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Lawyers and other representatives

Decision on Annulment

A. THE ANNULMENT PROCEEDINGS

1.
On 20 March 2001, Compañía de Aguas del Aconquija S.A. ("CAA") and Compagnie Générale des Eaux ("CGE"; CGE and CAA are referred to, collectively, as "Claimants") filed with the Secretary-General of the International Centre for Settlement of Investment Disputes ("ICSID") an application in writing (the "Application") requesting the partial annulment of an Award dated 21 November 2000 (the "Award") rendered by the Tribunal in the arbitration between Claimants and Respondent.1
2.
The Application was made within the time period provided in Article 52(2) of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the "ICSID Convention"). The Application sought partial annulment of the Award on three of the five grounds set out in Article 52(1) of the ICSID Convention, specifically: the Tribunal had manifestly exceeded its powers; there had been a serious departure from a fundamental rule of procedure; and the Award failed to state the reasons on which it was based.
3.
The Application was registered by the Secretary-General of ICSID on 23 March 2001. In accordance with Rule 50(2) of the ICSID Rules of Procedure for Arbitration Proceedings (the "Arbitration Rules"), the Secretary-General transmitted a Notice of Registration to the parties on that date and also forwarded to the Respondent copies of the Application and accompanying documentation. Thereafter, in accordance with Article 52(3) of the ICSID Convention and at the request of the Secretary-General, the Chairman of the Administrative Council proceeded to appoint an ad hoc Committee (the "Committee").
4.
The Committee was subsequently duly constituted—composed of Professor James R. Crawford, Professor José Carlos Fernández Rozas and Mr. L. Yves Fortier—and the parties were so notified by the Secretary-General on 18 May 2001, in accordance with Rule 52(2) of the Arbitration Rules. On 25 May 2001, the Secretary of the Committee informed the parties that Mr. L. Yves Fortier had been designated President of the Committee.
5.
The first meeting of the Committee was held at the seat of ICSID, in Washington, D.C., on 21 June 2001. At that meeting, all members made declarations in terms of Rule 6 of the Arbitration Rules. Mr. Fortier qualified his declaration in one respect, and the Respondent reserved the right to challenge him. Subsequently it did so, pursuant to Articles 14 and 57 of the ICSID Convention and Arbitration Rule 53. The challenge concerned Mr. Fortier’s disclosure that one of the partners in his law firm had been engaged by CGE to advise on certain specific matters relating to taxation under Quebec law. Mr. Fortier had had no personal involvement in the work, which was wholly unrelated to the present case and which did not involve a general retainer. After receiving written statements from the parties, the other two members of the Committee, by a decision of 24 September 2001, dismissed the challenge.
6.
In accordance with the procedural timetable laid down by the Committee at its meeting of 21 June 2001, the parties filed their respective Memorials on 20 August 2001 and on 12 November 2001. Claimants’ Memorial was accompanied by an Expert Opinion prepared by Professor Christoph H. Schreuer, and Respondent filed an Expert Opinion rendered by Professor Arthur T. von Mehren. Claimants thereafter submitted a Reply on 10 December 2001. Respondent filed a Rejoinder on 8 January 2002.
7.
A two-day hearing in this annulment proceeding was held at the seat of ICSID on 31 January and 1 February 2002, at which counsel for both parties presented their arguments and submissions, and responded to questions from the members of the Committee. The parties subsequently made observations to the English and Spanish transcripts made of the hearing, which have been taken into account by the Committee.
8.
In the absence of any agreed request by the parties to vary the rules of procedure laid down in the ICSID Convention and the Arbitration Rules, the annulment proceeding was at all times conducted in accordance with the applicable provisions of Section 3 of Chapter IV of the ICSID Convention and the Arbitration Rules.2

B. THE TRIBUNAL’S AWARD

9.
The dispute underlying the arbitration arose out of certain alleged acts of the Argentine Republic and its constituent Province of Tucumán that, according to Claimants, caused the termination of a thirty-year concession contract (the "Concession Contract") entered into by Tucumán and CAA on 18 May 1995. In the arbitration, Claimants asserted that all of these acts were attributable to the Argentine Republic under international law and, as such, violated Argentina’s obligations under the Agreement between the Government of the Argentine Republic and the Government of the Republic of France for Reciprocal Protection and Promotion of Investments of 3 July 1991 (the "BIT").3 Relevant provisions of the BIT are set out later in this decision.
10.
The Award that is the subject of the present annulment proceeding was rendered on 21 November 2000. In the Award, the Tribunal rejected the objections to its jurisdiction raised by the Argentine Republic. Having upheld its jurisdiction, the Tribunal nonetheless dismissed the claim.
11.
In order to provide relevant background and context to the present decision, and before proceeding to consider the detailed findings of the Tribunal and the grounds for annulment to which those findings are said to give rise, the Committee can do no better than recite the Tribunal’s own "Introduction and Summary":

A. Introduction and Summary

This case arises from a complex and often bitter dispute associated with a 1995 Concession Contract that a French company, Compagnie Générale des Eaux, and its Argentine affiliate, Compañía de Aguas del Aconquija, S.A. (collectively referred to as "Claimant" or "CGE"), made with Tucumán, a province of Argentina, and with the investment in Tucumán resulting from that agreement. The Republic of Argentina ("Argentine Republic") was not a party to the Concession Contract or to the negotiations that led to its conclusion....

