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Short Form Long Title
§ / §§ paragraph / paragraphs; section / sections
AETR / EUFE Association des Emetteurs de Titres de Restauration / Étkezési Utalávany Forgalmazól Egyesülés
Arbitration Rules ICSID Rules of Procedure for Arbitration Proceedings of 10 April 2006
BIT Bilateral Investment Treaty
C-# Claimants' Exhibit
C-I Claimants' Memorial on the Merits (19 January 2015)
C-II Claimants' Reply on the Merits (11 April 2016)
CEX-# Claimants' Expert Report
CJEU Court of Justice of the European Union
CLA-# Claimants' Legal Exhibit
CPHB-I Claimants' Post-Hearing Brief (22 September 2017)
CWS-# Claimants' Witness Statement
EC European Commission
EU European Union
ICSID The International Centre for the Settlement of Investment Disputes
ICSID Convention Convention on the Settlement of Investment Disputes between States and Nationals of Other States (18 March 1965)
KIM Ministry of Public Administration and Justice
MNUA Hungarian National Recreation Fund (Magyar Nemzeti Üdülési Alapitvany)
PIT Personal Income Tax
PIT Law Hungarian Act CXVII of 1995 on Personal Income Tax
PO-# Procedural Order No. #
POS Point of Sale
PSZAF Hungarian Financial Supervisory Authority
R-# Respondent's Exhibit
R-I Respondent's Counter Memorial (17 July 2015)
R-II Hungary's Rejoinder (21 July 2016)
REX-# Respondent's Expert Report
RfA Claimants' Request for Arbitration (3 December 2013)
RLA-# Respondent's Legal Exhibit
RPHB-I Respondent's Post-Hearing Brief (22 September 2017)
RWS-# Respondent's Witness Statement
SZÉP Card Szechenyi Recreational Card
UNCLOS United National Convention on the Law of the Sea (10 December 1982)
TEC Treaty on the Establishing the European Community
TEEC Treaty Establishing the European Economic Community
TFEU Treaty on the Functioning of the European Union
VCLT Vienna Convention on the Law of Treaties (23 May 1969)
Vyroba Le Cheque Déjeuner Vyroba - Vyroba, s.r.o.
WACC Weighted Average of the Cost of Equity and the Cost of Debt
Name Position
Mr. Gordon Bajnai Leader of Socialist Government (2008)
Dr. Ádám Balog Deputy Under-Secretary of Economic Development
Mr. László Balogh Vice President, the PSZAF
Commissioner Michael Barnier EC Commissioner
Mr. Bálint Bessenyey Sodexo representative
Ms. Anne Boddaert Claimants' representative
Mr. Anthony Charlton FTI Expert (First FTI Report, CEX-1)
Mr. Benedek Dér Managing Director of Le Cheque Déjeuner Deutschland GmbH (author of CWS-1) Commercial and Sales Director of CD Hungary, 2002 - 2012
Mr. Pierre Gagnoud Edenred representative
Dr. Zoltán Guller President of the Board of Trustees of MNUA (author of RWS-1, RWS-3) Became the KIM Commissioner responsible for Erzsébet programme on 31 August 2012
Mr. Endre Horváth Deputy Minister of State (economic development) (Hungary)
Mr. Zoltán Horváth Deputy President of the Hungarian Competition Authority
Mr. Brent C. Kaczmarek, CFA Navient Expert (REX-1 and REX-2)
Mr. Jacques Landriot CEO of LCD (2012, 2013) President of CD Internationale
Mr. Yvon Legrand Director of International Development for LCD Group Managing Director of CD Internationale Manager of CD Hungary (author of CWS-3)
Dr. Gal András Levente (Mr. András Levente Gál) Dr. Levente Gál András Commissioner with the KIM (responsible for Erzsébet vouchers) (former administrative state secretary at the KIM and Ministerial Commissioner in charge of implementation of the Erzsébet Program in 2012)
Mr. Dávid Marton Official from the KIM
Ms. Márta Nagy Managing Director of Le Cheque Déjeuner Pologne (2013 -present) Administrative and Financial Director of CD Hungary (1997 -1998) Managing Director of CD Hungary 1998 - 2012 (author of CWS-2 and CWS-4)
Ms. Róza Nagy Under Secretary of Administration, Ministry of National Economy
Mr. Tibor Navracsics Vice-Prime Minister and Minister of State Administration and Justice, Hungarian Ministry of State Administration and Justice
Mr. James Nicholson FTI Expert (Second FTI Report, CEX-2)
Prime Minister Viktor Orbán Prime Minister (Hungary)
Dr. Bence Rétvári Secretary of State of the KIM
Mr. René Roudaut French Ambassador to Hungary
President Nicholas Sarkozy President of France
Mr. Kiran P. Sequeira, MBA, PE Navigant Expert (REX-1 and REX-2)
Mr. Miklós Soltész Secretary of State for the Ministry of Natural Resources (Hungary)
Mr. Kristóf Szatmáry Ministerial Commissioner in the Prime Minister's Office for the Governmental Coordination of Commerce Policy (current title) Secretary of State for the Domestic Economy at the Ministry of National Economy (2011 - 2014) (author of RWS-2) Member of Hungarian Parliament (2006 - present) President of Budapest Chamber of Commerce (2008 - present)
Dr. László Trócsányi Head of Ministry of Justice
Mr. Mihály Varga Minister of the National Economy (Hungary)
Mr. Iván Vetési Centra Office for Administration and Electronic Public Services



This case concerns a dispute submitted to the International Centre for Settlement of Investment Disputes ("ICSID" or the "Centre") pursuant to the bilateral investment treaty between France and Hungary (the "BIT"), which entered into force on 30 September 1987, and the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, which entered into force on 14 October 1966 (the "ICSID Convention"). Claimants also rely on the bilateral investment treaty between Hungary and Croatia, which entered into force on 1 March 2002, and the bilateral investment treaty between Hungary and Lithuania, which entered into force on 20 May 2003.1
Respondent is Hungary (the "Respondent"), a sovereign state.
The Parties' dispute concerns Respondent's 2011 reforms of its tax and other laws ("2011 Reform") and Claimants' unwillingness or inability to continue business in Respondent State as a result. Claimants allege that the 2011 Reform was in violation of the BIT. Respondent argues that Claimants' claims are unfounded on the merits.


The Tribunal has carefully examined all the arguments and evidence presented by the Parties throughout these proceedings. The Tribunal does not consider it necessary to reiterate in this Award all such arguments or evidence, which are well-known to the Parties. Further, insofar as any matter has not been specifically identified or recorded in the body of this Award, this does not mean that it has not been taken into full consideration. The Tribunal discusses only those submissions which it considers most relevant for its decisions. The Tribunal's reasons, without repeating all the arguments advanced by the Parties, address what the Tribunal considers to be the determinative factors required to decide on the Requests of the Parties.
The Tribunal's use of one Party's terminology is without prejudice and in no way reflects the Tribunal's understanding of a particular issue. Rather, effort has been made to use consistent terminology throughout this Award to facilitate understanding. Likewise, the order in which the references are presented is not a reflection of a particular source's value in the eyes of the Tribunal. Instead, effort has been made to format the footnotes consistently.



On 26 February 2014, Claimants proposed the appointment of The Honourable L. Yves Fortier, PC CC OQ QC (Canadian) as arbitrator. He accepted the appointment on 6 March 2014. His contact details are as follows:

Mr. L. Yves Fortier PC CC OQ QC
Cabinet Yves Fortier
1 Place Ville Marie - Suite 2822
Montréal (Québec) H3B 1R4
Tel.: +1 514 286 2013
Fax: +1 514 286 2019
Email: vves.fortier@,vfortier.ca


On 28 March 2014, Respondent proposed the appointment of Sir Daniel Bethlehem, KCMG QC (British) as arbitrator. ICSID notified the Parties of his acceptance of this appointment on 1 April 2014. Sir Daniel's details are as follows:

Sir Daniel Bethlehem QC
20 Essex Street
London WC2R 3AL, UK
Tel.: +44 20 7842 1200
Fax: +44 20 7842 1268
Email: DBethlehem@20essexst.com


On 25 June 2014, the Parties informed ICSID of their agreement to appoint Prof. Dr. Karl-Heinz Böckstiegel (German) as the President of the Tribunal. On 30 June 2014, ICSID informed the Parties that all three arbitrators had accepted their appointments. Prof. Böckstiegel’s contact details are as follows:

Prof. Dr. Karl-Heinz Böckstiegel
Parkstr. 38
D-51427 Bergisch Gladbach, Germany
Tel.: +49 (0)2204 66268
Fax: +49 (0)2204 21812
Email: kh@khboeckstiegel.com


