[00:00:02] Speaker 00:
Case number 14-7142, Dyad Human SE Appellant versus Shaft Republic Ministry of Health.

[00:00:09] Speaker 00:
Mr. Shaffer for the appellant, Ms.

[00:00:11] Speaker 00:
Fortna for the appellee.

[00:00:15] Speaker 04:
Mr. Shaffer.

[00:00:16] Speaker 04:
Your Honor.

[00:00:18] Speaker 04:
I'm in shape on behalf of Dyack Newman.

[00:00:21] Speaker 04:
And as the court undoubtedly knows, it has before it a petition to confirm an arbitral award that was rendered against the Czech Republic in 2008 after 12-year arbitration.

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That arbitration yielded five separate opinions, all of which are in this record.

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There was a massive motion to dismiss filed by the Czech Republic in 2013 when the case was commenced.

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That motion was never decided.

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Instead, in August of 2014, the district court, Sue Espante, decided that it had no subject matter jurisdiction because, in the court's view,

[00:01:01] Speaker 04:
The award in question was not a commercial award that was rendered with respect to a legal relationship that was deemed as commercial under the Federal Arbitration Act, the UN Convention for the Enforcement of Foreign Arbitrital Awards, which we commonly refer to as the New York Convention.

[00:01:21] Speaker 04:
And the court found that in the absence of a sufficiently commercial relationship between the Czech Republic and Diageumen,

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that absent an alternative basis for jurisdiction, which was alleged under 1330 because the Czech Republic was not entitled to sovereign immunity, there was no jurisdiction and therefore the court dismissed.

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The key finding that the court made in its opinion in August of 2014 was that Diegumen had absolutely no relationship, whether commercial or otherwise, with the Czech Republic prior to 1996

[00:02:00] Speaker 04:
when the parties entered into an ad hoc arbitration agreement to resolve claims that Dyad Heumann had brought against the Czech Republic in the Prague commercial court.

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Dyad moved under Rule 59 for reconsideration of that in view of the fact that the record was replete with evidence that there was a commercial relationship between the parties.

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and did this arrive the relationship here was clearly a commercial relationship and the award did arise from it because the record contains findings by the arbitral panels

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that this event, the sending of a letter by the Czech Republic to Novo Nordis, which was known by the Czech Republic to be the key element to fractionation of blood products, that was designed to disrupt the relationship between Novo Nordis and Diagumen, therefore depriving Diagumen anyway.

[00:03:10] Speaker 03:
Question being, does that arrive out of the relationship between the sovereign

[00:03:24] Speaker 03:
up ahead.

[00:03:26] Speaker 04:
Doesn't it have to arise out of the relationship to come within that exception of the... Yes, and we believe that the awards themselves make it quite clear that it did arise out of that relationship.

[00:03:37] Speaker 03:
That's what I'm asking you about.

[00:03:38] Speaker 03:
Did it arise out of that relationship?

[00:03:41] Speaker 03:
And what I thought you told me about was the relationship between Diahuman and Novo, whatever it is.

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Novo Nordics.

[00:03:49] Speaker 03:
I did, Your Honor, and that's... Well, tell me about the relationship of Czech Republic and

[00:03:55] Speaker 03:
the position here, or they were the felon, and how this arose out of that relationship.

[00:04:00] Speaker 04:
Very simply, as the court may know, Mr. Stava was the founder of Diaguman, developed a program whereby communist countries could modernize their blood transfusion programs in exchange for payment in the form of blood plasma.

[00:04:18] Speaker 04:
And that blood plasma was known to be the method at which diaguin would be paid.

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The communist countries had no hard currency, so it was entirely to their benefit to do so.

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But in order to get paid,

[00:04:33] Speaker 04:
we had to be able to fractionate the blood products.

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In 1990, Diagumen and the Czech Republic entered into a framework agreement pursuant to which Diagumen replicated its program in the Czech Republic.

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There was no one who would doubt, there was no one who would deny that Diagumen performed that agreement.

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It modernized Czech transfusion programs.

[00:04:56] Speaker 03:
I understand your claim though, your claiming that there's an interference of a business relationship between, that the general public committed an interference with business between Novo and the Pellet.

[00:05:18] Speaker 03:
and you're claiming what amounts to slanderous trade, which both sound like tortuous events that could occur independent of any pre-existing relationship with the Czech Republic, even if they said to be a commercial relationship, which it may well be.

[00:05:36] Speaker 04:
The statute, the Federal Arbitration Act, does not require that there be any contractual or agreement-based claim.

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There can be a tort-based claim as long as the claim is commercial.

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And in fact, there are numerous cases so holding the fact that something is a commercial claim is not barred by the fact that it's tort-based.

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It could be a commercial tort.

[00:05:58] Speaker 03:
In this particular instance... As far as what the waiver is within the exception,

[00:06:04] Speaker 03:
Consistent with our precedent, it should be arising out of a commercial relationship.

[00:06:12] Speaker 04:
For jurisdiction under the Convention, that is true.

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The claim must arise from a relationship which is deemed as commercial.

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The fact that there was an arbitration which so found, and there was an award that so found, finds everybody here.

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You review that award as rendered.

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You don't go behind it and look to possible claims that may have been alleged but weren't.

