|Arbitration Rules||ICSID Rules of Procedure for Arbitration Proceedings effective 1|
|BIT||January 2003 Agreement between the Government of the Kingdom of Sweden|
|Claimant 1||and the Government of Romania on the Promotion and Reciprocal Protection of Investments dated April 1, 2003 Mr. Ioan Micula|
|Claimant 2||Mr. Viorel Micula|
|Claimant 3||European Food S.A|
|Claimant 4||Starmill S.R.L.|
|Claimant 5||Multipack S.R.L.|
|C-PHB||Claimants' Post-Hearing Submission dated May 13, 2011|
|C-Reply||Claimants' Reply dated December 22, 2009|
|C-SoC||Claimants' Statement of Claim dated March 9, 2007|
|EC Treaty||Treaty Establishing the European Community|
|ECHR||European Court of Human Rights|
|ECJ||European Court of Justice|
|Commission's Written Submission||European Commission's Written Submission dated July 20, 2009|
|EFDG or EFDC||European Food and Drinks Group (or European Food and Drinks|
|EGO||Companies) Emergency Government Ordinance|
|Exh. C||Claimants' Exhibits|
|Exh. EC||European Commission's Exhibits|
|Exh. HEC||Exhibits referred to at the Hearing on the merits and quantum|
|Exh. R||Respondent's Exhibits|
|Exh. RB||Exhibits filed with the Legal Opinion of F. Baias dated June 11,|
|Exh. RJ||2010 Exhibits filed with Expert Opinion of F. Jacobs dated June 11,|
|EU||2010 European Union|
|ICSID Convention||Convention on the Settlement of Investment Disputes Between|
|ICSID or the Centre||States and Nationals of Other States dated March 18, 1965 International Centre for the Settlement of Investment Disputes|
|ILC Articles||The ILC Articles on State Responsibility|
|PIC||Permanent Investor Certificate|
|R-CM||Respondent's Counter-Memorial dated April 6, 2009|
|RFA||Request for Arbitration dated July 28, 2005|
|RL or RLA||Respondent's Legal Authorities|
|R-PHB||Respondent's Post-Hearing Submission dated May 13, 2011|
|R-SPHB||Respondent's Supplementary Post-Hearing Submission dated May 27, 2011|
|R-Rejoinder||Respondent's Rejoinder dated June 11, 2010|
|TIC||Temporary investment certificate|
|TGIE||Transilvania General Import Export S.R.L.|
|Tr.||Transcripts of the Hearing on the merits and quantum|
|Tr. Jur.||Transcripts of the Hearing on jurisdiction|
|VCLT||Vienna Convention on the Law of Treaties of 1969|
For the reasons set forth above,
• The objections of Respondent are dismissed.
• The Tribunal has jurisdiction over the dispute submitted to it in this arbitration and rejects any objections as to the admissibility of the claims.
• The decision on costs is deferred to the second phase of the arbitration on the merits.
(Decision on Jurisdiction and Admissibility, ¶ 170).
Respondent's Counter-Memorial - 6 April 2009
Claimants' Reply (including full case on quantum and any accompanying expert reports) - 20 August 2009
Respondent's Rejoinder (including any expert reports) - 27 November 2009
Pre-hearing Conference - 4 January 2010;
Claimants' Rebuttal Expert Reports on Quantum - 26 January 2010;
Respondent's Rebuttal Expert Reports on Quantum - 5 March 2010;
Hearing - 3-7 May 2010;
Hearing reserve days - 10-11 May 2010.
a. Expert Report of Professor Rudolf Streinz ("First ER of R. Streinz")
b. Exhibits R-59 through R-132
c. Legal authorities RL-177 through RL-273.
In doing so, the Tribunal is particularly sensitive to the fact that the European Community may bring a factual or legal perspective that could assist the Tribunal in the adjudication of the Parties' rights. In granting leave to the European Community to participate as a non-disputing party, the Arbitral Tribunal is mindful of the need to preserve due process and the good order of the proceeding. In particular, the European Community shall act as amicus curiae and not as amicus actoris vel rei. In other words, the non-disputing party shall remain a friend of the court and not a friend of either Party.
(a) the stay on the proceedings be lifted insofar as the Tribunal's decision on the modalities of the European Community's participation as amicus curiae is concerned;
(b) the Tribunal render that decision in its present, provisionally truncated formation, by consent of the parties.
1. The European Community shall file a written submission on or before July 20, 2009. It shall send an electronic copy of the submission by e-mail to the Secretary of the Tribunal at email@example.com and 15 (fifteen) hard copies of the submission by courier to the Secretary at ICSID, for transmission to the Tribunal and the Parties.
2. The European Community's written submission shall not respond or comment upon the Parties' prayers for relief, but shall be focused on assisting the Tribunal in the determination of factual or legal issues at stake in the present dispute. It is expected that the scope of the Community's input will be limited to facts within its own knowledge and to European law rather than to any other facts or legal matters at issue in this arbitration. The Community may within this scope decide which facts and laws are relevant to the dispute.
3. The European Community's written submission shall be limited in length (40 pages) and written in English.
4. The European Community may file any relevant exhibits with its written submission within the scope described under paragraph 2 above. Any exhibit for which the original language is not English shall be submitted in the original language accompanied by a translation into English. If the document is lengthy and relevant only in part, it is sufficient if only the relevant parts, which must be precisely specified, are translated.
5. The Tribunal may request the European Community to produce any document or evidentiary material that the Tribunal deems useful for the resolution of this dispute, or which has been requested by either Party.
6. The European Community shall have access to the Parties' pleadings in their entirety as existing at this juncture, except for materials that have been designated as commercially confidential or legally privileged. Should a disagreement arise as to whether such materials have been so designated, the Tribunal will resolve such disagreement. The Secretary of the Tribunal will transmit electronic copies of the materials to the European Community at the latest by July 6, 2009.
7. Any person who has participated in the elaboration of the European Community's written submission may be called to provide clarifications on that submission at the hearing, as may be required by the Tribunal of its own initiative or at the request of the Parties. Such clarifications will be given in the form directed by the Tribunal and under its control.
8. The European Community will bear its own costs incurred in connection with its participation in the proceeding, including any costs relating to any appearance by the Community's representative(s) for examination at the hearing.
9. The European Community shall indicate whether it had any direct contact with either Party to this arbitration concerning the subject matter of this arbitration and should as far as possible avoid any future contact in this respect.
Parties' responses to EC amicus brief - 16 November 2009
Claimants' Reply - 14 December 2009
Respondent's Rejoinder - 12 April 2010
Claimants' Rebuttal Expert Reports on Quantum - 10 June 2010
Respondent's Rebuttal Expert Reports on Quantum - 19 July 2010
Respondent's Reply to the Claimants' request for production of documents - 16 December 2009
Claimants' Reply - 22 December 2009
Respondent's Rejoinder - 28 April 2010
Claimants' Rebuttal Expert Reports on Quantum - 25 June 2010
Respondent's Rebuttal Expert Reports on Quantum - 4 August 2010
Hearing on the Merits - 8-19 November 2010
a. Third Witness Statement of Mr. Ioan Micula ("Third WS of I. Micula")
b. Third Witness Statement of Mr. VioreI Micula ("Third WS of V. Micula)
c. Witness Statement of Mr. Sorin Baciu ("First WS of S. Baciu")
d. Witness Statement of Mr. Moisa Ban ("First WS of M. Ban")
e. Witness Statement of Mr. Mircea Halbac ("First WS of M. Halbac")
f. Witness Statement of Mr. Christian Balog ("First WS of C. Balog")
g. Witness Statement of Mr. Neculai-Liviu Marcu ("WS of N. Marcu)
h. Witness Statement of Mr. Nicolae Staiculescu ("WS of N. Staiculescu")
i. Expert Report of Professor Donald L. Lessard ("First ER of D. Lessard")
j. Expert Report of Professor Alan Dashwood ("First ER of A. Dashwood")
k. Expert Report of Professor David Caron ("ER of D. Caron")
l. Expert Report of Professor Lucian Mihai ("ER of L. Mihai")
m. Expert Report of Professor Jan-Benedict Steenkamp ("First ER of J. Steenkamp")
n. Expert Report of Mr. Chris Osborne (FTI) ("First ER of C. Osborne")
o. Expert Report of Dr. James Fry (LMC) ("First ER of J. Fry")
p. Boston Consulting Group Report, originally filed as Exh. C-655 ("First ER of BCG")
q. Claimants' Exhibits and Legal Authorities 271 to 675
6. That after deliberating on the arguments advanced by the Parties, the Tribunal is not persuaded that the documents requested by the Claimants are necessary or useful for the determination of the outcome of the dispute in this arbitration;
7. That even if, for the sake of argument, the Tribunal were to accept the Claimants' allegations and find that the European Community cooperated with the Respondent in preparing its Submission, which the Respondent denies, such finding would not affect the Tribunal's conclusion that the requested documents lack relevance;
8. That to the extent that the requested documents might be relevant for the purposes of establishing the objectivity of the arguments advanced by the non-disputing party in its Submission and the weight to be given to them by the Tribunal, this matter has already been adequately addressed in the Tribunal's letter of 25 June 2009, which, if necessary, provides the Claimants with the opportunity to examine at the hearing any person who has participated in the preparation of the Submission.
