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When to resolve a dispute out of court and how to proceed?

Relatively significant time savings and quick resolution of problems, greater flexibility, sometimes even lower costs. These are the advantages of out-of-court dispute resolution. When and how to use them and in which cases is the law forbidding them?

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There are several areas where out-of-court settlements are frequently and popularly used. The main one is undoubtedly commercial disputes, the out-of-court resolution of which can take an institutionalised form in the form of arbitration before an arbitral tribunal, but also a less formal form before a private arbitrator. The second group is family law disputes, where it is out-of-court proceedings that can lead to de-escalation of the problem and smoothing of the edges. A specific category is then consumer disputes, where out-of-court resolution also represents a cheap and quick option for a dispute that you might not have pursued in a court of law.

Apart from the substantive differences in the above-mentioned disputes, there is also a diametric difference in legal terms (i.e. especially in terms of binding and enforceability) whether you resolve your disputes in an arbitration court, the Czech Telecommunications Office or a family counselling office.

This also brings us to the disadvantages of such an alternative solution. If we do not have a clause on dispute resolution before an arbitrator directly agreed in the contract (which is only possible for commercial disputes among the above options), the essential principle of such solutions is voluntariness. Thus, you cannot force the other parent or the seller in a consumer dispute to enter into that solution if they do not want to. In terms of family disputes, then, the only thing that can be appealed for is helpfulness and an effort not to aggravate the problems in the family, and in terms of consumer disputes, a positive PR for the business, maintaining customer confidence and a pro-customer attitude.

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Family law

An area where an out-of-court solution can be a great relief for both parties are disputes concerning the family, in particular the setting up of the (former) family’s functioning in the period after the divorce and the care of the children. When a father and mother reach a point where they do not want to “win” and beat the other at all costs, but are looking for a solution that takes into account the interests of everyone involved, and especially the children, as far as possible, then out-of-court settlement is the ideal way forward.

It has to be said that the setting of a post-divorce modus vivendi is, from the point of view of the court and the lawyers, a question of rights and obligations, but from the point of view of the parents and the children it is also a question of needs, emotions and feelings, for which there is, of course, little room in court. However, in the context of an out-of-court solution, this aspect can also be dealt with.

It should be added that a number of other topics can also be addressed in the context of family or marriage counselling. We have focused in particular on the area that, if no agreement is found, is dealt with for many years in court, which is a great burden for the functioning of the family.

The advantage of such a procedure is its flexibility. Unlike a binding court decision, you can search together for options that suit you and, if they do not, then abandon them relatively easily.

The assistance of a lawyer is also undoubtedly appropriate in an out-of-court settlement, as the result of the joint agreement needs to be translated into a form that can be approved by the court. An out-of-court settlement cannot resolve your divorce on its own and, moreover, even if you do reach a mutually acceptable solution, we know from our experience that the emotions involved are what make such agreements fragile at times and fixing and anchoring them in a legally enforceable form is essential. The ideal solution is therefore to use an out-of-court settlement, together with subsequent legal assistance to draw up a joint agreement that can be submitted to the court as part of an uncontested divorce petition. The content of the agreement can be, for example, an agreement on the child custody ratio, the amount of child support, the method of handing over the child, the setting up of holiday care and so on.

Tip: The differences between contested and uncontested divorce and the court procedure under both options are described in detail in our article.

Out-of-court settlement in consumer disputes

For reasons of increased consumer protection, the law prohibits the negotiation of arbitration clauses in consumer contracts and the resolution of disputes with consumers through arbitration (the exception is the arbitration agreement, i.e. the agreement between the parties only at the time when a specific dispute is initiated). However, the consumer is still able to resolve a dispute under a purchase or service contract out of court.

The only exceptions are contracts concluded in the field of health services, including pharmacy services, where the alternative procedure cannot be chosen.
Consumer disputes may arise from ordinary sales or service contracts where the consumer is on one side and the entrepreneur on the other. Very often, the subject of the dispute is a performance within the range of hundreds of crowns or a few thousand crowns. If the only possible course of action were litigation, the parties would in practice often be more likely to change their minds about whether such an item was worth litigating, even if they knew for certain that they were in the right.

Tip: We have discussed the standard procedure for dealing with complaints in detail in our article.

