Italaw 10075

INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES
UP and C.D Holding Internationale
v.
Hungary
(ICSID Case No. ARB/13/35)
AWARD
Members of the Tribunal

Professor Dr. Karl-Heinz Böckstiegel, President of the Tribunal
The Honourable L. Yves Fortier PC CC OQ QC, Arbitrator
Sir Daniel Bethlehem KCMG QC, Arbitrator
Secretary of the Tribunal

Mr. Francisco Abriani
Assistant of the Tribunal

Dr. Katherine Simpson
Date of dispatch to the Parties: 9 October 2018

Table of Contents (Page Numbers)
REPRESENTATION OF THE PARTIES ........................................................................................ VI
FREQUENTLY USED ABBREVIATIONS AND ACRONYMS ................................................. VII
DRAMATIS PERSONAE................................................................................................................... IX
I. INTRODUCTION ....................................................................................................................... 1
A. THE DISPUTE ........................................................................................................................... 1
B. THE TRIBUNAL’S TERMINOLOGY AND REASONING ............................................................. 1
II. THE ARBITRAL TRIBUNAL .................................................................................................. 2
III. PROCEDURAL HISTORY ....................................................................................................... 3
IV. THE PARTIES’ REQUESTS .................................................................................................. 12
A. CLAIMANTS’ REQUESTS ........................................................................................................ 12
B. RESPONDENT’S REQUESTS.................................................................................................... 13
V. STATEMENT OF FACTS ....................................................................................................... 14
A. SUMMARY OF THE FACTS ..................................................................................................... 14
B. FACTUAL ASSERTIONS IN RESPONSE TO TRIBUNAL QUESTIONS....................................... 33
1. Tribunal Question (f) Regarding the Applicable Tax Rates .................................. 33
(a) Claimants’ Arguments ......................................................................................... 33
(b) Respondent’s Arguments ..................................................................................... 34
(c) The Tribunal’s Considerations ............................................................................ 35
2. Tribunal Question (h) Regarding Evidence Anticipating Changes to the Meal
Fringe Benefit System in 2011 .................................................................................. 35
3. Tribunal Question (i) Regarding Tax Rates on Wages / Salaries vs. Fringe
Benefits........................................................................................................................ 40
VI. JURISDICTION OF THE TRIBUNAL .................................................................................. 41
A. THE DECISION ON PRELIMINARY ISSUES OF JURISDICTION .............................................. 41
B. THE PARTIES’ SUBMISSIONS REGARDING THE ACHMEA DECISION .................................. 42
1. Claimants’ Arguments .............................................................................................. 42
(a) Procedural Objections and Due Process ............................................................. 43
(b) The Relevance of the Achmea Decision ............................................................... 43
(c) Whether Restraint from Jurisdiction Results in Denial of Justice................... 50
(d) Application of the Forum Prorogatum Principle ................................................ 52
ICSID Case No. ARB/13/35 Page ii

2. Respondent’s Arguments .......................................................................................... 53
(a) Procedural Objections and Due Process ............................................................. 54
(b) The Relevance of the Achmea Decision ............................................................... 54
(c) Whether Restraint from Jurisdiction Results in Denial of Justice................... 60
(d) Application of the Forum Prorogatum Principle................................................ 62
3. The Tribunal’s Considerations and Conclusions .................................................... 63
C. TRIBUNAL QUESTION (E) REGARDING OTHER RELEVANT ISSUES IN EU LAW ................ 66
3. The Tribunal’s Considerations and Conclusions .................................................... 69
VII. APPLICABLE LAW ................................................................................................................ 69
A. RELEVANT TERMS OF THE BIT ............................................................................................ 69
B. ARGUMENTS RELATED TO THE RELEVANCE OF OTHER DECISIONS AND PARTICULARLY
THE EDENRED AWARD .......................................................................................................... 70

3. Tribunal Considerations and Conclusions .............................................................. 72
VIII. RESPONDENT’S LIABILITY PURSUANT TO THE TREATY ....................................... 72
A. EXPROPRIATION / DISPOSSESSION (ART. 5(2) OF THE BIT) ............................................... 72
1. The Existence of a Right Capable of Expropriation / A Vested Right .................. 72
(c) Tribunal Considerations and Conclusions ......................................................... 77
2. Indirect Expropriation / The Existence of a Substantial Dispossession ................ 79
(c) Tribunal Considerations and Conclusions ......................................................... 92
3. The Lawfulness of the Alleged Expropriation......................................................... 98
(i) Existence of a Public Purpose and Tribunal’s Question (k) Regarding
Social or other Reasons for Reform ......................................................... 100
(ii) Proportionality and the Effect of the Measure ........................................ 102
(iii) Discrimination ............................................................................................ 104
(iv) Due Process ................................................................................................. 105
(v) Duty to Compensate ................................................................................... 106
(b) Respondent’s Arguments ................................................................................... 106
ICSID Case No. ARB/13/35 Page iii

(i) Existence of a Public Purpose and Tribunal’s Question (k) Regarding
Social or other Reasons for Reform ......................................................... 108
(ii) Proportionality and the Effect of the Measures ...................................... 111
(iii) Discrimination ............................................................................................ 115
(iv) Due Process ................................................................................................. 116
(v) Duty to Compensate ................................................................................... 117
(c) Tribunal Considerations and Conclusions ....................................................... 118
B. FAIR AND EQUITABLE TREATMENT (ART. 3 OF THE BIT)................................................ 120
1. The Legal Standard ................................................................................................. 120
(a) Claimants’ Arguments ....................................................................................... 120
2. Whether the 2011 Reform was Reasonable and/or Non-Discriminatory ........... 122
3. Whether Respondent Acted in Good Faith ........................................................... 131
4. Legitimate Expectations in the FET Standard ...................................................... 134
5. Tribunal Question (b)(b) Regarding the Relevance of EU Law vis-à-vis Article 3
of the BIT .................................................................................................................. 141
6. Tribunal Question (j) Requesting Table Comparing Intentions and Action ..... 144
7. The Parties’ Arguments in Response to the Tribunal’s Question (d) ................. 149
8. Tribunal Considerations and Conclusions Regarding FET................................. 151
IX. NO FURTHER CLAIMS RAISED BY CLAIMANTS ....................................................... 151
A. CLAIMANTS’ ARGUMENTS .................................................................................................. 152
B. RESPONDENT’S ARGUMENTS .............................................................................................. 152
C. TRIBUNAL CONSIDERATIONS AND CONCLUSIONS ............................................................ 152
X. DAMAGES .............................................................................................................................. 153
ICSID Case No. ARB/13/35 Page iv

A. THE STANDARD OF COMPENSATION UNDER ART. 5(2) OF THE BIT................................ 153
1. Claimants’ Arguments ............................................................................................ 153
2. Respondent’s Arguments ........................................................................................ 156
3. Tribunal Considerations and Conclusions ............................................................ 158
B. THE STANDARD OF COMPENSATION FOR VIOLATION OF ART. 3 OF THE BIT ............... 159
C. ARGUMENTS RELATED TO THE PARTIES’ AND EXPERTS’ DAMAGES CALCULATIONS.. 161
(a) DCF Valuation for Loss to CD Hungary .......................................................... 179
(i) The Parties’ and their Experts’ Agreements ........................................... 179
(ii) The Parties and their Experts’ Key Areas of Disagreement .................. 180
(iii) Resulting damages for CD Hungary......................................................... 187
(b) Losses Associated with Výroba.......................................................................... 188
XI. INTEREST............................................................................................................................... 189
A. CLAIMANTS’ ARGUMENTS .................................................................................................. 189
B. RESPONDENT’S ARGUMENTS .............................................................................................. 190
XII. COSTS...................................................................................................................................... 191
A. CLAIMANTS’ POSITION ....................................................................................................... 191
B. RESPONDENT’S POSITION ................................................................................................... 192
XIII. DECISIONS ............................................................................................................................. 196
ICSID Case No. ARB/13/35 Page v

REPRESENTATION OF THE PARTIES
UP AND C.D HOLDING INTERNATIONALE: HUNGARY:
Ms. Isabelle Michou Ms. Kiera S. Gans

Quinn Emanuel Urquhart & Sullivan Ms. Natalie Kanerva
6 rue Lamennais DLA Piper LLP (US)
75008 Paris 1251 Avenue of the Americas
France New York, New York 10020-1104
and USA
Mr. Laurence Shore (until 30 August 2017) and
Herbert Smith Freehills Paris LLP Dr. András Nemescói
66, avenue Marceau Dr. Péter Győrfi-Tóth
75008 Paris Dr. Dávid Kőhegyi
France Ms. Zsofia Deli
Horvath and Partners Law Firm DLA Piper
1124 Budapest, Csörsz u. 49-51.
Hungary
and
Dr. Beatrix Bártfai
Dr. András Lovas
Sárhegyi & Partners
Keleti Károly u. 26
H-1024 Budapest
Hungary
and
Dr. Norbert Tátrai
Government Office of the Prime Minister
1011 Budapest, Vám utca 5-7
H-1440 Budapest, P.O.B.1.
Hungary
ICSID Case No. ARB/13/35 Page vi

FREQUENTLY USED ABBREVIATIONS AND ACRONYMS
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
ICSID Case No. ARB/13/35 Page vii

VCLT Vienna Convention on the Law of Treaties (23 May 1969)
Výroba Le Chèque Déjeuner Výroba – Výroba, s.r.o.
WACC Weighted Average of the Cost of Equity and the Cost of Debt
ICSID Case No. ARB/13/35 Page viii

DRAMATIS PERSONAE
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 Chèque 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 Commissioner with the KIM (responsible for Erzsébet vouchers)
(Mr. András Levente Gál) (former administrative state secretary at the KIM and Ministerial
Dr. Levente Gál András 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 Chèque 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
ICSID Case No. ARB/13/35 Page ix

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
ICSID Case No. ARB/13/35 Page x

I. INTRODUCTION
A. THE DISPUTE
1. 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
2. Claimants in these proceedings are UP, formerly known as Le Chèque Déjeuner (“LCD”), a
cooperative company (société cooperative de production à forme anonyme et capital variable)
incorporated under the laws of France, and C.D Holding Internationale (“CD Internationale”), a
simplified joint stock company (société par actions simplifiée) wholly owned by UP and
organized under the laws of France (collectively the “Claimants”).2
3. Respondent is Hungary (the “Respondent”), a sovereign state.
4. 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.
B. THE TRIBUNAL’S TERMINOLOGY AND REASONING
5. 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
1
In their Post-Hearing Brief filed after the Hearing on Jurisdiction, however, Claimants assert that they rely
solely on the Hungary-Lithuania BIT. See Claimants’ Post-Hearing Brief on Jurisdiction, § 7.
2
C-I §§ 9 – 12; Kbis excerpt (certificate of incorporation), LCD (16 October 2013); Kbis excerpt (certificate of
incorporation), LCD (13 January 2015) [C-0002]; Constitutive instrument, CD Hungary (13 November 1996)
[C-0003]; Kbis excerpt (certificate of incorporation), CD Internationale (12 September 2013) ; Kbis excerpt
(certificate of incorporation), CD Internationale (13 January 2015) [C-0004].
ICSID Case No. ARB/13/35 Page 1

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.
6. 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.
II. THE ARBITRAL TRIBUNAL
7. 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
Canada
Tel.: +1 514 286 2013
Fax: +1 514 286 2019
Email: [email protected]
8. 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
9. 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
III. PROCEDURAL HISTORY
10. 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.
11. 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.
12. 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.
13. On 8 October 2014, the Tribunal issued Procedural Order No. 1 (“PO-1”).
14. On 19 January 2015, Claimants filed a Memorial on the Merits (“C-I”) and accompanying
documents.
15. On 17 July 2015, Respondent filed a Counter-Memorial on the Merits and Objections to
Jurisdiction (“R-I”) and requested bifurcation of the proceedings.
16. On 23 October 2015, Claimants filed a Reply on Objections to Jurisdiction and Response to
Request for Bifurcation.
17. 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.
18. 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.
19. 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.
20. 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.
21. 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.
22. On 1 April 2016, the Tribunal accepted the Parties’ revised timetable, based on PO-1 Annex A.
23. 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.
24. On 11 April 2016, Claimants submitted their Reply on the Merits (“C-II”), together with
supporting documentation, to the Tribunal.
25. On 18 April 2016, ICSID informed the Parties that Dr. Simpson’s appointment was effective.
26. On 21 July 2016, Respondent submitted “Hungary’s Rejoinder” (“R-II”), together with
supporting documentation, to the Tribunal.
27. 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.
28. On 4 August 2016, Claimants submitted “Claimants’ Second Request for the Production of
Documents” to the Tribunal.
29. On 5 August 2016, the Tribunal responded to Respondent’s 29 July 2016 letter stating that it did
not see any need for action.
30. On 8 August 2016, Respondent wrote in opposition to Claimants’ document request.
31. 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.
32. On 1 September 2016, Claimants sent their revised “Second Request for the Production of
Documents” to the Tribunal.
33. On 29 September 2016, the Tribunal issued Procedural Order No. 5 Regarding the Parties’
Second Requests for Document Production (“PO-5”).
34. 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.
35. 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.
36. On 17 October 2016, the Parties confirmed the witnesses and experts that each intended to call at
the Hearing.
37. On 19 October 2016, the Tribunal wrote to the Parties to request clarification regarding Exhibit
R-0013.
38. 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.
39. On 25 October 2016, Respondent clarified that its inclusion of Exhibit R-0013 was in error.
40. 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.
41. 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.

42. 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.
43. On 11 November 2016, ICSID informed the Tribunal and the Parties of the logistical
arrangements for the Hearing.
44. 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.
45. On 13 November 2016, the Tribunal invited Claimants to comment on Respondent’s submission
on the Hearing schedule.
46. 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.
47. On 15 November 2016, the Tribunal adopted an amended Hearing schedule.
48. 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.
49. After considering Claimants’ 24 November 2016 response to Respondent’s motion, the Tribunal
admitted Exhibit R-0013 on 26 November 2016.
50. 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.
51. 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.
52. 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.
53. 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.
54. 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.
55. On 12 December 2016, the Tribunal issued Procedural Order No. 7 Regarding the New Dates
for the Hearing on the Merits (“PO-7”).
56. 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.
57. 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.
58. 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.
59. 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.
60. On 24 February 2017, Respondent produced the Edenred Award to the Tribunal and to Claimants.
61. 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.
62. 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.
63. 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.
64. 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.
65. 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.
66. 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.
67. 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.
68. 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.
69. On 12 May 2017, Respondent proposed reversing the order of the appearance of its two fact
witnesses.
70. On 18 May 2017, the Tribunal sent the final Hearing schedule and the list of participants to the
Parties.

71. A Hearing was held in London from 22 – 25 May 2017. The following individuals attended the
Hearing:
TRIBUNAL
Professor Dr. Karl-Heinz Böckstiegel President

The Honourable L. Yves Fortier, PC CC OQ QC Co-Arbitrator
Sir Daniel Bethlehem, QC Co-Arbitrator
ICSID SECRETARIAT
Mr. Francisco Abriani Secretary of the Tribunal
CLAIMANTS
Mr./Ms. First Name/ Last Name Affiliation

Counsel
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
Parties
Ms. Elizaveta Tukhsanova
Witness
Ms. Márta Nagy
Experts
Mr. James Nicholson FTI Consulting
Ms. Juliette Fortin FTI Consulting
RESPONDENT
Mr./Ms. First Name/ Last Name Affiliation

Counsel
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
Witnesses
Dr. Zoltán Guller
Mr. Kristof Szatmáry
Experts
Mr. Brent Kaczmarek Navigant Consulting
Mr. Kiran Sequeira Navigant Consulting
Ms. Emily Khan Navigant Consulting
Mr. Stuart Dekker Navigant Consulting
72. 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 Výroba. Claimants
provided the Tribunal an updated version of Exhibit C-0002 and new Exhibits C-0189 – C-0191.
73. On 24 May 2017, the Tribunal wrote to the Parties with questions to be addressed in their Closing
Statements and post-hearing briefs.
74. 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.
75. 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.
76. 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.
77. 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.
78. 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.

79. 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.
80. 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.
81. 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.
82. On 22 September 2017, Claimants and Respondent submitted their respective post-hearing briefs
to the Tribunal.
83. 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.
84. 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.
85. 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.
86. 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.
87. On 12 January 2018, the Parties simultaneously submitted their respective Statements on Costs
to the Tribunal.
88. 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.

89. On 6 March 2018, Respondents informed the Tribunal that the CJEU rendered its judgment in the
Achmea case (the “Achmea Decision”) and urged the Tribunal to, therefore, decline jurisdiction
in this matter or, alternatively, to rule that it is precluded from issuing a decision on the merits.
90. On 7 March 2018, the Tribunal invited the Parties to submit their comments regarding the
relevance, if any for the present Arbitration, of the Achmea Decision.
91. On 28 March 2018, Respondent submitted its comments related to the Achmea Decision.
92. On 18 April 2018, Claimants submitted their comments related to the Achmea Decision, together
with exhibits CLA-0256 and CLA-0257.
93. On 2 May 2018, Respondent submitted its Response to Claimants’ letter to the Tribunal of 18
April 2018 concerning the Achmea Decision.
94. 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.
95. 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.
96. On 22 August 2018, the Tribunal invited the Parties to submit their comments to the EC’s
Application, by Friday, 24 August 2018.
97. On 24 August 2018, the Parties submitted their respective comments to the EC’s Application.
98. 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.
99. By letter dated 27 August 2018, the Tribunal closed the proceedings in accordance with Rule
28(1) of the ICSID Arbitration Rules.
IV. THE PARTIES’ REQUESTS
A. CLAIMANTS’ REQUESTS
100. 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
101. 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
B. RESPONDENT’S REQUESTS
102. 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
3
CPHB-I Annex No. 1.
4
RfA § 122.
5
C-I § 419.
6
C-II § 438.

proceedings, including attorneys’ fees.7
103. 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
104. 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
V. STATEMENT OF FACTS
A. SUMMARY OF THE FACTS
105. 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.
106. 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
7
R-I § 307.
8
R-II § 356.
9
Respondent’s Letter (2 May 2018).
10
R-II §§ 22 – 23; Gáspár Fajth and Judit Lakatos, Fringe Benefits in Transition in Hungary, in Enterprise and
Social Benefits After Communism 167 (Martin Rein et al. eds., 1997) 167 [RLA-0221]; Martin Rein, Barry L.
Friedman and Andreas Worgotter, Enterprise and Social Benefits After Communism, Introduction (Martin
Rein et al. eds., 1997) [RLA-0230]; C. Eugene Steuerle, Common Issues for Voucher Programs, in Vouchers
and the Provision of Public Services 3, 4 (C. Eugene Steuerle et al. eds., 2000) [RLA-0235].

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
107. 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
108. 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
11
C-I § 92; R-I § 29; R-II § 27; Act XLV of 1989 on the Income Tax of Private Individuals, in force as of 1
January 1990, § 7(2)4, 7(2)12 [RLA-0192].
12
R-II §§ 23, 26; Gáspár Fajth and Judit Lakatos, Fringe Benefits in Transition in Hungary, in Enterprise and
Social Benefits After Communism 167 (Martin Rein et al. eds., 1997) 169 [RLA-0221]; C. Eugene Steuerle,
Common Issues for Voucher Programs, in Vouchers and the Provision of Public Services 3, 4 (C. Eugene
Steuerle et al. eds., 2000) [RLA-0235].
13
KPMG report, Meal Voucher Reform in Hungary (2012) [R-0024].
14
R-II § 24.
15
C-I §§ 87 – 95; R-I §§ 26 – 32; Sample CD Hungary vouchers [C-0041]; Contract between CD Hungary and
Tesco-Global ZRT (as amended) (14 February 2011) [C-0042]; Extract from Internal CD Hungary presentation
(31 October 2006) [C-0043]; Extract from Mazars Summary Notes on CD Hungary, “Le Chèque Déjeuner
Kft., Hungary”, dated 31 December 2009, 31 December 2010, and 31 December 2011 – 31 December 2013
[C-0044]; Witness Statement of Mr. Benedek Dér (19 January 2015) [hereinafter “Dér Statement”], §§ 10
– 15 [CWS-1]; Witness Statement of Ms. Márta Nagy (19 January 2015) [hereinafter “First Nagy
Statement”], §§ 8 – 17, 22 [CWS-2]; Witness Statement of Mr. Yvon Legrand (19 January 2015)
[hereinafter “Legrand Statement”], § 11 [CWS-3]; FTI Report (Mr. Anthony Charlton) (19 January 2015)
[hereinafter “First FTI Report”], §§ 4.45, 4.61, 4.65 [CEX-1]; KPMG report, Meal Voucher Reform in
Hungary (2012) [R-0024]; HM Revenue & Customs, Luncheon Vouchers: Repeal of Relief [RLA-0110].
16
C-II § 44; R-I § 54; Janos Kun, On Cash Substitutes (A study), § 3.2.8 Meal voucher, holiday voucher [R-
0003]; Witness Statement of Dr. Zoltán Guller (10 July 2015) Revised (re-submitted 23 November 2016)

were not mandated, Claimants would have complied with such had they existed.17
109. By 1992, dependence on the fringe benefit system was such that non-wage compensation
amounted to 56% of employee compensation.18
110. 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
111. In late 1995, Claimants decided to enter the Hungarian market.24 LCD (now UP) opened an office
in Budapest in October 1996.25 Le Chèque Déjeuner Kft (“CD Hungary”) is Claimants’ wholly-
[hereinafter “First Guller Statement”], §§ 15, 20 [RWS-1]; Witness Statement of Mr. Kristóf Szatmáry (15
July 2015) [hereinafter “Szatmáry Statement”], § 13 [RWS-2].
17
C-II §§ 45 – 49; J. Bindics and N. Szabó, Fringe Benefits in the EU Member States, Ernst & Young Presentation
(13 March 2012) 10, 12 [R-0022]; Second Witness Statement of Ms. Márta Nagy (6 April 2016) [hereinafter
“Second Nagy Statement”], §§ 13 – 19 [CWS-4]; First Guller Statement, §§ 19, 20 [RWS-1].
18
R-II §§ 28 – 29; Gáspár Fajth and Judit Lakatos, Fringe Benefits in Transition in Hungary, in Enterprise and
Social Benefits After Communism 167 (Martin Rein et al. eds., 1997) 175 [RLA-0221]; József Poór and
Katalin Óhegyi, The Cafeteria System in Hungary: Development and New Directions, 3 J. Med. Eng’g Mgmt.
& Competitiveness 6 (2013) [RLA-0229]; Martin Rein and Barry L. Friedman, Enterprise Social Benefits and
the Economic Transition in Hungary, in Enterprise and Social Benefits After Communism 135 (Martin Rein
et al. eds., 1997) [RLA-0231]; Second Report Navigant Consulting Inc (Mr. Brent C. Kaczmarek, Mr. Kiran
P. Sequeira) (21 July 2016) [hereinafter “Second Navigant Report”], § 45 [REX-2].
19
R-I § 36; PIT Law [RLA-0083]; First Guller Statement, § 9 [RWS-1]; Szatmáry Statement, § 10 [RWS-2].
20
R-II § 31.
21
R-II § 32; PIT Law, § 8.17 [RLA-0083].
22
R-I § 37.
23
C-I § 108; R-II § 35; Act XLV of 1989 on the Income Tax of Private Individuals, in force as of 1 January 1990
[RLA-0192]; Act XLV of 1989 on the Income Tax of Private Individuals, in force as of 1 January 1991, § 7
[RLA-0193]; Dér Statement, § 27 [CWS-1].
24
R-I § 39; R-II § 30; Legrand Statement, §§ 11 – 13 [CWS-3]; PIT Law, §§ 8.12, 8.18, 8.21 [RLA-0083]; First
Report Navigant Consulting Inc (Mr. Brent C. Kaczmarek, Mr. Kiran P. Sequeira) (17 July 2015) [hereinafter
“First Navigant Report”], Appendix D [REX-1].
25
C-I §§ 86, 96; LCD, Extracts from the meeting minutes of the Board of Directors dated 17 October 1996, 22
November 2011, and 30 January 2012 [C-0045].

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
112. 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
113. 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
114. 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
115. On 24 May 2002, Claimants state that Le Chèque Déjeuner Výroba – Výroba, s.r.o. (“Výroba”)
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
116. In 2003, Respondent amended the PIT to expand the voucher system for fringe benefits and
26
RfA §§ 14, 17; C-I §§ 13, 96; Constitutive instrument, Le Chèque Déjeuner Kft., dated 13 November 1996,
Art. 7 [RfA Exhibit C-6]; Corporate copy, CD Hungary dated 9 July 2013 [RfA Exhibit C-7]; Le Chèque
Déjeuner Kft., articles of association updated as at 14 March 2013 [RfA Exhibit C-8]; Constitutive instrument,
CD Hungary (13 November 1996) [C-0003]; Legrand Statement, § 15 [CWS-3].
27
C-I § 108; Hungarian Act CXVII of 1995 on Personal Income Tax Summary Table (1996-2014) [hereinafter
“PIT Summary Table (1996-2014)”] [C-0046]; PIT Law as amended in 1996, effective 1 January 1997 [C-
0052]; PIT Law as amended in 2000, effective 1 January 2001 [C-0053]; PIT Law as amended in 2001,
effective 1 January 2002 [C-0054].
28
R-I § 40.
29
Tribunal’s Decision on Preliminary Issues of Jurisdiction at § 9.
30
C-I § 105; First Nagy Statement, § 24 [CWS-2]; Legrand Statement, § 20 [CWS-3].
31
R-I § 88.
32
C-I § 109; Notarised deed (24 May 2002) [C-0055]; “Contrats Mandataires” between Výroba and CD Hungary
- 1 January 2004 - 22 December 2008 - 15 December 2010 - 29 August 2011 [C-0056].

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
117. In 2004, CD Hungary first became profitable.35 CD Hungary was profitable between 2004 –
2009.36
118. 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
119. In November 2006, a study on meal vouchers and holiday vouchers was completed by Janos Kun
for the Hungarian Financial Supervisory Authority (“PSZAF”).39
120. 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
33
R-I § 41; PIT Law as amended in 2002, effective 1 January 2003 [RLA-0084]; Act XCI of 2003 on the
amendment of laws governing taxes, contributions and other payments to the state [RLA-0089].
34
R-I §§ 42 – 44; ‘Johan Bela’ National Programme for the Decade of Health, 2003 [R-0002]; PIT Law as
amended in 2004, effective 1 January 2005 [RLA-0085]; PIT Law as amended in 2007, effective 1 January
2008 [RLA-0086]; Christopher Wanjek, Food at Work: Workplace Solutions for Malnutrition, Obesity and
Chronic Diseases, International Labour Office (2005) [hereinafter “Wanjek, Food at Work (2005)”], 172 – 173
[RLA-0109]; First Navigant Report, § 76 [REX-1].
35
C-I §§ 103, 126; R-I § 45; C-II § 23; Second FTI Report (Mr. James Nicholson) (8 April 2016) [hereinafter
“Second FTI Report”], § 2.34 [CEX-2]; First Navigant Report, § 99 [REX-1].
36
C-I § 126.
37
R-I § 43; PIT Law as amended in 2004, effective 1 January 2005 [RLA-0085]; PIT Law as amended in 2007,
effective 1 January 2008 [RLA-0086].
38
R-I § 42; “Johan Bela” National Programme for the Decade of Health, 2003 [R-0002]; Wanjek, Food at Work
(2005), 172 – 173 [RLA-0109].
39
Janos Kun, On Cash Substitutes (A study), § 3.2.8 Meal voucher, holiday voucher [R-0003].
40
C-I § 23; R-I §§ 9, 48; R-II § 42; European Commission [hereinafter “EC”], Directorate-General for Economic
and Financial Affairs, Macroeconomic imbalances – Hungary, Occasional Papers 106 (July 2012) [RLA-
0097]; OECD Economic Surveys: Hungary 2010, OECD 2010/2 (February 2010) [RLA-0102]; Hungary
Financial Markets Profile 2008-09, Marketswiki (9 September 2011) [RLA-0118]; David Jolly, IMF Bailout
Lifts Hungarian Markets, N.Y. Times (29 October 2008) [RLA-0120]; Nicholas Kulish, Crisis Comes to
Hungary in Loans of Francs and Euros, N.Y. Times (19 October 2008) [RLA-0121].
41
R-I § 9; Hungary Financial Markets Profile 2008-09, Marketswiki (9 September 2011) [RLA-0118].

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
121. 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
122. In 2010, Multi-Pay Zrt developed an electronic card that could be used to purchase hot and cold
meals.49
123. In January 2010, Claimants and AETR prepared proposals to enhance the economic development
42
R-II § 42.
43
R-I §§ 52 – 59; R-II §§ 42, 48 – 49; Janos Kun, On Cash Substitutes (A study), § 3.2.8 Meal voucher, holiday
voucher [R-0003]; Ocsmány Módon Verik át a Megszorult Családokat!, valasz.hu (3 April 2010) [RLA-0111];
Mészáros Bálint, Drága Ingyenebéd (Expensive Meals), Magyar Narancs (June 2010) 4 [RLA-0112];
Böröczkyné Verebélyi Zsuzsanna, What Type of Goods Can the Hot Meal Voucher Be Used for?(Mire váltható
be a melegétel utalvány?), Adónavigátor (25 June 2010) [RLA-0127]; Adam Viktor, Cafeteria - What a Great
Business to Issue Vouchers!, Napi Online (11 June 2009) [RLA-0128]; First Guller Statement, §§ 14 – 17, 20
– 23 [RWS-1]; Szatmáry Statement, §§ 12, 13, 18 [RWS-2].
44
C-II § 69; see generally C-I §§ 17, 23 – 58; C-II § 27 – 40, 50 – 69.
45
R-II § 43; Dr. Péter Oszkó, T/9817 Draft Bill on the Amendment Amending the Transformation of Tax System
(May 2009) [R-0048].
46
C-I § 128; R-I §§ 10, 50; PIT Summary Table (1996-2014) [C-0046]; PIT Law as amended in 2009, effective
1 January 2010 [C-0067]; PM Promises Pain, The Budapest Times (20 April 2009) [RLA-0124].
47
C-I § 128; PIT Summary Table (1996-2014) [C-0046]; PIT Law as amended in 2010, effective 1 January 2011
[C-0068].
48
C-I § 130; C-II § 123; Summary table, “Le Chèque Déjeuner Kft. 1997-2012” [C-0057]; Dér Statement, § 34
[CWS-1]; First Nagy Statement, § 39 [CWS-2].
49
C-II § 108; R-I § 104; Second Nagy Statement, §§ 52 – 53 [CWS-4]; Certificate of incorporation for Multi-
Pay Fizetést Könnyítő Szervezó és Szolgáltatő Zártkörűen Működő Részvénytársaság, accessed on 17 July
2015 [R-0036].

of the voucher market and to “combat and sanction the misuse of vouchers.”50
124. 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
125. 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
126. 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
127. 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
50
R-II § 128; C-II §§ 53, 128; Proposal from the AETR concerning the universal regulation of the system for
allocating benefits in kind (January 2010) [C-0145]; Second Nagy Statement, §§ 9, 24 – 25 [CWS-4].
51
R-I §§ 51; R-II §§ 45 – 46; Eurostat: Statistics Explained, Glossary: At risk of poverty or social exclusion
(AROPE) [R-0044]; Eurostat, General Government Deficit and Surplus – Annual Data (2004-2015) [R-0046];
Központi Statisztikai Hivatal, Poverty Line 2010 (June 2011) [R-0050]; Chris Bryant, Orbán Aims to Calm
Nerves, Financial Times (9 June 2010) [RLA-0113]; Fidesz Wins Hungary Election, Budapest Business
Journal (12 April 2010) [RLA-0117]; Krisztina Than and Gergely Szakacs, Fidesz Wins Hungary Election
With Strong Mandate, Reuters (11 April 2010) [RLA-0126]; Consolidated Version of the Treaty on the
Functioning of the European Union O.J. C 115 / 99 (2008) [RLA-0205]; Marton Dunai and Krisztina Than,
Hungary’s Fidesz Wins Historic Two-thirds Mandate, Reuters (25 April 2010) [RLA-0241]; László Tóth, A
Fast Working System - The Széchenyi Club Is Working on Boosting Tourism, MNO (23 March 2010) [RLA-
0249]; First Guller Statement, §§ 14 – 17 [RWS-1].
52
R-I § 52; First Guller Statement, §§ 14 – 17 [RWS-1].
53
C-I § 23; Mr. Viktor Orbán (Prime Minister of Hungary), Speech at the Parliamentary Assembly, “Hold
individuals accountable and saving the country from economic collapse” (5 May 2010) [C-0011].
54
Memorandum to Mr. Ádám Balog, Deputy Under Secretary, from Mr. Endre Horváth, Subject: Brief proposal
for the introduction of the Széchenyi revitalization card (28 September 2010) [R-0006].
55
R-II § 61; RPHB-I § 68; Registry of Széchenyi-terv Gazdaságfejlesztő Társaság [R-0063]; Memorandum for
the Minister from Mr. Kristóf Szatmáry and Dr. Ádám Balog , Subject: The future of fringe benefits (31 May
2011) 2 [R-0010]; László Tóth, A Fast Working System - The Széchenyi Club Is Working on Boosting Tourism,
MNO (23 March 2010) [RLA-0249]; Second Nagy Statement, § 12 [CWS-4].

to central taxes.56
128. 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
129. On 13 December 2010, the SZÉP Card Proposal was submitted to public administrative bodies
and agencies.58
130. According to Claimants, CD Hungary controlled 18.1% of the Hungarian voucher market by
2011.59
131. 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
132. The French – Hungarian mediation was announced on 14 January 2011.62
133. 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
134. On 8 February 2011, Respondent’s public administrative bodies and agencies closed the
assessment and evaluation of the SZÉP Card Proposal.64
135. On 15 February 2011, the Ministry for National Economy noted, in a letter to the PSZAF, that it
56
C-I § 33.
57
Letter to Prime Minister Viktor Orbán from President Nicolas Sarkozy (23 November 2011) [R-0017].
58
Proposal to be submitted to the Government with regard to the Government Decree on the Rules and
Regulations for the Issue and the Utilization of the Széchenyi Recreational Card (28 March 2011) [hereinafter
“SZÉP Card Proposal”] [R-0008].
59
C-II § 23; Second FTI Report, § 2.34 [CEX-2].
60
C-I §§ 128, 136.
61
Id., at § 128.
62
63
Letter to Ms. Róza Nagy, Undersecretary for Administration, Ministry of National Economy, Subject: Proposal
for government decree on the rules of the issuance and utilization of Széchenyi Recreation Card (administrative
consultation, repeated consultation) (28 January 2011) [R-0007].
64
SZÉP Card Proposal [R-0008].

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
136. 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
137. On 28 February 2011, a letter from Mr. László Balogh provided advice on who could become a
SZÉP Card Issuer.68
138. 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
139. 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
65
C-II § 83; R-II § 235; Letter from Mr. Endre Horváth (Deputy Minister of State, responsible for economic
development) to Mr. László Balogh (Vice-President, the PSZAF) (15 February 2011) [C-0148].
66
R-I § 74; SZÉP Card Proposal [R-0008]; Memorandum for the Minister from Mr. Kristóf Szatmáry and Dr.
Ádám Balog , Subject: The future of fringe benefits (31 May 2011) [R-0010].
67
Letter from Mr. Zoltán Horváth (Deputy President of the Hungarian Competition Authority) to Mr. Kristof
Szatmáry (Minister of State, Ministry for National Economy) (23 February 2011) [C-0150].
68
Letter from Mr. László Balogh (Vice-President, the PSZAF) to Mr. Endre Horváth (Deputy Minister of State,
responsible for economic development) (28 February 2011) [C-0149].
69
Decree No. 55/2011 [C-0073] / [RLA-0091].
70
R-I § 70; SZÉP Card Proposal [R-0008]; Submission for the Government to amend Government Decree No.
55/2011. (IV. 12) on the rules of the issuance and use of Széchenyi Recreational Card (30 May 2011) [R-
0009]; Proposal on the modification of government decree 55/2011 (IV.12) on the rules of issuance and usage
of Széchenyi Recreational Card (18 July 2011) [R-0012]; National Ministry of Economics, Proposal for the
Government in Connection with the Amendment of Certain Tax Acts and Other Related Acts (11 October
2011) [R-0016]; Minister of National Economy, Proposal on the amendment of Government Decree 55/2011

not exceed 1.5% of the value of the payments made.71
140. 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
141. In May 2011, MNUA was reorganized into a non-profit corporation wholly owned by
Respondent.75
142. On 4 May 2011, Claimants and Tesco modified their contract on vouchers, retroactive to 14
February 2011.76
143. 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
144. On 4 July 2011, Claimants received the “First Data, Prepaid Card Issuing and POS acquiring
(IV. 12.) on the Rules of Issuance and Use of the Széchenyi Recreational Card (15 December 2011) [R-0018];
Szatmáry Statement, § 27 [RWS-2].
71
RfA §§ 32, 38; R-I §§ 69, 78; Decree No. 55/2011 [C-0073] / [RLA-0091]; PIT Law as amended in 2011,
effective 1 January 2012 [hereinafter “2011 PIT Law”] [C-0074] / [RLA-0088]; Adam Viktor, Cafeteria -
What a Great Business to Issue Vouchers!, Napi Online (11 June 2009) [RLA-0128].
72
R-I §§ 67, 231; R-II § 63; SZÉP Card Proposal, 12 – 13, 17, 29 [R-0008]; Szatmáry Statement, §§ 29 – 43
[RWS-2].
73
R-II § 63; SZÉP Card Proposal, 12 – 13, 17, 29 [R-0008].
74
CPHB-I § 56; C-II §§ 25 – 69.
75
C-I § 157; Respondent press release, “Agreement on National Holiday Fund” (25 May 2011) [C-0082].
76
Sample CD Hungary vouchers [C-0041].
77
Speech No. 211/324 by Dr. Bence Rétvári (Plenary Session of Parliament) (2 July 2011) [R-0052].

Services indicative proposal for Le Chèque Déjeuner Hungary.”78
145. 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
146. 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
147. 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
148. 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
149. 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
150. On 7 October 2011, Respondent replied to the French Government’s intervention of 22 September
78
First Data, “Prepaid Card Issuingand [sic] POS Acquiring Services – Indicative Proposal for Le Chèque
Déjeuner Hungary” (4 July 2011) [C-0135]; First Data, Prepaid Card Issuing and POS Acquiring Services
Indicative Proposal (4 July 2011) [R-0011].
79
Proposal on the modification of government decree 55/2011 (IV.12) on the rules of issuance and usage of
Széchenyi Recreational Card (18 July 2011) [R-0012].
80
R-I § 72; Proposal for the Government on the reform of the system of fringe benefits (September 2011) [R-
0015].
81
C-I § 144; 2011 PIT Law [C-0074] / [RLA-0088].
82
RfA § 54.
83
C-I § 170; AETR meeting minutes (15 September 2011) [C-0092]; AETR meeting minutes (22 September
2011) [C-0094]; AETR meeting minutes (26 September 2011) [C-0095]; AETR meeting minutes (29
September 2011) [C-0096].
84
RfA § 54; Letter from French ambassador to Hungary, Mr. Roudaut, to Mr. Szatmáry, Secretary of State for
the Domestic Economy, dated 22 September 2011 [RfA Exhibit C-18] / [C-0101].
85
Id.
86
C-I §§ 176, 191; R-I § 88, R-II § 89, Note to the EC regarding possible changes affecting the regime of meal
vouchers in Hungary (30 September 2011) [R-0014]; EC memo, “November infringements package: main
decisions” (21 November 2012) [C-0116].

2011, stating that the criteria for issuing the SZÉP Card would not be changed.87
151. 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
152. On 14 October 2011, the bill proposing the 2011 Reform was introduced.90
153. 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
154. 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
155. 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
87
Letter from Mr. Kristóf Szatmáry (Secretary of State for the National Economy, Hungary), to Mr. René
Roudaut (French ambassador to Hungary) (7 October 2011) [Exhibit C-0102].
88
R-II § 64.
89
Id., at § 69.
90
Id., at § 90; Dr. György Matolscy, T/4662 Draft Bill on the Amendment of Certain Tax Acts and Other Related
Acts (14 October 2011) [R-0054].
91
Letter from the members of the AETR (Mr. Bálint Bessenyey, SodexoPass Hungária Kft., Mr. Pierre Gagnoud,
Edenred Magyarország Kft. and Ms. Márta Nagy, Le Chèque Déjeuner Kft.), to Mr. László Trócsány
(Ambassador of Hungary to France) (18 October 2012) [C-0115].
92
93
Id.; R-I § 89; Letter from Mr. Nicolas Sarkozy (President of the French Republic), to Mr. Viktor Orbán (Prime
Minister of Hungary) (23 November 2011) [C-0103]; Press release, The SZEP Card, Is It Going to be the First
in the Class or Will it Suffer Failure in its First Year?, AETR [RLA-0125].
94
RfA § 36; C-I §§ 156, 382; 2011 PIT Law [RfA Exhibit CLA-3] / [C-0074] / [RLA-0088].
95
RfA §§ 36 – 41; C-I §§ 156 – 158; 2011 PIT Law [RfA Exhibit CLA-3] / [C-0074] / [RLA-0088]; Respondent
press release, “Agreement on National Holiday Fund” (25 May 2011) [C-0082]; Respondent press release,
“The Government Launches Social Holidays Programme” (12 January 2012) [C-0083]; Decree No. 39/2011
(XII.29.) of the KIM on the issuance of the Erzsébet voucher (29 December 2011) [C-0084]; MTI (Hungarian
Press Agency), “Decision about the new ‘eats tickets’ + video” (6 January 2012) [C-0085]; Law CVX of 2013
on the amendment of certain acts on economic matters (21 June 2013) [C-0086].

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
156. The 2011 Reform required Issuers of the SZÉP Card to meet five requirements, that they:
x have existed for at least five years before they begin issuing SZÉP Cards;
x be associated with a mutual insurance fund and provide services related to its
activity;
x 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;
x have premises open to the public in every Hungarian city with more than 35,000
inhabitants; and
x 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
157. 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
158. The Parties dispute whether “Non-Hungarian Issuers” (defined as Sodexo, Edenred, and
96
R-I §§ 80 – 84; Central European University, Cost of Living (Academic Year 2015/16) [R-0037]; Erzsébet
Program, Civil Society Partners [R-0040]; Erzsébet Program, Erzsébet Program description [R-0041];
Erzsébet Program, In Numbers [R-0042]; Eurostat: Statistics Explained, File: People at risk of poverty or
social exclusion, by age group, 2013 [R-0043]; Szatmáry Statement, §§ 44 – 46 [RWS-2]; Europe 2020
Website, http://ec.europa.eu/euroe2020/index_en.htm.
97
CPHB-I § 1.
98
RfA § 32; C-I § 145; R-I § 75; Decree No. 55/2011, § 13 [RfA Exhibit CLA-2]/ [C-0073]; Act XCVI of 1993
on Voluntary Mutual Insurance Funds, 6 December 1993, § 2(2)d [C-0075]; 2011 PIT Law, § 71(a)(cb) [C-
0074] / [RLA-0088].
99
C-I § 145; Act IV of 2006 on Business associations, 4 January 2006, §§ 1, 2(1), 55(1), 55(3), 64(1) (4 December
2006) [C-0076]; Act CXXXII of 1997 on Hungarian Branch Offices and Commercial Representative Offices
of Foreign Registered Companies, 2 December 1997, § 2b) (2 December 1997) [C-0077]; Action brought on
10 April 2014 – European Commission v. Hungary, Case C-179/14, Official Journal 2014 C 202 (30 June
2014) [C-0078].

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
159. 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)
100
RfA § 18; C-I § 3.
101
RfA § 22.
102
RfA § 33; C-I § 176.
103
R-I § 76; OTP Bank, Corporate Social Responsibility Report [R-0019]; Certificate of effective and non-
effective company data for MKB Bank Zrt., accessed via the website of the Hungarian Ministry of Justice on
(30 December 2014) [R-0032]; Certificate of effective and non-effective company data for KH Bank, accessed
via the website of the Hungarian Ministry of Justice (30 December 2014) [R-0033].
104
Tr. Day 4 at 60 (R. Closing) (citing Tr. Day 2 at 32:15 – 21 (Nagy)).
105
C-I §§ 206, 208 – 209, 269; C-II §§ 110 – 112; R-II § 260; Respondent press release, “The Government
Launches Social Holidays Programme” (12 January 2012) [C-0083]; Dr. Bence Rétvári (State Secretary of the
KIM), Speech at the Parliament No. 152/90 (12 December 2011) [C-0119] / [R-0055]; Mr. Miklós Soltész
(Ministry of Natural Resources), Speech at the Parliament No. 152/161 (12 December 2011) [C-0120]; Mr.
Miklós Soltész (Ministry of Natural Resources), Speech at the Parliament No. 152/165 (12 December 2011)
[C-0121].
106
C-II § 110; Dr. Bence Rétvári (State Secretary of the KIM), Speech at the Parliament No. 152/90 (12 December
2011) [C-0119].

stated that the profits would be used for children and their holidays, rather than being transferred
from Respondent State.107
160. 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
161. 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
162. 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
163. 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
107
C-II §§ 111 – 112; Respondent press release, “The Government Launches Social Holidays Programme” (12
January 2012) [C-0083]; Mr. Miklós Soltész (Ministry of Natural Resources), Speech at the Parliament No.
152/165 (12 December 2011) [C-0121].
108
Minister of National Economy, Proposal on the amendment of Government Decree 55/2011 (IV. 12.) on the
Rules of Issuance and Use of the Széchenyi Recreational Card (15 December 2011) [R-0018].
109
C-I § 381; R-I § 94.
110
Edenred, Sodexo, Chèque Déjeuner press release “Reform of the restaurant voucher in Hungary” (2012) [C-
0071]
111
R-II § 82; 2011 PIT Law [C-0074] / [RLA-0088].
112
R-I §§ 85 – 86, 94 – 95; R-II § 83; Graphic adapted from Edenred website, available at http://edenred.hu/.
113
C-II § 106.
114
C-I § 162; see also CPHB-I Annex No. 6, first table; 2011 PIT Law, Art. 70 [C-0074] / [RLA-0088].
115
C-I § 175; Letter from Mr. Viktor Orbán (Prime Minister of Hungary) to Mr. Nicolas Sarkozy (President of
the French Republic) (6 January 2012) [C-0107].

Government issued a press release regarding the negotiation efforts.116
164. By 30 January 2012, Claimants’ business activity in Hungary was 10% of what it was the previous
January.117
165. 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
166. On 6 March 2012, Ms. Nagy – representing AETR – attended a meeting with Mr. Szatmáry.121
167. 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
168. 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
169. On 13 April 2012, AETR members met with Mr. Guller and discussed three possible solutions to
116
C-I § 178; French Government press release, meeting between Mr. Alain Juppé (Minister of State for Foreign
Affairs, France) and Mr. János Martonyi (Minister of State for Foreign Affairs, Hungary) (24 January 2012)
[C-0108].
117
LCD, Extracts from the meeting minutes of the Board of Directors dated 17 October 1996, 22 November 2011,
and 30 January 2012 [C-0045].
118
C-I §§ 164 – 166; Respondent press release, “Common Communication Campaign for the Success of the Szép
Card” (16 December 2011) [C-0079]; Nemzeti Üdülési Szolgálat Kft., Company registry excerpt (11 April
2012) [C-0088]; Photos of the Erzsébet advertising campaign [C-0089]; Népszava, “Meal vouchers become a
political weapon” (27 January 2012) [C-0090]; Patrik Andó, “Hundreds of Millions for Promotion Purposes”,
Világgazsdaság (12 March 2012) [C-0091].
119
C-I § 202; Dér Statement, § 49 [CWS-1]; First Nagy Statement, § 54 [CWS-2].
120
R-II §§ 76, 78, 300; Extract from Claimants' internal presentation (27 March 2012) [C-0124]; Legrand
Statement, §§ 35 – 37, 40 [CWS-3]; Presentation, Hungarian Branch Strategic Meeting, Le Chèque Déjeuner
(27 March 2012) [R-0056] / [NAV-0066].
121
C-I § 179; Minutes of the meeting between Mr. Kristóf Szatmáry (Secretary of State for the National
Economy), and Ms. Márta Nagy (6 March 2012) [C-0080] / [R-0021]; First Nagy Statement, §§ 50, 55, 56
[CWS-2].
122
Legrand Statement, §§ 35 – 36 [CWS-3]; Extract from Claimants' internal presentation (27 March 2012) [C-
0124].
123
French Government press release, “Hungary – Bilateral Economic Relations: Summoning of Ambassador of
Hungary to France” (6 April 2012) [C-0109]; Letter from Edenred, Sodexo and Chèque Déjeuner to Mr. Michel
Barnier (European Commissioner, Internal Market and Services) (6 April 2012) [C-0164].

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
170. In June 2012, LCD (now UP) implemented an initial redundancy plan for 40 of its employees.125
171. On 21 June 2012, the EC initiated an infringement procedure against Respondent.126
172. On 28 August 2012, there were negotiations between Claimants (through AETR) and
Respondent.127
173. In November 2012, the 2011 Reform was amended.128
174. 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
175. 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
124
C-II §§ 132, 134; Email from Mr. Pierre Gagnoud (Edenred) to Mr. Bálint Bessenyey (Sodexo) and Ms. Márta
Nagy (16 April 2012) [C-0154]; Notes of the meeting (2 April 2012) [C-0167].
125
RfA § 49; C-I § 219; R-II § 76; Agreement between CD Hungary and employee representatives (19 June 2012)
[RfA Exhibit C-14] / [C-0125]; First Nagy Statement, § 61 [CWS-2]; Legrand Statement, §§ 35 – 37, 40
[CWS-3].
126
RfA § 62; EC press release dated 20 June 2013 “Internal market – the Commission has brought Hungary before
the Court of Justice to contest restrictive conditions on the issue of luncheon vouchers and other benefits in
kind” [RfA Exhibit C-24].
127
C-I § 185; C-II § 135; Minutes of the meeting between the Non-Hungarian Issuers and Respondent, 3, 5, 7, 8
(28 August 2012) [C-0112].
128
RfA § 68.
129
RfA § 62; C-I § 191; EC press release dated 20 June 2013 “Internal market – the Commission has brought
Hungary before the Court of Justice to contest restrictive conditions on the issue of luncheon vouchers and
other benefits in kind” [RfA Exhibit C-24]; Zoltán Simon, “Hungary on Path to Shed Junk Grade and Shield
Forint, Orbán Says”, Bloomberg (15 December 2014) [C-0016].
130
RfA §§ 68, 72; C-I §§ 221, 226; Agreement between CD Hungary and employee representatives, 7 February
2013 [RfA Exhibit C-26]; Legrand Statement, § 39 [CWS-3].
131
C-II § 136; Claimants’ press release, “Groupe Chèque Déjeuner stops issuing vouchers in Hungary” (7
February 2013) [C-0037].
132
RfA §§ 14, 73, 115; C-I §§ 142, 228; R-II §§ 76, 79; Claimants’ press release, “Groupe Chèque Déjeuner stops
issuing vouchers in Hungary” (7 February 2013) [RfA Exhibit C-27] / [C-0037]; Sample CD Hungary
(termination letter of network agreement) (4 February 2013) [C-0128]; Sample CD Hungary (termination letter

commenced further employee layoffs.133 As of 30 June 2013, CD Hungary ceased reimbursing
vouchers.134
176. On 20 June 2013, the EC announced that it would refer the Hungarian fringe benefits matter to
the CJEU.135
177. 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
178. 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
179. From September – November 2013, Claimants attempted to negotiate a settlement with
of employer agreement) (4 February 2013) [C-0129]; Legrand Statement, §§ 35 – 37, 40 [CWS-3]; Collection
of Network Agreement Termination Letters (4 February 2013) [R-0060].
133
Agreement between CD Hungary and the employee representatives (7 February 2013) [C-0127].
134
C-I § 229; First Nagy Statement, § 65 [CWS-2].
135
RfA § 64; C-I § 192; EC press release dated 20 June 2013 “Internal market – the Commission has brought
Hungary before the Court of Justice to contest restrictive conditions on the issue of luncheon vouchers and
other benefits in kind” [RfA Exhibit C-24]; Judgment of the Court (First Chamber) of 6 November 2012 —
European Commission v. Hungary, Case C-286/12, Official Journal C 9/35 (1 December 2013) [C-0017];
Letter from Mr. Jacques Landriot (CEO, Le Chèque Déjeuner CCR, Legal representative of the President, CD
Internationale), to Mr. Mihály Varga (Minister of the National Economy), copied to Mr. Viktor Orbán (Prime
Minister of Hungary), Mr. Tibor Navracsics (Vice-Prime Minister and Minister of State Administration and of
Justice) (23 September 2013) [C-0040]; Written question K/11769 (Dr. Garai István Levente, Parliamentary
Deputy, MSZP) and written response NGM/19787/2013 (Mr. Mihály Varga, Minister of the National
Economy) (12 and 29 July 2013) [C-0081].
136
C-I § 234; R-II § 150; Letter from Mr. Mihály Varga (Minister of the National Economy) to Mr. Jacques
Landriot (CEO, Le Chèque Déjeuner CCR, Legal representative of the President, CD Internationale) (26 July
2013) [C-0130]; Letter from Mr. Mihály Varga (Minister of the National Economy) to Mr. Jacques Landriot
(CEO, Le Chèque Déjeuner CCR, Legal representative of the President, CD Internationale) (26 July 2013) [R-
0025].
137
C-I § 229; First Nagy Statement, § 65 [CWS-2].
138
R-II § 87; Le Chèque Déjeuner Financial Statement (2014) [R-0061]; Certificate of Incorporation for CD
Hungary (28 June 2016) [R-0062]; Legrand Statement, § 40 [CWS-3].

Respondent.139 Claimants commenced these ICSID proceedings in December 2013.140
180. 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
181. 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
182. 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
139
C-I §§ 235 – 238; Letter from Mr. Jacques Landriot (CEO, Le Chèque Déjeuner CCR, Legal representative of
the President, CD Internationale), to Mr. Mihály Varga (Minister of the National Economy), copied to Mr.
Viktor Orbán (Prime Minister of Hungary), Mr. Tibor Navracsics (Vice-Prime Minister and Minister of State
Administration and of Justice) (23 September 2013) [C-0040]; Email exchange between Dr. Zoltán Guller
(Commissioner for the Ministry of State Administration), Ms. S. Trouillard (Assistant to Mr. Jacques Landriot),
and Mr. Jacques Landriot (CEO, Legal representative of the President of CD Internationale) (October 2013)
[C-0131]; Email exchange between Dr. Zoltán Guller (Commissioner for the Ministry of State Administration),
Ms. S. Trouillard (Assistant to Mr. Jacques Landriot), and Mr. Jacques Landriot (CEO, Legal representative
of the President of CD Internationale) (11, 24, 24, 29 October 2013) [R-0027].
140
C-I § 239; R-I § 91.
141
Letter to Csaba Kassai from Erzsébet Utalványforgalmazó Zrt. Word doc title: Translation_Test Purchase [R-
0028].
142
Hungarian Trade Licensing Office, Summary on the experiences of the control conducted in the fourth quarter
of 2014 in connection with the examination on the compliance of the regulations of Government Decree
55/2011. (IV.12.) on the rules of the issuance and use of the Széchenyi Recreational Card (April 2014) [R-
0029].
143
C-II § 117; Hungarian Trade Authority (MKEH), 2015 3rd quarter inspection report (2015) [C-0161];
Hungarian Trade Authority (MKEH), 2015 4th quarter inspection report (2015) [C-0162].
144
Action brought on 10 April 2014 – European Commission v. Hungary, Case C-179/14, Official Journal 2014
C 202 (30 June 2014) [C-0078].
145
European Large Families Confederation, ELFAC Prize 2014 [R-0030].
146
R-I § 96; Ministry for National Economy, Széchenyi Recreation Card system: a Good Practice from Hungary
to boost domestic tourism (October 2014) [R-0031].

183. On 17 September 2015, the Advocate General issued an opinion in EC v. Hungary.147
184. 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
185. 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
B. FACTUAL ASSERTIONS IN RESPONSE TO TRIBUNAL QUESTIONS
186. 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
187. 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
147
European Commission v. Hungary, European Court of Justice, Case C-179/14, Opinion of Advocate General
Yves Bot (17 September 2015) [C-0168].
148
C-II §§ 138 – 140; European Commission v. Hungary, European Court of Justice, Case CǦ179/14, Judgment
of the Court (Grand Chamber) (23 February 2016) [hereinafter “EC v. Hungary, CJEU Judgment”] [C-0153];
European Commission v. Hungary, European Court of Justice, Case C-179/14, Opinion of Advocate General
Yves Bot (17 September 2015) [C-0168].
149
R-II §§ 94; 326; Act CXXXI of 2010 on Participation of the Public in the Preparation of Legislation [RLA-
0191].
150
R-II § 94.

a tax rate of 51.17%, and there was no exemption ceiling.151
188. 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
189. 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
190. 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
191. 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
151
CPHB-I § 19; Claimants’ Opening, slide 3.
152
CPHB-I §§ 20 – 23; Respondent’s Appendix to Closing, 26; Tr. Day 4 at 8:20 – 11:4 (Claimants’ Closing).
153
CPHB-I § 23; Edenred Award, § 364.
154
CPHB-I § 24; Tr. Day 2 at 21:14 – 22:3 (Nagy).
155
RPHB-I § 60; R-II Table 1: Overview of the Fringe Benefit System as of 1 January 2012.
156
RPHB-I §§ 61 – 62; Table 3; Table 4; Tr. Day 2 at 17:23, 66:23 – 24; 67:4 – 7 (Nagy).
157
RPHB-I §§ 63.

