White & Case Secures Victory for Hungary in ICSID Case
Global law firm White & Case LLP has achieved a complete victory for Hungary following an arbitration tribunal's rejection of all claims brought by Vigotop Limited under the Cyprus-Hungary Bilateral Investment Treaty before the World Bank's International Centre for Settlement of Investment Disputes (ICSID). The claimant had sought damages of more than €300 million.
The dispute arose from a 2009 contract concluded between a Hungarian subsidiary of Vigotop and the Hungarian Ministry of Finance for the concession to build and operate a mega-casino. Vigotop was controlled by a group of U.S. and Israeli investors, including Ronald S. Lauder.
In 2011, Hungary terminated the concession contract on the basis that Vigotop had failed, among other things, to secure a site for the project. In the arbitration, Vigotop claimed that Hungary had, through a series of allegedly unlawful measures culminating in the termination of the concession contract, "expropriated" its investment and thus breached obligations under the treaty.
In its 177-page Award, the tribunal unanimously found that Hungary's termination of the concession contract was based on public policy reasons (environmental and tourism policies) and valid contractual grounds, and had been exercised in good faith. The tribunal held that the termination of the contract therefore did not amount to an expropriation.
The Award in Vigotop states a new test for determining whether a State has expropriated an investor’s contract rights – a growing source of claims under bilateral investment treaties. The tribunal first examined whether the State acted in its "sovereign capacity" when it terminated the concession contract, then whether contractual grounds for terminating the concession contract existed, and finally whether the contractual termination was "legitimate".
The White & Case team was comprised of lawyers collaborating across the Firm's Budapest, Paris and New York offices. It included Paris partners Charles Nairac and John Willems with support from associates Nathalie Makowski, Florian Quintard, Noor Davies and Sven Volkmer, Budapest partners István Réczicza and Milán Kohlrusz supported by associates Márk Baja, Katalin Zsebik and Mihály Czesznak and New York associate Damien Nyer. Hungarian law firm Sárhegyi és Társai acted as co-counsel.
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