Ioan Micula, Viorel Micula, S.C. European Food S.A, S.C. Starmill S.R.L. and S.C. Multipack S.R.L. v. Romania [I]
ICSID · Investment (ICSID and treaty) · Romania · 11 Dec 2013
Why it matters
This award is a landmark in investment treaty arbitration because it addressed the tension between EU state aid rules and BIT protections. The tribunal held that Romania's premature revocation of incentives, before EU accession required it, breached the fair and equitable treatment standard. The case also raised significant issues regarding the interaction between EU law and international investment law, and the enforceability of awards that may conflict with EU law, leading to subsequent proceedings before the CJEU.
Summary
The case arose from Romania's revocation of tax incentives granted under Emergency Government Ordinance 24/1998 (EGO 24) to investors in disadvantaged regions. The claimants, Romanian nationals who had invested in food production, received Permanent Investor Certificates entitling them to certain tax exemptions for 10 years. As Romania prepared for EU accession, the European Commission deemed the incentives incompatible state aid. Romania gradually phased out the scheme, ultimately revoking it in 2005. The claimants argued that this violated the fair and equitable treatment standard and the umbrella clause of the Sweden-Romania BIT. The tribunal, by majority, found that Romania had made specific promises to the claimants, creating legitimate expectations that the incentives would remain for 10 years. Although Romania's policy goal of EU accession was rational, the tribunal held that Romania acted unreasonably by revoking the incentives prematurely, without being required to do so by EU law at the time, and without adequate transitional measures. The tribunal awarded damages for increased costs and lost profits. The umbrella clause claim was dismissed. The award was later challenged in EU courts, leading to a CJEU ruling that enforcement of the award would violate EU law.
The detail
Parties: Ioan Micula, Viorel Micula, S.C. European Food S.A, S.C. Starmill S.R.L. and S.C. Multipack S.R.L. v. Romania [I]
Case number: ICSID Case No. ARB/05/20
Outcome: Romania breached the fair and equitable treatment standard under the Sweden-Romania BIT. Romania ordered to pay RON 376,433,229 in damages plus interest.
Quantum: RON 376,433,229
Applicable law: Sweden-Romania BIT (2002), ICSID Convention, Romanian law, EU law (as relevant)
Issues in play: The case involved a conflict between Romania's obligations under the BIT to provide fair and equitable treatment and its obligations under EU law to eliminate state aid incompatible with the common market. The tribunal found that Romania's revocation of tax incentives to comply with EU accession requirements violated the BIT.
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