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
192. 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.
193. 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
158
RPHB-I § 64; Table 6 in response to Question (i); Tr. Day 1 at 198:14 – 17, 199:24 – 200:2 (Nagy); Tr. Day 2
at 40:2 – 20 (Gans and Guller); PIT Law, in force as of 1 January 2013, § 70(4) [RLA-0189].
159
RPHB-I § 65; Tr. Day 3 at 88:13 – 17 (Gans and Nicholson) (confirming that Nicholson modeled the
continuation of the 2011 legislative conditions); Id. at 119:12 – 13 (Nicholson).
160
CPHB-I § 19 (Table); RPHB-I n. 118.
161
Compare CPHB-I § 19 (Table ) and R-II § 81 (Table 1).

anticipated.162
194. 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
195. 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 C-
0062 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
162
CPHB-I Annex No. 4 § 1.
163
CPHB-I Annex No. 4 n.1; Tr. Day 3 at 89:14 – 90:5 (Nicholson) (explaining that the market was moving
toward dematerialization); see also Tr. Day 1 at 66:20 – 67:15 (Claimants’ Opening) (stating that
dematerialization was not imminent on 1 January 2012); Tr. Day 4 at 13:22 – 16:18 (Claimants’ Closing)
(while dematerialization would occur, as of 2011 there was no reason to anticipate an imminent shift to
dematerialization).
164
Tr. Day 3 at 195:2 – 24 (Navigant).
165
Tr. Day 3 at 23:10 – 13, 30:19 – 31:3(Guller); see also Tr. Day 3 at 201:14-16 (Navigant) (confirming that the
market was not ready for dematerialization as of the valuation date).
166
CPHB-I §§ 97 – 98; Tr. Day 2 at 65:23 – 25, 66:1 – 67:1 (Nagy) (explaining why Claimants would not offer
electronic card); Tr. Day 3 at 101:4 – 102:6 (FTI) (confirming that Hungary was not prepared for
dematerialization).
167
CPHB-I §§ 230 – 233, Annex No. 4; Tr. Day 3 at 62:11 – 17; 77:7-15; 80:2-24 (Nagy).
168
CD Hungary Internal Memo, Hungary Card Issuance, 7 July 2011 [NAV-58].
169
Extract from Internal CD Hungary presentation (22 June 2009), slide 23 [C-0062].
170
Tr. Day 2 at 56:19 – 21 (Nagy).

dematerialization was not going to be passed within the next five years.171
196. 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 market 173 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
197. 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
198. 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
171
Tr. Day 3 at 99 – 102 (FTI); Tr. Day 4 at 16:19 – 18:4 (C. Closing).
172
CPHB-I § 94; Tr. Day 2 at 18:23 – 24 (Nagy); Tr. Day 4 at 18:16 – 20:9 (C. Closing); Summary table, “Le
Chèque Déjeuner Kft. 1997-2012” [C-0057].
173
See e.g., Extract from Internal CD Hungary presentation (22 June 2009) [C-0062]; Extract from Internal CD
Hungary presentation (2009) [C-0065]; First Data, “Prepaid Card Issuingand [sic] POS Acquiring Services –
Indicative Proposal for Le Chèque Déjeuner Hungary” (4 July 2011) [C-0135]; Presentation, Benefits of the
Card System, Le Chèque Déjeuner (17 June 2011) [R-0051] / [NAV-59].
174
See e.g., Tr. Day 2 at 61:20 – 22 (Nagy).
175
National Bank of Hungary, “The payment card business in Hungary”, 2008 2 [FTI-02].
176
Tr. Day 2 at 65:23 – 25; 66:1-4 (Nagy).
177
Id., at 51:16 – 17 (Nagy).
178
Edenred Award, at §§ 405, 686 – 689.
179
See e.g., Letter from Ms. Márta Nagy to Mr. Philippe Baudry (Economic and Commercial Counsellor, French
Embassy, Budapest) together with annexes (30 March 2000) [C-0051] (noting difficulties in the system in
Hungary that fringe benefits are considered “as a matter of tax policy”); Extract from Mazars Summary Notes
on CD Hungary, “Le Chèque Déjeuner Kft., Hungary”, dated 31 December 2009, 31 December 2010, and 31
December 2011 – 31 December 2013 [C-0044] (discussing the legislative changes from 2009 – 2013); Dr.
Péter Oszkó, T/9817 Draft Bill on the Amendment Amending the Transformation of Tax System (May 2009)
[R-0048] (in 2009, the Government considered the abolishment of the Fringe Benefit System by “significantly
reducing tax advantages, tax exemptions, and by eliminating certain taxes and contributions”); Proposal from
the AETR concerning the universal regulation of the system for allocating benefits in kind (January 2010) [C-
0145] (AETR’s proposition to reform to improve the Fringe Benefit System by introducing stronger

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
199. 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
200. 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
regulation); Dér Statement, § 11 [CWS-1] and First Nagy Statement, § 11 [CWS-2] (Claimants’ product
mix changed and depended on the tax framework of the relevant year).
180
RPHB-I § 87; Tr. Day 4 at 55:17 – 24 (R. Closing); Dér Statement, §§ 19 – 20 [CWS-1], Tr. 212:9 - 213:7
(Gans and Nagy).
181
RPHB-I § 88; C-I § 136 (“ground shifted”).
182
First Nagy Statement, § 37 [CWS-2].
183
See e.g., Extract from Internal CD Hungary presentation (31 October 2006) [C-0043] (describing “hot vouchers
in the form of a card” among “threats”, such as the card issued by Pannot Tikett); Internal CD Hungary
memorandum, “Outline of situation – cards on the Hungarian market” (18 July 2007) [C-0134] (describing
market players and government entities considering the transition to cards and how to respond); Extract from
Internal CD Hungary presentation (22 June 2009) [C-0062] (noting competition from issuers with electronic
vouchers); Extract from Internal CD Hungary presentation (2009) [C-0065] (explicitly mentioning Card
Issuers as new competitors); First Nagy Statement, § 41 [CWS-2] (in 2009, LCD – now UP – considered the
introduction of a card as a potential area of future growth); Dér Statement, § 41 [CWS-1] (demonstrating
awareness that electronic cards may be introduced); Legrand Statement, § 27 [CWS-3] (“if card-based
vouchers turned out to be a real threat, we would be in a position to respond within a year”); Benefits of the
card system, flyer dated 17 June 2011 [NAV-0059] (flyer prepared by CD Hungary detailing the advantages
of electronic cards over traditional paper); First Data, “Prepaid Card Issuingand [sic] POS Acquiring Services
– Indicative Proposal for Le Chèque Déjeuner Hungary” (4 July 2011) [C-0135] (LCD commissioned First
Data to provide an offer regarding the facilitation of LCD’s shift to electronic cards); CD Hungary Internal
Memo, Hungary Card Issuance, 7 July 2011 [NAV-0058] (discussing new voucher issuers introducing cards
in Hungary and warning that LCD “cannot afford not to have our own strategy in this market”).
184
RPHB-I § 86.

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
201. 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
185
Proposal for the Government on the reform of the system of fringe benefits (September 2011) [R-0015]; AETR
meeting minutes (15 September 2011) [C-0092]; AETR meeting minutes (22 September 2011) [C-0094];
AETR meeting minutes (26 September 2011) [C-0095]; AETR meeting minutes (29 September 2011) [C-
0096]; First Nagy Statement, § 50 [CWS-2]; C-I § 169.
186
RPHB-I § 89; AETR press release (4 October 2011) [C-0099] and AETR press release, “The SZEP Card, is it
going to be the first in the class or will it suffer failure in its first year?” (November 2011) [C-0100] (describing
Claimants’ media campaign criticizing the reforms); see e.g., Summary table, “Interviews and action taken
Hungary September 2011” (12 January 2012) [C-0098], Letter from Mr. Kristóf Szatmáry (Secretary of State
for the National Economy, Hungary), to Mr. René Roudaut (French ambassador to Hungary) (7 October 2011)
[C-0102]; Letter from Mr. Nicolas Sarkozy (President of the French Republic), to Mr. Viktor Orbán (Prime
Minister of Hungary) (23 November 2011) [C-0103] (evidencing diplomatic intervention); Letter from the
members of the AETR (Mr. Bálint Bessenyey, SodexoPass Hungária Kft., Mr. Pierre Gagnoud, Edenred
Magyarország Kft. and Ms. Márta Nagy, Le Chèque Déjeuner Kft.), to Mr. László Trócsány (Ambassador of
Hungary to France) (18 October 2012) [C-0115]; Letters from AETR together with Resolution and Proposal
(10 November 2011) [C-0165] (organization of white Paper and reforms).
187
Tr. Day 4 at 96:2-23.
188
Letter from Mr. René Roudaut (French ambassador to Hungary), to Mr. Kristóf Szatmáry (Secretary of State
for the National Economy, Hungary) (22 September 2011) [C-0101].
189
Letter from Mr. Kristóf Szatmáry (Secretary of State for the National Economy, Hungary), to Mr. René
Roudaut (French ambassador to Hungary) (7 October 2011) [C-0102].
190
Letter from Mr. Nicolas Sarkozy (President of the French Republic), to Mr. Viktor Orbán (Prime Minister of
Hungary) (23 November 2011) [C-0103].

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?
202. 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
203. 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)
191
Letter from Mr. Viktor Orbán (Prime Minister of Hungary) to Mr. Nicolas Sarkozy (President of the French
Republic) (6 January 2012) [C-0107].
192
French Government press release, meeting between Mr. Alain Juppé (Minister of State for Foreign Affairs,
France) and Mr. János Martonyi (Minister of State for Foreign Affairs, Hungary) (24 January 2012) [C-0108].
193
French Government press release, “Hungary – Bilateral Economic Relations: Summoning of Ambassador of
Hungary to France” (6 April 2012) [C-0109].
194
CPHB-I Annex No. 5.
195
RPHB-I § 90; Legrand Statement, § 12 [CWS-3]; Tr. Day 1 at 209:7 – 210:4 (Nagy) (noting that without the
cash advantage, CD Hungary could not exist).
196
RPHB-I § 91; R. Opening Statement, slide 5.

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
204. 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
205. 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.
VI. JURISDICTION OF THE TRIBUNAL
A. THE DECISION ON PRELIMINARY ISSUES OF JURISDICTION
206. In its Decision on Preliminary Issues of Jurisdiction of 3 March 2016, the Tribunal decided:
i. The Respondent’s objections against the Tribunal’s jurisdiction

regarding the claims for alleged breach of Article 3 of the Treaty
between Hungary and France are dismissed.
ii. The Tribunal has jurisdiction over all the claims raised.
197
RPHB-I § 92.
198
Id., at § 93; R. Closing Presentation, slide 6.
199
RPHB-I § 94.
200
Tr. at 58:1-10 (R. Closing).

iii. The decision on costs is reserved for a later stage of the procedure.201
B. THE PARTIES’ SUBMISSIONS REGARDING THE ACHMEA DECISION
207. The following summaries are based on the Parties’ responses to Question (a) regarding the
relevance of the Achmea Case 202 , 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
208. 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.
201
Decision on Jurisdiction, § 228.
202
Following the Hearing in PO-10, the Tribunal invited the Parties to explain “What relevance, if any, of the case
Slovak Republic v. Achmea (Case-284-16) for the present case?” in their post-hearing submissions.
203
Achmea Decision, CJEU (6 March 2018) [hereinafter “Achmea Decision”], at § 62.
204
Claimants’ Second Comments on Achmea Decision (16 May 2018), at 3.

(a) Procedural Objections and Due Process
209. 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
210. 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
211. 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.
205
Claimants’ Second Comments on Achmea Decision (16 May 2018), at 4; CPHB-I § 285.
206
Claimants’ First Comments on Achmea Decision (18 April 2018), at 3, citing Electrabel S.A. v. Hungary,
ICSID Case No. ARB/07/19, Decision on Jurisdiction, Applicable Law and Liability, 30 November 2012
[hereinafter “Electrabel v. Hungary, Decision on Jurisdiction”] [CLA-0070]; AES Summit Generation Limited
and AES-Tisza Erömü Kft. v. Hungary, ICSID Case No. ARB/07/22, Award, 23 September 2010 [hereinafter
“AES v. Hungary”] [CLA-0062]; Claimants’ letter to the Tribunal (21 April 2017).
207
Claimants’ First Comments on Achmea Decision (18 April 2018), at 3.
208
Id., at 4; CPHB-I §§ 294, 293 (arguing that since Art. 9 of the BIT is and will remain valid and applicable
regardless of the outcome of the Achmea case, there is no need for the Tribunal to delay this arbitration pending
the CJEU’s judgment.)
209
Claimants’ First Comments on Achmea Decision (18 April 2018), at at 6, point five.
210
Id. at 7; Claimants’ Second Comments on Achmea Decision (16 May 2018), at 6.

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
212. 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
211
212
Id.
213
Id. at 9; Achmea Decision, § 33.
214
215
CPHB-I § 287; Decision on Preliminary Issues of Jurisdiction § 208; Tr. Day 4 at 85: 21 – 22 (R. Closing).
216
CPBH-I § 288; Decision on Preliminary Issues of Jurisdiction § 136.
217
CPHB-I § 288; Christoph H. Schreuer, Loretta Malintoppi, August Reinisch & Anthony Sinclair, The ICSID
Convention: A Commentary, 2nd Edition, Cambridge University Press, 2009, Art. 25, §§ 596 – 599 [CLA-
0239].
218
219
Id., at 10.

213. 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
214. 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.”223 Achmea 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
215. 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
220
Claimants’ Second Comments on Achmea Decision (16 May 2018), at 6; Electrabel v. Hungary, Decision on
Jurisdiction, §§ 6.84 and 6.85 [CLA-0070].
221
Claimants’ Second Comments on Achmea Decision (16 May 2018), at 6; CPHB-I § 289.
222
Id., at 7.
223
Id.
224
Id., at 8.
225
Claimants’ First Comments on Achmea Decision (18 April 2018), at 4; see also CPHB-I §§ 285 – 286.
226
Claimants’ Second Comments on Achmea Decision (16 May 2018), at 8 – 9.

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
216. 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
217. 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
227
Claimants’ First Comments on Achmea Decision (18 April 2018), at 5; citing R-II § 91.
228
229
230
Id., at 10 – 11; CPHB-I § 291; Patrick Daillier, Mathias Forteau and Alain Pellet, Droit International Public,
L.G.D.J.-Lextenso, 2009, § 173 [CLA-0246]; Blusun S.A., Jean Pierre Lecorcier and Michael Stein v. The
Italian Republic, ICSID Case No. ARB/14/3, Award (27 December 2016) [hereinafter “Blusun v. Italy”], § 290
[CLA-0247].
231
Claimants’ First Comments on Achmea Decision (18 April 2018), at 14 – 15.
232

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
218. 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 –
238
is fulfilled. 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
233
“Fragmentation of International Law: Difficulties arising from the Diversification and Expansion of
International Law”, Report of the Study Group of the International Law Commission, 13 April 2006, at § 108
available at: http://legal.un.org/ilc/documentation/english/a_cn4_l682.pdf.
234
Id., at § 374.
235
Id., at § 412.
236
Claimants’ Second Comments on Achmea Decision (16 May 2018), at 11; Claimants’ First Comments on
Achmea Decision (18 April 2018), at 15.
237
CPHB-I § 291; VCLT Art. 59(1)(b) and Art. 30(3) [CLA-0240]; Eureko B.V. v. The Slovak Republic, PCA
Case No. 2008-13, Award on Jurisdiction, Arbitrability and Suspension (26 October 2010) [hereinafter
“Eureko PCA case”], § 187 [CLA-0245]; for tribunals finding that BITs and TFEU law do not have the same
subject matter, see e.g., Anglia Auto Accessories Limited v. The Czech Republic, SCC Case No. V 2014/181,
Award (10 March 2017) [hereinafter “Anglia v. Czech Republic”], §§ 115 – 116 [CLA-0241]; Jan Oostergetel
and Theodora Laurentius v. The Slovak Republic, UNCITRAL, Decision on Jurisdiction (30 April 2010)
[hereinafter “Oostergetel v. Slovakia”], § 104 [CLA-0242]; European American Investment Bank AG v. The
Slovak Republic, PCA Case No. 2010-17, Award on Jurisdiction (22 October 2012) [hereinafter “EAIB v.
Slovakia”], §§ 184 – 280 [CLA-0243] / [RLA-0259]; WNC Factoring Ltd v. The Czech Republic, PCA Case
No. 2014-34, Award (22 February 2017) [hereinafter “WNC v. Czech Republic”] §§ 295 – 308 [CLA-0244];
Eastern Sugar, B.V. v. Czech Republic, UNCITRAL, SCC Case No. 088/2004, Partial Award (27 March 2007)
[hereinafter “Eastern Sugar v. Czech Republic”], § 180 [RLA-0154]; see also Tr. Day 4 at 86:11-15 (R.
Closing) (admitting that the protections are not identical).
238
Claimants’ Second Comments on Achmea Decision (16 May 2018), at 12-13; Claimants’ First Comments on
Achmea Decision (18 April 2018), at 15, 16; CPHB-I § 291; VCLT Art. 59(1)(b) and Art. 30(3) [CLA-0240];
Eureko PCA case, § 187 [CLA-0245]; for tribunals finding that BITs and TFEU law do not have the same
subject matter, see e.g., Anglia v. Czech Republic, §§ 115 – 116 [CLA-0241]; Oostergetel v. Slovakia, § 104
[CLA-0242]; EAIB v. Slovakia, §§ 184 – 280 [CLA-0243] / [RLA-0259]; WNC v. Czech Republic, §§ 295 –
308 [CLA-0244]; Eastern Sugar v. Czech Republic, § 180 [RLA-0154]; see also Tr. Day 4 at 86:11-15 (R.
Closing) (admitting that the protections are not identical).
239

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
219. 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 non-
Member 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-à-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
240
Id., at 13; Claimants’ First Comments on Achmea Decision (18 April 2018), at 16.
241
Claimants’ Second Comments on Achmea Decision (16 May 2018), at 13 – 14; Claimants’ First Comments on
Achmea Decision (18 April 2018), at 16 – 17; RPHB para 29; Tr. Day 4 at 86:11 – 15 (R. Closing).
242
243
Electrabel v. Hungary, Decision on Jurisdiction, § 4.79 [CLA-0070] (“Response: In the Respondent's Response
of 1 August 2011, as regards Article 307 EC, the Respondent re-states its previous case, according to which
'Article 307 is aimed solely at respecting pre-existing obligations to non-Member States and is inapplicable in
an intra-EU dispute' (…)”; see also § 4.178: “(…) Both Parties submit that Article 307 EC is inapplicable to
the present case; but the Tribunal does not consider that Article 307 can so easily be dismissed.”).
244
245

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.
220. 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
221. 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,
246
247
Id., at 7.
248
249
Id.
250
Id., at 18 – 19; CPHB-I § 290. Given France’s position, a mutual termination of the BIT under Art. 54(b) of
the VCLT is unlikely. See CPHB-I § 290; Art. 54(b) of the VCLT [CLA-0240].
251

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
222. 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
252
Id.
253
Id., at 20; Claimants’ First Comments on Achmea Decision (18 April 2018), at 18 – 19.
254
255
Id., at 20; CPHB-I § 292; Tania Voon, Andrew Mitchell, James Munro, “Parting Ways: The Impact of Mutual
Termination of Investment Treaties on Investor Rights”, ICSID Review, Vol. 29, No. 2 (2014), 463 – 465
[CLA-0249]; Blusun v. Italy, §§ 289, 303 [CLA-0247]; WNC v. Czech Republic, § 307 [CLA-0244]; Eastern
Sugar v. Czech Republic, § 180 [RLA-0154].
256
257
Id.; C. Schreuer, “Interaction between International Tribunals and Domestic Courts”, in Contemporary Issues
in International Arbitration and Mediation: The Fordham Papers, edited by A. Rovine (2010), 71, available
at: http://www.univie.ac.at/intlaw/wordpress/pdf/interactions_int_tribunals_domestic.pdf; WNC v. Czech
Republic, § 300 [CLA-0244].
258
Decision on Jurisdiction, 3 March 2016, §§ 144 and 194.

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
223. 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
224. 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
225. 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
259
Claimants’ Second Comments on Achmea Decision (16 May 2018), at 20 – 21; Claimants’ First Comments on
260
Claimants’ Second Comments on Achmea Decision (16 May 2018), at 21, Claimants’ First Comments on
261
262
Id., at 23; CMS Gas Transmission Company v. The Republic of Argentina, ICSID Case No. ARB/01/8,
Decision of the Tribunal on Objections to Jurisdiction of 17 July 2003, § 28, available at:
https://www.italaw.com/sites/default/files/case-documents/ita0183.pdf; Ambiente Ufficio S.p.A. and others v.
Argentine Republic, ICSID Case No. ARB/08/9, Decision on Jurisdiction and Admissibility of 8 February
2013, available at: https://www.italaw.com/sites/default/files/case-documents/italaw1276.pdf; Abaclat and
Others v. Argentine Republic, ICSID Case No. ARB/07/5, Decision on Jurisdiction and Admissibility of 4
August 2011, § 588, available at: https://www.italaw.com/sites/default/files/case-documents/ita0236.pdf.
263
Claimants’ First Comments on Achmea Decision (18 April 2018), at 22; Claimants’ Second Comments on
Achmea Decision (16 May 2018), at 23 – 24.

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
226. Issues related to the enforcement of the award to be issued cannot be an obstacle to jurisdiction,
even when a tribunal considers that it has a duty to render an enforceable award.267 Indeed, the
ICSID system is not concerned with post-award issues, this being entirely governed by Arts. 53
and 54 of the ICSID Convention. The request that the Tribunal consider post-award issues in
effect asks the Tribunal to go beyond its mandate and must be rejected. In any event, the award
may be enforced outside the EU.268
(d) Application of the Forum Prorogatum Principle
227. 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
264
Achmea B.V. v. The Slovak Republic, UNCITRAL, PCA Case No. 2008-13 (formerly Eureko B.V. v. The Slovak
Republic), Award (7 December 2012) [hereinafter “Achmea v. Slovakia Award”], §§ 277 – 283 [CLA-0237].
265
266
Id., at 23.
267
268
Id., at 25; Claimants’ First Comments on Achmea Decision (18 April 2018), at 23 – 24.
269
Claimants’ Second Comments on Achmea Decision (16 May 2018), at 25, 27; C. Schreuer, “Belated
Jurisdictional Objections in ICSID Arbitration”, TDM 1, 2010, 20, available at:
http://www.univie.ac.at/intlaw/pdf/102_bel_jurisd_obj_icsid_arb.pdf.
270
271
Id., at 28 – 29; Claimants’ First Comments on Achmea Decision (18 April 2018), at 3-4; R-I § 16; Respondent’s
Post-Hearing Brief (Jurisdiction) § 3.

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
228. 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
229. 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
230. The issue before the CJEU in Achmea was the incompatibility of dispute resolution clauses
contained in intra-EU BITs with EU law and their resultant inapplicability. 277 The Achmea
Decision is applicable to these proceedings, as commenced pursuant to the BIT. As a
consequence of the Achmea Decision, the Tribunal lacks jurisdiction. In the alternative, the
Tribunal should decline exercising any jurisdiction over this matter. There are no procedural
grounds that would justify the Tribunal disregarding the Achmea Decision.
272
273
Claimants’ Second Comments on Achmea Decision (16 May 2018), at 28; Art. 26 of the ICSID Convention.
274
Claimants’ First Comments on Achmea Decision (18 April 2018), at 4; Claimants’ Second Comments on
Achmea Decision (16 May 2018), at 25.
275
276
Id., at 29 – 30, Claimants’ First Comments on Achmea Decision (18 April 2018), at 21.
277
RPHB-I § 24; German Federal Court of Justice Decision in the Procedure for the Annulment of a Domestic
Arbitral Award, Case No. I ZB 2/15 (3 March 2016) [RLA-0262].

(a) Procedural Objections and Due Process
231. 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
232. 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 pre-
existing 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
278
Respondent’s First Comments on Achmea Decision (28 March 2018), at 11; Christoph Schreuer, Loretta
Malintopi, August Reinisch and Anthony Sinclair, The ICSID Convention: A Commentary, Art. 41, § 42 (2d
ed. 2009).
279
Respondent’s First Comments on Achmea Decision (28 March 2018), at 12; Ioan Micula, Viorel Micula, S.C.
European Food S.A, S.C. Starmill S.R.L. and S.C. Multipack S.R.L. v. Romania, ICSID Case No. ARB/05/20,
Decision on Jurisdiction and Admissibility (24 September 2018), § 65.
280
Respondent’s First Comments on Achmea Decision (28 March 2018), at 13; Respondent’s Second Comments
on Achmea Decision (2 May 2018), at § 79.
281
RPHB-I §§ 22 – 23; Brasserie de Pêcheur and Factortame, Joined Cases C-46/93 and C-48/93, CJEU
Judgment (5 March 1996), ECLI:EU:C:1996:79 § 57 [RLA-0253]; Flaminio Costa v. ENEL, Case No. C-6/64,
Judgment of the Court (15 July 1964), EU:C:1964:66 § 593 [RLA-0260]; Koen Lenaerts, Ignace Maselis and
Kathleen Gutman, EU Procedural Law 246 (Janek Tomasz Nowak ed. 2014) [RLA-0274].
282
Id., Amministrazione Delle Finanza dello Stato v. Denkavit Italiana S.R.I., Joined cases C-283/94, C-291/94
and C-292/94, Judgment of the Court (Fifth Chamber) (17 October 1996), EU:C:1996:387 § 16 [RLA-0251].
283
Respondent’s First Comments on Achmea Decision (28 March 2018), at 6.
284
Id., at 6; Respondent’s Second Comments on Achmea Decision (2 May 2018), at §§ 29 – 34.

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
233. 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 investor-
state arbitration. Accordingly, even an arbitration in the so-called self-contained ICSID regime
would run afoul of EU law.289
234. 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
235. 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
285
286
Respondent’s Second Comments on Achmea Decision (2 May 2018), at § 1.
287
Achmea Decision, § 14.
288
Respondent’s First Comments on Achmea Decision (28 March 2018), at 3 – 4.
289
Id., at 4.
290
Respondent’s Second Comments on Achmea Decision (2 May 2018), at §§ 2 – 3.
291
Id., at § 4.

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.
236. 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
237. 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,
292
Id., at §§ 5 – 6.
293
Id., at § 7.
294
Id., at § 47.
295
Id., at §§ 47 – 51.
296
Id., at §§ 48 – 49.
297
Id., at §§ 53 – 54.
298
Id., at § 55.

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
238. 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.307 Achmea
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
299
Id., at § 57.
300
Id., at § 58.
301
Id., at §§ 58 – 59.
302
Id., at § 60.
303
Id., at § 61.
304
Id., at §§ 9 – 10.
305
Id., at § 65.
306
RPHB-I § 23; Amministrazione Delle Finanza dello Stato v. Denkavit Italiana S.R.I., Joined cases C-283/94,
C-291/94 and C-292/94, Judgment of the Court (Fifth Chamber) (17 October 1996), EU:C:1996:387 § 16
[RLA-0251].
307
on Achmea Decision (2 May 2018), at §§ 11 – 13; RPHB-I §§ 21 – 22; Tr. Day 4 at 82:3 – 86:4 (R. Closing);
Accord entre le Gouvernement de la République française et le Gouvernement de la République populaire
hongroise sur l’encouragement et la protection réciproques des investissements, signed 6 November 1986, in
force as of 30 September 1987 (together with the unofficial English translation published by the United Nations
Treaty Series (UN Treaty Series – Vol. 1512,1-26131, 1988, 120)) [hereinafter, “France-Hungary BIT”], Art.
9(3) [CLA-0001] / [RLA-0079]; Electrabel v. Hungary, Decision on Jurisdiction [CLA-0070] (“EU law has
to be classified first as international law”); see also AES v. Hungary, § 7.6.6 [CLA-0062] (stating that the
EU’s competition law regime is an “international law regime”)
308
Respondent’s Second Comments on Achmea Decision (2 May 2018), at §§ 14, 62 - 64.

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
239. To determine whether Hungary’s offer to arbitrate contained in Art. 9(2) of the BIT and in 25(1)
of the ICSID Convention was still present at the time the Claimants accepted it, the Tribunal must
apply the conflict resolution tools of international law. These tools include the doctrine of
primacy (lex superior), the lex posterior rule (also contained in Art. 30(3) of the VCLT), and the
lex specialis rule. Here, the application of the lex superior rule is warranted, since the conflict
between Art. 9(2) of the BIT and the TFEU concerns internal regime hierarchies in the
relationship between Member States, thus rendering the other two conflict maxims
inapplicable. 310 Respondent’s revocation of its offer of consent – resulting both from the
principles of lex posteriori and the principle of primacy, took effect prior to any arguable
acceptance by Claimants.311
240. 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
241. 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
309
Id., at § 68, Respondent’s First Comments on Achmea Decision (28 March 2018), at 5.
310
on Achmea Decision (2 May 2018), at §§ 16 – 18.
311
312
Id., at §§ 19 – 21.
313
Id., at § 22.
314
Id., at § 23.

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
242. 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
243. 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
315
Id., at §§ 25 – 26.
316
Achmea B.V. v. Slovak Republic, UNCITRAL, PCA Case No. 2008-13 (formerly Eureko B.V. v. Slovak
Republic), Award on Jurisdiction, Arbitrability and Suspension (October 26, 2010) [“Achmea v. Slovakia
Award on Jurisdiction”], §§ 272-273 [RLA-0250].
317
Id. at §§ 239 – 240; Report of the Study Group of the ILC, Fragmentation of International Law – Difficulties
Arising from the Diversification and Expansion of International Law, A/CN.4/L.682 (April 13, 2006), § 23,
available at: http://legal.un.org/ilc/documentation/english/a_cn4_l682.pdf
318
Respondent’s First Comments on Achmea Decision (28 March 2018), at 6 – 7; Respondent’s Second
Comments on Achmea Decision (2 May 2018), at §§ 40 – 44.
319
320
Id., at § 37.
321
Id., at § 35.
322
Id., at §§ 38 (table), 39.
323
Id., at § 40.

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
244. A State may revoke its consent to ICSID’s jurisdiction through the conclusion of another treaty
(such as the TFEU) that is incompatible with the BIT and which, by operation of the principles
of international law, would lead to the termination or inapplicability of the BIT, either as a whole
or with respect to specific provisions of the BIT.327 The revocation of consent does not run afoul
of Art. 25 of the ICSID Convention or any other applicable rules of international law. While both
the ICSID Convention and the VCLT preclude a State from relying ex post facto on its own laws
to avoid international liability, these limitations do not preclude the Tribunal from acknowledging
the significance of the Achmea Decision in terms of clarifying the Tribunal’s lack of
jurisdiction.328 Respondent is not seeking to rely on its own domestic law to escape international
legal obligations, and the “internal law” referred to in Art. 27 of the VCLT cannot reasonable be
read as encompassing law which directly derives from or incorporates international agreements.329
Rather, Respondent is invoking EU law to explain why a provision of the BIT is no longer
applicable.330
(c) Whether Restraint from Jurisdiction Results in Denial of Justice
245. 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
324
325
Id., at 8.
326
Id., at 9.
327
Respondent’s Second Comments on Achmea Decision (2 May 2018), at §§ 16, 70 – 72.
328
Id., at § 69.
329
Id., at § 74.
330
Id., at § 75.
331
Id., at 9.

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
246. 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.
247. 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
248. 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
332
Id..
333
Id.
334
Id., at 10.
335
Id., at 11.
336
Id., at 10.
337
Respondent’s Second Comments on Achmea Decision (2 May 2018), at §§ 80 – 82.

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
339
automatically have standing to pursue these rights.
249. 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
250. 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.
251. 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
338
Id., at §§ 85 – 86.
339
Id., at §§ 83 – 84.
340
Id., at §§ 87 – 92; Jurisdictional Immunities of the State (Germany v. Italy: Greece intervening), ICJ, Judgment
(February 3, 2012), available at: http://www.icj-cij.org/files/case-related/143/143-20120203-JUD-01-00-
EN.pdf., at 101 – 104.
341
342
Id.
343
Id., at 77.
344
Id., at § 78.

3. The Tribunal’s Considerations and Conclusions
252. The Tribunal has carefully considered the many arguments which the Parties have submitted
regarding the Achmea Decision and the relevance of European Law. Of these, it will address only
those which in its view are determinative for its decision in this matter in the case at hand. The
Tribunal is also aware of the wide discussion to which the Achmea Decision has lead both in later
jurisprudence and in academic writing and conferences. However, in the present Award, the
Tribunal does not consider that a detailed discussion of the substance of Achmea is required,
because the present case differs in determinative aspects from the case in Achmea.
253. First and most importantly, contrary to that in the Achmea case, this Tribunal’s jurisdiction is
based on the ICSID Convention. i.e. a multilateral public international law treaty for the specific
purpose of resolving investment disputes between private parties and a State (here, Hungary).
Thus, this Tribunal is placed in a public international law context and not in a national or regional
context.
254. With regard to the relevance of the Achmea Decision for the present arbitration, the Tribunal notes
that the Achmea Decision relies expressly on the following aspects:
x The place of arbitration is Frankfurt, Germany, with the result that

German law applies to the arbitration proceedings345
x The judicial review of the validity of the award was within the
competence of the German courts and was exercised by these courts346
x That it was in this review process that the German Federal Court of
Justice (Bundesgerichtshof) submitted the preliminary questions to the
EU-Court.347
255. None of these factors exist in the present case:
x While the place of arbitration according to PO-1 § 10.1 is London, it is

not English law, but exclusively the ICSID Convention and ICSID
Arbitration Rules are applicable to the proceedings.
x The judicial review of the validity of the award is not in the competence
of the English courts or of any other national courts, but subject
exclusively to the annulment procedure according to Art. 52 of the
ICSID Convention,
x This annulment review leads to a final decision by an international ad
hoc committee, which is not subject to further review by any other
345
Achmea Decision, § 10.
346
Id., at §§ 52 and 53.
347
Id., at 23.

court.
256. Further, Arts. 53 and 54 of the ICSID Convention provide as follows:
Article 53
(1) The award shall be binding on the parties and shall not be subject to
any appeal or to any other remedy except those provided for in this
Convention. Each party shall abide by and comply with the terms of
the award except to the extent that enforcement shall have been stayed
pursuant to the relevant provisions of this Convention.
(2) For the purposes of this Section, “award” shall include any decision
interpreting, revising or annulling such award pursuant to Articles 50,
51 or 52.
Article 54
(1) Each Contracting State shall recognize an award rendered pursuant
to this Convention as binding and enforce the pecuniary obligations
imposed by that award within its territories as if it were a final
judgment of a court in that State. A Contracting State with a federal
constitution may enforce such an award in or through its federal
courts and may provide that such courts shall treat the award as if
it were a final judgment of the courts of a constituent state.
257. Thereby, Hungary as a party to the ICSID Convention is expressly bound by the Tribunal’s Award
in the present case, has no option of appeal outside the ICSID system, and has to recognize the
present Award as binding and enforce the pecuniary obligations imposed by this Award within
its territories as if it were a final judgment of a court in Hungary.
258. The Achmea Decision contains no reference to the ICSID Convention or to ICSID Arbitration.
Therefore, and in view of the above mentioned determinative differences between the Achmea
case and the present one, the Achmea Decision cannot be understood or interpreted as creating or
supporting an argument that, by its accession to the EU, Hungary was no longer bound by the
ICSID Convention.
259. There is no rule in EU law that provides that these obligations under the ICSID Convention are
inconsistent with EU law or that obligations under the ICSID Convention have been terminated
or replaced by the accession to the EU. Regardless of what may be argued from the Achmea
Decision regarding BITs between EU Member States, as regard jurisdiction under the ICSID
Convention it is undisputed that Hungary did not expressly terminate its participation in and
submission to arbitration pursuant to the ICSID Convention when it joined the EU in 2004.
260. The Tribunal also cannot find that the accession to the EU was an implied withdrawal from the
ICSID Convention. There was no denunciation of the ICSID Convention, pursuant to Art. 71

thereof. The burden of establishing an implied withdrawal lies with Respondent. The Respondent
has failed to establish its case.
261. However, even if, arguendo, the Respondent were to be considered to have denounced the ICSID
Convention, this denunciation would not have the effect of retroactively withdrawing the
Respondent’s acceptance of ICSID arbitration contained in the BIT. Article 72 of the ICSID
Convention specifies that the denunciation of the ICSID Convention leaves unaffected the consent
previously perfected:
Notice by a Contracting State pursuant to Articles 70 or 71 shall not affect the

rights or obligations under this Convention of that State or of any of its
constituent subdivisions or agencies or of any national of that State arising out
of consent to the jurisdiction of the Centre given by one of them before such
notice was received by the depositary.
262. Denunciation of the ICSID Convention, therefore, cannot have the effect of retroactively
withdrawing consent. In this context, Claimants correctly quote Professor Schreuer:
Article 72 of the ICSID Convention constitutes a special application of the

principle of irrevocability, expressed in more general terms in the last sentence
of Article 25(1). When the parties have given their consent, no party may
withdraw its consent unilaterally by direct or indirect means. This includes an
attempted withdrawal of consent by way of a denunciation of the Convention.348
263. The Achmea Decision itself does not support any other conclusion. As mentioned above, the
CJEU did not say anything in the Achmea Decision about the effect of its Decision on consent to
arbitration under Art. 25 of the ICSID Convention.
264. The Respondent has not demonstrated in any way that EU law (as interpreted by the CJEU in the
Achmea Decision) would have the effect of validly withdrawing the Respondent’s consent to
arbitration with retroactive effect. As a consequence, Art. 25 of the ICSID Convention applies
and the Respondent’s consent remains valid. Accordingly, the Tribunal has jurisdiction under the
Convention.
265. Even further assuming arguendo that the France-Hungary BIT was retroactively terminated as of
1 May 2004, the BIT – including the submission to ICSID arbitration in Art. 9(2) of the BIT –
would still remain in force for a period of 20 years as a result of the “survival clause” contained
in Art. 12(2) of the BIT as this provision does not contain any limitation or exception as to its
348
C. Schreuer, “Chapter 15: Denunciation of the ICSID Convention and Consent to Arbitration”, in M. Waibel,
A. Kaushal, K-H. L. Chung, C. Balchin, The Backlash against Investment Arbitration: Perceptions and Reality,
2010, 363, available at: http://www.univie.ac.at/intlaw/wordpress/pdf/denunciation icsid.pdf.

application and applies to all investments made prior to the expiry of this Agreement. Thus,
investments made prior to the expiration of this BIT remain submitted to it for a period of 20
years from the date of expiry. In the present case, the investments were made prior to 1 May
2004. Therefore, the Claimants would still benefit from the protection offered by the ICSID
Convention until 2024. As is undisputed, neither Hungary nor France has made any attempt to
renegotiate, modify, or shorten the relevant “survival” period. Accordingly, even on the
Respondent’s own analysis regarding the BIT, the Claimants would still benefit from Art. 9(2) of
the BIT and the ICSID Convention, and the Tribunal would still have jurisdiction to hear this
case.
266. On the basis of the above considerations, the Tribunal concludes that the Achmea Decision
does not change the conclusion reached by this Tribunal in its Decision of 3 March 2016 that
the Tribunal has jurisdiction over all the claims raised.
267. In view of this conclusion, the Tribunal does not need to address the awards that other
tribunals have issued recently after and taking into account the Achmea Decision.
C. TRIBUNAL QUESTION (E) REGARDING OTHER RELEVANT ISSUES IN EU LAW
e) Any consequential or other issue of EU law that may be relevant to the

Tribunal’s consideration of the case, having regard, inter alia, to
Order No. 3 of the Tribunal in The MOX Plant Case (Ireland v. United
Kingdom), PCA Case 2002-01, Order of 24 June 2003.
268. There is no consequential or other issue of EU law, having regard in particular to the MOX Plant
case, that may be relevant to the Tribunal.349 In that UNCLOS arbitration between Ireland and
the UK, the tribunal suspended the arbitration pending a CJEU decision. This case has no
relevance in Respondent’s request for a delay or postponements, pending the outcome of the
Achmea case.350 As indicated in response to the Tribunal’s question (a), regardless of its outcome,
the Achmea Decision will have no impact on the Tribunal’s jurisdiction.
269. Further, the circumstances upon which the UNCLOS tribunal based its decision are different from
the present case in two material respects.351 First, the UNCLOS tribunal’s jurisdiction was based
349
CPHB-I § 308.
350
Id., at § 309.
351
Id.

on the UNCLOS, to which Ireland and the UK, as well as the EU, were party. There, the UK
alleged that, due to the EU’s declaration that such provisions covered by the UNCLOS had been
transferred to the EU, making the provisions EU law. The question was, therefore, whether the
exclusive jurisdiction of the CJEU extended to the interpretation and application of the UNCLOS,
as part of EU law.352 Here, (1) the EU is not party to the BIT, (2) matters covered by the BIT
have not been transferred to the EU and do not relate to EU law, and (3) the CJEU has no exclusive
jurisdiction upon the interpretation and application of the BIT.353
270. Second, the UNCLOS tribunal considered Art. 282 of the UNCLOS, which provides that
UNCLOS tribunals have only a subsidiary jurisdiction if the parties have agreed to another
procedure for the interpretation or application of the UNCLOS. Thus, in that case, there was a
substantial doubt related to the jurisdiction of the UNCLOS tribunal, as well as the risk of future
conflicting decisions. This case presents no such risk because the BIT is the only competent
forum: (1) the BIT does not include a provision similar to Art. 282 and, therefore, the Tribunal
does not have subsidiary jurisdiction, (2) the dispute is between a private investor and a State,
while the CJEU can only hear disputes between Member States, and (3) the CJEU has no
jurisdiction to hear a case under the BIT. There is, therefore, no risk of conflicting decisions.354
271. The MOX Plant case offers useful guidance as it concerned a tribunal that relied on the principle
of comity to suspend arbitration proceedings pending the determination of an issue that had the
potential to impact the tribunal’s jurisdiction by the CJEU. 355 In that case, the CJEU had to
determine whether the provisions of the UNCLOS invoked by Ireland were matters over which
competence had been transferred to the European Community and, thus, whether the CJEU’s
exclusive jurisdiction extended to the interpretation and application of UNCLOS.356
272. While there are key differences between the MOX Plant case and this case, the differences in the
352
Id., at 310; Ireland v. The United Kingdom, MOX Plant Case, PCA, Procedural Order No. 3 (24 June 2003)
[hereinafter “MOX Plant Case”] § 21 [CLA-0251] / [RLA-0263]; Declaration or Statements upon UNCLOS
ratification, United Nations, as of 29 October 2013 [CLA-0252].
353
CPHB-I § 310.
354
Id., at § 311; UNCLOS, Art. 282 [CLA-0253]; MOX Plant Case, §§ 22 – 25, 28 [CLA-0251] / [RLA-0263];
Tr. Day 4 at 83:3-16 (Respondent does not dispute that this dispute is between a private investor and a state).
355
RPHB-I § 47; MOX Plant Case, § 1 [CLA-0251] / [RLA-0263].
356

parties, the nature of the treaties, and the nature of the referral do not undermine the relevance of
the MOX Plant case to the request for the suspension of these proceedings based on Achmea.357
273. In MOX Plant, doubts were cast on the UNCLOS tribunal’s jurisdiction, and the question of
whether certain provisions of the underlying treaty could be relied upon before the tribunal arose.
Although formulated differently, this is the same question being confronted in Achmea: i.e.,
whether an investor can rely on a dispute resolution provision of an intra-EU BIT before an
arbitral tribunal.358
274. While this Tribunal (like the one in MOX Plant) is satisfied that it has jurisdiction prima facie, it
must also be able to satisfy itself that it has jurisdiction in a definitive sense, before proceeding to
any final decision on the merits.359 The UNCLOS tribunal, therefore, took account of the possible
outcome of the CJEU’s prospective decision and its import to the tribunal’s jurisdiction. 360
Importantly, in that case, the UNCLOS tribunal emphasized that the matters to be decided by the
CJEU concerned the legal order of the European Communities, to which the parties to those
proceedings were subject and which were “to be determined within the institutional framework
of the European Communities.” 361 Similarly, in this case, the issue of whether the dispute
resolution clauses in the intra-EU BITs violate Art. 344, 267, and 18 of the TFEU is an issue to
be determined solely by the CJEU – the body with exclusive authority to interpret EU law with
finality.362
275. The UNCLOS tribunal recognized that the determination of its jurisdiction was dependent upon
the resolution of the problems to be determined by the CJEU. Thus, mindful of the need to prevent
the fragmentation of international law, the tribunal suspended the arbitration based on
considerations of mutual respect and comity.363 That situation is similar to here, as, if the CJEU
establishes that the dispute resolution clauses of certain intra-EU BITs, such as the one in the case
at hand, conflict with a particular provision of the TFEU, it could contradict the decision of the
357
RPHB-I §§ 49 – 50.
358
Id., at § 51; MOX Plant Case, §§ 20 – 21 [CLA-0251] / [RLA-0263].
359
RPHB-I §§ 52 – 53; MOX Plant Case, § 14 [CLA-0251] / [RLA-0263].
360
361
362
RPHB-I § 54; see e.g., Achmea v. Slovakia, Award on Jurisdiction, § 282 [RLA-0250]; EAIB v. Slovakia, § 248
[CLA-0243] / [RLA-0259].
363
RPHB-I § 55; MOX Plant Case, §§ 23, 28 [CLA-0251] / [RLA-0263].

Tribunal concerning its own jurisdiction. 364 It would therefore be appropriate, based on the
principle of comity, and reinforced by the MOX Plant case, for the Tribunal to delay or postpone
its final deliberations and issuance of an award until after Achmea is decided. The Tribunal may
stay proceedings pursuant to Art. 44 of the ICSID Convention and Art. 19 of the Arbitration
Rules.365
3. The Tribunal’s Considerations and Conclusions
276. The Tribunal agrees with the Claimants that the MOX Plant case provides no useful guidance in
view of the considerable differences between that case and the present case.
277. First, the UNCLOS tribunal’s jurisdiction was based on the UNCLOS to which Ireland and the
UK, as well as the EU, were party. In the present case, the EU is not a party to the BIT, matters
covered by the BIT have not been transferred to the EU and do not relate to EU law, and the CJEU
has no jurisdiction in respect of the interpretation and application of the BIT.
278. Second, in the MOX Plant case, there was significant doubt with respect to the jurisdiction of the
UNCLOS tribunal as well as a risk of future conflicting decisions. The present case presents no
such risk since the BIT is the only competent forum. Clearly, the CJEU has no jurisdiction to
hear a case under the BIT.
279. Finally, and as Respondent noted in its submissions on Achmea,366 the MOX Plant tribunal never
dealt with the issue of jurisdiction as, after it suspended its proceedings, Ireland withdrew its
claim.
VII. APPLICABLE LAW
A. RELEVANT TERMS OF THE BIT
280. Article 9(3) of the BIT provides that:
The arbitral tribunal shall rule in accordance with the provisions of this
Agreement and the rules and principles of international law.367
364
RPHB-I § 56.
365
Id., at § 57; SGS Société Générale de Surveillance S.A. v. Republic of the Philippines, ICSID Case No.
ARB/02/6, Decision of the Tribunal on Objections to the Jurisdiction (29 January 2004) § 173 [RLA-0266].
366
367
France-Hungary BIT, Art. 9(3) [CLA-0001] / [RLA-0079].

281. Claimants argue that this dispute is governed by the BIT and international law. Pursuant to Art.
42(1) of the ICSID Convention, the choice of law contained in Art. 9(3) of the BIT is binding.368
282. Respondent has presented that Art. 5(2) of the BIT is the applicable legal standard with respect
to expropriation.369 Respondent denies everything not expressly admitted.370
283. The Tribunal agrees that Art. 9(3) of the BIT has to be applied.
B. ARGUMENTS RELATED TO THE RELEVANCE OF OTHER DECISIONS AND

PARTICULARLY THE EDENRED AWARD
284. In this context, though not an issue of the applicable law per se, the Tribunal has taken note of
the submissions by the Parties regarding other decisions and particularly the Award in the
Edenred case,371 which was issued during the course of the present proceedings.
285. On 27 March 2017, the Parties simultaneously submitted their respective comments on the
Edenred Award to the Tribunal. While the Parties agree that the Edenred case has striking
similarities with the present matter, they differ on the role that the Edenred Award should have
in the present matter.
286. Claimants argue that, although the Edenred Award cannot be determinative of the Tribunal’s
decision, it may shed useful light on some issues. While there are differences in the factual record,
four specific factual findings made in Edenred are relevant to this case: (1) the criteria established
by Hungary for the issuance of the SZÉP Card were tailored to exclude Non-Hungarian Issuers,
(2) the purpose underlying the creation of the Erzsébet vouchers was to enable 100% of the profit
to remain in Hungary and serve a public purpose and the exclusion of Non-Hungarian Issuers was
intentional, (3) the allegations that Claimants were charging high commissions to their clients and
368
C-I §§ 81 – 84; Christoph H. Schreuer, Loretta Malintoppi, August Reinisch & Anthony Sinclair, The ICSID
Convention: A Commentary, 2nd Edition, Cambridge University Press, 2009, §§ 42-80 [CLA-0007];
Burlington Resources Inc. v. Republic of Ecuador, ICSID Case No. ARB/08/5, Decision on Liability (14
December 2012) [hereinafter “Burlington v. Ecuador Decision on Liability”], § 392 [CLA-0008] / [RLA-
0017]; Campbell McLachlan, Laurence Shore, and Matthew Weiniger, International Investment Arbitration
Substantive Principles, 1st Edition, Oxford University Press, 2007, § 1.38 [CLA-0009].
369
R-I § 163; France-Hungary BIT, Art. 5(2) [CLA-0001] / [RLA-0079].
370
R-II § 4.
371
Edenred v. Hungary, ICSID Case No. ARB/13/21 (Award) (13 December 2016) [submitted by Claimants on
24 February 2017].

affiliates are false and the 2011 Reform did not significantly reduce the fees and costs associated
with the Erzsébet voucher, and (4) despite amendments to the tax system that have occurred since
1 January 2017 in light of the CJEU decision against Hungary, those are an ex post amendment
that should have no bearing on the merits of the case. Edenred confirmed that the 2011 Reform
breached Art. 5(2) of the BIT and that Hungary must compensate the investor for that breach.
Although there are factual distinctions between the Edenred case and this one, the Edenred
tribunal’s approach to the DCF valuation is consistent with Claimants’ expert’s approach in the
present case. Claimants’ damages case is different from that in Edenred, where the claimant
created a counter-factual scenario in which Hungary could have introduced the SZÉP Card and
the Erzsébet voucher without expropriatory effect. Here, Claimants demonstrate that that could
not have happened, as the SZÉP Card and the Erzsébet voucher would have been ordinary
competitors in the meal voucher market and would not have been able to acquire a significant
market share from the already-established players in Hungary. The present case also involves
different arguments and facts concerning the dematerialization of the vouchers.
287. Respondent explained that the Edenred Award offers limited useful guidance to the Tribunal and,
given its potential prejudicial impact and the absence of a stare decisis doctrine in investment
arbitration, it should be deemed irrelevant to its deliberations. The only guidance that the Tribunal
could draw from the Edenred Award relates to how that tribunal recited generally-held legal
principles and points of law. The Edenred tribunal’s application of these principles, however,
was inconsistent with predominant and accepted (though non-binding) views of international law
and investment law jurisprudence. Importantly, the Tribunal cannot consider the Edenred
tribunal’s determination(s) or characterization(s) of the factual evidence. It is precisely because
of the factual and other similarities between the present case and the Edenred dispute that
Respondent objects to any consideration of the Edenred Award in these proceedings. The Edenred
tribunal faced a different record than the one before the Tribunal, but assessed some of the same
factual and expert evidence as has been presented in this case. This places Respondent in the
impossible position of needing to refute Edenred arguments in these proceedings, as the same
claims could now be adopted by Claimants, who may seek to draw conclusions based on
comparing the testimony of witnesses who appear in both cases. Notably, neither Claimants nor
their witnesses are subject to the same degree of scrutiny. The Edenred tribunal’s decision
regarding indirect expropriation is predicated on an erroneous factual finding – one that is both
incorrect and at odds with the Edenred tribunal’s own description of the record. The Edenred
tribunal’s reliance on the CJEU adjudication – one that involved an entirely different legal system

with no relevance under the BIT – was also improper. Finally, the Edenred tribunal’s damages
award disregards recent changes to the fringe benefit system undertaken in light of the CJEU
Decision and thereby gave Edenred a double recovery. Although the facts here differ, the risk of
granting Claimants a double recovery is no less significant.
3. Tribunal Considerations and Conclusions
288. In addition to the Edenred Award, the Parties have extensively referred to decisions of other
tribunals. However, there is no dispute that, in any event, the decisions of other tribunals are not
binding on the Tribunal. The many references by the Parties to certain arbitral decisions in their
pleadings do not contradict this conclusion.
289. This does not preclude the Tribunal from considering arbitral decisions and the arguments of the
Parties based upon them, to the extent that it may find that they shed any useful light on the issues
that arise for the decision in the present case.
290. Such an examination, including the Edenred Award, is conducted by the Tribunal later in this
Award, after the Tribunal has considered the Parties’ contentions and arguments regarding the
various issues argued and relevant for the interpretation of the applicable BIT provisions, while
taking into account the specificity of the BIT to be applied in the present case.
VIII. RESPONDENT’S LIABILITY PURSUANT TO THE TREATY
A. EXPROPRIATION / DISPOSSESSION (ART. 5(2) OF THE BIT)
291. The Parties dispute whether Art. 5(2) of the BIT has been breached.372 Article 5(2) provides that:
The Contracting Parties shall not take any expropriation or nationalization

measures or any other measures which could cause the investors of the other
Party to be dispossessed, directly or indirectly, of the investments belonging to
them in its territory and maritime zones, except for reasons of public necessity
and on condition that these measures are not discriminatory or contrary to a
specific undertaking.
1. The Existence of a Right Capable of Expropriation / A Vested Right
292. This dispute arises out of Claimants’ indirect (in the case of UP) and direct (in the case of CD
372
C-I §§ 242 – 243; R-I § 163.

