Enforcement of interim judgment by DiaMedica is invalid

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Amsterdam , 07 February 2024

On 7 February 2024, the Netherlands Commercial Court (NCC) gave a final judgment in proceedings initiated by a US-based Sponsor (DiaMedica Therapeutics Inc), against PRA, a Contract Research Organisation located in the Netherlands. 

The core of the dispute

In 2013, DiaMedica signed an agreement with PRA to conduct a clinical trial to evaluate the safety and efficacy of a drug developed by DiaMedica for the treatment of type 2 diabetes (the Agreement). The core of the dispute is i) whether PRA misled DiaMedica prior to or during the Agreement by its statements on its study design and on interim test results and ii) whether PRA provided DiaMedica with the full study data set and access to the study site. DiaMedica seeks compensation in the amount of 74 million US dollars.

PRA initiated several counterclaims, inter alia: i) to declare the enforcement of the Court's interim judgment invalid and ii) to order DiaMedica to compensate PRA for the full costs of these and other proceedings.

DiaMedica’s claim for damages denied

DiaMedica seeks compensation in the amount of 74 million US dollars for damages allegedly caused by PRA as a result of breach of the Agreement as well as non-contractual causes of action under New York law: breach of the implied covenant of good faith and fair dealing, fraudulent inducement and fraudulent or negligent representation.

The Court ruled that DiaMedica's claim is governed by New York law. The Agreement contains a choice of law clause designating NY law as the applicable law. New York law not only applies where DiaMedica relies on specific provisions in the Agreement, but also where interpretation of the Agreement appears indispensable to establish the lawful or unlawful nature of PRA's alleged conduct. Any non-contractual obligation arising out of dealings prior to the conclusion of the Agreement is also governed by the law that applies to the Agreement (Article 12(1) Rome II Regulation).

The Court held that DiaMedica's claim for damages did not meet the requirements of New York law. The statements made by PRA's Vice President Medical Affairs were not false or were not relied upon by DiaMedica for its business decisions. DiaMedica did not show that not having access to the study data and study site was the direct and proximate cause of its damage. Therefore DiaMedica's claims are denied.

Enforcement of the Court’s interim judgment declared invalid

In the interim judgment the Court awarded DiaMedica's claim to cooperate with the surrender of documents and data pertaining to the clinical trial. Subsequently, DiaMedica instructed a bailiff to enforce this judgment. The Court now rules that the bailiff failed to observe the statutory notification and waiting period of 2 days before taking enforcement action, which invalidates the enforcement under Dutch procedural law.

In the Court's view, PRA was unreasonably prejudiced by the untimely enforcement, as it was induced to think it had ample time to appeal the interim judgment. The enforcement took place outside PRA's ambit and without PRA's knowledge. Therefore, the Court declared the enforcement to be invalid and ordered DiaMedica to return the documents obtained through the enforcement.

No compensation of the full costs of the proceedings

The Court dismissed PRA's counterclaim for compensation of the full costs of all proceedings initiated by DiaMedica against PRA inside and outside the Netherlands. When assessing alleged abuse of procedural law or wrongful acts by initiating proceedings, restraint is appropriate, in view of the right to access to justice that is also guaranteed by Article 6 of the European Convention on Human Rights.

Read the full judgment here.