Micula v. Gov't of Rom.

404 F.Supp.3d 265

Ioan MICULA, et al., Petitioners,

v.GOVERNMENT OF ROMANIA, Respondent.

Case No. 17-cv-02332 (APM)

United States District Court, District of Columbia.

Signed September 11, 2019

Viorel Micula, Oradea, Bihor County, Romania, pro se.

Francis A. Vasquez, Jr., White & Case LLP, John William Lomas, Jr., Daniel G. Morris, Dentons U.S. LLP, Danforth Newcomb, Shearman & Sterling LLP, Washington, DC, for Petitioners.

Ioana Salajanu, Skokie, IL, for Respondent.

MEMORANDUM OPINION

Amit P. Mehta, United States District Court Judge

I. INTRODUCTION

Petitioners Viorel Micula, Ioan Micula, and three entities they control have asked this court to confirm an arbitration award entered in their favor against Respondent Government of Romania ("Romania") by a tribunal convened under the International Convention on the Settlement of Investment Disputes between States and Nationals of Other States. Confirming the award would render it an enforceable judgment in the United States. Romania raises a host of objections to confirming the award, including a challenge to the court's subject matter jurisdiction. The European Commission, appearing as amicus curiae, also advocates against confirming the award.

For the reasons that follow, the court grants the petition to confirm the arbitration award and enters judgment in favor of Petitioners.

II. BACKGROUND

A. Factual Background

1. The ICSID Convention

The International Convention on the Settlement of Investment Disputes between States and Nationals of Other States ("Convention") is "a multilateral treaty aimed at encouraging and facilitating private foreign investment in developing countries." Mobil Cerro Negro, Ltd. v. Bolivarian Republic of Venezuela , 863 F.3d 96, 100 (2d Cir. 2017). The Convention carries out that purpose by providing a legal framework and procedural mechanism to resolve disputes between private investors and governments. See Convention on the Settlement of Investment Disputes between States and Nationals of Other States Preamble, Mar. 18, 1965, T.I.A.S. No. 6090, 17 U.S.T. 1270. The Convention establishes the International Centre for Settlement of Investment Disputes, or "ICSID," as an international institution that operates under the auspices of the World Bank. See Mobil Cerro Negro , 863 F.3d at 101. ICSID convenes arbitration panels "to adjudicate disputes between international investors and host governments in ‘Contracting States.’ " Id. Romania and Sweden are signatories to the ICSID Convention. So, too, is the United States.

"Any Contracting State or any national of a Contracting State" may ask ICSID to convene an arbitral tribunal to resolve a dispute. Convention art. 36. The tribunal is tasked with adjudicating the dispute and, if warranted, issuing a written award that addresses "every question submitted to the Tribunal" and "state[s] the reasons upon which [the award] is based." Id. art. 48. A party may contest the tribunal's decision, consistent with the procedures set forth in the Convention. See id. arts. 51–52. But critically, "except to the extent that enforcement [is] stayed," the tribunal's ruling is "binding on the parties and shall not be subject to any appeal or to any other remedy" other than those afforded under the Convention. Id. art. 53. In other words, the domestic courts of member countries lack the authority to review the merits of a decision by an ICSID tribunal.

The Convention does not, however, confer upon ICSID the power to enforce arbitral awards. It left that function to its Contracting States. Article 54(1) of the Convention provides: "Each Contracting State shall recognize an award rendered pursuant to this Convention as binding and enforce the pecuniary obligations imposed by that award within its territories as if it were a final judgment of a court in that State." Id. art. 54(1). Contracting States that, like the United States, have a federal system of government "may enforce such an award in or through [their] federal courts and may provide that such courts shall treat the award as if it were a final judgment of the courts of a constituent state." Id.

The ICSID Convention also is not self-executing. See Medellin v. Texas , 552 U.S. 491, 505–06, 128 S.Ct. 1346, 170 L.Ed.2d 190 (2008) (explaining when a treaty obligation requires legislation to become domestic law). Contracting States must "take such legislative or other measures as may be necessary for making the provisions of this Convention effective in [their] territories." Convention art. 69. In the United States, Congress gave the ICSID Convention domestic effect by passing the Convention on the Settlement of Investment Disputes Act of 1966. See Convention on the Settlement of Investment Disputes Act of 1966, Pub. Law 89–532, 80 Stat. 334 (1966) (codified at 22 U.S.C. §§ 1650 and 1650a ). Section 3 of the Act addresses the enforcement of ICSID arbitration awards in the United States. It provides in relevant part: "The pecuniary obligations imposed by [an ICSID] award shall be enforced and shall be given the same full faith and credit as if the award were a final judgment of a court of general jurisdiction of one of the several States." 22 U.S.C. § 1650a(a). Federal courts are vested with "exclusive jurisdiction over actions and proceedings" to enforce ICSID awards. Id. § 1650a(b).

