In Ioan Micula, et. al. v. Romania, Swedish food industry brothers Viorel and Ioan Micula asked the United States District Court for the District of Columbia to affirm a federal judge’s ruling ordering Romania to pay the remaining balance of $96 million on a $356 million award.
In 1989, the country of Romania suffered from significant economic and social challenges following the fall of the communist regime. In response to these circumstances, Romania adopted several measures to attract investment in the country. One of these measures was Emergency Government Ordinance No. 24 (“EGO 24”) which established a framework for granting incentives to invest in certain regions of Romania. In 1998, Swedish investors Viorel and Ioan Micula, along with three companies under their control (“Petitioners”), began building an integrated food platform that would produce consumer products for the Romanian market. In 2002, Romania entered a bilateral investment treaty with Sweden that granted each country’s investors certain protections, and one of those protections was the right to arbitrate investment disputes before a tribunal under the International Centre for Settlement of Investment Disputes Convention (“ICSID”).
In 2004, Romania repealed EGO 24 as part of its decision to join the European Union (“EU”), and this action caused monetary issues for Petitioners who relied on EGO 24’s incentives to complete their projects in Romania. Thus, in 2005, Petitioners initiated arbitration proceedings against Romania. Petitioners alleged that they made significant investments in certain regions of Romania relying on EGO 24’s economic incentives, and Romania revoking those incentives caused Petitioners significant financial losses. The ICSID’s arbitration tribunal agreed with Petitioners, and in 2013 they granted Petitioners an award of 376.43 million Romanian Leu, which was equal to $116.32 million, plus interest.
In 2007, after Petitioners invoked their right for arbitration, Romania became a full member of the EU. This resulted in the executive branch of the EU, the European Commission (“the Commission”) taking an interest in the ongoing arbitration between Romania and Petitioners. Approximately three months after the tribunal issued the award, the Commission issued a suspension injunction that prohibited Romania from taking any further action towards paying the award until the Commission determined if the award violated any EU laws. Romania responded to the injunction by returning to the ICSID arbitration tribunal to annul the award. In 2015, the Commission determined that the award did violate EU law, but that determination was essentially annulled by the General Court of the European Court of Justice—a constituent court of the chief judicial authority of the EU. Further, in 2016, the ICSID arbitration tribunal rejected Romania’s effort to annul the award.
While continuing their fight in both the General Court and in arbitral proceedings, Petitioners decided to bring their issue to the United States in 2014 seeking a confirmation of the award. In 2017 Petitioners were finally able to file a petition to confirm the arbitration award and a motion for judgement on the pleadings in the United States District Court for the District of Columbia. In the district court, Romania raised several arguments that the court ultimately found unpersuasive. First, Romania claimed that the court lacked subject-matter jurisdiction over the petition, but the court held that it had jurisdiction since Romania waived its sovereign immunity pursuant to the Foreign Sovereign Immunities Act’s arbitral award exception. Romania then argued that two related doctrines—the act of state and the foreign sovereign compulsion doctrines—required the court to reject confirming the award and dismiss the petition. The act of state doctrine prevents one country from questioning the validity of public acts performed by another country within their own borders even if the courts have jurisdiction. Similarly, the foreign sovereign compulsion doctrine immunizes parties from liability for actions compelled by foreign governments. However, the court disagreed with Romania and held that neither of these doctrines precluded the court from confirming the award.
Finally, Romania argued that the court should deny the petition because it already satisfied the award in full through a series of tax setoffs and forced execution on accounts held by the Romanian Ministry of Public Finance. However, a Romanian court found the asserted tax setoffs were unlawful. Because the district court found that Romania law governed whether the tax setoffs satisfied a portion of the award, the court determined that Romania could not rely on them to satisfy the award. The Romanian Ministry of Public Finance did create a separate account to satisfy the award in March 2015 but withdrew the funds after the Commission found that the award violated EU law. Thus, Petitioners never received those funds, and the court held that they could not apply funds against the award if they were never received. Ultimately, the court granted Petitioners’ confirmation of the award, their motion for judgment on the pleadings, and ordered Romania to pay $331million plus interest.
Romania has paid $274 million of the now $356 million award. In this most recent appeal, Romania claims that it has satisfied the award because a 2019 Romanian enforcement hearing determined that the true value of the award was equal to $274 million. Petitioners argue that a decision made in a non-U.S. proceeding does not impact Romania’s obligation to fully satisfy the award and Judgment. Further, Petitioners contend Romania’s attempts to challenge the district court’s calculations of the award are untimely and must be denied. The court is still in the process of scheduling the oral arguments.