Czech Republic

From BASESwiki

General Context

Part of Czechoslovakia until the “velvet divorce” in January 1993, the Czech Republic has a rich cultural heritage. Communist rule had lasted since the late 1940s. The “Prague Spring” of 1968, when leader Alexander Dubcek tried to bring in liberal reforms, was crushed by Soviet tanks. In 1989, as the curtain was coming down on communism in the Kremlin, the dissident playwright Vaclav Havel spearheaded the country’s velvet revolution and became the first president of post-communist Czechoslovakia. An era ended in February 2003 when his presidency finished. It had been interrupted for only a few months at the time of the separation of the Czech Republic and Slovakia. The ghost of former Soviet military influence was exorcised in 1999 when the republic was granted full membership of Nato. Vaclav Klaus, oversaw accession to the European Union.

Regulation of Alternative Dispute Resolution

Types of alternative dispute resolution in the Czech Republic

Arbitration

Arbitration takes place under the control of the participants on the basis of a written agreement in which the participants provide that their dispute will be resolved by a designated independent party. This could be either a freelance arbiter (any capable adult who is competent in legal matters) or a permanent arbitration body (in the Czech Republic, for example: Rozhodčí soud při Hospodářské komoře ČR a Agrární komoře ČR) (Arbitration court attached to the Economic chamber of the Czech Republic and Agricultural Chamber of the Czech Republic). The arbitration proceedings before the Arbitration Court are usually conducted in accordance with its Rules published in the official Trade Gazette ("Obchodni vestnik") unless the parties to the dispute have agreed otherwise.

This type of alternative dispute resolution can be used for civil property disputes. It is intended mainly for cases where payment transfers a right (for example, right of ownership for a purchase agreement) or an asset. Included in this category are commercial property disputes (for example, disputes arising from leasing agreements), labour-related disputes (arising from unfair termination of working agreements or wage demands) and family disputes (involving maintenance between adults). However, arbitration may not be used to resolve disputes arising from the implementation of decisions or relating to the handling of competitions or compensation.

Financial Arbiter

This is the body which handles dispute resolution between financial service providers (banks, savings banks and other organisations which carry out or broker money transfers) and their customers, or between issuers and users of means of payment (e.g. credit cards).

Ombudsman

This body deals with own-initiative complaints regarding disputes with government authorities.

The Ombudsman assists people whom the authorities have dealt with in a way which was contrary to the law or which did not comply with the principles of a democratic state which respects the rule of law. Though he may not change or overturn the decisions of government departments, he may recommend that they take corrective action if it establishes that they acted unfairly.

Disputes between business and consumers

In the Czech Republic these disputes may be resolved by means of arbitration and, in certain fields, financial disputes may be decided by the Financial Arbiter.

Practice of Alternative Dispute Resolution

Arbitration

Arbitration is possible for almost all disputes in this field, as the vast majority of them fall into the category of property disputes, as defined above. A typical dispute might arise from a sales agreement.

The rules on arbitration are set out in Law No 216/1994 Sb., No. 216/1994 Sb. on arbitration proceedings and on enforcement of arbitration awards, as subsequently amended.

Arbitration is carried out on the basis of a written arbitration agreement concluded by the parties (a verbal agreement is also acceptable provided that the participants confirm it in writing when the arbitration order is handed down).

The consumer must conclude a written agreement with the entrepreneur (arbitration clause) which states that all disputes arising from a particular agreement (e.g. sales agreement, agreement on working conditions etc.) will be resolved by arbitration. If a dispute concerns a matter covered by a current arbitration clause, this matter may not be resolved by the courts. However, the applicant may take court action if the matter is discussed before the arbiter in accordance with the agreement between the participants.

Arbiters are bound by an obligation of secrecy, which ensures that information which the parties to the dispute want to keep confidential is protected.

Arbiters may negotiate an agreement by telegram, telex or any electronic means which allows them to transmit their message and to designate people to negotiate the agreement. The proceedings themselves may also be conducted by these means if the parties agree.

In arbitration proceedings, the parties may not have a legal representative. The parties bear the cost of the proceedings.

The decision in arbitration proceedings (ruling) is final, binding and enforceable by legal means (seizure). The decision of the arbiter may only be overturned for legally defined reasons. These include technical reasons such as the arbiter not being competent to serve (i.e. an arbiter who is not an adult or who has had his or her authorisation to act as an arbiter withdrawn or restricted), the arbiter not having received prior authorisation by the parties, etc. A court order overturning a decision of the arbiter must be handed down within three months of the date on which that decision was delivered to the party seeking the nullification.