Respondent's Rejoinder - 11 June 2010
Claimants' Rebuttal Expert Reports on Quantum - 30 July 2010
Respondent's Rebuttal Expert Reports on Quantum - 10 September 2010
Hearing on the Merits and Quantum - 8-19 November 2010
a. Expert Report of Professor Flavius Baias ("ER of F. Baias")
b. Expert Report of Sir Francis Jacobs ("ER of F. Jacobs")
c. Expert Report of Mr. Asger Petersen ("ER of A. Petersen")
d. Rebuttal Expert Report of Professor Dr. Rudolf Streinz ("Second ER of R. Streinz")
e. Expert Report of Agra CEAS Consulting, Mr. Conrad Caspari, in conjunction with F.O. Licht ("ER of C. Caspari")
f. Expert Report of KPMG, Mr. John Ellison ("First ER of J. Ellison")1
g. Expert Report of Dr. Bill Robinson ("First ER of B. Robinson")
h. Witness Statements of Mr. Leonard Orban ("WS of L. Orban")
i. Witness Statement of Professor Mihai Berinde ("WS of M. Berinde")
j. Documentary evidence (Exhibits R-134 through R-203)
k. Legal authorities (Exhibits RL-284 through RL-336).
a. Expert Reply Report of Professor Donald R. Lessard ("Second ER of D. Lessard")
b. Expert Reply Report of Professor Jean-Benedict Steenkamp ("Second ER of J. Steenkamp")
c. Expert Opinion of Professor Georghe Piperea ("ER of G. Piperea")
d. Rebuttal Expert Report of Dr. James Fry of LMC International ("Second ER of J. Fry")
e. Expert Report of Mr. Richard Boulton of LECG ("ER of R. Boulton")
f. Rebuttal Expert Report of BCG ("Second ER of BCG")
g. Witness Statement of Mr. Juan Gamecho ("WS of J. Gamecho")
h. Second Witness Statement of Mr. Mircea Halbac ("Second WS of M. Halbac")
i. Second Witness Statement of Mr. Sorin Baciu ("Second WS of S. Baciu")
j. Second Witness Statement of Mr. Christian Balog ("Second WS of C. Balog")
k. Exhibits and Legal Authorities C-680 to C-1034
a. Factual Exhibits R-210 through R-229
b. Legal Authorities RLA-337 through 346
c. Reply Expert Report of Mr. Conrad Caspari ("Second ER of C. Caspari")
d. Reply Expert Report of Mr. John Ellison ("Second ER of J. Ellison")
e. Reply Expert Report of Dr. Bill Robinson ("Second ER of B. Robinson")
On behalf of Mr. Ioan Micula and the Corporate Claimants :
Mr. Ioan Micula
Mr. Eric Schwartz, King & Spalding
Mr. Reggie Smith, King & Spalding
Mr. Ken Fleuriet, King & Spalding
Mr. Ric Toher, King & Spalding
Mrs. Amy R. Frey, King & Spalding
Ms. Jamie Miller, King & Spalding
Ms. Catalina Constantina, King & Spalding
Mrs. Eva Micula
Ms. Natalie Micula
Ms. Olivia Micula
Mrs. Oana Popa
Mrs. Diana Radu
Mr. Vasile Popa-Bota
Mr. Traian Bulzan
On behalf of Mr. Viorel Micula :
Mr. Viorel Micula
Mr. Emmanuel Gaillard, Shearman & Sterling
Mr. David Reed, Shearman & Sterling
Mr. Robert Williams, Shearman & Sterling
Ms. Veronika Korum, Shearman & Sterling
Mr. Henry Ovens, Shearman & Sterling
Ms. Valerie Ollivier, Shearman & Sterling
Ms. Ioana Aron Blahuta
Ms. Medora Purle
Mr. Cristian Flora
Mr. Calin Vidican
Ms. Eva Fogarassy
Mr. Adrian Rotar
Ms. Alexandra Gheorghe-Duca
Mr. Mihai Clepce
On behalf of the Respondent :
HE Minister Gheorghe lalomiţianu, Ministry of Public Finance
Ms. Manuela Nestor, Nestor Nestor Diculescu Kingston Petersen
Ms. Georgeta Harapcea, Nestor Nestor Diculescu Kingston Petersen
Mr. D. Brian King, Freshfields Bruckhaus Deringer LLP
Mr. Georgios Petrochilos, Freshfields Bruckhaus Deringer LLP
Mr. Noah Rubins, Freshfields Bruckhaus Deringer LLP
Mr. Boris Kasolowsky, Freshfields Bruckhaus Deringer LLP
Mr. Jonathan J Gass, Freshfields Bruckhaus Deringer LLP
Mr. Ben Juratowitch, Freshfields Bruckhaus Deringer LLP
Mr. Sami Tannous, Freshfields Bruckhaus Deringer LLP
Ms. Evgeniya Rubinina, Freshfields Bruckhaus Deringer LLP
Mr. Moritz Keller, Freshfields Bruckhaus Deringer LLP
Mr. Marcus Benzing, Freshfields Bruckhaus Deringer LLP
Mr. Ignacio Stratta, Freshfields Bruckhaus Deringer LLP
Ms. Victoria Bokelmann, Freshfields Bruckhaus Deringer LLP
Ms. Rebecca Smith, Freshfields Bruckhaus Deringer LLP
Ms. Lauren Henschke, Freshfields Bruckhaus Deringer LLP
Ms. Smaranda Miron, Freshfields Bruckhaus Deringer LLP
Ms. Eleonore Gleitz, Freshfields Bruckhaus Deringer LLP
Claimants' witnesses and experts
Mr. Ioan Micula Claimant
Mr. Viorel Micula Claimant
Professor Lucian Mihai Expert Witness, University of Bucharest
Professor Alan Dashwood QC Expert Witness, Henderson Chambers
Professor David Caron Expert Witness, University of California at Berkeley
Mr. Liviu Marcu Witness
Mr. Nicolae Staiculescu Witness
Mr. Mircea Halbac Witness
Mr. Moisa Ban Witness
Mr. Sorin Baciu Witness
Mr. Jaun Gamecho Witness
Professor Don Lessard Expert Witness, MIT, The Brattle Group
Mr. Alexis Maniatis Expert Witness, The Brattle Group
Ms. Natasha Dupont Expert Witness, The Brattle Group
Mr. Chris Osborne Expert Witness, FTI Consulting
Mr. Richard Edwards Expert Witness, FTI Consulting
Mr. Richard Boulton Expert Witness, LECG
Mr. Ian Clemmence Expert Witness, LECG
Dr. James Fry Expert Witness, LMC
Mr. Laszlo Juhasz Expert Witness, BCG
Mr. Leonard Orban Fact Witness, Office of the President of Romania
Professor Mihai Berinde Witness
Sir Francis Jacobs QC Expert Witness, Fountain Court Chambers
Mr. Alexander Milner Expert Witness, Fountain Court Chambers
Professor Flavius Baias Expert Witness, Bucharest Public University
Professor Dr. Rudolf Streinz Expert Witness, University of Munich
Professor Dr. Christoph Herrmann Expert Witness, University of Passau
Mr. John Ellison Expert Witness, KPMG
Dr. Bill Robinson Expert Witness, KPMG
Mr. Nishad Morjaria Expert Witness, KPMG
Mr. Dan Aylward Expert Witness, KPMG
Mr. Conrad Caspari Expert Witness, Agra CEAS
Mr. Asger Petersen Expert Witness, Cleary Gottlieb Steen & Hamilton
Non-disputing Parties (EC)
Mr. Bernd Martenczuk, Legal Representative, European Commission
Mr. Frank Hoffmeister, Legal Representative, European Commission
Mr. Ion Rogalski, Legal Representative, European Commission
a. "an Order preserving the status quo ante by instructing Respondent to withdraw or otherwise cease and desist from enforcing the abovedescribed seizure orders, or from implementing any new such orders against any of the EFDG companies, prior to the Tribunal's issuance of its final award (and that the award itself deal with the matter as appropriate at that time, such as by maintaining the Order in place until Romania has satisfied the terms of the award in full); and
b. an Order that Respondent refrain from taking any other measure against any of the EFDG companies that would aggravate or extend the existing dispute prior to the Tribunal's issuance of its final award."
a. "preventing the Respondent from proceeding with the garnishments of the bank accounts of European Food, European Drinks and TGIE as set out in the [Garnishment] Notices;
b. ordering the Respondent to refrain from garnishing the accounts of any other EFDC company until the Tribunal issues its Final Award (collectively, the ‘Garnishment Application'); and
c. ordering the Respondent to refrain from repealing the fiscal warehouse authorizations of European Food and Scandic Distilleries until the Parties have fully briefed that issue and the Tribunal issues a decision with respect to it (‘Fiscal Warehouse Application').
d. Insofar as any further briefing may be required on any of these issues or the Tribunal is not able to take up this application immediately, the Claimants further request that the Tribunal issue a temporary emergency order instructing the Respondent to refrain from the acts cited in the preceding paragraph until such time as the Tribunal is able rule upon this application."
a. "The Respondent shall refrain from proceeding with the garnishments of the bank accounts of European Food, European Drinks and TGIE as set out in the [Garnishment] Notices.
b. The Respondent shall refrain from repealing the fiscal warehouse authorizations of European Food and Scandic Distilleries until the Tribunal issues its Final Award.
c. The Tribunal otherwise confirms its (First) Decision on Provisional Measures of 2 March 2011. Accordingly, the Respondent shall inform the Claimants, with a copy to the Tribunal, if it intends to proceed with the seal or forced sale of the seized assets or take any other tax collection measure (including garnishments of bank accounts) that could have a similar effect, two months prior to the date in which it intends to implement such seal, sale or other measure, until this arbitration is completed or this Decision is reconsidered.
d. The Parties shall continue to seek to reach an agreement on a mutually acceptable security or assurance to be provided by the Claimants.
e. If either Party considers that the circumstances under which this Decision is made have changed, either Party may apply to the Tribunal for reconsideration of this Decision.
f. The other prayers are dismissed.
g. Costs are reserved for a later decision or award."
