Arbitration and arbitral proceedings, or arbitration, represent a key alternative to traditional court proceedings, particularly in the area of commercial and international disputes. It is an out-of-court way of resolving disputes through independent and impartial arbitrators. Read about the history of this institution, what cases it commonly resolves and what new developments have taken place in the field of arbitration.
An arbitration court is an institution that provides out-of-court dispute resolution. Either they are permanent institutions or they are created ad hoc always for a specific case.
Arbitration and sometimes also called arbitration. It is a process in which the dispute between the parties is not resolved through the traditional court system, but is decided by one or more arbitrators, called arbitrators. These arbitrators may be appointed by the court or chosen by the parties to the dispute if it is an ad hoc procedure. Arbitration generally takes less time and is not as formal as court proceedings.
There are a number of arbitral tribunals and institutions providing arbitration services both nationally and internationally. In the Czech Republic, one of the most important ones is the Court of Arbitration at the Czech Chamber of Commerce and the Czech Chamber of Agriculture. This court offers its services not only to Czech but also to foreign entities that enter into a dispute. Like other courts of this type, it provides administrative support and rules that make the whole process easier.
The tradition of arbitration courts dates back to antiquity. Back then, it was actually a process that effectively resolved disputes between merchants. Arbitration is regulated in the Czech Republic by Act No. 216/1994 Coll., on Arbitration and Enforcement of Arbitral Awards. It is the law that sets out the basic rules for the conduct of arbitration, including the validity of arbitration clauses and the possibility of judicial review of arbitral awards. Arbitration is still used today mainly in disputes between companies.
Arbitration is based on several key principles:
Arbitration takes place on the basis of an arbitration clause or a separate arbitration agreement that the parties enter into either before or after the dispute arises. An arbitration clause is an agreement in which the parties agree to resolve any dispute that may theoretically arise between them in the future by arbitration. The law mandates that the arbitration clause must be in writing. Therefore, be sure not to write it on your knee, so to speak, but contact a lawyer who will ensure that all the formalities are in place. After all, legal representation is now commonplace in every company.
Need help with an arbitration clause?
If you find yourself in a situation where you are considering out-of-court proceedings in the form of arbitration, you should definitely contact an attorney. This is because the clause must be negotiated in writing, as required by law, or it cannot be considered valid. And since it is a crucial document that requires adherence to specific rules, you’d better rely on a quality drafting by a lawyer who understands the whole thing and keeps an eye on all the essentials.
The arbitration process usually starts with the filing of a claim by one of the parties. As a result, both parties to the dispute proceed to the appointment of arbitrators. However, this step can be omitted if the arbitrators are already specified in the arbitration clause. The arbitrators then take the floor and conduct the entire hearing. During the arbitration, both parties may present their evidence and arguments. At the end of this hearing, the arbitrators will issue an award. This binding document has the same legal value as a court judgment.
Compared to traditional court proceedings, arbitration is characterised above all by its speed. The process usually does not take as long, which is one of the main reasons why parties resort to it in the event of a dispute. Another advantage is the specialisation of the arbitrators. They often come from the ranks of experts on the subject, thus increasing the quality and professional level of the entire assessment and decision. The fact that the arbitration is not held in public is again appreciated by the parties who need to protect sensitive information. Finally, arbitration is definitely more flexible and less formal than a court process.
On the other hand, the overall costs can be higher than those for a court, especially when you have to pay the arbitrators for their services. Another downside is that the arbitration award is final and you have limited recourse if you want to review it in court. In arbitration, you also run the risk of inappropriate selection of arbitrators, which can create problems for you if they make a biased decision. So if the arbitrator makes a mistake, the parties have no way to defend against it.
There are also insufficient enforcement powers in arbitration. Arbitrators cannot order anyone to go and testify or present evidence, which can affect the quality of the decision, because it is up to the witnesses and experts themselves whether they are willing to come and testify voluntarily.
In arbitration, there is also a risk of unfair decision-making if the arbitral institution joins with one of the parties. And because arbitrators work independently, there can be inconsistent decisions in similar cases, making it difficult to predict the outcome of disputes. Some have also criticised the fact that arbitration proceedings tend to be closed to the public and therefore not sufficiently transparent. In addition, arbitration clauses have been used against consumers in the past for loans.
The arbitral award has the same legal force as a court judgment and is enforceable. If a party fails to comply with the obligation imposed by the arbitral award, the other party may apply to the court for enforcement of the arbitral award.
An arbitration award has the same legal force as a court judgment and both parties must abide by it. If one of the parties bound by the arbitration award fails to comply with this obligation, the other party can take the matter to court and apply for enforcement of the arbitration award. The enforceability of arbitral awards at international level is ensured by the so-called New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958. Most of the world’s states have acceded to this Convention.
However, a court can only review an arbitration in certain circumstances. The Arbitration Act sets out the grounds on which a court may set aside an arbitral award. These include, for example, situations where the supervisory clause has lapsed, the arbitral award is contrary to public policy or there has been a violation of the right to a fair trial at any stage of the proceedings.
Do you disagree with the arbitration decision? Refer the matter to our law firm. We will go through all the documentation and check for you whether the process was conducted in accordance with the rules and whether there are any ways to resolve the case.
Thanks to the amendment of the Rules of the Arbitration Court at the Czech Chamber of Commerce and the Czech Chamber of Agrarian Affairs, several significant changes have been made in the field of arbitration since January 2023. These changes were primarily intended to ensure a more efficient arbitration process and increase overall transparency. In particular, the following key points were affected by the new developments:
According to the report on the activities of the Arbitration Court for 2023, there has been an increase in the number of cases resolved by arbitration. Several hundred new proceedings were initiated in 2023, with most cases resolved within a few months. This clearly shows that confidence in this method of dispute resolution is increasing, and it also demonstrates the effectiveness of arbitration in the Czech Republic.
Arbitration and arbitration represent an important alternative to traditional court proceedings, offering a number of advantages including speed, confidentiality and the expertise of arbitrators. However, like any legal method, arbitration has its disadvantages, such as higher costs or limited appeal options. Knowledge of the basic principles, the legal framework and current trends is key to the successful use of this tool in dispute resolution. Developments in legislation and practice show that arbitration is becoming increasingly important in the field of commercial law and dispute resolution in the Czech Republic and internationally.
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