King & Spalding, Shearman Claim $250 Million ICSID Win

, The Litigation Daily

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In a victory for King & Spalding and Shearman & Sterling, an arbitration panel has ordered Romania to pay $250 million for violating an investment agreement with two wealthy brothers and business moguls, Ioan and Viorel Micula.

In a nonpublic decision issued on Dec. 11, a panel of three arbitrators associated with the International Centre for Settlement of Investment Disputes (ICSID) determined that the Romanian government improperly revoked incentives it offered to the Micula brothers in the hope that they would build factories in the Eastern European nation. The panel ordered Romania to pay the Macula brothers and their companies $116 in damages (mostly from lost profits), plus $134 million in interest.

While the decision isn't public, King & Spalding, which represented Ioan Micula, disclosed details of the award in a press release issued on Tuesday. Shearman & Sterling represented Viorel Micula. King & Spalding called the judgment "one of the largest arbitration awards on record" at ICSID.

The Micula brothers were born in Romania. They took Swedish citizenship in the 1990s, but continue to own several companies that do business in Romania, including one of the country's leading television stations.

In 1998, the Romanian government introduced a series of incentives to outside investors, including exemptions from certain custom duties and taxes. On the basis of these assurances, the Micula brothers said that they invested around €200 million to build food and beverage production plants in an ailing Romanian province. They brought an ICSID arbitration in 2005, alleging that Romania violated its bilateral investment treaty with Sweden by pulling the plug on the incentive programs.

Romania's lawyers at Freshfields Bruckhaus Deringer initially argued that the Micula brothers didn't have standing because of their tenuous claim to Swedish citizenship. After the panel dismissed that argument in a 2008 decision, Romania argued that it had to revoke the incentives in order to comply with requirements for joining the European Union. According to King & Spalding, the panel rejected that legal theory in the Dec. 11 decision, which followed a trial held in Paris.

The King & Spalding attorneys who represented Ioan Micula included Ken Fleuriet and Eric Schwartz. Emmanuel Gaillard of Shearman & Sterling represented Viorel Micula.

The ICSID panel consisted of arbitrators Laurent Levy (of Brasil and Switzerland), Georges Abi-Saab (of Egypt), and Stanimir Alexandrov (of Bulgaria). Alexandrov cochairs Sidley Austin's international arbitration practice.

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