Diag Human SE v The Czech Republic

Hearing dates: 12, 13, 14 & 15 May 2014

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

Introduction

These proceedings concern a claim by the claimant ("Diag Human") to enforce an Arbitration Award dated 4 August 2008 made in its favour in the Czech Republic against the defendant, the Czech Republic (the "Award").

The claim is made pursuant to s103 of the Arbitration Act 1996 (the "1996 Act") which provides in material part as follows:

" 103(1) Recognition or enforcement of a New York Convention award shall not be refused except in the following cases.

(2) Recognition or enforcement of the award may be refused if the person against whom it is invoked proves –

…

(f) that the award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, it was made

(3) Recognition or enforcement of the award may also be refused if the award is in respect of a matter which is not capable of settlement by arbitration, or if it would be contrary to public policy to recognise or enforce the award.

(4) …

(5) Where an application for the setting aside or suspension of the award has been made to such a competent authority as is mentioned in subsection (2)(f), the court before which the award is sought to be relied upon may, if it considers it proper, adjourn the decision on the recognition or enforcement of the award.

It may also on the application of the party claiming recognition or enforcement of the award order the other party to give suitable security."

The reference in s103(1) is to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards adopted by the United Nations Conference on International Commercial Arbitration on 10 June 1958 (the "New York Convention" or "Convention"). The wording in s103(1) and (2)(f) (which is the main focus of the present dispute) reflects the wording of Article V(1)(e) of the Convention which provides:

" Article V

(1) Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that:

…

(e) The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made."

It is common ground that the Czech Republic is a party to the Convention; and that therefore the Award is a New York Convention award within the meaning of s100 of the 1996 Act and one to which s103 of the 1996 Act applies.

The present proceedings seeking enforcement of the Award were issued on 20 July 2011. Following an application without notice by Diag Human, an order was made by Burton J in this court the following day i.e. 21 July 2011 giving Diag Human leave to enforce the Award and entering judgment against the Czech Republic in the terms of the Award, namely:

" The defendant shall pay the plaintiff the amount of damages of 4,089,716,666.00 CZK.

The defendant is liable to pay compensation to the plaintiff with interest on the arrears for the period from 1 July 1992 to 20 June 2007 of CZK 4,244,879,686.00.

The defendant shall pay the plaintiff interest on the amount of arrears of CZK 1,287,877.00 per day, starting on 1 July 2007 until payment and the amount of CZK 58,130,213.00 from 14 July 2007 until payment, at the repo rate set by the Czech National Bank plus 7 percentage points on the basis that in each calendar half year, in which the debtor is in default, the arrears interest rate will be based on the repo rate set by the Czech National Bank valid for the first calendar day of the half-year."

The Czech Republic now seeks to set aside that Order. In broad terms, the main thrust of the case advanced by the Czech Republic is that the Award is not binding for reasons set out below.

The primary submission advanced by Mr Crane QC on behalf of the Czech Republic is that that question has already been determined in its favour in separate enforcement proceedings brought by Diag Human in Austria in a decision of the Supreme Court of Austria on 16 April 2013 which, Mr Crane submitted, gives rise to an issue estoppel between the parties. In the alternative, Mr Crane submitted that the Award is in any event not binding within the meaning of s103(2)(f) of the 1996 Act. In contrast, Mr Cox QC on behalf of Diag Human submitted that there is no issue estoppel; and that the Award is indeed binding. Those are the main issues which arise for determination. In the alternative, Mr Cox submitted that Diag Human is, at the very least, entitled to partial enforcement of the Award.

S103 of the Arbitration Act 1996

At the outset, it is convenient to set out certain preliminary observations with regard to the general scope and effect of s103 of the 1996 Act. These are based in part on the helpful submissions of Mr Cox on behalf of Diag Human which (unless otherwise stated) were agreed by Mr Crane on behalf of the Czech Republic and which I gratefully adopt.

First, the Convention was given domestic effect in the United Kingdom by the Arbitration Act 1975. Ss100–103 of the 1996 Act replaced the relevant statutory provisions contained in that earlier Act. There was some debate before me as to the form of these provisions. Parliamentary draftsmen use different methods for giving effect to international conventions. For example, s1(2) of The Carriage of Goods by Sea Act 1971 expressly provides that the Hague Rules shall have the "force of law"; s1(2) of The Human Rights Act provides that certain rights set out in the European Convention of Human Rights are to have "effect". However, that is not the methodology used in the 1996 Act. Rather, although the wording of Article V of the Convention is reflected in s103 of the 1996 Act, the latter stands as an independent statutory provision. Notwithstanding, as a matter of substance and as stated by Tomlinson LJ in Lombard-Knight v Rainstorm Pictures [2014] EWCA Civ 356 at [1]–[3], the effect is that it directly enacts the relevant part of the Convention and gives effect to it; and bearing this in mind, the statutory language must of course be given an autonomous meaning, which may be informed by the travaux preparatoires, the decisions on it of foreign courts and the views on it of foreign jurists – la jurisprudence and la doctrine– see Bennion on Statutory Interpretation, 5 ^th Ed, 2008 at page 682.

Second, the Convention comprises an "overall scheme" for "the facilitation of the enforcement of an award." "The scheme reflects a 'pro-enforcement bias'… or … constitutes a praesumptio juris tantum, for the enforceability of an award …" (Van den Berg, The New York Convention 1958: Towards a Uniform Judicial Interpretation (Kluwer 1981) (hereinafter "Van den Berg, NYC") p267; see also Gary Born, International Commercial Arbitration (2 ^nd Ed, Kluwer 2014), pp3411–3417. A key feature of this pro-enforcement bias is the abolition of the "double exequatur" requirement under the New York Convention's forerunner. This was considered and explained by Burton J in Dowans Holding SA v Tanzania Electric Supply Co Ltd [2011] 2 Lloyd's Rep 275 at [8]–[10]:

" 8. The New York Convention (on the Recognition of Enforcement of Foreign Arbitral Awards) 1958 superseded the Geneva Convention (on the Execution of Foreign Arbitral Awards) 1927, which provided in Article 1 that a relevant Convention award would "be recognised as binding and … be enforced in accordance with the rules of the procedure of the territory where the award is relied upon, provided that the … award [had] been made in a [Convention] territory" but:

"To obtain such recognition or enforcement, it shall, further, be necessary:

…

(d) that the award has become final in the country in which it has been made, in the sense that it will not be considered as such if it is open to opposition, appel or pourvoi en cassation (in the countries where such forms of procedure exist) or if it is proved that any proceedings for the purpose of testing the validity of the award are pending."

9. It was further provided by Article 3 that:

"If the party against whom an award has been made proves that under the law governing the arbitration procedure there is a ground … entitling him to contest the validity of the award in a Court of Law, the court may, if it thinks fit, either refuse recognition or enforcement of the award or adjourn the consideration thereof, giving such party a reasonable time within which to have the award annulled by the competent tribunal."

10. The New York Convention, upon which the UK 1996 Act is based, contained in almost identical wording the provisions of s103(2)(f) in Article V(1)(e), and s103(5) is in almost identical terms to Article VI. It is common ground that the intention of the New York Convention was to make enforcement of a Convention award more straightforward, and in particular to remove the previous necessity for a double exequatur – i.e. the need, before a Convention award could be enforced in any other jurisdiction, for it to be shown that it has first been rendered...