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I. Summary of the Procedure

The initial phase of the proceedings

On January 17, 2003, the International Centre for Settlement of Investment Disputes ("ICSID or "the Centre") received a Request for Arbitration against the Argentine Republic (hereinafter "the Respondent" or "Argentina") from Continental Casualty Company (hereinafter "the Claimant" or "Continental"), a company incorporated under the law of the State of Illinois, United States of America. The Request concerned Continental's investment in CNA Aseguradora de Riesgos del Trabajo S.A. ("CNA ART" or "CNA"), an insurance company incorporated in Argentina, which Continental claims to wholly own, and Argentina's alleged breaches of Continental's rights as investor under the 1991 Treaty between the United States of America and the Argentine Republic concerning the Reciprocal Encouragement and Protection of Investment (the "Argentina-U.S. Bilateral Investment Treaty" or the "BIT").1
In its request, Continental invoked Argentina's advance consent to arbitration under the Convention on the Settlement of Investment Disputes between States and Nationals of other States (the "ICSID Convention" or "the Convention") in the Argentina-U.S. Bilateral Investment Treaty.
By letter dated January 28, 2003, Continental supplemented its request, attaching a copy of a letter dated January 15, 2003 with its consent to arbitration in accordance with the procedures set out in the BIT, and a power of attorney authorizing the law firm of Appleton & Associates to represent it in these proceedings.
On January 29, 2003, the Centre, in accordance with Rule 5 of the ICSID Rules of Procedure for the Institution of Conciliation and Arbitration Proceedings (Institution Rules), acknowledged receipt and transmitted a copy of the request to the Argentine Republic and to the Argentine Embassy in Washington, D.C.
By letter of March 14, 2003, the Centre requested Continental to provide: (i) further information regarding the steps taken to resolve the dispute through consultation and negotiation, as foreseen in Article VII(2) of the BIT; and (ii) confirmation that the dispute had not been submitted to the local courts of Argentina or any previously agreed dispute settlement procedures, in accordance with Article VII(3)(a) of the BIT. Continental responded by letter of March 17, 2003.
By letter of May 2, 2003, the Centre further asked Continental to clarify whether the condition set forth in the BIT that six months should elapse between the date in which the dispute arose and the submission of the request for arbitration had been fulfilled. Claimant responded by letter of May 5, 2003.
On May 22, 2003, the Acting Secretary-General of the Centre registered the request, pursuant to Article 36(3) of the ICSID Convention. On the same date, the Acting Secretary-General, in accordance with Institution Rule 7, notified the parties of the registration of the request and invited them to proceed, as soon as possible, to constitute an Arbitral Tribunal.
More than sixty days elapsed since the date of registration without the parties being able to agree on the number of arbitrators that would comprise the tribunal in this case or on the method for their appointment. Accordingly, on July 22, 2003, the Claimant requested that the tribunal be constituted in accordance with Article 37(2)(b) of the ICSID Convention (i.e., a Tribunal comprising three arbitrators, one appointed by each party, and the third, presiding arbitrator, to be appointed by agreement of the parties).
On August 20, 2003 the Argentine Republic appointed Licenciado Michell Nader, a Mexican national, as an arbitrator. On August 22, 2003, the Claimant appointed Sir Elihu Lauterpacht, a national of the United Kingdom, as an arbitrator.
Also on August 22, 2003, more than ninety days having elapsed since the date of registration, Continental, invoking Article 38 of the ICSID Convention, requested that the Chairman of ICSID Administrative Council appoint the president of the tribunal.
With the agreement of both parties, the Chairman of the ICSID Administrative Tribunal appointed Professor Giorgio Sacerdoti, an Italian national, as the President of the Arbitral Tribunal. On October 6, 2003, the Acting Secretary-General, in accordance with Rule 6(1) of the Rules of Procedure for Arbitration Proceedings (Arbitration Rules), notified the parties that all three arbitrators had accepted their appointments and that the Tribunal was therefore deemed to have been constituted on that date.
The first session of the Tribunal was held, with the agreement of the parties, on January 29, 2004, at the seat of the Centre in Washington, D.C. During the session the parties expressed their agreement that the Tribunal had been properly constituted in accordance with the relevant provisions of the ICSID Convention and the ICSID Arbitration Rules and that they did not have any objections in this respect.
During the first session the parties agreed on a number of procedural matters reflected in written minutes signed by the President and the Secretary of the Tribunal. Among others, it was agreed that, in accordance with Arbitration Rule 22, the languages of the proceedings would be English and Spanish. The Claimant would file its pleadings in English and Argentina would file its pleadings in Spanish, with a subsequent courtesy translation into English. Also, the Tribunal, after consultation with the parties fixed the following schedule for the written phase of the proceedings: the Claimant would file a memorial on the merits within ninety (90) days from the date of the first session; the Respondent would file a counter-memorial on the merits within ninety (90) days from its receipt of the Claimant's memorial; the Claimant would file a reply within forty-five (45) days from its receipt of the counter-memorial; and the Respondent would file a rejoinder within forty-five (45) days from its receipt of the Claimant's reply.
During the first session it was noted that were Argentina to raise objections to jurisdiction, it may do so within the ninety (90) days time limit fixed for the filing of its counter-memorial on the merits. In that case, the proceedings on the merits would be suspended in accordance with Arbitration Rule 41(3) and the Claimant would file its counter-memorial on jurisdiction within forty-five (45) days from its receipt of the Argentine Republic's objections to jurisdiction. The Tribunal would thereafter, in consultation with the parties, fix a date for a hearing on jurisdiction.
On April 27, 2004, the Claimant filed its Memorial on the Merits with accompanying documentation. The Claimant expanded therein the content of its Request for Arbitration, dealing with the "Facts of the Claims" and the "Legal Argument."
As indicated by the Claimant in its briefs, Continental is a company incorporated in Illinois, in the U.S., and is a subsidiary of CNA Financial Inc. (CNA), "a leading financial services provider which has its head offices in Chicago." Continental owns and controls CNA ART, which "is one of Argentina's leading providers of workers compensation insurance services." CNA ART was incorporated in Argentina in 1996 under the name of "OMEGA Aseguradora de Riesgos del Trabajo Sociedad Anómima." In June of 1997, Continental acquired a 70% interest in this company and increased its participation to practically 100% (precisely 99.9995%) in December 2000. Thereupon, Omega changed its name into CNA ART.
CNA ART, like other insurance companies, maintains a portfolio of investment securities in order to earn a return on its capital, consisting mainly of "low-risk assets such as cash deposit, treasury bills and government bonds." Under Argentinean regulations of CNA's insurance operation, "such capital must be invested within Argentina, with minor exceptions."
According to the Claimant, prior to March 2001, the CNA investment portfolio was primarily in assets denominated in Argentine pesos, which were at the time fully convertible to U.S. dollars at a one to one exchange rate. In order to hedge the risk of devaluation, CNA's management decided to invest assets within Argentina in low risk U.S. denominated assets. As a result of various investment operations, CNA held thereafter a portfolio of cash accounts, certificates of deposit, T-bills, Government bonds and Government loans (GGLs) for a U.S. value of $100,998,000.
Continental indicates that "[c]ommencing in December 2001, Argentina enacted a series of decrees and resolutions that destroyed the legal security of the assets held by CNA ART. These measures frustrated CNA ART's ability to hedge against the risk of the devaluation of the peso." Claimant refers to "Argentina's restrictions on transfers out of its territory;" to "rescheduling of cash deposits;" to "pesification of U.S. dollar deposits;" to "pesification and default on its debt obligations," as well as to other measures. Continental indicates that due to these measures (collectively referred to as "Argentina's Capital Control Regime"), as an investor in Argentina, it has suffered an absolute loss in value of its assets of U.S. $46,412,000; in addition it is or was unable due to the "Bank Freeze" to access its investments in Argentina.
From a legal point of view, Continental asserts that it is protected under the BIT as "a U.S. investor with an investment in Argentina," its protected investment being namely CNA ART. Continental claims that by the conduct and acts summarily referred to above, Argentina has failed to meet its existing bilateral investment treaty obligations owed to it as a U.S. investor in Argentina. Continental claims that Argentina has violated, at least, the following provisions of the BIT:

(i) the requirement to observe obligations required by Art. II(2)(c) of the BIT;

(ii) the requirement to provide treatment in accordance with international law, including fair and equitable treatment and full protection or security, as required by Art. II(2)(b) of the BIT, as well as MFN treatment under Art. II(2)(a);

(iii) the requirement to permit all transfers relating to an investment without delay, set out in Art. V of the BIT; and

(iv) the requirement to pay compensation upon acts of expropriation, set out in Art. IV of the BIT.

In view of the facts and arguments set out in its Memorial, the Claimant submitted that "owing to these violations of the BIT, individually and in combination, the Investor is entitled to compensation in an amount equal to the full amount of the damages suffered as a consequence."2
Based on an "Independent Valuators Report" it submitted to the Tribunal, Continental assessed its losses as follows: i) for the violation of contracts obligation, not less than U.S.$31 million; ii) for the violation of expropriation obligations, not less than U.S.$38 million.3

II. The Jurisdictional Phase

A. Generally

On June 29, 2004, Argentina filed a Memorial with objections to jurisdiction. Thereupon, by a letter of July 12, 2004, the Tribunal confirmed the suspension of the proceedings on the merits in accordance with ICSID Arbitration Rule 41(3). Consequently, the proceedings continued on the issue of jurisdiction in accordance with the agreed procedural calendar.

B. Argentina's specific objections to jurisdiction

Argentina's specific objections to jurisdiction were the following:

(i) "Argentina has not given its consent to submit to this arbitration;"

(ii) "The dispute submitted by Claimant does not comply with the requirements of the Convention or those under the U.S.-Argentina BIT," particularly as to (a) the existence of a legal dispute and as to (b) the requirement that the legal dispute arises directly out of an investment;

(iii) "The company may not file a claim because the claim is premature ‘or not ripe';"

(iv) "Continental's lack of action to submit a dispute to this Tribunal: the ius standi.

Under its first objection, Argentina took the position that it had not given its consent to ICSID arbitration with regard to the present dispute. Accordingly, it "insist[ed] on the need to examine the extent of the consent by the Argentine State to submit to the ICSID system" by examining, according to the principles of interpretation of treaties under international law, the relevant clauses of both the ICSID Convention and the Argentina-U.S. BIT.
As to requirement (a), Argentina submitted, based among other things on the travaux préparatoires of the ICSID Convention, that the dispute must be about "rights and obligations," about legal titles and not some "undesirable consequences" that have not as the proximate cause the host State's conduct in respect of its investment. In Argentina's view in this case the Claimant was not submitting a legal claim within those requirements because it "is not the holder of the legal rights that it alleged have been breached by the Argentine Republic."
As to requirement (b), Argentina submitted that the legal dispute must arise directly out of the investment in that "the measure or measures alleged as in violation of the U.S.-Argentina BIT must be specifically addressed to the investments." Argentina considered that the word "directly" in Art. 25(1) "may also be translated as specifically.... The measure must be addressed to the investment. Universal measures addressed to the general public cannot be considered by ICSID Tribunals. That would be to judge a public policy and not a legal conflict."
Argentina considered accordingly that in order for jurisdiction to be established "Continental must show which specific obligations, vis-a-vis the Claimant were breached by Argentina through its devaluation of the Peso, the establishment of a new exchange rate and the temporary pesification of the tariffs."
In Argentina's view, the only position that the Claimant was able to assert is its position as shareholder of CNA. According to Argentina, however, this position does not enable Continental to claim in the circumstances impairment to its "legal rights born out of the ownership of shares" due to Argentina's measures. Argentina submitted further that also the damages suffered by the investor must be direct, that is grounded on an action that "specifically impairs a legal right born out of the ownership of the shares." This requirement that those damages result from an interference with a right and not with a mere interest of the shareholders, be they minority or majority shareholders, was not met either in the present case, according to Argentina.4
Under its third objection to jurisdiction, Argentina considered that Continental's claim is not ripe - in legal terms and not just from a policy point of view - because the alleged damages constantly fluctuate since Argentina's negotiations with foreign creditors are not yet over; therefore, a claim based on indirect consequences that may have affected foreign shareholders of an Argentine corporation cannot be submitted before an arbitral tribunal under the BIT. Moreover, according to Argentina, this would be contrary to a proper interpretation of the BIT: "[s]hould it be admitted that this is applicable to the contractual relations governed by local law and submitted to the jurisdiction of the local courts, the scope of application of the BIT would be unlawfully extended."5
Finally, Argentina maintained that the dispute did not fall within the scope of the application of the BIT for different reasons, all related to the definition of "investment" suggested by Argentina as being the correct one under the Treaty. It is Argentina's view that the Claimant "has presented a claim founded on the loss in value of its investment represented by the acquisition of shares in an Argentinean corporation - CNA ART," and that the foreign investor has alleged "that its interests have been impaired by commercial and financial decisions taken in the framework of a shares investment business made within Argentina." Argentina submits further that the purchase of shares in that Argentine corporation is a business subject to Argentina's law, which is also the law applicable to the interest in those shares and more generally to the existing legal relationship between the Claimant and CNA. In view of the above, Argentina concludes that "the claimant has not proved that the Argentine State has issued any measure addressed directly to that acquisition of shares."
Argentina further indicated that since the investment of the Claimant consisted in shares of an Argentine company, while the measures affected the Argentinean corporation of which the Claimant is a shareholder, the lack of the required relationship between the dispute brought and the investment in accordance with the BIT resulted in a lack of jurisdiction on the "indirect claim," which is the subject matter of this dispute. This is because the situation here is that of a shareholder making a claim in connection to assets or circumstances related to the entity where it has interests, in disregard therefore of the acknowledged principle that the partners and the corporation are different legal persons. Argentina concluded that while the definitions of investment in the BIT are broad, CNA - whose interests have been affected - "does not qualify either as an investor or as an investment pursuant to the mentioned international instrument."6

C. The Claimant's counter-arguments

In conformity with the procedural time table, the Claimant submitted its Countermemorial on jurisdiction on July 30, 2004. Continental requested the Tribunal to reject the objections of Argentina and to affirm the jurisdiction of the Tribunal. The Claimant argued generally in the first place that the "Proper Approach to a Jurisdictional Challenge" requires that the Tribunal determine whether the pleadings have disclosed a prima facie claim.
Specifically, in respect of the first and second jurisdictional objections of Argentina, the Claimant maintained that the dispute is a "legal dispute" because it arises from a conflict of rights rather than a conflict of interests. More specifically, according to the Claimant, the dispute at issue "concerns the different views of the Claimant and Argentina on questions of legal rights and obligations in connection with the existence of an investment, and the effects this may have on Argentina's obligations to honor debt instruments, to preserve the Claimant's property rights in the cash deposits and its right under the BIT to transfer capital."
Moreover, according to the Claimant, the requirement that a dispute must arise "directly" from an investment does not imply that the measure challenged must be "specifically" addressed at the business concerned. The Claimant submitted that for jurisdictional purposes, it is enough that the impugned measures prima facie adversely affect the Claimant's investment, so that the Tribunal is competent to examine whether those measures are in breach of specific commitments given to the investor.7
The Claimant also opposed Argentina's third objection to jurisdiction that the claim was not ripe. The Claimant recalled that in a previous decision an ICSID Tribunal had stated that the perspective of negotiations between Argentine authorities and a company owned by foreign investors and/or those investors were immaterial in order to determine the jurisdiction of the ICSID tribunal. The Claimant took the position that the principles relied on by Argentina in support of this objection do not affect the jurisdiction of the present Tribunal, which depends on the claim satisfying the requirements of Art.25 of the ICSID Convention and of the BIT.8
As far as the fourth objection to jurisdiction is concerned, the Claimant considered that it is "now well settled that an investor may bring an investor-state claim under the BIT for measures interfering with the legal rights of its Argentine subsidiary and not just for measures affecting the investor's shares in the subsidiary." The Claimant concludes on this point that "the ability of shareholders to claim for damages suffered by the company in which they hold shares," in any case when the protected investor is a controlling shareholder (as here), is well settled in jurisprudence and cannot be open to challenges at the jurisdictional stage.9
On August 6, 2004, Sir Elihu Lauterpacht resigned as an arbitrator in this case due to health conditions. Following Professor Sacerdoti's and Licenciado Nader's consent to Sir Elihu's resignation and in accordance with Arbitration Rule 10, the proceedings were suspended until the vacancy created by Sir Elihu's resignation was filled. In accordance with Arbitration Rule 11(1), the Secretary of the Tribunal invited Continental to appoint a new arbitrator in replacement of Sir Elihu. By letter of September 14, 2004, the Claimant appointed Mr. V.V. Veeder, a national of the United Kingdom as an arbitrator. The proceedings were resumed in October 14, 2004, following Mr. Veeder's acceptance of his appointment.
By letter of December 16, 2004, the Tribunal proposed to the parties dates for holding the hearing on jurisdiction. The hearing was held, with the agreement of the parties, on February 1, 2005 at the seat of the Centre in Washington D.C. Messrs. Barry Appleton, Robert Wisner, Hernando Otero, Nick Gallus, Ali Ghiassi and Ms. Asha Kaushal from the law firm of Appleton & Associates, International Lawyers of Toronto Canada, and Ms. Sally Narey, General Counsel, Continental, attended the hearing on behalf of the Claimant. Ms. Cintia Yaryura and Ms. Maria Victoria Vitali from the Procuración del Tesoro de la Nación Argentina, Mr. Marcelo Massoni, from the Embassy of Argentina in Washington, D.C. and Mr. Roberto Bado from the Ministry of Economy of the Argentine Republic, attended the hearing on behalf of the Respondent. During the hearing, Messrs. Appleton and Wisner addressed the Tribunal on behalf of Continental. Ms. Yaryura and Vitali addressed the Tribunal on behalf of the Argentine Republic. The Tribunal posed questions to the parties, as provided in Arbitration Rule 32(3).
Subsequent to the hearing, the Tribunal received a communication from the Claimant pointing to recent ICSID decisions on jurisdiction issued in cases involving Argentina, and an answer from Argentina raising objections as to the relevance of those decisions. The Tribunal informed the parties, through the Secretariat, on July 20, 2005 that "it believes it is empowered to take judicial notice of such published decisions. However, in accordance with due process principles, the Tribunal is of the opinion that should it consider necessary for its decision on jurisdiction to specifically rely on points raised and discussed in those decisions, it should give an opportunity first to the parties to comment on those possibly relevant points. The Tribunal would accordingly do so should the situation envisaged occur."
On February 22, 2006, the Tribunal issued its Decision on Jurisdiction,10 rejecting the Respondent's objections to jurisdiction and holding that the present dispute is within the jurisdiction of ICSID and the competence of the Tribunal.
In view of the objections raised by Argentina, the Tribunal considered that it had to ascertain, for the sole purpose of determining its competence under the ICSID Convention and the Argentina-U.S. BIT, whether the criteria that define disputes for the purpose of the ICSID jurisdiction under those two instruments had been met. These criteria are:

a. that the dispute is between Argentina (as a contracting party to ICSID and the BIT) and a national of the U.S.A., as defined in the BIT;

b. that the dispute is a "legal" dispute (Art. 25(1) ICSID Convention);

c. that said legal dispute arises "directly" out of an investment (Art. 25(1) ICSID Convention);

d. that said dispute is "an investment dispute" within the meaning of Art. VII of the BIT, namely "arising out or relating to....(c) an alleged breach of any right conferred or created by this Treaty with respect to an investment;" and

e. that such investment is of the type covered under the BIT in accordance with the definition of "investment" found in Art.I(1)(a) of the BIT.11