The Procedural History contained in the Tribunal's Decision on Preliminary Issues of Jurisdiction of 3 March 2016 is incorporated herein. For ease of reference, however, some major procedural events are noted, below.
On 3 December 2013, ICSID received a request for arbitration of the same date from LCD and CD Internationale against Hungary ("RfA"). ICSID registered the RfA in accordance with Art. 36(3) of the ICSID Convention on 23 December 2013.
The first session of the Tribunal with representatives of the Parties was held on 12 September 2014. The Parties confirmed that the Tribunal was properly constituted and that they had no objection to the appointment of any member of the Tribunal.
On 8 October 2014, the Tribunal issued Procedural Order No. 1 ("PO-1").
On 19 January 2015, Claimants filed a Memorial on the Merits ("C-I") and accompanying documents.
On 23 October 2015, Claimants filed a Reply on Objections to Jurisdiction and Response to Request for Bifurcation.
On 12 November 2015, the Tribunal issued Procedural Order No. 2 ("PO-2"), by which it decided that the proceedings would be bifurcated and the Tribunal's jurisdiction would be determined as a preliminary issue.
On 13 and 14 January 2016, the Tribunal held a hearing on jurisdiction with the Parties at the International Dispute Resolution Centre in London, United Kingdom.
On 19 January 2016, the Tribunal issued Procedural Order No. 3 ("PO-3"), requesting that the Parties submit their corrections to the hearing transcript by 22 January 2016 and submit their post-hearing briefs by 5 February 2016.
On 22 January 2016, the Tribunal issued Procedural Order No. 4 ("PO-4"), containing the Tribunal's decisions on the Parties' document production requests and ordering the Parties to produce the relevant documents by 12 February 2016.
On 3 March 2016, the Tribunal issued its Decision on Preliminary Issues of Jurisdiction. Claimants consented to the publication of the decision by email on 9 March 2016 but, on 11 March 2016, Respondent refused consent to publish the decision.
On 1 April 2016, the Tribunal accepted the Parties' revised timetable, based on PO-1 Annex A.
On 7 April 2016, the Tribunal requested the Parties' permission to appoint Dr. Katherine Simpson as Assistant to the Tribunal, pursuant to Section 3.6 of PO-1. The Tribunal submitted Dr. Simpson's CV and Declaration to the Parties for their review and comment.
On 11 April 2016, Claimants submitted their Reply on the Merits ("C-II"), together with supporting documentation, to the Tribunal.
On 18 April 2016, ICSID informed the Parties that Dr. Simpson's appointment was effective.
On 21 July 2016, Respondent submitted "Hungary's Rejoinder" ("R-II"), together with supporting documentation, to the Tribunal.
On 29 July 2016, Respondent wrote to the Tribunal in response to C-II and to Claimants' claims concerning the adequacy of Respondent's document production in connection with Claimants' Requests No. 5-7. Respondent stated that it undertook a "reasonable search" and was unable to locate any documents responsive to the requests, as modified. Respondent argued that Claimants' request for the Tribunal to draw an adverse presumption was not justified.
On 4 August 2016, Claimants submitted "Claimants' Second Request for the Production of Documents" to the Tribunal.
On 5 August 2016, the Tribunal responded to Respondent's 29 July 2016 letter stating that it did not see any need for action.
On 8 August 2016, Respondent wrote in opposition to Claimants' document request.
On 11 August 2016, the Tribunal wrote in reference to the Parties' communications regarding document requests. The Tribunal clarified that, with its letter of 5 August 2016, it had neither accepted nor rejected Respondent's explanations regarding Requests No. 5-7. The Tribunal indicated that it would address Claimants' submission of 4 August 2016 and Respondent's letters of 29 July and 8 August 2016 in its 22 September 2016 decision on the Parties' second requests for production of documents, as planned in PO-1.
On 1 September 2016, Claimants sent their revised "Second Request for the Production of Documents" to the Tribunal.
On 29 September 2016, the Tribunal issued Procedural Order No. 5 Regarding the Parties' Second Requests for Document Production ("PO-5").
On 5 October 2016, the Tribunal sent its draft of Procedural Order No. 6 Regarding the Hearing on the Merits ("PO-6") to the Parties, for their review and comment by 12 October 2016. On 12 and 13 October 2016, the Parties sent their comments to the draft of PO-6 to the Tribunal.
On 16 October 2016, the Tribunal issued PO-6 and Annex A and informed the Parties that the pre-hearing telephone conference that had been provisionally agreed upon would be unnecessary, due to the absence of outstanding procedural, administrative, or logistical matters.
On 17 October 2016, the Parties confirmed the witnesses and experts that each intended to call at the Hearing.
On 19 October 2016, the Tribunal wrote to the Parties to request clarification regarding Exhibit R-0013.
On 20 October 2016, the Parties requested that the deadline for the submission of "Requests to introduce produced documents into the record for use at the hearing" be postponed until 28 October 2016. The Tribunal granted the extension on the same day.
On 25 October 2016, Respondent clarified that its inclusion of Exhibit R-0013 was in error.
On 26 October 2016, the Tribunal requested confirmation of the order in which the witnesses would be examined at the Hearing, by 7 November 2016.
On 28 October 2016, Claimants submitted a "Request to Introduce New Documents" to the Tribunal. On 31 October 2016, the Tribunal invited Respondent to respond. Respondent responded on 2 November 2016. Taking note of Respondent's comments, the Tribunal admitted the documents on 3 November 2016.
On 7 and 8 November 2016, the Parties submitted their respective Hearing Proposals to the Tribunal. After considering the Parties' comments, the Tribunal decided on 9 November 2016 to adopt the first Hearing proposal submitted by Claimants.
On 11 November 2016, ICSID informed the Tribunal and the Parties of the logistical arrangements for the Hearing.
On 11 November 2016, Respondent informed the Tribunal that Mr. Szatmáry would be available to testify on 6 and 7 December 2016, as needed, and requested that the Tribunal amend the Hearing time.
On 13 November 2016, the Tribunal invited Claimants to comment on Respondent's submission on the Hearing schedule.
On 14 November 2016, Claimants wrote in reference to Mr. Szatmáry's availability and submitted an amended Hearing schedule to the Tribunal. Claimants also notified the Tribunal of a change in representation and provided the Tribunal an updated list of exhibits including its new submissions Exhibits C-0171 to C-0188.
On 15 November 2016, the Tribunal adopted an amended Hearing schedule.
On 23 November 2016, Respondent submitted a redlined version of Dr. Guller's witness statement, seeking only to correct footnote numbering, and an application to submit Exhibit R-0013 to the Tribunal.
After considering Claimants' 24 November 2016 response to Respondent's motion, the Tribunal admitted Exhibit R-0013 on 26 November 2016.
On 28 November 2016, Claimants added three people to their list of participants. On the same day, Respondent raised concerns regarding Mr. David Pusztai's attendance at the Hearing. The Tribunal invited the Parties' responses the following day.
On 30 November 2016, Respondent submitted a letter-memorial clarifying its objection to Mr. Pusztai's involvement in the case. Claimants wrote in response, mentioning that counsel had terminated Mr. Pusztai's internship contract. As a result, the Tribunal determined, on the same date, that no further action would be required from it.
On 3 December 2016, the Chairman informed counsel that, due to illness, he would be unable to be physically present at the Hearing. To preserve the Hearing Dates, the Chairman proposed that, in his absence, the Hearing could continue if the Parties were to consent. While Claimants consented to the proposal, Respondent objected to the Hearing being conducted in the absence of the Chairman. As a result, the Hearing was cancelled and the Parties and the Tribunal immediately began discussing available alternate Hearing dates.
On 7 December 2016, the Tribunal - having found no other available 4-day periods - invited the Parties to block 22 - 25 May 2017 for a Hearing in London. The following day, Claimants objected to the later Hearing date and urged the Tribunal to again try to find a more suitable date. Respondent accepted the 22 - 25 May 2017 period.
On 9 December 2016, the Tribunal asked Claimants to confirm whether - despite Claimants' objection to the lateness of the Hearing - those dates would nonetheless be a possibility for Claimants. Claimants confirmed their availability to hold the Hearing on the proposed dates in May 2017.
On 12 December 2016, the Tribunal issued Procedural Order No. 7 Regarding the New Dates for the Hearing on the Merits ("PO-7").
On 18 January 2017, the Tribunal - considering that the Parties have relied on numerous arbitration awards, none of which are binding on the present proceedings - wrote to the Parties to request that Respondent submit a copy of the Edenred Award under cover of a confidentiality order for use in the present proceedings. The Tribunal considered that the Parties should be given the opportunity to comment on that Award before the Hearing in May.
On 30 January 2017, Respondent requested that the Tribunal reconsider its request that Respondent submit the Edenred Award to the Tribunal. On the following day, the Tribunal requested Claimants' comments on Respondent's request.
On 6 February 2017, Claimants responded that they opposed Respondent's objection and agreed with the Tribunal's request for production of the Edenred Award.
On 15 February 2017, and after taking the Parties' views into consideration, the Tribunal issued Procedural Order No. 8 on confidentiality ("PO-8") and Procedural Order No. 9 ("PO-9") on document production, ordering Respondent to produce the Edenred Award and granting the Parties until 24 March 2017 to simultaneously submit their respective comments on that Award.
On 24 February 2017, Respondent produced the Edenred Award to the Tribunal and to Claimants.
On 24 March 2017, Claimants requested an extension - until 27 March 2017 - to submit their comments on the Edenred Award. The Tribunal granted this extension on the same day.
On 27 March 2017, the Parties simultaneously submitted their respective comments on the Edenred Award to the Tribunal. While the Parties agreed that the Edenred case has striking similarities with the present matter, they differed on the role that the Edenred Award should have in the present matter.
On 14 April 2017, Respondent wrote to the Tribunal to notify it that the CJEU was seized of the case Slovak Republic v. Achmea. Respondent argued that, while the decision in Achmea would not bind this Tribunal, it would become part of EU law and would, thus, become part of the applicable law which the Tribunal would need to consider in determining its jurisdiction. Respondent requested that the Tribunal review its jurisdiction in light of the decision in Achmea, once the outcome of that case became known.
On 21 April 2017, Claimants wrote in response to Respondent's letter of 14 April 2017, arguing that the Tribunal should consider Respondent's letter to be an untimely objection to jurisdiction. In the alternative, Claimants requested that the Tribunal order Respondent to file its full submission on the objection to jurisdiction by 28 April 2017.
On 22 April 2017, Respondent wrote in response to Claimants' letter of 21 April 2017 and proposed that, should the Tribunal require additional written submissions on the matter, that those be provided in the form of limited post-hearing submissions.
On 23 April 2017, Claimants urged the Tribunal to reject Respondent's letter of 22 April 2017 and reiterated their request of 21 April 2017.
On 24 April 2017, the Tribunal informed the Parties that it required no further submissions regarding the matters presented in Respondent's letters of 14 and 22 April 2017, and Claimants' letters of 21 and 23 April 2017.
On 4 May 2017, the Parties informed the Tribunal of their agreement that the experts give presentations in lieu of direct examination. The following day, the Tribunal informed the Parties that it agreed with the joint proposal.
On 12 May 2017, Respondent proposed reversing the order of the appearance of its two fact witnesses.
On 18 May 2017, the Tribunal sent the final Hearing schedule and the list of participants to the Parties.

A Hearing was held in London from 22 - 25 May 2017. The following individuals attended the Hearing:

Professor Dr. Karl-Heinz Böckstiegel President
The Honourable L. Yves Fortier, PC CC OQ QC Co-Arbitrator
Sir Daniel Bethlehem, QC Co-Arbitrator
Mr. Francisco Abriani Secretary of the Tribunal
Mr./Ms. First Name/Last Name Affiliation
Ms. Isabelle Michou Quinn Emanuel Urquhart & Sullivan
Mr. Jehan-Damien Le Brusq Quinn Emanuel Urquhart & Sullivan
Ms. Lisa Stefani Quinn Emanuel Urquhart & Sullivan
Mr. Jeremie Kohn Quinn Emanuel Urquhart & Sullivan
Mr. Laurence Shore Herbert Smith Freehills
Ms. Elizaveta Tukhsanova  
Ms. Márta Nagy  
Mr. James Nicholson FTI Consulting
Ms. Juliette Fortin FTI Consulting
Mr./Ms. First Name/ Last Name Affiliation
Ms. Kiera Gans DLA Piper
Mr. Stanley McDermott DLA Piper
Ms. Natalie Kanerva DLA Piper
Ms. Aurélie Ercoli DLA Piper
Ms. Rachel Hamilton DLA Piper
Mr. Andras Nemescsoi DLA Piper
Mr. David Kohegyi DLA Piper
Ms. Zsofia Deli DLA Piper
Mr. Cosimo Spagnolo DLA Piper
Mr. Andras Lovas Sarhegyi and Partners Law Firm
Dr. Zoltán Guller  
Mr. Kristof Szatmáry  
Mr. Brent Kaczmarek Navigant Consulting
Mr. Kiran Sequeira Navigant Consulting
Ms. Emily Khan Navigant Consulting
Mr. Stuart Dekker Navigant Consulting
On 22 May 2017, Claimants informed the Tribunal that LCD had changed its company name to UP. Claimants confirmed that UP remains the 100% owner of CD Internationale, which in turn remains the 100% owner of CD Hungary and the 100% indirect owner of Vyroba. Claimants provided the Tribunal an updated version of Exhibit C-0002 and new Exhibits C-0189 - C-0191.
On 24 May 2017, the Tribunal wrote to the Parties with questions to be addressed in their Closing Statements and post-hearing briefs.
On 26 May 2017, the Tribunal issued Procedural Order No. 10 Regarding the Procedure After the Hearing on the Merits ("PO-10") to the Parties.
On 16 June 2017, the Parties informed the Tribunal that they had agreed on a postponement of the deadline to submit their transcript corrections from 16 June 2017 until 20 June 2017.
On 26 June 2017, in light of the CJEU proceedings in the case of Slovak Republic v. Achmea, the Tribunal proposed several changes to PO-10, to be issued in the form of a further procedural order, and requested the Parties' comments.
On 27 June 2017, the Tribunal wrote to the Parties in response to LCD's name change to UP and advised that, if it did not hear from the Parties by 5 July 2017, the Tribunal and ICSID would change the reference in these proceedings.
On 29 June 2017, Claimants wrote in response to the Tribunal's proposed amendments to PO-10. Respondent submitted its response on 3 July 2017. Claimants made two objections to Respondent's 3 July 2017 responses on 5 July 2017. Respondent replied on the same day.
On 7 July 2017, the Tribunal issued Procedural Order No. 11 Regarding Post-Hearing Briefs ("PO-11") and notified the Parties that this arbitration is now referred to as "UP and C.D Holding Internationale v. Hungary" and that the ICSID website would be updated accordingly.
On 1 August 2017, Claimants notified the Tribunal that Mr. Laurence Shore would cease to represent Claimants once his position with Herbert Smith Freehills ended on 30 August 2017.
On 22 September 2017, Claimants requested that the Tribunal authorize both Parties to submit post-hearing briefs of 100, rather than 75 pages. By email of the same date, Respondent indicated that had no objection to the proposed extension.
On 22 September 2017, Claimants and Respondent submitted their respective post-hearing briefs to the Tribunal.
On 26 September 2017, the Tribunal wrote to the Parties, stating that it had no objection to the Parties' agreement on the extension of page limits for the post-hearing briefs.
On 27 September 2017, Respondent wrote to the Tribunal noting that Claimants - despite the agreed extension to 100 pages - submitted 118 pages of material to the Tribunal. Respondent urged the Tribunal to (1) refrain from reading the Annexes to Claimants' submission and/or (2) consider this matter as part of an eventual cost award. Claimants responded to Respondent's email on the same day.
On 28 September 2017, the Tribunal responded to the Parties, indicating that it would keep these issues in mind in the course of its deliberations and for the purposes of its award, including costs.
On 15 December 2017, the Tribunal informed the Parties that it had its first deliberation and hoped to issue the Award in Spring 2018. The Tribunal invited the Parties, pursuant to §§ 3.1 and 3.2 of PO-10, to submit their Statements of Costs to the Tribunal by 12 January 2018 and to submit their comments on the Statement of Costs submitted by the other side by 26 January 2018.
On 12 January 2018, the Parties simultaneously submitted their respective Statements on Costs to the Tribunal.
On 26 January 2018, by simultaneous submission, Claimants submitted their comments to Respondent's Statement of Costs and Respondent informed the Tribunal that it had no further comments on Claimants' Statement of Costs.
On 28 March 2018, Respondent submitted its comments related to the Achmea Decision.
On 18 April 2018, Claimants submitted their comments related to the Achmea Decision, together with exhibits CLA-0256 and CLA-0257.
On 2 May 2018, Respondent submitted its Response to Claimants' letter to the Tribunal of 18 April 2018 concerning the Achmea Decision.
On 16 May 2018, Claimants submitted their Response to Respondent's comments concerning the Achmea Decision, together with new legal exhibits CLA-0258 - CLA-0263 and an updated Table of Authorities.
On 20 August 2018, the EC lodged its Application for Leave to Intervene as a Non-Disputing Party, together with two supporting Annexes, with the Tribunal.
On 22 August 2018, the Tribunal invited the Parties to submit their comments to the EC's Application, by Friday, 24 August 2018.
On 24 August 2018, the Parties submitted their respective comments to the EC's Application.
On 27 August 2018, the Tribunal issued Procedural Order No. 12 Regarding the European Commission's Application ("PO-12"), concluding that the EC's Application must be denied according to Rule 37(2) of the ICSID Arbitration Rules.
By letter dated 27 August 2018, the Tribunal closed the proceedings in accordance with Rule 28(1) of the ICSID Arbitration Rules.




