How can an Italian company litigate in the Czech Republic

Facing a commercial dispute in the Czech Republic? This guide provides clear, practical answers for Italian companies navigating the complexities of cross-border legal action. To succeed, you need more than just a lawyer; you need a strategic partner who can help you find the right Czech law firm for your case, navigate cross-border litigation in the European Union, and work with an English-speaking lawyer in Prague who understands your business.

Need advice on this topic? Contact the ARROWS law firm by email office@arws.cz or phone +420 245 007 740. Your question will be answered by "Mgr. Vojtěch Sucharda", an expert on the subject.

Your Dispute in the Czech Republic: The First Two Questions You Must Answer

For Italian companies operating within the European Union, the single market can create a false sense of legal security. While EU regulations have streamlined many cross-border procedures, they have not eliminated the fundamental differences in national laws.

The process of where to file a lawsuit and how to enforce a judgment is harmonized, but the substantive legal rules a court will use to decide who wins or loses are often rooted in local law. Understanding this distinction is the first step to building a successful litigation strategy.

Where Should You File Your Lawsuit? Understanding Jurisdiction under the Brussels I bis Regulation

The first question in any cross-border dispute is which country’s courts have the authority to hear the case. This is a matter of jurisdiction, and within the EU, it is governed by a foundational piece of legislation: the Brussels I bis Regulation (Regulation (EU) No 1215/2012). This regulation ensures that jurisdictional rules are consistent across all member states, including Italy and the Czech Republic.

The general rule, known by the Latin maxim Actor sequitur forum rei, is that you must sue a defendant in the courts of their country of domicile. If your dispute is with a Czech company, the default location for your lawsuit would be the Czech Republic. However, the Regulation provides several crucial exceptions that are highly relevant for commercial disputes:

• Breach of Contract: The lawsuit can be filed in the courts for the "place of performance of the obligation in question". For a contract involving the sale of goods, this is typically where the goods were delivered. For services, it is where the services were provided. This allows you to bring a case in a location directly connected to the substance of the contract.
• Non-Contractual Matters (Torts): For disputes not arising from a contract, such as claims for damages due to negligence, the case can be heard in the courts of the place where the "harmful event occurred".

Choosing the correct jurisdiction is a critical strategic decision. It affects the language of the proceedings, the procedural rules, and the convenience for your team and witnesses.

FAQ – Legal tips about jurisdiction

• Can we agree in our contract which country's court will hear disputes?
  Yes, this is called a choice of court agreement and is generally upheld under the Brussels I bis Regulation. However, it must be drafted correctly to be effective. For a review of your jurisdiction clauses, contact us at office@arws.cz.
• What if our Czech partner sues us in the Czech Republic? Do we have to defend ourselves there?
  Generally, yes. If a Czech court has jurisdiction under the EU rules, you must participate in the proceedings or risk a default judgment against you. For immediate assistance, write to us at office@arws.cz.

Which Country's Law Will the Court Apply? A Practical Look at the Rome I and Rome II Regulations

Once jurisdiction is established, the next critical question is which country's substantive law will be used to decide the case. A Czech court does not automatically apply Czech law. The rules for determining the applicable law are set out in two other key EU regulations.

The Rome I Regulation (Regulation (EC) No 593/2008) governs contractual obligations. Its primary principle is freedom of choice. If your contract contains a "choice of law" clause specifying that Italian law governs the agreement, a Czech court will generally respect and apply Italian law to the dispute. If the contract is silent, Rome I provides default rules. For example, contracts for the sale of goods are typically governed by the law of the seller's country, while service contracts are governed by the law of the service provider's country.

The Rome II Regulation (EC) No 864/2007 applies to non-contractual obligations, such as torts or claims of unjust enrichment. The general rule here is the law of the country in which the damage occurs (lex loci damni). This complex interplay between procedural and substantive law is precisely why expert local counsel is indispensable. Even if your contract is governed by Italian law, the case will proceed according to the Czech Code of Civil Procedure, and certain mandatory Czech rules will always apply.

The Czech Litigation Process: A Step-by-Step Guide for Italian Management

The Czech court system, governed by the Civil Procedure Code (Act No. 99/1963 Coll.), is a robust and predictable framework. While it shares roots with other continental European legal systems, it has unique features and procedures that foreign companies must understand to succeed. A key advantage for creditors with clear-cut claims is the existence of a highly efficient judicial fast-track procedure that can secure an enforceable judgment in a matter of weeks, not years.

