In December 2013, an ICSID Tribunal awarded the Micula brothers substantial damages against Romania in respect of the latter’s withdrawal of an investment incentive programme. This withdrawal was the result of Romania’s then recently-acquired membership to the EU, which subsequently introduced new EU State aid rules.
The Micula brothers began enforcement proceedings and in 2014 the award was registered ex parte in the High Court. In turn, Romania applied to set aside the Registration Order.
In January 2017, The High Court refused Romania’s set-aside application, granting a stay of enforcement proceedings in the United Kingdom pending the resolution of the Claimants’ proceedings in the EU Courts.
Mr Justice Blair noted that the enforcement of an ICSID award must be stayed in circumstances where the European Commission has found that payment under the award would represent unlawful State aid and there is an outstanding appeal against this decision in the EU Courts.
In its application, Romania asked the Court to set aside the Registration Order on two grounds. Namely, that Romania had paid the award in full and secondly that the Court should refuse recognition and enforcement in light of the terms of the Commission’s final decision.
In the alternative, Romania further asked the Court to stay proceedings until the EU Courts determine whether they should uphold the Claimants’ application to annul the final decision. Romania argued that the High Court should submit a preliminary question to the CJEU and until there is a preliminary ruling, proceedings should be stayed.
The Claimants argued that EU law did not impose an obligation on the High Court to refuse recognition and enforcement or to grant a stay. Firstly, EU law allows national courts to apply their own domestic rules on issues such as finality and res judicata.
Secondly, it was submitted that the terms of the Arbitration (International Investment Disputes) Act 1966, dealing with enforcement, are clear and do not allow any derogation.
Thirdly, the European Communities Act 1972 does not aim to put the UK in breach of international obligations undertaken before the accession to the EU or to confer primacy of EU law in the same context. Finally, the Claimants submitted that the award had not actually been paid in full.
Findings of the Court
The court looked at the issue of res judicata and found that the Claimants were correct to submit that, as a matter of English Law, the award became res judicata on 11 December 2013 and not 26 February, thus pre-dating the Commission’s decisions. Furthermore, the Court noted that if it were to proceed with the enforcement of the award against Romania, it would contradict the Commission’s final decision which aimed to prohibit payment by Romania.
In terms of the effect of the 1966 Act, the Court held that there was a distinction between registering an award and enforcing it in the sense that although registration may lead to execution, it is not necessarily a mandatory preceding step. The Court further noted that setting aside the award while the resolution of the State aid issue is pending, could prejudice the Claimants.
With regard to the European Communities Act 1972 issue, the Court considered whether there is a conflict between the provisions of the Communities Act and the obligations under 1966 Act as well as the issue of priority between the two. In this particular case, they concluded that there were no grounds to set aside the registration, but the judgement could not be enforced while the Commission expressly prohibited Romania from making payment under the award.
Finally, on the facts of the case, the Court found that other than the amounts already paid to the Claimants in Romania by way of executing a court order, most of the award still remained unpaid.
Sabina Adascalitei LLB, LLM, MCIArb
Research and Academic Affairs Coordinator