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published on 4 May 2021 | reading time approx. 15 minutes
International jurisdiction determines when and whether a court of a certain state has the authority to make a judicial decision in a particular situation. In the Czech Republic, as in other Member States, the jurisdiction in foreign civil and commercial cases is governed by the Regulation on Jurisdiction and Recognition of Judgments in Civil and Commercial Matters, commonly referred to as the Brussels Ia Regulation.
The Brussels Ia Regulation is a 2012 recast of the Brussels I Regulation of 2001, a comprehensive set of rules concerning the international jurisdiction of Member State courts in civil and commercial matters, with special amendments applicable to Denmark. Subject to specific rules set out in its various instruments, under the Brussels Ia Regulation, a person may only sue in a Member State in which he or she has its domicile. The Regulation also lists certain types of cases when the courts of a Member State have jurisdiction regardless of the domicile of the parties to the action. The Regulation applies to all cases where the defendant is a person domiciled in a Member State.
In addition to the Brussels Ia Regulation, international jurisdiction is also determined by the rules laid down in the Lugano Convention 2007, which extends the jurisdiction and recognition regime agreed between the EU Member States under the original Brussels 1 Regulation also to Denmark, Island, Norway and Switzerland, and by the rules laid down in bilateral mutual legal assistance treaties (MLAT’s) entered into by the Czech Republic.
In instances when international law does not prevail over national law and when the defendant does not have a domicile (in the sense of a habitual or ordinary residence) in a Member State, the jurisdiction in international civil and commercial cases is governed by the rules set out in Act 91/2012 Sb., on Private International Law (“PILA”). The Private International Law Act lays down rules under which Czech courts have international jurisdiction in civil and commercial cases in accordance with the basic principle of judicial procedure, which states that disputes are to be decided by the domestic court having the territorial jurisdiction over the case. To the extent that Czech courts have a jurisdiction over a case, the courts may also decide in any counterclaims pertaining to the same merits. In this regard, PILA refers to the jurisdiction rules laid down in the Czech Civil Procedure Code. Typically, Czech courts have international jurisdiction in cases involving defendants with a domicile in third countries who have their assets or a branch office in the Czech Republic insofar as the damage or harm which entitles the claimant to seek remedy occurred in the territorial jurisdiction of a Czech court. According to Czech case law, assets are defined broadly to also include capital interests in Czech business corporations, claims arising from a bank guarantee issued by a Czech bank, other claims enforceable in the Czech Republic and so forth.
Under the Brussels Ia Regulation, judicial decisions issued in other Member States are recognised in the Czech Republic without any specific proceedings and without an additional review of the judicial decision. The Brussels Ia Regulation also abolished the validation process (exequatur) in cases when the judicial decision was issued on and after 10 January 2015. The validation process is required and the exequatur must be issued in cases adjudicated prior to the effective date of the Brussels Ia Regulation in accordance with the original Brussels I Regulation.
Enforcement measures usually aim for the collection of sums of money, but they may also involve the fulfilment of other obligations. In international civil matters, a judicial decision must be enforced in accordance with the national law of the state in which the enforcement is executed (which is usually in the state in which the debtor/obligor and his assets are located). In practice, a title of execution (e.g. a verdict or a settlement deal) as well as a certificate issued in compliance with Art. 53 Brussel Ia Regulation must be presented in order to achieve the enforcement. The legal proceedings of the enforcement and the executing authorities are appointed by the domestic law of the state in which the enforcement is aimed to be achieved. In the Czech Republic, judicial decisions are usually enforced by licensed enforcement agents or by court enforcement officers (bailiffs). The former tends to be the preferred and more cost-efficient option in the Czech Republic.
In the Czech Republic, the recognition and enforcement of judicial decisions issued in third countries that have not ratified the Lugano Convention or a mutual legal assistance treaty follow the rules laid down in PILA. Foreign judicial decisions are effective once a foreign public authority certifies that the decision has become final and effective and once the decision has been recognized by a Czech public authority. But in practice, foreign judicial decisions in property cases are often recognized informally even without a special certificate, as Czech public authorities take the decision into consideration as if it had been enacted by a Czech public authority. A foreign judicial decision in a property case that satisfies the recognition criteria under PILA may be enforced by a Czech court via a court order. At the same time, nothing prevents the beneficiary of the judicial decision from seeking the recognition of a foreign judicial decision in a property case by a standalone court judgment. This is useful in situations when the foreign judicial decision is enforced in the Czech Republic by a private enforcement agent rather than by a court. Under the Czech Enforcement Procedure Code, an obligee may have a foreign judicial decision enforced privately only if the decision has been confirmed by a certificate issued under a directly applicable EU legislation (for EU execution titles issued before 10 January 2015), or under an international treaty (generally the Lugano Convention or a mutual legal assistance treaty), or if the decision has been recognized by a Czech court.