On behalf of Mr. Ioan Micula and the Corporate Claimants :
Mr. Eric Schwartz King & Spalding
Mr. Ken Fleuriet King & Spalding
Mr. Ric Toher King & Spalding
Ms. Amy R. Frey King & Spalding
Mr. Ioan Micula Claimant
Ms. Nathalie Micula Representative for Ioan Micula, European Food, Starmill, and Multipack
Ms. Olivia Micula Representative for Ioan Micula, European Food, Starmill, and Multipack
Ms. Dorin Floruta Representative for Ioan Micula, European Food, Starmill, and Multipack
Mr. Vasile Popa-Bota Representative for Ioan Micula, European Food, Starmill, and Multipack
Mr. Mircea Halbac Representative for Ioan Micula, European Food, Starmill, and Multipack
Mrs. Oana Popa Representative for Ioan Micula, European Food, Starmill, and Multipack
Mr. Ciprian Popa Representative for Ioan Micula, European Food, Starmill, and Multipack
On behalf of Mr. Viorel Micula :
Prof. Emmanuel Gaillard Shearman & Sterling
Mr. David Reed Shearman & Sterling
Mr. Robert Williams Shearman & Sterling
Ms. Veronika Korom Shearman & Sterling
Mr. Richard Kiveal Shearman & Sterling
Ms. Gresa Matoshi Shearman & Sterling
Mr. Viorel Micula Claimant
Ms. Doina Micula Representing Mr Viorel Micula
Mr. Victor Micula Representing Mr Viorel Micula
Ms. Ioana Aron Blahuta Representing Mr Viorel Micula
Ms. Medora Purle Representing Mr Viorel Micula
Mr. Calin Vidican Representing Mr Viorel Micula
Mr. Cristian Flora Representing Mr Viorel Micula
Ms. Eva Fogarassy Representing Mr Viorel Micula
On behalf of the Respondent :
Ms. Georgeta Harapcea Nestor Nestor Diculescu Kingston Petersen
Mr. D. Brian King Freshfields Bruckhaus Deringer LLP
Mr. Georgios Petrochilos Freshfields Bruckhaus Deringer LLP
Mr. Boris Kasolowsky Freshfields Bruckhaus Deringer LLP
Mr. Noah Rubins Freshfields Bruckhaus Deringer LLP
Mr. Jonathan J. Gass Freshfields Bruckhaus Deringer LLP
Mr. Ben Juratowitch Freshfields Bruckhaus Deringer LLP
Mr. Sami Tannous Freshfields Bruckhaus Deringer LLP
Ms. Evgeniya Rubinina Freshfields Bruckhaus Deringer LLP
Mr. Moritz Keller Freshfields Bruckhaus Deringer LLP
Ms. Smaranda Miron Freshfields Bruckhaus Deringer LLP
Mr. Tunde Oyewole Freshfields Bruckhaus Deringer LLP
Mr. Ignacio Stratta Freshfields Bruckhaus Deringer LLP
Ms. Kate Bousfield Freshfields Bruckhaus Deringer LLP
Mr. Nishad Morjaria KPMG
a. An exemption from customs duties related to certain types of imported machinery, equipment and means of transportation;
b. A two-year exemption from customs duties on imported raw materials;
c. A profit-tax exemption ranging from 2 to 5 years, depending on the type of investment; and
d. A profit-tax reduction for certain investments following the expiration of the profit-tax exemption.
Art. 6. - (1) Privately held companies, Romanian legal entities, as well as small or family businesses, authorized pursuant to the Decree-Law no. 54/1990 concerning the organization and operation of free initiative-based economic activities that are headquartered and conduct business within the disadvantaged region, will be granted the following advantages for their new investments in these regions:
(a) exemptions from payment of:
- customs duties and value added tax on machinery, tools, installations, equipment, means of transportation, other goods subject to depreciation which are imported for the purpose of making investments in that region;
- value added tax on machinery, tools, installations, equipment, means of transportation, other goods subject to depreciation manufactured domestically with the purpose of making investments in that region;
[the " Machinery Incentive " or " Machinery Facility "]
(b) refunds of customs duties on raw materials, spare parts and/or components necessary for achieving the investor's own production in that region. The refunds will be made based on the approval by the regional development agencies of the companies' production sales documents. The funds necessary for the refund of the customs duties will be provided to the Agency for Regional Development from the Regional Development Fund. In case [of] unprivileged regions belonging to two or more administrative-territorial units, the funds necessary for the refund of the customs duties will be provided by the National Agency for Regional Development from the National Development Fund [the " Raw Materials Incentive " or " Raw Materials Facility "];
(c) exemptions from payment of the profit tax during the existence of the disadvantaged region [the " Profit Tax Incentive " or " Profit Tax Facility "];
(d) exemptions from payment of the taxes collected for the changes of the destination of the land or for the removal from the agricultural use of some plots of land that had been earmarked for the fulfillment of the investment [the " Agricultural Land Incentive " or " Agricultural Land Facility "][;]
(e) preferred payments from the Special Development Fund of the Romanian Government, which was established pursuant to the Emergency Government Ordinance no. 59/1997 concerning the purpose of the funds collected by the State Property Fund during the privatization process of the companies where the State is a shareholder, with the purpose of:
- encouraging the exports of the final products and/or for the industrial services, as the case may be;
- guaranteeing external credits, within the annual limit set by the Ministry of Finance;
- financing special programs, approved by Government Decision;
- financing investment projects for companies through the state's participation in the share capital.
[the " Subsidies "]
2) The advantages and the financing stipulated in paragraph (1) letter e) is established through a Government Decision.
Art. 7. - If an investment which is benefiting from the provisions of the present Emergency Ordinance is voluntarily liquidated in a period of time shorter than twice the period of time in which they enjoyed the advantages granted through the Government Decision to create the underprivileged area, the liquidator(s) is/are obligated first to pay the funds related to the advantages granted in accordance with the provisions of the present Emergency Ordinance, to the State Budget, the State Social Insurance Budget and the Special Funds Budgets from the funds resulting from the liquidation procedure.
Art. 9. - Businesses established in a disadvantaged area may voluntarily cease to operate in the respective area, and those opening subsidiaries as legal entities in such an area may close them or move the location of their headquarters out of the disadvantaged area in a period shorter than the one provided in Art. 7 only if they pay the funds they owe to the State Budget, the State Social Insurance Budget and the Special Funds Budgets related to the advantages granted in accordance with the provisions of the present Emergency Ordinance.
Art. 1. - The mining area of Ştei-Nucet, Bihor county, is established as a disfavoured region.
Art. 2. - The geographical boundaries of the mining area of Ştei-Nucet, Bihor county are represented by Ştei and Nucet, as administrative-territorial units having a surface of 4,678 ha, according to annex no. 1.
Art. 3. - The mining area referred to in art. 1 will be established as a disfavoured region for a period of 10 years.
Art. 4. - During the existence of the disfavoured region, established according to this decision, the facilities under annex no. 2*) will be granted . ["se acordâ" in the Romanian original]
Companies the majority of the share capital of which is privately owned, Romanian legal entities, as well as the private investors or family associations authorized pursuant to the "Decree-Law no. 54/1990 on the organization and operation of economic activities based on free initiative" that were set up after the date of establishment of the disfavoured region and have their registered seat and operate in the disfavoured region, will be granted the following facilities for new investments in these regions:
(a) an exemption from payment of:
- custom duties and value added tax on machinery, tools, installations, equipment, means of transportation, other goods subject to depreciation which are imported with a view to performing and conducting investments in that region;
- value added tax on machinery, tools, installations, equipment, means of transportation, other goods subject to depreciation manufactured in the country with a view to performing and conducting investments in that region;
(b) refund of custom duties on raw materials, spare parts and/or components necessary for achieving the investor's own production in that region;
(c) an exemption from payment of profit tax during the existence of the disfavoured region;
(d) an exemption from payment of taxes collected for changes in the nature of land or for conversion of agricultural plots of land into industrial land for the implementation of the investment;
(e) preferred payment of amounts available from the Special Development Fund at the disposal of the Romanian Government that was established pursuant to the "Emergency Government Ordinance no. 59/1997 on the amounts collected by the State Property Fund during the privatization process of the companies in which the State is shareholder" to - encourage the export activities for the final products and/or for the industrial services, as the case may be;
- guarantee the external credits within the annual limit set by the Ministry of Finance;
- finance special programs approved by Government Decision;
- finance investment projects for companies through the state's participation in the share capital.
(1) The incentives provided by the law shall be granted [in Romanian, "se acorda"] pursuant to the certificate of investor in a disfavored area, which is issued, upon the business entity's request, by the Regional Development Agency under the jurisdiction of which the head office of such business entity is located.
(3) Business entities requesting the issuance of the certificate of investor in a disfavored area shall prove they meet the requirements set forth by the [EGO].
(4) Emerging business entities, unable to produce evidence regarding the investment, the commissioning of the operations and the creation of new jobs, may request the issuance of a temporary certificate of investor in a disfavored area, for a maximum of 3 months. In case they do not bring, during this period, evidence of having met the requirements set forth by the [EGO], they shall be compelled to pay and return, respectively the equivalent value of all the incentives they have benefited of.
(5) The temporary certificate shall be issued pursuant to the business entity's commitment regarding the investment and the creation of new jobs.
a. On 19 October 1990, Messrs. Micula allegedly incorporated the Romanian company Transilvania General Import Export S.R.L ("TGIE") (Claimants' "Correct Timeline of Messrs. Micula's Investments", C-Reply at page 25). The Claimants allege that this company was set up to benefit from Law 35/1991, as it was originally set up for the five years for which Law 35 granted corporate profit tax exemptions (C-Reply, Note 102). The Tribunal notes however that Law 35 was enacted after TGIE's stated date of incorporation, so it understands the Claimants to be saying that TGIE was established to benefit from the earlier Decree Law 96/1990, which was later replaced by Law 35. That being said, the Tribunal also notes that, according to the information provided by the Bihor Trade Register Office (Exh. R-60) and TGIE's 1993 Fiscal Report (Exh. C-356), TGIE was assigned its trade register reference number in May 1991. TGIE's date of incorporation is therefore not established with certainty.
b. From June 1993 to April 1995, Messrs. Micula incorporated or acquired an interest in ten Romanian companies, including European Drinks S.A. and Rieni Drinks S.A. (Claimants' "Correct Timeline of Messrs. Micula's Investments", C-Reply at page 25; R-CM, Figure 1, p. 7; Exh. R-60 and R-61).
c. From November 1996 to July 1998, the Claimants incorporated or acquired an interest in three additional Romanian companies (Claimants' "Correct Timeline of Messrs. Micula's Investments", C-Reply at page 25; R-CM, Figure 1, p. 7; Exh. R-60 and R-61.)
