UK Supreme Court Paves The Way For Enforcement Of An ICSID Award In The Long-Running Micula v Romania Dispute

On 19 February 2020, the UK Supreme Court rendered its judgment in Micula and others v Romania.1 In a unanimous ruling, the Supreme Court lifted a stay of enforcement of an ICSID arbitral award despite an extant State aid investigation by the European Commission (the Commission). With the stay lifted, the requirement for Romania to provide security as a condition of the stay was discharged.

This highly significant decision is the latest stage in the Micula brothers' (the Claimants) longstanding attempts to enforce their ICSID Award against Romania, which has involved proceedings in numerous jurisdictions. The Court's judgment concluded that while the English courts have the power to stay execution of ICSID awards in certain limited circumstances, the stay in this case exceeded the proper limits of that power. In particular, the EU Treaties did not displace the UK's obligations under the ICSID Convention (pursuant to which the UK had a prior (pre-EU-accession) obligation to enforce the Award).

Background

In December 2013, an ICSID Tribunal issued an Award finding Romania in breach of the Sweden-Romania bilateral investment treaty,2 and awarding the Claimants compensation of approximately £150 million (~$200 million), plus compound interest until satisfaction of the Award.3 Romania subsequently commenced ICSID annulment proceedings, which were ultimately rejected.4

In October 2014, the Claimants applied for registration of the Award before the Commercial Court,5 pursuant to the Arbitration (International Investment Disputes) Act 1966, which implemented the ICSID Convention into English law. In July 2015, Romania applied for the registration to be varied or set aside. By a counter-application, the Claimants sought an order for security to be made in the event that a stay of enforcement was ordered.

Meanwhile, in March 2015, the European Commission issued a decision (the Commission Decision) addressed to Romania concluding that payment of the Award constituted State aid in breach of the Treaty on the Functioning of the EU (the TFEU). Payment was, therefore, prohibited,6 and any payments made hitherto were to be recovered. The Claimants applied to the General Court of the EU (the GCEU) for the Commission Decision to be annulled.

Returning to the UK enforcement efforts: the High Court refused to set aside registration, but granted a stay enforcement pending the outcome of the GCEU proceedings.7 The High Court meanwhile refused the Claimants' application for security.8 In 2018, the Court of Appeal took a different approach. While maintaining the stay, it ordered Romania to provide security in the sum of £150 million.9 Romania was permitted to appeal the order for security before the Supreme Court. The Claimants cross-appealed the grant of a stay.

In a further twist, on 18 June 2019the morning the Supreme Court proceedings were scheduled to startthe GCEU annulled the Commission's Decision (the Annulment Decision). The GCEU found that the Commission had exceeded its competence by retroactively applying its State aid powers under the TFEU to events predating Romania's accession to the EU.10 The GCEU's...