Reimbursement of Legal Costs in Czech Court Proceedings

Reimbursement of Legal Costs in Court Proceedings: What the Court Awards and How the Amount Is Calculated

Reimbursement of legal costs in civil court proceedings works on a simple principle. Each party first bears its own costs. The law, however, requires the unsuccessful party to compensate the successful party for the costs needed to effectively pursue or defend a right. The amount of this reimbursement need not match what the client actually paid the lawyer, because the court sets the lawyer's fee under the Advocates' Tariff. This article summarises the conditions of the claim, the costs that are recoverable and the calculation method, so the amount can be estimated in advance.

Conditions for the Reimbursement of Legal Costs

The Principle of Success in the Case

The basic rule is set out in Section 142(1) of Act No. 99/1963 Coll., the Civil Procedure Code (the "CPC"): "A party that was fully successful in the case is awarded by the court reimbursement of the costs needed to effectively pursue or defend the right against the party that was not successful." The claim therefore requires full success and covers only costs incurred effectively, that is, necessary costs. The court does not award costs that were not effective.

In the case of partial success, Section 142(2) and (3) CPC applies: "(2) If a party was only partially successful in the case, the court shall divide the reimbursement of costs proportionally or declare that neither party is entitled to reimbursement of costs.
(3) Even if a party was only partially successful in the case, the court may award it full reimbursement of the costs of proceedings if it was unsuccessful in a relatively insignificant part or if the decision on the amount of the performance depended on an expert opinion or on the court's discretion."

Where the proportional division applies, the party receives reimbursement only to the extent corresponding to its degree of success. The exception under paragraph 3 may be used where the failure is insignificant. It may also be used where the amount of the performance depended on an expert opinion or on the court's discretion.

Letter Before Action

For a plaintiff in proceedings seeking performance of an obligation, a condition of the claim is that a demand letter was sent to the opposing party under Section 142a CPC: "(1) A plaintiff who was successful in proceedings for the performance of an obligation is entitled to reimbursement of the costs of proceedings against the defendant only if, at least 7 days before filing the petition to commence proceedings, the plaintiff sent the defendant a demand for performance to the address for service or, as the case may be, to the last known address.
(2) Where there are reasons deserving special consideration, the court may exceptionally award the plaintiff reimbursement of the costs of proceedings in whole or in part even if the plaintiff did not send the defendant a demand for performance under the conditions stated in paragraph 1."

Failing to send the letter within the stated period may therefore cost the plaintiff the claim to costs, even in the case of full procedural success. Paragraph 2 is exceptional, and no one should rely on it.

A defendant who lost the case is entitled to reimbursement of costs under the conditions of Section 143 CPC: "A defendant who was unsuccessful in the case is entitled to reimbursement of the costs of proceedings against the plaintiff if, through its conduct, it did not give cause for the filing of the petition to commence proceedings."

Range of Recoverable Costs

The costs of proceedings are defined by Section 137(1) CPC: "The costs of proceedings are in particular the cash expenses of the parties and their representatives, including the court fee, lost earnings of the parties and their statutory representatives, costs of evidence, interpreter's fees, reimbursement of value added tax, remuneration for representation and remuneration of the mediator under the Act on Mediation for the first meeting with the mediator ordered by the court under Section 100(2)."

The relationship between the lawyer's fee for representation and the costs of proceedings is governed by paragraph 2: "Remuneration for representation forms part of the costs of proceedings only if the representative is an advocate or a notary within the scope of their authorisation stipulated by special legal regulations, or a patent attorney within the scope of authorisation stipulated by special legal regulations." The fee for representation is thus a recoverable cost only if the party was represented by an advocate, by a notary within the scope of the notary's authorisation, or by a patent attorney within the scope of the patent attorney's authorisation.

Value Added Tax (VAT)

Under Section 137(3)(a) CPC, reimbursement of VAT forms part of the costs of proceedings only if the representative is "an advocate, notary (…) or patent attorney (…) who is a value added tax payer". The other letters of the same provision cover cases where the VAT payer is a legal entity in which the advocate works, or the advocate's employer. The court determines the rate under Section 151(2) CPC "from the remuneration for representation and from reimbursements according to the value added tax rate". The standard rate is 21% under Section 47(1)(a) of Act No. 235/2004 Coll., on Value Added Tax. If the representative is not a VAT payer, no reimbursement of tax is added to the costs.

Calculating the Lawyer's Fee under the Advocates' Tariff

The lawyer's fee is governed by Decree No. 177/1996 Coll., on Fees of Advocates and Reimbursement of Advocates' Expenses for the Provision of Legal Services (the Advocates' Tariff, the "AT"). Section 1(2) AT is decisive: "When determining the costs of proceedings whose reimbursement is awarded to the client by a decision of a court or another authority, the amount of the advocate's fee is determined under the provisions on non-contractual fees, unless this Decree provides otherwise; Section 12(2) shall not apply. The advocate is obliged to point this out to the client when negotiating a contractual fee with the client."