Before starting its examination on the basis of the parties' documentation and arguments, the Tribunal found it appropriate to outline the proper methodology to resolve the jurisdictional challenge. The Tribunal asserted that "[i]n order to determine its jurisdiction, the Tribunal must consider whether the dispute, as presented by the Claimant, is prima facie, that is, at a summary examination, a dispute that falls generally within the jurisdiction of ICSID and specifically within that of an ICSID Tribunal established to decide a dispute between a U.S. investor and Argentina under the BIT. [...] The object of the investigation is to ascertain whether the claim, as presented by the Claimant, meets the jurisdictional requirements, both as to the factual subject matter at issue, as to the legal norms referred to as applicable and having been allegedly breached, and as to the relief sought.12 For this purpose, the presentation of the claim as set forth by the Claimant is decisive. The investigation must not be aimed at determining whether the claim is well founded, but whether the Tribunal is competent to pass upon it."
The Tribunal continued:

As to the facts of the case, the presentation of the Claimant is fundamental: it must be assumed that the Claimant would be able to prove to the Tribunal's satisfaction in the merit phase the facts that it invokes in support of its claim. This does not mean necessarily that the "Claimant's description of the facts must be accepted as true," without further examination of any type. The Respondent might supply evidence showing that the case has no factual basis even at a preliminary scrutiny, so that the Tribunal would not be competent to address the subject matter of the dispute as properly determined. In such an instance, the Tribunal would have to look to the contrary evidence supplied by the Respondent and should dismiss the case if it found such evidence convincing at a summary exam.13 (Footnotes omitted)

Turning to the first requirement defining disputes for the purpose of ICSID jurisdiction, namely that concerning the disputing parties, the Tribunal acknowledged that Argentina was not disputing that the Claimant, Continental Casualty Company, was a juridical person having the nationality of another Contracting State in conformity with Art. 25(1)(a) of the ICSID Convention. More specifically, Argentina was not disputing that the Claimant met moreover the requirements of being a U.S. company under the BIT.14
With respect to the requirement that the dispute be of a "legal" nature, the Tribunal considered decisively the fact that the Claimant invoked specific legal acts and provisions as the foundation of its claim. In fact, the Claimant indicated that certain measures taken by Argentina have affected its legal rights stemming from contracts, legislation and the BIT. The Claimant further indicated specific provisions of the BIT granting various types of legal protection to its investments in Argentina, that in its view have been breached by those measures. The Tribunal then "concluded that the Claimant had made legal claims against Argentina, so that the Tribunal was presented with a legal dispute within its jurisdiction."15
With respect to the requirement that the dispute arises "directly" out of an investment, the Tribunal dismissed the objection of the Respondent according to which the measures impugned by the Claimant were general measures taken by Argentina in case of emergency and affecting all the sectors of its economy and not "specifically" addressed against Continental's investments. The Tribunal, on the contrary, considered satisfied the jurisdictional requirement at issue since, in the first place, from a textual point of view the term "specific" cannot be considered as a synonym of "directly." A measure of the host State can affect directly an investment, so that the dispute as to the international legality of that measure arises directly out of that investment, even if the measure is not specifically aimed at that investment. The Tribunal then considered that "[t]he requirement that the dispute arises directly from an investment is surely met when, as in the present case, the Claimant challenges some measures of the host State that affected directly the investment, in that they were applicable and were applied to such an investment. There is no doubt that the measures of Argentina described by the Claimant brought about, immediately and directly, an unfavorable change of the legal and economic regime applicable to the assets in Argentina that Continental indicates represented its investment in that country, in breach - according to Continental - to Argentina's obligations under the BIT."16
With respect to the requirement concerning the definition of the investment under the BIT (i.e. the ius standi of the Claimant), the Tribunal dismissed the objection of the Respondent according to which the Claimant had submitted an "indirect" claim as shareholder, for damages suffered by the company that represents its investment. The Tribunal acknowledged that "[t]he question whether under a BIT, such as the one at issue here, a controlling or even a minority foreign shareholder can bring a suit for the damages suffered by the local company, in which it hold shares, caused by expropriation or other measures affecting directly the economic rights of the shareholders, is a key legal issue in many disputes brought under BITs." It then proceeded by interpreting the BIT provision containing the definition of the investments covered by the Treaty and came to the conclusion that "the treaty protection is not limited to the free enjoyment of the shares, [...] It also extends to the standards of protection spelled out in the BIT with regard to the operation of the local company that represents the investment." Moreover, "the specific listing" in the BIT provision at issue "of various ‘associated activities', which typically pertain to FDI, indicates that in case of acquisition of a company established in the other country the scope of its application is not merely limited to the ownerships of the shares."

D. The Tribunal's conclusion on the objections to jurisdiction

The Tribunal concluded that the Claimant, as a corporate investor in an Argentinean company, enjoyed ius standi under the BIT, "even assuming that the measures taken by Argentina and challenged by Continental as having breached its treaty rights were addressed and affected primarily or essentially the assets, investments, activities of the wholly owned subsidiary of Continental in Argentina." In view of certain statements by the Claimant that the measures taken by Argentina "violated specific commitments in treaties, legislation and contracts" such as those "made by Argentina to CNA ART in GGLs and LETEs," the Tribunal recalled that "it is the concurrent denunciation of an alleged breach of a legal commitment stemming from the BIT that brings these actions or measures within the purview of our jurisdiction, not the alleged breach of contractual or legislative provisions per se."17
Finally, with respect to the alleged lack of jurisdiction because the claim was premature or "not ripe," the Tribunal rejected this objection as being without foundation for the following reasons: first of all, "[t]he claim of Continental cannot be considered to be without content because the measures challenged as being in breach of the BIT have not yet been enacted (so that they would be non-existent) or have not yet been applied. This is clearly not the case here." Then, "the possible uncertainty as to the final amount of the damages cannot represent a bar to jurisdiction, especially since the Claimant has petitioned for a declaratory judgment." Finally, the existence of ongoing negotiations with local companies or the foreign shareholders (which are however disputed by the Claimant) cannot represent a bar to the introduction or furtherance of an international claim such as the one at issue."18

III. The Procedure Leading to the Award on the Merits

Once the jurisdiction of the Tribunal had been affirmed, proceedings resumed on the merits in accordance with Procedural Order No. 1, issued on the same day as the Decision on Jurisdiction. Since the Claimant had already filed its Memorial on the merits (on April 27, 2004), the Respondent filed its Counter-Memorial on the merits on May 8, 2006.

A. Argentina's arguments

In its Counter-Memorial on the Merits of May 8, 2006, Argentina starts with the factual examination of the economic context in which the measures complained of by the Claimant were taken. In Argentina's view, the State "faced a terminal situation and had to forcibly change the economic plan of the country as a result of the devaluation of the local currency."19 "The crisis became an emergency situation when it turned into an institutional, social and economic collapse of unprecedented seriousness and depth in the country's history."20 "The financial system was on the verge of collapse. The Central Bank reserves had dropped significantly and, even if by the end of December 2001 the exchange rate in effect was formally still 1 peso = dollar 1, before the Emergency Law was passed, in practice the peso had already been devaluated."21 "The sovereign debt service difficulties faced by the Government were also evident, and by the end of December 2001 the Argentine Republic had no choice but to suspend payment of its sovereign debt obligations with private holders."22 "The social situation was dreadful and the unemployment rate was above twenty per cent (20%) of the active population."23 Argentina maintains that "[t]he Emergency Law," passed on January 6, 2002, "is not the cause of the economic emergency but a regulatory consequence intended to cure through realistic measures the existing state of necessity;"24 [...] "The Emergency Law only provided the institutional framework for a situation already existing in practice: the 1 to 1 peso-dollar convertibility had disappeared."25 Argentina then describes in turn the economic, the social, the political and the institutional aspects of what it defines as a "collapse" of the State.
In its Counter-Memorial on the merits, Argentina opposes the claims advanced by Continental. First of all, it maintains that it allowed, at all times, transfers in connection with investments in accordance with Article V of the BIT. In this respect, Argentina observed that "[d]uring a short period of time, BCRA authorization was required for that purpose, but neither CONTINENTAL nor CNA ART ever asked for such authorization." Moreover, according to the Respondent, "the actions brought into question by CONTINENTAL, which did not prevent them from transferring funds anyway, are expressly authorized by article XI of the BIT, which entitles a signatory State to take ‘measures necessary for the maintenance of public order. or the protection of its own essential security interests'."26
Secondly, as far as the alleged violation of Article IV of the BIT concerning expropriation is concerned, Argentina considers the claim inadmissible since the measures complained of did not affect Continental's investment value. Argentina maintains that "[t]he existence of an expropriation regarding such investment is impossible, as long as, after the adoption of measures that CONTINENTAL qualifies as expropriation and in spite of the fact that the Argentine Republic underwent the most serious economic crisis in its history, such investment is nowadays worth three times its value before the crisis, in U.S. dollars."27 In fact, "CONTINENTAL does not base its claim upon a reduction in its investment value, the shareholding in CNA, but on alleged reductions in the value of CNA investments and on measures that could have affected such investments."28 Additionally, in Argentina's view, the Claimant "confusedly invokes a de facto expropriation of certain contractual rights pertaining to CNA [...] Continental cannot make claims for alleged damages to CNA investments but only for damages to its investment, i.e. shareholding in CNA."29 According to Argentina, this claim should be dismissed since, firstly, "neither CNA nor CONTINENTAL have ever claimed before Argentine courts a redress of their allegedly affected contractual rights;"30 secondly, such rights or investments were not substantially affected in spite of the terminal crisis in the Argentine Republic, but "had a financial performance, on average, higher than the one they would have obtained provided they had been invested at a free from risk rate." Finally, Argentina describes the evolution of CNA Art throughout the crisis31 and concludes as follows:

1. - In the hard road towards restoring the country's economic and financial situation to normal, different options were available to the holders of deposits made with financial institutions.

2. - The holders of deposits had to state whether they wanted to choose any of the options offered by the Argentine Government, which varied according to the progress of the recovery of the country's economic, financial and social situation.

3. - That being so, three options were available to CNA ART in order to get back its deposited amounts, and it decided to go for the third of them.

4. - Through the option chosen by CNA ART, it had access to the release of its rescheduled deposits receiving also "BODEN 2013" bonds for the difference between the original face value of the Rescheduled Deposit adjusted by CER as of April 1, 2003 and the value of the dollar in the exchange market as of the same date.

5. - CNA ART was able to recoup its deposited amounts thanks to the options offered by the Argentine State, as it prevented the financial system from falling apart [...]

6.- Notwithstanding the option exercised by CNA ART, it should be noted that financial institutions could offer enhancements on the conditions established for the return of rescheduled deposits, such as bringing forward the schedule of payments, prepayments or acknowledgement of higher interest rates. If the banks with which CNA ART made the deposits offered no enhancement, this is attributable only to those banks and ultimately to CNA ART, which is responsible for choosing the financial institutions with which the deposits were made.32

Thirdly, Argentina opposes the claim concerning the alleged violation of article II(2)(b) of the BIT according to which a foreign investment has to be accorded treatment in accordance with international law, including fair and equitable treatment and full protection and security. Argentina submits that "investments made by CONTINENTAL, as it happens with the remaining foreign investments, have been considered in accordance with international law."33 According to Argentina, "the fair and equitable treatment standard (as well as the remaining treatment standards), in connection to which CONTINENTAL invokes its violation, must be compulsorily applied considering especially the circumstances under which such measures were adopted."34 "Nobody can deny that the Argentine Republic experienced (and it still does) a ‘dramatic economic situation'." No one can deny that when adopting the measures nowadays CONTINENTAL questions, the Argentine authorities had in mind the interests of almost 40 million inhabitants of the Argentine Republic, obviously including the interests of investors. Within such a context, the allegation made by CONTINENTAL should be considered inadmissible as regards the violation of the standards of treatment."35 Argentina furnishes in any case its evaluation of the standards of treatment provided for by Art. II of the BIT and comes to the conclusion "that investments made by CONTINENTAL, as it happens with the remaining foreign investments, have been considered in accordance with international law."36 Argentina therefore concludes that:

a) At all times CONTINENTAL's investment was granted fair and equitable treatment in accordance with international law.

b) The fair and equitable treatment is the minimum international treatment, understanding that the latter is a standard which means reasonability, proportionality and no discrimination.

c) The measures alleged to be infringing are proportional to the situation in which they were passed, and they are reasonable. The reasonability of such measures was based on the re-establishment of a balance among all the economic agents of society. The measures were not inconsistent because not only did they take into account the whole society, but also they re-adapted the circumstances to the prevailing economic situation.37

Finally, Argentina opposes the alleged violation of Article II(2)(c) of the BIT regarding the requirement to observe "obligations entered into with regard to investments." In this respect, Argentina maintains not to have violated any commitment towards the Claimant. The Respondent gives its assessment of "umbrella clauses" under international law, especially in light of arbitral practice and then proposes its interpretation of the umbrella clause of the BIT between Argentina and the U.S. According to Argentina, the umbrella clause of the BIT "is intended to protect the commitments assumed by the Argentine Republic towards foreign investors protected by the BIT, not contractual obligations." Thus, according to Argentina, it would not apply to the dispute at issue since "it does not apply to contracts entered into between CNA ART and the Argentine Republic."38
In case the Tribunal should conclude for a violation of the articles of the BIT invoked by the Claimant, Argentina invokes Art. XI of the BIT in order to justify the measures it adopted to face the severe crisis, which affected the country.39 In this context, Argentina also invokes Art. IV(3) of the BIT, which regards the protection of foreign investors suffering losses "owing to war or other armed conflict, revolution, state of national emergency, insurrection, civil disturbance or other similar events." This provision requires the contracting parties to apply a non-discriminatory treatment (according either to the Most Favored Nation or to the National Treatment principles) to the foreign investor "as regards any measures [they] adopt in relation to such losses."40 As to Art. XI of the BIT, first of all Argentina claims that a "bona fide invocation of Article XI of the BIT should be sufficient for the Tribunal to dismiss the claims made by the Claimant under such BIT, as both parties to the Treaty accorded that each State had the exclusive right to decide whether its own measures were covered by such Article."41 Argentina submits that since its measures were necessary "for the maintenance of public order" and also "for the protection of [its] own essential security interests" they "could never amount to a violation of the BIT or give rise to international liability on the part of the Argentine Republic."42
Argentina then asserts the "constitutionality of the state of necessity and emergency under Argentine law."43 "In accordance with the provisions of Sections 76 and 99(3) of the Constitution, an economic emergency is one of the situations expressly contemplated in the Constitution."44 "Subsidiarily," the Argentine Republic invokes the application of the state of necessity under international law to the present case "should the Tribunal consider that the provisions of articles IV(3) and XI of the BIT are not applicable to this controversy."45 In this respect, Argentina claims that all the requirements associated with the customary rule on the State of Necessity, as codified by the ILC in its works on State responsibility and specifically in Art. 25 of its draft articles on the subject matter, were satisfied in the present dispute. Namely, that "the State did not contribute to the state of necessity;" that "[t]he actions taken were the only way to safeguard an essential interest from grave and impending danger;" and that "no essential interest has been affected of the State or States in connection with which the obligation exists, or the community as a whole."46 Moreover, according to Argentina, "[w]ith respect to the treatment afforded by the Argentine Republic to foreign investors in the context of the state of emergency, [...] such treatment was not less favorable than the one afforded to nationals (who stoically suffered the crisis) and other investors, regardless of their citizenship." Argentina refers to its arguments on the standards of treatment mentioned here above.47
In its Counter-Memorial, Argentina does not address the issue of the damage that Continental claims to have suffered as a consequence of Argentina's alleged breaches. Argentina filed, however, an evaluation Report dated March 20, 2006 by AGM Finanzas (signed by Daniel Marx and José M.Echagüe) according to which CNA ART, and hence Continental, has suffered no damages due to Argentina's measures. On the contrary, according to this Report, both in terms of pesos and in terms of U.S. dollars, the value of CNA had increased considerably from November 2001 to March 2006.

B. The Claimant's arguments

On July 26, 2006 the Tribunal issued Procedural Order No.2 to settle certain questions regarding the submission of evidence to the Tribunal. Thereupon, the Claimant filed its Reply on August 17, 2006 and the Respondent filed its Rejoinder on October 20, 2006.
In its Reply dated August 17, 2006, the Claimant furnishes a descriptive context of the policies enacted by Argentina in the period preceding the crisis in order to show the Respondent's contribution to the crisis itself. Specifically, the Claimant points out that "Argentina failed to adopt policies to support its currency board." "Prior to 2001, Argentina made a number of serious policy mistakes [...] In particular: the lack of fiscal discipline and the failure to address deep rooted labor market and trade restrictions "which in the end "created a lack of credibility." "Instead, Argentina could have implemented economic policies that would have supported the ability of the currency board to withstand an economic recession."48
The Claimant, moreover, contests Argentina's allegation that "this Tribunal should deny recovery on the grounds that CNA ART voluntarily maintained assets in a country with high sovereign risk."49 The Claimant contests the behavior taken by the Respondent, which "promised to refrain from interference with Bank Deposits, then froze and pesified them;"50 "promised to honor its government debt, then defaulted on and pesified it."51 According to the Claimant, "[t]hese measures impugned the BITs provisions on expropriation, fair and equitable treatment, contracts observance and transfers."52
The Claimant points out to a number of factual elements in order to contest the alleged necessity of the specific measures taken by Argentina to overcome the crisis.53 The Claimant stresses that "in any event, the devaluation of the peso per se is not being challenged in this arbitration, only the subsequent pesification of U.S. dollars denominated contracts. an unusual and extraordinary measure." The Claimant adds that "[o]ther countries have pursued devaluation successfully without interfering with the property and contract rights of the holders of U.S. dollar-denominated contracts" by following alternative approaches.54 The Claimant further submits that the impugned measures themselves "inflamed social unrest" and that "their stated rationale has long since disappeared." Since Argentina's economy has now fully recovered, the Claimant concludes in this respect that "deposit holders should be fully compensated for the confiscatory pesification of their deposits."55
As to the applicable legal standards under the BIT, the Claimant then refers back and elaborates further the arguments it had already developed in its Memorial on the Merits in order to establish the violation by Argentina of the various articles of the BIT that the Claimant had invoked in its previous submissions. Continental addresses first, its claims that Argentina breached Art. II(2)(c) of the BIT concerning the obligation to observe contractual obligations.56 Furthermore, "[i]n the alternative, should this Tribunal determine that Article II(2)(c) applies only to obligations Argentina may have entered into with claimants (rather than ‘with regard to investments')," the Claimant indicates that "then CNA ART directly makes an ancillary claim for breach of this obligation."57 According to the Claimant, this ancillary claim would be allowed under the terms of Art. 25(2)(b) of the ICSID Convention, which "enables a locally incorporated company that is subject to foreign control to claim as if it were a national of the other contracting Party," provided that the contracting parties have so agreed. In the Claimant's view, the required agreement is to be found at Art. VII(8) of the BIT itself, which provides as follows:

For purposes of an arbitration held under paragraph 3 of this Article, any company legally constituted under the applicable laws and regulations of a Party or a political subdivision thereof but that, immediately before the occurrence of the event or events giving rise to the dispute, was an investment of nationals or companies of the other Party, shall be treated as a national or company of such other Party in accordance with Article 25(2)(b) of the ICSID Convention.58

As a matter of procedure, Continental claims that the Tribunal is empowered to add CNA ART as a claimant pursuant to Article 46 of the ICSID Convention.59
Secondly, Continental reasserted its claim about the violation of the obligation to compensate following an act of expropriation, provided for by Art. IV of the BIT. The Claimant argues that "CNA ART's assets are protected from expropriation;" that "legislation extinguishing intangible property rights is an expropriation;" and that "Argentine law continues to consider the measures as an expropriation." Continental points out to Argentina's Supreme Court decisions Smith and San Luis that declared "Decree 1570 to be unconstitutional on the grounds that it was an unreasonable measure, lacking in proportionality between the deprivation of property rights and the objective of averting the crisis;" and "the pesification of bank deposits through Decree 214 to be unconstitutional."60 Those cases "were based on Article 17 of the Argentine Constitution which provides that:

The right to property is inviolable and no inhabitant of the Nation can be deprived of it except by judicial decision founded in the law.61

The Claimant observes that "the Intangibility Law specifically declared that bank deposits were vested property rights entitled to the protections of Article 17."62
Thirdly, Continental reaffirms its claim about the violation of the obligation to treat the foreign investor according to the international law standard of treatment, provided for by Art. II(2)(a) of the BIT. This Article provides that:

Investment shall at all times be accorded fair and equitable treatment, shall enjoy full protection and security and shall in no case be accorded treatment less than that required by international law.

