ICSID Arbitration And BITs Challenged By the Argentine Government

Summary

The clear possibility of Argentina loosing in the majority of the current more than thirty arbitration cases filed before ICSID has moved the Government to build a two tier strategy of defense. One line of action is being developed at the local Federal Supreme Court level by a decision in a local case that has broaden the possibility of judicial review of arbitral awards. Another at political level by challenging the validity of the BIT arbitration clauses and of ICSID jurisdiction in the media and by introducing legislation changing the legal framework for privatized concessions of public services prohibiting in the future the submission of disputes under contracts to foreign jurisdiction.

Introduction

The economic crisis of 2001 threw the country into chaos and Argentina defaulted in the payment of its foreign debt. Bank deposits and all credit/obligations denominated in foreign currency under local law were converted into pesos. Public services' tariffs were frozen. These measures have had serious implications not only for investors awarded with concession contracts but also for all investors that trusted in an economic stability and a legal framework that was later substantially changed. Many of these investments were made under the umbrella of Bilateral Investment Treaties (BITs) which provided arbitration as the valid mechanism to solve any arising dispute.

As a result of all of the above and the delay of the successive governments in finding a solution to allow investors to minimize the effects of the pesification, many of them brought theirs claims against Argentine Federal and Provincial Governments before the International Centre for Settlement of Investment Disputes (ICSID). In some cases arbitration claims were filed to improve the standing of the companies in future renegotiations of their contracts.

Many of the cases before ICSID involve companies in charge of concessions of public services that were privatized during the nineties. Investment returns were tied up to a tariff that now has been substantially reduced by the devaluation and the Government has prohibited any adjustments even in pesos. Others involve investors that trusted a legal framework that promises that their investments were guaranteed in dollars at a rate of one local peso to one dollar.

ICSID Cases

The following is a list of all the cases filed with the ICSID taking into account the different activities involved:

Water: (1) Compaa de Aguas del Aconquija S.A. and Vivendi...