d. On 8 July 1997, the Claimants, through their company Edri Trading SRL purchased shares in SC Ipic Bucaresti S.A., a previously state-owned company which owned 88,000 square meters of land in Bucharest (Third WS of I. Micula, ¶¶ 31-36; Tr., Day 2, 211, Day 3, 133,141,145-150 (I.Micula); Exh. C-346; C-439).
a. Starmill was incorporated to establish integrated in-house grain milling facilities. It was designed to provide the milling capacity necessary for the planned brewery, but started as a corn mill which provided raw materials for the distillery. It was also responsible for the production of flour for several food products. According to the Claimants, through the use of the Raw Materials Incentive, Starmill would create cost efficiencies to help carry the businesses forward after the incentives expired. The Claimants claim that they made substantial investments for Starmill, including the purchase of land and construction (C-Reply, ¶¶ 197-200).
b. Multipack was incorporated to carry out the packaging and labeling for nearly all of the companies' products. The Claimants also allege that it relied heavily on the Raw Materials Incentive, and required substantial investments and created over 200 new jobs (C-Reply, ¶¶ 201-204).
a. A state-of-the-art brewery with an initial capacity for 2M hectoliters/year, expandable to 6M.
b. A malt plant, which would reduce the cost of malt by in-house manufacture;
c. A canning plant, which would reduce packaging costs;
d. A co-generation plant, which would use the biomass by-products of the brewery and other food and beverage production, and would save costs and produce revenue through sales back to the state of excess electricity.
is the beneficiary of the facilities under Government Decision no. 194/1999, in accordance with the provisions of Emergency Government Ordinance no. 24/1998, republished and subsequently amended, and in accordance with the provisions of Government Decision no. 728/2001 on the approval of the methodological norms for the application of Emergency Government Ordinance no. 24/1998 on the disfavoured regions regime.
The present certificate is valid until 01.04.2009.7
is the beneficiary of the facilities under Government Decision no. 194/1999, in accordance with the provisions of Emergency Government Ordinance no. 24/1998, approved and amended by Law no. 20/1999 and in accordance with the provisions of Government Decision no. 525/1999 on the approval of the methodological norms for application of Emergency Government Ordinance no. 24/1998 on the disfavoured regions regime.
The present certificate is valid until 4/1/09
is the beneficiary of the facilities under Government Decision no. 194/1999, in accordance with the provisions of Emergency Government Ordinance no. 24/1998, republished and subsequently amended, and in accordance with the provisions of Government Decision no. 728/2001 on the approval of the methodological norms for application of Emergency Government Ordinance no. 24/1998 on the disfavoured regions regime.
The present certificate is valid until 01.04.2009.
1. The following are incompatible with the proper functioning of this Agreement, in so far as they may affect trade between the Community and Romania: [...] (iii) any public aid which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods.
2. Any practices contrary to this Article shall be assessed on the basis of criteria arising from the application of the rules of Articles 85, 86, and 929 of the Treaty establishing the European Economic Community.
3. The Association Council shall, within three years of the entry into force of the Agreement, adopt the necessary rules for the implementation of paragraphs 1 and 2.
4. (a) For the purposes of applying the provisions of paragraph 1, point (iii), the Parties recognize that during the first five years after the entry into force of the Agreement, any public aid granted by Romania shall be assessed taking into account the fact that Romania shall be regarded as an area identical to those areas of the Community described in Article 92(3)(a) of the Treaty establishing the European Economic Community. The Association Council shall, taking into account the economic situation of Romania, decide whether that period should be extended by further periods of five years. [...]
The following may be considered to be compatible with the common market: (a) aid to promote the economic development of areas where the standard of living is abnormally low or where there is serious underemployment; […]
Article 74 - Investment promotion and protection
1. Cooperation shall aim to establish a favourable climate for private investment, both domestic and foreign, which is essential to the economic and industrial reconstruction of Romania.
2. The particular aims of the cooperation shall be:
- for Romania to establish and improve a legal framework which favours and protects investment;
- the conclusion by the Member States and Romania of Agreements for the promotion and protection of investment [...]
Article 69 - The Parties recognize that an important condition for Romania's economic integration into the Community is the approximation of
1. Save as otherwise provided in this Treaty, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the common market.
2. The following shall be compatible with the common market:
3. The following may be considered to be compatible with the common market:
(a) aid to promote the economic development of areas where the standard of living is abnormally low or where there is serious underemployment; […]
Romania's existing and future legislation to that of the Community.
Romania shall endeavour to ensure that its legislation will be gradually made compatible with that of the Community.
Article 70 - The approximation of laws shall extend to the following areas in particular: [...] rules on competition [...].
Romania, with a population of 22.6 million, had in 1995 a gross domestic product (GDP) of ECU 93 billion (expressed in purchasing power parity); its population was about 6.5% of the Union's, while its economy was only about 1.5%. Per capita GDP is about 24% of the Union average.
- Romania has made considerable progress in the creation of a market economy, but it would still face serious difficulties to cope with competitive pressure and market forces within the Union in the medium term;
- despite the progress that has been made, Romania has neither transposed nor taken on the essential elements of the acquis, particularly as regards the internal market. It is therefore uncertain whether Romania will be in a position to assume the obligations of membership in the medium term. […]
Romania has made enormous progress since the beginning of the transition, although it cannot be considered, as yet, to be a functioning market economy. […]
Policy-making on economic issues has not always been coherent. As a result, progress towards macroeconomic stability has not been steady: recent years have been characterised by widely fluctuating performances in term of growth, inflation and unemployment. Economic agents do not necessarily perceive the macroeconomic environment to be stable enough to promote the necessary level of savings and investment (both domestic and foreign).
If fully implemented, the comprehensive programme of macroeconomic stabilisation and structural reforms announced by the authorities in early 1997 should radically transform Romania's economy and lay the foundations for healthy growth in the years ahead. But the implementation of the basic features of the programme, especially with regard to restructuring, will take many years. It is yet too early to assess whether the programme will be implemented fully and successfully. […]
In order to complete its transformation process successfully and prepare for EU membership, the country still needs to implement many, detailed and complex measures. […]
In the past, foreign investors have singled out the unpredictable evolution of the legal system and the different interpretation of double taxation treaties as obstacles to doing business in Romania. […]
[T]he ability to withstand competitive pressure depends not only on the current structure of the economy, but also on the way in which it will develop in the near to medium-term future. In this respect, Romania offers a contrasted situation: the existing economic structure points to very important structural weaknesses, while the reforms that have been announced at the beginning of 1997 could have a very positive impact in a relatively short period of time, especially if rapid privatisation is achieved and foreign direct investment is forthcoming. However, in order to withstand competition within the Union both the industrial and agricultural sectors would need to undergo major structural transformation.
The current production base in industry relies to a large extent, although not exclusively, on sectors with very high energy intensity, or which are strongly dependent on imported raw materials, or have been the object of exercises of capacity reduction within the Union. […] The current structural reforms should aim at the restructuring of the very large state-owned combinats, which, in their present condition, would face strong competitive pressures from their western competitors.
A diversification of the industrial base towards lighter industries, entailing the creation of a large number of new, small and medium-sized enterprises, and increased participation of foreign capital and know-how, will help Romania adjust to the restructuring of the large enterprises. Light industry is already well-developed in some sectors (wood products, leather, textiles) and has achieved good performances on exports markets.
Although agriculture has been neglected in the last decades, it represents a potentially important source of comparative advantage for Romania […]. But the process of modernisation of the agricultural sector has just begun and will require a policy aiming at stimulating investments both in the farming sector and in the food industry.
Foreign direct investment has been low for a country the size of Romania: at the end of 1996 cumulative FDI per capita stood at ECU 50. With a few notable exceptions, FDI has not made a significant contribution to the modernisation of either industry or agriculture. This means that production in many sectors still relies on old and obsolete technologies. Increasing the chances that Romanian producers will be able to withstand competition of high-quality, high-standards EU goods, and improving the level of skills in the economy calls for much bigger inflows of FDI.
Romania possesses a number of key advantages: its geographical location at the cross-roads of many trade routes and in particular as the sea-gate for accessing central European markets; the size of its population which will attract industries with economies of scale; the relatively young population which points to vast needs for durable goods; and its low level of labour costs. All these factors could make Romania a strong export base for accessing markets of smaller neighbours, especially for consumer goods.
The relative success which Romania achieved in macroeconomic stabilisation during 1995 and 1996 rested on very fragile foundations. In fact, given the very slow progress in structural reforms, the high growth rates of this period were not sustainable, and not compatible with the aim of integrating Romania in the European and world economy. This diagnosis was at the heart of the economic and social programme of the new government elected in November 1996.
The programme of macroeconomic stabilisation and structural reforms announced in February 1997 represents a very ambitious attempt to radically transform, in a relatively short period of time, the old economic structures and lay the foundations for a fully-functioning market economy. However, this is only a first step in the right direction and much remains to be done.
A stable and predictable macroeconomic framework is the first key condition for laying the foundations of sustainable growth and modernisation of the microeconomic side of the economy. […]
The new Romanian authorities have already recognised the crucial role that foreign investors and international financial institutions will play in the success of their reform efforts. Restoring confidence among international investors and lenders and securing their medium-term investment in Romania calls for a stable macroeconomic framework, a sustained and credible commitment to structural reforms, a clear and broad political consensus over a medium-term strategy and the continuing legitimacy of reforms among the population. These conditions are indispensable to reduce political and economic uncertainty and so lay the foundations for successful investment planning.
Romania has made considerable progress in the creation of a market economy. The reorientation of economic policy since the recent change of government marks a change for the better, but much still needs to be done. While prices have been almost fully liberalised, property rights are not yet fully assured for land, the legal system is still fragile and policy-making on economic issues has not always been coherent. Further efforts to consolidate the legal and administrative framework, and to address persistent macroeconomic imbalances, are required to ensure a stable environment.
Romania would face serious difficulties coping with competitive pressure and market forces within the Union in the medium term. It has recently made progress towards improving the competitive capacity of its economy, notably by addressing major distortions such as low energy prices, accelerating privatisation and beginning to wind up large loss-making state-owned firms. However, much of Romania's industry is obsolete, and agriculture needs to be modernised. The low levels of research and development, and of skills among the workforce also suggest that the economy needs a number of years of sustained structural reform.