Internationale) shareholding in CD Hungary. This shareholding is a property right under
Hungarian law and, as the Tribunal observed in the Decision on Jurisdiction, is an investment for
the purposes of the BIT and Art. 25 of the ICSID Convention.373
293. Relying on the decision in Emmis, Respondent argues that Claimants’ case “fails because they
are not able to demonstrate that they had a property right that is even capable of being
expropriated.” 374 Respondent’s argument is without merit. Claimants’ claims concern
Respondent’s indirect expropriation of their shareholding in CD Hungary – and this shareholding
is similar to what the Respondent – in Emmis – accepted as an investment capable of
expropriation. Thus, Emmis restates the uncontested principle that “property rights that are the
subject of protection under the international law of expropriation are created by host State
law.”375 Claimants’ shareholding is a vested property right under Hungarian law and, therefore,
constitutes a “right capable of expropriation.” Claimants have, therefore, discharged the “burden
of proving that they had a property interest capable of being expropriated.”376
294. Contrary to Respondent’s suggestion, Claimants do not submit that Respondent expropriated “a
right to expect stability.” Nor do Claimants “assert a right to a particular tax or regulatory
system” or argue that “the value of their company was expropriated vis-à-vis a diminution in the
value of their potential future profit.” Rather, Claimants submit that Respondent expropriated
their shareholding in CD Hungary and the right to bring such a claim is well-established.377
295. The present proceedings are not comparable to those in Generation Ukraine v. Ukraine or Merrill
& Ring v. Canada. Neither case concerned the expropriation of a shareholding. Like Emmis,
these cases concerned claims by an investor to “recover damages for the expropriation of a right
373
C-I §§ 64 – 65; C-II §§ 146 – 147, 160 – 162; R-I §§ 162, 177; Decision on Jurisdiction, 3 March 2016, § 139.
374
C-II § 148; Emmis International Holding, B.V., Emmis Radio Operating, B.V., MEM Magyar Electronic Media
Kereskedelmi és Szolgáltató Kft. v. The Republic of Hungary, ICSID Case No. ARB/12/2, Award (16 April
2014) [hereinafter “Emmis v. Hungary Award”] [RLA-0027].
375
C-II § 152; Campbell McLachlan QC, Laurence Shore and Mathew Weiniger, International Investment
Arbitration: Substantive Principles (Oxford University Press 2007) [RLA-0100].
376
C-II §§ 149 – 152, 155; Emmis v. Hungary Award, §§ 155, 162, 170 [RLA-0027]; Emmis International
Holding, B.V. and others v. Hungary, ICSID Case No. ARB/12/2, Decision on Respondent's Application for
Bifurcation (13 June 2013) [hereinafter “Emmis v. Hungary Decision on Bifurcation”], § 57 [RLA-0028];
Campbell McLachlan QC, Laurence Shore and Mathew Weiniger, International Investment Arbitration:
Substantive Principles (Oxford University Press 2007) § 8.65 [RLA-0100].
377
C-II §§ 153 – 154; Andrew Newcombe and Lluis Paradell, Law and Practice of Investment Treaties: Standards
of Treatment, 1st Edition, Kluwer Law International, 2009, 289, 304 [CLA-0064]; RosInvestCo UK Ltd. v.
The Russian Federation, SCC Case No. ARB V079/2005, Award (12 September 2010) [hereinafter “RosInvest
v. Russia”], § 608 [CLA-0099].

it never had.” Claimants, however, seek to recover damages for the expropriation of the “vested
property right” – i.e., their shareholding in CD Hungary. The situations are, therefore, not
comparable.378
296. As Claimants concede, an investor cannot make a successful claim for expropriation without first
demonstrating that it had an asset, right, or interest of which they could be deprived by the host
State.379 As was affirmed in the Emmis decision and other cases,380 to determine whether this
threshold is met, tribunals consider how property rights are defined within the host jurisdiction.
Considering Hungarian law, the Emmis tribunal concluded that the essential attribute of a property
right is that it is “an asset capable of ownership, valuation and alienation.”381 Tribunals must
meticulously identify the rights alleged to have been expropriated.382 Once it is confirmed that
such a right has been affected, the analysis turns to whether the taking is expropriatory.383 The
378
C-II §§ 156 – 158; Generation Ukraine, Inc. v. Ukraine, ICSID Case No. ARB/00/9, Award (16 September
2003) [hereinafter “Generation Ukraine v. Ukraine”], §§ 6.12, 6.12(e), 22.1 [CLA-0038] / [RLA-0032];
Emmis v. Hungary Award [RLA-0027]; LG&E Energy Corp., LG&E Capital Corp., and LG&E Int'l Inc. v.
Argentine Republic, ICSID Case No. ARB/02/1, Decision on Liability (October 3, 2006) [hereinafter “LG&E
v. Argentina Decision on Liability”] [CLA-0041] / [RLA-0038]; Merrill & Ring Forestry L.P. v. The
Government of Canada, UNCITRAL, ICSID Administered Case, Award (31 March 2010) [hereinafter
“Merrill & Ring v. Canada”] [RLA-0042].
379
R-I § 164; R-II §§ 208 – 209; Bayindir Insaat Turizm Ticaret Ve Sanayi A.Ş. v. Islamic Republic of Pakistan,
ICSID Case No. ARB/03/29, Award (27 August 2009) [hereinafter “Bayindir v. Pakistan”], § 442 [RLA-
0013]; Chemtura Corporation v. Government of Canada, Ad Hoc NAFTA Arbitration under UNCITRAL
Rules, Award (2 August 2010) [hereinafter “Chemtura v. Canada”], § 242 [RLA-0018]; Emmis v. Hungary
Award, § 169 [RLA-0027]; Generation Ukraine v. Ukraine, § 8.8 [CLA-0038] / [RLA-0032]; Swisslion DOO
Skopje v. The Former Yugoslav Republic of Macedonia, ICSID Case No. ARB/09/16, Award (6 July 2012) §
320 [RLA-0067]; Andrew Newcombe and Lluís Paradell, Law and Practice of Investment Treaties: Standards
of Treatment § 7.1 (Kluwer Law International BV 2009) [RLA-0101].
380
EnCana Corp. v. Republic of Ecuador, UNCITRAL, LCIA Case No. UN3481, Award (3 February 2006)
[hereinafter “EnCana v. Ecuador”], § 184 [CLA-0019] / [RLA-0158]; Int’l Thunderbird Gaming Corp v.
United Mexican States, UNCITRAL/NAFTA, Arbitral Award (26 January 2006) § 208 [RLA-0160].
381
R-I § 172; Emmis v. Hungary Award, § 192 [RLA-0027]; Emmis International Holding, B.V. and others v.
Republic of Hungary, ICSID Case No. ARB/12/2, Decision on Respondent’s Objection under ICSID
Arbitration Rule 41(5) (11 March 2013) [hereinafter “Emmis v. Hungary Decision on 41(5)”] [RLA-0029];
Campbell McLachlan QC, Laurence Shore and Mathew Weiniger, International Investment Arbitration:
Substantive Principles (Oxford University Press 2007) [RLA-0100].
382
R-II § 211; Generation Ukraine v. Ukraine, §§ 6.2, 8.8 [RLA-0032].
383
R-I §§ 165 – 167, 171; Bayindir v. Pakistan, § 442 [RLA-0013]; Emmis v. Hungary Award, § 162 [RLA-
0027]; Emmis v. Hungary Decision on 41(5), § 173 [RLA-0029]; Methanex Corporation v. United States of
America, UNCITRAL, Final Award of the Tribunal on Jurisdiction and Merits (3 August 2005) [hereinafter
“Methanex v. USA”], § 7 [RLA-0045]; Saluka Investments BV (The Netherlands) v. The Czech Republic, PCA
- UNCITRAL Arbitration Rules, Partial Award (17 March 2006) [hereinafter “Saluka v. Czech Republic”], §
255 [CLA-0049] / [RLA-0059]; Campbell McLachlan QC, Laurence Shore and Mathew Weiniger,

RosInvest and ST-AD cases, among others, demonstrated that while a shareholder may claim a
loss in value resulting from damage to the company in which it invested, that damage must result
from interference with a separate and distinct property right to be recoverable.384
297. Respondent does not dispute that Claimants have an investment – their shareholding – for the
purposes of asserting jurisdiction. The existence of this right, however, is irrelevant because the
shareholding is not what Claimants allege Respondent has taken. Claimants’ entire claim is based
on the loss of economic profitability; they point to issue volumes and market share as the interests
of which they were deprived. None of these rights are cognizable under Hungarian law and,
accordingly, the expropriation claim must fail.385 Claimants do not allege that tangible aspects of
their business were expropriated. All such assets remain in Claimants’ ownership and control.
The only right that Claimants actually allege is a “right to expect stability.”386 Even if this right
– like the right to access a market – had been violated, it is not a right capable of expropriation
because it is not a right “capable of ownership, valuation and alienation.”387
International Investment Arbitration: Substantive Principles (Oxford University Press 2007) § 8.65 [RLA-
0100]; M. Sornarajah, The International Law on Foreign Investment (3d ed. 2004) 357 [RLA-0107].
384
R-II § 212; RosInvest v. Russia, § 607 [CLA-0099]; ST-AD GmbH v. The Republic of Bulgaria, UNCITRAL,
PCA Case No. 2011-06, Award on Jurisdiction (18 July 2013) § 282 [RLA-0064].
385
R-II § 209; R-I § 171.
386
R-I § 173.
387
Id., at §§ 170 – 173; R-II § 213; Campbell McLachlan QC, Laurence Shore and Mathew Weiniger, International
Investment Arbitration: Substantive Principles (Oxford University Press 2007) [RLA-0100]; Bayindir v.
Pakistan, § 442 [RLA-0013]; Emmis v. Hungary Award, §§ 192, 253 [RLA-0027]; Emmis v. Hungary
Decision on 41(5), § 173 [RLA-0029]; Generation Ukraine v. Ukraine, § 8.8 [CLA-0038] / [RLA-0032];
Zachary Douglas, Property, Investment, and the Scope of Investment Protection Obligations, in The
Foundations of International Investment Law (Zachary Douglas et al. eds. 2014) 377 [RLA-0096]; ADC
Affiliate Limited and ADC & ADMC Management Limited v. The Republic of Hungary, ICSID Case No.
ARB/03/16, Award (2 October 2006) [hereinafter “ADC v. Hungary”] [CLA-0030] / [RLA-0004] (contract
rights); AIG Capital Partners, Inc. and CJSC Tema Real Estate Company Ltd. v. The Republic of Kazakhstan,
ICSID Case No. ARB/01/6, Award (7 October 2003) [hereinafter “AIG v. Kazakhstan”] [CLA-0037] / [RLA-
0006] (real property rights); Bernardus Henricus Funnekotter and others v. Republic of Zimbabwe, ICSID
Case No. ARB/05/6, Award (22 April 2009) [hereinafter “Funnekotter v. Zimbabwe”] [CLA-0043] (real
property rights); Biwater Gauff (Tanzania) LTD, v. United Republic of Tanzania, ICSID Case No. ARB/05/22,
Award (24 July 2008) [hereinafter “Biwater v. Tanzania”] [CLA-0017] / [RLA-0016] (lease contract rights);
Burlington v. Ecuador Decision on Liability [CLA-0008] / [RLA-0017] (contract rights); CME Czech
Republic B.V. v. The Czech Republic, UNCITRAL Partial Award (13 September 2001) [hereinafter “CME v.
Czech Republic Partial Award”], [CLA-0023] (license rights); Compañía De Aguas del Aconquija S.A. And
Vivendi Universal S.A. v. Argentine Republic, ICSID Case No. ARB/97/3, Award (20 August 2007)
[hereinafter “Vivendi v. Argentina”] [CLA-0021] / [RLA-0021] (contract rights); ConocoPhillips Petrozuata
B.V., ConocoPhillips Hamaca B.V. and ConocoPhillips Gulf of Paria B.V. v. Bolivarian Republic of Venezuela,
ICSID Case No. ARB/07/30, Decision on Jurisdiction and the Merits (3 September 2013) [hereinafter “Conoco
v. Venezuela”] [CLA-0044] / [RLA-0022] (ownership interest); M. Meerapfel Söhne AG v. République
Centrafricaine, ICSID Case No. ARB/07/10, Award (12 May 2011) [hereinafter “Söhne v. CAR”] [CLA-0011]
(ownership interest); Metalclad Corporation v. The United Mexican States, ICSID Case No. ARB(AF)/97/1,

298. Claimants argue that the value of their company was expropriated vis-à-vis a diminution in the
value of their potential future profit. For future profit claims to be successful, there must be a
demonstrable property interest in those future earnings.388 Here, it is undisputed that Claimants
had no contract or any other type of commitment that guaranteed them a particular volume of
business or access to a certain market for a pre-determined period of operation. That Claimants’
future operations had value to them does not make it a property right.389
299. Likewise, Claimants cannot assert a right to a particular tax or regulatory system, as the BIT
contains no stabilization clause and Respondent never committed that it would never change the
voucher system. Indeed, Respondent regularly reviewed and modified the voucher system,
changed the exemption cap, and introduced new vouchers, and Claimants routinely switched their
product-mix, as well as their sales force and market strategy, to take advantage of these
changes.390 Rather than continue to adjust and diversify, Claimants decided to suspend operations
and claim that the Government deprived them of “business activity”, “profits”, or “market.” No
vested right, however, has been violated by the State. 391 Claimants’ argument that they had assets
and know-how that were tailored to particular market should be rejected. Claimants’ only
business was made possible as an indirect consequence of Respondent’s efforts to provide social
benefits to its citizens. Claimants had no reasonable expectation that the tax advantages that they
Award (30 August 2000) [hereinafter “Metalclad v. Mexico”] [CLA-0016] / [RLA-0043] (operation rights);
Mobil Corporation, Venezuela Holdings, B.V., Mobil Cerro Negro Holding, Ltd., Mobil Venezolana de
Petróleos Holdings, Inc., Mobil Cerro Negro, Ltd., and Mobil Venezolana de Petróleos, Inc. v. Bolivarian
Republic of Venezuela, ICSID Case No. ARB/07/27, Award (9 October 2014) [hereinafter “Mobil v.
Venezuela”], [RLA-0046] (ownership interest); Saar Papier Vertriebs GmbH v. Poland, UNCITRAL, Award
(16 October 1995) [RLA-0057] (operation rights); Siemens A.G. v. The Argentine Republic, ICSID Case No.
ARB/02/8, Award (6 February 2007) [hereinafter “Siemens v. Argentina”] [CLA-0028] / [RLA-0063]
(contract rights); Starrett Housing and others v. The Republic of Iran and others, IUSCT Case No° 24 (ITL
32-24-1), Interlocutory Award, 16 Iran- U.S.C.T.R. 112 (1983) [hereinafter “Starrett v. Iran”], [RLA-0065]
(ownership and contract rights); Tecnicas Medioambientales Tecmed S.A. v. The United Mexican States, ICSID
Case No. ARB (AF)/00/2, Award (29 May 2003) [hereinafter “Tecmed v. Mexico”] [CLA-0022] / [RLA-0068]
(operation right); Waguih Elie George Siag and Clorinda Vecchi v. The Arab Republic of Egypt, ICSID Case
No. ARB/05/15, Award (1 June 2009) [hereinafter “Siag v. Egypt”] [CLA-0040] (real property and contract
rights).
388
R-I § 174; Merrill & Ring v. Canada, §§ 142, 149 [RLA-0042].
389
R-I § 175; R-II §§ 214 – 215; Merrill & Ring v. Canada, §§ 127, 129, 142, 149 [RLA-0042]; Zachary Douglas,
Property, Investment, and the Scope of Investment Protection Obligations, in The Foundations of International
Investment Law (Zachary Douglas et al. eds. 2014) 377 [RLA-0096].
390
R-I § 176; R-II § 218; FTI First Report § 3.6 [CEX-1].
391
R-II §§ 218 – 220; Dér Statement, §§ 10 – 12, 35, 37 [CWS-1]; Second FTI Report, 4.51, 5.41 [CEX-2];
Oscar Chinn Case (U.K. v. Belg.), 1934 P.C.I.J. (ser. A/B) No. 63 (12 December 1934) [hereinafter “Oscar
Chinn Case”] [RLA-0166].

had been able to profitably exploit would remain unchanged.392
300. The Merrill Ring v. Canada holding, while not concerning the “expropriation of a shareholding”
involves the same type of claim that Claimants advance here. There, the claimant alleged that
Canada had taken the claimant’s business and argued that its investment included an interest in
realizing a fair market value of its product. The tribunal rejected that claim, as that claimant did
not have a demonstrable property interest in those future earnings.393 The tribunal in Methanex
v. USA and the PCIJ in the Oscar Chinn case reached similar conclusions.394
301. At the Hearing, Respondent noted that it was not the case that CD Hungary had a right to issue a
voucher in any particular year. Rather, they and many different entities simply had the opportunity
to do so.395
(c) Tribunal Considerations and Conclusions
302. The Tribunal recalls that, in its Decision on Jurisdiction, it concluded that, pursuant to Art. 1 of
the BIT, Claimants’ shareholding in CD Hungary constitutes an “investment” and Claimants fall
within the definition of “investor.”396
303. Respondent does not dispute that Claimants have an investment – their shareholding – for the
purposes of asserting jurisdiction. In its view, however, the existence of this right is irrelevant
392
R-I § 177; R-II § 218; Generation Ukraine v. Ukraine, § 22.1 [CLA-0038] / [RLA-0032]; Oscar Chinn Case
[RLA-0166]; First FTI Report, § 3.6 [CEX-1].
393
R-II § 215; Merrill & Ring v. Canada, §§ 127, 129, 149 [RLA-0042].
394
R-II §§ 216 – 217; Marvin Feldman v. United Mexican States, ICSID Case No. ARB(AF)/99/1, Award (16
December 2002) [hereinafter “Marvin Feldman v. Mexico”], § 211 [CLA-0013] / [RLA-0041]; Oscar Chinn
Case [RLA-0166]; Gillian White, Nationalisation of Foreign Property, Ch. 3 (Stevens & Sons Ltd. 1961)
[RLA-0238].
395
Tr. Day 4 at 53:8 – 12 (R. Closing).
396
Article 1 of the France-Hungary BIT, CLA-0001 / RLA-0079, provides in relevant part as follows:
1. The term ‘investment’ shall apply to assets such as property, rights and interests of any
category, related to economic activity in any sector whatever, established after 31
December 1972, in accordance with the legislation of the Contracting Party in whose
territory or maritime zones the investment was made, and particularly but not exclusively,
to: […] (b) Shares and other forms of participation, albeit minority or indirect, in
companies constituted in the territory of either Party;
[…]
2. The term ‘investor’ shall apply to: […] (b) Any body corporate constituted in the territory
of either Contracting Party in accordance with its legislation and having its registered
office there […]

because the shareholding is not what Claimants allege Respondent has taken. According to
Respondent, Claimants’ entire claim is based on the loss of economic profitability.
304. The Tribunal cannot accept that view. Claimants do not submit that Respondent expropriated a
right to expect stability or future profits or a right to a particular tax or regulatory system. Rather,
Claimants submit that Respondent indirectly expropriated their shareholding in CD Hungary by
dispossessing them of the economic value of the shareholding as it existed before the 2011
Reform.
305. Even if shares remain legally held by a claimant, if a State’s measures result in the loss of the
shares’ economic value, this may be considered an indirect expropriation. This is confirmed by
a wide body of jurisprudence such as the awards in RosInvest,397 Burlington Resources,398 and
others.399 The Metalclad tribunal defined indirect expropriation as an interference which has the
effect of depriving the owner “of the use or reasonably-to-be-expected economic benefit of
property[.]”400 It has further been established that such a loss of value must be substantial and
sufficiently permanent, though a substantial deprivation alone will suffice.401
306. Whether these conditions were fulfilled in the present case will have to be examined by the
Tribunal hereafter.
397
RosInvest v. Russia, § 574, 608 [CLA-0099]. Andrew Newcombe and Lluis Paradell, Law and Practice of
Investment Treaties: Standards of Treatment, 1st Edition, Kluwer Law International, 2009, 289, 304 [CLA-
0064].
398
Burlington v. Ecuador Decision on Liability, § 397 [CLA-0008] / [RLA-0017].
399
CME v. Czech Republic Partial Award, § 604 [CLA-0023]; Antoine Goetz and others v. Republic of Burundi,
ICSID Case No. ARB/95/3, Award (10 February 1999) [hereinafter “Goetz I Award”], § 124 [CLA-0213];
Compañia del Desarrollo de Santa Elena, S.A. v. The Republic of Costa Rica, ICSID Case No. ARB/96/1,
Final Award (17 February 2000) [hereinafter “Desarrollo v. Costa Rica”], §§ 76 – 77 [CLA-0215].
400
C-I § 248; C-II §§ 196, 199; Metalclad v. Mexico, § 103 [CLA-0016] / [RLA-0043]; Generation Ukraine v.
Ukraine, § 20.29 [CLA-0038] / [RLA-0032]; Goetz I Award, § 124 [CLA-0213]; Consortium RFCC v.
Kingdom of Morocco, ICSID Case No. ARB/00/6, Award (22 December 2003) [hereinafter “RFCC v.
Monocco”], §§ 68 – 69 [CLA-0214]; LG&E v. Argentina Decision on Liability, § 190 [CLA-0041] / [RLA-
0038].
401
C-I § 253; C-II § 200, Pope & Talbot Inc and The Government of Canada, UNCITRAL, Interim Award (26
June 2000) [hereinafter “Pope & Talbot v. Canada Interim Award”], §§ 101 – 102 [CLA-0014]; Andrew
Newcombe and Lluis Paradell, Law and Practice of Investment Treaties: Standards of Treatment, 1st Edition,
Kluwer Law International, 2009, 345-346 [CLA-0018]; EnCana v. Ecuador, § 174 [CLA-0019] / [RLA-
0158]; Tecmed v. Mexico, § 116 [CLA-0022] / [RLA-0068]; CME v. Czech Republic Partial Award, § 604
[CLA-0023]; LG&E v. Argentina Decision on Liability, § 200 [CLA-0041] / [RLA-0038]; Azurix Corp. v.
The Argentine Republic, ICSID Case No. ARB/01/12, Award (14 July 2006) [hereinafter “Azurix v.
Argentina”], § 313 [CLA-0092] / [RLA-0012]; Alpha Projektholding GmbH v. Ukraine, ICSID Case No.
ARB/07/16, Award (8 November 2010) [hereinafter “Alpha v. Ukraine”], § 410 [CLA-0103]; Chemtura v.
Canada, § 249 [RLA-0018].

2. Indirect Expropriation / The Existence of a Substantial Dispossession
307. Expropriation under international law requires an investor to have been substantially deprived of
the economic value of or – alternatively – of the use, management or control of its investment.
Thus, an expropriation may happen “indirectly”, i.e. without a formal transfer of property. The
determinative factor is whether the investor has been “substantially deprived” of its investment.
As reflected in Art. 5(2) of the BIT, an assessment of the effect of the relevant measures – as
opposed to the State’s intention – is critical. 402 When assessing evidence of an indirect
expropriation, decisive consideration must be given to the effects of the measure in question (the
“sole effects” test).403
308. The term “dispossession” as used in Art. 5(2) of the BIT is functionally equivalent to
“expropriation” and, therefore, Art. 5(2) should be read as codifying the customary international
law definition of expropriation.404 Respondent’s argument that there is a distinction between
“dispossession” and “expropriation” suffers from four flaws. First, the issue in this case is
whether the 2011 Reform rendered it impossible for Claimants to make economic use of their
402
C-I §§ 249 – 250, 262 – 265; C-II §§ 192 – 198; R-I § 210; Burlington v. Ecuador Decision on Liability, §§
396, 401 [CLA-0008] / [RLA-0017]; Pope & Talbot v. Canada Interim Award, §§ 101 – 102 [CLA-0014];
Biwater v. Tanzania, § 452 [CLA-0017] / [RLA-0016]; Andrew Newcombe and Lluis Paradell, Law and
Practice of Investment Treaties: Standards of Treatment, 1st Edition, Kluwer Law International, 2009, 345-
346 [CLA-0018]; EnCana v. Ecuador, § 174 [CLA-0019] / [RLA-0158]; Campbell McLachlan, Laurence
Shore, and Matthew Weiniger, International Investment Arbitration Substantive Principles, 1st Edition, Oxford
University Press, 2007, § 8.88 [CLA-0020]; Vivendi v. Argentina, §§ 7.5.10 – 7.5.11, 7.5.20 [CLA-0021] /
[RLA-0021]; Tecnicas Medioambientales § 116 [CLA-0022] / [RLA-0068]; CME v. Czech Republic Partial
Award, § 604 [CLA-0023]; Starrett v. Iran, 154 [RLA-0065]; Siemens v. Argentina, § 270 [CLA-0028] /
[RLA-0063]; Fireman’s Fund Insurance Company v. The United Mexican States, ICSID Case No.
ARB(AF)/02/1, Award (17 July 2006) [hereinafter “Fireman’s Fund v. Mexico”], § 176(f) [CLA-0029];
Archer Daniels Midland Company and Tate & Lyle Ingredients Americas, Inc. v. The United Mexican States,
ICSID Case No. ARB(AF)/04/05, Award (21 November 2007) [hereinafter “ADM v. Mexico”], §§ 241 – 242
[CLA-0032]; CMS Gas Transmission Company v. Argentina, ICSID Case No. ARB/01/8, Award (12 May
2005) [hereinafter “CMS Gas v. Argentina Award”], § 261 [CLA-0036]; Generation Ukraine v. Ukraine, §
20.29 [CLA-0038] / [RLA-0032]; RosInvest v. Russia, §§ 623 – 624 [CLA-0099]; Expropriation, UNCTAD
Series on Issues in International Investment Agreements II, United Nations Conference on Trade and
Development, 2012, xi [CLA-0210]; Tippetts, Abbett, McCarthy, Stratton v. Tams-Affa (IUSCT), Case No. 7,
Award, 6 IUSCTR 219 (22 June 1984) 226 [CLA-0211]; Draft Convention on the protection of foreign
property, Text with Notes and Comments, OECD (16 October 1967) [CLA-0212]; Bayindir v. Pakistan, § 443
[RLA-0013].
403
C-I § 262; Burlington v. Ecuador Decision on Liability, § 396 [CLA-0008] / [RLA-0017].
404
C-I § 244; International Investment Law: A Changing Landscape, a Companion Volume to International
Investment Perspectives, Chapter 2 “Indirect Expropriation and The Right to Regulate” in International
Investment Law, OECD, 2005, 49 [CLA-0010]; Söhne v. CAR, § 300 [CLA-0011].

investment, thereby destroying its value. The issue is not whether the loss is compensable.405
Second, interpreting the term “dispossession” in accordance with its ordinary meaning and the
other terms in the BIT, as required by Art. 31 of the VCLT, shows that it is synonymous with
“expropriation.” Another interpretation whereby dispossession and expropriation were not
synonymous would lead to impractical results which, while theoretically possible, would be
contrary to the BIT’s object and purpose of promoting and protecting investments. 406 The
preparatory work related to the conclusion of the BIT also indicates that the terms – in French and
in Hungarian – are synonyms with the same ordinary meaning. 407 Third, Respondent’s
assumption that “dispossession, as it pertains to French treaties” must be given special meaning
is unjustified. Rather, the terms of French treaties make it clear that the opposite is true.408 Fourth,
unlike in Total where the tribunal erroneously interpreted the term “dispossession”, the Vivendi
tribunal made it clear that a reference to “dispossession” does not alter the applicable legal
standard. Rather, “dispossession” as described therein is the customary international law standard
405
C-II §§ 169 – 171; R-I §§ 205 – 206.
406
C-II §§ 172 – 175; France-Hungary BIT [CLA-0001] / [RLA-0079]; United Nations, Vienna Convention on
the Law of Treaties, 23 May 1969, United Nations Treaty Series, vol. 1155, 331, Art. 31 [CLA-0052]; Richard
K. Gardiner, Treaty Interpretation (2d ed. 2015) 36 [RLA-0136].
407
C-II §§ 176 – 178; France-Hungary BIT [CLA-0001] / [RLA-0079]; Report on the negotiations relating to the
Hungarian-French investment protection agreement, prepared for the Ministry of Finance of the Government
of the People’s Republic of Hungary on 7 July 1986 2 [RLA-0092]; Memorandum from the Ministry of Foreign
Affairs regarding the Agreement with Hungary on the Reciprocal Promotion and Protection of Investments,
Negotiations of 1-2 July, Paris, dated 8 July 1986 2 [RLA-0130]; Outgoing Telegram from the Ministry of
Foreign Affairs regarding Negotiations on the French-Hungarian Agreement on the Reciprocal Promotion and
Protection of Investments, dated 11 July 1986 [RLA-0131]; Memorandum from the Directorate for European
Affairs regarding the French-Hungarian Agreement on the Reciprocal Promotion and Protection of
Investments, dated 19 December 1986 [RLA-0132]; Decision on Jurisdiction § 146.
408
C-II §§ 179 – 186; R-I § 206; France and Malta Agreement concerning the reciprocal encouragement and
protection of investments (with protocol), signed 11 August 1976 (Effective 1 January 1978) [CLA-0200];
Agreement between the Government of the French Republic and the Government of the People's Republic of
China on the reciprocal promotion and protection of investments (with annex),signed 30 May 1984, in force
as of 1 March 1985 (no longer in force) [CLA-0201]; Agreement between the Government of the French
Republic and the Government of the People's Republic of China concerning the encouragement and reciprocal
protection of investments, signed 26 November 2007 (Effective 20 August 2010) [CLA-0202]; Agreement
between the Government of the Federal Republic of Ethiopia and the Government of the Republic of France
for the reciprocal promotion and protection of investments, signed 25 June 2003 (Effective 7 August 2004)
[CLA-0203]; Richard Gardiner, Treaty Interpretation, 2nd Edition, The Oxford International Law Library,
2015, 200-202 [CLA-0204]; Agreement between the Government of the French Republic and the Government
of the Lebanese Republic on the reciprocal promotion and protection of investments, signed 28 November
1996 (Effective 29 November 1999) [CLA-0205]; Agreement between the Government of Jamaica and the
Government of the Republic of France on the reciprocal promotion and protection of investments, signed 25
January 1993 (Effective 15 September 1994) [CLA-0206]; Arnaud De Nanteuil, L'expropriation indirecte en
droit international de l'investissement, Editions A. Pedone, 2014, 95 [CLA-0207]; Dominique Carreau et
Patrick Juillard, Droit International Economique, 1ère édition, 2003, § 1376 [CLA-0208]; Total S.A. v.
Argentine Republic, ICSID Case No. ARB/04/1, Decision on Liability (27 December 2010) [hereinafter “Total
v. Argentina, Decision on Liability”], § 194 [RLA-0070].

of “substantial deprivation.” 409 Article 5(2) of the BIT, therefore, protects an investor from
suffering a substantial deprivation of its investment.410
309. Reference to “dispossession” in Art. 5(2) of the BIT is equivalent to a reference to indirect
expropriation. Thus, Claimants are not required to show that they have lost control of their
company. Rather, they show that Respondent deprived them of the economic value of their
investment. Under Art. 5(2), “control” must be understood in the economic sense – i.e., that
Claimants have been substantially deprived of the economic value of their investment and have
been stripped of their ability to make economic use of it. 411 The concept of “control” is
meaningless unless it includes the ability of an investor to continue to operate its investment
economically.412 Respondent’s focus on “control” is wrong as a matter of international law.413
Although Claimant CD Internationale continues to hold 100% of the shareholding in CD
Hungary, Claimants have nonetheless been substantially deprived of their investment, and this
constitutes a taking under Art. 5(2) of the BIT.414
310. There is ample international legal support for Claimants’ position that by destroying CD
Hungary’s economic value and viability, Respondent deprived Claimants of their investment. 415
Past awards offer useful, though non-dispositive guidance as to what constitutes an indirect
expropriation. It is recognized that tax measures can have the effect of an indirect
409
C-II §§ 189 – 190; R-I § 206; Vivendi v. Argentina, § 7.5.24 [CLA-0021] / [RLA-0021]; Gemplus S.A., SLP
S.A., Gemplus Industrial S.A. de C.V. v. The United Mexican States, ICSID Case No. ARB(AF)/04/3, Award
(16 June 2010) [hereinafter “Gemplus v. Mexico”] [CLA-0093].
410
C-I § 244; C-II §§ 187 – 191; International Investment Law: A Changing Landscape, a Companion Volume to
International Investment Perspectives, Chapter 2 “Indirect Expropriation and The Right to Regulate” in
International Investment Law, OECD, 2005, 49 [CLA-0010]; Söhne v. CAR, § 300 [CLA-0011]; Vivendi v.
Argentina, § 7.5.24 [CLA-0021] / [RLA-0021]; United Nations, Vienna Convention on the Law of Treaties,
23 May 1969, United Nations Treaty Series, vol. 1155, 331, Art. 31 [CLA-0052]; Gemplus v. Mexico [CLA-
0093]; Expropriation, UNCTAD Series on Issues in International Investment Agreements II, United Nations
Conference on Trade and Development, 2012, 5 [CLA-0209]; Total v. Argentina, Decision on Liability, § 194
[RLA-0070].
411
C-II §§ 207 – 208, 210; EnCana v. Ecuador, § 174 [CLA-0019] / [RLA-0158]; Alpha v. Ukraine, § 410 [CLA-
0103]; Goetz I Award, § 124 [CLA-0213]; Generation Ukraine v. Ukraine, § 191 [CLA-0038] / [RLA-0032].
412
C-I §§ 254 – 255; Tecmed v. Mexico, § 115 [CLA-0022] / [RLA-0068]; S.D. Myers, Inc. v. Government of
Canada, NAFTA, Partial Award (13 November 2000) [hereinafter “S.D. Myers v. Canada Partial Award”], §
283 [CLA-0027].
413
C-II § 193.
414
Id., at § 205; C-I § 246.
415
C-I § 253; C-II §§ 214 – 215; Burlington v. Ecuador Decision on Liability, § 397 [CLA-0008] / [RLA-0017];
CME v. Czech Republic Partial Award, § 604 [CLA-0023]; Goetz I Award, § 124 [CLA-0213]; Desarrollo v.
Costa Rica, §§ 76 – 77 [CLA-0215].

expropriation.416 Expanding on this and considering a deprivation of expected economic benefits,
the Metalclad tribunal defined indirect expropriation as an interference which has the effect of
depriving the owner “of the use or reasonably-to-be-expected economic benefit of property[.]”417
Such a loss of value must be substantial and sufficiently permanent, though a substantial
deprivation alone will suffice.418
311. The economic value of an investment is central to the assessment of a substantial deprivation of
the “ability to manage, use or control” the investment in a meaningful way. Construed widely so
as to include the investor’s ability to operate its investment economically, the Tecmed tribunal
considered whether, due to State actions, “the assets involved have lost their value or economic
use for their holder[.]”419 Similarly, the tribunal in Santa Elena noted that control of a property
included the ability for “the owner reasonably to exploit the economic potential of the
property.” 420 Scholar de Nanteuil also observed, with regard to property affected by
“dispossession”, that indirect expropriation is acknowledged because of the property’s use as a
tool for generating profit.421
312. Claimants explain that, “[b]y (i) creating a State monopoly through the Erzsébet voucher, (ii)
introducing the SZÉP card [with a sustained publicity campaign] and imposing conditions for its
issuance that excluded CD Hungary (and other Non-Hungarian Issuers), and (iii) instituting a
discriminatory tax framework that favoured Beneficiaries and penalized CD Hungary, the
Respondent transformed the environment and conditions under which CD Hungary carried on its
416
C-I § 247; Marvin Feldman v. Mexico, § 101 [CLA-0013] / [RLA-0041].
417
Id., at § 248; C-II §§ 196, 199; Metalclad v. Mexico, § 103 [CLA-0016] / [RLA-0043]; Generation Ukraine
v. Ukraine, § 20.29 [CLA-0038] / [RLA-0032]; Goetz I Award, § 124 [CLA-0213]; RFCC v. Monocco, §§
68 – 69 [CLA-0214]; LG&E v. Argentina Decision on Liability, § 190 [CLA-0041] / [RLA-0038].
418
C-I § 253; C-II § 200, Pope & Talbot v. Canada Interim Award, §§ 101 – 102 [CLA-0014]; Andrew
Kluwer Law International, 2009, 345-346 [CLA-0018]; EnCana v. Ecuador, § 174 [CLA-0019] / [RLA-
0158]; Tecmed v. Mexico, § 116 [CLA-0022] / [RLA-0068]; CME v. Czech Republic Partial Award, § 604
[CLA-0023]; LG&E v. Argentina Decision on Liability, § 200 [CLA-0041] / [RLA-0038]; Azurix v.
Argentina, § 313 [CLA-0092] / [RLA-0012]; Alpha v. Ukraine, § 410 [CLA-0103]; Chemtura v. Canada, §
249 [RLA-0018].
419
C-II § 201; see also C-I §§ 251 – 252; Burlington v. Ecuador Decision on Liability, § 397 [CLA-0008] / [RLA-
0017]; Vivendi v. Argentina, § 7.5.34 [CLA-0021] / [RLA-0021]; Tecmed v. Mexico, §§ 115 -116 [CLA-0022]
/ [RLA-0068]; CME v. Czech Republic Partial Award, § 604 [CLA-0023]; S.D. Myers v. Canada Partial
Award, § 283 [CLA -0027]; Expropriation, UNCTAD Series on Issues in International Investment Agreements
II, United Nations Conference on Trade and Development, 2012, xi [CLA-0210].
420
C-II § 202; Desarrollo v. Costa Rica, § 76 [CLA-0215].
421
C-II § 203; Arnaud De Nanteuil, L'expropriation indirecte en droit international de l'investissement, Editions
A. Pedone, 2014, 109-115 [CLA-0216].

business.”422 The impact was instant and disastrous, leading to (1) an immediate, devastating and
permanent decrease in CD Hungary’s activities, (2) a catastrophic loss in market share, and (3)
an end to CD Hungary’s economic viability.423 The present dispute must be distinguished from
cases where an investor continues to operate but merely experienced a reduction in profitability.
The 2011 Reform did not reduce CD Hungary’s profitability; it destroyed it and reduced CD
Hungary to a company with assets but without business.424 CD Hungary exists only on paper and
has 2 employees, one who is on maternity leave and cannot be made redundant, and one who runs
Claimants’ operations in Poland.425 Meal vouchers accounted for 97% of CD Hungary’s issue
volume by value in 2011. Excluding CD Hungary from the meal voucher market struck at the
economic heart of Claimants’ investment, bringing CD Hungary to a standstill.426 By destroying
CD Hungary’s economic value and viability, Respondent substantially deprived Claimants of
their investment.427 Respondent has made its refusal to amend the 2011 Reform clear and has
shown no willingness to amend the conditions for issuing the SZÉP Card.428
313. Although intentions are not determinative, where a State intended to carry out an expropriation,
this will only lend support to a claimant’s position. Here, Respondent’s intention to expropriate
Claimants’ investment was clear in the relevant legal texts and in the contemporaneous statements
of politicians, who confirmed the intention of removing all foreign competition from the meal
voucher market.429 For example, on 12 December 2011, the Dr. Bence Rétvári (Secretary of State
422
C-II § 212; C-I §§ 256 – 257; Summary table, “Le Chèque Déjeuner Kft. 1997-2012” [C-0057]; Edenred,
Sodexo, Chèque Déjeuner press release “Reform of the restaurant voucher in Hungary” (2012) [C-0071];
Extract from Internal CD Hungary presentation (2013) [C-0122]; Legrand Statement, § 39 [CWS-3].
423
C-II §§ 211 – 213, see also C-I §§ 256, 258 – 259; C-II §§ 217 – 218; Summary table, “Le Chèque Déjeuner
Kft. 1997-2012” [C-0057]; Edenred, Sodexo, Chèque Déjeuner press release “Reform of the restaurant voucher
in Hungary” (2012) [C-0071]; Extract from Internal CD Hungary presentation (2013) [C-0122]; Legrand
Statement, § 39 [CWS-3]; “Responsibility of States for Internationally Wrongful Acts”, 53 UN GAOR Supp.
(No. 10) at 43, UN Doc. A/56/83 (2001) [CLA-0080].
424
C-II §§ 209, 211; LG&E v. Argentina Decision on Liability, § 191 [CLA-0041] / [RLA-0038]; EnCana v.
Ecuador, § 174 [CLA-0019] / [RLA-0158]; CME v. Czech Republic Partial Award, § 591 [CLA-0023].
425
C-I § 261.
426
Id., at § 260; Extract from Mazars Summary Notes on CD Hungary, “Le Chèque Déjeuner Kft., Hungary”,
dated 31 December 2009, 31 December 2010, and 31 December 2011 – 31 December 2013 [C-0044]; EnCana
v. Ecuador, § 174 [CLA-0019] / [RLA-0158]; Vivendi v. Argentina, § 7.2.25 [CLA-0021] / [RLA-0021].
427
C-II § 214; Desarrollo v. Costa Rica, § 77 [CLA-0215].
428
C-I §§ 259, 261; PIT Summary Table (1996-2014) [C-0046]; Minutes of the meeting between the Non-
Hungarian Issuers and Respondent, 3, 5, 7, 8 (28 August 2012) 3, 5, 7, 8 [C-0112].
429
C-I §§ 264 – 269; Dr. Bence Rétvári (State Secretary of the KIM), Speech at the Parliament No 152/90 (12
December 2011) [C-0119]; Burlington v. Ecuador Decision on Liability, § 400 [CLA-0008] / [RLA-0017];
Vivendi v. Argentina, § 7.5.20 [CLA-0021] / [RLA-0021]; Fireman’s Fund v. Mexico [CLA-0029]; First Nagy
Statement, § 52 [CWS-2].

of the KIM) noted that the 2011 Reform would enable “100% of the profit [to] stay in
Hungary[.]”430 In January 2012, this sentiment was reiterated by another Hungarian politician,
Mr. Soltész, when he stated that “the reforms were intended to exclude the Non-Hungarian Issuers
from the voucher market.” 431 The obvious effect of the discriminatory tax treatment was a
reduction in Claimants’ business. Indeed, that is unsurprising, given that that was the only
possible outcome of the 2011 Reform.432
314. Claimants’ argument that any substantial deprivation results in an indirect expropriation is both
incomplete and incorrect. Legitimate exercises of a government’s regulatory authority are not
expropriatory, regardless of the alleged deprivation or loss. Adopting the broad formulation
proposed by Claimants would be contrary to customary international law and its application
through the relevant arbitral jurisprudence, which recognize that governments must be free to act
in the public interest, in particular through new or modified tax regimes or the granting or
withdrawal of government subsidies.433
315. In its post-hearing submission, Respondent stated that the application of the sole effects test to
the present circumstances would mark a significant departure from the relevant jurisprudence. 434
The “sole-effects test” is not applicable when generally applicable, non-discriminatory tax
measures are at issue.435 Cases relied upon by Claimants for the “sole effects” test, through non-
precedential and not concerning general measures, reaffirm that general regulatory measures are
subject to a different standard.436 Both Starrett Housing and Tippets involved a taking resulting
from the imposition and subsequent actions of a government appointed manager who impeded
430
C-I § 270; Dr. Bence Rétvári (State Secretary of the KIM), Speech at the Parliament No 152/90 (12 December
2011) [C-0119].
431
C-I § 271; Respondent press release, “The Government Launches Social Holidays Programme” (12 January
2012) [C-0083]; First Nagy Statement, § 49 [CWS-2].
432
C-I § 272.
433
R-I §§ 168 – 169; Saluka v. Czech Republic, § 260 [CLA-0049] / [RLA-0059]; Marvin Feldman v. Mexico, §
103 [CLA-0013] / [RLA-0041].
434
RPHB-I § 3.
435
R-II § 114.
436
R-II § 114; ADM v. Mexico, § 241 [CLA-0032].

the daily operations and interfered with the claimant’s control of the underlying investment. 437
Where the Iran-U.S. Claims Tribunal decided cases outside of the context involved in Starrett
Housing and Tippets and involving measures of general application, that tribunal recognized the
police powers doctrine. In Emanuel Too v. Greater Modesto Insurance Associates, the tribunal
explained that “a State is not responsible for … economic disadvantage resulting from bona fide
general taxation ... provided it is not discriminatory[.]”438
316. Respondent cannot be in breach of the BIT because the BIT prohibits “dispossession” and not
“expropriation.”439 By definition, “dispossession” places a higher burden on Claimants. For
indirect expropriation as alleged by Claimants, the intent is to provide compensation only for
those acts which cause the investor to be dispossessed of its ownership (i.e., title or use/right of
possession) and not a loss of economic value.440 Claimants remain in control of their shares and
were free to manage the operations of CD Hungary as they saw fit. None of their assets or offices
were seized and they were free to sell vouchers, including their hot and cold meal vouchers, to
new and existing clients. Their products still enjoyed tax advantages. 441 Here, however,
Claimants complain about reduced profits and alleged lost opportunities to expand and maintain
their market share.442 Economic loss alone is not compensable under the BIT. Claimants cannot
base an expropriation claim on the loss of value or capacity to earn a commercial return, but
instead must show a loss of one of the attributes of ownership.443
317. Although largely similar to expropriation, “dispossession” is not a functional equivalent of

expropriation, but rather is an element of expropriation.444 In Total v. Argentina, it was described
437
R-II §§ 109 – 110; Starrett v. Iran [RLA-0065]; Ian Brownlie, Principles of Public International Law 509 (6th
ed. 2003) [RLA-0211]; V. Heiskanen, The Doctrine of Indirect Expropriation in Light of the Practice of the
Iran-United States Claims Tribunal, 3 Transnat’l Dispute Mgmt. (December 2006) [RLA-0223].
438
R-II § 111; Emanuel Too v. Greater Modesto Insurance, 23 Iran-U.S. Cl. Tr. Rep. 378 (1989) [RLA-0157].
439
R-I § 205; C-I § 343.
440
R-II § 167; C-II § 300; Dominique Carreau et Patrick Juillard, Droit International Economique, 1ère édition,
2003, paras. 1376-1377 [CLA-0208].
441
R-I § 210; R-II § 188; RPHB-I § 5.
442
R-II § 155; C-II § 155.
443
R-I § 205; R-II § 173.
444
R-I § 206; Vivendi v. Argentina, § 7.5.24 [CLA-0021] / [RLA-0021]; SAUR International SA v. Republic of
Argentina, ICSID Case No. ARB/04/4, Decision on Jurisdiction and Liability (22 May 2014) (French) § 366
[RLA-0061]; Suez, Sociedad General de Aguas de Barcelona S.A., and Vivendi Universal S.A. v. The Argentine
Republic, ICSID Case No. ARB/03/19, Decision on Liability (30 July 2010) [hereinafter “Suez v. Argentina
Decision on Liability”], § 133 [RLA-0066].

as a term that was “more restrictive” than “expropriation.”445 Claimants acknowledge that the
text of the BIT is to be interpreted as to its ordinary meaning.446 Here, the BIT plainly refers to
dispossession, the ordinary meaning of which relates to the taking of property, usually real
property.447 This was not an accidental choice of language – the signatories selected a term that
has a specific meaning under civil law systems. The French Expropriation code distinguishes
between the transfer of legal title and the taking of possession. Expropriation under French law
requires both transfer of legal title and dispossession. The requirement to pay just compensation
results not from the loss of property itself, but the loss of its material and physical attributes. That
dispossession requires a loss of control is further evidenced by the law concerning the loss of
property in the territory which used to be under French Protectorate.448 Because dispossession
requires a loss of possession, it necessarily contemplates a loss of material control and the ability
to exercise the rights associated with ownership of the property.449 Claimants’ observation that
Hungary and France failed to distinguish between “dispossession” and “expropriation” – even in
the travaux préparatoires – does not militate in favor of a broader understanding of what is
required to establish a claim under Art. 5(2).450 The travaux confirm Hungary’s position.
318. France’s treaty practice with regard to expropriation clauses is consistent – the term
“dispossession” as specifically referenced in the France-Hungary BIT is consistently referred to
in 94 out of 96 of France’s investment treaties that are in force.451 Regarding the two outliers,
445
R-I § 206; Total v. Argentina Decision on Liability, § 194 [RLA-0070].
446
R-II § 156; Claimants’ Reply on Objections to Jurisdiction, § 7; C-II § 172; France-Hungary BIT, Art. 5(2)
[CLA-0001] / [RLA-0079].
447
R-II §§ 157, 159; Black’s Law Dictionary (9th ed. 2009), 540, 1211 [RLA-0209]; Jean Carbonnier, Droit Civil
2 – Les Biens, Les Obligations (PUF 2004) [RLA-0212]; Gérard Cornu, Vocabulaire Juridique (11th ed. 2000),
779 [RLA-0213]; Gérard Cornu, Dictionary of the Civil Code (Alain Levasseur and Marie-Eugénie Laporte-
Legeais trans. 2014) [RLA-0214]; Jamel Djoudi, Possession, Répertoire Dalloz de Droit Civil (2013) § 4
[RLA-0217].
448
R-II §§ 160 – 161; French Law °70-732 of 15 July 1970 [RLA-0199]; No. 00715, Conseil d’Etat
[C.E.][Council of State] (1 October 1976) [RLA-0201]; Gérard Cornu, Dictionary of the Civil Code (Alain
Levasseur and Marie-Eugénie Laporte-Legeais trans. 2014) [RLA-0214]; Christian Lavialle, Expropriation et
Dépossession, Revue Française de Droit Administratif 1228 (2001) [RLA-0227].
449
R-II §§ 158 – 159; Jean Carbonnier, Droit Civil 2 – Les Biens, Les Obligations (PUF 2004) [RLA-0212];
Gérard Cornu, Vocabulaire Juridique (11th ed. 2000), 779 [RLA-0213]; Gérard Cornu, Dictionary of the Civil
Code (Alain Levasseur and Marie-Eugénie Laporte-Legeais trans. 2014) [RLA-0214]; Jamel Djoudi,
Possession, Répertoire Dalloz de Droit Civil (2013) [RLA-0217].
450
R-II § 169; C-II § 177; Claimants’ Reply on Objections to Jurisdiction § 99.
451
R-II § 172; Memorandum from the Senate on behalf of the Ministry of Foreign Affairs concerning the draft
bill authorizing the Agreement between France and Bulgaria Concerning the Reciprocal Promotion and
Protection of Investments (26 October 1989) [R-0045]; Memorandum from the Senate on behalf of the Ministry

Claimants’ analysis of the France-Malta BIT ignores that Malta and France concluded a further
Protocol that specifically provides that “measures of dispossession” refers to measures with an
452
effect equivalent to expropriation or nationalization. Claimants’ interpretation of
“expropriation” and “dispossession” as synonyms would rob this Protocol of all purpose.453 The
France-China BIT does not mandate that an investor must have been dispossessed of its
investment to be expropriated.454
319. French publicists, including Carreau and Julliard, as cited by Claimants, support a restrictive
reading of the term “dispossession.”455 Tribunals charged with interpreting and applying French
treaties containing a clause relating to “dispossession” interpret the term restrictively and deploy
a “control test” to assess whether dispossession has occurred. The Total tribunal found that
dispossession, thus, refers to “loss of [factual] control.” 456 That tribunal rejected the
dispossession claim upon finding that Total continued to have full ownership of its investment
and was not precluded from exercising its rights as a shareholder. 457 Similarly, in Suez, the
tribunal dismissed the expropriation claims, emphasizing that possession and therefore control of
the investment by the investor remained unaffected. 458 Claimants have not meaningfully
challenged the analysis in the Total and Suez awards.459 The Vivendi award, on which Claimants
rely, does not address the meaning of “dispossession.”460
320. Claimants erred in their reliance on de Nanteuil, who explained that to determine what constitutes
a measure of dispossession, the term “control” must be understood as the power to manage – i.e.
the power to make decisions with regard to the administration and operation of the investment.
He stressed that the core issue is not the investor’s ability to obtain benefits, as economic risk is
of Foreign Affairs concerning the draft bill authorizing the Agreement Between France and Islamic Republic
of Iran Concerning the Reciprocal Promotion and Protection of Investments (25 February 2004) [R-0047].
452
R-II § 170; C-II § 179; Agreement between the Government of the Republic of France and the Government of
the Republic of Malta for the Promotion and Protection of Investments, signed on 11 August 1976, entered
into force 1 January 1978 [RLA-0182].
453
Id.
454
R-II § 171.
455
Id., at § 166; Dominique Carreau et Patrick Juillard, Droit International Economique, 1ère édition, 2003, paras.
1376-1377 [CLA-0208].
456
R-I § 207; R-II § 162; Total v. Argentina, Decision on Liability, § 193 [RLA-0070].
457
R-I § 208; Total v. Argentina, Decision on Liability, § 191 [RLA-0070].
458
R-I § 208; R-II § 163; Suez v. Argentina Decision on Liability, § 136 [RLA-0066].
459
R-II § 164; C-II § 187; Total v. Argentina, Decision on Liability, § 194 [RLA-0070].
460
R-II § 165.

not typically protected.461
321. Expropriation analysis does not, as Claimants insist, allow for the application of a test whereby a
claimant would recover if it suffered a substantial deprivation of the ability to manage, use or
control its property OR a deprivation of economic value or viability.462 The full excerpt of Art. 3
of the Draft Convention Protection of Foreign Property shows that expropriation analysis focuses
on outright deprivation and/or interference with use, stating that “the taking of property, within
the meaning of the Article, must result in a loss of title or substance – otherwise a claim will not
lie.” 463 Tribunals have found that a claimant must prove that at least one of the essential
components of property rights have disappeared for an expropriation to have occurred. As
confirmed in the Goetz v. Burundi II case, “a loss of value without a loss of control or loss of
usefulness of the investment cannot be regarded as an indirect expropriation.” 464 Even the
authorities cited by Claimants confirm that considerations of loss of value cannot be considered
absent loss of control.465
322. In order to constitute an indirect expropriation, measures must interfere with property rights to
such an extent that these rights are “rendered so useless that they must be deemed to have been
expropriated” such that the measures must effectively destroy the economic benefit of the
investment, resulting in the “neutralization, radical deprivation, irretrievable loss, inability to
use, enjoy or dispose of the property” and/or “that the property can no longer be put to reasonable
461
R-II § 168; C-II § 185; Arnaud De Nanteuil, L'expropriation indirecte en droit international de
l'investissement, Editions A. Pedone, 2014, 109-115 [CLA-0216].
462
R-II §§ 173 – 174; C-II §§ 198, 214.
463
R-II § 175; C-II n.316; Draft Convention on the protection of foreign property, Text with Notes and Comments,
OECD (16 October 1967) [CLA-0212].
464
R-II §§ 176 – 177; El Paso Energy Int'l Co. v. Argentine Republic, ICSID Case No. ARB/03/15, Award (31
October 2011) [hereinafter “El Paso v. Argentina”] [CLA-0025] / [RLA-0026]; Antoine Goetz & Others v.
Republic of Burundi, ICSID Case No. ARB/01/2, Award (21 June 2012) [RLA-0145]; Charanne B.V. &
Construction Investments S.A.R.L. v. Kingdom of Spain, Arbitration No. 062/2012, Final Award (21 January
2016) [RLA-0151]; Oxus Gold plc v. Republic of Uzbekistan, UNCITRAL, Final Award (17 December 2015)
[RLA-0167].
465
R-II §§ 178 – 180; C-II n. 316, 318, 320, 323, 333, 344; Pope & Talbot v. Canada Interim Award, §§ 101 –
102 [CLA-0014]; S.D. Myers v. Canada Partial Award, §§ 282, 286 – 287 [CLA -0027]; ADM v. Mexico, §
246 [CLA-0032]; LG&E v. Argentina Decision on Liability, §§ 199 – 200 [CLA-0041] / [RLA-0038]; Alpha
v. Ukraine, § 406 [CLA-0103]; Goetz I Award, § 124 [CLA-0213]; Mamidoil Jetoil Greek Petroleum Products
Société S.A. v. Republic of Albania, ICSID Case No. ARB/11/24, Award (30 March 2015) [hereinafter
“Mamidoil v. Albania”], § 566 [RLA-0164].

use or makes any form of exploitation of the property disappear.”466 The cases show a high
burden that a claimant must satisfy, including showing the impossibility of operating the
investment economically.467
323. The France-Hungary BIT will protect investors where State actions make it impossible to earn a
commercial return.468 Recognizing that a mere reduction in profitability will not support a claim,
Claimants allege that the 2011 Reform did not reduce profitability – “it destroyed it.” 469
Claimants have presented no evidence beyond conclusory accusations that operations were
uneconomic or not economically viable. 470 Claimants have not proven their claim that their
decrease in sales was permanent because the volume of vouchers issued in 2013 was just 5% of
what it had been in January 2011. Claimants suspended the issuance of vouchers in mid-January
2013, which accounts for the decrease in volume in 2013. Claimants also fail to acknowledge
that 35% of the customers that they lost in 2012 were lost for reasons having nothing to do with
the 2011 Reform.471 Finally, there is no evidence Respondent in any way forced Claimants to
terminate their contracts with affiliates or otherwise quit the market – those were Claimants’
election.472
324. One year of loss, however, does not speak to the long-term prospects of economic viability.
Claimants admit that it took six years to establish a business in Hungary and that it is typical to
struggle to assimilate to new market conditions, which includes experiencing losses. It may also
be typical to experience short-term loss before being able to recalibrate and achieve profit.473 The
466
R-II §§ 173, 183; National Grid plc v. The Argentine Republic, UNCITRAL, Award (3 November 2008)
[hereinafter “National Grid v. Argentina”] [CLA-0053]; Electrabel v. Hungary, Decision on Jurisdiction
[CLA-0070]; Biwater v. Tanzania [CLA-0017] / [RLA-0016]; Starrett v. Iran [RLA-0065].
467
R-II § 184; C-II §§ 202 – 203.
468
R-II §§ 185 – 186; United Nations Conference on Trade and Development, Expropriation, UNCTAD Series
on Issues in International Investment Agreements II, UNCTAD/DIAE/IA/2011/7, U.N. Sales No. E.12.II.D.7
(2012) [hereinafter “UNCTAD, Expropriation (2012)”] [RLA-0239].
469
R-II § 187; C-II §§ 209, 210; Mamidoil v. Albania, § 561 [RLA-0164].
470
R-II §§ 189 – 191; R-I §§ 85, 229; Claimants’ Response to Request Nos. 10, 11, 12, 15; Mamidoil v. Albania,
§ 561 [RLA-0164].
471
R-II § 192; C-II § 212; C-I § 228; RPHB-I § 8, Tr. Day 2 at 86:24 (Nagy); First FTI Report, § 1.20 [CEX-1];
Second Navigant Report, n.206 [REX-2]; Presentation, Hungarian Branch Strategic Meeting, Le Chèque
Déjeuner (27 March 2012), slide 34 [R-0056] / [NAV-0066].
472
R-II § 202.
473
Id., at § 195; SZÉP Card Proposal, 28 [R-0008]; Burlington v. Ecuador Decision on Liability, § 399 [CLA-
0008] / [RLA-0017]; Legrand Statement, § 17 [CWS-3].

limited documentation provided appears to recognize that losses were not likely to be indefinite.474
While Mr. Legrand claims that CD Hungary was unable to diversify in the short-term, the
documented strategic analysis instead suggests that diversification and the return of lost customers
might be possible.475 CD Hungary did not even attempt to adjust to new market conditions.476
Instead, the record indicates that even as of 27 October 2012, Claimants preferred to take
advantage of the BIT and the potential it offered for full reparation.477 The BIT, however, is not
intended to be an insurance policy, nor does it protect the investor from taking necessary measures
to make their investment profitable.478
325. Tribunals deny claims where the impact of the impugned measures was only temporary.479 The
2011 Reform was never intended or expected to be permanent.480 Many aspects of the 2011
Reform and especially the tax rates were set forth in the PIT, a law that is reviewed and amended
annually. Since the 2011 Reform, the Government expanded the use of some vouchers and began
subsidizing new ones. These are opportunities that Claimants could have taken advantage of, had
they not suspended operations.481 The circumstances surrounding Claimants’ decision to leave
Hungary show that they also did not anticipate or understand the 2011 Reform or attendant losses
to be permanent: they told their affiliates that they were “suspending” performance, not
permanently leaving the market.482
326. Due to the recent legislative amendments undertaken in response to the CJEU proceeding, the
circumstances giving rise to Claimants’ expropriation claim no longer exist. The new structure
474
R-II § 196; Presentation, Hungarian Branch Strategic Meeting, Le Chèque Déjeuner (27 March 2012) [R-0056]
/ [NAV-0066]; First FTI Report, §§ 4.105, 4.108 [CEX-1]; Legrand Statement, § 35 [CWS-3].
475
R-II § 197; Legrand Statement, § 36 [CWS-3]; Presentation, Hungarian Branch Strategic Meeting, Le Chèque
Déjeuner (27 March 2012) [R-0056] / [NAV-0066]; Extract from Claimants' internal presentation (27 March
2012) [C-0124].
476
R-II § 198.
477
Id., at §§ 199 – 200; Email from Mr. Yvon Legrand (Le Chèque Déjeuner) to Ms. Anne Boddaert (Le Chèque
Déjeuner) (27 October 2012) [R-0058].
478
R-II § 201; Waste Management, Inc. v. United Mexican States, ICSID Case No. ARB(AF)/00/3, Award (30
April 2004) [RLA-0180].
479
R-II § 204; S.D. Myers v. Canada Partial Award, § 284 [CLA-0027]; AIG v. Kazakhstan, § 292 [CLA-0037]
/ [RLA-0006]; Ulysseas, Inc. v. Republic of Ecuador, UNCITRAL, Final Award (12 June 2012) § 189 [RLA-
0179].
480
R-II § 205; PIT Law, in force as of 1 January 2013 [RLA-0189].
481
R-II § 205.
482
R-II § 206; Sample CD Hungary (termination letter of network agreement) (4 February 2013) [C-0128]; Board
Meeting Minutes of Société Le Chèque Déjeuner C.C.R. (29 January 2013) [R-0059]; Collection of Network
Agreement Termination Letters (4 February 2013) [R-0060]; Legrand Statement, § 40 [CWS-3].

will allow Claimants to compete on a level playing field with the Erzsébet voucher and the SZÉP
Card, even becoming an issuer if they have the desire and qualify. Thus, any deprivation
experienced by Claimants is insufficiently permanent to constitute a violation of the BIT.483
327. A recognition that the State has an obligation to compensate for the effects of a valid exercise of
regulatory powers would have a chilling effect on the State’s right to regulate.484 This is not a
case of lawful compensable expropriation, but rather a case involving the non-compensable
exercise of Hungary’s police powers.485 Claimants’ proof of the supposed effects is deficient in
any event, as it assumes that conditions that existed in 2011 would continue indefinitely. 486
Claimants hindered their ability to compete by depleting CD Hungary’s reserves.
328. Claimants’ true complaint concerns the alleged “dissemination” of its alleged customer base for
fringe benefits associated with food.487 Claimants, however, had no rights to a customer base and,
indeed, customers routinely moved between issuers.488 There is also no basis to conclude that
Respondent appropriated a benefit for itself.489 The SZÉP Card Issuers and the MNUA had to
establish their own affiliate networks (and SZÉP Cards their own POS system), negotiate and sign
contracts with clients, and launch their own marketing campaigns – all on restricted
commissions.490
329. At the Hearing, Respondent also noted that this case is completely different from Vivendi and
Tecmed. Vivendi does not concern general measures, as are at issue here. That case involved
sovereign acts that were designed to illegitimately end the concession, to force its cancellation or
renegotiation. That is not the case here. Tecmed involved a specific commitment. There was no
such commitment here.491
483
R-II §§ 203, 207.
484
RPHB-I § 3; Vincent J. Ryan, Schooner Capital LLC, and Atlantic Investment Partners LLC v. Republic of
Poland, ICSID Case No. ARB(AF)/11/3, Award (24 November 2015), § 492 [RLA-0267].
485
RPHB-I § 4; compare Vivendi v. Argentina, 7.5.22 (involving specific, rather than general measures) [CLA-
0021] / [RLA-0021].
486
RPHB-I § 8; Burlington v. Ecuador Decision on Liability, § 399 [CLA-0008] / [RLA-0017].
487
RPHB-I § 6; Tr. Day 2 at 11:13-17 (Nagy), 16:23-17:10 (Gans and Nagy).
488
RPHB-I § 7.
489
Id.
490
Id.; Tr. Day 1 at 205:11 – 208:18 (Gans and Nagy), Tr. Day 2 at 60:61 (Gans and Nagy) (discussing
dematerialization costs).
491
Tr. Day 4 at 66 – 67 (R. Closing).

