Following a decision by the International Centre for Settlement of Investment Disputes (ICSID) arbitral tribunal in November 2024, Romania decides to appeal the award to investor.
The appeal comes despite the country’s economic challenges and that refusing to pay the award could result in increased interest and budgetary pressure.In 2007, Petrochemical Holding GmbH purchased RAFO Oneşti, one of the largest oil refineries in Romania and Eastern Europe. At total refining capacity, the plant could process 3.5 million tonnes of oil and was a prime opportunity for investment. Now, almost two decades later, the Romanian government has decided to appeal a decision by the International Centre for Settlement of Investment Disputes (ICSID) that it breached its international obligations.
ICSID is an internationally renowned forum for investor-state disputes, operated by the World Bank. It provides a foundation for most international investment treaties and numerous investment laws.
ICSID ruled that the Romanian government had breached the Energy Charter Treaty, an international agreement signed in 1994 which contains provisions for protecting investors in the energy sector. Romania Journal notes that the tribunal found that Petrochemical Holding GmbH was ‘denied the right to fair and equitable treatment’ under the treaty and awarded the company €85 million in compensation, plus arbitration costs and interest.
Petrochemical Holding GmbH is a Vienna-based investment holding company owned by Austrian investor, Iakov Goldovskiy. Goldovskiy has invested in several petrochemical operations across Central and Eastern Europe and has previously vertical integrated the petrochemical industries in several countries with great success.
The appeal comes at a decisive moment for Romania following months of political uncertainty and rising concern over the future of foreign investment.
Romania has a chequered history of abiding by ICSID rulings. According to Kluwer Arbitration Blog, Romania ranks third in non-compliance with Energy Charter Treaty related awards and according to the ICSID website has seven pending cases.
On the other hand, Romania has paid ICSID awards in the past, notably in the case of the Micula Brothers who were awarded €178 million in 2013, following breaches of the BIT (Bilateral Investment Treaty).
Romania’s decision to appeal the award could have significant implications. Firstly, as tribunal decided that the Romanian government was liable for the interest and arbitration costs, delays to payment and further legal challenges will result in increased liability for the Romanian taxpayer.
Secondly, it could lead to growing concerns regarding Romania as a destination for foreign investment. In February 2025, Fitch Ratings, a leading provider of credit ratings and market analysis, downgraded Romania to BBB- reflecting a negative outlook for investment. EU Reporter notes that the recent political and economic uncertainty in Romania is spooking foreign investors and suggests enforcing international standards like ICSID as a way to position the country as an attractive investment destination.
Finally, while voluntary payment is one option, alternative methods of enforcement include the attachment of state-owned assets as part of the credit award. While complicated, this could mean that some of Romania’s state assets are potentially liable to be pursued in the future as part of the award.
Romania’s decision to appeal comes at an interesting time and could have far-reaching implications. For foreign investors, as well as Romanian citizens, the outcome is likely to be one to watch.
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