1. Introduction […]
Regional aid is designed to develop the less-favoured regions by supporting investment and job creation in a sustainable context. It promotes the expansion, modernisation and diversification of the activities of establishments located in those regions and encourages new firms to settle there. In order to foster this development and reduce the potential negative effects of any relocation, it is necessary to make the granting of such aid conditional on the maintenance of the investment and the jobs created during a minimum period in the less favoured region.
In exceptional cases, such aid may not be enough to trigger a process of regional development, if the structural handicaps of the region concerned are too great. Only in such cases may regional aid be supplemented by operating aid.
A derogation from the incompatibility principle established by Article 92(1) of the Treaty may be granted in respect of regional aid only if the equilibrium between the resulting distortions of competition and the advantages of the aid in terms of the development of a less-favoured region (6) can be guaranteed. The weight given to the advantages of the aid is likely to vary according to the derogation applied, having a more adverse effect on competition in the situations described in Article 92(3)(a) than in those described in Article 92(3)(c) (7).
3. Demarcation of regions
The derogation in Article 92(3)(a)
3.5. Article 92(3)(a) provides that aid to promote the economic development of areas where the standard of living is abnormally low or where there is serious underemployment may be considered compatible with the common market. As the Court of Justice of the European Communities has held, 'the use of the words "abnormally" and "serious" in the exemption contained in Article 92(3)(a) shows that it concerns only areas where the economic situation is extremely unfavourable in relation to the Community as a whole' (12).
The Commission accordingly considers, following a tried and tested approach, that the conditions laid down are fulfilled if the region, being a NUTS (13) level II geographical unit, has a per capita gross domestic product (GDP), measured in purchasing power standards (PPS), of less than 75,0 % of the Community average (14). The GDP/PPS of each region and the Community average to be used in the analysis must relate to the average of the last three years for which statistics are available. These amounts are calculated on the basis of data furnished by the Statistical Office for the European Communities.
4. Object, form and level of aid
4.1. The object of regional aid is to secure either productive investment (initial investment) or job creation which is linked to investment. Thus this method favours neither the capital factor nor the labour factor.
4.2. To ensure that the productive investment aided is viable and sound, the recipient's contribution (20) to its financing must be at least 25 %.
The form of the aid is variable: grant, low-interest loan or interest rebate, government guarantee or purchase of a State shareholding on favourable terms, tax exemption, reduction in social security contributions, supply of goods and services at a concessionary price, etc.
In addition, aid schemes must lay down that an application for aid must be submitted before work is started on the projects.
4.15. Regional aid aimed at reducing a firm's current expenses (operating aid) is normally prohibited. Exceptionally, however, such aid may be granted in regions eligible under the derogation in Article 92(3)(a) provided that (i) it is justified in terms of its contribution to regional development and its nature and (ii) its level is proportional to the handicaps it seeks to alleviate (36). It is for the Member State to demonstrate the existence of any handicaps and gauge their importance.
4.16. In the outermost regions qualifying for exemption under Article 92(3)(a) and (c), and in the regions of low population density qualifying either for exemption under Article 92(3)(a) or under 92(3)(c) on the basis of the population density test referred to at point 3.10.4, aid intended partly to offset additional transport costs (37) may be authorised under special conditions (38). It is up to the Member State to prove that such additional costs exist and to determine their amount.
4.17. With the exception of the cases mentioned in point 4.16, operating aid must be both limited in time and progressively reduced. In addition, operating aid intended to promote exports (39) between Member States is ruled out.
Romania meets the Copenhagen political criteria. Much remains to be done in rooting out corruption, improving the working of the courts and protecting individual liberties and the rights of the Roma. Priority should also be given to reform of the public administration.
Romania has made very little progress in the creation of a market economy and its capacity to cope with competitive pressure and market forces has worsened.
Despite progress made in transposition of key parts of the acquis, Romania has a long way to go in terms of additional legislative transposition, implementation and enforcement before the country will be able to assume the obligations of membership. (p. 61).
Case study: regional development in Romania
Through a series of projects beginning in 1994, Phare is contributing to the creation of the institutional and legal framework for the development of regional policy in Romania, and to preparations for programmes to be implemented along the lines of the EU structural funds.
Under a 1994 Phare budget, EU and Romanian experts prepared an analysis of regional disparities in Romania, and drew up proposals for a legal and institutional framework for the development of regional policy.
In 1997, the conclusions of a Phare-financed study were published as a Green Paper on Regional Development, which proposed the establishment of a number of macro regions as planning units, based on associations of elected county councils. The Green Paper also defined a national framework for the development of regional policy and the financing of programmes.
The government adopted the main points of the Green Paper as its policy on regional development; consequently, a 1997 Phare budget was approved, providing support for institution building at national and regional level.
In 1998 a Law on Regional Development was passed, creating an appropriate institutional framework and establishing a National Agency for Regional Development and a National Fund for Regional Development.
A 1998 Phare budget was approved, providing preliminary financial support for projects which would be proposed by the regions and financed out of the National Fund for Regional Development. Linked to this is technical assistance under the Special Preparatory Programme for Structural Funds, which provides further support and training to relevant institutions at regional and national level.
(b) "existing aid" shall mean: (i) all aid which existed prior to the entry into force of the Treaty in the respective Member States, that is to say, aid schemes and individual aid which were put into effect before, and are still applicable after, the entry into force of the Treaty; […]
(c) 'new aid' shall mean all aid, that is to say, aid schemes and individual aid, which is not existing aid, including alterations to existing aid; […]
(f) 'unlawful aid' shall mean new aid put into effect in contravention of Article 93(3) of the Treaty;
a. On 25 March 1999, by means of Government Decision No. 194/1999 ("GD 194/1999", Exh. C-31), Romania designated the Ştei-Nucet region as a disfavored region for a period of ten years, starting on 1 April 1999, and stipulated that all six incentives offered under EGO 24/1998 would be available to investors in the Ştei-Nucet region while that region was designated disfavored.
b. As noted in paragraph 146 above, on 8 November 1999, Romania republished a renumbered version of EGO 24/1998 (Exh. R-68).
c. On 9 December 1999, European Food obtained its Temporary Investor Certificate (Exh. C-442).
3. Exemption from customs duties. on raw materials are deemed State aid for operating purposes and goes beyond the purpose of Emergency Government Ordinance No 24/1998 on Less-Favoured Areas, leading to distortion of competition. The granting of such facilities, subject to the conditions set forth in the Ordinance, solely to economic operators who make and register new investments puts the economic operators already in the market at a disadvantage, as was alleged before the Competition Council by both the Milling and Baking Industry Employers' Association and the Romanian Meat Association. Exemption from paying customs duties effectively stimulates imports to the detriment of domestic producers. Largescale importing of live pigs from Hungary and the mere slaughtering of these animals in Less Favoured Areas have occurred, with the meat being sold in the form of carcases and no significant degree of processing occurring. The cost of these products, which were subsidised in their country of origin and also benefited from the facilities provided by Emergency Government Ordinance No 24/1998, is lower and they are penetrating neighbouring markets, with the result that they are in competition with products produced outside Less Favoured Areas.
The Competition Council takes the view that the granting of these facilities is distorting competition within the market, and has also expressed this opinion in other similar cases.
On the basis of Article 12(2) [unclear letter - possibly "c" or "e"], the Competition Council hereby takes the following.
Article 1. The aid scheme set forth in Article 6 of Emergency Government Ordinance No 24/1998 is authorised subject to the following conditions:
a) the provisions of Article 6(1)(b) of Emergency Government Ordinance No 24/1998 republished, concerning the reimbursement of customs duties on imported raw materials, spare parts and/or components necessary for own production purposes within an area, and consequently, the proposed amendment concerning exemption from customs duties on raw materials shall be deleted;
d) the methodological standards for the application of Emergency Government Ordinance No 24/1998 on Less Favoured Areas are to be submitted to the Competition Council for approval, in accordance with the provisions of Article 27(j) of Law No 21/1996.
Article 2. Pursuant to Article 13(2) of Law No 143/1999, the Competition Council may decide to suspend the State aid scheme if the aid provider fails to take the steps referred to in Article 1 of this Decision.
Regarding the state aid rules and agreeing to the principles provided for in Art. 87 and 88 of the Treaty establishing the European Community, it is necessary to grant state aids to the sensitive sectors of economy and the deprived areas due to the difficulties confronting the Romanian economy during the transition to a market economy.
It is also obvious that, after accession, Romania's development level will not exceed the EU average, and, consequently, the whole territory of Romania will comply with the conditions laid down in Art. 87(3) of the Treaty establishing the European Community.
Regional development. Deprived areas
Based on the Romanian legislation, namely the Law on Regional Development no. 151/1998, eight development regions were established. Those regions correspond to the NUTS II level of the European classification. At that level, the programs and projects of regional development are funded through the National Fund for Regional Development that was established according to the Law no. 151/1998. The funds for these programmes are yearly allocated through the state budget as distinct item [sic] for the policy on regional development and also from other domestic and foreign resources. The National Agency for Regional Development administers, as provided for in the law, the National Fund for Regional Development by annual allocations of funds to the eight Funds for Regional Developments that were established in accordance to same law and are managed by eight Agencies for Regional Development. The funds allocated in this manner are granted to the recipients on competitive basis, such as tendering for regional development projects.
The Government Emergency Ordinance no. 24/1998 on the deprived areas (D areas) ensures a framework for granting state aid for the NUTS IV (villages) to NUTS III (counties) areas. Since July 1999 the majority of facilities granted to the investors within those areas became applicable after the Methodological Rules which were authorised by Government Decision no. 525/1999, came into effect.
On 16 June 2000, the Government Emergency Ordinance no. 75 amending the Government Emergency Ordinance no. 24/1998 was adopted, the main facilities granted to the investors acting within the D areas being the following:
- customs duty and VAT exemptions for machinery, equipment, motor-vehicles, other capital assets which are imported for making investments within the area;
- VAT exemption for the domestic machinery, equipment, motor-vehicles, other capital assets which are used for making investments within the area;
- customs duty exemption for the raw materials imported for producing within the area; profit tax exemption during the existence of the 0 area;
- fee exemption for the alteration of destination or driving out from agricultural use of lands necessary for the investment.