330. At the outset, the Tribunal recalls that Art. 5(2) of the BIT expressly clarifies that it considers as
an “expropriation” “[…] measures which could cause the investors of the other Party to be
dispossessed, directly or indirectly, of the investments belonging to them in its territory[.]”492
331. Thus, any “measures” have to be considered, irrespective of whether they are legislative,
administrative, or other measures undertaken by the State.493 What is relevant is whether such
measures had the effect of dispossessing Claimants, directly or indirectly, of their investment.
Therefore, the test is not which measure caused which effect, but whether the “measures” taken
together as a package resulted in the dispossession. For the present case, this means that the
Tribunal need not examine whether Respondent’s taxation changes, administrative decisions
taken, or the introduction of the Erzsébet voucher and the SZÉP Card, each by themselves, caused
a dispossession. Rather, the Tribunal must examine whether these measures together had the
effect of dispossession.
332. In this context, the Tribunal has noted the Parties’ discussion of a possible difference between
“expropriation” and “dispossession.” The Tribunal does not consider that discussion relevant for
its own decision. From the text of Art. 5(2), it is clear that the terms “expropriation”,
nationalization”, and “other measures” describe the action taken by a government and indicate,
by inserting the word “other”, that the term “measures” includes all three of these terms.
Thereafter, the term “dispossessed” describes the result of such measures.
333. Therefore, to determine if there is a dispossession, the Tribunal has to compare the economic
value of Claimants’ investment, i.e. its shareholding, before the disputed measures, to the value
after such measures. This analysis will show whether there was a substantial loss in value and
whether this loss was an effect of the measures.
492
In the official French version of the France-Hungary BIT, Art. 5(2) states as follows: “Les Parties
contractantes ne prennent pas de mesures d’exportation ou de nationalisation ou toutes autres mesures dont
l’effet est de déposséder, directement ou indirectement, les investisseurs de l’autre Partie des investissements
leur appartenant sur son territoire et dans ses zones maritimes, si ce n’est pour cause d’utilité publique et à
condition que ces mesures ne soient pas discriminatoires, ni contraires à un engagement particulier. […]”
[CLA-0001] / [RLA-0079] (emphasis added).
493
As mentioned in the Edenred Award (§ 316), this conclusion is supported (applying Art. 31(1) VCLT) by the
literal wording of the BIT, which uses the adjective “any” to emphasize the broadness of scope. Consequently,
the term “measures” encompass all administrative acts taken by the Hungarian State, including its agencies
and territorial bodies, legislative acts of general application, formalized as laws approved by Parliament or as
decrees or other regulations authorized by the Government, and judicial decisions adopted by Hungarian courts
and other judicial bodies.

334. Before Respondent’s 2011 Reform, Claimants’ investment had produced a profit every year since
2004, including the years after Reforms 2009 and 2010 to which Claimants had to readapt their
access to the market.494 While the extent of profit and the effective value of the shareholding will
have to examined in the later chapter on damages, in the present context it suffices to state that,
for years, the shareholding was an investment with a considerable economic value.
335. The Tribunal now has to examine whether Claimants were substantially dispossessed of that
economic value by Respondent’s 2011 Reform.
336. Respondent concedes that “[i]n order to constitute an indirect expropriation, measures taken by
the State must interfere with property rights to such an extent that these rights are ‘rendered so
useless that they must be deemed to have been expropriated’ so that the measures thus must
effectively destroy the economic benefit of the investment, resulting in the ‘neutralization, radical
deprivation, irretrievable loss, inability to use, enjoy or dispose of the property’ and/or ‘that the
property can no longer be put to reasonable use’ or ‘makes any form of exploitation of the
property disappear.’”495
337. While the Tribunal does not necessarily subscribe to every detail of this interpretation, it considers
that, in the present case, the essence of this interpretation by Respondent itself is fulfilled.
338. The evidence as confirmed at the Hearing shows that Respondent, as part of the 2011 Reform,
adopted a number of measures which it itself considered as a package under that name: (1) the
SZÉP Card, (2) the Erzsébet voucher, and (3) a preferential tax rate.496 Taking into account the
earlier considerations to the effect that the results of the package rather than those of each
particular measure are relevant for an examination under Art. 5(2) of the BIT, the Tribunal now
has to examine the results of the package of the 2011 Reform.
339. The first measure was the introduction of the SZÉP Card by decree of 12 April 2011.497 Although
Respondent has argued that it was only designed to purchase holiday-related services,
Respondent’s witness Mr. Szatmáry confirmed at the Hearing that, from the outset, the
494
See C-I §§ 34 – 45, 139 (chart), 141.
495
R-II § 183; National Grid v. Argentina [CLA-0053]; Electrabel v. Hungary, Decision on Jurisdiction [CLA-
0070]; Biwater v. Tanzania [CLA-0017] / [RLA-0016]; Starrett v. Iran [RLA-0065].
496
This was acknowledged by Respondent’s witness Szatmáry at Tr. Day 2 at 155:8-13 (Szatmáry).
497
Decree No. 55/2011 [C-0073] / [RLA-0091].

government intended to use the SZÉP Card to purchase hot meals.498 And indeed, the provisions
of the PIT Law applicable to the SZÉP Card were quickly amended after the entry into force
of the decree of 12 April 2011 to allow the SZÉP Card to purchase hot meals.499
340. In order to qualify as a SZÉP Card Issuer, a company had (and still has)500 to meet mandatory and
cumulative conditions set forth in the decree of 12 April 2011, including:501
x be a “service provider”, i.e. a financial institution or be linked to such

institution by contract;
x have existed for at least 5 years before starting to issue SZÉP cards;
x have premises open to the public in every city in Hungary with more
than 35,000 inhabitants (there are at least 25 such cities in Hungary);
x have issued at least 100,000 bank cards at the end of the last financial
year; and
x have at least 2 years of experience in the issuance of electronic
vouchers for the provision of fringe benefits, with at least 25,000
vouchers issued at the end of the last financial year.
341. Since all of these cumulative criteria had to be satisfied, there was no way that CD Hungary could
qualify. These criteria were obviously tailored such that only a small number of pre-selected
issuers would qualify.502 Mr. Szatmáry confirmed at the Hearing that the government knew, prior
to the adoption of the SZÉP Card decree, which companies would qualify.503
498
Tr. Day 2 at 154:10-12 (Szatmáry) (“Q. Isn’t it the case that by 1 January 2012 the SZÉP Card had been
extended to hot meals? Is that correct? A. From the beginning it was included.”).
499
C-I § 144; 2011 PIT Law [C-0074] / [RLA-0088].
500
While Respondent has indicated that these criteria would be modified as of 1 January 2017, these modifications
have not been provided to the Tribunal. R-II §§ 94, 326. Regardless, however, as the Tribunal finds below,
the modifications were not foreseeable as of the Valuation Date. .
501
Decree No. 55/2011, 3 [C-0073] / [RLA-0091].
502
C-I §§ 144 – 155; C-II §§ 82 – 86; The letters exchanged in February 2011 between the Ministry for National
Economy and the PSZAF show that, having restricted the possibility to become a SZÉP Card Issuer to financial
institutions, Respondent tailored the criteria to ensure that no more than two or three banks would be eligible.
See Letter from Mr. Endre Horváth (Deputy Minister of State, responsible for economic development) to Mr.
László Balogh (Vice-President, the PSZAF), 15 February 2011 [C-0148]; Letter from Mr. László Balogh
(Vice-President, the PSZAF) to Mr. Endre Horváth (Deputy Minister of State, responsible for economic
development), 28 February 2011 [C-0149].
503
See Tr. Day 2 at 120:20 – 121:6 (“Szatmáry”) (“Q. Can we agree that in the category which is called on the
document ‘Entities that meet all relevant terms and conditions’, there are three companies identified: 1,OTP;
2, K&H; 3, MKB. Can we agree on those three which are listed in the entities that meet all relevant terms and
conditions?
A. Yes

342. Therefore, the Tribunal concludes from the evidence that Respondent defined criteria for SZÉP
Card Issuers that only selected banks could meet. While the SZÉP Card Decree theoretically
makes it possible for any company to become an issuer, Respondent knew – and intended – that
in practice no company other than three selected banks, and certainly not the Claimants, would
qualify.
343. The second measure was the Erzsébet voucher. It was a paper voucher which could only be issued
by a State-owned entity, the MNUA, and was introduced by the 2011 PIT Law.504 The Erzsébet
voucher was initially presented to be used for the purchase of cold meals only. As confirmed by
Respondent, it decided to extend it to hot meals first for 2012 only, and then permanently from
2013 onward.505.
344. For Claimants, this measure eliminated the remaining segment of the market in which CD
Hungary could have continued to sell its vouchers. This segment was relevant, because of the
low acceptance of electronic cards in many areas of Hungary. If the Erzsébet voucher had been
confined to cold meals, clients who wanted to buy hot meal vouchers for their employees without
using the SZÉP Card could have turned to the hot meal paper vouchers issued by CD Hungary.
With the extension of the Erzsébet voucher to hot meals, however, this possibility disappeared.
345. The third measure was a change in the taxation rules applicable to meal vouchers, adopted by the
2011 PIT Law.506 The SZÉP Card and the Erzsébet voucher were given a preferential tax rate
over the existing meal vouchers sold by CD Hungary and other issuers. The 2011 Reform
reserved a preferential tax rate of 30.94% (Art. 71 of 2011 PIT Law) for the SZÉP Card and the
Erzsébet voucher, while transferring the hot and cold meal vouchers sold by CD Hungary (and
other French issuers) to another category of “specific defined benefits” (Art. 70 of the 2011 PIT
Q. This list is a proposal dated March 2011 before the decree was adopted, so you knew at the time that those
three would meet the requirement of the SZÉP Card decree that would be adopted a month later?
A. Well, yes. […]”) (discussing SZÉP Card Proposal, 30 [R-0008]); see also Letter from Mr. Horváth to Mr.
Balogh [C-0148] (“It is an important part of the concept that (...) the requirements could only be met by large
market actors and, as a result, create an oligopolistic market with 2-3 actors. (...) The MNE requests the HSFA
to review these terms and conditions (...) to ease them to ensure that potentially the 2-3 largest actors should
be able to comply with them.”); Letter from Mr. László Balogh (Vice-President, the PSZAF) to Mr. Endre
Horváth (Deputy Minister of State, responsible for economic development) (28 February 2011) [C-0149].
504
2011 PIT Law [C-0074] / [RLA-0088], National Ministry of Economics, Proposal for the Government in
Connection with the Amendment of Certain Tax Acts and Other Related Acts (11 October 2011), 9 [R-
0016].
505
C-I § 158; Law CVX of 2013 on The amendment of certain acts on economic matters (21 June 2013) [C-0086].
506
2011 PIT Law [C-0074] / [RLA-0088].

Law) which were subject to a tax rate of 51.17%, i.e. significantly higher than the rate applicable
to the two new products.
346. The Tribunal is not persuaded by Respondent’s argument that non-meal vouchers were taxed at
the same rate as the SZÉP Card and Erzsébet voucher after the 2011 Reform. Only meal vouchers
are relevant to this arbitration. It is also not relevant that the SZÉP Card and Erzsébet voucher
were taxed at the same rate as CD Hungary’s vouchers above the exemption ceiling, because the
meal voucher market only exists, in practice, up to the exemption ceiling.507 Finally, the Tribunal
does not consider it relevant that CD Hungary’s vouchers were still, after the 2011 Reform,
subject to a tax rate that was lower than the rate applicable to salaries (96%), because, in practice,
there was no market for these vouchers above the exemption ceiling, and employers could not be
expected to increasingly use vouchers instead of salaries to pay their employees.
347. In view of these considerations, the Tribunal concludes that Respondent created a tax differential
in favor of its two new products, the SZÉP Card and Erzsébet voucher, which disadvantaged CD
Hungary. Whether this preferential tax treatment alone would have caused a dispossession of
Claimants’ investment does not have to be determined by the Tribunal because, for the reasons
elaborated above, it is the result of Respondent’s package of measures, i.e., the SZÉP Card, the
Erzsébet voucher, and the tax advantages, which together result in a dispossession.
348. In 2011, CD Hungary, Edenred, and Sodexo together accounted for 86% of the Hungarian meal
voucher market.508 The evidence shows that the 2011 Reform was intended to – and in fact did –
exclude CD Hungary (and other French issuers) from the meal voucher market and replace them,
such that the profits made in this sector would no longer be made by foreign-owned companies
such as CD Hungary, and repatriated to their foreign owners like Claimants, but would instead
stay in Hungary.
349. That this was, indeed, a goal of the package was confirmed by a speech by the State Secretary of
the KIM to the Hungarian Parliament in which he mentioned:
507
As explained by Ms. Nagy, clients would normally have a budget to buy meal vouchers for their employees
which corresponds to the cumulated value of the exemption ceiling for hot and cold meal vouchers. Once the
total exemption ceiling has been reached, clients would have no more budget. It is therefore irrelevant that CD
Hungary could theoretically compete with the Erzsébet voucher and the SZÉP card on equal terms above the
exemption ceiling. Virtually no company would have purchased vouchers above the exemption ceiling. Tr.
Day 2 at 21:14 – 22:3 (Nagy).
508
First FTI Report, §§ 3.17, 3.19-3.20 [CEX-1].

[a]s for the Erzsébet voucher in particular: this field has been controlled by
foreign owned companies. The 10% financial profit of the voucher market,
which exceeds HUF 200 billion, has been realized by foreign-owned
companies. By this proposal, 100% of the profit will stay in Hungary and serve
a public purpose, the social and child-based catering. For the Government, it
is hard to find resources financing public well-being and community purposes,
but this is a typical success story, since the profit, which had [sic] until now
migrated abroad now forms a huge meal-voucher market as profit, it will serve
the purposes of social and children catering henceforward. […]509
350. This is also confirmed by a Draft Proposal of September 2011 for the reform of the fringe benefit
system, which was addressed to the Government.510 It clearly states that the hot meal account of
the SZÉP Card “would be the successor of the previous hot meal voucher in the form of a
card[.]”511 Like the May 2011 Memorandum, this September 2011 Draft Proposal repeated that
the hot meal account of the SZÉP Card “would thus be the electronic card version of the previous
hot meal vouchers” and expressly clarified that “[t]his decision would mean that the hot meal
benefits would be issued by the institutions entitled to issue the SZÉP Card instead of the current
issuers.”512 The reference to “instead of the current issuers” leaves no doubt that the hot meal
vouchers would be issued by the SZÉP Card Issuers and would no longer be issued by the existing
or then-current issuers – including CD Hungary.
351. In view of the above, the Tribunal concludes from the evidence that Respondent intended to create
a State monopoly and evict CD Hungary from the meal voucher market, or at the very least, it
knew that the effect of the 2011 Reform would be that no clients would continue to buy CD
Hungary’s meal vouchers and that they would buy the SZÉP Card and Erzsébet voucher instead.
352. As a result of the 2011 Reform, CD Hungary was evicted from the meal voucher market. Meal
vouchers represented 97% of its business in 2011.513
353. As argued by Claimants, CD Hungary was in a desperate position within months after the
implementation of the 2011 Reform, and there is no evidence that Respondent had any intention
to change the 2011 Reform. The destruction of the value of Claimants’ shareholding was
permanent, or at least sufficiently permanent for the purposes of expropriation. Under these
509
Speech No. 152/90 by Dr. Bence Rétvári (State Secretary of the KIM) (Plenary Session of Parliament) (12
December 2011) [C-0119] / [R-0055].
510
Proposal for the Government on the reform of the system of fringe benefits, dated September 2011 [R-0015].
511
Id. (emphasis added).
512
Id. (emphasis added).
513
First FTI Report, § 4.23 [CEX-1].

circumstances, the Tribunal accepts that Claimants’ decision to shut down as of 2013 and to
repatriate some of CD Hungary’s reserves after CD Hungary started to collapse following the
2011 Reform was inevitable. This was a legitimate and reasonable decision justified to avoid
further losses.
354. In conclusion, the Tribunal finds that the package of Respondent’s measures in the 2011 Reform,
resulting in creating in fact a State monopoly and excluding CD Hungary from the meal voucher
market, dispossessed Claimants of the greatest part and the economic heart of their investment,
bringing CD Hungary to a standstill. By destroying CD Hungary’s economic value Respondent
substantially dispossessed Claimants of their investment.
355. The Tribunal notes that this conclusion is in conformity with that in the Edenred Award, though
certain factual and legal differences between the two cases exist.514
356. Having established that a dispossession as required under Art. 5(2) of the BIT was indeed effected
by Respondent, the Tribunal will now turn to the question whether this dispossession was lawful
and, therefore, that it does not justify the consequences provided by Art. 5(2) of the BIT or by a
breach of that provision.
3. The Lawfulness of the Alleged Expropriation
357. This section also contains the Parties’ responses to the Tribunal’s Question (k):
k) Taking into account that fringe benefit legislation is generally for

social reasons, what were the further social or other reasons of the
reform by Respondent?
358. Article 5(2) should be read as codifying the customary international law definition of
expropriation.515 Accordingly, an expropriation is only lawful under the BIT if it is (1) for a
public purpose, (2) non-discriminatory, (3) conducted, each by themselves in accordance with
514
Edenred, § 434 (“In summary, the counter-arguments submitted by Respondent cannot be endorsed by the
Arbitral Tribunal. The 2012 Reforms constitute ‘measures having the effect of directly or indirectly
dispossessing’ Edenred of its investment in Hungary, in breach of Art. 5(2) of the BIT.”).
515
C-I §§ 242 – 244; C-II § 164; International Investment Law: A Changing Landscape, a Companion Volume to
International Investment Perspectives, Chapter 2 “Indirect Expropriation and The Right to Regulate” in
International Investment Law, OECD, 2005, 49 [CLA-0010]; Söhne v. CAR, § 300 [CLA-0011].

due process of law, (4) accompanied by prompt and adequate compensation, and (5) not contrary
to a specific undertaking.516
359. International law does not recognize a blanket exception related to “general regulatory
powers.”517 Here, Respondent cannot meet its burden of proving that the measures in question
were justified on the grounds that they were a “legitimate exercise of Hungary’s general
regulatory powers.” 518 Respondent knowingly targeted Claimants’ investment and the 2011
Reform was disproportionate and discriminatory. 519 Furthermore, a State’s right to adopt
regulatory measures must be exercised in good faith. Measures deliberately targeting an investor
cannot be a legitimate exercise of a State’s police powers.520
360. Confiscatory taxation is, for example, by definition expropriatory.521 The effects of the tax are
critical. 522 The 2011 Reform was effectively confiscatory as it destroyed any prospect of
“economic or commercial use” of Claimants’ investment. Through the imposition of
discriminatory taxation, Respondent ousted Claimants and their Non-Hungarian competitors from
the market they built, leaving the resulting profits to be divided between the MNUA and select
Hungarian financial groups.523 The analysis of a tax measure is indistinguishable to that applied
to any other regulatory measure – it must meet the five criteria outlined above.524
516
C-II §§ 168, 261, 265; Vivendi v. Argentina, § 7.5.21 [CLA-0021] / [RLA-0021].
517
C-I § 274; C-II §§ 221 – 224; Pope & Talbot v. Canada Interim Award, § 99 [CLA-0014]; Tecmed v. Mexico,
§ 119 [CLA-0022] / [RLA-0068]; ADC v. Hungary, § 423 [CLA-0030] / [RLA-0004].
518
C-II §§ 219 – 221, 233.
519
Id., at §§ 221, 231 – 235; Andrew Newcombe and Lluis Paradell, Law and Practice of Investment Treaties:
Standards of Treatment, 1st Edition, Kluwer Law International, 2009, § 7.27 [CLA-0218]; Continental
Casualty Company v. The Argentine Republic, ICSID Case No. ARB/03/9, Award (5 September 2008)
[hereinafter “Continental Casualty v. Argentina”], § 276 [RLA-0023].
520
C-II § 252; Vivendi v. Argentina, § 7.5.22 [CLA-0021] / [RLA-0021]; Phoenix Action, Ltd. v. The Czech
Republic, ICSID Case No. ARB/06/5, Award (15 April 2009) [hereinafter “Phoenix Action v. Czech
Republic”], § 107 [CLA-0219].
521
C-I §§ 275 – 276; C-II § 225; Burlington v. Ecuador Decision on Liability, §§ 393 – 401 [CLA-0008] / [RLA-
0017]; Marvin Feldman v. Mexico, § 101 [CLA-0013] / [RLA-0041]; ADC v. Hungary, § 423 [CLA-0030] /
[RLA-0004]; Occidental Exploration and Production Company v. The Republic of Ecuador, LCIA Case No.
UN3467, Award (1 July 2004) [“Occidental v. Ecuador LCIA Award”], § 85 [CLA-0031]; ADM v. Mexico, §
238 [CLA-0032]; Saluka v. Czech Republic, § 264 [CLA-0049] / [RLA-0059]; RosInvest v. Russia, § 629
[CLA-0099].
522
C-II § 226; Burlington v. Ecuador Decision on Liability, § 395 [CLA-0008] / [RLA-0017].
523
C-I § 278; Legrand Statement, § 39 [CWS-3].
524
C-I § 277; Tecmed v. Mexico, § 121 [CLA-0022] / [RLA-0068]; S.D. Myers v. Canada Partial Award, § 282
[CLA-0027]; ADM v. Mexico, §§ 240 – 242 [CLA-0032]; Corn Products International, Inc. v. United Mexican

361. Although Claimants disagree that tax measures need to fulfill additional criteria to be considered
expropriatory, they would be met in this case. Three factors are of particular relevance: the
presence of discrimination, the effect of the tax measures, and Respondent’s intent. 525 It is
undisputed that no undertaking was violated and that no compensation was given.526 Claimants
submit that the lack of compensation renders this expropriation unlawful. Below, the disputed
aspects of Respondent’s expropriation are addressed, including the alleged (1) public purpose and
(2) proportionality of the measures, (3) their discriminatory nature (including Respondent’s
intent), (4) Respondent’s violation of due process, and (5) whether the lack of compensation
makes this taking unlawful.
(i) Existence of a Public Purpose and Tribunal’s Question (k)

Regarding Social or other Reasons for Reform
362. The purpose of the 2011 Reform was to exclude the Non-Hungarian issuers from the Hungarian
voucher market. Here, Respondent has admitted that the 2011 Reform was intended to keep the
profit previously “realized by foreign-owned companies” within Hungary.527 The public policy
goal of keeping profits within the country, rather than the prospect of Claimants repatriating them,
is not a legitimate public purpose under Art. 5(2) of the BIT.528 There is no basis to assume that
the State Secretary of the KIM and the Secretary of State at the Ministry of National Resources
were lying to the Hungarian Parliament when they made their statements. Their statements are
attributable to Respondent and are a clear indication of the true intention of the Government.529
States, ICSID Case No. ARB(AF)/04/1, Award (15 January 2008) [hereinafter “Corn Products v. Mexico”], §
92 [CLA-0033].
525
C-I §§ 279 – 283; Burlington v. Ecuador Decision on Liability, §§ 374 – 375, 393, 402 [CLA-0008] / [RLA-
0017]; Pope & Talbot v. Canada Interim Award, § 96 [CLA-0014]; EnCana v. Ecuador, § 177 [CLA-0019] /
[RLA-0158]; Vivendi v. Argentina, § 7.5.20 [CLA-0021] / [RLA-0021]; CME v. Czech Republic Partial
Award, § 603 [CLA-0023]; ADM v. Mexico, § 250 [CLA-0032]; Corn Products v. Mexico, § 90 [CLA-0033];
Andrew Newcombe and Lluis Paradell, Law and Practice of Investment Treaties: Standards of Treatment, 1st
Edition, Kluwer Law International, 2009, 361-362 [CLA-0034]; Link-Trading Joint Stock Company v.
Department for Customs Control of the Republic of Moldova, UNCITRAL, Award (18 April 2002) [hereinafter
“Link-Trading v. Moldova”], § 64 [CLA-0035].
526
C-I § 310; C-II § 265; Vivendi v. Argentina, § 7.5.21 [CLA-0021] / [RLA-0021].
527
C-II § 253; Respondent press release, “The Government Launches Social Holidays Programme” (12 January
2012) [C-0083]; Dr. Bence Rétvári (State Secretary of the KIM), Speech at the Parliament No 152/90 (12
December 2011) [C-0119]; Mr. Miklós Soltész (Ministry of Natural Resources), Speech at the Parliament No
152/161 (12 December 2011) [C-0120]; Mr. Miklós Soltész (Ministry of Natural Resources), Speech at the
Parliament No 152/165 (12 December 2011) [C-0121].
528
C-I §§ 292 – 294; ADC v. Hungary, § 423 [CLA-0030] / [RLA-0004].
529
C-II §§ 257 – 258; Yukos Universal Limited (Isle of Man) v. The Russian Federation, UNCITRAL, PCA Case
No. AA 227, Award (18 July 2014) [hereinafter “Yukos v. Russia”], § 1472 [CLA-0071]; “Responsibility of

While Respondent seeks to downplay the significance of these remarks, Respondent’s deliberate
targeting of Claimants’ investment supports a finding of expropriation.530
363. If the true purpose was to protect consumers through regulation and technological innovation, as
Respondent now alleges, it would not have ignored the proportionate, more efficacious
alternatives that were available.531
364. The social reasons inherent to fringe benefit legislation cannot explain the 2011 Reform, as those
social reasons are already inherent to fringe benefit legislation and are thus irrelevant to explain
the 2011 Reform.532
365. First, in response to Respondent’s allegation that the Erzsébet voucher was intended to (1)
improve the health and nutrition of disadvantaged Hungarians, and (2) to provide food security
to those living in the country side,533 Claimants explain that both goals were met by the meal
voucher system prior to the 2011 Reform.534 In any event, Respondent admitted that the ceiling
of the Erzsébet voucher was so low that it does not actually provide much food security.535
366. Second, Respondent’s claim that the Erzsébet voucher was created to fund a social welfare
program cannot serve as an excuse to create a monopoly. There were less onerous measures that
could have achieved the same purpose – including the imposition of a social tax – without
excluding CD Hungary and other French issuers.536
367. Third, in response to Respondent’s alleged public purpose that the reform would solve structural
problems identified in a review of the voucher system, Respondent has failed to show that such a
review ever existed. None of the documents upon which Respondent relied prove that the
information was gathered, analyzed, or collated on the structural problems or that a review was
States for Internationally Wrongful Acts”, 53 UN GAOR Supp. (No. 10) at 43, UN Doc. A/56/83 (2001) Art.
4 [CLA-0080].
530
C-II §§ 254 – 256; R-I § 185; Burlington v. Ecuador Decision on Liability, § 401 [CLA-0008] / [RLA-0017].
531
C-II §§ 261 – 262; R-I § 178, 181.
532
CPHB-I Annex No. 7.
533
Id.; R. Opening Slide 28.
534
CPHB-I § 62, Annex No. 7; R-I § 82; Tr. Day 1 at 126:22-23 (R. Opening).
535
CPHB-I Annex No. 7; Tr. Day 1 at 126:22 – 23 (R. Opening).
536
CPHB-I Annex No. 7.

conducted. 537 Likewise, none of Respondent’s witnesses have demonstrated that there were
problems in the voucher system or that a review was conducted.538
368. Fourth, even if Respondent’s alleged problems of “the diversion of income from intended
beneficiaries” or the “subsidization of private companies” existed, they were marginal and could
not have caused a diversion of the amounts of income, as alleged. Voucher issuers did not receive
a subsidy from the State. Rather, the issuers issued vouchers that benefitted from a preferential
tax treatment through reduced rates of healthcare contributions and personal income tax rates.
The issuer’s clients (employers) benefitted from the preferential tax and thus, the employees, not
the issuer, benefitted.539
369. Fifth, Respondent’s public purpose arguments that the SZÉP Card was meant to allow the creation
of a more modern, secure, efficient, solvent and cost-effective system based on electronic
vouchers does not explain (1) the stringent criteria to become a SZÉP Card Issuer or (2) the
preferential tax rate, as neither are necessary to achieve this objective. 540 To the contrary,
Respondent’s creation of the Erzsébet voucher as a paper voucher contradicts the stated intention
to dematerialize the voucher market.541
(ii) Proportionality and the Effect of the Measure
370. To be a legitimate exercise of police power, regulatory measures must be proportionate to the
public purpose pursued. That measures are adopted in the public interest does not preclude them
from being expropriatory or absolve the state from its duty to compensate.542 As with any other
measure, the critical question is the extent of the interference with the investor’s property.543 The
537
Id.
538
Id., CPHB-I §§ 55 – 60; Tr. Day 2 at 102:17-18, 103:3-15 (Szatmáry) (describing extent of research); First
Guller Statement, § 16 [RWS-1]; J. Bindics and N. Szabó, Fringe Benefits in the EU Member States, Ernst &
Young Presentation (13 March 2012) [R-0022]; Chart listing Practical Function of In Kind Benefits in the EU
Member States [R-0038]; Chart listing Taxation of In Kind Benefits in the EU Member States [R-0039].
539
CPHB-I Annex No. 7
540
Id.; CPHB-I § 63.
541
CPHB-I § 64; First Guller Statement, § 32 [RWS-1].
542
C-II §§ 227, 229; R-I §§ 178, 182; Tecmed v. Mexico, § 121 [CLA-0022] / [RLA-0068]; Desarrollo v. Costa
Rica, § 72 [CLA-0215].
543
C-II § 228; Pope & Talbot v. Canada Interim Award, § 102 [CLA-0014]; Tecmed v. Mexico, § 115 [CLA-
0022] / [RLA-0068]; ADM v. Mexico, §§ 240, 246 [CLA-0032]; LG&E v. Argentina Decision on Liability, §§
189 – 191 [CLA-0041] / [RLA-0038].

deference due to a host state does not preclude tribunals from scrutinizing the proportionality of
the measures adopted.544
371. During the EU proceedings, the EC explained that the conditions for the issue of the SZÉP Card
were neither necessary nor proportionate – they bore no relationship to the aim allegedly sought
to be realized. First, Respondent failed to demonstrate that the problems it alleges ever arose.
Second, no other EU Member State had imposed comparable requirements on the issuers of
electronic vouchers. Third, less restrictive measures were available to Respondent. Fourth,
Respondent rebuffed Claimants’ and AETR’s efforts to engage with Respondent, and this in and
of itself was disproportionate. Fifth, even credit institutions are not subject to statutory conditions
comparable to those contained in Art. 13 of the SZÉP Decree. A voucher cannot be equated with
a bank card. The CJEU agreed and found that the conditions for the issuance of the SZÉP Card
were neither necessary nor proportionate.545
372. Since the CJEU found the introduction of the Erzsébet voucher was disproportionate, it did not
rule on the EC submission that the Erzsébet voucher generated further heavy losses by having an
inappropriate transitional period, causing Claimants to bear an individual and excessive burden.
This precludes the 2011 Reform from being a legitimate exercise of Respondent’s general
regulatory powers.546
373. Less restrictive methods were available to Respondent with respect to the introduction of the
Erzsébet voucher, as well. Respondent was aware that less onerous options, such as the
544
C-II § 230; Tecmed v. Mexico, § 122 [CLA-0022] / [RLA-0068]; Azurix v. Argentina, § 311 [CLA-0092] /
[RLA-0012]; Deutsche Bank AG v. Democratic Socialist Republic of Sri Lanka, ICSID Case No. ARB/09/2,
Award (31 October 2012) [hereinafter “Deutsche Bank v. Sri Lanka”], § 522 [RLA-0025]; LG&E v. Argentina
Decision on Liability, § 195 [CLA-0041] / [RLA-0038]; Occidental Petroleum Corporation and Occidental
Exploration and Production Company v. The Republic of Ecuador, ICSID Case No. ARB/06/11, Award (5
October 2012) [hereinafter “Occidental v. Ecuador ICSID Award”], §§ 404, 416, 427 [RLA-0049].
545
C-II §§ 239 – 240; EC v. Hungary, CJEU Judgment [C-0153]; Tecmed v. Mexico, § 122 [CLA-0022] / [RLA-
0068].
546
C-II §§ 241 – 244; EC v. Hungary, CJEU Judgment [C-0153]; Email from Mr. Pierre Gagnoud (Edenred) to
Mr. Bálint Bessenyey (Sodexo) and Ms. Márta Nagy (16 April 2012) [C-0154]; National Ministry of
Economics, Proposal for the Government in Connection with the Amendment of Certain Tax Acts and Other
Related Acts (11 October 2011) [R-0016]; Tecmed v. Mexico, § 122 [CLA-0022] / [RLA-0068]; LG&E v.
Argentina Decision on Liability, § 196 [CLA-0041] / [RLA-0038]; Azurix v. Argentina, § 311 [CLA-0092] /
[RLA-0012]; Case of James and others v. The United Kingdom, European Court of Human Rights, Court
(Plenary), Application No. 8793/79, Judgment (21 February 1986) [hereinafter “James v. United Kingdom”],
§§ 50 [CLA-0199]; Deutsche Bank v. Sri Lanka, § 522 [RLA-0025]; LG&E v. Argentina Decision on Liability,
§ 195 [CLA-0041] / [RLA-0038].

imposition of a “solidarity levy” were available and were indeed raised during discussions
between Respondent and the AETR in Spring 2012.547
(iii) Discrimination
374. The 2011 Reform was also discriminatory and, accordingly, cannot be a legitimate exercise of the
State’s police power.548 Although Art. 13 of the SZÉP Decree does not openly discriminate on
the grounds of nationality, in practice, the only entities able to satisfy the requirements to become
SZÉP Card Issuers were three banks seated in Hungary.549 Although the 2011 Reform privileged
three Hungary-based banking groups, Claimants do not submit that they suffered discrimination
on that basis. Rather, (1) CD Hungary was in like circumstances to the Beneficiaries of the 2011
Reform, and (2) the 2011 Reform subjected it and Claimants as investors to differential treatment
without reasonable justification.550 Respondent has not discharged its burden of proof that no
discrimination has taken place. The differential treatment included (1) establishing criteria for
the issue of SZÉP Cards (which could be used as an “account” to purchase hot meals) that only
three Hungary-based groups could meet, (2) granting MNUA a monopoly over the issue of
Erzsébet vouchers (initially limited to cold meals, but extended to hot meals), and (3) introducing
a tax framework that subjected CD Hungary’s meal vouchers to higher tax rates than those
imposed on the SZÉP Card and Erzsébet voucher, in order to penalize CD Hungary by
encouraging clients and users to switch products.551
375. Prior to the reform, OTP Bank had only been able to acquire 2% of the meal voucher market.
After the 2011 Reform, the Beneficiaries used their new found fiscal advantage to drive the non-
547
C-II § 242; EC v. Hungary, CJEU Judgment, § 125 [C-0153].
548
C-II §§ 236, 245, 263; R-I §§ 178, 196; Tecmed v. Mexico, § 122 [CLA-0022] / [RLA-0068]; CMS Gas v.
Argentina Award, § 293 [CLA-0036]; LG&E v. Argentina Decision on Liability, § 196 [CLA-0041] / [RLA-
0038]; Azurix v. Argentina, § 311 [CLA-0092] / [RLA-0012]; James v. United Kingdom, §§ 50, 63 [CLA-
0199]; Deutsche Bank v. Sri Lanka, § 522 [RLA-0025].
549
C-II § 238; Decree No. 55/2011 [C-0073].
550
C-II §§ 246 – 247, 249; PIT Law as amended in 2010, effective 1 January 2011 [C-0068]; 2011 PIT Law, Art.
70, 71(1)(bb) [C-0074] / [RLA-0088]; Nykomb Synergetics Technology Holding AB v. The Republic of Latvia,
Arbitration Institute of the Stockholm Chamber of Commerce, under the Energy Charter Treaty, Award (16
December 2003) [hereinafter “Nykomb v. Latvia”], 34 [CLA-0065] / [RLA-0048].
551
C-II § 248; see also C-I §§ 284 – 285, 296 – 299; ADC v. Hungary, § 442 [CLA-0030] / [RLA-0004]; CMS
Gas v. Argentina Award, § 293 [CLA-0036]; Legrand Statement, § 25 [CWS-3].

Hungarian Issuers from the market. By 2012, the Non-Hungarian issuers who had made up 86%
of the market were almost completely displaced.552
376. There was no reasonable justification for the imposition of differential tax treatment – CD
Hungary’s meal vouchers were functionally identical to the Erzsébet voucher and the meals
account on the SZÉP Card.553 There was no reason to reclassify CD Hungary’s meal vouchers as
“specific defined benefits” with a higher tax rate, rather than “non-wage benefits”, as the Erzsébet
and SZÉP Card were classified and as CD Hungary’s vouchers were previously classified.554 The
2011 Reform deliberately targeted Claimants’ investment, breaching Respondent’s international
obligations and Claimants’ legitimate expectations. Such a bad faith measure cannot be a
legitimate exercise of the State’s police powers.555
(iv) Due Process
377. Although the requirement of due process is not expressly contained in Art. 5(2), due process is an
element in the expropriation analysis under customary international law. It requires, in the words
of ADC v. Hungary, that there be an “actual and substantive legal procedure for a foreign investor
to raise its claims against the depriving actions […]” 556 The expropriation was carried out
without due process. The FIDESZ government so weakened the independence and reach of the
judiciary that the basic requirement of due process would not have been met in relation to any
measures passed at the time of the 2011 Reform.557 To the extent that Respondent alleges that it
fulfilled its due process obligations by engaging in “extensive consultation” with market
552
C-I § 286; Edenred, Sodexo, Chèque Déjeuner press release “Reform of the restaurant voucher in Hungary”
(2012) [C-0071]; First FTI Report, § 1.11 [CEX-1].
553
C-I §§ 288 – 289; C-II § 249; PIT Law as amended in 2010, effective 1 January 2011 [C-0068]; 2011 PIT Law,
Art. 70, 71(1)(bb) [C-0074] / [RLA-0088].
554
C-I § 287.
555
Id., at § 290; C-II §§ 251 – 252, 259 – 260; R-I §§ 178, 203; Vivendi v. Argentina, § 7.5.22 [CLA-0021] /
[RLA-0021]; ADC v. Hungary, § 424 [CLA-0030] / [RLA-0004]; Phoenix Action v. Czech Republic, § 107
[CLA-0219].
556
C-I §§ 300 – 302; AIG v. Kazakhstan, § 10.3.1 [CLA-0037] / [RLA-0006]; Generation Ukraine v. Ukraine, §
11.3 [CLA-0038] / [RLA-0032]; Andrew Newcombe and Lluis Paradell, Law and Practice of Investment
Treaties: Standards of Treatment, 1st Edition, Kluwer Law International, 2009, 338-339 [CLA-0039]; Siag v.
Egypt, §§ 427 – 428 [CLA-0040].
557
C-I §§ 303 – 304; C-II § 264.

participants, to the extent that any consultation was conducted, key stake holders and the existing
issuers were excluded.558
(v) Duty to Compensate
378. Even if the 2011 Reform had been adopted in the public interest, that would not preclude it from
being expropriatory, nor would it absolve the State of its obligation to compensate. A lawful
expropriation under Art. 5(2) of the BIT must be accompanied by prompt and adequate
compensation – the failure to pay compensation will make an otherwise lawful expropriation
unlawful.559 Although it can be argued that the failure to pay compensation should not render an
otherwise lawful expropriation unlawful, Respondent has never even offered Claimants
compensation. Accordingly, Respondent committed an unlawful expropriation contrary to Art.
5(2) of the BIT.560
379. Claimants’ expropriation claim fails because the legislative measures were enacted for a public
purpose and were applied equally to all investors. As Claimants agree, economic damage caused
by bona fide, general, proportionate, and non-discriminatory regulation is not, in normal
circumstances, compensable.561 The application of the police powers doctrine, in particular with
respect to tax and fiscal policy, precludes a finding of expropriation. Nothing in international law
or the BIT prohibits a country from creating tax breaks or subsidies, so long as those decisions
are not discriminatory.562 The deprivations of which Claimants complain are not expropriatory
558
C-II § 264.
559
Id., at § 265; C-I §§ 305 – 311; Burlington v. Ecuador Decision on Liability, § 542 [CLA-0008] / [RLA-0017];
Vivendi v. Argentina, § 7.5.21 [CLA-0021] / [RLA-0021]; Siemens v. Argentina, § 273 [CLA-0028] / [RLA-
0063]; ADC v. Hungary, § 444 [CLA-0030] / [RLA-0004]; Siag v. Egypt, §§ 434 – 435 [CLA-0040];
Funnekotter v. Zimbabwe, § 98 [CLA-0043]; Conoco v. Venezuela, § 362 [CLA-0044] / [RLA-0022]; Mobil
v. Venezuela, §§ 301 – 306 [RLA-0046].
560
C-I § 310 – 311.
561
R-I § 178; R-II §§ 97 – 99; C-II §§ 221 – 224, 231, 265; C-I § 178; Marvin Feldman v. Mexico, § 103 [CLA-
0013] / [RLA-0041]; Methanex v. USA, § 7 [RLA-0045]; Saluka v. Czech Republic, § 255 [CLA-0049] /
[RLA-0059]; France-Hungary BIT, Art. 5(2) [CLA-0001] / [RLA-0079]; M. Sornarajah, The International
Law on Foreign Investment (3d ed. 2004) [RLA-0107].
562
R-II §§ 99 – 105; C-II §§ 223, 265; Link-Trading v. Moldova, § 64 [CLA-0035]; RosInvest v. Russia, §§ 628,
630 [CLA-0099]; Tippetts, Abbett, McCarthy, Stratton v. Tams-Affa (IUSCT), Case No. 7, Award, 6 IUSCTR
219 (22 June 1984) [CLA-0211]; Draft Convention on the protection of foreign property, Text with Notes and
Comments, OECD (16 October 1967) [CLA-0212]; Burlington v. Ecuador Decision on Liability, §§ 391, 393,
394 [CLA-0008] / [RLA-0017]; El Paso v. Argentina, §§ 249 – 255, 290, 295 [CLA-0025] / [RLA-0026];
Marvin Feldman v. Mexico, § 113 [CLA-0013] / [RLA-0041]; Suez v. Argentina Decision on Liability, § 139

at all – rather, they are a legitimate exercise of the government’s regulatory authority.563 Below,
Respondent demonstrates that the measures were (1) enacted for a public purpose, (2) were
proportional to these goals, and (3) were non-discriminatory. Further, Respondent complied with
(4) the requirements of due process. Accordingly, (5) Claimants are not owed compensation.
380. As an introductory note, Claimants’ claim that CD Hungary’s profits and market share were
negatively impacted when Respondent changed its tax laws – which it did on a yearly basis – to
decrease the tax benefit enjoyed by employees with regard to certain vouchers. Respondent does
not tax vouchers – it offers tax breaks on some income that is provided as vouchers rather than
salary. Claimants were not deprived of their investment or of any right by application of an
excessive tax, making their “confiscatory tax” theory inapt.564
381. While Claimants wanted Respondent to accede to their demands and maintain the status quo,
Claimants’ sense of entitlement does not sustain a claim under the BIT.565 The 2011 Reform did
not contradict any commitment made by Respondent to Claimants, making this situation similar
to that in Methanex, where – in the absence of a promise upon which to base their allegations of
expropriation – the case was dismissed. 566 Claimants were not entitled to expect that the
Hungarian regulatory regime would remain unchanged – the market was always predicated on a
discretionary regulatory system.567
[RLA-0066]; EnCana v. Ecuador, § 177 [CLA-0019] / [RLA-0158]; Quasar de Valors SICAV S.A. & Others
(Formerly Renta 4 S.V.S.A et al.) v. Russian Federation, SCC Case No. 24/2007, Award (20 July 2012) § 48
[RLA-0171]; Sergei Paushok, CJSC Golden East Company & CJSC Vostokneftegaz Company v. Government
of Mongolia, Award on Jurisdiction and Liability (28 April 2011) [hereinafter “CJSC v. Mongolia”], § 310
[RLA-0176]; Tza Yap Shum v. Republic of Peru, ICSID Case No. ARB/07/6, Award (7 July 2011) [RLA-
0178]; Restatement (Third) of The Foreign Relations Law of the United States, § 712 (1987) [RLA-0204];
A.R. Albrecht, The Taxation of Aliens Under International Law, 29 Brit. Y.B. Int’l Law 145 (1952) [RLA-
0206]; Ian Brownlie, General Course on Public International Law, 255 Recueil des Cours 143 (1995) [RLA-
0210]; Louis B. Sohn and Richard Baxter, Draft Convention on the International Responsibility of States for
Injuries to the Economic Interests of Aliens, in Responsibility of States for Injuries to the Economic Interests
of Aliens, 55 Am. J. Int’l Law 545, 554 (1961) [RLA-0234].
563
R-I § 168; Saluka v. Czech Republic, § 260 [CLA-0049] / [RLA-0059].
564
R-II § 106; C-II § 225.
565
R-II § 125; C-II § 235.
566
R-I § 202; Methanex v. USA, § 9 [RLA-0045].
567
R-I §§ 203 – 204.

382. At the Hearing, Respondent noted that Claimants agreed that the decision to remove the cold meal
voucher, which went into effect in 2010, was within the proper prerogative of the State’s tax-
making authority and that that decision did not violate the BIT.568
(i) Existence of a Public Purpose and Tribunal’s Question (k)

Regarding Social or other Reasons for Reform
383. Although the definition of “public purpose” is not well established, economic damage that results
from policies regarding public health, safety, morals, welfare, or essential state functions,
including anti-trust, consumer protection, environmental protection and land planning, is
generally regarded as non-compensable.569 The 2011 Reform fits within this definition.
384. Claimants ignore that governments must be afforded due deference in defining the issues that
affect their public policy or the interests of society as a whole.570 The Hungarian voucher system
is rooted in improving access to food in support of the welfare of the citizenry. The 2011 Reform
resulted from critical budget concerns as well as a mandate from the Hungarian electorate and
was undertaken for important public and social goals. As part of the 2011 Reform, the SZÉP
Card was designed to protect consumers through regulation and technological innovation, as well
as to encourage Hungarians to improve their health, among other social purposes.571 The criteria
for the issuance of the SZÉP Card were designed to protect the end-user, as well as other
participants in the previously unregulated fringe benefits system.572 The Erzsébet program is a
social benefits program that uses the issuance of vouchers to fund itself, which also aimed to
regulate and create a more transparent fringe benefit system. Both measures were constitutional
under Hungarian law.573
385. The 2011 Reform and the contemporaneous documentation reflecting the discussions and
deliberations about the voucher system suggest no nefarious intent. Rather, the available
documentation reflects the concerns about achieving the stated voucher objectives. The
568
569
R-I § 179; R-II § 99; C-II §§ 223, 224, 231 M. Sornarajah, The International Law on Foreign Investment (3d
ed. 2004) at 283; 338 [RLA-0107].
570
R-I § 182; ADC v. Hungary, § 432 [CLA-0030] / [RLA-0004]; Tecmed. v. Mexico, § 122 [CLA-0022] / [RLA-
0068].
571
R-I §§ 180 – 181; SZÉP Card Proposal [R-0008]; Erzsébet Program, Erzsébet Program description [R-0041].
572
R-II §§ 121 – 122; C-I § V(A)(3); SZÉP Card Proposal [R-0008].
573
R-II §§ 123 – 124; Proposal for the Government on the reform of the system of fringe benefits (September
2011) [R-0015]; Fundamental Law of Hungary [RLA-0196].

statements of re-election seeking officials, who made their statements when the 2011 Reform was
already in place, are not able to reveal the true intention of the government.574
386. Although Claimants state that they were ignorant of problems facing the voucher system, the
lobby group of which they were a part – AETR – began already in January 2010 to provide
proposals on how to “combat, and sanction, misuse of vouchers” in light of criticisms that had
been presented. AETR recognized the need for regulation and acknowledged that it was in the
interest of all “participants in the sector to ensure that the activities of voucher issuers are
regulated.” The clear implication is that, at least by January 2010, fringe benefits were not
efficiently serving their purpose.575 Claimants also admit that they began studying moving to an
electronic card (“dematerialization”) in 2006 because cards enabled a level of governmental
oversight that was not possible with paper vouchers. Finding the option too expensive, however,
CD Hungary chose not to pursue it.576
387. The introduction of the new fringe benefits – the Erzsébet voucher and the SZÉP Card – and the
other aspects of the 2011 Reforms, served multiple interrelated economic and social objectives,
including the (1) creation of an efficient and secure system, (2) promotion of healthy living and
prevention of disease, (3) promotion of domestic tourism and stimulation of economic growth,
(4) generation of revenue to fund social welfare programming, (5) elimination of voucher misuse,
and (6) enhancement of consumer protection.
388. Regarding (1), the Government aimed to incentivize dematerialization – i.e., the shift to electronic
vouchers. Electronic cards would mitigate the problems of lost or expired vouchers by enabling
issuers to easily track usage and to compensate employees for lost vouchers.577 The shift to
electronic cards would also contribute to the overall modernization of the Fringe Benefit System
and to Hungary generally, by spurring the proliferation of POS machines.578 The Government
also wanted to reduce inefficiencies endemic in the Fringe Benefit System, including those related
574
R-I §§ 183 – 185; SZÉP Card Proposal [R-0008].
575
R-II §§ 128, 130; C-II §§ 53, 128; Proposal from the AETR concerning the universal regulation of the system
for allocating benefits in kind (January 2010) [C-0145].
576
R-II § 129; Internal CD Hungary memorandum, “Outline of situation – cards on the Hungarian market” (18
July 2007) [C-0134]; First Nagy Statement, § 44 [CWS-2].
577
RPHB-I §§ 106 – 107; SZÉP Card Proposal, 4 [R-0008]; Tr. Day 2 at 106:12-23 (Szatmáry); Tr. Day 2 at
31:15 – 21 (Gans and Nagy).
578
RPHB-I § 107; SZÉP Card Proposal, 12 – 13 [R-0008]; Tr. Day 2 at 38:14-25, 39:1-11 (Gans and Nagy).

to commission expenses. The SZÉP Card Issuers are prohibited from charging commissions to
employers and employees and may only charge affiliates a fixed commission of 1.5%.579
389. Regarding (2), the Government aimed to incentivize and encourage consumer spending on healthy
food, and this was encouraged by Hungarian health experts in light of Hungary’s significant
public health concerns.580 The connection between the SZÉP Card and the pursuit of health and
recreation is clear in the first official SZÉP Card proposal, where the primary objective of the
SZÉP Card expressly relates to the promotion of healthy lifestyle. Later proposals made health
promotion even more express.581
390. Regarding (3), the SZÉP Card was designed to stimulate economic growth in the domestic tourism
sector.582 AETR – Claimants’ lobby group – recognized that this was the objective of the SZÉP
Card and recognized the authenticity of the Government’s efforts and the link between key
features of the 2011 Reform and the Government’s objectives.583
391. Regarding (4) the Erzsébet voucher was introduced as a charity voucher whereby all revenues
generated would fund social welfare programs to support impoverished and marginalized groups.
Since its inception, hundreds of thousands of Hungarians have benefitted from participation in
these social programs and, importantly, these benefits were provided without imposing an
additional burden on the Government’s budget.584
392. Regarding (5), the paper vouchers could be redeemed for products other than their earmarked use
and there were concerns about vouchers being sold for cash or in the secondary / “black”
market.585 AETR repeatedly recognized issues with the black market and further recognized that
579
RPHB-I § 108; Tr. Day 2 at 107:7-12) (Michou and Szatmáry); Decree No. 55/2011 at §§ 10(2) – (3) [RLA-
0091].
580
RPHB-I § 103.
581
Id., at §§ 104 – 105; SZÉP Card Proposal, 4 [R-0008].
582
RPHB-I § 109 – 110; Tr. Day 3 at 31:8-10 (Guller) (confirming that the SZÉP Card was intended to promote
tourism in Hungary); SZÉP Card Proposal, 4, 22 [R-0008]; National Ministry of Economics, Proposal for the
Government in Connection with the Amendment of Certain Tax Acts and Other Related Acts (11 October
2011) [R-0016].
583
RPHB-I § 110 – 111; Letter from the members of the AETR (Mr. Bálint Bessenyey, SodexoPass Hungária
Kft., Mr. Pierre Gagnoud, Edenred Magyarország Kft. and Ms. Márta Nagy, Le Chèque Déjeuner Kft.), to Mr.
László Trócsány (Ambassador of Hungary to France) (18 October 2012) [C-0115].
584
RPHB-I § 112; First Guller Statement, § 34 [RWS-1]; Tr. Day 3 at 38:2-8 (Guller).
585
RPHB-I § 113; Tr. Day 2 at 53 (Nagy) (Acknowledging that the electronic voucher enabled better oversight);
First Guller Statement, § 21 [RWS-1]; Second Nagy Statement, § 21 [CWS-4]; Letter from the members of
the AETR (Mr. Bálint Bessenyey, SodexoPass Hungária Kft., Mr. Pierre Gagnoud, Edenred Magyarország

an electronic card could enhance security, traceability, and efficiency.586 The introduction of the
electronic voucher card – the SZÉP Card – aimed to fight this corruption and these improper
practices.587 Other countries have sought to incentivize or mandate the use of electronic cards for
the same reason.588 The 2011 Reform introduced processes to monitor compliance with usage
rules and to sanction non-compliant affiliates that further contribute to the realization of this
goal.589 Ms. Nagy recognized that this was a goal of the SZÉP Card.590
393. Regarding (6), under the 2011 Reform, SZÉP Card Issuers were required to satisfy five criteria
and were subject to various regulations, including related to permissible commission rates and the
requirement to provide online access to employees to their SZÉP Card’s traffic history and current
balance. Issuers also have reporting obligations to the Hungarian Trade Licensing Office and the
Office is responsible for monitoring the activity of the Issuer and publishing a report every six
months. All of these requirements are aimed at enhancing consumer protection by ensuring that
Issuers are experienced and subject to regulation.591
(ii) Proportionality and the Effect of the Measures
394. Proportionality is not universally recognized as relevant in the expropriation analysis. Claimants
have not met their burden of establishing that the doctrine of proportionality is part of the
expropriation analysis under Art. 5(2), as they have failed to demonstrate state practice or opinio
juris (beyond arbitral awards) showing that this standard has been incorporated into customary
international law.592
Kft. and Ms. Márta Nagy, Le Chèque Déjeuner Kft.), to Mr. László Trócsány (Ambassador of Hungary to
France) (18 October 2012) [C-0115].
586
587
RPHB-I § 114; SZÉP Card Proposal, 29 [R-0008].
588
RPHB-I § 115; see e.g., Tr. Day 3 at 94:9 -13 (Nicholson); Belgian Royal Decree laying down the approval
conditions and the approval procedure for the issuers of food vouchers in electronic format [RLA-0197].
589
RPHB-I § 116; First Guller Statement, §§ 40 – 42 [RWS-1].
590
RPHB-I § 117.
591
RPHB-I, last page; First Guller Statement, §§ 19, 20 [RWS-1]; Decree No. 55/2011 at §§ 8, 13, 16 – 18 [RLA-
0091].
592
R-II § 117; C-II §§ 222, 230; LG&E v. Argentina Decision on Liability, § 195 [CLA-0041] / [RLA-0038];
Case Concerning Rights of Nationals of the United States of America in Morocco, Judgment, I.C.J. Reports
1952, 176 (27 August 1952) [CLA-0115]; Azurix v. Argentina, § 213 [CLA-0092] / [RLA-0012]; Glamis
Gold, Ltd. v. United States of America, UNCITRAL Arbitration, Award (8 June 2009) [hereinafter “Glamis
Gold v. USA”], [RLA-0033]; Cargill, Inc. v. United Mexican States, ICSID Case No. ARB(AF)/05/2, Award
(18 September 2009) [hereinafter “Cargill v. Mexico”] [RLA-0150]; Continental Shelf (Libyan Arab