2. Events Leading to the ICSID Arbitration

This case arises out of a dispute between Swedish investors and Romania. Following the overthrow of the communist regime of Nicolae Ceausescu in December 1989, the country of Romania found itself in dire economic and social circumstances. See Ioan Micula, et al. v. Romania , ICSID Case No. ARB/05/20 (Dec. 11, 2013), ECF No. 1-1–1-4 [hereinafter Final Decision], ¶ 137. In response to these problems, Romania adopted a series of measures designed to attract and promote investment. Id. ¶¶ 138–144. Among the measures was Emergency Government Ordinance No. 24/1998 ("EGO 24"), which established a framework for granting incentives to invest in "disfavored" regions of Romania. Id. ¶ 145.

The petitioners in this case are Swedish nationals Viorel and Ioan Micula, along with three companies they control, S.C. European Food S.A., S.C. Starmill S.R.L., and S.C. Multipack S.R.L. See Petition to Confirm ICSID Award, ECF No. 1 [hereinafter Pet.], ¶¶ 8–12. Starting in 1998, in reliance on the incentives offered by EGO 24, Petitioners began to build an integrated food platform designed to produce consumer products and beverages for the Romanian market. Final Decision ¶¶ 166–172.

In August 2004, Romania thwarted Petitioners' plans when it announced that it would repeal EGO 24, effective February 22, 2005. Id. ¶ 241. Romania made the repeal decision as part of the process of becoming a member of the European Union ("EU"). Id. ¶¶ 234–239. The action followed Romania's receipt of advice from the European Commission—an institution of the European Union that is responsible for ensuring the proper application of EU treaties—that the incentives constituted "state aid" that was incompatible with the EU's prohibition of such anticompetitive schemes. Id. The incentives' repeal caused Petitioners to suffer cash constraints that prevented them from completing the projects they had planned in reliance on EGO 24. Id. ¶ 172.

3. The ICSID Arbitration

In 2002, Romania entered a bilateral investment treaty ("Sweden-Romania BIT") with the Kingdom of Sweden, which entered into force on April 1, 2003. Final Decision ¶ 226. That treaty granted certain protections to each country's investors who invested in the other country, including the right to arbitrate investment disputes. See Agreement between the Government of the Kingdom of Sweden and the Government of Romania on the Promotion and Reciprocal Protection of Investments art. 2, Swed.-Rom., May 29, 2002, Law No. 541/2002 (Rom.) [hereinafter Sweden-Romania BIT]. Pertinent to the parties' dispute is Article 7 of the Sweden-Romania BIT. See generally Ioan Micula, et al. v. Romania , ICSID Case No. ARB/05/20 (Sept. 24, 2008), ECF No. 62-2. It provides that disputes concerning investments are to be settled by international arbitration, before either an ICSID arbitral tribunal or an ad hoc tribunal established under the Arbitration Rules of the United Nations Commission on International Trade Law. See id. ¶ 57; Sweden-Romania BIT art. 7.

In response to Romania's decision to revoke financial incentives, Petitioners initiated arbitration proceedings against Romania before an ICSID tribunal on August 2, 2005. Final Decision ¶ 10. Petitioners claimed that they had made investments in certain regions of Romania in reliance on the economic incentives. Id. ¶ 131. The revocation of those incentives, Petitioners alleged, caused them to suffer significant financial losses, for which Romania was liable. Id. ¶¶ 131, 262. The ICSID tribunal agreed. In December 2013, the tribunal ruled for Petitioners and awarded monetary damages of 376,433,229 Romanian Leu (RON)—the equivalent of $116,317,868—plus interest at the rate of the three-month Romanian Interbank Offer Rate, plus 5%, compounded on a quarterly basis with respect to certain amounts and periods ("the Award"). Id. ¶ 1329.

4. Romania Joins the European Union

Meanwhile, in parallel with the ICSID arbitral tribunal proceedings, Romania continued taking steps necessary to join the EU. Id. ¶¶ 246–47. Romania formally joined the EU on January 1, 2007—after Petitioners invoked their right to arbitration under the Sweden-Romania BIT but before the ICSID tribunal ruled in favor of Petitioners. Id. ¶¶ 247–49.

Shortly after the ICSID tribunal issued the award, the European Commission advised Romania that implementing or executing the Award would constitute impermissible new state aid, about which Romania would be required to notify the Commission. See Commission Decision (EU) 2015/1470 of 30 March 2015, ECF No. 51-2 [hereinafter State Aid Decision], ¶ 2. Three months later, in May 2014, the Commission issued a ...