Diag Human SE v The Czech Republic

JurisdictionEngland & Wales
CourtQueen's Bench Division (Commercial Court)
JudgeMr Justice Burton
Judgment Date25 October 2013
Neutral Citation[2014] EWHC 3190 (Comm),[2013] EWHC 3190 (Comm)
Docket NumberCase No: Folio 2011/684

[2013] EWHC 3190 (Comm)




Royal Courts of Justice

Rolls Building, London, EC4A 1NL


Mr Justice Burton

Case No: Folio 2011/684

Diag Human SE
The Czech Republic

Raymond Cox QC, Philip Riches, Liisa Lahti (instructed by Goodman Derrick) for the Claimant

Charles Joseph (instructed by DWFM Beckman) for the Defendant

Hearing dates: 2 and 3 October 2013

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.

Mr Justice Burton Mr Justice Burton

The Claimant is Diag Human SE and the Defendant, is the Czech Republic. Diag Human SE is a company incorporated in Lichtenstein, which until 1996 was trading in the Czech Republic in the pharmaceutical field, particularly in relation to the supply of blood plasma. The Claimant brought proceedings in the Czech Republic, arising out of a letter written by the then Minister of Health of the Czech Republic on 9 March 1992 to A/S Novo Nordisk Copenhagen, its major supplier and the company which carried out the fractionation of the plasma, which led to Novo Nordisk terminating its relationship with the Claimant. On 18 September 1996 the Claimant and Defendant agreed to submit the dispute in respect of compensation for the loss caused in connection with that letter to arbitration. A number of awards by arbitrators have followed, in particular a partial award (after a review) by which the arbitrators awarded damages or compensation to the Claimant on account by way of interim damages in the sum of CZK 326,608,334 (approximately £10 million), which sum the Defendant paid on 15 January 2003. There has now been a final award issued in Prague on 4 August 2008 by which the arbitrators awarded further sums by way of damages and interest which was not included in the partial award. The arbitrators awarded CZK 4,089,716,666 in damages, interest from the period from 1 July 1992 to 30 June 2007 in the sum of CZK 4,244,879,686 and interest since 1 July 2007 of CZK 58,130,213 and continuing, an amount equivalent to some £135 million in damages and £140 million in interest.


The Claimant has been trying to enforce the award in Austria, France, Luxembourg, Switzerland and the United States, and pursuant to an ex parte application to this court dated 21 July 2011 now in this country. The Defendant's resistance to enforcement is not upon the basis that the award is not valid, but that it is not (yet) binding because there is an outstanding application for review, and that such an application for review has been made. Article V of the Arbitration Agreement reads as follows:

"The parties have also agreed that the arbitral award will be submitted to a review by other arbitrators whom the parties appoint in the same manner if an application for review has been submitted by the other party within 30 days from the date on which the applicant party received the arbitral award. Articles II-IV of this agreement apply similarly to the review of the arbitral award. If the review application of the other party has not been submitted within the deadline, the award will enter into effect and the parties voluntarily undertake to implement it within the deadline to be determined by the arbitrators, in default of which it may be implemented by the competent court."


The Claimant challenges the validity and timeousness of that application for review, but accepts that if there has been a valid such application then the award is not binding.


Upon the ex parte application above referred to, as it happens I was the Commercial Court Judge dealing with it on paper, and I made an ex parte order for enforcement as sought.


It is common ground that this is a New York Convention Award. By CPR 62.18, where an application for permission is made in respect of such an award under s.101 of the Arbitration Act 1996 ("the 1996 Act"), it follows the same course as an application for permission to enforce a domestic award under s.66 of the 1996 Act, namely that such application for permission to enforce is made without notice in an arbitration claim form. Such a claim form was issued and served and, as is always provided for in relation to an ex parte application under CPR 62.18, an application to set aside the permission has been issued by the Defendant, which is to be heard at a hearing fixed for 2 days in May 2014. There is very substantial evidence to be adduced by both sides, namely as to:

