Diag Human S.E. v. The Czech Republic [I], Case No. RSP 06/2003
Ad hoc (Czech Republic) · Investment (ICSID and treaty) · Czech Republic · 25 Jun 2002
Why it matters
This partial award is notable for its early recognition of state liability for anti-competitive conduct by a ministry, and for the tribunal's pragmatic approach to awarding a minimum undisputed amount despite conflicting expert opinions. It illustrates the challenges of quantifying damages in long-running disputes involving state entities and the use of partial awards to expedite justice.
Summary
Diag Human, a Czech company, claimed that the Ministry of Health of the Czech Republic violated competition laws by sending a letter in March 1992 to Novo Nordisk, a Danish partner, which led to the termination of a profitable plasma processing agreement. Diag Human sought damages for lost profits from 1992 onward. The dispute was submitted to ad hoc arbitration under an arbitration agreement signed in 1996. The tribunal issued an interim award in 1997 finding the claim justified in principle, and a revision award in 1998 confirmed liability. After procedural delays, including court challenges by the Respondent, the tribunal resumed proceedings. Two expert opinions on quantum were submitted: one commissioned by the Claimant valuing damages at CZK 1.97 billion, and another by the Respondent valuing damages at CZK 358.1 million. The tribunal found that the causal link between the Ministry's letter and the damage ended when Novo Nordisk closed its plasma line in May 2000. Using the Respondent's own expert opinion as a basis, the tribunal calculated the minimum undisputed damages for the period from 1 July 1992 to May 2000, deducting profits after the line closure. It awarded CZK 326,608,334 as a partial award, leaving other claims (including interest and costs) for a final award. The tribunal encouraged the parties to settle the remaining issues amicably.
The detail
Parties: Diag Human S.E. v. The Czech Republic [I], Case No. RSP 06/2003
Case number: italaw/cases/6274
Outcome: Partial award: Respondent ordered to pay CZK 326,608,334 to Claimant as minimum undisputed damages for lost profits from 1 July 1992 to May 2000.
Quantum: CZK 326,608,334
Applicable law: Czech Commercial Code (Act No. 513/1991 Coll.), Act No. 63/1991 Coll. on Protection of Economic Competition, Act No. 216/1994 Coll. on Arbitral Proceedings, Arbitration Agreement of 18 Sept 1996
Issues in play: Competition law (misuse of participation in economic competition) and unfair competition provisions under the Commercial Code collided with the state's sovereign immunity and procedural objections regarding the validity of the arbitration agreement and expert evidence.
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