The Concession Contract...makes no reference to either the BIT or ICSID Convention or to the remedies that are available to a French foreign investor in Argentina under these treaties. Articles 3 and 5 of the BIT provide that each of the Contracting Parties shall grant "fair and equitable treatment according to the principles of international law to investments made by investors of the other Party," that investments shall enjoy "protection and full security in accordance with the principle of fair and equitable treatment," and that Contracting Parties shall not adopt expropriatory or nationalizing measures except for a public purpose, without discrimination and upon payment of "prompt and adequate compensation." Article 8 of the Argentine-French BIT provides that, if an investment dispute arises between one Contracting Party and an investor from another Contracting Party and that dispute cannot be resolved within six months through amicable consultations, then the investor may submit the dispute either to the national jurisdiction of the Contracting Party involved in the dispute or, at the investor’s option, to arbitration under the ICSID Convention or to an ad hoc tribunal pursuant to the Arbitration Rules of the United Nations Commission on International Trade Law.

Article 16.4 of the Concession Contract between CGE and Tucumán provided for the resolution of contract disputes, concerning both its interpretation and application, to be submitted to the exclusive jurisdiction of the contentious administrative courts of Tucumán. While this case presents many preliminary and other related questions, the core issue before this Tribunal concerns the legal significance that is to be attributed to this forum-selection provision of the Concession Contract in light of the remedial provisions in the BIT and the ICSID Convention. This question bears both on the jurisdiction of the Centre and the competence of this Tribunal under the ICSID Convention and on the legal analysis of the merits of the dispute between CGE and the Argentine Republic.

When CGE invoked the jurisdiction of ICSID in reliance on the terms of the BIT and the ICSID Convention and sought damages of over U.S. $300 million, the Argentine Republic responded that it had not consented to submission of the dispute for resolution under the ICSID Convention. Because of the close relationship between the jurisdictional issue and the underlying merits of the claims, the Tribunal decided that it would not be able to resolve the jurisdictional question without a full presentation of the factual issues relating to the merits. Accordingly, the Tribunal, after receiving memorials from the parties and hearing oral argument, joined the jurisdictional issue to the merits.

For the reasons set forth in this Award, the Tribunal holds that it has jurisdiction to hear the claims of CGE against the Argentine Republic for violation of the obligations of the Argentine Republic under the BIT. Neither the forum-selection provision of the Concession Contract nor the provisions of the ICSID Convention and the BIT on which the Argentine Republic relies preclude CGE’s recourse to this Tribunal on the facts presented.

With respect to the merits, CGE has not alleged that the Republic itself affirmatively interfered with its investment in Tucumán. Rather, CGE alleges that the Argentine Republic failed to prevent the Province of Tucumán from taking certain action with respect to the Concession Contract that, Claimants allege, consequently infringed their rights under the BIT. CGE also alleges that the Argentine Republic failed to cause the Province to take certain action with respect to the Concession Contract, thereby also infringing Claimants’ rights under the BIT. In addition, CGE maintains that international law attributes to the Argentine Republic actions of the Province and its officials and alleges that those actions constitute breaches of the Argentine Republic’s obligations under the BIT.

While CGE challenged actions of Tucumán in administrative agencies of the Province, CGE concedes that it never sought, pursuant to Article 16.4, to challenge any of Tucumán’s actions in the contentious administrative courts of Tucumán as violation of the terms of the Concession Contract. CGE maintains that any such challenge would have constituted a waiver of its rights to recourse to ICSID under the BIT and the ICSID Convention.

The Tribunal does not accept CGE’s position that claims by CGE in the contentious administrative courts of Tucumán for breach of the terms of the Concession Contract, as Article 16.4 requires, would have constituted a waiver of Claimants’ rights under the BIT and the ICSID Convention. Further, as the Tribunal demonstrates below, the nature of the facts supporting most of the claims presented in this case make it impossible for the Tribunal to distinguish or separate violations of the BIT from breaches of the Concession Contract without first interpreting and applying the detailed provisions of that agreement. By Article 16.4, the parties to the Concession Contract assigned that task expressly and exclusively to the contentious administrative courts of Tucumán. Accordingly, and because the claims in this case arise almost exclusively from alleged acts of the Province of Tucumán that relate directly to its performance under the Concession Contract, the Tribunal holds that the Claimants had a duty to pursue their rights with respect to such claims against Tucumán in the contentious administrative courts of Tucumán as required by Article 16.4 of their Concession Contract.

CGE presented certain additional claims regarding allegedly sovereign actions of Tucumán that Claimants maintained were unrelated to the Concession Contract. CGE asserted that these actions of the Province gave rise to international responsibility attributable to the Argentine Republic under the BIT as interpreted by applicable international law. Furthermore, CGE alleged that the Argentine Republic was also liable for its failures to perform certain obligations under the BIT that Claimants submitted gave rise to international responsibility independent of the performance of Tucumán under the Concession Contract. The Tribunal finds that many of these other claims arose, in fact, from actions of the Province relating to the merits of disputes under the Concession Contract and, for that reason, were subject to initial resolution in the contentious administrative tribunals of Tucumán under Article 16.4 To the extent such claims are the result of actions of the Argentine Republic or of the Province that are arguably independent of the Concession Contract, the Tribunal holds that the evidence presented in these proceedings did not establish the grounds for finding violation by the Argentine Republic of its legal obligations under the BIT either through its own acts or omission or through attribution to it of acts of the Tucumán authorities.4

12.
In the final section of its Award, after reviewing the procedural history of the arbitration,5 summarising the facts and respective legal positions of the parties6 and explaining its reasoning with respect to both its jurisdiction7 and the merits,8 the Tribunal disposed of Claimants’ case in the following terms:

G. Award

The Tribunal herewith dismisses the claims filed by the Claimants against the Republic of Argentina.9

13.
Before considering the grounds for annulment presented to the Committee, it is necessary to set out in some greater detail the Tribunal’s reasoning both as to its jurisdiction and regarding the merits of the claim.