Claimants' most recent iteration of its request for relief is contained in their Post-Hearing Submission ("CPHB-I"), where Claimants provided the following summary of relief sought:

In light of the above, Claimants ask the Tribunal to:

- Find that Hungary expropriated UP and C.D Holding Internationale of their investment in Hungary, in breach of Art. 5(2) of the BIT;

- Find that Hungary (i) failed to accord UP and C.D Holding Internationale's investment in Hungary fair and equitable treatment and (ii) adopted unjustified and discriminatory measures that impeded the management, maintenance, use, enjoyment or liquidation of that investment, in breach of Art. 3 of the BIT;

and consequently

- Award compensation to UP and C.D Holding Internationale for their entire loss in the amount of €39,465,434 plus compound interest and net of any taxes, subject to adjustment until the date of payment;

- Order Hungary to pay all costs, expenditures and fees in respect of the arbitration proceedings including legal fees incurred by UP and C.D Holding Internationale.3

The only difference between this summary of relief sought and Claimants' previous requests is the amount of the alleged entire loss, which in Claimants' Request for Arbitration was "EUR 18.5 million, subject to adjustment",4 in their Memorial was "€31,163,000, plus compound interest subject to adjustment until the date of payment",5 and in their Reply was "€35,589,000, plus compound interest and net of any taxes, subject to adjustment until the date of payment."6



In its Counter-Memorial ("R-I"), Respondent made the following requests:

307. Accordingly, and for the reasons set forth above, Hungary respectfully requests that the Tribunal:

a. Decline jurisdiction over this dispute with respect to Claimants' claims under Article 3 of the BIT due to the absence of Respondent's consent to ICSID jurisdiction over such claims;

b. Dismiss all of Claimants' claims under Article 5(2) of the BIT;

c. In the event the Tribunal determines that it has jurisdiction over the claim under Article 3, to dismiss those claims in their entirety; and

d. Award Hungary all of the costs and expenses incurred in these proceedings, including attorneys' fees.7


In its Rejoinder ("R-II"), Respondent requested the Tribunal to:

(1) Dismiss all of the Claimants' claims under Article 5(2) and Article 3 of the BIT;

(2) Award Hungary all of the costs and expenses incurred in these proceedings, including attorneys' fees.8


Respondent's 2 May 2018 letter regarding the Achmea Decision contained the following request for relief:

94. For the foregoing reasons, Hungary requests the Tribunal to conclude that it lacks jurisdiction to adjudicate this dispute owing to the preclusion of Article 9(2) of the BIT. In the alternative Hungary requests the Tribunal to find that it is barred from exercising any jurisdiction it may have and from rendering an award on the merits of this case.9