(i) whether, at Czech law or otherwise, any of the various documents relied upon by the Defendant (I am told four in all) amount to a valid and timeous application for a review. The Claimant asserts that the question of validity and thus of whether there is a binding award must be decided by the English Court on this application, relying on my decision in Dowans Holdings SA and Anr v Tanzania Electric Supply Co Ltd [2011] 2 Lloyd's Rep 475. In the Austrian Courts (three hearings up to the Supreme Court) and the French Courts (two hearings so far and only to the Court of Appeal) those courts have concluded that the issue of the validity of the applications for review must be decided by the appointed arbitrators in connection with the putative review, who have, after some considerable litigation in the Czech Republic, now been appointed, although the Claimant has expressed considerable reservations about those arbitrators and the manner of their appointment (and in some cases removal).

(ii) whether there is any issue estoppel arising out of any of the various foreign proceedings.


The Defendant has issued an application for security of the costs of that application. It claims the sum of £258,405 (in three tranches).


I deal first with the Defendant's case as to non-disclosure by the Claimant on the ex parte application. The Claimant did not disclose to me that there was a dispute as to whether there was a binding award, because the Defendant was going to rely upon the assertions that (i) it had made a valid application for review within Article V (ii) the Claimant had itself made an application for review, albeit that it had subsequently withdrawn it. There was of course nothing improper about bringing an application for enforcement on the basis that the award was binding when that is indeed the Claimant's case, for it is thoroughly sceptical as to the strength of the Defendant's arguments (which I cannot possibly resolve nor am asked to do so). However the issue is that the Claimant did not disclose the existence of the dispute. There is a note in the White Book under 2E-39 which refers to the " importance of full and frank disclosure in any affidavit and by like token in any witness statement in support of [an] application which in the first instance is made without notice", referring to Curacao Trading Co BV v Harkisandas & Co [1992] 21 Lloyd's Rep 186. Neither I nor the Claimant would have required such a note in order to be conscious of the importance of full and frank disclosure in any ex parte application. No explanation was given by the Claimant as to why the existence of the dispute about the review (which, if valid, would be conceded to render the award not binding, as discussed above), save that Mr Raymond Cox QC who, together with Mr Philip Riches and Ms Liisa Lahti appears for the Claimant, describes it (I am told on instructions) in paragraph 109 of his skeleton as " the result of oversight". In an inappropriately argumentative witness statement Ms Janine Alexander of the Claimant's former solicitors suggests that " the duty of disclosure depends on the type of application … and in the present case it is [her] view that even if there was a failure to disclose all material facts that does not have the consequence that the order of Burton J should now be set aside. Perhaps this is why Mr Bridson does not explicitly say that it does. It must be clear to him that there would have been no defence in any event."


It is very likely that I would have made the same order that I did, albeit with the knowledge of the inevitability that there would be an application to set aside the order I made once the claim form was issued. However there must have been at least a risk that I would not have made the order, but directed the Claimant to issue a claim form without making the order, and this is a risk which the Claimant's oversight avoided. In a witness statement served subsequent to the hearing before me, the appropriate apology has been given by the Claimant, and it seems clear that the omission was not deliberate.


However I am satisfied that the Claimant should be deprived of any advantage it may have gained by having the ex parte order made in its favour. There may be no such advantage, but one of the debates that took place at the hearing before me was whether the Defendant was, because it was making an application to set aside and had the onus of proof of establishing its case by way of challenge to the award, not really in the position of a defendant such as to be an applicant for security for costs. Of course the main argument, so far as it was material to the outcome, concentrated on the fact that the Defendant bears the onus of proof, but if there is any additional strength to the Claimant's case by virtue of this application being one to set aside an order, rather than one by the Claimant to enforce inter partes ab initio, the non-disclosure on the ex parte application must deprive the Claimant of that argument. Mr Cox did not resist that proposition once I formulated it.


I turn now to the issues on this application for security of costs:

(1) Jurisdiction

Is there jurisdiction to grant an order for security of the costs in favour of a Defendant who is resisting...

To continue reading

Request your trial
1 cases

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT