How to Resolve Legal Disputes in the Czech Republic as a Croatian Company: What to Expect

Commencing a high-value commercial dispute against a Czech counterparty requires a precise understanding of the legal environment to minimize delays and financial exposure. If you are a corporate leader seeking to navigate unfamiliar legal terrain and secure the ultimate enforceability of your claim, you need definitive answers regarding jurisdiction, procedural compliance, and strategic planning. This expert guide provides actionable clarity on the foundational laws and strategic pitfalls necessary for achieving a successful outcome in Czech courts. 

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.

Immediate Clarity: Where Does Your Commercial Dispute Belong?

The Foundational Law: International Jurisdiction and the Brussels I bis Regulation

The starting point for any cross-border commercial dispute between a Croatian company and a Czech entity is the question of international jurisdiction. Since both Croatia and the Czech Republic are members of the European Union, their legal relationship concerning jurisdiction, recognition, and enforcement in civil and commercial matters is harmonized by the Regulation (EU) 1215/2012. This instrument is commonly known as the Brussels I bis Regulation. Both nations apply this comprehensive set of rules.

The Brussels I bis Regulation establishes clear rules to ensure predictability across member states. The primary default rule dictates that a person or company must be sued in the Member State where they are domiciled. Consequently, if your Czech business partner is the defendant, the Czech courts are generally the default competent jurisdiction, regardless of where the contract was executed or in what language.

While the Brussels I bis Regulation simplifies where you sue, it does not harmonize the detailed national procedural law governing the case itself. A Croatian company might easily establish jurisdiction in Prague, but the subsequent litigation will be governed entirely by unique rules of Czech Civil Procedure, evidence admissibility, and local judicial practice.

 This lack of harmonization in procedural rules means that a company focused only on achieving jurisdiction risks significant difficulty if it fails to grasp the subsequent procedural compliance requirements. We provide comprehensive legal opinions on jurisdiction and case merits, ensuring you choose the optimal forum from the outset. For immediate resolution of your situation, contact us at office@arws.cz.

Special Jurisdiction and the Power of the Contract Clause

The Brussels I bis Regulation also provides for exceptions to the general domicile rule, known as special jurisdiction. This includes rules related to the location of contractual performance, which allows a party to sue where the relevant contractual obligation was or should have been fulfilled. However, the most effective tool for certainty in high-value B2B relationships is the explicit agreement between parties on a choice of forum (jurisdiction clause).

A clear contractual clause allows contracting parties to confer personal jurisdiction on the courts of a specific jurisdiction to adjudicate disputes. A sophisticated Croatian corporation should ensure all commercial contracts with Czech partners include a robust, enforceable jurisdiction clause, as this dictates the procedural landscape of any future dispute and significantly reduces uncertainty.

 ARROWS specializes in the preparation or revision of contracts to establish robust jurisdiction clauses, proactively protecting clients from future disputes. Do you need legal assistance with reviewing your contractual clauses? Contact us at office@arws.cz.

FAQ – Legal Tips on Jurisdiction

• How do I distinguish between jurisdiction and applicable law?
  Jurisdiction (Choice of Forum) determines which country’s court hears the case (e.g., a Czech court). Applicable Law (Governing Law) determines which country's substantive laws (e.g., Croatian contract law via Rome I) the chosen court applies to the dispute. For a detailed analysis, email us at office@arws.cz.
• Can a Croatian company be sued in the Czech Republic even if the contract is governed by Croatian law?
  Yes, potentially. Jurisdiction under the Brussels I bis Regulation is determined separately from the contract's governing law. If the Czech company is the defendant, the default jurisdiction is often the Czech Republic, and the Czech court will apply the rules of Brussels I bis to determine if it is competent. Our lawyers are prepared to help you – write to office@arws.cz.

The Substantive Law Challenge: Choice of Law and Validity Traps

Understanding which law will be applied to your contractual obligations is distinct from determining jurisdiction, yet equally vital for strategic litigation planning.

Governing Law under the Rome I Regulation

The substantive law applicable to commercial contracts within the EU is governed by the Rome I Regulation (EC 593/2008). This Regulation applies to contractual obligations in civil and commercial matters across almost all EU Member States, including the Czech Republic and Croatia.

The cornerstone of the Rome I Regulation is the principle of contractual freedom, allowing parties to choose the law that governs their agreement (governing law clause). Thus, a Croatian company may specify Croatian law to govern a contract litigated in Prague. However, the legal landscape is more complex than simply substituting one country’s contract law for another.