In accordance to the legislation in force, the terms under which the investors are deemed to benefit of the mentioned facilities are the following:
- the facilities are granted only to the companies where the majority is owned by private shareholders, Romanian legal persons; to private undertakings or family associations which are licensed in accordance to the Law no. 54/1990;
- the companies must have their headquarters and act within the D area;
- the new investment to be made and registered within the financial records of the undertaking, after the qualification of [sic] as a D area;
- the investment to be made within the interest fields which are covered by the Government Decision qualifying the area as D area;
- through investment new jobs must be created for the unemployed people which live within the D area;
- the goods for which facilities, such as fee exemption, must be used for investments/production within the D area;
- the investment within the D area must be in function for a period twice as long as the period when the facilities were granted, otherwise, the investor is held to reimburse the amounts granted as facilities.
The EU underlines the particular importance of the "acquis" under chapter 6 for the proper functioning of the internal market, including the creation of a level playing field for investment. The significance of the "acquis" is such that Romania has undertaken, under the Europe Agreement, to comply with the Community rules on competition. Thus, while welcoming Romania's statement that it accepts the "acquis" and will apply it as from the accession, the EU underlines that the "acquis" under chapter 6, in accordance with the Europe Agreement, has to be applied by Romania already now. In this context, the EU also underlines the importance of reinforcing the administrative capacity for effective implementation and enforcement of the "acquis". Therefore, the EU will conduct a general assessment of whether Romania has set up effective structures to enforce and apply the relevant substantive rules of the "acquis". Moreover, the full and immediate application of the "acquis" is also necessary in order to adapt companies well before the date of accession to be able to withstand the competitive pressures of the internal market resulting from the full and direct application of the competition "acquis" upon accession. It is inconceivable that the Romanian economy would be able to support the switching from one day to the next to the full and correct application of the "acquis".
- provide details regarding existing aid measures (i.e. those programs on the basis of which aid continues to be granted and which existed already before the entry into force of the present state aid law). In particular, Romania should explain which measures are envisaged for bringing such aid into line with the EU "acquis";
- provide a more detailed analysis of the aid facilities in the so-called D areas of the country. In particular, Romania should explain what action, in light of the Community Guidelines on Regional Aid, the Competition Council has taken with regard to the Government Ordinances providing for these aid facilities.
Romania has made further progress in the transposition in the acquis in this chapter.
Further alignment with the EC competition legislation and the improvement of the administrative capacity in this field is a short-term priority in the Accession Partnership.
Romania's anti-trust legislation is largely in line with the acquis. During the period under consideration the legislative framework for anti-trust has been developed further by the adoption of secondary legislation. The anti-trust enforcement authorities have dealt with an increasing number of cases. The main challenge is now to ensure that the application and enforcement of the anti-trust rules is effective and that priority is given to such cases that concern the most serious distortions of competition. In order to achieve this, the administrative capacity of the Romanian Competition Council and Competition Office will need to be reinforced.
As concerns state aid the entry into force of the new state aid law on 1 January 2000 and the subsequent adoption of secondary legislation is an important step forward. However, the major challenge is to ensure that the legislation will be properly implemented and enforced. The recent adoption of the law on ‘industrial parks' is a major concern.
State aid reports have still to be submitted for the years 1998 and 1999. The latest report broadly follows the methodology and the presentation of the Community's Survey on State Aid. Additional work is needed in order to finalise a comprehensive state aid inventory covering all aid measures in operation in Romania.
In order to ensure a differentiation of maximum aid intensities in assisted areas, Romania still has to prepare a regional aid map in consultation with the Commission.
Through the Emergency Ordinance no. 75/2000 modifying the Emergency Ordinance no. 24/1998 on the deprived areas, the following facilities may be granted to the investors within D areas:
- customs duty and VAT exemptions for machinery, equipment, installations, motor-vehicles, other capital assets which are imported for making investments within the area;
- VAT exemption for the domestic machinery, equipment, installations, motor vehicles, other capital assets, which are used for making investments within the area;
- customs duty exemption for the raw materials imported for the own production within the area;
- profit tax exemption during the existence of D area;
- fee exemption for the alteration of destination or driving out from agricultural use of lands necessary for the investment.
Facilities provided for by Government Emergency Ordinance (GEO) no. 24/1998, amended by GEO no. 75/2000, are granted to undertakings operating within deprived areas, mention being made that in the deprived area co financing is approved only for projects selected by the National Agency for Regional Development (NARD) through public tender, nationwide, and within "Special Programs", as approved by decision of the Government, programs which have been notified to the Competition Council.
[The] Competition Council analyzed the existing state aid scheme provided in GEO no. 24/1998; it found out that it seriously distorts competition, and thus issued Decision no. 244/15.05.2000 whereby it authorized with conditions the state aid scheme as contained in art. 6 of the GEO no. 24/1998. Providing for the elimination of art. 6 (I)(b) referring to refunding of customs duties for imported raw materials, spare parts and/or components dedicated to the own production in the deprived area, and for modification of art..6 (I)(c), mainly, the exemption from profit tax payment during the existence of the deprived area shall be done only for plowed-back profit. The modification of the existing state aid scheme contained in 311.6 of the GED no. 24/1998, referring to exemption from customs duty payment for imported raw materials, notified by NARD, has not been authorized by the Competition Council.
GEO no. 75/2000 amending GED no. 24/1998 overlooked the conditions set by the Competition Council through Decision no. 244/15.05.2000, and maintained the facilities in art. 6 (l)(b) and (c) of GEO no. 24/1998. Although the Competition Council did not authorize the modification of the state aid scheme, GEO no. 75/2000 provides for exemption from payment of custom duties for imported raw materials for the own production in the deprived area.
In December 2000, the Competition Council has brought action at the Court of Appeals alleging failure to comply with Competition Council's Decision no. 244/15.05.2000 by the Government, which authorized, with conditions, the modification of the state aid scheme within GEO no. 24/1998, modification made through GEO 00.75/2000.
The request was made in front of the Court of Appeals to cancel GED no. 75/2000 and to recover the state aid.
The Government will made [sic] a study in order to assess the effects of enforcing this Ordinance, and further takes necessary measures.
Romania has made considerable progress in creating a legal framework in this area that is broadly aligned with the Community acquis. However, additional efforts are necessary to complete the legal framework and ensure its adequate enforcement.
As regards anti-trust, Romania's legislation is largely in line with, and covers most of, the acquis provisions. However, further secondary legislation still needs to be adopted, to take account of the Commission's new vertical restraints policy and its policy on horizontal cooperation agreements. The Competition Council has broad powers to enforce competition rules but will need further reinforcements- especially in the form of training and IT equipment, in order to fulfil the tasks assigned to it. It is essential that the Competition Council could focus its resources more effectively on cases with most serious distortions to competition. A more deterrent sanctioning policy will also be required. Finally, general transparency, including an improved access of the public to relevant documents should be increased.
As regards state aids, the existing legislation covers the basic principles of state aid control. However, the field of application of this law is not comprehensive and numerous state aid measures are not notified to the competition authorities. Romania should rapidly adopt the required secondary legislation on state aids, which is currently being prepared. This is a precondition to any effective enforcement activities. A significant number of unaligned aid schemes remains such as the profit tax rate 5% on export earnings and the law on direct investment promotion. Moreover, implementation of state aid policy in sensitive sectors is still at an early stage. There are continuous problems with the monitoring of frequent waivers by public bodies of the accumulated debt.
Romania has now formally adopted state aid reports for the period 1996 -1999 but has yet to finalise the state aid inventory. In addition, Romania's recent proposal for the regional aid map would allow aid intensities for regional investment aid of up to 50% net grant equivalent. In the area of state aids, both the Competition Office and the Competition Council require further strengthening in terms of human resources and training.
In addition to strengthening administrative capacity within the competition authorities, particular attention should also be given to intensifying the training of the judiciary in the specific fields of anti-trust and state aid. There is also a need to raise awareness amongst all market participants, and especially amongst administrations granting state aids, of the policy and legislative provisions in this area.
The EU further notes that there are a number of existing as well as new incompatible aid schemes which have not been brought into line with the acquis. The EU notes that such schemes include in particular the new draft law on industrial parks, the fiscal facilities offered in the free areas which are set up under Law No. 84/1992, the reduced rate of corporate income tax of 5% for income from exports, and facilities provided under Emergency Ordinances no. 24/1998 and 75/2000 in the so-called "D-areas". The EU urges Romania to align the existing incompatible aid schemes without delay. (2001 EU Common Position, p. 4)
With regard to aid which Romania wishes to operate beyond the date of accession, the EU invites Romania to draw up a list of those existing aid measures which the Competition Council considers as compatible with the acquis. The EU invites Romania to transmit this list to the Commission; Romania may continue to operate any aid which is included in the list and against which the Commission has not objected for the period for which the aid was approved by the Competition Council. A reference to the existing aid list and to the procedure for its establishment will be included in the Accession Treaty. (2001 EU Common Position, p. 4)
All existing State aid measures will be assessed, establishing their compatibility with the acquis in order to suggest measures eliminating or transforming the incompatible ones in compatibles [sic] aids, taking into account the legal and economic implication of the modification of any incompatible schemes on the already granted specific allocations.
This approach will be made according to the European Commission recommendation and will take into consideration [sic] following three steps: (i) closing the incompatibles [sic] schemes in order to stop potential future allocations; (ii) the modification of these scheme to reach the compatibility with the acquis; (iii) the identification of the solutions for the economic agents that received the State aid under the present schemes (e.g. Free areas, deprived areas etc). [...] (p. 132)
Regarding the "D areas", the State aid granted in the present must  be converted into a compatible State aid. The Ministry of Development and Prognosis started the technical debates with the beneficiary associations in order to identify solutions and to make, in 2 months, proposals for alteration of the present system of facilities. (p. 133)
"D area" granted facilities
Presently in Romania D areas are regulated by Law no. 621/2001 on the approval of Government Emergency Ordinance (GEO) no. 75/2000 for the alteration of Government Emergency Ordinance no. 24/1998, republished, on deprived area (OG no. 737 of 19th November 2001), GEO no. 75/2000 for the alteration of GEO no. 24/1998, republished and GEO no. 24/1998 on deprived areas, approved and modified by Law no. 20/1999.