You will find a reference to the delegation of powers in the section on Recommended wording of arbitration clauses in contracts on the website of the Arbitration Court attached to the Economic Chamber of the Czech Republic and Agricultural Chamber of the Czech Republic.

There is also a complaints procedure in place. If either of the parties are dissatisfied with the quality or with the ruling issued by the arbitration proceedings or even if either of the parties feel that the ADR rules were broken, they can file/e-mail a complaint to the Ministry of Trade (adr@mpo.cz). The complaint may be filed within 30 days, starting on the date when the prosecutor learned about the reasons, which forced him to file the applicable complaint. However, the complaint may be filed within one year from the day, when the reason to file the applicable complaint appeared. The complaint will be also processed by the Platform for alternative dispute resolution.

Recovery Claims

There are organisations in the Czech Republic that particularly deal with recovery claims. PROFI-CZ is an auction and enforcement agency that deals with non-judicial enforcement and the repurchase of debt in both the Czech and Slovak Republic.

Conciliation regarding Consumer Disputes

The Ministry of Industry and Trade has only just in recent years introduced conciliation proceedings (also known as mediation) and special consumer arbitration (see ADR project). The first system will involve the conciliation of parties mediated by a neutral mediator rather than the ruling of a third party. The latter system will only be used as a last resort if both parties fail in reaching an agreement. As mentioned before, arbitration proceedings shall result in a ruling executable by the third party (arbitrator). Voluntary participation applies to both methods.
This system will be administered by the Ministry of Industry and Trade. A special advisory board for consumer disputes is also being put in place. The board will be made up of entrepreneurs, consumers, mediators, arbitrators and the state. The board will approve the Mediation and Arbitration Rules governing dispute resolution, process complaints by consumers and businesses and collect data from the disputes to enhance the effectiveness of the future system. After 2 years of testing the out of court dispute proceedings, the board will recommend any necessary modifications to the system, which will be ratified by the Ministry of Industry and Trade.
The public budget shall finance the mediation system and therefore will be free of charge to parties of any future proceeding. The fees for arbitrating proceedings shall not exceed fees for legal proceedings and forums for mediation shall be available in every district of the Czech Republic for easy consumer access.
This system will only be approved after final negotiations with the Ministry and the potential persons of the board.
For more information, click here. Also, read document 41192.

Ministry of Industry and Trade Initiative
What is an out—of—court settlement of consumer disputes /ADR

The Czech Trade Inspection Authority - ADR

Financial Arbiter

Consumers can take to this body their disputes with banks and other financial institutions regarding the provision or facilitation of money transfer, the use of means of payment such as credit cards or other banking services. The services of the Financial Arbiter may also be called upon where banks do not carry out the transaction requested by the customer or carry it out with a delay or with errors. Another typical case in which this type of ADR is used is the misuse of customer’s credit cards. The Financial Arbiter is competent to rule in cases where the amount of the transfer does not exceed EUR 50 000. Since the Czech Republic’s accession to the European Union, the Czech Financial Arbiter has been responsible for resolving disputes concerning transactions in Euros in the European Union and the European Economic Area.

Proceedings before the Financial Arbiter and the powers of this office are governed by Law 229/2002 Coll. on the Financial Arbiter of 9 May 2002 (which came into force on 1 January 2003).

The Financial Arbiter is appointed by the Czech Parliament and must be a person of good repute with appropriate qualifications and experience. He is bound by an obligation of secrecy regarding information obtained in the course of his work. This ensures that the proceedings are conducted fairly and that confidential information is protected.

Arbitration is not compulsory. Other means of dispute resolution, including traditional court proceedings, can be used as an alternative. It is therefore not possible to initiate proceedings before the Financial Arbiter if a court has already ruled on the same matter or if court proceedings are already under way. The same applies if the dispute is or has already been brought before the Financial Arbiter or if it has been the subject of other arbitration proceedings.

A consumer who is a customer of a particular financial institution or a holder of an electronic means of payment may initiate proceedings.

Proceedings may also be initiated electronically by means of a secure electronic signature. It is also possible to initiate proceedings by telex, fax or by public data network without an advanced electronic signature, on condition that the application to initiate proceedings is signed within three days either in writing or by advanced electronic signature. The application may also be made on a form provided by the Arbiter.

The proceedings themselves can be conducted remotely, either in writing or by electronic means, but the arbiter may request the participants to provide oral explanations.

The parties may not have a legal representative. Proceedings are not subject to tax. Each participant bears his or her own expenses, with the exception of interpretation, which is paid for by the financial institution. This refers to interpretation into the language in which the applicant's agreement with the institution is drawn up or into that in which he or she usually communicates with the institution in writing. The applicant is entitled to this type of interpretation.

