GCEU ruling for arbitral award considered as illegal state aid: Micula brothers v. Government of Romania
On 18th of June 2019, the GCEU issued a judgement in the Micula Case, between European Food SA and Others v. European Commission, declaring that the Commission had no competence to apply EU State aid rules prior to Romania’s accession to the EU.
The factual background of Micula Case concerned two Romanian brothers with Swedish citizenship, who set up business in Romania, based on the Romania-Sweden BIT concluded on 29 May 2002 on the Promotion and Reciprocal Protection of Investments and the incentives provided with it. In the meantime, Romania joined EU and revoked the relevant incentives. For this reason, Micula brothers and their group of companies, brought proceedings against Romania before the ICSID and the tribunal awarded compensation in favour of the claimants. In response to the award and the execution of it in Romanian courts, the Commission, considering that payment of the compensation awarded to the claimants by the Tribunal amounts to state aid, adopted the Decision (EU)2015/1470, confirming that that the state aid rules will not be set aside neither due to obligation under BIT nor under arbitral award. Thus, the Micula brothers appealed the Decision before GCEU.
The GCEU found that the compensation rendered by arbitral award is not considered as state aid according to the EU law, based on the temporal element of an arbitral award. The Court clarified that all the matters, given right to compensation in this case took place before the accession of Romania to the EU and therefore Commission had no power to review such events. The interesting observation is that the Court referred only to a part of compensation concerning the pre-accession period, based on the fact that Commission by itself did not distinguish in its decision the compensation rendered for the pre and post accession period.
In addition, the GCEU observed that, under its case-law, State aid is fundamentally different in its legal nature from damages which the competent national authorities may be ordered to pay in compensation for the damage which they have caused, implying that even if the GCEU had referred to the part of compensation for post-accession period, the execution of arbitral award would not been considered as illegal state aid.
Clearly, the Court hesitated to draw any conclusions on whether a compensation rendered on the basis of an arbitral award is contrary to EU state aid rules. The analysis of the compensation granted for post - accession period would lead to the determination of existence or not of State aid elements, while in this case the Commission’s decision may not have been annulled in its entirety. Thus, unfortunately, the most important aspect of this case remains intact: whether compensation payable on the basis of an arbitral award is considered as an illegal Aid, after all. The GCEU’s decision is subject to appeal before the Court of Justice of the EU.
For further information on this topic please contact
Ms. Christina Poursanidou( cpoursanidou@pittaslegal.com ) at SOTERIS PITTAS & CO LLC,
by telephone (+357 25 028460) or by fax (+357 25 028461)
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