While the Czech court is obligated to apply the chosen Croatian law to determine the substance of the dispute (e.g., breach of obligation, damages calculation), the court remains strictly bound to apply its own Czech procedural rules. Furthermore, the court must ensure that the contract’s content and validity comply with Czech public order and overriding mandatory local rules, irrespective of the chosen foreign law.

Avoiding the Validity Trap: The Perils of Informal Agreements

Corporate leaders entering the Czech market often underestimate the practical differences in legal philosophy and business culture.If a company operates in a jurisdiction where long-term commercial relationships often rely on personal trust and verbal understandings, it may face a “validity trap” in the Czech Republic, where the legal system imposes stricter formal requirements on specific types of commercial contracts.

An assumption that an informal agreement is binding can be devastating if litigation arises. If the agreement’s validity is challenged based on Czech statutory requirements for certain transaction types, the entire claim could be jeopardized, even if Croatian law was contractually chosen as the governing law. This scenario illustrates that even when a familiar substantive law is chosen, the forum court's perspective on procedural and formal validity rules could fundamentally undermine the claim. 

This is just one of many subtle legal details that non-specialists often overlook when dealing with the complexities of Czech commercial law. Our ARROWS lawyers routinely handle these issues and can assist with the preparation of documentation that protects against fines and sanctions – write to office@arws.cz.

Commercial Arbitration: Speed, Expertise, and Global Enforceability

Given the potential complexity and duration of state court litigation—ordinary commercial proceedings can spread over two to three years before a final enforceable order is rendered —many sophisticated corporations prefer alternative dispute resolution. Commercial arbitration, specifically before institutions like the Czech Arbitration Court attached to the Economic Chamber, is a highly respected and efficient alternative.

Arbitration offers crucial advantages: generally greater speed compared to state courts, access to specialized judges, and enhanced global security. ARROWS has extensive experience representing clients before key domestic institutions and major international forums, including the International Chamber of Commerce (ICC) in Paris and the Stockholm Chamber of Commerce (SCC).

For multinational businesses, a primary strategic benefit is guaranteed enforcement. Arbitral awards are widely enforceable globally under the New York Convention of 1958. This mechanism provides a comprehensive guarantee of international enforceability of the award, offering greater security than a state court judgment when dealing with counterparties who may have assets outside the EU.

 We offer specialized representation in litigation and international arbitration, leveraging our experience to resolve disputes effectively. Do you need legal assistance with selecting the optimal arbitration clause? Contact us at office@arws.cz.

The Procedural Gauntlet: Essential Formalities for Foreign Entities

The successful pursuit of a high-value commercial claim in the Czech Republic hinges entirely on meticulous adherence to Czech procedural requirements. Failure in these administrative steps can lead to significant delays, loss of procedural rights, or even the rejection of crucial filings.

Mandatory Local Expertise: The Need for Expert Legal Representation

For high-value corporate disputes, navigating Czech civil procedure requires more than general legal competency; it demands deep, localized expertise. While a large Croatian corporation’s internal legal department is highly capable, a local partner like ARROWS provides the necessary strategic advantage, including intimate knowledge of local judges and current court practices.

Czech procedural law is highly prescriptive, and a foreign party attempting self-representation risks misinterpreting deadlines, evidence admissibility rules, or formal submission requirements, resulting in the loss of critical arguments. Given that international cases already incur extra delays for translation and communication,, procedural errors carry inexcusable business risk. Legal consultation, protecting against fines and audits, is the foundation of successful cross-border litigation and risk mitigation. Do not hesitate to contact our office – office@arws.cz.

Properly Executing the Power of Attorney (PoA)

A crucial administrative step at the outset of any proceeding is the submission of a valid Power of Attorney (PoA) authorizing local counsel to act on the foreign company’s behalf. For a foreign legal entity acting as the principal, the PoA must strictly adhere to Czech requirements, including providing the full company name, registered office, and registration number (IČO).

The failure to secure the required official certification of the statutory body’s signature is a common procedural trap. The court will reject an improperly authenticated PoA, demanding resubmission. When dealing with foreign registries and notary services in Croatia, this corrective process can take significant time, resulting in missed procedural deadlines and costly delays. 

This step, which appears simple, has hidden exceptions and detail requirements. ARROWS addresses this agenda daily and can significantly shorten the client’s time investment and minimize the risk of errors during the preparation of statutory documentation. Our lawyers are ready to help you – write to office@arws.cz.

The Requirement for Certified Sworn Translation

Any documentation submitted to the Czech courts that is not in the Czech (or Slovak) language must be accompanied by a certified sworn translation. This includes critical documents such as key pieces of evidence, formal submissions, and the Power of Attorney itself.