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All of these findings were made against the Czech Republic in the arbitration.

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They're all in the record.

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In the context of this particular case, what the Czech Republic had been trying to do for years was to dispatch Diahuman out of its contract with the Czech Republic.

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Diahuman had already performed.

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It had modernized the Czech system, and yet it had no way to get paid because Diah was being excluded from the marketplace.

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The capstone of doing that was the letter that the Czech Republic sent to Novo Nordisk because it realized, finally, that the way to get rid of this problem was to tell Novo Nordisk that it had questions about diet.

[00:07:20] Speaker 04:
The record shows that Novo Nordisk itself was, in addition to being a blood fractionator, involved in the direct

[00:07:27] Speaker 04:
proposal with the Czech Republic for diabetes, that would be a huge contract.

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And the arbitration board finds this, that NOVO Board has actually understood what the Czech Republic was telling it about its possibility of success with respect to that.

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Namely, you better not do business with Diageumen, because you will not be able to get that contract.

[00:07:48] Speaker 05:
I had understood you to be arguing that there's a legal relationship between Gajakumin and the Czech Republic, and this arose out of that relationship.

[00:07:59] Speaker 05:
Not necessarily a contractual relationship, but there was a relationship ongoing.

[00:08:04] Speaker 05:
purchase and sale of fractionization equipment, et cetera, tender offer, applications for permits, granting of permits, signing of or initialing of a framework agreement.

[00:08:19] Speaker 05:
So that's the relationship.

[00:08:21] Speaker 05:
Am I right about that?

[00:08:22] Speaker 04:
That is the primary argument.

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But even were the court to look at this separately,

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In other words, if you were to look at this as a result of an exclusion from a tender that the Czech Republic gave, that itself would create an independent commercial relationship.

[00:08:37] Speaker 03:
I don't see how that one follows.

[00:08:39] Speaker 03:
I understand what the chief's asking you about, but how does a refusal to enter into a relationship arrive out of a relationship?

[00:08:49] Speaker 04:
We cited the Kenton case.

[00:08:51] Speaker 03:
You may have a claim, but does it arise out of a relationship for terms of bringing it within the convention and therefore within the exceptions?

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It requires a commercial relationship.

[00:09:02] Speaker 03:
Yeah, and refusal.

[00:09:03] Speaker 03:
How can refusal to enter into a commercial relationship create a commercial relationship?

[00:09:09] Speaker 04:
If it's a wrongful refusal to do so and you have a commercial tort.

[00:09:12] Speaker 03:
No, no, forgive me if I'm trying to wrong.

[00:09:14] Speaker 04:
How can any refusal to enter into a relationship create a relationship?

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You can have a clean.

[00:09:21] Speaker 04:
All it has to be is a relationship which is right.

[00:09:24] Speaker 03:
It has to be a relationship which is commercial.

[00:09:26] Speaker 03:
The chief has outlined what I thought to be your better argument.

[00:09:30] Speaker 03:
That is my argument.

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But I do not understand this one that says, well, they refuse to enter into a relationship.

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They're in a relationship.

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I wouldn't die in that debt if I were fighting for what I'm thinking.

[00:09:40] Speaker 04:
What the chief judge has articulated is the primary point, that DIA human operated under a framework agreement.

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It had all the permits, it did what it was supposed to do, and it was barred through the conduct of the Czech Republic from getting paid for it.

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There's no one who's going to deny that.

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That is what the case is all about.

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But the point simply is that it's conceivable that you would have a claim based on exclusion from the tender itself.

[00:10:06] Speaker 04:
But Chief Judge, you are correct that that is the primary point, that we were the only bidder.

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We had the contract.

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We did what we were supposed to do.

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We were excluded from our known method of payment.

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And that's what the claim is based on.

[00:10:19] Speaker 04:
For the questions from the back.

[00:10:22] Speaker 05:
We'll hear from the other side.

[00:10:34] Speaker 01:
Good morning, Your Honors.

[00:10:34] Speaker 01:
May it please the Court.

[00:10:36] Speaker 01:
My name is Elena Fortna, and I am here on behalf of Defendant Appellee, the Czech Republic Ministry of Health.

[00:10:42] Speaker 01:
As my opposing counsel has already discussed, the crux of this appeal really pertains to the issue of whether or not this arbitration and this award arose out of a commercial legal relationship

[00:10:55] Speaker 01:
not between Deog Human and another party, a third party, but whether it arose out of a commercial legal relationship between Deog Human and the Ministry of Health.

[00:11:04] Speaker 05:
And that's because that's the language of the New York Convention?

[00:11:07] Speaker 05:
Is that why you're saying that?

[00:11:08] Speaker 01:
Yes, Your Honor.

[00:11:09] Speaker 05:
So I have a question about whether we're approaching this in the correct order.

[00:11:14] Speaker 05:
So the Supreme Court has repeatedly held, and so have we, that the only exclusive way of getting jurisdiction over a sovereign Czech Republic is through the Foreign Sovereign Immunities Act, which suggests that the first place you look is not the New York Convention,

[00:11:32] Speaker 05:
which provides 1331 jurisdiction, but rather the Sovereign Immunities Act, which provides jurisdiction under 1330.

