Following a 5 day hearing in February 2025 and a further 1 day hearing in July 2025, the Court of Appeal partially set aside an investment treaty arbitration award (the “Award”) under the Czech-Swiss BIT pursuant section 67 of the Arbitration Act 1996 (the “Act”). This is the latest set of decisions in the long-running dispute between Josef Stava, Diag Human SE and the Czech Republic, with the proceedings having previously been recognized as one of ‘The Lawyer Top 20 Cases of 2024’.
In its first judgment dated 7 May 2025 ([2025] EWCA Civ 588), the Court of Appeal considered an appeal by Mr Stava and Diag Human arising out of a judgment of Mr Justice Foxton from March 2024 (the “First Appeal”), and two appeals by the Czech Republic, one arising out of the first judgment (the “Second Appeal”) and another arising out of a judgment of Mr Justice Foxton from August 2024 (the “Third Appeal”).
The question on the First Appeal was whether Mr Justice Foxton was wrong to hold that certain of the Czech Republic’s grounds of challenge to the Award (i.e. those which were the subject matter of the Second Appeal and the Third Appeal) were not barred by s.73 of the Act. The Court of Appeal dismissed the First Appeal, finding that no objection to the timing of the Czech Republic’s grounds of challenge was made during the arbitration, that they were made within time as permitted by the Tribunal and thus within the time permitted by s.73 of the Act, and in any event were admitted by the Tribunal within the meaning of s.31(3): [62]-[89].
The question on the Second Appeal was whether Mr Justice Foxton was wrong to hold that an objection by the Czech Republic which related to Mr Stava’s disposal of his interest in the qualifying investments was not an issue going to substantive jurisdiction, such that it did not fall within s.30 and was not capable of grounding a challenge under s.67 of the Act. The Court of Appeal dismissed the Second Appeal, finding that on a proper interpretation of the BIT, the Czech Republic’s objection was not a jurisdiction issue for the purposes of s.30: [123]-[142].
The question on the Third Appeal was whether Mr Justice Foxton was wrong to hold that notwithstanding the fact that Mr Stava placed the shares of Diag Human SE into a Liechtenstein law governed discretionary trust in 2011, he nevertheless continued to control Diag Human SE, such that Diag Human SE qualified as an “investor” under Art 1(1) of the BIT, over whom the Tribunal had jurisdiction. The Court of Appeal allowed the Third Appeal, finding that on a proper interpretation of the BIT, de jure control was required, but even if that were not the case and a de facto analysis were to be used, on either view Mr Stava no longer directly or indirectly controlled Diag Human SE after the shares were placed into the trust. As a result, this jurisdiction objection under s.67 succeeded, and the Award as far as Diag Human SE was concerned was set aside: [143]-[208].
In its second judgment dated 28 July 2025 ([2025] EWCA Civ 998), the Court of Appeal considered the extent and impact of its decision to partially set aside the Award in allowing the Third Appeal, in circumstances where: (a) the challenges to the Award as far as Mr Stava was concerned had been dismissed, but (b) the Tribunal’s reasoning as far as Mr Stava was concerned was based on him not having divested himself of control by placing the shares into the trust (which analysis the Court of Appeal had reversed on the Third Appeal).
The Court of Appeal determined that this was a matter concerning the merits of Mr Stava’s claim and was therefore a matter for the Tribunal, not the Court, such that the Award as far as Mr Stava was concerned was unaffected by the Czech Republic’s success on the Third Appeal: [17]-[23]. The Court accepted further undertakings from Mr Stava and Diag Human SE in relation to double recovery: [24]-[27], and varied the costs aspects of the Award to remove references to Diag Human SE: [28]-[32].
The judgments can be found here and here.
Graham Dunning KC, Lucas Bastin KC, Peter Webster, Richard Hoyle and Katherine Ratcliffe appeared on behalf of the Czech Republic, instructed by Jane Wessel and Charlotte Mallorie of Arnold & Porter LLP.