When deciding on the reimbursement of legal costs, the court therefore does not start from the fee agreed in the contract, but from the non-contractual fee. If the contractual fee exceeds the non-contractual fee, the opposing party does not reimburse the difference, and the client bears it. The calculation has three steps.

Step One: Tariff Value

Under Section 8(1) AT: "Unless provided otherwise, the tariff value is the amount of the monetary performance or the price of the thing or right at the time the legal service act commenced, to which the legal service relates; the price of a right means both the value of a receivable and of a debt. Accessories are disregarded when determining the tariff value, unless they are claimed as an independent claim."

In a claim for payment of CZK 100,000, the tariff value is CZK 100,000. Accessories, in particular default interest, are not included. If the value cannot be expressed in money, a special provision applies. Under Section 9(1) AT: "If the value of a thing or right cannot be expressed in money, or can be determined only with disproportionate difficulty, and unless provided otherwise below, the tariff value is CZK 30,000."

Other flat tariff values (for example CZK 10,000, CZK 65,000 or CZK 113,000) are set by Section 9 AT depending on the type of matter.

Step Two: Rate per Legal Service Act

The rate of the non-contractual fee per legal service act is set by Section 7 AT:

Tarifní hodnota	Sazba za jeden úkon
do 500 Kč	300 Kč
přes 500 Kč do 1.000 Kč	500 Kč
přes 1.000 Kč do 5.000 Kč	1.000 Kč
přes 5.000 Kč do 10.000 Kč	1.500 Kč
přes 10.000 Kč do 200.000 Kč	1.500 Kč a 40 Kč za každých započatých 1.000 Kč, o které hodnota převyšuje 10.000 Kč
přes 200.000 Kč do 10.000.000 Kč	9.100 Kč a 40 Kč za každých započatých 10.000 Kč, o které hodnota převyšuje 200.000 Kč
přes 10.000.000 Kč	48.300 Kč a 40 Kč za každých započatých 100.000 Kč, o které hodnota převyšuje 10.000.000 Kč

For clarity, we give the rate per act converted to percentages of the tariff value:

Tarifní hodnota	Sazba za jeden úkon	Podíl z tarifní hodnoty
10.000 Kč	1.500 Kč	15 %
50.000 Kč	3.100 Kč	6,2 %
100.000 Kč	5.100 Kč	5,1 %
200.000 Kč	9.100 Kč	4,55 %
500.000 Kč	10.300 Kč	2,06 %
1.000.000 Kč	12.300 Kč	1,23 %
10.000.000 Kč	48.300 Kč	0,483 %

Example for a tariff value of CZK 100,000: CZK 1,500 + CZK 40 × 90 = CZK 5,100.

Step Three: Number of Legal Service Acts

The fee is multiplied by the number of acts the advocate performed in the matter (Section 6(1) AT). The acts are defined in Section 11 AT. In proceedings before the court of first instance, the following acts are claimed most often:

"a) taking over and preparing representation or defence under a contract for the provision of legal services,

d) a written submission or petition on the merits, a demand for performance with a basic factual and legal analysis preceding a petition on the merits,

g) attendance at an act of an administrative or other authority, attendance at a hearing before a court or another authority, for every commenced two hours,

k) an appeal, an extraordinary appeal, a petition for retrial, an action for nullity, or a complaint against a decision on a petition for retrial, and statements on them,"

The fee for some acts is one half. Under Section 11(2) AT, this applies, among others, to

"c) an appeal against a decision that is not a decision on the merits, and a statement on such an appeal, (…)

f) attendance at a hearing at which only a decision was pronounced,

g) attendance at the preparation of a hearing, (…)

h) a simple demand for performance."

Flat Reimbursement of Expenses and Compensation for Lost Time

The reimbursement of cash expenses is added to the fee. Under Section 13(4) AT: "Unless the advocate and the client agreed on a different flat amount as reimbursement of expenses for domestic postage, local telephone charges and transport, this amount is CZK 450 per legal service act."

Compensation for lost time is, under Section 14(3) AT, unless agreed otherwise, "CZK 150 for every commenced half hour". Travel expenses are governed by Section 13(5) AT and the legal regulations on travel allowances.

Joint Representation of Several Persons

Where acts are performed jointly for several persons, the fee is reduced. Under Section 12(4) AT: "The non-contractual fee is reduced by 20% for the second person, by 40% for the third person, by 60% for the fourth person and by 80% for the fifth and each further person."