[00:11:41] Speaker 05:
And when I look at the Sovereign Immunity Act, I get a slightly different question in my mind.

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I look at A6.

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It seems to have two requirements relevant to your case.

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The first is,

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There's no sovereign immunity in an action brought to enforce an agreement with respect to, to submit arbitration or any differences which have arisen with respect to a defined legal relationship.

[00:12:07] Speaker 05:
So it doesn't even say arising under.

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It just has to be with respect to.

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And that's what we said in the Belize case repeatedly.

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The question is related to, with respect to.

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And then the second, whether contractual or not.

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And then the second requirement is, and the one that's relevant here, the agreement or award is or may be governed by a treaty, may be governed by a treaty.

[00:12:32] Speaker 05:
It doesn't have to actually establish that it is governed by the New York Convention, just that it may be governed by the Convention.

[00:12:40] Speaker 05:
And we have two cases on this question.

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One is the Gudez Chabad case, which says,

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that all that's required for jurisdiction is a non-frivolous argument that it's covered by the convention.

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You don't have to actually establish that it's governed by the convention.

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That is a cause of action question.

[00:13:02] Speaker 05:
The jurisdictional question is only whether the claim is plausible, I think, is the language.

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And similarly, in the Chevron case, make the same point by emphasizing the maybe governed.

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So I don't understand why we actually have to establish here whether it's under the convention.

[00:13:21] Speaker 05:
That's for another day.

[00:13:22] Speaker 05:
That's for a ruling under 12b6 or under summary judgment.

[00:13:27] Speaker 05:
But it's not for a ruling under 12b1 for jurisdiction.

[00:13:32] Speaker 05:
Why is this analysis wrong?

[00:13:34] Speaker 01:
Well, Your Honor, because

[00:13:36] Speaker 01:
specifically for this case, and I think the complaint alleges this fact, as does the briefs of D'Acumen.

[00:13:43] Speaker 01:
They pled this case and brought this case in the District of D.C.

[00:13:48] Speaker 01:
pursuant to the New York Convention.

[00:13:50] Speaker 05:
Right, but the District Court's ruling threw it out only on jurisdiction.

[00:13:53] Speaker 05:
Am I right about that?

[00:13:54] Speaker 01:
That's correct, Your Honor.

[00:13:55] Speaker 05:
So the only question is whether we have jurisdiction.

[00:13:57] Speaker 05:
That's the only question before us, is whether there's jurisdiction in the District Court, right?

[00:14:02] Speaker 01:
Yes, Your Honor.

[00:14:02] Speaker 05:
We're not here to discuss the merits.

[00:14:03] Speaker 05:
We're here to only discuss jurisdiction.

[00:14:05] Speaker 05:
So isn't it the case, why isn't it the case, I look at the two pieces of the Foreign Sovereign Communities Act, why isn't this the case?

[00:14:15] Speaker 05:
This has to do with differences which have arisen with respect to a legal relationship.

[00:14:23] Speaker 01:
Well, because the legal relationship, though, and the underlying dispute that we're talking about is an arbitration and for an award.

[00:14:31] Speaker 05:
No, the legal relationship, the dispute is not about the arbitration.

[00:14:35] Speaker 05:
That goes to the second question.

[00:14:38] Speaker 05:
The dispute is about, did they have any, was there any kind of legal relationship at all between Diag Human and the Czech Republic, and is this

[00:14:52] Speaker 05:
were their differences with respect to that relationship.

[00:14:56] Speaker 05:
Now, they put in evidence in the form of the affidavit and in the form of the attached final arbitration decision.

[00:15:06] Speaker 05:
And those things say, whether they're true or not, this is a question for another day, but those things say that they had a framework agreement, says it was signed.

[00:15:16] Speaker 05:
They said that they won the first tender or whatever it's called.

[00:15:19] Speaker 05:
Is it called tender?

[00:15:20] Speaker 01:
Yes.

[00:15:21] Speaker 05:
Yes, they say they won the first tender.

[00:15:23] Speaker 05:
That seems like they established some kind of relationship.

[00:15:25] Speaker 05:
They say they had agreements with hospitals and that the hospitals are maybe not directly controlled but nonetheless owned by or under the control of the ministry.

[00:15:38] Speaker 05:
Why isn't that all enough to create a plausible argument at least that there is a legal relationship and that the dispute here

[00:15:47] Speaker 05:
The letter was intended to disrupt that and eliminate that relationship.

[00:15:52] Speaker 01:
Well, Your Honor, as we discussed pretty thoroughly in our brief and as well as the District Court's second opinion after the motion to alter and amend, the documents, the additional evidence that was submitted with Mr. Stava's affidavit, if you look at the exhibits and you look and analyze the evidence, we're talking about a proposal to enter into a cooperation agreement.

[00:16:16] Speaker 01:
Not an actual cooperation agreement, but a proposal.

[00:16:19] Speaker 05:
But it's initialed, right?

[00:16:21] Speaker 01:
The draft, the cooperation program, that's a framework.

[00:16:25] Speaker 01:
That's separate, yes.

[00:16:27] Speaker 01:
And then the framework agreement, it's directly titled a draft framework agreement.

[00:16:32] Speaker 05:
But it's initial, right?

[00:16:33] Speaker 01:
It is initial.

