News

On 19 February 2020, the UK Supreme Court issued a long-awaited judgement ordering the enforcement of an intra-EU award in favour of Swedish investors, the Micula brothers.  The dispute raises the key issue of conflicts arising between international enforcement obligations of a State, on the one hand, and its obligations under EU law, on the other hand. 

In December 2013, an International Centre for Settlement of Investment Disputes (“ICSID”) tribunal adopted a final award in favour of the Micula brothers against Romania.  Romania was ordered to pay them 791 million lei (USD 179 million) as compensation for breach of investors’ protection rules.  Such ICSID awards are subject to a specific regime, as they are binding on signatory states and must be recognized and enforced by their national courts “as if [they] were a final domestic judgment of a court in that State” (Article 54(1) ICSID Convention).  

However, to date, the Micula brothers have not yet succeeded in having their award enforced despite their repeated attempts to do so before national courts (i.e.,UK, US, Belgian, French, Swedish and Luxembourgish courts).  This is partly due to attempts by Romania and the European Commission to prevent the enforcement of the award on the ground that it would infringe EU law prohibiting unlawful State aid.  

On march 2015, the European Commission adopted Decision 2015/1470, which found that the payment of the award by Romania constituted state aid within the meaning of article 107(1) TFEU and was incompatible with EU law.  This decision was quashed by the General Court in June 2019 on the grounds that the Commission lacked competence ratione temporisto exercise its powers.  The latter judgment has been appealed by the European Commission and is currently pending before the Court of Justice.

In this case, the UK Supreme Court held that the granting of a stay of the proceedings was not consistent with its ICSID obligations to recognize and enforce the award. It further ruled that these obligations were not contrary to the EU duty of sincere co-operation, which did not go so far as to require the domestic court to freeze an award on the grounds of a mere “contingent and remote possibility” of conflicting decision adopted in parallel EU proceedings. 

This decision underlines the tension that exists between a State’s international obligations under the ICSID Convention and its obligations under EU law. This decision also follows the Achmea case, following which the EU Members States have affirmed their firm commitment to put a definitive end to intra-EU investment arbitration, including by preventing the enforcement of intra-EU awards (see on this discussion : C. Alter and Su-Yi Leung, ‘Post-Achmea Investment Treaty Arbitration : A departure from the EU-centric Approach’, in Liber Amicorum CEPANI, Kluwer, 2019, pp.333 to 358).  

Cédric Alter & Su-Yi Leung