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Romania Wins Sixth Investment Treaty Arbitration Case Under ICSID Rules

Date: 09/16/2013
Þuca Zbârcea & Asociaþii and Freshfields Bruckhaus Deringer LLP score a major arbitration victory before the International Centre for Settlement of Investment Disputes (ICSID).
The Arbitration Tribunal of the International Centre for Settlement of Investment Disputes (ICSID) dismissed the request for arbitration filed by the Turkish investors Ömer Dede and Serdar Elhüseyni against Romania and, therefore, rejected claims of more than EUR 28 million. The award was rendered on September 5th, 2013.

In November 2010, Ömer Dede and Serdar Elhüseyni submitted their request for arbitration under the ICSID Convention for alleged breaches by the Government of Romania and the Authority for the Recovery of State Assets (currently the Authority for the Management of State Assets, AAAS) of the bilateral investment treaty signed between the Government of the Republic of Turkey and the Government of the Republic of Romania for the Promotion and Reciprocal Protection of Investments.

Claimants challenged the enforcement by the AAAS of a pledge on the shares they held in Întreprinderea Mecanicã de Utilaje Medgidia (IMUM), a Romanian company acquired by claimants through privatisation. The Turkish investors alleged that, since they had purportedly fulfilled their obligations in the privatisation agreement, AAAS’ enforcing the guarantee was unlawful, and amounted to abusive expropriation. Claimants sought compensations of more than EUR 28 million.

The constitution of the arbitral tribunal in November 2011 was followed by the first written phase of the proceedings, with claimants filing their memorial in July 2012. In November 2012, respondent raised an objection to the arbitral tribunal’s jurisdiction, later discussed during the hearings held by the arbitral tribunal in April 2013. Finally, on September 5th, 2013, the arbitral tribunal found that it does not have jurisdiction over the dispute and unanimously rejected the claim.

The defence team was formed of Romanian and foreign lawyers from Þuca Zbârcea & Asociaþii and Freshfields Bruckhaus Deringer LLP. The core team of Þuca Zbârcea & Asociaþii was led by Florentin Þuca (Managing Partner), Levana Zigmund (Partner) and Cornel Popa (Partner), alongside Anca Puºcaºu (Managing Associate) and Ruxandra Niþã (Associate). Freshfields Bruckhaus Deringer LLP fielded a team of international arbitration lawyers from its Frankfurt and New York offices co-ordinated by Boris Kasolowsky (Partner) and Moritz Keller (Principal Associate).

Both teams have a wealth of experience in international arbitration, especially investor-state cases under bilateral investment protection treaties. As for the Romanian lawyers working in the Ömer Dede and Serdar Elhüseyni v. Romania case, the same core team has previously successfully defended Romania in three other investment treaty arbitration cases under the ICSID rules, i.e. Noble Ventures Inc. v. Romania; EDF Services (Ltd.) v. Romania; and S&T Oil Equipment and Machinery v. Romania.
“For the sixth time, Romania was successful in defeating claims made against it at an arbitral tribunal of the World Bank. The tribunal found merit in the arguments raised by Romania’s lawyers in support of the objection to the tribunal’s jurisdiction, and rejected the claimants’ claim. This is, indeed, yet another victory for Romania in international arbitration initiated by foreign investors under bilateral investment treaties. For us, it is a new success obtained by the firm’s international arbitration group to add to our track record of winning cases before the ICSID,” stated Florentin Þuca, Managing Partner at Þuca Zbârcea & Asociaþii and one of the Romanian State’s defence lawyers.

“For the first time, Romania has won an ICSID arbitration case based on an objection to jurisdiction. This type of solution is unusual in the practice of ICSID tribunals, as, in general, it is difficult to decide on an objection without examining the merits; typically, the plea is joined to the case merits and debated during ordinary proceedings. In the case at hand, the grounds of the plea were convincing enough for the tribunal to conclude that an examination of the merits was no longer necessary. This is a success both for Romania and for the lawyers who represented the Romanian State,” added Levana Zigmund, a Partner at Þuca Zbârcea & Asociaþii and the coordinator of the arbitral proceedings in this case.

The lawyers also noted that the team had identified solid arguments for the defence, both in support of the objection and on the merits (demonstrating that claimants had in fact failed to comply with their obligations under the privatisation agreement with AAAS, hence the enforcement of the pledge was lawful).

Þuca Zbârcea & Asociaþii’s International Arbitration practice is part of a wider Dispute Resolution team which currently comprises 45 lawyers. The International Arbitration group consists of lawyers with up to 20 years of practical expertise who share a common professional background, as they worked together at a different law firm for many years. The team has an in-depth working knowledge of various arbitration procedural rules such as ICSID, ICC, GAFTA, and UNCITRAL, including before the Court of Arbitration for Sport (TAS) in Lausanne. In particular, Þuca Zbârcea & Asociaþii’s International Arbitration team is recognised for its impressive capabilities and successful track record of handling disputes flowing from breaches of bilateral investment protection treaties.

About Þuca Zbârcea & Asociaþii:
Þuca Zbârcea & Asociaþii is a full-service firm in Romania, employing cross-disciplinary teams of lawyers, insolvency practitioners, tax consultants, IP counselors and EU structural funds consultants. In addition to Romania, the firm operates a representative office in Spain and has a “best friend” agreement with another law firm in neighbouring country – Republic of Moldova.
Þuca Zbârcea & Asociaþii offers the whole range of legal services, and has been recommended by prestigious specialised international directories in areas of practice such as: corporate & commercial; mergers, acquisitions & privatisation; litigation & international arbitration; energy & natural resources; banking & finance and others.
In addition, Þuca Zbârcea & Asociaþii has garnered a string of local, regional and international accolades, having been named the “Law Firm of the Year” for four consecutive years and the “Most Innovative Continental European Law Firm” in the Financial Times’ Innovative Lawyers Report. The firm is a winner of the “Law Firm of the Year Award: Romania” (IFLR European Awards 2012) and the “Best Managed Workplace Award” (Managing Partners’ European Leadership Awards 2012). It also received the “Law Firm of the Year Award” (Chambers Europe Awards for Excellence 2010), the “Law Firm of the Year in Eastern Europe and the Balkans Award” (The Lawyer European Awards 2010).
Þuca Zbârcea & Asociaþii’s client portfolio comprises many local and international companies, prominent financial institutions, as well as public authorities and government institutions. A selective list of clients includes: Erste Bank / Banca Comercialã Românã (BCR), NIS-Gazprom, Vodafone Romania, Expur S.A. – a member of French group Sofiprotéol/Saipol, OMV Petrom, CEZ group, Rompetrol Rafinare, ArcelorMittal, Carrefour, Romtelecom, Colgate Palmolive, Bursa de Valori Bucureºti (Bucharest Stock Exchange), BRD-Groupe Société Générale, European Bank for Reconstruction and Development (EBRD), Philip Morris, Alstom Transport, Siemens, Ericsson Telecommunications Romania etc.
Þuca Zbârcea & Asociaþii now boasts 100 lawyers, including 21 partners.

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