[00:16:34] Speaker 05:
So I don't know, when you make a decision about whether or not to buy a house, you don't enter into the final mortgage documents and the final sale documents until the day of the closing.

[00:16:47] Speaker 05:
But you enter into an agreement to get to the agreement.

[00:16:51] Speaker 05:
And that seems like what they've done here.

[00:16:53] Speaker 05:
Now, it doesn't, whether they've actually done that or not, they have a relationship.

[00:16:58] Speaker 05:
They've agreed sort of to get to the next step of agreement.

[00:17:04] Speaker 05:
It doesn't have to be a contract.

[00:17:05] Speaker 05:
It doesn't have to be a binding contract.

[00:17:07] Speaker 05:
It just sort of is an agreement that we're going to continue to negotiate.

[00:17:11] Speaker 05:
Isn't that what they have here?

[00:17:13] Speaker 01:
Well, Your Honor, I would respectfully say that under

[00:17:16] Speaker 01:
sort of basic contract interpretation and contract law, they have an agreement to agree.

[00:17:22] Speaker 05:
And then if you look at the subsequent... Isn't that a legal relationship whether contractual or not?

[00:17:28] Speaker 05:
That's the language of the statute.

[00:17:30] Speaker 05:
Whether contractual or not, which suggests it doesn't have to be contractual.

[00:17:34] Speaker 01:
Well, if you, but if you look at the subsequent actions in this case of the Ministry of Health, specifically the fact that after this cooperation proposal and after this draft framework agreement were submitted, which were actually, the cooperation program was between the Czech Transfusion Service and Diod Cuman's parent company,

[00:17:55] Speaker 01:
and then the draft framework agreement was between DOC human subsidiary company.

[00:18:00] Speaker 01:
But if you look at the following subsequent actions, the Ministry of Health opened up this public bid process asking seeking companies to tender proposals for the very work that this cooperation program and this draft framework agreement were addressing.

[00:18:17] Speaker 01:
Importantly,

[00:18:19] Speaker 01:
Deog-Human did not contest that bid proposal.

[00:18:22] Speaker 01:
It didn't object to it.

[00:18:23] Speaker 01:
If it truly thought that it had an actual commercial agreement, which is argued in their briefs, or if it thought that it had a commercial relationship, why not object to the proposal?

[00:18:34] Speaker 05:
I don't know why not, but the only question here is whether this is plausible, not whether there's something binding.

[00:18:40] Speaker 05:
Did they have agreements with hospitals in Czechoslovakia?

[00:18:43] Speaker 01:
Mr. Stava's affidavit alleges that there was framework agreements.

[00:18:48] Speaker 05:
Yes, and did you put any evidence to the contrary that there were relations with some number of hospitals in Czechoslovakia?

[00:18:55] Speaker 01:
No, we did not, Your Honor.

[00:18:57] Speaker 05:
So we're bound by that?

[00:18:58] Speaker 01:
With respect to what Mr. Stava... Yeah, we're bound by what he said because... Mr. Stava didn't submit any actual framework agreements.

[00:19:06] Speaker 05:
No, but he submitted his testimony that there was agreements with some number of hospitals, right?

[00:19:13] Speaker 01:
He did, but he didn't specify exactly which hospitals.

[00:19:16] Speaker 05:
That makes it weak evidence, but it doesn't make it zero evidence.

[00:19:20] Speaker 05:
This may make it something you can argue when you get to the merits, but we're on the jurisdictional question here.

[00:19:27] Speaker 01:
Well, I think that the critical component and what the district judge, I think, aptly honed in on was the fact that

[00:19:34] Speaker 01:
While Mr. Stava's affidavit spoke about these alleged commercial agreements or framework agreements with individual Czech hospitals, this was after that change in the Czech law in June of 1990 that basically deregulated everything.

[00:19:49] Speaker 05:
When you say deregulated, is your position that the Ministry of Health doesn't have any relationship to those hospitals?

[00:19:56] Speaker 01:
At that point, as Mr Stava alleges, Ministry of Health lost control over those hospitals.

[00:20:02] Speaker 05:
No, they said direct control.

[00:20:03] Speaker 05:
I read it.

[00:20:03] Speaker 05:
It said direct control.

[00:20:05] Speaker 05:
Is Czechoslovakia's position that they have no authority at all over those hospitals?

[00:20:11] Speaker 01:
They own some.

[00:20:13] Speaker 01:
They may own some of the hospitals.

[00:20:15] Speaker 01:
I think there was reference to university hospitals, but they don't directly control.

[00:20:20] Speaker 01:
They're not entering into agreements with respect to those hospitals.

[00:20:27] Speaker 05:
What does direct control mean as compared to indirect control?

[00:20:33] Speaker 01:
Well, by saying they don't have direct control, it's because of that change in the law.

[00:20:38] Speaker 01:
They no longer specifically, they no longer basically ran the show with respect to these Czech hospitals.

[00:20:46] Speaker 01:
There was

[00:20:48] Speaker 01:
basically a change.

[00:20:49] Speaker 05:
There was a change in the law and it altered the way that... How would you describe the relationship between the Ministry of Health and the hospitals after that time?

[00:20:59] Speaker 05:
It says, according to the STAWA, legally these hospitals remain state property.