The regime of the facilities granted in '"D" areas was changed by the recent entering into force of the law on VAT and of the law on profit tax.
The Law 345/2002 on VAT entered into force on 01.06.2002 and abrogated the facility of exempting from VAT payment granted for machines, outfits, installations, equipments, means of transport, other depreciable goods imported or produced in the country that were necessary for the investments in a D area. This facility was stipulated in Art. 6(1) of the GEO no. 24/1998 regarding the regime of the deprived areas.
The Law no. 414/2002 (OG no. 456/27.06.2002) on profit tax abrogated the facility of exempting undertakings acting in "D" areas from the payment of the profit tax. This facility was stipulated in Art. 6(1), let. c) of the GEO no. 24/1998 regarding the regime of the deprived areas.
For ensuring the legislative continuity, the legal persons that had obtained the permanent certificate of investor in "D" area before the Law no. 414/2002 entered into force, will further benefit from the profit tax exemption on the whole duration of existence of the deprived area, according to Art. 35, par. 3.
Community officials stated clearly that the negotiations on this chapter may be closed if, and only if, the following conditions (relating primarily to State aid, which was found to have the highest potential to distort the Internal Market) are met: new aid must comply strictly with the acquis, existing aid must be aligned or in the process of being aligned (including in terms of duration; the granting of transition periods may be considered depending on the outcomes of discussions between the competent institutions in Romania and the relevant operators), and ALL cases of non-notified State aid must be analysed and resolved.
The Commission stated that it had asked all of the candidate countries to bring their tax breaks into line with the acquis communautaire, including those granted in Free Zones or Less Favoured Areas, which entails either their withdrawal or their conversion into compatible aid. In the latter case, negotiations with a view to converting them into compatible schemes must be pursued directly by the Competition Council with the economic operators concerned. Only once this has occurred can the companies for which transition periods may be negotiated with the EU be identified.
The EU recalls that all fiscal aid provisions, (for example those included in the VAT Law; the Law on customs duties exemptions - including benefits for transactions undertaken by firms located in industrial parks, free zones and disadvantaged areas […]) should be subject to the approval by the Competition Council. In cases where the Competition Council assesses the respective measures to be incompatible with the State aid rules, the EU invites Romania to either end the measures or to align them with the acquis.
The EU invites Romania to bring all incompatible aid measures in line with the acquis without delay and to continue to provide information on the progress made towards this goal. […]
The EU moreover invites Romania to provide information on individual benefits granted in the free zones and the disadvantaged areas and on any other individual tax benefits that have already been granted and which provide for tax benefits beyond Romania's target date for accession. The EU urges Romania to close incompatible aid schemes for new entrants with immediate effect.
In this context Romania is further invited to present a plan outlining how it intends to convert the benefits that are incompatible with the acquis and to hold further technical consultations with the Commission to explore the possibilities for this conversion.
With regard to aid which Romania wishes to operate beyond the date of accession, the EU recalls it's invitation to Romania to draw up a list of those existing aid measures which the Competition Council considers as compatible with the acquis and to transmit this list to the Commission. The EU recalls that Romania may continue to operate any aid which is included in the list and against which the Commission has not objected for the period for which the aid was approved by the Competition Council. A reference to the existing aid list and to the procedure for its establishment will be included in the Accession Treaty.
The EU recalls that the existing aid measures are subject in accordance with Article 88(1) of the EC Treaty to the appropriate measures procedure, under which the Commission can, in cooperation with the (future) Member State, propose changes to an aid measure for the future. To the extent that Romania wishes to benefit from this mechanism, the EU invites Romania to present the following to the Commission, every six months as from 1 January 2002, and up until the date of accession:
(a) a list of all existing aid measures (both schemes and ad hoc aid) (i) which have been assessed by the Competition Council and (ii) which it found to be compatible with the acquis ; (b) any other information which is essential for the assessment of the compatibility of the aid measures referred to under (a).
Details on the precise format for this reporting have been provided by the Commission.
The EU underlines that all aid measures in Romania which are considered State aid according to the acquis and which are not included in this list shall be considered as new aid upon Romania's accession. After that date, application of such an aid measure will be conditional upon Romania's notification of it pursuant to Article 88 of the EC Treaty, and a decision of the Commission that the aid measure in question is compatible with the Common Market. As regards individual aid, no measures which continue to have effects after accession and which are incompatible will be acceptable.
The Ministry of Administration and Interior elaborated a draft law for completing the Government Emergency Ordinance no. 24/1998 on the regime of deprived areas. The draft provides that the facilities the undertakings that have an investor certificate and operate in deprived areas benefit from, will be granted below the maximum admitted intensity foreseen in the Regulation on regional aid. At present, the draft normative act is under inter-ministerial endorsement procedure.
By entering into force of the Fiscal Code, the fiscal facilities have been significantly diminished. In fact, the undertakings with investor certificate in the deprived areas will benefit from the exemption from the payment of the taxes perceived for changing the destination or removing from the agrarian circuit of certain fields designated to achieving the investment as well as the exemption from the custom duties payment for raw materials and imported components, excepting the import of the raw material for meat production, processing and preserving. Also the undertakings that obtained before 1 July 2003 the permanent certificate of investor in the deprived area, will benefit from exemption from the profit tax payment related to the new investment, during the whole existing duration of the deprived area.
In order to meet the criteria in the Community rules on state aid, and also to complete the negotiations under Chapter No. 6 - Policy it is necessary to eliminate all forms of State aid in national legislation incompatible with the acquis communautaire in this area and, in this respect, it is proposed to repeal […] the provisions of Article 6 paragraph (1), letter (b), letter (d) and letter (e) of the Emergency Government Ordinance no. 24/1998 on the disadvantaged areas […]
(Substantiation Report accompanying EGO 94/2004, 26 August 2004, Exh. R-95, pp. 12-13).
(7) In joining the European Union, the Republic of Bulgaria and Romania accept, without reserve, the Treaty establishing a Constitution for Europe, and until its entry into force, the Treaty on European Union and the Treaties establishing the European Communities including all their objectives and all decisions taken since their entry into force, and the options taken in respect of the development and strengthening of those Communities and of the Union.
(8) It is an essential feature of the legal order introduced by the Treaties establishing the European Communities and, at its entry into force, the Treaty establishing a Constitution for Europe that certain of their provisions and certain acts adopted by the institutions are directly applicable, that the law of the Union takes precedence over any national provisions which might conflict with it, and that procedures exist for ensuring the uniform interpretation of the law of the Union; accession to the European Union implies recognition of the binding nature of these rules, observance of which is indispensable to guarantee the effectiveness and unity of the law of the Union.
Regional aid aimed at reducing a firm's current expenses (operating aid) is normally prohibited. Exceptionally, however, such aid may be granted in regions eligible under the derogation in Article 87(3)(a) provided that (i) it is justified in terms of its contribution to regional development and its nature and (ii) its level is proportional to the handicaps it seeks to alleviate (69). It is for the Member State to demonstrate the existence and importance of any handicaps (70). In addition, certain specific forms of operating aid can be accepted in the low population density regions and the least populated areas.
a. Breached a clear commitment undertaken by Romania vis-à-vis the Claimants, and therefore breached the BIT's umbrella clause contained in Article 2(4) of the BIT;
b. Undermined the Claimants' legitimate expectations, upset the stability of the regulatory regime, lacked transparency and consistency, and was taken in bad faith, and therefore breached Romania's obligation under Article 2(3) of the BIT to afford the Claimants fair and equitable treatment;
c. Impaired by unreasonable measures the management, maintenance, use, enjoyment and disposal of the Claimants' investments, and therefore breached Article 2(3) of the BIT; and
d. Expropriated without compensation the Claimants' right to receive the incentives and substantially deprived their entire investment of value, and therefore breached Article 4(1) of the BIT.
The Claimants request an award be made granting the relief set out in paragraphs 1 to 6 below.
Any damages payable, including interest and costs, should be awarded to the individual Claimants, Ioan Micula and Viorel Micula, to be divided between them on a 50:50 basis.
In the alternative, any damages payable, including interest and costs, should be awarded to all five Claimants.
1. A declaration that Romania has violated the Sweden-Romania Bilateral Investment Treaty ("Treaty") and customary international law by:
1.1 failing to ensure fair and equitable treatment of the Claimants' investments (Article 2(3) of the Treaty) by treating the Claimants' investments in a manner that was inconsistent, ambiguous, and not transparent;
1.2 failing to ensure fair and equitable treatment of the Claimants' investments (Article 2(3) of the Treaty) by violating the Claimants' legitimate expectations regarding their investments;
1.3 impairing the Claimants' investments through unreasonable and discriminatory measures (Article 2(3) of the Treaty);
1.4 failing to observe obligations entered into with the Claimants with regard to their investments (Article 2(4) of the Treaty); and
1.5 expropriating the Claimants' investments without the payment of prompt, adequate, and effective compensation (Article 4(1) of the Treaty).
2. Damages for the following losses suffered by the Claimants:
A. Expectation losses
2.1 Losses suffered as a result of the increased cost of raw materials following revocation of the incentives provided by Emergency Government Ordinance 24/1998 ("Incentives") and the lost opportunity to build a sugar stockpile in 2009, comprising:
(a) increased costs of sugar in the amount of RON 85.1 million;
(b) increased costs of PET in the amount of RON 6.3 million;
(c) increased costs of raw materials other than sugar and PET in the amount of RON 17.5 million; and
(d) lost opportunity to stockpile sugar in 2009 in the amount of RON 62.5 million.