The following summary is based on the submissions from the Parties, and is without prejudice as to their relevance for the decisions of the Tribunal.
According to Respondent, "fringe benefits" refer to remuneration other than wages that are paid to employees as part of their compensation packages. Historically, Respondent has used vouchers - "a subsidy that grants limited purchasing power to an individual to choose among a restricted set of goods and services" - to facilitate the provision of fringe benefits.10 The employers' incentive to buy vouchers, and the employees' incentive to use them, hinges on preferential tax treatment. Unlike standard cash compensation, vouchers are either tax exempt (both from payroll tax for employers and income tax for employees) or are taxed at a lower rate, within a determined limit.11 Through the use of vouchers, the government can achieve specific social goals by encouraging employees to consume particular goods and services, and employers can incentivize employees through a means other than wages.12
In 1989, meal vouchers were introduced in Hungary as an alternative for companies that could not provide employees a canteen.13 Respondent states that "the meal voucher originated in pursuit of a social good in recognition of the fact that a healthy and well-fed workforce is more productive."14
The fringe voucher business consists of the following sequence: (1) an issuer (like CD Hungary) sells vouchers to employers at face value, plus a commission; (2) the employer gives vouchers to employees as part of a broader compensation package; (3) employees use their vouchers to pay for goods and services at affiliates that have entered into an agreement with the issuer to accept such vouchers as payment; and (4) the affiliates claim payment from the issuer for the face value of the collected vouchers, minus a commission. Issuers derive revenues from: (1) the commissions charged to employers and affiliates; (2) investments made during the period between voucher issuance to employers and reimbursement to affiliates; and (3) unclaimed vouchers (such as lost or expired vouchers), the face value of which is retained by the issuer.15 According to Respondent, this carries the risk that issuers operate as banks and could be unable to meet payment obligations on demand.16 Claimants contest this and argue that although capital requirements were not mandated, Claimants would have complied with such had they existed.17
By 1992, dependence on the fringe benefit system was such that non-wage compensation amounted to 56% of employee compensation.18
In 1995, Respondent enacted Hungarian Act CXVII of 1995 on Personal Income Tax ("PIT Law"), which instituted reforms to the voucher system.19 These reforms maintained the tax-free status afforded to meals provided at the workplace (hot meal) and to vouchers used to purchase food (cold meal).20 Employees could receive up to HUF 1,200 per month of tax-free cold meal vouchers and up to HUF 2,000 of tax-free hot meal vouchers.21 According to Respondent, the goal of the 1995 PIT was to allow the voucher system to develop and to achieve the policy objectives driving the system, and to regulate it once it had evolved and the circumstances so warranted.22 Each year, Respondent amends the PIT and enacts a new tax scheme governing the fringe benefit system.23
In late 1995, Claimants decided to enter the Hungarian market.24 LCD (now UP) opened an office in Budapest in October 1996.25 Le Cheque Déjeuner Kft ("CD Hungary") is Claimants' wholly-owned subsidiary in Hungary. It was created in November 1996 and began operations in 1997 as a fringe voucher issuer.26 CD Hungary was primarily active in the food voucher business. It marginally issued gift vouchers and school supplies vouchers for public and private sector clients.27
In 1998, Respondent introduced a new type of subsidized employee benefit - a holiday voucher - to provide tax-free status for domestic tourism. Only the Hungarian National Recreation Fund ("MNUA") was authorized to issue these vouchers.28
In 1999 and 2000, two tax reforms were passed. First, the tax rate applicable to cold meal vouchers and gift vouchers was substantially increased, prompting CD Hungary to focus on hot meal vouchers only. Later, the tax rates applicable to hot and cold meal vouchers were re-aligned, prompting CD Hungary to create a new type of vouchers that could be redeemed for both meals.29
In 2000, CD Hungary expanded by purchasing a regional issuer.30 Also in 2000, CD Hungary -together with other voucher issuers - formed a lobbying organization called the "Association des Emetteurs de Titres de Restauration" ("AETR").31
On 24 May 2002, Claimants state that Le Cheque Déjeuner Vyroba - Vyroba, s.r.o. ("Vyroba") was created as a wholly owned subsidiary of LCD (now UP) to supply CD Hungary and other eastern European LCD (now UP) subsidiaries with pre-printed vouchers.32
In 2003, Respondent amended the PIT to expand the voucher system for fringe benefits and increased the tax-free limits.33 Also in 2003, Respondent declared the "Johan Bela" National Programme for the Decade of Health, which aimed to expand life expectancy by 3 years over the next 10 years. The program focused in part on meal provision in schools and mass catering (canteen) services.34
In 2004, CD Hungary first became profitable.35 CD Hungary was profitable between 2004 -2009.36
In 2005, Respondent amended the PIT and doubled the limit for food and meal vouchers, to HUF 4,000 and HUF 8,000, respectively.37 In the same year, the ILO reported that the goal of improving nutrition should be implemented through the voucher system.38
In November 2006, a study on meal vouchers and holiday vouchers was completed by Janos Kun for the Hungarian Financial Supervisory Authority ("PSZAF").39
In 2008, Respondent was hit particularly hard by the global financial crisis and requested IMF, World Bank, and EU assistance.40 Respondent's industrial production plummeted 23% year-on-end.41 According to Respondent, "the 2008 economic crisis led to serious debt problems and budget deficits that forced the Government to re-evaluate the large amount of tax revenue that it was foregoing in the form of tax exemptions for fringe benefits."42 According to Respondent, the social utility and effectiveness of the fringe benefit system had been diminished by widespread misuse of vouchers, unwarranted commissions, and a general lack of oversight, all of which made the system no longer serve its public purpose.43 Claimants agree that there was political change following the 2008 financial crisis, but state that Respondent has failed to prove the existence of "numerous structural problems, rampant misuse, and economic inefficiencies."44
One of the initial austerity measures adopted was the elimination of any tax advantage afforded to meal vouchers.45 In 2009, prior to becoming Respondent's Prime Minister, Mr. Gordon Bajnai introduced the Reform 2009, which included the abolition of meal vouchers and an increase in taxes on all voucher types as of 1 January 2010.46 Reform 2009 went into force in 2010.47 According to Claimants, Reform 2009 introduced the taxation of hot meal vouchers and effectively eliminated cold meal vouchers by taxing them at 97.89%. In response, Claimants reorganized their commercial team and rethought their commercial strategy. Claimants increased the total value of vouchers issued in 2010.48
In 2010, Multi-Pay Zrt developed an electronic card that could be used to purchase hot and cold meals.49
In January 2010, Claimants and AETR prepared proposals to enhance the economic development of the voucher market and to "combat and sanction the misuse of vouchers."50
According to Respondent, Mr. Bajnai's reforms were not popular. In the 2010 election, the FIDESZ Party took office with a clear mandate to reform to the fringe benefit system while maintaining popular social policies.51 According to Respondent, the new government put together a team to review the voucher system to (1) identify existing problems and evaluate the system's effectiveness in achieving its goals, and (2) remediate and develop reform proposals.52
On 5 May 2010, Mr. Viktor Orbán (Prime Minister of Hungary) made a speech in the Parliamentary Assembly entitled "Hold individuals accountable and saving the country from economic collapse", wherein he advocated for sweeping reforms.53
On 28 September 2010, Mr. Endre Horváth sent Dr. Ádám Balog (Deputy Under-Secretary of Economic Development) a memo on the "Brief Proposal for the Introduction of the Szechenyi Revitalization Card" ("SZÉP Card Proposal").54 According to Respondent, the SZÉP Card was initially conceived as an electronic card to replace the holiday voucher, which at the time was exclusively provided by the MNUA.55
Claimants state that, in November 2010, the Hungarian government adopted a constitutional amendment limiting the scope of the Constitutional Court's review of acts and decisions related to central taxes.56
On 18 November 2010, there was a meeting between President Sarkozy of France and Prime Minister Orbán of Respondent regarding difficulties that French businesses faced in Hungary. They agreed to appoint two mediators to act as facilitators.57
On 13 December 2010, the SZÉP Card Proposal was submitted to public administrative bodies and agencies.58
According to Claimants, CD Hungary controlled 18.1% of the Hungarian voucher market by 2011.59
Reform 2010 went into force on 1 January 2011.60 Reform 2010 reintroduced cold meal vouchers and recalibrated the taxes applicable to the remaining vouchers.61
The French - Hungarian mediation was announced on 14 January 2011.62
On 28 January 2011, Ms. Róza Nagy (Undersecretary of Administration, Ministry of National Economy of Hungary) received a letter regarding consultations on the draft proposal for the government decree on rules of issuance and utilization of the SZÉP Card from the Ministry of Public Administration and Justice ("KIM") Undersecretary for Administration.63
On 8 February 2011, Respondent's public administrative bodies and agencies closed the assessment and evaluation of the SZÉP Card Proposal.64
On 15 February 2011, the Ministry for National Economy noted, in a letter to the PSZAF, that it would be important to ensure that the 2-3 largest actors should be able to comply with the requirements for issuing SZÉP Cards.65 The Government wanted the SZÉP Card to offer electronic services and have the security, safety, and surety akin to that of electronic bank cards. It was also vital that an issuer could provide nationwide coverage to serve rural and urban regions. According to Respondent, initially the government wanted itself or a state-run entity to issue the SZÉP Cards, but later opted for a market-based approach.66
On 23 February 2011, Mr. Zoltán Horváth (Deputy President of the Hungarian Competition Authority) wrote a letter to Mr. Kristof Szatmáry (Minister of State, Ministry for National Economy), finding the SZÉP Proposal acceptable in terms of competition law.67
On 28 February 2011, a letter from Mr. László Balogh provided advice on who could become a SZÉP Card Issuer.68
On 12 April 2011, Decree No. 55/2011 on the Rules of Issuance and Use of the Szechnyi Recreational Card ("Decree No. 55/2011") was published. Decree No. 55/2011 introduced the SZÉP Card (a dematerialized alternative to paper vouchers).69
Decree No. 55/2011 created a national electronic card system that allowed Hungarian employees to receive up to HUF 300,000 annually for expenditures related to holidays. As a result of deliberations from the Ministry of the Interior, Ministry of Defense, KIM, Ministry of Foreign Affairs, Ministry of Natural Resources, Ministry of National Development, and Ministry of Rural Development, the use of the SZÉP Card expanded beyond travel expenses to include other goods and services.70 Pursuant to Decree No. 55/2011, the total costs for the use of the SZÉP Card could not exceed 1.5% of the value of the payments made.71
The Parties dispute the amount of research that led to Decree No. 55/2011. According to Respondent, after a three month review and comment period, on 28 March 2011, Respondent received an official proposal stating that the purpose of the SZÉP Card would be to facilitate the utilization of services under the fringe benefits scheme in a more efficient and less expensive way.72 The proposal made it clear that the goal was to raise standards related to the issuance of such vouchers. It was estimated that the SZÉP Card scheme would generate a 35% increase in the turnover of the domestic tourism industry within a period of 3 - 5 years. Respondent states that it was also believed that issuers would be able to make a profit in approximately three years.73 Claimants have stated that there is no evidence of any review or structural problems and, regardless, that the measures undertaken by Respondent were not necessary to fix the alleged problems.74
In May 2011, MNUA was reorganized into a non-profit corporation wholly owned by Respondent.75
On 4 May 2011, Claimants and Tesco modified their contract on vouchers, retroactive to 14 February 2011.76
On 2 July 2011, Dr. Bence Rétvári (Member of Parliament) made Speech No. 211/324 at a Plenary Session of Parliament about the duty to provide meals and free time activities to needy children in Hungary using the Erzsébet voucher, which was then under consideration in Parliament.77
On 4 July 2011, Claimants received the "First Data, Prepaid Card Issuing and POS acquiring Services indicative proposal for Le Cheque Déjeuner Hungary."78
On 18 July 2011, the "Proposal on the Modification of Government Decree 55/2011 (IV.12) on the rules of issuance and usage of the SZÉP Card" was issued.79
In September 2011, a proposal re-conceptualized the SZÉP Card as an electronic wallet with different pockets - each subject to different tax-exemption caps: hotel and accommodation services (HUF 225,000 per year), restaurant services (HUF 150,000 per year); and other leisure and recreational services (HUF 75,000 per year).80 According to Claimants, the SZÉP Card's ability to be used for hot meals made it a direct competitor with CD Hungary's meal vouchers.81
In September 2011, CD Hungary, through AETR, attempted to participate in the preparation of the draft of the 2011 Reform.82 During the last two weeks of September 2011, AETR met on four occasions to discuss the proposed 2011 Reform.83
On 22 September 2011, CD Hungary expressed concerns about the proposed 2011 Reform to the Hungarian Embassy in France.84 The French government intervened on 22 September 2011.85
On 30 September 2011, Claimants, Sodexo, and Edenred filed a complaint with the EC alleging that the proposed 2011 Reform violated the TFEU and the European Services Directive.86
On 7 October 2011, Respondent replied to the French Government's intervention of 22 September 2011, stating that the criteria for issuing the SZÉP Card would not be changed.87
On 11 October 2011, Respondent received a 100+ page proposal related to the 2011 Reform. According to Respondent, that document explained that the purpose of the proposal was to decrease public debt and accelerate economic growth and competitiveness.88 The proposal stated that then-issuers of vouchers were not able to qualify to issue SZÉP Cards.89
On 14 October 2011, the bill proposing the 2011 Reform was introduced.90
On 18 October 2011, AETR wrote to the Ambassador of Hungary to France expressing a wish to be a part of the reform of the fringe benefit system.91 Mediators were engaged to help AETR and Hungary reach an agreement. The mediators issued a report on 28 October 2011.92
On 23 November 2011, President Sarkozy of France - upon AETR's request - wrote to Prime Minister Orbán to express concerns about the proposed reforms.93
On 29 November 2011, IR 2011 Law amended law XCVII/1995 ("2011 PIT Law").94 This law created the new meal voucher, the Erzsébet voucher, which would be issued exclusively by MNUA.95 Respondent explains that the Erzsébet voucher was established pursuant to a larger plan - the Erzsébet Program - which was introduced by the KIM. The Erzsébet Program would serve the two goals of (1) improving health and nutrition of disadvantaged Hungarians, and (2) funding social welfare programs that would be defunded after 2011, when the Holiday Vouchers would be discontinued.96 Claimants allege that the SZÉP Card and the Erzsébet voucher were designed and implemented as a "package" which, together with the 2011 PIT Law, are referred to as the "2011 Reform."97

The 2011 Reform required Issuers of the SZÉP Card to meet five requirements, that they:

• have existed for at least five years before they begin issuing SZÉP Cards;

• be associated with a mutual insurance fund and provide services related to its activity;

• have issued at least 100,000 cash-substitute payment cards at the end of the last financial year preceding the request to issue the SZÉP Card;

• have premises open to the public in every Hungarian city with more than 35,000 inhabitants; and

• have at least two years' experience in the issuance of electronic vouchers as fringe benefits and more than 25,000 vouchers issued at the end of the last financial year .98