According to the Claimant, the article obliges Argentina "to provide a stable legal and business environment"63 and "to protect the investor's legitimate expectations."64
Finally, as to the obligation to permit free transfers, provided for by Art. V of the BIT, Continental asserts that "Article V Protects Transfers of CNA ART's Assets"65 and that "Article V proscribes any interference with the transfer of CNA ART's Assets."66
According to the Claimant, in the light of what it considers to be the legal import of the BIT provisions it relies upon, Argentina breached its treaty obligations through Decree 1570 (Corralito);67 by pesification of bank deposits through Decree 214;68 by pesification of government debt through Decree 471;69 by the unilateral rescheduling of deposits and default on debt.70
The Claimant denies that Argentina could rely on the defense of necessity. On the one hand, the conditions required by the customary rule on the State of Necessity are not satisfied in the present case; on the other hand, it argues that Art. XI of the BIT cannot be applied. As to the customary international law defense of necessity, Continental argues that "Argentina has failed to satisfy any of the cumulative elements of the defense of necessity."71 According to the Claimant, Argentina was not threatened by a grave and imminent peril to an essential interest, such as the existence of the State; Argentina's actions were not "the only means to safeguard itself from the grave and imminent peril to its essential interest," since other means consistent with the BIT were available to it; and Argentina contributed to the state of necessity. Finally Continental considers that "[e]ven if Argentina can successfully invoke the defense of necessity, Argentina must compensate the Claimant."72
As to Art. XI, Continental denies in the first place that the provision is self-judging, relying on the various means of interpretation of international treaties. Furthermore, Continental asserts that the requirements provided for by Art. XI have not been met: the correct interpretation of concepts like "essential security interests" and "public order" leads Continental to deny that such values were threatened when Argentina adopted the measures complained of by the Claimant.73 Continental also denies that the measures adopted by Argentina in order to protect such values were "necessary" in light of the correct interpretation of Article XI.74
Continental concludes that, should the Tribunal find that Art. XI of the BIT is applicable in the present case, "Argentina must still compensate the investor."75

Continental asserts further that Argentina cannot rely on Article IV(3) to avoid such compensation. "Regardless of whether Argentina faced circumstances falling within the scope of Article IV(3), the Investor does not claim Argentina has compensated foreigners and locals unequally and, therefore, Article IV(3) is irrelevant to this claim."76

In the last part of its Reply, the Claimant develops its arguments concerning the amount of damages it has suffered from Argentina's breaches of the Treaty. According to the Claimant, this "calculation. is straightforward. But for Argentina's actions in breach of the Treaty, the Claimant would have received the value of the principal and interest payable on CNA ART's financial securities in accordance with their terms. The Claimant would have received the value of its U.S. dollar deposits and the value of its government loans at the agreed rate of interest."77 Instead, "[a]s a consequence of Argentina's breaches, the Claimant received a fraction of this value. The Claimant received financial securities pesified at a confiscatory exchange rate and certificates of deposit and government loans with unilaterally reduced rates of interest. In the case of the LETEs, the Claimant received nothing at all."78 Continental challenges Argentina's claim that the Claimant suffered no damage. Based on the Reply Report of its expert Mr. Rosen, Continental argues that the "AGM's conclusion that the Claimant has suffered no damages" based "on the alleged growth of CNA ART's overall equity since Argentina took its measures in breach of the Treaty" is based on a "completely inappropriate" methodology.79
Quite to the contrary, the Claimant asserts it has suffered substantial losses / damages. It has included in its Reply the following table reproduced from the Rosen Reply Report, which summarizes the Investor's damages from Argentina's breaches of the BIT:

Losses Due to

C. Argentina's counter-arguments

In its Rejoinder of October 20, 2006, Argentina replies to the arguments that the Claimant has developed in its Reply. First of all, Argentina opposes the Claimant's attempt to introduce a new party into the arbitration (CNA ART), at this late stage of the proceedings and requests that it be rejected as inadmissible and contrary to Art. 36(2) of the ICSID Convention80 and Arbitration Rules. "Argentina will not argue at this point whether CNA ART can invoke Article 25(2)(b) in fine of the ICSID Convention or whether it complies with the requirements expressed in Article VII(8) of the BIT," since "[t]hese are matters which affect the claim's admissibility and the Tribunal's competence (apart from other jurisdiction-related and/or preliminary issues that might come up in connection with CNA ART), which Argentina has the right to address as exceptions to the Centre's jurisdiction or the Tribunal's competence in view of Rule 41 of the Arbitration Rules. As to the merits, Argentina claims that introducing CNA ART at this point would also seriously violate Argentina's right of defense in various ways. The right for a party to submit an additional claim under Art. 46 of the Convention does not include in Argentina's view the right to introduce additional parties into the proceedings.81
Secondly, Argentina insists on its description of the context "in which the measures applied during the collapse in 2001 were taken," reiterating that what the country suffered was a "collapse that goes beyond an economic crisis."82 In particular, Argentina stresses that "measures taken were necessary to counteract the effects of the crisis" and that "the challenged measures were not the cause of the social unrest."83
Next, Argentina then resumes its arguments against the claims raised by the Claimant. Firstly, Argentina reiterates that it cannot have expropriated Continental's investment since "the value of CNA ART's equity increased by almost threefold-measured in U.S. dollars- than what it was worth before the crisis."84 In fact, "the Claimant grounds its claim not in the decrease in the value of its investment (the interest in CNA ART) but alleged decreases in the value of CNA ART's investments and the measures that would have affected such investments."85
Secondly, "Argentina confirm[ed] the grounds presented in its Counter-Memorial and restates that it granted CONTINENTAL a treatment in conformity with the provisions of Article II.2(a) and (b) of the BIT at all times."86 Argentina reiterates its position already stated in its Counter-Memorial according to which "the fair and equitable treatment standard should be applied taking special consideration of the special circumstances in which the challenged measures were adopted."87 Argentina maintains that "at no time (had it) stopped meeting its treatment obligations during the course of the crisis."88 According to Argentina "[t]he fair and equitable treatment standard does not have as an objective to guarantee an objective and immutable right to the stability of the juristic order where the investment is carried out. On the contrary it should be interpreted as including the basic powers of the States of maintaining public order and facing emergencies."89 Argentina adds that "[a]nother interpretation would turn the BITs into an insurance policy that would make the State respond in light of any situation regardless of the external circumstances motivating the State's acts."
Thirdly, Argentina reiterates that it did not violate Art. V of the BIT in regard to transfers. First of all, Argentina claims that Art. V concerns only foreign investors and not local subsidiaries as CNA ART. Argentina draws support for this position from the Claimant's request to "legitimize CNA ART as a party in this controversy."90 Argentina further argues that Art. V does not prevent "specific regulations for balance-of-payment difficulties" in view of Art. XI of the BIT and the "standards established in multilateral agreements which both Argentina and the United States -the parties involved in the BIT applicable in this arbitration- have signed," with specific mention of GATT, GATS and the IMF.91 Argentina also claims that its regulations of monetary transfers conform with international customary law, as a manifestation of the exercise of monetary sovereignty by States, in view of the severe difficulties in its balance-of-payment.92 Therefore Argentina adds that "if CONTINENTAL wanted to make transfers abroad of money derived from revenues and dividends, they could be made by previously requesting the authorization from the corresponding authority, i.e., the BCRA."93 However, Argentina submits that Art. V(1)(e) "protects transfers of the proceeds of the sale or liquidation of all or any part of an investment" but that this was not the case since CNA ART and not "CONTINENTAL was the holder of the bank deposits."94
Next, Argentina opposes again the Claimant's argument about the alleged violation of Art. II(2)(c) of the BIT. Firstly, it maintains that it had never "adopted any commitment towards CONTINENTAL." According to Argentina, Continental "intends to 'turn' a claim of contractual nature which is not its own into a claim for violations of the BIT."95 Continental's claim on this ground should thus be considered inadmissible since "CONTINENTAL is acting on its own behalf, on the basis of an alleged violation of rights which are entitled to CNA ART. CONTINENTAL is not acting on behalf of CNA ART."96 Argentina points out "the contractual nature of the claim," opposing "CONTINENTAL's extensive interpretation" of Art. II (2)(b) of the BIT.97
As to Art. XI of the BIT, Argentina points out that it "requested the Tribunal to apply Article XI of the BIT to this dispute... notwithstanding the fact that the measures under analysis did not violate any BIT standard."98 Argentina submits that Art. XI of the BIT and the customary rule on the State of Necessity are two different rules since they come from "autonomous sources of international law," namely treaty and customary law respectively.99 Argentina adds that, contrary to Continental's assertions, the Report by professors Slaughter and Burke White - submitted as expert's testimony by Argentina -does not support the opinion that "Article XI is lex specialis within the customary lex generalis of the state of necessity."100
Argentina then opposes the Claimant's interpretation of Art. XI of the BIT. With regard to the reference to the "essential security interests," Argentina contests the argument according to which it would "comprise only the external threats against the country."101 On the contrary, according to Argentina, "the terms ‘essential security interests' should be interpreted in a broad manner and they include crises as the one suffered by the Argentine Republic."102 Argentina also opposes the Claimant's views that the term "public order" in Art. XI, has to be assimilated with the concept of public order [ ordre public ] under private international law.103 According to Argentina, on the contrary, "within the concept of public order" are to be included "at least the protection of public security and other powers included within the State's police power."104 Finally, Argentina submits that the term "necessary" contained in Art. XI of the BIT must be interpreted in line with the GATT-WTO case-law, under which "necessary" is not synonymous of "indispensable."105
As far as the issue of compensation is concerned, Argentina opposes Continental's allegation that "even if the requirements under Article XI were fulfilled with respect to this case, the Argentine Republic should compensate it." According to Argentina, on the contrary, if Art. XI is applicable to the dispute at issue no compensation is due since "there is no treaty violation."106
Argentina also reiterates its position that application of Art. XI of the BIT is self-judging. Finally, as to the invocation of the State of Necessity under customary international law, Argentina challenges Continental's reliance on the CMS v. Argentina ICSID award and invokes instead the decision in the LG&E v. Argentina case. Argentina reiterates that "the measures were the only means of safeguarding an essential interest from a serious and imminent peril."107
Argentina then specifies its defense based on the customary rule on the State of Necessity contended in its Counter-Memorial, in the alternative with respect to the one based on Art. XI of the BIT. Argentina concludes that all the requirements associated with the customary rule were satisfied in the present case, contrary to the Claimant's allegations.108
In the final pages of its Rejoinder, Argentina deals with Continental's request of compensation for the damage it has suffered, denying that the investor suffered any damage based on the Max & Echagüe Report.109 Finally, Argentina denies Continental's argument that a forcible effect of pesification was to "trigger additional tax liabilities for CNA ART." According to Argentina, the income tax that was applied to all residents of Argentina does not constitute an expropriatory act and was not discriminatory, nor extraordinary or punitive.110
On November 13, 2006, the Tribunal issued Procedural Order No. 3 deciding the schedule for the Hearing to be held from November 27 to December 3, 2006; requiring to the disputing parties some additional information in order to fill a Chronological Table of the relevant events and measures at issue in the present dispute; asking the parties to send to the Secretary of the Tribunal a list of persons who would be attending the hearing as counsel, party representatives, witnesses and experts. The parties complied with those requests. The Hearing on the Merits took place from November 27 to December 3, 2006 at the seat of the Centre in Washington, D.C. At the hearing the Claimant was represented by: Messrs. Barry Appleton, Robert Wisner, Hernando Otero, Nick Gallus and Ms. Asha Kaushal of the law firm of Appleton & Associates International Lawyers. The Respondent was represented by the Office of the Procuración del Tesoro de la Nación Argentina, in person of the Procurador Mr. Oswaldo César Guglielmino assisted by: Mr. Jorge Barraguirre, Ms. Cintia Yaryura, Mr. Fabían Markaida, Mr. Gabriel Bottíni, Mr. Ignacio Torterola, Ms. María Victoria Vitali, Mr. Nicolás Duhalde, Ms. Veronica Lavista, Mr. Diego Brian Gosis, and Mr. Norberto Ariel Martins. The witnesses and experts presented by the Claimant's counsel for oral examination were: Gary J. Owcar; César Bunge; Kenneth Vandevelde; Howard Rosen; Sebastian Edwards. Mr. Samitier was also present as party representative for Continental. The following witnesses and experts testified on behalf of the Argentine Republic: Roberto Frenkel & Mario Damill; Eduardo Ratti; Federico Molina; Roberto Fortunati; Augusto Belluscio; A.M. Slaughter & B. White; Daniel Marx & José M. Echagüe. Each party cross-examined the witnesses and experts of the other party as far as they requested.
Pursuant to the Procedural Direction of the Tribunal dated December 12, 2006, the Claimant and the Respondent filed their Post-Hearing Briefs on January 22, 2007. Afterwards, the Claimant and the Respondent filed their Post-Hearing Replies on March 9, 2007. Both parties presented their Statements of Costs on April 10, 2007. In the above-mentioned Procedural Direction the Tribunal also indicated that it would decide together with the merits the admissibility of the "ancillary claim" advanced by the Claimant in its Reply and opposed by Argentina concerning the addition of CNA ART as a claimant.
Thereafter, the Tribunal declared the file closed to the parties on May 11, 2007. On June 25, 2007 Argentina wrote to the Tribunal asking that the Tribunal take into account as "a decisive factor for the resolution of the present dispute" an attached letter of the U.S. Department of State to former Legal Advisor Abraham Soafer (filed by a Claimant against Argentina in another ICSID dispute against Argentina in a pending arbitration under the U.S.-Argentina BIT) where the U.S. Department of State states, inter alia, that ".the position of the U.S. Government is that the essential security language in our FCN treaties and Bilateral Investment treaties is self-judging [...]." The Claimant asked the Tribunal "to ignore this untimely material" adding that "even if the Tribunal decides to consider the document, it sheds no greater light on the meaning of the essential security interests provision in the Argentina-U.S. treaty."
The Tribunal answered to the parties on July, 6, 2007 admitting the document (and allowing the Claimant to comment in writing on it) notwithstanding the file had been declared closed to the parties, stating various reasons justifying that it "represents a rare exception to the above mentioned ruling."111 The Claimant duly filed its comments on July 16, 2007, restating its position that this standard "Employment Ethics Letter" by the Department of State was irrelevant, since it "is not a letter about the meaning of the Argentine-U.S. BIT," does not evidence any agreement between the Contracting Parties to the BIT that Article XI is self-judging, is irrelevant under the Vienna Convention on the Law of Treaties, and is generally far from a "decisive factor for the resolution of the dispute" contrary to Argentina's claim.112
The Tribunal declared the proceedings closed in accordance with ArbitrationRule 38 on April 24, 2008.

IV. Preliminary Issue

A. Continental's request to add CNA ART as a Claimant

In its Reply Continental has submitted that the "Umbrella Clause" of Art. II (2)(c) of the BIT also applies to obligations entered by the host State "with an investment" of the protected covered investor, thus here CNA. Continental has also submitted that "should this Tribunal determine that Article II (2)(c) applies only to obligations Argentina may have entered into with claimants (rather than "with regard to investments"), then CNA ART makes directly an ancillary claim for breach of this obligation."113 According to Continental, this ancillary claim is permissible under Art. 25 (2)(b) of the ICSID Convention, which is referred to at Art. VII (8) of the BIT.114 As a matter of procedure, Continental claims that the Tribunal "is empowered to add CNA ART as a claimant pursuant to Article 46 of the ICSID Convention" which establishes the competence of an ICSID Tribunal to "determine any incidental or ancillary claims or counterclaims arising directly out of the subject-matter of the dispute provided that they are within the scope of the consent of the parties and are otherwise within the jurisdiction of the Centre."
Argentina opposes the introduction of a new party mid-way through these pending arbitration proceedings, as being contrary to various provisions of the ICSID Convention and related procedural rules. Argentina also submits that the introduction of such a new party would adversely affect its position as a respondent and its rights of defense.115

B. Tribunal's Conclusion

The Tribunal recognizes that Art. VII (8) of the BIT could allow CNA to initiate separate arbitration proceedings against Argentina on the basis of Art. 25 (2)(b) of the ICSID Convention. It is also correct that Art. 46 of the ICSID Convention permits a tribunal to determine additional claims to be introduced in pending proceedings, subject to any agreement otherwise between the parties (of which none exists here). However these are two very different procedures. We fail to see how Art. 46 of the ICSID Convention allowing the introduction of an additional claim in a pending dispute between the same disputant parties could possibly justify the introduction into that arbitration of an additional third person with its own new claim, moreover at a late stage of the proceedings. An "incidental or additional claim" to the principal claim initially submitted clearly refers in Art. 46 to the relationship of this new claim with those claims already made in the pending proceedings by the same claimant; that is what "additional" and "incidental" signify in their ordinary meaning; and Art. 46 does not permit an extension of the dispute ratione personae. Moreover, as a further relevant factor in this case, the due process concerns raised by Argentina against the late introduction of a new claimant and a new claim are well founded in the view of the Tribunal.
We observe further that it is not CNA that has asked to be joined in the pending dispute; it was its parent Continental that purported to add it to the dispute as a coclaimant, an initiative that finds no support in the ICSID rules. Such an addition of CNA appears in any case unnecessary in the light of the objectives asserted by the Claimant. If a contract or other obligation entered into by the host State is found to be covered by Art. II (2)(c) of the BIT because it was entered into "in regard to investments," notwithstanding the fact that it was entered into with the local subsidiary of the foreign investor, it would be immaterial if, procedurally, the claim is brought by the foreign investor directly, or by its local subsidiary relying on Art. VII (8) of the BIT in conjunction with Art. 25 (2)(b) of the ICSID Convention.
The Tribunal, for these reasons, rejects the request of the Claimant in the above respect.

