A New Arbitration with the Diag Human Company Has Begun. An International Law Office Shall Represent the Czech Republic

Quietly, two days before Christmas Eve, arbitration proceedings settling the international investment dispute between the Czech Republic and the Diag Human SE company and with Josef Šťáva were launched. This information is gleaned from the report that the Minister of Finance, Alena Schillerová (ANO), submitted to the cabinet. It informs the members of the cabinet about the public procurement of legal services by the Czech Republic in this dispute, and about the selection of the law office of Arnold & Porter Kaye Scholer. Diag Human has been successful in “opening fire” on an entirely “new front”, which is based, however, on a 28-year-old agreement between the Czech Republic and Switzerland on the Support and Protection of Investments, dated 5 October 1990.

Why Josef Šťáva has suddenly decided to “discover” this long-valid agreement is not yet clear. The arbitration, which was held in the Czech Republic up until 2014, was prepared by his former lawyer Josef Oršula in cooperation with Deputy Minister of Health Aleš Dvouletý in 1996. Diag Human had its people not only in the government, but also in the arbitration bodies. Thanks to this, it enjoyed success in the beginning, and the Czech state paid out 327 million crowns. In 2007, however, the Ministry of Health changed its strategy, and the company no longer has its hooks in the government, which would allow it to influence the proceedings, and finally, in 2014, it lost the Czech arbitration. The company has attempted to reverse this verdict in foreign courts, but every other court that has already made its final decision – in Austria, France, or even Switzerland – has voted that it has lost. Proceedings are still being held in other countries. (The case is described in detail in the book Krev a peníze – Blood and Money).

Last year, the “Hlídací pes” (Watchdog) web portal stated that in the new arbitration, the company will be requesting 800 million dollars (more than 17 billion crowns if converted).

Mohlo by vás zajímat

The government materials say that the selected lawyer shall represent the Czech Republic in the arbitration before an arbitration tribunal determined on the basis of international contracts. According to the report submitted by the Ministry of Finance, “In this case, the arbitration clause is contained in the Agreement between the Czech Republic and the Swiss Confederation on the Support and Protection of Investments, signed on 5 October 1990. In this international contract, the Czech Republic committed to allow the settlement of any disputes stemming from this agreement in front of an arbitration court/tribunal.” It is not yet clear where the arbitration will be based, and if it were to be the Czech Republic, the proceedings would have to held in accordance with our procedural rules, especially with Act No. 216/1994 Coll., on arbitration and on the performance of arbitration. The Ministry of Finance, however, feels that the chance of this is rather small, since the “investors prefer neutral jurisdiction for the places where their disputes with countries are dealt with”.

The invitation to participate in the public procurement with the expected value of 60 million CZK without VAT was, according to the information meant for the government, sent to the following law offices: Arnold & Porter Kaye Scholer, Curtis, Mallet-Prevost, Colt & Mosle, Debevoise & Plimpton, Freshfields Bruckhaus Deringer, Shearman & Sterling. “On the basis of the evaluation of the submitted bids, where the basic criterion for evaluation was the lowest price offered, the law office of Arnold & Porter Kaye Scholer was selected, and the Ministry of Finance shall conclude a contract with them in the days directly following informing the government,” states the report.

Arnold & Porter Kaye Scholer is an international law office based in Washington. It was founded in 1946, and belongs among the largest law offices in the world.

Tomáš Cikrt