MOL Hungarian Oil and Gas Company Plc v. Republic of Croatia (I)
ICSID · Investment (ICSID and treaty) · Croatia · 5 Jul 2022
Why it matters
This award is significant for its detailed treatment of corruption allegations in investment arbitration, including the burden and standard of proof. It also addresses the impact of EU law on intra-EU ECT claims, and provides guidance on the attribution of conduct of state entities and the calculation of damages for breach of treaty standards. The case is one of the few where an ICSID tribunal awarded substantial damages against an EU member state in an intra-EU dispute post-Achmea.
Summary
The dispute arose from the privatization of Croatia's largest energy company, INA, in which MOL became the major private investor. Relations soured after allegations that Croatia's former Prime Minister was bribed to secure advantages for MOL. Croatia launched criminal investigations and adopted measures affecting MOL's gas market operations and hydrocarbon licenses. MOL brought claims under the ECT, alleging expropriation, unfair treatment, and discrimination. Croatia raised jurisdictional objections based on EU law, arguing that intra-EU ECT arbitration is incompatible with EU law following the CJEU's Achmea judgment. The Tribunal rejected these objections, finding that the ECT's arbitration clause remains valid and that the EU's internal disputes do not deprive the Tribunal of jurisdiction. On the merits, the Tribunal dismissed Croatia's corruption defense, finding insufficient evidence of bribery. It held that Croatia breached the ECT's fair and equitable treatment standard through certain gas market measures that discriminated against MOL and undermined its legitimate expectations. However, it rejected MOL's claims regarding the hydrocarbon license revocation and the criminal prosecution, finding no treaty breach. The Tribunal awarded MOL USD 167.84 million for the gas market breach and USD 16.1 million for related losses, plus interest. The award is notable for its comprehensive analysis of corruption allegations and its application of the ECT in an intra-EU context.
The detail
Parties: MOL Hungarian Oil and Gas Company Plc v. Republic of Croatia (I)
Case number: ICSID Case No. ARB/13/32
Outcome: The Tribunal rejected Croatia's objections to jurisdiction and admissibility, found Croatia breached the Energy Charter Treaty through certain gas market measures, and ordered Croatia to pay MOL USD 167.84 million plus USD 16.1 million in compensation, with interest. All other claims were rejected. Costs were allocated 60% to Croatia and 40% to MOL.
Quantum: USD 183.94 million
Applicable law: Energy Charter Treaty (ECT); ICSID Convention; ICSID Arbitration Rules 2006
Issues in play: The case involved the interaction between the ECT and EU law, particularly the Achmea judgment on intra-EU investor-state arbitration, and the standard for proving corruption in investment arbitration.
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