V. Factual Background

A. The economic evolution of Argentina from the introduction of the convertibility regime (1991) to the crisis (2001)

a) General overview

All measures (the "Measures"), which Continental challenges, were enacted by Argentina during the well-known economic, political and social crisis which the country experienced during 2001-2002,116 as a response to that crisis and in attempts to control and overcome it. In different ways, all the Measures reflected, brought about, formalized or implemented the abrupt and traumatic abolition of the convertibility regime. The introduction of bank deposit freezes and of foreign exchange controls (Corralito, Decree 1570 of December 1, 2001) were the first Measures introduced. The Public Emergency Law 25,561 of January 6, 2002, and Measures adopted thereunder provided for the official abolition of the convertibility regime and of the connected pegging of the peso with the U.S. dollar, as well as the forced conversion into pesos of all dollar denominated financial instruments, indebtedness and contracts ("pesification"). A further set of Measures adopted under Law 25,561 acknowledged and formalized the default of Argentina on its internal and external debt and provided subsequently for that debt's restructuring with the aim of progressively restoring normal economic and financial conditions. Certain of these Measures affecting the Claimant have also been challenged by Continental as being in breach with BITs obligations.
Continental, on the one hand, relies on the convertibility regime as representing a standard of treatment to which it was entitled and the abolition of which, especially as to how it was carried out through the Measures, breached various BIT provisions to its financial detriment. On the other hand, Argentina claims that the Measures are justified because of the "economic, social and institutional crisis precipitated in the Argentine Republic, which was the gravest of the country's history," so to render the context within which the Argentina's Measures were adopted absolutely exceptional.117
It is therefore appropriate to summarize at the outset the economic evolution of Argentina following the introduction of the convertibility regime in 1991 up to the crisis, including the latter's causes, with a specific focus on the legal aspects of this regime as well as on the nature and effects of the various Measures. This part of the Award contains the factual basis for the Tribunal's consideration of Argentina's defense of necessity, including the availability of alternative measures.
In this summary the Tribunal has been much assisted by the Parties' Counsel and the Parties' expert witnesses and related materials. The subject is, of course, vast, difficult and complex. There is no single comprehensive study or chronology adequate for the task facing the Parties and the Tribunal in these proceedings. Moreover, each case addressing Argentina's crisis, with its different parties, claims and legal texts, raises its own special issues and particular considerations. Guided by the issues in the present case, this Tribunal has made its own analysis and arrived at its own decisions based upon the materials presented by the Parties in these proceedings. However, the Tribunal has confirmed such analysis and decisions by relying on authoritative and publicly available reports and studies of an economic and social-political nature, which assist in the narration of the crisis, its causes and responses. A distinction is made below, as appropriate, between objective facts and data, contemporary evaluation of the economic policy pursued by Argentina, and subsequent evaluation based on hindsight, made retrospectively.
As described by the IMF in 2004:

The Convertibility Law, which pegged the Argentine currency to the U.S. dollar in April 1991, was a response to Argentina's dire economic situation at the beginning of the 1990s. Following more than a decade of high inflation and economic stagnation, and after several failed attempts to stabilize the economy, in late 1989 Argentina had fallen into hyperinflation and a virtual economic collapse [...]. The new exchange rate regime, which operated like a currency board, was designated to stabilize the economy by establishing a hard nominal peg with credible assurances of non reversibility. The new peso (set equal to 10,000 australes) was fixed at par with the U.S. dollar and autonomous money creation by the central bank was severely constrained, though less rigidly than in a classical currency board. The exchange rate arrangement was part of a larger Convertibility Plan, which included a broader agenda of market-oriented structural reforms to promote efficiency and productivity in the economy. Various service sectors were deregulated, trade was liberalized, and anti-competitive price-fixing schemes were removed; privatization proceeded vigorously, notably in oil, power, and telecommunications, yielding large capital revenues. [footnotes omitted]118

The investment made by Continental in Omega ART (later CNA ART) in 1997 and completed in 2000 was made in a newly privatized sector (in June 1996), that of workers' accident insurance.119 In general, foreign direct investment inflows were sustained after the convertibility, representing more than 2-3% of GDP from 1995 to 2000 with a peak of 8.46% in the year 1999.120

There have been many descriptions of the evolution of Argentina's economy under the Convertibility Plan from what have been described as the "boom years," to the first deterioration of the country's performance in the second half of 1998, and thereafter to the intensification of Argentina's problems in 2000, ultimately leading to the crisis and the abandonment of the convertibility regime in early January 2002. The Tribunal considers that a useful overview of this evolution relevant for the subsequent legal analysis is set forth in the relevant pages of the "Overview of Economic Developments, 1991-2001," found in the IMF Independent Evaluation Office Report "The IMF and Argentina: 1991-2001" published in 2004, 11-13.126

There was a marked improvement in Argentina's economic performance under the Convertibility Plan, particularly during its early years. Inflation, which was raging at a monthly rate of 27 percent in February 1991, declined to 2.8 percent in May 1991; on an annual basis, inflation fell to single digits in the summer of 1993 and remained low (or even negative) from 1994 to the end of the convertibility regime in early 2002. The overall fiscal balance of the federal government improved significantly from the previous years, with an average budgeted deficit of less than 1% of GDP during 1991-98.

Growth performance was impressive through early 1998, except for a brief set back in 1995 when Argentina was adversely affected by the Mexican crisis. For 1991-98, GDP growth averaged nearly 6 percent a year, vindicating the market-oriented reforms introduced in the early 1990s. Attracted by a more investment-friendly climate, there were large capital inflows in the form of portfolio and direct investments.127 During 1992-99, Argentina received more than $100 billion in net capital inflows, including over $ 60 billion in gross foreign direct investments.

The resilience of the convertibility regime was severely tested by the Mexican crisis in 1995. In response, Argentina launched a rigorous adjustment program under IMF financial support consisting of strong fiscal action and structural reform. When the peg survived and a V-shaped recovery ensued, this was widely interpreted as evidence of the convertibility regime's robustness and credibility. Favorable external circumstances also contributed to this outcome. This was a period in which the U.S. dollar was relatively weak, so the peg did not entail a loss of competitiveness, particularly given the improvements in productivity. Tariff reductions achieved under MERCOSUR also helped promote exports, particularly to Brazil, Argentina's largest trading partner. Capital flows to emerging markets were strong in the mid-1990s and Argentina was a major beneficiary. Argentina was relatively unaffected by the outbreak of the East Asian crisis in 1997; it quickly returned to the international capital markets in December of that year.

In October 1998, the performance of Argentina received the attention of the world when President Carlos Menem shared the podium of the Annual Meetings with the IMF Managing Director, who characterized "the experience of Argentina in recent years" as "exemplary." The Managing Director further remarked: "Argentina has a story to tell the world: a story which is about the importance of fiscal discipline, of structural change, and of monetary policy rigorously maintained."

As it happened, Argentina's performance deteriorated from the second half of 1998, owing to adverse external shocks, including a reversal in capital flows to emerging markets following the Russian default in August 1998; weakening of demand in major trading partners, notably in Brazil; a fall in oil and other commodity prices; general strengthening of the U.S. dollar against the euro; and the 70 percent devaluation of the Brazilian real against the U.S. dollar in early 1999. Real GDP fell by over 3 percent in the second half of 1998, there was a mild pickup in economic activity in the second half of 1999, spurred by increasing government spending in the run-up of the October presidential elections, but this was not sustained and GDP declined by 3½ percent for 1999 as a whole. The economy never recovered through the end of the convertibility regime.

The economic slowdown, coupled with the election-driven surge in public spending in 1999, had important implications for fiscal solvency. Argentina's consolidated fiscal balance had been in deficit throughout the 1990s except in 1993, but the magnitude was not large. Consolidated public sector debt, however, increased more rapidly because of the periodic recognition of off-budget liabilities, including the court-ordered payments of past pension benefits, which averaged over 2 percent of GDP a year during 1993-99. Even so, the rise in the debt-to-GDP ratio was modest as long as growth remained high, and there was even a small decline in the ratio from 1996 to 1997. The situation changed in 1999, when growth decelerated and the public finances deteriorated sharply. The debt-to-GDP ratio rose from 37.7 percent of GDP at end-1997, to 47.6 percent at end-1999, an increase of 10 percentage points in just two years. The ratio would eventually reach 62 percent at end of 2001.

Argentina's problems intensified in 2000, when growing solvency concerns over the cumulative increase in public debt was exacerbated by the continued appreciation of the U.S. dollar and a further drying up of capital flows to emerging market economies. These developments would normally require a smaller current account deficit and a depreciation of the real exchange rate, but the convertibility regime placed severe limitations on the ability of Argentina to achieve this adjustment in a manner that could avoid recession. Argentina initially sought to restore market confidence by negotiating a SBA with the IMF, which it indicated would be treated as precautionary.

Market confidence did not recover as expected and market access was effectively lost later in the year, leading Argentina to seek an augmentation of IMF support. From December 2000 to September 2001, the IMF made a series of decisions to provide exceptional financial support to Argentina, which ultimately amounted to SDR 17 billion, including the undrawn balance under the existing arrangement. However, stabilization proved elusive. The augmentation announced in December 2000 and formally approved in January 2001 had a favorable effect, but it was short-lived. Pressure built up again as it became evident that political support for the agreed measures was lacking and program targets were unlikely to be met.

From the spring of 2001, the authorities took a series of measures in quick succession, including: an announced plan to change the anchor of the convertibility regime from the U.S. dollar to an equally weighted basket of the dollar and the euro (the switch to take effect only when the two currencies reached parity); a series of heterodox industrial or protectionist policies (called "competitiveness plans") involving various tax-exemptions measures in sectors most adversely affected by the recession; and an exchange of outstanding government bonds totaling $30 billion in face value for longer maturity instruments (the so-called mega-swap). Many of these measures, which were taken without consultation with the IMF, were perceived by the markets as desperate or impractical and served to damage market confidence.

Despite these initiatives and the financial support of the IMF, market access could not be restored, and spreads on Argentine bonds rose sharply in the third quarter of 2001. Amid intensified capital flight and deposit runs, capital controls and a partial deposit freeze were introduced in December 2001. With Argentina failing to comply with the fiscal targets, the IMF indicated that it could not clear the disbursement scheduled for December. At the end of December, following the resignation of President Fernando De La Rùa the country partially defaulted on its international obligations. In early January 2002, Argentina formally abandoned the convertibility regime and replaced it with a dual exchange rate system.

Argentina's crisis of 2001-2002 has been described both as "one of the worst economic crises in its history" and "among the most severe of recent economic crises" worldwide.128 It resulted in a massive default of public debt both domestic and international, the latter involving U.S.$141 billion. "The immediate macroeconomic consequences of the crisis were severe. Real GDP fell by about 10% in 2002, bringing the cumulative decline since 1998 to almost 20%.129 Inflation peaked at a monthly rate of about 10% in April 2002, driven by liquidity provisions from the central bank to banks experiencing deposit withdrawals, but then declined, averaging around 40% for the year as a whole.130 More generally the crisis was characterized by severe deflation, a decline in domestic prices as a consequence of the peso overvaluation and the deterioration of the competitiveness of the economy.131 The stock index of Buenos Aires lost more than 60% from 1998 to 2002.132 More important than any of these economic indicators, the crisis lead to substantial social and personal hardship, including the youngest and most vulnerable members of the populations: the unemployment rate rose to above 20% in 2002; and per capita expenses fell off about 74%.133 "The poverty level increased to 54.3% of the urban population of the country and the indigence level reached 24.7%. Between October 1998 and October 2002, the poverty level was doubled, whereas the indigence level increased 358%," most of the increase having taken place from May 2001 on.134 Argentina also points out to other aspects of the social crisis due to the "impossibility of the State to provide the necessary conditions for harmonious development of society as set forth in the Argentine Constitution," due to the gradual deterioration of the State as regards fulfillment of security and health duties.135 The political effects of this massive economic and social crisis, were "the political demonstrations, riots and looting in December 2001 which led to an abrupt end of De La Rúa's government" and the vacuum in the political power that followed his resignation.136 Argentina has concluded from its recapitulation of those events that "the effective control of the government on the territory was seriously endangered, with presidents coming one after the other and riots causing tens [sic] of deaths throughout the country, which entails in turn that the existence of the Argentine Government137 itself was at risk."138 The Tribunal accepts this characterization of the gravity of the crisis confronting Argentina at this particular time.

b) The Deterioration of the financial and economic situation of Argentina in 2001 until Decree 1570 of December 1 (Corralito)

Having thus presented an overview of the developments of Argentina's economy from 1991 to 2001-2002 in general terms, we will here address more specifically the events of the year 2001-2002.139

(i) The events and economic policy initiatives that punctuated the deterioration of the situation of Argentina

In March 2000 the IMF approved a Stand-By Arrangement with Argentina providing an amount equivalent to SDRs 5.4 billion. In its First Review and periodic consultation under Art. IV of the Fund's Articles of Agreement140 released in December 2000, the IMF noted that the economy had slowed down again in 2000, that it continued to adjust to the external shocks it suffered in 1998-99 through domestic cost and price deflation, that competitiveness had improved, that there had been a further decline in nominal wages.141 The Review underlined that the "fiscal program for 2000 was designed to comply with the Fiscal Responsibility Law approved by the Argentine Congress in September 1999, and aimed at reducing the deficit of the federal government... To this end, the authorities early in the year enacted a sizable tax package..., and budgeted a cut in non-interest expenditures equivalent to almost 1 percent of GDP142... The program envisaged a reduction of the overall public sector deficit (including the provinces)." The Review further mentioned that since the effects of the tax package had not materialized due to the sluggish recovery of the economy resulting in a growing shortfall in tax revenues, the authorities had announced in May [2000] "a sizable package of additional spending cuts including a 12-15 percent cut in salaries of civil servants earning more than Arg. $ 1,000 per month"... "The program also envisaged that the fiscal adjustment effort at the federal level would be complemented by improvements in the finance of the provinces, which are responsible for nearly half of total public sector expenditure."143 The Review further noted "[p]rogress was made along a broad front in the structural reform area" pointing out to Labor Market Reform, Health Care, Tax Administration.144
Certain sentences are worth quoting from the "Public Information Notice" annexed to the IMF Report, reporting the conclusion of the IMF Executive Board of September 15, 2000:

Executive Directors welcomed the authorities' strong ownership of, and demonstrated commitment to, their economic program, and the significant progress made so far in improving the fiscal position at both the federal and provincial level, despite cyclical adverse conditions, and in implementing structural reforms (...)

While recognizing these concerns, Directors concurred with the authorities' view that, within the framework of the convertibility regime, the resumption of sustainable growth depended crucially on credible further progress in fiscal consolidation and structural reform. (...)

Directors noted that the convertibility regime, together with a strong financial system, had served Argentina well in weathering the major external shocks that had affected it in recent years. They also noted the strong support of the population for the regime, its demonstrated success in anchoring inflation expectations, and the high degree of de facto dollarization in the economy... Directors considered that, with an improved competitive position, both the current account and the public sector deficits on a declining path, and important structural reforms enacted or under way, the Argentine economy was now in a good underlying position to resume sustainable growth.145

