Viorel Micula, Ioan Micula and others v. Romania

At a glance

Parties

Viorel Micula and Ioan Micula (Swedish nationals), S.C. European Food S.A., S.C. Starmill S.R.L. and S.C. Multipack S.R.L. (Romanian companies) v. Romania; European Commission intervening

Case no.

[2020] UKSC 5, on appeal from [2018] EWCA Civ 1801 and [2019] EWHC 2401 (Comm); High Court Claim No. CL-2014-000251

Court

UK Supreme Court (earlier: High Court, Commercial Court; Court of Appeal of England and Wales)

Underlying award(s)

ICSID Case No. ARB/05/20, Award of 11 December 2013; annulment rejected by the ICSID ad hoc Committee on 26 February 2016

Forum and rules

Registration and enforcement in England under the Arbitration (International Investment Disputes) Act 1966 (ICSID Convention, Article 54)

Treaty

Sweden–Romania BIT; ICSID Convention

Court

Supreme Court: Lady Hale, Lord Reed, Lord Hodge, Lord Lloyd-Jones, Lord Sales (joint judgment by Lord Lloyd-Jones and Lord Sales)

Sector

Food production; investment incentives; EU State aid

Outcome

Supreme Court allowed the award creditors' cross-appeal, lifted the stay on enforcement of the ICSID award and discharged the £150m security order (19 February 2020).

Amount

Award: RON 376,433,229 in damages plus RON 424,159,150 in interest, with further interest until payment; outstanding amount about £173m as at 31 August 2016 (claimants' figure). Security of £150m ordered by the Court of Appeal and discharged by the Supreme Court.

The dispute

The Micula brothers, Swedish nationals, and their Romanian companies invested in a food production operation in a disfavoured region of Romania in reliance on tax incentives under Emergency Government Ordinance No. 24/1998 (EGO 24). Romania repealed most of the incentives with effect from 22 February 2005, before it joined the EU. An ICSID tribunal held that this breached the fair and equitable treatment standard of the Sweden–Romania BIT. In its Final Decision 2015/1470 of 30 March 2015, the European Commission held that paying the award would be new State aid that is incompatible with the internal market, and it prohibited Romania from paying. The award was registered in the English High Court on 17 October 2014. Romania, supported by the Commission, then applied to set aside the registration or to stay enforcement, relying on the EU duty of sincere co-operation (Article 4(3) TEU). The award creditors relied on the ICSID Convention and the 1966 Act, on res judicata (the Kapferer principle), and on Article 351 TFEU, which protects treaty obligations a Member State took on before joining the EU.

Key holdings

1. High Court: the registration of the award stands, because registration was not a payment prohibited by the Commission's decisions. But enforcement was stayed pending the claimants' annulment actions before the General Court, because the duty of sincere co-operation bars national courts from taking decisions that conflict with a Commission decision. The judge also found that, apart from sums seized by court-ordered execution in Romania, the award had not been paid. High Court judgment of 20 January 2017, ¶ 203
2. Court of Appeal: the award became res judicata when it was rendered, but the Kapferer principle must yield to the effective application of EU State aid law. The court upheld the stay unanimously, although the judges gave different reasons. It allowed the appeal on security and ordered Romania to provide £150m, holding that providing security is not a payment prohibited by the Commission Decision. Court of Appeal ¶¶ 67, 100, 235, 248, 272
3. Supreme Court: the General Court annulled the Commission Decision, and the Commission has appealed. Even so, the Commission's decision opening the State aid investigation still exists, and the appeal pending before the CJEU would in principle engage the duty of sincere co-operation. Supreme Court ¶¶ 51, 56
4. If Article 54 is read as Arden and Leggatt LJJ read it, the stay was not a limited, procedural stay of execution. It prevented enforcement on substantive grounds, contrary to Articles 53 and 54 of the ICSID Convention. In substance, the Court of Appeal used domestic powers to thwart enforcement of an award that had become enforceable under the Convention. Supreme Court ¶ 84
5. The UK's obligations under Articles 54 and 69 of the ICSID Convention are owed to all Contracting States, including States outside the EU. Article 351 TFEU therefore protects these obligations, which predate the UK's accession, from being affected by the EU Treaties. Romania's reliance on sincere co-operation was a 'bootstraps' argument. Supreme Court ¶¶ 85–87, 104–108
6. English courts need not defer to the EU courts on the scope of the UK's ICSID obligations. That question is not one of EU law. The Article 351 issue before the EU courts concerned Romania's obligations, not the UK's. Any future ruling by the EU courts on the point is contingent and remote. Supreme Court ¶¶ 112–117
7. The cross-appeal was allowed and the stay lifted. The Court described the stay as an unlawful measure in international law and unjustified and unlawful in domestic law. Romania's appeal on security therefore fell away, and the security order was discharged. Supreme Court ¶¶ 118–119

Procedural history

1. 28 July 2005The claimants filed a Request for Arbitration with ICSID under the Sweden–Romania BIT.
2. 11 December 2013The ICSID Award found that Romania had breached fair and equitable treatment and awarded damages.
3. 17 October 2014Burton J registered the award in the English High Court under the 1966 Act.
4. 30 March 2015Commission Final Decision 2015/1470: paying the award would be incompatible State aid, and Romania may not pay it.
5. 26 February 2016The ICSID ad hoc Committee rejected Romania's application to annul the award.
6. 20 January 2017High Court (Blair J) refused to set aside the registration but stayed enforcement.
7. 15 June 2017High Court refused to make the stay conditional on security and granted permission to appeal.
8. 27 July 2018Court of Appeal dismissed the appeal against the stay and ordered security of £150m.
9. 18 June 2019The General Court annulled the Commission Decision (Cases T-624/15, T-694/15 and T-704/15). The Commission appealed to the CJEU on 27 August 2019. On 10 September 2019 Phillips J ordered a new stay pending the CJEU appeal, with security of £150m.
10. 19 February 2020Supreme Court allowed the cross-appeal, lifted the stay and discharged the security order.

Tribunal, counsel and experts

Decided by

• Lord Lloyd-Jones Judge, UK Supreme Court

For the claimant

Shearman & Sterling LLP · Croft Solicitors · White & Case LLP

For the respondent

Thrings LLP

For other participants

European Commission Legal Service, assisted by Langleys Solicitors LLP

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Keywords

• Micula
• ICSID award enforcement
• Article 54 ICSID Convention
• Arbitration (International Investment Disputes) Act 1966
• EU State aid
• duty of sincere co-operation
• Article 4(3) TEU
• Article 351 TFEU
• stay of enforcement
• security for award
• res judicata
• Kapferer principle
• Commission Decision 2015/1470
• Sweden–Romania BIT
• intra-EU BIT
• EGO 24
• food production
• pre-accession treaty obligations

Summary generated with AI from the published documents — refer to the award for the authoritative text.