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Proposal to introduce class actions into Czech law

The Czech Ministry of Justice has published a legislative proposal aiming to introduce, for the first time, a generally applicable class action regime into Czech law. This could lead to increased litigation risk for banks.

Although there have been a few attempts at quasi-collective actions in the past, most notably in connection with allegedly unlawful fees charged by lenders under consumer credit agreements, none of them succeeded. The Czech courts appeared reluctant to handle tens of thousands of individual, albeit standardised, claims at the same time. In some cases, individual claimants were ordered to reimburse the banks’ legal fees. 

The proposed regime would be primarily opt-out based. Everyone with a similar claim would automatically become party to the action unless they explicitly opted out. However, the court could decide in the initial certification phase of the proceedings that an opt-in basis would apply instead where appropriate (for example, if the individual claims were substantial in amount or the class was relatively small). The action would be financed by the claimants’ legal representative, who would be entitled to a percentage of the amount awarded if the action succeeded and liable to pay the defendant’s legal fees if the action failed. The proposal does not exclude the possibility of a third party funding the action.

The proposal is currently at the very beginning of the legislative process, a set of principles rather than a draft bill. A new government has yet to win a confidence vote following the recent parliamentary elections. However, the Minister of Justice who introduced the proposal before the elections and whose winning party had the introduction of a law on class actions in its election manifesto, will likely remain in his post. It would therefore not be surprising if the current legislative proposal were submitted to Parliament in the form of a draft bill before the end of 2018 and became law in 2019 or 2020. The Ministry of Justice itself has mentioned 2021 as the expected effective date. 

Legal and Regulatory Risk Note