The Czech Republic is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 10 July 1958 and recognises arbitral awards in accordance with the reciprocity principle, i.e. it recognises arbitral awards from countries that recognize Czech arbitral awards in return. Some of the mutual legal assistance treaties entered into by the Czech Republic also regulate the matter of arbitral award recognition and enforcement. The Czech Republic also ratified the European Convention on International Commercial Arbitration. Despite this, and even though the New York Convention expressly stipulates that a contracting state may not impose substantially more onerous conditions or higher fees or charges on the recognition or enforcement of foreign arbitral awards than those imposed on the recognition and enforcement of domestic arbitral awards, the Supreme Court of the Czech Republic currently subscribes to a somewhat controversial view that foreign arbitral awards may not be enforced by private enforcement agents but only by court enforcement officers. This opinion has been derived by a verbatim interpretation of the applicable provisions of the Czech Private International Private Law. According to the prevailing opinion of domestic legal scholars, this construction violates the spirit of the New York Convention and is not sustainable in the long term, the main point being that the judicial enforcement of arbitral awards, unlike private enforcement, tends to be much slower and more rigid, as well as liable to a duty to pay court fees on the part of the beneficiary of the judicial decision.
The Czech Republic has a two-instance system of courts which consists of four organizational branches. At the lowest level, there are the district courts or the area courts in the Capital City of Prague and the Municipal Court in Brno, which have the same status as the district courts. The next branch includes 8 regional courts, followed by 2 high courts and finally the Supreme Court and the Supreme Administrative Court. In a special branch of its own, the Constitutional Court of the Czech Republic supervises over the constitutional order. The Constitutional Court does not act as a court of last resort against the decisions made by ordinary courts, but rather only oversees that the decision-making of ordinary courts conforms to the constitutional order of the Czech Republic.
The procedure may be split into three basic areas which are regulated by separate rules:
Generally, the courts do not formally specialize in any particular area of jurisdiction, which means that the same court may handle an employment dispute in accordance with the rules of civil procedure as well as a tax dispute in accordance with the rules of administrative justice, for example.
The orders and judgments of first-instance courts may be generally appealed before second-instance courts; this type of appeal is treated as an ordinary remedial measure which means that it affects the finality and the enforceability of the first-instance ruling on the merits of the case. In addition, Czech law allows an appellate review as a special remedial measure, which does not affect the finality or the enforceability of the order or the judgment.
Appellate courts may either affirm, reverse or vacate the decision of a lower court and remand it for further proceedings. This usually substantially affects the length of proceedings.
The Supreme Court and the Supreme Administrative Court do not reverse judgments appealed, but rather vacate the case and remand it for further proceedings.
Czech law distinguishes between ordinary and extrajudicial legal costs. Ordinary costs are largely paid for indirectly by taxpayers from the Government budget and directly by the parties to the proceedings in the form of court fees. Extrajudicial costs are costs incurred by the individual parties in relation to the proceedings. Ordinary costs may be borne by the parties themselves or by any other participants, the Government included. When it comes to extrajudicial costs, a distinction is drawn between the duty to pay and the duty to reimburse. The duty to pay the costs of proceedings has both a deterrent and a punitive function.
Having defined the costs of proceedings, let us now discuss the differences in the duty to pay and the duty to reimburse the costs.
It is one of the principles of the Czech proceedings costs system that the prevailing party is generally allowed to recover its costs and expenses from the opposite party at the end of a lawsuit (barring certain exceptions listed in the Civil Procedure Code). This means that the costs of the proceedings may be awarded both to the claimant who won the action and to the defendant if the action was dismissed; if both parties succeed partially in the action to a comparable extent, the court usually does not order either party to reimburse the costs of the other.
Except for certain special circumstances, the claimant who has prevailed in a coercive action is entitled to reimbursement of legal costs only insofar as he had sent a demand letter to the defendant (or rather to the defendant’s correspondence or last known address) at least seven days before raising the action.
In non-contentious proceedings which may be initiated on a court’s own motion and in matrimonial or registered partner status cases, the courts generally do not award legal costs to the prevailing party, unless expressly warranted by the circumstances of the case.
As noted above, in awarding the costs of representation, the courts proceed with a view to official tariffs, which are based on the number of formal acts carried out in the course of the proceedings by the lawyer or the notary, rather than with a view to the fees agreed between the client and the legal counsel in their contract. In other words, a party does not necessarily have to receive full reimbursement of costs of legal representation. In addition, the court also has the discretion to award costs only for such acts conducted by the party’s counsel that it finds reasonable and appropriate.
Specific features of the administrative procedure: Although there are some exceptions, in administrative proceedings, courts generally do not award reimbursement of costs to the prevailing defendant on the grounds that in defending a lawsuit, Government agencies and authorities do not incur any reasonable costs beyond the scope of their regular administrative tasks.
Courts award costs of proceedings ex officio and on their own motion in the final judgment on the merits of the case; but courts also have the discretion to decide about legal costs in the course of proceedings, such as by granting a court fee exemption.
