Most Favoured Nation | 11 February 2022
by Sam Lowe
Yesterday one of my favourite trade/investment sagas of all time got pulled into the Brexit debate, and I am very here for it.
It all starts in Romania. Back in before-joining-the-EU-times Romania used to provide a load of incentives to foreign investors. A couple of Swedes – the Micula brothers – took advantage of these incentives and invested heavily in Romania.
But then, in 2005, Romania revoked the incentives scheme (four years before it was due to expire) in order to bring its national subsidy rules in line with the EU’s, ready for EU accession.
[I know I know … what does this have to do with Brexit? Bear with me …]
The Micula brothers were peeved, and decided to sue Romania under the terms of a 2003 bilateral investment treaty between Sweden and Romania. In 2013 the tribunal ruled that Romania had done the brothers dirty, and therefore should pay them compensation in the region of $250 million.
But the story doesn’t end there! Hilariously, in 2014, the European Commission served an injunction against Romania to stop it from paying the compensation because the compensation would in fact constitute … illegal state aid! The scenes.
The Micula brothers then went to the UK courts [got there eventually] to have their award recognised. In 2020, the UK Supreme Court ruled that the award should be paid and that EU state aid rules can’t be relied on to wriggle out of international obligations made pre-accession. At the same time the Commission’s decision to block the payment was awaiting a decision in the Union courts … which in 2022 decided that, contra the UK, the Commission’s action was lawful therefore the award should be blocked.
So now the EU is bringing an ECJ case against the UK [under the terms of the withdrawal agreement the Commissions has 4 years post-transition period to bring claims against the UK for issues related to when the UK was still an EU member] claiming (among other things) it breached the principle of sincere co-operation by adjudicating on a case that was already in front of union courts.
There is a bit of additional context: the Commission’s efforts to prevent the payment of the award need to be viewed in light of its desire to rid the EU of the web of member-state-to-member-state bilateral investment treaties which can [evidentially] come into conflict with EU law.
But still, most observers think the case against the UK is a bit odd, considering the UK has now left the EU and … let’s be honest … there are more important things to worry about **waves at Ukraine and Northern Ireland**.
I’m not in that camp. I think it is objectively hilarious.
David Frost, on the other hard, is not amused.