395. Even if proportionality could be considered to distinguish between dispossession and non-
compensable taking, in the investment context, such analysis is limited to whether the means are
so disproportionate to the claimed purpose as to call into question the genuineness of the purpose
itself. As explained by the tribunal in Paushok v. Mongolia, a proportionality analysis cannot be
used to second-guess state decision making.593
396. The 2011 Reform was necessary to remedy numerous problems in the voucher system and to
develop a system that served the purpose for which it was created.594 The 2011 Reform was
specifically targeted to pursue goals within the public interest. These were proportionate in light
of (1) the importance of these goals to the Hungarian government and the Hungarian people, (2)
the pervasive nature of inefficiencies and violations tainting the previous system, and (3)
Claimants having had no legitimate expectation that such measures would not ever be enacted.595
Claimants’ analysis also overlooks that there were more onerous options that were rejected by
Respondent. For example, the Government could have closed the market to Claimants by limiting
the market to just SZÉP Card Issuers and the MNUA. Instead, however, all issuers were entitled
to continue to issue vouchers and a number of vouchers continued to receive favorable tax
treatment. This is because the 2011 Reform was aimed to regulate – not abolish – the voucher
system. CD Hungary’s fellow French issuers continue to operate and issue vouchers in the
market.596
397. The 2012 UNCTAD Publication on Expropriation confirms that it is inappropriate to transplant
the proportionality analyses designed an applied to one particular legal regime to the investment
treaty context.597 The proportionality analysis in investment law is far less onerous and less broad
than in the European human rights context or in the CJEU analysis in its 23 February 2016
Jamahiriya v. Malta), 1985 I.C.J. 13 (3 June 1985) [RLA-0153]; Jurisdictional Immunities of the State (Ger.
v. It.: Greece intervening), 2012 I.C.J. 99 (3 February 2012) [RLA-0162]; S.S. “Lotus” (Fr. v. Turk.), 1927
P.C.I.J. (ser. A) No. 10 (September 1927) [RLA-0177]; UNCTAD, Expropriation (2012) [RLA-0239].
593
R-I § 186, R-II § 120; Azurix v. Argentina, § 311 [CLA-0092] / [RLA-0012]; Deutsche Bank v. Sri Lanka, §
522 [RLA-0025]; LG&E v. Argentina Decision on Liability, § 195 [CLA-0041] / [RLA-0038]; Tecmed v.
Mexico [CLA-0022] / [RLA-0068]; Cargill v. Mexico, § 292 [RLA-0150]; Invesmart, B.V. v. Czech Republic,
UNCITRAL, Award (26 June 2009) [hereinafter “Invesmart v. Czech Republic”], § 501 [RLA-0161]; CJSC v.
Mongolia, § 299 [RLA-0176].
594
R-I § 188.
595
Id., at § 190; R-II § 126; C-II §§ 98, 239, 242.
596
R-I §§ 188 – 189; R-II §§ 134 – 135; C-II §§ 107, 108; First Nagy Statement, §§ 52 – 53 [CWS-2]; First
Navigant Report, §§ 243 – 246 [REX-1].
597
R-II § 119; UNCTAD, Expropriation (2012)”] [RLA-0239].

decision.598 Claimants were not represented in the CJEU proceedings and those proceedings did
not consider any alleged “burden” on Claimants.599
398. To the extent that Claimants argue that “nobody else is doing it”, Respondent points out that each
State is entitled to enact different policies consistent with what they believe to be in the best
interests of their citizens. without incurring international legal liability. Further, while in most
countries only 20 – 25% of employees use vouchers, in Hungary nearly 80% do, representing a
different level of risk and exposure posed by the market.600 There is significant variation as to
how different jurisdictions regulate the issuance of fringe benefit vouchers and many restrict or
otherwise regulate the market.601
399. Arbitrariness in international law means that “prejudice, preference or bias is substituted for the
rule of law.” To be arbitrary, a measure must have no legitimate purpose.602 It is necessary to
balance two competing interests – the degree of the measures’ interference with the right of
ownership and the power of the state to adopt its policies. 603 When creating standards,
Respondent sought to balance a number of competing needs. It settled on requiring that every
issuer have an office in every town of more than 35,000 inhabitants, to balance the need to obtain
598
R-II § 118; EC v. Hungary, CJEU Judgment [C-0153]; LG&E v. Argentina Decision on Liability [CLA-0041]
/ [RLA-0038]; James v. United Kingdom [CLA-0199]; Tecmed v. Mexico [CLA-0022] / [RLA-0068].
599
R-II §§ 127, 141; C-II §§ 97, 239, 243 n. 377; Thomas Elimansberger Bilateral Investment Treaties and EU
Law, 46 Common Mkt. Law Rev. 383 (2009), 400 – 401 [RLA-0220]; Press Release, Explanation of EC
Infringement Proceedings for Non-compliance with Community Law, Brussels EC, MEMO/07/343 (5
September 2007) [RLA-0246]; First Guller Statement, § II(A)(4) [RWS-1]; Szatmáry Statement, § II(A)
[RWS-2].
600
R-II § 131; Wanjek, Food at Work (2005) [RLA-0109]; First Navigant Report, Figure 4 [REX-1].
601
R-II § 132; C-II § 92 (bullet 2); Wanjek, Food at Work (2005) [RLA-0109]; Belgian Royal Decree laying
down the approval conditions and the approval procedure for the issuers of food vouchers in electronic format
[RLA-0197]; French Labor Code, Art. R-3262-37 [RLA-0198]; Romanian Law No. 142/1998 of 9 July 1998
on Granting Meal Vouchers [RLA-0202]; Romanian Criteria Regarding the Authorization for the Functioning
of the Units which Issue Food Vouchers, in force as of 17 August 2015 [RLA-0203].
602
R-II § 136; Joseph Charles Lemire v. Ukraine, ICSID Case No. ARB/06/18, Decision on Jurisdiction and
Liability (14 January 2010) [hereinafter “Lemire v. Ukraine Decision on Jurisdiction”], § 263 [CLA-0220];
Sempra Energy International v. Argentine Republic, ICSID Case No. ARB/02/16, Award (28 September 2007)
[hereinafter “Sempra v. Argentina”], § 318 [RLA-0175].
603
R-I § 187; LG&E v. Argentina Decision on Liability, § 189 [CLA-0041] / [RLA-0038]; Tecmed v. Mexico, §
122 [CLA-0022] / [RLA-0068].

geographic coverage for clients, users, and affiliates with the cost to potential issuers.604 This
standard is not “arbitrary”, as Claimants suggest.605
400. The SZÉP Card Issuer criteria do not require that an issuer operate as a bank. The law requires
that the issuer partner with a bank to ensure that a stable, regulated company can ensure the
security of funds. This does not mean, however, that the issuers are subject to the same stringent
requirements as is a bank. Even if issuers and banks were to be subject to the same requirements,
however, this would not mean that a breach of the BIT had occurred, per Paushok.606
401. Claimants’ allegations with regard to the alleged disproportionality of the Erzsébet voucher
likewise fail. The true value of the Erzsébet program is that is a “self-sufficient, viable project,
which can function without state budget resources as an effective social tool in years of economic
downturn.” Claimants’ argument that social programs should simply be funded by the State
exposes their ignorance of the state of the Hungarian economy as of the 2011 Reform. Claimants
are also unaided by referencing considerations about a possible solidarity tax, which could not
generate as much funds as could be generated through the Erzsébet voucher.607 The Erzsébet
Program was carefully tailored to achieve its goals of ensuring that food is available to the most
disadvantaged and marginalized, and that the revenues so generated were put to charitable
purposes. The issuance of this voucher by the State-owned MNUA assured that these goals would
be prioritized. They were issued for a modest amount (HUF 5,000, approximately EUR 16),
above which they no longer attracted a better tax rate than other vouchers, including the hot and
cold meal vouchers sold by CD Hungary. The Erzsébet voucher created no competition regarding
604
R-II §§ 136 – 137; Letter from Mr. Endre Horváth (Deputy Minister of State, responsible for economic
development) to Mr. László Balogh (Vice-President, the PSZAF) (15 February 2011) [C-0148]; Enron
Corporation and Ponderosa Assets, L.P. v. Argentine Republic, ICSID Case No. ARB/01/3, Award (22 May
2007) [hereinafter “Enron v. Argentina”], § 281 [RLA-0030]; Cargill v. Mexico [RLA-0150]; Dér Statement,
§ 44 [CWS-1]; Hungary Central Statistical Office, Gazetteer of Hungary (1 January 2012) [RLA-0243].
605
R-II § 136; C-II § 92.
606
R-II § 138; Act XCVI of 1993 on Voluntary Mutual Insurance Funds, 6 December 1993, § 2(2)d [C-0075];
Email from Ms. Anne Boddaert (Le Chèque Déjeuner) to Mr. Yvon Legrand (Le Chèque Déjeuner) (10 July
2012) [R-0057]; CJSC v. Mongolia [RLA-0176]; Act CCXXXVII of 2013 on Credit Institutions and Financial
Enterprises [RLA-0186]; Act CXII of 1996 on Credit Institutions and Financial Enterprises [RLA-0188].
607
R-II §§ 139 – 140; EC v. Hungary, CJEU Judgment [C-0153]; Email from Mr. Pierre Gagnoud (Edenred) to
Mr. Bálint Bessenyey (Sodexo) and Ms. Márta Nagy (16 April 2012) [C-0154]; ELFC, ELFAC Prize 2014 [R-
0030]; Cargill v. Mexico [RLA-0150]; Second Witness Statement of Zoltán Guller (20 July 2016) § 2 [RWS-
3].

Claimants’ cold meal vouchers. For the first quarter of 2012, 20% of Claimants’ customers used
both Erzsébet and CD Hungary products.608
402. Claimants’ argument concerning the lack of a transition period for the Erzsébet program does not
result in the 2011 Reform being “obviously disproportionate.”609 Any start-up issues resulting
from a premature beginning to that program would arguably help rather than harm CD Hungary. 610
Typically, all market participants had one month to adapt their business model, so as to capitalize
on the year’s new tax policy. Here, the Erzsébet voucher was announced in September 2011,
giving participants a far longer period than is typically afforded. AETR even had sufficient notice
to launch a media campaign criticizing the reforms.611
(iii) Discrimination
403. There is some support for the position that “discrimination” in the international context,
particularly with regard to tax policies, requires differential treatment on the basis of nationality.
It is accepted that treating different categories of subjects differently is not unequal treatment. 612
Claimants concede that nationality is not the issue. The 2011 Reform was implemented by the
legislature and applicable to any vouchers issued in Hungary, regardless of the nationality of the
voucher issuer or the employer or customer who purchased them. The tax law concerned the
economy as a whole.613
608
R-II § 142; R-I § 188; C-II § 98; Proposal for the Government on the reform of the system of fringe benefits
(September 2011) [R-0015]; Presentation, Hungarian Branch Strategic Meeting, Le Chèque Déjeuner (27
March 2012) [R-0056] / [NAV-0066].
609
R-II §§ 143, 145; C-II § 99; Letter from Mr. Iván Vetési (President, Central Office for Administrative and
Electronic Public Services) to Dr. András Levente Gál (Minister of State, the KIM) (27 September 2011) [C-
0155]; LG&E v. Argentina Decision on Liability [CLA-0041] / [RLA-0038]; Invesmart v. Czech Republic, §
501 [RLA-0161].
610
R-II § 143; C-II § 99; Letter from Mr. Iván Vetési (President, Central Office for Administrative and Electronic
Public Services) to Dr. András Levente Gál (Minister of State, the KIM) (27 September 2011) [C-0155].
611
R-II § 144; C-II § 124; C-I § 169; AETR meeting minutes (6 October 2011) [C-0097]; AETR press release (4
October 2011) [C-0099]; AETR press release, “The SZEP Card, is it going to be the first in the class or will it
suffer failure in its first year?” (November 2011) [C-0100].
612
R-II §§ 146 – 147; Marvin Feldman v. Mexico, § 170 [CLA-0013] / [RLA-0041]; Metalpar S.A. and Buen
Aire S.A. v. The Argentine Republic, ICSID Case No. ARB/03/5, Award on the Merits (6 June 2008)
[hereinafter “Metalpar v. Argentina”], § 162 [RLA-0044]; CMS Gas v. Argentina Award, § 293 [RLA-0152];
Sempra v. Argentina, § 319 [RLA-0175]; A.R. Albrecht, The Taxation of Aliens Under International Law, 29
Brit. Y.B. Int’l Law 145 (1952) [RLA-0206].
613
R-II § 149; C-II § 246; C-I § 198.

404. The SZÉP Card Issuer criteria were crafted to ensure that all issuers had adequate size, nation-
wide penetration, and sufficient experience in electronic payment systems to effectively
implement the new system. Nothing prevents a non-Hungarian issuer from becoming a Card
Issuer, and this was not the intent. The three Card Issuers were foreign owned initially, and two
still are.614 That Claimants describe them as “Hungary-based” is misleading and confusing – the
same term could be applied to CD Hungary.615
405. Claimants were not “in like circumstances to the Beneficiaries.” Unlike Claimants, the enterprises
that ultimately issued SZÉP Cards met the SZÉP Card criteria. Hungary did not create the criteria
so that only these three issuers could meet the requirement – this was not a results-oriented process
and any market operator meeting the conditions would be allowed to issue the Cards.616 The
SZÉP Card proposal of 28 March 2011 does not show that three Hungarian banks were
preselected. Rather, it shows that Respondent made efforts to propose criteria that were
reasonable and not so restrictive that no one could qualify.617 The Erzsébet program excludes all
issuers because it is a social program and not a market.618 The taxation structure contains no
elements that discriminate between non-Hungarian and Hungarian voucher issuers. Different tax
rates applied to different vouchers related to specific government objectives to achieve certain
social goals and to stimulate participation.619 Claimants’ allegations of bad faith, including that
the measures were taken to drive the French issuers out of the market, are without merit and
without factual support.620
(iv) Due Process
406. Under customary international law, it is often required that the measure be adopted in accordance
with due process.621 The international law due process analysis requires an investor to have its
614
R-I § 198; Letter from Mr. Mihály Varga (Minister of the National Economy) to Mr. Jacques Landriot (CEO,
Le Chèque Déjeuner CCR, Legal representative of the President, CD Internationale) (26 July 2013) [R-0025].
615
R-II § 149.
616
Id., at § 150; C-II §§ 246, 248; Letter from Mr. Mihály Varga (Minister of the National Economy) to Mr.
Jacques Landriot (CEO, Le Chèque Déjeuner CCR, Legal representative of the President, CD Internationale)
(26 July 2013) [R-0025].
617
Tr. Day 4 at 60:22 – 25 (R. Closing); SZÉP Card Proposal [R-0008].
618
R-I § 199; Szatmáry Statement, § 48 [RWS-2].
619
R-I § 201.
620
R-II § 152.
621
R-I § 178.

case reviewed before an independent and impartial body.622 The judiciary had no role in the
present case. Claimants never approached the judiciary, despite being entitled to do so.623
407. The 2011 Reform was implemented in accordance with due process because it was proposed,
reviewed, and enacted following the well-established Hungarian legislative process by a
democratically elected government. 624 The 2011 Reform was the subject of extensive
consultation with various Hungarian ministries. 625 This case is distinct from AIG Capital
Partners.626 It is not shocking that Claimants were not extensively consulted on the reforms, most
of which had no possible bearing on their business.627
(v) Duty to Compensate
408. States are entitled to engage in bona fide regulation, and Claimants have failed to distinguish
between (1) valid non-compensable regulation and (2) indirect expropriation. While international
law recognizes a State’s duty to compensate for a lawful expropriation, it does not recognize a
similar obligation to compensate for the effects of a valid exercise of regulatory powers. 628
Dozens of cases, including Burlington v. Ecuador, confirm that adverse effect will not suffice to
ground liability, where the measures are within the host State’s police powers and the host State
has not acted arbitrarily or discriminatorily.629
409. The Claimants are not helped by the reasoning in Santa Elena v. Costa Rica, which concerned
only the amount of compensation due and not whether an expropriation had occurred. In
suggesting that Santa Elena helps establish a rule that general measures will result in liability and
622
R-II § 153; ADC v. Hungary, § 432 [CLA-0030] / [RLA-0004].
623
R-I §§ 194 – 195; R-II § 154; Generation Ukraine v. Ukraine, § 20.30 [CLA-0038] / [RLA-0032]; Act CLI of
2011 on the Constitutional Court [RLA-0187]; Act XXXII of 1989 on the Constitutional Court [RLA-0195].
624
R-I § 191; Christoph H. Schreuer, Fair and Equitable Treatment in Arbitral Practice, 6 J. World Inv. & Trade
357 (June 2005) [RLA-0104].
625
R-I § 193.
626
Id., at § 192; Generation Ukraine v. Ukraine, § 20.30 [CLA-0038] / [RLA-0032].
627
R-II § 133; C-II §§ 36, 58, § III (3.3); Act CXXXI of 2010 on Participation of the Public in the Preparation of
Legislation [RLA-0191].
628
R-II § 107.
629
Id., at §§ 107, 115 – 116; Draft Convention on the protection of foreign property, Text with Notes and
Comments, OECD (16 October 1967) [CLA-0212]; Burlington v. Ecuador Decision on Liability, § 471 [CLA-
0008] / [RLA-0017]; Ian Brownlie, Principles of Public International Law 509 (6th ed. 2003) [RLA-0211];
Louis B. Sohn and Richard Baxter, Draft Convention on the International Responsibility of States for Injuries
to the Economic Interests of Aliens, in Responsibility of States for Injuries to the Economic Interests of Aliens,
55 Am. J. Int’l Law 545 (1961) [RLA-0234].

an obligation to compensate, Claimants wrongly conflate a lawful expropriation taken for a public
purpose and a legitimate exercise of sovereign regulatory power. 630 Claimants’ reliance on
Tecmed, which involved the closure of a landfill in contravention to specific undertakings,
similarly falls flat.631
410. At the outset, the Tribunal notes that the second paragraph of Art. 5(2) of the BIT provides
expressly that “any dispossession measures taken shall give rise to the payment of prompt and
adequate compensation[.]” The last sentence of Art. 5(3) requires compensation even for
dispossessions that result from a State of national emergency, which has not been claimed to exist
by Respondent in the present case and indeed did not exist at the time of the 2011 Reform.
411. It is undisputed that no compensation was offered or paid by Respondent after the 2011 Reform.
For that reason alone, it is clear that Respondent breached Art. 5(2) of the BIT.
412. Nevertheless, in view of the respective discussions of the Parties, the Tribunal will consider the
other criteria that may be relevant for the lawfulness of the dispossessions.
413. It is recalled that Art. 5(2) expressly provides that a dispossession may be permitted “for reasons
of public necessity[.]” The Tribunal notes that this wording seems to provide a higher threshold
than that found in similar BIT provisions requiring that the dispossessing measure must be for
“public purpose.”
414. It is undisputed that the fringe benefit legislation in general was for the public purpose of ensuring
a better nutrition and food supply for employees in Hungary. However, as already elaborated
above, Respondent’s purpose of the 2011 Reform was to exclude the Non-Hungarian issuers from
the Hungarian voucher market. Respondent has admitted that the 2011 Reform was intended to
keep the profit previously “realized by foreign-owned companies” within Hungary.632 The public
630
R-II § 112; C-II § 227; LG&E v. Argentina Decision on Liability, §§ 194 – 195 [CLA-0041] / [RLA-0038];
Desarrollo v. Costa Rica, §§ 3, 17 – 18 [CLA-0215].
631
R-II § 113; C-II § 228; Tecmed v. Mexico, §§ 115, 119, 145 – 149 [CLA-0022] / [RLA-0068]; Caroline
Henckels, Indirect Expropriation and the Right to Regulate: Revisiting Proportionality Analysis and the
Standard of Review in Investor-State Arbitration, 15 J. Int’l Econ. Law 224 (2012) [RLA-0224].
632
C-II § 253; Respondent press release, “The Government Launches Social Holidays Programme” (12 January
2012) [C-0083]; Dr. Bence Rétvári (State Secretary of the KIM), Speech at the Parliament No 152/90 (12
December 2011) [C-0119]; Mr. Miklós Soltész (Ministry of Natural Resources), Speech at the Parliament No

policy goal of keeping profits within the country is not a legitimate public purpose under Art. 5(2)
of the BIT.633
415. Respondent has not shown that the measures in question were justified on the grounds that they
were a “legitimate exercise of Hungary’s general regulatory powers.” The Tribunal has found
above that Respondent targeted Claimants’ investment. Measures deliberately targeting an
investor or three foreign investors cannot be a legitimate exercise of a state’s police powers.634
416. Taxation measures can also be part of the regulatory powers of the State. However, the Tribunal
does not have to decide whether in the present case the taxation measures, which were part of the
2011 Reform, were by themselves confiscatory. As elaborated above, their effect together with
the other measures of the 2011 Reform as a package taken by Respondent dispossessed Claimants
of the economic value of their investment.
417. Article 5(2) also expressly provides that the dispossession measures must not be “discriminatory.”
While, in view of the lack of compensation in the present case, this criteria is not needed to
establish Respondent’s breach of Art. 5(2). The Tribunal notes that the above conclusion that the
2011 Reform was intended to and in fact did exclude CD Hungary and the two other foreign
investors from the market, also renders the 2011 Reform discriminatory. This was also confirmed
by the decision of the CJEU,635 though the criteria of European law are obviously different.636
418. In this context, the Tribunal had raised its Question (b)(a): The Relevance, if at all, of EU law to
the Parties’ respective positions on the application and interpretation of […] Article 5 of the
France-Hungary BIT. It is noted that. the Parties agree that EU law has no relevance to the
Parties’ respective positions on the application and interpretation of Art. 5 of the BIT. 637 The
Tribunal agrees. Although Art. 9(3) of the BIT requires the Tribunal to rule in accordance with
international law, only breaches of the BIT and not of EU law will give rise to liability in these
152/161 (12 December 2011) [C-0120]; Mr. Miklós Soltész (Ministry of Natural Resources), Speech at the
Parliament No 152/165 (12 December 2011) [C-0121].
633
C-I §§ 292 – 294; ADC v. Hungary, § 423 [CLA-0030] / [RLA-0004].
634
This conclusion is in conformity with the respective reasoning in the Edenred Award, 94, as well as Tecmed v.
Mexico [CLA-0022] / [RLA-0068] and ADC v. Hungary §§ 429 et seq. [CLA-0030] / [RLA-0004].
635
EC v. Hungary, CJEU Judgment, at 32 [C-0153].
636
In this respect, the Tribunal agrees with the same conclusion in the Edenred Award, §§ 353 to 355, where more
details are provided.
637
CPHB-I § 294; Tr. Day 4 at 86:9-11 (R. Closing).

proceedings. Article 5 of the BIT has no equivalent in the TEU or the TFEU or in secondary EU
law such as EU directives or regulations.
419. In view of the above considerations, the Tribunal concludes that Respondent’s dispossession of
Claimants’ investment was not lawful and that, therefore, Respondent breached Art. 5(2) of the
BIT.
B. FAIR AND EQUITABLE TREATMENT (ART. 3 OF THE BIT)
420. Article 3 of the BIT provides that:
Each Contracting Party shall undertake to accord, in its territory and maritime
zones, to investments made by investors of the other Contracting Party, just and
equitable treatment, excluding any unjustified or discriminatory measure which
might impede their management, maintenance, use, enjoyment or
liquidation.638
1. The Legal Standard
421. Article 3 of the BIT is independent of the customary international law minimum standard of
treatment. Had the parties wished to codify the minimum standard of treatment, they could have
done so in explicit terms.639
422. In interpreting Art. 3 of the BIT, it is necessary to consider (1) the BIT’s object and purpose and
(2) the meaning of the terms “fair” and “equitable.” The terms “fair” and “equitable” have been
found to mean “just”, “even-handed”, “unbiased”, and “legitimate.” Article 3 of the BIT
specifically excludes “unjustified or discriminatory” measures, and such a prohibition is widely
638
France-Hungary BIT, Art. 3 [CLA-0001] / [RLA-0079].
639
RfA §§ 88 – 90; C-I 314 – 315; § Vivendi v. Argentina, § 7.5.4 [CLA-0021] / [RLA-0021]; Tecmed v. Mexico,
§§ 155 – 156 [CLA-0022] / [RLA-0068]; Andrew Newcombe and Lluis Paradell, Law and Practice of
Investment Treaties: Standards of Treatment, 1st Edition, Kluwer Law International, 2009, 264 [CLA-0047];
Rudolf Dolzer and Christoph Schreuer, Principles of International Investment Law, 2nd Edition, Oxford
University Press, 2012, 137 [CLA-0048]; Saluka v. Czech Republic, §§ 294, 309 [CLA-0049] / [RLA-0059];
MTD Equity Sdn. Bhd. And MTD Chile S.A. v. Republic of Chile, ICSID Case No. ARB/01/7, Award (25 May
2004) [hereinafter “MTD v. Chile”], §§ 110 – 112 [CLA-0050]; Rudolf Dolzer and Christoph Schreuer,
Principles of International Investment Law, 2nd Edition, Oxford University Press, 2012, 134 [CLA-0051];
RosInvest Co UK Ltd. v. Russia, CCS No. V/079/2005, Decision on Jurisdiction (1 October 2007) §§ 124-144
[CLA-0128]; Emilio Agustín Maffezini v. Spain, ICSID Case No. ARB/97/7, Decision on Jurisdiction (25
January 2000) §§ 38 et seq. [CLA-0126].

accepted as being both intrinsic to and more encompassing than the FET standard.640 When
interpreting “fair and equitable” in light of the parties’ intentions (as reflected in the Preamble to
the BIT), other tribunals have found that similar language suggests that the FET standard should
be interpreted and applied as a broad and flexible standard of protection. At its most basic level,
the FET standard allows tribunals to assess the substantive fairness of the state’s treatment of the
investor.641 Article 3 of the BIT prohibits any unreasonable or discriminatory measures which
impede the investors’ enjoyment of their investment.642
423. Legitimate expectations are a substantive protection included in the FET standard, the violation
of which is a breach of the FET standard. Legitimate expectations are evaluated at the time the
investment is made.643 These expectations last for the duration of the investment. Claimants
could have expected bona fide regulatory changes in the meal voucher system (as happened in
2009 and 2010), but could not have expected that an unreasonable and discriminatory package of
measures would be adopted by Respondent. Claimants had a permanent right to a legislative
640
C-I §§ 316 – 317; CMS Gas v. Argentina Award, § 290 [CLA-0036]; Fair and Equitable Treatment, UNCTAD
Series on Issues in International Investment Agreements II, United Nations Conference on Trade and
Development (2012) 81 [CLA-0046]; Saluka v. Czech Republic, § 297 [CLA-0049] / [RLA-0059]; MTD v.
Chile, §§ 113, 196 [CLA-0050]; United Nations, Vienna Convention on the Law of Treaties, 23 May 1969,
United Nations Treaty Series, vol. 1155, 331, Art. 31 [CLA-0052]; National Grid v. Argentina, § 168 [CLA-
0053]; Andrew Newcombe and Lluis Paradell, Law and Practice of Investment Treaties: Standards of
Treatment, 1st Edition, Kluwer Law International, 2009, 303 [CLA-0054]; Andrew Newcombe and Lluis
Paradell, Law and Practice of Investment Treaties: Standards of Treatment, 1st Edition, Kluwer Law
International, 2009, 289, 301, 303 and 304 [CLA-0055].
641
C-I §§ 318 – 324; Vivendi v. Argentina, § 7.4.4 [CLA-0021] / [RLA-0021]; Saluka v. Czech Republic, §§ 299
– 301 [CLA-0049] / [RLA-0059]; MTD v. Chile, § 113 [CLA-0050]; National Grid v. Argentina, § 170 [CLA-
0053]; Andrew Newcombe and Lluis Paradell, Law and Practice of Investment Treaties: Standards of
Treatment, 1st Edition, Kluwer Law International, 2009, 266 [CLA-0056]; Andrew Newcombe and Lluis
International, 2009, 268 [ CLA-0057]; Rudolf Dolzer and Christoph Schreuer, Principles of International
Investment Law, 2nd Edition, Oxford University Press, 2012, 132 [CLA-0058]; Andrew Newcombe and Lluis
International, 2009, 278 [CLA-0059]; Rudolf Dolzer, “Fair and Equitable Treatment: Today’s Contour”, 12
Santa Clara J. INT’L K.7 (2014) 12 [CLA-0060]; Ioan Micula, Viorel Micula, S.C. European Food S.A, S.C.
Starmill S.R.L. and S.C. Multipack S.R.L. v. Romania, ICSID Case No. ARB/05/20, Award (11 December 2013)
[hereinafter “Ioan Micula v. Romania”], § 522 [CLA-0061] / [RLA-0036].
642
C-I § 325; C-II §§ 271, 293 – 297; France-Hungary BIT, Art. 3 [CLA-0001] / [RLA-0079]; CMS Gas v.
Argentina Award, § 290 [CLA-0036]; Fair and Equitable Treatment, UNCTAD Series on Issues in
International Investment Agreements II, United Nations Conference on Trade and Development (2012) 20
[CLA-0046]; Lemire v. Ukraine Decision on Jurisdiction, § 259 [CLA-0220].
643
CPHB-I § 159, 319; Enron v. Argentina, § 262 [RLA-0030]; Rudolf Dolzer, “Fair and Equitable Treatment:
Today’s Contours”, 12 Santa Clara J. INT’L K.7 (2014) 17 [CLA-0060]; Lemire v. Ukraine Decision on
Jurisdiction, § 264 [CLA-0220]; OAO Tatneft v. Ukraine, PCA UNCITRAL, Award (29 July 2014)
[hereinafter “OAO v. Ukraine”] [CLA-0250].

framework that would be fair and transparent. 644 The 2011 Reform frustrated Claimants’
legitimate expectations and therefore breached Art. 3 of the BIT.645
424. Article 3 of the BIT obligates signatories to accord investors fairness and equity of treatment, and
these terms are often interpreted to mean “‘just’, ‘even-handed’, ‘unbiased’, and ‘legitimate.’”
Tribunals have interpreted the FET standard as protecting an investor’s legitimate expectations,
as well as prohibiting measures adopted in bad faith. It does not prohibit a signatory from
adopting measures that might impede the operation of an investor. It only prohibits those
measures that are “unjustified or discriminatory.”646
425. After the Hearing, Respondent explained that Claimants knowingly invested in a system where
legislative changes effecting the fundamentals of their investment were likely. Claimants are,
thus, unable to use the obligation to afford fair and equitable treatment to obtain a protection they
never sought and never received.647
2. Whether the 2011 Reform was Reasonable and/or Non-Discriminatory
426. Claimants had a legitimate expectation that changes to the legal framework of the meal vouchers
market would be reasonable and non-discriminatory, and in compliance with Hungary’s
international obligations under the BIT.648 Respondent was not free to take any action – it entered
into the BIT to open the country to foreign investment and undertook to protect Claimants from
“manifestly inconsistent, non-transparent, unreasonable (i.e. unrelated to some rational policy),
644
CPHB-I § 160.
645
Id., at § 319.
646
R-I §§ 212 – 214; Mondev International LTD v. United States of America, ICSID Case No. ARB(AF)/99/2,
Award (11 October 2002) [RLA-0047]; Plama Consortium, Ltd. v. Republic of Bulgaria, ICSID Case No.
ARB/03/24, Award (27 August 2008) [hereinafter “Plama v. Bulgaria”] [CLA-0063] / [RLA-0053]; Siemens
v. Argentina, § 290 [CLA-0028] / [RLA-0063]; France-Hungary BIT, Art. 3 [CLA-0001] / [RLA-0079]..
647
RPHB-I § 17.
648
CPHB-I § 154 – 155, 157 – 158; Tr. Day 4 at 37:14 – 38:18 (C. Closing); Tr. Day 1 at 74:11-16; Andrew
Newcombe and Lluís Paradell, Law and Practice of Investment Treaties: Standards of Treatment § 6.26
(Kluwer Law International BV 2009) 279 [RLA-0101]; Saluka v. Czech Republic, §§ 301, 303 [CLA-0049] /
[RLA-0059]; Rudolf Dolzer, “Fair and Equitable Treatment: Today’s Contours”, 12 Santa Clara J. INT’L K.7
(2014) 23 [CLA-0060].

or discriminatory (i.e. based on unjustifiable distinctions)” measures.649 Respondent breached
Claimants’ legitimate expectation to have a consistent and predictable legal framework applicable
to their investment in the Hungarian meal voucher market. Claimants have never submitted that
they expected the legal framework would remain unchanged or immutable or that Hungary gave
a specific commitment in that regard. Such a specific commitment is not necessary for an
expectation to be legitimate.
427. The Saluka tribunal held that reasonableness required “a showing that the State’s conduct bears
a reasonable relationship to some rational policy”, while the AES v. Hungary tribunal held that
a reasonable measure involved (1) “[a] rational policy [] taken by a state following a logical
(good sense) explanation and with the aim of addressing a public interest matter” and (2) “an
appropriate correlation between the state’s public policy objective and the measure adopted to
achieve it.”650 Respondent agrees that this is the test for reasonableness, and this reasoning has
been followed by other tribunals.651
428. Respondent misunderstands that, in order to be reasonable, there must be an “appropriate

652
correlation between the state’s public policy objective and the measure adopted.”
Respondent’s premise that the 2011 Reform was reasonable because it was “directly correlative
to Hungary’s public policy objectives” is fundamentally wrong. As explained by the tribunal in
AES v. Hungary, correlation alone is insufficient – the measure must also be appropriate
649
CPHB-I § 156; Memorandum from the Directorate for European Affairs regarding the French-Hungarian
Agreement on the Reciprocal Promotion and Protection of Investments, dated 19 December 1986 1 [RLA-
0132]; Saluka v. Czech Republic, § 309 [CLA-0049] / [RLA-0059].
650
C-I §§ 326 – 328; C-II § 272; R-I § 216; Saluka v. Czech Republic, § 460 [CLA-0049] / [RLA-0059]; AES v.
Hungary, §§ 10.3.8, 10.3.9 [CLA-0062].
651
C-I § 329; C-II § 272; CPHB-I § 136; R-I § 216; Saluka v. Czech Republic, § 460 [CLA-0049] / [RLA-0059];
National Grid v. Argentina, § 197 [CLA-0053]; AES v. Hungary, §§ 10.3.8, 10.3.9 [CLA-0062]; Plama v.
Bulgaria, § 184 [CLA-0063] / [RLA-0053].
652
C-II § 273.

(proportionate). 653 Proportionality is central to the FET standard. 654 The 2011 Reform was
grossly disproportionate.655
429. Respondent has failed to demonstrate that the measure was reasonable because it was (1) founded
upon a logical explanation and aimed at addressing a matter of public interest or (2) appropriately
(or proportionately) correlative to the State’s public policy objective. Respondent has failed to
prove that the pre-existing voucher system “was an inefficient and unregulated system that was
not achieving the policy objectives for which it was created”, that the system suffered from
structural problems, misuse, and economic inefficiencies, and was not achieving and was
incapable of achieving the State’s alleged public policy objectives. As explained above in
reference to “expropriation”, the 2011 Reform was not appropriately or proportionately
correlative to Respondent’s alleged public policy objective. Although the success of the 2011
Reform is irrelevant as a matter of law in the reasonableness analysis, audits have shown that the
SZÉP Card Issuers have thus far not, contrary to Respondent’s assertion, been compliant with the
regulations.656
430. The unreasonable measures adopted by Respondent impaired Claimants’ “management,

maintenance, use, enjoyment or liquidation” of their investment, breaching both the express
prohibition of “unjustified or discriminatory measures” and the general FET obligation under Art.
3 of the BIT.657
653
Id., at §§ 274 – 276, 278 – 279; El Paso v. Argentina, § 373 [CLA-0025] / [RLA-0026]; MTD v. Chile, § 109
[CLA-0050]; AES v. Hungary, §§ 10.3.9, 10.3.36 [CLA-0062]; EDF (Services) Limited v. Romania, ICSID
Case No. ARB/05/13, Award (8 October 2009) [hereinafter “EDF v. Romania”], § 293 [CLA-0221];
Occidental v. Ecuador ICSID Award, §§ 404, 452 [RLA-0049].
654
C-II § 276; CPHB-I § 138; El Paso v. Argentina, § 373 [CLA-0025] / [RLA-0026]; MTD v. Chile, § 109
[CLA-0050]; Ioan Micula v. Romania, § 525 [CLA-0061] / [RLA-0036]; AES v. Hungary, §§ 10.3.9, 10.3.36
[CLA-0062]; EDF v. Romania, § 293 [CLA-0221]; Occidental v. Ecuador ICSID Award, §§ 404, 452 [RLA-
0049].
655
C-II § 279.
656
Id., at §§ 280 – 284; R-I §§ 53, 59. 220 – 224; “[A]ctivity”, Oxford English Dictionary, Oxford University
Press, 2015 (accessed 22 October 2015) [C-0140]; Letter from Mr. Endre Horváth (Deputy Minister of State,
responsible for economic development) to Mr. László Balogh (the PSZAF) (15 February 2011) [C-0148]; EC
v. Hungary, CJEU Judgment [C-0153]; Letter from Mr. Iván Vetési (President, Central Office for
Administrative and Electronic Public Services) to Dr. András Levente Gál (Minister of State, the KIM) (27
September 2011) [C-0155]; Ioan Micula v. Romania, § 525 [CLA-0061] / [RLA-0036]; AES v. Hungary, §§
10.3.8, 10.3.9, 10.3.36 [CLA-0062]; SZÉP Card Proposal [R-0008]; National Ministry of Economics, Proposal
for the Government in Connection with the Amendment of Certain Tax Acts and Other Related Acts (11
October 2011) [R-0016]; First Guller Statement, § 16 [RWS-1].
657
C-II § 285; Lemire v. Ukraine Decision on Jurisdiction, § 259 [CLA-0220].

431. The discriminatory nature of the 2011 Reform that Claimants allege in their expropriation analysis
is the same conduct as alleged as in violation of the FET, and this is comparable to the unfair
treatment suffered in Saluka. 658 Different treatment of similarly situated investments is
discriminatory unless the state can establish a reasonable basis for the differential treatment.659
Newcombe and Paradell identify “unjustifiable or arbitrary regulatory distinctions made between
things that are alike or treating unlike things in the same way” and “conduct targeted at specific
persons or things motivated by bad faith or with an intent to injure or harass” as discrimination
that violates the FET.660 The Parties agree that “measures are discriminatory if similarly situated
investments are subject to differential treatment without a reasonable basis for the differential
treatment.”661 The 2011 Reform was discriminatory because, even though CD Hungary was in
the same economic sector, and was entitled to the same treatment, as the Beneficiaries, the 2011
Reform imposed differential treatment on CD Hungary and the other Non-Hungarian issuers by
(1) establishing criteria for the issuance of the SZÉP Cards that could only be met by three
Hungary-based banking groups, (2) granting MNUA a monopoly over the issue of Erzsébet
vouchers, and (3) introducing a discriminatory tax framework that subjected CD Hungary’s meal
vouchers to higher tax rates than those imposed on the SZÉP Card and Erzsébet voucher. There
was no reasonable justification for the differential treatment.662
432. The impact of the measure, rather than the motivation behind it, is determinative of whether a
measure is discriminatory.663 There is also no need to demonstrate discrimination on the basis of
nationality – in the absence of justification of the differential treatment of a foreign investor, any
658
C-I §§ 332 – 333, C-II § 287; Saluka v. Czech Republic, §§ 313, 329, 347 [CLA-0049] / [RLA-0059].
659
C-I § 330; C-II § 290; CMS Gas v. Argentina Award, § 293 [CLA-0036]; LG&E v. Argentina Decision on
Liability, § 148 [CLA-0041] / [RLA-0038]; Saluka v. Czech Republic, § 460 [CLA-0049] / [RLA-0059];
Andrew Newcombe and Lluis Paradell, Law and Practice of Investment Treaties: Standards of Treatment, 1st
Edition, Kluwer Law International, 2009, 289, 304 [CLA-0064]; Nykomb v. Latvia, 34 [CLA-0065] / [RLA-
0048].
660
C-I § 331; Andrew Newcombe and Lluis Paradell, Law and Practice of Investment Treaties: Standards of
Treatment, 1st Edition, Kluwer Law International, 2009, 289, 304 [CLA-0064].
661
C-II § 286; R-I § 225; CMS Gas v. Argentina Award, § 293 [CLA-0036]; LG&E v. Argentina Decision on
Liability, § 148 [CLA-0041] / [RLA-0038]; Andrew Newcombe and Lluis Paradell, Law and Practice of
Investment Treaties: Standards of Treatment, 1st Edition, Kluwer Law International, 2009, 289, 304 [CLA-
0064]; Nykomb v. Latvia, 34 [CLA-0065] / [RLA-0048].
662
RfA § 92; C-II § 291; R-I §§ 225, 229; Saluka v. Czech Republic [CLA-0049] / [RLA-0059]; Nykomb v.
Latvia, 34 [CLA-0065] / [RLA-0048]; GAMI Investments, Inc. v. The Government of the United Mexican
States, NAFTA Chapter 11 and UNCITRAL, Final Award (15 November 2004) [hereinafter “GAMI v.
Mexico”], §§ 285 – 290 [RLA-0031].
663
C-II §§ 288 – 289; Siemens v. Argentina, § 460 [CLA-0028] / [RLA-0063].

differential treatment is discriminatory.664 Respondent’s treatment of Non-Hungarian Issuers was
so disadvantageous that it enabled the SZÉP Card Issuers and MNUA – within one year – to take
over the voucher market.665 The only goal of the new tax policy provided in the 2011 Reform
was to exclude the Non-Hungarian Issuers from the voucher market, and no reasonable
justification can be provided for this differential treatment. The 2011 Reform thus fails to fulfill
the most basic requirements of reasonableness and non-discrimination included in the FET
standard as defined by Art. 3 of the BIT.666
433. Respondent’s justifications for the 2011 Reform were both self-serving and after the fact. First,
Respondent failed to demonstrate that there even were problems for the 2011 Reform to resolve.
Even if they did exist, however, the measures used by Respondent were not appropriately tailored
to the alleged public policy pursued, and were adopted without due regard for the investor.667
Second, even assuming that income was being diverted from the intended beneficiaries (which is
denied), Respondent misrepresents how the voucher system works in order to reach that
conclusion: (1) Claimants never received subsidies from Hungary; (2) commissions are not a
diversion of income (as the employers benefitted from the exemption irrespective of the
commissions); and (3) there was no correlation between the amount of the commissions and the
extent of the 2011 Reform. 668 Third, Respondent’s alleged goal of “efficiency, security and
accessibility” does not explain the strict criteria for the issuance of the SZÉP Card and the
introduction of preferential tax treatment.669 Fourth, the alleged goals of health and nutrition
promotion were already fulfilled by the meal voucher system prior to the 2011 Reform. 670 Fifth,
the alleged “welfare” purpose of the Erzsébet voucher does not explain why it needed to be created
as a monopoly, at the expense of Claimants.671
664
C-II § 290; Saluka v. Czech Republic, § 460 [CLA-0049] / [RLA-0059].
665
C-I § 334.
666
Id.; C-II §§ 285, 292; see also CPHB-I §§ 140 – 146; France-Hungary BIT, Art. 3 [CLA-0001] / [RLA-0079];
Lemire v. Ukraine Decision on Jurisdiction, § 259 [CLA-0220].
667
CPHB-I §§ 140 – 141; Proposal from the AETR concerning the universal regulation of the system for allocating
benefits in kind (January 2010) [C-0145]; Ioan Micula v. Romania, § 525 [CLA-0061] / [RLA-0036].
668
CPHB-I § 142; Claimants’ Opening, slide 2; Szatmáry Statement, § 19 [RWS-2]; Tr. Day 2 at 106:1-16
(Szatmáry); Edenred Award at § 266.
669
CPHB-I § 143; Tr. Day 2 at 161:24 – 25.
670
CPHB-I § 144; Tr. Day 3 at 23:6-13 (Guller); compare R-I § 81; Respondent’s Opening, Slide 28.
671
CPHB-I § 145; Email from Mr. Pierre Gagnoud (Edenred) to Mr. Bálint Bessenyey (Sodexo) and Ms. Márta
Nagy (16 April 2012) 2 (“scenario 2”) [C-0154].

434. Claimants bear the burden of proving that proportionality is part of Respondent’s obligation under
the FET standard, as a matter of customary international law. Claimants cannot satisfy this burden
by looking to ad hoc arbitral awards, but rather must point to general and consistent practice of
States that flow out of a sense of legal obligation.672 Claimants’ sole support for the existence of
the proportionality requirement is a passage from EDF v. Romania, which cites cases that refer
to proportionality not as part of the FET standard but as part of the expropriation analysis.673
435. The standard of “reasonableness” requires a showing that the State’s conduct bears a reasonable
relationship to a rational policy. This two-part definition requires that (1) “a rational policy is
taken by a state following a logical (good sense) explanation with the aim of addressing a public
interest matter”, and (2) “an appropriate correlation between the state’s public policy objective
and the measure adopted to achieve it.”674 Respondent’s policy objectives with respect to the
2011 Reform were to (1) achieve the social benefits for which the voucher system was intended
and stimulate the economy, and (2) eliminate the problems and inefficiencies that had otherwise
plagued the use of fringe benefits in the past.675 As the recent award in Bilcon v. Canada made
clear, Respondent is not required to show that the measures were perfect in their design or
implementation.676
436. The 2011 Reform was a rational policy measure adopted by Respondent pursuant to a logical
explanation aimed at addressing specific public interest matters. The voucher system was no
longer serving the purpose for which it was created, it had no regulatory oversight, and it
presented risks for consumers. The State was also forfeiting PIT revenues in the form of tax
benefits that were being redirected away from intended recipients. Thus, the policy underlying
the 2011 Reform was rational: Respondent sought to reform the voucher system (a system aiming
to address public interest concerns including stimulating economic growth, consumer protection,
672
R-II §§ 224 – 225; C-II § 276.
673
R-II § 226; James v. United Kingdom [CLA-0199]; EDF v. Romania, § 293 [CLA-0221]; Azurix v. Argentina,
§ 311 [CLA-0092] / [RLA-0012].
674
R-I §§ 215 – 216; R-II § 229; AES v. Hungary, §§ 10.3.8, 10.3.9 [RLA-0005]; Saluka v. Czech Republic, §
460 [CLA-0049] / [RLA-0059].
675
R-II § 229.
676
Id., at § 228; GAMI v. Mexico, § 114 [RLA-0031]; William Ralph Clayton, William Richard Clayton, Douglas
Clayton, Daniel Clayton and Bilcon of Delaware, Inc. v. Government of Canada, PCA Case No. 2009-04,
Award (17 March 2015) § 437 [RLA-0181].

public health, and public welfare, among others), such that it efficiently and effectively achieves
the governmental objectives while eliminating the problems in the previous system.677
437. There is an appropriate correlation between the public policy objective and the measures
adopted.678 Here, problems with the old system included (1) lack of voucher regulation, (2) the
misuse of vouchers as a cash equivalent, (3) the emergence of a secondary market, and (4) voucher
issuers’ interest in unredeemed vouchers and high commission rates diverting the tax benefit away
from the intended recipients. The new system has addressed each of these issues. SZÉP Card
Issuers must satisfy particular criteria to become Card Issuers and are limited in the amount of
commission that they can charge. Audits confirm that Issuers are complying with the
requirements, meaning that the tax benefits are still being enjoyed by the intended beneficiaries.
The shift to electronic vouchers also precludes their use as a cash-equivalent and their resale in a
secondary market. The Erzsébet voucher has also achieved its social objectives of improving
access to affordable food for Hungarian workers, and hundreds of thousands of marginalized,
impoverished, and otherwise disadvantaged people have benefitted from the revenue generated
through this program.679
438. Measures are discriminatory if similarly situated investments are subject to differential treatment
without a reasonable basis. The 2011 Reform does not discriminate against Claimants in violation
of Art. 3 of the BIT.680 There is no regulatory distinction between foreign and domestic voucher
issuers. There are no nationality requirements for participating in the voucher system and there
is nothing preventing a foreign company from being permitted to issue SZÉP Cards. The first
three companies to issue SZÉP Cards were foreign-owned when they became Issuers. 681
Regarding taxation, there is no discriminatory treatment between like entities and no
discrimination based on nationality. Rather, taxation rates distinguished on the basis of the type
of good or service for which the voucher was redeemable. The tax scheme, like all tax schemes,
was designed to encourage certain spending and consumption habits in support of economic and
social goals. All SZÉP Cards are taxed at the same rate of 35.7%. All other employer
677
R-I §§ 218 – 220; R-II § 229.
678
R-I § 220.
679
Id., at §§ 220 – 224.
680
R-I §§ 225 – 228; R-II §§ 255, 256; C-I §§ 157, 288; C-II § 290 – 291; CMS Gas v. Argentina Award, § 293
[RLA-0020]; LG&E v. Argentina Decision on Liability, § 148 [CLA-0041] / [RLA-0038]; Saluka v. Czech
Republic [CLA-0049] / [RLA-0059].
681
R-I § 228.

contributions that serve a social benefit (school assistance, health insurance, pension funds, local
transit passes) are taxed at the same rate as SZÉP Cards and Erzsébet vouchers. All other vouchers
are taxed at 51.17%, which is preferential treatment as compared with the tax rates applied in the
PIT. If Claimants had chosen to issue any voucher except the Erzsébet voucher, they would have
been taxed at the same rate as the other issuers.682
439. Participation in the same economic sector is a relevant but insufficient consideration to assess
whether something is entitled to the same treatment. 683 Hot and cold meal vouchers have
historically had different tax treatment. The SZÉP Card and the Erzsébet voucher offer
advantages and serve different purposes than CD Hungary’s meal vouchers. Claimants’ claim of
discrimination falters because discrimination requires differential treatment between things in like
circumstances, and CD Hungary’s product was not sufficiently similar to the SZÉP Card or the
Erzsébet voucher. The SZÉP Cards are more secure and more efficient, involve lower
commissions and bear the cost of education of the Hungarian market regarding the products. CD
Hungary has never issued either the SZÉP Card or the Erzsébet voucher and, accordingly, was
never “subject to the same laws and regulations” as either SZÉP Card Issuers or MNUA. Any
differential treatment was objective, rational, and established pursuant to Hungary’s general
regulatory powers.684 These are products with an inherent public value that the Government
wants to encourage and promote via its tax policy. The Government also rationally uses its tax
policy to encourage people to use Erzsébet vouchers, to generate more revenue for social
programs. 685 That CD Hungary’s customers chose the Erzsébet voucher over CD Hungary’s
products does not reflect pressure – it reflects that customers, logically and predictably, place
value on a product that would be used for charitable purposes.686 The Erzsébet voucher excludes
682
Id., at § 229; R-II §§ 246 – 247; compare C-II §§ 249, 291, citing Nykomb v. Latvia, 34 [CLA-0065] / [RLA-
0048] (“subject to the same laws and regulations”).
683
R-II § 244; Cargill v. Mexico, §§ 195, 206 [RLA-0150].
684
R-II §§ 242, 245.
685
Id., at §§ 248 – 250; C-II § 291; Extract from Internal CD Hungary presentation (31 October 2006) [C-0043];
Extract from Internal CD Hungary presentation (22 June 2009) [C-0062]; Internal CD Hungary memorandum,
“Outline of situation – cards on the Hungarian market” (18 July 2007) [C-0134]; First Data, Prepaid Card
Issuing and POS Acquiring Services Indicative Proposal (4 July 2011) [R-0011]; Marvin Feldman v. Mexico,
§ 113 [CLA-0013] / [RLA-0041].
686
R-II § 251; R-I § 202; Second Navigant Report, § 48 [REX-2]; Taiyuan Wang and Pratima Bansal, Social
Responsibility in New Ventures: Profiting from a Long-Term Orientation, 33 Strategic Mgmt. J. 1135
(February 2012) [RLA-0237] / [NAV-0049].

all issuers, and the regime is no different from that prior to the 2011 Reform, where the Holiday
voucher was issued exclusively by MNUA.687
440. The 2011 Reform neither targeted non-Hungarian voucher issues nor was it motivated by bad
faith or intent to injure. While Respondent acknowledges that CD Hungary does not meet the
criteria to be a SZÉP Card Issuer, it is preposterous to deduce that the standards were designed
with this outcome in mind. The 28 March 2011 proposal for the SZÉP Card explains the rationale
behind the standards. All aspects of the criteria are objectively defendable as improving the
functioning of the voucher system and this is confirmed by the contemporaneous internal
governmental documentation – far more so than Claimants’ reliance on a handful of public
statements by politicians.688 The Erzsébet voucher did not create a monopoly over cold meal
vouchers, which CD Hungary was able to continue to issue.689 There was no aim to exclude CD
Hungary from the market.690 Respondent’s refusal to adopt Claimants’ proposal when it was
weighing conflicting interests and priorities in developing the 2011 Reform, does not mean that
Respondent “chose to ignore” alternatives or chose to exclude Claimants.691 The market involved
a variety of taxpayers and participants, including the employers and employees who were the
target of the legislation as both the main end-users and the tax payers. The Government worked
with all stakeholders, including Ms. Nagy, to make the system more efficient and effective in
serving its goals.692
441. Contemporaneous evidence demonstrates the baselessness of the claim that the 2011 Reform was
designed to exclude CD Hungary. The 15 February 2011 letter from Mr. Endre Horváth (Deputy
Ministry) provided comments on the proposed SZÉP Card and asked that the PSZAF “review
these terms and conditions, which may be too tight in their current form and to make a proposal
to ease them to ensure that potentially the 2-3 largest actors should be able to comply with
them.” 693 The Government considered the three largest foreign-owned and three largest
Hungarian banks and created a list such that at least three companies – irrespective of nationality
687
R-II § 255; C-I §§ 157, 288; C-II § 291.
688
R-I §§ 230 – 232; R-II § 253; SZÉP Card Proposal [R-0008]; Szatmáry Statement, §§ 29 – 43 [RWS-2].
689
R-II § 254.
690
Id., at §§ 234, 240; C-II § 232.
691
R-II § 233; C-II § 282.
692
RPHB-I §§ 11 – 16.
693
R-II § 235; Letter from Mr. Endre Horváth (Deputy Minister of State, responsible for economic development)
to Mr. László Balogh (Vice-President, the PSZAF) (15 February 2011) [C-0148].

