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Press release ICSID Micula vs. Romania
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RO SK CZDE
National Authority of Consumers' Protection (ANPC)

PRESS RELEASE - EUROPEAN FOOD GROUP

After nearly 9 years of intense efforts regarding the arbitration proceedings initiated under the auspices of the International Centre for Settlement of Investment Disputes in Washington, the Swedish investors Ioan and Viorel Micula were granted a favorable arbitral award.

According to this award, the Romanian state has been found liable under the Sweden-Romania Bilateral Investment Treaty for the Promotion and Reciprocal Protection of Investments for breaching the fair and equitable treatment standard, due to the unforeseen and premature revocation - in 2004 - of the incentives granted for a period of 10 years.

As a consequence of this conduct, the Romanian state has been bound to pay damages of approximately 250 million USD, as reflected in the international legal press.

The group of companies owned by Ioan and Viorel Micula created and developed - in a period of 23 years - investments of over 2 billion EUR in high-tech equipment, brands, distribution network, infrastructure etc., using capital attracted from financial institutions (amounting to approximately 900 million EUR) and equity (including social capital and reinvested profits).

The investments consist in:

The benefits generated by these investments had a significant impact both for the local economy of Bihor County and for the national economy, the state budget collecting over 1 billion EUR in taxes from the companies.

The development of the investments started from a greenfield point in a disfavored area, without endangering the natural environment and with a low energy consumption. In this regard, it was necessary to create an entire infrastructure to sustain the magnitude of such investments, consisting in electricity and water supply networks, sewage, access roads and purification station.

The construction of the industrial platforms was realized by implementing state-of-the-art technology and by working together with many Romanian companies, which generated the creation and conservation of tens of thousands workplaces and significant contributions in taxes to the state budget.

For the companies' activity there have been - and still are - acquisitions from the internal production regarding utilities (electricity, thermic energy, combustible) and raw materials (wheat, corn, fruit concentrates, sugar, tomato paste etc.). Moreover, the processing capacity of the industrial platforms (milling, beer and alcohol processing) covers the cereal production of hundreds of thousands of small local farmers.

The Group's products are developed by specialized employees that have been trained in programs assisted by foreign and Romanian specialists. Such products create an added value of 80-90% in Romania, leading to vertical and horizontal welfare in the Romanian economy, whereas other firms import 95% from the value of the product and only add 5% in Romania.

In addition, throughout the existence of the companies, hundreds of millions of EUR have been invested in the training and professional formation of over 30 000 employees that operated in the Group (from 1990 until the present day). The Group had over 12 000 permanent employees for a long period. At this moment, the Group of companies has over 7 000 employees.

The entire economic activity of these companies developed horizontally hundreds of thousands of workplaces in connected economic branches (by delivering products to a network of over 100 000 clients - in 2003-2004 - which assured a stable economy and workplaces), the group thus contributing to the increase of social welfare. The created products were designed to rise to a high-quality level at an accessible price for most of the Romanian consumers.

In light of these circumstances, the level of damages awarded by the international arbitral tribunal in order to sanction the Romanian state represent only a small fraction from the value of the actual investments.

The Romanian state has the obligation to support and promote the investments that create added value for the national economy and create long-term workplaces. The Romanian state should understand that any such investor can invest and create added value only if the legal and economic framework in Romania shall become predictable, transparent, reasonable and consistent. An economy cannot be effectively sustainable and truly functional unless it supports the private sector business environment. Therefore, economic policies based solely on the multiplication and the increase of taxes while totally ignoring the private sector shall inevitably lead to the reduction of budgetary resources, the increase of unemployment and the consolidation of the non-fiscal market phenomenon.