Crucially, this translation must be provided by a court-appointed (sworn) translator authorized by the Czech Ministry of Justice. The translation is required to be physically bound (by a colored string and stamp) to the source text (original or authenticated copy) and affixed with the translator’s seal and clause confirming its accuracy. Submitting a high-quality but non-certified translation will likely lead to its rejection, causing substantial procedural delays and forcing the court to halt proceedings until proper documents are filed.

 Key Risks of Procedural Non-Compliance in Czech Litigation

Risks and Sanctions	How ARROWS Helps
The court rejects the lawsuit due to an improperly executed Power of Attorney (PoA) lacking necessary official certification from Croatia.	Preparation of statutory documentation, including ensuring proper PoA authentication and adherence to all formal requirements. Do you need assistance with PoA certification? Contact us at office@arws.cz.
Critical evidence is deemed inadmissible due to the rejection of non-certified or improperly bound translation.	Securing Certified Sworn Translations for all key documents and evidence via our vetted network of court-appointed translators. Do you need certified translation services? Write to us at office@arws.cz
The opposing party initiates a disruptive counter-suit in another EU jurisdiction (e.g., a "Torpedo lawsuit") to halt the Prague proceedings.	Legal opinions and strategic defense, drafting robust contracts to protect the chosen Czech jurisdiction against complex procedural tactics. For immediate resolution of your situation, write to office@arws.cz.
Exposure to liability due to internal corporate policies (e.g., HR, compliance) not aligning with strict Czech regulatory frameworks uncovered during litigation.	Expert training for employees or management, including certification, minimizing secondary legal risks and protecting against regulatory fines. Do you want to arrange training to protect against fines? Write to office@arws.cz.
Loss of the entire case due to the court deeming a verbally agreed contract invalid under strict Czech formal requirements for specific transactions.	Preparation or revision of contracts, ensuring the validity and full enforceability of documents according to Czech commercial law. Do you need a contract review? Email us at office@arws.cz.

 

Litigation Realities: Costs, Duration, and Risk Mitigation

Corporate decision-makers, particularly CFOs and General Counsel, must approach cross-border litigation as a critical financial project requiring accurate risk assessment, budget predictability, and proactive management to minimize the long-term impact on the business.

Calculating Financial Exposure: Understanding Czech Court Fees

The initial financial exposure in Czech commercial litigation is the mandatory court fee. These fees are directly linked to the monetary value of the claim. For commercial disputes involving a monetary benefit exceeding CZK 20,000, the fee is generally calculated as 5% of the claimed amount.

For exceptionally large claims exceeding CZK 40,000,000, a tiered system applies. The fee structure is ultimately capped at CZK 4.1 million for claims above CZK 250 million. This percentage-based fee structure, particularly for mid-to-large corporate disputes, necessitates accurate pre-litigation analysis and comprehensive budgeting. 

ARROWS provides essential legal consultation to help clients budget accurately and strategically weigh the cost of litigation against the potential recovery, ensuring all financial stakeholders are prepared. Do you need legal assistance with cost calculation and litigation strategy? Contact us at office@arws.cz.

Duration: The Opportunity Cost of Protracted Disputes

The duration of legal proceedings represents a significant financial and opportunity cost. While the average length of civil proceedings before district courts was reported at around 263 days in 2019, ordinary legal proceedings for complex commercial disputes involving foreign parties commonly spread over two to three years before a final and enforceable order is rendered. Subsequent enforcement procedures may require several additional years, depending on the debtor's asset profile.

A two-to-three-year timeline is a critical factor for corporate planning, requiring effective management of capital lock-up and prolonged risk exposure. Litigation in the Czech Republic thus requires rigorous project management. 

ARROWS, through its vast experience, manages the entire procedural timeline—including the complex steps of international evidence taking and service of documents—to minimize wasted time. We emphasize speed and high quality in our service delivery.

 Our lawyers address this agenda daily, which allows them to significantly shorten the client’s time commitment and minimize the risk of errors. For immediate resolution, write to us at office@arws.cz.

Partnering for Security: ARROWS’ Portfolio and Insurance

Entrusting high-value, complex cross-border disputes to a legal partner requires assurance of both proven expertise and financial security. Our portfolio demonstrates unparalleled corporate depth in the Czech market, built on providing long-term services to clients that include over 150 joint-stock companies (a.s.), 250 limited liability companies (s.r.o.), and 50 municipalities and regions.