(1) The Tribunal’s Findings on Jurisdiction

14.
The core of the Tribunal’s reasoning in support of its jurisdictional finding is contained in paragraphs 49 to 54 of the Award. The Tribunal found as follows:

(a) Claimants’ claims concerning the actions of the federal government of Argentina as well as those of the provincial authorities of Tucumán are properly characterised as claims arising under the BIT, and not as contractual claims under the Concession Agreement.10

(b) Under international law, the acts of organs of both the central government and provincial authorities are attributable to the state—in this case, the Argentine Republic—with the result that Argentina cannot rely on its federal structure as a means of limiting its treaty obligations.11

(c) Article 25(3) of the ICSID Convention is intended to allow for constituent subdivisions or agencies of a state party to the ICSID Convention to be subject to ICSID jurisdiction and to be parties to ICSID cases, in their own right and in their own name, where they have so consented and the Contracting State in question has approved. Article 25(3) neither limits the scope of the state’s international responsibilities in accordance with normal rules of attribution nor qualifies the jurisdiction of an ICSID tribunal over that state. In the present case, it does not restrict the Tribunal’s jurisdiction over the Argentine Republic pursuant to the BIT, and there is no question of the Province of Tucumán itself being a party to the arbitration in its own name.12

(d) Similarly, Article 16(4) of the Concession Contract—which provides that " [f]or purposes of interpretation and application of this Contract the parties submit themselves to the exclusive jurisdiction of the Contentious Administrative Tribunals of Tucumán"—does not, and indeed could not, exclude the jurisdiction of the Tribunal under the BIT. Claimants’ claims "are not subject to the jurisdiction of the contentious administrative tribunals of Tucumán, if only because, ex hypothesi, those claims are not based on the Concession Contract but allege a cause of action under the BIT."13

15.
The Tribunal went on to state that " [b]y this same analysis,"14 instituting proceedings against the Province of Tucumán before the contentious administrative tribunals for breach of the Concession Contract would not have been "the kind of choice by Claimants of legal action in national jurisdictions (i.e., courts) against the Argentine Republic that constitutes the ‘fork in the road’ under Article 8 of the BIT, thereby foreclosing future claims under the ICSID Convention."15

(2) The Tribunal’s Findings on the Merits

(a) The Federal Claims

18.
The Tribunal dealt with the federal claims—that is, claims arising from alleged conduct on the part of the federal authorities of the Argentine Republic—in paragraphs 83-90 and 92 of the Award.
19.
It began by noting that on only one occasion—in a letter dated 5 March 1996—did Claimants ever raise the issue, as against the federal authorities directly, of a breach of the BIT.19 The Tribunal noted that nowhere in the letter did Claimants "ask Argentine officials to take any particular action relating to the Concession Contract or the pending differences between Claimants and the authorities of Tucumán."20 Accordingly the Tribunal determined that " [t]he record contains no evidence that Argentine officials ever failed to take any specific action that the Claimants requested."21
20.
The Tribunal nonetheless went on to deal with the federal claims in some detail. It surveyed the range of "legal and political means" which, according to Claimants, the federal authorities should have used "to protect Claimants’ rights."22 These included: commencing legal proceedings against Tucumán in a federal court (para. 87); exercising financial (para. 88) and political (para. 89) leverage over the province; and notifying Tucumán that its conduct was in breach of the BIT (para. 90).
21.
Representative of this discussion is the treatment of potential legal action by the federal government, in a federal court, designed "to compel Tucumán to comply with the BIT."23 The Tribunal acknowledged (but declined to resolve) the contested issue of Argentine law as to whether a federal court action would lie against a province for breach of a treaty. It observed that recourse to the Tucumán tribunals was available to Claimants (or at least to CAA) under the terms of the Concession Contract. It concluded by holding:

On the facts presented, the Tribunal finds that there was no action of the Province of Tucumán that, absent such a local court proceeding [viz. under Article 16(4) of the Concession Agreement], so obviously violated the BIT as to require the Argentine government to seek a legal remedy against the Province in the Argentine courts nor, for that matter, did the Claimants ever specify any such action to the Argentine Republic.24

22.
The Tribunal’s overall conclusion regarding the federal claims was as follows:

In conclusion, the Tribunal finds that the record of these proceedings does not provide a basis for holding that the Argentine Republic failed to respond to the situation in Tucumán and the requests of the Claimants in accordance with the obligations of the Argentine government under the BIT.25

