On 14 July 2022, the enforcement of the Micula ICSID award was rejected by Luxembourg Court of Cassation.
The Supreme Court overturned the decision of the Appeal Court upholding the enforcement of the award rendered by the arbitral tribunal on 11 December 2013 in Ioan Micula, Viorel Micula, S.C. European Food S.A, S.C. Starmill S.R.L. and S.C. Multipack S.R.L. v. Romania (the “Award” or the “Micula Award”).
According to the Supreme Court, when Romania joined the European Union (“EU”), the arbitration agreement provided for in the Sweden-Romania bilateral investment treaty (“BIT”) became incompatible with EU law. Accordingly, the arbitration agreement lacked any force from that date and Romania never waived its jurisdictional immunity.
The decision of the Luxembourg Court of Cassation is questionable on several grounds, however.
Procedural Background of the Enforcement of the Micula ICSID Award
In 1998, by the emergency government ordinance No. 24/1998 (the “Ordinance”), Romania introduced certain economic incentives, such as customs duties exemptions, to promote the development of certain less-favoured regions of Romania.
Based on the Ordinance containing incentives that were expected to be maintained for ten years, Viorel and Ioan Micula and their companies (the “Claimants”) made substantial investment in the less-favoured regions of Romania.
However, in 2005, Romania revoked these economic incentives. According to Claimants, the premature revocation of the economic incentives by Romania constituted a breach of the State’s obligations under the Sweden-Romania BIT which entered into force on 1 April 2003.
In 2006, Viorel and Ioan Micula and their companies brought their claim against Romania to the ICSID.
In parallel, Romania acceded to the European Union in 2007.
Claimants obtained a final Award in 2013. Pursuant to the Award, Romania was required to pay more than 376 million Romanian lei, plus interest.
Romania proceeded to a partial payment of the Award. However, in 2015, the European Commission considered that such payment constituted illegal State aid and precluded Romania from making any further payment.
In June 2019, the General Court reversed the decision of the European Commission based on the fact that the award recognized a right to compensation for the investors existing before the accession of Romania to the EU. Consequently, the European Commission could not apply the EU State aid rules to this case:
83 According to settled case-law, new rules apply, as a matter of principle, immediately to the future effects of a situation which arose under the old rule (see judgment of 11 December 2008, Commission v Freistaat Sachsen, C‑334/07 P, EU:C:2008:709, paragraph 43 and the case-law cited).
84 In the present case, due to the specific nature of the arbitral award, which is apparent, inter alia, from recital 146 of the contested decision, it cannot be considered that the effects of that award constitute the future effects of a situation arising prior to accession within the meaning of the case-law cited in paragraph 83 above, since that award retroactively produced definitively acquired effects which it merely ‘stated’ for the past, that is to say, effects which, in part, were already established before accession.
The European Commission appealed the decision of the General Court on 27 August 2019 before the Court of Justice of the European Union (the “CJEU”). In January 2022, the CJEU ruled in favour of the European Commission and considered that the European Commission was competent to decide that the partial payment made by Romania as part of the award in favour of the Micula brothers would violate State aid rules. The Court of Justice also considered that the Achmea case was relevant to this case.
Enforcement Rejected by the Supreme Court of Luxembourg
In 2015, the president of the duchy’s district court in Luxembourg ordered the enforcement of the Award.
Romania appealed the decision. In 2021, the Court of Appeal rejected Romania’s appeal. According to the Court, Romania had waived its right to invoke jurisdictional immunity by entering into the Sweden-Romania BIT.
Against all expectations, the Luxembourg Court of Cassation then overturned the Appeal Court’s decision that upheld the enforcement of the Award. According to the Court of Cassation, the arbitration clause within the Sweden-Romania BIT had been nullified when Romania joined the EU in 2007:
[L]e consentement que la Roumanie avait donné à la possibilité qu’un litige avec des investisseurs soit porté contre elle dans le cadre de la clause d’arbitrage prévue par l’article 7(5) du TBI est, à compter de l’adhésion de la Roumanie à l’Union européenne en date du 1er janvier 2007, « dépourvu de tout objet » (point 145 de l’arrêt précité) parce qu’il est contraire aux articles 267 et 344 TFUE, de sorte que ces articles s’opposent à déduire de l’article 7(5) du TBI une renonciation à l’immunité de juridiction et que, en procédant à cette déduction, la Cour d’appel a méconnu ces articles, et que, seconde branche, en déduisant la renonciation par la Roumanie à son immunité de juridiction du consentement donné par celle-ci à l’article 7(5) du TBI.
Consequences of the Decision of the Luxembourg Court of Cassation on Enforcement
The Luxembourg Court of Cassation arguably misinterprets the ICSID Convention by considering that the relevant time to decide that a State has waived its jurisdictional immunity is the date when enforcement is sought.
