Objection! Use it or lose it? Court of Appeal examines when a late jurisdictional objection may still be permitted

Diag v The Czech Republic: the BIT Award

A long-running dispute relating to blood plasma derivatives led to arbitration under a bilateral investment treaty (the “BIT”). Diag and its founder (together, “Diag”) argued before a London-seated tribunal that the Czech Republic breached the BIT. The tribunal agreed with Diag in its award (the “BIT Award”).

The Czech Republic applied to set aside the BIT Award in the High Court on several grounds, including as to jurisdiction under s. 67 of the Arbitration Act 1999 (the “Act”) (as discussed in our previously published article). That judgment was appealed and in its judgment the Court of Appeal (the “Court”) covered many issues. We focus here on the Court’s decision regarding the timeliness of jurisdictional objections.

Sections 31 and 73 of the Arbitration Act: what do they say?

S. 73 of the Act prevents later challenges to a tribunal’s jurisdiction or conduct of an arbitration where a party continues to engage with an arbitration without making a timely objection. That restriction doesn’t apply if a party didn’t know, and couldn’t with reasonable diligence have discovered, the grounds for an objection. In those cases, the party must object promptly once it’s able to.

S. 31 of the Act requires jurisdictional objections to be brought at the outset of proceedings, if a party alleges that a tribunal has no jurisdiction over (elements of) a dispute. If a party believes a tribunal has exceeded its jurisdiction during proceedings, it must object promptly. However, the tribunal may admit late objections if it considers the delay justified.

The High Court: the Czech Republic’s list of jurisdictional objections streamlined by application of section 73.

The Czech Republic presented the High Court with a long list of jurisdictional objections. The High Court held that to satisfy s. 73, jurisdictional objections raised in arbitration must be adequately particularised and sustained. S. 73 barred several of the jurisdictional challenges accordingly: they had either not been raised before, or raised in such general terms that they were not adequately particularised.

But other jurisdictional objections were not barred by s. 73, despite being brought late (under both Article 23 of the UNCITRAL Rules and s. 31), because they had been addressed by the tribunal in the BIT Award. The tribunal had not expressly granted a time extension; nor had it explained why it considered any delay was justified. But where the tribunal heard submissions and made a determination, the High Court found one could infer that the tribunal had, under ss. 31 and 73, impliedly decided to extend time or that the objections had been made in time.

The appeal: do ss. 31 and 73 require the tribunal to take active steps?

Diag appealed that decision, arguing that the Czech Republic’s jurisdictional objections had been raised late; and the tribunal only had power to permit late jurisdictional objections under s. 31(3). This required the tribunal to decide whether or not a delay was justified – which Diag said it couldn’t have done, given that it hadn’t considered the cause of the delay. Diag said that the “pragmatic” rationale given for the High Court’s judgment wasn’t a basis to excuse breaches of s. 31.

The Court of Appeal agreed with the High Court’s conclusion – but not its reasons

In its judgment, the Court agreed with the High Court: the jurisdictional objections addressed in the BIT Award were not barred by s. 73. It came to that view on three grounds.

First, the Court noted that Diag had not objected to the jurisdictional objections being brought late in the arbitration. S. 73 barred Diag from doing so now: “that timeliness objection is an objection which itself falls within the scope of s. 73(1)(c)”.

Secondly, the Court noted that Diag had not just failed to object to the timing of the objections. It had addressed the objections fully in submissions. The tribunal determined them with the apparent agreement of all parties. As a matter of normal language, that meant the objections were raised within the time “allowed by” the tribunal under s. 73: “The tribunal permitted [the Czech Republic] to make the objections within the time in which they were in fact made”. The use of the passive verb “allowed” meant a positive declaration was unnecessary.

Thirdly, the Court observed that s. 31(3) does not use the language of extensions of time and the High Court had erred in approaching the provision that way: instead, s. 31 allows tribunals to decide whether or not to “admit” late objections.  As with s. 73, the use of a passive verb meant a positive declaration was unnecessary. The tribunal here plainly admitted the objections, because it made a decision about them in the BIT Award.

The Court explained this approach represented a sensible, holistic reading of ss. 31 & 73 in line with their purpose and the principles of adversarial dispute resolution: parties shouldn’t be allowed to advance unwarranted late jurisdictional challenges, but nor should they be expected to take points against themselves that their counter-party has not chosen to advance.

The Court ended up in the same place as the High Court. But it sought to distance itself from the High Court’s logic. The BIT Award’s determination of the objections meant that the objections had been raised in “the time allowed by the tribunal” (s. 73) and the tribunal had admitted the points (s. 31).  There was no need to resort to implied or deemed conduct.

Comment

What does this all mean when you are faced with a jurisdictional objection, particularly one that is late?

Parties must take care to raise jurisdictional objections promptly and particularise them adequately. It’s not enough vaguely to assert a tribunal’s lack of jurisdiction and leave it there. It’s also plain that if a party thinks a jurisdictional objection has been made late, it must raise that objection promptly during the arbitration, otherwise they might well lose the right to do so later.

Judgment: The Czech Republic v Diag [2025] EWCA Civ 588