In its Second Review of January 2001, the IMF staff noted that "the external environment worsened in the subsequent months, with external financing to emerging markets nearly drying up. This was compounded by domestic political uncertainties, which raised doubts about the political governability of the country.(...) The authorities have responded to these adverse developments by strengthening the growth orientation of their economic program, through measures aimed at promoting a recovery of investment, and an accelerated implementation of structural reforms... " In view of the staff, this strategy is appropriate, and deserves the increased financial support of the international community... A recovery of confidence hinges, in turn, not only on a relatively benign international environment, but perhaps more importantly, on a demonstrated, unwavering commitment by the authorities to a rapid and full implementation of their announced policies. "146
Based on the IMF staff recommendation, the IMF Executive Board approved on January 12, 2001 an augmentation of Argentina's Stand-By Arrangement to an equivalent of U.S.$14 billion, as part of a broader international support package of almost U.S.$40 billion.147 "Financial markets initially responded positively to the revised program, but already by mid February it became evident that the fiscal deficit was about to exceed the agreed ceiling for the first quarter. Moreover, following the resignation of the finance minister, his successor was forced out of office in less than two weeks as his planned budgetary cuts and reform measures failed to find the necessary political backing. Doubts about the sustainability of the public debt dynamics and the currency board arrangement resurfaced quickly, evidenced by rising spreads and sizable deposit outflows."148 Thus on March 28, 2001, Domingo Cavallo, the author of the Convertibility Plan of 1991, was appointed Minister of Economy and secured "emergency powers" from Congress. However, at the end of March 2001 risk-rating agencies lowered Argentina's long-term sovereign rating.149 On April 26, 2001, the President of the Central Bank was replaced after a clash with the Minister.150 On May 1, 2001 Minister Cavallo publicly reaffirmed that he would stick to convertibility.151
On 21 May 2001, the IMF completed its planned Third Review of Argentina's Stand-By Arrangement, at a point when the Fund had an outstanding credit of nearly SDR 5.8 billion and another SDR 6.8 billion scheduled purchase under the arrangement in place, making Argentina the third largest debtor to the IMF.152 The Review contained both favorable and critical evaluations. The IMF underlined "the favorable developments that followed the agreement on the program and financing package in January" which were however interrupted in early March by a new crisis. The principal catalyst was evidence of a major deterioration in the fiscal performance, but internal political disagreements and increased uncertainty in international markets were contributing factors.153 Amongst the negative developments, the Report mentioned the increase of the spread on Argentine bonds, the decline in economic activity and the significance of the deterioration in the federal government finances.154 Positive developments mentioned included the fact that the provincial government deficit for 2000 was slightly lower than expected, and the improvement of the trade balance in 2000 and in the first quarter of 2001. The Review highlighted the revised economic program of Minister Cavallo, praised the fact that "[t]he government re-affirmed its commitment to the fiscal targets of the economic program for 2001;" noted the introduction in April 2001 of a financial transaction tax "[t]o correct for the prospective large deviation and bring the fiscal program back on track."155 The Review estimated that the new fiscal package has started to show results, and that the new fiscal measures under the Fiscal Responsibility Law "will contribute substantially to strengthen fiscal performance in 2002," also in view of the fact that the authorities attach great importance to improving the province's finance and "are continuing to work with provincial governments to secure a sustained adjustment of their fiscal position, as contemplated in the federal fiscal pact signed last November."156
The Review also praised the initiatives taken by the Argentinean Government within the Competitiveness Law. The IMF Staff's concluding appraisal was that "[t]he government has responded to this latest crisis with an effort commensurate with the gravity of the situation" and regarded "this strategy - consistent with the objectives of the program supported by the Stand-By Arrangement."157 The News Brief of May 21, 2001 announcing the positive completion of the Fund's Third Argentina Review ended with the following paragraph: "‘[i]n adopting the new measures, the Argentine authorities have responded promptly and effectively in difficult circumstances. The strengthened program deserves the strong support of the international community" Köhler said.158
At the beginning of June 2001 Argentina's authorities announced the completion of the "mega-swap" entailing the voluntary exchange of external Governmental bonds of a face value of U.S.$29.5 million for longer-term instruments.159 In July 2001, Minister Cavallo announced a drastic program of fiscal adjustment (zero-deficit plan), which was promptly approved by Congress. "But by the time the law was approved by Congress at the end of July, spreads between the peso and U.S. dollar-denominated interest rates had reached 1,500-2.000 basis points,"160 while the Government was paying a yield of 14.1% to place U.S.$827 million of 90-day paper.161 Risk agencies further lowered Argentina's debt rate. A likely U.S.$8 billion increase of the Stand-By was announced by the IMF in August and approved on September 7, 2001, augmenting the total to U.S.$21.6 billion, while the IMF positively completed its Fourth Review, which entailed a commitment to disburse further funds in November 2001.
As mentioned above, from the end of 2000 and in the course of 2001, Argentina passed several laws aimed at adopting the structural reforms that the IMF had asked Argentina to undertake in accordance with the Stand-By conditions. These related to budgetary discipline against the deficit,162 increases in taxation, fiscal discipline (including the provinces), labor market flexibility (i.e. reducing employees' protection under labor legislation in place), reforming social security and controlling the pensions' costs, increasing the competitiveness of enterprises and helping exporters. Many of these provisions were not or could not be carried out effectively, or did not yield the expected results. Thus tax revenues continued to fall, due also to the economic crisis, while the promised reform of the central governments revenue-sharing agreement with the provinces was not concluded.163 The planed labor market reform which entailed addressing labor market rigidities through "the adjustment of real wages"164 was not completed; on the other hand widespread strikes had taken place specifically to protest against harsh spending cuts. Many of these reforms, recommended by the Fund consistent with a market-oriented approach to the structural changes deemed appropriate for a country like Argentina, met with widespread social opposition, to the point that some reforms were blocked by the courts.165 The domestic economy of Argentina - which was in a state of recession since early 2000 - and hence the population of Argentina, had to bear the increasingly heavy burden of adjustment to the maintenance of the exchange rate and convertibility.166
In fact, throughout this period, the Government of Argentina showed and declared a staunch commitment to maintaining the convertibility regime in all its features (as was expected by the international financial community). This was a fundamental element of the policy of stability pursued by the IMF in agreement with Argentina.167
As decided and announced in August 2001, "[d]espite concerns about the lack of political support for the measures that would be needed to achieve the zero-deficit target, the IMF agreed in early September of 2001 to support the new program," increasing the support by U.S.$8 billion, disbursing U.S.$5 billion immediately (pledging another U.S.$3 billion in support of prospective debt restructuring).168
It was in this context that Argentina's Congress passed the "Intangibility Law," promulgated on September 24, 2001, providing, as described concisely by the Claimant, that "the government would not alter terms of deposits in the banking system." In emphatic terms, the law proclaimed in Art. 1 that all deposits in pesos or in foreign currency were considered "intangible," that is, the State was prohibited, in all cases, from changing the terms agreed between the depositors and the financial institution, exchange them with public debt instruments or other public assets, extend their terms, modify the agreed interest rate, change the currency of the debt. Art. 3 declared the law to be "of public order;" the private rights covered by its Art. 1 "shall be considered acquired rights and protected under Art. 17 of the Nation's Constitution."169
In the mid-term congressional elections held on October14, 2001 the ruling coalition obtained less than 25% of the votes; and the opposition Peronist party won control of both Chambers. In the same month the rating agencies downgraded Argentina's debt twice. On October 28, 2001, Minister Cavallo announced that he would seek voluntary restructuring of all government debt, which was in part carried out throughout November 2001.170
This was the first of a series of Measures that Argentina took while the crisis was developing, culminating in the devaluation of the peso, the pesification of dollar-denominated assets in Argentina and the default on public debt and its rescheduling, all of which impacted adversely on the Claimant's assets, and which it has challenged as being in breach of the BIT (with the exclusion of the devaluation per se).
The Corralito brought about immediate and severe hardship in the general population which relied largely on cash for every day transactions, as is the practice in Argentina's economy. The crisis worsened also in the social and political dimension. On December 13, 2001, the Government announced that the unemployment rate had reached a record level of 18%; trade unions called for nationwide strikes. Supermarket looting began in various locations; and rioting spread to major cities. The Government declared a state of siege; and Minister Cavallo resigned. Finally, on December 20, 2001 President de La Rúa "resigns in the wake of continuous rioting, leaving 28 people dead."182
It is worth here recording the personal accounts of Judge Augusto Belluscio who lived through this turbulent period of Argentina's crisis and appeared as a witness before the Tribunal. Judge Belluscio was and remains one of the most distinguished and respected jurists in Argentina. He was an impressive expert witness at the hearing. As a law professor, he was first appointed a judge in 1965 and served on the Supreme Court of Argentina from 1983 until his retirement in 2005. In early January 2002, Judge Belluscio was on leave; but he was called back to the Supreme Court for urgent judicial meetings in litigation associated with the crisis. It is best to give his account in his own words, as recorded in the hearing's transcript in English translation:

In the middle of the meeting I received a phone call from the city of Cordoba, where my in-laws lived, to inform me that a horde or a mob had attacked my inlaws' home thinking that I was there. There were shouts, "The judge should come out, the judge should come out," so my father-in-law went out to see what was happening, and they thought I was him [i.e. Judge Belluscio], and they began to throw pieces of stone which didn't hit him, but which did do harm to the facade of the house. He was with - one of his sons was with him, one of my brothers-in-law. My brother-in-law went out. He tried a dialogue with the mob and get them to see that it wasn't the judge who was in the house because evidently they wanted to attack me, and the response was that he was attacked, he was beaten, and he suffered a fracture in one finger. Well, this obviously upset me a great deal [...].183

It requires very little imagination to see that if Judge Belluscio had in fact been present at the family home, this incident could have produced much more serious consequences for one of Argentina's most senior judicial figures.

(ii) The actions undertaken by CNA / Continental as to its investments in 2001

Continental and CNA did not stand idle while the crisis unrolled and the likelihood of some kind of exchange and financial restriction increased in the course of 2001. Before addressing the steps undertaken by CNA and Continental, it is useful to describe the activity carried out by CNA and the nature of its investments and other funds that it intended to protect against the associated risks.
As explained by the Claimant,184 CNA ART, like other insurance companies, maintains a portfolio of invested securities in order to earn a return on its capital, reserves and other funds. CNA has a history of making conservative investments, so that its "portfolio consists mainly of low-risk assets, such as cash deposits, treasury bills and government bonds." These investments derive from its business activity, its capital, reserves and undistributed profits. The proceeds of its insurance business drive from the underwriting of its policies; the clients of CNA are business companies that satisfy their statutory and contractual obligations to cover their employees against worker's risks. CNA's insurance operations are regulated by two Argentine state agencies: the Superintendent of Insurance (SSN), which regulates the financial aspects of the business, while the handling of workers' compensation claims and services (such as medical treatment, etc.) is regulated by the Superintendent of Workers Compensation of the Ministry of Labor (SRT). More specifically, SSN lays down criteria for insurance companies such as CNA concerning the ratio of reserves they have to hold and the types of investment they may make.
The business of CNA was successful. As explained by Claimant, its premiums "have consistently been among the highest in the market. CNA ART also maintained the highest reserves and investments per insured worker in the market."185 Furthermore, "[p]rior to March 2001, CNA ART's investment portfolio was primarily in assets denominated in Argentinean pesos. At the time, pesos were fully convertible to U.S. dollars at a one to one exchange rate. However, CNA ART's management was concerned about the risk of devaluation. As a result, CNA ART's senior management prepared an analysis of the options available to CNA ART to hedge the risk of devaluation. These options consisted of:

i) maintaining the portfolio in peso denominated assets, which were earning a much higher return than comparable dollar denominated assets;

ii) transferring all of CNA ART's assets in excess of minimum capital requirements out of Argentina to be held by CNA; and

iii) moving CNA ART's investment portfolio to lower return U.S. dollar assets with greater credit worthiness."186

c) The Measures adopted by Argentina during the crisis, specifically those challenged by the Claimant

B. Subsequent measures by Argentina in 2002-2003 relevant to the present dispute

Starting in the spring of 2002 the Government enacted various Measures aimed at reestablishing normal conditions in the financial market. None of these Measures reinstated the "status quo ante," whilst nonetheless mitigating in some cases losses for those concerned and representing some steps toward the reinstatement of an orderly economic, monetary and financial situation on a new basis. These Measures failed to give any sufficient satisfaction to CNA or Continental; on the contrary, certain of these Measures are challenged by the Claimant as having caused further damage to its subsidiary in breach of the BIT.
Decree 905 of May 31, 2002 offered dollar denominated bonds (BODEN 2012) in exchange for the term deposit dollars that had been pesified by Decree 214. It also provided a choice as to the receipt of BODEN 2012214 for depositors in financial institutions in distress, such as Scotiabank where CNA held term deposits. CNA opted for converting these deposits into U.S.$ 4,470,900 worth of BODEN 2012.215
CNA accepted instead "under protest" the terms of Decree 739 of March 28, 2003 that provided for an elaborate scheme of "partial thawing" of the bank freeze, after a further rescheduling of 120 days, earning 2% interest, and the distribution of a BODEN 2013 "to compensate for the difference between the market exchange rate at the date of the enactment of the Decree and the government imposed rate of 1.4 pesos to the dollar adjusted by CER."216 Continental complains that these bonds were not issued on the due dates and that payments of the initial interest were delayed. It was only on February 11, 2004 that "the government issued BODENs for deposits at ten of the twelve banks at which CNA had originally held its certificated of deposits" and paid interest in arrears.217
As to the LETEs, Argentina offered to restructure them through Decree 1735/04 in December 2004 by offering a swap of these securities, as well as of several others also in default, against newly issued securities, specifically GDP-linked derivative instruments.218 CNA did not accept this conversion, since it would have received in exchange "only U.S.$ 0.30 per dollar and would have been required to waive its rights" and to accept long maturities on bonds from a Government "that had demonstrated its willingness to repeatedly default on its debt."219

C. Relevant economic, financial and political developments in Argentina after the crisis

As mentioned above,220 the social and economic crisis reached its apogee in the second half of 2002, when more than half of the population where forced to live below the poverty line. The situation improved slowly but progressively from the end of that year onwards. Even two years later, in 2004, per capita GDP, adjusted for inflation, remained about 13% below the 1998 level; and in dollar terms it was equivalent to minus 55%.221
It is worth noting that ultimately the crisis did not affect the functioning of the democratic constitutional order of Argentina beyond emergency measures enacted on the basis of the Constitution. Civil liberties were not restricted, nor constitutional guarantees suspended.222 This is apparent now; but it certainly could not be assumed in late 2001 and 2002.
On the other hand, while the crisis affected heavily the financial sector, inflicting losses on depositors and effecting radical changes to binding contractual relations resulting from devaluation, pesification, defaults and restructuring, it is also worth noting that business activity went on without interference from the State, and that it progressively adjusted to the new conditions, including import-export operations. Major bankruptcies that had characterized previous economic crises in Argentina, notably those affecting banks, did not take place after the Government supported the financial system in the asymmetric pesification.
The above finding holds true for the insurance business and specifically for CNA.223 CNA's Annual Report as to June 30, 2003224 states:

CNA ART has come out very reinforced both economically and financially from the severe economic crisis that the country has suffered during the last years. CNA ART enjoys a very solvable economic situation and a very comfortable financial situation, with an extraordinary degree of liquidity. CNA ART has an average investment of almost P. 850 for each insured. This amount is almost four times the average for the other insurers of workmen risks. Moreover only 30% of CNA ART investments are represented by public debt instruments, while the market average as to this indicator amounts to almost 50% of the investment papers. As to the average level of reserves per insured, CNA ART has about P. 270 that is more than the double than the other companies in the market. The net assets of the Company at the closing of the financial amounts to P. 106,004,253, so as to allow the company to present a substantial excess (superavit) in respect to the minimum capital, which amounts at said date to 102,626,233, after having the company obtained during the business year an after taxes profit of P. 39,531,719. The level of investments of the Company at the closing of the financial year amounts to P. 195,602,044. The level of reserves and of technical commitments amounts to P.62.283.313.

Towards the end of 2002, Argentina also fell in arrears with its obligations owed to multilateral financial institutions. Notwithstanding the criticism previously addressed by the IMF to Argentina after the collapse of the Stand-By, in mid-January 2003 the IMF resumed its assistance and announced an interim Stand-By Arrangement. The Fund rolled over obligations due to it and provided liquidity so as to permit Argentina to pay arrears due to the World Bank and the Inter-American Bank and to service debt becoming due in the next months.225
In May 2004, Argentina made an offer to its foreign bondholders to pay about 25 cents to the dollar on such debt, leading to partial acceptance (but leading also to international litigation by creditors not accepting the offer). The settlement of the swap operation of bonds in default, both domestic and issued abroad was completed in June 2005, with a participation of about 75% of the bondholders, notwithstanding the fact that the new instruments offered in exchange were worth only about 30% of the original securities in dollar terms.228 In September 2004 Argentina re-entered the international financial market by filing a prospectus concerning the future issuance of debt securities up to more than U.S.$12 billion.229 By February 2005 Argentina had completed its various restructuring procedures.230 Finally, the improved balance of payment situation enabled Argentina to repay in a short time-span all of the sizeable amounts outstanding to the IMF, in 2005 (SDR 2,417 billion) and January 2006 (SDR 6,655 billion).231

VI. Necessity: Argentina's Defence based on Article XI of the BIT and on State of Necessity under International Law

A. Differences between the two Defences

As to Art. XI, the Parties have expressed different views as to various fundamental elements relating to its application:

a. Whether the economic political and social crisis, with its specific aspects, in Argentina during 2001-2002 qualify under Art. XI in that they involved the "maintenance of public order" and/or the protection of Argentina's "essential security interests;"

b. Whether the invocation of Art. XI is "self-judging," in the sense that the Party relying on it has absolute discretion to invoke it;

c. Whether the Measures challenged were "necessary" in order to maintain the Argentine public order and protect the essential security interests of Argentina that were at stake;

d. The effect of the application of Art. XI to the evaluation by the Tribunal of the lawfulness under the BIT of Argentina's Measures challenged by Claimant.

B. Whether Argentina's crisis in 2001-2002 qualifies under Article XI in that it involved the "maintenance of public order" and/or the protection of Argentina’s "essential security interests"

The Claimant submits that the crisis that Argentina encountered in 2001-2002 does not qualify under Art. XI, first of all because "the ordinary meaning of ‘security' is safety from external threats."248 The Claimant considers the adjective "essential" as meaning nothing less than indispensable, and it concludes "[t]he essential security interest of a country are, therefore, interest indispensable to keeping the country safe from external threats."249 Argentina was obviously never exposed to such an external threat, nor did Argentina ever suggest it in these proceedings.
As to "public order," the Claimant submits that it is the equivalent of the French term " ordre public " "which is the civil law equivalent of the common law concept of ‘public policy'." The Claimant further submits that this is a "special meaning" of the term public order250 that refers, more narrowly, "to measures necessary to maintain the public policies, laws and morals that define the country's society."251 The Claimant concludes that the Measures it has challenged were obviously not aimed at protecting these values, which were not threatened by Argentina's crisis.
In contrast, Argentina contends that under Art. XI "the measures necessary for the maintenance of public order... include the measures aimed at ensuring internal security in the face of events such as violent internal upheavals, disturbances, looting and crimes, extended social tension, or the likelihood of the fundamental order falling apart and the government loosing actual control over the territory of the State." Argentina submits that was exactly the situation prevailing in Argentina when the Measures challenged by the Claimant were adopted so that this situation "constitutes a national emergency sufficient to invoke the protections of Art. XI."252
The Tribunal is thus confronted by a narrow interpretation by the Claimant and a broader definition by Argentina of the terms "public order" and "essential security interests." The Tribunal's view is that the interpretation submitted by the Claimant is far too narrow and that the emergency situation at issue qualifies in general under Art. XI for the following reasons.
It has been submitted in this case that since Art. XI derives from the Model BIT of the U.S., which in turn derives from the United States' Friendship Commerce and Navigation (FCN) standard treaties, special attention should be addressed to this historical context in interpreting the expressions found in Art. XI and its object and purpose in general. This appears to be correct; and the Tribunal will therefore assume that the interpretation based on those antecedents conforming to the plain texts, and the legislative history of the Model BIT was well known and taken into account when the parties concluded this BIT.
In this respect the Tribunal notes that the Parties' inquiries into the origin of these antecedent texts do not support the restrictive view advanced by the Claimant. An authoritative commentary, whose distinguished author was involved in the drafting of the U.S. BITs for many years, takes the following view:257

United States treaty practice since the Second World War has acknowledged that the interest in protecting United States investment overseas may be subordinate to certain other national interests, primarily the interest in protecting the national security and the health, safety and welfare of the people. Investment-related treaties thus have had provisions which permit the United States to deny protection to foreign investment in its territory where necessary to these other interests. The price paid by the United States for reserving the right to derogate from investment-related treaties on these grounds has been the recognition of a corresponding right in its treaty partners.258

A severe economic crisis may thus qualify under Art. XI as affecting an essential security interest, in the broad sense described by the Tribunal above. The Tribunal is comforted in this approach by previous ICSID awards in other arbitrations brought against Argentina (although perhaps their discussion of the issue does not as clearly distinguish between the requirements of Art. XI and Art. 25 of the ILC text). Those ICSID tribunals have recognized, in general terms, that "there is nothing in the context of customary international law or the object and purpose of the treaty that could on its own exclude major economic crises from the scope of Art. XI,"259 even if they have taken a different evaluation in concreto as to the gravity of the Argentine economic crisis.

