The Argentine Crisis and Foreign Investors: A Glimpse into the Heart of the Investment Regime
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Description
Actions taken by the Argentine government in response to its 2001 economic and political crisis have resulted in the greatest wave of claims by foreign investors against a single host country in recent history. Of the over forty claims filed to date against Argentina pursuant to bilateral investment agreements (BITs) in the wake of that crisis, a number of arbitral awards have now been issued. These include four involving claims by U.S. investors in Argentina’s gas transportation and distribution utilities—CMS, Enron, Sempra, and LG&E (henceforth the Argentine Gas Sector Cases ). In all four cases, ad hoc tribunals established under the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) rules have found Argentina liable for its actions. The damage awards, three of which exceeded $100 million, have been among the highest ever rendered by an ICSID tribunal. The damage award in the CMS case was affirmed in an annulment proceeding. Requests for annulment of the LG&E, Enron and Sempra Awards are pending. Although all of these decisions interpret and apply the same treaty, the Treaty Between the United States of America and the Argentine Republic Concerning the Reciprocal Encouragement and Protection of Investment of 1991 (henceforth the U.S.-Argentina BIT), to a strikingly similar set of facts, the five judgments issued to date differ on a number of points, and in particular concerning the interpretation of that treaty’s “measures not precluded” (NPM) clause (Article XI). Specifically, although there is significant commonality between the CMS, Enron, and Sempra decisions (which is not surprising, given the overlap in arbitrators), the LG&E Decision on Liability and the CMS Annulment Award differ markedly from the other decisions in their treatment of Argentina’s central defense to the investors’ claims, namely that its financial crisis excused it from compensating injured U.S. investors for breach of the U.S.-Argentina BIT (Article XI). Only the LG&E panel accepted this defense and excused part of Argentina’s liability on this basis. Although the CMS Annulment Committee did not annul the CMS liability decision, it severely criticized it in terms that suggested considerable sympathy with the position taken by the LG&E arbitrators.
Source Publication
Yearbook on International Investment Law and Policy 2008-2009
Source Editors/Authors
Karl P. Sauvant
Publication Date
2009
Recommended Citation
Alvarez, José E. and Khamsi, Kathryn, "The Argentine Crisis and Foreign Investors: A Glimpse into the Heart of the Investment Regime" (2009). Faculty Chapters. 75.
https://gretchen.law.nyu.edu/fac-chapt/75
