Czech Republic
In your jurisdiction, are there any formal ADR procedures available for resolving commercial disputes other than litigating (or arbitrating) to a final hearing?
Whilst not a formal ADR process, negotiation remains a fundamental method of resolving disputes. Parties can engage in direct discussions to reach a mutually acceptable solution. There are several types of formal ADR available in the Czech Republic including Mediation, Conciliation, Expert Determination and resolution by Dispute Resolution Boards.
Mediation in the Czech Republic involves a neutral third party assisting disputing parties in resolving conflicts through facilitated communication and negotiation.
Conciliation involves a neutral third party assisting the disputing parties in reaching a settlement. While similar to mediation, conciliation may involve more active suggestions and recommendations from the conciliator. It’s often used in labor disputes and administrative matters.
In cases where disputes involve technical or specialized issues, parties can agree to have an independent expert make a determination. This expert determination can then serve as a basis for resolving the dispute.
Dispute Resolution Boards are commonly used in construction contracts. They consist of neutral experts who help parties resolve issues during the course of a project.
Does engaging in ADR have any effect on potential or existing litigation or arbitration?
In the Czech Republic, engaging in ADR, such as mediation or negotiation, doesn’t typically have a direct legal effect on ongoing litigation or arbitration processes. ADR is generally considered a separate and voluntary method of resolving disputes outside of formal court proceedings or arbitration. Therefore, engaging in ADR does not automatically stay any commenced arbitral or court proceedings (more details are referenced below).
Pursuant to the Czech Civil Code (CC), if parties agree to out-of-court dispute resolution, the statute of limitation is stayed. The statute of limitations continues, if any party refuses to continue the dispute resolution process but the stay does not end before six months from the party’s refusal. The CC does not stipulate any formal requirements either for parties’ agreement or party’s refusal (it can be both oral or written). According to some opinions, the parties’ agreement can be also implied (based on parties’ conduct).
Is ADR compulsory and if so are there any consequences if a party fails to engage in ADR? If it is not compulsory are there any plans for this to change?
The Czech Republic, like other EU member states, has committed to promoting and implementing ADR mechanisms as part of its legal framework. The Czech Republic has implemented the EU Directive on Consumer ADR (2013/11/EU) through national legislation but focused on the availability of ADR for consumer disputes.
Besides that, the Civil Procedure Code (CPC) allows the courts to conduct mediation, if parties agree to it. The CPC explicitly states that parties cannot be forced to mediate. The CPC also enables the courts to order a meeting with a mediator and order a stay of the proceedings for up to three months. Parties are then obliged to meet with a mediator of their choice and consider mediation. However, parties are free to decide whether they want to use mediation – the only obligation is to meet with the mediator. If parties do not wish to engage in mediation, then the court proceedings continue.
Can the parties agree, in advance of any potential dispute, to engage in ADR?
Yes, parties can agree to engage in ADR in advance and they are free to include such a clause (including multi-tier clauses) in the contract.
When does ADR generally take place?
It is up to the parties when they want to engage in ADR. The CPC implies that meeting with the mediator is ordered at the beginning of the proceedings (see above).
Is ADR subject to without prejudice privilege and/or confidential? If not, is there any other means to protect confidential information?
ADR, except mediation, is not explicitly regulated by Czech law. Also, Czech law is not familiar with the concept of without prejudice privilege. Thus, ADR is not subject to this type of privilege. With regard to mediation, only a registered mediator is bound by confidentiality (see below). The parties are not. Thus, the use of a non-disclosure agreement (NDA) is highly advisable for mediation as well as for other ADR methods.
Does the output from ADR create precedents?
The Czech Republic is a civil law country and Czech law does not operate on a precedent basis. So, no, it does not create a precedent.
Who bears the costs of ADR?
The usual practice is for the parties to divide the costs evenly, but they can agree otherwise.
Is your jurisdiction subject to any specific rules for cross border ADR?
The Czech Act on Mediation covers both national and cross-border mediation as it was adopted in reaction to the EU Directive 2008/52/EC on certain aspects of mediation in civil and commercial matters. The Czech Republic has not signed or ratified the United Nations Convention on International Settlement Agreements Resulting from Mediation (Singapore Convention).
Are there any particularly unusual features of ADR in your jurisdiction that you are aware are different to other jurisdictions?
In the Czech Republic, there are two types of mediators – mediators and registered mediators. Registered mediators need to fulfil requirements stipulated in the Act on Mediation. Parties are free to choose whoever they wish. However, the Act on Mediation, governs only mediation conducted by the registered mediators.
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