A Few Words on the New Czech Act on Private International Law

As of January 2014 a new private law recodification will enter into effect in the Czech Republic. While the cornerstone of this significant change of the Czech private law landscape is primarily the new Civil Code (No. 89/2012 Coll.) and the new Business Corporations Act (No. 90/2012 Coll.), international readers might be interested in the third element of the recodification effort, namely the new Act on Private International Law (“NAPIL”), adopted under No. 91/2012 Coll. This note briefly outlines its main features and differences as compared to the existing rules contained in Act No. 97/1963 Sb., as amended.

In comparison to the existing rules comprised of 70 sections, the new Act with its 125 sections establishes more detailed regulations of private law and procedural relationships involving an international (cross-border) element. The main benefit of the new law is that it regulates issues not explicitly addressed in the old law, that up to now have had to be inferred from legal doctrine or often ambiguous case law.

For instance, NAPIL contains specific conflict rules on the law applicable to a legal entity’s status issues (until now, a general rule under Section 3 of the old law did not even distinguish between a natural and legal person,[1] and additionally regulates conflict rules for trusts, including the recognition of foreign trusts in the territory of the Czech Republic.[2] Contrary to the old act, NAPIL prescribes principles for determining the jurisdiction and governing law for a registered (same-sex) partnership (civil union) having an international element.[3] NAPIL also regulates cross-border bankruptcy law, which is relevant for the practice particularly in respect of bankruptcy with a non-EU factor (i.e. in the area not governed by EU Regulation No.1346/2000). Furthermore, some principles contained in the Arbitration Act relating to arbitration issues with an international element and the recognition of foreign arbitration awards have been transposed to NAPIL (Sections 117-122).

The NAPIL regulates certain entirely novel issues in detail, which have not been covered by the old law (and judges and lawyers have thus had to have consult international private law textbooks). These issues include the interpretation of the problem of characterisation (qualification/classification) regulated by Section 20 of NAPIL; preliminary questions/issues (Section 22); overriding mandatory (imperative/supermandatory) rules (Section 3 governing lex fori and Section 25 for third state overriding mandatory rules); or subsidiary (residual) application of a governing law other than that which is primarily stipulated by the law and the use of analogy within the Act (Section 24). More detailed and instructive are also the rules concerning the establishment and application of foreign law (Section 23), which has often been the cause of problems in judicial practice.[4]

In addition, in comparison to the structure of the existing law, NAPIL is more “user-friendly. Currently, conflict rules and procedural rules are regulated in two separate parts; NAPIL has abandoned this approach and has instead thematically interlinked these within one section. Upon arriving at the provisions regulating a relevant matter (for example, the law of inheritance), a judge or a practising lawyer will find in one place both the rules on establishing jurisdiction as well as on the governing law.

Last but not least, NAPIL has modernised certain connecting factors – e.g., replaced an outdated criterion of citizenship with habitual residence, which is a factor that much more accurately reflects today’s high level of mobility. Unfortunately, the legislator was not consistent and has not replaced it everywhere that it was possible and advisable. The NAPIL also attempts to reflect the interest in preserving the validity of legal acts and their effects (by preference for law that upholds the validity of the legal acts) and hence reflect the will of those doing the acts.

Although NAPIL contains some very useful provisions, its real significance is quite limited in some key areas, as there are directly applicable EU rules in existence. EU law has priority over national law, and NAPIL will thus not apply. This goes, for instance, for the area of determining jurisdiction for civil and commercial matters where the Brussels I Regulation (Regulation No. 44/2001) will apply (save for certain exceptions, such as when a plaintiff is a non-EU resident and there is no exclusive jurisdiction or jurisdiction agreement in favour of an EU Member State’s court). The Regulation also concerns the recognition and enforcement of judgments from other EU countries (however, the recognition and enforcement of judgments from non-EU countries will be subject to NAPIL unless an international treaty governing these issues exists with the given country). The Rome I Regulation (No. 593/2008) or the Rome II Regulation (No. 864/2007) will apply instead of NAPIL to determine governing law for contractual and non-contractual obligations. Also, some other matters have been or soon will be regulated at the EU-level,[5] which also reduces room for NAPIL application.

Regardless, there are still matters to which NAPIL will be applied (EU regulation in a given area is either non-existent or non-binding on the Czech Republic – the latter is true for the Rome III Regulation regulating applicable law for divorces). Therefore, NAPIL’s benefit is not limited to the regulation of general issues of international private law and should be of interest to any legal practitioner who has to deal with a private law situation that has some connection to the Czech Republic.

Petr Briza

Petr Briza is senior associate/counsel at Havel, Holásek & Partners, the largest Czech law firm. He is a graduate from NYU (LL.M. 2008) and Charles University in Prague (J.D. equivalent 2004, Ph.D. 2012). He can be reached at petr.briza@nyu.edu.

[1]See Section 30 of NAPIL laying down governing law not only in respect of legal personality and internal relationships of a legal entity, but also covering the issue of who represents the legal entity as its body (issue of a statutory representative). The governing law is the law of incorporation.

[2]See Section 73 of NAPIL; the applicable law is the law of the closest connection with the trust, unless the settlor selects the applicable law. The rule is to large extent modelled after the Hague Convention on the Law Applicable to Trusts and on their Recognition (http://www.hcch.net/index_en.php?act=conventions.text&cid=59).

[3] See Section 67 of NAPIL; the applicable law is the law of a country where the registered partnership was celebrated (occurred).

[4] The foreign law is treated as a law not a fact, the content of foreign law is ascertained by court ex officio, i.e., it is mandatory for the court to take all necessary measures to find out what the content of foreign law is. The court may ask the Ministry of Justice for assistance with this task, but the Ministry’s opinion on the foreign law’s content is not binding upon the court. If all the court’s efforts fail and it is not possible to ascertain the foreign law’s content in due time, the Czech law will be applied instead.

[5]A unified regulation of conflict and jurisdictional issues related to inheritance was adopted in July 2012 (Regulation No. 650/2012) and will be in effect from August 2015; the regulation governing maintenance obligation is already in effect from June 2011 (see Regulation No. 4/2009).