C. Whether the Invocation of Article XI is "self-judging"

Having concluded that the crisis of Argentina (in the context of which the Measures challenged by the Claimant were adopted) qualifies under Art. XI, the Tribunal is still faced with the conflicting position of the Parties as to the alleged self-judging nature of the provision. If Art. XI granted unfettered discretion to a party to invoke it, in good faith, in order to exempt a particular measure which the investor claims has breached its treaty rights from any scrutiny by a tribunal, then that tribunal would be prevented from entering further into the merits, after having recognized that an economic crisis such as the one experienced by Argentina in 2001-2002 qualified under Art. XI.
Argentina claims that "[t]he Argentine Republic's bona fides invocation of Art. XI of the BIT should be sufficient for the Tribunal to dismiss the claim made by the Claimant under such BIT, as both parties to the Treaty accorded that each State had the exclusive right to decide whether its own measures were covered by such Article.271 The United States stated its position expressly, and the Argentine Republic gave its consent to such statements."272
The Claimant rejects this submission. The Claimant notes that the text of Art. XI does not explicitly include such a restriction (as Argentina itself admits), and that there is no negotiating record (or at least none presented or known to this Tribunal) that would evidence an understanding of the Contracting Parties to this effect. To the contrary, the Claimant points out that the formulation of Art. XI follows closely the FCN model of the U.S.A, which in terms did not follow the language of Art. XXI of GATT 1947 (although the content is in part similar). Art. XXI of GATT 1947 specifies that "[n]othing in this Agreement shall be construed (b) to prevent any contracting party to take action which it considers necessary for the protection of its essential security interests...
The Parties have argued the point extensively, relying on the expert opinions of Prof. Kenneth J. Vandevelde for the Claimant and of Prof. Anne-Marie Slaughter for Argentina, who also testified at the final hearing. Both were impressive experts. Their basic difference derives from the lack of documentation as to whether the U.S. had taken the position at the time of the negotiation and signature of the BIT that it considered its invocation and application as self-judging and therefore not reviewable by an arbitral tribunal established under Art. VII of the BIT.
The position of Argentina is that this was indeed the case: that the U.S. had informed Argentina of its position and that Argentina had shared it. The position of the Claimant is that the U.S. had not taken nor expressed such a position at that time. On the contrary, after the International Court of Justice had rejected in the Nicaragua case the claim by the U.S. that Art. XXI of the FCN Treaty between the U.S. and Nicaragua (including identical expressions to those of the BIT) was self-judging,273 the U.S. abandoned, in any case de facto, such a position. That position was only later resumed by the U.S. when Russia had asked and obtained during the negotiations of the U.S.-Russia BIT that the self-judging nature of the exception be inserted into this BIT (Art. 8 Protocol of U.S.-Russia BIT of 1992).274 Thereafter, the U.S. adopted this interpretation and finally changed the text of its Model BIT to such effect, but only in 2004.275

D. Whether the measures challenged were "necessary" in order maintain public order and protect essential security interests of Argentina

a) The applicable standard

At this point the Tribunal has to evaluate whether the impugned measures were "necessary" for the maintenance of public order and the protection of the essential security interests of Argentina within the meaning of the BIT. Argentina claims that the actions taken were the only way to safeguard an essential interest from grave and impending danger.283 Argentina submits that "[a]n international tribunal should analyze this issue with the highest deference and should not arrogate itself the power to establish what other measures could have been taken instead."284 In any event, Argentina submits that "[i]f the measures now brought into question by Continental had not been adopted, the accelerated drain of deposits and loss of reserves of the Argentine financial system evidenced since early 2001 would have brought about a widespread collapse of the Argentine economy, even bigger than the one actually experienced."285
Continental, in contrast, submits that "[t]he ordinary meaning of ‘necessary' is that which ‘cannot be dispensed with or done without,' or, in other words, indispensable. Under the ordinary meaning of Article XI, Argentina must demonstrate that its measures were indispensable to the protection of its essential security interests or maintenance of public order."286 Thus, it is the Claimant's opinion that "Argentina must meet a high threshold in demonstrating that its measures were necessary," taking into account the Treaty's objects to provide a stable framework for investment and to encourage and protect investment.287
To support this conclusion the Claimant relies also on the ILC commentary on Art. 25 (1)(a) stating that the "plea is excluded if there are other (otherwise lawful) means available, even if they may be more costly or less convenient" (ILC commentary para. 15). This ought to be considered not only as a more precise explanation of the term ‘necessary' with regard to invocation of the defense of necessity under customary international law, but also as a standard applicable in interpreting Art. XI of the BIT. In the Claimant's view "if a measure is indispensable to the protection of its essential security interests or maintenance of public order then it must be the only means to protect those essential security interests or maintain the public order."288 The Claimant submits that it has shown to the Tribunal that alternative measures (irrespective of their costs) were available to Argentina for addressing the national emergency in 2001. It concludes that "the existence of these alternate measures demonstrates that the measures Argentina did take were not necessary for the purposes of Article XI of the BIT."289
With regard to the necessity test for the purposes of application of the general exception of Article XX of GATT, it is well established that:

[...] the reach of the word "necessary" is not limited to that which is "indispensable" or "of absolute necessity" or "inevitable." Measures which are indispensable or of absolute necessity or inevitable to secure compliance certainly fulfill the requirements of Article XX (d). But other measures, too, may fall within the ambit of this exception. As used in Article XX (d), the term "necessary" refers in our view to a range of degrees of necessity. At a one end of this continuum lies "necessary" understood as "indispensable;" at the other, is "necessary" taken to mean as "making a contribution to." We consider that a "necessary" measure is, in this continuum, located significantly closer to the pole of "indispensable" than to the opposite pole of simply "making a contribution to."293

In order to determine whether a measure which is not indispensable, may nevertheless be "necessary":

The necessity of a measure should be determined through "a process of weighing and balancing of factors" which usually includes the assessment of the following three factors: the relative importance of interests or values furthered by the challenged measures, the contribution of the measure to the realization of the ends pursued by it and the restrictive impact of the measure on international commerce.294

Within the WTO a measure is not necessary if another treaty consistent, or less inconsistent alternative measure, which the member State concerned could reasonably be expected to employ is available:

[...] an alternative measure may be found not to be "reasonable available," however, where it is merely theoretical in nature, for instance, where the Responding Member is not capable of taking it, or where the measure imposes an undue burden on that Member, such as prohibitive costs or substantial technical difficulties. Moreover a "reasonable available" alternative measure must be a measure that would preserve for the responding Member its right to achieve its desired level of protection with respect to the objective pursued under paragraph (a) of Article XIV.295

b) Application of the standard

According to these principles, the next step for us is to assess whether the Measures contributed materially to the realization of their legitimate aims under Art. XI of the BIT, namely the protection of the essential security interests of Argentina in the economic and social crisis it was facing. More specifically, whether the Measures were apt to and did make such a material or a decisive contribution to this end.296
The Tribunal is also guided by the principles highlighted above in its analysis of whether Argentina had reasonably available alternatives, less in conflict or more compliant with its international obligations, "while providing an equivalent contribution to the achievement of the objective pursued,"299 to the Measures challenged by Continental as inconsistent with the BIT. If so, the Measures adopted would be deprived of a fundamental element underpinning their alleged necessity. The Tribunal will look accordingly both to:

i) alternatives to the Measures, not in breach of the BIT, that might have been available when the Measures challenged were taken (thus from November 2001 onwards) and that would have yielded equivalent results/relief; and

ii) whether Argentina could have adopted at some earlier time different policies, that would have avoided or prevented the situation that brought about the adoption of the measures challenged.

If the result of such additional analysis shows that such alternatives would not have been reasonably available or would have been impracticable or speculative as to their effects, the conclusion that the measures were necessary under Art. XI of the BIT would be confirmed.

In evaluating whether these alternatives were in fact reasonably available and would have avoided the adoption of the challenged Measures, the Tribunal is mindful that it is not its mandate to pass judgment upon Argentina's economic policy during 20012002, nor to censure Argentina's sovereign choices as an independent state. Our task is more modestly to evaluate only if the plea of necessity by Argentina is well-founded, in that Argentina had no other reasonable choice available, in order to protect its essential interests at the time, than to adopt these Measures. If the conclusion upholds this defence, then Argentina will escape any liability since necessity would exclude a breach of the BIT's obligations to the detriment of the Claimant, and/or would exempt Argentina from responsibility. If not, Argentina would have to face the consequences of its breaches in as far as Continental's claims are otherwise upheld. In either case, the Tribunal is not called upon to make any political or economic judgment on Argentina's policies and of the Measures adopted to pursue them. Nor does this entail, retrospectively, a judgment on those same grounds that Argentina should not have enacted the Measures that it did adopt.

(i) Alternatives that might have been available when the challenged measures were taken (thus at the outbreak and at the height of the crisis in November 2001 - February 2002)

(a) In respect of the Corralito (the imposition of the bank freeze in December 2001)

In particular, Continental submits that the Corralito, instead of qualifying as a necessary reaction to a sudden extraneous fall in bank deposits, aggravated the crisis because it inevitably caused a deep loss of public confidence. In the Claimant's words "[t]he social discontent triggered by this measure put an end to any further negotiations between federal authorities and the Provinces and the multilateral institutions,"300 which would have represented an alternate available measure to avoid the sharp fall in the bank deposits.
The Tribunal recalls the evidence as to the massive falls in bank deposits and the capital flight out of the country that had occurred in the preceding months and had amplified in the weeks and days before the imposition of the Corralito, very significantly depleting Argentina's reserves.301 The Tribunal notes that the imposition of the bank freeze is a typical short-term measure used by monetary authorities in order to block withdrawals from banks and block capital flight. These events occur when the public loses confidence in the economy and in the ability of the state to maintain freedom of exchange; bank-runs must then be stopped lest the banks and the country go bankrupt.302

In the situation of Argentina in the autumn of 2001, the impossibility for Argentina to maintain convertibility was reasonably foreseeable and was even widely expected; the need to take strict remedial actions against massive withdrawals from the banks, widespread requests of exchange of pesos for dollars and capital flight was inevitable.303

Thus the Corralito has to be viewed in connection with the abandonment of the conversion of the peso to U.S. dollar at 1:1, which entailed floating of currency and market-driven devaluation. This was also widely considered inevitable once the IMF had withdrawn its further support for the reasons highlighted above. It is true that the imposition of severe restrictions on withdrawals from bank accounts entailed further hardship, especially as to individuals, families and small businesses. However, the block affected CNA's business activity only marginally304 because intra-bank operations were allowed and special authorisations were soon thereafter granted to insurance companies.305 There was indeed no difference between the position of a local subsidiary of an American investor, such as CNA, and the position of any other Argentine insurance company.
The evidence does not permit the Tribunal to conclude that "further negotiations between federal authorities and the Provinces and the multilateral institutions" could have formed the basis for Argentina obtaining additional external support.306 First of all, the ex post facto evaluation indicates that a restructuring of Argentina's debt without sacrificing in part creditors' rights in breach of same (as was finally the case in 2002-2003) was probably already impossible by 2000.307 In late 2001, Argentina had already carried out various restructurings of its debt, both external (through the mega-swap) and domestic (through the issuance of GGLs), but had not obtained any meaningful relief. The country was precluded from further voluntary restructuring by its loss of credibility in the world financial markets and the withdrawal of the Fund's support. Consultations and negotiations cannot be considered per se an alternative measure to urgent legislative or administrative action of general application such as a bank freeze. This is even more true when taking account of the level of public order protection and protection of its own essential security interests that a State manages to achieve with such prohibitions. Moreover, in this regard it can even be questioned whether consultations and negotiations can be considered as "measures" at all, due to their uncertain results.308 In any case, when the Government was able to strike a financial and fiscal deal with the provinces, in the midst of the crisis towards the end of February 2002, this entailed leaving to the provinces about 30% of the proceeds of the financial tax. These proceeds had been specifically earmarked as a guarantee to GGLs holders in case of default, a measure complained of by Continental as having affected its own rights, at least indirectly by rendering recourse to this guarantee impossible.309
To conclude, for the Tribunal the Corralito was justified by necessity within the meaning of this BIT, in any case as far as a company like CNA was affected by it. The block was adequate and effective in respect of its legitimate aims to prevent further fall in bank deposits that would have brought about the banks' bankruptcy, as well as the exhaustion of the country's reserves. Continental also complains mostly of the Corralito because it prevented CNA from transferring out of the country funds available in Argentina to CNA. This raises a different point. We will address later the issue whether such international transfers of funds are and would have been guaranteed by Art. V of the BIT. Subject to that, we conclude here that the Corralito was necessary to prevent exactly that outflow of funds to which Continental would have contributed, according to its own statements, an outflow that would have undermined Argentina's essential security interests.310

(b) In respect of the devaluation of the peso

Continental does not challenge devaluation per se and recognizes that the BIT does not guarantee foreign investors and their investments against devaluation, nor does it claim that devaluation breached per se its treaty rights.312 There was however a close connection between the devaluation of the peso and the decision to pesify bank deposits and government debt. The pesification was an integral part of the scheme of abandoning convertibility and letting the peso float, i.e. to devalue against the US dollar. The Claimant when challenging the necessity of the pesification suggests alternatives that would have avoided in its view the very need for devaluing the peso.
In the Claimant's submission, Argentina could have avoided devaluation either through (a) a voluntary debt exchange or (b) "full dollarization" of the economy.313 The Tribunal has not received evidence that would sustain either argument. As to voluntary debt exchange (alternative (a)), we have recalled that Argentina had already pursued this policy: Argentina had entered into swaps both as to its foreign debt ("megaswap" of Spring 2001) and domestic debentures, namely through the restructuring of part of the government's debt by issuing in November 2001 GGLs in exchange, a swap in which also CNA took part.314 Both operations were ineffective in lessening the burden on Argentina's finances and in restoring the public's confidence. With the Fund refusing further support to Argentina, there was no realistic possibility for the Government at a later date, towards the end of 2001, to conclude a voluntary exchange that would have fully respected the depositors' rights in dollar terms, while also avoiding devaluation.
As to "full dollarization" (alternative (b)), that is, replacing physically the pesos in circulation with dollar bills and adopting the U.S. dollar as legal tender, the overwhelming evidence before us indicates that this was a purely theoretically and thoroughly impractical solution, never really envisaged by the various relevant actors, considering that Argentina alone would not have been in the position to pursue it. Such a full dollarization had never been tried before for a large economy, such as that of Argentina, and that would have required massive financial and logistical support by the U.S. Government.315 That support was not available. Commentators have also considered that, even if implemented, full dollarization would not have solved Argentina's problems, nor restored confidence in its debt sustainability.316
Thus neither solution can be considered as an alternative to devaluation that could have been reasonably pursued by Argentina with any probable chances of success. For the purpose of the present legal evaluation, devaluation has thus to be considered inevitable in view of the economic unsustainability of the parity with the U.S. dollar, and because of the run on deposits and the flight from the peso which had made the Corralito necessary.317

(c) In respect of the pesification of the U.S. dollar-denominated contracts and deposits

The main argument of the Claimant is that Argentina could have let the peso devalue and terminate convertibility, whilst leaving unaffected the denomination in dollar of the deposits and especially of the financial instrument issued in dollars within Argentina. The Claimant submits that many countries had similar levels of "dollarization" during similar currency crisis, but that "[o]nly Argentina chose the highly unusual route of mandatory de-dollarization, i.e. pesification of contracts - deposits, debt and utility tariffs."318
Argentina in turn submits that, in view of the level of dollarization of the financial sector, it would have been impossible after the devaluation of the peso of more than 300% to satisfy claims denominated in dollars by converting them at the market rate. The debtor would have gone bankrupt and a massive bail-out of the banks would have been required far beyond the possibilities of Argentina's strained public finances. Moreover, this would have caused widespread imbalances and unjustified discrimination between those depositors which had converted their peso in dollars, possibly just before the Corralito, and those who had maintained their assets in pesos. The solution which was put in place distributed more evenly and equitably the burden of the country's new financial situation between all those affected, while recognizing through the asymetric pesification the expectations of those who had made deposits in dollars.
According to one of the most specific economic studies devoted to the issue, and discussed by the Parties at the hearing, "[r]edenomination of dollar debts implied a substantial reduction of the real debt service burdens of dollar-denominated debtors. It was inspired by the realization that without redenomination Argentina would have to find a way to address massive economy-wide insolvency of dollar-denominated debtors, as well as huge relative price increases for energy and transport costs that were fixed by concession contracts in dollar terms."319 Furthermore "Argentina was in an unusually vulnerable macro-economic position as the result of the large fraction of domestic debts and transportation and utility concession contracts that were denominated in or indexed to the dollar, and the small fraction of its economy devoted to exports."320 Thus dedollarization seems to have represented, according to qualified observers,321 as almost a "must" for Argentina, in order to devaluate effectively, avoid unbearable asymmetries in the allocation of the burden that devaluation entails and to stimulate the recovery.322 Finally, contrary to the Claimant's allegations, the de-dollarization of 2002 by Argentina was not without precedents in recent financial crises.323
The Tribunal finds that de-dollarization was inevitable in the situation facing Argentina, in order to achieve a balanced distribution of the burden of the devaluation and of the abandonment of the convertibility at par with the dollar, once the fiction that pesos and dollars were equivalent had been discredited by the massive flight from peso to dollar (which had become a cause for the unsustainability of the very convertibility at par). The asymmetry of the exchange rates adopted reflected as far as possible, although only partially, the expectations of depositors in dollars within Argentina that they would

be more secure than holders in pesos in case of crisis.324 That burden was charged to the entire economy.325

(d) In respect of the suspension of payments, default and rescheduling of the governmental financial instruments held by CNA

First of all, the Claimant complains that Argentina defaulted at the end of 2001 and the beginning of 2002 on various financial instruments issued by the Government and held by CNA. Moreover it also complains that interest payments due to CNA under these financial instruments were delayed substantially in 2002, even in respect of the new terms that Argentina had unilaterally set. Argentina submits that in the first months of 2002 its financial administration was in such a state of disarray and the public finances in such a shortage of funds due to the crisis (and specifically due to the lack of access to international capital markets) that both forms of conducts, namely as to default and as to lack of punctual payment of interest, appear to have been inevitable. Overdue payments were in any case made when, where and as far as payments restarted on a regular basis in the second half of 2002.326
The other complaints of Continental relate to specific aspects of the conditions of the restructuring process of the various obligations and similar instruments on which Argentina had defaulted at the end of 2001 and at the beginning of 2002. As described by Argentina itself, under the restructuring process, which ended in June 2005, "the Argentine Government offered to swap all Argentine government debt securities issued before December 31, 2001, on default, for new securities with an extended term and for a minor principal and/or interested value but adjusted to Argentina's capacity payment."327
Specifically as to the GGLs, the evidence shows that they were pesified and indexed to the CER and that they were to earn a reduced interest rate in accordance with Decree 471/02. The guarantee that had initially been provided for the case of default (consisting in the proceeds of the financial transaction tax) was thereafter withdrawn by Decree 644/02 specifically dealing with GGLs: within the restructuring of Argentina's public finances the proceeds of this tax were now to be shared by the Government with the provinces. Since there was no interest for a holder to opt for the return of the securities which had been swapped for the GGLs (since these were also in default), CNA opted to accept the new terms. In view of the situation of the public finances of Argentina in the crisis of 2002, we conclude that these Measures can be considered reasonably necessary within the pesification of the economy. The treatment of GGLs compares with that of other financial instruments held by the public. The special guarantees (that had been provided in the original conditions, in order to induce depositors to accept a swap intended to avert the risk of an impending crisis), once the crisis had arrived, had either lost their value or could not escape being subjected to the same necessity and hence to the need of being restructured.328
As to dollar-denominated Term Deposits (CD), the evidence shows that they had been first frozen under the Corralito, then "reprogrammed" (so-called CEDROS) under Res. 6/2002, thereafter pesified at 1.4 plus CER adjustment (Decree 471/2002), and further frozen under Res. 73. Short term deposits were thus frozen for a considerable length of time, except for the possibility of withdrawals as introduced for insurance companies. As Continental explains, it opted in July 2002 for a dollar denominated bond (BODEN 2012) in exchange of deposits held with the bankrupt Scotiabank.329 As to the rest of its deposits, Continental preferred not to accept the Government's offers in May and July 2002 (Decree 905 and 1836) to exchange them against long terms bonds in dollars.330 The Claimant accepted instead the conditions of the repeal of the Corralon, that is the subsequent de-freezing, or thawing provided by Decree 739 of March 28, 2003: this entailed a further rescheduling of 120 days with a 2% annual interest and receiving a dollar bond (BODEN 2013) "to compensate for the difference between the market exchange rate at the date of the enactment of the Decree and the government imposed rate of 1.4 pesos to the dollar as adjusted by CER."331 According to Argentina, thanks to this mechanism a holder like CNA was able through indexation and the dollar bond to recover a substantial amount of the initial capital loss.
We are of the view that in the state of necessity faced by Argentina the elaborate mechanism described above was appropriate and reasonable to cope with the need urgently to stabilize the financial markets and the banks, reinstating progressively the rights of depositors. The burden that depositors had to bear initially was alleviated pari passu with the improvement of the conditions of the economic and financial system: this entailed also a partial "re-dollarization" of their claims through the dollar-denominated BODEN.
As to the Treasury Bills (LETE)332, the evidence shows333 that Argentina offered to restructure them through Decree 1735/04 of December 9, 2004 by offering a swap of these securities, as well as of several other securities also in default, against newly issued securities, specifically GDP-linked derivative instruments.334 CNA did not accept this conversion, since it would have received in exchange "only U.S.$0.30 per dollar and would have been required to waive its rights. It would have also been required to accept long maturities on bonds from a government that had demonstrated its willingness to repeatedly default on its debt."335
In respect of this restructuring the Tribunal rejects the defense of necessity by Argentina based on Art. XI of the BIT, in the light of the following factors:

(a) the late date in which the swap was offered, when Argentina's financial conditions were evolving towards normality;336

(b) the reduced percentage of the original value of the debt that Argentina unilaterally offered to recognize;

(c) the condition that any other rights would be waived, which entailed also waiving the protection of the BIT.337

Since, as stated above under (a), Argentina's financial situation was evolving towards normality when the LETEs were restructured, Argentina cannot avail itself in this respect of the alternative defense based on state of necessity in customary international law. The fundamental requirement that the conduct be "the only way for a State to safeguard an essential interest against a grave and imminent peril" (Art. 25 (1) (i) ILC Articles) was lacking for the reasons stated hereabove under (a). The Tribunal rejects, therefore, also this alternative defense by Argentina as to the restructuring of the LETEs. We consider separately below the consequences of this adverse decision for Argentina.