The project of out-of-court resolution of consumer disputes, which has been in operation since 2016, was adopted from European Union law and involves, in addition to the Ministry of Industry and Trade, the Czech Telecommunications Office, the Energy Regulatory Office, the Financial Arbitrator, the Czech Trade Inspection Authority, the Association of Czech Consumers, the Czech Bar Association and the Office of the Ombudsman of the Czech Association of Insurance Companies.

  • TheFinancial Arbitrator resolves disputes between consumers and financial institutions such as banks.
  • TheEnergy Regulatory Office can help you resolve discrepancies with your gas or electricity provider.
  • TheCzech Telecommunications Office can stand up for you if you are in a dispute with an electronic communications service provider (i.e. telephone or internet service).
  • TheCzech Trade Inspection Authority and the Association of Czech Consumers have the power to resolve disputes arising from purchase and service contracts.
  • The Office of the Ombudsman of the Czech Association of Insurance Companies will help you if you have a difference of opinion with your insurance company.
  • TheCzech Bar Association offers the possibility of resolving a dispute between an attorney and a consumer client if they themselves cannot agree on a mutually acceptable compromise.

In practice, this may include various disputes over claims, problems with non-delivery of goods, insurance company performance, etc.

This method can be used by natural persons when they are acting as consumers, i.e. when it is not their business or self-employment.

What is typical for the so-called ADR (Alternative Disputes Resolution):

  • financial ease – the parties pay only what they put into the “process”, i.e., for example, copying costs, travel, legal counsel. The mediation itself is free of charge and the mediator’s fee is subsequently covered by the Ministry of Industry and Trade. Legal representation is not mandatory. However, in the case of disputes over higher value transactions, it is more than recommended. On the other hand, there is no limit to the amount of the performance, in theory you can go into a dispute for performance within ten crowns (if it is worth the effort).
  • speed – the proceedings must be completed within 90 days of commencement. This is almost impossible in a court case. Only in more complicated cases can the proceedings be extended for an additional 90 days.
  • flexibility – as a consumer, you can stop participating in ADR at any time. In addition, choosing this option does not deprive you of the possibility to use the judicial solution of the dispute.

In the case of the Czech Telecommunications Office, the Energy Regulatory Office and the Financial Arbitrator, you will receive a decision at the end of the proceedings that is valid and binding on both parties. The other authorities and institutions mentioned above, in particular the Czech Trade Inspection Authority, which is important for consumer disputes, cannot issue legally binding decisions in these situations and the result is an agreement between the parties. Nevertheless, even such an agreement is usually sufficient to resolve the dispute and the parties abide by it.

From the point of view of consumers, the most frequent disputes before the Czech Trade Inspection Authority are. Disputes arising from purchase contracts and service contracts can be resolved under ADR. It is always necessary that the consumer is a party to the relevant contract. In order for the dispute to be effective, it is essential that the consumer is able to provide credible evidence of the validity of the claim. The most frequent disputes resolved under ADR are disputes arising from defective performance (claims for goods and services). However, the consumer is often required to prove the validity of the claim by expert evidence.

Commercial disputes

Arbitration is a well-known and sought-after option in the case of disputes between two traders. Especially in the case of cross-border disputes, they can guarantee a quick resolution. For many businessmen, the possibility of greater secrecy in their business affairs is not uninteresting, as arbitrations are not public. They also allow for the prior selection of an expert who specialises in a particular area of law and on whom both parties agree. Perhaps surprisingly to many people, arbitral awards are also easier to enforce, which is particularly true for cross-border disputes where the New York Convention on the Recognition and Enforcement of Arbitral Awards applies. On the other hand, the flexibility and speed is compensated by the absence of an enforcement apparatus if one of the parties does not accept the decision, and also by the lesser possibility of redress for poor quality decisions.

Tip: The out-of-court settlement of disputes in commercial matters is quite a broad topic. That is why we have dealt with it in detail in a separate article.

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Author of the article

JUDr. Ondřej Preuss, Ph.D.

Ondřej is the attorney who came up with the idea of providing legal services online. He's been earning his living through legal services for more than 10 years. He especially likes to help clients who may have given up hope in solving their legal issues at work, for example with real estate transfers or copyright licenses.

Education
  • Law, Ph.D, Pf UK in Prague
  • Law, L’université Nancy-II, Nancy
  • Law, Master’s degree (Mgr.), Pf UK in Prague
  • International Territorial Studies (Bc.), FSV UK in Prague

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