- 11 Dec 2012 8:02 AM
The Belgian owner of the Dunamenti Power Plant initiated the launching of the international arbitration procedure on grounds of the breach of the Energy Charter Treaty (ECT). The review concerned state measures relating to so-called long-term power purchase agreements of MVM Hungarian Electricity Ltd. (MVM) and Hungarian power plants between 2006 and 2008.
Electrabel contested, inter alia, Hungary's renewed introduction of the administrative pricing of power plant electricity in 2006. The company also contested the Hungarian party’s cancellation of the long-term power purchase agreements by law at the end of 2008, after the European Commission had determined by a binding decision that these constituted prohibited state aid provided to the power plants.
Electrabel filed a claim for compensation amounting to one hundred billion forints for the alleged infringements. According to the ruling of the international court of arbitration in Washington, Hungary did not breach the provisions of the ECT. A decision is expected after 2015 as to whether compensation for so-called stranded costs, due to power plants in connection with the cancellation of the above agreements, might be in breach of the provisions of the ECT.
In a similar procedure launched by the English owner of AES Tisza Power Plant, the ICSID court of arbitration also ruled in favour of Hungary in June 2012.
The ICSID is a special international court of arbitration operating under the World Bank, established to settle disputes between states and investors. It was established under the Washington Convention in 1965 specifically for the purpose of arbitrating international investment protection cases. With the rise in the number of investment protection disputes launched directly by investors in the past two decades, the ICSID has become the most highly regarded investment dispute settlement forum. Its rulings are treated as equal in force to rulings passed by the highest courts in all the states that are parties to the convention.