Analysis of Jurisdictional and Procedural Challenges in The Czech Republic v Diag Human SE & Anor Case

Introduction

The case of The Czech Republic v Diag Human SE & Anor ([2024] EWHC 503 (Comm)) presents an intricate exploration of jurisdictional challenges and procedural fairness under the Arbitration Act 1996. The case arose from an investment treaty arbitration under the Agreement between the Czech and Slovak Federal Republic and the Swiss Confederation on the Promotion and Reciprocal Protection of Investments of 1990. This article carefully dissects the legal principles applied by Mr Justice Foxton in assessing both jurisdictional objections under section 67 and procedural irregularity challenges under section 68 of the Arbitration Act 1996, as well as the interplay with section 73’s “loss of right to object.”

Key Facts

The dispute’s genesis was the Czech Republic’s alleged breaches of the investment treaty, which led to an award against it. The Czech Republic subsequently challenged the award’s jurisdiction under sections 67 and 68 of the Arbitration Act 1996, raising issues such as the existence of investments, investor qualification based on nationality, and proper conduct of the proceedings.

Legal Principals

Jurisdictional Challenges under Section 67

The principle at hand dictated that a challenge to an award’s substantive jurisdiction must be raised promptly. It underscored that objections on grounds that were not articulated or pursued through the arbitral proceedings would typically be barred under section 73. In dealing with the various jurisdictional challenges, the court closely examined whether each contention regarding the investments in question and investor status had been sufficiently raised and maintained during arbitration.

Procedural Fairness under Section 68

Section 68 of the Arbitration Act 1996 addresses severe irregularities that cause substantial injustice. It was considered that a challenge under this provision must meet a high threshold - only extreme cases warranting correction to uphold justice qualify. The analyzed case raised questions about whether a tribunal exceeded its powers and appropriately dealt with all presented issues.

Loss of Right to Object under Section 73

Section 73 operates as a safeguard against parties who fail to make timely objections during the arbitral proceedings. The court considered whether by actively participating in the arbitration without raising objections or through reasonable diligence could have discovered the grounds for such objections, parties waived the right to challenge later.

Outcomes

The court’s detailed analysis led to the dismissal of several jurisdictional objections under section 67, due to the failure of meeting strict timing requirements or because they were not characterized as jurisdictional in nature. Moreover, the court upheld a procedural irregularity challenge under section 68 due to the tribunal’s omission to decide on an issue material to the award’s quantum. However, the court reserved judgment on another section 68 challenge, pending resolution on related objections.

Conclusion

In The Czech Republic v Diag Human SE & Anor, the court applied stringent standards to the arbitration’s jurisdictional objections and procedural challenges, reaffirming the principles of prompt and precise issue articulation in arbitration and the reluctance to permit unwarranted judicial intervention. The decision underlines the importance of parties vigilantly maintaining their objections throughout the duration of arbitral proceedings to avoid waiving their rights and underscores the high threshold set for rectifying procedural irregularities under the Arbitration Act 1996.