Special Rules for Proceedings Commenced on a Standard Template

For claims filed repeatedly on a standard template, the AT provides lower rates in Section 14b(1): "In civil court proceedings,

a) which were commenced by a petition filed on a standard template used repeatedly by the same plaintiff in factually and legally similar matters,

b) in which the subject matter is a monetary performance and the tariff value does not exceed CZK 50,000, and

c) in which the plaintiff was awarded reimbursement of the costs of proceedings,

for the purposes of determining reimbursement of the costs of proceedings, the rate for each legal service act up to and including the filing of the petition to commence proceedings is, for a tariff value

up to CZK 10,000: CZK 300,

over CZK 10,000 up to CZK 30,000: CZK 400,

over CZK 30,000 up to CZK 50,000: CZK 700."

The flat reimbursement of expenses in these cases is, under Section 14b(6)(a) AT, CZK 100 per act paid under paragraphs 1 to 3.

Court Fee

The court fee is a separate component of the costs of proceedings, as provided in Section 137(1) CPC. For a claim for monetary performance, under item 1 of the schedule that forms an annex to Act No. 549/1991 Coll., on Court Fees, it is 5% of the value of the subject matter of the proceedings. At a value of CZK 100,000, this is CZK 5,000.

Illustrative Calculation of the Reimbursement of Legal Costs

Assumptions: a claim for payment of CZK 100,000, full success of the plaintiff, and an advocate who is a VAT payer.
For the purposes of the example, four acts are assumed:

taking over the representation,
the claim,
one written statement on the merits, and
attendance at a hearing lasting up to two hours.

Položka	Výpočet	Částka
Odměna za 4 úkony	4 x 5.100 Kč	20.400 Kč
Paušální náhrada výdajů	4 x 450 Kč	1.800 Kč
Mezisoučet		22.200 Kč
DPH 21 %	21 % z 22.200 Kč	4.662 Kč
Soudní poplatek	5 % ze 100.000 Kč	5.000 Kč
Náhrada nákladů celkem		31.862 Kč

VAT in the example is calculated on the fee and the flat reimbursement of expenses, and the court fee is added without VAT. The actual amount depends on the number of acts, the place of the hearing, any travel expenses and compensation for lost time. It also depends on the court's assessment of effectiveness.

Partial Success

In the case of partial success, the court divides the costs "proportionally" under Section 142(2) CPC. The following overview gives a simplified guide for a claimed amount of CZK 100,000:

Přiznaná částka	Úspěch	Orientační podíl účelných nákladů žalobce, který nese protistrana
100.000 Kč	100 %	100 %
90.000 Kč	90 %	90 %, příp. 100 % při použití § 142 odst. 3 o.s.ř.
60.000 Kč	60 %	60 %
30.000 Kč	30 %	30 %
0 Kč	0 %	povinnost nahradit náklady protistrany

The overview is for orientation only. The court may take a different approach, in particular under Section 142(3) CPC, or declare that neither party is entitled to reimbursement of costs. In addition, the opposing party may acquire a claim in proportion to the plaintiff's failure.

Cases Where Reimbursement Is Not Awarded or Is Reduced

Settlement and discontinuance of proceedings. Under Section 146(1) CPC, neither party is entitled to reimbursement of the costs of proceedings according to the outcome if the proceedings "ended in a settlement, unless the settlement agreed otherwise on reimbursement of costs", or "were discontinued". Paragraph 2 provides: "If a party is at fault for the proceedings having to be discontinued, it is obliged to pay their costs. However, if a petition that was filed justifiably was withdrawn because of the conduct of the defendant (another party to the proceedings), the defendant (other party to the proceedings) is obliged to pay the costs of proceedings." In a settlement, it is therefore essential to regulate the reimbursement of costs expressly.

Reasons Deserving Special Consideration

Under Section 150 CPC: "Where there are reasons deserving special consideration, or where a party refuses without a serious reason to attend the first meeting with the mediator ordered by the court, the court need not exceptionally award reimbursement of the costs of proceedings in whole or in part."

Costs Caused by Fault

Under Section 147(1) CPC, the court may order a party or its representative to pay costs of proceedings that would not otherwise have arisen, if they caused them through their own fault. Under Section 151(4) CPC, such costs cannot be reimbursed on any ground other than Section 147 CPC.

Proving the Costs

Under Section 151(2) CPC, for costs whose amount is not determined by special regulations, the court starts from the costs that the party "demonstrably incurred". These costs must therefore be documented.

From Case Law

The Supreme Court, in its resolution file no. 23 Cdo 6000/2017, stated that decisions on the costs of proceedings are governed by "the principle of success in the case, supplemented by the principle of fault". According to the court, the principle of fault applies in particular where proceedings are discontinued under Section 146(2) CPC. In that case, the plaintiff withdrew the claim after the defendant acknowledged the debt in a notarial deed with consent to enforcement. The Supreme Court concluded that the plaintiff is entitled to reimbursement of costs, because the plaintiff withdrew a justifiably filed claim solely because of the defendant's conduct.

