Court Rejects Czech Republic's Arbitration Challenge - International Law Office

Background
Proceedings
Comment

Background

The quest for the optimum location for arbitration is influenced by a number of considerations, including:

• geographical convenience;
  
  
• availability of administrative services; and
  
  
• the track record of the local arbitration community.

Further, the way in which local state courts discharge their supervisory function is a pre-eminent consideration. The court is required to strike a delicate balance, ensuring that its decisions promote a pro-arbitration policy, while at the same time not succumbing to a laissez-faire approach. In addition, the court must support and facilitate the smooth conduct of arbitration, while ensuring that its actions do not amount to interference. CME Czech Republic BV v Czech Republic , recently decided by the Svea Court of Appeal in Stockholm, is a case in point. A vast amount of documentation was involved: written submissions ran to thousands of pages and each party submitted no less than five extensive legal opinions. Given the quantity of documentation involved the court dealt with the case with commendable speed.

Proceedings

The dispute involved a Czech television licence granted to CME in 1993 to establish the first private nationwide television station in the Czech Republic, TV Nova, which quickly became the most popular television station. As a result of various activities by the Czech authorities, CME was deprived of its right to use the licence, thereby destroying its investment in TV Nova.

In court, the Czech Republic challenged the arbitral award issued in Stockholm which held the Czech Republic liable for CME's loss. The basis for the its liability was a bilateral investment treaty between the Netherlands and the Czech Republic, the objective of which was to encourage and protect private investment between the two countries.

Under the Arbitration Act 1999, challenges are heard by the court of appeal at first instance and further review by the Supreme Court will only be permitted when leave to appeal is granted by the court. This procedure is designed to further the speedy resolution of challenges to arbitral awards. The court of appeal rejected the challenge by the Czech Republic; as a result, the Czech Republic had to pay more than $350 million in damages to CME and to pay $4.2 million towards CME's legal costs. The court also found that there were no grounds for granting leave to appeal to the Supreme Court.

Comment

The court's handling of the case - not least its express emphasis on the final and binding character of an arbitration award - and the fact that the court has upheld the principle that challenges must be tried only in one forum, will help Stockholm and Sweden to retain and strengthen their position as a desirable and suitable forum for international arbitration.

For further information on this topic please contact Hans Bagner of Advokatfirman Vinge by telephone (+46 8 614 3000) or by fax (+46 8 614 3190) or by email (hans.bagner@vinge.se).