Furthermore, every litigation carries a residual risk of human error or misjudgment. ARROWS provides a safety net designed for high-stakes corporate clients: we carry professional liability insurance coverage up to CZK 500,000,000 (CZK half a billion).

For large corporate disputes, this substantial insurance limit is not merely a regulatory minimum; it offers profound financial assurance to CFOs and GCs. This provides a superior safety margin, ensuring that corporate interests are comprehensively protected. We often serve as trusted partners to corporate legal departments for solving specialized cross-border matterS. Do you need legal assistance? Contact us at office@arws.cz.

FAQ – Legal Tips on Procedure and Costs

• Are the court proceedings held in Czech or can we use Croatian/English?
  Hearings and official decisions in state court litigation are generally conducted in Czech (or Slovak). All foreign-language documents submitted must be officially translated by a Czech sworn translator to be admissible as evidence. To resolve international cases, connect with us at office@arws.cz.
• Can ARROWS help our company reduce litigation time?
  Yes. We reduce litigation time through proactive strategy, accurate filing (avoiding procedural delays from errors like flawed PoA certification), and expert advice on selecting the optimal dispute resolution forum (arbitration is often faster). Our lawyers are prepared to help you – write to office@arws.cz.

Securing Your Victory: Enforcement of Czech Judgments in Croatia

Obtaining a favorable judgment in Prague is only the intermediate goal; the true objective is the efficient recovery of assets via enforcement, whether in Croatia or internationally.

Automatic Recognition: The Abolition of Exequatur

The Brussels I bis Regulation significantly simplifies cross-border enforcement within the EU. For judgments issued by a Czech court, the need for exequatur (a separate declaration of enforceability) is abolished for enforcement in Croatia. This principle of automatic recognition is highly beneficial for intra-EU debt collection.

However, automatic recognition is not absolute. Recognition and enforcement can still be challenged on limited grounds. These challenge grounds primarily relate to procedural defects, such as the judgment conflicting with Czech public policy or, crucially for foreign litigants, the violation of the rights of defense.

The Adversarial Principle: Protecting Against Enforcement Challenges

A critical procedural defect that can lead to a successful enforcement challenge is the violation of the adversarial principle (audi et alteram partem). This fundamental principle ensures that the defendant has been given proper notice and adequate opportunity to defend themselves during the Czech proceedings.

If a Czech judgment is found to have violated the defendant’s rights of defense—for instance, if service of process was technically deficient—the judgment, despite automatic recognition under Brussels I bis, could potentially be challenged by the Croatian enforcement court, leading to the judgment being suspended or even rejected. This highlights a key strategic point: procedural perfection in the Czech court is essential to guarantee enforcement in Croatia.

 ARROWS provides legal opinions ensuring that procedural steps in the Czech Republic meet the stringent EU standards required for guaranteed final enforceability. Connect with us at office@arws.cz and gain tailor-made legal solutions.

Global Asset Recovery via ARROWS International

For commercial disputes where the opposing party holds assets scattered across the globe, enforcement cannot rely solely on the Brussels I bis Regulation. When debtors shift assets to non-EU third countries, enforcement becomes highly complex and requires localized expertise.

ARROWS mitigates this risk through its robust international presence. We ensure access to necessary local legal resources through the ARROWS International network, which has been actively built over ten years. We currently solve problems in more than 70 countries worldwide Our lawyers handle cases with an international element practically daily, making us experts in coordinating complex cross-border judgment enforcement, effective asset tracking, and recovery actions that extend beyond the EU framework. 

Our ARROWS lawyers routinely handle these issues. Do you need a strategy for international debt collection? Contact us at office@arws.cz.

Financial and Strategic Risks in Czech Litigation

Risks and Sanctions	How ARROWS Helps
Prolonged dispute resolution (2–3 years) resulting in lost business opportunities and capital lock-up.	Full representation before courts and administrative bodies, accelerating procedural steps and strategically minimizing internal delays. Do you need representation in court? Write to office@arws.cz.
Enforcement failure or suspension in Croatia due to successful challenges based on violation of the rights of defense in the Czech proceedings.	Legal opinions, ensuring that procedural steps in the Czech Republic meet strict EU due process standards for assured final enforceability. Do you want to know what your legal options are? Write to office@arws.cz.
Debtor shifts assets to a non-EU third country, complicating asset recovery under standard EU rules.	Representation before registries and regulators, coordination of international enforcement via the ARROWS International network (70+ countries). Do you need help with international enforcement? Contact us at office@arws.cz.
Operational disruption or fines due to incomplete compliance (e.g., permits, complex regulatory duties) uncovered during legal review or audits.	Legal advice for obtaining permits and licenses, utilizing our long-term experience with complex holding structures and securing compliance documentation. For immediate legal assistance, write to office@arws.cz.