[00:21:06] Speaker 05:
Is that false?

[00:21:08] Speaker 01:
State property?

[00:21:10] Speaker 01:
I don't believe that's false.

[00:21:12] Speaker 05:
So that's what he says in paragraph 9, the hospitals are state property.

[00:21:20] Speaker 01:
yet uh... i i i don't believe that that's that that's false your honor so that means it's true uh... uh... yeah uh... uh... uh... as far as i know tonight is for for our purposes we have to take

[00:21:40] Speaker 02:
I thought your initial argument here, you were defending the district court's position, which was that this did not arise out of, in other words, that the subject of the arbitration did not arise out of this relationship, assuming there was one, correct?

[00:22:00] Speaker 02:
And so I guess my question is, if that's the argument,

[00:22:09] Speaker 02:
aren't you bound by at least the findings of the arbitration tribunal?

[00:22:20] Speaker 02:
In other words, what you seem to be arguing with the chief judge is that there was no relationship, but the arbitration tribunal found in fact that there was and that it was a commercial relationship.

[00:22:35] Speaker 02:
So I guess what I'm trying to figure out is, does the Czech Republic accept the findings of the arbitral tribunal and is simply arguing that this arbitration did not arise out of that?

[00:22:53] Speaker 01:
Well, Your Honor, I think that there's multiple aspects to that question.

[00:22:59] Speaker 01:
Certainly the arbitration proceedings have continued in the Czech Republic, and I don't know that that's necessarily something that I should address at this juncture.

[00:23:08] Speaker 02:
Well, you're saying have continued.

[00:23:10] Speaker 02:
I thought this was a final award.

[00:23:12] Speaker 02:
You're saying that this isn't final?

[00:23:14] Speaker 01:
Well, there was a subsequent, there was an appeal and the record, it discusses the fact that both parties submitted an appeal of the final award and it took years for an arbitration appeal panel to- But I thought that that was decided.

[00:23:29] Speaker 02:
against the Czech Republic.

[00:23:31] Speaker 02:
That's how I feel.

[00:23:32] Speaker 01:
No, the final award was not reviewed by the arbitration appeal panel at that point in time, at the point that this decision came through, which was part of one of our arguments before the district court was that the award was not yet final and binding because there was an appeal to the arbitration appeal panel.

[00:23:54] Speaker 05:
Is it final and binding now?

[00:23:58] Speaker 05:
Well, there was an appeal.

[00:23:59] Speaker 05:
What was the result of the appeal?

[00:24:03] Speaker 01:
Well, my understanding is that the final award was determined to be basically null and void.

[00:24:14] Speaker 01:
I don't want to get into it too deeply because I can't speak on it very specifically.

[00:24:21] Speaker 05:
When you say null and void, do you mean by a check court, or do you mean by an arbitration appeal?

[00:24:27] Speaker 01:
An arbitration panel?

[00:24:28] Speaker 03:
Is that evidence from your brief or any other brief.

[00:24:35] Speaker 01:
I know your honor.

[00:24:39] Speaker 03:
Would that not seem to be a salient fact to the attention of the court.

[00:24:42] Speaker 03:
We're litigating over an arbitration award that an arbitration panel has said is not valid.

[00:24:50] Speaker 03:
I'm not sure what we would be doing

[00:24:57] Speaker 01:
I that I apologize your honor at that the limited scope of the appeal.

[00:25:03] Speaker 01:
As the chief judge pointed out was related to the subject matter jurisdiction and we have.

[00:25:10] Speaker 01:
Well, I know I would argue no.

[00:25:15] Speaker 03:
When you are you know if it's the case that it's not a final award.

[00:25:21] Speaker 01:
I think just based on the limited, narrow scope of the appeal and where the facts were at that point in time.

[00:25:30] Speaker 03:
Jurisdiction is always an issue.

[00:25:32] Speaker 03:
I mean, either it's there or it's not.

[00:25:35] Speaker 01:
Right.

[00:25:35] Speaker 03:
And if there's not a final award, is there jurisdiction?

[00:25:40] Speaker 01:
I would argue no.

[00:25:41] Speaker 03:
Well, why didn't you argue no?

[00:25:43] Speaker 03:
You didn't argue no, either below or here.

[00:25:46] Speaker 03:
I don't know.

[00:25:47] Speaker 03:
I may be overlooking something, but I didn't see it in there.

[00:25:51] Speaker 03:
None of the same is seen in the brief, any evidence from you that says this is not final.

[00:25:56] Speaker 01:
We did, Your Honor, argue in the district court that the award had not been final and enforceable based on the subsequent appeal to the arbitration panel.

[00:26:06] Speaker 05:
Regardless of whether it's final, is your position that the whole case is moot now because the arbitration award's been overthrown by the arbitration panel itself?

[00:26:21] Speaker 01:
Possibly.

[00:26:25] Speaker 05:
OK, any further questions from the panel there?

[00:26:27] Speaker 05:
Alright, hopefully we'll hear something from the other side on this.

[00:26:34] Speaker 04:
I want to make first.

[00:26:35] Speaker 04:
Make them about this first.

[00:26:37] Speaker 04:
Yes.

[00:26:37] Speaker 04:
With respect to this, none of this, none of the subsequent events are in the record here.

