The Micula Saga – A Tale of EU Law and BREXIT

Mihai Ioachimescu-Voinea
Mihai Ioachimescu-Voinea


Much has been written about the Micula case. The story begins in 1999, when the post-communist Romania was trying to increase the flow of investments and to become a member of the European Union (“EU”). In pursuing the former objective, Romania adopted an investment incentive scheme for foreigners seeing a financial opportunity in the country. The EGO 24/1998 was adopted, which allowed certain tax exemption for investments made in specified economically disfavoured regions. During EU`s accession negotiations, the EU pointed out that the incentive scheme was contrary to its competition rules. On 31 of August 2004 Romania repealed all but one of the tax incentives provided in EGO 24/1998.

Micula brothers were born in Romania but became Swedish nationals in 1992 and 1995. At the beginning of 2000`s, the Micula brothers made a series of investments in food production companies, taking advantage of the tax incentives Romania had in place. After Romania dropped its tax incentives scheme in 2004 the Micula brothers filed a request for arbitration with ICSID on 28 of July 2005 under the 2002 Sweden-Romania BIT. On 11 December 2013 the ICSID Tribunal issued an Award. It provided for compensation for the breach of the BIT of approximatively €170m, for Romania`s failure to ensure fair and equitable treatment, respect the Claimants’ legitimate expectations and act transparently. After Romania failed its application of annulment of the ICSID Award, the EU Commission adopted Decision 2015/1470. The Commission`s decision prohibited Romania from making any payments to Micula brothers according to the award, as it considered such payments as representing a State aid, contrary to Art. 107(1) TFEU. With that, the Micula brothers commenced proceedings seeking the annulment of the Commission`s Decision before the General Court of the European Union (“GCEU”), while exploring different avenues of enforcing the contended Award in the United States, France, Belgium, Luxembourg and Sweden. However, what other “enforcement-friendly” jurisdiction could have been sought, other than one that recently decided to claim back its autonomy from the Court of Justice of the European Union`s (“CJEU”)?

UK Proceedings

The Micula brothers commenced their enforcement proceedings within the United Kingdom (“UK”) on 17 October 2014. On 20 January 2017 Mr Justice Blair rendered the High Court Decision in which he decided to stay the enforcement proceedings pending the GCEU`s decision. On 27 July 2018 the stay was confirmed by the EW Court of Appeal, which ordered Romania to pay a security of £150m. The issue of law related to the stay of the enforcement proceedings can be explained as follows. The ICSID Convention provides in Art. 54 that “[E]ach Contracting State shall recognize an award rendered […] as if it were a final judgment of a court in that State”. The duty of sincere cooperation, enshrined in Art. 4(3) of the Treaty on European Union (“TEU”) requires Member States to follow and support the application of the EU Treaties and acts, including those issued by the Commission.

However, if the High Court would have rendered a final decision according to Art. 54 of ICSID text, and that decision would be contrary to an EU act, the duty of sincere cooperation would require the courts to abstain from giving effect to the ruling. Thus, as the High Court and the EW Court of Appeal argued, the EU Commission`s Decision which prohibited Romania from paying the Award required the UK`s courts to stay the enforcement proceedings, up to the moment when the GCEU would have rendered a decision on its validity.

Both parties filed for a leapfrog appeal to the Supreme Court under the Administration of Justice Act 1969. The Micula brothers appealed the stay of the enforcement proceedings while Romania seeked to overturn the decision on security.

UK Supreme Court

The day of the first hearings came with a surprise for the parties and the members of the Supreme Court. The GCEU had quashed the EU Commission`s decision on State aid. The hearings were adjourned, and a subsequent cross-appeal ground was lodged by the Micula brothers. Meanwhile the EU Commission lodged an appeal against the GCEU`s decision of annulment, with a final decision yet to be rendered by the CJEU. Before the UK Supreme Court, the Micula brothers contended, among other things, that (i) “[T]he European Communities Act 1972 does not require the United Kingdom to breach its pre-accession obligations under the ICSID Convention as implemented by the 1966 Act” and (ii) “[A]rticle 351 TFEU applies with the result that the obligations of the United Kingdom under the pre-accession ICSID Convention are not subject to the over-riding effect of EU law” (para. 38).