The Pre-Action Stage: Why the First Letter Matters

Before initiating court proceedings, Czech law requires a formal pre-action letter to be sent to the debtor. This notice must be sent to the debtor’s last known address at least seven days before filing a claim. This is not merely a procedural box to tick; it is a strategic opportunity. A professionally drafted legal notice demonstrates your seriousness and can often prompt a settlement without the need for costly litigation. ARROWS can prepare this documentation to ensure full legal compliance while maximizing its persuasive impact.

Filing the Claim: Standard Procedure vs. the Fast-Track Payment Order (Platební Rozkaz)

When a lawsuit is necessary, you have two primary paths in the Czech system. The first is the standard civil lawsuit (žaloba), which involves filing a detailed claim that leads to court hearings where evidence is presented and witnesses are examined. This is the required route for complex disputes.

However, for straightforward monetary claims, such as unpaid invoices, the Czech system offers a powerful and efficient alternative: the Platební Rozkaz (Payment Order). This is a judicial process that allows a creditor to obtain a binding court order without an initial hearing. The process is simple and effective:

1. File the Application: You submit an application (návrh na platební rozkaz) to the court, supported by strong documentary evidence like signed contracts, invoices, and delivery confirmations.

2. Court Review: The court reviews the documents on file. It does not hold a hearing or conduct a substantive review of the claim's merits at this stage.

3. Issuance of the Order: If the claim is properly substantiated, the court issues the Payment Order and serves it on the debtor.

4. Debtor's Response: The debtor has 15 days from delivery to either pay the full amount or file a formal objection (odpor).

If the debtor fails to respond within the 15-day deadline, the Payment Order becomes a final and fully enforceable judgment. This procedure shifts the burden of action to the debtor and provides a swift, cost-effective path to resolution for undisputed debts.

From Objection (Odpor) to a Full Hearing: What to Expect in Court

If the debtor files an odpor against the Payment Order, the case is automatically converted into a standard civil lawsuit. The process then moves to a full hearing. The court will schedule one or more hearings where both parties can present their arguments, submit additional evidence, and call witnesses to testify. The Czech civil procedure is based on key principles like the equality of arms, ensuring both parties have a fair opportunity to be heard and present their case.

The Judgment and Your Right to Appeal

After all evidence has been presented and arguments have been heard, the court will issue its judgment. If you disagree with the decision of the first-instance court, you have the right to file an appeal. The appeal is heard by a superior court, which will review the case and can either confirm, modify, or overturn the original decision. Understanding the full lifecycle of a dispute, including the appellate process, is essential for long-term strategic planning.

Critical Legal Traps: Why Your Italian Business Instincts Can Be a Liability in Prague

The most significant challenges for Italian companies in the Czech Republic arise not from malice, but from a fundamental clash of legal and business cultures. Italian commercial law is deeply rooted in principles of good faith (buona fede) and the underlying intentions of the parties, giving judges significant flexibility. In contrast, the Czech legal system, with its Germanic influences, places a much stronger emphasis on legal certainty and the strict, literal wording of a written contract. What is considered a reasonable business practice in Milan can be a catastrophic legal error in Prague.

The Smluvní Pokuta: A Contractual Penalty Unlike Anything in Italian Law

Perhaps the most dangerous legal trap is the misunderstanding of the Czech contractual penalty, or smluvní pokuta. While it may sound similar to the Italian clausola penale, its function and power are vastly different.

The Italian clausola penale is primarily compensatory, and courts can reduce a penalty deemed excessive. The Czech smluvní pokuta, however, is designed to be punitive and preventive. Critically, it is enforceable even if the other party suffered no actual financial damage from the breach. Furthermore, it can be applied to any contractual obligation, including a simple delay in payment. 

A minor, ten-day administrative delay could trigger a penalty clause equivalent to a large percentage of the entire contract value, completely erasing your profit margin. While Czech courts do have the power of moderation to reduce an "unreasonably high" penalty, this is a discretionary remedy, and relying on it is a risky and expensive litigation strategy.

The "Validity Trap": When Your Verbal Agreement is Legally Worthless

Italian business culture often values personal trust and verbal understandings, where a handshake can seal a deal. This approach is legally perilous in the Czech Republic. Czech law imposes strict written form requirements (písemná forma) for certain types of agreements, and failure to comply renders the contract void from the start.

