The Czech Republic v Diag Human SE & Anor

Under Arbitration Act 1996 section 73, a party which does not raise before the tribunal a complaint that its opponent's jurisdiction objection was late cannot raise that timeliness complaint for the first time in court. Where the tribunal permits the objection to be made, without any timeliness objection, and determines it on its merits, it was made within the time allowed by the tribunal. Alternatively, the tribunal has admitted it under section 31(3).

An investment treaty's offer to arbitrate extends to a qualifying investor who made a qualifying investment, even if that investor later disposes of it, unless the treaty provides otherwise. Later disposal concerns standing or admissibility, not substantive jurisdiction. A third-country company controlled under article 1(1)(c) of the treaty must be subject to de jure, rather than merely factual, control by a Swiss investor.

The Czech Republic challenged, under sections 67 and 68 of the Arbitration Act 1996, a London-seated treaty arbitral award in favour of Mr Stava and Diag Human SE. The award concerned alleged breaches of a bilateral investment treaty between Switzerland and the Czech Republic.

Foxton J held in the March judgment, [2024] EWHC 503 (Comm), that three Czech jurisdiction objections were not barred by section 73, but that the objection to Mr Stava's claim after June 2011 was not one of substantive jurisdiction. In the August judgment, [2024] EWHC 2102 (Comm), he held that Mr Stava retained sufficient factual control of Diag SE after its shares were transferred into a Liechtenstein discretionary trust.

The three appeals concerned timeliness, the characterisation of Mr Stava's post-disposal claim, and whether Diag SE remained a qualifying investor.

1. First appeal dismissed. Mr Stava and Diag SE could not contend in court that the Czech Republic's jurisdiction objections were late. That was itself an objection under section 73(1)(c) of the Arbitration Act 1996, based respectively on non-compliance with section 31(1) or article 23 of the UNCITRAL Rules. They had not made it before the tribunal.

   Further, the tribunal had allowed the objections to be made. The parties addressed them on their merits, no timeliness objection was made, and the tribunal determined them accordingly. They were therefore made within the time allowed by the tribunal for section 73 purposes. Alternatively, the tribunal had admitted them under section 31(3). Admission does not require an express order extending time: it is enough that the tribunal permits the later objection.

2. Second appeal dismissed. Article 9 of the bilateral investment treaty offered arbitration to a qualifying investor who had made a qualifying investment after the stated date. The necessary investor-investment link was required when the investment was made. Article 9 did not require the investor still to hold the investment when the alleged breach occurred or when arbitration commenced.

   Accordingly, an issue whether Mr Stava had later disposed of his investments concerned standing or admissibility and fell within the tribunal's jurisdiction ratione materiae. It was not an issue of substantive jurisdiction under section 30 of the Arbitration Act 1996. The Czech Republic could not expand its permitted ground of appeal into a separate objection concerning Mr Stava's status when arbitration commenced.

3. Third appeal allowed. Applying article 31 of the Vienna Convention on the Law of Treaties 1969 as a single combined operation, article 1(1)(c) of the treaty required de jure control. The treaty and its Protocol contemplated proof and recognition of control through a workable, predictable legal structure. A merely factual-control test would be vague, unstable and inconsistent with that function.

   Mr Stava had transferred the Diag SE shares into a valid discretionary trust. His managerial, voting and protector powers were exercised for the trustee or in the interests of the trust, not in his own right. His practical influence, funding and ability potentially to acquire control did not amount to control of the economic interest in Diag SE. Diag SE was therefore not a qualifying investor. The award in its favour was set aside.

• Court of Appeal (Civil Division): The first and second appeals were dismissed. The third appeal was allowed and the treaty award in favour of Diag Human SE was set aside: [2025] EWCA Civ 588.
• High Court, Commercial Court: Foxton J held that the Czech Republic's relevant jurisdiction objections were not barred by section 73, but that the objection to Mr Stava's claim after June 2011 was not jurisdictional: [2024] EWHC 503 (Comm).
• High Court, Commercial Court: Foxton J rejected the jurisdiction challenge to Diag SE, holding that Mr Stava retained sufficient factual control after the trust arrangements: [2024] EWHC 2102 (Comm).