Czech Republic v Diag Human SE & Anor

On an application to amend an arbitration challenge, the merits threshold is whether the proposed ground has a real prospect of success. A new ground of objection is a new application for the purposes of the time limit in the Arbitration Act 1996. The statutory reasonable-diligence requirement under section 73 applies throughout the relevant period. It becomes more exacting when facts arise which should prompt active investigation. The applicant must establish with particularity why the ground could not reasonably have been discovered earlier. A party may generally proceed on the assumption that others have acted honestly, but that principle does not remove the statutory diligence requirement. In deciding an extension of time, the court considers delay, reasonableness, responsibility for delay, prejudice, merits and overall fairness.

The Czech Republic challenged an investment-treaty arbitration award under sections 67 and 68 of the Arbitration Act 1996. It sought permission to add a new jurisdictional ground, alleging that Josef Stava was not a protected investor because his dominant and effective nationality was not Swiss. It also sought an extension of time under section 80(5).

The proposed ground was based principally on evidence served on 21 December 2023 concerning Stava’s residence, connections with Switzerland and possible TCI nationality. The issues were whether the new ground had a real prospect of success, whether it was barred by section 73(1), and whether an extension of time should be granted.

1. Application refused. Permission to amend the arbitration challenge was refused because the proposed objection was barred by section 73(1) of the Arbitration Act 1996. No disclosure order was made. The section 80(5) extension issue therefore did not arise, although it was addressed hypothetically.
2. The proposed jurisdictional argument was legally arguable. The Investment Treaty defined an investor by nationality, but it was arguable that customary international law concerning dual nationals informed its interpretation. The authorities did not provide an unequivocal answer whether predominance had to be assessed only between the claimant and respondent states or against all states of nationality.
3. The burden under section 73(1) was on the Czech Republic to show that, when it took part or continued to take part in the arbitration, it did not know and could not with reasonable diligence have discovered the proposed objection. Reasonable diligence applies continuously. A relevant trigger may make the required investigation more exacting, but the statutory question remains whether the ground could have been discovered by reasonable diligence.
4. The arbitration record contained ample indications requiring investigation of Stava’s possible TCI nationality, residence and connections outside Switzerland. The Czech Republic could have pursued those matters through document production and other investigative steps before the award. The evidence did not establish an arguable case that Stava had dishonestly misled the tribunal, and the entitlement to assume honesty did not displace section 73(1).
5. A new ground of objection constitutes an application for section 70(2) purposes, notwithstanding that an arbitration claim form had already been issued. Otherwise the statutory policy of speedy finality would be undermined.
6. Had an extension been required, it would have been granted on balance. The delay was substantial, but there was no irremediable prejudice, the issue was legally arguable, and the late service of Stava’s evidence contributed to the timing. The proposed challenge was not strong, however.