 

ARROWS as Your Strategic Partner: Local Expertise, Global Reach

Integrated Solutions for Corporate Success

The complexity of cross-border litigation demands comprehensive support that extends beyond the courtroom. ARROWS functions as an integrated advisory group, offering complete legal and tax services under one roof. We provide crucial comprehensive support, often serving as specialist partners to corporate legal departments for solving high-stakes cross-border matters. 

Our services cover every critical phase of risk management, from preventative measures like the drafting of internal policies and preparation of statutory documentation, to proactive steps like legal consultation protecting against fines and audits, and aggressive steps like full representation before courts and administrative bodies. Our deep experience, cultivated from providing long-term services to a large portfolio of significant entities, ensures both efficiency and high quality.

We are dedicated not only to resolving current legal issues but also to fostering future commercial growth for our clients. We actively look for opportunities to benefit our clients by connecting major investors and corporate groups with interesting investment or business opportunities within our robust network. We welcome hearing innovative business and entrepreneurial ideas, leveraging our position to facilitate profitable connections.

Conclusion: Secure Your Position. Choose ARROWS.

Cross-border commercial litigation between Croatian and Czech entities is a field full of hidden exceptions, complex procedural details, and significant financial risks that demand expert daily practice to manage effectively. Relying on general legal knowledge risks procedural mistakes—such as flawed PoA certification or translation errors—that can easily jeopardize a high-value commercial claim.

ARROWS eliminates these risks. We solve this agenda daily, which allows us to significantly reduce client time investment and minimize the risk of costly errors. Furthermore, for high-value claims, the safety provided by our substantial professional liability insurance coverage, up to CZK 500,000,000, offers unparalleled peace of mind and security for corporate leaders. If the reader does not want to risk errors, damages, or fines, they can safely entrust the entire matter to the ARROWS law firm. Simply contact office@arws.cz.

FAQ – Most Common Legal Questions Regarding Cross-Border Litigation for a Croatian Company in the Czech Republic

1. If the Czech court decides the case, will the judgment be recognized in Croatia?
   Yes, generally automatically. Under the Brussels I bis Regulation, Czech judgments are recognized in all EU member states, including Croatia, without needing exequatur. However, recognition can be successfully challenged on limited grounds, primarily related to public policy or serious violations of the adversarial principle (rights of defense). If you are facing a similar problem, contact us at office@arws.cz.
2. How are court fees calculated in the Czech Republic for large commercial disputes?
   Court fees are calculated based on the claimed monetary value. For most commercial claims exceeding CZK 20,000, the fee is 5% of the claimed amount up to CZK 40 million. For the largest claims, the maximum fee is capped at CZK 4.1 million. We provide comprehensive legal consultation and cost analysis to ensure budget predictability. Do you need legal consultation? Write to office@arws.cz.
3. Why is arbitration often preferred over state court litigation for international commercial contracts?
   Arbitration is frequently favored because it is typically faster, provides access to judges specialized in commercial or technical matters, and, most importantly, ensures wider international enforceability of the resulting award outside the EU via the New York Convention. Do you need representation in arbitration proceedings? Contact us at office@arws.cz.
4. We agreed on Croatian law. If we sue in Prague, will the Czech court apply Croatian law?
   Yes. Pursuant to the Rome I Regulation , the Czech court must apply the chosen Croatian substantive law to the contractual obligations. However, Czech procedural rules (e.g., evidence admissibility, deadlines) and specific Czech mandatory legal provisions will still apply, regardless of the choice of law clause. Our lawyers are ready to help you with the preparation of statutory documentation – write to office@arws.cz.

 

• How does ARROWS’ international network assist a Croatian company in litigation?

Our ARROWS International network (70+ countries) allows us to coordinate the service of documents, evidence taking, and comprehensive enforcement actions globally, ensuring that a judgment obtained in Prague can be efficiently executed against assets worldwide, even in non-EU jurisdictions. Our ARROWS lawyers routinely handle these issues. For immediate resolution, write to us at office@arws.cz.

1. What protection does the CZK 500,000,000 insurance offer our corporation?
   For high-value commercial claims, our substantial professional liability insurance coverage offers an unparalleled layer of security. This protects your financial interests and ensures that, even in the highly unlikely event of complex legal errors or setbacks, your potential losses are fully secured up to half a billion CZK. Do not hesitate to contact our office – office@arws.cz.

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