Friday, January 17, 2014

CMS v. Argentina, ICSID case brief summary

    1. CMS v. Argentina, ICSID case brief summary, 2005 (U2 415)

      1. FACTS: Argentina, in the early ‘90s takes neoliberal policy stance. It squelches inflation through currency board & convertibility requirement (one to one), it signs over 40 BITs, and it works to attract private capital for its privatizations. Claimant argues that under the K, tariffs were calculated in $, converted to pesos, and tariffs adjusted to the US PPI every six months. In the late 90’s however, an economic crisis occurred. An emergency law was passed which removed the rights of public utilities to adjust tariffs according to PPI every six months and also removed their right to calculate tariffs in $. Tariffs were redenominated in pesos at the rate of 1 to 1 (despite devaluation of peso).
        1. Π claims this law caused him losses, and violates investment protections owed to CMS under treaty: 1) expropriation, 2) fair & equitable treatment, 3) arbitrary & discriminatory measures, 4) observance of umbrella obligations [“Each party shall observe any obligation it may have entered into with regard to investments.” US-Argentina BIT, DU1 453]. (U2 422, #88).
        2. Argentina answers (U2 423-4): 1) Π was taking a risk; 2) national emergency brought about by the economic and social crisis are grounds for exemption of liability under international law and Treaty.
      2. HOLDING:
        1. (U 428 # 124) – “the Tribunal concludes . . . that it does not have jurisdiction over measures of general economic policy adopted by the Republic of Argentina and cannot pass judgment on whether they are right and wrong.”
          • However, it also concludes that “it has the jurisdiction to examine whether specific measures affecting the Claimant’s investment or measures of general economic policy having direct bearing on such investment have been adopted in violation of legally binding commitments made to the investor in treaties, legislation, or contracts.”

            DISCUSSION
        2. Tribunal finds that Argentina did make legally binding commitments and obligations to the investor in its legislation, regulations and licenses, and that it did not keep those commitments. (U 438 #252)
          • Changing economic conditions are no defense here. State of necessity/force majeure is not enough to justify infringing these rights (U 436 # 217; 227). This is b/c the contract itself allows for a rebalancing of terms every 5 years (U 438 # 238).
        3. Tribunal finds that there was nothing “tantamount to expropriation” here. (U 439 # 264).
        4. Tribunal states that “the standard of protection against arbitrariness and discrimination is related to that of fair and equitable treatment. Any measure that might involve arbitrariness or discrimination is in itself contrary to fair and equitable treatment.” #290. Tribunal holds that arbitrariness and discrimination are not present here, nor is there at present a breach of fair & equitable treatment. #295.
        5. Tribunal finds that the umbrella clause has been breached. # 303.
      3. Compensation is granted to the Π on the basis of expert testimony.  

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