Viorel Micula and Others v Romania European Commission (Intervener)

JurisdictionEngland & Wales
JudgeMr Justice Blair
Judgment Date15 June 2017
Neutral Citation[2017] EWHC 1430 (Comm),[2017] EWHC 31 (Comm)
Docket NumberCase No: CL-2014-000251
CourtQueen's Bench Division (Commercial Court)
Date15 June 2017
Between:
(1) Viorel Micula
(2) Ioan Micula
(3) S. C. European Food S.A
(4) S. C. Starmill S.R.L.
(5) S. C. Multipack S.R.L.
Claimants/Applicants
and
Romania
Defendant/Respondent

and

European Commission
Intervener

[2017] EWHC 1430 (Comm)

Before:

Mr Justice Blair

Case No: CL-2014-000251

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Rolls Building

7 Rolls Building, Fetter Lane, London

Patrick Green QC and Jonathan Worboys (instructed by Shearman & Sterling (London) LLP) for the First Claimant

Marie Demetriou QC (instructed by White & Case LLP) for the Second to Fifth Claimants

Robert O'Donoghue QC and Emily MacKenzie (instructed by Thrings LLP) for the Defendant

Nicholas Khan for the European Commission

Hearing dates: 24 May 2017

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

Mr Justice Blair Mr Justice Blair
1

Judgment was handed down in this matter on 20 January 2017: see [2017] EWHC 31. This decision deals with (1) the claimants' alternative application for security (see paragraphs 182–202) of the judgment, and (2) the claimants' applications for permission to appeal.

2

It is convenient to take permission to appeal first. The claimants' applications were made by letters of 17 May 2017, so shortly before this hearing, together with draft grounds of appeal. Difficult issues of law are raised in the case, and it appears that similar issues arise in other arbitral proceedings involving other parties. Both limbs of CPR r.52.6(1) are satisfied, and permission to appeal as per the draft grounds of appeal is accordingly given.

3

As to security, the claimants ask the court as a condition of the stay to order Romania to provide security in the sum of £150m, or such sum as the court may think fit.

4

In the judgment:

i) The court recognised that there are discretionary arguments against, as well as in favour of, the claimants' application for an order requiring Romania to provide security as a term of the stay, on the assumption that there is power to make such an order (paragraph 191).

ii) Nevertheless, having considered at that stage the parties' written submissions only, the court considered that the claimants had advanced a persuasive case for an order requiring Romania to provide security as a term of the stay. It reflects the fact that (i) the proceedings relate to an ICSID Award which pre-dates the decisions of the Commission, (ii) the Award is to be treated as a final judgment of the English court given at the time of the Award, and (iii) the Award has been unpaid for some years. More generally, although security is not the same as enforcement or payment because the monies may never be paid to the claimants, the grant of security is at least consonant with the obligation placed on the UK under the ICSID Convention to enforce awards. As the claimants say, should the European Court rule in their favour, security would assist in enabling them promptly to recover the sums due to them. This is particularly important given the long duration of this dispute (paragraph 192).

iii) However, before reaching a decision, the court required (i) to be satisfied that there is legal power to make an order for security, and (ii) to be assured that the making of an order for security and such steps as may be consequent on any non-compliance would not themselves be treated as a violation of EU law (paragraphs 194–198 and 199–201).

5

This decision follows further submissions from the parties addressing in particular the points identified by the court.

6

As to (i), namely whether the court has power to order security at all, Romania relies on the decision of the Supreme Court in IPCO (Nigeria) Limited v Nigerian National Petroleum Corporation [2017] UKSC 16, which was handed down after judgment.

7

It is certainly right that in general terms and in the context of arbitration IPCO shows the importance of clarity as to the legal power under which the court orders security. On the other hand, the specific issue in IPCO was a different one, concerning the power to order security under s. 103 Arbitration Act 1996 (which gives effect to Arts. V and VI of the New York Convention). In that context, it was decided that the court's power to order security was limited to adjournments under s. 103(5), and that further powers in relation to security could not be justified by reference to CPR 3.1(3). The claimants rely on CPR 3.1(3) in this case, along with the court's inherent jurisdiction.