[00:26:41] Speaker 04:
What's the fact here?

[00:26:44] Speaker 04:
Is the whole thing?

[00:26:45] Speaker 04:
There has been a purported determination by a purported arbitral review panel, all three of whose arbitrators were selected by the Czech Republic.

[00:26:55] Speaker 04:
The effect of this, no one knows.

[00:26:59] Speaker 04:
The Czech Republic has never brought it to the district court.

[00:27:01] Speaker 04:
We've never brought it to the district court because what its effect is is unknown and at this point I think unknowable.

[00:27:08] Speaker 04:
With respect to Judge Santelli's question, the question of whether the award is final or not is not a jurisdictional question.

[00:27:15] Speaker 04:
That would not deprive you of jurisdiction whatsoever, because that would simply be a defense to the enforcement, but not a jurisdictional issue.

[00:27:23] Speaker 04:
So I don't believe that this would deprive this court of jurisdiction.

[00:27:26] Speaker 04:
But the effect, if any, on this punitive review award has definitely worked.

[00:27:31] Speaker 03:
At the very least, there'd be a problem with credential rightness if there were, in fact, a non-finality

[00:27:38] Speaker 03:
to the arbitral award.

[00:27:40] Speaker 04:
That would be a defense.

[00:27:40] Speaker 03:
It would not make any sense for the court to hear litigation about an arbitration award that was still subject to being set aside by the arbitration process.

[00:27:48] Speaker 04:
The claim in the district court, the defense in the district court, was a lack of finality, which Diag had plenty to say about.

[00:27:57] Speaker 04:
What subsequently happened is an award, a putative award, which was rendered by an appellate panel, and no one knows what the effects are.

[00:28:07] Speaker 03:
No one is in favor of it.

[00:28:07] Speaker 03:
What may happen, the intention of either this court or the district court at this point, that there is such a putative award,

[00:28:13] Speaker 04:
The district court was told by me in a footnote that there had been subsequent events which were not of record and the court should know that, but what those events were.

[00:28:26] Speaker 03:
That didn't tell the district court very much.

[00:28:28] Speaker 04:
The district court looked at footnotes which are very much marginal.

[00:28:32] Speaker 04:
That's correct because the effect of this award is not known.

[00:28:35] Speaker 04:
No one has passed on it yet.

[00:28:37] Speaker 04:
I mean, obviously, the fact that the Czech Republic didn't bring it anywhere is suggestive of something.

[00:28:43] Speaker 04:
And I certainly am not bringing it somewhere, because I would have a lot to say about the putative award.

[00:28:47] Speaker 04:
But it's not a jurisdictional fact whatsoever.

[00:28:50] Speaker 04:
It's a defense.

[00:28:53] Speaker 04:
With respect to the chief judge's questions about

[00:28:57] Speaker 04:
ownership.

[00:28:58] Speaker 05:
Before we get to that again, so the thing we have in the appendix is titled final award.

[00:29:03] Speaker 04:
Correct.

[00:29:03] Speaker 04:
What does that mean?

[00:29:05] Speaker 04:
That award was the final award that was rendered after a 12-year arbitration.

[00:29:10] Speaker 04:
What then happened, and this is also in the record, is that both sides took an appeal.

[00:29:16] Speaker 04:
An appeal to?

[00:29:17] Speaker 04:
To, well, under the structure that was agreed to, and this is quite uncommon in this country, there was an appellate process, an appellate arbitral process pursuant to which you would... Established by the original agreement to arbitrate?

[00:29:32] Speaker 04:
Correct.

[00:29:33] Speaker 04:
And you would be able to take an appeal, if you so desired, to this appellate panel, which would then review the award that had been rendered by the original arbitrators.

[00:29:44] Speaker 04:
If the court takes a look in the record that exists, the court will see that there are two such awards.

[00:29:49] Speaker 04:
There's an interim award, there's a preliminary award, both of which were appealed and both of which have opinions by an arbitral panel on review.

[00:29:57] Speaker 05:
With respect to this award, the validity of that appeal was something that was very highly... I guess I had assumed, perhaps wrongly, that the interim one was on the way to the final one.

[00:30:13] Speaker 05:
But that's not correct?

[00:30:14] Speaker 05:
The interim?

[00:30:15] Speaker 05:
Yes, you are correct.

[00:30:16] Speaker 04:
By the same panel as decided the final award or by a different?

[00:30:19] Speaker 04:
No, the arbitrators, there was a change in the arbitral composition over time.

[00:30:24] Speaker 04:
But it's still the lowest level decision.

[00:30:28] Speaker 05:
Correct.

[00:30:28] Speaker 05:
So the final award

[00:30:31] Speaker 05:
overtakes the interim awards?

[00:30:33] Speaker 04:
Well, sequentially what happened was the following.

[00:30:37] Speaker 04:
There was an interim award, I'm sorry, there was a preliminary award.

[00:30:40] Speaker 04:
The preliminary award, which was rendered in 1997, established liability by the Czech Republic to die out.

[00:30:47] Speaker 04:
The question was clearly determined there.

[00:30:50] Speaker 04:
It was affirmed by an appellate arbitral panel.

[00:30:52] Speaker 04:
So there was an appeal of that one.

