František Honsa and Petr Vošahlík give an overview of arbitration in the Czech Republic
Arbitration within the territory of the Czech Republic recently celebrated its 70th anniversary. Although having a longstanding tradition, the reputation of arbitration as an alternative to dispute resolution before the courts in the Czech Republic has not always been positive. Arbitration was negatively influenced by consumer arbitration and infamous private arbitration centres. On the other hand, the Czech business environment thrives on arbitration as an instrument that benefits parties that make use of it by establishing clear rules and the far-reaching possibilities it offers in contractual freedom.
The framework of Czech arbitration is still laid down by Act No. 216/1994 Coll. on Arbitral Proceedings and on Execution of Arbitral Awards, as amended (Arbitration Act), now 25 years old, which reflects many essential concepts of UNCITRAL Model Law. This act is supplemented by Act No. 99/1963 Coll., the Code of Civil Procedure, as amended. Therefore, arbitration proceedings in the Czech Republic are subject to the same principles of civil procedure as proceedings before the general courts with necessary regard to the specifics of arbitration (such as greater party autonomy). The Czech Republic is also party to the New York Convention with the reservation of the principle of reciprocity.
Bodies of arbitration
The most significant arbitral institution in the Czech Republic is the Arbitration Court attached to the Economic Chamber of Commerce of the Czech Republic and the Agricultural Chamber of Commerce of the Czech Republic.
The Arbitration Court decides all disputes arbitrable under the Arbitration Act, including, but not limited to, disputes arising from both domestic and international trade, private law disputes between individuals and many others.
The Arbitration Court’s scope of jurisdiction with respect to disputes covered under the Arbitration Act is one of the widest in the world and it is the fourth arbitration body with respect to the number of cases it has historically decided, ranking behind only the world-class arbitration centres of the ICC, China International Economic and Trade Arbitration Commission and London Court of International Arbitration (LCIA). Combined with the history of the Arbitration Court, this makes it one of the largest and most well-renowned arbitration bodies in Central and Eastern Europe, with more than 500 foreign and domestic experts listed as arbitrators with the Arbitration Court.
The Arbitration Court also decides domain disputes arising from local (eg .cz), generic (eg .com, .org, etc) and .eu domains. Domain dispute resolution is mainly based on the Uniform Domain-Name Dispute-Resolution Policy applicable to generic domains and the Code of the Arbitration Court. Specialised arbitrations are conducted by the Exchange Court of Arbitration (attached to the Prague Stock Exchange) and the International Arbitration Court of the Czech Commodity Exchange in Prague.
Thanks to its relative stability and contractual scope, commercial arbitration in the Czech Republic has experienced steady growth in the past few years. Between 2000 and 2018, the Arbitration Court recorded an increase of nearly 300% in the volume of decided international and domestic cases.
The practice of the general courts and later amendment to the Arbitration Act, effective as of 1 December 2016, has rendered consumer disputes not arbitrable in the Czech Republic. This fact greatly benefited the arbitration environment by releasing it from decisions of the general courts, which were aimed at consumer protection and ended up putting B2B disputes and arbitration clauses in legal uncertainty. By being exempt from consumer disputes, the practice of Czech arbitration can focus on contractual freedom and the autonomy of free will, the primary and original purpose of commercial arbitration.
Effective arbitration with BBH
BBH, advokátní kancelář regularly represents both domestic and foreign clients in arbitrations and acts as the co-ordination counsel in large-scale international cases in the commercial and investment areas. The key points of successful representation often are:
a) immediate diligent analysis of all possible scenarios for the development of the dispute – BBH relies on their multi-disciplinary expertise and effectively consults with the non-dispute resolution departments of BBH with a focus on the business goals of the client;
b) appointment of arbitrator – apart from having six active arbitrators among its senior staff, BBH has deep experience with most of the arbitration community and thus a good capacity to appoint the best possible experts for each specific case; and
c) methodical and consistent advocacy in proceedings – the best and most convincing arguments are based in the business logic of the case, relying on the relevant case law and presenting this clearly from the very beginning of the dispute.
František Honsa is a founding partner of BBH, having cultivated a wealth of experience particularly in litigation matters, with a main focus in commercial and banking law, in which he acts in both civil disputes and international arbitration. Honsa’s professional background includes major disputes that have proven significant for the interpretation of Czech laws and he has further served as lead adviser in a number of significant disputes that have substantially contributed to determining the responsibility of banks in protecting their clients’ accounts and obligations arising from the adoption of the International Swaps and Derivatives Association standards from a Czech law perspective.
In addition, Honsa has a widely respected practice as one of the most sought Czech arbitrators, acting, inter alia, in five high-profile disputes between the Czech state and major contracting companies concerning highway construction, with claimed damages amounting to over €100m and several further commercial arbitrations with values over €50m. Honsa has been a long-serving member of the board of the Arbitration Court, as well as an arbitrator with the LCIA and Vienna International Arbitral Centre (VIAC), and enjoys market-wide distinction for his extensive experience in corporate fraud and white-collar criminal defence law.
Petr Vošahlík is a senior associate in BBH’s dispute resolution department and has great experience in both litigation and arbitration proceedings. He further advises clients in the areas of private international law and white-collar criminal law, and represents numerous prominent clients in post-M&A, real estate development, energy and healthcare disputes, with a focus on international arbitration cases in which he combines his experience as counsel and arbitrator. Vošahlík is a listed arbitrator with the Arbitration Court, a member of the German Arbitration Institute and listed practitioner at the VIAC. He has led oral hearings in court and international arbitration disputes, in the Czech, English and German language, with an overall value exceeding €900m.