8

However, this case arises on different facts, which are unusual, and possibly unique. Applying Art. 4(3) TEU, the court has stayed enforcement of the Award pending the resolution of the claimants' proceedings in the European Court which seek the annulment of the Commission's Final Decision prohibiting Romania from paying the Award, alternatively has stayed enforcement having regard to the risk of inconsistent decisions.

9

There is force in the claimants' contention that if there is power to order such a stay (which finds support in Department of Trade and Industry v British Aerospace [1991] 1 CMLR 165 where a stay was granted under the court's inherent jurisdiction), there is power to do so on terms, including the grant of security. However, because of the court's present view as to (ii), namely the requirement of assurance that the making of an order for security and such steps as may be consequent on any non-compliance would not themselves be treated as a violation of EU law, there is no need to reach a final conclusion at this stage.

10

As to (ii), the judgment records that:

"199. … Romania submits that if the court were to order such security to be paid, that might itself fail to respect the Commission's Final Decision in a way that violates EU law.

200. For obvious reasons, this is a significant issue for the court. The parties have sought to address it, but it raises a further question as to the practical consequences of making an order for security. The court should have an understanding of the steps that it would be asked to take in the event of non-compliance, and the implication of such steps. This may affect the exercise of its discretion in deciding whether or not to make the order.

201. It is to be hoped that the possibility of non-compliance is academic, but in the light of the history of this dispute that cannot be taken for granted. The court needs to be assured that the making of an order for security and such steps as may be consequent on any non-compliance would not themselves be treated as a violation of EU law. The Commission went some way to providing such assurance in the oral submissions referred to above, and may be able to dispel the concerns altogether. As the jurisprudence shows, the national court is entitled to look to the Commission for assistance, and the Commission has assured the court that it will continue to provide any assistance it can."

11

The claimants take as their starting point the court's view expressed in the judgment that they have advanced a persuasive case for an order requiring Romania to provide security as a term of the stay. The court remains firmly of that view.

12

The claimants submit that the court's concerns as to what happens on non-compliance with an order only arise if Romania states expressly that it will not comply. The claimants characterise Romania's tactic as being one of delay. They describe the present impasse as one in which they are forced to keep operating their business "six hundred miles from Bucharest", whilst not being allowed any of the regional aid incentives which encouraged them to set up there in the first place, and say that they are suffering major prejudice as a result of non-payment of the Award.

13

In response, Romania denies delaying tactics, and submits that there is no evidence supporting the claimants' case that the delay in meeting the Award is causing the claimants prejudice. As to delay, the claimants' case is deposed to in its evidence, so it is not mere assertion, and as to prejudice, the court agrees with the claimants that this is something which can be assumed given the size of the unpaid Award.

14

So all other things being equal, the claimants have made out their case for security. The question remains, however, as to what would happen on non-compliance, and how the court should take that into account in exercising its discretion. Here, it is necessary to note that the position has moved on since the last hearing.

15

The judgment records that the "Commission appeared to accept in oral argument that the court had power to order security" (paragraph 184(i), and see paragraph 201 set out above). The claimants relied, and continue to rely, on that statement.

16

In its written submissions for this hearing, the Commission has clarified its position in this respect. It takes the view that so far as power to order security under European law is concerned, the conditions for the grant of interim relief do not apply. However, the claimants are not seeking interim relief of this kind, and it is unnecessary to consider this issue further.

17

More relevantly, the Commission states that, "The Commission's Final Decision would regard the provision of the security sought as a payment under the Award made 'to the Claimants' (and would trigger Romania's obligation to recover those sums)".

18

As to enforcement, the Commission's case is that because enforcement of the Award falls within the prohibition in its Final Decision, "Any enforcement measures taken by the Claimants would therefore be liable to be unwound immediately by way of recovery of aid pursuant to Romania's obligations under the Final Decision. The Court should not be persuaded to make an order which would lead to such...

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