The claimants were foreign entities that had invested in the 1999 expansion of an airport near Budapest, Hungary. The airport was owned by the Government of Hungary. In 2002, the government enacted a decree that resulted in the privatization of the airport and caused the effective termination of the claimants' long-term leases from which they sought to recover their investment. Arbitration against Hungary ensued. The ICSID panel ruled that this was a violation of the agreement with the investors, which took the investors' property, an unlawful expropriation. After the expropriation, the airport boomed; thus, had the expropriation not occurred, the investors would have greatly profited. The ICSID panel focused on the measure of damages owed under the circumstances.
1. The measure of damages was quite high because the case was deemed an unlawful expropriation. Why was it unlawful? Would damages have been lower if it had been lawful?
2. The panel found damages as of the date of the Award rather than the date of the taking. Why? How can one tell whether to apply the Chorzow date of valuation rule or the rule in this case?
3. The panel chose the DCF method. Why was that necessary under the circumstances of this case?