The Arbiter hands down a ruling on each case which is delivered to the participants personally. Objections against the decision must be submitted in due legal form. The parties may submit reasoned objections within 15 days of receipt of the ruling. It is possible to waive the right to make objections. The submission of objections has a suspensory effect. The Arbiter's decision on the objections raised either maintains or changes the ruling. A written copy of the decision on objections is delivered to the participants and is deemed final. This decision is legally binding and no further objections are permitted. The decision is enforceable by the courts in accordance with the Code of Civil Procedure once the deadline for its implementation has passed. If the deadline is not explicitly stated in the decision, it is enforceable once it becomes legally binding.

If the consumer is not happy with the Financial Arbiter’s resolution of the dispute, he can take his case to court. The financial institution concerned also has the right to do so. Taking court action, bringing the dispute before an arbitration tribunal, reaching an agreement on an out‑of‑court settlement and withdrawing the application before the decision becomes legally binding all render the decision null and void.

Disputes between employees and employers

In this type of dispute, arbitration can be used for labour-related issues (unfair termination of employment, wage demands, etc.).

The new Labour Code 2006 is here.

The Collective Bargaining Act in the Czech Republic is available here. Sections 11 and 12 relate to mediation.

Multinational Companies and Collective Bargaining

In general, collective bargaining coverage amongst multinational companies is higher than the private sector, the manufacturing sector and private services. Single-employer bargaining arrangements are the most common in the Czech Republic; multi-employer bargaining is also available, but only in some sectors. Some industrial sectors and services are covered by higher-level collective agreements and/or company collective agreements.
The new Labour Code suggests that company collective agreements do not define employees’ rights and duties to a lesser extent than higher-level collective agreements. The new Labour Code has also introduced ‘working time accounts’, this allows the employer to ‘adjust working hours more flexibly in response to changing needs for work in line with developments in orders and sales’. This means that the employee is given specific work to complete by a certain time frame and is also given a fixed wage for this.

‘The results of wage bargaining in MNCs (i.e. in Czech branches of those multinationals) usually represent a higher standard for other employers in the sector. In general the relevant provisions of the Labour Code apply to labour law relations; that also holds for wages and in the context of collective bargaining. While new approaches and forms of wages that are often introduced into wage practice by many MNCs are incorporated into company collective agreements…New forms of wages include a variety of atypical wage bonuses for working conditions specific to certain professions (e.g. a bonus for work in a self-contained breathing apparatus) and entirely new wage components (e.g. the restructuring bonus that serves as a form of compensation, or the differential job tariff, which, with the tariff for the appropriate tariff level comprises a valuation of the job, i.e. the basic wage for the job in question’. Another new form is the bonus system with variable and fixed components which allow it to be more closely tied to performance at work.

Sector agreements do not cover issues concerning wages, social issues, working hours, cooperation between employers and trade unions on establishing regulations.

Trade Unions have not reacted to the outcomes of collective bargaining within multinational companies instead they have gathered information on a cross-border scale when trade unions prepare for collective bargaining. ‘There is also more emphasis on effective support provided from the trade union level to a union branch in collective bargaining within an MNC subsidiary’.For information on Multinational companies and collective bargaining, click here.

The recent Services Directive in the Czech Republic has not affected existing collective bargaining frameworks; it has however affected the assignment of foreign workers.

Disputes between individuals

Individuals may also use arbitration to resolve property disputes.

The Social and Environmental Regulation of Business

Other Alternatives

Currently, there is no set body in the Czech Republic that deals with human rights or civil society issues/disputes. Andrea Barsova in her article ‘Enhancing the Effectiveness of the Non-Judicial Human Rights Protection Mechanisms in the Czech Republic’ suggests there are three possible options- to establish an independent statutory National Human Rights Institution, extend the powers of the Ombudsman or adjust and strengthen non-judicial mechanisms to protect and promote human rights.

Extending the mandate of the ombudsman could include human rights issues; however the only benefit would be cost. She believes that entrusting one body to deal with a broad range of issues would simply complicate matters. Source : Enhancing the Effectiveness of the Non-Judicial Human Rights Protection Mechanisms in the Czech Republic

Relevant links

Arbitration Court attached to the Economic Chamber of the Czech Republic and Agricultural Chamber of the Czech Republic

Arbitration Court Central Credit Bureau

Arbitrators Association

Recovery claims website. PROFI-CZ, spol. S r.o. mainly deals with non-judicial enforcement and the repurchase of debt in the Czech and Slovak Republic.

Arbitration Centre

The Arbitration Court of the Czech Republic

Society for Arbitration

Arbitration and Arbitration Society

Czech Arbitration Centre

The Platform for Alternative Dispute Resolution

Out of court settlement of consumer disputes