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Arnold & Porter Garners ICSID Win for Hungary with Dismissal of AES Annulment Claims

July 12, 2012

Washington, D.C., July 11, 2012 -- With a win in the annulment proceeding in AES Summit Generation Limited and AES-Tisza Erömü Kft. v. Hungary, on June 29, 2012, Arnold & Porter LLP attorneys Jean Kalicki, Dmitri Evseev and Mallory Silberman secured the Firm's third-straight victory on behalf of Hungary at the International Centre for Settlement of Investment Disputes (ICSID).  The annulment decision is a complete vindication of an earlier Arnold & Porter victory - a 2010 award rejecting AES's claim under the Energy Charter Treaty for Hungary's 2007 reintroduction of regulated prices in the electricity sector. 

In the original arbitration proceeding, the ICSID tribunal found that Hungary did not breach the Energy Charter Treaty's investment protection provisions when it temporarily imposed maximum price caps on electricity sold by AES Tisza's electric power plant - as well as on electricity sold by other generators operating in Hungary's public utility market segment - in the course of transitioning to a more liberalized market structure in the aftermath of Hungary's accession to the European Union.  One after another, the Tribunal considered and rejected claims that Hungary's actions breached the ECT's provisions on fair and equitable treatment, impairment by unreasonable and discriminatory measures, constant protection and security, national treatment, most favored nation treatment and expropriation.

Unsatisfied with this result, AES initiated annulment proceedings under the ICSID Convention, claiming that the arbitration tribunal "manifestly exceeded its powers" and "failed to state reasons" for its award - two potential grounds for annulment under the ICSID Convention. 

The Arnold & Porter team convinced a panel composed of Bernard Hanotiau, Rolf Knieper, and Abdulqawi Ahmed Yusuf that AES' annulment claim was "clearly without merit."  The panel not only rejected AES' attempt to reverse the 2010 award in Hungary's favor, but also ordered AES to pay 100% of Hungary's procedural costs and attorney fees for the annulment phase. 

To date, Arnold & Porter is the only law firm to have successfully represented Hungary before ICSID, having also achieved a complete victory on behalf of Hungary in the Telenor case in 2006.  Arnold & Porter also represents the Government of Hungary at ICSID in three other pending cases. 

For more information on this ruling, contact Jean Kalicki at 202-942-6155 or Jean.Kalicki@aporter.com or Dmitri Evseev at +44 (0)20 7786 6114 or Dmitri.Evseev@aporter.com. For more information about Arnold & Porter LLP's award-winning international arbitration practice and a list of our international arbitration professionals, see http://www.arnoldporter.com/practices.cfm?u=InternationalArbitration&action=view&id=379.

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