Mr Josef Stava and his company, Diag Human SE (“Diag”), obtained a USD $350m award against the Czech Republic (“CZR”) under the CZR-Switzerland BIT.  CZR challenged the award under section 67 of the Arbitration Act 1996 (the “Act”), arguing the claimants were not qualifying investors under the BIT and the tribunal therefore lacked jurisdiction.  The Court of Appeal confirmed the award in favour of Mr Stava and set aside the award in favour of Diag.

Background:

In an award dated 18 May 2022, a London-seated UNCITRAL tribunal awarded the claimants USD $350m plus interest.

CZR’s challenged the award under section 67 of the Act on grounds that, in 2011, Mr Stava transferred his shareholding in Diag to a Liechtenstein trust under which he was a discretionary beneficiary.  CZR argued Mr Stava (a Swiss national) therefore no longer owned or controlled Diag, so Mr Stava and Diag ceased to be qualifying investors under the BIT and the tribunal lacked jurisdiction.

Foxton J delivered two judgments in the Commercial Court in March and August 2024 ([2024] EWHC 503 (Comm) and [2024] EWHC 2102 (Comm), respectively).  The March judgment determined that three of CZR’s grounds of challenge were not barred by section 73 of the Act, and that CZR’s challenge to Mr Stava’s claim from June 2011 was not jurisdictional and therefore did not fall within section 67.  The August judgment determined that Mr Stava retained control of Diag at the end of 2011, so the jurisdiction challenge concerning Diag failed on its merits.  Both sides appealed against the March judgment and CZR appealed against the August judgment.

Court’s Decision:

The Court of Appeal (Males, Popplewell and Andrews LJJ) dismissed the appeals concerning the March judgment and allowed CZR’s appeal against the August judgment.  It confirmed the award in favour of Mr Stava and set aside the award in favour of Diag.

The Court held that Mr Stava was a qualifying investor who made a qualifying investment in CZR, so he could accept the offer to arbitrate in Article 9 of the BIT and was entitled to the BIT’s protections.  It did not matter that he subsequently disposed of his interest in the investment.  Any disputes that arose between CZR and Mr Stava after the disposal were “disputes between a Contracting party and a qualifying investor”.  The offer to arbitrate in Article 9 did not require that Mr Stava held the investment at the time of the treaty breach (ruling instead that his disposal of the investment was an issue of standing/admissibility, rather than a matter of substantive jurisdiction within the meaning of s.67 of the Act), nor at the time he accepted the offer to arbitrate.  The disputes need only be “with respect to investments” to come within Article 9.  An investor parting with an investment would give rise to a standing/admissibility dispute for claims arising afterwards, but such a dispute did not concern the tribunal’s substantive jurisdiction.

The Court of Appeal found, however, that Diag was not a qualifying investor under Article 1(1) of the BIT.  As a matter of interpretation, the requirement in Article 1(1) for Mr Stava to “directly or indirectly” control Diag meant de jure rather than de facto control.  When Mr Stava transferred his shareholding to the trust, he no longer controlled Diag de jure.  This meant Diag was no longer an “investor” under Article 1(1) and the tribunal lacked substantive jurisdiction to consider its claims.