US court rules new sanction against Romania in Micula case

The broader dispute between the Miculas and the Romanian Government dates back to Romania’s pre-EU accession period. Foreign investors Ioan Micula and Viorel Micula, together with three companies , brought arbitration proceedings against Romania after the government prematurely withdrew a package of investment incentives in the early 2000s, while maintaining the correlative obligations for 20 years. The claimants argued that they had relied on those incentives when making investments in Romania and that the state’s decision to prematurely repeal them and its behavior beached the Romania-Sweden Bilateral Treaty for protection of investments, causing them significant losses. In December 2013, an arbitral tribunal constituted under the rules of the International Centre for Settlement of Investment Disputes (ICSID) ordered Romania to pay compensation to the claimants. The award, initially quantified at around EUR 178 million, plus accruing interest quickly became one of the most prominent investor-state disputes involving an EU member state. However, the case soon moved beyond arbitration. In 2015, the European Commission issued an administrative decision which argued that payment of the compensation would amount to incompatible state aid under EU law mainly because the dispute resolution mechanism (through arbitration proceedings) was found incompatible with the EU law and ordered Romania to recover amounts that had already been paid. That finding created a legal conflict between the enforcement of an international arbitration award and the EU’s state aid regime. The dispute then expanded into several parallel tracks. The Micula side challenged the Commission’s decision before EU courts, while also pursuing recognition and enforcement of the arbitral award in jurisdictions outside the European Union, including the United States and the United Kingdom. In the EU courts, the legal picture has shifted several times. The General Court initially annulled the Commission’s decision in 2019. But in 2022, the Court of Justice of the European Union set aside that ruling, finding that the Commission did have competence to examine the measure in light of Romania’s accession to the EU. The matter returned to the General Court, which in 2024 dismissed the actions brought against the Commission decision. This ruling was appealed by Ioan Micula, Viorel Micula and the companies, the case being now before the Court of Justice of the European Union. In the United States, the Micula claimants succeeded in obtaining recognition of the ICSID award. In September 2019, the US District Court for the District of Columbia entered judgment in the amount of USD 356.4 million, and that judgment was later upheld on appeal. Since then, the proceedings in Washington have focused on enforcement and on Romania’s obligation to provide information relevant to collection efforts. In December 2019, Romania made a partial payment of approximately USD 274 million, but hasn’t paid the rest of the amount. The new USD 5.8 million sanction is not a new damages award tied to the original arbitration. Instead, it is a court-imposed penalty linked to Romania’s failure to comply with procedural obligations during enforcement. To date, Romania owes to the investors USD 21 million as sanctions.