What powers does an arbitrator have in relation to: (a) procedure, including evidence; (b) interim relief; (c) parties which do not comply with its orders; (d) issuing partial final awards; (e) the remedies it can grant in a final award and (f) interest?

(a) Procedure, including evidence?

The arbitrators may hear witnesses, experts and parties only if they agree and voluntarily provide a statement. Other evidence may be examined only if it has been provided to the arbitrators. Procedural measures that the arbitrators are unable to carry out themselves may be carried out by the court on the arbitrators' request. The court shall satisfy this request unless the requested measure is inadmissible according to law. In doing so, the court shall issue all decisions necessary to realise the request.

(b) Interim relief?

The Arbitration Act does not give the arbitrators the power to order preliminary measures or to grant injunctions. If it becomes clear during the proceedings, or even before their commencement, that enforcement of the arbitration may be jeopardised, the court may order preliminary measures upon the request of a party.

(c) Parties which do not comply with its orders?

The arbitrators may hear parties only if they agree and voluntarily provide a statement. Parties cannot be forced to participate in arbitration proceedings.

(d) Issuing partial final awards?

The Arbitration Act does not regulate this issue. However, pursuant to the Civil Procedure Code, a court may issue a partial final decision, so this could also apply to arbitration proceedings.

Pursuant to the Civil Procedure Code, a judgment should deal with the whole case. However, where this is useful, the court may first issue a judgment dealing with only part of the case or with the basis thereof.

(e) The remedies it can grant in a final award?

The parties may agree to have the arbitral award reviewed by other arbitrators, but only if they have expressly agreed to this in the arbitration agreement.

(f) Interest?

The arbitral tribunal can, if requested, include interest on the principal amount awarded in the decision on the merits. The amount of interest that may be included is regulated by Czech law.

8.7 How may a tribunal seated in your jurisdiction proceed if a party does not participate in the arbitration?

If any of the parties does not take part in the proceedings, either fully or partially, through no fault of its own, or fails to perform any legal act necessary to exercise its right through no fault of its own, the arbitrators shall take appropriate measures to allow the party to make up for this.

8.8 Are arbitrators immune from liability?

The Arbitration Act contains no express provisions governing the liability of the arbitrators. In relation to institutional arbitration, Czech case law states that an award made by arbitrators in proceedings conducted under the auspices of an arbitration institution is deemed to have been issued on behalf of that institution. Therefore, the arbitration institution is held directly liable, rather than the individual arbitrators.

In ad hoc arbitration, it is advisable to address the liability of the arbitrators in the agreement between the parties and the arbitrators. In addition, the liability of arbitrators cannot be excluded if the general conditions for liability under the Czech Civil Code are met.

9 The role of the court during an arbitration

9.1 Will the court in your jurisdiction stay proceedings and refer parties to arbitration if there is an arbitration agreement?

The court will stay proceedings if there is an arbitration agreement and the respondent objects due to lack of jurisdiction. The court will not stay proceedings on its own motion. The respondent must object due to lack of jurisdiction at the point of its first act in the dispute at the latest; otherwise, the objection shall be dismissed.

9.2 Does the court in your jurisdiction have any powers in relation to an arbitration seated in your jurisdiction and/or seated outside your jurisdiction? What are these powers? Under what conditions are these powers exercised?

At the request of either party or the arbitrators, the court can appoint an arbitrator if there is a dispute regarding the appointment of arbitrator, if a party fails to appoint an arbitrator or if an arbitrator resigns or is unable to serve as arbitrator.

At the request of either party, the court can remove an arbitrator if the arbitrator is not independent.

At the request of either party, the court can order preliminary measures if enforcement of the award is threatened.

At the request of the arbitrators, the court has the power to compel evidence (eg, to hear witnesses, experts and parties) for use in the arbitral proceedings if such evidence is not voluntarily provided directly to the arbitral tribunal.

The court can set aside the award and terminate the enforcement proceedings if the statutory requirements are met (for further details see questions 41 and 42).

9.3 Can the parties exclude the court's powers by agreement?

The parties can exclude the court's powers in relation to the appointment and removal of arbitrators if they specify another appointing authority or another manner to appoint or remove the arbitrators.

10 Costs

10.1 How will the tribunal approach the issue of costs?

The Arbitration Act does not include any definition of fees and expenses relating to arbitral proceedings; neither does it provide for the apportionment of costs. Thus, in ad hoc arbitration, the parties and the arbitral tribunal should determine the arbitral tribunal's fees, expenses and rules for reimbursement of costs by agreement between themselves.

In institutional arbitration, the issue of costs is governed by the rules set forth by the relevant institution. Under the rules of the Czech Arbitration Court, the arbitral tribunal's fees and the court's administrative fee are calculated as a percentage of the value of the dispute and must be paid by the claimant. Apart from these fees, the parties may need to make an advance payment in an amount stated by the court to cover extra costs, such as the costs of taking evidence or translation costs. As a rule, the losing party shall reimburse these costs to a fully successful party. If a party is only partially successful, the costs will be awarded partially in proportion to its actual success. The tribunal can also decide that neither party is entitled to reimbursement of costs. The costs of legal representation are reimbursed only up to an amount calculated in accordance with Decree of the Ministry of Justice 177/1996 Coll; in practice, the actual costs of legal representation will be higher than those reimbursed. The tribunal's decision on costs is included in the award.