In addition to these requirements, Claimants state that a company seeking to meet these requirements could not use other service providers within its group of companies to meet the requirements of (1) having premises in every city of more than 35,000 inhabitants, (2) having at least 100,000 bank cards issued at the end of the last financial year, or (3) having 2 years of experience in the field of electronic vouchers under Section 71 of the PIT.99
The Parties dispute whether "Non-Hungarian Issuers" (defined as Sodexo, Edenred, and Claimants,100 who Claimants state held almost 100% of the market share for fringe benefit vouchers not including vacation vouchers as of 2011101) could meet the requirements to issue SZÉP Cards. According to Claimants, none of the Non-Hungarian Issuers could meet the criteria and only OTP Bank, MKB Nyugdipenztart es Egeszsegpenztart Kiszolgalo Kft (subsidiary of MKB Bank Zrt.), and K&H Cszoportzolgaltato Kft (subsidiary of K&H Bank Zrt.) became SZÉP Card Issuers.102 Respondent states that the three issuers of SZÉP Cards were not Hungarian-owned: MKB was owned solely the German Bayerische Landesbank from 2010 - 2014, K&H Bank was and is owned by the Belgian KBC Bank N.V., and 62.5% of the shareholders in OTP Bank were foreign individuals, with foreign, institutional, corporate investors, and international development institutions holding 62.7% of the shares.103 At the Hearing, Respondent noted that Ms. Nagy explained that Claimants were not interested in working with a bank because it would have impacted their profits and were not interested in issuing the SZÉP Card because the economics did not work.104
On 12 December 2011, Hungarian politicians issued statements about the rationale of the 2011 Reform, the creation of the SZÉP Card, and the creation of the Erzsébet voucher.105 Dr. Bence Rétvári (State Secretary of the KIM) informed Parliament that the proposal would enable 100% of the profit related to the relevant voucher market to "stay in Hungary and serve a public purpose, the social and child-based catering..."106 Mr. Miklós Soltész (Secretary of State at the PSZAF) stated that the profits would be used for children and their holidays, rather than being transferred from Respondent State.107
On 15 December 2011, there was a "Proposal for the Government on the amendment of 55/2011 on the Rules of Issuance and Use of the [SZÉP] Card."108
The 2011 Reform went into effect on 1 January 2012.109 Following this, Claimants, Edenred, and Sodexo issued a joint press release stating that Hungary was excluding French companies from the meal voucher market.110
As of 1 January 2012, there were three tax rates applicable to all benefits: 0%, 30.94%, and 51.17%. The Parties dispute how the tax rates applied to individual voucher types. According to Respondent, in addition to the SZÉP Card and the Erzsébet voucher, other vouchers with no issuer restriction or requirement (including meal vouchers that could be redeemed at workplace canteens up to HUF 12,500/month) were subject to the 30.94% tax rate.111 Beyond that, any issuer could continue to issue vouchers redeemable for hot or cold meals taxed at the preferential rate of 51.17%.112 Claimants dispute this and argue that the preferential rate of 30.94% was only available for the SZÉP Card and the Erzsébet voucher and, thereby, excluded CD Hungary from the market.113 Claimants state that the 2011 Reform reclassified their meal vouchers as "specific defined benefits" under Art. 70 of the PIT and subjected them to the tax of 51.17%.114
On 6 January 2012, Prime Minister Orbán responded to President Sarkozy's letter of 23 November 2011, noting his concerns but not commenting on the 2011 Reform.115 French and Hungarian Foreign Ministers discussed the situation on 24 January 2012, and the French Government issued a press release regarding the negotiation efforts.116
By 30 January 2012, Claimants' business activity in Hungary was 10% of what it was the previous January.117
The SZÉP Card and Erzsébet voucher benefitted from a massive publicity campaign.118 Claimants also state that 99% of CD Hungary's public sector clients admitted that they had been pressured to choose the Erzsébet voucher and had, therefore, stopped using CD Hungary's vouchers.119 Respondent states, however, that Claimants have stated in other fora that 32% of their customers were lost for reasons unrelated to the 2011 Reform.120
On 6 March 2012, Ms. Nagy - representing AETR - attended a meeting with Mr. Szatmáry.121
On 27 March 2012, Claimants held the Hungarian Branch Strategic Meeting to discuss CD Hungary's future, in light of the pending economic conditions.122
On 6 April 2012, the French Ministry of Foreign Affairs announced that the Hungarian Ambassador had been summoned to the Quai d'Orsay to discuss the 2011 Reform.123
On 13 April 2012, AETR members met with Mr. Guller and discussed three possible solutions to the difficulties created by the 2011 Reform. Other anticipated attendees, including representatives from the Government, representatives responsible for the SZÉP Card, MNUA, and Social Partners, were absent.124
In June 2012, LCD (now UP) implemented an initial redundancy plan for 40 of its employees.125
On 21 June 2012, the EC initiated an infringement procedure against Respondent.126
On 28 August 2012, there were negotiations between Claimants (through AETR) and Respondent.127
In November 2012, the 2011 Reform was amended.128
On 21 November 2012, the EC issued a reasoned opinion against Hungary, finding that the measures constituted a breach of the TFEU and the Services Directive (2006/123/EC).129
In January 2013, after the IR 2011 Law amendments from November 2012 took effect, LCD (now UP) began taking steps to discontinue voucher activities in Hungary.130 On 7 February 2013, Claimants announced that CD Hungary had ceased to issue vouchers.131 CD Hungary terminated its agreements with companies accepting vouchers effective 31 May 2013.132 CD Hungary commenced further employee layoffs.133 As of 30 June 2013, CD Hungary ceased reimbursing vouchers.134
On 20 June 2013, the EC announced that it would refer the Hungarian fringe benefits matter to the CJEU.135
On 26 July 2013, Mr. Mihály Varga (Minister of the National Economy) replied to Mr. Landriot's (Claimants' then-CEO) 19 April 2013 letter, on behalf of Respondent.136
In September 2013, Claimants state that CD Hungary closed its office in Budapest.137 Respondent, however, states that CD Hungary continued to have financial activity in Hungary in 2014.138
From September - November 2013, Claimants attempted to negotiate a settlement with Respondent.139 Claimants commenced these ICSID proceedings in December 2013.140
In February 2014, Erzsébet Utalványforgalmazó carried out a test purchase with one of its contractual partners, "Csaba Kassai." This test showed irregularities and Erzsébet Utalványforgalmazó informed the partner that such irregularities would be cause for termination of the contract.141 In April 2014, the Hungarian Trade Licensing Office issued a summary on the experiences related to compliance with Decree No. 55/2011 on the rule of the issuance and use of the SZÉP Card.142 According to Claimants, audits conducted by the Trade Licensing Office suggest that misuse of SZÉP Cards is widespread.143
On 10 April 2014, the EC brought its action, EC v. Hungary, Case C-179/14, seeking a declaration that Hungary has infringed the Services Directive by adopting and maintaining in force the SZÉP Card system governed by Decree No. 55/2011, to the CJEU.144
In September 2014, the European Large Families Confederation gave Hungary an award as an acknowledgement for the Erzsébet Program.145 By October 2014, the SZÉP Card system was used by over 1 million employees and 58,000 affiliates.146
On 17 September 2015, the Advocate General issued an opinion in EC v. Hungary.147
On 23 February 2016, the CJEU found that the 2011 Reform was discriminatory, unjustified, and disproportionate. All four of the complaints brought by the EC in relation to the SZÉP Card and the complaint regarding the Erzsébet voucher were upheld.148
Respondent states that, beginning in mid-2016, Hungary began revising the PIT to remove preferential tax treatment for the Erzsébet vouchers as of 1 January 2017.149 According to Respondent, from that date forward, the Erzsébet voucher would be taxed at the same rate as hot or cold meal vouchers (49.98%). Respondent is also revising the criteria to qualify as a SZÉP Card Issuer.150


The following summaries are based on the Parties' responses, in their post-hearing briefs, to the Tribunal's questions contained in PO-10.

1. Tribunal Question (f) Regarding the Applicable Tax Rates

f) Having regard to paragraphs 82 and 83 of the Respondent's Rejoinder, the Parties are asked to elaborate on the tax rate applicable to Claimants' meal vouchers before and after the 2011 changes.

(a) Claimants' Arguments

Prior to the 2011 Reform, Claimants' hot and cold meal vouchers were subject to a tax rate of 19.04%, and this rate applied to benefits valued up to an exemption ceiling of HUF 18,000 per employee. Following the 2011 Reform, Claimants' cold and hot meal vouchers were subject to a tax rate of 51.17%, and there was no exemption ceiling.151
After the 2011 Reform, the SZÉP Card and the Erzsébet voucher were given a more advantageous rate than the one applicable to Claimants' vouchers, with the 30.94% rate applying to the SZÉP Card and the Erzsébet voucher and the 51.17% rate applying to Claimants' vouchers.152 This difference was confirmed in the Edenred Award.153
Claimants argue that it is irrelevant that CD Hungary could theoretically compete with the SZÉP Card and the Erzsébet voucher on equal terms above the exemption limit, as no company would purchase vouchers above the exemption ceiling.154

(b) Respondent's Arguments

In 2011, hot and cold meal fringe benefits were available below HUF 18,000 at an effective tax rate of 19.04%. Above HUF 18,000, these benefits were taxed at an effective tax rate of 51.57%. In 2012, hot and cold meal fringe benefits were taxed at an effective rate of 51.17%.155 Although the tax exemption granted to the SZÉP Card and the Erzsébet voucher is 20% less that that applied to the hot and cold meal vouchers, that did not make Claimants' vouchers 20% more expensive. Indeed, in 2013 when Claimants left the market, Claimants' hot meal voucher was USD 8.76 more expensive than an SZÉP Card of the same value (11.4%) and its cold meal voucher was only USD 5.60 more expensive (also, 11.4%). This difference was only relevant up to the exemption cap.156
The comparison of tax treatment of hot and cold meal fringe benefits in 2011 versus 2012 offers little relevant information to the Tribunal. The tax treatment of all fringe benefits changed yearly, and the tax treatment of a particular fringe benefit in one year had no bearing on the tax treatment in another year.157 Ms. Nagy's testimony, which suggested that the 2011 Reforms exhausted an internal budget held by CD Hungary's customers, was unsound and ignored the fact that CD Hungary's customers were companies to whom CD Hungary had no right and with whom they had no long-term commitment. If Claimants' theory is accurate, CD Hungary would have had to convince clients (pre-existing clients who renewed and clients taken from competitors) every year to spend up to the new yearly tax code, regardless of the amount spent in the prior year, as part of their expected business activity.158 Claimants' assumption that conditions would remain unchanged from 2011 onwards is arbitrary and serves to stabilize the legal framework - and that is a condition that neither Claimants nor Hungary contracted for.159

(c) The Tribunal's Considerations

The Parties agree that in 2011, prior to the 2011 Reform, hot and cold meal fringe benefits were available below HUF 18,000 at an effective tax rate of 19.04% and above HUF 18,000 at an effective tax rate of 51.57%. The Parties also agree that, after the 2011 Reform and beginning in 2012, vouchers to provide hot and cold meal fringe benefits were taxed at an effective rate of 51.17%. The SZÉP Card and the Erzsébet voucher could be used for the purchase of hot and cold meal fringe benefits, up to the exemption limit of HUF 12,500 and HUF 5,000 per month, respectively.160 The SZÉP Card and the Erzsébet voucher had a tax rate of 30.94%, up to the exemption limit of HUF 12,500 and 5,000 per month, respectively.161

2. Tribunal Question (h) Regarding Evidence Anticipating Changes to the Meal Fringe Benefit System in 2011

h) The Parties are requested to bring together, and supplement as appropriate, their respective submissions addressing the evidence, or lack thereof, anticipating the changes to the meal fringe benefit system in 2011.

(a) Claimants' Arguments

When Claimants made their decision to invest in Hungary, there was no way that Claimants could have anticipated that Respondent would make discriminatory and unreasonable regulatory changes in the future. Thus, there can be no evidence that the 2011 Reform could have been anticipated.162
While it is undisputed that the market was moving toward dematerialization, the meal voucher market was not ready for dematerialization prior to the 2011 Reform.163 Indeed, Edenred's electronic voucher failed in 2009, confirming that the market was not ready for dematerialization.164 Further, the Erzsébet voucher was launched as a paper voucher rather than as a card because the market was not ready for dematerialization in 2011.165 This paper-based Erzsébet voucher gained a larger share of the market than did the SZÉP Card, in spite of that card's advantages, thereby confirming that the market simply was not ready for electronic cards.166
There was no reason, over the period from 2007 - 2011, to believe that the government would take regulatory measures encouraging or mandating dematerialization and there are no draft bills or internal papers in the record showing that Respondent considered taking such measures prior to the 2011 Reform.167 Exhibit NAV-58 only mentions the view of a person seeking to promote electronic vouchers, that there is a political will supporting the issuance of cards.168 Exhibit C0062 reports only CD Hungary's assumption that the government planned a changeover as of 2010 for all types of benefits in kind.169 As Ms. Nagy explained, even if the Government thought to implement legislation, nothing happened between 2007 and 2012.170 FTI also testified that a prospective buyer looking at the situation in 2011 would have believed that a law mandating dematerialization was not going to be passed within the next five years.171
CD Hungary's decision not to issue an electronic voucher was prudent and legitimate from a business perspective.172 While Claimants knew since 2006 that electronic vouchers were a future potential business, Claimants regularly monitored the market173 and noted that those companies who tried to issue electronic vouchers were unsuccessful.174 In the circumstances, especially where there was a low level of POS terminals in the country,175 issuing an electronic voucher when there was no reason to do so would have jeopardized CD Hungary's profitability.176
Even if CD Hungary had issued an electronic voucher, CD Hungary would be in no better position since it would not have been permitted to qualify as a SZÉP Card Issuer.177 Further, issuing electronic vouchers did not prevent another company, Edenred, from being evicted from the voucher market by the 2011 Reform.178

(b) Respondent's Arguments

Changes to the legislative framework were not a speculative or unknown risk, but were instead predictable and certain. Claimants were aware that the PIT was amended annually and that there was always a possibility of the abolishment or elimination of all fringe benefits.179 All participants in the system anticipated these annual changes and governed themselves in accordance with the constantly evolving legislative framework. For Claimants, their success depended on clients re-signing contracts depending on the mix of products that would be available that year. Every year, Claimants waited until November to design and determine what their business activity was likely to look like the following year.180
As Claimants were aware, the 2008 economic crisis caused significant hardship in Hungary and required dramatic changes to the Fringe Benefit System. The Reform 2009 and the Reform 2010, which imposed taxation on fringe benefits and eliminated certain fringe benefits - including cold meal and gift vouchers - caused, in Claimants' words, the ground to shift. Claimants were, thus, on notice that Respondent was facing difficult fiscal constraints and was concerned about the loss of tax revenues in the inefficient Fringe Benefit System.181 Claimants even anticipated the abolishment of cold meal vouchers,182 the impending shift to electronic cards, and the possibility that the Government might use legislation to accelerate that transition.183
The 2011 Reform was considered long before they were put into force.184 Claimants were aware of the proposed content of the amendments contained in the 2011 Reform as early as September 2011.185 Although Claimants were not entitled to prior notice, and certainly not to better notice than received by other stakeholders, Claimants responded to the publicly available draft law by (1) developing and launching a media campaign criticizing the content of the reforms, (2) lobbying for diplomatic intervention, (3) filing a pre-emptive complaint with the EC, (4) drafting and circulating a white paper containing remarks on the reforms and additional proposals, and (5) organizing more than 20 meetings with Government officials and other voucher issuers.186

(c) The Tribunal's Considerations

In response to the Tribunal's request187 Claimants prepared a table showing when France raised these issues with Hungary. To summarize : Once CD Hungary and the other French issuers discovered the draft proposal on the amendments to the PIT law, they sought to negotiate changes to the proposed legislation and, through AETR, obtained the French Government's support to convince Respondent to change its plans. The French government intervened on 22 September 2011.188 In response, on 7 October 2011, Respondent State replied that the criteria for issuing the SZÉP Card would not be changed.189 On 23 November 2011, President Sarkozy wrote to Prime Minister Orbán to again express his concern.190 On 6 January 2012, after the 2011 Reform entered into force, Prime Minister Orbán responded to President Sarkozy's letter, without commenting on the 2011 Reform.191 Thereafter, on 24 January 2012, the French Government issued a press release regarding negotiation efforts.192 The French Government issued a second press release on 6 April 2012 announcing that the Hungarian ambassador had been summoned in regard to legislative amendments affecting French businesses, especially in the meal voucher sector.193

3. Tribunal Question (i) Regarding Tax Rates on Wages / Salaries vs. Fringe Benefits

i) What was the tax rate on wage / salary payments, as opposed to fringe benefits, during the periods addressed in these proceedings?