(b) The Tucumán Claims

23.
Claimants’ claims arising from the alleged conduct of Tucumán and its officials are discussed in paragraphs 57-82 and 91 of the Award.
24.
After some initial discussion of the arguments of the parties regarding the so-called "strict liability standard of attribution" (paras. 57-61), the Tribunal declared that it would resolve the case not by answering any general question as to whether treaty provisions "impose a strict liability standard on a central government for actions of a political subdivision," but rather by analysing "the specific allegations on which the Claimants base their claims and their legal significance in light of the terms of the Concession Contract and the BIT."26 It then proceeded to analyse what Claimants had identified as "four categories of ‘acts of the Province attributable to [Respondent] that violated Claimants’ rights under the BIT.’"27
25.
The first category of alleged BIT violations by Tucumán concerned "[a]cts that resulted in a fall in the recovery rate."28 These included a decision by the Ombudsman, in December 1996, which was said to have deprived CGE of "their right to cut off service to non-paying customers," as well as certain decisions of a local regulatory authority, ERSACT, which were said to have "forced a reduction in the tariff and thereby created uncertainty as to what invoices had to be paid." In respect of all these decisions, the Tribunal found that "Claimants never challenged in the courts of Tucumán any of these actions of the administrative agencies of Tucumán relating to implementation of the Concession Contract."29
26.
Under this first category of impugned conduct, the Tribunal also considered Claimants’ allegations concerning public statements by provincial legislators and others purportedly urging customers not to pay their water bills. The Tribunal remarked that those allegations concerned "a highly disputed issue of fact, i.e., whether Tucumán authorities organized a campaign for nonpayment of invoices issued by Claimants"; but it determined that " [i]n any event, this non-payment issue relates to the grounds for non-payment under the Concession Contract," and, as with the administrative decisions discussed above, the Tribunal found that "Claimants failed to challenge any of these acts in the Tucumán courts."30
27.
The second category of Tucumán conduct allegedly in violation of Claimants’ rights under the BIT concerned "[a]cts that unilaterally reduced the tariff rate."31 These were found to comprise essentially the same acts referred to in the first category, and the Tribunal determined that, as with the impugned conduct comprising the first category, they "were never challenged in the Tucumán courts."32
28.
With respect to the third category of alleged Tucumán breaches of the BIT, which concerned certain "[a]buses of regulatory authority,"33 the Tribunal again noted that "CGE never challenged in the Tucumán courts the interpretation that the Tucumán agencies gave to the provisions of the Concession Contract bearing on this issue."34
29.
The fourth category of alleged BIT violations by Tucumán concerned certain "[dealings in bad faith."35 A number of examples were given, including conduct by the provincial Governor designed to alter unilaterally "the terms of the second renegotiated agreement that was submitted to the Tucumán legislature" in the period March-August 1997 (paras. 70-71). After briefly reviewing the factual differences between the parties on this point (para. 72), the Tribunal observed that this aspect of the dispute related solely to the parties’ efforts to conclude a negotiated settlement. It stressed that, as Claimants themselves acknowledged, Tucumán was not "legally obligated to modify the Concession Contract" (para. 73). After noting that Argentina itself was involved in attempts to resolve the impasse, the Tribunal held that "on the evidence presented, the Tribunal does not find the basis for holding the Argentine Republic liable for actions of the Tucumán authorities."36
30.
Three additional allegations were made by Claimants in support of their claim of bad faith. One concerned certain fines imposed on Claimants for poor water quality allegedly discovered during water testing by Tucumán. Argentina argued that the fines were authorised by the Concession Contract, and were in any event never collected; Claimants asserted that the fines were politically motivated and were intended to induce it to modify the Concession Contract, thus amounting to an abuse of power. For its part, the Tribunal concluded that "[s]ince none of the fines were ever enforced against Claimants, the Tribunal cannot base a finding of bad faith dealings on this alleged action, particularly when the dispute concerning its justification appears to depend in significant part on an interpretation of the Concession Contract that the parties thereto agreed would be decided by the Tucumán courts."37 Similarly, as regards the other acts of Tucumán allegedly committed in bad faith, the Tribunal concluded that "the parties disagree over the meaning and applicability of the pertinent provisions of the Concession Contract, as well as over the underlying facts."38
31.
The Tribunal’s conclusions, drawn from its analysis of these "four categories" of Tucumán acts, are summarised in paragraphs 77-84 of the Award.
32.
The Tribunal opens this section of its Award with the statement that "it is apparent that all of the...actions of the Province of Tucumán on which the Claimants rely...are closely linked to the performance or non-performance of the parties under the Concession Contract."39 It concludes that "all of the issues relevant to the legal basis for these claims against Respondent arose from disputes between Claimants and Tucumán concerning their performance and non-performance under the Concession Contract."40 These findings lead to the Tribunal’s central conclusion:

[T]he Tribunal holds that, because of the crucial connection in this case between the terms of the Concession Contract and these alleged violations of the BIT, the Argentine Republic cannot be held liable unless and until Claimants have, as Article 16.4 of the Concession Contract requires, asserted their rights in proceedings before the contentious administrative courts of Tucumán and have been denied their rights, either procedurally or substantively.41

33.
The Tribunal went on to make a number of additional findings in support of this overarching conclusion:

[G]iven the nature of the dispute between Claimants and the Province of Tucumán, it is not possible for this Tribunal to determine which actions of the Province were taken in exercise of its sovereign authority and which in the exercise of its rights as a party to the Concession Contract.... To make such determinations the Tribunal would have to undertake a detailed interpretation and application of the Concession Contract, a task left by the parties to that contract to the exclusive jurisdiction of the administrative courts of Tucumán.42

There is no allegation before the Tribunal that the courts of Tucumán were unavailable to hear such claims or that they lacked independence or fairness in adjudicating them.43

Because the Tribunal has determined that on the facts presented the Claimants should first have challenged the actions of the Tucumán authorities in its administrative courts, any claim against the Argentine Republic could arise only if Claimants were denied access to the courts of Tucumán to pursue their remedy under Article 16.4 or if the Claimants were treated unfairly in those courts (denial of procedural justice) or if the judgment of those courts were substantively unfair (denial of substantive justice) or otherwise denied rights guaranteed to French investors under the BIT by the Argentine Republic.44

The Tribunal emphasizes that this decision does not impose an exhaustion of remedies requirement under the BIT because such requirement would be incompatible with Article 8 of the BIT and Article 26 of the ICSID Convention.