(ii) Whether Argentina could have adopted at an earlier time different policies that would have avoided or prevented the situation that brought about the adoption of the challenged measures

The Claimant developed a further argument in order to reject Argentina's plea of necessity. In the Claimant's submission, Argentina could have avoided the devaluation and the pesification if it had adopted a different economic policy, specifically if it had implemented in a timely manner those accompanying policies and measures (especially relating to budgetary and fiscal discipline) required for the sustainability of the parity arrangement, convertibility and the currency board. This argument points also to a contribution by Argentina itself to the crisis and hence to the impugned Measures:

"Argentina could have implemented economic policies that would have supported the ability of the currency board to withstand an economic recession."338

In this respect too, the analysis by the Tribunal is circumscribed in drawing appropriate conclusions in respect of the necessity for Argentina's impugned measures under the BIT. States are basically free to adopt economic and monetary policies of their choice; and this Tribunal is not subjecting past economic policies to any judicial, administrative or political review. It is a fact that economic observers and institutions, looking retrospectively at the causes of Argentina's crisis, have pointed out that Argentina had not carried out, fully or adequately, the various policies that the Fund had recommended, especially as to fiscal balance (in order to sustain the currency board system) and as to cost of labour (in order to maintain the economy's competitiveness). It is also a fact that, at the time, the IMF recognized favourably Argentina's efforts towards the implementation of the recommended policies, even if they had not been enacted fully and had not obtained the expected results. Thus the IMF had continued supporting Argentina all along. It is also a fact that the IMF had recognized the negative impact of various exogenous factors in this failure.339 Even ex post facto, however, qualified observers remain in disagreement as to the exact causes of the crisis and the mix of measures that might have avoided it.340
We have highlighted above, based on the chronology of relevant facts, contemporary accounts and later analyze, that Argentina's authorities made serious efforts in 2000-2001 to take a number of measures and policies in order to implement the Fund's advice (as part of the IMF Stand-By conditions) and to redress the economic and financial situation under the convertibility regime. These efforts culminated with the zero-deficit law in the summer of 2001, with the IMF recognising these efforts by continuing to extend its support.
It is a fact that the results were not those expected. The harsh measures recommended were met by public resistance (notably the labour force), could not be successful in the short time span that was available, and could not be realistically implemented as such in view of the organizational shortcomings of Argentina's administrative apparatus. Nor does it appear to the Tribunal that the Argentinean Government can be faulted for not having more energetically pursued these policies. The lenient and benevolent attitude of the Fund which acknowledged in 2001 the difficulties that Argentina had encountered in implementing the conditions of the Stand-By arrangement has also to be taken into account.341 Significantly, even retrospectively, some analysts have expressed the opinion that those measures would have been ineffective to avoid the crisis in any event.342
In exploring alternative policies that Argentina might have pursued in the preceding months that would have made resort to the impugned Measures unnecessary, an early abandonment of the currency board system and of convertibility at par must be considered. In fact several observers, retrospectively, have criticized Argentina and the Fund not for having failed to implement those accompanying policies envisaged by the Stand-By Arrangement that had been recommended at the time, but rather for not having abandoned convertibility earlier, once the sustainability of convertibility appeared to be unlikely under realistic conditions.344
Such an exit from convertibility could be considered a reasonable alternative if it could have been carried out in an orderly fashion, without forcing upon holders a reduction of the value of their security, by unilateral restructuring below par or by pesification. However, contrary to the Claimant's position, the dominant view in retrospect is that a voluntary restructuring, respectful of holders' rights, within an abandonment of the currency board would not have been viable from at least early 1998345 or 1999.346 Any abandonment of the convertibility in 2000347 or by mid-2001 would have entailed an even more significant reduction of the value of the debt for the creditors in order to avert a general crisis as the one that materialized at the end of the year.348 In legal terms, such a debt forced restructuring would have represented a breach of the terms of the debt instruments being restructured, exactly as was the case for the relevant Measures enacted by Argentina at the end of 2001 - beginning of 2002. Such a pre-emptive or anticipatory default could have been more easily challengeable as to the absence of any "necessity" under the BIT.
Even if practicable, these "alternatives" cannot however be invoked fruitfully by the Claimant as measures that would have respected its dollar-denominated investments in Argentina whilst being sufficient to avoid the crisis. If Argentina had abandoned the parity and convertibility at 1:1 before 2000, Continental could not have made those U.S. dollars denominated investments exchanging at par CNA's income made in peso that it complains have been affected by Argentina devaluation/pesification. If the convertibility board system had been abandoned later, the probability is, as indicated above, that the Claimant would have been subject to the same losses that it challenges here. Therefore the alternative would not have put it in any better situation.

E. The effect of the applicability of Article XI

(i) In general

Concluding that the measures taken by Argentina were necessary to address, through painful means and by retreating from a number of commitments to the public as to the stability and convertibility of the national currency, an impending situation of complete breaking down of the economy, does not imply that the crisis was inevitable. If a different economic and exchange policy had been introduced years before this could have avoided the crisis of 2001-2002. While we have examined this scenario, the causative link between these "pre-emptive" policies and the Measures at issue would have been possibly too tenuous to consider them as alternatives that would have rendered these measures unnecessary under Art. XI. In any case, for the reasons just stated, the Claimant would not have profited in respect of its dollar-denominated investments that it made in 2001 on the basis of the fix parity/free convertibility system in place that was soon thereafter to become unsustainable. At the stage when the Measures were adopted it does not appear to the Tribunal that Argentina had the choice to resort generally to alternatives that would have been economically and legally less disruptive.
In sum, based on the evidence adduced by the Parties in these proceedings, we consider that Argentina's conduct in the face of the economic and social crisis conformed, by and large,350 with the conditions required for derogating from its obligations under Art. XI of the BIT as to the Measures challenged in the present dispute. The examination of the Claimant's challenges under the various BIT provisions it has invoked will have therefore to take into account Art. XI, evaluating in more detail whether and how far the defense based on necessity under that provision is relevant and available as to the specific claims of breach and with what effects.351

(ii) Has Argentina contributed to necessity?

VII. Specific Claims of Breaches

A. Claim of breach of Article V (Freedom of Transfer)

As mentioned above at para. 82, Argentina denies having breached Art. V of the BIT in regards to transfers. First of all, Argentina claims that Art. V concerns only foreign investors and not local subsidiaries as CNA ART. Argentina indicates that Art. V(1)(e) is not applicable here, because it "protects transfers of the proceeds of the sale or liquidation of all or any part of an investment," that is by the parent company (Continental), while here the bank deposits were held by CNA. Argentina further argues that Art. V does not prevent "specific regulations for balance-of-payment difficulties" in view of Art. XI of the BIT and of the "standards established in multilateral agreements which both Argentina and the United States. have signed," with specific mention of the GATT, the GATS and the IMF.360 Argentina also claims that its regulation of monetary transfers conforms with international customary law, as a manifestation of the exercise of monetary sovereignty by States, in view of the severe difficulties in its balance-of-payment.361 Argentina claims that "if CONTINENTAL wanted to make transfers abroad of money derived from revenues and dividends, they could be made by previously requesting the authorization from the corresponding authority, i.e., ‘the BCRA,' a request that neither CNA nor Claimant ever made."362
The first issue here is to determine whether the transfer that Continental claims it would have made if the Corralito had not prevented it, falls within those "transfers related to an investment" which the Parties to the BIT undertook in Art. V to permit "freely and without delay into or out of its territory." This type of provision is a standard feature of BITs: the guarantee that a foreign investor shall be able to remit from the investment country the income produced, the reimbursement of any financing received or royalty payment due, and the value of the investment made, plus any accrued capital gain, in case of sale or liquidation, is fundamental to the freedom to make a foreign investment and an essential element of the promotional role of BITs.363 This explains moreover the detailed list of permitted transfers that most BITs set forth.364 On the other hand, the Treaty terms show that such freedom is not without limit.
The type of transfer at issue here does not fall into any of these categories, nor specifically does it represent the "proceeds from the sale or liquidation of all or any part of an investment." It was merely a change of type, location and currency of part of an investor's existing investment, namely a part of the freely disposable funds, held short term at its banks by CNA, in order to protect them from the impending devaluation, by transferring them to bank accounts outside Argentina.
The transfer did not correspond to, nor was it required to satisfy any payment obligation of CNA, commercial, financial or other; nor would it involve the transfer of ownership of the funds involved to some different entity. It was clearly a legitimate operation from a business point of view, permissible under the convertibility regime of Argentina until the Corralito. This does not mean that it would fall within the "transfers related to an investment" under Art. V. The fact that the BIT does not limit these transfers to those made by the foreign investor itself and that these transfers may be made by the local subsidiary, in favor of its parent company as well of other entities (thus in case of payment of royalties, payments related to loans received etc.), does not mean that any trans-border movement of funds by such subsidiary is "related to an investment."
Both parties have relied also on the IMF provisions and the connected principles of the multilateral regulation of international payments in support of their position. As is well known, the IMF distinguishes between current transactions and capital movements.

The "avoidance of restrictions on current payments" (Art. VIII), except with the approval of the Fund, is a "general obligation" of IMF members, adhered to by their vast majority that do not avail themselves of the transitional regime of Art. XIV. It reflects one of the key purposes of the Fund, "to assist in the establishment of a multilateral system of payments in respect of current transactions" as stated in Art. I (iv), as was the case of Argentina when its currency was freely convertible. On the other hand, capital movements may be subject to exchange controls by individual members, inter alia in view of their possible speculative nature and destabilizing effects on national economies.

The above distinction is of limited assistance here, because transfers "related to an investment" listed in and allowed by Art. V of the BIT includes both current transactions and capital movements: Art. V may be considered a lex specialis in respect of the IMF regime and more liberal than the latter. In any case, capital movements are defined a contrario by the definition of "current transactions" in Art. XXX of the Fund. Not all capital movements are in themselves "investments," such as direct investments or portfolio investments listed in Art. V of the BIT. In the IMF terminology and classification, widely accepted beyond the Fund's ambit, the movement of capital at issue here was or would have been more specifically a short-term deposit abroad, a transaction which may be subject to tighter controls than direct or portfolio investment transactions.366 This confirms the Tribunal in its conclusion that the transfer which the Claimant complains it could not carry out because of the Corralito, namely a short-term placement out of Argentina of the equivalent of $19,000,000, was not a transfer related to an investment protected by Art. V of the BIT.
As a consequence Argentina has committed no breach of Art. V of the BIT to the detriment of the Claimant, so that the latter's claim in this respect must be and is rejected by the Tribunal. This conclusion makes it unnecessary for the Tribunal to examine the subordinate arguments of the Parties: namely (a) whether in view of the acute foreign exchange crisis Argentina was encountering, Argentina was allowed, notwithstanding its obligations under Art. V BIT to introduce the exchange restrictions of Decree 1570, based on Art. XI of the BIT, on the IMF Agreement or under customary international law; (b) whether the Claimant cannot invoke Art. V because neither itself (Continental) nor CNA ever decided to make, or asked to be authorized to effect the transfers at issue;367 and (c) whether the derogations allowed under the Corralito would have made those transfers possible.368

B. Claim of breach of Article II (2)(a) (Fair and Equitable Treatment)

a) In general

The Claimant has severely criticized the behavior of Argentina towards its investments during the crisis; in its view Argentina "promised to refrain from interference with Bank Deposits, then froze and pesified them;"369 "promised to honor its government debt, then defaulted on and pesified it."370 The Claimant submits that these Measures breached the BIT's obligation to treat it, as a U.S. investor, in a fair and equitable manner and according to the international law standard of treatment, contrary to Art. II (2)(a) of the BIT. This Article provides that: "[i]nvestment shall at all times be accorded fair and equitable treatment, shall enjoy full protection and security and shall in no case be accorded treatment less than that required by international law." Specifically according to the Claimant, this article obliges Argentina "to provide a stable legal and business environment"371 and "to protect investors' legitimate expectations."372
According to the Claimant, in the light of what it considers to be the legal import of these Treaty standards and in view of the commitments Argentina had undertaken in respect of its monetary system, of the protection of private investments and of the terms of the debt instruments it had issued, Argentina has breached the standards of Art. II (2)(a) BIT: through Decree 1570 (Corralito); by pesification of bank deposits through Decree 214; by pesification of government debt through Decree 471; by the unilateral rescheduling of deposits and default on debt.373
Argentina opposes the Claimant's claim concerning the alleged violation of Art. II (2)(a) of the BIT.374 According to Argentina, the fair and equitable treatment standard (as well as the other treatment standards mentioned in the same paragraph) must be applied considering especially the circumstances under which such measures were adopted, namely the "dramatic economic situation" that Argentina was experiencing when the challenged Measures were enacted. According to Argentina, the traditional "minimum standard" of treatment of aliens is the one relevant under Art. II(2)(a), so that "investments made by Continental, as it happens with the remaining foreign investments, have been considered in accordance with international law."375 Argentina then explains why in its view the Measures it had adopted since December 2001 are in accordance with the principle of fair and equitable treatment: "[t]hese measures constituted a reasonable, good faith and non discriminatory answer to the most serious crisis that the country had ever suffered which, over time, had a positive effect on the country in general and on the investments of Continental and CNA ART in particular."376 Argentina opposes the reliance by the Claimant on the alleged respect required for the Claimant's "legitimate expectations," submitting that the standard at issue does not justify the foreign investor expecting that regulation will never change; specifically it does not prevent re-adaptation in an exceptional situation of emergency. In any case, as already indicated Argentina claims that the Measures challenged were necessary to counteract the crisis and are thus covered by its invocation of Art. XI of the BIT.377
The Parties disagree on the legal content of the "fair and equitable" standard of treatment in Art. II (2)(a) of the BIT. They especially disagree as to whether, factually, the abrupt radical change of the legal setting concerning Argentina's currency, exchange mechanism, and the regime of financial instruments in circulation in the crisis period, as it affected the Claimant's investments, was a breach of such standard.
Thus the Claimant had "legitimate expectations" that the convertibility regime of Argentina would not be changed, so that free transfer would be maintained, existing dollar-denominated securities and deposits would not be compulsory transformed in pesos at a below-market rate and their terms would be respected (all of which did not happen in Argentina's crisis). The Claimant concludes that since Argentina subverted the business environment it failed to respect the Claimant's rights.
The Claimant relies as a basis for its alleged legitimate expectations on a series of acts and pronouncements by Argentina's authorities from different sources and having unequal legal value. Thus, the Claimant invokes the Intangibility Law of September 24, 2001 by which "Argentina assured investors that Argentina would not interfere with bank deposits. The Investor relied on Argentina's representations to keep its money in Argentina. Argentina's subsequent asset freeze failed to fulfill the Investor's legitimate expectation that Argentina would not interfere with its deposits."380 Also the pesification in itself is claimed to be contrary to this standard in conjunction with the Intangibility Law.381 The Claimant also relies on certain public statements by Minister Cavallo, undertaking not to abandon the convertibility regime, as well as on the terms of the GGLs382 and of the LETEs.383
Argentina on the other hand submits that the fair and equitable treatment standard does not oblige further treatment or treatments beyond what is required by virtue of the minimum standard of international customary law. This standard is related to notions such as natural justice or lack of discrimination and does not refer, as results also by the more recent agreements amongst states, to the legal and business framework stability, or the expectations or "basic assumptions" of foreign investors. Argentina relies on the NAFTA arbitral awards concerning the application of fair and equitable treatment standard. Quoting the NAFTA Tribunal in the Waste Management II case, Argentina submits that the minimum standard of fair and equitable treatment is breached if the State's conduct is "arbitrary, grossly unfair unjust or idiosyncratic, is discriminatory and exposes the claimant to sectional or racial prejudice or involves a lack of due process leading to an outcome which offense judicial propriety- as might be the case with the manifest failure of natural justice in judicial proceedings or a complete lack of transparency and candor in an administrative process."384 Argentina relies also on the position recently taken by several states, including the United States of America, with regard to the content of this standard, as expressed in the context of the NAFTA, the FTA with Chile, and the U.S. Model BIT of 2004.385 In summary, according to Argentina, "to determine whether the Argentine Republic acted in accordance with the principle of good faith it is necessary to evaluate whether allegedly offensive measures invoked adopted by the Argentine Republic were dishonest, unreasonable or unfair."386 Applying the abovementioned criteria, the challenged measures appear honest, reasonable and fair, so Argentina submits that that it did not act in bad faith.
It is not necessary for us here to go more into that debate. The issue here is relatively straightforward: whether certain abrupt and fundamental changes made by Argentina to its exchange and currency regime because of the 2001-2002 economic and financial crisis, with the aim of resolving it, including the traumatic blocking of bank accounts, the pesification of deposits and financial instruments, the default and subsequent restructuring of the same, made the treatment of the Claimant's investment not "fair and equitable."
The Claimant has framed its claim in terms of "legitimate expectations." It submits that it was entitled to rely legally under the BIT on the existing exchange and currency regime which existed when it made its investment in the insurance sector of Argentina, so that when this was changed to its detriment, it was entitled to claim indemnification. The Claimant does not rely on the convertibility regime of 1991 per se. It rather points out to certain specific legislative enactments and contractual undertakings of Argentina (the Intangibility Law and the terms of issuance of the GGL's respectively) in order to support its claim that its expectations of stability were "legitimate." In respect of GGLs, the Claimant also points to the circumstances that the complete subversion of the monetary regime happened just weeks after the solemn and formal statements contained in those instruments.
In light of the above criteria the Tribunal concludes on the facts of this case that:

i) Continental cannot invoke legitimate expectations as to the change of the convertibility regime of 1991, notwithstanding political declarations by various authorities that convertibility would not be abandoned.

