30/07/2025

Josef Stava successfully resists challenge to US$750 million investment treaty award against the Czech Republic

The Court of Appeal handed down judgment on Monday, confirming an award in favour of Mr Josef Stava for approximately US$750 million (including interest).

A team of Twenty Essex barristers – Lord Verdirame KC, Philip Riches KC, Dr Kate Parlett, Sam Goodman, Dr Jonathan Ketcheson and Isabelle Winstanley acted for both Mr Stava and Diag Human.

The case was listed in The Lawyer’s Top 20 Cases for 2024.

Background

This is a long-running dispute relating to wrongdoing by a former Czech health minister in the early 1990s and involving interference in and corruption of a commercial arbitration brought by Diag Human against the Czech Republic.

Lord Verdirame KC, Philip Riches KC and Jonathan Ketcheson successfully represented Diag Human and Mr Stava in a BIT arbitration, in which the tribunal held that the Czech Republic had abused its sovereign powers and breached its treaty obligations, including as a result of its egregious interference in an arbitral review process.

The Czech Republic brought a challenge to the BIT award on a large number of grounds under both s.67 and s.68.

• Pursuant to a March 2024 judgment, Mr Justice Foxton found that the majority of challenges which the Czech Republic sought to pursue were barred by s.73 of the Act. He remitted one narrow issue to the tribunal for its consideration. The tribunal issued an award in May 2025 in which it determined that the 2022 BIT award remained unaffected.
• Following a second trial, Mr Justice Foxton dismissed the remainder of the challenges brought by the Czech Republic.

Following a five-day hearing, the Court of Appeal rejected one aspect of appeal by the Czech Republic, concerning Mr Stava, but upheld another, deciding that the tribunal lacked jurisdiction over Diag Human.

The Court of Appeal’s 28 July judgment

Given certain arguments raised by the Czech Republic concerning the effect of its partial success in respect of Diag Human, the Court of Appeal unusually directed an oral hearing of consequential matters.

• The Czech Republic contended that the award in favour of Mr Stava was dependent upon, and not severable from, the award in favour of Diag Human, such that the consequence of the setting aside of the award in favour of Diag Human was that the award in favour of Mr Stava must also be set aside. The Court of Appeal rejected this argument. It held that the fact that the original commercial arbitration award was in favour of Diag Human did not prevent the BIT tribunal from treating Mr Stava (who was a privy of Diag Human) as having suffered loss in the same amount. This was a decision by the tribunal on the merits which was not open to review, and, furthermore, all jurisdictional challenges as regards Mr Stava had been dismissed.
• The Court of Appeal accepted that the tribunal might have made a different award on costs had it correctly concluded that it had no jurisdiction over Diag Human. However, the court declined to exercise its discretion to remit the question of costs and instead determined that it would be fair to award Mr Stava all of the costs that had been previously awarded (even though that original award of costs had been in favour of him and Diag Human). The Court of Appeal noted that Mr Stava funded all of Diag Human’s claim in the arbitration and that it would be difficult to disentangle costs as between the two claimants. It accepted that there was an element of rough justice in this decision. However, it said that this arose as a result of the tribunal’s resignation, which was deliberately procured by the Czech Republic in the knowledge that the Court of Appeal would have to consider remission of the award and that the need to constitute a new tribunal would inevitably cause substantial difficulty.

The Court of Appeal also acknowledged that the consequence of the Czech Republic’s partial success is that Diag Human is once again able to seek to enforce the underlying commercial award in its favour (enforcement of which had been suspended while Diag Human had the benefit of the BIT award).

The judgment draws Mr Stava, and indirectly Diag Human, considerably closer to final resolution of their long-running dispute with the Czech Republic, and both parties towards the conclusion of this extraordinary litigation.

The Twenty Essex team was instructed by Mishcon de Reya LLP.