In this case, however, the obligation to resort to the local courts is compelled by the express terms of Article 16.4 of the [Concession Contract] and the impossibility, on the facts of the instant case, of separating potential breaches of contract claims from BIT violations without interpreting and applying the Concession Contract, a task that the contract assigns expressly to the local courts.45

34.
Two further points should be noted. The first concerns Article 10 of the BIT, on which Claimants had relied to avoid the apparently preclusive effect of Article 16(4) of the Concession Contract. Article 10 provides that:

Investments which have been the subject of a specific undertaking by one Contracting Party vis-à-vis investors of the other Contracting Party shall be governed, without prejudice to the provisions of this Agreement, by the terms of this undertaking, in so far as its provisions are more favourable than those laid down by this Agreement.

35.
In a footnote, the Tribunal declared:

Article 10 protects rights granted to an investor under a special agreement if such rights are more favorable to the investor than those granted under the BIT. The question here is not whether one or the other is more favorable, but whether the Tribunal is in a position, on the facts of this case, to separate the breach of contract issues from violations of the BIT, considering that the parties to the Concession Contract have agreed to an exclusive remedy in the Tucumán courts for the determination of the disputed contractual issues which are not governed by the BIT.46

36.
The second point concerns the Tribunal’s explanation of why, in its view, the so-called "fork in the road" provision of Article 8(2) of the BIT has no application to Claimants in the circumstances of this case. Article 8(2) provides in relevant part that, " [o]nce an investor has submitted the dispute to the courts of the Contracting Party concerned or to international arbitration, the choice of one or the other of those procedures is final." In the Tribunal’s view, recourse by Claimants to the contentious administrative courts of Tucumán would not have precluded them from subsequently bringing claims before an ICSID tribunal in accordance with the BIT, i.e., it would not have amounted to a final "choice of one or the other of those procedures" within Article 8(2). The Tribunal addressed this question twice, in paragraphs 55 and 81 of the Award.
37.
In paragraph 55, the Tribunal announced this conclusion with the prefatory words "[b]y this same analysis." The analysis in question is found in paragraphs 53 and 54, where, after analysing the decision in the Lanco case, the Tribunal stated:

53.... In this case the claims filed by CGE against Respondent are based on violation by the Argentine Republic of the BIT... As formulated, these claims against the Argentine Republic are not subject to the jurisdiction of the contentious administrative tribunals of Tucumán, if only because, ex hypothesi, those claims are not based on the Concession Contract but allege a cause of action under the BIT.

54. Thus, Article 16.4 of the Concession Contract cannot be deemed to prevent the investor from proceeding under the ICSID Convention against the Argentine Republic on a claim charging the Argentine Republic with a violation of the Argentine-French BIT.

55. By this same analysis, a suit by Claimants against Tucumán in the administrative courts of Tucumán for violation of the terms of the Concession Contract would not have foreclosed Claimant from subsequently seeking a remedy against the Argentine Republic as provided in the BIT and ICSID Convention...47

38.
As these passages show, the Tribunal interpreted Article 8(2) as applying only to claims of a breach of the BIT, and not to purely contractual or other claims within the jurisdiction of the administrative courts of Tucumán, even if those claims overlapped with the claims for breach of the BIT. In other words, in the view of the Tribunal, the fork in the road set out in Article 8(2) is limited in its application to claims which explicitly "allege a cause of action under the BIT" or which " [charge] the Argentine Republic with a violation of the Argentine-French BIT"; it does not apply in the circumstance of claims "based on the Concession Contract" or to "a suit by Claimants...for violation of the terms of the Concession Contract."
39.
That this is the correct interpretation of the Tribunal’s ruling as to Article 8(2) is reinforced by the discussion contained in footnote 19, at paragraph 53 of the Award, where the Tribunal explicitly rejected Respondent’s contention that the Tucumán courts would have had jurisdiction over "a claim against the Argentine Republic based on the BIT." It gave two reasons: first, "the Argentine Republic could have engaged in conduct or failed to act in violation of its obligations under the BIT even if Tucumán were not in violation of the Concession Contract"; and second, "the Tucumán courts do not have jurisdiction over such a suit [against the Argentine Republic] absent consent by Respondent." The underlying assumption is, again, that for a claim before the Tucumán courts to be covered by Article 8(2), it would have to be "based on the BIT."
40.
The Tribunal returned to the question in paragraph 81 of its Award:

That is why the Tribunal rejects Claimants’ position that they had no obligation to pursue such local remedies against the Province or that, in the event of a denial of justice of [sic] rights under the BIT, that any such legal action in the Tucumán courts would have waived their right to resort to arbitration against the Argentine Republic before ICSID under the BIT.48

41.
The Tribunal’s stated rationale for rejecting Claimants’ position is "the impossibility, on the facts of the instant case, of separating potential breaches of contract claims from BIT violations without interpreting and applying the Concession Contract, a task that the contract assigns expressly to the local courts." The Tribunal appears to have considered that, because Claimants’ contract and treaty claims could not be separated, a distinct claim "based on the BIT" was impossible in the circumstances of the case, at least prior to submission of the dispute to the provincial courts.
42.
Thus, it seems that the Tribunal’s conclusion that the fork in the road was never reached in this case is based on an interpretation of Article 8(2) which limits its application exclusively to claims alleging a breach of the BIT, that is, to treaty claims as such.
43.
The Tribunal returned to consider the Tucumán claims in paragraph 91 of the Award, which addresses Claimants’ allegations regarding hostile and concerted "action by officials, legislative and executive." In this regard, the Tribunal said:

