Spring 2020

UK Supreme Court allows enforcement of the €300 million Micula award

Introduction

On 19 February 2020, the UK Supreme Court (“SC”) unanimously lifted the stay on the enforcement of the Micula v. Romania ICSID award.  This decision is the latest development in the Micula brothers’ extensive attempts to enforce the award in different European jurisdictions.  Romania and the European Commission (the “Commission”) intervened in the case.

Background

The Micula brothers and their three Romanian-incorporated companies (“the Miculas”) obtained an award against Romania on 11 December 2013 for breaches by Romania of the fair and equitable treatment standard under the Romania-Sweden BIT, relating to their early 2000s investment in a food production operation before Romania’s accession to the European Union.

Romania sought and obtained a stay enforcement from the UK Commercial Court in January 2017, upheld in July 2018 by the Court of Appeal, pending decision of the General Court of the European Union (the “GCEU”) on the status of the award under EU law, which the Commission had declared State aid incompatible with the internal market in a 2015 decision.  The GCEU annulled the Commission’s decision on 18 June 2019, on the ground that the Commission had exceeded its powers by ruling on events predating Romania’s accession to the EU.  The Commission lodged an appeal before the Court of Justice of the European Union (“CJEU”), which has not yet heard oral arguments.

Following the Miculas’ appeal of the Court of Appeal decision to stay enforcement, the SC heard oral arguments in October 2019 and issued its judgment on 19 February 2020.

The decision

Before detailing the reasons why it lifted the stay enforcement, the SC rejected the Miculas’ argument that the UK courts were not bound by the duty of sincere cooperation under EU law following the GCEU’s decision to annul the Commission’s ruling of 2015.  The SC considered that a risk of contradictory decisions between the UK and EU courts remained.

The SC’s first ground for lifting the stay enforcement was that the UK courts have the obligation to give effect to the Micula award under the ICSID Convention.  After a careful review of the ICSID Convention’s travaux préparatoires, the SC found that article 54(1), which provides that States shall recognise an award “as if it were a final judgment of a court in that State”, arguably allows, in exceptional and extraordinary circumstances that are not defined, certain defences to enforcement available in local courts to final judgments.

Though the SC took note of the debate on the interpretation of that article, which had divided the Court of Appeal, it considered that the proper interpretation of article 54(1) could only be resolved by the International Court of Justice and that this interpretation was in fact irrelevant to the present circumstances.  The SC finally deemed that the Court of Appeal had exceeded its powers by granting the stay enforcement on substantive grounds as opposed to procedural grounds.

Second, the SC relied on article 351 of the Treaty on the Functioning of the European Union to find that the duty of sincere cooperation under EU law does not require domestic courts to decline ruling on the present issue pending resolution by the EU courts.  In fact, the UK’s obligation to enforce the award under ICSID could not be affected by EU treaties posterior to the ratification of the ICSID Convention by the UK.

The SC thus ruled that the stay enforcement was an unlawful measure both under international and domestic law.  It further discharged the order for security which had been granted to the Miculas but stayed by the Court of Appeal.

Commentary

This decision brings a significant development to enforcement proceedings of ICSID awards before UK courts, both with regards to EU treaties and to the power of local courts to resist enforcement.

The SC seems to grant English courts further power to stay enforcement of an ICSID award in limited and exceptional circumstances, which remain to be defined, while specifying that stays can only be granted for procedural reasons and in circumstances where no inconsistency arises with obligations under ICSID.

The SC’s ruling also appears to take an investor-friendly approach to the enforcement of intra-EU ICSID awards.  Indeed, the EU duty of sincere cooperation no longer is a valid ground to resist enforcement as a Respondent State before the UK courts.