Commercial Disputes Weekly – Issue 24413 May 2025

Arbitration
The Court of Appeal has set aside an UNCITRAL award made under a bilateral investment treaty between Switzerland and the Czech Republic. It required the Czech Republic to pay US$350m plus interest to Diag Human SE (“DH”) and its founder Mr Stava. The treaty protected investments between the two countries and both Mr Stava and DH qualified as investors until the shares in DH were transferred into a Lichtenstein trust of which Mr Stava was a beneficiary. The court held that DH no longer qualified as an investor for the purposes of the treaty because it was no longer controlled de jure by Mr Stava once he became a beneficiary of the trust, rather than shareholder of DH directly. The award was therefore set aside. The court also concluded that even if de facto control was sufficient (which it held was not), Mr Stava did not have sufficient de facto control of DH for it to qualify as an investor.
The Czech Republic v Diag Human SE, Stava [2025] EWCA Civ 588, 7 May 2025

Insurance
The Circuit Commercial Court has found that an insurance company, Aviva, was liable to the claimant hotel owner for property damage from escaped water from a cold-water storage tank in its hotel. Aviva had attempted to deny cover on the basis that the claimant caused the damage and that fraudulent evidence was used to support the claim (in breach of the contractual fraud condition clause). The court held as a matter of fact that the escape of water was a fortuitous event and that the claimant was not in breach of the fraud condition. In reaching this conclusion, the court clarified that following the 2017 Supreme Court decision in Versloot Dredging BV v HDI Gerling, any contractual clause providing that cover can be declined due to fraudulent devices or collateral lies being deployed as part of the claim, should be read subject to the limitations imposed by the old common law doctrine in The Aegeon (2003).
Malhotra Leisure Ltd v Aviva Insurance Ltd [2025] EWHC 1090 (Comm), 7 May 2025

Fraud – Insolvency
The Supreme Court has been asked to decide the liability of third parties who facilitated or assisted the directors of insolvent companies in a fraudulent scheme. The defendant was a broker in the trading of EU carbon credits and the fraudulent scheme involved VAT fraud which resulted in the companies building up huge tax liabilities. Based on certain assumed facts as to the defendant’s knowledge, the court concluded that where the broker was actively involved in the scheme, section 213 of the Insolvency Act 1986 did not limit parties who may be liable to contribute in the insolvency to just directors or managers of the relevant companies. Therefore, third parties who know that a company’s business is being carried on for a fraudulent purpose and facilitate or assist with fraudulent transactions could be required to contribute to the company’s assets in the liquidation.
Bilta (UK) Ltd (In Liquidation) v Tradition Financial Services Ltd [2025] UKSC 18, 7 May 2025

Arbitration
The Commercial Court has granted a stay of proceedings enforcing an arbitration award against the Russian Federation. The Russian Federation had applied to the Hague Court of Appeal for the award to be annulled (the seat of the arbitration was the Netherlands) and requested therefore that the English proceedings in relation to enforcement of the award be stayed until the Dutch proceedings have been completed. After an extensive balancing act of considering the various relevant factors, including the possibility of conflicting judgments, the court granted a stay but only until determination of the Hague Court of Appeal proceedings, not until final determination of all routes of appeal in the Netherlands.
JSC DTEK Krymenergo v Russian Federation [2025] EWHC 1060 (Comm), 2 May 2025

Should you wish to discuss any of these cases in further detail, please speak with a member of our London dispute resolution team below, or your regular contact at Watson Farley & Williams: