The European Commission (EC) urged Romania to recover the damages paid to Swedish - Romanian businessmen Ioan and Viorel Micula and to their companies in Romania, as these represent unlawful state aid.

The European Commission said that there are no legal grounds that Romania should pay any damages to the Miculas. The EC contradicted a decision of the arbitration tribunal in Washington ICSID which ruled some EUR 178 million worth of damages to the two businessmen, in December 2013.

The Miculas, who were born in Romania but got Swedish citizenship in the ‘90s, own one of the largest food and beverage groups in Romania that includes European Foods, European Drinks, Scandic Distilleries, Starmill, Multipack and other companies that produce food and beverages.

They filed against the Romanian state in international courts, after the Government revoked a state aid scheme in 2005 which allowed the Miculas’ companies to pay no taxes on raw material imports and granted them other fiscal breaks. The state aid measure, which had been implemented at the end of the ‘90s for a period of ten years, was incompatible with the European Union’s regulations, which is why the Government discontinued it.

However, the ICSID ruled that the state’s decision violated the bilateral investment treaty between Romania and Sweden and ordered Romania to pay EUR 82 million worth of damages to the Miculas plus interest which increased the total amount to EUR 178 million.

“By letter of 31 January 2014 the Commission services informed the Romanian authorities that any implementation of the Award would constitute new aid and would have to be notified to the Commission,” according to the EC.

However, the Romanian authorities went on and partially implemented the international court’s decision by offsetting part of the sum owed to the Miculas against taxes owed by one of their companies, European Food, for a total of EUR 76 million.

Then, Romania asked the European Commission if it could pay the remaining damages to individuals. The Commission requested more information from the Romanian authorities and in May 2014 decided to issue a suspension injunction thereby obliging Romania to suspend any payments to the Miculas until it determined whether these payments were compatible with EU regulation on state aid.

In October 2014, the European Commission informed Romania that it initiated an investigation on a possible state aid that Romania granted the Miculas by paying them part of the damages decided by ICSID.

“The foregoing analysis indicates that any execution of the Award of 11 December 2013 would amount to the granting of incompatible new aid, subject to the State aid rules contained in the Treaty. The Commission regrets that Romania has already, according to the information provided, partially implemented the Award of 11 December 2013 by canceling outstanding tax debts of European Food SA,” the European Commission concluded.

The full document can be found here.

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Andrei Chirileasa, andrei@romania-insider.com