– could qualify as issuers. The 28 February 2011 letter from Mr. László Balogh focused on
helping more entities to become SZÉP Card Issuers and proposed relaxing the requirements. The
SZÉP Card Proposal noted that the Government was attuned and sought to avoid requirements
that were not properly justified, and this undermines Claimants’ argument that the Government
disregarded the consequences of their policies. 694 The October 2011 proposal merely
acknowledges that “as of 1 October 2012, ready-to-eat meal vouchers would be issued by the
issuer appointed by the governmental decree provided under the authorization of the [PIT].”695
442. Many of Claimants’ arguments repeat those made in reference to their expropriation claim.
Claimants’ claims, however, do not show that there was anything “unreasonable” about requiring
that the Erzsébet voucher only be issued by a state entity, nor do they challenge the
“unreasonableness” of the SZÉP Card Issuer criteria. That the 2011 Reform was unique within
the EU is of no significance and the comparison between Belgium and France (which have meal
voucher rates of 25% and 10.5%, respectively) and Hungary (meal voucher rate of 80%) is inapt.
Given the usage, it is reasonable for Respondent to want greater regulatory oversight in
comparison to countries whose populations are less dependent on meal vouchers.696
3. Whether Respondent Acted in Good Faith
443. The FET standard overlaps considerably with the meaning of good faith.697 As confirmed in
Tecmed, FET is “an expression and part of the bona fide principle recognized in international
law, although bad faith from the State is not required for its violation.”698 Bad faith, however,
violates the FET standard, in particular when a state uses its legislative or executive power to
694
R-II §§ 236 – 238; C-II § 282; Letter from Mr. László Balogh (Vice-President, the PSZAF) to Mr. Endre
Horváth (Deputy Minister of State, responsible for economic development) (28 February 2011) [C-0149];
SZÉP Card Proposal, 11 [R-0008].
695
R-II § 239; National Ministry of Economics, Proposal for the Government in Connection with the Amendment
of Certain Tax Acts and Other Related Acts (11 October 2011) [R-0016].
696
R-II §§ 329 – 332; C-I § 396, CD Hungary’s exceptional Costs, November 2014 § 6.3.3 [AC-45]; Sergey
Ripinsky and Kevin Williams, Damages in International Investment Law, §§ 5.1, 5.4 and 5.52 (2008) [RLA-
0232].
697
C-I §§ 335 – 336; Rudolf Dolzer and Christoph Schreuer, Principles of International Investment Law, 2nd
Edition, Oxford University Press, 2012, 132 [CLA-0058].
698
C-I § 337; Tecmed v. Mexico, § 153 [CLA-0022] / [RLA-0068].

harm or destroy a foreign investment.699 State action that is intended to harm a foreign investment
is not FET.700 As stated in Vivendi (citing Frontier Petroleum Services Ltd. v. Czech Republic),
host States have an obligation not to purposefully inflict damage upon an investment.701 This is
different from a “do no harm” standard, which Claimants do not advocate.702 The present case
is an example of an expulsion of an investment based on local favoritism. Far from doing no
harm, Respondent used its powers of taxation to purge an entire market of foreign investors in
violation of Art. 3 of the BIT.703
444. Respondent’s contention that the documentary evidence shows that excluding or inflicting harm
on foreign companies was not a consideration in the decision-making process is incorrect. Rather,
the documentary evidence indicates that such exclusion was a consideration or factor. This was
obvious from (1) the criteria for the SZÉP Card that were selected so as to allow only three
banking groups to meet the requirements, thereby admitting that the standards were designed to
exclude Claimants, (2) Respondent’s knowledge that the 2011 Reform would displace non-
Hungarian Issuers, and (3) Respondent’s desire that 100% of the profit remain in Hungary. 704
699
C-I §§ 338 – 340; Rudolf Dolzer and Christoph Schreuer, Principles of International Investment Law, 2nd
Edition, Oxford University Press, 2012, 156 [CLA-0066]; Andrew Newcombe and Lluis Paradell, Law and
Practice of Investment Treaties: Standards of Treatment, 1st Edition, Kluwer Law International, 2009, 277
[CLA-0067]; Frontier Petroleum Services Ltd. v. Czech Republic, UNCITRAL, Award (12 November 2010)
[hereinafter “Frontier v. Czech Republic”], § 300 [CLA-0068].
700
C-II §§ 298, 299, 307; Rudolf Dolzer and Christoph Schreuer, Principles of International Investment Law, 2nd
Edition, Oxford University Press, 2012, 156 [CLA-0066]; Andrew Newcombe and Lluis Paradell, Law and
[CLA-0067].
701
C-I § 341; C-II §§ 300 – 303; Vivendi v. Argentina, § 7.5.39 [CLA-0021] / [RLA-0021]; Rudolf Dolzer and
Christoph Schreuer, Principles of International Investment Law, 2nd Edition, Oxford University Press, 2012,
156 [CLA-0066]; Andrew Newcombe and Lluis Paradell, Law and Practice of Investment Treaties: Standards
of Treatment, 1st Edition, Kluwer Law International, 2009, 277 [CLA-0067]; Frontier v. Czech Republic, §
300 [CLA-0068].
702
C-II §§ 303 – 304; Andrew Newcombe and Lluis Paradell, Law and Practice of Investment Treaties: Standards
of Treatment, 1st Edition, Kluwer Law International, 2009, 277 [CLA-0067]; Frontier v. Czech Republic, §
300 [CLA-0068]; Parkerings-Compagniet AS v. Republic of Lithuania, ICSID Case No. ARB/05/8, Award
(11 September 2007) [hereinafter “Parkerings v. Lithuania”], § 332 [RLA-0051].
703
C-I § 342; Dr. Bence Rétvári (State Secretary of the KIM), Speech at the Parliament No 152/90 (12 December
2011) [C-0119]; Mr. Miklós Soltész (Ministry of Natural Resources), Speech at the Parliament No. 152/161
(12 December 2011) [C-0120].
704
(12 December 2011) [C-0120]; Mr. Miklós Soltész (Ministry of Natural Resources), Speech at the Parliament
No. 152/165 (12 December 2011) [C-0121]; Letter from Mr. László Balogh (Vice President, the PSZAF) to
Mr. Endre Horváth (Deputy Minister of State, responsible for economic development) (28 February 2011) [C-

445. Respondent has failed to refer to any “contemporaneous internal government documents” that
would support their arguments. Rather, the contemporaneous internal government documents
reveal that the exclusion of CD Hungary and other market participants was a consideration in the
development and implementation of the 2011 Reform. The relevant public statements are
attributable to Respondent and evidence the motivation and intent to inflict economic harm on
Claimants’ investment.705
446. Although showing that the host state acted in bad faith is not a required element of the FET
standard, proving that measures were taken in bad faith is sufficient to substantiate a claim. 706
“Good faith” is a broad standard that eludes strict definition. Bin Cheng explained that
“performance of a treaty obligation in good faith means carrying out the substance of this mutual
understanding honestly and loyally.”707 The tribunal in Micula reasoned that at “minimum, good
faith would require that any party would not consciously conduct itself in such a way that should
contradict the implications of that party’s earlier behavior.”708 Claimants’ suggestion, as per
Vivendi, that a “do no harm” standard should apply would broaden the FET standard beyond the
language of this BIT and of investment treaty interpretation generally. The tribunal in Vivendi
was referring to the government’s obligation not to disparage and undercut a concession and there
was no indication that this reasoning should be adopted in situations where there is no contractual
relationship between the host state and the investor. BITs do not guarantee the profitability or
0149]; SZÉP Card Proposal, 10 – 11 [R-0008]; National Ministry of Economics, Proposal for the Government
in Connection with the Amendment of Certain Tax Acts and Other Related Acts (11 October 2011) 9 [R-0016].
705
(12 December 2011) [C-0120]; Mr. Miklós Soltész (Ministry of Natural Resources), Speech at the Parliament
No. 152/165 (12 December 2011) [C-0121]; National Ministry of Economics, Proposal for the Government in
Connection with the Amendment of Certain Tax Acts and Other Related Acts (11 October 2011) 9 [R-0016];
El Paso v. Argentina, § 373 [CLA-0025] / [RLA-0026].
706
R-I § 233; Alex Genin, Eastern Credit Limited, Inc. and A.S. Baltoil v. Republic of Estonia, ICSID Case No.
ARB/99/2, Award (25 June 2001) [RLA-0007]; Glamis Gold v. USA, § 616 [RLA-0033].
707
R-I § 234; Bin Cheng, General Principles of Law as Applied by International Courts and Tribunals (Grotius
Publications Ltd. 1987) [RLA-0093].
708
R-I § 234; Ioan Micula v. Romania, § 831 [CLA-0061] / [RLA-0036].

success of an investment, and no signatory to a BIT would expect that they must constrain their
legislative actions to “do no harm” to an investor.709
447. Respondent did not conspire or intend to inflict harm on Claimants, and Claimants’ efforts to
manufacture such motives fall flat.710 Claimants rely on isolated comments made by members of
Parliament after the implementation of the 2011 Reform began to substantiate their claims. These
statements are irrelevant as they were not made while the 2011 Reform was being considered and
drafted.711 Contemporaneous evidence and the statements cited show an intent to use a tool of
economic policy to generate revenue and to further social welfare goals, including those related
to health and nutrition, while dealing with the limits of public funds.712
448. The 12 December 2011 speech by Dr. Bence Rétvári about the Erzsébet voucher, cited by
Claimants, contains no indication about intent or taking profits or market share from private
foreign companies and giving them to similarly situated domestic companies.713 The focus is on
the limited resources available to finance public initiatives and on Respondent’s utilization of the
Erzsébet voucher as a means to finance certain projects.714 The most clear expression of the
justifications for the Erzsébet program is contained in the first article of Act CIII of 2012, which
designates the charitable purpose of the voucher and regulated the obligations of MNUA.715 This
was reiterated by Dr. Retvari when he presented the same to Parliament.716
4. Legitimate Expectations in the FET Standard
709
R-I § 236; Vivendi v. Argentina, § 7.4.39 [CLA-0021] / [RLA-0021]; Vannessa Ventures Ltd. v. Bolivarian
Republic of Venezuela, ICSID Case No. ARB(AG)/04/6, Award (16 January 2013) § 222 [RLA-0074].
710
R-II § 263; RPHB-I §§ 11 – 16.
711
R-I § 235; R-II § 257; C-II § 257; SZÉP Card Proposal [R-0008]; Proposal on the modification of government
decree 55/2011 (IV.12) on the rules of issuance and usage of Széchenyi Recreational Card (18 July 2011) [R-
0012]; Proposal for the Government on the reform of the system of fringe benefits (September 2011) [R-0015];
Rudolf Dolzer and Christoph Schreuer, Principles of International Investment Law (Oxford University Press
2008) [RLA-0094].
712
R-II § 258; C-II §§ 8, 305, 319.
713
R-II §§ 259 – 260; C-II § 110; Speech No. 152/90 by Dr. Bence Rétvári (Plenary Session of Parliament) (12
December 2011) [R-0055].
714
R-II § 260.
715
Id., at § 261; Act CIII of 2012 on The Erzsébet Project (6 July 2012) [C-0114].
716
R-II § 262; Speech No. 211/324 by Dr. Bence Rétvári (Plenary Session of Parliament) (2 July 2011) [R-0052].

449. Legitimate expectations are the dominant element of the FET standard.717 There are three forms
of legitimate expectation: (1) those arising from the foreign investor’s reliance on specific host
State conduct, (2) that of a stable and predictable legal and administrative framework that meets
certain minimum standards (which does not require a particular promise on the part of the host
State 718 ), and (3) the expectation that the host State will comply with its IIA obligations. 719
Respondent’s assertion that this is a high standard relies on a narrow reading of the awards in
Parkerings, Metalpar, GAMI, and Feldman. The Parkerings tribunal observed that, although an
expectation that the legislative framework will never change will only be legitimate in the face of
a stabilization clause, investors have a right to “a certain stability and predictability”, which
encompasses the expectation that the host state will conduct itself in a lawful manner.720 Under
Feldman, the absence of “definitive, unambiguous and repeated” assurances does not preclude a
finding of unfair and inequitable treatment. The present dispute is different from GAMI, as “the
Claimants’ legitimate expectations were founded (in large part) upon express and unequivocal
undertakings by the Respondent.”721
450. The exercise of regulatory power is predictable, but the abuse of the same is not. Likewise,
deliberate breach of international obligations is not foreseeable. By adopting unreasonable and
discriminatory measures that knowingly inflicted economic harm on CD Hungary, Respondent –
through the 2011 Reform – breached Claimants’ legitimate expectations of predictability and
stability.722 Claimants were entitled to expect that Respondent would implement its policies in a
717
C-I § 343; Saluka v. Czech Republic, § 302 [CLA-0049] / [RLA-0059].
718
C-II § 315; Metalpar v. Argentina, §§ 164, 186, 188 [RLA-0044].
719
C-II §§ 312 – 316; R-I §§ 238, 241; Marvin Feldman v. Mexico, §§ 141, 148, 209 – 210 [CLA-0013] / [RLA-
0041]; GAMI v. Mexico, § 76 [RLA-0031]; Metalpar v. Argentina, §§ 164, 186, 188 [RLA-0044]; Parkerings
v. Lithuania, §§ 332 – 333 [RLA-0051]; Andrew Newcombe and Lluís Paradell, Law and Practice of
Investment Treaties: Standards of Treatment § 6.26 279 – 280 (Kluwer Law International BV 2009) [RLA-
0101].
720
C-II § 315; Parkerings v. Lithuania, §§ 332 – 333 [RLA-0051]; Andrew Newcombe and Lluís Paradell, Law
and Practice of Investment Treaties: Standards of Treatment § 6.26 279 – 280 (Kluwer Law International BV
2009) [RLA-0101].
721
C-II § 315; GAMI v. Mexico, § 76 [RLA-0031].
722
C-II §§ 334 – 338, 340; Proposal from the AETR concerning the universal regulation of the system for
allocating benefits in kind (January 2010) [C-0145]; El Paso v. Argentina, § 402 [CLA-0025] / [RLA-0026];
Saluka v. Czech Republic, §§ 309, 329, 337 [CLA-0049] / [RLA-0059]; Ioan Micula v. Romania, § 525 [CLA-
0061] / [RLA-0036]; AES v. Hungary, § 10.3.9 [CLA-0062]; James v. United Kingdom [CLA-0199]; Lemire
v. Ukraine Decision on Jurisdiction, § 259 [CLA-0220]; EDF v. Romania, § 293 [CLA-0221].

lawful and non-discriminatory manner. The adoption of openly discriminatory and unreasonable
measures was not foreseeable.723
451. Claimants do not submit that Respondent made a “specific commitment to the Claimants with
regard to the continuation of the pre-2011 voucher system” and they do not dispute Respondent’s
right to regulate “in accordance with the BIT.” 724 In making their investment, Claimants
reasonably relied on their expectation that Respondent would maintain a certain stability and
predictability in the applicable legal environment. At the time, the BIT promising to “open up
the country to foreign investment” was in place and Hungary was in the process of joining the
EU. Both the BIT and the Europe Agreement were critical to Claimants’ decision to invest, and
obliged Respondent to refrain from adopting disproportionate and discriminatory measures, such
as the 2011 Reform. Respondent’s adoption of the 2011 Reform was disproportionate and
discriminatory and, therefore, was in violation of Claimants’ legitimate expectations of stability
and predictability.725
452. The State’s actions and the investor’s expectations must be examined in the light of all of the
circumstances, taking into account both sides’ legitimate interests.726 The issue is not whether a
specific commitment has been violated, but rather whether the measures adopted exceeded the
normal regulatory powers of the state and violated the legitimate expectations of the investor.727
The investor’s “right to a certain stability and predictability of the legal environment of the
723
C-II § 339; Saluka v. Czech Republic, § 329 [CLA-0049] / [RLA-0059].
724
C-II § 308 – 311, 317 – 319; R-I § V.B.5, § 237, 243, 245, 247; El Paso v. Argentina, § 364 [CLA-0025] /
[RLA-0026]; CMS Gas v. Argentina Award, § 277 [CLA-0036]; LG&E v. Argentina Decision on Liability, §
125 [CLA-0041] / [RLA-0038]; Saluka v. Czech Republic, § 303 [CLA-0049] / [RLA-0059]; Ioan Micula v.
Romania, § 528 [CLA-0061] / [RLA-0036]; Parkerings v. Lithuania, §§ 332 – 333 [RLA-0051].
725
C-I § 350, C-II §§ 329 – 332; CD Hungary, “CD Hungary Movements in share capital (HUF)” (2 July 2003)
[C-0132]; Europe Agreement Establishing an Association Between the European Communities and their
Member States, of the one part, and the Republic of Hungary, of the other part, 16 December 1991, Art. 67
[CLA-0003]; El Paso v. Argentina, § 364 [CLA-0025] / [RLA-0026]; “Draft Articles on the Law of Treaties
with commentaries”, Yearbook of the International Law Commission, Volume II (1966) Art. 23(1) [CLA-
0130]; United Nations, Vienna Convention on the Law of Treaties, 23 May 1969, United Nations Treaty Series,
Vol. 1155, 331, Art. 26 [CLA-0140]; Europe Agreement establishing an association between the European
Communities and their Member States, of the one part, and the Republic of Hungary, of the other part, signed
on 16 December 1991 (Decision of the Council and the Commission of 13 December 1993, Official Journal of
the EC No. L 347 Vol.36) Art. 72(1) [CLA-0198]; Parkerings v. Lithuania, § 333 [RLA-0051]; Legrand
Statement, § 14 [CWS-3].
726
C-II §§ 323 – 324; El Paso v. Argentina, §§ 358, 364 [CLA-0025] / [RLA-0026].
727
C-II § 325; El Paso v. Argentina, § 402 [CLA-0025] / [RLA-0026]; Saluka v. Czech Republic, § 329 [CLA-
0049] / [RLA-0059]; Electrabel v. Hungary, Decision on Jurisdiction, § 7.78 [CLA-0070].

investment” is inseparable from the FET standard. 728 This is not a right to stasis – it
accommodates the host State’s right to exercise its legislative power, reasonably and
proportionately.729 In implementing changes to its legal framework, States must comply with
fundamental principles such as good faith, due process and non-discrimination and must act in a
way that is fair, consistent, and predictable.730
453. Although domestic laws are subject to change, investors are legitimately entitled to expect that a
host State will provide a stable, predictable framework that meets certain baseline requirements. 731
Claimants had an expectation that Respondent would act in good faith and would not transform
the voucher system or tax framework in a discriminatory and disproportionate manner that
deliberately excluded Claimants’ investment from the Hungarian voucher market. This
expectation was based on Respondent’s international obligations, and its obligations as a future
or actual Member State of the EU.732
454. At the time of Claimants’ investment, the voucher market was unregulated and all issuers were
treated equally. By creating the voucher market and welcoming foreign investors, Respondent
accepted certain basic obligations toward those investors – and the investors had the right to
expect stability. Respondent could not adopt changes beyond certain acceptable margins.
Claimants did not accept the risk of being treated arbitrarily or discriminatorily, and they did not
728
C-II § 326; ADC v. Hungary, § 423 [CLA-0030] / [RLA-0004]; CMS Gas v. Argentina Award, § 276 [CLA-
0036]; Parkerings v. Lithuania, § 333 [RLA-0051].
729
C-II §§ 327 – 328, 333; El Paso v. Argentina, §§ 373, 400 [CLA-0025] / [RLA-0026]; Ioan Micula v. Romania,
§ 529 [CLA-0061] / [RLA-0036]; Parkerings v. Lithuania, § 332 [RLA-0051].
730
C-I § 346; ADC v. Hungary, § 424 [CLA-0030] / [RLA-0004]; Saluka v. Czech Republic, § 303 [CLA-0049]
/ [RLA-0059]; Plama v. Bulgaria, § 176 [CLA-0063] / [RLA-0053]; Electrabel v. Hungary, Decision on
Jurisdiction, § 7.77 [CLA-0070]; Yukos v. Russia, § 1578 [CLA-0071]; Occidental Petroleum Corporation
and Occidental Exploration and Production Company v Republic of Ecuador, ICSID Case No. ARB/06/11,
Decision on Provisional Measures (17 August 2007) [hereinafter “Occidental v. Ecuador Decision on
Provisional Measures”], §§ 185, 191 [CLA-0072].
731
C-I §§ 344 – 345; C-II § 320 – 322; Tecmed v. Mexico, § 154 [CLA-0022] / [RLA-0068]; El Paso v. Argentina,
§§ 358, 368 [CLA-0025] / [RLA-0026]; ADC v. Hungary, § 423 [CLA-0030] / [RLA-0004]; CMS Gas v.
Argentina Award, § 276 [CLA-0036]; LG&E v. Argentina Decision on Liability, § 125 [CLA-0041] / [RLA-
0038]; Saluka v. Czech Republic, §§ 301, 303, 307, 309 [CLA-0049] / [RLA-0059]; Rudolf Dolzer, “Fair and
Equitable Treatment: Today’s Contours”, 12 Santa Clara J. INT’L K.7 (2014) 21, 28 – 29 [CLA-0060]; Ioan
Micula v. Romania, § 528 [CLA-0061] / [RLA-0036]; Andrew Newcombe and Lluis Paradell, Law and
[CLA-0069]; Electrabel v. Hungary, Decision on Jurisdiction, § 7.77 [CLA-0070].
732
C-II § 319; El Paso v. Argentina, § 364 [CLA-0025] / [RLA-0026]; CMS Gas v. Argentina Award, § 277
[CLA-0036]; LG&E v. Argentina Decision on Liability, § 125 [CLA-0041] / [RLA-0038]; Saluka v. Czech
Republic, § 303 [CLA-0049] / [RLA-0059]; Ioan Micula v. Romania, § 528 [CLA-0061] / [RLA-0036];
Parkerings v. Lithuania, § 332 [RLA-0051].

accept the risk of being deliberately targeted by the Hungarian legislature.733 The 2011 Reform
arbitrarily, discriminatorily, and confiscatorily altered the legal framework in which CD Hungary
operated, rendering a once profitable enterprise inoperable.734
455. Whether Claimants had notice of the changes would not have removed the unreasonable and
discriminatory nature of the 2011 Reform.735
456. Claimants allege that Respondent violated the FET standard by breaking Claimants’ legitimate
expectation that Respondent would not violate the FET standard. This argument is circular and
ultimately meaningless.736
457. While legitimate expectations have been associated with a more general right to predictability or
transparency under a FET claim, this must be understood in light of the state authorities’ right to
regulate domestic affairs. Absent an express commitment or a stabilization clause, the doctrine
of legitimate expectations cannot be invoked to protect the investor from all legislative or
regulatory changes, especially those that are foreseeable. Changes in law are to be expected and
all that an investor may expect is that the law be applied.737
458. Claimants suggest that “stability and predictability” is a universal legitimate expectation held by
all investors. This argument must be rejected because it is based on a misunderstanding of arbitral
jurisprudence. The tribunal in Parkerings did not endorse a broad or universal expectation of
stability. In ultimately rejecting the claim in Parkerings, that tribunal found that the doctrine of
733
C-I §§ 348 – 349, 351; Respondent press release, “Common Communication Campaign for the Success of the
Szép Card” (16 December 2011) [C-0079]; Patrik Andó, “Hundreds of Millions for Promotion Purposes”,
Világgazsdaság (12 March 2012) [C-0091]; El Paso v. Argentina, § 402 [CLA-0025] / [RLA-0026].
734
C-I § 352.
735
CPHB-I §§ 161 – 162; PIT Law [C-0047] (Hungary created a favorable environment for the fringe benefits
system).
736
R-II § 271; C-II § 5.2.3.(A); Campbell McLachlan QC, Laurence Shore and Mathew Weiniger, International
Investment Arbitration: Substantive Principles (Oxford University Press 2007) 234 [RLA-0100].
737
RPHB-I §§ 74 – 75; MTD v. Chile, § 50 [CLA-0050]; Total v. Argentina, Decision on Liability, §§ 121 – 124
[RLA-0070]; Andrew Newcombe and Lluis Paradell, Law and Practice of Investment Treaties: Standards of
Treatment, § 6 (Kluwer Law International BV 2009) [RLA-0228]; Oscar Chinn Case [RLA-0166]; Philip
Morris Brands Sàrl, Philip Morris Products S.A. and Abal Hermanos S.A. (formerly FTR Holding SA, Philip
Morris Products S.A. and Abal Hermanos S.A.) v. Oriental Republic of Uruguay, ICSID Case No. ARB/10/7,
Award (8 July 2016) § 426 [RLA-0265]; Blusun v. Italy, §§ 367 – 371 [RLA-0252]; Crystallex International
Corporation v. Bolivarian Republic of Venezuela, ICSID Case No. ARB (AF)/11/2, Award (4 April 2016) §
552 [RLA-0257].

legitimate expectations, without more, cannot protect the investor from legislative or regulatory
changes.738 Many scholars and other authorities require that legitimate expectations are founded
in specific State conduct.739 Interpreting the FET clause as broadly as proposed by Claimants
would run afoul two principles of international investment law: (1) it would unduly restrict the
right of domestic authorities to regulate matters within their own borders, and (2) it would grant
the investor insurance against any change in regulation, irrespective of whether they had
negotiated for that right or protection.740
459. Even if the Tribunal were to find that there can be an expectation of stability or predictability in
the absence of a particular commitment by the host State, such an expectation would need to “rise
to the level of legitimacy and reasonableness in light of the circumstances.”741 Here, the non-
specific circumstances like Hungary’s entry into a BIT and the then-possible entry into the EU
cannot give rise to meaningful expectations, and neither mention predictability or stability. 742
Further, there can be no reasonable expectation that Respondent would not change the regulations
surrounding the fringe benefit system. Claimants have conceded that they were conscious of the
possibility of reasonable changes in the legal framework – a framework that was altered after
Claimants’ initial investment and every year following.743
460. Although a measure will be found to violate the FET standard if it is contrary to a claimant’s
legitimate expectations, such an expectations must be “justifiable and reasonable based on
objective criteria”, because the investor received an explicit promise or guarantee as to (1) a
particular legal or regulatory provision, (2) that the investor took into account in making its
investment or (3) the circumstances surrounding the investment were such as to give rise to a
738
R-II §§ 264 – 266; C-II §§ 308, 314; Parkerings v. Lithuania, §§ 333, 336 [RLA-0051]; Saluka v. Czech
Republic, § 304 [CLA-0049] / [RLA-0059]; Noble Ventures, Inc. v. Romania, ICSID Case No. ARB/01/11,
Award (12 October 2005) [hereinafter “Noble Ventures v. Romania”], § 181 [RLA-0165].
739
R-II § 267; EDF v. Romania, § 217 [CLA-0221]; Glamis Gold v. USA, § 620 [RLA-0033]; Ioan Micula v.
Romania, §§ 528 – 529 [CLA-0061] / [RLA-0036]; Saluka v. Czech Republic, § 304 [CLA-0049] / [RLA-
0059]; Total v. Argentina, Decision on Liability, § 117 [RLA-0070]; ECE Projektmanagement International
GmbH & Kommanditgesellschaft PANTA Achtundsechzigste Grundstücksgesellschaft mbH & Co v. Czech
Republic, PCA Case No. 2010-5, Award (19 September 2013) § 4.762 [RLA-0155]; Andrew Newcombe and
Lluis Paradell, Law and Practice of Investment Treaties: Standards of Treatment, § 6 (Kluwer Law
International BV 2009) [RLA-0228].
740
R-II § 268; C-II § 327.
741
R-II §§ 264, 269; Saluka v. Czech Republic, § 304 [CLA-0049] / [RLA-0059]; Noble Ventures v. Romania, §
181 [RLA-0165].
742
R-II § 270; Continental Casualty v. Argentina, § 261 [RLA-0023].
743
R-II § 272; C-I § 348; C-II § 333; Legrand Statement, § 14 [CWS-3]; El Paso v. Argentina [CLA-0025] /
[RLA-0026].

legitimate expectation.744 It must also be shown that the claimant reasonably relied on the explicit
or implicit promise from the host State.745 This is a high standard, prohibiting a claimant from
transforming wishful thinking into legitimate expectations.746 Here, Claimants have pointed to
no stabilization clause and no other basis for their alleged expectation. Thus, Respondent was
permitted to regulate domestic matters, providing the measures are otherwise in accordance with
the BIT.747
461. When Claimants entered the voucher market, they knew that their business was dependent on
indirect subsidies provided by the State and that Claimants were, therefore, exposed to any
changes in social policy. They invested with these risks in mind.748 They were aware that laws
would evolve and, as explained in Saluka, “[n]o investor may reasonably expect that
circumstances prevailing at the time the investment is made remain totally unchanged.”749 Since
Respondent did not commit otherwise, Respondent was permitted to regulate.750 In the face of
the 2008 financial crisis, Hungary was entitled to reassess the voucher system and to implement
necessary changes. There could be no legitimate expectation that Hungary would not exercise
this right.751
462. The doctrine of legitimate expectations does not create an “entitlement to sufficient notice.”752
Claimants here have not claimed an entitlement to notice, and here there are no circumstances
that would suggest that Claimants had any expectation of notice or of a consultation right vis-à-
vis changes of the State’s annual tax policy.753 Indeed, were a state to be required to give specific
notice to all stake-holders or even just foreign investors, it would be impossible to pass an annual
tax code. At best, the only expectation that Claimants held would be that the State would
744
R-I §§ 238 – 239; Parkerings v. Lithuania [RLA-0051]; Andrew Newcombe and Lluís Paradell, Law and
Practice of Investment Treaties: Standards of Treatment § 6.06 (Kluwer Law International BV 2009) [RLA-
0101].
745
R-I § 240; Ioan Micula v. Romania [CLA-0061] / [RLA-0036].
746
R-I § 241; GAMI v. Mexico [RLA-0031]; Marvin Feldman v. Mexico [CLA-0013] / [RLA-0041]; Metalpar v.
Argentina, § 186 [RLA-0044]; Parkerings v. Lithuania [RLA-0051].
747
R-I §§ 242, 244.
748
Id., at § 243.
749
Id., at § 246; Saluka v. Czech Republic, § 305 [CLA-0049] / [RLA-0059].
750
R-I § 245; Continental Casualty v. Argentina, § 258 [RLA-0023].
751
R-I § 247; C-I §§ 343, 349; Saluka v. Czech Republic [CLA-0049] / [RLA-0059].
752
RPHB-I § 85.
753
Id.

implement a draft law which would then be put into effect after a vote in Parliament and put into
force according to law. This is exactly what happened in the present case and, thus, if there was
any requirement of notice, it was satisfied.754
5. Tribunal Question (b)(b) Regarding the Relevance of EU Law vis-à-vis Article 3 of

the BIT
463. The Tribunal’s question (b)(b) was as follows:
b) The Relevance, if at all, of EU law to the Parties’ respective positions

on the application and interpretation of each of: […] (b) Article 3 of
the France-Hungary BIT[.]
464. EU law as such has no relevance to the Parties’ respective positions on the application and
interpretation of Art. 3 of the BIT, and this is agreed between the Parties.755 Claimants have only
referred to the EU parallel infringement proceedings and the CJEU’s judgment of 23 February
2016 because they constitute compelling factual evidence to Claimants’ claim under Art. 3 of the
BIT.756 Claimants have relied on three facts established by the CJEU in its judgment in support
of its claim that the 2011 Reform was unreasonable: (1) no other EU Member State has imposed
comparable requirements on issuers of electronic vouchers, (2) the alleged objectives could have
been achieved through less restrictive measures, and (3) a voucher card cannot be reflexively
equated to a bank card.757 These facts show that the 2011 Reform was unreasonable, as there was
no rational justification for the 2011 Reform and there were less restrictive measures available to
achieve the same alleged public purpose.758
465. While the Parties agree that EU law has no relevance to the merits of this case,759 the protections
available under the France-Hungary BIT and EU law are not identical. With respect to Art. 3 of
754
Id.
755
CPHB-I § 294; Tr. Day 4 at 86:9-11 (R. Closing).
756
CPHB-I § 295.
757
Id., at §§ 296 – 297.
758
Id., at § 297.
759
RPHB-I §§ 27 – 28; Tr. Day 4 at 5:2-15 (C. Closing).

the BIT, tribunals have held that the FET standard as articulated in international investment law
has no parallel in EU law.760
466. While the TFEU and the FET standard contain a prohibition of discrimination on the basis of
nationality, there are substantial and significant differences in the application of the non-
discrimination standard in investment law and EU law. First, the two legal regimes tend to apply
different comparator clauses to ascertain if two situations or objects are alike for the purpose of
comparison. Respondent states that “EU law has recently moved from the application of formal
criteria – that refused to consider the competitive relationship between products – to endorsing
economic considerations and even subjective elements in determining whether products or
situations are similar. Investment law, [however], typically considers the competitive
relationship between products to ascertain if products are alike.”761 Second, EU law limits the
specific public policy grounds that may be invoked and requires that the disadvantage caused by
the measure be “necessary” and “proportionate” to obtaining the public policy objective
pursued. 762 In investment law, however, the treatment of investors must merely bear a
“reasonable” relationship to the rational policies determined within the state’s wide discretion.763
Thus, while a particular measure may contravene both EU law and the BIT, a violation of EU law
alone will not trigger a violation of the BIT, as Claimants agree.764
467. The CJEU Decision rendered on 23 February 2016 did not hold that the 2011 Reforms were
expropriatory or that Hungary violated Art. 17 of the Charter. Rather, the CJEU determined that
the 2011 Reforms violated the freedom of establishment and the freedom of movement of
services.765 That cause of action finds no parallel in the BIT or investment law generally, which
provides protection for existing investments and compensates investors for damage that actually
occurred.766 Further, the factual findings have no relevance to the claims here. While the CJEU
760
RPHB-I § 31; Achmea v. Slovakia Award on Jurisdiction, § 250 [RLA-0250].
761
RPHB-I § 31; Nicolas F. Diebold, Standards Of Non-Discrimination in International Economic Law, in
International & Comparative Law Quarterly (2011) [RLA-0271].
762
RPHB-I § 31; Angelos Dimopoulos, EU Foreign Investment Law (Oxford Univ. Press 2012) [RLA-0272].
763
RPHB-I § 31; Saluka v. Czech Republic [CLA-0049] / [RLA-0059].
764
RPHB-I § 32; C-II § 142 (“Claimants do not submit that the Respondent’s breaches of EU law constitute, in
themselves, a breach of the BIT”).
765
RPHB-I § 33; EC v. Hungary, CJEU Judgment, §§ 42, 64, 87, 107, 164 [C-0153] (the SZÉP Card and the
Erzsébet voucher system operated by Hungary violated EU law).
766
RPHB-I § 33; Eastern Sugar v. Czech Republic, §§ 160 – 164 [RLA-0154]; Achmea v. Slovakia Award on
Jurisdiction, § 261 [RLA-0250]; WNC v. Czech Republic, § 303 [RLA-0269].

found that certain aspects of the SZÉP Card framework violated the EU law principle of freedom
of establishment, that freedom only protects the right of a company to choose the location of its
incorporation within the EU without being subjected to differential treatment on that basis.767 The
SZÉP Card Decree contains an implicit requirement that, in order to qualify as an Issuer, a
company must incorporate in Hungary and it stipulates the form of incorporation. These
requirements were found by the CJEU to violate four separate provisions of Directive
123/2006/EC of the EU (“Services Directive”).768 Unlike the BIT, EU law requires that the State
recognize incorporation in Hungary as equivalent to incorporation elsewhere in the EU.769 While
this criterion ran afoul of EU law, it is not the criterion that Claimants complain of because,
factually, CD Hungary was incorporated in Hungary and, thus, this criterion could not have been
the cause of Claimants’ damage.770
468. Under Art. 3, Claimants must show not that there was differential treatment, but that this
771
requirement was somehow unreasonable or not tied to a rational policy objective.
Respondent’s requirement of local incorporation is typical and, in any event, this BIT and most
others grant standing to investors where the investor has the nationality of the host State but is
owned by investors in the other State. The requirement to submit to the jurisdiction makes sense
for a business such as this one where issuers sell products that serve as a cash substitute and where
employers and affiliates need confidence that an issuer would be able to satisfy ongoing
obligations and that there would be redress before Hungarian courts. In this regard, Hungary is
no different from most of the jurisdictions where Claimants operate in that local incorporation is
a requirement of doing business.772
469. The CJEU Decision does not conclude that the SZÉP Card discriminates based on nationality.773
All companies – whether foreign or domestic-owned – were required to satisfy the same criteria
to become SZÉP Card Issuers. There is no prohibition on foreign ownership and all of the current
Issuers are foreign-owned Hungarian subsidiaries (as were those that were considered while the
767
RPHB-I § 34; EC v. Hungary, CJEU Judgment, §§ 42, 64, 87, 107 [C-0153]; Decree No. 55/2011, § 13 [RLA-
0091].
768
RPHB-I § 34; EC v. Hungary, CJEU Judgment [C-0153].
769
RPHB-I § 35.
770
Id.
771
Id.
772
Id., at § 36.
773
Id., at § 37.

issuer criteria were being developed). There is no privilege whatsoever – the issue that the CJEU
decided was a question of access to the market, not on whether the tax rates benefitted some over
others (even assuming that the tax rates applied to issuers as opposed to fringe benefits, which
they do not).774 Finally, all private companies, whether foreign or domestic, where precluded
from issuing the Erzsébet voucher because issuance was limited to the exclusive authority of the
State, like analogous services such as health care, food stamps, etc. All such private companies
were permitted to continue to issue other fringe benefits, including traditional paper vouchers for
hot meals.775
6. Tribunal Question (j) Requesting Table Comparing Intentions and Action
470. The Tribunal’s question (j) was as follows:
j) The Parties are requested to prepare a table comparing the

Respondent’s intention for reform as alleged by Claimants in their
Opening Presentation (such as exhibits R-5, R-10, R-15, R-16, C-119,
C-121, C-84) to the actual decisions of reform as issued and put in
force by Respondent.
471. The Parties presented numerous arguments in connection with their respective Tables, all of
which have been helpful. Here, the Tribunal summarizes these arguments.
472. The contemporaneous documents confirm that the 2011 Reform was intended to exclude CD
Hungary and the other French Issuers – which together accounted for 86% of the Hungarian meal
voucher market – and to replace them, such that their profits would not be earned by foreign
companies and would instead remain in Hungary.776
473. Exhibits R-0010, R-0013, R-0015, and R-0016 demonstrate Respondent’s intention that the SZÉP
Card would replace hot meal vouchers issued by CD Hungary and other French issuers. 777
774
Id., at §§ 37 – 38.
775
Id., at § 39.
776
CPHB-I § 34; First FTI Report, §§ 3.17, 3.19, 3.20 [CEX-1].
777
Memorandum for the Minister from Mr. Kristóf Szatmáry and Dr. Ádám Balog , Subject: The future of fringe
benefits (31 May 2011) [R-0010]; Széchenyi Recreational Card – Project Status (9 September 2011) [R-0013];
Proposal for the Government on the reform of the system of fringe benefits (September 2011) [R-0015];
National Ministry of Economics, Proposal for the Government in Connection with the Amendment of Certain
Tax Acts and Other Related Acts (11 October 2011) 9 [R-0016].

Through the SZÉP Card Decree778 and changes to the PIT Law, Claimants’ hot meal vouchers
were moved from the “non-wage benefits” category in Section 71 of the PIT779 to Section 70’s
category of “specifically defined benefits.”780 The resulting tax differential made it impossible
for CD Hungary to continue selling its vouchers, which offered the same service as the SZÉP
Card and the Erzsébet voucher, but at a cost significantly higher to the clients.781 The hot meal
vouchers issued by CD Hungary and other French issuers were thus effectively replaced on the
market by the SZÉP Card and the Erzsébet voucher.782
474. Claimants further state that Exhibits R-0010, R-0016, and Dr. Guller’s First Witness Statement783
show that Respondent intended that the Erzsébet voucher would replace the cold meal vouchers
issued by CD Hungary and other existing issuers. 784 This change was implemented through
changes to the PIT Law creating the Erszébet cold meal voucher785 and the Decree on the Issuance
of the Erzsébet Voucher, which gave the MNUA a monopoly over the issuance over the Erzsébet
voucher. 786 The Erzsébet voucher’s scope was also extended to cover hot meals, and this
extension was made permanent in 2013.787
475. Exhibits C-0119, C-0120, and C-0121 demonstrate that Respondent’s intention was that 100% of
the profits made in the meal voucher market would remain in Hungary.788 The 2011 Reform as
implemented fulfilled this goal. First, CD Hungary and the other foreign-owned issuers could not
778
Decree No. 55/2011 [C-0073].
779
PIT Law as amended in 2010, effective 1 January 2011 6 [C-0068].
780
2011 PIT Law at 5 [RLA-0088] / [C-0074].
781
CPHB-I Annex No. 6, first Table.
782
CPHB-I Annex No. 6.
783
First Guller Statement, § 31 [RWS-1]. Memorandum for the Minister from Mr. Kristóf Szatmáry and Dr. Ádám
Balog , Subject: The future of fringe benefits (31 May 2011) [R-0010]; National Ministry of Economics,
Proposal for the Government in Connection with the Amendment of Certain Tax Acts and Other Related Acts
(11 October 2011) 9 [R-0016].
784
CPHB-I Annex No. 6.
785
PIT Law as amended in 2010, effective 1 January 2011 [C-0068].
786
Decree No. 39/2011 (XII.29.) of the KIM on the issuance of the Erzsébet voucher (29 December 2011) [C-
0084], later Law CVX of 2013 on The amendment of certain acts on economic matters (21 June 2013) [C-
0086].
787
CPHB-I Annex No. 6; Decree No. 39/2011 (XII.29.) of the KIM on the issuance of the Erzsébet voucher (29
December 2011) [C-0084].
788
Dr. Bence Rétvári (State Secretary of the KIM), Speech at the Parliament No. 152/90 (12 December 2011) [C-
0119]; Mr. Miklós Soltész (Ministry of Natural Resources), Speech at the Parliament No. 152/161 (12
December 2011) [C-0120]; Mr. Miklós Soltész (Ministry of Natural Resources), Speech at the Parliament No.
152/165 (12 December 2011) [C-0121].

make a profit because they were no longer competitive. Second, as for SZÉP Card Issuers, they
are loss-making and, thus, have been unable to repatriate any profits. Finally, the profits generated
by MNUA on the Erzsébet voucher remain in Hungary, as MNUA is a state-owned entity.789
476. Claimants agree that Exhibit R-0005, which Claimants state envisioned the creation of a card
system by a 100% State-owned financial enterprise, did not become law.790
477. Claimants’ claim that they were deliberately targeted by reforms and that their removal from the
market was the Government’s motivation is inconsistent with the evidence. 791 Claimants are
mistaken when they state that the proposed reforms discussed in Exhibits R-0005, R0010, R0015,
and R-0016 were “reflected entirely in the law which came into force on 1 January 2012”, as
those are preparatory documents where the Government or other related individuals considered
possible options for reform. Some of the options contained therein, including the complete
elimination of the voucher system, were not implemented into law as part of the 2011 Reform or
ever found their way into any legislation or act of the Hungarian Parliament.792
478. Second, Claimants have conflated products (fringe benefits) and the entities that facilitated the
provision of those products to end-users (issuers, like CD Hungary), in an effort to manufacture
ill-intent. Claimants are wrong to suggest that the Government’s consideration of whether to
eliminate a particular fringe benefit – the cold meal voucher – offers evidence of an intent to
eliminate an issuer or set of issuers from the market. The Government elects to grant a tax benefit
for a number of reasons that are particular to the fringe benefit in question. When priorities or
budgets change, the Government might eliminate or add new fringe benefits because they were
focused on the provision of services and/or goods, the end-users, and/or the impact on the
economy. The Government was not focused on the potential market participants who might
facilitate the use of the vouchers, which is at best a derivative business and not the focus of the
system.793
789
CPHB-I Annex No. 6.
790
CPHB-I Annex No. 6, n.5.
791
RPHB-I § 16.
792
Id., at § 96.
793
Id.

479. Exhibit R-0005 is only a partial translation of a document that highlights the main elements of the
proposed SZÉP Card. While the Government considered limiting the issuance of the SZÉP Card
to a State-owned enterprise, the Government also considered that the SZÉP Card might be
issued/operated by tender-winning private entities, including CD Hungary.794 Had the proposal
been adopted, Claimants would have been prohibited from issuing the SZÉP Card, but not other
fringe benefits. The proposal did not address the issuer criteria or suggest any intent to create
overly restrictive criteria. The SZÉP Card Issuer criteria were designed to identify qualified
issuers having a particular skillset that the Government viewed as relevant to the intended
purpose, and these criteria applied equally to any party wishing to issue the SZÉP Card.795 In
developing the SZÉP Card criteria, the Government identified entities that were most likely to
have the necessary infrastructure and would most likely be able and willing to agree to restricted
commissions. 796 Claimants could have satisfied the issuer criteria and become a SZÉP Card
Issuer by partnering with a bank, but chose not to.797
480. Exhibit R-0010 makes it clear that the Government was not focused on Claimants or even the so-
called hot meal benefit, but rather on ensuring the efficient and effective delivery of fringe
benefits to the Hungarian population. Under the 2011 PIT Law,798 employers and employees
could obtain the benefit of the hot meal either through a paper voucher and/or through the SZÉP
Card. Under section 70(1)(a) of the 2011 PIT Law, hot and cold meal fringe benefits continued
to receive a tax advantage and were neither eliminated by the reforms nor replaced by the SZÉP
Card or the Erzsébet voucher. Due to the language of Exhibit R-0010, the SZÉP Cards would
render the retention of the vacation voucher futile. At the time, that voucher was issued
exclusively by the State. If the Government had intended to abolish the hot meal voucher and
replace it with the SZÉP Card (a product), that does not mean that the Government intended to
replace or exclude a particular issuer. The Government did not intend to exclude anyone or force
anyone out.799 The Government intended and assumed that issuers that were unable to qualify
alone would partner with banks and issue the SZÉP Card and/or would continue to sell other
794
RPHB-I Table 7, n.180; The main elements of the introduction of Széchenyi Recreational Card, prepared by:
Rudolf Petendi, head counselor (24 September 2010) [R-0005].
795
RPHB-I Table 7; Tr. Day 2 at 79:11 – 13 (Nagy) (confirming).
796
RPHB-I Table 7; Tr. Day 2 at 207:21 – 208:13 (Gans and Nagy).
797
RPHB-I Table 7; Tr. Day 2 at 79:7 – 10 (Gans and Nagy).
798
2011 PIT Law [C-0074] / [RLA-0088].
799
RPHB-I Table 7; Tr. Day 2 at 135:9-15 (Szatmáry); Id. at 132:7 – 133:13 (showing that Claimants’ counsel
failed to afford the witness an opportunity to respond to Claimants’ interpretation).

products. 800 There were sound reasons to expand the SZÉP Card to include catering and
restaurant services, including to mitigate against initial distrust and, thus, to facilitate comfort
with and adoption of the new benefit.801 Finally, the State focused on all aspects of the Fringe
Benefit System, and this supports the conclusion that the State was engaged in bona fide
regulation and not in the improper targeting of Claimants or foreign nationals.802
481. Some of Claimants’ allegations were based on a translation error of page 2 of Exhibit R-0015,
which Respondent provided, and which should read “this fringe benefit is the electronic card-
based version of the previous hot meal voucher.”803 Exhibit R-0015 shows that the Government
considered a number of options for reform of the Fringe Benefit System, including abolishing
paper-based hot meal vouchers. There was nothing, however, about being a “current issuer” that
precluded an entity from also becoming a SZÉP Card Issuer. Exhibit R-0015 affirms the bona
fides of the 2011 Reforms.
482. Regarding Exhibit R-0016, this proposal was ultimately not adopted as part of the 2011 Reforms.
Neither the 2011 PIT Law nor any other law contains any limitation as to who can issue hot meal
vouchers.804 Moreover, that the Government considered abolishing hot meal vouchers does not
mean that the Government intended to exclude or target any issuers. There is no basis for
Claimants’ interpretation that issuers were targeted. Exhibit R-0016 reaffirms the bona fides of
the reform and the legitimate intentions of the Government.805
483. Regarding Exhibit C-0119, there is no possible argument that the State or any state sanctioned
entity or even the SZÉP Card Issuers appropriated any profits from Claimants. Claimants had no
right to future profits. Both MNUA and SZÉP Card Issuers had to generate their own customer
bases and revenues. Due to the limits on commissions and the high infrastructure costs, the SZÉP
Card Issuers are not making a profit but, rather, are losing money.806
800
RPHB-I Table 7; Tr. Day 2 at 139:16-24 (Szatmáry).
801
RPHB-I Table 7; Tr. Day 2 at 47:23 – 48:24 (Nagy).
802
RPHB-I Table 7.
803
Id.; Tr. Day 2 at 143:19-25 – 144:6-22 (Szatmáry) (explaining that there was no replacement of issuers).
804
RPHB-I Table 7.
805
See e.g., National Ministry of Economics, Proposal for the Government in Connection with the Amendment of
Certain Tax Acts and Other Related Acts (11 October 2011) 4, 5 [R-0016].
806
RPHB-I Table 7, Tr. Day 3 at 80:8-12 (Nicholson).

484. Respondents also stated that, while the SZÉP Card and the Erzsébet voucher can be used to
purchase the same end product, they offer more in terms of benefits to the population (like a less
expensive product, due to restricted commissions). These products did not fully replace the hot
meal and cold meal vouchers because those have been retained in the system.807
7. The Parties’ Arguments in Response to the Tribunal’s Question (d)
485. The Tribunal’s question (d) was as follows:
d) Having regard to Hungary’s membership of the European Union from

2004, whether, absent a sustained claim under Article 5 of the France-
Hungary BIT, treatment consistent with Article 4 of the BIT is relevant
to an evaluation of the just and equitable treatment claim under Article
3 of the BIT, save for any claim arising out of an alleged breach of EU
law going to just and equitable treatment.
486. Article 3 of the BIT contains a specific prohibition of discrimination or unreasonable measures
and a wider obligation to treat the investor’s investment fairly and equitably. 808 Article 3 goes
beyond national treatment and prohibits every type of discrimination with respect to the treatment
of foreign investors.809
487. Article 3, however, does not include discrimination based on EU law, which – as was illustrated
in the CJEU’s judgment of 23 February 2016 – is subject to different criteria. Claimants have
never advanced any allegation based on discrimination under EU law to prove their claim under
Art. 3 of the BIT. Neither Art. 4 of the BIT nor EU law is relevant to the evaluation of the just
and equitable treatment claim under Art. 3 of the BIT.810
807
Tr. Day 4 at 58:2-10 (R. Closing).
808
CPHB-I §§ 117 – 122, 300 – 301; Tr. Day 4 at 97:21-25, 98:1-2 (R. Closing).
809
CPHB-I §§ 125, 302 – 304; Andrew Newcombe and Lluis Paradell, Law and Practice of Investment Treaties:
Standards of Treatment, 1st Edition, Kluwer Law International, 2009 §§ 6.27, 6.28 [CLA-0055]; Rudolf
Dolzer, “Fair and Equitable Treatment: Today’s Contour”, 12 Santa Clara J. INT’L K.7 (2014), at 15 [CLA-
0060]; OAO Tatneft v. Ukraine, PCA UNCITRAL, Award (29 July 2014) § 394 [CLA-0250].
810
CPHB-I §§ 305 – 307; EC v. Hungary, CJEU Judgment, §§ 8, 66 – 68, 85 – 92 [C-0153].

488. The fact that Hungary has been a Member State of the EU since 2004 should have no relevance
for establishing any violation of any BIT provision. While circumstances that lead to a breach of
EU law might result in a breach of the BIT, that would depend on the particular facts. The facts
that led the CJEU to reach its conclusions in the CJEU Decision would not support a claim under
Art. 3.811
489. Articles 4 and 3 of the BIT afford different protections and/or create different obligations for the
host State. While Art. 4 requires the State to treat investors of other nations equal to domestic
investors, Art. 3 requires that the State act fairly to investors.812 The fact that the State treated
similarly situated investors the same could be relevant to determining that there was no liability
under Art. 3, as it could demonstrate that the State acted justly and fairly and undertook a general
regulation that did not target a particular investor or group of investors.813
490. A showing that a party had not acted in accordance with Art. 4 would not necessarily suffice to
establish a claim under Art. 3.814 As various authorities have recognized, particularly in the area
of fiscal policy, there may be sound reasons to differentiate between domestic and foreign
taxpayers.815 Accordingly, the fact that a challenged measure had the effect of distinguishing
between local and foreign investors would violate the national treatment clause, but would not
result in liability under Art. 3 of the BIT if that effect was incidental to a valid purpose and/or if
that differentiation was supported by sound and justifiable policy reasons.816 The underlying facts
or conduct could result in liability under each of EU law, Art. 3, and/or Art. 4, but the assessment
of whether facts give rise to a cause of action is unique to each cause of action and the
particularities thereof.817
811
RPHB-I § 43.
812
Id., at § 44; Flemingo DutyFree Shop Private Limited v. Republic of Poland, UNCITRAL, Award (12 August
2016) § 531 [RLA-0261].
813
RPHB-I § 44.
814
Id., at § 45; see, e.g., Tr. Day 2 at 60:13-16 (C. Opening).
815
RPHB-I § 45; The Oxford Handbook of International Investment Law (Peter Muchlinski et al. eds., 2008), at
339 [RLA-0277].
816
RPHB-I § 45.
817
Id. at § 46.

8. Tribunal Considerations and Conclusions Regarding FET
491. Claimants’ requests in this arbitration as quoted above are:
- 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.
492. Respondent’s Request on the Merits is that the Tribunal dismiss all claims raised by Claimants.
493. The Tribunal notes that the Parties do not submit different requests as resulting from a possible
breach of Art. 5(2) and of Art. 3 of the BIT. Above, the Tribunal has concluded that Respondent
has breached Art. 5(2) and is, thus, liable. Therefore, if the Tribunal were to find that Respondent
also breached Art. 3 of the BIT, it would not lead to any damages in excess of those which result
from the breach of Art. 5(2). In the interest of procedural efficiency, therefore, the Tribunal
considers that it need not examine whether Respondent also would be liable for a breach of Art.
3.
IX. NO FURTHER CLAIMS RAISED BY CLAIMANTS
494. As a precaution, the Tribunal asked the Parties to address the following issue:
c) The Relevance, if at all, of Article 4 of the France-Hungary BIT, and

in particular its national treatment aspect, noting that the Claimants
have not advanced an allegation of breach of Article 4.

A. CLAIMANTS’ ARGUMENTS
495. Claimants have not made a claim for breach of Art. 4 of the BIT, which obliges the host State to
accord foreign investors “the same treatment accorded to its own investors.”818 To prove a breach
of Art. 4, it would be necessary to prove that the 2011 Reform was discriminatory based on
nationality. This contrasts with Art. 3 (FET).819 Here, Claimants have proved that the 2011
Reform was discriminatory based on the differential treatment that Respondent imposed on them
in comparable circumstances, without justification.820
B. RESPONDENT’S ARGUMENTS
496. Article 4 of the BIT has no relevance because Claimants have not alleged a breach of Art. 4, nor
could they in light of the Signatories’ limited consent to arbitration. Claimants’ choice not to
allege a violation of Art. 4, however, may have some relevance to the Tribunal’s understanding
of Claimants’ claim and the defects thereof.821 Article 4 requires that foreign investors be treated
equally to domestic investors, while Art. 3 requires that they be treated fairly. In theory, there
could be measures that apply equally to domestic and foreign nationals, but nonetheless violate
Art. 3. Likewise, measures could comply with Art. 3, but run afoul Art. 4.822 Here, the measures
do not discriminate on the basis of nationality. Rather, any party that met the qualifications to
become a SZÉP Card Issuer and agreed to the limitations thereon was entitled to issue the SZÉP
Card, regardless of the nationality of the owners of the issuing company.823 Even if Claimants
were able to substantiate a claim of disparate treatment, this alone would not go far enough to
substantiate a claim under the provision they have actually invoked – Art. 3.824
C. TRIBUNAL CONSIDERATIONS AND CONCLUSIONS
497. From the replies it is clear that Claimants have not submitted a claim regarding a breach of Art.
4.
818
CPHB-I §§ 298 – 299; France-Hungary BIT, Art. 4 [CLA-0001] / [RLA-0079].
819
CPHB-I § 299; Agreement between the Republic of Croatia and the Republic of Hungary for the Promotion
and Reciprocal Protection of Investments, signed 15 May 1996, in force as of 1 March 2002 [CLA-0005].
820
CPHB-I § 299.
821
RPHB-I § 40; France-Hungary BIT, Art. 9(2) [CLA-0001] / [RLA-0079].
822
RPHB-I § 41; Ulf Linderfalk, On the Interpretation of Treaties (Springer 2007) [RLA-0275].
823
RPHB-I § 42.
824
Id.

498. Thus, this Award only has to decide on the claims actually raised, i.e. whether there were breaches
of Arts. 5(2) and 3.
X. DAMAGES
A. THE STANDARD OF COMPENSATION UNDER ART. 5(2) OF THE BIT
499. Regarding the standard of compensation, Art. 5(2) of the BIT states as follows:
[…]
Any dispossession measures taken shall give rise to the payment of prompt and
adequate compensation, the amount of which must equal the real value of the
investments concerned on the day prior to the date on which the measures are
taken or made public.
Such compensation shall be payable to investors in convertible funds, and shall

be freely transferrable. It shall be paid promptly starting from the date of the
dispossession, failing which, interest calculated at the applicable market rate
shall be charged up to the date of payment.825
500. Compensation for the unlawful expropriation of CD Hungary is governed by customary

international law, rather than Art. 5(2) of the BIT. 826 To compensate Claimants for losses
resulting from Respondent’s violations of the BIT, damages must be calculated in accordance
with the principle of full reparation, which aims to put Claimants in the position they would have
been in, had Respondent not breached its obligations under the BIT.827 Unlike the standard of
compensation set forth in Art. 5(2), the customary international law standard allows the Tribunal
to (1) consider events after the Valuation Date when quantifying Claimants’ loss, and (2) assess
both the value of the enterprise and the consequential damages flowing from Respondent’s
825
France-Hungary BIT, Art. 5(2) [CLA-0001] / [RLA-0079].
826
C-II § 346.
827
Id., at § 34; C-I § 353; Chorzów Factory (Claim for Indemnity) (Merits), Germany v. Poland, 1928 P.C.I.J.
Ser. A., No. 17, Judgment No. 13, Award (13 September 1928) [CLA-0079]; “Responsibility of States for
Internationally Wrongful Acts”, 53 UN GAOR Supp. (No. 10) at 43, UN Doc. A/56/83 (2001) Art. 31 [CLA-
0080].

breaches. 828 In its post-hearing submission, Claimants highlighted that the consequential
damages claimed by Claimants are the losses associated with Výroba, Claimants’ subsidiary.829
501. Although Respondent accepts that a distinction between lawful and unlawful expropriation is
“both necessary and logical”,830 it argues that the compensation rules of Art. 5(2) should apply to
both lawful and unlawful expropriation, thereby limiting Claimants’ damages to the “actual
value” of their investment. Article 5(2), however, contains an express carve-out and is therefore
only lex specialis for lawful expropriation. Further, as confirmed in investment jurisprudence,
including ADC v. Hungary, unless a treaty contains a clear reference to damages due for unlawful
expropriation, the compensation rule referred to in the BIT will only apply to lawful
expropriation, with damages for unlawful expropriation being governed by customary
international law. The compensation rule prescribed in Art. 5(2) of the BIT, therefore, does not
apply to unlawful expropriation.831
502. The customary international law principle of full reparation was defined in the oft-cited PCIJ
Chorzow Factory case and this principle has since been codified in Art. 31 of the ILC Articles on
State Responsibility. While restitution in kind would most closely conform to the principle of
full reparation, such is frequently neither possible nor practical. Here, it would be impossible to
restore the status quo ante and any attempt to do so would require significant interference with
Respondent’s sovereignty. The appropriate remedy should therefore be the payment of a sum
corresponding to the value that restitution in kind would bear, as defined by Art. 36 of the ILC
Articles.832
828
C-I § 369; “Draft articles on Responsibility of States for Internationally Wrongful Acts, with commentaries”,
Yearbook of the International Law Commission, 2 vol. II, Part Two (2001) § 34 [CLA-0081]; Andrew
Kluwer Law International, 2009, 395 [CLA-0085]; Mark Kantor, Valuation for Arbitration: Compensation
Standards Valuation Methods and Expert Evidence, Kluwer Law, 2008, 65 [CLA-0086]; Irmgard Marboe,
“Compensation and Damages in International Law The Limits of ‘Fair Market Value’”, Transnational Dispute
Management Vol. 4, Issue 6 (November 2007) 751 [CLA-0087].
829
CPHB-I § 173 – 174; First Navigant Report, §§ 243 – 246 [REX-1].
830
C-I §§ 361 – 363; C-II § 348; R-I §§ 253 – 256.
831
C-I § 356; C-II §§ 347 – 356; CPHB-I §§ 168 – 172; France-Hungary BIT, Art. 5(2) [CLA-0001] / [RLA-
0079]; ADC v. Hungary, § 481 [CLA-0030] / [RLA-0004]; Sébastien Manciaux, Investissements Etrangers et
arbitrage entre Etats et ressortissants d'autres Etats – Trente années d'activité du CIRDI, Litec, 2004, § 674
[CLA-0222]; Arnaud De Nanteuil, L'expropriation indirecte en droit international de l'investissement,
Editions A. Pedone, 2014, 186 [CLA-0223].
832
C-I §§ 365 – 367; Yukos v. Russia, §§ 1587 – 1593 [CLA-0071]; Occidental v. Ecuador Decision on
Provisional Measures, §§ 81 – 84 [CLA-0072]; Chorzów Factory (Claim for Indemnity) (Merits), Germany v.
Poland, 1928 P.C.I.J. Ser. A., No. 17, Judgment No. 13, Award (13 September 1928) 47 [CLA-0079];
“Responsibility of States for Internationally Wrongful Acts”, 53 UN GAOR Supp. (No. 10) at 43, UN Doc.

