The judgment of the Court of the European Union (“TEU”) of 2 October 2024 in the Micula case concerns the compatibility with EU law of compensation awarded following an arbitration award against Romania.
The dispute stems from Romania’s repeal in 2005 of a tax incentive scheme for investors in certain disadvantaged regions. Several companies in the European Food and Drinks Group (EFDG), controlled by Swedish investors Mr Ioan and Mr Viorel Micula, argued that the repeal violated the protections afforded by the bilateral investment treaty (“BIT”) signed between Romania and Sweden in 2002. In 2013, an arbitral tribunal set up under the BIT ordered Romania to pay approximately €178 million to the claimants as compensation for the damage suffered.
However, the European Commission considered that this payment constituted state aid incompatible with the internal market within the meaning of Article 107(1) TFEU. The Court of First Instance had initially annulled the Commission’s decision, but the Court of Justice of the European Union, on appeal, set aside this judgment and referred the case back for a fresh examination.
In its judgment of 2 October 2024, the Court of Justice dismissed the appeals against the Commission’s decision, confirming that the payment in question constituted State aid incompatible with EU law.
In its judgment, the TEU found that the aid measure examined was the payment of sums in execution of the award, and not the award itself. The TEU specifies that, even if the arbitration award is at the origin of the payment, the latter constitutes a distinct aid measure that improves the financial situation of the beneficiaries.
As regards the existence of State aid, the TEU confirms that the payment of damages in execution of the arbitration award gives the recipient undertaking an economic advantage which it would not have obtained under normal market conditions. Indeed, the damages awarded by the arbitral tribunal compensated for the losses resulting from the repeal of the tax incentive scheme, in particular the additional costs associated with customs duties and the loss of sales of finished products. The TEU also emphasised that the key issue was to analyse the effect of the measure on the financial situation of the beneficiaries, and not the origin of the loss.
Consequently, the compensation paid in execution of the arbitration award corresponded to a reduction in the economic burdens that would have weighed on the companies under normal market conditions.
Romania, a Member State of the European Union, is therefore obliged to refuse to enforce the award on the grounds that EU law takes precedence over international agreements between Member States.
TUE, 2 octobre 2024, T‑624/15 RENV, T‑694/15 RENV et T‑704/15 RENV.
