Mazen Al Ramahi v. Hungary

Case summary

At a glance

Parties: Mazen Al Ramahi (Jordan) v. Hungary
Case no.: ICSID Case No. ARB/17/45
Forum and rules: ICSID Convention; ICSID Arbitration Rules (2006); place of proceeding Paris, France
Treaty: Hungary–Jordan BIT, signed 14 June 2007, in force 9 March 2008
Tribunal: Ian Binnie (President), Hamid G. Gharavi, Brigitte Stern
Sector: Hotels and tourism (Budapest luxury hotel); insolvency
Outcome: Jurisdiction upheld; all claims dismissed on the merits (Award dispatched 19 April 2021).
Amount: Damages: nothing awarded. Claimant to pay Hungary HUF 221,250,000 in attorney's fees (three quarters of the HUF 295,000,000 claimed) and USD 30,000 in expert fees, with interest at 1.85% compounded semi-annually. Arbitration costs of USD 339,294.54 shared equally.

The dispute

Mazen Al Ramahi, a Jordanian national, held at least 90% of the shares in a Hungarian company that owns a luxury hotel in Budapest. His wife held the rest until 13 March 2016. A creditor used Section 27(2)(a) of the Hungarian Bankruptcy Act to put the company into liquidation over a disputed trade debt of about 6,000 Euro. The Government then designated the company as strategically important and appointed a State liquidator. The President of the Metropolitan Court filed a creditor's claim, described in the Award as 8 billion Euro, for trademark-infringement fines. The fines arose from the hotel's use of a name that infringed a trademark (Inditex is named as applying for enforcement), and the order imposing them had already been set aside. The claimant alleged breaches of fair and equitable treatment, denial of justice, a failure of full protection and security, and expropriation. Hungary objected that he had not proved that he made an investment or suffered a personal loss. On the merits, Hungary argued that its courts had simply applied laws that already existed when he invested.

Key holdings

Jurisdiction upheld. The claimant never produced documents proving his investment. Even so, the facts Hungary itself acknowledged show he incorporated the company and held at least 90% of its shares, so on a balance of probabilities he was the source of the capital. Shares are an investment under Article 1(1) of the BIT. In a closely held company, the company's losses flow through to the shareholder. ¶¶ 142–147
Section 27(2)(a) of the Bankruptcy Act does not breach fair and equitable treatment. It was in force more than a decade before the investment, and the investor had to take the law as he found it. He had no legitimate expectation that the law would change to protect him better, and his failure to survive the liquidation petition was self-inflicted. ¶¶ 155–157
No denial of justice in ordering the liquidation. The Tribunal said malice is not required for a denial of justice. But the courts properly ignored matters the Act makes irrelevant, such as the escrow deposit with a lawyer and the counterclaim. The requirement of an enhanced-security electronic signature is a procedural detail within the court's competence. ¶¶ 161–165
The filing of the fine claim by the President of the Metropolitan Court was an administrative act of a State official attributable to Hungary, and it was shockingly disproportionate. It was still no breach of the Treaty. The State liquidator reversed the registration within six weeks, and the courts rejected the President's appeals within about ten months, a reasonable time. ¶¶ 170–177
The claims about the State liquidator's conduct and fees, delay by the courts, and full protection and security fail. No concluded composition agreement existed, the fees were unsupported by evidence, and Hungary had no duty to reform its insolvency law. ¶¶ 179–189
No expropriation. The claimant still owns the shares and there is no evidence that their value fell. The temporary liquidation was not permanent and was self-inflicted. Damages were moot, and any assessment would in any case have been frustrated by the claimant's refusal to produce documents. ¶¶ 190–196
Costs: the Tribunal applied 'costs follow the event', adjusted for divided success and for access to justice. Hungary recovers three quarters of its attorney's fees (HUF 221,250,000) and its expert fees in full (USD 30,000), with interest at 1.85% compounded semi-annually. The arbitration costs are shared equally. ¶¶ 205–213

Procedural history

17 November 2017ICSID received the Request for Arbitration. The claimant supplemented it by letter of 19 December 2017.
21 December 2017The ICSID Secretary-General registered the Request.
6 June 2018Tribunal constituted.
22 August 2018Procedural Order No. 1 issued after the first session of 25 July 2018.
13 January 2020Procedural Order No. 2 issued on Hungary's document production request.
20 April 2020Procedural Order No. 3: after the claimant repeatedly failed to file documents and comply with orders, he may file nothing further without the Tribunal's leave.
23 September 2020One-day virtual hearing on jurisdiction, merits and quantum.
1 April 2021Proceeding closed.
19 April 2021Award dispatched to the parties: jurisdiction upheld, all claims dismissed, partial costs awarded to Hungary.