Pursuant to Article 25(1) of the ICSID Convention, “The jurisdiction of the Centre shall extend to any legal dispute arising directly out of an investment, between a Contracting State (or any constituent subdivision or agency of a Contracting State designated to the Centre by that State) and a national of another Contracting State, which the parties to the dispute consent in writing to submit to the Centre. When the parties have given their consent, no party may withdraw its consent unilaterally.”
By entering into the Sweden-Romania BIT, Romania consented to submit disputes to ICSID arbitration as expressly stated in Article 7 of the said BIT:
(1) Any dispute concerning an investment between an investor of one Contracting Party and the other Contracting Party shall, if possible, be settled amicably.
(2) If any such dispute cannot be settled within three months following the date on which the dispute has been raised by the investor through written notification to the Contracting Party, each Contracting Party hereby consents to the submission of the dispute, at the investor’s choice, for resolution by international arbitration to either:
i) the International Centre for Settlement of Investment Disputes (ICSID) for settlement by conciliation or arbitration under the Washington Convention of 18 March 1965 on the Settlement of Investment Disputes between States and Nationals of Other States, (the Washington Convention); or
ii) an ad hoc tribunal set up under the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL). The appointing authority under the said rules shall be the Secretary General of ICSID.
Accordingly, Romania offered its consent to ICSID arbitration by entering into the Sweden-Romania BIT on 1 April 2003.
As stated above, the ICSID Convention requires consent in writing by both parties to the dispute, the State and the foreign investor. It is well established in international investment arbitration that the investor may accept the offer of consent contained in the BIT by instituting ICSID proceedings.
Viorel and Ioan Micula and their companies accepted the offer of consent contained in the Sweden-Romania BIT when they brought their ICSID claim on 28 July 2005.
In light of the above, contrary to the position of the Luxembourg Court of Cassation, the relevant time to decide whether a State has waived its jurisdictional immunity is arguably the moment when the arbitration agreement is signed, i.e., 1 April 2003.
The Miculas’ saga is far from being over. The European Commission is launching infringement proceedings against the UK over the (arguably correct) decision by its Supreme Court allowing enforcement of the Award.
Additional decisions from European domestic courts may only confirm the difficulty for European investors to enforce awards in the European Union against member States.
 Ioan Micula, Viorel Micula, S.C. European Food S.A, S.C. Starmill S.R.L. and S.C. Multipack S.R.L. v. Romania, ICSID Case No. ARB/05/20, Award, 11 December 2013.
 Emergency Government Ordinance No. 24/1998 effective on 2 October 1998, EGO 24/1998.
 Agreement between the Government of the Kingdom of Sweden and the Government of Romania on the Promotion and Reciprocal Protection of Investments dated 29 May 2002 and entered into force on 1 April 2003.
 The European Commission, Two new members join the EU Family, 28 December 2006, https://ec.europa.eu/commission/presscorner/detail/en/IP_06_1900 (last accessed 21 July 2022).
 Ioan Micula, Viorel Micula, S.C. European Food S.A, S.C. Starmill S.R.L. and S.C. Multipack S.R.L. v. Romania , ICSID Case No. ARB/05/20.
 Judgment of the General Court, Micula v. European Commission dated 18 June 2019.
 Appeal brought on 27 August 2019 by European Commission against the judgment of the General Court (Second Chamber, Extended Composition) delivered on 18 June 2019 in Case T-624/15: European Food e.a. v Commission (Case C-638/19 P).
 See, e.g., Aceris Law LLC, Intra-EU Investment Arbitration: Impact of EU Member States’ Declarations in the Wake of Achmea, dated 6 May 2019.
 Agreement between the Government of the Kingdom of Sweden and the Government of Romania on the Promotion and Reciprocal Protection of Investments dated 29 May 2002 and entered into force on 1 April 2003, Article 7 (emphasis added).
 See, e.g., American Manufacturing & Trading, Inc. v. Republic of Zaire, ICSID Case No. ARB/93/1, 10 February 1997, para. 5.23; AAPL v. Sri Lanka, ICSID Case No. ARB/87/3, Award, 27 June 1990; Fedax v. Venezuela, ICSID Case No. ARB/96/3, Decision on Jurisdiction, 11 June 1997; CSOB v. Slovakia, ICSID Case No. ARB/97/4, Decision on Jurisdiction, 24 May 1999.
 Ioan Micula, Viorel Micula, S.C. European Food S.A, S.C. Starmill S.R.L. and S.C. Multipack S.R.L. v. Romania, ICSID Case No. ARB/05/20, Award, 11 December 2013, para. 10.
Reference Article: https://www.international-arbitration-attorney.com/enforcement-of-the-micula-icsid-award-rejected/