(a) Claimants' Arguments

Claimants argue that the comparison between meal vouchers and salaries is irrelevant because there is no market for meal vouchers above the exemption ceiling. Thus, even if CD Hungary's voucher still had a preferential tax over salaries, it does not change the fact that the SZÉP Card and the Erzsébet voucher had a preferential tax over CD Hungary's vouchers.194

(b) Respondent's Arguments

The entire market of fringe benefits is, and has always been, predicated on tax incentives - i.e., preferential tax rates are applied to fringe benefits as compared to those applicable to salary.195 The annual PIT contained a list of fringe benefits that could be enjoyed by Hungarian employees at a reduced rate.196 Considering the 2011 Reforms, it is important to note that (1) the fact that a particular fringe benefit enjoyed preferential tax treatment in one year was no guarantee that it would exist in the next year, (2) it could not be assumed that fringe benefits would enjoy the same or increasingly preferential tax rates and exemption limits as the year before because (3) Government priorities change.197 The 2011 Reform were not focused on Claimants or any other particular issuer. They impacted a variety of fringe benefits.198 The 2011 Reforms did not eliminate hot and cold meal fringe benefits, which continued to receive a significant tax advantage as compared to salary, and these benefits received the same tax rate as applied to the Erzsébet voucher and the SZÉP Card above their respective exemption limits. The 2011 Reforms removed the exemption limits for hot and cold meal vouchers, thus enabling employers to purchase Claimants' vouchers in an unlimited amount, if they so desired.199
At the Hearing, Respondent explained that, although the SZÉP Card can be used to purchase hot meals and the Erzsébet voucher was initially introduced as a cold meal opportunity but could not be used for hot meals, neither is an identical replacement of the pre-existing vouchers, which were retained in the system. Rather, they are less expensive due in part to restricted commissions. They also offer better security.200

(c) The Tribunal's Considerations

In response to the Tribunal's question, the Parties provided detailed tables with their submissions. They show the requested tax rates as they applied to a wide variety of vouchers. The Parties appear to agree on the "effective tax up to the limit" for hot meal and cold meal vouchers from 2008 - 2011, but their numbers diverge from 2012 onwards. Insofar as considered necessary for its reasoning, the Tribunal will address the information provided in the Tables later in this Award.





The following summaries are based on the Parties' responses to Question (a) regarding the relevance of the Achmea Case202, Respondent's letter of 6 March 2018, and the Tribunal's invitation for submissions following the 6 March 2018 Achmea Decision. The CJEU's Achmea Decision was as follows:

Articles 267 and 344 TFEU must be interpreted as precluding a provision in an international agreement concluded between Member States, such as Article 8 of the Agreement on Encouragement and reciprocal protection of investments between the Kingdom of the Netherlands and the Czech and Slovak Federative Republic, under which an investor from one of those Member States may, in the event of a dispute concerning investments in the other Member State, bring proceedings against the latter Member State before an arbitral tribunal whose jurisdiction that Member State has undertaken to accept.203

1. Claimants' Arguments

The Achmea Decision has no relevance for the present proceedings. There is no focus on EU law in this case and the Tribunal is only required to resolve a dispute under the BIT and the ICSID Convention. While the Tribunal may ultimately consider the Achmea Decision as fact (as Claimants argue) or as law, the Tribunal is not bound to apply it or to conclude that it robs the Tribunal of jurisdiction. This Tribunal is an international tribunal constituted under the ICSID convention and is, therefore, outside of the scope of the Achmea Decision.204 Further, this arbitration is held outside the EU, is not seated within the EU, and is not governed by an EU of EU Member State lex loci arbitri. There is no local court within the EU that has jurisdiction over this arbitration, including in the case of a challenge to an award. This arbitration, therefore, does not and cannot infringe EU law, and there is no rule in EU law that provides an ICSID arbitration proceedings such as this would be inconsistent with EU law.

(a) Procedural Objections and Due Process

Claimants object to the timing of Respondent's objection, and its new argument that the alleged incompatibility between the TFEU and Art. 9(2) of the BIT has effect from 1 May 2004, when Respondent acceded to the EU. This is an argument that Respondent could have raised earlier and does not result from an analysis of the Achmea Decision.205
Respondent first raised a jurisdictional objection based on EU law in April 2017, after losing its case in Edenred. Prior to that, although the issue of potential incompatibility between EU law and intra-EU BITs already existed, and although Respondent knew of this objection and had raised it in other matters, Respondent never challenged or reserved its position as to the jurisdiction of the Tribunal on that ground in these proceedings.206 Here, Respondent only raised an objection based on the scope of its consent.207 This belated challenge to ICSID Jurisdiction based on EU law is nothing more than an attempt to withdraw consent, which is prohibited under the ICSID Convention.208 Further, by its Decision on Jurisdiction, the Tribunal found that it had jurisdiction over all of the Claimants' claims. For the Tribunal to reconsider that Decision there would need to exist an exceptional circumstance involving some sort of fraud or egregious circumstance or manifest error of law.209 None are present here.

(b) The Relevance of the Achmea Decision

The only issue before the Tribunal is whether and to what extent it should consider the Achmea Decision. Claimants' position is that the Tribunal can only consider this judgment as fact.210 Given the Parties' agreement that EU law is not relevant to the dispute, and Claimants' reliance on Respondent's position that EU law is not to be and cannot be applied by the Tribunal to resolve the issues in this case, Respondent cannot now change its position to Claimants' detriment. Claimants expressly request that the Tribunal not apply EU law to resolve the dispute submitted to it.211 For completeness, Claimants' position is that EU law does not form part of the rules and principles of international law that the Tribunal has to apply, pursuant to the BIT and the ICSID Convention. The EU legal order is based on a body of law that is distinct from international law. EU law binds its Member States but does not, at an international level, bind all subjects of international law, as does international public law.212 The CJEU confirmed the autonomy of EU law in the Achmea Decision,213 and reached its conclusion without reference to international law, rather than by reference to the national law of the two EU Member States and to the other treaties between them. The mere fact that EU law is rooted in international treaties does not make it part of the rules and principles of international law referred to in Art. 9 of the BIT.214 Further, as noted by the Tribunal, and as Respondent agrees, decisions of other tribunals - including decisions of the CJEU - are not binding on the Tribunal.215 Third, the Tribunal itself, and not the CJEU, must determine and exercise its own jurisdiction on the basis of Art. 25(1) of the ICSID Convention and Art. 9 of the BIT, which are fully valid and applicable instruments governed by international law.216 Article 9 of the BIT contained a valid offer to arbitrate that has been accepted by Claimants. For the purposes of this case, this consent has become irrevocable.217
Here, the EU is not a party to the BIT, and none of Claimants' claims is based on EU law. None of the ECT cases relied on by Respondent is relevant because the EU is a party to the ECT alongside the Member States and third-party States.218 Further, in those cases, at least one of the parties relied on EU law in the merits. The Wirtgen case is also irrelevant, as in that case the tribunal had to determine the applicable law and one party argued that EU law was part of the rules of law applicable to the dispute.219
As argued by Hungary in Electrabel, the operative part of a CJEU judgment, like the Achmea Decision, must be understood in light of the reasoning on which it was based.220 If the Tribunal considers the Achmea Decision as part of the applicable international law under the BIT, the Tribunal must conclude that, contrary to Respondent's allegations, the Achmea Decision does not apply to (1) all dispute settlement provisions in all intra-EU BITs, (2) Art. 9(2) of the BIT, or (3) ICSID arbitration.221
Here, Respondent seeks to broaden the scope of the Achmea Decision by its analysis of the words "such as" and "may be called to interpret and apply EU law."222 In the Achmea Decision, and consistent with the purpose of preliminary references as an opportunity to expound authoritatively on points of EU law to ensure its coherence, the CJEU deliberately used restrictive language, rather than terms like "any."223Achmea cannot be extended to all and any dispute settlement provisions in intra-EU BITs.224 An important difference between the present matter and the Achmea case is that this matter engages ICSID proceedings, whereas Achmea concerned an UNCITRAL arbitration with a seat localized in an EU Member State. The Achmea Decision concerned Art. 8 of the Netherlands-Slovakia BIT (which does not contain an option for ICSID Arbitration) or to dispute settlement provisions of the same kind.225
In the Achmea Decision, the CJEU specifically made reference to the potential risk of interpretation or application of EU law by the arbitral tribunal and it specifically referred to the applicable law provisions of Art. 8 of the Netherlands-Slovakia BIT and to the internal law of Slovakia and the EU treaties. By contrast and contrary to what Respondent now suggests, there is no risk that the Tribunal may be called to interpret or apply any substantive rule of EU law. It is undisputed that (1) Claimants' claims are not based on EU law, but are based on the BIT, (2) Respondent does not attack EU law or the Commission Decision of 22 November 2012 or the CJEU Decision of 23 February 2016 that rules that Hungary had infringed EU law, and (3) the Tribunal is only called upon to resolve the specific dispute before it, under the BIT.226 Respondent has repeatedly stated that EU law has no relevance to the present dispute and that EU law must be distinguished from the BIT.227 There is no reason to distinguish between jurisdiction and the merits: Respondent's position on the lack of relevance of EU law must apply equally to whether the Tribunal is examining jurisdiction or the merits.228
Respondent's analogy to the Diallo case is irrelevant for four reasons. First, Respondent has not demonstrated the broad scope of the Achmea Decision, and it can be expected that further preliminary requests by national courts will be necessary to understand the Achmea Decision. Second, the parties in Diallo were both States, not a private investor and a State. Third, Respondent cites Diallo for the position that "when decisions of interpretative bodies are binding upon the parties to a dispute, they should also bind the tribunal before which the two parties appear" and that this requires that application of the Achmea Decision in the present case, even if it is not binding on the Tribunal. Unlike the comparison in Diallo, where one party relied on a treaty, neither Party in this case has relied on the TFEU to support the merits of the case. Fourth, in Diallo, the ICJ insisted on the necessity to protect legal security. If anything, the requirement of legal security would be on Claimants' side in the present case.229
Even if the Tribunal considers that it is bound to apply the Achmea Decision, that it has broad scope, and that there is a fundamental conflict between Art. 9(2) of the BIT and the TFEU (all of which Claimants deny), the Tribunal would still have jurisdiction based on the principle of lex specialis.230 The BIT provided special procedural protection in the form of investment protection against the host State and constitutes an exception to the general rule of the relationship envisioned in the EU treaties and is, therefore, lex specialis in comparison with the EU treaties. Similarly, the ICSID Convention is lex specialis with respect to the procedural protection in comparison with the BIT which refers to it.231 Most general international law may be derogated in application of the lex specialis rule and it is only in exceptional circumstances that the application of this principle is precluded,232 such as in situations of conflicting jus cogens or human rights norms.233 EU law does not qualify as jus cogens or as human rights norms, and the ILC Report does not suggest so.234 In the hierarchy analysis between lex superior and lex specialis, the ILC Report concludes that lex specialis prevails.235 Noting in the present case prevents the application of the lex specialis rule and, by virtue of this rule, the BIT and the ICSID Convention - being lex specialis - must prevail over EU law.236
The other provisions of the VCLT do not allow the Tribunal to decide that Art. 9 of the BIT is no longer in force. The BIT and the TFEU do not relate to the same subject matter, and this renders Art. 59(1)(b) of the VCLT (implicit termination of an earlier treaty by a subsequent one) and Art. 30(3) of the VCLT (inapplicability of incompatible provisions in the earlier treaty) inapplicable.237 The lex posterior rule of Art. 30 of the VCLT does not apply because neither requirement - (1) the existence of a fundamental incompatibility between provisions of two successively ratified treaties, or (2) that the two rules in conflict have the same subject matter -is fulfilled.238 Respondent has failed to demonstrate that a fundamental or material incompatibility exists between Art. 9(2) of the BIT and the TFEU.239 The Achmea Decision is silent on the issue of fundamental or material incompatibility and instead only referred to "potential" incompatibility between Art. 8 of the Netherlands-Slovakia BIT and the TFEU. Article 8 of the Netherlands-Slovakia BIT, however, is substantially different from Art. 9 of the BIT, and such an analysis based on the former does not ipso facto apply to the latter.240 EU law does not provide investors with the important procedural right of access to independent international arbitration. Further, the BIT and the TFEU do not have the same subject matter.241 Thus, the Tribunal should reject Respondent's theory based on the lex posterior rule under Art. 30 of the VCLT, which is not applicable here.242