In addition to pointing out that the legislators on whose actions the Claimants rely were opponents of the governing party in Tucumán at the time that the disputes arose under the Concession Contract, Respondent presented a point by point refutation of the other evidence upon which Claimants rely for these allegations. After carefully reviewing the extensive memorials and testimony, the Tribunal finds that the record in these proceedings regarding these allegations does not establish a factual basis for attributing liability to the Argentine Republic under the BIT for the alleged actions of officials of Tucumán.49

C. THE COMMITTEE’S ANALYSIS

44.
Before proceeding to analyse the Tribunal’s reasoning in more detail, with a view specifically to assessing the validity of the grounds of annulment raised by the parties, it is necessary to say something about the France-Argentina BIT of 3 July 1991, and about the role of annulment panels and the scope of their powers.

(1) Relevant Provisions of the France-Argentina BIT

45.
The Agreement between the Government of the Argentine Republic and the Government of the Republic of France for Reciprocal Protection and Promotion of Investments was signed by France and Argentina at Paris on 3 July 1991 and came into force on 3 March 1993.50 It deals, inter alia, with the following matters relevant to the present proceeding.

(a) Definition of "Investor" and "Investment"

49.
Notwithstanding these facts (on which there seems to be no dispute between the parties) the Tribunal held, in a footnote, that "CAA should be considered a French investor from the effective date of the Concession Contract."53 The Respondent claims that this finding was unsupported by any reasons and was in fact contradicted by uncontested evidence before the Tribunal. According to the Respondent, CGE was not the controlling shareholder at the time when most of the alleged BIT violations occurred, and CAA was accordingly not an "investor" for the purposes of the BIT at that time.

(b) Local Remedies and Their Relation to Arbitration under the BIT

51.
The role and effect, if any, of local remedies available to the investor under the France-Argentina BIT are addressed in Article 8 of the BIT, which is central to this case, and in certain articles of the ICSID Convention, especially Article 26.
52.
In accordance with Article 26 of the Convention, consent to ICSID arbitration involves consent "to the exclusion of any other remedy." A Contracting State may qualify its consent by requiring, as a pre-condition to arbitration, "the exhaustion of local administrative or judicial remedies." Argentina did not impose such a pre-condition when it agreed to Article 8 of the BIT. Accordingly it is common ground (and the Tribunal so held) that the exhaustion of local remedies rule does not apply to claims under the BIT.
53.
Article 8 of the BIT expressly gives investors a choice of forum. Article 8 provides in full as follows:

1. Any dispute relating to investments made under this Agreement between one Contracting Party and an investor of the other Contracting Party shall, as far as possible, be settled amicably between the two parties concerned.

2. If any such dispute cannot be so settled within six months of the time when a claim is made by one of the parties to the dispute, the dispute shall, at the request of the investor, be submitted:

• Either to the domestic courts of the Contracting Party involved in the dispute;

• Or to international arbitration under the conditions described in paragraph 3 below.

Once an investor has submitted the dispute to the courts of the Contracting Party concerned or to international arbitration, the choice of one or the other of these procedures is final.

3. Where recourse is had to international arbitration, the investor may choose to bring the dispute before one of the following arbitration bodies:

• The International Centre for Settlement of Investment Disputes (ICSID), established by the Convention on the Settlement of Investment Disputes between States and National of other States opened for signature in Washington on March 18, 1965, if both States Parties to this Agreement have already acceded to the Convention.

Until such time as this requirement is met, the two Contracting Parties shall agree to submit the dispute to arbitration, in accordance with the rules of procedure of the Additional Facility of ICSID;

• An ad hoc arbitral tribunal established in accordance with the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL).

4. The ruling of the arbitral body shall be based on the provisions of this Agreement, the legislation of the Contracting Party which is a party to the dispute, including rules governing conflict of laws, the terms of any private agreements concluded on the subject of the investment, and the relevant principles of international law.

5. Arbitral decisions shall be final and binding on the parties to the dispute. [Footnote omitted.]

54.
Two initial points may be made about these provisions. First, it is evident that the term "national jurisdictions" as used in Article 8(2) ("juridictions nationales"/"jurisdiciones nacionales" in the authentic French and Spanish texts; "domestic courts" in the UNTS English translation) refers to all the courts and tribunals of the Contracting Parties, and not just to those at the federal level. In a treaty between a unitary and a federal state, such as France and Argentina respectively, one would not expect any disparity in the application of a phrase such as "national jurisdictions": all French courts and tribunals are national, as are, for the purposes of the BIT, all courts and tribunals of Argentina. The relevant distinction, as Article 8(2) makes clear, is between "national" and "international" tribunals, not between "national" and "provincial" courts. Thus, there is no disparity between the phrases "national jurisdictions [i.e., courts]" and "jurisdictions [courts] of the Contracting Party" as used in the two paragraphs of Article 8(2). In consequence, the contentious administrative courts of Tucumán are to be considered as national courts falling within the scope of Article 8 (2).54

(c) Scope and Application of Substantive Provisions of the BIT

56.
Claimants’ case before the Tribunal was based on Articles 3 and 5 of the BIT, which deal, respectively, with "fair and equitable treatment according to the principles of international law" and with "measures of expropriation...or any other equivalent measure."
57.
Article 3 provides that:

Each Contracting Party shall undertake to accord in its territory and maritime zone just and equitable treatment, in accordance with the principles of international law, to the investments of investors of the other Party and to ensure that the exercise of the right so granted is not impeded either de jure or de facto.

