16 August 2017
Czech Republic

Czech Republic: Fifth Anniversary of Mediation in the Czech Republic

Mediation as an alternative to classic dispute resolution in other than criminal matters was formally incorporated into the Czech legal system in September 2012.

Although it was formally regulated only five years ago, mediation has been used in the Czech Republic since the early 1990s, practised by unregistered mediators who learned from mentors with experience from the USA. As of 2001, mediation started to be used in criminal matters as well. After that, Czech legislators implemented (not really on time, but still in time) Directive 2008/52/EC on Certain Aspects of Mediation in Civil and Commercial Matters, thus formally broadening the scope of mediation in the Czech Republic. Regulated mediation is performed by certified registered mediators – a list of whom can be found on the website of the Czech Ministry of Justice – in both cross-border and local disputes.

A lot has changed since 2012. If nothing else, at least mediation is less frequently confused with meditation or medialisation, but there is still a lot of work to do. Hopefully this short article will help cast light on why and when this form of dispute resolution should be used and when parties should opt for something else.

Under Czech law, the parties to a dispute may choose to resolve their differences by mediation without having recourse to a court (or arbitration). Once the mediation starts, the statutory limitation periods cease. Mediation thus has an effect similar to the initiation of court proceedings, except that the parties are not limited in the possibilities to terminate the mediation and refer their dispute to court, should they ascertain that mediation was not the ideal option. Should the parties to a successful mediation wish to have an enforcement title, they may conclude a settlement agreement in the form of a notarial deed (faster option) or propose that the court approve the settlement agreement (less costly option). If the parties settle their dispute before the court decides on the merits, the court will generally reimburse the claimant 80 % of the court fee paid.

When is mediation not recommended? The instances are numerous, so only a short selection is presented here. Firstly, if the parties do not want to negotiate, but rather need robust case law that would eventually support their view of the case, mediation cannot help. Secondly, if the mediation process is used to obtain information from the other party with a view to using it against that party, mediation does not make sense. Lastly, if money is no object for the parties, mediation should not be considered. In mediation, the parties pay only the mediator's fees as agreed with the mediator, but do not need to pay court fees (in major disputes in the Czech Republic these may even exceed CZK 4,000,000, ie approx EUR 154,000) or legal fees, which is actually one of the reasons why some lawyers are reluctant to mediate.

The parties nevertheless should consider alternatives to a court dispute if they wish to have control over the solution of their dispute and to actively find a solution that best suits their needs within a short time (most court proceedings take more than one and very frequently more than two years, while disputes in mediation may be resolved within hours or, in the worst case, days). They may also opt for mediation if parties from foreign jurisdictions are involved in the dispute, if a specific language or expertise is needed or if it is hard to have all parties present in one place, since mediation is possible online. Obviously mediation is the best option if the parties want to keep their dispute private or do not have time or money to lose.

In such a case, the parties could select a mediator or several mediators, discuss their matter and, eventually, find a solution and become part of the 75 to 80 % of parties that reached an agreement with the help of mediation.

The Czech Republic is promoting mediation by introducing into the Czech Civil Procedure Code the possibility for the courts to order a so-called "first meeting with a mediator". Once litigation has begun, the court may order the parties to meet a mediator and discuss the possibility of settling their dispute outside of court. This first meeting with a mediator is subject to a relatively low fee – capped at CZK 400 (approx EUR 15) excl VAT per hour – each party pays half of the fee, unless agreed otherwise, and the purpose of the meeting is to explain to the parties the advantages of the mediation and to propose other options to resolve their dispute quickly and privately. The courts are increasingly taking advantage of this possibility. For example, in 2016 the number of first meetings with a mediator ordered by the courts in business disputes rose by more than 130 % when compared to 2014, and the number of mediated consumer disputes increased by 300 % between 2014 and 2016, according to statistics kept by the Czech Ministry of Justice. On the other hand, if the parties refuse to meet the mediator, the court may decide that the refusing party, even if it succeeds in the dispute, does not have the right to claim reimbursement of the fees incurred in connection with the dispute. 

This short article naturally cannot address all the nuances of this relatively novel possibility and cannot explain all the advantages or discuss the risks. Interested readers are therefore invited to contact the Schoenherr Prague office, which will happily offer more information or schedule a consultation with a registered mediator, who happens to be the author of this article.