Micula & Ors v Romania (Rev 1)

A registered ICSID award has the force and effect of a High Court judgment for execution. This does not generally permit the court to refuse enforcement on substantive grounds available against an ordinary judgment. The court nevertheless retains a limited power to grant a temporary stay controlling the manner and timing of execution, provided that the stay accords with the purposes of the ICSID Convention.

Res judicata cannot be invoked where it would directly frustrate the effective application of EU State aid law. Pending resolution of proceedings challenging a Commission State aid decision, enforcement may therefore be stayed. The stay may be conditional on security because security paid into court is not payment of the award. Its breach cannot automatically terminate a stay required to prevent enforcement contrary to EU law.

The appellants obtained an ICSID award against Romania for breach of the Sweden–Romania bilateral investment treaty. The award was registered in the High Court under the Arbitration (International Investment Disputes) Act 1966. The European Commission subsequently decided that payment of the award would constitute incompatible State aid and prohibited Romania from paying it.

Blair J, in [2017] EWHC 1430 (Comm), refused to set aside registration but stayed enforcement pending proceedings in the General Court challenging the Commission’s decision. He later declined to require security as a condition of the stay.

The appellants appealed against both decisions. The central questions were whether res judicata permitted immediate enforcement, how the ICSID Convention and the 1966 Act interacted with EU obligations, whether enforcement should remain stayed, and whether Romania should provide security.

1. Stay appeal dismissed. The award became binding and res judicata when rendered. Registration under sections 1 and 2 of the Arbitration (International Investment Disputes) Act 1966 treated its pecuniary obligations as those of a High Court judgment for execution. Subsequent ICSID annulment proceedings did not postpone that finality.

2. The Kapferer principle did not permit enforcement. Res judicata ordinarily protects final decisions even where they infringe EU law, but it remains subject to effectiveness. Enforcing this award would directly frustrate the Commission’s binding decision that payment constituted unlawful State aid and would compel Romania to breach it. The principle therefore yielded to the effective application of EU State aid law.

3. Arden and Leggatt LJJ held that section 2(1) of the 1966 Act must be construed consistently with the ICSID Convention. Its analogy with a High Court judgment defines the award’s force and effect for execution; it does not import every substantive ground on which enforcement of an ordinary domestic judgment might be refused. Hamblen LJ considered instead that Article 54 required equivalent treatment and allowed any bar equally applicable to a domestic judgment.

4. All members nevertheless agreed that enforcement should remain stayed until determination of the General Court proceedings or further order. Arden and Leggatt LJJ held that the national court retained a limited procedural discretion over the manner and timing of execution. A temporary stay was compatible with the Convention, whereas an indefinite or permanent refusal to enforce an otherwise enforceable award would not be. Hamblen and Leggatt LJJ also considered that deciding the disputed application of article 351 TFEU risked conflict with the General Court proceedings.

5. Security appeal allowed. CPR 40.8A, CPR 83.7(4) and CPR 3.1(3) empowered the court to impose security as a condition of the stay. Payment into court would not amount to payment of the award and was not prohibited by the Commission’s decision. The English court should do the next best thing to immediate enforcement by securing prompt recovery if the EU proceedings favoured the appellants.

6. Romania was ordered to provide security of £150 million. Non-compliance would not of itself terminate the stay, because automatic lifting would permit the very enforcement which the stay was intended to prevent.

1. Court of Appeal (Civil Division): By [2018] EWCA Civ 1801, dismissed the appeal against the stay of enforcement, allowed the security appeal and ordered Romania to provide £150 million security.
2. Commercial Court: Blair J, in [2017] EWHC 1430 (Comm), refused to set aside registration of the ICSID award but stayed enforcement pending the General Court proceedings. In a later judgment, he refused to make security a condition of the stay.