[00:30:54] Speaker 04:
Correct.

[00:30:55] Speaker 04:
And that is binding.

[00:30:56] Speaker 04:
Those facts are binding.

[00:30:58] Speaker 04:
But there's no award.

[00:31:00] Speaker 04:
No monetary award in that, just liability?

[00:31:02] Speaker 04:
Correct.

[00:31:04] Speaker 04:
Then there is a preliminary award.

[00:31:06] Speaker 04:
The preliminary award was rendered in 2002 after submission of evidence.

[00:31:10] Speaker 04:
The award in 2002 was rendered on the basis of the minimum agreed upon damages between both sides' experts.

[00:31:19] Speaker 04:
So the preliminary award

[00:31:23] Speaker 04:
became the interim award.

[00:31:27] Speaker 04:
The interim award fixed a minimum quantum of damage in 2002, which in dollar terms at that point was roughly $10 million.

[00:31:38] Speaker 04:
The remaining arbitration from 2002.

[00:31:41] Speaker 04:
And that one was appealed also?

[00:31:43] Speaker 04:
Correct.

[00:31:44] Speaker 04:
And affirmed.

[00:31:44] Speaker 04:
And affirmed.

[00:31:45] Speaker 04:
With respect to the final award, that determined the quantum of damages remaining other than what both parties had agreed to in 2002.

[00:31:54] Speaker 04:
This was the subject of massive amounts of expert testimony.

[00:31:59] Speaker 04:
At the end of the day, the arbitral panel rendered a final award.

[00:32:03] Speaker 04:
And it rendered an award based on the low end of the damages that the experts had awarded to die a human.

[00:32:12] Speaker 04:
In other words, both their expert and our expert submitted evidence.

[00:32:20] Speaker 04:
What ended up happening was that the arbitral panel selected the low end of damages as being what we were entitled to.

[00:32:28] Speaker 04:
both sides took an appeal from that.

[00:32:30] Speaker 04:
DIAG took an appeal on the ground that the award was too low.

[00:32:34] Speaker 04:
Czech Republic took an appeal.

[00:32:36] Speaker 04:
It wasn't clear what the basis of the appeal was because there had been clear findings of liability.

[00:32:43] Speaker 04:
What was the result?

[00:32:44] Speaker 04:
What happens next?

[00:32:45] Speaker 04:
The result of that was a

[00:32:49] Speaker 04:
Multi-year litigation over the... Was there a decision by the appeal panel?

[00:32:56] Speaker 04:
As far as I know, there was some sort of ruling by a putative appeal panel, which was composed of three arbitrators ultimately selected by the Czech Republic itself.

[00:33:14] Speaker 04:
This type, but the effect of what that panel did, its validity, anything like it, has never been determined, has never been tested in any court that I'm aware of, and has never been brought to the district court.

[00:33:30] Speaker 04:
So what its effect is has never been... In words, did it vacate the decision of the final agreement?

[00:33:36] Speaker 04:
It did not vacate anything.

[00:33:38] Speaker 04:
What the...

[00:33:40] Speaker 03:
And anybody read this thing?

[00:33:42] Speaker 04:
Yes.

[00:33:43] Speaker 03:
So what's the bottom line?

[00:33:44] Speaker 03:
Tell us what it says.

[00:33:45] Speaker 04:
The bottom line.

[00:33:46] Speaker 04:
Whether you agree with it or not, what's the bottom line?

[00:33:48] Speaker 04:
The bottom line is that, as I understand the procedural point.

[00:33:53] Speaker 04:
Quit chasing rabbits down trails and I can be quick and please.

[00:33:58] Speaker 04:
The award said that, it wasn't an award, it was a warning.

[00:34:04] Speaker 03:
Quit chasing rabbits and tell us what it said, please.

[00:34:06] Speaker 04:
What it said was that,

[00:34:08] Speaker 04:
The award which was rendered in 2000, as I understand it, the award that was rendered in 2002, namely this $10 million interim award, that was the final award because under check law, you couldn't have anything after that.

[00:34:26] Speaker 05:
So there's no dispute even after the appeal that there is at least the, what million dollar did you say?

[00:34:33] Speaker 05:
$10 million.

[00:34:34] Speaker 05:
$10 million award.

[00:34:35] Speaker 05:
Is that what you're saying?

[00:34:36] Speaker 05:
That's been paid.

[00:34:37] Speaker 05:
And that's been paid.

[00:34:38] Speaker 05:
The Czech Republic paid that award as directed.

[00:34:42] Speaker 05:
So there may be no other award, is that what you're saying?

[00:34:46] Speaker 04:
If that appeals panel is a valid one and its ruling was correct and there were no ways to upset them, it's deceivable.

[00:34:56] Speaker 05:
And how would that be determined?

[00:34:57] Speaker 04:
If the district court were to get to the merits, would the district court determine that?

[00:35:02] Speaker 04:
Who would determine that?

[00:35:04] Speaker 04:
I think that there are proceedings pending in the Czech Republic as to its validity.

[00:35:09] Speaker 05:
So until those are resolved, even if there were jurisdiction in this case, the district court could not get to the merits.

[00:35:18] Speaker 05:
Is that what you're saying?

