The Czech Republic (Appellant) v Diag Human SE and another (Respondents) No 2

Case summary

Case ID

UKSC/2025/0177

Parties

Appellant(s)

The Czech Republic

Respondent(s)

(1) Diag Human SE (2) Josef Stava

Issue

Does “control” for the purposes of Article 1(1)(c) of the investment treaty agreed between the Czech and Slovak Federal Republic and the Swiss Confederation dated 5 October 1990 (“BIT”) require that the legal entity be controlled de jure, or is de facto control sufficient? What is the test for “de facto” control for the purposes of Article 1(1)(c) BIT? Did the CA err by holding that CR’s objection to Mr Strava’s claim in respect of breaches of the BIT post-dating the alleged disposal of his interest in the qualifying investments was not an objection to “substantive jurisdiction” under section 30 Arbitration Act 1996? Did the Court of Appeal err by ordering that the full BIT award should be paid to Mr Stava despite finding that Diag Human SE was not a qualifying investor for the purposes of the BIT?

Facts

Mr Stava is a Swiss national who founded a Czech company, Conneco, in 1990. The dispute underlying these appeals arises out of a letter written by the Czech Health Minister, Dr Matrin Bojar, which disparaged Conneco and led to the termination of its relationship with Novo Nordisk A/S, a pharmaceuticals company (“the Bojar letter”). In 1996, Diag Human a.s. (as Conneco had been renamed) commenced an arbitration against the Czech Minister of Health (“the commercial arbitration”). By a Final Award dated 4 August 2008 (the “2008 Award”), the tribunal ordered the Czech Republic (“CR”) to pay damages to Diag Human SE (“DH”), the successor to Diag Human a.s. On 22 August 2008, CR applied for an arbitral review of the 2008 Award pursuant to Czech arbitration law. On 23 July 2014, the review tribunal issued a resolution which discontinued proceedings. Meanwhile, in 2011, Mr Strava entered into a “Lawbook Transaction”, the effect of which was that the shareholding in DH was transferred to the trustee of the Koruna Trust at the end of 2011. The Koruna Trust was a Liechtenstein trust established by Mr Stava under which he and his daughters were, amongst others, discretionary beneficiaries. On 22 December 2017, Mr Stava and DH commenced arbitration proceedings against CR alleging that CR had breached the BIT (“the BIT arbitration”). The tribunal held that the Bojar Letter breached the BIT and that CR had interfered with the Commercial Arbitration in breach of the BIT. Damages were awarded to both Mr Stava and DH in the amount of the 2008 Award (“the BIT arbitration award”). CR challenged the BIT arbitration award under sections 67 and 68 of the Arbitration Act 1996 (“AA 1996”). In the first of two judgments, Foxton J addressed whether a number of the section 67 grounds advanced by CR were barred by section 73 AA 1996 and/or were jurisdictional in nature within the meaning of s. 30 AA 1996 so as to amount to legitimate grounds of challenge under section 67. Amongst other things he determined that (i) CR’s grounds of challenge under section 67 that relied upon Lawbook Transaction as depriving the tribunal of jurisdiction in relation to alleged treaty breaches by CR thereafter, were not barred by section 73 and (ii) the ground of challenge against Mr Stava’s claim from June 2011 was not jurisdictional in nature and did not fall within the scope of section 67, but the challenge against DH’s claim was jurisdictional in nature and should be determined at a subsequent hearing. In a second judgment dated 9 August 2024, Foxton J determined that Mr Stava had control of DH for the purposes of Article 1(1)(c) BIT such that the jurisdictional challenge against DH failed on its merits. Mr Stava and DH appealed against Foxton J’s finding that CR was not barred from raising certain jurisdictional objections. CR appealed against Foxton J’s finding that (i) Mr Stava’s disposal of his interest in DH in 2011 was not a jurisdictional challenge which could be pursued under section 67 of the AA 1996 and (ii) DH qualified as an investor under Article 1(1)(c) of the BIT. By judgment dated 7 May 2025, the Court of Appeal (i) dismissed Mr Stava and DH’s appeal, (ii) dismissed CR’s appeal against the finding that its objection was not a jurisdictional challenge, and (iii) allowed CR’s second ground of appeal, concluding that, following the Lawbook Transaction in 2011, DH was not “controlled” by JS within the meaning of Article 1(1)(c) BIT. DH therefore did not qualify as an “investor” within the meaning of that Article, and therefore the Tribunal lacked jurisdiction over its claim. By second judgement dated 28 July 2025, the CA ordered that the 2008 Award should be awarded in full to Mr Stava. Mr Stava and DH now appeal to the Supreme Court against the CA’s finding that DH was not a qualifying investor for the purposes of Article 1(1)(c) BIT. CR appeals to the Supreme Court against the CA’s finding that its objection to the claim was not a jurisdictional challenge within the meaning of section 67 AA 1996, and its decision to award the full 2008 Award to Mr Stava.

Date of issue

24 October 2025

Case origin

PTA

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