United States Court of Appeals, District of Columbia Circuit
September 6, 2018
from the United States District Court for the District of
Columbia (No. 1:13-cv-00355)
L. Schaffer argued the cause and filed the briefs for
E. Fortna argued the cause for appellee. With her on the
brief was Leonard Fornella. Dean A. Calland entered an
Before: Srinivasan and Wilkins, Circuit Judges, and Randolph,
Senior Circuit Judge.
RANDOLPH, SENIOR CIRCUIT JUDGE.
an appeal from the judgment of the district court refusing to
enforce an arbitral award against the Czech Republic Ministry
of Health and in favor of Diag Human, S.E., a corporation
organized under the laws of the Principality of
Liechtenstein. Under the New York Convention, federal courts
enforce duly rendered foreign arbitral awards, subject to
certain exceptions. The district court held that this award
fell into one of those exceptions - the award was not
"binding on the parties." Diag Human, S.E. v.
Czech-Ministry of Health, 279 F.Supp.3d 114, 121 (D.D.C.
2017). For the reasons that follow, we agree.
parties have been engaged in this dispute for nearly three
decades. The arbitration commenced after the Czech Republic
allegedly interfered with Diag Human's blood plasma
business in the early 1990s. The then-Minister of Health
allegedly violated unfair competition laws by sending to Novo
Nordisk, a Danish company and Diag Human's major business
partner, a letter accusing Diag Human of ethical violations.
This led Novo Nordisk to cease work with Diag Human, which
was fatal to the latter's business in the Czech Republic.
Further details concerning the background of the dispute are
recounted in this court's previous opinion and not
necessary to repeat here. Diag Human, S.E. v.
Czech-Ministry of Health, 824 F.3d 131, 132-34 (D.C.
Cir. 2016), cert. denied, 137 S.Ct. 1068 (2017).
series of arbitral awards flowed from proceedings pursuant to
the parties' arbitration agreement. Initially, in 1997,
an arbitral panel confirmed that the Czech Republic had
committed a wrongful act and caused damages to Diag Human
(the "Interim Award"). This award left the issue of
the amount of damages for later proceedings. In 2002, this
was followed by a partial damages award covering undisputed
damages of approximately $10 million (the "Partial
Award"). In 2008, an additional arbitral panel
considered the full scope of damages and awarded Diag Human
approximately $400 million in damages and interest, with
further interest accruing until payment (the "Final
Award"). The action in the district court sought to
confirm the 2008 Final Award.
of the traditional features of arbitration is its exclusion
of appeal . . .." See Alexander J.
Belohlávek, Arbitration Law of Czech Republic:
Practice and Procedure 1349 (2013). Accordingly, most
international arbitral systems use a single panel to produce
a final and binding award. See, e.g., United Nations
Comm'n on Int'l Trade Law, Arbitration Rules art.
34(2). But Czech arbitration law permits parties to agree to
a review process in which a second arbitral panel can revisit
the original award with the power to uphold, nullify, or
modify it. Zakon o rozhodcim rizeni a o vykonu rozhodcich
nalezu [Law on Arbitral Proceedings and Enforcement of
Arbitral Awards], Zakon c. 216/1994 Sb. § 27 (Czech)
[hereinafter Czech Arbitration Law]. Although in the Czech
Republic this procedure is "rarely used by parties in
practice," Belohlavek, supra, at 1350, it was
used here. The arbitration agreement allowed a party to
request a review of any arbitral award within 30 days of
the three awards was submitted for review according to this
procedure. The Interim and Partial Awards were confirmed and
upheld by review panels consisting of different arbitrators.
In each case, an "arbitral award" was issued
pursuant to § 23(a) of the Czech Arbitration Law
explicitly upholding the decision of the first panel. The
arbitral awards entered into legal force and effect following
these confirmations. After the Final Award was issued, each
of the parties challenged it and requested review, although
Diag Human later withdrew its request. The review panel,
after a lengthy delay, did not explicitly confirm the
arbitral award as had the previous review panels. Instead, it
issued a "Resolution" which "discontinued the
proceedings." The effect of this Resolution on the 2008
Final Award is at the core of this controversy.
enforce foreign arbitral awards according to the New York
Convention, "part of a 'carefully crafted framework
for the enforcement of international arbitration
awards.'" Belize Bank Ltd. v. Gov't of
Belize, 852 F.3d 1107, 1110 (D.C. Cir. 2017) (quoting
Belize Soc. Dev. Ltd. v. Gov't of Belize, 668
F.3d 724, 729 (D.C. Cir. 2012)), cert. denied, 138
S.Ct. 448 (2017); see also 9 U.S.C. §§
201-208. A court "shall confirm the award unless it
finds one of the grounds for refusal or deferral of
recognition or enforcement" as specified in the
Convention. 9 U.S.C. § 207. Article V sets out the
circumstances that enable a court to refuse to enforce an
award; these are tightly construed, and the burden is placed
on the party opposing enforcement. Convention on the
Recognition and Enforcement of Foreign Arbitral Awards art.
V, opened for signature June 10, 1958, 21 U.S.T.
2517 [hereinafter New York Convention]; TermoRio S.A.
E.S.P. v. Electranta S.P., 487 F.3d 928, 934-35 (D.C.
Cir. 2007). "Recognition and enforcement of an award may
be refused" if the "award has not yet become
binding on the parties." New York Convention art.
V(1)(e). An award may also be "set aside" by a
"competent authority" of the rendering
these circumstances, the district court found that the terms
of the parties' arbitration agreement precluded the award
from entering into legal effect to become "binding"
under Article V(1)(e). The agreement specified that the award
would go into effect "[i]f the review application of the
other party has not been submitted within the deadline."
Arb. Agreement ¶ V. The district court therefore ruled
that because a party requested review, and the review
"ended the arbitration," the award did not go into
effect. Diag Human, 279 F.Supp.3d at
agree with the district court's result, but for different
reasons. Not only the termination of the review, but also the
content of the arbitration review panel's
"Resolution," prevented the Final Award from
becoming binding. Under the agreement, the parties had
recourse to another arbitration panel, which was sufficient
to prevent the award from becoming binding at that time.
See Ministry of Def. & Support for the Armed Forces
of the Islamic Republic of Iran v. Cubic Def. Sys.,
Inc., 665 F.3d 1091, 1100-01 (9th Cir. 2011) (citing
Fertilizer Corp. of India v. IDI Mgmt., Inc., 517
F.Supp. 948, 958 (S.D. Ohio 1981)). The Resolution resulting
from the review proceeding does not permit the award to
stand. Instead, it offers multiple grounds for the
award's invalidity. The review panel ...