In resolution file no. 30 Cdo 1435/2015, the Supreme Court addressed how to determine the proportion of success where several claims are asserted at the same time. It stated that, as a rule, it is necessary to proceed from "the mutual proportion of tariff values" of the asserted claims, determined under Section 8 et seq. AT. In that case, the court set the degree of success at 37% by the calculation ((50,000 + 8,500) − 26,800) : 85,300 × 100 and awarded reimbursement of effectively incurred costs in that proportion. The decision concerned satisfaction for non-pecuniary harm and compensation for damage. The method used nevertheless illustrates well that tariff values determine not only the amount of the fee, but also the weight of individual claims when success is assessed.

Decision on Costs and Performance

Under Section 151(1) CPC, the court decides on the obligation to reimburse the costs of proceedings "without a petition" in the decision that ends the proceedings before it. No special petition is therefore needed. The costs must nevertheless be documented to the court, usually by a statement of costs with the relevant supporting documents.

The recipient of the performance is determined by Section 149(1) CPC: "If an advocate represented a party who was awarded reimbursement of the costs of proceedings, the person ordered to reimburse these costs is obliged to pay them to the advocate." The opposing party therefore pays directly to the advocate. The difference between the client's actual costs and the awarded reimbursement is settled between the client and the advocate under the contract for the provision of legal services.

As to the time limit for performance, Section 151(6) CPC provides: "Even if the reimbursement of the costs of proceedings was decided by a separate resolution, the time limit for performance always runs only from the legal force of the decision by which the reimbursement of the costs of proceedings was awarded."

In appeal proceedings, the provisions on the costs of proceedings before the court of first instance apply accordingly under Section 224(1) CPC. If the appellate court changes the decision, it also decides on the costs of proceedings before the court of first instance under paragraph 2 of the same provision.

Can You Claim Actually Incurred Costs from the Opposing Party?

The reimbursement of legal costs awarded by the court usually does not match the amount the party actually paid the advocate. The court sets the fee for representation according to the non-contractual fee under the Advocates' Tariff (Section 1(2) AT), not according to the contract for the provision of legal services. If the agreed fee exceeds the tariff fee, the client bears the difference. If the court awarded, for example, CZK 20,000 and the client paid CZK 50,000, the remaining amount cannot be recovered from the opposing party, not even by a separate claim for damages.

The reason is the procedural nature of this claim. The right to reimbursement of the costs of proceedings is based on procedural law and arises only through a final decision of the court. In judgment file no. 29 Cdo 3403/2012, the Supreme Court stated that the obligation to pay the costs of proceedings "arises only through a decision of the court, without it being possible … to claim reimbursement on top of that under liability for damage". It added that "this applies regardless of whether the amount awarded to a fully successful party as reimbursement of the costs of proceedings is lower than the amount actually paid for these costs".

Similarly, in judgment file no. 23 Cdo 1773/2011, the Supreme Court concluded that a claim for payment of further remuneration paid to the advocate "does not follow from any regulation" and that a party cannot claim further reimbursement of the costs of proceedings "not even under liability for damage". The Supreme Court also adopted the same conclusion as settled decision-making practice in judgment file no. 29 Cdo 3752/2018. The older of these decisions rely on the earlier version of the tariff, but the conclusion on the nature of the claim has not changed.

If a party disagrees with the amount awarded, a remedy against the costs ruling is available. Note, however, that the admissibility of remedies against decisions on the costs of proceedings is limited. Only a special act can create exceptions to this rule. One example is Section 31 of Act No. 82/1998 Coll., under which compensation for damage caused by an unlawful decision or incorrect official procedure includes effectively incurred costs of proceedings. This applies only if the injured party could not claim them under procedural regulations or if they were not already awarded. Even here, the fee for representation is determined not by the contract, but by the non-contractual fee. In practice, it is therefore advisable for the client to know, when concluding the contract for legal services, what part of the agreed fee will probably be recoverable and what difference the client will bear.

Conclusion

Procedural success alone does not create a claim to reimbursement of all costs the party incurred. The court awards only effective costs and sets the advocate's fee under the Advocates' Tariff, not under the contract, and the client bears any difference. In practice, it is therefore decisive that the plaintiff sends the defendant a demand for performance at least 7 days before filing the claim, and that the reimbursement of costs is expressly regulated in a settlement. If these conditions are respected, the reimbursement of legal costs can be estimated in advance.

For more information, please do not hesitate to contact us at:

JUDr. Mojmír Ježek, Ph.D.

ECOVIS ježek, advokátní kancelář s.r.o.
Betlémské nám. 6
110 00 Praha 1
e-mail: mojmir.jezek@ecovislegal.cz
www.ecovislegal.cz

ECOVIS ježek, advokátní kancelář s.r.o.

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