503. Respondent introduces an artificial distinction between the first and second paragraphs of Art.
5(2) of the BIT to argue that paragraph 2 applies to “any dispossession”, regardless of legality.833
This suffers from three flaws. First, it fails to interpret Art. 5(2) in its context and in light of the
BIT’s object and purpose, as required by the VCLT.834 Second, it relies on a mistaken distinction
between the present case and Vivendi. Contrary to Respondent’s assertion, that tribunal found
that the France-Argentina BIT did not purport to establish lex specialis governing the standards
of compensation for wrongful expropriations. 835 Third, the submission is founded upon an
erroneous translation of the text “measures de dispossession qui pourraient être prises”, which in
the authoritative French and Hungarian does not allow for “any” measure (as argued by
Respondent, based on the non-authoritative English translation), but rather restricts the
compensation calculation method in Art. 5(2) to permissible or lawful expropriation. Thus, the
interpretation of the relevant wording in other French BITs supports Claimants’ position that it
only applies to lawful expropriation measures.836
A/56/83 (2001) Art. 31 [CLA-0080]; “Draft articles on Responsibility of States for Internationally Wrongful
Acts, with commentaries”, Yearbook of the International Law Commission, 2 vol. II, Part Two (2001) § 4
[CLA-0081]; Alan Redfern and Martin Hunter, Law and Practice of International Commercial Arbitration, 3rd
Edition, Sweet & Maxwell, 1999, 372 [CLA-0082]; Thomas W. Wälde, “Remedies and Compensation in
International Investment Law”, Transnational Dispute Management, Vol. 2, Issue 5 (November 2005) 21
[CLA-0083]; Sergey Ripinsky and Kevin Williams, Damages in International Investment Law, BIICL, 2008,
57 – 59 [CLA-0084].
833
C-I §§ 357 – 361; ADC v. Hungary, § 497 [CLA-0030] / [RLA-0004]; Andrew Newcombe and Lluis Paradell,
Law and Practice of Investment Treaties: Standards of Treatment, 1st Edition, Kluwer Law International, 2009,
382 [CLA-0073]; Sergey Ripinsky and Kevin Williams, Damages in International Investment Law, BIICL,
2008, 67 [CLA-0074]; Pierre Bienvenu and Martin J. Valasek, “Compensation for Unlawful Expropriation,
and Other Recent Manifestations of the Principle of Full Reparation” in International Investment Law in Albert
Jan van den Berg (ed.), 50 Years of the New York Convention: ICCA International Arbitration Conference,
ICCA Congress Series, 2009, Dublin, Volume 14 240 – 244 [CLA-0075].
834
C-II § 362; United Nations, Vienna Convention on the Law of Treaties, 23 May 1969, United Nations Treaty
Series, vol. 1155, 331, Art. 31 [CLA-0052].
835
C-II §§ 363 – 364; R-I § 255 n. 269; Vivendi v. Argentina, § 8.2.3 [CLA-0021] / [RLA-0021].
836
C-I §§ 357 – 364; C-II 365 – 370; France-Hungary BIT, Art. 5(2) [CLA-0001] / [RLA-0079]; Vivendi v.
Argentina, § 8.2.8 [CLA-0021] / [RLA-0021]; ADC v. Hungary, § 497 [CLA-0030] / [RLA-0004]; United
Nations, Vienna Convention on the Law of Treaties, 23 May 1969, United Nations Treaty Series, vol. 1155,
331, Art. 31 [CLA-0052]; Andrew Newcombe and Lluis Paradell, Law and Practice of Investment Treaties:
Standards of Treatment, 1st Edition, Kluwer Law International, 2009, 382 [CLA-0073]; Sergey Ripinsky and
Kevin Williams, Damages in International Investment Law, BIICL, 2008, 67 [CLA-0074]; Pierre Bienvenu
and Martin J. Valasek, “Compensation for Unlawful Expropriation, and Other Recent Manifestations of the
Principle of Full Reparation” in International Investment Law in Albert Jan van den Berg (ed.), 50 Years of
the New York Convention: ICCA International Arbitration Conference, ICCA Congress Series, 2009, Dublin,
Volume 14 240 – 244 [CLA-0075]; Charles Brower and Michael Ottolenghi, “Damages in Investor-State
Arbitration”, Transnational Dispute Management, Vol. 4, Issue 6 (2007) 13 [CLA-0076]; Ian Brownlie,
Principles of Public International Law, 7th Edition, Oxford University Press, 2008, 539 [CLA-0077];
Campbell McLachlan, Laurence Shore, and Matthew Weiniger, International Investment Arbitration
Substantive Principles, 1st Edition, Oxford University Press, 2007, § 9.107 [CLA-0078]; Agreement between

504. In the alternative, should the Tribunal apply the methodology for calculating damages set out in
paragraph 2 of Art. 5(2) of the BIT, Claimants note that (1) the calculation of the “real value” of
an investment under Art. 5(2) of the BIT should be read as a reference to “fair market value” and
(2) the DCF methodology is the most accurate method of assessing fair market value of this
investment.837
505. Article 5(2) of the BIT specifies that Claimants can only be entitled to the actual value of their
investment as damages – nothing more. Although international law recognizes a right to “full
reparation” for an international wrong, Claimants must prove the existence of damage as well as
a causal link between the breaches of the BIT and the damage alleged. Full reparation does not
permit the recovery of damages that have not been suffered or that are too remote. Rather,
reparation should put the claimant in the same – but no better – position that it would have
occupied in absent the breach.838 Exemplary or punitive damages that are too attenuated from the
breach or which could have been mitigated should be excluded from the obligation to make full
reparation.839
506. The French and Hungarian language versions of Art. 5(2) do not use the term “any”, but
nonetheless employ generic pronouns, indicating that the term “dispossession measures” refers
to any of a large number, class, or category of dispossession measures. The first paragraph of
Art. 5(2) sets the compensation standard that “shall” apply to all types of measures contemplated
therein and it stands to reason that that remains unchanged in the second paragraph. The entirety
of Art. 5(2) sets forth the conditions for lawful and unlawful dispossessions. Logically, it does
the Government of the Federal Republic of Ethiopia and the Government of the Republic of France for the
reciprocal promotion and protection of investments, signed 25 June 2003 (Effective 7 August 2004) Art. 5(2)
[CLA-0203]; Agreement between the Government of Jamaica and the Government of the Republic of France
on the reciprocal promotion and protection of investments, signed 25 January 1993 (Effective 15 September
1994) Art. 5(3) [CLA-0206]; Agreement between the Government of the Republic of Trinidad and Tobago
and the Government of the Republic of France on the reciprocal promotion and protection of investments,
signed 28 October 1993 (Effective 16 May 1996) Art. 5(2) [CLA-0224]; Agreement between the Government
of the Republic of India and the Government of the Republic of France on the reciprocal promotion and
protection of investments, signed 2 September 1997 (Effective 17 May 2000) Art. 6(2) [CLA-0225].
837
C-II § 393; Sergey Ripinsky and Kevin Williams, Damages in International Investment Law, BIICL, 2008,
182-183 [CLA-0231]; CME Czech Republic B.V. v. The Czech Republic, UNCITRAL, Final Award (14 March
2003) § 493 [CLA-0232]; Rumeli Telekom A.S. and Telsim Mobil Telekomikasyon Hizmetleri A.S. v. Republic
of Kazakhstan, ICSID Case No. ARB/05/16, Award (29 July 2008), § 786 [CLA-0233].
838
R-II §§ 287 – 291.
839
Id., at § 292.

not permit an additional standard of compensation. It, therefore, constitutes lex specialis that
governs any compensation that may be awarded to Claimants and limits the quantum of any award
to the real value of the investment in Hungary.840
507. Claimants are incorrect when they argue that Art. 5(2) only applies to lawful expropriations. They
reach this conclusion by an impermissible reading of Art. 5(2) that interprets the phrase “could
be taken” or “might be taken” as referring only to lawful takings under the BIT. The phrase,
however, makes no such distinction. It refers to measures that factually have the capacity of being
adopted. Claimants’ interpretation is contrary to the plain and ordinary meaning of the word
“could” and leads to a misinterpretation of the BIT.841
508. The claim that paragraph two specifies a condition for lawful expropriation does not follow from
the text.842 Claimants’ argument also fails to acknowledge the third paragraph of Art. 5(2), which
details the compensation contemplated in the second paragraph and is critical to understanding
the object and purpose of the article. The third paragraph details the compensation in the second
paragraph, including that “it shall be paid promptly from the date of dispossession, failing which,
interest calculated at the applicable market rate shall be charged up to the date of payment.”
Thus, on Claimants’ reading of Art. 5(2) (that a failure to provide prompt payment converts a
lawful expropriation into an unlawful one), Respondent explains that “Art. 5(2) must set the
calculation method for compensation for both lawful and unlawful compensation, including
providing that where an expropriation is unlawful due to a failure to provide prompt
compensation, interest must be paid.”843
509. Further, the same word must be given the same meaning in the same document. The term
“dispossession measures” as found in Art. 9(2) and Art. 5(2) gives the Tribunal jurisdiction over
all disputes concerning lawful and unlawful dispossessions, as well as the compensation that
840
R-I §§ 253 – 255; R-II §§ 275 – 277; Tidewater Investment SRL, Tidewater Caribe, C.A., v. The Bolivarian
Republic of Venezuela, ICSID Case No. ARB/10/5, Award (13 March 2015) [hereinafter “Tidewater v.
Venezuela”], § 136 [CLA-0236]; Vivendi v. Argentina, § 7.5.1 [CLA-0021] / [RLA-0021]; France-Hungary
BIT, Art. 5(2) [CLA-0001] / [RLA-0079]; Yas Banifatemi and Andre Von Walker, France, in Commentaries
on Selected Investment Treaties (Chester Brown ed., 2013) 266 [RLA-0207]; UNCTAD, Expropriation
(2012)”] [RLA-0239].
841
R-I § 256; R-II § 278; C-I § 359; C-II § 362.
842
R-II §§ 278 – 280; C-II § 359, 362, 368; France-Hungary BIT, Art. 5(2) [CLA-0001] / [RLA-0079].
843
R-II § 281 (emphasis in original); C-II §§ 173, 354; France-Hungary BIT, Art. 5(2) [CLA-0001] / [RLA-
0079].

would flow from such disputes. In respect of compensation, therefore, the term should be
interpreted as concerning lawful and unlawful dispossessions.844
510. Each treaty must be interpreted and applied as written, and ADC v. Hungary does not stand for
the proposition that there is a general rule of construction that would presume that the
compensation rule referred to in all BITs will apply only to lawful expropriations unless they
explicitly state that they also apply to unlawful expropriations.845 In British Caribbean Bank Ltd.
v. Belize, the tribunal rejected the approach that Claimants advocate here and instead found that
the standard of compensation set forth in the BIT provided the standard for breach thereof.846
Likewise, Claimants’ argument based on Vivendi is flawed, as the underlying treaty in that case
delineated the standard only for lawful compensation.847 It is, therefore, inapplicable here.
511. The Tribunal does not agree with Respondent’s view that, while accepting a distinction between
lawful and unlawful expropriation, it is “both necessary and logical”848 that the compensation
rules of Art. 5(2) should apply to both lawful and unlawful expropriation. It is by no means
“logical” that a breach of Art. 5(2) by an unlawful dispossession should not result in any wider
liability than a lawful dispossession. Most legal systems, though by different terminology and
criteria, distinguish between a “compensation” for lawful measures and a liability for “damages”
as a result for unlawful measures. As Claimants correctly argue, Art. 5(2) contains an express lex
specialis for lawful expropriation. Indeed, as confirmed in investment jurisprudence, including
ADC v. Hungary, unless a treaty contains a clear reference to damages due for unlawful
expropriation, the compensation rule referred to in the BIT will only apply to lawful
expropriation, with damages for unlawful expropriation being governed by customary
international law. The compensation rule prescribed in Art. 5(2) of the BIT, therefore, does not
apply to unlawful expropriation.849
844
R-II § 282; C-II § 173; France-Hungary BIT, Art. 9(2) [CLA-0001] / [RLA-0079].
845
R-II § 283; C-II § 356; ADC v. Hungary, [CLA-0030] / [RLA-0004].
846
R-II § 284; British Caribbean Bank Ltd. v. Government of Belize, UNCITRAL, PCA Case No. 2010-18, Award
(19 December 2014) [hereinafter “BCB v. Belize”] [RLA-0148].
847
R-II § 285; C-II §§ 180 – 182, 364; Vivendi v. Argentina [CLA-0021] / [RLA-0021].
848
C-I §§ 361 – 363; C-II § 348; R-I §§ 253 – 256.
849
C-I § 356; C-II §§ 347 – 356; CPHB-I §§ 168 – 172; France-Hungary BIT, Art. 5(2) [CLA-0001] / [RLA-
0079]; ADC v. Hungary, § 481 [CLA-0030] / [RLA-0004]; Sébastien Manciaux, Investissements Etrangers et
arbitrage entre Etats et ressortissants d'autres Etats – Trente années d'activité du CIRDI, Litec, 2004, § 674

512. Rather, the customary international law principle of full reparation was defined in the oft-cited
PCIJ Chorzow Factory case, and this principle has since been reflected in Art. 31 of the ILC
Articles. Under this standard, compensation must wipe out the consequences of the illegal act.850
Thus, the customary international law principle of full reparation includes reparation for
consequential damages.
B. THE STANDARD OF COMPENSATION FOR VIOLATION OF ART. 3 OF THE BIT
513. For a breach of Art. 3 of the BIT, the compensation awarded to Claimants should be determined
in accordance with customary international law.851 The principle of full reparation as articulated
by the PCIJ in Chorzow Factory and reflected in Art. 31 of the ILC Articles applies to claims
under Art. 3 of the BIT.852
514. Respondent’s breach of its FET obligation has caused Claimants to be deprived of the economic
value of their investment. As a result, Claimants are entitled to the same damages as would be
due in the case of an unlawful expropriation.853 This principle has been adopted by academics,854
and has been illustrated in cases.855
[CLA-0222]; Arnaud De Nanteuil, L'expropriation indirecte en droit international de l'investissement,

Editions A. Pedone, 2014, 186 [CLA-0223].
850
See discussion Meg Kinnear, “Damages in Investment Treaty Arbitration”, in Katia Yannaca-Small (ed.),
Arbitration under International Investment Agreement, a Guide to the Key Issues, Oxford University Press,
2010, 559 [CLA-0089]; Siemens v. Argentina, §§ 352 – 353 [CLA-0028] / [RLA-0063].
851
C-II §§ 376 – 378; Chorzów Factory (Claim for Indemnity) (Merits), Germany v. Poland, 1928 P.C.I.J. Ser.
A., No. 17, Judgment No. 13, Award (13 September 1928) [CLA-0079]; “Responsibility of States for
Internationally Wrongful Acts”, 53 UN GAOR Supp. (No. 10) at 43, UN Doc. A/56/83 (2001) Art. 31 [CLA-
0080].
852
C-II § 373.
853
C-II §§ 379, 382.
854
Id., at § 380; Campbell McLachlan, Laurence Shore, and Matthew Weiniger, International Investment
Arbitration Substantive Principles, 1st Edition, Oxford University Press, 2007, §§ 9.107 – 9.019 [CLA-0078];
Christopher F. Dugan, Don Wallace Jr., Noah Rubins and Borzu Sabahi, Investor-State Arbitration, Oxford
University Press, 2008, 579 [CLA-0228].
855
C-II § 381; CMS Gas v. Argentina Award, § 410 [CLA-0036]; LG&E Energy Corp., LG&E Capital Corp.,
and LG&E International, Inc .v. Argentine Republic, ICSID Case No. ARB/02/1, Award (25 July 2007)
[hereinafter “LG&E v. Argentina Award”] [CLA-0229] / [RLA-0138].

515. The cumulative breaches of Art. 5(2) and 3 of the BIT give rise to full compensation.856 A tribunal
confronted with multiple heads of loss including expropriation typically bases its award on the
measure of damages due in respect of expropriation because expropriation typically gives rise to
the highest level of reparation and, as a consequence, other treaty breaches would not cause
additional losses.857 Here, Respondent’s violations of the BIT, individually and cumulatively,
have led to the destruction of Claimants’ investment and full reparation must be awarded in
respect of all of Claimants’ losses.858
516. Respondent has not acquiesced to Claimants’ proposed standard of compensation for claims under
Art. 3 of the BIT. The BIT does not define the manner in which damages are to be calculated for
treaty violations other than expropriation. In similar situations, relying on principles of
international law, most tribunals have held that the appropriate standard of damages for these
types of breaches is the loss “adequately connected to the breach” of that specific provision of
the treaty.859
517. Where expropriation and non-expropriatory breaches produce the same effects, it may be
appropriate to measure the loss, and therefore compensation, by focusing on the market value of
the investment loss. It would not be proper to make such an award where doing so would
compensate Claimants beyond the actual harm.860 Thus, the appropriate focus is on the nature
and extent of the loss caused by the conduct in question. Accordingly, if Claimants fail to show
that they were substantially deprived of their investment to support an expropriation claim, they
will be no more able to recover that loss under Art. 3 than under Art. 5(2).861
856
C-II § 372.
857
Id., at § 374; Vivendi v. Argentina, §§ 8.2.8, 8.2.10 [CLA-0021] / [RLA-0021]; Tecmed v. Mexico, § 188
[CLA-0022] / [RLA-0068]; CME v. Czech Republic Partial Award, § 618 [CLA-0023]; Mark Kantor,
Compensation Standards Valuation Methods and Expert Evidence, Ch. 2 (2008), 89 [CLA-0226]; Christopher
F. Dugan, Don Wallace Jr., Noah Rubins and Borzu Sabahi, Investor-State Arbitration, Oxford University
Press, 2008, 579 [CLA-0228].
858
CPHB-I §§ 176 – 178.
859
R-II § 294 – 296; C-II § 371; S.D. Myers v. Canada Partial Award, § 309 [CLA -0027]; Marvin Feldman v.
Mexico, §§ 194 – 197 [CLA-0013] / [RLA-0041]; S.D. Myers, Inc. v. Government of Canada, NAFTA, Second
Partial Award (21 October 2002) § 140 [RLA-0174].
860
R-II § 297; Marvin Feldman v. Mexico, § 194 [CLA-0013] / [RLA-0041].
861
R-II §§ 298 – 299; LG&E v. Argentina Award, § 45 [CLA-0229] / [RLA-0138].

518. As the Tribunal has concluded above that it does not need to examine whether, in addition to the
breach found above regarding Art. 5(2) of the BIT, there is also no need to examine that standard
for compensation for a possible breach of Art. 3.
C. ARGUMENTS RELATED TO THE PARTIES’ AND EXPERTS’ DAMAGES CALCULATIONS
519. The Parties also agree that, in case the Tribunal finds a breach of the BIT and does not apply the
compensation standard of Art. 5(2) for lawful measures, damages may be assessed using a DCF
method,862 though they disagree how it should be applied in the present case.863
520. In their post-hearing submission, Claimants updated their losses to total EUR 27.4 million before
interest (as opposed to EUR 26,909,000 before interest).864 Claimants reported that the loss in
value of CD Hungary was updated to EUR 23.6 (as opposed to EUR 23.2 million in the Second
FTI Report) and the value of Výroba’s lost profits amount to EUR 3.8 million (as opposed to
EUR 3.7 million).865 Claimants seek to recover for the loss of the value of the expropriated
enterprise and the value of their subsidiary, Výroba, from which CD Hungary procured its
vouchers.866 The Second FTI Report adjusted the discount rate related to CD Hungary from
12.6% to 12.8%.867 The discount rate used to assess the lost profits of Výroba was adjusted in the
Second FTI Report from 10.5% to 11.7%.868
521. FTI confirms the reliability of its DCF valuation by comparing it to the results obtained by using
other methodologies: the market value of other publicly-listed comparable companies and past
862
In the DCF assessment, the business’s year-on-year future cash flow (revenue less expenses) is projected from
the Valuation Date, onward. A discount rate is then applied to the projected net cash flow to calculate the
present value of those cash flows.
863
CPHB-I § 163; Navigant’s Opening Slide 4; Tr. Day 3 at 127:18-22 (Navigant); R-I § 251.
864
CPHB-I § 279; C-II § 420.
865
CPHB-I § 279; C-II §§ 429 (reporting the value of CD Hungary as EUR 23.2 million) and 432 (reporting
Výroba’s lost profits as EUR 3.7 million).
866
C-I § 371.
867
C-II § 427; Second FTI Report, Appendix 3 para A3.43, A3.12-3.16 - 3.21[CEX-2].
868
C-II § 430.

transactions involving companies comparable to CD Hungary. FTI’s DCF valuation is well
within range values derived from these benchmarks.869
522. The DCF methodology is most appropriate for assessing Claimants’ losses because it best reflects
the value of an enterprise that is well-established and has been operating for a sufficient period of
time to allow for a meaningful projection of future profits.870 Claimants have demonstrated that
CD Hungary was a successful and profitable operation. The conclusion that there would have
been future profits is well-founded, satisfying the test for the award of future lost profits. 871
Although some tribunals have been reluctant to apply the DCF valuation methodology, this is of
no relevance to the present case. Unlike the claimants and/or investments in Siemens AG v.
Argentina, Wena Hotels v. Egypt, Metalclad v. Mexico, and Siag v. Egypt, CD Hungary had a
long operational history and had been reliably profitable since 2004.872 Indeed, on the Valuation
Date, CD Hungary had been operational for over 15 years and had just completed its 8 th year of
profitability, which is sufficient for deriving reliable cash flow projects for a future 5-year period.
Unlike in the Tecmed and SPP v. Egypt cases, applying the DCF methodology in such a situation
cannot be described as “speculative.”873
523. In calculating CD Hungary’s future revenues for 2012 – 2016, FTI projected CD Hungary’s future
issuance volume based on (1) CD Hungary’s past performance (issue volume and market share)
869
C-I §§ 393 – 394; First FTI Report, §§ 5.1, 5.10 – 5.24 [CEX-1].
870
C-I §§ 374 – 376, 385; C-II § 384; Biwater v. Tanzania, § 793 [CLA-0017] / [RLA-0016]; Sergey Ripinsky
and Kevin Williams, Damages in International Investment Law, BIICL, 2008, 195 [CLA-0088]; Meg Kinnear,
“Damages in Investment Treaty Arbitration”, in Katia Yannaca-Small (ed.), Arbitration under International
Investment Agreement, a Guide to the Key Issues, Oxford University Press, 2010 563 [CLA-0089]; Campbell
McLachlan, Laurence Shore, and Matthew Weiniger, International Investment Arbitration Substantive
Principles, 1st Edition, Oxford University Press, 2007, § 9.73 [CLA-0090].
871
C-I § 377 – 378; C-II §§ 386 – 388; R-I §§ 257 et seq.; Metalclad v. Mexico, §§ 120, 121 [CLA-0016] / [RLA-
0043]; “Draft articles on Responsibility of States for Internationally Wrongful Acts, with commentaries”,
Yearbook of the International Law Commission, 2 vol. II, Part Two (2001) 104 [CLA-0081]; Sergey Ripinsky
and Kevin Williams, Damages in International Investment Law, BIICL, 2008, 206 [CLA-0091]; First FTI
Report, §§ 3.59, 3.74 [CEX-1]; First report on State responsibility by Mr. Roberto Ago, Special Rapporteur –
Review of previous work on codification of the topic of the international responsibility of States (Harvard Draft
Convention on the International Responsibility of States for Injuries to Aliens), Yearbook of the International
Law Commission (Extract)(1969, vol. II) [RLA-0099].
872
C-II § 389 – 390; Metalclad v. Mexico, §§ 120, 121 [CLA-0016] / [RLA-0043]; Siemens v. Argentina, §§ 357,
379 [CLA-0028] / [RLA-0063]; Siag v. Egypt, § 570 [CLA-0040]; Wena Hotels Limited v. Arab Republic of
Egypt, ICSID Case No. ARB/98/4, Award (8 December 2000) [hereinafter “Wena v. Egypt”], § 124 [RLA-
0077]; First FTI Report, Figure 3-5 [CEX-1].
873
C-II §§ 391 – 392; R-I § 274; Tecmed v. Mexico, § 186 [CLA-0022] / [RLA-0068]; Southern Pacific Properties
(Middle East) Limited v. Arab Republic of Egypt, ICSID Case No. ARB/84/3, Award on the Merits (20 May
1992) §§ 187 – 188 [CLA-0230].

and (2) third party projections of likely growth in the European market. FTI projected that CD
Hungary’s issue volume would have increased by 13.8% in 2012 and that this rate of increase
would have fallen to 5% in 2016.874 Next, FTI calculated the revenues flowing from that issue
volume. Revenues include (1) issuing commission (assumed to be 1.09% in the projection period,
based on the average commission in 2011); (2) reimbursement commission (assumed to be 2.97%,
the 2011 average); (3) revenue from lost or expired vouchers (assumed to be 0.3% of issue
volume); and (4) financial income (assumed to be 5% of cash flows).875 Future expenses were
then deducted from these revenues. FTI next adjusted these cashflows to take depreciation,
overhead costs, capital expenditure, and tax into account. 876 Following the initial projection
period, FTI assumes that the business continues after the terminal date.
524. Next, FTI applied a discount rate to the cash flows. The discount rate was initially calculated as
CD Hungary’s weighted average cost of equity capital (“WACC”), as derived from (1) the risk
free rate (calculated at 1.9%, the risk free rate of US government bonds with a 10-year maturity),
(2) the equity market risk premium (calculated at 6.01%, representing the expected return on the
market portfolio), (3) Beta (0.72%, representing the degree of market risk of the asset, later
corrected to 0.96%), (4) country risk premium (3.6%, based on Hungarian equity markets as at
December 2011), and (5) small-size premium (2.0%, risks that are mitigated by CD Hungary’s
position as a subsidiary in a large company).877
525. In response to Navigant’s comments, the Second FTI Report adjusted the WACC to 12.8%.878
FTI also adjusted its analysis with respect to the value of the float, and this had a standalone effect
of reducing the value of CD Hungary in the but-for scenario by EUR 3.3 million.879
526. The alleged “uncertainty” in the Hungarian voucher market does not change FTI’s but-for
scenario analysis. Future legislative change was already reflected in FTI’s valuation of CD
Hungary in the following ways: (1) prior to 2012, there was a trend of increases in the tax
874
C-I §§ 386 – 387; First FTI Report, §§ 4.18, 4.37 [CEX-1].
875
C-I §§ 94, 388; Extract from Mazars Summary Notes on CD Hungary, “Le Chèque Déjeuner Kft., Hungary”,
dated 31 December 2009, 31 December 2010, and 31 December 2011 – 31 December 2013, at 6 [C-0044];
Dér Statement § 14 [CWS-1]; First Nagy Statement, §§ 9 – 10 [CWS-2]; First FTI Report, §§ 4.54, 4.61,
4.65 [CEX-1].
876
C-I § 389; First FTI Report, § A3.12 [CEX-1].
877
C-I §§ 390 – 391; First FTI Report, §§ A4.1, A4.29 – A4.43 [CEX-1].
878
C-II § 419; Second FTI Report, § 1.3 [CEX-2].
879
C-II §§ 425 – 426; Second FTI Report, §§ 2.8 – 3.9 [CEX-2] (correcting First FTI Report, §§ 4.63 – 4.66
[CEX-1]); First Navigant Report, §§ 159 – 160 [REX-1].

exemption limit for meal vouchers, (2) CD Hungary had previously been able to influence
voucher related legislation in Hungary, (3) CD Hungary had been able to adapt to unfavorable
legislation in the past, (4) changes in legislation are a standard business risk, and (5) a likely buyer
of CD Hungary has a portfolio that would diversify away CD Hungary’s specific risks. Thus, it
is unnecessary to add an additional risk premium to the discount rate.880
527. Claimants also pointed out that Respondent overstated the uncertainty associated with the meal
voucher market.881 Respondent was unable to rebut FTI’s response to Respondent’s criticisms,
contained in FTI’s Second Report, and Respondent’s proposed adjustment must be rejected. 882
First, Claimants clarified that “Claimants’ position is not that CD Hungary was somehow immune
from any legislative changes as a result of lobbying but rather that any nondiscriminatory
changes would not affect CD Hungary, in part because of its proven ability to prevent or limit
their negative effects.”883 Second, while it may be correct that fringe benefits legislation changed
yearly, that is not correct as far as meal vouchers are concerned.884 Third, Respondent’s claim
that there was a great deal of legislative uncertainty was contradicted by independent analyses of
the industry. 885 Fourth, FTI undermined Navigant’s position, which results in a quadruple
counting of the effects of any uncertainty.886
528. The Hungarian meal voucher market was not ready for dematerialization as of 1 January 2012.
At the Hearing, FTI explained that all of the evidence available in 2011 showed that projects
mandating dematerialization prior to the 2011 Reform had not made progress because the
Hungarian market was not ready.887 A prospective buyer would not have believed that a law
mandating dematerialization would be passed in the short term i.e., within 5 years. Navigant’s
claims that (1) CD Hungary and its competitors had considered launching or had launched
electronic vouchers prior to the 2011 Reform, and that (2) payment card trends were moving in
880
C-II § 409 – 411; R-I §§ 265, 267; Second FTI Report, §§ 5.39 – 5.41, 6.7, 6.10, 6.12; Appendix 3 §§ A.3.23
– A.3.27 [CEX-2]; First Navigant Report, §§ 24, 187 [REX-1].
881
CPHB-I § 195; Second Navigant Report, §§ 143 – 145 [REX-2].
882
CPHB-I §§ 196, 203; Second FTI Report, §§ 5.39 – 5.41, 6.7, 6.10 [CEX-2].
883
CPHB-I § 197 (emphasis in original); Tr. Day 3 at 121:17 – 122:4 (FTI).
884
CPHB-I §§ 198 – 199; R. Closing Slide 26; Tr. Day 3 at 133 (Navigant); PIT Summary Table (1996-2014) [C-
0046].
885
CPHB-I §§ 200 – 201; Tr. Day 3 at 64:25 – 65:4 (FTI); Deutsche Bank, Report on Edenred, 16 January 2012
[AC-14]; Deutsche Bank, Report on Edenred, 1 July 2010 [AC-15]; Redburn, Report on Sodexo, 6 October
2011 [AC-16].
886
CPHB-I § 202; Tr. Day 3 at 65:5-14 (FTI).
887
CPHB-I § 204.

888
the direction of dematerialization were unconvincing and unsubstantiated. Further,
Respondent’s 2012 belief that it had no other option but to issue the Erzsébet voucher in paper
contradicts Navigant’s position that the market was ready for dematerialization at the time.889
Navigant ultimately concluded at the Hearing that the market was not ready for dematerialization
as at the valuation date. 890 Accordingly, the Tribunal should reject Respondent’s proposed
adjustments to Claimants’ framework.891
529. The “but-for” scenario used by FTI is one where Respondent did not introduce the SZÉP Card,
the Erzsébet voucher, or the discriminatory tax framework (the 2011 Reform).892 In order to
calculate Claimants’ losses, the actual value of CD Hungary must be deducted from its value in
the but-for scenario. Since CD Hungary’s business has been completely destroyed, its value in
the actual scenario is negative. It carries costs for (1) redundancy and outplacement of staff (HUF
216,423,235 and HUF 18,339,843, respectively), (2) early termination of vehicle rentals (HUF
20,924,432), and (3) lawyers’ costs related to pursuing the case before the EC (HUF 55,431,255).
These costs form part of the “financially assessable” consequences of the breach recoverable
under the restitutio in integrum principle and as contained in Art. 36 of the ILC Articles. As a
result of such expenses, CD Hungary made losses totaling EUR 2,670,000 in 2012 and 2013.893
530. Navigant’s Alternative But-For Scenario considers that the only breaches alleged by Claimants
are the discriminatory tax rate, and constructs a scenario where CD Hungary was able to
participate in the SZÉP Card program or issue vouchers subject to the same tax treatment as the
SZÉP Card and the Erzsébet voucher.894 In this scenario, Respondent argues that (1) Claimants’
losses should account for a 1.5% commission cap imposed on the SZÉP Card because all other
888
Id., at §§ 206 – 211; Tr. Day 3 at 191:18 – 192:3, 195:2-24, 205 – 208 (Navigant); CD Hungary Internal Memo,
Hungary Card Issuance, 7 July 2011 [NAV-0058]; Dér Statement, §§ 39 – 40 [CWS-1].
889
CPHB-I § 212 – 213; Tr. Day 3 at 197 – 209 (Navigant).
890
CPHB-I § 214; Tr. Day 3 at 201:14-16 (Navigant).
891
CPHB-I § 215.
892
C-II § 395; First FTI Report, § 2.8 [CEX-1]; Second FTI Report, § 2.5 [CEX-2].
893
C-I §§ 395 – 398; First FTI Report, §§ 4.106 – 4.107 [CEX-1]; Siemens v. Argentina, § 352 [CLA-0028] /
[RLA-0063]; “Draft articles on Responsibility of States for Internationally Wrongful Acts, with
commentaries”, Yearbook of the International Law Commission, 2 vol. II, Part Two (2001) §§ 1, 34 [CLA-
0081]; Pope & Talbot Inc. v. The Government of Canada, UNCITRAL, Award in respect of Damages (31 May
2002) [hereinafter “Pope & Talbot v. Canada Damages Award”], § 85 [CLA-0096]; Sergey Ripinsky and
Kevin Williams, Damages in International Investment Law, BIICL, 2008, 302-303 [CLA-0097]; Reinhard
Unglaube v. Republic of Costa Rica, ICSID Case No. ARB/09/20 and Marion Unglaube v. Costa Rica, ICSID
Case No. ARB/08/1, Award (16 May 2012) § 307 [CLA-0098].
894
C-II § 396 – 397; CPHB-I §§ 216 – 217; First Navigant Report, §§ 116 – 124, 154 – 155 [REX-1].

issuers would have lowered their commission rates in response to the SZÉP Card, (2) CD Hungary
would have been obliged to return expired vouchers to the employer instead of retaining the
amounts as revenue, and (3) CD Hungary’s market share during the forecast period would not
have increased. None of these arguments have any bearing on the valuation of Claimants’
losses.895 Respondent has not demonstrated how Navigant’s Alternative But-For Scenario could
be used to measure the Claimants’ losses. It is too speculative to be of any value896 and this
conclusion is not altered by the Award in Amco, which concerns the question of the relevance of
factors subsequent to an internationally wrongful act when calculating damages. 897 FTI’s
evaluation of the consequences of the 2011 Reform using the but-for valuation technique is
entirely consistent with the Amco tribunal’s conclusions.898
531. The Second FTI Report concludes that the introduction of the SZÉP Card and the Erzsébet
voucher would not have affected CD Hungary’s business, were the operators of those cards not
entitled to more favorable tax treatment. Without that, they would have been ordinary competitors
in the voucher market.899 First, since the market was not ready for dematerialization, the SZÉP
Card Issuers could not have succeeded in the market. The SZÉP Card has only taken a limited
share of the market, even with the preferential tax rate.900 Without the preferential tax rate, neither
the SZÉP Card nor the Erzsébet voucher issuers would have taken a significant market share from
CD Hungary, due to the high barriers to entry in this market, as well as cost differences between
the products.901 In particular, the Tribunal should reject Navigant’s change in position that the
Erzsébet voucher would have gained 20% of the market, rather than the initial 0% assigned to it,
895
C-II § 398 – 399; R-I §§ 295 – 297.
896
C-II § 402 – 403, 408; Second FTI Report, §§ 4.1, 4.12, 4.26 [CEX-2].
897
C-II § 404 – 405; R-I § 263.
898
C-II § 406; Amco Asia Corp. v. Indonesia, ICSID Case No. ARB/81/8, Final Award (5 June 1990) § 186 [RLA-
0008].
899
C-II § 407; CPHB-I §§ 218 – 228; Tr. Day 3 at 148 – 152 (Navigant); FTI Opening, slide 13; Second FTI
Report, §§ 4.34 – 4.46 [CEX-2]; Second Navigant Report, §§ 11, 40 – 41 [REX-2].
900
CPHB-I §§ 230 – 233; Tr. Day 3 at 62, 77, 80 (FTI).
901
CPHB-I §§ 234 – 252; Tr. Day 3 at 153 – 170, 172, 175, 176 – 183; First Navigant Report, §§ 32, 37, 108,
124, 236 – 237 [REX-1]; First FTI Report, § 3.14 [CEX-1]; Second FTI Report, §§ 2.30 – 2.31, 4.37 – 4.40
[CEX-2]; Second Navigant Report, §§ 42 – 45, 47 – 50, 114 [REX-2]; Wang, “Social responsibility in new
ventures: Profiting from a long-term orientation,” Strategic Management Journal, February 2012 [NAV-0049];
Cheng, Beiting, Ioannis Ioannou, and George Serafeim, “Corporate Social Responsibility and Access to
Finance,” Strategic Management Journal, accessed 12 July 2016 [NAV-0050]; MNB, 2012 Report on Payment
Systems in Hungary [NAV-0057]; Decree 55-2011 on the Szechenyi Recreation Card [AC-0007]; MF Global,
Report on Edenred, 29 June 2010 [AC-0012]; Deutsche Bank, Report on Edenred, 1 July 2010 [AC-0015].

because Navigant – preparing expert reports in the related Sodexo and Edenred Arbitrations – was
quite familiar with the market when it issued its first report.902
532. Putting Claimants in the same position that would have existed had the internationally wrongful
act not been committed means that the damages suffered as a result of Respondent’s breaches of
the BIT by Výroba – a wholly owned subsidiary of CD International that supplied CD Hungary
vouchers from 2002 – 2013903 – must be included. The damages suffered by Výroba are the only
consequential damages claimed. 904 Claimants correctly determined the damages related to
Výroba as full compensation for the 44% loss of Výroba’s business, which it derived from CD
Hungary. 905 The losses suffered by Výroba flowed through to Claimants as shareholders in
Výroba. Compensation for Claimants’ losses must “include all losses suffered by Výroba as a
result of the destruction of the business of CD Hungary’s business.” 906 Claimants state that
Respondent’s submissions confuse the investment protected under the BIT and the damages
claimed.907
533. FTI considered that Výroba is located in the Czech Republic and conducted its business in Czech
koruna and adjusted for inflation appropriately. Like CD Hungary, FTI used the DCF
902
CPHB-I §§ 245 – 246; Edenred Award, 8 and § 544.
903
C-I §§ 399 – 400; CPHB-I §§ 270 – 272; Extract from the commercial registrar of the Municipal Court of
Prague, § C, Le Chèque Déjeuner s.r.o. (CD Czech Republic), 18 May 2017 [C-0189]; Extract from the
commercial registrar of the Municipal Court of Prague, § C, Le Chèque Déjeuner Výroba s.r.o., 18 May 2017
[C-0190]; Extract from the Business Register of the District Court Bratislava I, Le Chèque Déjeuner s.r.o. (CD
Slovenska Republica), 18 May 2017 [C-0191].
904
CPHB-I §§ 173 – 174; First Navigant Report, §§ 243 – 246 [REX-1].
905
C-I § 401; C-II §§ 412 – 418; R-I §§ 268 – 271; Chorzów Factory (Claim for Indemnity) (Merits), Germany v.
Poland, 1928 P.C.I.J. Ser. A., No. 17, Judgment No. 13, Award (13 September 1928) [CLA-0079]; Meg
Kinnear, “Damages in Investment Treaty Arbitration”, in Katia Yannaca-Small (ed.), Arbitration under
International Investment Agreement, a Guide to the Key Issues, Oxford University Press, 2010 558 [CLA-
0089]; Sergey Ripinsky and Kevin Williams, Damages in International Investment Law, BIICL, 2008, 89
[CLA-0226]; LG&E v. Argentina Award, § 31 [CLA-0229] / [RLA-0138]; Sergey Ripinsky and Kevin
Williams, Damages in International Investment Law, BIICL, 2008, 105-106 [CLA-0234]; Christopher F.
Dugan, Don Wallace Jr., Noah Rubins and Borzu Sabahi, Investor-State Arbitration, Oxford University Press,
2008, 567 [CLA-0235]; Tidewater v. Venezuela, § 129 [CLA-0236]; First FTI Report, §§ 6.10 – 6.25 [CEX-
1].
906
C-II §§ 414 – 417; see also Sergey Ripinsky and Kevin Williams, Damages in International Investment Law,
BIICL, 2008, 89 [CLA-0226]; Sergey Ripinsky and Kevin Williams, Damages in International Investment
Law, BIICL, 2008, 105-106 [CLA-0234]; Christopher F. Dugan, Don Wallace Jr., Noah D. Rubins and Borzu
Sabahi, Investor-State Arbitration, Oxford University Press, 2008, 567 [CLA-0235]; Tidewater v. Venezuela,
§ 129 [CLA-0236]; LG&E v. Argentina Award, § 31 [CLA-0229] / [RLA-0138]; Chorzow Factory (Claim
for Indemnity) (Merits), Germany v. Poland, 1928 P.C.I.J, Ser. A., No. 17, Judgment No. 13, Award (13
September 1928) [CLA-0079].
907
C-II § 413.

methodology for the valuation of Výroba’s future lost profits. This was appropriate, since Výroba
has a profitable trading history from 1999 to 2011. 908 Respondent’s submissions opposing
compensation for these losses confuse the investment protection under the BIT and the damages
claimed.909
534. While Respondent has argued that this would not translate to a one-for-one loss for Claimants,
from an economic point of view, the impact of the losses suffered by a 100%-owned group
company will be suffered at the group level, by Claimants. 910 Claimants’ case is materially
different from the Nykomb case, as Claimants’ damages claim is for Výroba’s lost profits only.
FTI has deducted all of the elements listed by the Tribunal in Nykomb from the income lost as a
result of Respondent’s breaches of the BIT.911 The only deduction to Výroba’s profits that could
be argued to be necessary here would be dividend withholding tax, but no such taxes applied
because EU law forbids the application of taxes on dividends distributed by EU companies to
their parent companies also incorporated in the EU, as is the case here.912 FTI’s calculation of
Claimants’ loss of Výroba’s profits amounts to EUR 3.8 million.913
535. FTI has concluded that Claimants and CD Hungary would have had every incentive to optimize
the position of CD Hungary and, therefore, considered various options for minimizing the effect
of the 2011 Reform. FTI concluded that CD Hungary took actions to minimize the effect of
Respondent’s actions.914
536. The amount to be awarded to Claimants should account for any tax liability that may be incurred
as a result of the Award. Various arbitral tribunals have accepted that compensation is to be paid
908
C-I §§ 402 – 404; Notarised deed (24 May 2002) [C-0055]; “Contrats Mandataires” between Výroba and CD
Hungary - 1 January 2004 - 22 December 2008 - 15 December 2010 - 29 August 2011 [C-0056]; First FTI
Report, § A4.48 [CEX-1].
909
C-II § 413.
910
CPHB-I § 273.
911
CPHB-I §§ 273 – 275; Tr. Day 3 at 58:4-20 (FTI); First FTI Report, §§ 6.10 – 6.25 [CEX-1]; Nykomb v. Latvia,
39 [CLA-0065] / [RLA-0048].
912
CPHB-I § 277; see Council Directive 90/435/EEC, amended by Directive 2003/123/EC.
913
CPHB-I § 279; FTI’s Opening, slide 4.
914
C-II § 436; Second FTI Report, § 4.53 [CEX-2]; First Navigant Report, § 244 [REX-1].

net of any taxes. To the extent that the relevant French taxation provisions differ from those in
Hungary, this should be taken into account.915
537. The Hearing confirmed that FTI’s assessment of Claimants’ losses is justified and, thus, reflects
an objective view of CD Hungary’s expected performance but-for the 2011 Reform, which is the
view that a prospective buyer would have taken of CD Hungary’s value as of 1 January 2012.916
538. Respondent’s suggestion that Claimants’ losses should be reduced to reflect contemplated
legislative changes that did not occur is preposterous. 917 The unrealistic suggestion that CD
Hungary would be able to re-enter the market as of 1 January 2017 and that, therefore, the analysis
of Claimants’ damages should be adjusted to excluded losses beyond that date should be rejected
by the Tribunal.918 In addition, the adjustment should be rejected because the factual premise
upon which is based failed to materialize.919 Further, by maintaining the advantage of the SZÉP
Card, the legislative changes enacted in 2017 will likely have the effect of moving the entire meal
voucher market to the SZÉP Card, since only the latter will continue to benefit from a significant
tax advantage.920 Finally, there is no legal basis for the adjustment is based entirely on facts
subsequent to the valuation date and such facts can only be taken into account to increase the
quantum of a party’s loss, not the opposite.921
539. FTI made two final adjustments to the calculation of Claimants’ losses prior to the Hearing,
leading to an increase of EUR 0.5 million of the losses suffered by Claimants. These two
adjustments were technical and do not alter the general approach taken to valuing Claimants’
915
C-I § 415; C-II §§ 420 – 423; Siemens v. Argentina, § 403(1) [CLA-0028] / [RLA-0063]; Saluka v. Czech
Republic, § 389 [CLA-0049] / [RLA-0059]; Achmea v. Slovakia Award, § 333 [CLA-0237].
916
See generally CPHB-I §§ 179 – 186.
917
CPHB-I § 253.
918
CPHB-I §§ 254 – 257, 263 – 264; compare Tr. Day 3 at 72:15-25 (FTI) and 223:8-19 (Navigant), see also Tr.
Day 3 at 143:24 – 144:1, 223:4-5 (Navigant); Navigant’s Opening Slide 31; Second Navigant Report, § 171
[REX-2].
919
CPHB-I §§ 258 – 262; 266 – 267; Tr. Day 3 at 219:9-23, 220:17-23, 223 – 224 (Navigant).
920
CPHB-I § 265; Tr. Day 3 at 94:9 – 95:25 (FTI).
921
CPHB-I §§ 258, 268 – 269; Mark Kantor, Valuation for Arbitration: Compensation Standards Valuation
Methods and Expert Evidence, Kluwer Law, 2008, 65 – 66 [CLA-0086]; Irmgard Marboe, “Compensation and
Damages in International Law The Limits of ‘Fair Market Value’”, Transnational Dispute Management Vol.
4, Issue 6 (November 2007) [CLA-0087]; Siemens v. Argentina, § 360 [CLA-0028] / [RLA-0063]; Yukos v.
Russia, §§ 1766 – 1768 [CLA-0071].

losses. The adjustment to the terminal value increases Claimants’ losses, but the adjustment
related to the WACC tax rate reduces the losses.922
540. If the Tribunal finds that the introduction of the SZÉP Card and the Erzsébet voucher are bona
fide regulations but that the tax differential breached the BIT and caused a total loss of Claimants’
investment, Navigant has calculated the appropriate amount of damages, excluding interest, as
EUR 7,552,000. If the Tribunal accepts Respondent’s argument as to the appropriate
compensation standard set forth in Art. 5(2) of the BIT, this amount needs to be further reduced
to eliminate the amounts claimed for Výroba’s lost profits (EUR 126,000), redundancies,
outplacement costs and vehicle lease penalties (EUR 872,707), lawyers’ fees (EUR 186,377),
and/or the Terminal Value of CD Hungary (EUR 1,422,642).923
541. Although some tribunals have awarded compensation under an additional head of damage to
“wipe out the consequences of the wrongful act”, that would only become relevant if the Tribunal
declined to apply the standard articulated in Art. 5(2) of the BIT. Claimants must demonstrate
that they actually incurred the incidental damages after the breach, including those needed to
mitigate harm. Claimants’ claims for damages related to (1) redundancy and outplacement costs
/ equipment costs, (2) lawyers’ fees associated with pursuing complaints before the EC, and (3)
lost profits associated with Výroba are too remote or unforeseeable (defined as being not
reasonably anticipated by both parties as the probably result of the breach at the time of the
breach) to be compensable. For the first items, Claimants have not proven the circumstances
surrounding these expenditures, why they were incurred, and if they were incurred.924 The same
is true for the lawyers’ fees, which were not incurred in the course of fending off particular attacks
by Hungary, but were presumably lobbying costs that Claimants incurred as a matter of due course
when Claimants elected to challenge Hungary’s regulatory powers.925
922
CPHB-I §§ 279 – 281; FTI Opening, Slide 4; Tr. Day 3 at 52:20 – 53:8 (FTI).
923
R-II §§ 354 – 355; Second Navigant Report, Table 1 [REX-2].
924
R-II §§ 329 – 334; C-I § 396; CD Hungary’s exceptional Costs, November 2014, § 6.3.3 [AC-45]; Sergey
Ripinsky and Kevin Williams, Damages in International Investment Law, §§ 5.1, 5.4 and 5.52 (2008) 162
[RLA-0232].
925
R-II §§ 335 – 337; Pope & Talbot v. Canada Interim Award, §§ 156, 160, 169 – 170, 181 [CLA-0014]; Letter
from Edenred, Sodexo and Chèque Déjeuner to Mr. Michel Barnier (European Commissioner, Internal Market
and Services) (6 April 2012) [C-0164]; Pope & Talbot v. Canada Damages Award, § 85 [RLA-0169].