A classic example is an agency agreement. An Italian company might engage a Czech sales agent based on a series of meetings and emails, believing a binding relationship exists. However, under Czech law, an agency agreement is legally non-existent unless it is in a formal written contract. This "validity trap" can leave you with no legal recourse if a dispute arises.

The "Procedural Trap": Forfeiting Your Claim Due to a Shorter Statute of Limitations

Time is of the essence in Czech litigation. Italian law provides a generous ten-year general limitation period for breach of contract claims. This can create a false sense of security for Italian managers, who may delay legal action. In the Czech Republic, the clock ticks much faster.

Czech law uses a dual system of limitation periods. The subjective limitation period is generally three years and begins when the claimant knew, or should have known, about the claim (e.g., from the date an invoice was due). This is backed by an objective limitation period of ten years, which is an absolute deadline from when the breach occurred. An Italian company that waits beyond the three-year subjective period, assuming it has ten years, may discover its right to sue has been permanently forfeited.

Common Contractual and Procedural Risks for Italian Companies

Risks and penalties	How ARROWS helps
Enforcement of a massive smluvní pokuta (contractual penalty) for a minor breach, potentially exceeding the value of the contract.	Contract drafting or review: We analyze and redraft penalty clauses to be reasonable and enforceable, protecting you from disproportionate financial loss. Do you need a contract prepared? Contact us at office@arws.cz.
An agreement being declared legally void for not meeting Czech written form requirements (písemná forma), resulting in total loss of contractual rights.	Drafting legally required documentation: We ensure your key agreements, such as agency or distribution contracts, comply with all formal requirements to be fully valid and enforceable.
Permanent loss of the right to sue due to the expiry of the short 3-year Czech statute of limitations.	Legal analysis and representation: We assess your claim deadlines immediately and can initiate legal action promptly to preserve your rights. Want to understand your legal options? Email us at office@arws.cz.
Losing a dispute because a Czech court strictly interprets ambiguous wording in a contract against you.	Legal opinions and contract review: We provide clear analysis of your contractual obligations under Czech law and can redraft clauses to eliminate ambiguity and protect your interests. Need legal help? Contact us at office@arws.cz.

Enforcing Your Victory: Making a Judgment Count Across Borders

Winning a lawsuit is only half the battle; the ultimate goal is to enforce the judgment and recover what you are owed. Here, the European Union's legal framework provides a significant advantage. The difficult journey of navigating a foreign litigation system is rewarded with a simplified and powerful enforcement process. The end of the road is made easy, but the journey to get there is complex, which underscores the importance of securing a victory in the initial case with expert legal counsel.

How to Enforce a Czech Judgment in Italy (and Vice Versa) with Ease

Thanks to the Brussels I bis Regulation, the cumbersome and costly process of having a foreign judgment recognized (known as exequatur) has been abolished between EU member states. A final judgment from a Czech court is automatically recognized and enforceable in Italy, and vice versa, without any special procedure being required.

The practical steps are remarkably simple. To enforce a Czech judgment in Italy, the creditor generally only needs to provide the Italian enforcement authorities with two documents:

1. A copy of the Czech judgment.

2. A standard certificate issued by the Czech court (often referred to as the Annex I or Article 53 certificate).

This streamlined system ensures that a legal victory in one EU country has real teeth across the entire single market. Other EU tools, such as the European Enforcement Order (EEO) for uncontested claims and the European Order for Payment (EOP), can further simplify cross-border debt collection.

The Czech Enforcement (Exekuce) Process: What Happens When the Debtor Won't Pay

If you have a final Czech judgment and the debtor is based in the Czech Republic, enforcement is carried out through a powerful process called exekuce. This process is managed by a court-appointed private executor (soudní exekutor), who has extensive legal powers to compel payment. These powers include freezing and seizing funds from bank accounts, placing liens on real estate, and seizing movable assets such as vehicles, equipment, and inventory. 

ARROWS provides comprehensive support throughout the enforcement phase, from filing the application to coordinating with the executor to ensure a swift and effective collection process.

