Magyar Farming Company Ltd, Kintyre Kft and Inicia Zrt v. Hungary
ICSID · Investment (ICSID and treaty) · Hungary · 13 Nov 2019
Why it matters
This award is significant because it addressed the intra-EU objection under the Achmea decision, ultimately upholding jurisdiction under the UK-Hungary BIT. It also clarified that a statutory pre-lease right can constitute an investment protected under a BIT, and that Hungary's 2011 amendment eliminating such rights without compensation amounted to an unlawful expropriation. The case illustrates the tension between EU law and bilateral investment treaties, and the limits of a state's police powers when interfering with contractual and statutory rights.
Summary
The case concerns a dispute between three companies (Magyar Farming Company Ltd, a UK company; Kintyre Kft and Inicia Zrt, both Hungarian companies) and Hungary over agricultural land leases. Inicia had a lease agreement with Hungary's state-owned asset management agency for 760 hectares of land, which included a contractual and statutory pre-lease right. In 2011, Hungary amended its land law to eliminate statutory pre-lease rights when land was leased by tender. In 2014, Hungary conducted tenders for the land, and despite the Claimants' higher bids, the leases were awarded to third parties. The Claimants were evicted and lost their farming business. They brought a claim under the UK-Hungary BIT, alleging unlawful expropriation. Hungary objected to jurisdiction on intra-EU grounds, citing the CJEU's Achmea decision, but the Tribunal found it had jurisdiction because the BIT was concluded before Hungary's EU accession and the dispute did not involve EU law. On the merits, the Tribunal held that the 2011 amendment expropriated the Claimants' statutory pre-lease right, which was a protected investment. The measure was not a valid exercise of police powers because it was not proportionate and did not serve a legitimate public purpose. The Tribunal awarded EUR 7,148,824 in compensation, plus interest and costs, rejecting Hungary's arguments on mitigation and quantum.
The detail
Parties: Magyar Farming Company Ltd, Kintyre Kft and Inicia Zrt v. Hungary
Case number: ICSID Case No. ARB/17/27
Outcome: Hungary breached Article 6.1 of the UK-Hungary BIT by expropriating the Claimants' investment without compensation; ordered to pay EUR 7,148,824 plus interest and costs.
Quantum: EUR 7,148,824
Applicable law: UK-Hungary BIT (1987), ICSID Convention, Hungarian land laws (Act No. LXXXVII of 2010 on the National Land Fund)
Issues in play: The UK-Hungary BIT's expropriation provision (Article 6) collided with Hungary's sovereign right to regulate agricultural land through amendments that eliminated statutory pre-lease rights for lessees of state-owned land.
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