[00:35:19] Speaker 04:
No, I don't say that, because as far as we're concerned, the effect of that ruling by the panel, its actual effect was to make the 2008 award final and bind it.

[00:35:32] Speaker 05:
I thought you said that there was no 2008.

[00:35:35] Speaker 05:
It decided that 2002 was the only award possible.

[00:35:39] Speaker 04:
That may be its effect.

[00:35:41] Speaker 04:
Our view is that, in reality, what all that award could possibly do was render the 2000 award final.

[00:35:48] Speaker 05:
I was asking you, is that for the district court to determine whether that's correct, or is that for the check panel to determine?

[00:35:54] Speaker 04:
It may be the district court has to determine that, but I know that their proceedings pending.

[00:35:58] Speaker 04:
It's my understanding that their proceedings pending the Czech Republic with respect to

[00:36:01] Speaker 04:
what the effect of that pronouncement was.

[00:36:04] Speaker 04:
And it's not an award.

[00:36:06] Speaker 04:
It's a ruling by a panel, which, as I understand it, is not subject to any appeal, which was why it was rendered and the way it was rendered.

[00:36:14] Speaker 04:
And there were proceedings with respect to that that I am utterly unaware of.

[00:36:19] Speaker 05:
If the consequence of that is that all you get is the $10 million, there would be no case here, is that right?

[00:36:27] Speaker 04:
Because you already got your $10 million.

[00:36:29] Speaker 04:
If there's no basis to

[00:36:32] Speaker 04:
upset that pronouncement or if that pronouncement has an effect other than what we believe, which is to render the 2008 award final in binding, there would be nothing further.

[00:36:42] Speaker 05:
Are there provisions in the New York Convention for making those kinds of determinations by district courts?

[00:36:49] Speaker 04:
The New York Convention provides as a defense lack of finality.

[00:36:55] Speaker 04:
So if the award isn't final or it's been overruled, then the district court can make that determination by itself.

[00:37:05] Speaker 03:
Laying aside for a moment the question of whether prudential rightness is or is not jurisdictional, which you seem very sure it isn't.

[00:37:14] Speaker 03:
Lay that aside, because the chief brought us back to the very basic question, and that is jurisdiction has to come out of

[00:37:30] Speaker 04:
Well, it's a peculiar situation, Your Honor, because... Don't tell me about the situation.

[00:37:35] Speaker 03:
Listen to my question, very carefully.

[00:37:36] Speaker 03:
Because the... Why do I even listen to my question?

[00:37:40] Speaker 03:
Don't talk while I'm asking you to listen, please.

[00:37:42] Speaker 03:
What language in the F.S.I.A.

[00:37:44] Speaker 03:
do you say governs your specific question in this case?

[00:37:48] Speaker 04:
The F.S.I.A.

[00:37:50] Speaker 04:
does not allow a defense of sovereign immunity if there's an award that is or may be subject to a foreign convention.

[00:37:58] Speaker 04:
Okay, so that's A6, right?

[00:38:01] Speaker 04:
Correct.

[00:38:03] Speaker 04:
That was the original basis in the district court under the FAA and why there was no possible defense of sovereign immunity.

[00:38:16] Speaker 04:
And this court has the Turmerillo case, which is so determined as far as I know.

[00:38:24] Speaker 04:
So that was the basis for it.

[00:38:28] Speaker 03:
What are the conditions?

[00:38:37] Speaker 04:
The standards?

[00:38:38] Speaker 04:
Yeah.

[00:38:39] Speaker 04:
The only standard?

[00:38:40] Speaker 03:
Do you have the language of the FSA in front of you?

[00:38:43] Speaker 03:
I do.

[00:38:43] Speaker 03:
Okay, how about reading the segment to us, please?

[00:38:49] Speaker 03:
Other than A6?

[00:38:50] Speaker 03:
No, A6.

[00:38:51] Speaker 03:
He's talking about A6.

[00:38:52] Speaker 03:
Read it to A6.

[00:38:55] Speaker 03:
It's a bit longer than what the description ever was.

[00:38:58] Speaker 03:
Okay.

[00:39:04] Speaker 04:
A foreign state shall not be immune from the jurisdiction of courts of the United States or the states in any case.

[00:39:13] Speaker 04:
in which the action is brought either to enforce an agreement made by the foreign state with or for the benefit of a private party to submit to arbitration any or all differences which have arisen or which may arise between the parties with respect to a defined legal relationship, whether contractual or not, concerning the subject matter capable of settlement by arbitration under the laws of the United States,

[00:39:38] Speaker 04:
or to confirm an award made pursuant to such an agreement to arbitrate if a, the arbitration takes place or is intended to take place in the United States, b, the agreement or award is or may be governed by a treaty or other international agreement in force for the United States calling for the recognition and enforcement of arbitral awards,

[00:39:59] Speaker 04:
C, the underlying claim, save for the agreement to arbitrate, could have been brought in the United States Court.

[00:40:06] Speaker 05:
C is not relevant and A is not relevant, right?

[00:40:08] Speaker 05:
We're only talking about B. Yes.

[00:40:14] Speaker 05:
Further questions from the panel?

[00:40:16] Speaker 03:
No, I think that... We'll take the matter under submission.

[00:40:18] Speaker 05:
Thank you.