58.
Article 5 provides that:

1. Investments made by investors of one Contracting Party shall be fully and completely protected and safeguarded in the territory and maritime zone of the other Contracting Party, in accordance with the principle of just and equitable treatment mentioned in article 3 of this Agreement.

2. The Contracting Parties shall not take, directly or indirectly, any expropriation or nationalization measures or any other equivalent measures having a similar effect of dispossession, except for reasons of public necessity and on condition that the measures are not discriminatory or contrary to a specific undertaking.

Any such dispossession measures taken shall give rise to the payment of prompt and adequate compensation the amount of which, calculated in accordance with the real value of the investments in question, shall be assessed on the basis of a normal economic situation prior to any threat of dispossession.

The amount and methods of payment of such compensation shall be determined not later than the date of dispossession. The compensation shall be readily convertible, paid without delay and freely transferable. It shall yield, up to the date of payment, interest calculated at the appropriate rate.

3. Investors of either Contracting Party whose investments have suffered losses as a result of war or any other armed conflict, revolution, state of national emergency or uprising in the territory or maritime zone of the other Contracting Party shall be accorded by the latter Party treatment which is no less favourable than that accorded to its own investors or to investors of the most-favoured nation.

59.
Both these Articles refer to an international law standard, expressly or by clear implication. The protection afforded under both Articles is extended to "investments made by investors."

(2) The Role of Annulment Under the ICSID Convention

67.
Another question, which was debated between the parties in this case, is whether an ad hoc committee is limited to the grounds for annulment relied on by a Claimant, or whether the Respondent may itself raise additional grounds for annulment. In their Application, Claimants sought only the partial annulment of the Award, on three grounds: (1) that the Tribunal manifestly exceeded its powers; (2) that there had been a serious departure from a fundamental rule of procedure; and (3) that the Award failed to state the reasons on which it is based.59 The Respondent not only resisted each of these contentions, it further argued that if any of them were to be upheld, the Award as a whole should be annulled, on the grounds either that the Tribunal had no jurisdiction at all, or that there was a fundamental contradiction in the Tribunal’s reasoning as between that part which dealt with jurisdiction and that part which dealt with the merits. By way of reply, in their written pleadings, Claimants argued that what they called Respondent’s "counterclaim" for annulment of the Award as a whole was inadmissible, on the ground that it was out of time and that Article 52 made no provision for counterclaims.
69.
Thus where a ground for annulment is established, it is for the ad hoc committee, and not the requesting party, to determine the extent of the annulment. In making this determination, the committee is not bound by the applicant’s characterisation of its request, whether in the original application or otherwise, as requiring either complete or partial annulment of the award. This is reflected in the difference in language between Articles 52(1) and 52(3), and it is further supported by the travaux of the ICSID Convention. Indeed, Claimants in the present case eventually accepted this view.
70.

In seeking in the alternative the annulment of the jurisdictional portion of the Award, the Respondent was not making a late annulment application by way of a counterclaim—a procedure which, as Claimants correctly asserted, is not contemplated by Article 52 of the ICSID Convention. Rather it was arguing that if Claimants’ position on the merits were to be upheld, either under Article 52(1)(b) or 52(1)(e), the effect must necessarily be to bring down the whole Award. That position was entirely open to the Respondent. It in no way entailed what would have been an inadmissible counterclaim for annulment on new grounds.

(3) The Grounds of Annulment

71.
The Committee accordingly turns to the grounds for annulment themselves. Since, as explained above, the grounds validly pleaded by the Respondent extend to the Tribunal’s holding on jurisdiction, it is appropriate to consider first the issue of the Tribunal’s jurisdiction.

(a) The Tribunal’s Jurisdictional Finding

72.
The Committee has already summarised the grounds on which the Tribunal upheld its jurisdiction. The Tribunal gave extensive reasons for doing so, and these reasons are not in themselves contradictory.60 It is true that Respondent argued, in the alternative, that there was a contradiction between those reasons and the reasons given by the Tribunal concerning the merits. But Argentina also argued that the Tribunal lacked jurisdiction in any event. If this is right, it was a manifest excess of power for the Tribunal to proceed to consider the merits, and the whole Award must be annulled. Accordingly, the question of failure to give reasons, including possibly contradictory reasons, does not arise so far as the Tribunal’s jurisdictional finding is concerned.
74.
In particular, the Committee agrees with the Tribunal in characterising the present dispute as one "relating to investments made under this Agreement" within the meaning of Article 8 of the BIT. Even if it were necessary in order to attract the Tribunal’s jurisdiction that the dispute be characterised not merely as one relating to an investment but as one concerning the treatment of an investment in accordance with the standards laid down under the BIT, it is the case (as the Tribunal noted) that Claimants invoke substantive provisions of the BIT.
75.
The Committee likewise agrees that the fact that the investment concerns a Concession Contract made with Tucumán, a province of Argentina which has not been separately designated to ICSID under Article 25(1), does not mean that the dispute falls outside the scope of the BIT, or that the investment ceases to be one "between one Contracting Party and an investor of the other Contracting Party" within the meaning of Article 8(1) of the BIT.
77.
The Lanco decision, cited by the Tribunal, supports its finding of jurisdiction.61 In that case the contract at issue, which involved an agency of the federal government of Argentina, contained an exclusive jurisdiction clause referring contractual disputes to a federal contentious administrative tribunal. The Lanco Tribunal held:

