Arbitration analysis: Laure-Hélène Gaicio, partner at BSP, examines a recent decision from the District Court of Luxembourg in a longstanding case concerning an attachment to enforce an arbitral award. The decision concerned an award in favour of a company incorporated in Liechtenstein against the Czech Republic. The court found that the Czech Republic had waived its jurisdictional immunity and immunity from enforcement and validated the attachment on assets based in Luxembourg.
What was the background to the court’s June 2019 decision?
A dispute arose between a company incorporated in Liechtenstein, Diag Human, and the Czech Republic concerning the award of a blood contract, which caused damages to Diag Human. As per the arbitration agreement signed by the parties on 18 September 1996, the dispute was submitted to an arbitration panel.
An interim award was handed down on 25 June 2002, ordering the Czech Republic to pay to Diag Human 326,608,334 CZK. A final award was handed down on 4 August 2008, ordering the Czech Republic to pay to Diag Human damages for a total amount of 4,089,716,666 CZK to which late interest was to be added. Each party was to bear its own costs.
According to the arbitration agreement, this final award was to acquire res judicata authority once a request for reexamination had been examined. On 23 July 2014, the arbitrators handed down a resolution indicating that the proceedings were terminated, and that the parties did not have a right to obtain a reimbursement of their costs.
Notwithstanding the fact that the decision on re-examination was not yet handed down, the award was declared enforceable by the President of the District Court of Luxembourg on 10 August 2011.The Czech Republic challenged this exequatur order requesting it to be set aside. This challenge was rejected by the Court of Appeal on 27 April 2017. The decision of the Court of Appeal was confirmed by the Supreme Court on 28 June 2018.
In parallel, Diag Human proceeded, on 4 October 2011, with an attachment on the Czech Republic’s assets held with two banks, by virtue of an authorisation given ex parte by the President of the District Court of Luxembourg on 15 September 2011. The decision handed down by the Tenth Chamber of the District Court in June 2019 dealt specifically, and solely, with the validation of this attachment.
What issues were before the court (re the June 2019 decision)?
Despite the fact that the Court of Appeal had declared the award dated 4 August 2008 enforceable in Luxembourg, the Czech Republic raised a certain number of arguments opposing the validation of the attachment.
First of all, the Czech Republic claimed the courts of Luxembourg did not have the territorial jurisdiction to rule on Diag Human’s requests. The Czech Republic also claimed that the Luxembourg court did not have jurisdiction to hear state related matters involving the Czech Republic on the basis of both jurisdictional immunity and immunity from enforcement. Diag Human asked the District Court to reject the Czech Republic’s immunity pleas.
The Czech Republic argued also that the attachment was null as Diag Human did not have a claim which was certain at the date on which it was carried out. Indeed, the attachment was carried out, on the basis of a judicial authorisation, on 4 October 2011 whereas no decision on the re-examination of the 4 August 2008 award had been handed down as of yet. Diag Human counter argued that at the date of the attachment, the award was enforceable by virtue of the exequatur order dated 10 August 2011, as the Czech Republic challenged such exequatur order only on 7 October 2011.
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