INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES WASHINGTON, D.C. In the arbitration proceeding between MARCO GAVAZZI AND STEFANO GAVAZZI Claimants and ROMANIA Respondent ICSID Case No. ARB/12/25 DECISION ON JURISDICTION, ADMISSIBILITY AND LIABILITY Members of the Tribunal Hans van Houtte, President V.V. Veeder QC., Arbitrator Mauro Rubino-Sammartano, Arbitrator Secretary of the Tribunal Ms. Martina Polasek Date of dispatch to the Parties: April 21, 2015 REPRESENTATION OF THE PARTIES Representing Marco Gavazzi and Stefano Representing Romania: Gavazzi: Ms. Mihaela Stanescu Prof. Avv. Giorgio Sacerdoti and Mrs. Laura Voinea Dr. Avv. Anna de Luca AAAS Privatization Agency of Government of Via Privata Maria Teresa 4 Romania, 20123 Milano Department of Legal Assistance and Litigations Italy 50 Cpt. Av.Al. Şerbănescu St., District 1 014294 Bucharest Romania Ms. Alina Cobuz Mr. Dan Visoiu SCPA “Cobuz & Associates” The Consortium Leader 14 Margaritarelor St., Sector 2 020564 Bucharest Romania Ms. Emilia Toader Ms. Ramona Voinea Mrs. Genoveva Luca SPRL“Bostina & Associates” 70 Jean Louis Calderon St., Sector 2 020039 Bucharest Romania Ms. Manuela Sarbu Mrs. Diana Croitoru-Anghel 12 B.P.Hasdeu Bvd., Cam. 1, sector 5 Bucharest Romania i TABLE OF CONTENTS I. INTRODUCTION ...................................................................................................................................................... 5 II. THE PARTIES ........................................................................................................................................................... 5 III. PROCEDURAL HISTORY....................................................................................................................................... 6 IV. FACTS AND CONTENTIONS .............................................................................................................................. 11 THE SHARE PURCHASE CONTRACT ........................................................................................................................................... 13 SOF’S NOTICE OF 3 JUNE 1999 TO THE CLAIMANTS ............................................................................................................ 16 a) The Government’s Note No. 5/3228 of 17 May 1999 ..................................................................................... 17 b) SOF’s Note No. P/2994 of 28 May 1999 to the Romanian Minister of Industry and Commerce... 19 EVENTS FOLLOWING SOF’S NOTICE OF 3 JUNE 1999 TO THE CLAIMANTS AND THE FREEZING OF SOCOMET’S BANK ACCOUNTS IN SEPTEMBER 1999 .............................................................................................................................................. 20 THE ROMANIAN MINISTRY OF FINANCE’S LETTER TO SOCOMET DATED 19 OCTOBER 1999 ...................................... 21 THE SUBSTANTIATION NOTE OF MAY 2001 AND THE GOVERNMENT’S DECISION NO. 692 OF 19 JULY 2001 ........ 24 EVENTS LEADING UP TO THE COMPANY’S INSOLVENCY ....................................................................................................... 25 THE ARBITRATION PROCEEDINGS INITIATED BY APAPS AGAINST MESSRS. GAVAZZI IN OCTOBER 2002................ 29 AVAS’ SUCCESSFUL CHALLENGE OF THE 2007 ROMANIAN AWARD .................................................................................. 30 V. THE PARTIES’ CLAIMS AND COUNTERCLAIMS ......................................................................................... 30 THE CLAIMANTS’ CLAIMS ........................................................................................................................................................... 30 THE RESPONDENT’S RESPONSE AND COUNTERCLAIM .......................................................................................................... 32 VI. THE TRIBUNAL’S JURISDICTION OVER THE CLAIMS ............................................................................. 33 JURISDICTION RATIONE PERSONAE ........................................................................................................................................... 33 JURISDICTION RATIONE MATERIAE ........................................................................................................................................... 33 a) The Claimants’ Purchase of Shares in Socomet Qualifies as an “Investment” Under Article 1(1) of the BIT. ....................................................................................................................................................................... 34 b) The Claimants’ Purchase of Shares in Socomet Qualifies as an “Investment” Under Article 25 of the ICSID Convention............................................................................................................................................ 