Czech Republic: New Rules on Reimbursement of Costs in Civil Proceedings
→ Jiří Hrádek
When considering whether to enforce rights in judicial proceedings, the potential claimant must consider not only the facts and evidence that can be presented to the court but also the solvency of the debtor and procedural costs that may be reimbursed in case of success, or must be paid in case of failure. Since 2013, there has been a big change in the reimbursement of attorney’s costs as a part of procedural costs.
System of reimbursement of legal costs
When considering whether to enforce rights in judicial proceedings, the potential claimant must consider not only the facts and evidence that can be presented to the court but also the solvency of the debtor and procedural costs that may be reimbursed in case of suc-cess, or must be paid in case of failure. Therefore, the issue of reimbursement of procedural costs is topical from the point of view of both the claimant and the respondent.
Claims for reimbursement of costs are based on the provisions of the Czech Procedural Code, under which the “loser pays” system applies (but exceptions exist). However, the amount of attorney’s fees to be awarded is subject to decrees that precisely describe how these costs are to be calculated.
Until 2013 there were two decrees that applied to the calculation of attorney’s fees. The first was Decree No. 484/2000 Coll., based on which the reimbursement of attorney’s fees within judicial or other proceedings was provided as lump sum compensation, thus making it irrelevant for the calculation whether an attorney carried out one or a hundred acts. For a claimant, this approach was favourable, as in case of extensive amounts with a limited number of attorney’s acts, the excessive amount was awarded. The same applied in cases of very small claims when the decree provided for a relatively high compensation.
Then there was Decree No. 177/1996 Coll. (the attorney’s tariff), which specified in detail so-called non-contractual attorney’s fees and that contained rules both for representation in proceedings and in non-procedural matters, such as IP matters.
In case of the collision of both decrees, the first decree providing lump sum compensation applied and the attorney’s tariff ruled on only some aspects that did not qualify as representation, such as travel costs, compensation for travelling time to the court, or administrative costs. If no conflict occurred, the attorney’s tariff applied in all matters.
Impact of the case law of the Constitutional Court
The Czech Constitutional Court, which had long criticised sums awarded without reference to the attorney’s acts, fundamentally changed this practice. This U-turn happened on 7 May 2013, when the Constitutional Court published its decision on abolishing Decree No. 484/2000 Coll.
The main issue concerning the cancelled decree was the basis on which remuneration for representation had been calculated. The Constitutional Court found these rules to be in conflict with the principle of a fair trial, as these rules had failed to reflect the complexity of the case and the number of acts undertaken by the representative. The representative of the successful plaintiff was thus awarded an inappropriately high amount compared to the amount actually claimed.
The Constitutional Court did not stipulate how to calculate the attorney’s fees after abolishing the decree, but under the case law of the general courts the attorney’s fees are now calculated only under the attorney’s tariff, which has fully replaced the cancelled decree.
Despite this clear legal situation, the activity of the Constitutional Court has a serious impact on client-attorney relations.
The new situation sends the Czech Republic back to pre-2000, when attorneys were unable to calculate the costs in advance and had to set a basic rate to be multiplied by the number of acts. On the other hand, based on this information, the client can compare the attorney’s fees agreed with his representative and applied later when calculating the reimbursement.
Still, if the losing side bears the costs of the counterparty, any assumption of such costs is practically impossible at the beginning of the proceeding. This is especially risky when the claimed amount is high and the attorney will carry out a number of acts.
In consequence, all parties involved must carefully analyse the case and the chances of success to responsibly decide on the risks and challenges.