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How a dispute over payment of commission for a newly introduced customer can get complicated

The Supreme Court of the Czech Republic has ruled in our favour that in a dispute between a company and its former partner, the district court may have substantive jurisdiction in certain circumstances.

The Supreme Court of the Czech Republic has ruled in our favour that in a dispute between a company and its former partner, the district court may have substantive jurisdiction in certain circumstances. In addition, it examined in more detail why an appeal is admissible against an order annulling a judgment and the case can be referred to another court.

The proceedings in the dispute between our client, which is a company, and its former partner over the payment of commission for an introduced customer, has gradually turned into a completely absurd situation. The arrangement that someone will receive a regular monthly commission for a newly introduced customer for the duration of the cooperation between the company and this customer is nothing new or earth-shattering. But how fundamental a problem can be caused if that someone is a partner in that company we only found out in the appeal proceedings regarding a dispute over the payment of this commission.

We won the dispute before the district court – the court confirmed that after the end of the cooperation between the company and the customer, the commission should no longer be paid. However, in hearing the other party’s appeal, the regional court came to the conclusion that the case should not have been resolved by the district court at all, but in the first instance it should have been resolved directly by the regional court, as it is a dispute between a company and its former partner. Our objection that the regional courts have jurisdiction in the first instance only if a dispute arises from participation in a business corporation, and that in this case the dispute clearly arises from a concluded contract and not from participation in a company, was not reflected by the court.

We appealed against the order annulling the judgment of the court of first instance and on the referral of the case to the regional court, with the same evident arguments. If a commission agreement, exactly the same as in our case, can be concluded with a company by, for example, a sales representative or almost any employee, and a dispute under such a contract would clearly be heard before the district court, how is it possible that a dispute under exactly the same contract, only concluded between a company and its (former) partner, which nota bene has nothing to do with this partner’s participation in the company, is to be heard before a regional court?

The absurdity of the situation was perfectly underlined by the High Court, which also coincidentally became involved in the case. The former partner filed a second lawsuit in the same case, only for a different period of time. In the first case mentioned above, he sued for payment for a certain period of time (until 2016), and due to the impending statute of limitations, he subsequently filed a second lawsuit for the exact same case, only for the following period of time (2016-2019). He filed the case with the district court. The district court already knew about the annulling decision made by the regional court, so it submitted the whole case to the High Court for a decision on jurisdiction, because logically it did not want to wait for the regional court to annul its judgment again.

The High Court ruled on jurisdiction in a completely fascinating way. Although the two lawsuits were exactly the same except for the time period, the High Court ruled that the district courts had jurisdiction in the case before it (the second lawsuit) and stated in the justification that in the earlier case (the first lawsuit) the regional courts, of course, have jurisdiction. Who says judges have no sense of humour?

We immediately sent this interesting decision to the Supreme Court so that it could rectify this apparently untenable situation, which, fortunately, it did. It finally ruled that (in the first case) it would annul the decision of the regional court, because in the case, of course, the district courts have substantive jurisdiction.

Readers interested in procedural law are recommended to have a look at a larger part of the relevant case law, in which the Supreme Court of the Czech Republic discusses the issue of admissibility of appeals in a case where the appellate court annuls the decision of the court of first instance but does not return the case to the court of first instance for further proceedings, as provided for in Section 238 (1k) of the Code of Civil Procedure, but refers the case to the regional court for proceedings. The Supreme Court did not reach a conclusion on this issue by a grammatical or teleological interpretation of the relevant provision, however, it comes to the (logical) conclusion that, since substantive jurisdiction can no longer be reviewed, it is necessary that an appeal against a resolution answering the question of jurisdiction be admissible. It therefore took a restrictive position on that provision. It even generalises this issue at the end of its reasoning, stating that if the case is referred to the competent court by the appelate court after the decision of the court of first instance has been annulled, an appeal against such a decision is objectively admissible.

Source:
Resolution of the Supreme Court of the Czech Republic File no. 27 Cdo 291/2020, dated 07.04.2020