35 c) The 2007 Romanian Award as an “Investment” .............................................................................................. 41 NO JURISDICTION OVER SHARE PURCHASE CONTRACT CLAIMS .......................................................................................... 44 JURISDICTION OVER CLAIMS FOR BREACHES OF THE BIT .................................................................................................... 46 THE CLAIM IS NOT TIME-BARRED ........................................................................................................................................... 49 THE MAJORITY’S VIEWS ON JURISDICTION OVER THE COUNTERCLAIM ............................................................................. 52 VII. NO RES JUDICATA OR ISSUE ESTOPPEL BECAUSE OF ROMANIAN COURT JUDGMENTS ....... 56 VIII. THE MERITS .................................................................................................................................................... 60 THE PRINCIPAL CLAIMS .............................................................................................................................................................. 60 a) “Fair and Equitable Treatment Standard” Not Respected (Article 2(3) of the BIT) ......................... 62 b) Article 4(1) and (2) of the BIT ................................................................................................................................ 71 THE CLAIMANTS’ ADDITIONAL, SUBORDINATE CLAIM UNDER ARTICLE 2(5) OF THE BIT ........................................... 84 a) The Claimants’ Position ............................................................................................................................................. 84 b) The Respondent’s Position ........................................................................................................................................ 87 c) The Tribunal’s Decision ............................................................................................................................................. 90 IX. THE OPERATIVE PART .......................................................................................................................................... 93 ii FREQUENTLY USED ABBREVIATIONS AND ACRONYMS 2007 Arbitration Award Award of 30 October 2007 in an arbitration pursuant to the Share Purchase Contract Arbitration Rules ICSID Rules of Procedure for Arbitration Proceedings AAAS Authority for State Assets Administration APAPS Authority for Privatization and Management of State Ownership AVAS Authority for State Asset Recovery BIT Agreement between the Government of the Italian Republic and the Government of Romania on the Mutual Promotion and Protection of Investments C-1 … Claimants’ exhibits C-PHB Claimants’ Post-Hearing Brief, 9 July 2014 C-Request Request for Arbitration, 23 July 2012 C-RJ/CC Claimants’ Rejoinder on Jurisdiction and Counterclaim, 14 May 2014 C-RL/OJ/A/CC Claimants’ Reply on Liability, Objections to Jurisdiction/Admissibility, and on the Counterclaim, 17 December 2013 C-RM Claimants’ Reply Memorial on Respondent’s Objections to Jurisdiction and on the Admissibility of the Counterclaim, 31 July 2013 C-RPHB Claimants’ Reply to Respondent’s Post-Hearing Brief, of 23 July 2014 Company or Socomet S.C. Socomet S.A/ Gavazzi Steel S.A. iii ICSID or the Centre International Centre for Settlement of Investment Disputes ICSID Convention Convention on the Settlement of Investment Disputes between States and National of Other States dated 18 March 1965 R-1 … Respondent’s exhibits R-PHB Respondent’s Post-Hearing Brief, 9 July 2014 R-PO/CM/CC Respondent’s Preliminary Objections, Counter- Memorial and Counterclaim, 15 July 2013 R-RL/RJ/CC Respondent’s Rejoinder on Liability and Reply on Jurisdiction and the Counterclaim, 14 April 2014 R-RPHB-- Respondent’s Reply Post-Hearing Brief, 23 July 2014 Share Purchase Contract Contract for Selling-Buying Shares No. 145 dated 19 April 1999 between Claimants and SOF SOF State Ownership Fund iv I. INTRODUCTION This case concerns a dispute submitted to ICSID pursuant to the Agreement between the Government of the Italian Republic and the Government of Romania on the Mutual Promotion and Protection of Investments, which entered into force on 14 March 1995 (“BIT”),1 and the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (“ICSID Convention”). The BIT was agreed in the Italian, Romanian and English languages with all three texts being equally authentic, and in case of any differences of interpretation, the English text was to be considered as the text of reference. The ICSID Convention