Ioan Micula v. Gov't of Romania, No. 17-cv-02332 (D.D.C. Sept. 11, 2019) [click for opinion]
Brothers Ioan and Viorel Micula, through three companies they control, invested in the consumer products and beverages industry in Romania beginning in 1998 in reliance on incentives Romania implemented to encourage foreign investment in "disfavored" regions. When Romania was joining the EU, however, it had to repeal these incentives because the European Commission ("EC") informed it that the incentives would constitute illegal state aid. The repeal went into effect February 22, 2005. The Miculas subsequently brought an ICSID arbitration against Romania pursuant to the Sweden-Romania BIT and were awarded $116,317,868 in damages plus interest.
Romania initially set out to satisfy the award, but the EC issued a decision that implementing or executing the Award would constitute impermissible new state aid and Romania was prohibited from doing so. Romania also attempted to annul the arbitration award, but an ICSID ad hoc tribunal upheld it. The Miculas then proceeded to try to enforce the ICSID award and also appealed the EC's determination to the EU General Court.
Petitioners first tried to enforce the award in the US on an ex parte basis. The D.C. court held that awards against a state cannot be enforced ex parte because of the Foreign Sovereign Immunities Act (the "FSIA"). Petitioner Viorel Micula tried next to enforce the award ex parte in New York, which was originally granted, but then overturned by the Second Circuit. In Mobil Cerro Negro, Ltd. v. Bolivarian Republic of Venezuela the Second Circuit agreed with the D.C. courts that the FSIA controls the manner of obtaining personal jurisdiction over a sovereign so that an ICSID award cannot be enforced ex parte. Petitioners then returned to D.C. with this proceeding.
There were delays in the proceeding because Romania raised objections regarding its service. After these were resolved, the parties addressed whether or not the award should be enforced given the EC's decision that satisfying the award constitutes impermissible state aid and the European Court of Justice's Achmea decision that intra-EU disputes cannot be resolved by arbitration. On June 18, 2019, however, the General Court overturned the EC's decision that satisfying the award would constitute impermissible state aid. The General Court distinguished this situation from Achmea because all of the actions occurred before Romania acceded to the EU and therefore did not implicate EU law.
Romania tried to argue enforcement should be stayed again while the EC appealed the General Court's decision, but the district court refused to extend what should be summary proceedings any further and for an indefinite time. The district court then turned to the substance of Romania's objections.
Romania argued that the Micula award should not be enforced because the court lacked subject matter jurisdiction under the FSIA, it had already fully satisfied the award, and that the act of state doctrine as well as the foreign sovereign compulsion doctrine prohibit the award's enforcement. First, the district court found that it had jurisdiction under the arbitration exception to the FSIA. The court rejected Romania's argument that Achmea had invalidated the arbitration clause in the Sweden-Romania BIT because it found that the concerns which animated Achmea were not present here. It distinguished Achmea on the same grounds as the General Court. As to the act of state doctrine and the foreign sovereign compulsion doctrine, the court held that these arguments had been rendered moot by the General Court's decision.
The court also rejected Romania's arguments that it had satisfied the award. The tax setoffs Romania had issued to satisfy the award had been invalided by a Romania court and the money that had been transferred to a Treasury account never actually reached Petitioners. The only payments that Petitioners received and agreed could be written off amounted to about $11.2 million. The court rejected that international comity played any role in whether Romania had satisfied the award and enforced the award in the amount of $331,557,687, which took into account the interest that had accrued.