542. Claimants have failed to prove the requisite nexus between their losses and the 2011 Reform. The
limited evidence indicates that there were many factors contributing to Claimants’ losses.
Claimants’ 27 March 2012 Hungarian Branch Strategic Meeting Presentation indicates that 32%
of Claimants’ customers were lost for reasons unrelated to the 2011 Reform and indicated
additional factors influenced the Hungarian voucher market.926
543. To properly apply the Chorzow Factory test, one must identify what the government most likely
would and could have legitimately done. The tribunal in Amco instructed that, if the purpose is
to put the investor in the position it would have been in without the breach, there is no need to
assume only data that would have been known to a prudent businessperson at the time.
Subsequent known factors bearing on the performance are to be reflected in the valuation
technique.927 Claimants’ valuation of CD Hungary is unsound because it improperly assumes
away market circumstances and actions that are not in violation of the BIT.928
544. Claimants claim that Navigant’s Alternative But-For Scenario is too speculative, because it is too
difficult to specify the conditions under which the SZÉP Card and the Erzsébet voucher would
have been issued, had existing issuers been allowed to participate. Under the BIT, there is nothing
that requires that the existing issuers be allowed to participate – only that the criteria for issuers
be non-discriminatory.929 Claimants have maneuvered their claim and now it appears that their
true claim relates to the so-called differential tax and not the introduction of the Erzsébet voucher
or the SZÉP Card.930
545. Claimants’ damage analysis is further unsound because it fails to reflect what Hungary did that
was consistent with its international law obligations. 931 Claimants do not allege that the
926
R-II §§ 300 – 301; Tr. Day 4 at 75:13 – 24 (R. Closing); Presentation, Hungarian Branch Strategic Meeting,
Le Chèque Déjeuner (27 March 2012) [R-0056] / [NAV-0066].
927
R-I § 263; Amco Asia Corp. v. Indonesia, ICSID Case No. ARB/81/8, Final Award (5 June 1990), § 186 [RLA-
0008].
928
R-II §§ 302 – 304; C-II §§ 397, 400 – 402; C-I §§ 5, 143, 167 – 168; John Barker, The Different Forms of
Reparation: Compensation, in The Law of International Responsibility (Crawford et. al eds., 2010) [RLA-
0208]; Rudolf Dolzer and Christoph Schreuer, Principles of International Investment Law (Oxford Univ. Press
2008) [RLA-0218]; Thomas W. Wälde and Borzu Sabahi, Compensation, Damages, and Valuation in
International Investment Law, 4 Transnat’l Dispute Mgmt. (10 February 2007) [RLA-0236].
929
R-II § 307; C-II §§ 402, 407; Thomas W. Wälde and Borzu Sabahi, Compensation, Damages, and Valuation
in International Investment Law, 4 Transnat’l Dispute Mgmt. (10 February 2007) [RLA-0236].
930
R-II §§ 305 – 306; C-II §§ 401, 407; Dér Statement, § 33 [CWS-1].
931
R-II § 308.

introduction of the SZÉP Card alone violated the BIT.932 There is no argument that Respondent
was not entitled to create a voucher for a charitable purpose and to distribute it exclusively. Thus,
the but-for world must account for the increased competition from the SZÉP Card and the
Erzsébet voucher. 933 Further, the 2011 Reform-based SZÉP Card requirements of a 1.5%
commission cap for affiliates and zero commission for employers/clients and the requirement to
return lost or expired vouchers to employers are not considered wrongful or in violation of
international law or the BIT. The competitive impact of these requirements among all voucher
issuers reduce Claimants’ claim to damages and cannot be assumed away.934 Claimants’ effort to
remove the impact of competition from the Erzsébet voucher and SZÉP Card, by claiming that if
they were introduced, in the absence of more favorable tax treatment, they would have been the
same as any other competitor cannot be successful.935 While CD Hungary’s competitive position
would have given Claimants some advantage, this would not be sufficient to preserve their market
share indefinitely. Claimants’ analysis fails to account for the benefits of the Erzsébet voucher
or the SZÉP Card that distinguish them in the market place.936 The low commissions and the
electronic cards would have helped the SZÉP Card compete with competitors’ vouchers.937
546. Claimants demand compensation based on a DCF valuation model that relies on speculative
projections for 2012 – 2016. Damages must be proven with reasonable certainty and speculative
hypotheticals must be disregarded. Hypothetical lost profits are typically only included where
the anticipated income stream is legally protected. Tribunals have rejected the use of a DCF-
based valuation in circumstances where the data was too speculative and unreliable. Here, CD
Hungary had no contractual arrangements or other means by which to ground a legally protected
interest. It lacked a sufficiently well-established history of dealings to make their anticipated
income stream certain.938
932
R-I § 262; C-I § 257; First Navigant Report, § 123 [REX-1].
933
R-II § 309.
934
Id., at §§ 310 – 311; R-I §§ 264, 294 – 298; First Navigant Report, §§ 238 – 241 [REX-1]; Second Navigant
Report, §§ 102, 105 [REX-2].
935
R-I §§ 277 – 278; R-II § 312, 315; C-II § 407; Second FTI Report, § 4.34 [CEX-2]; First Navigant Report, §§
190, 242 [REX-1].
936
R-II § 313; Second Navigant Report, § V(C), §§ 50, 106, 113 [REX-2].
937
R-II § 314; Second Navigant Report, §§ 50, 102 – 103 [REX-2].
938
R-I §§ 257 – 260, 272 – 275; ADC v. Hungary, § 502 [CLA-0030] / [RLA-0004]; BG Group Plc. v. The
Republic of Argentina, UNCITRAL, Final Award (24 December 2007) [RLA-0015]; Vivendi v. Argentina
[CLA-0021] / [RLA-0021]; Enron v. Argentina, § 385 [RLA-0030]; Metalclad v. Mexico [CLA-0016] /
[RLA-0043]; Siemens v. Argentina, § 290 [CLA-0028] / [RLA-0063]; Siag v. Egypt [CLA-0040]; Wena v.
Egypt, §§ 28, 123 [RLA-0077]; Mark Kantor, Valuation for Arbitration: Compensation Standards Valuation

547. The First FTI Report contains three defects that render the entire model flawed and the resultant
valuation inaccurate and inflated: (1) it fails to account for the impact of legitimate measures
taken by Hungary that were not in violation of the BIT, (2) it ignores uncertainties that existed in
the Hungarian voucher system, and (3) it overstates the loss associated with Výroba by incorrectly
ascribing the entirety of lost profits to events in Hungary.939
548. Claimants’ DCF analysis in the First FTI Report overstates the counterfactual valuation.940 The
First FTI Report made six errors that resulted in overstating CD Hungary’s forecasted cashflows.
First, by forecasting CD Hungary’s issue volumes based only on the 2011 numbers, FTI assumed
that volumes would continue to grow at the same pace as in other EU countries with far lower
penetration rates. The impact of correcting this error results in a EUR 356,000 reduction in the
value of CD Hungary.941 Second, FTI’s assumption that CD Hungary would continue to exhibit
higher growth in the forecasted period is unsupported, and is based on a one-time event
attributable to the combined tax-free exemption limit for hot and cold meal vouchers that released
pent-up demand for cold meal vouchers in 2011. Expectations for wage and job growth as of the
Valuation Date were weak. A reasonable buyer would anticipate more moderate growth during
the forecast period, beginning at 6 percent in 2012 and declining to 3 percent by the end of the
period. This results in a EUR 6.5 million reduction in the value of CD Hungary.942 Third, FTI
overestimates that income from three of CD Hungary’s four revenue streams. Sustaining the
value of revenue from lost and expired vouchers is unsustainable, given the shift to electronic
cards. This results in a EUR 1.1 million reduction in the value of CD Hungary.943 Fourth, with
regard to “floats” (financial revenues), FTI’s calculations are riddled with errors, which with
correction result in a EUR 3.3 million reduction in the value of CD Hungary.944 Fifth, the FTI
Report further assumes that the interest generated from the float will remain constant, contrary to
the downward inflation trend in the year preceding the Valuation Date. This results in a EUR 2.8
Methods and Expert Evidence (Kluwer Law International 2008) [RLA-0098]; First report on State
responsibility by Mr. Roberto Ago, Special Rapporteur – Review of previous work on codification of the topic
of the international responsibility of States (Harvard Draft Convention on the International Responsibility of
States for Injuries to Aliens), Yearbook of the International Law Commission (Extract) (1969, vol. II) [RLA-
0099].
939
R-I § 261; First Navigant Report, §§ 115 – 130 [REX-1].
940
R-I §§ 272, 276; First Navigant Report, § VIII [REX-1].
941
R-I §§ 279 – 281; First Navigant Report, § 138 [REX-1].
942
R-I §§ 282 – 284; First Navigant Report, §§ 141, 147, 149 [REX-1].
943
R-I §§ 285 – 286; First Navigant Report, § 157 [REX-1].
944
R-I § 287; First Navigant Report, § 160 [REX-1].

million reduction in the value of CD Hungary.945 Sixth, the FTI Report predicts no decrease in
client commissions over time, even though this source had shown constant decline since 2007
with only slight recovery in 2011. This results in a EUR 0.74 million reduction in the value of
CD Hungary.946
549. In their second report, FTI has failed to correct other flaws in their model. First, FTI’s
assumptions with respect to employment trends are inconsistent with the trends as of the
Valuation Date. Second, FTI’s projection that CD Hungary would experience an increase in their
market share disregards the increasingly competitive environment prior to the Valuation Date, as
reflected in CD Hungary’s eroding profit margins during those years. Third, FTI excludes the
impact that CD Hungary’s decision to not transition to using electronic cards would have of CD
Hungary’s revenues and financial performance. Fourth, FTI’s model assumes that CD Hungary’s
client commissions would increase after the Valuation Date, even though there is no analysis to
support this conclusion and it contradicts the falling trend in client commission prior to the
Valuation Date. Fifth, FTI’s WACC is understated as it (1) understates CD Hungary’s cost of
debt and (2) fails to add a risk premium for the specific risks to the Hungarian Market. 947
Although the First FTI Report calculated the WACC to be 12.6%, Navigant recommends using
the inflation forecast for the projection period through 2016, raising the inflation-adjusted cost of
equity to 13.3 %, which results in a EUR 1.6 million reduction in the value of CD Hungary.948
550. Claimants’ valuation contains assumptions about the voucher market that are not supported by
the available evidence. Claimants’ analysis overlooks the threat to CD Hungary’s business from
dematerialization. Although Claimants appear to erroneously state that they were not pursuing
dematerialization, evidence indicates that in 2011, CD Hungary developed an advertising
campaign promoting its own card.949 Navigant presents clear and convincing evidence that the
transition to electronic cards in Hungary was both inevitable and imminent. In contrast, the only
945
946
R-I § 289; First Navigant Report, §§ 167, 169 [REX-1].
947
R-II § 328; Second Navigant Report, § VII(A)(i)(1) – (3), (6), VII (A)(ii) [REX-2].
948
R-I §§ 290 – 292; First Navigant Report, §§ 172, 187 [REX-1].
949
R-II §§ 316 – 317; Second FTI Report, § 4.10 [CEX-2]; Presentation, Benefits of the Card System, Le Chèque
Déjeuner (17 June 2011) [R-0051] / [NAV-0059].

objective evidence that Claimants’ expert relies upon is a 2008 National Bank of Hungary Report
– and this report shows that even in 2008, the trajectory of digitization was positive.950
551. FTI’s valuation also ignores the uncertainty that existed within the fringe benefit system. The
Government routinely changed the relevant legal framework, and these changes would have
signaled uncertainty to a buyer. Nonetheless, FTI unsoundly assigns no value to this uncertainty
and assumes away all risk based on lobbying skills and adaptability. A hypothetical buyer would
not assume that CD Hungary’s operations would continue exactly as they had in the past,
regardless of legislative changes. FTI’s analysis is simply unreasonable and not the result of
sound methodology.951
552. Claimants’ valuation improperly includes the terminal value – and this results in a double
recovery. The CJEU Decision prompted Respondent to amend the laws challenged here by
Claimants. Thus, beginning on 1 January 2016, Claimants’ cold meal vouchers would receive
the same tax treatment as the Erzsébet voucher. Further, the criteria for becoming a SZÉP Card
Issuer have been lessened. The re-establishment of the so-called level playing field has been
established. Thus, Claimants have been granted the full reparation that they seek in the form of
restitution in-kind, rather than compensation. This analysis must be adjusted to exclude lost
profits beyond 1 January 2017. This value represents more than 64% of the claimed damages.952
553. FTI attempts to corroborate its results with an alternative “Market Approach”, to evaluate the
reasonableness of the results of the DCF valuation in the but-for scenario by comparing the subject
company to others. The uncertainty present on the Valuation Date of 1 January 2012 precludes
reliable comparisons. The selected companies Edenred and Sodexo are not comparable – both
have different growth and risk prospects as compared with CD Hungary. Ultimately, with respect
to Edenred, the FTI Report (1st) reached the same conclusion and acknowledged that Sodexo
operates a substantially different type of business, as it is primarily a catering company. Both
950
R-II § 318; National Bank of Hungary, “The payment card business in Hungary”, 2008 [FTI-02]; Second
Navigant Report, § 85 [REX-2].
951
R-I § 265 – 267; R-II §§ 319 – 323; Second FTI Report, §§ 6.3 – 6.10 [CEX-2]; American International Group,
Inc. and American Life Insurance Company v. The Islamic Republic of Iran, Award (December 19, 1983),
reprinted in 4 Iran-US Cl. Trib. Rep. 96, 107 [RLA-0009]; Occidental v. Ecuador ICSID Award, § 543 [RLA-
0049]; PIT Law as amended in 2010, effective 1 January 2011 [C-0068]; First Navigant Report, § 94 [REX-
1]; Second Navigant Report, § 144 [REX-2].
952
R-II §§ 324 – 327; Glamis Gold v. USA [RLA-0033]; Mobil v. Venezuela, § 378 [RLA-0046]; BCB v. Belize,
§ 190 [RLA-0148]; James Crawford, The International Law Commission’s Articles on State Responsibility:
Introduction, Text and Commentaries (Cambridge Univ. Press 2002), 218 [RLA-0215]; Second Navigant
Report, § 170 [REX-2].

companies are significantly more diversified and international than is CD Hungary and would be
valued much higher than CD Hungary.953
554. Claimants have not supported the damages associated with Výroba. The question of whether a
claimant can seek remedy for losses suffered by companies it owns rather than losses it suffered
itself has been discussed in the jurisprudence. Respondent argues in that context that Gemplus is
also instructive in the distinction between claims of a shareholder, as opposed to claims of the
company.954 Reparation serves to compensate an investor for losses it suffered – not for losses
suffered by third parties over which the Tribunal has no jurisdiction. 955 The measure for
compensation is the change in value of the shareholding and not, as Claimants allege, the loss
suffered by Výroba. Here, there is no basis to assume that the entire value of the lost profits
incurred by a subsidiary will be experienced in identical magnitude by the shareholder or an
indirect shareholder.956 Here, the damages are attenuated – Claimants are seeking to recover lost
profits suffered by a third company (Výroba) in a third country (Czech Republic) which one of
the Claimants (CD Internationale) purports to own indirectly through various non-party
subsidiaries that have not been properly identified. Claimants have failed to prove that either of
them are actually the ultimate shareholder of Výroba. The figure provided by Mr. Nicholson does
not demonstrate an actual link between the various alleged owners.957 Navigant states that CD
Hungary owned a 33.2% equity interest in Výroba as of the valuation date. 958 But, even if
Claimants had proven that CD Internationale was the ultimate shareholder, Claimants have shown
no injury to CD Internationale that would entitle them to compensation – there has been no loss
of dividends or decrease in the value of CD Internationale’s shareholding resulting from the
alleged injury to Výroba. There is no legal or economic basis to assume that the value of the lost
953
R-I § 299 – 304; First Navigant Report, §§ 194, 199, 205 [REX-1].
954
Gemplus v. Mexico, §§ 12 – 50 [CLA-0093]. AAPL v. Sri Lanka, § 95 [RLA-0146]; Khan Resources v.
Mongolia, § 388 [RLA-0163]; Sergey Ripinsky and Kevin Williams, Damages in International Investment
Law, §§ 5.1, 5.4 and 5.52 (2008) § 155 [RLA-0232].
955
R-II §§ 343; C-II §§ 416 – 417; Gemplus v. Mexico, §§ 12 – 50 [CLA-0093]; Second FTI Report, § 4.63 [CEX-
2]; Asian Agricultural Products Ltd. (AAPL) v. Republic of Sri Lanka, ICSID Case No. ARB/87/3, Final Award
(27 June 1990) [hereinafter “AAPL v. Sri Lanka”], § 95 [RLA-0146]; Khan Resources Inc. & Others v.
Government of Mongolia, UNCITRAL, PCA Case No. 2011-09, Award on the Merits (2 March 2015)
[hereinafter “Khan Resources v. Mongolia”], § 388 [RLA-0163]; Sergey Ripinsky and Kevin Williams,
Damages in International Investment Law, §§ 5.1, 5.4 and 5.52 (2008) § 155 [RLA-0232].
956
R-II § 344 n.566. Nykomb v. Latvia, 39 [CLA-0065] / [RLA-0048]; LG&E v. Argentina Award [CLA-0229]
/ [RLA-0138] (while measures had caused a significant decrease in revenues of Argentine subsidiaries, the
injury to the claimant was in the form of lost dividends.)
957
R-II §§ 343; Second FTI Report, § 4.63 [CEX-2].
958
See Second Navigant Report, §84 [REX-2]; Vyroba's audited financial statements, 2011 [CZ], 11 [AC-48-d].

profits incurred by a subsidiary will be experienced in identical magnitude by the shareholder or
even an indirect shareholder. Výroba is not an investor under the BIT and tribunals in similar
situations have declined to award damages. 959 Respondent argues that the losses allegedly
suffered by Výroba are not recoverable because Výroba is not an Investor under the BIT, nor is it
a protected investment.960 The case ADM v. Mexico, where the tribunal determined that it could
not award damages allegedly suffered by a subsidiary on the basis that the losses occurred outside
of Mexico, is illustrative and consistent with prevailing case law.961
555. Výroba’s losses were not unforeseeable. It would be reasonable to assume that in the four years
since the alleged breach, Výroba would have undertaken steps to mitigate their losses and to turn
their focus to other profitable activity.962 It is instead reasonable to assume that a company like
Výroba would, in the intervening four years since the purported breach, undertake steps to
mitigate these losses. Navigant reports that Výroba indeed mitigated losses and calculates
Navigant’s calculation of lost profits of Výroba (in Claimants’ corrected “But-For” analysis)
amounts to EUR 429,000.963
556. Claimants are foreclosed from recovering the damages sought because they failed to take
necessary measures to limit the damage sustained. Although Claimants have presented a March
2012 presentation where the need to study diversification was noted, there is no evidence that a
study on diversification was conducted or that diversification was attempted. Instead, Claimants
simply state that diversification was “not an option.” FTI then assumes that CD Hungary must
have considered diversification because there is no evidence that they did not. Neither statement
is sufficient to discharge Claimants’ duty to mitigate. 964 This stands in stark contrast to the
959
R-II §§ 344 – 346; Nykomb v. Latvia, 39 [CLA-0065] / [RLA-0048]; France-Hungary BIT, Art. 1 [CLA-0001]
/ [RLA-0079].; LG&E v. Argentina Award [CLA-0229] / [RLA-0138]; Canadian Cattlemen for Fair Trade
(formerly Consolidated Canadian Claims) v. United States of America, UNCITRAL, Award on Jurisdiction
(28 January 2008) [hereinafter “Canadian Cattlemen v. USA”], §§ 194 – 223 [RLA-0149].
960
R-II § 345; France-Hungary BIT, Art. 1 [CLA-0001] / [RLA-0079].
961
See R-II § 346 Midland v. Mexico [CLA- 0032]; Canadian Cattlemen v. USA, §§ 194-223 [RLA-0149].
962
R-I §§ 268 – 271, 293; R-II §§ 347 – 348; Extract from Internal CD Hungary presentation (22 June 2009) [C-
0062]; First Data, “Prepaid Card Issuingand [sic] POS Acquiring Services – Indicative Proposal for Le Chèque
Déjeuner Hungary” (4 July 2011) [C-0135]; AIG v. Kazakhstan, [CLA-0037] / [RLA-0006]; Biwater v.
Tanzania, § 785 [CLA-0017] / [RLA-0016]; Mark Kantor, Compensation Standards Valuation Methods and
Expert Evidence, Ch. 2 (2008), 102 [RLA-0226]; First Navigant Report, §§ 127, 128, 188 [REX-1]; Second
Navigant Report, § 95 [REX-2].
963
Second Navigant Report, §§ 94 – 95 [REX-2].
964
R-II §§ 349 – 350; Gabčíkovo–Nagymaros Project (Hung. v. Slovk.), 1997 I.C.J. 7 (25 September 1997) [RLA-
0159].

mitigation efforts that LCD’s Spanish subsidiary took to adapt to changing legislation in that
country.965
557. Testimony at the Hearing reaffirmed that Claimants’ damages analysis is inherently flawed and
cannot form the basis of any Award. Rather than seeking an amount that would make Claimants
whole, Claimants seek to be put in a position that they would never have obtained but for
breach.966 Claimants and their expert have conceded that their valuation makes no adjustments
for competition or for the introduction of an electronic card.967 Claimants’ model also does not
account for a reduction in commission rates and it assumes that the 2011 conditions or something
similar would prevail for the indefinite future.968 Claimants are asking the Tribunal to insulate it
from the completely foreseeable and accepted risks of the market, including imminent and
inevitable dematerialization.969
558. In contrast, Navigant demonstrated a sophisticated understanding of the Hungarian fringe benefit
system and of Claimants’ business. Navigant’s model reflects the fundamental dependence of the
system on tax incentives, the risk that a potential buyer would perceive in light of economic and
legislative changes, and the multi-faceted impact of the inevitable shift to electronic cards. 970
Navigant’s analysis enables the specific damages resulting from the allegedly wrongful acts to be
isolated and quantified. Since Claimants do not allege that Respondent was foreclosed from
introducing new fringe benefits or regulating issuers thereof, Claimants may only seek
compensation for harm flowing from the differential tax treatment. 971 By excluding the
introduction of the SZÉP Card and the Erzsébet voucher from the but-for model, Navigant’s
framework enables the Tribunal to determine a proper quantum of damages, should such
calculation prove necessary.972
965
R-II § 351; Second FTI Report, § 6.8 [CEX-2].
966
RPHB-I § 18.
967
Id.; Tr. Day 3 at 76:15-24 (Gans and Nicholson) (confirming that Mr. Nicholson made no adjustment to his
valuation to reflect new competition in the market), see also Tr. Day 3 at 82:16-23 (Gans and Nicholson); Tr.
Day 3 at 91:2-4 (Gans and Nicholson) (confirming that Mr. Nicholson made no adjustment to his valuation to
reflect dematerialization in Hungary); Tr. Day 4 at 91:8 – 16 (R. Closing).
968
RPHB-I § 18; Tr. Day 3 at 88:11-88 (Gans and Nicholson).
969
RPHB-I § 18; Tr. Day 2 at 69:21-23 (Gans and Nagy) (agreeing that Hungary would transition to electronic
vouchers).
970
RPHB-I § 19; Navigant Presentation, slides 7 – 19.
971
RPHB-I § 19, n. 51.
972
Id., at § 19.

559. In its closing statement Respondent also pointed out that Mr. Nicholson was instructed that one
of the breaches to the BIT was the fact that MNUA undertook a media campaign in relation to the
Erzsébet voucher. It is unclear how this could breach the BIT.973
560. Above, the Tribunal has found that there was a compensable breach of Art. 5(2) of the BIT, and
that the compensation standard is not governed by Art. 5(2) for lawful measures, but rather by the
full reparation principle of customary international law. Further, the Tribunal recalls that the
Parties accept 1 January 2012 as the Valuation Date.974 The Tribunal found that the destruction
of the value of Claimants’ shareholding was permanent at that point in time and accepted
Claimants’ decision to withdraw from the market in 2013,975 rendering the costs associated with
that withdrawal compensable.
561. The Tribunal recalls that the Parties and their Experts accept that using the DCF method is
appropriate in the present case.976 The Tribunal agrees and now proceeds to examine the experts’
application of the DCF method to the present case.
(a) DCF Valuation for Loss to CD Hungary
(i) The Parties’ and their Experts’ Agreements
562. The Tribunal recalls its conclusion that Respondent intentionally created a state monopoly and
evicted CD Hungary from the meal voucher market or, at the very least, it knew that the effect of
the 2011 Reform would be that no clients would continue to buy CD Hungary’s meal vouchers
and that they would instead buy the SZÉP Card and Erzsébet voucher. The but-for calculation
must start from that basis to assess the damage Claimants suffered compared to the value of their
investment, had such a state monopoly not been established.
563. FTI provided in detail reasons why a five-year projection period is appropriate, given the trading
history of CD Hungary and the relative maturity of the Hungarian market (with a 62% penetration
973
974
C-I §§ 379 – 384, 413; R-I § 250.
975
See § 353, supra.
976
CPHB-I § 163; Navigant’s Opening Slide 4; Tr. Day 3 at 127:18-22 (Navigant); R-I § 251.

rate), and in view of CD Hungary’s rates of growth in the years until 2011.977 Navigant also uses
a five-year projection period for its calculations. 978 The Tribunal agrees that the five-year
projection period is appropriate in the present case. The projection period for CD Hungary’s cash
flows, therefore, spans five years, from 2012 to 2016 while, thereafter, CD Hungary would have
only attained growth thereafter in line with the long-term rate of inflation in Hungary.979
564. The Experts agree that the appropriate discount rate should be a WACC. 980
(ii) The Parties and their Experts’ Key Areas of Disagreement
565. The Tribunal has considered and refers to the reports of both Experts in assessing the but-for
scenario, i.e., that without the introduction of the 2011 Reform. The key areas of disagreement
between the reports of FTI and Navigant regarding the but-for valuation of CD Hungary relate to
the following:981
x Hungary’s economic outlook,

x CD Hungary’s exposure to legislative risks,
x The market risk from Reforms of 2009 and 2010,
x The impact of SZÉP Card / Erzsébet voucher’s entry on the playing field, and
x The effect of transition to electronic cards (dematerialization.
566. Hereafter, to avoid repetition, the Tribunal will address these interlinked areas of disagreement
together. The Tribunal’s role, as explained in Gemplus, is not “to make a simplistic binary choice
between the two very different cases advanced by the two sides.”982 Rather, as did the PCIJ in
Chorzów, this Tribunal ascertains damages owed for the treaty violation by reference to the
different valuations presented by the Parties and their Experts and bases its conclusions on the
valuations, facts, and documents submitted to it. 983 This Tribunal’s exercise of its broad
977
First FTI Report, § 7.4 [CEX-1].
978
Second Navigant Report, §§ 30 - 31 [REX-2].
979
Second FTI Report, Table 5-1[CEX-2].
980
First FTI Report, §§ 3.14 – 3.16 [CEX-1]; Second Navigant Report, § 141 [REX-2].
981
Navigant Presentation at Hearing (24 May 2017), slide 4.
982
Gemplus v. Mexico, §§ 12-57 [CLA-0093].
983
Compare Chorzów Factory (Claim for Indemnity) (Merits), Germany v. Poland, 1928 P.C.I.J. Ser. A., No. 17,
Judgment No. 13, Award (13 September 1928), 53 – 54 [CLA-0079].

discretion is guided by its aim to conduct these proceedings efficiently, while ensuring fairness
to the Parties.984
567. Here, the helpful and plausible calculation spreadsheets provided by each Expert, which have
been the subject of review and comment by the opposing side, enable the Tribunal to conduct its
own calculation based on the factors identified and argued by both sides, without the need to
further revert to the Parties for calculations based on the elements that the Tribunal has found
persuasive.
568. The assumptions that inform the DCF projections in a fair market value analysis must be based
on information that would have been known to a hypothetical buyer as of the Valuation Date.
Therefore, it is appropriate to forecast growth in the Hungarian voucher market in accordance
with expected wage growth in Hungary as of the Valuation Date.985 The relevant macroeconomic
factors that indicate growth in revenues for the voucher market are: (1) employment growth
(increased demand), (2) higher minimum wages, and (3) higher inflation, which increases interest
rates, thereby increasing financial revenues earned from the cash float.986 Contrary to Navigant’s
assumption of a negative economic outlook as of the Valuation Date,987 the Tribunal is more
persuaded by FTI’s assessment of the situation that Hungary’s economic outlook was positive as
of that date. This would have affected the voucher market in Hungary and particularly CD
Hungary’s position in it. The issue volumes used by FTI are based on appropriate projections
that are supported by actual developments.988
569. Legislative risks existed for Claimants from the very beginning of their investment, as
Respondent’s relevant legislation was updated yearly. As Respondent has explained, 989
employers’ incentive to buy vouchers, and the employees’ incentives to use them, hinges on
preferential tax treatment – i.e., legislation that the Parties agree was updated regularly. Claimants
984
Compare Corn Products v. Mexico, § 19 (point 8) [CLA-0033].
985
First FTI Report, Figure 5-1 [CEX-1]; First Navigant Report, § 137, Appendix I.2f [REX-1].
986
First FTI Report, § 3.34 [CEX-1] (citing AC-19 Table 3-1; AC-8 3); see also Second FTI Report, §§ 5.9 – 5.12
[CEX-2].
987
Navigant based its assumption of a negative economic outlook as of the valuation date on Economist
Intelligence Unit, “Hungary Country Forecast,” November 2011, 13 [NAV-12], which contains positive
indications for Hungary’s growth from 2011 – 2016, including growth in employment (and, by extension, Issue
Volume) and growth in wages.
988
Second FTI Report, §§ 5.3 et seq. [CEX-2]; see also First Navigant Report, § 147 [REX-1] (citing Economist
Intelligence Unit, “Hungary Country Forecast,” November 2011, 13 [NAV-12] (showing that employment was
projected to increase during the relevant period)).
989
Supra, § V.A.

have shown that they were aware of legislative risk and took it into account and adapted to the
yearly changes, including the Reforms of 2009 and 2010. However, the 2011 Reform was
different. As concluded above, it was a series of measures that created a state monopoly which
was not foreseeable by Claimants and in fact dispossessed them of their investment, in violation
of the BIT.
570. The Experts disagree on whether an additional risk premium should be added to CD Hungary’s
WACC to account for the Hungarian market-specific risks that were present following the 2009
and 2010 voucher market reforms, which resulted in more uncertainty in the voucher market than
before.990 In response to those changes, however, CD Hungary maintained a strong competitive
position in the Hungarian voucher market in 2009 and 2010 and it achieved “our best ever results
in 2011.”991 The Tribunal, therefore, accepts that CD Hungary’s lobbying skills (i.e., its ability
to influence legislation) and its ability to adapt to legislative changes would mitigate legislative
risk, as shown in their past performance.992 A hypothetical buyer would have been able to assume
that CD Hungary’s operations would continue as they had in the past, regardless of legislative
changes (as they were to be expected from past practice, but not of the kind that have been found
to be a breach above) and how CD Hungary might be able to adapt to further reforms and to what
degree this would adversely impact CD Hungary’s margins/value. Therefore, the Tribunal finds
the additional legislative risk premium of 1.5% to be added to the WACC, as recommended by
Navigant, inappropriate.993 The Tribunal agrees with FTI’s use of the 12.8% WACC.
571. Navigant994 estimated that CD Hungary’s market share would gradually decline by approximately
one third (33 percent) over the projection period, because the SZÉP Card Issuers established
themselves in the hot meal voucher market and took market share from the incumbent issuers.
Having found the introduction of the SZÉP Card to be among the measures included in the Treaty
breach, however, the Tribunal cannot accept this assumption in the but-for analysis.
572. A potential buyer would have taken the transition to electronic vouchers (dematerialization) into
account because dematerialization would result in a reduction in revenues from lost or expired
990
First Navigant Report, § 187 [REX-1]; Second Navigant Report, § 143 [REX-2].
991
Dér Statement, §§ 32 – 37 [CWS-1].
992
First FTI Report, §§ 6.3 – 6.7 [CEX-1].
993
For detailed discussion see First Navigant Report, §§ 174 – 177 and 183 – 186 [REX-1].
994
Second Navigant Report, §§ 44, 113 [REX-2].

vouchers. While the experts agree that dematerialization would take approximately five years, 995
they disagree as to whether dematerialization would have begun on the Valuation Date (as
Navigant argues) or after the projection period (as FTI argues). CD Hungary had contemplated
dematerialization996 and was in the process of recruiting a POS contractor in June 2011, should
dematerialization become imminent.997 While dematerialization of vouchers represented a long-
term growth opportunity for CD Hungary that the company had studied since 2006, CD Hungary
did not consider that by the Valuation Date the Hungarian market was ready for electronic
vouchers. The Tribunal agrees that dematerialization was not imminent as of 1 January 2012 and
the documentary record confirms that Hungary was not prepared for dematerialization as of that
date.998 Indeed, the 2015 introduction of an electronic card combining the Erzsébet voucher and
SZÉP card999 confirms Hungary’s lack of preparedness for dematerialization as of the Valuation
Date.1000
573. The Experts agree that the revenue from lost/expired vouchers would be 0.3% in Issue Volume at
the Valuation Date, based on the actual revenues earned by CD Hungary from 2009 – 2011.1001
The Tribunal finds this assumption reasonable for the forecast period. Navigant’s assumption of
a 50% reduction in revenues lost and expired revenues vouchers over the forecast period was
based on dematerialization beginning at the Valuation Date – an assumption that the Tribunal has
rejected.1002
574. While later developments based on new decisions by Respondent after the Valuation Date were
not foreseeable for Claimants and, therefore, Claimants’ decision to shut down was justified as
concluded above, Respondent argues that they must be considered for the calculation of
Claimants’ future losses. Respondent argues that the CJEU Decision prompted Respondent to
amend the laws challenged here by Claimants. Beginning 1 January 2017, cold meal vouchers
995
See Second FTI Report, §§ 4.21 – 4.22 [CEX-2] (five or six years); Second Navigant Report, § 93 [REX-2]
(five years).
996
Benefits of the card system, flyer dated 17 June 2011 [NAV-59]; First Data, “Prepaid Card Issuingand [sic]
POS Acquiring Services – Indicative Proposal for Le Chèque Déjeuner Hungary” (4 July 2011) [C-0135].
997
First Data, “Prepaid Card Issuingand [sic] POS Acquiring Services – Indicative Proposal for Le Chèque
Déjeuner Hungary” (4 July 2011) [C-0135].
998
See e.g., “Shift to Digital Strategy,” Edenred, November 2011 [NAV-19].
999
Second FTI Report, § 4.14 [CEX-2].
1000
Second FTI Report, § 4.16 [CEX-2].
1001
First Navigant Report, § 157 [REX-1]; (accepting 0.3% as the starting point); First FTI Report, §§ 4.60 –
4.61, Figure 4-5 [CEX-1]; Second FTI Report, §§ 5.57 – 5.59 [CEX-2].
1002
Second Navigant Report, § 132, Appendix I.2g [REX-2].

were to receive the same tax treatment as the Erzsébet voucher and the criteria for becoming a
SZÉP Card Issuer were to be lessened. Respondent explains that these changes re-established the
so-called level playing field in the relevant market, and support Respondent’s argument for
excluding the terminal value, as it compensates Claimants in kind, rather than monetarily.1003 As
indicated, however, Respondent has not met its burden of proving the establishment of a level
playing field.
575. The Parties’ Experts accept that CD Hungary had growth of 13.8% in Issue Volume in 2011.1004
CD Hungary’s average growth rate in Issue Volume was 9.7% over the final two years (2010,
2011), 7.8% over the final three years (2009 to 2011), and 16.5% over the final four years (2008
to 2011).1005 The Tribunal considers that FTI has sufficiently justified the growth projection of
13.8% for CD Hungary. By contrast, Navigant has provided no sufficient documentary support
for its assumption of only 6.0% growth,1006 for its position that 13.8% growth projected toward
the future would be unreasonable, or that the 13.8% growth in 2011 was a one-time event, based
on pent up demand or customers pre-ordering vouchers.1007
576. Regarding impact of inflation on financial revenues, Navigant’s review of CD Hungary’s historic
financial revenues from 2006 through 2011, after adjusting for inflation, shows that CD
Hungary’s real return varied from negative 2.8 percent to positive 2.2 percent,1008 and that the
average real interest rate was just 0.2 percent and the median was 0.5 percent over this period.1009
Navigant’s analysis, if accurate, relies on an IMF Report that reports the true, rather than
forecasted, inflation rates for the projection period and is, thus, not appropriate for use in the but-
for scenario.1010 Instead, the Tribunal is more persuaded by FTI’s assessment, which references
a 2015 IMF Report that contains the actual and the then-projected values for each year.1011 FTI’s
1003
R-II §§ 324 – 327.
1004
First FTI Report, § 4.30 [CEX-1]; First Navigant Report, § 140 [REX-1].
1005
First FTI Report, § 4.30 [CEX-1] (citing RSM DTM Hungary, Cafeteria 2012, 7 December 2011 [AC-6b] –
[AC-6f]).
1006
First Navigant Report, § 149 [REX-1].
1007
Second Navigant Report, §§ 140 – 142 [REX-2].
1008
Id., at § 134, Appendix J.
1009
Id.
1010
Id., at Appendix J.
1011
IMF World Economic Outlook, Inflation expectations updated 28 September 2015 [FTI-9].

analysis was based on CD Hungary’s prior performance and relies on information that a
prospective buyer would have had at the Valuation Date.1012
577. Further, the Tribunal notes the competitive pressures facing the voucher market in 2009 – 2011
and CD Hungary’s strategy of pursuing government clients at particularly low client commission
rates. 1013 The Parties appear to rely on the same graph reflecting the historic trend of CD
Hungary’s Client Commission percentage.1014 FTI and Navigant agree that it is appropriate to
use Edenred as a benchmark for client commissions, 1015 but neither Expert has provided
Edenred’s Client Commissions for Hungary.1016 Edenred’s client commission rate from its global
operations was 1.6% in 2010.1017 Unable to report Edenred’s Client Commissions, FTI reports
that the Erzsébet Client Commission rates ranged from 3.1% – 3.5% from 2012 – 2014, which
was higher than the 1.09% Client Commissions projected for Claimants. 1018 Navigant’s
assumption in Appendix I.2c in the Corrected Framework, which is provided without
documentary support, is that Cold Voucher Commissions would be pressured to 0.75% due to
competition with SZEP and Erzsébet, Hot Voucher Network fees would be restricted to 1.5%,
and Client Commissions would be restricted to 0% due to SZEP.1019 While the Tribunal cannot
consider the effects of competition with the Erzsébet Voucher and the SZÉP Card in the but-for
scenario, it is nonetheless noteworthy that the Erzsébet Client Commission rates ranged from
3.1% – 3.5% from 2012 – 2014, which was higher than the 1.09% Client Commissions projected
for Claimants. The Tribunal is, therefore, not persuaded that it would be reasonable as at the
Valuation Date to project that Client Commissions would decrease by approximately 2% per year
until 2016.1020
1012
First FTI Report, § 4.65, Figure 4-6 [CEX-1]; Second FTI Report, § 5.48 [CEX-2].
1013
First Navigant Report, §§ 166 – 169 [REX-1].
1014
See id., at Figure 14 [REX-1]; First FTI Report, Figure 4-3 [CEX-1].
1015
Second Navigant Report, § 135 [REX-2] (citing First Navigant Report, §§ 166 – 169 [REX-1]), First FTI
Report, § 4.46 [CEX-1]; Second FTI Report, § 5.53 [CEX-2].
1016
Second FTI Report, §§ 5.53 [CEX-2].
1017
First FTI Report, § 4.46 [CEX-1] (citing Crédit Suisse, Report on Edenred, 27 July 2011, p 10 [AC-8]).
1018
Second FTI Report, § 5.55[CEX-2].
1019
Second Navigant Report, Appendix 1.2, Tab 1.2c [REX-2].
1020
Compare First Navigant Report, §§ 166 – 169 [REX-1].

578. CD Hungary did not have any debt at the Valuation Date, and while the Experts do not disagree
with FTI’s inclusion of debt in the WACC, Navigant states that FTI’s calculation of CD
Hungary’s WACC is understated.1021
579. FTI’s calculation of CD Hungary’s cost of debt relies as a benchmark on interest coverage ratios
of Edenred SA, Sodexo Pass International, Wex, and Fleetcor and thereby applies a rating of AA
which is the second-highest credit rating available.1022 Navigant points out that such a rating
equates the credit rating of CD Hungary to that of large, multinational, diversified parent
companies and that the other four companies relied on in comparison by FTI are significantly
larger and more diversified than CD Hungary.1023 FTI explains that CD Hungary is a wholly
owned subsidiary of Claimants – which is not disputed – with debt held at the parent company
level. That capital structure has no necessary connection with the risks of the Hungarian voucher
industry.1024 The Tribunal does not find it unreasonable to calculate CD Hungary’s debt based on
debt held at the parent company level: CD Hungary’s parent company in France is a large multi-
national company. Navigant has not provided sufficient evidentiary support for the need for an
additional 1% to be added to the cost of debt. The Tribunal, therefore, declines to add an
additional 1% premium on CD Hungary’s cost of debt, as recommended by Navigant.1025
580. The Tribunal has considered the Experts positions regarding the comparable companies analysis
that FTI used to cross-check its results. Indeed, while the analysis does not prove the accuracy of
FTI’s analysis, it does not weaken it as alleged by Navigant. In any event, the Tribunal has not
relied on it as such in its deliberations. The damages to be awarded in this case are based on a
factors analysis of each input in each Expert’s report. The comparable companies and comparable
transactions analyses, while interesting, did not assist in the assessment of each variable of the
Expert’s DCF models, and have ultimately had no impact on the Tribunal in reaching its
conclusions.
581. The Experts disagree regarding the acceptance of a Terminal Value, (i.e., value of lost cash flows
beyond the projection period). FTI maintains that following the standard approach in business
valuation, a Terminal Value must be added to the net present value of the cash flows in the
1021
Second Navigant Report, § 141 [REX-2].
1022
First FTI Report, Appendix 4, “Cost of debt ratings” worksheet [CEX-1].
1023
1024
Second FTI Report, § 3.15 [CEX-2]; First FTI Report, 2 [CEX-1].
1025

projection period. To determine this Terminal Value, FTI assumes that in the period beyond 2016,
CD Hungary would have grown at no more than the projected long-term rate of inflation in
Hungary, being 3%, which the Tribunal accepts as an accurate projection of Hungary’s long-term
inflation rate as at the Valuation Date. 1026
582. Navigant argues that the Terminal Value should be excluded.1027 The Tribunal agrees with FTI
that, indeed, it is standard practice to include a Terminal Value and sees no reason not to do so in
the present case. Respondent dispossessed Claimants of an investment with long-term income
generating prospects, and the proper compensation to be awarded is its fair market value as of the
Valuation Date. At the time of dispossession, there was no prospect that after a certain period,
Hungary would annul the legislative measures in breach of the BIT, as it now has. The BIT
provides that the fair market value must be established as of the Valuation Date, with the
information which a prospective buyer would have had at that time. There is, thus, no reason to
deduct the terminal value in CD Hungary’s DCF model.1028
583. The Tribunal notes that Claimants sought to amend their Terminal Value with the result that the
Terminal Value would increase, during the Hearing. While the Tribunal believes that Claimants
have met their burden of proof in establishing the Terminal Value and that this proposed
modification does not change that, it rejects the Claimants’ late amendment to the Terminal Value.
As this change was only introduced by the Expert in his oral testimony and then by Claimants
only in the post-hearing brief, and since there was no 2nd round of post-hearing briefs, Respondent
has not had an opportunity to object. Further, the Tribunal does not find that Claimants provided
the Tribunal sufficient evidence demonstrating what was changed or how, as only the results of
the new calculation was provided. Accordingly, the Tribunal does not accept the purported
correction.
(iii) Resulting damages for CD Hungary
584. Taking into account all the above considerations regarding CD Hungary (without Výroba and
without interest, both of which will be discussed hereafter), based on Respondent’s breach of the
BIT, the Tribunal accepts FTI’s calculation of damages to CD Hungary as summarized in FTI’s
second report, Appendix Four Tab “Total Losses.”
1026
First FTI Report, §§ 497, 498 [CEX-1].
1027
1028
The same conclusion was reached in the Edenred Award, §§ 620 – 622.

585. Accordingly, the damages suffered by CD Hungary are EUR 23,196,000.
(b) Losses Associated with Výroba
586. The Parties agree that Výroba is a third company located and incorporated in the Czech Republic,
and that Výroba supplied Claimants’ paper vouchers. The Parties dispute whether losses suffered
by Výroba are compensable in these proceedings, whether Výroba is 100% owned by either of
the Claimants and, if so, whether and to what extent such losses are compensable.
587. The Tribunal shares the view expressed in Gemplus cited by Respondent and in other
jurisprudence 1029 that the payment of damages resulting from a breach of a treaty serves to
compensate an investor for “losses it has actually suffered – not for losses suffered by third parties
over which the tribunal has no jurisdiction.”1030
588. The Claimants seek to recover lost profits suffered by a third company (Výroba) in a separate
country (Czech Republic) that one of the Claimants (CD Internationale) purports to own indirectly
through various different subsidiaries that are not parties to or part of the relevant investments.
Výroba is neither an “Investor” nor a protected investment under the BIT. The BIT defines
“investment” as assets established “in accordance with the legislation of the Contracting Party in
whose territory or maritime zones the investment was made.” 1031 Indeed, as pointed out by
Respondent, the case ADM v. Mexico deals with a similar scenario and thus is illustrative. In that
case, the claimant’s investment was a Mexican distributor of corn syrup that was manufactured
in the US. As part of their damages claim, the claimants sought compensation for the US
subsidiary’s lost sales of corn syrup that could have been sold in Mexico. The tribunal determined
that it could not award such damages on the basis that the losses had occurred outside of Mexico.
This conclusion is consistent with prevailing case law.1032 A similar conclusion was reached in
the Canadian Cattlemen case though this was a decision under NAFTA.1033
1029
Khan Resources v. Mongolia, § 388 [RLA-0163].
1030
R-I § 340 – 341; Gemplus v. Mexico, § 12-50 [CLA-0093]; AAPL v. Sri Lanka, § 95 [RLA-0146].
1031
Art. 1 of the France-Hungary BIT [CLA-0001] / [RLA-0079].
1032
R-II § 346; ADM v. Mexico [CLA-0032].
1033
Canadian Cattlemen v. USA, §§ 194-223 [RLA-0149].

589. Therefore, without the need to examine further the Parties’ dispute regarding the evaluation of
the claim of EUR 3.8 million raised regarding Výroba,1034 that claim has to be dismissed.
XI. INTEREST
A. CLAIMANTS’ ARGUMENTS
590. In its post-hearing submission, Claimants stated that the interest accrued on Claimants’ losses
amounts to EUR 12.1 million as of 22 September 2017.1035
591. Based on Art. 5(2) paragraph 3 of the BIT, the calculation of the interest payable by Respondent
should not be limited to a calculation of the “taux de marché approprié” in the BIT, but should
be defined by consideration of what would fully compensate Claimants. This Tribunal should be
guided by the principle of restitutio ad integrum under international law, as expressed in Art. 38
of the ILC Articles.1036 The appropriate interest rate should take into account the amount of
compensation that the amount awarded would have earned, had it been paid after the
expropriation.1037
592. Interest shall be calculated as the EURIBOR, plus 6.01% to reflect equity market risk premium.
Interest shall accrue annually from 2 January 2012 and compound annually until the date of
payment.1038 EURIBOR is a reasonable interbank rate and represents a risk-free rate of interest
on investments. 1039 The use of such a rate in isolation is disadvantageous, requiring the
application of a surcharge to the applicable rate.1040
1034
C I § 432; CPHB-I § 279.
1035
CPHB-I § 282; compare C-II §§ 433 – 434 (interest applied 1 April 2016 totalled EUR 8.7 million).
1036
C-I §§ 406 – 407; “Responsibility of States for Internationally Wrongful Acts”, 53 UN GAOR Supp. (No. 10)
at 43, UN Doc. A/56/83 (2001) Art. 38(1) [CLA-0080]; RosInvest v. Russia, § 684 [CLA-0099].
1037
C-I § 408; Siemens v. Argentina, § 396 [CLA-0028] / [RLA-0063]; Yukos v. Russia, §§ 1682 – 1685 [CLA-
0071]; Sergey Ripinsky and Kevin Williams, Damages in International Investment Law, BIICL, 2008, 373
[CLA-0100].
1038
C-I §§ 405, 413 – 415.
1039
Id., at §§ 409 – 410; Gemplus v. Mexico, §§ 16 – 23 [CLA-0093]; Irmgard Marboe, Calculation of
Compensation and Damages in International Investment Law, Oxford University Press, 2009, paras. 6.130
and 6.137 [CLA-0101]; First FTI Report, § 2.5 [CEX-1].
1040
C-I § 411; Irmgard Marboe, Calculation of Compensation and Damages in International Investment Law,
Oxford University Press, 2009, § 148 [CLA-0102]; Alpha v. Ukraine, § 514 [CLA-0103]; John Y. Gotanda,
“The Unpredictability Paradox: Punitive Damages and Interest in International Arbitration”, Transnational
Dispute Management, Vol. 7, issue 1 (April 2010) 30 [CLA-0104].

B. RESPONDENT’S ARGUMENTS
593. The BIT mandates that the interest for expropriation claims should be calculated based on an
“applicable market rate.” The appropriate market rate should be the market lending rate or a
commercial lending rate, not the market premium which is used to assess the market return on
equity. Further, if Claimants seek compensation in EUR, a EUR-based market lending rate should
be applied – not a market risk premium calculated for the US market.1041
594. While Respondent agrees with using the EURIBOR, it alleges that Claimants’ proposed interest
rate using the EURIBOR plus 6.01 percent to reflect the equity market risk premium is
overstated.1042
595. The Tribunal recalls its conclusion above that Respondent has breached Art. 5(2) of the BIT and
that its measures were not a lawful, but rather an unlawful dispossession. Therefore, the limitation
for the interest on compensation in case of a lawful dispossession in Art. 5(2) to a calculation of
the “taux de marché approprié” cannot be applied.
596. Rather, guidance should be taken from the principle of restitutio ad integrum under international
law1043 as reflected in Art. 38 of the ILC Articles, which states:1044
Interest on any principal sum due under this chapter shall be payable when necessary
in order to ensure full reparation. The interest rate and mode of calculation
shall be set so as to achieve that result.
597. Therefore, as stated by the tribunal in Siemens v. Argentina,1045 the appropriate rate of interest
should take into account “the interest rate the amount of compensation would have earned had it
been paid after the expropriation”, in order to give effect to the principle of full reparation.
1041
R-I §§ 306; R-II §§ 352 – 353; France-Hungary BIT, Art. 5(2) [CLA-0001] / [RLA-0079]; First Navigant
Report, § 251 [REX-1].
1042
R-I § 305.
1043
RosInvest v. Russia, § 684 [CLA-0099].
1044
Responsibility of States for Internationally Wrongful Acts (2001), 53, UN GAOR Supp. (No. 10) at 43, U.N.
Doc. A/56/83 (2001), Art. 38(1) [CLA-0080].
1045
Siemens v. Argentina, § 396 [CLA-0028] / [RLA-0063]; see also Yukos v. Russia, §§ 1682-1685 [CLA-0071];
and Sergey Ripinsky and Kevin Williams, “Damages in International Investment Law”, BIICL, 2008, 373
[CLA-0100].

598. The Parties agree that using the EURIBOR is appropriate for the determination of interest in the
present case.
599. Though, as pointed out above, the ruling in Art. 5(2) of the BIT for lawful dispossessions cannot
be applied here, because Respondent’s measures were unlawful and a breach of the BIT, guidance
can still be taken from the fact that Art. 5(2) provides the “applicable market rate.” While the
Tribunal has carefully considered Respondent’s and Navigant’s views regarding the appropriate
market rate, 1046 the Tribunal agrees with Claimants that EURIBOR plus 6.01% is appropriate in
the circumstances of the present case.
600. According with the standard practice in recent investment arbitration,1047 from 2 January 2012,
the interest shall accrue annually and be compounded annually until the date of payment.
XII. COSTS
A. CLAIMANTS’ POSITION
601. In their Reply Statement of Costs dated 26 January 2018, Claimants state that their total amount
of costs, expenses, and fees in respect of the arbitration proceedings, is EUR 3,570,753.76 plus
USD 450,000.1048
602. Claimants request that the Arbitral Tribunal order Hungary to pay all these costs, expenses, and
fees including the legal fees and expenses incurred by UP and CD Internationale.
603. Claimants explained that their request is based on the “costs follow the event” principle and on
the fact that Claimants have brought their claims to arbitration fairly and have used their best
effort to achieve an efficient resolution of the dispute. In the event that the Tribunal were to find
Respondent liable, but for a lower amount of damages, the Tribunal must still order Respondent
to pay the entirety of Claimants’ costs incurred, because reparation must wipe out the
1046
1047
See e.g., ICSID Award of 30 November 2017, in Bear Creek Mining Corporation v. Republic of Perú (ICSID
Case No. ARB/14/21); Joseph Charles Lemire v. Ukraine, ICSID Case No. ARB 06/18, Award (28 March
2011), at § 360; Flughafen Zürich A.G. and Gestión e Ingeniería S.A. v. Bolivarian Republic of Venezuela,
ICSID Case No. ARB/10/19 Award (18 November 2014) at 968; OI European Group B.V. v. Bolivarian
Republic of Venezuela, ICSID Case No. ARB 11/25 Award (10 March 2015) at 949; Siemens v. Argentina,
§§ 399 – 401 [CLA-0028] / [RLA-0063]; Vivendi v. Argentina, at §§ 9.6.1 – 9.6.2 [CLA-0021] / [RLA-
0021].
1048
Claimants’ Letter (26 January 2018). The amount of USD 450,000 corresponds to the ICSID lodging fee and
the advances made by Claimants to ICSID until 26 January 2018, which were “subject to any adjustment by
ICSID.”

consequences of the illegal act and restore the situation that would have existed without such acts.
Here, absent these illegal acts, there would have been no arbitration and, thus, no related fees or
expenses. To restore the situation that would have existed in the absence of Respondent’s illegal
actions, Claimants must, therefore, be awarded their entire costs incurred in connection with these
proceedings. Respondent’s alleged good faith and professional behavior (which are denied) are
irrelevant in this regard.
604. Respondent’s suggestion that Claimants should be penalized for their efforts to preserve the initial
hearing dates are ludicrous.
605. Respondent is not permitted to claim reimbursement of the VAT, and its expert fees are excessive,
amounting to nearly 40 percent more than Claimants’ expert costs. This is especially so, given
that Navigant has served as expert in other similar cases.
B. RESPONDENT’S POSITION
606. In its first Submission on Costs also dated 12 January 2018, Respondent states that its costs in
respect of the arbitration proceedings are HUF 647,284,339.00 plus USD 1,384,447.1049
607. Respondent argues that the circumstances of this case warrant an award of full costs for
Respondent, without apportionment. If Respondent prevails in these proceedings, there is no
sound policy reason to prevent a successful host State from obtaining the benefit of a “cost follows
the event” or “loser pays” rule.
608. Regarding apportionment, Respondent requests that, even if Respondent were to not wholly
prevail, it should not be required to pay any portion of Claimants’ costs or their share of the
administrative costs because it presented good faith defenses in a straightforward and professional
manner. Alternatively, Respondent argues that the most appropriate apportionment would be for
the Parties to share in the costs of the proceedings equally and for each to bear its legal costs.
There is no inconsistency between Respondent’s entitlement to full costs should it prevail, and
the fact that Claimants should not be reciprocally entitled to any costs award against Respondent
should the Tribunal even partially grant Claimants’ claims. The reason for this is the distinction
between the nature of Claimants’ manifestly unfounded claims on the one hand and Respondent’s
measured response to those claims on the other.
1049
Respondent’s Letter (12 January 2018). The amount in USD includes the amounts advanced by Respondent
to ICSID until 12 January 2018 to cover the costs of the proceeding.

609. Claimants’ unreasonable and non-cooperative behavior aggravated costs in many ways. Their
failure to precisely state their claims or provide basic information to Respondent forced
Respondent to undertake substantial independent investigation and adjust its defense to respond
to a number of speculative scenarios. Next, Claimants complicated their late notification of Mr.
Dávid Pusztai’s attendance at the Hearing by failing to provide appropriate assurance regarding
his involvement in the case. Claimants complicated matters related to the unforeseen and
unavoidable delay in the December Hearing by resisting postponement. Similarly, Claimants
challenged Respondent over a number of inconsequential procedural matters, including
Respondent’s effort to resolve an inadvertent procedural matter. Their aggressive tactics hindered
and delayed the Parties’ ability to make simple procedural arrangements and otherwise increased
costs.
610. Claimants’ arguments that they are entitled to costs are without merit, as Respondent’s notice
related to the Achmea Decision was appropriate.
611. The applicable arbitration rules are Art. 61(2) of the ICSID Convention and Rule 47(1)(j) of the
ICSID Arbitration Rules. They allow the Tribunal a degree of discretion.
612. The Tribunal will first address the question of how the arbitration costs shall be apportioned
between the Parties, because the evaluation of the amounts claimed by a party will only be
relevant for the Tribunal’s decision insofar as the Tribunal finds that a party has to reimburse to
the other party some of the costs that party incurred.
613. In this context, the Tribunal takes into account the following. First, Respondent failed in its
objection to jurisdiction as decided in this Tribunal’s Decision on Preliminary Issues of
Jurisdiction dated 3 March 2016. The Tribunal does not share Respondent’s view1050 that this
failure should not be taken into account, because its objection was raised in good faith and
engaged a novel question of law on which other tribunals have held differently (including,
notably, the Edenred tribunal), and because Respondent agreed to resolve the jurisdictional issue
on the preliminary basis with a view towards reducing costs for both Parties, were the objection
to be upheld. While the Tribunal does not doubt that Respondent made its objections to
jurisdiction in good faith, this does not change the fact that it failed with these objections and that
1050
Respondent’s First Cost Submission (12 January 2018), § 17.

particularly the separation of the procedure on jurisdiction caused a considerable delay and part
of the total costs of this procedure.
614. Second, Respondent failed on the question of liability, as the Tribunal concluded that
Respondent’s measures were in breach of Art. 5(2) of the BIT. This part of the proceedings was
the major part of the dispute and caused the major part of the time and costs of the case.
615. Third, regarding Quantum, Respondent partially prevailed, as the Tribunal awarded only the
amount of EUR 23,196,000, plus interest, of the total of EUR 39,465,434 requested by Claimants.
With rounding, this amounts to nearly 60% of Claimants’ claim.
616. Taking the above considerations into account, including the considerable work involved in the
procedural matters regarding Respondent’s jurisdictional motion where Claimants ultimately
prevailed, the Tribunal considers it appropriate and fair that Respondent shall bear 75% of the
costs reasonably claimed by Claimants.
617. In view of this decision, the Tribunal only has to examine whether and to which extent the costs
requested by Claimants are to be considered appropriate and reasonable and therefore subject to
reimbursement according to Art. 61(2) of the ICSID Convention.
618. Though objecting to bearing any costs claimed by Claimants by apportionment, Respondent has
not objected to the calculation of the costs claimed by Claimants.1051 Indeed, the Tribunal also
considers that the costs claimed by Claimants are reasonable.
619. The costs of the arbitration, including the fees and expenses of the Tribunal and the Tribunal’s
Assistant, ICSID’s administrative fees and direct expenses, amount to (in USD):1052
Arbitrators’ fees and expenses

Professor Dr. Karl-Heinz Böckstiegel 356,001.86
The Honourable L. Yves Fortier QC 146,883.31
Sir Daniel Bethlehem QC 121,236.20
Assistant’s fees and expenses 68,716.48
ICSID’s administrative fees 170,000
Direct expenses (estimated)1053 136,729.48
1051
Respondent’s Second Costs Submission (26 January 2018).
1052
The ICSID Secretariat will provide the parties with a detailed Financial Statement of the case account once
all invoices are received and the account is final.
1053
This amount includes estimated charges relating to the dispatch of this Award (courier, printing and copying).

Total 999,567.33
620. The above costs have been paid out of the advances made by the Parties in the amount of
USD 1,149,788, of which USD 574,950 were paid by Claimants and USD 574,838 were paid by
Respondent. 1054 As a result, each Party’s share of the costs of arbitration amounts to
USD 499,783.67.
621. In conclusion, the Tribunal finds that Respondent has to bear its own costs of arbitration, and has
to reimburse 75% of the EUR 3,570,753.76 requested by Claimants as legal fees and expenses as
well as 75% of the USD 524,783.671055 corresponding to the expended portion of the Claimants’
advances to ICSID and the ICSID lodging fee, i.e. EURO 2,678,065.32 plus USD 393,587.75.
622. The rate of interest found above to be applicable for the damages awarded also has to be applied
to this payment for arbitration costs, however only from the date this amount is due, i.e. from the
date of this Award.
For convenience, in order to facilitate the signing of the Award by the members of the
Tribunal, the Decisions and Signatures are placed below on a separate page.
1054
The remaining balance will be reimbursed to the Parties in proportion to the payments that they advanced to
ICSID.
1055
This amount in USD includes the amounts advanced by Claimants to defray the costs of the proceeding and
the ICSID lodging fee paid by Claimants.

XIII. DECISIONS
623. For the above reasons, the Tribunal decides as follows:
1. Respondent breached Art. 5(2) of the BIT between France and

Hungary signed in Paris on 6 November 1986.
2. Respondent shall pay to Claimants damages amounting to EURO

23,196,000.
3. Respondent shall bear its own costs of arbitration and shall

reimburse Claimants 75% of Claimants’ total arbitration costs, i.e.
75% of the expended portion of Claimants’advances to ICSID and
the ICSID lodging fee (USD 393,587.75), and of Claimants’ legal
fees and expenses (EURO 2,678,065.32).
4. Respondent shall pay, on the above amount of damages awarded,

i.e. EURO 23,196,000, interest at a rate of EURIBOR plus 6.01%
compounded annually from 2 January 2012 until date of payment.
5. Respondent shall pay, on the above amounts of arbitration costs to

be reimbursed to Claimants according to Decision No. 3 above,
interest at a rate of EURIBOR plus 6.01% compounded annually
from the date of this Award until date of payment.
6. All other claims are dismissed.

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INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES

UP and C.D Holding Internationale

(ICSID Case No. ARB/13/35)

Members of the Tribunal

Secretary of the Tribunal

Assistant of the Tribunal

Date of dispatch to the Parties: 9 October 2018

ICSID Case No. ARB/13/35 Page ii

1. Claimants’ Arguments .............................................................................................. 70

ICSID Case No. ARB/13/35 Page iii

ICSID Case No. ARB/13/35 Page iv

ICSID Case No. ARB/13/35 Page v

UP AND C.D HOLDING INTERNATIONALE: HUNGARY:

Ms. Isabelle Michou Ms. Kiera S. Gans

ICSID Case No. ARB/13/35 Page vi

Short Form Long Title

ICSID Case No. ARB/13/35 Page vii

ICSID Case No. ARB/13/35 Page viii

ICSID Case No. ARB/13/35 Page ix

ICSID Case No. ARB/13/35 Page x

3. Respondent is Hungary (the “Respondent”), a sovereign state.

B. THE TRIBUNAL’S TERMINOLOGY AND REASONING

ICSID Case No. ARB/13/35 Page 1

II. THE ARBITRAL TRIBUNAL

Mr. L. Yves Fortier PC CC OQ QC

Sir Daniel Bethlehem QC

ICSID Case No. ARB/13/35 Page 2

III. PROCEDURAL HISTORY

ICSID Case No. ARB/13/35 Page 3

30. On 8 August 2016, Respondent wrote in opposition to Claimants’ document request.

ICSID Case No. ARB/13/35 Page 4

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47. On 15 November 2016, the Tribunal adopted an amended Hearing schedule.

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ICSID Case No. ARB/13/35 Page 8

Professor Dr. Karl-Heinz Böckstiegel President

Mr./Ms. First Name/ Last Name Affiliation

Mr./Ms. First Name/ Last Name Affiliation

ICSID Case No. ARB/13/35 Page 9

ICSID Case No. ARB/13/35 Page 10

88. On 26 January 2018, by simultaneous submission, Claimants submitted their comments to

ICSID Case No. ARB/13/35 Page 11

IV. THE PARTIES’ REQUESTS

ICSID Case No. ARB/13/35 Page 12

102. In its Counter-Memorial (“R-I”), Respondent made the following requests:

ICSID Case No. ARB/13/35 Page 13

103. In its Rejoinder (“R-II”), Respondent requested the Tribunal to:

A. SUMMARY OF THE FACTS

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132. The French – Hungarian mediation was announced on 14 January 2011.62

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