10.2 Are there any restrictions on what the parties can agree in terms of costs in an arbitration seated in your jurisdiction?

No. However, there is a rule that the parties must have equal standing in the arbitration proceedings and must have a full opportunity to assert their rights.

11 Funding

11.1 Is third-party funding permitted for arbitrations seated in your jurisdiction?

Czech law does not regulate third-party funding; therefore, third-party funding is permitted under the general freedom of contract principle.

12 Award

12.1 What procedural and substantive requirements must be met by an award?

An award must be approved and signed by at least a majority of the arbitrators, made in writing and served on the parties. The operative part of the award must be unambiguous. The award must be reasoned, unless the parties agree otherwise.

In deciding the case, the arbitrators shall proceed according to the law applicable to the dispute; they may decide the dispute according to principles of equity if they have been explicitly instructed to do so by the parties. Apart from the abovementioned requirements, the parties must have equal standing in the arbitration proceedings and must have a full opportunity to assert their rights.

12.2 Must the award be produced within a certain timeframe?

The Arbitration Act does not specify any express timeframe for rendering the award.

13 Enforcement of awards

13.1 Are awards enforced in your jurisdiction? Under what procedure?

Awards issued in the Czech Republic can be enforced once they are final, if the respondent fails to comply voluntarily with the award. Since an enforceable award has the same effects as an enforceable judgment, there is no special procedure for the recognition of awards. The claimant can choose between:

  • enforcement under the Civil Procedure Code, which is executed by court bailiffs; and
  • enforcement under the Enforcement Code, which is executed by private bailiffs.

In general, enforcement under the Enforcement Code is considered swifter and more likely to succeed. In addition, the claimant need not be aware of and pursue property of the respondent itself, as private bailiffs will suggest a suitable type of enforcement on their own motion.

Awards issued in countries which are parties to the New York Convention are enforceable without a special procedure by court bailiffs under the Civil Procedure Code. However, pursuant to recent Czech Supreme Court case law, foreign awards can be enforced under the Enforcement Code only subject to prior recognition proceedings. This case law has been criticised by some commentators, who claim that it contradicts the New York Convention.

14 Grounds for challenging an award

14.1 What are the grounds on which an award can be challenged, appealed or otherwise set aside in your jurisdiction?

Under Section 31 of the Arbitration Act, the court shall set aside an award, upon the request of either party, if:

  • the subject matter of the dispute is not arbitrable;
  • the arbitration agreement is invalid, was cancelled or does not apply to the subject matter;
  • any of the participating arbitrators were not supposed to decide the award, based on the arbitration agreement or otherwise, or lacked the capacity to serve as an arbitrator;
  • the award was not decided by a majority of the arbitrators;
  • a party was not provided with the opportunity to hear or present its case;
  • the award requires a party to proceed with performance that was not requested by the claimant or that is impossible or unlawful under domestic law; or
  • it is ascertained that reasons exist for which it is possible to request the resumption of civil proceedings.

Under Section 35 of the Arbitration Act, the party against which enforcement of an award is ordered can request the court to terminate enforcement proceedings if:

  • the award is affected by an error mentioned in Section 31(a), (d) or (f) of the act;
  • the party had to have a legal representative, but was not represented by such representative in the proceedings, and its acts were not subsequently approved; or
  • a person that acted on behalf of the party or its legal representative in the proceedings was not empowered to act as such, and its acts were not subsequently approved.

14.2 Are there are any time limits and/or other requirements to bring a challenge?

An application to set aside an award under Section 31 of the Arbitration Act shall be filed with the competent courts within three months of the date of its delivery to the applicant.

A request for termination of enforcement proceedings under Section 35 of the Arbitration Act may be filed with the enforcement court at any time. The applicant must file an application to set aside the award with the competent courts within 30 days of its request for termination of enforcement proceedings.

14.3 Are parties permitted to exclude any rights of challenge or appeal?

As a rule, an award cannot be appealed. The only exception to this rule is stipulated in Section 27 of the Arbitration Act, which provides that an award can be reviewed by other arbitrators if the parties explicitly stipulate this option in the arbitration agreement.

The parties cannot exclude the rights of challenge stipulated in Sections 31 and 35 of the Arbitration Act.

15 Confidentiality

15.1 Is arbitration seated in your jurisdiction confidential? Is a duty of confidentiality found in the arbitration legislation?

Under Section 19(3) of the Arbitration Act, the arbitral proceedings are private. Under Section 6(1) of the Arbitration Act, arbitrators are bound by a duty of confidentiality. By contrast, the parties to the arbitral proceedings and witnesses are not bound by such a duty.

15.2 Are there any exceptions to confidentiality?

The arbitrators may be relieved from their duty of confidentiality upon the parties' joint agreement. In addition, where there are serious grounds to do so, a presiding judge of the district court can relieve the arbitrators from their duty of confidentiality upon the request of arbitrator, a party or a person with an interest in obtaining confidential information (eg, authorities pursuing criminal proceedings). The Arbitration Act is silent on which grounds are deemed to constitute serious grounds; legal commentary suggests that these are grounds for which an award could be set aside by the court.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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