Risks During the Judgment Enforcement Stage

Risks and penalties	How ARROWS helps
The debtor is insolvent or has no identifiable assets, making the judgment practically worthless.	Asset tracing and legal opinions: Before initiating costly enforcement, we can investigate the debtor's assets to provide a realistic assessment of recoverability. Do not hesitate to contact our firm – office@arws.cz.
Procedural errors in filing for enforcement, leading to delays and additional costs.	Representation in enforcement proceedings: We handle all communication and filings with the court and the executor, ensuring the process is initiated correctly and efficiently. For immediate assistance, write to us at office@arws.cz.
The debtor attempts to hide or transfer assets to frustrate enforcement.	Securing interim measures: Where necessary, we can apply for court orders to freeze assets even before a final judgment, preventing the debtor from dissipating them. Need legal help? Contact us at office@arws.cz.
Disputes over the enforcement of a foreign judgment based on public policy exceptions (a rare but possible challenge).	Expert legal representation: Our deep knowledge of both EU and Czech law allows us to effectively counter any challenges to the enforcement of your judgment. Get tailored legal solutions by writing to office@arws.cz.

Why ARROWS is Your Strategic Partner for Czech-Italian Disputes

Success in a Czech-Italian commercial dispute requires more than just knowledge of the law. It demands a sophisticated understanding of the subtle but critical differences in legal philosophy, business culture, and judicial practice. As a leading Czech law firm in Prague, EU, ARROWS is uniquely positioned to bridge this gap for our Italian clients. We combine deep, on-the-ground expertise in Czech litigation with decades of experience representing international companies.

Our capabilities are enhanced by the ARROWS International network, a global alliance built over 10 years that allows us to handle complex cross-border matters in over 90 countries. We don't just represent you in court; we provide end-to-end strategic advice. 

We help you prevent future disputes through expert contract drafting and review, ensure compliance by preparing internal company policies, and provide robust representation in court or before public authorities with a strategy tailored to the nuances of the Czech legal system. Our broad client base, which includes over 150 joint-stock companies and 250 limited liability companies, is a testament to the trust businesses place in our firm.

Conclusion: Your Next Step to a Successful Resolution

Navigating a commercial dispute in the Czech Republic presents unique challenges for Italian companies, where differences in law and business culture can lead to unexpected risks and severe financial consequences. However, with expert legal guidance that bridges this cultural and legal divide, a successful outcome is entirely achievable. Proactive legal advice is the most effective way to protect your interests and avoid costly litigation.

Don't let legal differences turn a business challenge into a financial disaster. To discuss your specific situation with our team of experts at our international law firm operating from Prague, European Union, contact us today for a confidential consultation. Our lawyers are ready to assist you – email us at office@arws.cz.

FAQ – Most common legal questions about litigating in the Czech Republic

1. How much does it cost to litigate in the Czech Republic?
Costs vary based on the complexity of the case but generally include court fees and legal fees. Court fees for monetary claims are typically 5% of the claimed amount up to CZK 40 million. The Czech system follows the "loser pays" principle, meaning the unsuccessful party is often ordered to cover the successful party's reasonable costs. We provide transparent fee structures and can assess the potential costs for your case. To get a cost estimate, contact our firm at office@arws.cz.

2. How long does a typical commercial lawsuit take in the Czech Republic?
The timeline depends on the procedure. A fast-track platební rozkaz can yield an enforceable judgment in a matter of weeks if uncontested. A standard, contested civil lawsuit at the first-instance court can take one to two years to resolve. 

3. Do I need to have all my documents translated into Czech?
Yes. All official submissions to a Czech court, including evidence and pleadings, must be in the Czech language. We manage this entire process for you, working with certified legal translators to ensure all your documentation is accurately prepared and compliant with court requirements. For help with your documentation, write to us at office@arws.cz.

4. Is arbitration a better option than litigation in the Czech Republic?
It can be. Arbitration is often faster, more flexible, and more confidential than state court litigation. The Arbitration Court attached to the Economic Chamber of the Czech Republic, based in Prague, is a highly respected institution that resolves most commercial disputes within a year. Choosing between arbitration and litigation is a key strategic decision we can help you with. Get tailored legal solutions by writing to office@arws.cz.

5. My contract says Italian law applies. Does that mean I don't need a Czech lawyer?
You absolutely still need a Czech lawyer. Even if a Czech court applies Italian substantive law to the dispute, all procedural matters will be governed by the Czech Code of Civil Procedure. A Czech lawyer is essential to navigate the court process, meet deadlines, and present your case effectively within the local legal framework. 

6. Can ARROWS represent my company even if the dispute is already in progress?
Yes, we can provide expert representation at any stage of a dispute. Whether you have just received a court summons, are in the middle of proceedings, or are considering an appeal against an unfavorable judgment, our team is equipped to step in and protect your interests. For immediate assistance with an ongoing case, write to us at office@arws.cz.

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