Law

Legal News [September 2026]: When is a lawyer liable for damage caused to a client in arbitration proceedings?

September's selection of case law from the Constitutional Court and the Supreme Court offers noteworthy conclusions in the areas of civil procedure, liability for damages, expropriation, and inheritance law. The Constitutional Court addressed procedural safeguards for parties in proceedings concerning preliminary injunctions and emphasized the importance of equality of arms in appellate proceedings. The Supreme Court examined the conditions for a lawyer's liability for damages arising from legal representation, clarified the rules governing compensation for non-pecuniary harm in connection with annulled expropriation, and interpreted the international jurisdiction of courts in inheritance proceedings involving assets located in another Member State of the European Union.

The Constitutional Court, in its judgment of 3 June 2026 (Case No. IV. ÚS 324/26), considered whether an appeal against a decision on an application for a preliminary injunction must be served on the opposing party where the appellate court intends to reverse the court of first instance’s dismissal and grant the injunction. In the case at hand, the appellate court overturned the district court’s decision and issued a preliminary injunction regulating a father’s contact with his minor children, without serving the father’s appeal on the mother and allowing her to present her observations. The Constitutional Court recalled that, although courts are not required to serve appeals against decisions on preliminary injunctions in every case and under all circumstances, they must assess in each individual case whether such service is required by the principles of a fair trial and equality of the parties. Where there is an evident factual and legal dispute between the parties and the appellate court intends to rely on arguments raised in the appeal, the other party must be given an opportunity to respond to those arguments. The Constitutional Court further emphasized that an exception to the obligation to serve the appeal may be justified where service could frustrate the purpose of a preliminary injunction based on an element of surprise. However, that was not the case in the proceedings under review. By failing to serve the appeal, the appellate court violated the complainant’s right to judicial protection and equal standing in the proceedings. Consequently, the Constitutional Court annulled the relevant part of the regional court’s decision.
In its judgment of 23 July 2026 (Case No. 25 Cdo 921/2025), the Supreme Court examined the circumstances under which a lawyer may be liable for damage caused to a client in connection with representation in arbitration proceedings. The claimant sought compensation corresponding to the amount he had been ordered to pay under an arbitral award, arguing that his lawyer had remained passive during the arbitration and failed to raise objections that could have led to a different outcome. The Supreme Court confirmed that a lawyer is obliged to act with professional care and actively protect the client’s interests; however, professional misconduct alone is insufficient to establish liability for damages. The Court emphasized that the injured party must prove not only the lawyer’s breach of duty but also that, had the breach not occurred, the dispute would have been resolved more favourably for the client. In the context of arbitration proceedings, it is not enough merely to argue that the arbitrator might have been persuaded by stronger legal arguments. It must be demonstrated that the arbitrator would in fact have adopted a different legal position. Since, in the case under review, the arbitrator had all the material factual information at his disposal and nevertheless ruled against the claimant, no causal link between the lawyer’s conduct and the alleged damage was established. The Supreme Court therefore dismissed the appeal.
In its judgment of 24 July 2026 (Case No. 25 Cdo 1921/2025), the Supreme Court addressed whether, and to what extent, an expropriated person is entitled to compensation for non-pecuniary harm under Section 27 of the Expropriation Act where a final expropriation decision is subsequently annulled. The defendant sought compensation for non-pecuniary harm in the amount of CZK 2,000,000 resulting from restrictions on ownership rights to land lasting for more than ten years, but the appellate court awarded only CZK 200,000. The Supreme Court confirmed that the term “other harm” under Section 27 of the Expropriation Act also encompasses non-pecuniary harm and that compensation is governed by the general principles set out in Section 2951(2) of the Civil Code. In determining the appropriate amount of monetary satisfaction, courts must take into account in particular the significance of the affected right, the intensity of the interference, its duration, and the circumstances on the side of both the expropriating authority and the expropriated person. At the same time, the Court stressed that the amount of compensation cannot be derived automatically from the value of the expropriated property, nor can such claims be equated with compensation awarded for unlawful infringements of personality rights. In the present case, it was significant that the expropriation had been carried out in accordance with the law, that the defendant had had access to the financial compensation awarded for the expropriation from the outset, and that he had no special personal attachment to the land. The Supreme Court therefore considered the award of CZK 200,000 to be adequate and dismissed the appeal.
In its resolution of 11 August 2026 (Case No. 27 Cdo 898/2025), the Supreme Court considered whether Czech courts have jurisdiction under Article 4 of Regulation (EU) No. 650/2012 of the European Parliament and of the Council to conduct supplementary inheritance proceedings involving immovable property located in the Slovak Republic, where the deceased had their habitual residence in the Czech Republic at the time of death. The heirs sought supplementary proceedings concerning co-ownership shares in Slovak real estate. Both the court of first instance and the appellate court terminated the proceedings on the grounds that Slovak courts enjoyed exclusive jurisdiction over those properties. The Supreme Court concluded that Article 4 of Regulation No. 650/2012 confers jurisdiction on the courts of the Member State in which the deceased had their habitual residence at the time of death to rule on the succession as a whole, including immovable property situated in another Member State of the European Union. The Court emphasized the principle of the unity of the estate underlying the Regulation and referred to the case law of the Court of Justice of the European Union, according to which fragmentation of inheritance proceedings among courts of different states should be avoided. Since the deceased had her habitual residence in the Czech Republic at the time of death, Czech courts had jurisdiction over the entire estate. The fact that part of the estate consisted of real property located in Slovakia was therefore irrelevant. The Supreme Court further noted that conclusions drawn from earlier case law based on the legal framework applicable before the entry into force of Regulation No. 650/2012 could no longer be relied upon. Accordingly, it amended the appellate court’s decision and ruled that the supplementary inheritance proceedings should continue.