If a party waives its right to reimbursement of costs, the court confirms the waiver by a ruling that the party is not entitled to such a reimbursement.
In contentious proceedings before Czech courts in property, commercial and civil law cases, no regulations exist that would stipulate a maximum permitted duration of the proceedings. This means that the only limit is set forth in Article 6 of the European Convention on Human Rights, which stipulates the right to a fair hearing before a court within a reasonable time period. At the same time, there have been numerous cases in the Czech Republic in which courts awarded personal damages on the grounds that the length of the proceedings was found to have been unreasonably long. Depending on the circumstances involved, a prevailing consensus appears to have formed that the parties have a reasonable right to expect that their civil lawsuit will not exceed the period of 6 years.
Statistics from various sources provide the following information on the duration of proceedings.
According to various sources, during 2018 the average length of proceedings was 458 days (this represents a decrease in comparison with an average of 503 days in the preceding year); the shortest time period was at the Regional Court in České Budějovice, with an average length of proceedings of 224 days, while the longest period was at the Metropolitan Court in Prague, with an average of 558 days.
According to the President of the Supreme Court of the Czech Republic (Czech Supreme Court), in proceedings before the Czech Supreme Court (acting in its capacity as the court of last instance in appellate review proceedings), the average length of proceedings in 2018 in civil matters was 200 days.
In civil matters, the Czech Supreme Court decides on special remedial measures against final and conclusive court judgments and has the power to overturn judgments that have already become final and conclusive and to order the proceedings to be restarted from the very beginning.
In total, according to the statistics published by the Ministry of Justice, in 2017, in civil proceedings, adjusted by removing the time taken up by administrative order process, it took 298 days on average to bring a lawsuit to a final and conclusive judgment, the median being 181 days and the 90th percentile falling at 614. The highest averages were seen with regard to proceedings before courts operating under the Regional Court in Ústí nad Labem (449 days), and proceedings before courts falling under the Regional Court in Brno (405 days), while the lowest average was seen with regard to proceedings before courts operating under the Regional Court in Prague (189 days). The official statistics of the Ministry of Justice for 2018 are not available.
As the title suggests, the aim of emergency rulings in Czech civil proceedings is to regulate the state of affairs of the parties to a lawsuit on an interim basis or if reasonable concerns arise that the enforcement of a judgment might be adversely affected. Courts may also issue a preliminary ruling prior to the initiation of a lawsuit in order to collect a piece of evidence which would be difficult to produce at a later stage or which would be particularly arduous to obtain. An emergency ruling may order a party to a lawsuit, or even a third party to a reasonable extent, to do something or to refrain from doing something.
While courts have a fairly broad discretion as to the measures which may be ordered in a preliminary ruling, in practice such measures largely aim to prevent a party from making dispositions with certain assets or prohibit a third party, typically a bank, from releasing cash from an account or available under a bank guarantee or other similar instrument. A petition for an emergency ruling must be well-reasoned and substantiated, given the urgent nature of this type of injunctive relief in Czech law. Courts in our jurisdiction are therefore generally hesitant to award an emergency ruling unless for a valid cause and are prepared to cancel the ruling if convinced by a timely, reasoned and documented counter-motion from the defending party. To prevail, the petitioner must usually document the pre-existing illicit conduct on the part of the defendant or the defendant’s express intention or outright attempts to obstruct the enforcement of the court’s potential decision on the merits (such as by selling or transferring its assets in advance) or must convince the court that there exists an imminent risk of an irredeemable encroachment onto the parties’ rights if the present state of affairs is allowed to continue. The petitions for and motions against emergency rulings tend to be adjudicated in-camera and relatively promptly, at least compared to the courts’ decision-making in the trial proceedings – i.e. in a matter of weeks. Except for expressly listed instances, the petitioner must give a security deposit when filing the emergency ruling petition, usually in the amount of 50,000 czech crown which may be increased at the court’s discretion depending on the circumstances. The deposit is refunded after the lapse of 6 months from the expiry of the emergency measure to allow the defendant to recover damages if the petitioner does not prevail on the merits of the case. In addition to a security deposit, the petitioner must also pay the usual court fees.
The emergency measure sought by the petitioner expires on the adjudication of the claim. When awarding an emergency ruling in the absence of a pending action in the case, the court sets forth a time limit in which the petitioner must file the action lest the effects of the ruling expire. The ruling may also be cancelled at any time insofar as the grounds for which it was awarded in the first place come to an end, whether through a natural cessation of the extraordinary circumstances under which it was issued or whether because the defendant granted some other type of security for the obligations owed. While courts have the duty to review the necessity of the continued existence of any emergency measures on their own motion, the statutes do not lay down any precise timeframe for such review, which means that in practice emergency rulings tend to be awarded and terminated mostly at the parties’ own initiative.
Litigation & Arbitration
Alice Kubová Bártková
Associate Partner
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