Micula brothers’ ICSID award stayed by Commercial Court pending EU Court proceedings

20/01/17

Mr Justice Blair has today delivered an important judgment in Micula and others v Romania, a case concerning the intersection of international law rules for investment arbitration with EU law rules on State aid.  The Judge found that the enforcement of an ICSID award must be stayed in circumstances where the European Commission has decided that payment under the award would constitute unlawful State aid and there is an outstanding appeal to the EU Courts against that decision.  It is understood that this is the first time that an ICSID award’s further enforcement has been stayed on such terms in the UK.  The Judge however also dismissed an application to set aside registration of the award altogether.

In 2013, an ICSID Tribunal awarded the Micula brothers and associated companies substantial damages against Romania in respect of Romania’s withdrawal of an investment incentive programme. The withdrawal occurred in the context of Romania’s accession to the EU and the introduction of EU State aid rules.

The European Commission issued first an injunction and later a final decision declaring that implementation or execution of the ICSID award by Romania (including payment) would constitute new State aid, incompatible with the internal market. The Claimants have applied to the EU Courts for the final decision to be annulled in proceedings that remain pending.

The ICSID award was registered ex parte by Burton J in 2014 under the Arbitration (International Investment Disputes) Act 1966, under which ICSID awards are enforceable on the same basis as judgments of the High Court. Romania applied to have this set aside or to have enforcement of the Award stayed. Supported by the EU Commission (as intervener), Romania argued before Mr Justice Blair that the High Court is obliged to refuse recognition and enforcement of the Award, given the terms of the Commission’s decision. Romania and the Commission argued in the alternative that the Court must stay proceedings because it cannot take a decision that conflicts with the Commission’s decision and because the legal issues are currently before the GCEU.

The Claimants argued that EU law did not require the High Court to refuse recognition/enforcement or to grant a stay because of the principle of EU law permitting national courts to apply their own domestic rules on finality of decisions and res judicata, and because of the terms of the 1966 Act dealing with enforcement.

Mr Justice Blair refused to set aside recognition of the award.  However, he granted a stay of enforcement pending the resolution of the Claimants’ proceedings in the European courts. He stated that this was because the principle of sincere cooperation in Art. 4(3) TEU “precludes national courts from taking decisions which conflict with a decision of the Commission” and because “the issues raised in the present application substantially overlap with the arguments raised in the annulment proceedings…giving rise to the risk of inconsistent decisions.”

The Judge further held that this did not create a conflict with the UK’s duties under the ICSID Convention or 1966 Act because the effect of these was that an ICSID award was to be equated with a domestic judgment, in respect of which a similar stay would have been granted.

A further hearing will be held to determine a security application made by the Claimants.

The judgment is available here.