ii) Continental should have maintained a reduced trust in the Intangibility Law of September 2001, since this was enacted when the worsening of the crisis was evident and indeed made in order to try to support dwindling confidence in the sustainability of the convertibility. (Even more so since Continental and CNA were professional operators in the financial sector).

iii) As far as the de-dollarization and its specific modalities could be considered contrary to any fair and equitable treatment in the light of previous assurances by Argentina (including the Intangibility Law),391 the Tribunal considers that the necessity defense under Art. XI is available to Argentina for the reasons explained above.

iv) The Measures were not discriminatory;392 they were general, affecting all sectors of the national economy and all classes of depositors and investors, nor did they affect the carrying-on of the insurance business of Continental in respect of which the reliance on stability of the legal environment could have been properly focused.393

As to the LETEs, on the contrary, we have already decided that the defence of necessity, both under Art. XI of the BIT and under the principles of customary international law, is not available to Argentina as to the conditions of their restructuring in December 2004 and that the terms of the unilateral restructuring were by then unreasonable;394 notably where they implied a waiver of all rights by the holders, who were being subjected to a substantial loss of their investment, in addition to having been previously subjected to losses due to pesification.
The breach of the Fair and Equitable Treatment concerns the restructuring (not the pesification of the LETEs), since we have found that the pesification generally is covered by the defense of necessity. The loss sustained by the Claimant to be made good by Argentina because of its breach of the Fair and Equitable standard in the BIT amounts, therefore, to the dollar equivalent of the pesified amount of the LETEs in November-December 2004, as indicated by the Claimant in U.S.$2.8 million, plus interest as determined hereunder.395
In conclusion, save for the LETEs, the Tribunal considers that the invocation of necessity by Argentina under Art. XI of the BIT is applicable to all other claims by the Claimant for breach of the Fair and Equitable Treatment standard by Argentina's Measures. The Tribunal decides accordingly that Argentina has not breached its obligations under Art. II (2) (a), by these Measures, except as to the LETEs.

b) Capital gain tax

Continental complains of the capital tax that was imposed in accordance of existing tax legislation on the gain allegedly made by CNA, when its investments in dollar-denominated financial assets up to then accounted for at one peso for one dollar, were converted in pesos at 1.4:1. Continental submits that the increase of the peso value was purely nominal: through the pesification it had suffered a substantial loss in the real value of its investment which amounted also to a partial expropriation. In any case the imposition of the tax on such a non-existent profit amounts to unfair treatment.396
Argentina denies any wrongdoing under the BIT. It points out that CNA's accounts were in pesos (as were all corporate accounts in the country) and that the tax is a general pre-existing fiscal measure applicable to capital gains by companies. It was thus properly due by CNA since its accounts showed a capital value increase due only to the conversion of dollar-denominated assets at 1.4:1, thanks to the preferential rate of the pesification applied, while before they had be valued under the convertibility / par regime at 1:1.
We recognize that, at first glance, it seems odd that a company holding dollar-denominated assets which by effect of the forceful conversion is left with a peso amount much inferior to the peso equivalent resulting had a market rate been applied, must also pay a capital gain tax on such a nominal increase of value. However, such a tax regime is far from unusual. Moreover, it has to be kept in mind that, in conformity with the nominalistic principle, the currency of Argentina was the peso; CNA's corporate accounts were naturally expressed in pesos, as were both its revenues from its insurance activity and its costs. Thus, during the convertibility regime any of CNA's assets (and income) denominated in dollars was necessarily recorded in its accounts in pesos at the rate of 1:1. When these assets held in Argentina were converted in pesos at 1.4:1, CNA realized an "exchange gain," to be recorded in the assets part of the balance sheet and which was not balanced by any corresponding item in the liability side. As a result, this gain was properly considered a capital gain, subject to the general applicable tax regime. The reduced external value of all peso assets of CNA was not something that could be recorded and have an effect within those accounts governed by Argentina's legislation. The reduced net value of CNA, as an effect of the devaluation of the peso vis-à-vis the dollar, diminished the value of any Argentina-based assets in term of any other stable currency. This was material for the U.S. parent company and was properly registered in its accounts. However, from an accounting perspective within Argentina it was neutral and irrelevant.
In the Tribunal's view, the claim of Continental concerning the application of the capital gain tax has therefore no basis under Art. II (2)(a) of the BIT, nor for the same reasons does it constitute an expropriation under Art. IV of the BIT. It is therefore rejected by the Tribunal.

C. Claim of breach of Article IV (Prohibition of Direct and Indirect Expropriation)

The Claimant has also impugned several of Argentina's Measures as representing an indirect, creeping or partial expropriation of CNA's investments in breach of Art. IV(1) of the BIT. According to this provision:

Investments shall not be expropriated or nationalized either directly or indirectly through measures tantamount to expropriation or nationalization except for a public purpose; in a non-discriminatory manner; upon payment of prompt, adequate and effective compensation; and in accordance with due process of law and the general principles of treatment provided for in Article II(2).

More specifically Claimant considers that such an expropriation has resulted from:

i) the pesification of CAN's dollar-denominated deposits and securities at a much "below market exchange rate;"

ii) the restructuring of the GGLs at terms that did not reflect their acquisition value; and

iii) the fact that the LETEs have been deprived of their value after CNA had not accepted the "unreasonable" terms of their restructuring offered by Argentina on May 31 and September 16 of 2002.397

Argentina opposes this claim as being groundless.398 Argentina invokes the principle that each state is sovereign as to the management of the exchange rate of its currency, so that devaluation does not give rise to a claim of damages by those affected neither under general international law nor under the BIT. Argentina further claims that the pesification consisted in a new regulation of the pegging of the peso to the dollar, in respect to domestic deposits and financial instruments which had until then benefited from the convertibility-at-par regime. Argentina claims that it was within its prerogatives to put an end to convertibility, compulsorily reconverting the domestic dollar-denominated instruments in pesos at the same rate of 1:1, especially in view of the serious reasons that had led it to abandon convertibility at par.399 The fact that as a result the peso devaluated so much more on the free market, so that the real value of the formerly dollar-denominated instruments decreased at the same rate as the peso vis-à-vis the U.S. dollar is for Argentina immaterial. Argentina also points out that depositors such as CNA received a preferential treatment in that their holdings were converted at 1:1.4.
Argentina in any case invokes the defense of necessity, both under Art. XI of the BIT and under the principles of customary international law. It points out that, in view of the economic emergency the country was facing, the Emergency Law expressly suspended the application of the Intangibility Law which had declared deposits "intangible." It also points out that Argentina's Supreme Court, reversing its initial position, has recognized since the Bustos decision of October 26, 2004, that the emergency situation in which the country had fallen at the end of 2001 justified for public purposes a restriction on the right of private property such as those introduced by the emergency legislation. The Supreme Court had considered that this was a general regulation that had been applied fairly and reasonably and that therefore did not give rise to indemnification under Argentina's Constitution, which in that respect reflects an approach shared by most democratic constitutions and by international law.400
The Tribunal notes that most of the allegations brought by the Claimant under the heading of expropriation (breach of Art. IV of the BIT) are substantially the same and are addressed to the same Measures impugned as breaches of the fair and equitable standard of Art. (II)(2)(a) of the BIT. We have already found that the defense of necessity under the BIT is available to Argentina as concerns most claims of breach that Continental has raised against the Measures, namely the pesification of dollar-denominated deposits and the restructuring of GGL's.401 The same defense based on Art. XI, leading to the nonapplicability of the various BIT substantive obligations, is available in respect of Art. IV of the BIT. We do not need therefore to go further into the claims for breach of Art. IV than is required for our decision.
It is well known that the distinction is not always easy, that in different historical and social contexts the line has been drawn differently and that different international tribunals, including arbitration tribunals under various BITs, have relied on different criteria and have given different weight to them, such as those recognizing the public interest on the one side and those protecting the integrity of property rights on the other. Different tribunals have come to different evaluations as to the definition of a specific measure brought forward for their decision and its classification in the first or second category.407
As to the pesification of existing dollar denominated financial assets within Argentina, subject to its domestic law, there is no basis in our view for the Claimant's case that any compulsory conversion in peso has to be measured against the floating market value of the peso against the dollar at the time of the conversion, to the effect that the difference amounts to an expropriation that Argentina has to make good in damages.408 The issue is rather whether Argentina had given a commitment to the foreign investor that those assets would be linked to the U.S. dollar, thereby meaning the convertible currency of the U.S. under U.S. law, and would be immune from any evolution of the currency regime within Argentina. We cannot detect from the evidence any such specific commitment. Any commitment in this respect would relate, as we have already mentioned, to the fair and equitable treatment standard; namely whether Argentina had given rise to some specific "legitimate expectations" addressed to and relied upon by the foreign investor that its dollar denominated domestic deposits would be immune from any encroachment. We have already discussed this issue under the fair and equitable standard above, denying generally the Claimant's claim of breach. We came there also to the conclusion that, as far as these expectations might have had a basis, the proper invocation of Art. XI of the BIT by Argentina does not allow us to analyze the matter further under Art. II(2)(a) of the BIT (except in respect of the LETEs restructuring).
The Tribunal has noted the invocation by the Claimant of the Intangibility Law also under Art. IV of the BIT protecting U.S. investors in case of expropriation. The argument is to the effect that since Argentina itself has declared the dollar deposits as protected property in their "real dollar value" under the Constitution, thus precluding the Government from affecting their value by pesification, the contrary action by the Government during the crisis must result in an expropriation of private property under Art. IV since assets defined as property in Art. I (a) of the BIT were thereby materially affected.
In this respect the Supreme Court of Argentina has always relied on generally accepted principles, recognized beyond the legal system of Argentina. They had been spelled out and applied most recently before the 2001-2002 crisis in the leading Peralta case of 1990. At issue was one of the restrictive measures taken in Argentina to cope with the inflation of the 1980s, namely that providing the reimbursement of deposits in part with long term bonds.411 The Supreme Court held in that case that in a situation of emergency there is no violation of fundamental property rights "when for reasons of necessity a regulation is enacted that does not deprive individuals of their economic rights recognized by law nor denies their property, but restraints temporally the enjoyment of those benefits or the use that may be made of that property." As to the crisis of 2001-2002, the decisions Smith of 2002 and San Luis of 2003 had adhered to that standard, but had concluded that the Measures challenged (pesification and postponement of due dates of deposits) had restricted unreasonably the substance of the right of property of those affected. In the Bustos decision of 2004 instead, the Supreme Court (consistently followed thereafter) held that in a situation of generalized necessity, duly determined by the legislative power, non-discriminatory Measures such as the forced conversion of deposits in foreign currency were lawful under Art. 17 of the Constitution, in that they were reasonable limitations to private property in face of the severe emergency of 2001-2002. In its 2004 decision the Court balanced differently the compression of individual economic rights against the need to preserve society in a state of adversity and of serious perturbation of physical, economic or other nature.412 It is the acute crisis, and possibly only the acute nature of the crisis, that ultimately has justified the judicial upholding of the "suspension," or rather the revocation of the legislative pronouncement contained in the Intangibility Law, by which just a few months before Argentina's Parliament had aimed to reassure the citizens of the country of the stability of the convertibility regime also for the future.413
We reject therefore Continental's claims of breach of Art. IV, as far as the matter is not excluded from our scrutiny by the application of Art. XI.
Expropriation, even indirect, requires a certain level of sacrifice of private property in order to be found. Minor losses that are an incidental consequence to a general regulation of the economy adopted in the public interest are not considered to be expropriation giving rise to indemnification as highlighted before. This is applicable to the delays in payments of interest (that were subsequently made) and in the issuance of certain bonds (that were in any case delivered later to CNA) of which Continental complains. In the disarray Argentina was facing in 2002, these non compliances are covered in any case by the plea of necessity under the BIT.
Before concluding, we recall that we have found above that the restructuring of the LETEs held by CNA was not covered by the defense of necessity both under the BIT and the principles of customary international law and caused substantial loss to the Claimant. This has led the Tribunal to hold that the restructuring as concerns CNA was in breach of the Fair and Equitable Treatment of Art. II (2)(a) of the BIT and that Claimant is entitled to indemnification for that loss in the form of damages. Continental has claimed that the restructuring and its implementation constitute at the same time an expropriation and has asked indemnification under either provision of the BIT in an amount corresponding to the original dollar nominal value of those LETEs. Having already decided the same issue under Art. II(2)(a) BIT, we do not need to pronounce further on the alternative claim of violation of Art. IV submitted by the Claimant.

D. Claim of Breach of Article II (2)(c) ("Umbrella clause")

VIII. Conclusions of the Tribunal

A. Calculation of Interest

B. Apportionment of the arbitral costs

As to costs, each party has asked the Tribunal that its expenses in connection with these proceedings, including the amount of the deposits made to ICSID for the Centre's charges and the expenses and fees of the arbitrators (Art. 59 and 60 of the ICSID Convention), be reimbursed to it by the other party. To this effect each party has submitted detailed calculations.445 This is an issue that the Tribunal has to decide as part of the award pursuant to Art. 61 of the ICSID Convention.
The Convention and the attendant Rules and Regulations give ICSID tribunals' broad discretion in awarding costs and offer little guidance on how this discretion is to be exercised. Moreover, the practice of ICSID tribunals in apportioning costs "is neither clear nor uniform."446 In a number of cases the principle "the loser pays," commonly applied in international commercial arbitration, has been followed; in many others the tribunals decided that the parties were to bear equal shares of the fees and expenses of the arbitrators and of the charges for the use of Centre's facilities and services. In their decisions on awarding costs, besides assessing them against the unsuccessful party, arbitral tribunals have often taken into account the nature of the dispute, the novelty of the legal issues, and the conduct of the parties in the proceedings.
As to this case, the Tribunal notes that the Claimant is succeeding in only one of the many claims of breaches of the BIT it has put forward, namely only in relation to the restructuring of the LETEs. As to the other claims, most of them (except the one under Art. V (Freedom of Transfer) and in part those under the Umbrella Clause, (which are being rejected as groundless in the merits)) are being dismissed because the Tribunal has accepted the preliminary exception raised by Argentina that Art. XI of the BIT removes the Measures challenged by the Claimant from the Treaty's coverage. This leads the Tribunal to conclude that there are good reasons to decide, as it is hereby decided, that each party shall bear any and all of its own expenses in connection with the presentation and preparation of the case, as well as half of the fees and expenses of the arbitrators and the charges for the use of the Centre's facilities and services.

IX. Decision of the Tribunal

For these reasons, the Tribunal finally decides as follows:

(A) Save for the Claimant's claim relating to the LETEs, all substantive claims made by the Claimant are dismissed;

(B) As regards the claim relating to the LETEs, the Respondent is liable to pay compensation to the Claimant in the principal sum of U.S. $2,800,000 (United States dollars two million eight hundred thousand) and compound interest thereon at the rates for U.S.$ 6 month Libor (as published in the Financial Times) plus 2 per cent compounded annually from January 1, 2005 until payment, subject to the Claimant first procuring the surrender of all LETEs held by its subsidiary, not previously tendered to and accepted by Argentina;

(C) The Parties shall bear all their own legal costs and expenses, without recourse to each other; and

(D) The Parties shall bear equally the costs and expenses of the Tribunal and ICSID.

XI. Abbreviations448

Argentina Business Nolan J.L., Hinkelman E.G., Woznick A., Shippey K. C., Argentina Business, The Portable Encyclopaedia For Doing Business with Argentina, World Trade Press, 1996, California, U.S.A.

BCRA Banco Central de la Republica Argentina

Blustein Blustein, And the Money Kept Rolling in (and out): Wall Street, the IMF, and the bankrupting of Argentina, 2005, New York (C-145)

Calomiris Calomiris C., Devaluation with Contract Redenomination in Argentina, National Bureau of Economic Research Working Paper No. 12644

Dolzer, Stevens Dolzer, Stevens, Bilateral Investment Treaties, The Hague, Kluwer Law International, 1995

FCN Treaty Treaty of Friendship, Commerce and Navigation

GATS General Agreement on Trade in Service

GATT 1947 General Agreement on Tariffs and Trade

Hornbeck Hornbeck J.H., The Argentine Financial Crisis: A Chronology of Events, CRS Report for Congress, January 31, 2002 (C-189)

ICSID International Centre for the Settlement of Investment Disputes

ILA International Law Association

ILC International Law Commission

ILC Articles International Law Commission Articles on Responsibility of States for Internationally Wrongful Acts, with commentaries, 2001

IMF, Evaluation Report IMF, The IMF and Argentina, 19912001, [Washington, D.C.]: International Monetary Fund, Independent Evaluation Office, 2004 (C-149, R-207)

IMF, First Review IMF, Argentina: 2000 Article IV Consultation and First Review Under the Stand-By Arrangement, and Request for Modification of Performance Criteria-Staff Report and Public Information Notice Following Consultation, IMF Staff Country Report No. 00/164, December 2000 (C-137)

IMF, Second Review IMF, Argentina: Second Review Under the Stand-By Arrangement, Request for Waivers and Modification of the Program-Staff Report and News Brief on the Executive Board Discussion, IMF Country Report No. 01/26, January 2001 (C-396, R-209)

IMF, Third Review IMF, Argentina: Third Review Under the Stand-By Arrangement, Request for Waivers and Modification of the Program-Staff Report and News Brief on the Executive Board Discussion, IMF Country Report No. 01/90, June 2001 (C-397, R-110)

IMF-Fund International Monetary Fund

Iran-U.S. CTR Iran-United States Claims Tribunal Reports

Krugman Krugman P., Editorial, Reckonings; A cross of Dollars, N.Y. Times, November 7, 2001 (R-54)

Lessons from the Crisis Daseking C., Ghosh A., Lane T., and Thomas A., Lessons from the Crisis in Argentina, IMF Occasional Paper No. 236, Washington DC, 2005

Mann Mann F.A., The Legal Aspect of Money, Fifth Edition, 1992, Oxford

Mussa Mussa M., Argentina and the Fund: From Triumph to Tragedy, 2002, Washington D.C.(C-153, R-208)

Nussbaum Nussbaum A., Money in the Law National and International, The Foundation Press Inc.: Brooklyn, 1950

Scott Scott H.S., International Finance: Law and Regulation, Thomson Sweet & Maxwell, 13 ed., 2006

UNCTAD United Nations Conference on Trade and Development, International Investment Agreements, Key Issues Vol. I, 2004

U.S. 2004 Model BIT United States of America's Model Bilateral Investment Treaty of 2004

U.S.-Argentine BIT or BIT Treaty between United States of America and the Argentine Republic concerning the reciprocal encouragement and protection of investment

U.S.-Congo BIT Treaty between United States of America and the Republic of Zaire concerning the reciprocal encouragement and protection of investment

U.S.-Russia BIT Treaty between United States of America and the Russian Federation concerning the reciprocal encouragement and protection of investment

Vandevelde Vandevelde K. J., United States Investment Treaties, Policy and Practice, 1992, Deventer, Boston

VCLT Vienna Convention on the Law of Treaties

Wildhaber Luzius Wildhaber, The Protection of Legitimate Expectations in European Human Rights Law ; Economic Law and Justice in Times of Globalisation, Festschrift for Carl Baudenbacher, 2007

The World Bank International Bank for Reconstruction and Development

WTO World Trade Organization

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