Clarifying “Investor” Control in BIT Arbitration: De Jure Ownership Requirement and Timeliness of Jurisdictional Objections

Introduction

This commentary examines the Court of Appeal’s decision in The Czech Republic v Diag Human SE & Anor [2025] EWCA Civ 588. The dispute arose from a US$-350 million bilateral investment treaty (BIT) award in favour of Swiss national Josef Stava and his Liechtenstein-registered company Diag Human SE (“Diag SE”), following alleged unfair treatment and interference by the Czech Republic in a commercial arbitration. The Czech Republic mounted challenges under sections 67–68 of the Arbitration Act 1996 (“AA 1996”), questioning (1) the timeliness of its jurisdictional objections, (2) the claim by Mr Stava to recover treaty breaches post-June 2011, and (3) Diag SE’s “investor” status after a 2011 trust transaction. The Court of Appeal dismissed the first two appeals and upheld the third, clarifying the test of “control” in BIT investor definitions and the interplay of AA 1996 provisions on timeliness.

Summary of the Judgment

First Appeal (Timeliness of Jurisdictional Objections): The Court rejected the argument that the Czech Republic’s jurisdictional objections—first raised in its Rejoinder—were time-barred under sections 31 and 73 of the AA 1996 and Article 23 of the UNCITRAL Rules. It held that where a party invites the tribunal to decide a point, and the other side addresses it on the merits without objecting to its lateness, the tribunal “admits” the objection under s. 31(3) and/or the objection falls within “such time as is allowed by the tribunal” under s. 73(1).
Second Appeal (Mr Stava’s Post-June 2011 Claims): The court confirmed that Mr Stava’s claim to breaches after June 2011 was an admissibility/standing issue, not a substantive jurisdictional matter under s. 30 AA 1996. The BIT does not limit the offer to arbitrate to breaches occurring only while the investor held the investment; once an investment is made by a qualifying investor, disputes “with respect to” that investment may be submitted under Article 9.
Third Appeal (Diag SE’s Investor Status After Trust Transaction): The Court reversed the High Court’s finding that Mr Stava retained control of Diag SE via a Liechtenstein discretionary trust. Interpreting Article 1(1)(c) of the Switzerland–Czech Republic BIT in accordance with the Vienna Convention, the court held that “control” requires de jure control—legal rights of ownership or governance—rather than mere de facto influence. The trust structure severed Mr Stava’s legal title and residual ownership, so Diag SE ceased to qualify as a Swiss “investor”.

Analysis

1. Precedents Cited

Gulf Import & Export Co v Bunge SA [2007] EWHC 2667 (Comm): Obiter that a tribunal’s decision to hear a late jurisdictional plea equates to an extension of time under s. 31(3) or falls within “time allowed by the tribunal” under s. 73(1).
The Republic of Serbia v Imagesat International NV [2009] EWHC 2853 (Comm): Endorsed Gulf’s conclusion that a respondent’s failure to object to delay at the arbitration renders it too late to object in court.
Stockman Interhold SA v Arricano Real Estate Plc [2017] EWHC 2909 (Comm): Fact-specific refusal to imply an extension where no timeliness objection was taken, but recognized the tribunal’s implicit admission under s. 31(3).
International Law Commission Model Law (1985): Article 16 welcomed tribunals’ power to admit late jurisdictional pleas if delay is justified.
UNCITRAL Rules (2010): Articles 23 and 32 align with AA 1996 on pleas to jurisdiction and waiver of objections.
Vienna Convention on the Law of Treaties (1969): Rules of treaty interpretation applied to BIT investor definitions.

2. Legal Reasoning

2.1 Timeliness of Jurisdictional Objections (First Appeal)

The court held that AA 1996 sections 31 and 73 must be read together: s. 31 prescribes when a “substantive jurisdiction” plea must be raised, but s. 73(1) provides four alternative timings—“forthwith,” within time allowed by the arbitration agreement, by the tribunal, or by any provision of Part 1. Where a party addresses a late plea on the merits without objecting to its timeliness, the tribunal is taken to have “admitted” it under s. 31(3) or permitted it under s. 73(1). Because Diag SE and Mr Stava never objected to delay, the tribunal implicitly allowed the Czech Republic’s challenges, curing any lateness.

2.2 Standing vs Substantive Jurisdiction (Second Appeal)

Article 9 of the BIT offers arbitration “with respect to investments by investors.” The court embraced a broad reading: once a qualifying investor makes a qualifying investment, disputes about it—even after sale—are covered. Challenges to whether the investor retained the asset at breach time affect admissibility/standing, not the tribunal’s substantive jurisdiction under s. 30 AA 1996.

2.3 “Control” in BIT Investor Definition (Third Appeal)

Applying Article 31 of the Vienna Convention, the court interpreted Article 1(1)(c) of the BIT in context, including its Protocol which contemplates proof of “control.”

Ordinary meaning: “Control” must align with “investor” as defined in paragraphs (a) and (b), both legal concepts.
Context & Protocol: The Protocol offers an advance recognition mechanism requiring a clear legal test—proof of de jure control—otherwise the procedure would be unworkable and defeat BIT objectives of certainty and predictability.
Object & Purpose: The BIT aims to foster cross-border investment by providing clear conditions. An open-ended “de facto” test is vague, impeding investor confidence.
Investment treaty jurisprudence: Although many awards have accepted de facto influence, the court found that a solid minority approach, and the Protocol’s presence, demanded de jure control for this treaty.

Because the discretionary trust severed Mr Stava’s legal ownership and governance rights, his residual practical influence over Diag SE could not suffice as “control.” Diag SE thus ceased to qualify as an investor.

3. Potential Impact

Clarifies the interplay of AA 1996 s. 31 and s. 73: tribunals implicitly “admit” late pleas if unopposed and addressed on the merits.
Reaffirms limits on court intervention in arbitration, promoting finality.
In investor-State arbitrations, reinforces that “control” in BIT definitions generally requires legal rights of ownership or governance, especially where a treaty’s Protocol contemplates proof of control.
Encourages contracting states to include clear definitions or mechanisms if they intend to broaden “control” beyond de jure ownership.

Complex Concepts Simplified

S. 31 vs S. 73 AA 1996: s. 31 sets deadlines for jurisdictional pleas; s. 73 bars objections not made “forthwith” or within time allowed by the agreement, tribunal, or AA Part. If a party hears but does not object, the tribunal is taken to have allowed the delay.
De jure vs De facto control: De jure means legal entitlement (e.g. share ownership, board rights). De facto means practical influence (e.g. informal control). For BIT “investor” status, legal entitlements are decisive.
Bearer shares & trusts: Possession of bearer share certificates alone does not create ownership; trust law and company law determine legal title and voting rights.
Investor-State vs Commercial Arbitration: Challenges to whether an investor remains the owner at breach time affect admissibility/standing, not the tribunal’s competence to decide the dispute once jurisdiction is established.

Conclusion

The Court of Appeal’s decision in Czech Republic v Diag Human SE provides authoritative guidance on two critical fronts: the treatment of late jurisdictional pleas under the AA 1996, and the meaning of “control” in BIT investor definitions. It confirms that a tribunal’s decision to hear a late objection, unchallenged on timeliness, cures any delay; and it affirms that “control” for BIT purposes typically requires legal rights of ownership or governance. This clarity advances arbitration efficiency, finality, and the predictability so vital to cross-border investment.