The customary 1-1 correspondence is طعن = challenge and استئناف = appeal, but I don't think the 1-1 correspondence works here. It looks like your instance of طعن should be translated as 'appeal' because it is a court case. 'challenge' has very restricted legal uses or can be a non-specialist term, used in journalism and the like to talk about appeals.

Note this legal dictionary entry doesn't have the 'appeal' meaning for 'challenge':

http://www.translegal.com/legal-english-dictionary/challenge

I've done some quick research and it seems that استئناف is often used to mean an appeal to the Appeal Court (محكمة الاستئناف) which is the lower court, and طعن is often used to mean an appeal to the Court of Cassation (محكمة التمييز) which is the higher court.

Hope this helps!

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Note added at 47 mins (2014-08-26 20:30:50 GMT)
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Response: one way to make the distinction would be to translate the higher one طعن as Court of Cassation Appeal no. 11.

That seems to be used a lot around the web:

https://www.google.com/search?q="court of cassation appeal"&...