Originally from EU Law and International Investment Arbitration - IAI Series No. 11

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I. INVESTMENT ARBITRATION AND EU STATE AID LAW

The participants focused on the issue of State aid as an example of problems arising from the interaction of EU law and investment arbitration.  Indeed, the significance of this debate grew after the Micula case.   Recently, the European Commission has presented arguments regarding this interaction during the public hearing in the Micula case pending before the General Court.   The essence of the European Commission’s argument is that the award of damages in the Micula v. Romania arbitration – which corresponded to the amount of aid that the investor would have received had Romania not prematurely terminated the aid scheme – constituted State aid. The enforcement of the investment award would therefore be incompatible with EU law.  The participants questioned whether such compatibility problems concerned State aid specifically or competition law more generally.  Indeed, it seems that the focus on State aid could stem from historical circumstances.  Micula v. Romania arose in the specific context of Romania’s accession to the EU.  In a different situation, State aid law is part of the legal environment and informs the concept of legitimate expectations.  Hence, the fair and equitable treatment standard would play a very different role in a post-accession context.  The core idea is, therefore, that there are historical circumstances for which we focus on the issue of State aid, but the frictions between international investment law and EU law do not depend on a clear-cut difference of visions between these legal orders. Moreover, arbitrators have traditionally had to deal with competition law.  Some participants argued that it is unreasonable to question the compatibility of investment arbitration with EU law just because some arbitrators may treat State aid questions incorrectly.