District Court Rejects Argument that FSIA and Related Doctrines Preclude "Registration" of ICSID Arbitration Award against Romania by Federal Court Securities Law

The World in U.S. Courts: Fall 2015 - Arbitration

Micula v. Government of Romania, U.S. District Court for the Southern District of New York, August 5, 2015

Plaintiffs obtained an ICSID arbitration award against the Government of Romania stemming from investments they made in Romania that declined in value after the Government eliminated certain financial subsidies. Romania opposed the awards, arguing that satisfying them through payments would constitute subsidies that are illegal under European law. The European Commission agreed, and precluded Romania from making the payment. Proceedings to vacate the award are pending. Separately, the plaintiffs sought to use a special ex parte procedure to enforce the award in the U.S. District Court in New York, and to this end obtained a court order converting the arbitration award into a judgment. The present proceeding reflects Romania's attempt to declare the order as violative of the FSIA and various related doctrines, and therefore void.

Romania first argued that the judgment was void because the FSIA requires that actions to recognize ICSID awards be plenary proceedings in which the affected government is a participant. Citing strong, but not uniform, precedent, the Court concluded that the New York ex parte procedure was lawful. In so doing, it observed that the only issue presented was the prior court order "recognizing" the ICSID award, not whether that judgment should be enforced against Romania through an order requiring payment or the attachment of assets. Indeed, the Court recognized that Romania retained extensive rights under the FSIA for such time as enforcement may be sought. Additionally, the Court noted that Romania's principal objection was to the arbitration award itself, and Romania's appeal of that award through European channels remains ongoing.

The Court also rejected various arguments made by the European Commission, which intervened to support Romania. First, although it treated the EC as a "sovereign," the Court rejected the argument that "international comity" required that it defer to the EC's proceedings in Europe. In so doing, it found no significant potential for conflict by again contrasting the narrow nature of the U.S. proceeding to "recognize" the award with the substantive review of the merits that is being undertaken in Europe. Second, the Court rejected applicability of the "act of state doctrine," under which U.S. courts deem actions taken by sovereigns within their own borders to be valid. The Court found the argument had not properly been raised, and in any event was irrelevant because the question whether an ICSID awards should be recognized did not involve an act of state. Finally, the Court rejected applicability of the "foreign compulsion doctrine," a defense by a party arguing that liability was based on actions a sovereign required that it perform. Even assuming the availability of the defense, the Court concluded that Romania's "voluntary submission to the ICSID process" was a waiver of any rights it possessed.

[Editor's note: The Micula case is also discussed in the Alien Tort Statute/Foreign Sovereign Immunity Act section of this report.]

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