There is no lex superior primacy of EU law in international law. As Respondent argued in Electrabel, Art. 351 of the TFEU "is aimed solely at respecting pre-existing obligations to nonMember States and is inapplicable in an intra-EU dispute."243 Claimants' procedural rights of access to ICSID arbitration and the obligations of Respondent under the ICSID Convention are not affected by provisions of the TFEU or the Achmea Decision.244 Article 351 of the TFEU recognizes the validity and applicability of earlier treaties with third parties, such as the ICSID Convention. Article 351 of the TFEU is not a lex superior rule under international law - it is merely a conflict of law rule. The ILC Report states that in relation to conflict of law clauses, those cannot affect the rights of third parties to the treaty containing the conflict of law rule. The European Court of Human Rights confirms that international courts will refuse to give effect to arguments based on the alleged supremacy of EU law.245 While Art. 351 of the TFEU may govern the rights and obligations of EU Member States vis-á-vis one another in their inter se agreements, the analysis is different from the perspective of international law where third parties are involved. Here, giving effect to Art. 351 of the TFEU (or a rule of EU law) to deny a third party's rights under a separate treaty would be contrary to the settled rule of international law that a State cannot evade its international obligations on grounds of its internal law. Thus, the Tribunal should find that rules of EU law cannot deprive the Claimants of their right to resort to arbitration under the BIT and the ICSID Convention. Further, pursuant to Art. 27 of the VCLT, Respondent cannot invoke EU law to excuse its breaches of the BIT. EU law is part of the "internal law" of all Member States, for purposes of Art. 27 of the VCLT. Thus, Respondent's reliance on the Achmea Decision to escape its international responsibility under the ICSID Convention and the BIT is precluded by settled principles of international law concerning the application of treaties.

Although the EC has initiated infringement proceedings against some Member States with intra-EU BITs, and some are in the process of terminating theirs, Respondent has not terminated or sought to terminate its BITs pursuant to Art. 12 of the BIT.246 This confirms both that (1) the BIT remains valid, and (2) it is for the EC and the EU Member States to take the appropriate actions. It is not for the Tribunal to simply decline or refrain from exercising jurisdiction. It is Respondent's responsibility to denounce the BIT if it considers this necessary, and to date it has not done so.247
The BIT was not terminated in 2004 and, therefore, Respondent's consent to ICSID jurisdiction was not withdrawn.248 Even if the BIT was retroactively terminated as of 1 May 2004, the BIT -including Art. 9(2) - would remain in force for a period of 20 years as a result of the "survival clause" contained in Art. 12(2) of the BIT. Claimants, thus, would benefit from the protection offered under the BIT until 2024.249 Further, Respondent did not denounce the ICSID Convention in 2004 - or ever - and cannot claim to benefit from the effects of a denunciation of the ICSID Convention.250 Denunciation of the ICSID Convention is governed by Arts. 71 and 72 thereof, and leaves unaffected the consent previously perfected. It cannot have the effect of retroactively withdrawing consent.251 Finally, the Achmea Decision does not support Respondent's argument that its offer to arbitrate and, consequently, its consent, was withdrawn retroactively. The Achmea Decision said nothing about its effect on perfected consent to arbitration between an EU national and an EU Member State under Art. 25 of the ICSID Convention, and this silence serves as further evidence of the limited scope of the judgment, which does not apply to ICSID arbitration. Thus, Art. 25 of the ICSID Convention applies and Respondent's consent remains valid, which means that the Tribunal has jurisdiction under the Convention.252

(c) Whether Restraint from Jurisdiction Results in Denial of Justice

If the Tribunal declines or refrains from exercising jurisdiction, it would deprive the BIT of any effect, as the substantive rights contained in the BIT become ineffective without access to international arbitration.253 This would result in a denial of justice for Claimants. Pursuant to Art. 26 of the ICSID Convention, Claimants have lost the right to seek relief elsewhere.254 The present forum is the only one competent to hear the dispute under the BIT.255 Arbitration is the only mechanism provided in the BIT for the settlement of expropriation claims. Respondent has not shown that there is any other international and neutral forum in which an investor may bring a direct action against an EU Member State for damages suffered as a result of a breach of a BIT.256 The value of arbitration and the avoidance of the use of domestic courts is undeniable as a matter of principle.257 Respondent has not shown that Claimants would even have standing to bring their claims before Hungarian domestic courts. Even with standing, however, Claimants' claims would be time-barred. Even so, bringing an action in domestic courts would be fundamentally inconsistent with the Tribunal's Decision on Jurisdiction, which considers that "delocalized dispute settlement is at the very heart of the Treaty edifice concerning conditions of investment."258 While Respondent argues that domestic courts must be presumed to be neutral based on the principle of mutual trust, that presumption is inapplicable as it only binds Member States and not tribunals. The recognized effects of this vague principle are limited to (1) preventing courts of one Member State from evaluating the practice of courts of other Member States, and (2) the recognition of judgments from one Member State in the jurisdiction of all Member States, without the need for a special procedure.259 In any event, the Dan Cake award, finding Hungary liable for denial of justice for the behavior of its courts, puts into question the neutrality and respect of fundamental rights in that country.260
What is at issue in the present matter is an alleged inapplicability of Respondent's consent to arbitration as the result of a CJEU decision that is not binding on the Tribunal. Even if Germany v. Italy were relevant by analogy, that case only states that judicial redress may be precluded for individuals by the effect of a norm of international law. Here, the norm on which Respondent relies has not been identified and such application cannot be "in accordance with international law." Thus, the obiter dictum in the ICJ's decision does not apply to the present case.261
When confronted with two sets of functions which are both valued by the international community, a balance must be struck between those two sets of functions, and the ICJ was criticized for its failure to do so in Germany v. Italy. Here, in addition to balancing competing norms of international law, the Tribunal must also balance the Parties' rights and interests. The finality of the ICSID system indeed strikes that necessary balance.262 Here, what is at stake is Claimants' right to ICSID arbitration as the only effective means of obtaining judicial redress. Respondent's only stated interest is to avoid running afoul EU law through the enforcement of a future award. The balance weighs decisively in the Claimants' favor, as the consequences of the Tribunal's failure to exercise jurisdiction in this case would be dramatic and irreparable, and tantamount to a denial of justice.263
Respondent's contention that the Tribunal should decline or refrain from exercising jurisdiction in order "to avoid fragmentation" is unfounded and the consequences thus identified are speculative. First, there is no risk of fragmentation especially since the Parties have expressly agreed not to apply EU law. Second, like the tribunal in the Achmea case, that found that "the argument that Article 8 of the BIT is incompatible with EU law is [] unsustainable",264 other tribunals have consistently found no incompatibility between EU law and the relevant intra-EU BITs.265 Third, issues of policy of a particular Member State are beyond the Tribunal's mandate.266

(d) Application of the Forum Prorogatum Principle

Under the principle of forum prorogatum, which is accepted in ICSID arbitration, the jurisdiction of the tribunal can be extended by agreement of the parties in a case that would otherwise be outside of the tribunal's jurisdiction.269 Such an agreement can be found in statements or conduct - beyond mere participation in proceedings - that involve an element of consent.270 Here, there is such agreement: as recognized by the Tribunal in its Decision on Jurisdiction, Respondent has repeatedly expressed - through statements and conduct - its consent to resort to ICSID arbitration for the adjudication of claims based on the BIT.271 By expressly choosing ICSID Arbitration, the Parties confirmed that they accepted that their dispute would be settled by a mechanism which is truly international: a delocalized arbitration, without a seat, detached from municipal legal systems.272 Once the offer to arbitrate was accepted, it became irrevocable, preventing Respondent from unilaterally withdrawing its consent and the Claimants from bringing claims elsewhere.273 Thus, as may be necessary, a binding arbitration agreement separate from Art. 9 of the BIT was, therefore, also formed.274
Respondent's objection to the Tribunal's jurisdiction over Claimants' FET claims is not an obstacle to the Tribunal's jurisdiction over these claims under the forum proragatum principle because there the issue was not whether the Tribunal had jurisdiction. Rather, the issue was whether the scope of the Tribunal's jurisdiction, resulting from the consent of the Parties, could be extended to the FET claim by operation of Art. 4 of the BIT. Here, Respondent has confirmed that the alleged inapplicability of Art. 9(2) of the BIT leaves all other provisions of the BIT intact and effective. Since Respondent, thus, agrees that Art. 4 remains effective, it could serve as a basis on which the scope of the Tribunal's jurisdiction is extended to apply to the Claimants' FET claims.275
The principles of good faith, estoppel, and venire contract factum proprium all prevent Respondent from arguing that its consent to ICSID arbitration has been retroactively withdrawn.276

2. Respondent's Arguments

(a) Procedural Objections and Due Process

The Achmea Decision cannot be disregarded on procedural grounds. Respondent's jurisdictional objection based on this decision is not time-barred, and ICSID Arbitration Rule 41(1) is not coercive and does not negate each tribunal's obligation to determine any objection to its jurisdiction.278 Further, tribunals have a duty to determine their jurisdiction, and to examine jurisdictional requirements sua sponte, if there are compelling reasons to do so.279 The Achmea Decision serves as a compelling reason for this Tribunal to ascertain its jurisdiction sua sponte.280

