Diag Human SE and Mr. Josef Stava v. The Czech Republic

Case summary

At a glance

Parties: Diag Human SE (Liechtenstein) and Mr Josef Stava (Swiss national) v. the Czech Republic
Case no.: PCA Case No. 2018-20; English court challenge Claim No. CL-2022-000307
Forum and rules: UNCITRAL Arbitration Rules 2010; seat London. Challenges in the English Commercial Court under ss. 67 and 68 of the Arbitration Act 1996
Treaty: Czech and Slovak Federal Republic–Swiss Confederation BIT of 5 October 1990
Court: High Court of England and Wales (Foster J with Master Simon Brown as assessor; Bright J; Foxton J); Court of Appeal (Males, Snowden and Falk LJJ; Males, Popplewell and Andrews LJJ)
Underlying award(s): Treaty Award of 18 May 2022 (finding breaches of fair and equitable treatment under Article 4(2) of the BIT)
Sector: Healthcare; blood plasma collection and processing
Outcome: The Commercial Court refused security for costs and security for the award (2023), refused the Czech Republic leave to add a new nationality objection (March 2024), and dismissed its surviving s. 67 challenges (August 2024). The published text of the May 2025 Court of Appeal judgment does not include its conclusions.
Amount: Awarded: CZK 4,089,716,666.00 plus interest (about US$350 million plus interest, according to the Court of Appeal). The claim in the arbitration was about US$2.4 billion. In a separate fee dispute, Volterra Fietta's post-6 September 2017 fees of US$2,929,928.38 were assessed at nil and had to be repaid.

The dispute

Mr Stava founded Conneco, a Czechoslovak company that collected blood plasma from Czech hospitals for processing by Novo Nordisk in Denmark. Diag Human SE, a Liechtenstein company, later succeeded Conneco. On 9 March 1992 the Health Minister, Dr Martin Bojar, wrote a letter to Novo Nordisk questioning Conneco's respectability (the "Bojar Letter"), and Novo Nordisk cancelled its plasma cooperation. A domestic arbitration ended in a Final Award of 4 August 2008 for about CZK 8.3 billion. That award was then reviewed, and a Resolution of 23 July 2014 discontinued the proceedings. Courts in several countries then refused to enforce the 2008 award. In 2017 Diag Human and Mr Stava brought a BIT claim. They alleged that the Bojar Letter, interference with the domestic arbitration and the corruption of the review tribunal breached fair and equitable treatment. The Czech Republic challenged the resulting award in London for lack of jurisdiction and serious irregularity. Its main arguments were that there was no protected investment, that the claims were outside the treaty's temporal scope, and that Mr Stava gave up ownership and control of Diag Human SE in 2011 through the Lawbook Transaction and the Koruna Trust.

Key holdings

Fee dispute with the claimants' former solicitors. A side letter made the solicitors' fees partly contingent on success in the BIT claim. It was an unenforceable conditional fee agreement. The contingent terms could not be severed, because they were the essence of the new retainer. A quantum meruit claim is barred by public policy. All fees for work after 6 September 2017 are assessed at nil and must be repaid. Volterra Fietta's appeal was dismissed. Diag v Volterra [2022] EWHC 2054 (QB), ¶¶ 84–86, 110, 116, 123
Security for costs under s. 70(6) was refused only because the Czech Republic gave a formal undertaking to pay any costs order. Security for the award under s. 70(7) was refused because there was no evidence that the State would dissipate its assets. Historic misconduct, including the alleged corruption of the review tribunal, did not show that the award would become harder to enforce while the challenge was pending. [2023] EWHC 1691 (Comm), ¶¶ 50–51, 56, 74, 81–82, 88
Only the first-instance court can give permission to appeal a decision on security under s. 70(7), so the Court of Appeal had no jurisdiction to hear the award creditors' appeal. Obiter, the court doubted the 'flimsiness' threshold applied to s. 67 challenges. It said the merits are generally irrelevant and the real question is whether the challenge prejudices enforcement. [2023] EWCA Civ 1518, ¶¶ 36–42, 51–59
Permission to add a new s. 67 objection was refused. The objection was that Mr Stava's dominant and effective nationality was that of the Turks and Caicos Islands rather than Swiss. It was barred by s. 73(1), because the arbitration record contained enough material to alert the Czech Republic to the point. The court also found no arguable case that Mr Stava had dishonestly misrepresented his links to Switzerland. [2024] EWHC 708 (Comm), ¶¶ 37, 40, 44
The Czech Republic's surviving s. 67 challenges were dismissed: no investment, ratione temporis, and that Diag Human SE was not a protected investor. The court also found that the Czech Republic suffered no substantial injustice under the remaining s. 68 ground, subject to the outcome of any appeals. [2024] EWHC 2102 (Comm), ¶¶ 264–265
The Lawbook Transaction was not a genuine arm's-length sale. It was an attempt to create apparent distance between Mr Stava and Diag Human SE after indications from the Czech Government. The shares were legally owned by the trustee of the Koruna Trust. Even so, Mr Stava was the determining voice in all decisions of Diag Human SE, and the trustee had delegated the company's only business, enforcing the 2008 award, to him. [2024] EWHC 2102 (Comm), Annex 3 ¶¶ 19, 44, 52–53, 61

Procedural history

4 August 2008Final Award in the domestic Czech arbitration grants about CZK 8.3 billion. The review proceedings end with the Resolution of 23 July 2014, which discontinues the arbitral proceedings.
22 December 2017Diag Human SE and Mr Stava commence the BIT arbitration. On 20 June 2018 the parties agree to the UNCITRAL Rules 2010 and a seat in London.
July 2020Five-day remote hearing, at which Mr Stava is cross-examined.
18 May 2022The Treaty Award finds breaches of Article 4(2) of the BIT, holds that the 2014 Resolution is not entitled to recognition, and awards the amount of the 2008 award with interest.
29 July 2022High Court (Foster J) dismisses Volterra Fietta's appeal in the solicitors' fee assessment.
7 July 2023Bright J refuses security for costs and security for the award.
21 December 2023Court of Appeal holds that it has no jurisdiction to grant permission to appeal the refusal of security for the award.
27 March 2024Foxton J refuses permission to amend to add the dominant-nationality objection. His earlier judgment of 8 March 2024 had dealt with the s. 68 and s. 73 issues.
9 August 2024Foxton J dismisses the surviving s. 67 challenges.
7 May 2025Court of Appeal judgment on three appeals from Foxton J's March and August 2024 judgments. The conclusions are not included in the published text.

Tribunal, counsel and experts

Decided by: Simon Brown High Court of Justice, Queen's Bench Division, High Court of Justice, Queen's Bench Division (sat as Assessor)
For the claimant: Mishcon de Reya LLP
For the respondent: Arnold & Porter Kaye Scholer LLP
For other participants: Saunders Law Ltd
Experts: Nicholas Reithner (respondent) · Christian Batliner (claimant)