By Marijana Milic
The long-running “Micula Case,” a legal saga pivotal to the future of investor-state dispute settlement (ISDS) in Europe, has reached another critical juncture. On December 19, 2024, Ioan Micula, alongside his companies European Food, Starmill, Multipack, and Scandic Distilleries, filed an appeal to the European Court of Justice (ECJ). The case challenges the General Court’s October 2024 judgment, which upheld a European Commission decision classifying Romania’s payment of an arbitral award as illegal state aid.
This appeal represents not only a clash over EU state aid rules but also a broader test of the balance between EU law and the international legal frameworks underpinning investor protections. Legal experts warn the stakes are high for foreign investor confidence and Europe’s global competitiveness.
At the Heart of The Dispute
The case originates from a 2013 ICSID arbitral award, which ordered Romania to compensate Micula and his companies for prematurely withdrawing investment incentives promised under a bilateral investment treaty (BIT) between Romania and Sweden. The European Commission intervened, deeming the payment of this compensation incompatible with EU state aid rules and instructing Romania to recover the funds.
The General Court’s 2024 judgment sided with the Commission, but the claimants argue this decision reflects significant legal missteps. Central to the appeal are four contentious issues:
1. Applicability of EU State Aid Rules to Arbitral Awards:
The appeal challenges the Commission’s novel approach of classifying damages ordered by an ICSID tribunal as state aid. Critics argue this undermines the purpose of BITs and ICSID’s dispute resolution framework, both designed to shield investors from arbitrary government actions.
2. Shareholder Liability for State Aid Recovery:
Another pivotal question is whether individual shareholders and their affiliated companies can be held jointly liable for the recovery of state aid. If upheld, this principle could set a troubling precedent for family-owned businesses and individual investors across Europe.
3. Impact of the Achmea Judgment:
The ECJ’s 2018 Achmea ruling invalidated intra-EU arbitration clauses in BITs, but the claimants argue that it does not apply to their case, as arbitration proceedings began before Romania joined the EU. The EU courts have yet to fully grapple with how Achmeaprinciples should apply in such situations.
4. Reconciling EU Law with ICSID Commitments:
The claimants invoke Article 351 of the Treaty on the Functioning of the European Union (TFEU), which protects pre-accession international obligations. They argue Romania’s commitments under the ICSID Convention, ratified before EU accession, should take precedence over EU state aid rules.
A Clash of Legal Regimes
Since 2015, the case has been reviewed three times by EU courts, yet key questions remain unresolved. The General Court’s latest judgment upheld the Commission’s view that compensating the claimants violated EU state aid rules, but the claimants insist this misinterprets EU law.
The appeal argues that the General Court improperly substituted its reasoning for the Commission’s decision, excluded crucial evidence, and misapplied principles from Achmea and Article 351 TFEU. Most significantly, the claimants contend that denying the legal effect of the arbitral award violates their property rights under the European Convention on Human Rights and the EU Charter of Fundamental Rights.
“The decision creates profound uncertainty for investors,” said a spokesperson for the claimants. “It sends a message that even ICSID awards can be overridden by EU law, undermining the trust foreign investors place in Europe as a reliable jurisdiction.”
Implications For Global Competitiveness
The case has far-reaching implications for ISDS mechanisms and Europe’s role in the global investment landscape. ICSID awards have historically been regarded as binding and enforceable, offering a dependable framework for resolving investor-state disputes. By asserting primacy over such awards, the EU risks weakening this system and discouraging foreign investment.
For European businesses operating globally, the case raises concerns about reciprocal treatment. If EU courts undermine the enforceability of arbitration awards, other jurisdictions may retaliate by disregarding rulings in favor of European investors.
Legal experts also warn that holding shareholders personally liable for state aid recovery could set a dangerous precedent. Such liability could discourage entrepreneurship and investment in Europe’s family-owned enterprises, which play a vital role in the EU economy.
A Critical Test For EU Law
The Micula appeal represents a defining moment for the relationship between EU law and international arbitration. As the ECJ deliberates, it must navigate a delicate balance between asserting the bloc’s legal order and respecting global investment frameworks.
Failure to resolve these tensions could erode the foundations of investor protection and cast a shadow over Europe’s appeal as a destination for foreign capital. With billions of euros in investment and the credibility of ISDS mechanisms at stake, the outcome of the Micula Case will reverberate far beyond Romania’s borders, shaping the future of arbitration and investor rights worldwide.
