Czech Republic
TBC
1. Is third party funding permissible for disputes?
Yes, third-party funding is accepted for disputes in Czech Republic.
Currently, there is no specific legal framework dedicated to regulating this practice.
Czech Republic relies primarily on contractual agreements between the parties involved (the funder and the funded party, either the claimant or defendant), and sometimes the lawyer representing the funded party. These agreements outline the rights, obligations, and terms of the funding arrangement, including matters such as the funder’s share of any award or settlement, confidentiality, termination clauses, and any potential conflicts of interest.
Czech third-party funding relies on best practices and principles derived from case law and legal precedents in other jurisdictions as well as comments made by the local scholars. This includes ensuring transparency, fairness, and compliance with ethical standards. In certain situations, there is also a safeguard against funding provided by an entity connected to the defendant: the court may review the source of funding and, if it concludes that the funding originates from an entity linked to the defendant, it may order the claimant to reject such funding.
2. Are lawyers able to work on a contingent basis in the jurisdiction and are there any restrictions?
Yes. Lawyers may agree on a contractual fee calculated as a share of the value of the matter or of the outcome (including contingency or success-based arrangements). Such arrangements are subject to the professional rules of the Czech Bar Association, in particular Article 10 of the Code of Ethics.
A contingency fee must be reasonable and proportionate in light of the complexity and value of the case and the lawyer’s professional obligations. Under the Code of Ethics, a fee based on a share of the outcome will generally not be considered reasonable if it exceeds 25% of the result achieved. The lawyer must also maintain independence, avoid conflicts of interest and ensure that the agreed fee does not undermine the client’s interests or the proper administration of justice.
In practice, contingency elements are often combined with a base fee or reduced hourly rate plus a success uplift, rather than structured as a pure “no win, no fee” arrangement.
3. Can the court or tribunal order one party to pay the other’s legal costs?
Yes. The Czech civil procedure is based on the “loser pays” principle. Under Section 142(1) of the Czech Code of Civil Procedure, the court will generally award the successful party reimbursement of costs reasonably and effectively incurred in enforcing or defending its rights against the unsuccessful party.
Where a party is only partially successful, the court will typically apportion costs proportionately or may decide that none of the parties is entitled to reimbursement. In certain circumstances, the court may nevertheless award full costs even where success was only partial, for example where the unsuccessful part of the claim was insignificant or where the amount awarded depended on expert assessment or judicial discretion; conversely, the court may, in certain circumstances, decline to award costs at all.
Costs are awarded only to the extent they are considered necessary and effective, and the recoverable amount is usually calculated in accordance with the statutory attorneys’ tariff rather than the parties’ agreed contractual fees. The court also retains discretion, in exceptional cases, to reduce or deny a costs award based on considerations of fairness or specific circumstances of the case.
In certain claim types (particularly debt recovery matters), compliance with pre-action requirements may affect recoverability of legal costs, such as whether a formal pre-litigation demand was served prior to commencing proceedings.
4. Is insurance available to protect against adverse outcomes for funded litigation?
We are not aware of any specific insurance available to protect against adverse outcomes for funded litigation. However, insurance is available in Czech Republic to protect against adverse outcomes in general and are known as legal assistance insurances. Legal assistance insurances often form part of a regular business insurance. However, the legal assistance insurances often have a cap preventing the unsuccessful party from being reimbursed for the whole litigation cost through its insurance.
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