[T]he stipulation of Article 12 of the Concession Agreement, according to which the parties shall submit to the jurisdiction of the Federal Contentious-Administrative Tribunals of the City of Buenos Aires, cannot be considered a previously agreed dispute-settlement procedure. The Parties could have foreseen submission to domestic or international arbitration, but the choice of a national forum could only lead to the jurisdiction of the contentious-administrative tribunals, since administrative jurisdiction cannot be selected by mutual agreement.62

78.
But in any event the Lanco Tribunal denied that an exclusive jurisdiction clause could exclude ICSID jurisdiction, relying in particular on Article 26 of the ICSID Convention. It said:

§39 A State may require the exhaustion of domestic remedies as a prior condition for its consent to ICSID arbitration. This demand may be made (i) in a bilateral investment treaty that offers submission to ICSID arbitration, (ii) in domestic legislation, or (iii) in a direct investment agreement that contains an ICSID clause. The ARGENTINA-U.S. Treaty does not provide at any point for the exhaustion of domestic remedies, and the Argentine Republic, for its part, has not alleged that there is any such domestic legislation. The only requirement that the ARGENTINA-U.S. Treaty does provide for is the period of six months that is required for turning to ICSID arbitration.

§40 In our case, the Parties have given their consent to ICSID arbitration, consent that is valid, there thus being a presumption in favor of ICSID arbitration, without having first to exhaust domestic remedies. In effect, once valid consent to ICSID arbitration is established, any other forum called on to decide the issue should decline jurisdiction. The investor’s consent, which comes from its written consent by letter of September 17, 1997, and its request for arbitration of October 1, 1997, and the consent of the State which comes directly from the ARGENTINA-U.S. Treaty, which gives the investor the choice of forum for settling its disputes, indicate that there is no stipulation contrary to the consent of the parties... In effect, the offer made by the Argentine Republic to covered investors under the ARGENTINA-U.S. Treaty cannot be diminished by the submission to Argentina’s domestic courts, to which the Concession Agreement remits.63

79.
Indeed, Lanco was a stronger case on the facts than the present, as regards the effect of an exclusive jurisdiction clause, since the foreign claimant in Lanco was actually a party to the exclusive jurisdiction clause at issue, unlike CGE here.64
80.
For all these reasons, the Respondent’s request that the Tribunal’s jurisdictional finding be annulled must be rejected.

(b) The Tribunal’s Findings on the Merits

81.
Claimants relied on three grounds set out in Article 52 of the ICSID Convention as supporting its request for partial annulment. The Committee will deal with these in turn.

(i) Serious departure from a fundamental rule of procedure: Article 52(l)(d)

(ii) Manifest excess of powers: Article 52(1)(b)

88.
With these preliminary comments in mind, the Committee turns to the substance of Claimants’ request for partial annulment of the Award on the ground of manifest excess of powers. In doing so, it is necessary to distinguish between the Tribunal’s treatment of the federal claims and the Tucumán claims.

The federal claims

92.
For these reasons, Claimants’ request for partial annulment of the Award in relation to the Tribunal’s determination of the federal claims is rejected.

The Tucumán claims

(iii) Failure to state reasons: Article 52(1)(e)

116.
In view of the foregoing conclusion, it is unnecessary to consider the further ground of annulment relied on by Claimants, viz., that in dismissing the claim the Tribunal failed to state the reasons on which its decision was based. As to the federal claims, the Committee has already concluded that reasons for the dismissal of those claims were given. As to the Tucumán claims, in the Committee’s view the Tribunal gave very full reasons for the step it took, viz., the dismissal of those claims without any overall consideration of their merits. The question of failure to state reasons would only arise if one took the view that the Tribunal actually did reach a conclusion adverse to Claimants under Articles 3 and 5 in respect of the Tucumán claims as a whole—a view the Committee has already rejected. Accordingly, nothing more needs to be said on this ground of annulment.

D. COSTS

117.
The Tribunal made no order for costs, and required Claimants and Respondent to share equally the costs of ICSID. It observed that the dispute raised "a set of novel and complex issues not previously addressed in international arbitral precedent relating to the interplay of a bilateral investment treaty, a Concession Contract with a forum-selection clause and the ICSID Convention."80 It noted that both parties had prevailed to some extent. These considerations apply equally to the present phase of the proceedings. Claimants have succeeded in part, but only in part. Moreover, Argentina was entitled to take the position it took, which itself raised a difficult and novel question of public importance concerning ICSID and the operation of investment protection agreements on the model of the BIT.
118.
In the light of the importance of the arguments advanced by the parties in connection with this case, the Committee considers it appropriate that each party bear its own expenses incurred with respect to this annulment proceeding, and that the parties bear equally all expenses incurred by the Centre in connection with this proceeding, including the fees and expenses of the members of the Committee.

E. DECISION

119.
For the foregoing reasons, the Committee DECIDES:

(a) The Tribunal rightly held that it had jurisdiction over the claims.

(b) The Tribunal committed no annullable error in its rejection of the federal claims (claims concerning the conduct of federal authorities) on the merits, and that rejection is accordingly res judicata.

(c) The Tribunal manifestly exceeded its powers by not examining the merits of the claims for acts of the Tucumán authorities under the BIT and its decision with regard to those claims is annulled.

(d) Each party shall bear its own expenses, including legal fees, incurred in connection with this annulment proceeding.

(e) Each party shall bear one half of the costs incurred by the Centre in connection with this annulment proceeding. Accordingly, the Argentine Republic shall reimburse the Claimants one half of the total costs incurred by the Centre in connection with this annulment proceeding once the amount has been determined by the Secretariat of the Centre.

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