(b) The Relevance of the Achmea Decision

The preliminary rulings of the CJEU - including the Achmea Decision - are (1) considered part of the acquis communautaire, (2) are binding in the same way as statutory law, (3) have erga omnes effect, extending the consequences of such rulings to all EU Member States and to private entities, like Claimants,281 and (4) have retroactive effect.282 This retroactive effect is part of the nature of preliminary rulings, which do not create new rules but rather clarify the meaning of preexisting EU law "as it must be or ought to have been understood and applied from the time of its coming into force."283 This is consistent with international law.284 In the Achmea Decision, the CJEU concluded that international agreements that allow an investor from one Member State to arbitrate disputes against another Member State are incompatible with EU law because such agreements adversely affect the autonomy of EU law and are contrary to Arts. 267 and 344 of the TFEU.285 Various aspects of the Achmea Decision affirm its broad application.286 The referring court referenced the import and influence of its referral, noting its broad consequences given "the numerous [BITs] still in force between Member States containing similar clauses."287
The CJEU deliberately did not restrict its comments to the investment treaty there at issue, but rather established the incompatibility of Arts. 267 and 344 of the TFEU with any intra-EU BIT under which an investor may bring a claim against another Member State before an arbitral tribunal.288 While there are differences between ICSID and UNCITRAL cases (where the possibility for a preliminary ruling exists during the annulment stage), the CJEU considered there to be insufficient guarantees for the uniform and consistent interpretation of EU law in investorstate arbitration. Accordingly, even an arbitration in the so-called self-contained ICSID regime would run afoul of EU law.289
Claimants' effort to impose an unduly restrictive interpretation of the terms "such as" is unavailing. This is reinforced by the CJEU's use of the words "an" international agreement "such as" the Netherlands-Slovakia BIT, as being only exemplative of the total category of intra-EU BITs giving rise to the conflict. The phrase "such as Article 8 of the [Netherlands-Slovakia BIT]" is preceded and followed by commas and, therefore, must be understood as being non-restrictive. The phrase could even be left out of the sentence. This is consistent with the purpose of preliminary references, which is to permit the CJEU to expound authoritatively on points of EU law, thereby ensuring the coherence of the same.290
Whether there is an actual risk that a tribunal will be asked to consider or interpret matters of EU law is not relevant. The inquiry is not whether a particular tribunal addressed a point of EU law but whether the dispute resolution clause might give rise to disputes where an arbitral tribunal might be called to do so. This renders the dispute resolution clause, but not the dispute itself, incompatible with EU law. In the investment treaty context, the CJEU reasoned that such risk was always present,291 and it is acutely so in this case. Claimants sought to rely on Respondent's alleged infringement of EU law to bolster their legal arguments on the merits and even went so far as to tie their legitimate expectations under Art. 3 of the BIT to the fact that Respondent would "respect EU law and would not target European investors."292 Further, the questions asked by the Tribunal in the post-hearing briefs reveals the focus on EU law matters.293 Thus, the risk that the Tribunal may be called upon to interpret issues of EU law cannot be dismissed.
The CJEU's interpretation of Arts. 267 and 344 of the TFEU is binding on a tribunal whose jurisdiction purports to be based on Art. 9(2) of the BIT.294 As stated by the ICJ in Diallo, it is not possible to ignore the interpretative decisions issued by a specific body in charge of the interpretation of the treaty in question. Where such decisions are binding upon the parties to a dispute, they should also bind the tribunal - even where the interpretive committee or similar body does not have any actual power to bind the tribunal or court to whom interpretation is offered.295 Although Art. 31 of the VCLT is silent as to the competent body or decision-maker to interpret treaties, the parties to a treaty designate such a body.296 Article 267 of the TFEU provides the CJEU with jurisdiction over the interpretation of the TFEU, and these interpretative decisions are binding upon the Member States.297 The CJEU's case law affirms the erga omnes effect of preliminary judgments and, in Kühne & Heitz, the CJEU even suggested that bodies might have an obligation to reopen matters to ensure that the CJEU's interpretation is properly applied.298
Preliminary rulings are afforded erga omnes effect where certain conditions are satisfied: (1) the questions of interpretation at issue are the same in the preliminary ruling as in the present case, and (2) there are no additional factors that could change such interpretation. Here, there are no additional factors, and the question of interpretation in the Achmea Decision and in the case at bar is the same: "whether a provision in an international agreement concluded between EU Member States, under which an investor from one of those Member State may, in the event of a dispute concerning investments in the other Member State, bring proceedings against the latter Member State before an arbitral tribunal whose jurisdiction that Member State has undertaken to accept, is precluded by Articles 267 and 344 of the TFEU."299 Thus, there is strong support for the view that the Tribunal must also abide by the CJEU's interpretation.300 Otherwise, investors of the EU and the Member States would be deprived of the legal certainty to which they are entitled.301 Thus, the Tribunal is bound to rule that Arts. 267 and 344 of the TFEU preclude the dispute resolution clause contained in Art. 9(2) of the BIT.302
Even if the Tribunal finds that the Achmea Decision is not binding, it will nonetheless become so through the applicable law.303 Questions of jurisdiction and, indeed, of consent are not governed by the law applicable to the merits, but rather by reference to the instruments in which the Parties' consent is contained, i.e. Art. 9(3) of the BIT and Art. 25(1) of the ICSID Convention. While both provide that international law applies to the Tribunal's determination of its jurisdiction, international law must be interpreted in accordance with the VCLT.304 Any relevant rules set out under EU law, including CJEU decisions, would be treated like any other international rules for the purpose of Art. 31(3)(c) of the VCLT.305 Thus, the CJEU's findings in Achmea will be part of the acquis communautaire and, thus, will have to be applied by the Tribunal as part of the law applicable to its jurisdiction.306 EU law forms part of international law and, thus, must be considered in determining the extent of consent - both in ECT and in BIT cases.307Achmea further held that EU law doctrines are part of the general principles on international law, and Claimants have acknowledged that EU law is part of public international law.308 Here, the issue is the interpretation of the TFEU and its impact on dispute resolution clauses contained in intra-EU BITs. The Achmea Decision touches on the same subject matter, within the meaning of Art. 31(3)(c) of the VCLT. Thus, in order to comply with the provisions of Art. 31(3)(c) of the VCLT, the Tribunal would need to apply the Achmea Decision when interpreting the TFEU. In so doing, the Tribunal would find that EU law applies directly to its jurisdiction in accordance with Art. 9(3) of the BIT, rendering Art. 9(2) of the BIT invalid at the time of the institution of these proceedings.309
Under Art. 351 of the TFEU, in cases of incompatibility between an inter se Member State agreement and EU treaties, the conflicting provisions of the former agreement are rendered inapplicable. The ILC has confirmed the absolute precedence of EU treaties over agreements concluded between Member States inter se,312 and this was endorsed by the tribunal in Electrabel.313 The principle of primacy of EU law within the relationship between Member States, thus, renders Art. 9(2) of the BIT inapplicable, due to its incompatibility with Arts. 267 and 344 of the TFEU.314
The inapplicability of Art. 9(2) of the BIT also flows from Art. 30(3) of the VCLT, pursuant to which the provisions of an earlier treaty are applicable only so far as they are compatible with the provisions of the later treaty.315 The possible neutralization of the dispute resolution clause contained in a BIT in case of incompatibility with a later treaty was specifically contemplated by the tribunal in the Achmea arbitration,316 and was clarified by the CJEU in the Achmea Decision.317 As a result, the incompatibility of Art. 9(2) of the BIT and the EU Treaties arose with Hungary's accession to the EU on 1 May 2004, because, as of that date, Hungary entered into an international treaty with France that was incompatible with Art. 9(2) of the BIT.318 Alternatively, this incompatibility crystalized on 1 December 2009 when the TFEU came into effect. This incompatibility predates Claimants' effort to initiate proceedings pursuant to Art. 9 of the BIT in 2013.319
The 1957 TEEC was amended on numerous occasions and in 1992 became the Treaty on establishing the European Community (TEC) and in 2007 was renamed TFEU.320 The incompatibility between Arts. 267 and 344 of the TFEU and the dispute resolution mechanisms contained in intra-EU BITs clarified in the Achmea Decision must be transposed to Arts. 292 and 234 of the TEC and to Arts. 177 and 219 of the TEEC.321 The aforementioned articles are practically identical and the CJEU's interpretation of Art. 267 and 344 TFEU should necessarily be deemed to apply to legal relationships also arising out of Art. 177 and 219 of the TEEC or Arts. 234 and 292 of the TEC.322 These treaties all serve one purpose: to ensure the uniform interpretation of EU law through the CJEU.323
The MOX Plant case further supports the argument that the Tribunal lacks jurisdiction, as that case confirms that, in addition to jurisdiction based on the treaty, a tribunal must satisfy itself that it had jurisdiction in a definitive sense.324 That tribunal suspended its proceedings pending the issuance of a CJEU's decision because it considered that its jurisdiction could be precluded by the CJEU's finding. The MOX Plant tribunal never reached the issue because Ireland withdrew its claim. As in the case before this Tribunal, whether arbitration clauses contained in intra-EU BITs violate Arts. 344 and 267 of the TFEU was an issue to be determined solely by the CJEU -the body with exclusive authority to interpret EU law with finality.325 The Tribunal should defer to the Achmea Decision and conclude that it lacks jurisdiction to adjudicate this dispute owing to the preclusion of Art. 9(2) of the BIT.326

(c) Whether Restraint from Jurisdiction Results in Denial of Justice

In the alternative, the Tribunal should refrain from exercising its jurisdiction.331 Respondent explains that "[o] ne of the compelling reasons not to exercise jurisdiction a tribunal otherwise has is to prevent the fragmentation of international law resulting from the proliferation of international [sic] and/or the issuance of conflicting decisions and unenforceable awards."332 Tribunals have relied on principles of judicial propriety or comity to refrain from exercising jurisdiction.333 Indeed, the tools for coordinating between proceedings and decisions of different fora - including comity, lis alibi pendens, res judicata - are available and tribunals should make efforts to utilize them to achieve the appropriate level of cohesion.334 The incompatibility of the BIT and EU law need not be resolved by recourse to Arts. 30(3) or 59(1) of the VCLT.335
The enforcement of an award to be issued by the Tribunal will be impossible within the EU because, owing to the erga omnes effect of the Achmea Decision, Member States would be in breach of EU law if their judicial organs enforced an award that was rendered in breach of EU law.
Disregarding the Achmea Decision and entertaining the merits of this dispute would lead to conflicting decisions by the Tribunal and the CJEU. The CJEU has decided that clauses such as Art. 9(2) of the BIT are precluded, with the resultant implication that disputes based on intra-EU BITs should be dealt with by Member State courts or arbitral fora that form part of the judicial system of the EU.336
It is only Art. 9(2) of the BIT offering the possibility of referring disputes in connection with dispossession measures to ICSID arbitration that is in conflict with Art. 267 and 344 of the TFEU. The default mechanism in the BIT for the resolution of disputes in the domestic forum has been fully retained. Because the domestic courts of Hungary and France are "courts of a Member State" within the meaning of Art. 267 of the TFEU, recourse to those courts does not conflict and is not rendered inapplicable by virtue of the Achmea Decision.337 Claimants' argument that they have no standing before domestic courts is without merit. Based on the concept of sincere cooperation, the principle of mutual trust between Member States establishes a presumption of compliance by other Member States with EU law and fundamental rights. There is a strong presumption that Hungarian courts respect EU law and fundamental rights during their proceedings.338 The BIT is part of Hungary's and France's internal legal order, and the substantive rights contained therein are automatically protected in each. Thus, Claimants automatically have standing to pursue these rights.339
Even if Claimants had no other forum to bring their claims, that would not override the deficiencies in the Tribunal's jurisdiction. Germany v. Italy is illustrative, as there, the ICJ rejected Italy's argument expressly acknowledging that application of certain norms might result in a denial of justice. By analogy, in this case, there is nothing which would deprive international law of its force based on the Claimants' individual claims of denial of justice.340

(d) Application of the Forum Prorogatum Principle

There is little support for the position that consent can be waived through a forum prorogatum principle or estoppel theory.341 Such a theory would need to be premised on a finding of actual or constructive knowledge of the Respondent. In this case, there is no such possibility.342 In the present instance, the CJEU's issuance of the Achmea Decision conclusively established the conflict between the dispute resolution clauses allowing investor-state arbitration contained in intra-EU BITs with EU law.343 It would have been impossible for the Respondent to raise the issue of the lack of its valid offer to arbitrate prior to the issuance of that decision.
Respondent's prior statements concerning its consent to arbitrate during the course of the Hearing on Jurisdiction and prior have no relevance. The Tribunal's Decision on Jurisdiction was issued the same day that the German Federal Supreme Court decided to make the Achmea referral to the CJEU, and this was not made public until May 2016. By the time Respondent became aware of the Achmea referral, the Tribunal had already issued its Decision of Preliminary Issues of Jurisdiction.344

3. The Tribunal's Considerations and Conclusions