ICSID Enforcement Mechanism – Out of EU`s reach

The Supreme Court proceeded towards examining the enforcement mechanism enshrined in Art. 54 of the ICSID Convention.[1] It naturally found that the ICSID enforcement system is self-contained, and that once the authenticity of an award is established, domestic courts cannot revise the award, as opposed to the mechanism of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (para. 68). It then concluded that the reading “as if it were a final judgment of that State” of Art. 54(1) of the ICSID Convention is capable of two interpretations, according to the travaux préparatoires and the 1966 Act implementing the ICSID Convention.

Firstly, the Supreme Court held that the purpose of correlating an ICSID Award with a final judgment of the enforcing State is not to put an equality sign between the two. The consequence of it is that an Award cannot be subject to the legal challenges that can be brought against a final decision of the High Court in the enforcement proceedings (para. 81). Rather, as the UK Supreme Court held, the purpose of the Art. 54(1) “is to give legal force to an award for the purpose of executing it and to provide machinery for that purpose” (para. 81). Under this interpretation, the Supreme Court held that national courts in the UK jurisdiction would still have the power to stay the execution of an ICSID award in extraordinary circumstances. However, the stay ordered by the High Court and confirmed by the Court of Appeal pending the annulment proceedings at the GCEU was not an extraordinary circumstance that would fall within the scope of the ICSID Convention, and therefore was unlawful (para. 84).

Secondly, Art. 54(1) could be interpreted according to the “equivalence” principle. Under this interpretation an ICSID Award will be deemed as a final decision of the High Court. But such an interpretation also allows UK courts to stay proceedings and refuse enforcement where the award would conflict with EU norms or acts. The UK Supreme Court dismissed this possibility, by relying on Art. 351 TFEU, “which relieves Member States of the obligation to ensure the primacy of EU law” when Member States concluded pre-accession international agreements.[2] Thus, as the Court concluded, UK`s obligations arising from the ICSID Convention were not affected by the Treaties` provisions, due to the fact that UK ratified the ICSID Convention in 1966, before acceding to the European Communities in 1973. As a result, there was no duty of sincere co-operation owed towards the EU and other Member States.


While the Supreme Court rushed in dismissing the principle of sincere co-operation under Art. 351 TFEU, it might have adopted a more prudent approach, by making a request for a preliminary ruling according to Art. 267 TFEU. The Supreme Court argued that a reference to the CJEU was not necessary, due to the fact that Art. 267 TFEU “does not confer any power to interpret agreements in international law which member states concluded with non-member states before the entry into force of the Treaties or prior to their own accession” (para. 99). That may well be true, but the Court could have requested for guidance as to the interaction between the European State aid rules and the ICSID Convention, similar to the Brussels Court`s request for a preliminary ruling.

Another more cautious option would have been for the Supreme Court to make a preliminary reference to the CJEU with respect to the scope and application of the sincere co-operation principle. As a fundamental principle, the extent of the obligations derived from it are numerous, and vary from refraining from fulfilling the obligations resulting from acts of the institutions of the Union (Art. 4(3) TEU) to refraining from any action which would be contrary Union`s interests or likely to impair its effectiveness in international relations (Art. 24(3) TEU). As such, if the CJEU would have found that UK still owes a duty of sincere co-operation, the enforcement of the Award would have most likely failed. The decisive move to simply bypass the principle of sincere co-operation by relying on Art.`s 351 TFEU escape clause signals the fact that United Kingdom is ready to embrace intra-EU awards that may not be to the CJEU`s liking.

[1] Art. 54(1) of ICSID Convention –  Each Contracting State shall recognize an award rendered pursuant to this Convention as binding and enforce the pecuniary obligations imposed by that award within its territories as if it were a final judgment of a court in that State. A Contracting State with a federal constitution may enforce such an award in or through its federal courts and may provide that such courts shall treat the award as if it were a final judgment of the courts of a constituent state.
[2] P. Craig & G. de Burca, EU Law: Text, Cases, and Materials 277, 6th ed. (2015).

Mihai Ioachimescu-Voinea, LLM, Associate SĂVESCU & ASSOCIATES