2.2 Financial penalties incurred but not yet paid as a result of the Claimants being financially constrained due to the losses incurred as a result of the revocation of the Incentives in the amount of RON 63.65 million as 30 September 2010 unless these financial penalties are waived by the Respondent and a declaration that the Respondent shall waive or reimburse all additional financial penalties imposed or assessed until the date of Romania's full and final satisfaction of the award.
2.2A Financial penalties paid by the Micula brothers' companies in the period 1 April 2005 to 30 September 2010 in the amount of RON 40 million.
2.3 Lost profits on sales of finished goods following revocation of the Incentives of no less than RON 427 million.
2.4 Lost profits on sales of Sugar Containing Products ("SCPs") following revocation of the Incentives in the amount of RON 492.3 million.
2.5 Lost profits incurred as a result of the Claimants' inability to complete their incremental investments following revocation of the Incentives comprising:
(a) a malt plant in the amount of RON 28 million;
(b) a cogeneration [p]lant in the amount of RON 712.6 million; and
(c) a canning [p]lant and subsequent sales of private label beer in the amount of RON 720.4 million.
2.6 In the alternative to paragraphs 2.3, 2.4 and 2.5 above, lost profits on sales of finished goods following revocation of the Incentives in the amount of RON 2423.2 million.
B. Reliance losses
2.7 In the alternative to the losses described in paragraphs 2.1, 2.2A, and 2.3 to 2.6 above, but not 2.2, the amounts lost by the Claimants as a result of investing in reliance on the Incentives in the amount of RON 811 million.
3. An award of interest on the damages payable pursuant to paragraph 2 above calculated in the following manner:
3.1 For losses as described in paragraphs 2.1(a) to (c) above, interest compounded on a quarterly basis at a rate of 3 month ROBOR (Romanian Interbank Offer Rate) plus 5% from 1 March 2007 until the date of Romania's full and final satisfaction of the award.
3.2 For losses as described in paragraph 2.1(d) above, interest compounded on a quarterly basis at a rate of 3 month ROBOR plus 5% from 1 July 2010 until the date of Romania's full and final satisfaction of the award.
3.3 For penalties as described in paragraph 2.2A above, interest compounded on a quarterly basis at a rate of 3 month ROBOR plus 5% from 1 July 2007 until the date of Romania's full and final satisfaction of the award.
3.4 For losses as described in paragraph 2.3 above, interest compounded on a quarterly basis at a rate of 3 month ROBOR plus 5% from 1 May 2008 until the date of Romania's full and final satisfaction of the award.
3.5 For losses as described in paragraph 2.4 above, interest compounded on a quarterly basis at a rate of 3 month ROBOR plus 5% from 1 March 2007 until the date of Romania's full and final satisfaction of the award.
3.6 For losses as described in paragraph 2.5 above, interest compounded on a quarterly basis at a rate of 3 month ROBOR plus 5% from 30 September 2009 until the date of Romania's full and final satisfaction of the award.
3.7 For losses as described in paragraph 2.6 above, interest compounded on a quarterly basis at a rate of 3 month ROBOR plus 5% from 15 August 2007 until the date of Romania's full and final satisfaction of the award.
3.8 For the amounts lost by the Claimants as a result of investing in reliance on the Incentives as described in paragraph 2.7 above, interest to be applied compounded on a quarterly basis at a rate of 3 month ROBOR plus 5% from 1 January 2002 until the date of Romania's full and final satisfaction of the award.
3.9 The ROBOR rate to be applied in relation to paragraphs 3.1 to 3.8 above is to be the average annual rate for each year or part thereof.
4. The total amount of damages payable by the Respondent comprising the amounts set out in paragraphs 2, 3 and 5 to be received net of any tax obligations imposed by Romania on the proceeds.
5. All costs incurred by the Claimants in relation to these proceedings, including but not limited to the Claimants' lawyers' fees and expenses, experts' fees and expenses, and all costs of ICSID and the Tribunal.
6. Any further relief that the Tribunal may deem fit and proper.
(Claimants' Revised Request for Relief, footnotes omitted)
b. provide in the Award that Romania is enjoined from any further tax collection measures of any kind in respect of the Claimants and the EFDC until such a time as the damages awarded by the Tribunal have been paid in full, and include a pecuniary alternative in case of nonperformance;
c. issue a declaration that Romania is not entitled to set-off tax debts of the EFDC against an Award in favor of Claimants;
d. order Romania to pay all of Claimants' costs in responding to this Application, including reasonable lawyers' fees and other costs; and
e. grant any other relief that the Tribunal may deem fit and proper in these proceedings.
(Claimants' Rejoinder on the Respondent's Revocation Application, ¶ 75).
a. First, the existence of such a promise is the basis for the Claimants' assertions regarding their legitimate expectations, including their expectation of legal stability, and is therefore necessary for proving this aspect of the Claimants' fair and equitable treatment claim.
b. Second, the existence of such a promise is necessary to establish the existence and scope of an obligation under Romanian law, the breach of which could result in the breach of the umbrella clause.
c. Third, the existence of such a promise is allegedly what gave rise to the Claimants' right to the facilities, which Claimants assert has been expropriated.
a. With respect to the fair and equitable treatment claim, the Respondent argues that the Claimants must show that, after exercising due diligence, they legitimately and reasonably relied on an instrument which a reasonable investor, properly advised by Romanian lawyers, would have understood as an assurance of the immutability of the EGO 24 facilities.
b. With respect to the umbrella clause and expropriation claims, the Respondent argues that the Claimants must show that they had an actionable vested right existing under Romanian law which was breached or expropriated.
"(a) DISMISS the Claimants' claims in their entirety; and
(b) ORDER the Claimants to pay in their entirety the costs of this arbitration, including the fees and expenses of the Tribunal and the Centre and the reasonable fees and expenses incurred by Romania in defending against the Claimants' claims."
(Respondent's Post-Hearing Brief, ¶ 354).
c. if any amount is awarded to any of the Claimants, whether as damages, arbitration costs, or otherwise, explicitly provide in the award that the amount awarded is subject to set-off against the tax debts of all eleven EFDG companies, including lawful interest and penalties;
d. grant any other relief the Tribunal considers just and proper."
(Respondent's Reply regarding its Revocation Application, ¶ 41)
a. The Tribunal's jurisdiction is determined by Article 25 of the ICSID Convention and Article 7 of the BIT.
b. Regarding jurisdiction ratione personae, the Tribunal rejected Romania's argument that the Individual Claimants’ Swedish nationality could not be opposed to Romania because of purported tenuous links with Sweden. Accordingly, the Tribunal concluded that Messrs. Micula are and have been Swedish nationals at all times relevant to the Tribunal's jurisdiction. As for the three Corporate Claimants, the Tribunal resolved that they were held by nationals of another Contracting State at the time of consent to arbitration, in accordance with the requirements of Article 25(2)(b) of the ICSID Convention and Article 7(3) of the BIT.
c. Regarding jurisdiction ratione materiae, the Tribunal found that the investments made by the Corporate Claimants qualified as such for the purposes of the ICSID Convention. In the same vein, the Tribunal was satisfied that the shareholding of Messrs. Micula qualified as an investment under the ICSID Convention. The Tribunal also held that there was an investment for the purposes of the BIT. Further, the Tribunal expressed no doubt that the dispute was of a legal nature, arising directly out of an investment, for the purposes of Article 25 of the ICSID Convention. Moreover, the Tribunal understood that the dispute was not merely hypothetical and that the Claimants had made a prima facie case of entitlement.
d. Regarding jurisdiction ratione temporis, the Tribunal found that the dispute arose after the entry into force of the BIT and therefore fell within the scope of application of the BIT ratione temporis.
e. The Tribunal also rejected the Respondent's objection related to the remedy of restitution sought by the Claimants, ruling that the Tribunal had powers to order restitution both under the ICSID Convention and the BIT.
The Tribunal shall decide a dispute in accordance with such rules of law as may be agreed by the parties. In the absence of such agreement, the Tribunal shall apply the law of the Contracting State party to the dispute (including its rules on the conflict of laws) and such rules of international law as may be applicable.
Everything here in this case is crystallised prior to the accession of Romania to the EU. The BIT was entered in force before, the breach predates the accession and hence the right to be compensated predates accession. [...] [T]he only element which postdates accession is the payment: the payment of a sum of money which represents the consequences of the breach which predates accession (Tr., Day 12, 141 (Gaillard)).
a. First, under the preservation of rights provision in Article 9(2) of the BIT, the BIT prevails over external provisions, except to the extent that the latter would be more favorable to the investor than the provisions of the BIT.
b. Second, the BIT prevails as lex posterior pursuant to Article 30(3) of the Vienna Convention on the Law of Treaties of 1969 (the "VCLT")16 because none of the requirements for Article 30(3) to apply is met (in particular, the Europe Agreement and the BIT were not entered into between the same parties, nor do they have the same subject matter).
c. Third, the BIT prevails as lex specialis, because it is the treaty with a more precisely delimited scope of application. In addition, the Claimants argue that there is no evidence of Romania's and Sweden's common intention to give precedence to EU law and subordinate the BIT to it. Indeed, the Claimants note that, in the few instances where Romania has intended to give precedence over a BIT to a particular source of law, it has done so expressly.
a. An "interpretation" cannot be construed to abrogate express language in the BIT;
b. The meaning of the terms "shall be taken into account" should be understood to mean that an interpreter of the treaty has the discretion to consider relevant rules of international law, not that such rules must be incorporated into the treaty, and
c. The "relevant rules of international law" are only those that are in place at the time of the violation.
desiring to intensify economic cooperation to the mutual benefit of both States and to maintain fair and equitable conditions for investments by investors of one Contracting Party in the territory of the other Contracting Party,
recognizing that the promotion and protection of such investments favour the expansion of the economic relations between the two Contracting Parties and stimulate investment initiatives [...]
Article 74 - Investment promotion and protection
1. Cooperation shall aim to establish a favourable climate for private investment, both domestic and foreign, which is essential to the economic and industrial reconstruction of Romania.
2. The particular aims of the cooperation shall be:
- for Romania to establish and improve a legal framework which favours and protects investment;
- the conclusion by the Member States and Romania of Agreements for the promotion and protection of investment [...]