PharmaEssentia's dispute with its European distribution partner AOP has reignited. On the evening of the 19th, the company issued a material announcement stating that its board of directors has resolved to file for annulment of the Partial Final Award received on February 17, 2025, at the Higher Regional Court in Frankfurt, Germany. PharmaEssentia will also request a suspension of the second phase of the arbitration proceedings, aiming to fully protect the rights and interests of the company and its shareholders.
According to the company, based on the assessment of its legal team, the annulment process is expected to take about two years and will not impact its financial or business operations. PharmaEssentia reaffirmed its commitment to integrity and the rule of law, and stated it will actively respond to any false accusations that damage its reputation or shareholder interests through proper legal channels. The legal team has presented four major procedural errors as the basis for initiating the annulment process.
The four key procedural errors identified by PharmaEssentia's legal counsel are as follows:
First, AOP deliberately withheld evidence, and the arbitral tribunal unjustly favored AOP by giving it another opportunity, blatantly violating the parties’ agreement to conduct the arbitration in a single phase. PharmaEssentia emphasized that both parties had agreed at the outset to complete the arbitration in one proceeding. However, due to AOP’s insufficient—and at times intentional—lack of evidence, the tribunal issued only a partial award and unilaterally arranged a second phase to determine the amount of damages. The tribunal allowed AOP to delay its evidence submission while ignoring PharmaEssentia’s objections, effectively granting AOP a "second chance." This conduct was clearly unfair, violated PharmaEssentia’s procedural rights, and infringed its right to be heard as protected under German law.
PharmaEssentia noted that in a previous arbitration case, AOP had attempted to seek substantial damages but the German Federal Supreme Court overturned the award. At that time, the court found AOP’s evidence insufficient and its claims unsupported. In the current arbitration, AOP alleged that PharmaEssentia breached the agreement, causing a 9.5-month delay in drug marketing approval, and even publicly claimed that PharmaEssentia owed approximately €300 million in damages. However, throughout the arbitration, AOP failed to present any evidence, and the tribunal neither thoroughly examined nor confirmed whether such an astronomical claim was reasonable. This reveals that AOP’s assertions were baseless and lacked any legal or factual foundation.
Second, although the tribunal acknowledged AOP’s delay in the U.S. drug approval process, it dismissed PharmaEssentia’s compensation claims on the grounds that "causality was not established." PharmaEssentia expressed shock at the tribunal’s disregard for clear correspondence and factual connections between the parties, and for dismissing its legitimate claims solely due to an alleged lack of causal linkage.
PharmaEssentia strongly questioned whether the ruling adequately addressed the substantial harm caused by AOP’s delays. It argued that the tribunal not only dodged key issues and misallocated responsibility but also severely undermined procedural justice and commercial trust. The ruling defied logic and raised serious concerns about the neutrality and professionalism of the tribunal. Such inconsistencies indicated a lack of fairness and violated the principle of party equality under German law.
Third, the tribunal again showed bias toward AOP by holding PharmaEssentia liable for a 9.5-month delay in obtaining European marketing authorization. During the evidence-gathering phase in 2022, PharmaEssentia had requested AOP to provide documents explaining the reasons for the delay. At the time, the tribunal rejected the request, stating that AOP was already obligated to supply the relevant information. However, in the final award, the tribunal concluded that PharmaEssentia failed to prove the delay was unrelated to its conduct, thus supporting AOP’s claims. The tribunal provided no explanation for its shift in stance and did not allow PharmaEssentia an opportunity to respond. This inconsistent handling highlights the tribunal’s lack of impartiality and its infringement on PharmaEssentia’s right to be heard.
Fourth, the tribunal committed serious procedural errors in ordering PharmaEssentia to bear approximately €1.35 million in arbitration costs and to refund about €200,000 in clinical drug expenses.
Regarding the arbitration costs, PharmaEssentia asserted that the tribunal erred by relying on a prior arbitration ruling that had already been annulled by the German Federal Supreme Court. Furthermore, the tribunal’s finding that PharmaEssentia was responsible for the 9.5-month delay in obtaining European marketing authorization was incorrect, and the basis for cost allocation should be reevaluated accordingly.
As for the €200,000 refund of clinical drug expenses, PharmaEssentia believes the tribunal wrongly extended the scope of the prior arbitration’s ruling to cover claims that AOP never even raised in the current case. The tribunal also failed to properly examine whether AOP had in fact overpaid or whether a refund was justified, rendering the process highly unreasonable.
PharmaEssentia stated it will file an application with the arbitral tribunal to suspend the second phase of proceedings, arguing that AOP's delayed submission of evidence violates the original agreement. The tribunal’s unilateral decision to proceed with a second phase has caused further controversy, prompting PharmaEssentia to seek a halt to the proceedings. According to its legal team, the annulment process is expected to take about two years, and the company believes this will not affect its financial or operational performance.
Resource: 藥華藥再戰AOP 指仲裁裁決不公 揭四程序錯誤、申請撤仲
